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As filed with the Securities and Exchange Commission on March 18, 2002

Registration Nos. 333-84334
333-84334	-01
333-84334	-02
333-84334	-03

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

RFS PARTNERSHIP, L.P.	Tennessee	62-1541639
RFS 2002 FINANCING, INC.	Tennessee	42-1530460
RFS HOTEL INVESTORS, INC.	Tennessee	62-1534743
RFS LEASING VII, INC.	Tennessee	62-1837005
(Exact name of registrant as specified in its charter)	(State of Incorporation or Formation)	(I.R.S. Employer Identification No.)

850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120
(901) 767-7005
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)

Dennis M. Craven
Chief Accounting Officer
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120
(901) 767-7005
(Names and addresses, including zip codes, and telephone numbers, including area codes, of agents for service)

It is respectfully requested that the Commission send copies of all notices, orders and communications to:

David C. Wright, Esq.	Andrew A. Gerber, Esq.
Hunton & Williams	Hunton & Williams
951 E. Byrd Street	101 South Tryon Street
Richmond, Virginia 23219	Charlotte, North Carolina 28280
(804) 788-8200	(704) 378-4700

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed exchange offer described herein have been satisfied or waived.

        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 a 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

Title of Each Class of Securities to be Registered	Amount to be Registered	Maximum Offering Price Per Bond	Maximum Aggregate Offering Price	Amount of Registration Fee(1)
9.75% Series B Senior Notes Due 2012(2)	$125,000,000	100%	$125,000,000	$11,500
Guarantees of RFS Hotel Investors, Inc. and RFS Leasing VII, Inc.(3)	$125,000,000	(3)	(3)	(3)

(1)

Previously paid on March 15, 2002. Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended.

(2)

The Senior Notes are being co-issued by RFS Partnership, L.P. and RFS 2002 Financing, Inc.

(3)

RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. are registering guarantees of the payment obligations of the primary registrants under the Senior Notes being offered hereby. No consideration will be received for the Guarantees by RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. Under Rule 457(n), no separate fee is payable with respect to the Guarantees.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant will file a further amendment which specifically states that this registration statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement will become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

        As a result of miscoding in the EDGAR submission header at the time of the initial filing of this Registration Statement on Form S-4 on March 15, 2002, this Registration Statement was not filed for the following co-registrants: RFS 2002 Financing, Inc., a co-issuer of the Senior Notes, and RFS Leasing VII, Inc., a guarantor of the Senior Notes. Accordingly, this Amendment No. 1 is being filed solely for the purpose of filing this Registration Statement on behalf of RFS 2002 Financing, Inc. and RFS Leasing VII, Inc., as co-registrants. This Amendment No. 1 contains no substantive changes from the initial filing of this Registration Statement on March 15, 2002.

The information in this prospectus is not complete and may be changed. We cannot and will not exchange the notes until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the exchange notes and it is not a solicitation of an offer to buy the exchange notes in any state where the offer or sale is not permitted.

Subject to Completion, Dated March 18, 2002

PROSPECTUS

RFS Partnership, L.P.
RFS 2002 Financing, Inc.

$125,000,000
Offer to Exchange All Outstanding
9.75% Series A Senior Notes due 2012
For
9.75% Series B Senior Notes due 2012

Payment of principal and interest is unconditionally guaranteed by
RFS Hotel Investors, Inc. and RFS Leasing VII, Inc.

Interest Payable March 1 and September 1

•

The exchange offer will expire at 5:00 p.m. New York City time on                        , 2002, unless otherwise extended. The exchange offer will not be extended beyond            , 2002.



•

All outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer will be exchanged for an equal principal amount of exchange notes that are registered under the Securities Act of 1933.



•

The exchange of outstanding notes for exchange notes will not be a taxable event for U.S. federal income tax purposes.



•

We do not intend to list the exchange notes on any national securities exchange or NASDAQ.

You should carefully consider the risk factors beginning on page 17 of this prospectus before participating in the exchange offer or investing in the exchange notes issued in the exchange offer.

        We are not making this exchange offer in any state or jurisdiction where it is not permitted.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the exchange notes to be distributed in the exchange offer, nor have any of these organizations determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                        , 2002.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS	ii
CERTAIN DEFINITIONS	iv
PROSPECTUS SUMMARY	1
SUMMARY OF THE EXCHANGE OFFER	6
RISK FACTORS	17
USE OF PROCEEDS	29
CAPITALIZATION	30
THE EXCHANGE OFFER	31
SELECTED HISTORICAL FINANCIAL DATA	41
SUPPLEMENTARY QUARTERLY RESULTS OF OPERATIONS	44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RFS AND THE PARTNERSHIP	46
BUSINESS AND PROPERTIES	64
MANAGEMENT	79
PRINCIPAL STOCKHOLDERS	81
DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK	83
DESCRIPTION OF THE EXCHANGE NOTES	87
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS	123
PLAN OF DISTRIBUTION	128
LEGAL MATTERS	128
EXPERTS	129
WHERE YOU CAN FIND MORE INFORMATION	129
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE	129

        This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. You should rely only on the information contained in or incorporated by reference into this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front page of this prospectus.

        Unless otherwise indicated:

•

the 9.75% Series A Senior Notes due 2012 issued on February 26, 2002, are referred to in this prospectus as the outstanding notes;



•

the 9.75% Series B Senior Notes due 2012 offered under this prospectus are referred to in this prospectus as the exchange notes; and



•

the outstanding notes and the exchange notes are collectively referred to as the notes.

        Each broker-dealer that receives exchange notes for its own account under the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, or the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where the outstanding notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending not less than 180 days after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any resale. See "Plan of Distribution."

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All brand names, trademarks and service marks appearing in this prospectus are the property of their respective owners. This prospectus contains registered trademarks owned or licensed to companies other than us, including but not limited to Comfort Inn®, Courtyard by Marriott®, Doubletree®, Four Points by Sheraton®, Hampton Inn®, Hilton®, Holiday Inn®, Holiday Inn Express®, Homewood Suites® by Hilton, Residence Inn by Marriott®, Sheraton®, and TownePlace Suites by Marriott®. None of the owners or licensees of any trademarks contained in this prospectus, including but not limited to Marriott International, Inc., Starwood Hotels & Resorts Worldwide, Inc., The Sheraton Corporation, Hilton Inns, Inc., Hilton Hotels Corporation, Six Continents Hotels, Inc., Holiday Hospitality Franchising, Inc., Choice Hotels International, Inc. or any of their respective present and future owners, subsidiaries, affiliates, officers, directors, agents or employees are in any way participating in or endorsing this offering and none of them shall in any way be deemed an issuer or underwriter of the notes or have any liability or responsibility for any financial statements, projections or other financial information contained or incorporated by reference in this prospectus. Certain subsidiaries of RFS are parties to license agreements with The Sheraton Corporation or its affiliates that enable those subsidiaries to operate hotels using the service mark "Sheraton®." Neither The Sheraton Corporation nor its affiliates own such hotels. Holiday Inn® and Holiday Inn Express® are trademarks owned by Six Continents Hotels, Inc.

FORWARD-LOOKING STATEMENTS

        This prospectus and the information incorporated by reference into this prospectus contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements containing the words "believes," "anticipates," "expects," "estimates," "intends," "plans," "projection," "will continue" and words of similar import. We have based these forward-looking statements on our current expectations and projections about future events and trends affecting the financial condition of our business which may prove to be incorrect. These forward-looking statements relate to future events, our future financial performance, and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. You should specifically consider the various factors identified in this prospectus, particularly those under the caption "Risk Factors," and in any other documents filed by us with the SEC that could cause actual results to differ materially from our forward-looking statements.

        These factors include risks relating to:

•

September 11, 2001's events and the current U.S. economic recession;



•

our hotel concentration in certain states, particularly California;



•

increases in our leverage and related adverse effects on our financial condition;



•

restrictive debt covenants that could adversely affect our ability to run our business;



•

dependence of our ability to grow on our ability to obtain suitable financing and to take advantage of favorable acquisition opportunities;



•

increased debt service obligations and resulting reductions in our funds from operations;



•

our new TRS lessee structure and the associated risk of increased hotel operating expenses;



•

the loss of key executive officers that we depend on to operate our business;



•

uninsured and underinsured losses;



•

our reliance on third-party management companies to operate our hotels and the risk that a change in these companies may be costly and disruptive to our operations;

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•

requirements of franchise agreements, including the right of some franchisors to immediately terminate their respective agreements if we breach certain provisions relating to registration or transfer of our securities;



•

inability to successfully implement our selective acquisition and disposition strategy or fully realize the benefits of our strategy;



•

inability to adequately finance or fully realize the anticipated benefits of our renovations;



•

increases in our leverage and related adverse effects on our financial condition;



•

risks of hotel operations;



•

seasonality of the hotel business;



•

risks that may adversely affect real estate ownership in general;



•

costs of complying with environmental laws;



•

costs of complying with the Americans with Disabilities Act;



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the complexity of federal income tax laws governing REITs;



•

being subject to tax as a result of a failure to make required distributions;



•

being subject to federal income tax for failure to qualify as a REIT;



•

increase in our overall tax liability as a result of the formation of the TRS lessees; and



•

other factors described under "Risk Factors" in this prospectus and as described from time to time in our filings with the SEC.

        We undertake no obligation to, and do not intend to update any forward-looking statements, the factors listed above, the matters discussed in the "Risk Factors" section of this prospectus, or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. There are a number of risk factors associated with the conduct of our business, and the discussion contained in the section entitled "Risk Factors" may not be exhaustive. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. All forward looking statements should be viewed with caution.

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CERTAIN DEFINITIONS

        Unless otherwise indicated, the term "Partnership" refers to RFS Partnership, L.P., and the terms "RFS," "we," "us," "our," "our Company" or "the Company" refer to RFS Hotel Investors, Inc. and its subsidiaries, including the Partnership, RFS 2002 Financing, Inc. and RFS Leasing VII, Inc.

        Unless otherwise indicated, the term "pro forma" or the phrase "on a pro forma basis" refers to the adjustments resulting from:

•

the issuance and sale of $125 million of outstanding notes and application of the net proceeds as described in this prospectus; and



•

our sale on February 20, 2002 of 1.15 million shares of common stock and the application of the net proceeds (approximately $14.2 million) to reduce the outstanding balance under our line of credit.

        We define "EBITDA" as earnings before interest, taxes, depreciation and amortization, computed by adding Funds From Operations, as defined herein, interest expense, amortization expense, current income taxes and preferred stock dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

        Unless otherwise indicated, the phrase "1996 commercial mortgage bonds" refers to both the Class A and Class B commercial mortgage bonds described under "Description of Other Indebtedness and Preferred Stock—Commercial Mortgage Bonds—1996 Financing."

        We obtained market data and certain other industry data and forecasts used throughout this prospectus from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that they obtain their information from sources they believe to be reliable, but they do not guarantee the accuracy and completeness of such information. Similarly, while we believe that the internal surveys, industry data and forecasts and market research are reliable, we have not independently verified such data and we do not make any representation as to the accuracy of such information.

iv

PROSPECTUS SUMMARY

This summary may not contain all the information that may be important to you. You should read this entire prospectus, including the financial data and related notes, before making an investment decision.

The Company

        RFS Hotel Investors, Inc. is a self-administered hotel real estate investment trust ("REIT") headquartered in Memphis, Tennessee. We have grown from owning seven hotels with 1,118 rooms in five states at the time of our initial public offering in August 1993 to owning interests in 58 hotels with approximately 8,400 rooms in 24 states at December 31, 2001. Many of our hotels are located in attractive metropolitan areas or rapidly growing secondary markets and are well located within these markets. All but two of our hotels are operated under franchises from nationally recognized franchisors such as Marriott International, Inc., Hilton Hotels Corporation, Starwood Hotels & Resorts, Inc. and Six Continents PLC. For the year ended December 31, 2001, we generated approximately 93% of our EBITDA, as defined herein, from hotels operating under nationally recognized brands from these franchisors.

        RFS is the sole general partner of the Partnership and, at December 31, 2001, owned an approximately 91% interest in the Partnership. Substantially all of our business activities are conducted through the Partnership. For the year ended December 31, 2001, we generated revenues of $221.9 million and EBITDA of $81.8 million.

        The following summarizes information for the 58 hotels we owned at December 31, 2001:

Franchise Affiliation		Hotel Properties	Rooms/Suites
Full Service Hotels:
Sheraton		4	864
Holiday Inn		5	954
Independent		2	331
Four Points by Sheraton		2	412
Hilton		1	234
Doubletree		1	221
		15	3,016
Extended Stay Hotels:
Residence Inn by Marriott		14	1,851
TownePlace Suites by Marriott		3	285
Homewood Suites by Hilton		1	83
		18	2,219
Limited Service Hotels:
Hampton Inn		17	2,113
Holiday Inn Express		5	637
Courtyard by Marriott		1	102
Comfort Inn		2	337
		25	3,189
	Total	58	8,424

        On June 1, 1993, RFS was incorporated in Tennessee, and on August 3, 1993, the Partnership was formed as a limited partnership in Tennessee. Our principal executive office is located at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120, and our telephone number is (901) 767-7005. RFS's common stock is listed on the New York Stock Exchange under the symbol "RFS."

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Competitive Strengths

        We believe that we are distinguished by the following competitive strengths:

        Diversified Asset Base.    Our hotel portfolio is diversified by brand, geography and market segment. Our hotels are operated under leading brands including Sheraton, Residence Inn by Marriott, Hilton, Doubletree, Holiday Inn, Hampton Inn, and Homewood Suites by Hilton. We own hotels in 24 states. For the year ended December 31, 2001, we generated 37% of our EBITDA in California, 10% in Florida, 7% in Texas, 6% in Michigan, 5% in Illinois and 35% in 19 other states, and we generated 42% of our EBITDA from full service hotels, 33% from extended stay hotels and 25% from limited service hotels. No single hotel accounted for more than 6% of our EBITDA for the year ended December 31, 2001.

        Conservative Balance Sheet.    We believe there is a competitive advantage in limiting the use of leverage and preserving a conservative capital structure. We are committed to maintaining financial flexibility, which we believe may allow us to pursue selective acquisitions and attractive renovation, rebranding and redevelopment opportunities. As part of this commitment, our board of directors presently has a policy limiting the amount of total debt we will incur to an amount not in excess of 45% of our investment in hotel properties, at cost. Furthermore, our management's long-term compensation is based, in part, on maintaining leverage below this target ratio. At December 31, 2001, our ratio of total debt to investment in hotel properties, at cost, as defined, was 38%. Additionally, our ratios of debt to EBITDA and EBITDA to interest expense for the year ended December 31, 2001 were 3.7x and 3.3x, respectively.

        Disciplined Capital Rationing.    We are committed to our selective acquisition strategy which entails acquiring properties only if they meet at least one of our specific criteria and can be purchased at reasonable multiples to historical cash flow. As a result, we have achieved significant returns on investments on our hotel properties. For the years ended December 31, 2001, 2000, and 1999, the un-leveraged return on investment for our comparable hotels was 11.3%, 13.4%, and 12.8%, respectively. Based upon our 38% to 40% leverage and our 7.44% to 7.9% average borrowing costs in those years, our leveraged return on investment was 13.4%, 16.8%, and 16.4%, respectively.

        Favorable Corporate Structure.    As a result of the REIT Modernization Act, effective January 1, 2001, we were able to terminate our operating leases and management contracts with subsidiaries of Hilton, and establish taxable REIT subsidiaries, which currently lease 53 of our hotels ("TRS lessees"). This TRS structure enables us to directly oversee the management of these hotels without an intermediate third-party lessee. The new TRS structure also allows us to retain the operating profits from the hotels in the TRS lessee structure and provides us with the following advantages when compared to our prior third-party lessee structure:

•

more control over the daily operations of these hotels;



•

benefits from cost efficiencies or ancillary revenues generated at these hotels;



•

benefits from hotels no longer being encumbered by long-term third-party leases;



•

favorable management agreements; and



•

financial statements that more clearly depict our hotel operations.

        Experienced Senior Management.    Our senior management team is comprised of three executive officers with complementary skills and extensive experience in the hotel industry and various other areas of real estate. Bob Solmson, our Chairman of the Board and Chief Executive Officer, founded our company in 1993 and has been actively involved in the real estate and hotel businesses since 1974. Randy Churchey, our President and Chief Operating Officer since November 1999, previously served as the Chief Financial Officer for FelCor Lodging Trust Incorporated and prior to that held various

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positions with Coopers & Lybrand, L.L.P. Kevin Luebbers, our Executive Vice President and Chief Financial Officer, joined us in July 2000 from Hilton Hotels Corporation, where he most recently served as Senior Vice President of Planning and Investment Analysis.

Business Strategy

        The principal features of our business strategy are outlined below:

        Actively Manage Our Portfolio of Assets.    We seek to increase operating cash flows through aggressive asset management. We apply our asset management and investing expertise to the renovation, redevelopment and rebranding of our existing hotels and the maintenance of strong strategic relationships with our brand owners and managers. Over the past four fiscal years, we have spent approximately $86 million upgrading, renovating and redeveloping existing hotels in order to enhance their competitive position and improve cash flow. Recent examples of this strategy include:

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an $11 million renovation and conversion of our 234-room San Francisco Fisherman's Wharf hotel from a Ramada Plaza to a Hilton;



•

a $4.5 million, 40-room addition to our Beverly Heritage hotel in Milpitas, California;



•

the conversion of our Sunnyvale, California hotel from a Four Points by Sheraton to a Sheraton; and



•

the renovation and conversion of our Clayton, Missouri hotel from a Holiday Inn to a Sheraton.

        Maintain Strong Brand Affiliations.    All but two of our hotels operate under franchises from national hotel brands. Franchised hotels typically have higher levels of occupancy and average daily rates than non-franchised hotels due to access to the national reservation systems and marketing provided by these franchisors. For the year ended December 31, 2001, we generated 93% of our EBITDA from hotels under franchise by four of the largest and most well-respected hotel franchisors: Marriott (Residence Inn, Courtyard by Marriott, TownePlace Suites by Marriott), Hilton (Hilton, Doubletree, Hampton Inn, Homewood Suites by Hilton), Starwood (Sheraton and Four Points by Sheraton) and Six Continents (Holiday Inn and Holiday Inn Express).

        Make Selective Acquisitions.    Over the past several years, we believed that acquisition prices were not attractive by historical standards and generally offered cash returns below our cost of capital; as a result, we reduced our acquisition activity. We believe that the current acquisition environment may become more favorable because an increasing number of owners are seeking liquidity events and many potential buyers are focused on integrating past acquisitions and reducing debt levels. We intend to pursue our acquisition strategy by focusing our acquisition activities primarily on individual 200 to 500-room hotels with the potential for attractive returns and which meet one or more of the following criteria:

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under-performing, upscale, full service hotels in strong markets (i.e., urban or highly developed suburban markets) which may benefit from rebranding or redevelopment;



•

national brand hotels in the upscale, full service segment which may benefit from overflow traffic from a nearby larger, convention hotel of the same brand; and



•

hotels in promising geographic locations where we are currently under-represented.

        Divest Non-Core Properties.    We continue to modify our portfolio by selectively divesting hotels that are not consistent with our long-term investment objectives, particularly limited service hotels located in smaller markets. We intend to continue to selectively divest hotels that:

•

may offer limited earnings growth;

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•

may suffer adverse changes in their local markets; or



•

may not offer attractive returns on required additional capital investments.

        Over the past four years, we have sold 10 non-core properties for approximately $61.9 million.

Recent Developments

        Since January 1, 2001, we:

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successfully completed the sale of 1.15 million shares of our common stock, including shares that were issued upon the exercise of the underwriter's over-allotment option, net proceeds of approximately $14.2 million from the sale of the common stock were used to reduce the outstanding balance under our line of credit; and



•

successfully completed the sale of $125 million in senior, unsecured notes, which bear an annual interest rate of 9.75% and mature on March 1, 2012, net proceeds of approximately $121.5 million from the sale of the senior notes were (or are expected to be) used to reduce the outstanding balance under our line of credit, terminate two interest rate swaps and redeem our 1996 commercial mortgage bonds.

Risk Factors

        Tendering your outstanding notes or otherwise investing in the exchange notes involves substantial risks. See "Risk Factors" for a description of the risks that are presently known by us. You should carefully consider these risk factors before investing in the exchange notes.

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Our Organizational Structure

        The following table summarizes our organizational structure and debt outstanding on a pro forma basis as of December 31, 2001. The TRS lessees lease 53 of the 58 hotels owned by the Partnership and its subsidiaries. Flagstone Hospitality Management LLC manages 51 of these hotels and two third party management companies manage two of these hotels. The remaining five hotels are leased to and managed by third party hotel management companies.

(1)

Reflects the repayment of (i) approximately $53.6 million with a portion of the net proceeds from the issuance of the outstanding notes, and (ii) approximately $14.2 million with the net proceeds of our recently completed sale of 1.15 million shares of common stock.

(2)

Reflects the redemption of the aggregate outstanding balance (approximately $58.2 million at December 31, 2001) of our 1996 commercial mortgage bonds with the remaining portion of the net proceeds from the issuance of the outstanding notes. We expect to fund the redemption of our 1996 commercial mortgage bonds on or about March 20, 2002. Upon consummation of the redemption, RFS Financing Partnership, LP, the issuer of the 1996 commercial mortgage bonds, is expected to become a guarantor of the notes.

(3)

We own a 75% interest in this partnership which owns the Hilton San Francisco Fisherman's Wharf and we are the sole general partner of this partnership.

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Summary of the Exchange Offer

        We summarize the terms of the exchange offer below. This summary is not intended to be complete. You should read the discussion under the heading "The Exchange Offer" for further information regarding the exchange offer and resale of the exchange notes.

The Exchange Offer	We are offering to exchange up to $125 million in aggregate principal amount of exchange notes, which have been registered under the Securities Act, for up to $125 million in aggregate principal amount of outstanding notes, which we issued on February 26, 2002 in a private offering.
	In order for your outstanding notes to be exchanged, you must properly tender them prior to the expiration of the exchange offer. Except as set forth below under "—Conditions to the Exchange Offer," all outstanding notes that are validly tendered and not validly withdrawn will be exchanged. We will issue exchange notes as soon as practicable after the expiration of the exchange offer.
	Outstanding notes may be exchanged for exchange notes only in integral multiples of $1,000.
	We believe that the exchange notes may be offered for resale, resold and otherwise transferred by you without compliance with the registration or prospectus delivery provisions of the Securities Act if:
	•	you are acquiring the exchange notes in the ordinary course of your business;
	•	you are not participating, do not intend to participate, and have no arrangements or understanding with any person to participate, in the distribution of the exchange notes issued to you; and
	•	you are not an affiliate, under Rule 405 of the Securities Act, of ours.
	Our belief is based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties unrelated to us. If our belief is not accurate and you transfer an exchange note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from such requirements, you may incur liability under the Securities Act. We do not and will not assume or indemnify you against such liability.

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	Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with those resales.
Registration Rights Agreement	We sold the outstanding notes on February 26, 2002 to the initial purchasers of the outstanding notes. Simultaneously with that sale, we signed a registration rights agreement with the initial purchasers which requires us to conduct this exchange offer. You have the right pursuant to the registration rights agreement to exchange your outstanding notes for exchange notes with substantially identical terms. This exchange offer is intended to satisfy these registration rights. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to outstanding notes you do not tender for exchange.
Consequences of Failure to Exchange Your Outstanding Notes	If you do not exchange your outstanding notes for exchange notes pursuant to the exchange offer, you will continue to be subject to the restrictions on transfer provided in the outstanding notes and the indenture. In general, the outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not intend to register any untendered outstanding notes under the Securities Act. To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for untendered outstanding notes and tendered but unaccepted outstanding notes will be adversely affected.
Expiration Date	The exchange offer will expire at 5:00 p.m., New York City time, on                        , 2002, or a later date and time to which we may extend it, in which case the term "expiration date" will mean the latest date and time to which the exchange offer is extended.
Withdrawal Rights	You may withdraw your tender of outstanding notes at any time prior to the expiration date by delivering written notice of your withdrawal to the exchange agent in accordance with the withdrawal procedures described in this prospectus. We will return to you, without charge, promptly after the expiration or termination of the exchange offer any outstanding notes that you tendered but that were not exchanged.
Conditions to the Exchange Offer	We will not be required to accept outstanding notes for exchange if:

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	•	the exchange offer would violate applicable law or SEC interpretations or any legal action has been instituted or threatened that would impair our ability to proceed with the exchange offer; or
	•	you do not tender your outstanding notes in compliance with the terms of the exchange offer.
	The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered. We reserve the right to terminate the exchange offer if certain specified conditions have not been satisfied and to waive any condition or extend the exchange offer or otherwise amend the terms of the exchange offer in any respect. Please read the section "The Exchange Offer—Conditions to the Exchange Offer" for more information regarding the conditions to the exchange offer.
Procedures for Tendering Outstanding Notes and Representations	If your outstanding notes are held through The Depository Trust Company ("DTC") and you wish to participate in the exchange offer, you may do so through one of the following methods:
	•	Delivery of a Letter of Transmittal. You must complete and sign a letter of transmittal in accordance with the instructions contained in the letter of transmittal and forward the letter of transmittal by mail, facsimile transmission or hand delivery, together with any other required documents, to the exchange agent, either with the outstanding notes to be tendered or in compliance with the specified procedures for guaranteed delivery of the outstanding notes; or
	•	Automated Tender Offer Program of The DTC. If you tender under this program, you will agree to be bound by the letter of transmittal that we are providing with this prospectus as though you had signed the letter of transmittal.
	Under both methods, by signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:
	•	any exchange notes that you receive are being acquired in the ordinary course of your business;
	•	you have no arrangement or understanding with any person or entity to participate in any distribution of the exchange notes;
	•	you are not engaged in and do not intend to engage in any distribution of the exchange notes;

8

	•	if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes, you acquired those notes as a result of market-making activities or other trading activities and you will deliver a prospectus, as required by law, in connection with any resale of the exchange notes; and
	•	you are not our "affiliate," as defined in Rule 405 of the Securities Act.
	Please do not send your letter of transmittal or certificates representing your outstanding notes to us. Those documents should only be sent to the exchange agent. Questions regarding how to tender and requests for information should be directed to the exchange agent.
Special Procedures for Beneficial Owners	If you own a beneficial interest in outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender the outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf.
Consequences of Not Complying with Exchange Offer Procedures	You are responsible for complying with all exchange offer procedures. You will only receive exchange notes in exchange for your outstanding notes if, prior to the expiration date, you deliver to the exchange agent:
	•	the letter of transmittal, properly completed and duly executed;
	•	any other documents or signature guarantees required by the letter of transmittal;
	•	certificates for the outstanding notes or a book-entry confirmation of a book-entry transfer of the outstanding notes into the exchange agent's account at DTC.
	Any outstanding notes you hold and do not tender, or which you tender but which are not accepted for exchange, will remain outstanding and continue to accrue interest, but will not retain any rights under the registration rights agreement. You will not have any appraisal or dissenters' rights in connection with the exchange offer. You should allow sufficient time to ensure that the exchange agent receives all required documents before the expiration of the exchange offer. Neither we nor the exchange agent has any duty to inform you of defects or irregularities with respect to your tender of outstanding notes for exchange.

9

Guaranteed Delivery Procedures	If you wish to tender your outstanding notes and cannot comply, prior to the expiration date, with the applicable procedures for tendering outstanding notes described above and under "The Exchange Offer—Procedures for Tendering," you must tender your outstanding notes according to the guaranteed delivery procedures described in "The Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures."
U.S. Federal Income Tax Considerations	The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for United States federal income tax purposes. Please read "Material U.S. Federal Income Tax Considerations."
Use of Proceeds	We will not receive any cash proceeds from the issuance of exchange notes. The net proceeds from the sale of the outstanding notes were (or are expected to be) used to:
	•	redeem certain of our outstanding commercial mortgage bonds, including the payment of a yield maintenance premium;
	•	repay amounts outstanding under our line credit; and
	•	pay interest rate swap termination fees.
	See "Use of Proceeds."
The Exchange Agent	We have appointed U.S. Bank National Association as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent as follows: U.S. Bank National Association, 180 East Fifth Street, St. Paul, MN 55101; Attention: Frank P. Leslie, (651) 244-8677. Eligible institutions may make requests by facsimile at (651) 244-0711.

10

Summary of the Terms of the Exchange Notes

        This exchange offer relates to the exchange of up to $125 million in aggregate principal amount of exchange notes for an equal principal amount of outstanding notes. The outstanding notes were issued on February 26, 2002. The form and terms of the exchange notes are substantially identical to the form and terms of the outstanding notes, except the exchange notes will be registered under the Securities Act. Therefore, the exchange notes will not bear legends restricting their transfer. The exchange notes will evidence the same debt as the outstanding notes, which they are replacing, and both the outstanding notes and the exchange notes are governed by the same indenture.

Co-Issuers	RFS Partnership, L.P. RFS 2002 Financing, Inc.
Securities Offered	$125 million in aggregate principal amount of 9.75% Series B Senior Notes due 2012.
Maturity Date	March 1, 2012.
Interest Payment Dates	The exchange notes will bear interest at a rate of 9.75% per year, payable semi-annually, in arrears, on March 1 and September 1 of each year, commencing on September 1, 2002.
Ranking	The exchange notes will be senior, unsecured obligations of the Partnership. The exchange notes will rank:
	•	senior to all our subordinated indebtedness;
	•	equally with all our existing and future senior unsecured indebtedness; and
	•	effectively subordinate to all of our secured indebtedness to the extent of the value of the collateral and to all other debt of our non-guarantor subsidiaries.
Optional Redemption	At any time prior to March 1, 2005, we will have the option to redeem up to 35% of the notes (subject to certain limitations) at the redemption price 109.750% using the proceeds of certain equity offerings.
	Prior to March 1, 2007, we will have the option to redeem the notes, in whole or in part, from time to time, at a price equal to the greater of 104.875% of the principal amount of the exchange notes or a "make-whole" premium as set forth in this prospectus.
	On or after March 1, 2007, we will have the option to redeem the exchange notes, in whole or in part, at the redemption prices between 104.875% and 100.000%, as set forth in this prospectus.
Change of Control	Upon a change of control, you may require us to repurchase all or a portion of your exchange notes at a purchase price of 101% of their principal amount, plus accrued but unpaid interest, if any.

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Guarantees	The exchange notes will be guaranteed on a full, unconditional, joint and several basis by RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. Most of our subsidiaries are not guarantors and our future subsidiaries are not required to become guarantors.
Certain Covenants	The terms of the exchange notes restrict our ability and the ability of certain of our subsidiaries to:
	•	pay or permit payment of certain dividends on, or redeem or repurchase, our capital stock;
	•	make certain distributions, investments and other restricted payments;
	•	incur additional indebtedness;
	•	allow the imposition of dividend restrictions on subsidiaries;
	•	sell assets and the capital stock of our subsidiaries;
	•	guarantee indebtedness;
	•	create certain liens;
	•	engage in certain transactions with affiliates; and
	•	consolidate or merge or sell all or substantially all our assets and the assets of our subsidiaries.
	However, these limitations will be subject to a number of important qualifications and exceptions described under "Description of Exchange Notes."

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Summary Historical and Unaudited Pro Forma Consolidated Financial Data

        The following table sets forth summary historical consolidated financial data for RFS Hotel Investors, Inc. and RFS Partnership, L.P. The summary historical consolidated information is presented as of and for the years ended December 31, 1999, 2000 and 2001. We derived the historical consolidated financial information for the years ended December 31, 1999, 2000 and 2001 from RFS Hotel Investors, Inc.'s and RFS Partnership, L.P.'s consolidated financial statements and the notes thereto, audited by PricewaterhouseCoopers LLP, independent accountants. RFS Hotel Investors, Inc.'s only significant asset is its ownership interest in RFS Partnership, L.P., accordingly the only difference between RFS Hotel Investors, Inc. and RFS Partnership, L.P.'s statement of operations data is the earnings or loss attributed to the minority interest in RFS Partnership, L.P. not held by RFS Hotel Investors, Inc.

        The following table also sets forth summary unaudited pro forma consolidated financial data for RFS Hotel Investors, Inc. and RFS Partnership, L.P. as of and for the year ended December 31, 2001. The summary unaudited pro forma consolidated financial data as of and for the year ended December 31, 2001 has been prepared based upon the consolidated financial statements of RFS Hotel Investors, Inc. and RFS Partnership, L.P. included herein and have been prepared based upon available information and assumptions our management believes are reasonable. The summary unaudited pro forma consolidated financial data as of and for the year ended December 31, 2001 is presented for illustrative purposes only and is not necessarily indicative of what the actual results of operations or financial position would have been had the transactions described below occurred on the indicated dates. The summary unaudited pro forma consolidated financial data for the year ended December 31, 2001 assumes that the following occurred on January 1, 2001 and the summary unaudited pro forma balance sheet data assumes the following occurred on December 31, 2001:

•

the issuance of $125 million of Series A Senior Notes on February 26, 2002, and the application of the net proceeds therefrom (approximately $121.5 million) to (1) retire $58.2 million in mortgage debt and pay a related $6.5 million yield maintenance premium, (2) terminate two interest rate swap agreements at a cost of $3.2 million and (3) reduce the balance outstanding on our line of credit by $53.6 million; and



•

our sale of 1.15 million shares of common stock on February 20, 2002, and the application of the net proceeds therefrom (approximately $14.2 million) to reduce the balance outstanding on our line of credit.

        You should read the following information together with "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership" and the RFS Hotel Investors, Inc. and RFS Partnership, L.P. consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

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RFS Hotel Investors, Inc.

			Year Ended December 31,
			1999			2000			2001(1)
			(in thousands, except per share, ratio, % and hotel data)
Statement of Operations Data:
	Total revenues		$	99,662		$	107,359		$	221,878
	Hilton lease termination expense, net of deferred income taxes			—			—			40,762
	Net income (loss)			34,990			30,790			(13,729	)
	Net income (loss) applicable to common shareholders			33,578			29,378			(11,713	)
	Earnings (loss) per share data:
		Earnings (loss) per share—basic and diluted		1.34			1.20			(0.47	)
		Weighted average common shares outstanding—basic		25,002			24,559			25,045
		Weighted average common shares outstanding—diluted		25,002			24,580			25,045
Balance Sheet Data (end of period):
	Investment in hotels, net of accumulated depreciation		$	651,988		$	635,997		$	615,562
	Total assets			687,242			673,467			668,862
	Total debt			282,278			277,431			301,135
	Minority interest in RFS Partnership, L.P. and other consolidated subsidiaries			35,618			34,848			31,059
	Preferred stock			10			10			25,000
	Shareholders' equity			361,283			348,445			290,811
Other Data:
	Cash flows:
		Provided by operating activities	$	66,884		$	65,223		$	10,466
		Used by investing activities		(26,580	)		(10,843	)		(8,642	)
		Provided (used) by financing activities		(36,405	)		(56,612	)		230
	Depreciation			24,210			27,198			29,605
	Capital expenditures			34,066			32,551			18,013
	Funds from operations(2)			63,010			64,170			51,229
	EBITDA(3)			86,116			90,308			81,800
	Ratio of earnings to fixed charges(4)			2.7x			2.4x			0.4x
	Supplemental ratio of earnings to fixed charges(5)			—			—			2.0x
Hotel Data:
	Number of properties			62			60			58
	Number of rooms			9,086			8,689			8,424
	Average daily rate		$	87.98		$	91.83		$	92.28
	Occupancy percentage			71.8	%		73.1	%		70.2	%
	RevPAR(6)		$	63.13		$	67.16		$	64.74
Pro Forma Financial Data (end of period):
Investment in hotels, net of accumulated depreciation									$	615,562
Total assets										670,999
Total debt										300,180
Minority interest in RFS Partnership, L.P. and other consolidated subsidiaries										29,965
Preferred stock										25,000
Shareholders' equity										298,217
Interest expense(7)										27,307
EBITDA to interest expense										3.0x
Total debt to EBITDA										3.7x

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RFS Partnership, L.P.

			Year Ended December 31,
			1999			2000			2001(1)
			(in thousands, except per unit, ratio, % and hotel data)
Statement of Operations Data:
	Total revenues		$	99,662		$	107,359		$	221,878
	Hilton lease termination expense, net of deferred income taxes			—			—			40,762
	Net income (loss)			38,610			34,008			(14,886	)
	Net income (loss) applicable to common unit holders			37,198			32,596			(12,870	)
	Earnings (loss) per unit data:
		Earnings (loss) per unit—basic and diluted		1.35			1.20			(0.47	)
		Weighted average common units outstanding—basic		27,569			27,121			27,520
		Weighted average common units outstanding—diluted		27,569			27,127			27,520
Balance Sheet Data:
	Investment in hotels, net of accumulated depreciation		$	651,988		$	635,997		$	615,562
	Total assets			687,242			673,467			668,862
	Total debt			282,278			277,431			301,135
	Series B preferred units			—			—			25,000
	Redeemable limited partnership units, at redemption value			26,779			33,461			27,980
	Partners' capital			369,947			349,667			291,715
Other Data:
	Cash flows:
		Provided by operating activities	$	66,884		$	65,223		$	10,466
		Used by investing activities		(26,580	)		(10,843	)		(8,642	)
		Provided (used) by financing activities		(36,405	)		(56,612	)		230
	Depreciation			24,210			27,198			29,605
	Capital expenditures			34,066			32,551			18,013
	Funds from operations(2)			63,010			64,170			51,229
	EBITDA(3)			86,116			90,308			81,800
	Ratio of earnings to fixed charges(4)			2.7x			2.4x			0.4x
	Supplemental ratio of earnings to fixed charges(5)			—			—			2.0x
Hotel Data:
	Number of properties			62			60			58
	Number of rooms			9,086			8,689			8,424
	Average daily rate		$	87.98		$	91.83		$	92.28
	Occupancy percentage			71.8	%		73.1	%		70.2	%
	RevPAR(6)		$	63.13		$	67.16		$	64.74
Pro Forma Financial Data (end of period):
Investment in hotels, net of accumulated depreciation									$	615,562
Total assets										670,999
Total debt										300,180
Series B preferred units										25,000
Redeemable limited partnership units, at redemption value										27,980
Partners' capital										298,027
Interest expense(7)										27,307
EBITDA to interest expense										3.0x
Total debt to EBITDA										3.7x

(1)

Includes hotel revenues and hotel operating expenses with respect to 55 hotels that were leased to or managed by Hilton or other third-parties prior to the effectiveness of the REIT Modernization Act on

15

January 1, 2001. Prior to January 1, 2001, our revenues were comprised mainly of percentage lease revenues.

(2)

We consider Funds From Operations to be a key measure of a REIT's performance which should be considered along with, but not as an alternative to net income or loss and cash flow as a measure of operating performance and liquidity. The White Paper on Funds From Operations approved by the Board of Governors of NAREIT defines Funds From Operations as net income or loss (computed in accordance with GAAP), excluding gains or losses from debt restructuring which would be extraordinary items in accordance with GAAP and sales of depreciable operating properties, plus real estate related depreciation and amortization and after comparable adjustments for our portion of these items related to unconsolidated entities and joint ventures. We believe that Funds From Operations is helpful to our investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of our ability to incur and service debt, to make capital expenditures and to fund other cash needs. We compute Funds From Operations in accordance with standards established by NAREIT, except that we add back lease termination costs and deferred income taxes to derive Funds From Operations. This may not be comparable to Funds From Operations reported by other REITs that may or may not define the term in accordance with the current NAREIT definition, that interpret the current NAREIT definition differently than we do or that do not adjust Funds From Operations for lease termination costs and deferred income taxes. Funds From Operations does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income or loss (determined in accordance with GAAP) as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. Funds From Operations may include funds that may not be available for our management's discretionary use due to requirements to conserve funds for capital expenditures, debt repayment and property acquisitions and other commitments and uncertainties. For additional information regarding our FFO and EBITDA calculations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

(3)

We compute earnings before interest, taxes, depreciation and amortization (EBITDA) by adding Funds From Operations, interest expense, amortization expense, current income taxes and our preferred stock dividends. EBITDA is presented because it provides useful information regarding our ability to service debt and is commonly used by financial analysts and others who follow our industry to measure operating performance. EBITDA should not be considered as an alternative measure of operating results or cash flow from operations, as determined in accordance with GAAP. EBITDA as presented by us may not be comparable to other similarly titled measures used by other companies. For additional information regarding our FFO and EBITDA calculations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

(4)

For the purpose of computing the ratio of earnings to fixed charges, earnings consist of income plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the year ended December 31, 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $14.8 million.

(5)

The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (4) except that income from continuing operations is adjusted to add back the Hilton lease termination expense, net of deferred income taxes, of $40.8 million.

(6)

Revenue per available room (RevPAR) is calculated as room revenue divided by available room nights.

(7)

Interest expense excludes $1.6 million in amortization of capitalized debt costs.

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RISK FACTORS

        Before tendering your outstanding notes for exchange notes or investing in the exchange notes, you should carefully consider the following factors and other information in this prospectus. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition, results of operations and our ability to make payments on the notes could be materially adversely affected by any of the following risks. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks faced by us described below or elsewhere.

Risks Related to Our Debt and an Investment in the Exchange Notes

The exchange notes will be effectively subordinated to certain of our and our subsidiaries' liabilities.

        The exchange notes will be unsecured and will rank equally with our existing and future senior unsecured indebtedness and will be effectively subordinated to all of our and our subsidiaries' secured debt to the extent of the value of such security. The exchange notes will be guaranteed by RFS and RFS Leasing VII, Inc. (RFS Leasing), and, therefore, will be effectively subordinated to all current and future liabilities of our non-guarantor subsidiaries. The covenants governing the exchange notes will allow us and will allow our subsidiaries to incur additional debt, including secured debt, and will allow our non-guarantor subsidiaries to incur additional debt up to an aggregate amount equal to 45% of our adjusted total assets. On a pro forma basis, at December 31, 2001, we and our consolidated subsidiaries would have had approximately $161.8 million of mortgage debt which is secured by $255.8 million of our investments in hotel properties on a book value basis. On a pro forma basis, at December 31, 2001, this mortgage debt was the only outstanding debt of our non-guarantor subsidiaries. In addition, on a pro forma basis, at December 31, 2001, we would have had $126.6 million of available borrowing capacity under our line of credit, subject to borrowing base values, which, including two hotels expected to be added to the collateral pool during the first quarter of 2002, is secured by $216.2 million of our investments in hotel properties on a book value basis. The terms of certain of our mortgage debt prevent the subsidiaries that issued such debt from guaranteeing any of our other debt. On a pro forma basis, at December 31, 2001, our non-guarantor subsidiaries would have had approximately $255.8 million of our investments in hotel properties on a book value basis. On a pro forma basis, for the year ended December 31, 2001, these investments in hotel properties represented approximately 42% of the net book value of our investment in hotel properties and produced approximately 42% of our EBITDA.

RFS 2002 Financing, a co-issuer, and RFS Leasing, a co-guarantor, offer little credit support because they lack sufficient assets and cash flow to service the exchange notes.

        The exchange notes will be co-issued by the Partnership and RFS 2002 Financing, Inc. (RFS 2002), a wholly-owned subsidiary of ours. RFS 2002 was formed in February 2002 solely to facilitate the offering of the notes. RFS 2002 has no assets and no sources of revenue or cash flow. The exchange notes will be guaranteed by RFS and RFS Leasing, a wholly-owned subsidiary of ours. RFS Leasing was recently formed and had no substantial operations prior to January 1, 2001. Since that date, RFS Leasing's only activities relate to the 23 hotels it leases directly or indirectly from us. As of and for the year ended December 31, 2001, RFS Leasing did not have a material amount of assets, and incurred both operating and net losses. Consequently, in the event that it becomes necessary for RFS 2002 or RFS Leasing to provide credit support for the exchange notes, RFS 2002 will not, and RFS Leasing likely will not have sufficient cash flow to make any required payments under the exchange notes.

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We have restrictive debt covenants that could adversely affect our ability to run our business.

        The indenture governing the exchange notes and the agreements governing our line of credit and commercial mortgage bonds contain various restrictive covenants including, among others, provisions restricting us from:

•

incurring indebtedness;



•

making distributions to our shareholders;



•

making investments;



•

engaging in transactions with affiliates;



•

incurring liens;



•

merging or consolidating with another person;



•

disposing of our assets; or



•

permitting limitations on the ability of our subsidiaries to make payments to us.

        These restrictions may adversely affect our ability to finance our operations or engage in other business activities that may be in our best interest.

        For example, our 1996 commercial mortgage bonds are secured by first mortgages on 15 of our hotels. These bonds do not permit us to sell any of these 15 hotels or substitute mortgages on other hotels as substitute collateral. We intend to use the remaining net proceeds from our sale of the outstanding notes to redeem these commercial mortgage bonds.

        Furthermore, certain of these agreements require us to maintain certain specified financial ratios. Our ability to comply with such covenants may be affected by events beyond our control. These covenants also may restrict our ability to engage in certain transactions. In addition, a breach of these limitations could result in the acceleration of most of our debt. We may not be able to refinance or repay this debt in full under such circumstances.

Our ability to grow may also be limited by our ability to attract debt financing and a decrease in acquisition opportunities.

        Internal growth, which includes the renovation, redevelopment and rebranding of our hotels to achieve improved revenue performance, along with external growth, in the form of acquisitions, are both important parts of our strategy. We may not be able to fund growth solely from cash provided from operating activities because we must distribute at least 90% of our taxable income each year to maintain our tax status as a REIT. Consequently, we rely upon the availability of debt or equity capital to fund hotel acquisitions and improvements. We cannot assure you that we will be successful in attracting sufficient debt or equity financing to fund future growth at an acceptable cost. In addition, we currently have a policy of limiting debt to not more than 45% of our investment in hotel assets, at cost, which, unless waived or modified by our board of directors, could also limit our ability to incur additional debt to fund our continued growth. At December 31, 2001, on a pro forma basis, our consolidated debt represented approximately 37% of our investment in hotels, at cost. We define "cost," as our investment in hotel properties before accumulated depreciation and amortization, plus approximately $60 million paid to Hilton on January 1, 2001, plus related expenses, to terminate our hotel leases and related agreements.

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Increases in our leverage could adversely affect our financial condition.

        Although our board of directors has adopted a policy of limiting the amount of debt we will incur to an amount not in excess of 45% of our investment in hotel properties, at cost, as defined, the board may change the debt policy at any time without shareholder approval. Furthermore, our line of credit and the exchange notes are less restrictive than our self-imposed 45% limitation. Accordingly, we and our subsidiaries may be able to incur substantial additional debt, including secured debt, in the future. The terms of our debt will not fully prohibit us or our subsidiaries from doing so. On a pro forma basis, at December 31, 2001, our line of credit would have permitted borrowings of up to $140 million, subject to borrowing base values and all of those borrowings would have effectively been senior to the exchange notes and the subsidiary guarantees to the extent of the collateral for the line of credit. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify.

        Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense on our floating rate debt and reducing funds available for our current renovation, redevelopment and rebranding plans.

        An increase in our leverage could adversely affect holders of the exchange notes by:

•

making it more difficult for us to satisfy our obligations with respect to the exchange notes;



•

limiting our ability to obtain additional financing, if we need it, for working capital, renovation, redevelopment and rebranding, acquisitions, debt service requirements or other purposes;



•

increasing our vulnerability to adverse economic and industry conditions;



•

requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities or other purposes;



•

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and



•

placing us at a competitive disadvantage compared to our competitors that have less debt.

If a change of control occurs, we may not have sufficient funds to repurchase your exchange notes.

        Upon specified change of control events, you may require us to repurchase all or a portion of your exchange notes at 101% of the principal amount then outstanding. If a change of control occurs, we may not be able to pay the repurchase price for all of the exchange notes submitted for repurchase. Future credit agreements or other agreements relating to debt may contain provisions which prohibit us from purchasing any exchange notes until we have repaid all debt outstanding thereunder. We may not be able to secure the consent of our lenders to repurchase the exchange notes or refinance the borrowings that prohibit us from repurchasing the exchange notes. If we do not obtain a consent or repay the borrowings, we could not repurchase the exchange notes. In addition, some important corporate events, such as leveraged recapitalizations that would increase the level of our debt, would not constitute a change of control under the indenture for the exchange notes.

Under certain circumstances, courts may void the guarantees under fraudulent transfer laws.

        The exchange notes will be guaranteed on an unsecured senior basis by RFS and RFS Leasing. Federal and state fraudulent conveyance laws allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors in the event of the bankruptcy or other financial difficulty of the guarantor. Under federal bankruptcy law and comparable

19

provisions of state fraudulent transfer laws, a guarantee of the exchange notes could be voided, or claims in respect of a guarantee could be subordinated to all other debt of the guarantor, if, among other things, at the time the guarantor incurred the debt evidenced by its guarantee, the guarantor:

•

received less than reasonably equivalent value of fair consideration for the incurrence of such guarantee; and



•

was insolvent or was rendered insolvent by reason of such incurrence; or



•

was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or



•

intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay such debts as they mature.

        In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to fund for the benefit of the creditors of the guarantor.

        The measure of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor of the exchange notes would be considered insolvent if:

•

the sum of its debts, including liabilities, was greater than the fair saleable value of all of its assets; or



•

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and matured; or



•

it could not pay its debts as they become due.

        A court is likely to find that a guarantor of the exchange notes did not receive fair consideration or reasonably equivalent value for its guarantee to the extent that its liability under the guarantee is greater than the direct benefit it received from the issuance of the exchange notes. By its terms, each guarantee of the exchange notes will limit the liability of the guarantor to the maximum amount that it can pay without the guarantee being deemed a fraudulent transfer. A court may not give effect to this limitation on liability. In that event, a court may find that the issuance of the guarantee rendered the subsidiary guarantor insolvent. If a court avoids the guarantee or holds it unenforceable, you will cease to have a claim against the guarantor and will be solely a creditor of the Partnership. If the limitation on liability is effective, the amount that the guarantor is found to have guaranteed might be so low that there will not be sufficient funds to pay the exchange notes in full.

The failure of a market to develop could affect your ability to, and the price at which you may, resell your securities.

        The exchange notes will be a new issue of securities for which there is no existing trading market. We cannot assure you as to the liquidity of markets that may develop for the exchange notes, your ability to sell the exchange notes or the price at which you would be able to sell the exchange notes. If such markets were to develop, the exchange notes could trade at a discount from their face value depending on many factors, including prevailing interest rates and the markets for similar securities. In addition, any market-making by the initial purchasers of the outstanding notes may be limited during any registered exchange offer or the pendency of any resale registration statement and may be discontinued at any time without notice. The initial purchasers of the outstanding notes have advised us that they intend to make a market in the exchange notes after the exchange offer. However, they are not obligated to do so and may discontinue market-making at any time without notice. We do not intend to apply for listing of the exchange notes on any securities exchange. As a result, we cannot

20

assure you that an active trading market will ultimately develop for the exchange notes. The liquidity of, and trading market for, the exchange notes also may be adversely affected by:

•

the number of holders of the exchange notes;



•

the interest of securities dealers in making a market in the exchange notes;



•

changes in the market for high yield securities; and



•

changes in our financial performance or prospects or in the prospects for companies in our industry generally.

        Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. Any market for the exchange notes may be subject to similar disruptions. Any such disruptions may adversely affect you as a holder of the exchange notes.

If you do not exchange your outstanding notes for exchange notes, your notes will continue to have restrictions on transfer.

        If you do not exchange your outstanding notes for exchange notes in the exchange offer, or if your outstanding notes are tendered but not accepted, your outstanding notes will continue to have restrictions on transfer. In general, you may offer or sell any outstanding notes only if the notes are registered under the Securities Act and applicable state laws, or resold under an exemption from these laws. We do not intend to register the outstanding notes under the Securities Act, other than in the limited circumstances required under the registration rights agreement.

The issuance of the exchange notes may adversely affect the market for outstanding notes.

        If outstanding notes are tendered for exchange, the trading market for untendered and tendered but unaccepted outstanding notes could be adversely affected. Please refer to the section in this prospectus entitled "The Exchange Offer—Consequences of Failure to Exchange."

Risks Related to Our Company and the Conduct of Our Business

The events of September 11, 2001, as well as the U.S. economic recession, have adversely impacted the hotel industry generally, and we have experienced an adverse effect on our results of operations and financial condition. These trends may continue to impact us into the foreseeable future.

        Prior to September 11, 2001, our hotels had begun experiencing declining RevPAR as a result of the slowing economy, particularly our hotels in San Francisco and Silicon Valley. The terrorist attacks of September 11, 2001 and the effects of the economic recession have led to a substantial reduction in business and leisure travel throughout the United States and industry RevPAR generally. RevPAR at our hotels specifically has declined substantially since September 11. While RevPAR at our hotels has improved from the depressed levels in the weeks following the events of September 11, RevPAR at our hotels remains below pre-September 11 levels and may remain at such depressed levels. We cannot predict the extent to which the events of September 11 will continue to directly or indirectly impact the hotel industry or our operating results in the future. Continued lower RevPAR at our hotels could have an adverse effect on our results of operations and financial condition, including our ability to remain in compliance with our debt covenants, our ability to fund capital improvements and renovations at our hotels and our ability to make dividend payments necessary to maintain our REIT tax status. Additional terrorist attacks could have further material adverse effects on the hotel industry and our operations.

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Our new TRS lessee structure subjects us to the risk of increased hotel operating expenses.

        Prior to January 1, 2001, substantially all of our hotels were leased to third-parties under leases providing for the payment of rent based, in part, on revenues from our hotels. Accordingly, our operating risks were essentially limited to changes in hotel revenues and to the lessees' ability to pay the rent due under the leases. In addition to the ownership expenses previously borne by us, we are now subject to the risks of increased hotel operating expenses for the 53 hotels now in our TRS lessee structure, including but not limited to:

•

wage and benefit costs;



•

repair and maintenance expenses;



•

energy costs, which increased significantly during the summer of 2001, especially at our California hotels;



•

the costs of liability insurance; and



•

other operating expenses.

        Increases in these operating expenses can have a significant adverse impact on our earnings and cash flow.

The loss of key executive officers that we depend on to operate our business could have a material adverse effect on us.

        Our continued success is dependent upon the efforts and abilities of our key executive officers. In particular, the loss of the services of Bob Solmson, our Chief Executive Officer, Randy Churchey, our President and Chief Operating Officer, or Kevin Luebbers, our Executive Vice President and Chief Financial Officer, could have a material adverse effect on our company. There can be no assurance that we would be able to recruit or hire any additional personnel with equivalent experience and contacts.

Uninsured and underinsured losses might have an adverse effect on our financial condition.

        We maintain comprehensive insurance on each of our hotels, including liability, fire and extended coverage, of the type and amount we believe are customarily obtained for or by hotel owners. All 10 of our hotels in California are located in areas that are subject to earthquake activity. These hotels are located in areas of high seismic risk and some were constructed under building codes which were less stringent with regard to earthquake related requirements. An earthquake could render significant damage to our hotels. Additionally, areas in Florida, where seven of our hotels are located, may experience hurricane or high-wind activity. We have earthquake insurance policies on our hotels in California and wind insurance policies on certain of our hotels located in Florida. However, various types of catastrophic losses, like earthquakes and floods may not be fully insurable or may not be economically insurable. With respect to our hotels in California, in addition to the applicable deductibles under our earthquake insurance policies, we are self-insured for the first $5 million per earthquake. Our property insurance, which we believe currently insures us against losses resulting from a terrorist attack, is subject to renewal in July 2002. Upon renewal, we do not know whether our property insurance will protect us against losses resulting from a terrorist attack. We believe that such losses may not be economically insurable. In the event of a substantial loss, our insurance coverage may not be able to cover the full current market value or replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also affect our ability to replace or renovate a hotel after it has been damaged or destroyed.

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Our hotel concentration in certain states, particularly California, subjects us to operating risks.

        For the year ended December 31, 2001, approximately 65% of our EBITDA came from our hotels located in California (37%), Florida (10%), Texas (7%), Michigan (6%) and Illinois (5%). Adverse events in these areas, such as economic recessions or natural disasters, could cause a loss of revenues from these hotels, which could have a greater adverse effect on us as a result of our concentration of assets in these areas. Our geographic concentration also exposes us to risks of oversupply and competition in our principal markets. Each of our hotels competes with other hotels in its market area. A number of additional hotel rooms will continue to be built in the markets in which our hotels are located, which could result in too many hotel rooms in those regions. Significant increases in the supply of hotel rooms without corresponding increases in demand can have a severe adverse effect on our business, financial condition and results of operations.

        The San Francisco Bay Area has recently suffered an economic downturn related to the decline in the technology and Internet related markets which populated this area. In particular, revenues at our four hotels in Silicon Valley and two hotels in San Francisco have been adversely impacted by the slowing economy and by recent job reductions in the technology and Internet sectors. For the year ended December 31, 2001, we received approximately 37% of our EBITDA from hotels in portions of California, including Silicon Valley (18%), Los Angeles (7%), San Francisco (5%), San Diego (4%) and Sacramento (3%). As a result of the events of September 11 and the continued economic recession in the fourth quarter of 2001, while our entire hotel portfolio was adversely impacted, our six San Francisco Bay Area hotels were particularly affected. Our six San Francisco Bay Area hotels' RevPAR declined 42.7% in the fourth quarter of 2001. Our remaining four California hotels' RevPAR declined 2.3% and the entire portfolio RevPAR, excluding our six San Francisco Bay Area hotels, declined 6.9% in the fourth quarter of 2001.

        Also, California faced an energy crisis during 2001 that significantly increased energy costs at our 10 California hotels, although the impact was somewhat offset through our ability to collect energy surcharges in California. While this energy crisis appears to be resolved, if California experiences another energy crisis, and we cannot adequately pass our increased costs to customers through energy surcharges or otherwise, or the state's economy, particularly Northern California, continues to experience decreasing occupancy rates, RevPAR, average daily rate ("ADR") or other industry fundamentals, it could have a material adverse effect on our business, financial condition and results of operation.

We must rely on third-party management companies to operate our hotels and a change in these management companies may be costly and disruptive to our operations.

        Under the REIT Modernization Act, in order for us to continue to qualify as a REIT, our hotels must be managed by third-parties. Under the terms of the management agreements, our ability to participate in operating decisions regarding the hotels is limited. Flagstone Hospitality Management and four other unrelated third-parties currently manage all of our hotels. These property managers presently control the daily operations of our hotels. We depend on these managers to adequately operate our hotels as provided in the management agreements. Even if we believe that our hotels are not being managed efficiently or in a manner that results in satisfactory occupancy rates, RevPAR or ADR, we may not be able to force the management company to change the way it operates our hotels in a timely manner. Additionally, in the event that we need to replace any of our management companies, particularly Flagstone, which manages 51 of our 58 hotels, we may experience significant disruptions at our hotels and in our operations generally and decreased occupancy. Flagstone is a recently formed company with a limited operating history. Furthermore, because we must have third-party managers to maintain our REIT status, we may be forced to enter into new management agreements on terms that we believe are unfavorable or less favorable than the terms of our current

23

agreements. Any of the foregoing, may result in a material adverse effect on our business, financial condition and results of operations.

We must comply with requirements of franchise agreements.

        Most of our hotels are operated under a franchise license. Each license agreement requires that the licensed hotel be maintained and operated in accordance with certain standards and requires us to pay a variety of franchise related fees to the franchisors. The franchisors also may require substantial improvements to our hotels, for which we would be responsible, as a condition to the renewal or continuation of these franchise licenses.

        If a franchise license terminates due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment. These termination payments would vary by franchise agreement and by hotel. Although we have never had a franchise agreement terminated by a franchisor, the loss of a substantial number of franchise licenses and the related termination payments could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to successfully implement our selective acquisition and disposition strategy or fully realize the benefit of our strategy.

        One of our key strategies includes the acquisition of attractive hotel properties. However, we compete for hotel acquisitions with entities that have substantially greater financial and other resources and a lower cost of capital than we have. These entities generally may be able to accept more risk than we can manage wisely and may be able to pay higher acquisition prices than we are willing to pay. This competition may generally limit the number of suitable investment opportunities offered to us. This competition may also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new properties on attractive terms. Furthermore, in recent years, we believe that acquisition prices were not attractive by historical standards and we reduced our acquisition activity accordingly. While we believe that the hotel acquisition market has recently become more favorable, there can be no assurance that a sufficient number of attractive properties, both in terms of price and quality, will be available for acquisition or that we will ultimately be able to acquire those hotel properties on favorable terms.

        Additionally, our strategy includes continually shifting our portfolio by selectively divesting limited service hotels which are not consistent with our long-term investment horizon, particularly those in smaller markets. As with acquisitions, we face competition for buyers of our hotel properties. Other sellers of hotels may have the financial resources to dispose of their hotels on unfavorable terms that we would be unable to accept. If we cannot find buyers for our non-core properties, we will not be able to implement our divestiture strategy.

        In the event that we cannot fully execute our acquisition and divestiture strategy or realize the benefits therefrom, we may not be able to grow our business, our EBITDA or our cash flow.

We may be unable to adequately finance or fully realize the anticipated benefits of our renovations.

        As part of our internal growth strategy, we regularly renovate, redevelop and, in certain cases, re-brand our hotels. In addition, the franchisors of our hotels require us to make periodic capital improvements as a condition to keeping the franchise licenses. During 2000 and 2001, we spent approximately $32.6 million and $18.0 million, respectively, on capital improvements to our hotels. We expect to spend approximately $9.0 million on capital improvements to our hotels in 2002. Our current indebtedness, as well as the notes, will restrict our ability to finance our proposed capital expenditures, which may cause us to delay, alter materially or abandon our planned capital improvements and

24

renovating. In addition to the difficulties with financing these projects discussed above, renovations also give rise to the following risks:

•

possible environmental problems;



•

construction cost overruns and delays;



•

uncertainties as to market demand or a loss of market demand after renovations have begun; and



•

displacement of room revenues due to rooms being out of order.

        If the completion of renovation projects is significantly delayed, our operating results could be adversely affected. In addition, no assurance can be given that recently completed and ongoing improvements will achieve the results anticipated when we made the decision to invest in the improvements.

Risks Related to the Hotel Industry

We are subject to the risks of hotel operations.

        We have invested only in hotel-related assets, and our hotels are subject to all of the risks common to the hotel industry. These risks could adversely affect hotel occupancy and the rates that can be charged for hotel rooms as well as hotel operating expenses, and generally include:

•

competition from other hotels;



•

increases in supply of hotel rooms that exceed increases in demand;



•

increases in energy costs and other travel expenses that reduce business and leisure travel;



•

adverse effects of declines in general and local economic activity;



•

adverse effects of a downturn in the hotel industry; and



•

risks generally associated with the ownership of hotels and real estate, as discussed below.

A continued industry fundamental downturn could adversely affect our results of operations.

        According to Smith Travel Research, for all U.S. hotels, room supply in 2001 increased 2.4% while demand decreased by 3.4% and this trend may continue for the immediate future. Additionally, industry RevPAR in 2001 decreased 6.9% as compared to the same period in 2000, and is expected to decrease slightly in 2002.

        If we are unable to sustain appropriate levels of RevPAR, our operating margins may deteriorate, and we may be unable to execute our business plan, including the selective acquisition of hotel properties. In addition, if this downward trend continues we may be unable to continue to meet our debt service obligations as they become due or to obtain necessary additional financing.

Seasonality of the hotel business can be expected to cause quarterly fluctuations in our revenues.

        The hotel industry is seasonal in nature. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. This seasonality can be expected to cause quarterly fluctuations in our revenues. Our quarterly financial results also may be adversely affected by factors outside our control, including weather conditions and poor economic factors. As a result, we may have to enter into short-term borrowing in our first and fourth quarters in order to offset these fluctuations in revenues and to make distributions to our shareholders.

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We will also encounter risks that may adversely affect real estate ownership in general.

        Our investments in hotels are subject to the numerous risks generally associated with owning real estate, including among others:

•

adverse changes in general or local economic or real estate market conditions;



•

changes in zoning laws;



•

changes in traffic patterns and neighborhood characteristics;



•

increases in assessed valuation and tax rates;



•

increases in the cost of property insurance;



•

governmental regulations and fiscal policies;



•

the potential for uninsured or underinsured property losses;



•

the impact of environmental laws and regulations; and



•

other circumstances beyond our control.

        Moreover, real estate investments are relatively illiquid, and we may not be able to vary our portfolio in response to changes in economic and other conditions.

Compliance with environmental laws may adversely affect our financial condition.

        Our hotel properties are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require the owner of a contaminated property to clean up the property, even if the owner did not know of or was not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated. In addition to the costs of cleanup, contamination can affect the value of a property and, therefore, an owner's ability to borrow funds using the property as collateral. Under the environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, like a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. Furthermore, decisions by courts have established that third-parties may recover damages for injury caused by property contamination. For instance, a person exposed to asbestos while staying in a hotel may seek to recover damages if he suffers injury from the asbestos.

        We could be responsible for the costs discussed above, if one or more of our properties are found to be contaminated. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be material and could affect the funds available for distribution to our shareholders. To determine whether any costs of this nature may be incurred, we commissioned Phase I environmental site assessments, or ESAs, before we acquired our hotels. These studies typically include a review of historical information and a site visit but not soil or groundwater testing. We obtained the ESAs to help us identify whether we might be responsible for cleanup costs or other environmental liabilities. The ESAs on our hotels did not reveal any environmental conditions that are likely to have a material adverse effect on our business, assets, results of operations or liquidity. However, ESAs do not always identify all potential problems or environmental liabilities. Consequently, we may have material environmental liabilities of which we are unaware.

        The Phase I ESA for the Hampton Inn—Airport in Indianapolis, indicated that the hotel disposes of approximately 10% of its solid waste at a facility that is a state Superfund site. Such a site may be subject to investigation and remediation under the federal and state Superfund laws, and persons that sent hazardous substances to the site may be jointly and severally liable for the costs of the work. The

26

Phase I ESA report states that solid waste from our Indianapolis hotel was disposed into a domestic waste cell of the facility. A state official informed the engineering firm conducting the Phase I ESA that this domestic waste cell is segregated by a containment structure and is adjacent to, but not part of, the Superfund site. The Phase I audit did not indicate that our Indianapolis hotel has arranged for the disposal of any hazardous substances at this facility. If the Indianapolis hotel in fact arranged for such disposal, however, it could be found liable for at least a part of any response costs.

Compliance with the Americans with Disabilities Act may adversely affect our financial condition.

        Under the Americans with Disabilities Act of 1990, all public accommodations, including hotels, are required to meet certain federal requirements for access and use by disabled persons. We believe that our hotels substantially comply with the requirement of the Americans with Disabilities Act. However, a determination that the hotels are not in compliance with that Act could result in liability for both governmental fines and damages to private parties. If we were required to make unanticipated major modifications to the hotels to comply with the requirements of the Americans with Disabilities Act, it could adversely affect our ability to pay our obligations.

Risks Related to RFS's Qualification as a REIT Under U.S. Tax Laws

The federal income tax laws governing REITs are complex.

        RFS has operated and intends to continue to operate in a manner that is intended to qualify it as a REIT under the federal income tax laws. The REIT qualification requirements are extremely complicated, however, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, RFS cannot be certain that it has been or will continue to be successful in operating so as to qualify as a REIT. At any time, new laws, interpretations, or court decisions may change the federal tax laws or the federal income tax consequences of qualification as a REIT.

Failure to make required distributions would subject RFS to tax.

        In order to qualify as a REIT, each year RFS must pay out to its shareholders at least 90% of its taxable income, other than any net capital gain. To the extent that RFS satisfies the distribution requirement, but distributes less than 100% of its taxable income, RFS will be subject to federal corporate income tax on its undistributed taxable income. In addition, RFS will be subject to a 4% nondeductible excise tax if the actual amount that it pays out to its shareholders in a calendar year is less than a minimum amount specified under federal tax laws. RFS's only source of funds to make such distributions comes from distributions that it receives from the Partnership. Accordingly, RFS may be required to borrow money or sell assets to make distributions sufficient to enable it to pay out enough of its taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. This risk may be intensified because our current indebtedness and the notes restrict our ability to borrow money and sell assets, even if necessary to make distributions to maintain RFS's REIT status.

Failure to qualify as a REIT would subject RFS to federal income tax.

        If RFS fails to qualify as a REIT in any taxable year, RFS would be subject to federal income tax on its taxable income. We might need to borrow money or sell hotels in order to pay any such tax. If RFS ceases to be a REIT, RFS no longer would be required to distribute most of its taxable income to its shareholders. Unless RFS's failure to qualify as a REIT were excused under federal income tax laws, it could not re-elect REIT status until the fifth calendar year following the year in which it failed to qualify.

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The formation of the TRS lessees will increase our overall tax liability.

        Effective January 1, 2001, we formed the TRS lessees, which currently lease 53 of our hotels. The TRS lessees are subject to federal and state income tax on their taxable income, which consists of the revenues from the hotels leased by the TRS lessees net of the operating expenses for such hotels and rent payments. Accordingly, although the formation of the TRS lessees allows us to participate in the operating income from the hotels in addition to receiving rent, that operating income is fully subject to income tax. We do not expect to pay any material state or federal income taxes in the next several years. The after-tax net income of the TRS lessees is available for distribution to us as dividends.

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USE OF PROCEEDS

        We will not receive any cash proceeds from the issuance of the exchange notes. In consideration for issuing the exchange notes, we will receive in exchange a like principal amount of outstanding notes. The outstanding notes surrendered in the exchange offer will be retired and canceled and cannot be reissued.

        The net proceeds from the issuance of the outstanding notes, approximately $121.5 million after deducting the expenses of the offering, were (or are expected to be) used as follows:

•

$64.7 million to redeem our 1996 commercial mortgage bonds, including a yield maintenance premium of $6.5 million;



•

$53.6 million to pay down the outstanding balance under our line of credit, which balance was approximately $81.2 million at December 31, 2001; and



•

$3.2 million to pay interest rate swap termination fees.

        At December 31, 2001, the outstanding balance of our 1996 commercial mortgage bonds was approximately $58.2 million, $33.2 million of which bears a fixed annual interest rate of 6.83% and $25.0 million of which bears a fixed annual interest rate of 7.30%. At the time of the consummation of our redemption of the 1996 commercial mortgage bonds, which will not be a condition to closing this exchange offer, we expect the outstanding balance to be approximately $57.2 million. We expect to fund the redemption of our 1996 commercial mortgage bonds on or about March 20, 2002. Our line of credit matures on July 30, 2004, and for the year ended December 31, 2001, outstanding borrowings under our line of credit carried an average interest rate (including the impact of our interest rate swaps) of 7.9% per annum. See "Description of Other Indebtedness and Preferred Stock."

        We may borrow funds available under our line of credit in the future, as we have in the past, for general business purposes, including renovations and improvements, acquisitions and other general business purposes. Although we continually evaluate potential strategic acquisitions that we believe would complement our existing business, we do not have currently any material pending negotiations or agreements regarding future acquisitions.

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CAPITALIZATION

        The following table sets forth RFS's and the Partnership's capitalization as of December 31, 2001 on an actual and pro forma basis, giving effect to (i) our February 20, 2002 sale of 1.15 million shares of common stock and the application of the net proceeds therefrom (approximately $14.2 million) to reduce the outstanding balance under our line of credit, and (ii) the issuance and sale of the outstanding notes and application of the net proceeds therefrom as follows: (1) $64.7 million to redeem our 1996 commercial mortgage bonds, including a yield maintenance premium of $6.5 million, (2) $53.6 million to pay down the outstanding balance under our line of credit and (3) $3.2 million to pay interest rate swap termination fees. As a result of the prepayment of the 1996 commercial mortgage bonds, we will also expense, as an extraordinary item, $1.4 million in unamortized debt costs.

RFS Hotel Investors, Inc.

					As of December 31, 2001
					Actual		Pro Forma
					(in thousands)
Short-term debt:
	Current portion of long-term debt				$	6,547	$	2,487
Long-term debt:
	Line of credit					81,188		13,414
	Notes offered hereby					—		125,000
	Mortgage debt
		1996 commercial mortgage bonds				54,121		—
		Other mortgage debt				159,279		159,279
			Total long-term debt			294,588		297,693
				Total debt		301,135		300,180
Preferred stock						25,000		25,000
Shareholders' equity						290,811		298,217
			Total capitalization		$	616,946	$	623,397

RFS Partnership, L.P.

					As of December 31, 2001
					Actual		Pro Forma
					(in thousands)
Short-term debt:
	Current portion of long-term debt				$	6,547	$	2,487
Long-term debt:
	Line of credit					81,188		13,414
	Notes offered hereby					—		125,000
	Mortgage debt
		1996 commercial mortgage bonds				54,121		—
		Other mortgage debt				159,279		159,279
			Total long-term debt			294,588		297,693
				Total debt		301,135		300,180
Preferred units						25,000		25,000
Redeemable units						27,980		27,980
Partners' capital						291,715		298,027
			Total capitalization		$	645,830	$	651,187

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THE EXCHANGE OFFER

General

        We are offering to exchange up to $125 million in the aggregate principal amount of exchange notes for the same aggregate principal amount of outstanding notes. We are making the exchange offer for all of the outstanding notes. Your participation in the exchange offer is voluntary and you should carefully consider whether to accept this offer.

Purpose and Effect of the Exchange Offer

        We issued and sold $125 million in principal amount of the outstanding notes on February 26, 2002 in a transaction exempt from the registration requirements of the Securities Act. Because this transaction was exempt under the Securities Act, you may re-offer, resell, or otherwise transfer the outstanding notes only if registered under the Securities Act or if an applicable exemption from the registration and prospectus delivery requirements of the Securities Act is available.

        In connection with the issuance of the outstanding notes, we entered into a registration rights agreement. Under the registration rights agreement, we, among other things, agreed to:

•

prepare and file a registration statement with the SEC for the proposed purpose of exchanging the outstanding notes for notes which have been registered under the Securities Act;



•

use our best efforts to cause the registration statement to become effective within 150 days following the original issuance of the outstanding notes;



•

keep the exchange offer open for at least 20 business days after its commencement; and



•

accept for exchange all outstanding notes validly tendered by and not withdrawn in accordance with the terms of the exchange offer set forth in the registration statement.

        In addition, there are circumstances where we are required to use our best efforts to file a shelf registration statement with respect to resales of the notes. We have filed a copy of the registration rights agreement as an exhibit to the registration statement that this prospectus forms a part of and that has been filed with the SEC.

        As soon as practicable after the registration statement is declared effective, we will offer the holders of outstanding notes who are not prohibited by any law or policy of the SEC from participating in this exchange offer the opportunity to exchange their outstanding notes for exchange notes registered under the Securities Act that are substantially identical to the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights and liquidated damages.

        In the event that we do not meet certain deadlines set forth in the registration rights agreement with respect to the registration of the exchange notes and consummation of the exchange offer, we have agreed to pay to each affected holder of outstanding notes liquidated damages in an amount equal to $0.05 per week per $1,000 in principal amount of outstanding notes for each week or portion thereof that the default continues for the first 90-day period immediately following the occurrence of such default. The amount of liquidated damages shall increase by an additional $0.05 per week per $1,000 in principal amount with respect to each subsequent 90-day period until all defaults have been cured. We are not required to pay liquidated damages for more than one default at any given time.

        To exchange your outstanding notes for freely transferable exchange notes, you will be required to make the following representations:

•

any exchange notes that you receive will be acquired in the ordinary course of your business;

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•

you have no arrangement or understanding with any person or entity to participate in the distribution of the exchange notes;



•

you are not our "affiliate," as defined in Rule 405 of the Securities Act;



•

you are not a broker-dealer, and you are not engaged in and do not intend to engage in the distribution of the exchange notes;



•

if you are a broker-dealer that will receive exchange notes for your own account and you acquired those notes as a result of market-making activities or other trading activities, you will deliver a prospectus, as required by law, in connection with any resale of the exchange notes; and



•

any other representations and warranties required by law or Commission policy.

Resale of Exchange Notes

        Based on the interpretations of the SEC staff in no-action letters issued to third parties, we believe that exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, if:

•

you are not our "affiliate" within the meaning of Rule 405 under the Securities Act;



•

the exchange notes are acquired in the ordinary course of your business; and



•

you do not intend to participate in any distribution of the exchange notes.

        Broker-dealers that acquired outstanding notes directly from us may not rely on the interpretations of the SEC described above. Accordingly, in order to sell their notes, broker-dealers that acquired outstanding notes directly from us must comply with the registration and prospectus delivery requirements of the Securities Act, including being named as a selling security holder in any resale prospectus. If you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes and you acquired those notes as a result of market-making activities or other trading activities, you must deliver a prospectus, as required by law, in connection with any resale of the exchange notes. Only broker-dealers that acquired outstanding notes as a result of market-making or other trading activities may participate in the exchange offer.

        If you do not satisfy the above conditions, you

•

cannot rely on the interpretations by the SEC staff; and



•

must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.

        We do not intend to seek our own no-action letter, and we cannot assure you that the SEC staff would make a similar determination with respect to the exchange notes as it has in prior no-action letters issued to other parties. In November 1998, the SEC proposed various changes to the regulatory structure for offerings registered under the Securities Act. The SEC has stated that, if these proposals are adopted, the SEC staff will repeal the interpretations set forth in prior no-action letters. We cannot predict whether these proposals will be adopted or, if they are adopted, when and in what form they will be adopted or what impact any new interpretations would have on this exchange offer.

        If an exemption from registration is not available, any noteholder intending to resell exchange notes must be covered by an effective registration statement under the Securities Act containing the selling noteholder's information required by Item 507 of Regulation S-K under the Securities Act. This prospectus may be used for an offer to resell, resale or other retransfer of exchange notes only as

32

specifically described in this prospectus. Please read the section captioned "Plan of Distribution" for more details regarding the transfer of exchange notes.

Terms of the Exchange Offer

        Upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal, we will accept for exchange any outstanding notes properly tendered and not withdrawn prior to the expiration date. We will issue exchange notes in principal amount equal to the principal amount of outstanding notes surrendered. Outstanding notes may be tendered for exchange notes only in integral multiples of $1,000.

        The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

        As of the date of this prospectus, $125 million aggregate principal amount of the outstanding notes are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of outstanding notes. There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer.

        We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, and the rules, regulations and interpretations of the SEC. Outstanding notes that are not tendered for exchange will remain outstanding and continue to accrue interest, but will not be entitled to the rights and benefits the holders have under the registration rights agreement.

        We will be deemed to have accepted for exchange properly tendered outstanding notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the applicable provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from us.

        If you tender outstanding notes in the exchange offer, you will be required to pay any applicable brokerage commissions, fees or transfer taxes with respect to the exchange of outstanding notes. We will not pay any charges and expenses (other than those related to the registration of the exchange notes) in connection with the exchange offer. It is important that you read the "—Fees and Expenses" section for more details regarding fees and expenses incurred in the exchange offer.

        We will return any outstanding notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer.

Neither we nor the exchange agent makes any recommendation to holders of the outstanding notes as to whether to tender or refrain from tendering all or any portion of their outstanding notes in the exchange offer. In addition, no one has been authorized to make any recommendation to holders of the outstanding notes. After reading this prospectus and the letter of transmittal and consulting with your advisers, if any, based on your financial position and requirements, you must make your own decision whether to participate in the exchange offer, and, if so, the aggregate amount of outstanding notes to tender.

Expiration Date

        The exchange offer will expire at 5:00 p.m., New York City time on [                            ], 2002, unless, in our sole discretion, we extend it. Notwithstanding the preceding, we will not extend the expiration date beyond [                            ], 2002.

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Extensions, Delays in Acceptance, Termination or Amendment

        We expressly reserve the right, at any time or various times, to extend the period of time during which the exchange offer is open. We may delay acceptance of any outstanding notes by giving oral or written notice of the extension to their holders. During any extensions, all outstanding notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange.

        In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of outstanding notes of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

        If any of the conditions described below under "—Conditions to the Exchange Offer" have not been satisfied, we reserve the right, in our sole discretion:

•

to delay accepting for exchange any outstanding notes;



•

to extend the exchange offer; or



•

to terminate the exchange offer

by giving oral or written notice of the delay, extension or termination to the exchange agent. We also reserve the right to amend the terms of the exchange offer.

        Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of outstanding notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly file a post-effective amendment to the registration statement and disclose the amendment by means of a prospectus supplement when the post-effective amendment has been declared effective by the SEC. The prospectus supplement will be distributed to the registered holders of the outstanding notes. Depending upon the significance of the amendment and the manner of disclosure to the registered holders, we will extend the exchange offer if the exchange offer would otherwise expire during any period of delay.

Conditions to the Exchange Offer

        Despite any other term of the exchange offer, we will not be required to accept for exchange, or exchange any exchange notes for any outstanding notes, and we may terminate the exchange offer as provided in this prospectus before accepting any outstanding notes for exchange, if in our reasonable judgment:

•

the exchange offer, or the making of any exchange by a holder of outstanding notes, would violate applicable law or any applicable interpretation of the staff of the SEC;



•

any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer; or



•

you do not tender your outstanding notes in compliance with the terms of the exchange offer.

        In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us the representations described under "—Purpose and Effect of the Exchange Offer" and "—Procedures for Tendering" and "Plan Distribution."

        We expressly reserve the right to amend or terminate the exchange offer and to reject for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the conditions to the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the registered holders of the outstanding notes as promptly as practicable.

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        These conditions are for our sole benefit and we may assert them in whole or in part at any time or at various times in our sole discretion. If we fail at any time to exercise any of these rights, this failure will not mean that we have waived our rights. Each right will be deemed an ongoing right that we may assert at any time or at various times. If any waiver or amendment constitutes a material change to the exchange offer, we will promptly disclose the waiver or amendment by means of a prospectus supplement that will be distributed to the registered holders of the outstanding notes. In this case, we will extend the exchange offer to the extent required by the Exchange Act to provide holders of outstanding notes the opportunity to effectively consider the additional information and to factor this information into their investment decision.

        In addition, we will not accept for exchange any outstanding notes tendered, and will not issue exchange notes in exchange for any outstanding notes, if at the time any stop order has been threatened or is in effect with respect to (i) the registration statement of which this prospectus constitutes a part or (ii) the qualification of the indenture relating to the notes under the Trust Indenture Act of 1939.

        We currently expect that each of these conditions will be satisfied and that no waiver will be necessary.

Procedures for Tendering

How to Tender Generally

        Only a holder of outstanding notes may tender the outstanding notes in the exchange offer. To tender in the exchange offer, a holder must:

•

complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal;



•

have the signature on the letter of transmittal guaranteed, if the letter of transmittal so requires; and



•

mail, send by facsimile or otherwise deliver the letter of transmittal to the exchange agent prior to the expiration date; or



•

comply with the automated tender offer program procedures of DTC, as described below.

        In addition, either:

•

the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of the outstanding notes into the exchange agent's account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agent's message; or



•

the holder must comply with the guaranteed delivery procedures, as described below.

        To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at its address provided under "Summary of the Exchange Offer—The Exchange Agent" prior to the expiration date.

        A tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

The method of delivery of the letter of transmittal and all other required documents to the exchange agent is at your election and risk. Rather than mail these items, we recommend that you use an overnight or hand delivery service. In all cases, you should allow sufficient time to assure delivery to the exchange agent before the expiration date. Do not send the letter of transmittal to us. You may request your brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for you.

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How to Tender if You Are a Beneficial Owner

        If you beneficially own outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those notes, you should contact the registered holder promptly and instruct it to tender on your behalf.

Your Representation to Us

        By signing or agreeing to be bound by the letter of transmittal, you represent to us that, among other things:

•

any exchange notes that you receive are being acquired in the ordinary course of your business;



•

you have no arrangement or understanding with any person or entity to participate in any distribution of the exchange notes;



•

you are not a broker-dealer, and you are not engaged in and do not intend to engage in any distribution of the exchange notes;



•

if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes and you acquired those notes as a result of market-making activities or other trading activities, you will deliver a prospectus, as required by law, in connection with any resale of the exchange notes; and



•

you are not our "affiliate," as defined in Rule 405 of the Securities Act.

Signatures and Signature Guarantees

        You must have signatures on a letter of transmittal or any notice of withdrawal, as described below, guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act, that is a member of one of the recognized signature guarantee programs identified in the letter of transmittal, unless the outstanding notes are tendered:

•

by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or



•

for the account of a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondence in the United States, or an eligible guarantor institution.

        If the letter of transmittal or any notes or note powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless waived by us, the parties listed above should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal.

Tendering Through DTC's Automated Tender Offer Program

        Any financial institution that is a participant in DTC's system may be able to use DTC's automated tender offer program to tender. Participants in the program may be able to transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the outstanding notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent.

36

        The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that:

•

DTC has received an express acknowledgment from a participant in its automated tender offer program that it is tendering outstanding notes that are the subject of the book-entry confirmation;



•

the participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and



•

the agreement may be enforced against the participant.

Determinations Under the Exchange Offer

        We will determine in our sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered outstanding notes and withdrawal of tendered outstanding notes. Our determination will be final and binding on all parties. We reserve the absolute right to reject any outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defect, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of outstanding notes must be cured within the time as we will determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the exchange agent nor any other person is obligated to do so, and no such parties will incur any liability for failure to give the notification. Tenders of outstanding notes will not be deemed made until the defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

When We Will Issue Exchange Notes

        In all cases, we will issue exchange notes for outstanding notes that we have accepted for exchange only after the exchange agent timely receives:

•

outstanding notes or a timely book-entry confirmation of the outstanding notes into the exchange agent's account at DTC;



•

a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message; and



•

the exchange offer has expired.

Return of Outstanding Notes Not Accepted or Excepted

        If we do not accept any tendered outstanding notes for exchange for any reason described in the terms and conditions of the exchange offer or if outstanding notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged outstanding notes will be returned without additional expense to their tendering holder. In the case of outstanding notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described below, the non-exchanged outstanding notes will be credited to an account maintained with DTC. These actions will occur as promptly as practicable after the expiration or termination of the exchange offer.

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Book-Entry Transfer

        The exchange agent will establish an account with respect to the outstanding notes at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participating in DTC's system may make book-entry delivery of outstanding notes by causing DTC to transfer the outstanding notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer.

Guaranteed Delivery Procedures

        If you wish to tender your outstanding notes but you cannot deliver the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's automated tender offer program prior to the expiration date, you may still tender if:

•

the tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution;



•

prior to the expiration date, the exchange agent receives from a member firm as described above, either a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery or a properly transmitted agent's message and notice of guaranteed delivery;



•

setting forth your name and address, the registered number(s) of your outstanding notes and the principal amount of outstanding notes tendered;



•

stating that the tender is being made thereby;



•

guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent; and



•

the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as a book-entry confirmation, and all other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the close of business, New York time, on the expiration date.

        Upon request to the exchange agent, a notice of guaranteed delivery will be sent to you if you wish to tender your outstanding notes according to the guaranteed delivery procedures described above.

Withdrawal of Tenders

        Except as otherwise provided in this prospectus, you may withdraw your tender at any time prior to the expiration date.

        For a withdrawal to be effective:

•

the exchange agent must receive a written notice of withdrawal at one of the addressees listed below under "—The Exchange Agent," or



•

you must comply with the appropriate procedures of DTC's automated tender offer program system.

        Any notice of withdrawal must:

•

specify the name of the person who tendered the outstanding notes to be withdrawn; and

38

•

identify the outstanding notes to be withdrawn, including the principal amount of the outstanding notes.

        If outstanding notes have been tendered under the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn outstanding notes and must otherwise comply with the procedures of DTC.

        We will determine all questions as to the validity, form, eligibility and time of receipt of notice of withdrawal, and our determination will be final and binding on all parties. We will deem any outstanding notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer.

        Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be credited to an account maintained with DTC for the outstanding notes. This crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn outstanding notes by following one of the procedures described under "—Procedures for Tendering" above at any time on or prior to the expiration date.

The Exchange Agent

        The U.S. Bank National Association has been appointed as the exchange agent for the exchange offer. U.S. Bank National Association also serves as the trustee under the indenture governing the notes. Questions and requests for assistance or additional copies of this prospectus or the letter of transmittal should be directed to the exchange agent addressed as follows:

By Registered Mail or Certified Mail:	By Overnight Courier:
U.S. Bank National Association	U.S. Bank National Association
180 East Fifth Street	180 East Fifth Street
St. Paul, MN 55101	St. Paul, MN 55101
Attention: Frank P. Leslie	Attention: Frank P. Leslie
By Telephone: 651-244-8677	By Facsimile: 651-244-0711 (confirm by telephone)

Fees and Expenses

        We will bear the expenses of the exchange offer. The principal solicitation is being made by mail; however, we may make additional solicitation by telegraph, telephone or in person by our officers and regular employees and those of our affiliates.

        We have not retained any dealer-manager in connection with the exchange offer and will not make payments to broker-dealers or other soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees, if any, for its services and reimburse it for its related reasonable out-of-pocket expenses.

        We will pay the expenses to be incurred in connection with the exchange offer. They include:

•

SEC registration fees;



•

fees and expenses of the exchange agent and trustee;



•

accounting and legal fees and printing costs; and



•

any related fees and expenses.

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Transfer Taxes

        We will not pay any transfer taxes, if any, applicable to the exchange of outstanding notes under the exchange offer. In addition to the exchange of your notes, you may be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

•

certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered;



•

tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal;



•

a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer; or



•

satisfactory evidence of payment of any transfer taxes payable by a noteholder is not submitted with the letter of transmittal.

        If you have any questions regarding transfer taxes, you should consult your legal or tax advisor. In such circumstances, the amount of the transfer taxes will be billed directly to that tendering holder.

Consequences of Failure to Exchange

        If you do not exchange your outstanding notes for exchange notes in the exchange offer, you will remain subject to the existing restrictions on transfer of the outstanding notes, and the market for secondary resales is likely to be minimal. In general, you may not offer or sell the outstanding notes unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register the outstanding notes under the Securities Act. Unless they are broker-dealers selling under certain circumstances, holders of outstanding notes will no longer have any rights under the registration rights agreement although the outstanding notes will remain outstanding and will continue to accrue interest. Broker-dealers that are not eligible to participate in the exchange offer may have additional rights under the registration rights agreement to facilitate the sale of their outstanding notes.

Accounting Treatment

        We will record the exchange notes in our accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount of the outstanding notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

Further Note Acquisition

        We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We are not required and have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

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SELECTED HISTORICAL FINANCIAL DATA

        The following table sets forth the selected historical consolidated financial data for RFS Hotel Investors, Inc. and RFS Partnership, L.P. The selected historical consolidated information is presented as of and for the years ended December 31, 1997, 1998, 1999, 2000 and 2001. We derived the historical consolidated financial information for the years ended December 31, 1997, 1998, 1999, 2000 and 2001 from RFS Hotel Investors, Inc.'s and RFS Partnership, L.P.'s consolidated financial statements and the notes thereto, audited by PricewaterhouseCoopers LLP, independent accountants. RFS Hotel Investors, Inc.'s only significant asset is its ownership interest in RFS Partnership, L.P., accordingly the only difference between RFS Hotel Investors, Inc. and RFS Partnership, L.P.'s statement of operations data is the earnings or loss attributed to the minority interest in RFS Partnership, L.P. not held by RFS Hotel Investors, Inc.

        You should read the following information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership" and the RFS Hotel Investors, Inc. and RFS Partnership, L.P. consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus.

RFS Hotel Investors, Inc.

			Year Ended December 31,
			1997			1998			1999			2000			2001(1)
			(in thousands, except per share, ratio, % and hotel data)
Statement of Operations Data:
	Total revenues		$	83,069		$	96,927		$	99,662		$	107,359		$	221,878
	Hilton lease termination expense, net of deferred income taxes			—			—			—			—			40,762
	Net income (loss)			34,232			34,068			34,990			30,790			(13,729	)
	Net income (loss) applicable to common shareholders			32,820			32,656			33,578			29,378			(11,713	)
	Earnings (loss) per share data:
		Earnings (loss) per share—basic		1.35			1.32			1.34			1.20			(0.47	)
		Earnings (loss) per share—diluted		1.34			1.31			1.34			1.20			(0.47	)
		Weighted average common shares outstanding—basic		24,389			24,775			25,002			24,559			25,045
		Weighted average common shares outstanding—diluted		24,536			24,864			25,002			24,580			25,045
Balance Sheet Data (end of period):
	Investment in hotels, net of accumulated depreciation		$	589,565		$	643,019		$	651,988		$	635,997		$	615,562
	Total assets			617,128			683,991			687,242			673,467			668,862
	Debt			208,909			272,799			282,278			277,431			301,135
	Minority interest in RFS Partnership, L.P. and other consolidated subsidiaries			36,235			35,974			35,618			34,848			31,059
	Preferred stock			10			10			10			10			25,000
	Shareholders' equity			362,070			366,937			361,283			348,454			290,811
Other Data:
	Cash flows:
		Provided by operating activities	$	58,590		$	55,092		$	66,884		$	65,223		$	10,466
		Used by investing activities		(140,751	)		(65,932	)		(26,580	)		(10,843	)		(8,642	)
		Provided (used) by financing activities		28,357			8,723			(36,405	)		(56,612	)		230
	Depreciation			17,664			20,906			24,210			27,198			29,605
	Capital expenditures			153,564			78,839			34,066			32,551			18,013
	Dividends paid per share			1.46			1.51			1.54			1.54			1.26
	Funds from operations(2)			55,263			63,030			63,010			64,170			51,229
	EBITDA(3)			70,033			82,756			86,116			90,308			81,800
	Ratio of earnings to fixed charges(4)			3.7x			2.9x			2.7x			2.4x			0.4x
	Supplemental ratio of earnings to fixed charges(5)			—			—			—			—			2.0x
Hotel Data:
	Number of properties			60			60			62			60			58
	Number of rooms			8,799			8,850			9,086			8,689			8,424
	Average daily rate		$	75.94		$	84.66		$	87.98		$	91.83		$	92.28
	Occupancy percentage			74.1	%		74.1	%		71.8	%		73.1	%		70.2	%
	RevPAR(6)		$	56.28		$	62.70		$	63.13		$	67.16		$	64.74

41

RFS Partnership, L.P.

			Year Ended December 31,
			1997			1998			1999			2000			2001(1)
			(in thousands, except per share, ratio, % and hotel data)
Statement of Operations Data:
	Total revenues		$	83,069		$	96,927		$	99,662		$	107,359		$	221,878
	Hilton lease termination expense, net of deferred income taxes			—			—			—			—			40,762
	Net income (loss)			37,847			37,723			38,610			34,008			(14,886	)
	Net income (loss) before extraordinary items applicable to common unit holders			36,435			36,311			37,198			32,596			(12,870	)
	Earnings (loss) per unit data:
		Earnings (loss) per unit—basic		1.35			1.33			1.35			1.20			(0.47	)
		Earnings (loss) per unit—diluted		1.34			1.32			1.35			1.20			(0.47	)
		Weighted average common units outstanding—basic		26,952			27,343			27,568			27,121			27,520
		Weighted average common units outstanding—diluted		27,099			27,432			27,568			27,127			27,520
Balance Sheet Data (end of period):
	Investment in hotels, net of accumulated depreciation		$	589,565		$	643,019		$	651,988		$	635,997		$	615,562
	Total assets			617,128			683,991			687,242			673,467			668,862
	Debt			208,909			272,799			282,278			277,431			301,135
	Series B preferred units			—			—			—			—			25,000
	Redeemable limited partnership units, at redemption value			51,232			31,453			26,779			33,461			27,980
	Partners' capital			347,081			371,283			369,947			349,667			291,715
Other Data:
	Cash flows:
		Provided by operating activities	$	58,590		$	55,092		$	66,884		$	65,223		$	10,466
		Used by investing activities		(140,751	)		(65,932	)		(26,580	)		(10,843	)		(8,642	)
		Provided (used) by financing activities		28,357			8,723			(36,405	)		(56,612	)		230
	Depreciation			17,664			20,906			24,210			27,198			29,605
	Capital expenditures			153,564			78,839			34,066			32,551			18,013
	Distributions paid per unit			1.46			1.51			1.54			1.54			1.26
	Funds from operations(2)			55,263			63,030			63,010			64,170			51,229
	EBITDA(3)			70,033			82,756			86,116			90,308			81,800
	Ratio of earnings to fixed charges(4)			3.7x			2.9x			2.7x			2.4x			0.4x
	Supplemental ratio of earnings to fixed charges(5)			—			—			—			—			2.0x
Hotel Data:
	Number of properties			60			60			62			60			58
	Number of rooms			8,799			8,850			9,086			8,689			8,424
	Average daily rate		$	75.94		$	84.66		$	87.98		$	91.83		$	92.28
	Occupancy percentage			74.1	%		74.1	%		71.8	%		73.1	%		70.2	%
	RevPAR(6)		$	56.28		$	62.70		$	63.13		$	67.16		$	64.74

(1)

Includes hotel revenues and hotel operating expenses with respect to 55 hotels that were leased to or managed by Hilton or other third-parties prior to the effectiveness of the REIT Modernization Act on January 1, 2001. Prior to January 1, 2001, our revenues were composed mainly of percentage lease revenues.

42

(2)

We consider Funds From Operations to be a key measure of a REIT's performance which should be considered along with, but not as an alternative to, net income or loss and cash flow as a measure of operating performance and liquidity. The White Paper on Funds From Operations approved by the Board of Governors of NAREIT defines Funds From Operations as net income or loss (computed in accordance with GAAP), excluding gains or losses from debt restructuring which would be extraordinary items in accordance with GAAP and sales of depreciable operating properties, plus real estate related depreciation and amortization and after comparable adjustments for our portion of these items related to unconsolidated entities and joint ventures. We believe that Funds From Operations is helpful to our investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of our ability to incur and service debt, to make capital expenditures and to fund other cash needs. We compute Funds From Operations in accordance with standards established by NAREIT, except that we add back lease termination costs and deferred income taxes to derive Funds From Operations. This may not be comparable to Funds From Operations reported by other REITs that do not define the term in accordance with the current NAREIT definition, that interpret the current NAREIT definition differently than we do or that do not adjust Funds From Operations for lease termination costs and deferred income taxes. Funds From Operations does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income or loss (determined in accordance with GAAP) as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. Funds From Operations may include funds that may not be available for our management's discretionary use due to requirements to conserve funds for capital expenditures, debt repayment and property acquisitions and other commitments and uncertainties. For additional information regarding our FFO and EBITDA calculations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

(3)

We compute EBITDA by adding Funds From Operations, interest expense, amortization expense, current income taxes and our preferred stock dividends. EBITDA is presented because it provides useful information regarding our ability to service debt and is commonly used by financial analysts and others who follow our industry to measure operating performance. EBITDA should not be considered as an alternative measure of operating results or cash flow from operations, as determined in accordance with GAAP. EBITDA as presented by us may not be comparable to other similarly titled measures used by other companies. For additional information regarding our FFO and EBITDA calculations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

(4)

For the purpose of computing the ratio of earnings to fixed charges, earnings consist of net income plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the year ended December 31, 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $14.8 million.

(5)

The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (4) except that income from continuing operations is adjusted to add back the Hilton lease termination expense, net of deferred income taxes, of $40.8 million.

(6)

Revenue per available room (RevPAR) is calculated as room revenue divided by available room nights.

43

SUPPLEMENTARY QUARTERLY RESULTS OF OPERATIONS

        The following table sets forth supplementary quarterly results of operations for RFS Hotel Investors, Inc. and RFS Partnership, L.P. The supplementary quarterly results of operations is presented for each of the quarters ended March 31, June 30, September 30 and December 31, 2001 and 2000. We derived the historical consolidated quarterly financial information from RFS Hotel Investors, Inc.'s and RFS Partnership, L.P.'s consolidated quarterly financial statements and the notes thereto. RFS Hotel Investors, Inc.'s only significant asset is its ownership interest in RFS Partnership, L.P., accordingly the only difference between RFS Hotel Investors, Inc. and RFS Partnership, L.P.'s statement of operations data is the earnings or loss attributed to the minority interest in RFS Partnership, L.P. not held by RFS Hotel Investors, Inc.

RFS Hotel Investors, Inc.

		First Quarter			Second Quarter			Third Quarter		Fourth Quarter		Total
		(in thousands, except per share amounts)
2001:(1)
	Operating Data:
	Total revenue	$	57,904		$	60,415		$	55,505	$	48,054	$	221,878
	Net income (loss)		(30,821	)		9,641			6,554		897		(13,729	)
	Net income (loss) applicable to common shareholders		(26,460	)		8,859			5,773		115		(11,713	)
	Diluted earnings (loss) per share		(1.07	)		0.35			0.23		0.02		(0.47	)
Other Data:
	Recurring funds from operations(2)		14,988			16,918			12,414		6,909		51,229
	Weighted average common shares, partnership units and potential dilutive shares outstanding		27,468			27,474			27,722		27,694		27,655
	Dividends paid per share		0.385			0.385			0.385		0.100		1.255
2000:(1)
	Operating Data:
	Total revenue(3)	$	11,398		$	14,502		$	38,771	$	42,685	$	107,359
	Net income (loss)		(5,246	)		(6,108	)		19,088		23,056		30,790
	Net income (loss) applicable to common shareholders		(5,594	)		(6,459	)		18,733		22,698		29,378
	Diluted earnings (loss) per share		(0.23	)		(0.26	)		0.75		0.94		1.20
Other Data:
	Recurring funds from operations(2)		14,183			17,504			18,999		13,484		64,170
	Weighted average common shares, partnership units and potential dilutive shares outstanding		27,305			27,052			27,100		27,126		27,127
	Dividends paid per share		0.385			0.385			0.385		0.385		1.54

44

RFS Partnership, L.P.

	First Quarter			Second Quarter			Third Quarter		Fourth Quarter		Total
	(in thousands, except per share amounts)
2001:(1)
Operating Data:
Total revenue	$	57,904		$	60,415		$	55,505	$	48,054	$	221,878
Net income (loss)		(33,268	)		10,328			7,148		906		(14,886	)
Net income (loss) applicable to unitholders		(28,907	)		9,546			6,367		124		(12,870	)
Diluted earnings (loss) per unit		(1.06	)		0.35			0.23		0.01		(0.47	)
Other Data:
Recurring funds from operations(2)		14,988			16,918			12,414		6,909		51,229
Weighted average units and potential dilutive units outstanding		27,468			27,474			27,722		27,694		27,655
Distributions paid per unit		0.385			0.385			0.385		0.100		1.255
2000:(1)
Operating Data:
Total revenue(3)	$	11,398		$	14,502		$	38,771	$	42,685	$	107,359
Net income (loss)		(5,784	)		(6,108	)		21,250		24,650		34,008
Net income (loss) applicable to unitholders		(6,132	)		(6,459	)		20,895		24,292		32,596
Diluted earnings (loss) per unit		(0.23	)		(0.26	)		0.77		0.92		1.20
Other Data:
Recurring funds from operations(2)		14,183			17,504			18,999		13,484		64,170
Weighted average units and potential dilutive units outstanding		27,305			27,052			27,100		27,126		27,127
Distributions paid per unit		0.385			0.385			0.385		0.385		1.54

(1)

Under the RMA, which became effective January 1, 2001, only five of our hotels are operated under long-term leases with third parties. As such, there is little comparability between the interim financial results for 2001 and 2000.

(2)

For additional information regarding our recurring FFO calculations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations of RFS and the Partnership—Funds From Operations and EBITDA."

(3)

Deferred revenue is recorded in 2001 and 2000 in accordance with Staff Accounting Bulletin ("SAB 101"), which requires deferral of certain revenue until the third and fourth quarters.

45

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF RFS AND THE PARTNERSHIP

Overview

        Unless the context otherwise requires, the management's discussion and analysis of financial condition and results of operation for RFS and the Partnership are substantially similar in all respects except for net income (loss) due to the approximate 9% minority interest in the Partnership.

        We are a hotel real estate investment trust which, at December 31, 2001, owned interests in 58 hotels with 8,424 rooms located in 24 states. RFS Hotel Investors, Inc. owns an approximately 91% interest in RFS Partnership, L.P., its operating partnership.

        For the year ended December 31, 2001, we received 42% of EBITDA from full service hotels, 33% from extended stay hotels and 25% from limited service hotels.

        The following summarizes additional information for our hotels owned as of December 31, 2001:

Franchise Affiliation			Hotel Properties	Rooms/ Suites	EBITDA
			(in thousands)
Full Service Hotels:
	Sheraton		4	864	$	10,749
	Holiday Inn		5	954		8,359
	Independent		2	331		4,771
	Four Points by Sheraton		2	412		4,673
	Hilton		1	234		3,418
	Doubletree		1	221		2,454
			15	3,016		34,424
Extended Stay Hotels:
	Residence Inn by Marriott		14	1,851		24,015
	TownePlace Suites by Marriott		3	285		2,231
	Homewood Suites by Hilton		1	83		521
			18	2,219		26,767
Limited Service Hotels:
	Hampton Inn(1)		17	2,113		13,621
	Holiday Inn Express		5	637		4,363
	Courtyard by Marriott		1	102		1,134
	Comfort Inn(1)		2	337		1,096
			25	3,189		20,214
		Total	58	8,424	$	81,405

(1)

Excludes EBITDA of approximately $0.1 million and $0.3 million from the Hampton Inn in Plano, Texas that was sold on February 20, 2001 and the Comfort Inn in Farmington Hills, Michigan that was sold on May 31, 2001, respectively.

Termination of Leases and Related Agreements with Hilton

        Under the REIT Modernization Act that became effective January 1, 2001, we are permitted to lease our hotels to our wholly-owned TRS lessees, provided that the TRS lessees engage a third-party management company to manage the hotels. Effective January 1, 2001, we terminated our operating

46

leases, management contracts and related ancillary agreements with a wholly-owned subsidiary of Hilton for approximately $60 million, plus related expenses, at which time our TRS lessees began leasing the hotels previously leased by Hilton. This payment to Hilton represented the cancellation of executory contracts that extended through 2012 and substantially all of the termination payment was recorded as an expense on January 1, 2001. The cancellation of these agreements entitles the TRS lessees to retain the operating profits from hotels, which previously accrued to Hilton under these contracts, and gives us the following advantages over our prior third-party structure:

•

more control over the daily operations of these hotels;



•

benefits from any cost efficiencies or ancillary revenues generated at these hotels;



•

these hotels are not encumbered by long term third-party leases;



•

favorable management agreements; and



•

our financial statements more clearly depict our hotel operations.

All of the hotels continue to operate under the same franchise affiliation as prior to the contract termination.

        Effective January 1, 2001, the TRS lessees entered into new management contracts with Flagstone Hospitality Management. Flagstone is a recently formed company owned by MeriStar Hotels & Resorts, Inc., a leading independent hotel management company. At December 31, 2001, Flagstone managed 51 of our 58 hotels, two of our hotels were managed by other hotel management companies and five of our hotels were operated under long term leases with third-parties.

        In connection with the termination of the leases and related agreements, RFS redeemed 973,684 shares of its Series A Preferred Stock owned by a subsidiary of Hilton for $13 million, plus expenses. RFS included approximately $5 million in net income available to common shareholders on January 1, 2001, that represented the difference between our purchase price and the approximately $18 million of proceeds received from the original sale of the Series A Preferred Stock. Simultaneously, the Partnership redeemed 973,684 units of its Series A Preferred Units owned by RFS for $13 million, plus expenses. The Partnership included approximately $5 million in net income available to common unit holders on January 1, 2001, that represented the difference between its purchase price and the approximately $18 million of proceeds it received from the original issuance of the Series A Preferred Units.

        The aggregate $73 million of payments to Hilton ($60 million lease termination expense plus $13 million to repurchase the Series A Preferred Stock, plus related expenses), were financed by:

•

the sale of two hotels in 2000;



•

net proceeds from the sale of our Series B Preferred Stock; and



•

borrowings under our line of credit.

Results of Operations

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

        For the year ended December 31, 2000, we leased 56 hotels to third parties and reported percentage lease revenue. In connection with the Hilton lease termination transaction, effective January 1, 2001, we leased 51 of these hotels to our TRS lessees. Effective January 1, 2001, we also leased four additional hotels, that were not previously leased, to our TRS lessees. We subsequently sold two hotels. As a result of these transactions, the TRS lessees now lease 53 hotels and we reported hotel operating revenues and expenses with regard to these hotels for the year ended December 31, 2001.

47

Accordingly, the hotel revenues and operating expenses for 2001 are not directly comparable to 2000, where we reported only percentage lease revenue from our hotels.

Revenues

        Total revenue increased $114.5 million over 2000. The increase is principally a result of reporting hotel operating revenues compared to the percentage lease revenue reported in the prior year.

Expenses

        Total operating expenses increased $191.7 million. This increase is associated with the reporting of hotel operating expenses in 2001.

        Property taxes, insurance and other expenses increased $2.1 million or 19.5%, due primarily to the inclusion of hotel operating costs (liability insurance of $1.0 million and personal property taxes of $0.7 million) in 2001. The remainder of the variance relates to increase in earthquake insurance ($0.3 million), and property insurance ($0.1 million).

        Depreciation increased 8.8% due to the increase in depreciable assets resulting from renovation expenditures at certain of our hotels, including the Hilton San Francisco Fisherman's Wharf.

        The lease termination expenses of $65.5 million represents the expenditures incurred in connection with the termination of the leases, management contracts and related ancillary agreements with Hilton. For accounting purposes, this transaction represented the cancellation of executory contracts and was required to be expensed as incurred.

        Amortization of deferred expenses and unearned compensation increased $0.7 million over 2000 as a result of stock grants in 2001.

        General and administrative expenses increased $13.1 million due primarily to the inclusion of hotel general and administrative expenses of $15.2 million in 2001, offset by a decrease of $2.1 million in corporate general and administrative expenses. In the second and third quarters of 2001, we implemented austerity programs aimed at reducing these expenses as well as hotel operating expenses, which provided a $1.0 million favorable variance versus 2000. In addition, we reduced executive bonuses for 2001 by $0.6 million as compared to 2000. The remainder of the variance relates to the first quarter 2000, when we wrote off development and due diligence costs for potential projects that we decided not to pursue, of $0.2 million and incurred severance expense of approximately $0.3 million associated with a former employee.

        Interest expense increased $2.0 million due to a weighted average increase in borrowings of approximately $19.5 million as well as an increase in the weighted average interest rate on borrowings outstanding on our line of credit from 7.6% in 2000 to 7.9% in 2001. In addition, amortization of debt issue costs increased $0.3 million due to the costs incurred to issue new debt in 2000 and complete amendments to the line of credit. Borrowings increased primarily to fund the lease termination costs as well as renovation costs.

        The benefit from income taxes in 2001 relates to the $65.5 million book loss recorded by our TRS lessees. This loss relates primarily to the lease termination payments.

Net Income (loss) Applicable to Common Shareholders

        Net income (loss) applicable to common shareholders was $(11.7) million in 2001 and $29.4 million in 2000. The $41.1 million reduction relates primarily to the $65.5 million lease termination expense offset by the related benefit from income taxes of $24.7 million. Included in the net loss applicable to common shareholders in 2001 is a gain of $5.1 million recognized on the redemption of the Series A Preferred Stock.

48

Year Ended December 31, 2001 Compared to Pro Forma Year Ended December 31, 2000

        During 2000, our revenues primarily consisted of rental income from third-party lessees. As a result of the previously discussed termination of the leases and related agreements with Hilton, beginning January 1, 2001, our consolidated results of operations primarily reflect hotel-related revenues and operating costs. As a result, a comparison of historical results for the year ended December 31, 2001 to the year ended December 31, 2000 would not be as meaningful as a discussion of the actual 2001 results versus 2000 pro forma results. Accordingly, we have presented a discussion of the actual year ended December 31, 2001 versus a pro forma year ended December 31, 2000. The pro forma results of operations for the year ended December 31, 2000 assumes that the following occurred on January 1, 2000:

•

the termination of the Hilton leases, management contracts and ancillary agreements;



•

the formation of TRS lessees to lease 54 of our hotels (one of which was subsequently sold);



•

the implementation of the hotel management agreements between the TRS lessees and Flagstone Hospitality Management, LLC;



•

the sale of three hotels in 2000;



•

the redemption of our Series A Preferred Stock; and



•

the issuance of our Series B Preferred Stock.

49

Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2000

			Historical						Pro Forma Adjustments
(in thousands)			RFS Hotel Investors, Inc.			RFS, Inc.			Sale of Hotels			Other Properties			Other			Pro Forma RFS Hotel Investors, Inc.
			(a)			(b)			(c)			(d)
Revenue:
	Rooms					$	177,406		$	(8,350	)	$	30,878					$	199,934
	Food and beverage						13,348						6,345						19,693
	Other operating departments						8,631			(328	)		1,501						9,804
	Lease		$	106,574						(4,052	)		(14,953	)	$	(81,692	)(e)		5,877
	Other			785			2,394									(2,236	)(f)		943
		Total hotel revenue		107,359			201,779			(12,730	)		23,771			(83,928	)		236,251
Hotel operating expenses by department:
	Rooms						32,637			(1,554	)		7,112						38,195
	Food and beverage						9,271						5,218						14,489
	Other operating departments						1,956			(118	)		449						2,287
Undistributed operating expenses:
	Property operating costs						20,005			(982	)		4,024						23,047
	Property taxes, insurance and other			10,747			1,176			(347	)		187						11,763
	Franchise costs						15,680			(580	)		1,061						16,161
	Maintenance and repair						8,667			(382	)		1,475						9,760
	Management fees						1,565						716			3,458	(g)		5,739
	Percentage lease						85,744			(4,052	)					(81,692	)(e)		—
	Depreciation			27,198			5,419			(623	)					(5,419	)(f)		26,575
	Amortization of deferred expenses and unearned compensation			674															674
	General and administrative			6,304			16,608			(564	)		3,292			(3,685	)(f)		21,955
		Total operating expenses		44,923			198,728			(9,202	)		23,534			(87,338	)		170,645
Operating income				62,436			3,051			(3,528	)		237			3,410			65,606
	Interest expense			24,052												1,411	(h)		25,463
Income before minority interest, loss on sale of hotels, and income taxes				38,384			3,051			(3,528	)		237			1,999			40,143
	Loss on sale of hotel properties			4,376															4,376
	Minority interest in Operating Partnership and subsidiaries			3,218															3,218
	Income taxes						3,169									(490	)(j)		2,679
Income from continuing operations				30,790			(118	)		(3,528	)		237			2,489			29,870
Preferred stock dividends				(1,412	)											(1,713	)(i)		(3,125	)
Income from continuing operations applicable to common shareholders			$	29,378		$	(118	)	$	(3,528	)	$	237		$	776		$	26,745

See Notes to Unaudited Pro Forma Consolidated Statement of Operations.

50

Notes to Unaudited Pro Forma Consolidated Statement of Operations

a)

Represents our historical results of operations.

b)

Represents RFS, Inc.'s historical results of operations.

c)

Eliminate the historical results of operations of the three properties sold by us during 2000: the Hawthorn Suites in Atlanta, Georgia, Hampton Inn in Warren, Michigan and Hampton Inn in Plano, Texas. These properties were also leased to RFS, Inc.

d)

Represents the historical results of operations of four hotels that were owned by us throughout 2000 and not leased. The operating results of these hotels were grouped with lease revenue due to their insignificance. Also includes operating results of the Beverly Heritage hotel that was leased to a subsidiary of Hilton other than RFS, Inc. and the operations of the Hilton Fisherman's Wharf hotel that was leased to another third party until December 31, 2000. The net income for these properties in the pro forma statement of operations is the lessee profit for the Beverly Heritage hotel and the Hilton Fisherman's Wharf hotel. Effective January 1, 2001, all six of these hotels are leased to the TRS Lessees.

e)

Eliminate the lease revenue earned by us from our leases with RFS, Inc.

f)

Eliminate the RFS, Inc. management and consulting fees, other revenue, corporate general and administrative expenses, depreciation and amortization that do not accrue to us as a result of the Hilton lease termination transaction.

g)

Adjust historical management fees to the new management contracts that are effective January 1, 2001.

h)

Represents the increase in interest expense (computed using the 1999 weighted average interest rate of 7.6%) after applying the net proceeds from the sale of three hotels of $30.8 million to the line of credit and the additional draw on the line of credit of approximately $49.3 million to fund the Hilton lease termination transaction.

i)

Recognize the following preferred stock transactions as if they occurred on January 1, 2000:

1)

We purchased 973,684 shares of our Series A Preferred Stock owned by Hilton for approximately $13 million, accordingly, the historical preferred dividends have been eliminated.

2)

We issued 250,000 shares of non-convertible mandatorily redeemable Series B Preferred Stock for $23.9 million, net of fees and expenses. Holders of the Series B Preferred Stock are entitled to receive quarterly cash dividends commencing March 31, 2001 at an annual rate of 12.5%. The preferred dividends are included in the pro forma financial information.

j)

Eliminate income tax expense on RFS, Inc. of $3.2 million that does not accrue to us as a result of the Hilton lease termination transaction and to recognize a provision for deferred income taxes of approximately $2.7 million associated with our TRS Lessees (calculated as the TRS Lessees income before income taxes for financial reporting purposes multiplied by 40%). Since the payments to terminate the operating leases, management contracts and ancillary agreements represented the cancellation of executory contracts, the lease termination payments were expensed for financial reporting purposes. However, for tax purposes, the lease termination payments will be amortized over a period of years and the amortization will offset the income of the TRS such that the income tax provision in future years will be primarily a deferred tax provision.

51

Revenues

        Revenue decreased 6.1% from $236.2 million to $221.9 million primarily due to the slowing economy exacerbated by the terrorist activities of September 11, 2001. Revenue per available room (RevPAR) at our 56 comparable hotels declined 4.6% due to a decline in occupancy of 3.3 percentage points and a decline in average daily rate of 0.1%. The revenue decline of 6.1% resulted from weak third and fourth quarters where RevPAR at our comparable hotels decreased 12.3% and 15.9%, respectively, promulgated by the significant decline in travel following the terrorist activities. Since the week ended September 22, RevPAR has improved incrementally at our hotels, albeit at levels well below 2000 levels. RevPAR at our full service, extended stay and limited service hotel portfolios showed decreases in RevPAR of 10.4%, 1.3% and 0.3%, respectively from the comparable 2000 period. The comparable California hotels (9 of 10 hotels excluding the Hilton San Francisco Fisherman's Wharf which was undergoing renovation in 2000) experienced an average RevPAR decrease of 9.9%. Excluding our California hotels, RevPAR decreased 1.8%. California hotels represented 36% of room revenue in 2001. Within California, San Francisco and Silicon Valley generated approximately 22% of room revenue and the economy of this area has deteriorated rapidly in 2001, even prior to the events of September 11, as a result of the dot-com implosion, the well-publicized energy crisis, a weak convention calendar and the poor Japanese economy.

        The following shows hotel operating statistics for the 56 comparable hotels for the year ended December 31, 2001. Excluded from the 56 comparable hotels are the Hilton San Francisco Fisherman's Wharf hotel, which underwent renovation and was converted from a Ramada Plaza in 2000 and the Sheraton Hotel in Birmingham, Alabama, which was undergoing renovation in 2000.

Comparable Hotels Operating Statistics
For the Year Ended December 31, 2001

	ADR				OCCUPANCY			RevPAR
Hotel Type	2001		Variance vs. 2000		2001		Variance vs. 2000	2001		Variance vs. 2000
Full Service	$	108.52	(2.0)	%	67.9	%	(6.4) pts	$	73.73	(10.4)	%
Extended Stay		96.55	2.0	%	78.5	%	(2.7) pts		75.83	(1.3)	%
Limited Service		70.91	1.8	%	67.4	%	(1.4) pts		47.79	(0.3)	%
Total	$	90.50	(0.1)	%	70.7	%	(3.3) pts	$	63.95	(4.6)	%

        The comparable full service hotels (year to date excludes the Hilton San Francisco Fisherman's Wharf and the Sheraton hotel in Birmingham) produced an average RevPAR decrease of 10.4% year to date. The following six full service hotels located in Silicon Valley and San Francisco had RevPAR changes for the year ending December 31, 2001 as follows:

Hotel	Location	RevPAR Change
173-room Sheraton	Sunnyvale, CA	(15.0)	%
237-room Beverly Heritage	Milpitas, CA	(18.4)	%
229-room Sheraton	Milpitas, CA	(13.1)	%
214-room Sheraton Four Points	Pleasanton, CA	(9.4)	%
234-room Hilton	San Francisco, CA	(9.6)	%
94-room Hotel Rex	San Francisco, CA	(31.0)	%

        As explained previously, coupled with the events of September 11, the Silicon Valley and San Francisco markets have declined due to deteriorating economic conditions, particularly in the technology sector, and this adversely affected the operating results of these hotels.

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        Our extended stay hotels, which comprised approximately 33% of EBITDA, experienced a decline in RevPAR of 1.3%. Fourteen of our 18 extended stay properties are Residence Inns by Marriott, which experienced a decrease in RevPAR of 1.2%. We believe that Residence Inns by Marriott is the extended stay brand of choice for consumers as these hotels benefit from longer duration stays that include the typically slower weekend days. Similarly, most of our extended stay hotels, with the exception of our 176-room Residence Inn in Orlando, are in markets that can be categorized as "drive to" markets rather than air travel markets. These hotels have been less affected by the events of September 11, with RevPAR declines of 11.4% since September 11, as our extended stay hotels have performed with less volatility than many of our full service hotels in a slowing market.

        Our limited service hotels, which comprised approximately 25% of EBITDA, experienced a decrease in RevPAR of 0.3%. This market segment performed the best in terms of RevPAR versus the prior year. Seventeen of the 26 limited service hotels are Hampton Inns, which we believe is the best upscale limited service brand. These Hampton Inns produced a RevPAR increase of 3.6% from increases in occupancy of 0.2 points and ADR of 3.3%, respectively. These results are due to a combination of a slowing rate of increase in limited service room supply and increased demand resulting from a slowing economy that translated into guests trading down in price point to stay at limited service hotels. Like the extended stay hotels, these hotels have been less impacted by the events of September 11 than full service hotels.

        Food and beverage revenue decreased $2.0 million or 10.1%, directly attributable to the decrease in RevPAR of 10.4% on our full service portfolio. Revenue from other operating departments decreased $0.7 million or 7.1% as a result of fewer guest staying at all of our hotels, where RevPAR decreased 5.6%.

Expenses

        Total operating expenses increased $65.9 million due primarily to the lease termination expense of $65.5 million. Excluding the lease termination expense, operating margins (operating income as a percentage of total hotel revenue) decreased 4.9 points to 22.9% from 27.8%, driven by the decrease in revenue of 6.1%. Individual line items comprising hotel operating expenses are discussed below.

        Hotel operating expenses decreased 4.1% to $52.7 million from $55.0 million; however, as a percentage of total hotel revenue, hotel operating expenses increased to 23.8% in 2001 versus 23.3% in 2000. The increased percentage was due to the tight labor market conditions which resulted in an increased wage rate, but were partially offset by head count reductions that were made as the economy slowed throughout the year.

        Property operating costs decreased $0.5 million or 2.2% due primarily to a decrease in other capital expenses and operating leases of $1.0 million, offset by an increase in energy costs of 7.3% due primarily to the California energy crisis earlier in the year. At our ten California properties, energy costs rose 15.4%. We have implemented several initiatives, including the use of high efficiency lighting, to lessen the impact of increased energy costs going forward.

        Property taxes, insurance and other expenses increased $1.0 million or 9.2%, driven primarily by increased costs of all types of insurance, including liability insurance ($0.4 million), earthquake insurance ($0.3 million), and property insurance ($0.1 million). The remainder of the variance ($0.2 million) is attributable to increased personal property taxes at our hotels resulting from the significant renovations at certain hotels.

        Franchise costs increased $0.9 million or 5.2% due primarily to the brands frequency programs (specifically the Hilton HHonors® program which is now accepted at our Hampton Inns). While these increasing costs are not directly attributable to increased revenues, we have seen a beneficial effect on RevPAR at our limited service hotels.

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        Depreciation increased 11.4% due to the increase in depreciable assets resulting from capital improvements at certain of our hotels, including the Hilton San Francisco Fisherman's Wharf. As a percentage of hotel revenue, depreciation increased from 11.3% to 13.3%. We are now substantially finished with major renovations and expect depreciation increases to level off.

        The lease termination costs of $65.5 million represent the expenditures incurred in connection with the termination of the leases, management contracts and related ancillary agreements with Hilton. For accounting purposes, this transaction represented the cancellation of executory contracts and was required to be expensed as incurred.

        Amortization of deferred expenses and unearned compensation increased $0.7 million as a result of stock grants in January 2001.

        General and administrative expenses decreased $2.5 million due primarily to the decrease in corporate general and administrative expenses of $2.1 million to 1.9% from 2.7% of hotel revenue. In the second and third quarters of 2001, we implemented austerity programs aimed at reducing these expenses as well as hotel operating expenses, which provided a $1.0 million favorable variance versus 2000. In addition, we reduced executive bonuses for 2001 by $0.6 million as compared to 2000. The remainder of the variance relates to the first quarter of 2000, when we wrote off development and due diligence costs of $0.2 million for potential projects that we decided not to pursue and incurred severance expense of approximately $0.3 million associated with a former employee.

        Interest expense increased $0.6 million or 2.3% due to the increase in the weighted average interest rate on borrowings outstanding on our line of credit from 7.6% in 2000 to 7.9% in 2001. In addition, amortization of debt issue costs increased $0.3 million due to the costs incurred to issue new debt in 2000 and complete amendments to the line of credit.

        The benefit from income taxes in 2001 relates to the $65.5 million book loss recorded by our TRS lessees relating primarily to the Hilton lease termination.

Net Income (loss) Applicable to Common Shareholders

        Net income (loss) applicable to common shareholders was $(11.7) million in 2001 and $26.7 million in 2000. The $38.4 million reduction in net income relates primarily to the $65.5 million lease termination expense net of the related benefit from income taxes of $24.7 million. Included in the net loss applicable to common shareholders is a gain of $5.1 million recognized on the redemption of the Series A Preferred Stock from Hilton in 2001.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Revenues

        Lease revenue increased 7.7% in 2000 over 1999 due primarily to an increase in RevPAR at the 55 comparable hotels of 5.5% and lease revenue associated with a 40-room addition to the Beverly Heritage hotel in Milpitas, California completed in November 1999. At December 31, 2000, we owned interests in 60 hotels with 8,689 rooms located in 24 states.

        The following shows hotel operating statistics for the 55 comparable hotels for the year ended December 31, 2000. Excluded are three hotels opened in 1999, and two hotels that underwent renovations in 1999 and 2000 (Ramada Plaza in the Fisherman's Wharf district of San Francisco,

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California converted to a Hilton full service hotel in the second quarter 2000 and the Sheraton Hotel in Birmingham, Alabama):

Comparable Hotels Operating Statistics
For the Year Ended December 31, 2000 and 1999

		Lease Revenue				ADR				Occupancy			RevPAR
Hotel Type		2000		Variance vs. 1999		2000		Variance vs. 1999		2000		Variance vs 1999	2000		Variance vs. 1999
		(In thousands)
Full Service		$	40,349	15.1	%	$	110.75	7.3	%	74.3	%	+2.0pts	$	82.28	10.3	%
Extended Stay			27,347	4.9	%	$	98.49	2.7	%	82.3	%	+1.0pts	$	81.07	4.0	%
Limited Service			28,132	0.9	%	$	69.55	0.9	%	68.4	%	+0.0pts	$	47.61	1.0	%
	Total	$	95,828	7.6	%	$	90.82	4.2	%	73.7	%	(0.9)pts	$	66.93	5.5	%

        Increases in RevPAR for all market segments in 2000 exceeded those of 1999 with the full service hotels leading the way.

        Full Service Hotels.    Full service hotels comprised approximately 42% of comparable lease revenues in 2000. The full service hotels produced an average RevPAR increase of 10.3% in 2000 versus 3.8% in 1999. This 10.3% RevPAR increase was achieved through a 2.0 percentage point increase in occupancy and a 7.3% increase in ADR. The following four full service hotels, located in Silicon Valley, had RevPAR increases averaging 14.8% in 2000:

Hotel	Location	Increase in RevPAR
173-room Sheraton	Sunnyvale, CA	18.2	%
214-room Four Points by Sheraton	Pleasanton, CA	17.5	%
229-room Sheraton	Milpitas, CA	14.7	%
214-room Beverly Heritage	Milpitas, CA	8.8	%

        The Sunnyvale hotel was renovated and converted from a Four Points by Sheraton in December 1998. Since conversion, the hotel has posted strong results with occupancy increasing 6.7 points to 81.7% and ADR increasing 8.5% to $162.64.

        The Four Points by Sheraton in Pleasanton has rebounded from the loss of a major account in 1999 with occupancy increasing 7.2 points to 76.2% and ADR increasing 6.4% to $114.52.

        The Beverly Heritage's RevPAR is attributable to an increase in occupancy of 1.5 points to 76.1% in spite of a 40-room addition in November 1999 combined with an increase in ADR of 6.6% to $141.89.

        In addition to the Silicon Valley full service hotels, the following two hotels benefited from recent renovations and/or re-brandings:

        The Hilton San Francisco Fisherman's Wharf, which was converted from a Ramada Plaza in April 2000 after an $11 million dollar renovation, operated at occupancy of 75.4%, and ADR of $178.24 in the fourth quarter of 2000.

        The 255-room Sheraton Hotel in Clayton, Missouri, a suburb of St. Louis, produced a RevPAR gain of 16.1% in 2000. This Sheraton was converted from a Holiday Inn in August 1999. For the year, occupancy increased 6.4 points to 68.5% and ADR increased 5.3% to $100.38.

        Other full service hotels include the 94-room Hotel Rex in San Francisco's Union Square that produced a RevPAR increase of 17.4% in 2000 driven by an occupancy increase of 3.7 points to 80.0% and an ADR increase of 11.9% to $175.58. The five Holiday Inns, which have an average of 190 rooms per hotel, produced an increase in RevPAR of 1.1% in 2000. The Holiday Inn at Crystal Lake, Illinois

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(a suburb of Chicago) had been hit by significant supply increases over the last 18 months, as over 400 primarily limited service rooms have opened in its primary and secondary market area. Group business at this hotel remains strong, but transient business has been reduced in that market. The rest of the Holiday Inns are primarily located in competitive secondary markets that generally do not allow us the opportunity to aggressively increase rate or occupancy.

        Extended Stay Hotels.    Extended stay hotels comprised approximately 29% of comparable lease revenues in 2000. The extended stay hotels experienced an increase in RevPAR of 4.0% in 2000. Fourteen of the 18 extended stay properties are Residence Inns by Marriott and produced an increase in RevPAR of 3.8%, occupancy of 0.7 points to 82.7% and ADR of 2.9% to $98.89.

        Limited Service Hotels.    Limited service hotels comprised approximately 29% of comparable lease revenues in 2000. The limited service hotels experienced an increase in RevPAR of 1.0% in 2000 versus a decrease of 1.9% in 1999. Nineteen of the 27 limited service hotels are Hampton Inns and produced increased RevPAR of 1.7% through an increase in occupancy of 1.3 points.

Expenses

        As a percentage of total revenue, expenses, before the loss on sale of hotel properties and franchise termination fees, increased to 67% in 2000 from 63% in 1999.

        Taxes and insurance expense represented 10% of lease revenues for 2000 and 1999. The decrease in real estate taxes from the sale of two hotels in the fourth quarter was offset by increases in the taxing authorities' reassessments on renovations at some of our properties.

        Depreciation increased 12.3% due to increases in depreciable assets related to two hotels opened in 1999 and substantial renovations at the Hilton San Francisco Fisherman's Wharf and the Sheraton Birmingham.

        General and administrative expenses increased $2.6 million in 2000 to 5.9% of lease revenues in 2000 from 3.7% in 1999. Increases in general and administrative expenses were due to increases in compensation from incentive bonuses and additional personnel, other expenses in response to initiatives associated with the REIT Modernization Act, and to Centrafuse, our application service provider of hotel accounting solutions.

        Interest expense increased $3.2 million in 2000 due to a weighted average increase in borrowings during the year of approximately $19 million and an increase in borrowing costs due to a general increase in interest rates that impacted our variable rate debt. Borrowings increased primarily due to funding of renovation costs. At December 31, 2000, variable rate debt was 4% of total debt, a reduction from 35% a year ago. From 1998 through 2000, we spent $75 million or approximately 12% of gross hotel revenues renovating, expanding and re-branding our hotels.

        The loss on the sale of hotel properties and franchise termination fees of $4.4 million represents a reserve of $4.0 million established against notes receivable from prior years hotel sales and a loss of approximately $1.0 million on the sale of the Hampton Inn in Plano, Texas offset by gains on the sale of two hotels, the Hawthorne Suites in Atlanta, Georgia and the Hampton Inn in Warren, Michigan, aggregating approximately $0.7 million.

Funds From Operations and EBITDA

        We consider Funds From Operations (FFO) and EBITDA to be appropriate measures of a REIT's performance which should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance and liquidity.

        The National Association of Real Estate Investment Trusts (NAREIT), defines FFO as net income (computed in accordance with generally accepted accounting principles or GAAP), excluding gains or

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losses from debt restructuring which would be extraordinary items in accordance with GAAP and sales of depreciable operating properties, plus real estate related depreciation and amortization and after comparable adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. Recurring FFO represents FFO, as defined by NAREIT, adjusted for significant non-recurring items including lease termination costs and deferred income taxes. However, Recurring FFO and EBITDA as presented may not be comparable to amounts calculated by other companies. Recurring FFO and EBITDA do not represent cash flows from operations as determined by GAAP and should not be considered as an alternative to net income as an indication of our financial performance or to cash flow from operating activities determined in accordance with GAAP as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. The computation of FFO and EBITDA for RFS and the Partnership yield the same results.

        The following details the computation of RFS's recurring FFO (in thousands):

	Year Ended December 31,
	2001			2000			1999
Net income (loss)	$	(13,729	)	$	30,790		$	34,990
Minority interest in Operating Partnership		(1,157	)		3,218			3,620
Depreciation		29,605			27,198			24,210
Hilton lease termination expense, net of deferred income taxes		40,762			—			—
(Gain) loss on sale of hotel properties		(1,127	)		4,376			1,602
Preferred stock dividends		(3,125	)		(1,412	)		(1,412	)
Recurring FFO	$	51,229		$	64,170		$	63,010
Weighted average, common shares, partnerships units and potential dilutive shares outstanding		27,655			27,127			27,569

        The following details the computation of RFS's EBITDA (in thousands):

	Year Ended December 31,
	2001		2000		1999
Recurring FFO	$	51,229	$	64,170	$	63,010
Interest expense		26,042		24,052		20,836
Amortization		1,384		674		858
Current income taxes		20		—		—
Preferred stock dividends		3,125		1,412		1,412
EBITDA	$	81,800	$	90,308	$	86,116

Liquidity and Capital Resources

        For the year ended December 31, 2001 cash flow provided by operating activities was $10.5 million. We believe that cash provided by our operating activities will be adequate to meet some of our liquidity needs. Also, we currently expect to fund our strategic objectives and any other liquidity needs by borrowing on our line of credit, exchanging equity for hotel properties or possibly accessing the capital markets if market conditions permit. At December 31, 2001, we had $5.7 million of cash and cash equivalents and had borrowed $81.2 million under our $140.0 million line of credit. The borrowing capacity under our line of credit is determined by a borrowing base calculation which, at December 31, 2001, based on the hotels currently in the collateral pool, would permit us to borrow up to approximately $111.4 million. We used a portion of the net proceeds from the issuance and sale of the outstanding notes to repay approximately $53.6 million of our outstanding borrowings under our line of credit and to terminate two interest rate swaps at an aggregate cost of approximately

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$3.2 million, and we expect to use the remaining proceeds to redeem, on or about March 20, 2002, our 1996 commercial mortgage bonds for approximately $64.7 million, including a yield maintenance premium of $6.5 million. On February 20, 2002, we sold 1.15 million shares of common stock. We used the net proceeds from the issuance of the common stock to repay approximately $14.2 million of our outstanding borrowings under our line of credit. On a pro forma basis, at December 31, 2001, we would have $13.4 million outstanding under our line of credit, $125 million of notes and $161.8 million of mortgage debt.

        The following details our debt outstanding at December 31, 2001 (dollar amounts in thousands) on an actual and pro forma basis:

								Collateral
	Actual Balance		Pro Forma Balance		Interest Rate		Maturity	# of Hotels	Net Book Value at December 31, 2001
Line of Credit	$	81,188	$	13,414	LIBOR + 200bp(a)	Variable	July 2004	24	$	216,228
1996 Mortgage Debt, Class A		33,181		—	6.83%	Fixed	August 2008	15		143,522
1996 Mortgage Debt, Class B		25,000		—	7.30%	Fixed	November 2011	(b)		(b)
Mortgage Debt		92,087		92,087	7.83%	Fixed	December 2008	10		126,404
Mortgage Debt		18,271		18,271	8.22%	Fixed	November 2007	1		44,421
Mortgage Debt		51,408		51,408	8.00%	Fixed	August 2010	8		84,987
Notes		—		125,000	9.75%	Fixed	March 2012	—
	$	301,135	$	300,180					$	615,562

(a)

Effective April 1, 2002, this interest rate is expected to increase to LIBOR + 225 basis points.

(b)

This mortgage debt is also collateralized by the 15 properties pledged against the 1996 Mortgage Debt, Class A.

        The interest rate on our line of credit ranges from 150 basis points to 250 basis points above LIBOR, depending on our ratio of total debt to investment in hotel properties (as defined). The average interest rate on our line of credit (including the impact of our interest rate swaps) was approximately 7.9% for the year ended December 31, 2001. Our line of credit is collateralized by first priority mortgages on 24 hotels that restrict the transfer, pledge or other hypothecation of the hotels (collectively, the "collateral pool"). We can obtain a release of the pledge of any hotel in the collateral pool if we provide a substitute hotel or reduce the total availability under the line of credit. Our line of credit contains various covenants including the maintenance of a minimum net worth, minimum debt and interest coverage ratios, and total indebtedness and liability limitations. We were in compliance with these covenants at December 31, 2001. See "Description of Other Indebtedness and Preferred Stock—Line of Credit."

        On March 21, 2001, we entered into an interest rate swap agreement, which effectively fixed the interest rate on $30.0 million of our floating rate debt at 6.775% through July 20, 2003. The 6.775% interest rate consists of a fixed rate of 4.775% plus the credit spread in effect on our line of credit (currently 200 basis points). The credit spread can vary from 150 basis points to 225 basis points, depending on our leverage ratios. The agreement effectively converts a portion of our floating rate debt to fixed rate in order to reduce our risk to increases in interest rates. Such agreements involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts. In addition, we participate in a second interest rate swap agreement for a notional amount of $40.0 million maturing in July 2003. Under the interest rate swap agreement, at December 31, 2001, we receive payments based on the one-month LIBOR rate of 2.14% and pay a fixed rate of 6.535%. In connection with the repayment of a portion of our line of credit

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using proceeds from the issuance of the outstanding notes, we terminated these agreements at an aggregate approximate cost of $3.2 million.

        Our other borrowings are nonrecourse to us and contain provisions allowing for the substitution of collateral, upon satisfaction of certain conditions, after the respective loans have been outstanding for approximately four years. Most of the mortgage borrowings are repayable, subject to various prepayment penalties, yield maintenance or defeasance obligations. At December 31, 2001, approximately 96% of our debt was fixed at an average interest rate of 7.7%. On a pro forma basis, at December 31, 2001 approximately 96% of our debt was fixed at an average interest rate of 8.7%.

        Future scheduled principal payments of debt obligations on an actual and pro forma basis at December 31, 2001, are as follows (in thousands):

	Actual			Pro Forma
2002	$	6,547		$	2,487
2003		7,044			2,695
2004		88,735	(1)		16,301	(1)
2005		8,152			3,161
2006		8,772			3,424
Thereafter		181,885			272,112
	$	301,135		$	300,180

(1)

Includes the outstanding balance of our line of credit, as of December 31, 2001, which is scheduled to mature on July 30, 2004.

        In addition to the above principal payment of debt obligations, as of December 31, 2001, the Company had a $0.6 million letter of credit outstanding. The letter of credit serves as collateral on the worker's compensation plan set-up on behalf of the hotel employees of Flagstone. On January 1, 2002, the letter of credit was increased to $2.0 million. There are no outstanding balances on the letter of credit. The Company is also committed to make future payments under various operating leases that are not material.

        On January 2, 2001, RFS Hotel Investors, Inc. issued 250,000 shares of non-convertible mandatorily redeemable Series B Preferred Stock with an aggregate liquidation preference of $25 million. Holders of the Series B Preferred Stock are entitled to receive quarterly cash dividends commencing March 31, 2001 at an annual rate of 12.5% of the liquidation preference of the shares. If not repaid, beginning January 1, 2006, the dividend rate increases 2.0% per annum up to a maximum rate of 20.5%. RFS may redeem shares of the Series B Preferred Stock in whole but not in part, on or after December 31, 2003 for $25 million. If the shares are redeemed before December 31, 2003, the redemption price is at varying premiums over the liquidation preference. The shares are mandatorily redeemable upon a change of control, dissolution, or winding up or on our failure to qualify as a REIT. RFS contributed the proceeds from the sale of the Series B Preferred Stock to the Partnership in exchange for 250,000 units of nonconvertible mandatorily redeemable Series B Preferred Units with the same terms as the Series B Preferred Stock issued by RFS.

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        Certain significant credit statistics at December 31, 2000 and 2001 and, on a pro forma basis, for the year ended December 31, 2001, are as follows:

Credit Statistic	December 31, 2000	December 31, 2001	Pro Forma Year Ended December 31, 2001
EBITDA to interest expense(1)	3.9x	3.3x	3.0x
Total debt to EBITDA	3.1x	3.7x	3.7x
Weighted average maturity of fixed rate debt	8.4 years	7.3 years	8.4 years
Ratio of fixed interest rate debt to total debt	96%	96%	96%
Ratio of debt to investment in hotel properties, at cost(2)	38%	38%	37%

(1)

Excludes amortization of loan costs and deferred financing fees.

(2)

Investment in hotel properties at cost, as defined by us.

        For the years ended December 31, 2000 and 2001, we spent $32.6 million and $18.0 million, respectively, on capital improvements to our hotels. We expect to spend approximately $9.0 million on capital improvements to our hotels during 2002, which we expect to fund from cash generated from operations and borrowings under the line of credit.

        We used the net proceeds from the sale of the outstanding notes to reduce outstanding amounts under the line of credit, terminate both of our existing interest rate swap agreements and to pay transaction fees and expenses, and we intend to use the remaining net proceeds to redeem our 1996 commercial mortgage bonds and pay related prepayment penalties.

        We intend to fund our future operating cash, capital expenditure and debt service requirements through cash flow from operations and borrowings under our $140.0 million line of credit which matures on July 30, 2004. Borrowings under the line of credit bear interest at a floating rate based upon (and including spreads over), at our option, LIBOR or the Prime Rate. The line of credit also has various financial and other covenants. At December 31, 2001, on a pro forma basis, we had $126.6 million of borrowing availability under the line of credit excluding outstanding letters of credit. For more information, see "Description of Other Indebtedness and Preferred Stock."

        Over the next 12 months, we expect to be able to meet our working capital, capital expenditure and debt service requirements through cash flow from operations and borrowings under the line of credit. Over the longer term, our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including payments on the notes, we may have to undertake alternative financing plans. We cannot assure you that completion of any such alternative financing plans will be possible. Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms would have an adverse effect on our business, financial condition and results of operations, as well as our ability to satisfy our obligations on the notes. See "Risk Factors."

        We intend to fund cash distributions to shareholders and limited partners principally out of cash generated from operations. We may incur, or cause our subsidiaries to incur, indebtedness to meet distribution requirements imposed on a REIT under the Internal Revenue Code, including the requirement that a REIT distribute to its shareholders annually at least 90% of its taxable income, to the extent that working capital and cash flow from our investments are insufficient to make such distributions.

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        In the future we may seek to increase further the amount of our credit facilities, negotiate additional credit facilities, or issue corporate debt instruments. Although we have no charter restrictions on the amount of indebtedness we may incur, our board of directors has adopted a current policy limiting the amount of indebtedness that we will incur to an amount not in excess of approximately 45% of our investment in hotel properties, at cost (as defined). The board may change the debt policy at any time without shareholder approval.

Qualitative and Quantitative Disclosure about Market Risk

        We are exposed to certain financial market risks, one being fluctuations in interest rates. We monitor interest rate fluctuations as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on our results. The effect of interest rate fluctuations historically has been small relative to other factors affecting operating results, such as occupancy.

        Our operating results are affected by changes in interest rates primarily as a result of borrowing under our line of credit. If interest rates increased by 25 basis points, our annual interest expense would have increased by approximately $68 thousand based on balances outstanding during the year ended December 31, 2001.

        Our primary market risk exposure is to changes in interest rates as a result of our line of credit and long-term debt. At December 31, 2001, on an a pro forma basis, we had outstanding total indebtedness of approximately $300.2 million. Our interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve this objective, we manage our exposure to fluctuations in market interest rates for our borrowings through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements and derivative financial instruments such as interest rate swaps, to effectively lock the interest rate on a portion of our variable debt. We do not enter into derivative or interest rate transactions for speculative purposes. On a pro forma basis, at December 31, 2001, approximately $286.8 million of our outstanding debt was subject to fixed rates with a weighted average interest rate of 8.72%. On March 21, 2001, we entered into an interest rate swap agreement for a notional amount of $30.0 million that effectively locked an interest rate (before the spread of LIBOR) of 4.775% through an interest rate swap agreement. We participated in a second interest rate swap agreement for a notional amount of $40.0 million that effectively locked an interest rate (before the spread of LIBOR) of 6.535%. We regularly review interest rate exposure on our outstanding borrowings in an effort to minimize the risk of interest rate fluctuations. In connection with the issuance of the outstanding notes and pay down of the outstanding balance under our line of credit, we terminated these interest rate swap agreements at an aggregate cost of approximately $3.2 million.

        The following table provides information about our instruments that are sensitive to changes in interest rates. For debt obligations outstanding at December 31, 2001, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve as of December 31, 2001. For the interest rate swap, the table presents notional amounts and weighted average interest rates by expected contractual maturity dates. The fair value of our fixed rate debt indicates the estimated principal amount of debt having similar debt service requirements, which could have been borrowed by us at December 31, 2001. The rate assumed in the fair value calculation of fixed rate debt is equal to 6.66%, which consists of the 7-year treasury rate of 4.66% as of December 31, 2001, plus 200 basis points.

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Expected Principal Cash Flows
(in thousands)

Liabilities			2002			2003			2004			2005			2006			Thereafter			Total		Fair Value Total
Long-Term Debt:
	Fixed Rate		$	6,547		$	7,044		$	77,547		$	8,152		$	8,772		$	181,885		$	289,947	$	301,414
		Average Interest Rate		7.71	%		7.71	%		7.69	%		7.69	%		7.69	%		7.69	%
	Variable Rate								$	11,188											$	11,188	$	11,188
		Average Interest Rate								4.03	%
Interest Rate Derivatives:
	Variable to Fixed					$	70,000														$	70,000	$	(3,220	)
		Average Pay Rate(1)		5.78	%		5.78	%
		Average Receive Rate(1)		2.32	%		4.16	%

(1)

Before the spread on LIBOR of 200 basis points.

        The table incorporates only those exposures that exist as of December 31, 2001, and does not consider exposures or positions that could arise after that date. In addition, because firm commitments are not represented in the table above, the information presented therein has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations would depend on the exposures that arise during future periods, prevailing interest rates, and our strategies at that time. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our financing requirements.

Inflation

        Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of the lessees and management companies to raise room rates.

Seasonality

        Our hotels' operations historically have been seasonal in nature, reflecting higher occupancy during the second and third quarters. This seasonality can be expected to cause fluctuations in our quarterly operating profits. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, we expect to utilize cash on hand or borrowings under our line of credit to make distributions to our equity holders.

Critical Accounting Policies and Estimates

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

        On an on-going basis, we evaluate our estimates, including those related to bad debts, carrying value of investments in hotels, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of

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assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

        We record an impairment charge when we believe an investment in hotels has been impaired such that future undiscounted cash flows would not recover the book basis of the investment in hotel. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

        We record a valuation allowance to reduce our deferred tax assets to an amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

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BUSINESS AND PROPERTIES

Our Company

        We are a hotel real estate investment trust headquartered in Memphis, Tennessee. We have grown from owning seven hotels with 1,118 rooms in five states at the time of our initial public offering in August 1993 to owning interests in 58 hotels with approximately 8,400 rooms in 24 states, at December 31, 2001. Our hotel portfolio is diversified by geography, brand affiliation and market segment. The leading franchise brands under which our hotels operate include Comfort Inn, Courtyard by Marriott, Doubletree, Four Points by Sheraton, Hampton Inn, Hilton, Holiday Inn, Holiday Inn Express, Homewood Suites by Hilton, Residence Inn by Marriott, Sheraton, and TownePlace Suites by Marriott. Many of our hotels are located in attractive metropolitan areas or rapidly growing secondary markets and are well located within these markets. All but two of our hotels are operated under franchises from nationally recognized franchisors such as Marriott International, Inc. (18 hotels), Hilton Hotels Corporation (20 hotels), Six Continents PLC (10 hotels), Starwood Hotels & Resorts, Inc. (six hotels) and Choice Hotels International, Inc. (two hotels). For the year ended December 31, 2001, we generated 93% of our EBITDA from hotels operating under nationally recognized brands from our top four franchisors. For the year ended December 31, 2001, we generated 42% of our hotel EBITDA from our full service hotels, 33% from our extended-stay hotels, and 25% from our limited service hotels. We believe that owning a hotel portfolio diversified by geographic location, brand affiliation and market segment is the best method to maximize risk-adjusted return on investment over time.

        RFS is the sole general partner of the Partnership and, at December 31, 2001, owned a 91% interest in the Partnership. Substantially all of our business activities are conducted through the Partnership. For the year ended December 31, 2001, we generated revenues of $221.9 million and EBITDA of $81.8 million.

        At December 31, 2001, 51 of our hotels were managed by Flagstone pursuant to management contracts. Flagstone is a hotel management company which is owned by MeriStar Hotels & Resorts, a leading independent hotel management company. Our remaining seven hotels are managed by four different hotel management companies.

Business Strategies

        The principal features of our business strategy are outlined below:

        Actively Manage Our Portfolio of Assets.    We seek to increase operating cash flows through aggressive asset management. We apply our asset management and investing expertise to the renovation, redevelopment and rebranding of our existing hotels and the maintenance of strong strategic relationships with our brand owners and managers. Over the past four fiscal years, we have spent approximately $86 million upgrading, renovating and redeveloping existing hotels in order to enhance their competitive position and improve cash flow. Recent examples of this strategy include:

•

an $11 million renovation and conversion of our 234-room San Francisco Fisherman's Wharf hotel from a Ramada Plaza to a Hilton;



•

a $4.5 million, 40-room addition to our Beverly Heritage in Milpitas, California;



•

the conversion of our Sunnyvale, California hotel from a Four Points by Sheraton to a Sheraton; and



•

the renovation and conversion of our Clayton, Missouri hotel from a Holiday Inn to a Sheraton.

        Maintain Strong Brand Affiliations.    All but two of our hotels operate under franchises from national hotel brands. Franchised hotels typically have higher levels of occupancy and average daily rates than non-franchised hotels due to access to the national reservation systems and marketing provided by these franchisors. For the year ended December 31, 2001, we generated 93% of our

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EBITDA from hotels under franchise by four of the largest and most well-respected hotel franchisors: Marriott (Residence Inn, Courtyard by Marriott, TownePlace Suites by Marriott), Hilton (Hilton, Doubletree, Hampton Inn, Homewood Suites by Hilton), Starwood (Sheraton and Four Points by Sheraton) and Six Continents (Holiday Inn and Holiday Inn Express).

        Make Selective Acquisitions.    Over the past several years, we believed that acquisition prices were not attractive by historical standards and generally offered cash returns below our costs of capital; as a result, we reduced our acquisition activity. We believe that the current acquisition environment may become more favorable because an increasing number of owners are seeking liquidity events and many potential buyers are focused on integrating past acquisitions and reducing debt levels. We intend to pursue our acquisition strategy by focusing our acquisition activities primarily on individual 200 to 500-room hotels with the potential for attractive returns and which meet one or more of the following criteria:

•

under-performing, upscale, full service hotels in strong markets (i.e., urban or highly developed suburban markets) which may benefit from rebranding or redevelopment;



•

national brand hotels in the upscale, full service segment which may benefit from overflow traffic from a nearby larger, convention hotel of the same brand; and



•

hotels in promising geographic locations where we are currently under-represented.

        Divest Non-Core Properties.    We continue to modify our portfolio by selectively divesting hotels that are not consistent with our long-term investment objectives, particularly limited service hotels located in smaller markets. We intend to continue to selectively divest hotels that:

•

may offer limited earnings growth;



•

may suffer adverse changes in their local markets; or



•

may not offer attractive returns on required additional capital investments.

        Over the past four years, we have sold 10 non-core properties for approximately $61.9 million.

The Hotel Industry

General

        In 2001, the lodging industry encountered a significant downturn as a result of the economic recession, coupled with the impact of the terrorist attacks on the U.S. on September 11, 2001. For 2001, Smith Travel Research ("STR") estimates that compared to 2000, U.S. lodging industry room revenue declined approximately 4.7% to $76.6 billion, RevPAR declined 6.9% to $51.00 and occupancy levels declined 5.7% to 60.1%.

        Historically, the lodging industry has demonstrated consistent RevPAR growth that slows during economic downturns. In the last twenty-one years, year-over-year RevPAR growth has been negative only twice: in 1991 during the height of the last U.S. economic recession and the Gulf War with Iraq and in 2001.

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U.S. LODGING INDUSTRY
REVPAR ANNUAL CHANGE

Source: Smith Travel Research

        Industry statistics indicate that the U.S. lodging industry's performance is strongly correlated to economic activity. Room supply and demand historically have been sensitive to shifts in economic growth, which has resulted in cyclical changes in average daily room rates and occupancy. Recent supply growth peaked in 1998 and in 2000, demand growth exceeded supply growth for the first time since 1995.

U.S. LODGING INDUSTRY
ROOM SUPPLY AND DEMAND % GROWTH

Source: Smith Travel Research

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        Overbuilding in the lodging industry, particularly in the late 1980s and early 1990s, resulted in an oversupply of rooms that depressed industry profitability. By 1992, the percentage growth in room demand exceeded the percentage growth in room supply, and since that time the industry has benefited from an improved supply and demand balance. As a result, U.S. hotel industry profitability, as measured by RevPAR, has had positive growth in every year from 1992 to 2000. In 2001, according to STR, the percentage growth in room supply was 2.4% while the percentage room demand declined 3.4%. Even factoring in this decline, industry RevPAR has experienced an annual compound growth rate of 3.5% from 1992 through 2001.

        The lodging industry can generally be segmented by the level of service provided. Segmentation by level of service can be divided into the following general categories:

        Full Service Hotels:    Generally target both business, group and leisure travelers. Guests are offered food and beverage services, meeting rooms, room service and similar guest services.

        Limited Service Hotels:    Generally target value-oriented guests. Typically offer rooms with limited food and beverage and meeting facilities, but may offer amenities such as continental breakfast, swimming pools and other limited services.

        Extended Stay Hotels:    Target guests staying five or more nights. Typically provide limited public spaces, but may offer more amenities such as guest suites, swimming pool and complimentary breakfast.

        We own hotels in all three segments, with 42% of our EBITDA coming from our full service hotels, 33% from our extended stay hotels and 25% from our limited service hotels.

Impact of September 11, 2001 and Outlook

        The U.S. lodging industry experienced a significant decline in business as a result of the terrorist attacks on September 11, 2001. The attacks caused a severe reduction in travel in the immediately following weeks, and this reduction was in addition to already weakened travel as a result of the U.S. economic recession. The industry has seen gradual improvement in the months following the attacks, however, RevPAR is still lower than the levels prior to September 11, 2001.

U.S. LODGING INDUSTRY
REVPAR WEEKLY % CHANGE SINCE SEPTEMBER 11, 2001

Source: Smith Travel Research

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        In its 2001 Lodging Industry Briefing, PricewaterhouseCoopers LLP, or PWC, forecasts that U.S. lodging industry RevPAR will be virtually flat in 2002, with a 1% increase in average daily rates and a 0.7% decrease in occupancy. In 2003, PWC forecasts the U.S. lodging industry will regain momentum with RevPAR growth of 5.1%, an average daily rate increase of 3.1% and an occupancy increase of 1.2%.

Hotel Portfolio

        The following sets forth information regarding our hotels as of, and for the year ended December 31, 2001. Pursuant to management agreements between the TRS lessees and Flagstone, Flagstone manages 51 of our 58 hotels. As indicated below, the remaining seven hotels are leased to or managed by other hotel management companies.

					Year Ended December 31, 2001
			Date Opened	Number of Rooms	Room Revenue		RevPAR
				(in thousands)
Full Service
Beverly Heritage
	Milpitas, California		1988	237	$	7,623	$	88.12
Doubletree
	San Diego, California		1990	221		7,173		88.93
Hilton
	San Francisco, California		1976	234		8,967		104.99
Holiday Inn
	Crystal Lake, Illinois		1988	197		4,676		65.14
	Louisville, Kentucky		1970	169		2,589		41.97
	Lafayette, Louisiana		1983	242		3,985		45.12
	Flint, Michigan		1990	171		4,610		73.86
	Columbia, South Carolina		1969	175		3,025		47.36
Hotel Rex
	San Francisco, California(1)		1912	94		3,328		97.01
Four Points by Sheraton
	Bakersfield, California		1983	198		4,039		55.89
	Pleasanton, California		1985	214		6,179		79.10
Sheraton
	Birmingham, Alabama		1984	205		3,702		49.47
	Milpitas, California		1988	229		8,717		104.29
	Sunnyvale, California		1980	173		7,131		112.92
	Clayton, Missouri		1965	257		6,244		66.76
		Full Service Total/Average		3,016	$	81,988	$	74.50
Extended Stay
Homewood Suites by Hilton
	Chandler, Arizona		1998	83		1,907		62.96
Residence Inn by Marriott
	Sacramento, California		1987	176		5,528		86.05
	Torrance, California		1984	247		8,404		93.22
	Wilmington, Delaware		1989	120		3,461		79.02
	Jacksonville, Florida(2)		1997	120		3,157		72.09
	Orlando, Florida		1984	176		4,953		77.10
	West Palm Beach, Florida(2)		1998	78		2,305		81.04
	Atlanta, Georgia		1987	128		3,127		66.94
	Ann Arbor, Michigan		1985	114		3,320		79.79

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	Kansas City, Missouri			1987	96	$	2,465	$	70.35
	Charlotte, North Carolina(1)			1984	116		2,223		52.65
	Fishkill, New York			1988	136		5,614		113.10
	Warwick, Rhode Island			1989	96		3,710		105.89
	Ft. Worth, Texas			1983	120		3,611		82.45
	Tyler, Texas			1985	128		2,712		58.04
TownePlace Suites by Marriott
	Miami Lakes, Florida(2)			1999	95		1,461		42.15
	Miami West, Florida(2)			1999	95		2,003		57.77
	Fort Worth, Texas			1998	95		1,443		41.60
			Extended Stay Total/Average		2,219	$	61,404	$	75.83
Limited Service
Comfort Inn
	Marietta, Georgia			1989	184		2,400		28.32
	Ft. Mill, South Carolina			1987	153		1,581		35.70
Courtyard
	Flint, Michigan			1996	102		2,490		66.88
Hampton Inn
	Chandler, Arizona			1997	101		1,711		46.42
	Sedona, Arizona			1997	56		1,318		64.49
	Denver, Colorado			1985	138		1,730		34.35
	Lakewood, Colorado			1987	150		2,134		38.98
	Ft. Lauderdale, Florida			1986	122		2,383		53.51
	Jacksonville, Florida(2)			1998	118		2,510		58.27
	Indianapolis, Indiana			1994	131		2,842		59.44
	Bloomington, Minnesota			1994	135		2,878		58.40
	Minnetonka, Minnesota			1990	127		2,295		49.50
	Hattiesburg, Mississippi			1988	154		2,206		39.23
	Lincoln, Nebraska			1983	111		1,796		44.33
	Omaha, Nebraska			1985	129		2,103		44.66
	Oklahoma City, Oklahoma			1986	134		2,242		45.84
	Tulsa, Oklahoma			1986	148		2,157		39.93
	Memphis, Tennessee			1992	120		1,961		44.77
	Laredo, Texas			1995	120		3,002		68.73
	Houston, Texas			1996	119		2,157		49.67
Holiday Inn Express
	Arlington Heights, Illinois			1989	125		2,214		48.52
	Downers Grove, Illinois			1984	123		2,226		49.59
	Bloomington, Minnesota			1987	142		3,067		59.18
	Austin, Texas			1992	125		2,059		45.13
	Wauwatosa, Wisconsin			1984	122		2,163		48.56
		Limited Service Total/Average			3,189		55,625		47.79
			Portfolio Total/Average		8,424	$	199,017	$	64.74

(1)

This hotel is managed by a third-party management company pursuant to a management agreement between the TRS lessee and the management company.

(2)

This hotel is leased to a third party lessee pursuant to a long-term percentage lease which provides for fixed base rent and percentage rent based on the revenues of the hotels.

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Hotels Owned at Beginning and End of Period

        The following summarizes the number of hotels we owned for the periods presented:

	Year Ended December 31,
	1998		1999	2000		2001
Hotels owned at beginning of period	60		60	62		60
Acquisitions	2		—	—		—
Developed hotels placed into service	4		2	—		—
Sales of hotels	(6	)	—	(2	)	(2	)
Hotels owned at end of period	60		62	60		58

        During 1998, we acquired two hotels in the San Francisco market for approximately $49 million, the Hotel Rex in Union Square and the Ramada Plaza at Fisherman's Wharf, which subsequently underwent a major renovation and was rebranded to a Hilton. In addition, we developed three extended stay hotels and one limited service hotel during 1998 for $21.3 million. In 1999, we developed two TownePlace Suites hotels in Miami, Florida for approximately $12.2 million.

        Consistent with our strategy of reducing investment in limited service hotels in smaller markets, during 1998, we sold six under-performing limited service hotels (three Comfort Inns, one Hampton Inn, one Holiday Inn Express and one independent) with 637 rooms for approximately $22.3 million, resulting in a loss on sale of approximately $4.1 million. During 2000, we sold our 280-room Hawthorn Suites in Atlanta for $20.8 million, resulting in a nominal gain, and our 124-room Hampton Inn in Warren, Michigan for $5.4 million, resulting in a gain on the sale of $0.7 million. During February 2001, we sold our 131-room Hampton Inn in Plano, Texas for $5.5 million, resulting in a loss on sale of approximately $1.0 million. On May 31, 2001, we sold our 135-room Comfort Inn in Farmington Hills, Michigan for $6.6 million, resulting in a gain on sale of approximately $1.1 million.

Geographic Diversity of Our Hotel Portfolio

        The following table sets forth information regarding the geographic diversity of our hotels for the year ended December 31, 2001:

			EBITDA(1)
Geographic Location		Hotel Properties	Dollars (in thousands)		Percentage of Total
California		10	$	30,442	37	%
Florida		7		7,944	10
Texas		6		5,707	7
Michigan		3		4,620	6
Illinois		3		4,336	5
New York		1		3,080	4
Minnesota		3		3,022	4
Missouri		2		2,756	3
Georgia		2		1,981	2
Rhode Island		1		1,759	2
Oklahoma		2		1,694	2
Louisiana		1		1,649	2
Delaware		1		1,488	2
Others(2)		16		10,927	14
	Portfolio Total	58	$	81,405	100	%

(1)

Excludes EBITDA of approximately $0.1 million and $0.3 million from the Hampton Inn in Plano, Texas that was sold on February 20, 2001 and the Comfort Inn in Farmington Hills, Michigan that was sold on May 31, 2001, respectively.

(2)

We own hotels in each of the following states: Alabama (1), Arizona (3), Colorado (2), Indiana (1), Kentucky (1), Mississippi (1), Nebraska (2), North Carolina (1), South Carolina (2), Tennessee (1) and Wisconsin (1).

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Brand Affiliation and Market Segment Diversity of Our Hotel Portfolio

        At December 31, 2001, our 58 hotel portfolio had 12 different brand affiliations, with Marriott, Sheraton, Hilton and Holiday Inn being the dominant brand affiliations. These four brands accounted for 93% of our hotel EBITDA for the year ended December 31, 2001. We have concentrated our hotels in what we believe are the strongest and most well-respected brands in the industry. These brands have strong central reservation systems, strong advertising, promotion and marketing programs, significant advertising budgets, and share our commitment to customer service.

        Our long term goal is to achieve a general market segment mix of 50-55% of hotel revenues from full service hotels, 30-35% from extended stay hotels, and 10-15% from limited service hotels. We intend to reduce our exposure to the limited service sector over time to represent our target mix for this market segment. To that end, we recently sold our Hampton Inn properties in Warren, Michigan and Plano, Texas and our Comfort Inn property in Farmington Hills, Michigan and will continually look to adjust our portfolio mix by selling non-strategic properties.

        The following table sets forth information regarding the brand affiliation and market segment of our hotels for the year ended December 31, 2001:

						EBITDA(1)
Franchise Affiliation				Hotel Properties	Rooms/ Suites	Dollars		Percentage of Total
						(in thousands)
Full Service Hotels:
	Sheraton			4	864	$	10,749	13	%
	Holiday Inn			5	954		8,359	10
	Independent			2	331		4,771	6
	Four Points by Sheraton			2	412		4,673	6
	Hilton			1	234		3,418	4
	Doubletree			1	221		2,454	3
		Full Service Total		15	3,016		34,424	42
Extended Stay Hotels:
	Residence Inn by Marriott			14	1,851		24,015	30
	TownePlace Suites by Marriott			3	285		2,231	2
	Homewood Suites by Hilton			1	83		521	1
		Extended Stay Total		18	2,219		26,767	33
Limited Service Hotels:
	Hampton Inn			17	2,113		13,621	17
	Holiday Inn Express			5	637		4,363	5
	Courtyard by Marriott			1	102		1,134	2
	Comfort Inn			2	337		1,096	1
	Limited Service Total			25	3,189		20,214	25
			Portfolio Total	58	8,424	$	81,405	100	%

(1)

Excludes EBITDA of approximately $0.1 million and $0.3 million from the Hampton Inn in Plano, Texas that was sold on February 20, 2001 and the Comfort Inn in Farmington Hills, Michigan that was sold on May 31, 2001, respectively.

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Hotel Brands

Full Service Hotels

        Sheraton and Four Points by Sheraton.    Sheraton Hotels target both business and leisure travelers. Business travelers are offered a wide variety of services and amenities designed to help them stay productive while traveling. Guest rooms offer large working desks, good task lighting, extra electrical outlets and personalized voice mail. Other services include the flexible check-in/check-out. Leisure travelers are offered many attractive vacation destinations. Additionally, Sheraton Hotels generally offer multiple restaurants, banquet and meeting space, and recreational facilities. More than 375 hotels in 68 countries operate under the Sheraton brand. Both Sheraton and Four Points by Sheraton offer a frequent stay program known as Starwood Preferred Guest.

        Four Points by Sheraton is positioned as an affordable, full-service hotel that provides numerous amenities for business and leisure travelers. Each room offers the business traveler two-line phones, a large desk for working or in-room dining, and comfortable seating. On-site restaurants serve three meals a day. Most Four Points by Sheraton hotels have a swimming pool, and all have meeting rooms, on-site catering, and a fitness room. Approximately 135 Four Points by Sheraton hotels operate in 11 countries.

        Holiday Inn.    The Holiday Inn brand is positioned to attract the business and leisure traveler seeking up-to-date products and features, value and friendly service. Holiday Inns feature convenient locations that offer many features, including guest rooms equipped with coffee makers, hair dryers and irons. Holiday Inns offers travelers full-service amenities such as restaurants and room service, a lounge, swimming pool and fitness center. For business travelers, Holiday Inn offers 24-hour business services, meeting facilities, and a hotel rewards program. The Holiday Inn name is recognized around the world, with more than 1,500 hotels currently being operated under the brand.

        Doubletree.    Doubletree hotels are full-service hotels in the mid-market to upscale hotel category. Typical properties offer a full-service restaurant and lounge, room service, swimming pool, health club, complete meeting and banquet facilities, oversized guest rooms and luxury amenities. Doubletree offers a frequent stay program.

        Hilton.    Hilton hotels are upscale, full-service hotels designed to attract business travelers, leisure guests and groups and conventions. Hilton hotels typically offer swimming pools, gift shops and retail facilities, meeting and banquet facilities, restaurants and lounges, room service, parking facilities and other services. According to Hilton, their hotels have a 98% brand awareness worldwide. Hilton offers a frequent stay program.

        Independents—Hotel Rex and the Beverly Heritage.    The Hotel Rex offers a full range of services and amenities targeted at both the business and leisure traveler. The Hotel Rex has 94 guestrooms, including king executive rooms and one-bedroom suites. All rooms have writing desks, cordless speaker phones with voicemail and dataports, honor bars, cable TV, pay per view movies, CD players, irons, bathrobes, lighted makeup mirrors, hair dryers, and electronic locks. Guests also receive a complimentary newspaper, complimentary glass of wine served each evening, deluxe breakfast service, room service, same-day laundry and valet services, and fitness club privileges. The Hotel Rex has conference and catering facilities available for up to 130 people. The Hotel Rex is managed by Joie de Vivre Hospitality.

        The Beverly Heritage Hotel's newly renovated guest accommodations are designed to provide comfort and informal luxury. The Beverly Heritage targets both the business and leisure traveler. The Beverly Heritage has 237 deluxe guest rooms, including 65 two-room executive suites and an equal number of rooms with either a king or two double beds. Guest rooms also include two-line telephone with dataport and voicemail, large spacious work desks with an outlet, irons and ironing boards, coffee

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maker, hair dryers, complimentary newspaper, remote control TV with in-room movies, large closets, and same day valet laundry services available. The Beverly Heritage also offers banquet and meeting facilities.

Extended Stay Hotels

        Residence Inn and TownePlace Suites, each by Marriott.    Residence Inn hotels provide an extended-stay, residential atmosphere with spacious accommodations and are designed as a home away from home for travelers staying five or more nights. Residence Inn targets business, government and family travelers who stay more than five consecutive nights. Standard amenities include: a complimentary breakfast, in-room coffee, voice and data ports, free newspaper, an evening hospitality hour, swimming pool, Sport Court®, personalized grocery shopping, daily housekeeping, guest suites with separate living and sleeping areas, a fully equipped kitchen, and work space with data ports and voice mail. Residence Inn hotels offers a frequent stay program.

        TownePlace Suites is a mid-priced, extended-stay brand that provides the conveniences of home in a residential atmosphere. The typical TownePlace Suites hotel contains 95 high quality studio and two-bedroom suites. Standard amenities include: 24-hour on-site staffing, 24-hour access to business equipment, free local calls, weekly housekeeping, exercise room, outdoor swimming pool, locations near restaurants, grocery and retail stores, guest suites that feature separate living and working areas, fully equipped kitchen, and ample workspace with separate voice and data lines. TownePlace Suites offers a frequent stay program.

        Homewood Suites by Hilton.    Homewood Suites by Hilton are upscale, extended stay hotels that feature residential-style accommodations including business centers, swimming pools, convenience stores and limited meeting facilities. Homewood Suites targets travelers who are on the road for a few days or more. Homewood Suites is designed to make guests feel at home, providing them with all the comforts, convenience and privacy of home for the price of a traditional hotel room. Each hotel features such amenities as spacious two-room suites with fully-equipped kitchens, daily complimentary breakfast and evening reception with hors d'oeuvres and beverages. The brand was designed for guests who travel on field assignments, relocate to a new community, attend seminars, conventions or corporate training programs, and leisure travelers on vacation or attending family events. Homewood Suites offers a frequent stay program.

Limited Service Hotels

        Hampton Inn.    Hampton Inn hotels are moderately priced hotels with limited food and beverage facilities. Hampton Inn hotels offer value-minded travelers comfortable, well-equipped rooms. Hampton Inn hotels also provide guests with a free breakfast bar, free local calls, and as free in-room movie channel. Hampton Inn offers a frequent stay program.

        Holiday Inn Express.    Holiday Inn Express brand is positioned to attract value-oriented guests who want a clean, and simple choice. Holiday Inn Express' offer may features including a free breakfast bar, free local calls, free long-distance access, cable television, children 19 and under stay free in parents' room, limited business services, including fax and photocopying services, in-room data ports, and other similar amenities. Holiday Inn Express offers a frequent stay program.

        Comfort Inn.    Comfort Inns offer rooms in the mid-scale without food and beverage category and is targeted to business and leisure travelers. Comfort Inn hotels offers highly competitive rates, and many amenities, such as complimentary deluxe continental breakfast, free newspaper, a frequent stay program, non-smoking rooms, remote control TV, and a program that allows children to stay free.

        Courtyard by Marriott.    Courtyard by Marriott is a moderately priced lodging brand that is designed by business travelers for business travelers. In addition to business travelers, Courtyard targets

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leisure travelers and families. Courtyards typical features 80 to 150 guest rooms, a restaurant, a lounge, meeting space, a central courtyard, exercise room, swimming pool. This brand has recently increased its number of downtown locations, often through conversions of historical buildings.

Property Management and Related Management Agreements

Flagstone Hospitality

        At December 31, 2001, 51 of our hotels were managed by Flagstone Hospitality Management. Flagstone is a hotel management company which is owned by MeriStar Hotel & Resorts, a leading independent hotel management company. Flagstone employs substantially all of the former employees of the previous lessee/manager of these 51 hotels. Accordingly, the individuals responsible for the day-to-day operations of these hotels have not changed, thus avoiding the disruption normally caused by a change in property management.

        We believe that our management agreements with Flagstone align Flagstone's interests with our interests by compensating Flagstone partly on the basis of total hotel revenue and partly upon hotel profitability. Furthermore, MeriStar Hotel & Resorts' ownership position in Flagstone continues and expands our strategic relationship with the MeriStar companies and offers the prospect of important synergies in such areas as purchasing (supplies, insurance and energy management), human resources, telecommunications, and marketing.

        Simultaneous with the termination of the leases and related agreements with Hilton, the TRS lessees entered into new management agreements with Flagstone. The following summary sets forth certain information regarding the terms of our standard management agreements with Flagstone.

        Under the terms of the management agreements, the TRS lessees pay Flagstone a fixed base fee, which will approximate $5 million in the aggregate in 2002. The base fee is generally based upon annual gross hotel revenues, as defined, and is payable monthly based upon gross hotel revenues for the immediately prior month. In addition to the base fee, the agreement provides that the parties shall establish each year a mechanism for Flagstone to potentially earn an incentive fee. The base fee and incentive fee formula is established by agreement between the TRS lessees and Flagstone prior to the beginning of each fiscal year. The agreements provide that the incentive fees for our current hotel portfolio shall not exceed $750,000 in the aggregate for any fiscal year, and such fees are intended to be based on increases in hotel operating performance.

        Under the agreements, Flagstone must operate each hotel:

•

in compliance with the standards and terms of any relevant franchise agreement;



•

in accordance with all lease terms;



•

in a manner that is customary and usual in the operation of first-class hotels in the comparable market;



•

in compliance with the law; and



•

in accordance with any terms and conditions of any applicable financing and insurance policies.

        Flagstone is obligated to promote each hotel through the respective franchisors' sales and reservation systems and to encourage the use of each hotel by all recognized sources of hotel business. Additionally, Flagstone must adequately advertise and promote the hotels.

        The term of the agreements is 10 years, subject to earlier termination as to one or more hotels at any time and from time to time by agreement of the parties or upon 90 days prior written notice by either party to the other party. With respect to properties pledged as security under certain of our indebtedness, the TRS lessees may terminate the agreement as to one or more hotels in the event that

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the debt service coverage ratio (as defined in the loan documents) falls below agreed upon levels. The TRS lessees may also terminate the agreements with respect to one or more hotels in the event of a sale of the hotel. The agreements may also be terminated in the event of a change of control of either party. Subject to certain exceptions, the agreements provide for the parties to indemnify each other.

        Generally, Flagstone has no right to transfer or assign any of its rights or obligations under the agreements without the prior written consent of the TRS lessees. The TRS lessees may transfer or assign any of their rights or obligations under the agreements without the prior written consent of Flagstone, however in such event, Flagstone may subsequently terminate the agreements as to the hotels subject to the transfer or assignment.

Other Agreements

        Five of our 58 hotels are leased to and managed by third-parties under long-term lease agreements which provide for a fixed base rent and a percentage rent based upon revenues of the hotels. The remaining terms of these leases range from five to seven years. Two of our hotels are managed by third-party hotel management companies under management agreements with remaining terms of one year and 12 years. These management agreements provide for total management fees of 3% to 5% of hotel revenues.

Franchise Agreements

        Other than our Hotel Rex and Beverly Heritage hotels, our 56 hotels operate under franchise licenses as follows:

Franchise Affiliation	No. of Hotels	No. of Rooms/Suites
Hampton Inn	17	2,113
Residence Inn by Marriott	14	1,851
Holiday Inn	5	954
Holiday Inn Express	5	637
Sheraton	4	864
TownePlace Suites by Marriott	3	285
Comfort Inn	2	337
Four Points by Sheraton	2	412
Doubletree	1	221
Homewood Suites by Hilton	1	83
Hilton	1	234
Courtyard by Marriott	1	102
Totals	56	8,093

        We anticipate that most of the additional hotel properties in which we invest will be operated under franchise licenses. We believe that the public's perception of quality associated with a franchisor is an important feature in the operation of a hotel. Franchisors provide a variety of benefits for franchisees, including national advertising, publicity and other marketing programs designed to increase brand awareness generally, training of personnel, review of quality standards and centralized reservation systems.

        Our franchise licenses generally specify certain management, operational, recordkeeping, accounting, reporting and marketing standards and procedures with which our TRS lessee, other third-party lessees and management companies must comply, including the franchisors' standards and requirements with respect to training of operational personnel, safety, maintaining specified insurance, the types of services and products ancillary to guest room services that may be provided, display of

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signage, and the type and age of furniture and equipment included in guest rooms, lobbies and other common areas.

        Our franchise licenses generally give us the right to operate a particular hotel under a franchise for an initial period of 10 to 20 years. The franchise agreements provide for termination at the franchisor's option upon the occurrence of certain events, including failure to pay royalties and fees or perform other covenants under the license agreement, bankruptcy, abandonment of the franchise, commission of a felony, assignment of the license without the consent of the franchisor, or failure to comply with applicable law in the operation of the relevant hotel. Royalties and other fees payable under our franchise agreements typically range from 7% to 9% of room revenue at the franchised hotel. We are also required to make certain capital improvements to our hotels from time to time required by our franchisors. Where we are entitled to terminate the franchise license by giving notice to the franchisor, we generally must pay a specified amount of liquidated damages. Our franchise license agreements will not renew automatically upon expiration.

Competition

        The hotel industry is highly competitive. Substantially all of our hotels are located in developed areas that include other hotel properties and each hotel competes for guests primarily with other full service, extended stay, and limited service hotels in its immediate vicinity and secondarily with other hotels in its geographic market. The number of competitive hotel properties in a particular area could have a material adverse effect on occupancy, ADR and RevPAR of the hotels. New, competing hotels may be opened in our markets, which could materially and adversely affect hotel operations. We believe that brand recognition, location, quality of the hotel and services provided, and price are the principal competitive factors affecting our hotels.

Environmental Matters

        Under various federal, state and local laws and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. Such laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. Furthermore, a person that arranges for the disposal or transports for disposal or treatment a hazardous substance at another property may be liable for the costs of removal or remediation of hazardous substances released into the environment at the property. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral. Thus, if such liability were to arise in connection with the ownership and operation of our hotels, we could be potentially liable for such costs.

        Phase I Environmental Survey Assessments (ESAs) were obtained on all of our hotels from independent environmental engineering firms at the time of acquisition (and, for some hotels, in connection with subsequent financing transactions). The Phase I ESAs were intended to identify potential sources of contamination for which the hotels may be responsible and to assess the status of environmental regulatory compliance. No assurance can be given that the Phase I ESAs identified all significant environmental problems or that no additional environmental liabilities exist and there may be material environmental liabilities or compliance concerns of which we are unaware. The Phase I ESAs included historical reviews of the hotels, reviews of certain public records, preliminary investigations of the sites and surrounding properties, screening for the presence of asbestos, PCBs, wetlands and underground storage tanks, and the preparation and issuance of a written report. The Phase I ESAs did not include invasive procedures, such as soil or ground water sampling and analysis.

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        The only Phase I ESA report that revealed an environmental liability or compliance concerns that we believe could have a material adverse effect on our business, assets or results of operations is the Phase I ESA for the Hampton Inn—Airport in Indianapolis. This Phase I ESA report indicated that the Indianapolis hotel disposes of approximately 10% of its solid waste at a facility that is a state Superfund site. Such a site may be subject to investigation and remediation under the federal and state Superfund laws, and persons that sent hazardous substances to the site may be jointly and severally liable for the costs of the work. The Phase I ESA report states that solid waste from the Indianapolis hotel was disposed into a domestic waste cell of the facility. A state official informed the engineering firm conducting the Phase I ESA that this domestic waste cell is segregated by a containment structure and is adjacent to, but not part of, the Superfund site. The Phase I audit did not indicate that the Indianapolis hotel has arranged for the disposal of any hazardous substances at this facility. If the Indianapolis hotel in fact arranged for such disposal, however, it could be found liable for at least a part of any response costs. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the hotels will not be affected by the condition of the properties in the vicinity of the hotels (such as the presence of leaking underground storage tanks) or by third-parties unrelated to us.

Employees

        At December 31, 2001, we had a total of 23 employees. Certain of our executive officers, including Bob Solmson, Chairman of the Board and Chief Executive Officer, Randy Churchey, President and Chief Operating Officer and Kevin Luebbers, Executive Vice President and Chief Financial Officer, have employment agreements with the Company. Information with respect to these employment agreements is incorporated by reference to the "Employment Agreements" section of our proxy statement.

        All persons employed in the day-to-day operations of our hotels are employees of the management companies engaged to operate our hotels and are not our employees.

REIT Modernization Act

        RFS has operated and intends to continue to operate so as to qualify as a REIT under the federal income tax laws. Qualification as a REIT involves the application of highly technical and complex rules for which there are only limited judicial or administrative interpretations. There are no controlling authorities that deal specifically with many tax issues affecting a REIT that owns hotel properties. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT.

        Under the RMA, commencing January 1, 2001, we may now own up to 100% of the stock of one or more TRSs. A TRS is a taxable corporation that may lease hotels under certain circumstances, provide services to our tenants, and perform activities unrelated to our tenants, such as third-party management, development, and other independent business activities. Overall, no more than 20% of the value of our assets may consist of securities of one or more TRSs.

        Under the RMA, a TRS is permitted to lease hotels from us as long as the hotels are operated on behalf of the TRS by a third-party hotel manager who satisfies the following requirements:

•

such manager is, or is related to a person who is, actively engaged in the trade or business of operating "qualified lodging facilities" for any person unrelated to us and our TRS;



•

such manager does not own, directly or indirectly, more than 35% of RFS's stock;



•

no more than 35% of such manager is owned, directly or indirectly, by one or more persons owning 35% or more of RFS's stock; and

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•

we do not directly or indirectly derive any income from such manager.

        The RMA limits the deductibility of interest paid or accrued by a TRS to us to assure that the TRS is subject to an appropriate level of corporate taxation. The RMA also imposes a 100% excise tax on transactions between a TRS and us or our tenants that are not conducted on an arm's-length basis.

        Effective January 1, 2001, the TRS lessees entered into leases with respect to 54 of our hotels (one of which was subsequently sold), including 48 hotels that were leased to subsidiaries of Hilton prior to January 1, 2001. We intend to lease hotels that we acquire in the future to TRS lessees. We and the TRS lessees have elected to treat the TRS lessees as TRSs for federal income tax purposes. The TRS lessees have engaged independent third-party hotel managers to operate the related hotels on behalf of such TRS lessees.

Termination of Leases and Related Agreements with Hilton

        In connection with the RMA, effective January 1, 2001, we terminated our operating leases, management contracts and related ancillary agreements with subsidiaries of Hilton, at which time the TRS lessees began leasing the related hotels. The cancellation of these agreements entitles the TRS lessees to retain the operating profits from the 53 hotels which are currently leased to our TRS lessees, which previously accrued to Hilton under these contracts and gives us the following advantages over our prior third-party lease structure:

•

more control over the daily operations of our hotels;



•

benefits from any cost efficiencies or ancillary revenues generated at the hotels;



•

these hotels are no longer encumbered by long term third-party leases;



•

favorable management agreements; and



•

our operating statements more clearly depict our hotel operations.

        All of our hotels continue to operate under the same franchise affiliation as prior to the Hilton contract termination.

        As previously indicated, simultaneous with the termination of the leases and related agreements, the TRS lessees entered into new management contracts with Flagstone Hospitality Management. Five of our 58 hotels are leased to and managed by third-parties under long-term lease agreements which provide for a fixed base rent and a percentage rent based upon revenues of the hotels. The remaining terms of these leases range from five to seven years. Two of our hotels are managed by third-party hotel management companies under management agreements with remaining terms of one year and 12 years. These management agreements provide for total management fees of 3% to 5% of hotel revenues.

Legal Proceedings

        There is no litigation pending or known to be threatened against us or affecting any of our hotels other than claims arising in the ordinary course of business or which are not considered to be material. Furthermore, most of such claims are substantially covered by insurance. We do not believe that any claims known to us, individually or in the aggregate, will have a material adverse effect on us, without regard to any potential recoveries from insurers or other third parties.

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MANAGEMENT

Directors and Executive Officers

        As of March 15, 2002, our directors and executive officers are as follows:

Name	Position	Term Expires
Robert M. Solmson	Chairman of the Board, Chief Executive Officer	2002
Randy L. Churchey	President, Chief Operating Officer, Director	2004
Bruce E. Campbell, Jr.	Independent Director	2004
H. Lance Forsdick, Sr.	Independent Director	2004
R. Lee Jenkins	Independent Director	2002
Karl Matthies	Independent Director	2002
Richard Reiss, Jr.	Independent Director	2003
Michael S. Starnes	Independent Director	2003
John W. Stokes, Jr.	Independent Director	2003
Kevin M. Luebbers	Executive Vice President, Treasurer and Chief Financial Officer
Dennis M. Craven	Vice President and Chief Accounting Officer
Herb W. Cummings	Vice President, Renovation and Design
Craig Hofer	Vice President and Chief Information Officer
Elizabeth A. McNeill	Vice President, General Counsel and Secretary
Diane Radcliffe	Vice President, Asset Management

Robert M. Solmson, age 54, is our Chairman and Chief Executive Officer. He has been Chairman and Chief Executive Officer and a board member since our formation in 1993 and President from 1993 to February 1996 and from February 1998 to October 1998. He is also a director of Independent Bank and formerly was a director of Morgan Keegan & Company, Inc., an investment firm.

Randy L. Churchey, age 41, has served as our President and Chief Operating Officer since November 1999. From 1997 to 1999, he served as Senior Vice President and Chief Financial Officer of FelCor Lodging Trust, Inc., a hotel real estate investment trust. For approximately 15 years prior to joining FelCor, Mr. Churchey held various positions with Coopers & Lybrand, L.L.P., most recently serving as the Chairman of the Hospitality and Real Estate Practice of the accounting firm for the Southwestern United States.

Bruce E. Campbell, Jr., age 70, is a member of the board of directors and the executive committee of National Commerce Bancorporation, a national bank holding company. Mr. Campbell was the Chairman of National Commerce Bancorporation's executive committee from 1993 to 2000. 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.

H. Lance Forsdick, Sr., age 62, was Chairman of the Board of RFS, Inc., lessee of our hotels, from 1974 until February 1996, when RFS, Inc. was acquired by Doubletree Corporation. Prior to 1974, Mr. Forsdick held various positions in the real estate and hotel development and management business. He has been a director of RFS since 1993.

R. Lee Jenkins, age 72, was President of Plough, Inc. and Executive Vice President-Consumer Operations of Schering-Plough Corporation, pharmaceutical companies, from 1976 through 1989. He is a director of National Commerce Bancorporation, and has been a director of RFS since 1996.

Karl Matthies, age 58, is the President of Bellagio Partners, a private investment management and consulting company. Prior to forming Bellagio, he was the Senior Partner in charge of Consumer & Real Estate Investment Banking at Banc of America Securities. Mr. Matthies was a founding member of Montgomery Securities, Banc of America Securities' predecessor firm, where he held a variety of positions from 1971-1999.

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Richard Reiss, Jr., age 57, is the founder and chairman of Georgica Advisors LLC, a New York based investment firm with public and private investments in the communications, media and entertainment industries, a position he has held since January 1997. From 1978 to 1998, Mr. Reiss served as managing partner of Cumberland Associates and its three investment funds. From 1970 to 1977, Mr. Reiss was the director of research at Shearson Hayden Stone, a predecessor company of Salomon Smith Barney. He also is a director of Grey Advertising, the Lazard Funds, Inc., O'Charley's, Inc. and is a trustee of the Manhattan Institute.

Michael S. Starnes, age 56, is Chairman of the Board, President and Chief Executive Officer of MS Carriers, Inc., a truckload carrier in Memphis, Tennessee, positions he has held since 1986.

John W. Stokes, Jr., age 64, was formerly the Vice Chairman of Morgan Keegan and Company, Inc., in Memphis, TN, a position he had held since 1983. He is a director of O'Charley's, Inc., a restaurant operator and formerly was a director of Morgan Keegan. He has been a director of RFS since 1993.

Kevin M. Luebbers, age 35, is our Executive Vice President and Chief Financial Officer. Prior to joining us in July 2000, Mr. Luebbers was Senior Vice President of Planning and Investment Analysis, for Hilton Hotels Corporation. Prior to joining Hilton, he held various positions with the Prudential Realty Group, a division of the Prudential Insurance Company of America, where he specialized in hotel asset management.

Dennis M. Craven, age 30, has served as our Vice President and Controller since November 2000 and became our Chief Accounting Officer in January 2002. Prior to joining us, he worked for PricewaterhouseCoopers, where he was a senior manager in their Assurance and Business Advisory Services group. Throughout his career in public accounting, he specialized in the hospitality and financial services industries.

Herb W. Cummings, age 59, has served as our Vice President, Renovation and Design since October 1999. Previously, he was senior project manager and Vice President of Construction with Bristol Hotels and Resorts and held various similar positions with Davidson Hotel Company and United Inns, Inc.

Craig Hofer, age 42, is our Vice President, Chief Information Officer. He has served as President of Centrafuse, Inc., our wholly owned subsidiary engaged in the sale of hotel accounting services over the Internet, since November 1999. Since July 1995, he has held various positions with us, including Vice President of Financial Planning.

Elizabeth A. McNeill, age 41, is our Vice President, General Counsel and Secretary. Prior to joining us in April 2001, Ms. McNeill held various positions with Medshares, Inc., a health care provider, most recently serving as Senior Vice President and General Counsel. Prior to joining Medshares in 1993, Ms. McNeill was a partner in Wolff Ardis PC, a Memphis law firm specializing in commercial litigation.

Diane Radcliffe, age 36, has served as our Vice President, Asset Management since July 2000. Prior to joining us, she was Senior Director of Hotel Performance Support for Homewood Suites Hotels, the extended-stay brand of Promus Hotel Corporation (now Hilton Hotels Corporation). In this position she was responsible for that brand's hotel sales and marketing, revenue management and operational support team. During her 13-year tenure with Promus, she held various field and corporate level positions including leading the Hotel Performance Support team for Hampton Inn Hotels.

Executive Compensation

        For information regarding the executive compensation of certain of our officers and directors, please refer to our proxy statement for our 2002 annual meeting of shareholders, which is incorporated into this prospectus. As the general partner of the Partnership, certain of our officers and directors serve in various capacities on behalf of the Partnership, but are not separately compensated for such activities.

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PRINCIPAL STOCKHOLDERS

Common Stock

        The following table shows the beneficial ownership of our common stock, as of March 15, 2002 by:

•

each executive officer named under the heading "Management" herein;

•

each non-employee director; and

•

all directors and executive officers, as a group.

        To our knowledge, no person beneficially owns five percent or more of our common stock. Unless otherwise indicated, each person owns directly the shares shown after his name in the following table:

Name of Beneficial Owner		Amount and Nature of Beneficial Ownership of Common Stock	Percent of Class
Executive Officers and Inside Directors:
	Robert M. Solmson(1)	901,102	3.1	%
	Randy L. Churchey(2)	178,501	*
	Kevin M. Luebbers(3)	99,610	*
	Herb W. Cummings(4)	15,187	*
	Dennis M. Craven(5)	2,425	*
	Diane Radcliffe(6)	5,000	*
	Craig Hofer(7)	35,833	*
	Elizabeth A. McNeill	—	*
Non-Employee Directors:
	Bruce E. Campbell, Jr.(8)	101,500	*
	H. Lance Forsdick, Sr.(9)	541,000	1.9	%
	Michael S. Starnes(10)	83,000	*
	John W. Stokes, Jr.(11)	88,480	*
	R. Lee Jenkins(12)	79,000	*
	Richard Reiss, Jr.(13)	95,000	*
	Karl Matthies(14)	47,300	*
All directors and executive officers as a group (15 persons)		2,272,938	7.9	%

*

Represents less than one percent

(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 exercise of rights to redeem units of partnership interest in RFS Partnership, L.P. for shares of common stock (the "Redemption Rights"). Also includes (i) 11,500 shares owned by trusts for the benefit of his children, (ii) 15,500 shares owned by his children, (iii) 10,000 shares owned by his wife, (iv) 74,000 shares of restricted common stock, all of which are vested, (v) 75,000 shares of restricted common stock which vest at a rate of 12,500 shares in each of January 2002, 2003 and 50,000 shares in 2004 (subject to the satisfaction of certain performance criteria), and (vi) 225,000 shares issuable pursuant to exercisable stock options. Prior to vesting, Mr. Solmson is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(2)

Includes 25,000 shares of restricted common stock, including 16,667 that are vested and 8,333 shares that will vest in November 2002. Also includes (i) 100,000 shares of restricted common stock, which will vest at a rate of 10,000 shares in each of January 2002, 2003, 2004 and 2005, and 60,000 shares in January 2006 (subject to the satisfaction of certain performance criteria) and (ii) 33,333 shares issuable pursuant to exercisable stock options. Prior to vesting, Mr. Churchey is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

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(3)

Includes 12,000 shares of restricted common stock, including 4,000 shares that are vested and 8,000 that shares will vest at a rate of 4,000 shares in each of July 2002 and July 2003. Also includes 75,000 shares of restricted common stock, which vest at a rate of 7,500 shares in each of January 2002, 2003, 2004 and 2005, and 45,000 shares in January 2006 (subject to the satisfaction of certain performance criteria). Prior to vesting, Mr. Luebbers is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(4)

Includes 5,000 shares of restricted common stock that vest ratably over three years in each of January 2002, 2003 and 2004, and 8,333 shares issuable pursuant to exercisable stock options. Prior to vesting, Mr. Cummings is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(5)

Includes 2,000 shares of restricted common stock, including 667 shares that are vested and 1,333 shares that will vest ratably in each of November 2002 and 2003. Prior to vesting, Mr. Craven is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(6)

Includes 5,000 shares of restricted common stock that vest ratably over three years in each of January 2002, 2003 and 2004. Prior to vesting, Ms. Radcliffe is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(7)

Includes 7,500 shares of restricted common stock of which all are vested and 28,333 shares issuable pursuant to exercisable stock options. Prior to vesting, Mr. Hofer is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(8)

Includes (i) 12,500 shares of restricted common stock, all of which are vested, (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, (iii) 10,000 shares owned by Mr. Campbell's wife and (iv) 25,000 shares issuable pursuant to exercisable stock options.

(9)

Includes (i) 7,500 shares of restricted common stock, all of which are vested, (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, (iii) 20,573 shares issuable to Mr. Forsdick upon exercise of his redemption rights and (iv) 25,000 shares issuable pursuant to exercisable stock options.

(10)

Includes (i) 12,500 shares of restricted common stock, all of which are vested, (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, and (iii) 25,000 shares issuable pursuant to exercisable stock options.

(11)

Includes (i) 12,500 shares of restricted common stock, all of which are vested, (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, (iii) 5,000 shares owned by Mr. Stokes' wife and (iv) 25,000 shares issuable pursuant to exercisable stock options.

(12)

Includes (i) 12,500 shares of restricted common stock, all of which are vested, (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, and (iii) 25,000 shares issuable pursuant to exercisable stock options.

(13)

Includes (i) 10,000 shares of restricted common stock, including 4,000 shares that are vested and 6,000 shares that will vest at a rate of 2,000 shares in each of October 2002, 2003 and 2004 (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, and (iii) 10,000 shares issuable pursuant to exercisable stock options. Prior to vesting, Mr. Reiss is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

(14)

Includes (i) 10,000 shares of restricted common stock that vest ratably over three years in each of August 2002, 2003 and 2004 (ii) 1,500 shares of restricted common stock, which vest on December 31, 2002, and (iii) 22,100 shares held in trusts. Prior to vesting, Mr. Matthies is entitled to vote and receive distributions with respect to unvested shares of restricted common stock.

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DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK

Line of Credit

        We have a $140 million line of credit which matures on July 30, 2004. Interest on outstanding borrowings under the line of credit bear interest at a variable rate ranging from 150 basis points to 250 basis points above LIBOR, depending on our ratio of total debt to our investment in hotel properties. At December 31, 2001, the interest rate was LIBOR plus 200 basis points, however, we expect this rate to increase to LIBOR plus 225 basis points, effective April 1, 2002. The average interest rate, including the impact of our interest rate swaps, was 7.9% for the year ended December 31, 2001. At December 31, 2001, on a pro forma basis, the outstanding borrowings under our line of credit would have been $13.4 million. The borrowing capacity under our line of credit is determined by a borrowing base calculation which at December 31, 2001, based on the hotels currently in the collateral pool, would permit us to borrow up to $111.4 million. The line of credit is collateralized by first mortgages on the following 24 hotels:

Hotel—Location	Hotel—Location
Beverly Heritage—Milpitas, California	Holiday Inn—Louisville, Kentucky
Courtyard—Flint, Michigan	Holiday Inn Express—Bloomington, Minnesota
Hampton Inn—Chandler, Arizona	Homewood Suites—Chandler, Arizona
Hampton Inn—Denver, Colorado(1)	Hotel Rex—San Francisco, California
Hampton Inn—Ft. Lauderdale, Florida	Residence Inn—Fishkill, New York
Hampton Inn—Laredo, Texas	Residence Inn—Tyler, Texas
Hampton Inn—Lincoln, Nebraska	Residence Inn—West Palm Beach, Florida
Hampton Inn—Minnetonka, Minnesota	Residence Inn—Wilmington, Delaware
Hampton Inn—Sedona, Arizona	Sheraton Hotel—Birmingham, Alabama(1)
Hampton Inn—Tulsa, Oklahoma	TownePlace Suites—Fort Worth, Texas
Holiday Inn—Columbia, South Carolina	TownePlace Suites—Miami Lakes, Florida
Holiday Inn—Lafayette, Louisiana	TownePlace Suites—Miami West, Florida

(1)

These two hotels are expected to be added to the collateral pool during the first half of 2002.

        We can obtain a release of any hotel in the collateral pool if we provide a substitute hotel or reduce the borrowing availability under the line of credit. The line of credit contains various covenants including the requirement that we maintain a minimum net worth, minimum debt and interest coverage ratios, and limitations on total indebtedness and liabilities.

        On March 21, 2001, we entered into an interest rate swap agreement, which effectively fixes the rate on $30 million of our floating rate debt at 6.775% through July 30, 2003. The 6.775% interest rate consists of a fixed rate of 4.775% plus the credit spread in effect on our line of credit (currently 200 basis points). The credit spread can vary from 150 basis points to 250 basis points, depending on our leverage ratios. The agreement effectively converts a portion of our floating rate debt to fixed rate in order to reduce our risk to increases in interest rates. Such agreements involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts.

        On November 3, 2000, we entered into an interest rate swap agreement for a notional amount of $40.0 million maturing in July 2003. The agreement effectively converts a portion of our floating rate debt to fixed rate in order to reduce our risk to increases in interest rates. Such agreements involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts. Accordingly, the impact of fluctuations in interest rates on these interest rate swap agreements is fully offset by the opposite impact on the related debt. Under the interest rate swap agreement, we receive payments based on the one-month LIBOR rate of 6.80%

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at December 31, 2000 and pays a fixed rate of 6.535%. The fair value of the interest rate swap is estimated based on quotes from the market makers of these instruments and represents the estimated amounts we would expect to receive or pay to terminate the agreements. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net loss on these instruments was approximately $3.2 million at December 31, 2001. In connection with our sale of the outstanding notes, we terminated these two interest rate swap agreements at an aggregate cost of approximately $3.2 million.

Commercial Mortgage Bonds

        The following discussion summarizes certain terms of our commercial mortgage bonds.

1996 Financing

        In November 1996, one of our special purpose subsidiaries issued $75 million of commercial mortgage bonds as follows:

Class	Initial Principal Amount	Rate		Stated Maturity
Class A	$50 million	6.83	%	August 20, 2008
Class B	$25 million	7.30	%	November 21, 2011

        The interest rate on the bonds is fixed. Principal payments on the Class A Bonds are based on a 141-month amortization schedule beginning in December 1996. Total monthly principal and interest payments approximate $0.5 million for the Class A Bonds. Principal payments on the Class B Bonds are payable based on a 39-month amortization schedule beginning in September 2008. Total monthly interest payments are approximately $0.2 million for the Class B Bonds. The bonds are collateralized by first mortgage liens on the following 15 hotel properties which had an aggregate net book value of $143.5 million at December 31, 2001:

Hotel—Location	Hotel—Location
Comfort Inn—Fort Mill, South Carolina	Holiday Inn Express—Austin, Texas
Comfort Inn—Marietta, Georgia	Residence Inn—Ann Arbor, Michigan
Doubletree Hotel—Del Mar, California	Residence Inn—Charlotte, North Carolina
Hampton Inn—Hattiesburg, Mississippi	Residence Inn—Ft. Worth, Texas
Hampton Inn—Lakewood, Colorado	Residence Inn—Orlando, Florida
Hampton Inn—Oklahoma City, Oklahoma	Residence Inn—Warwick, Rhode Island
Hampton Inn—Omaha, Nebraska	Residence Inn—Sacramento, California
Holiday Inn—Crystal Lake, Illinois

        The bonds do not permit us to sell or substitute for any of the 15 hotel properties that collateralize the bonds. The bonds can be prepaid upon payment of a yield maintenance premium. The outstanding principal balance on the bonds was $58.2 million at December 31, 2001. The bonds are non-recourse to our company. On or about March 20, 2002, we intend to use the remaining net proceeds from the sale of the outstanding notes to redeem all of the Class A and Class B bonds issued in the 1996 financing.

1998 Financing

        In December 1998, two of our special purpose subsidiaries completed a $95.8 million long-term mortgage financing of 10 hotels. Principal and interest payments, based on a 25-year amortization, of $0.7 million and escrow payments of $0.4 million for taxes and insurance are due monthly through December 2008 at which time all outstanding principal and interest is due. The debt bears interest at a

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fixed rate of 7.8% per annum. The debt is collateralized by first mortgage liens on the following 10 hotels which had an aggregate net book value of $126.4 million at December 31, 2001:

Hotel—Location	Hotel—Location
Hampton Inn—Bloomington, Minnesota	Residence Inn—Kansas City, Missouri
Hampton Inn—Indianapolis, Indiana	Sheraton—Milpitas, California
Hampton Inn—Memphis, Tennessee	Sheraton—Sunnyvale, California
Holiday Inn Express—Arlington Heights, Illinois	Four Points by Sheraton—Bakersfield, California
Holiday Inn Express—Wauwatosa, Wisconsin	Four Points by Sheraton—Pleasanton, California

        The bonds permit us to sell or substitute any of the 10 hotel properties that collateralize the bonds. The bonds cannot be prepaid prior to maturity. The outstanding balance on this debt at December 31, 2001 was $92.1 million. The debt is non-recourse to our company.

2000 Financing

        In August 2000, two of our special purpose subsidiaries completed a $52.2 million long-term mortgage financing of eight hotels. Principal and interest payments, based on 25-year amortization, of $0.4 million and escrow payments of $0.2 million for taxes and insurance are due monthly through August 2010 at which time all principal and interest is due. The debt bears interest at a fixed rate of 8% per annum. The debt is collateralized by first mortgage liens on the following eight hotels which had an aggregate net book value of $85.0 million at December 31, 2001:

Hotel—Location	Hotel—Location
Hampton Inn—Houston, Texas	Residence Inn—Atlanta, Georgia
Hampton Inn—Jacksonville, Florida	Residence Inn—Jacksonville, Florida
Holiday Inn—Flint, Michigan	Residence Inn—Torrance, California
Holiday Inn Express—Downer's Grove, Illinois	Sheraton—Clayton, Missouri

        The bonds permit us to sell or substitute any of the eight hotel properties that collateralize the bonds. The bonds cannot be paid prior to maturity. The outstanding principal balance on this debt was $51.4 million at December 31, 2001. The debt is non-recourse to our company.

Other Mortgage Debt

        We own a 75% interest in the partnership which owns the San Francisco Hilton Fisherman's Wharf hotel. The Wharf hotel is subject to mortgage debt having a principal balance of $18.3 million at December 31, 2001. The debt is secured by a first mortgage lien on the Wharf hotel. This debt bears interest at a fixed rate of 8.22% per annum. Principal and interest payments, based on a 25-year amortization, of $152,000 and escrow payments of $50,000 are due monthly through November 2007 at which time all outstanding principal and interest is due. The Wharf hotel had a net book value of $44.4 million at December 31, 2001. This debt is non-recourse to our company.

Series B Preferred Stock

        RFS has 250,000 shares of Series B Preferred Stock outstanding. The shares of Series B Preferred Stock have a liquidation preference of $100 per share. Holders of the Series B Preferred Stock do not have voting rights unless dividends are in arrears with respect to the Series B Preferred Stock for two or more quarterly periods (whether or not consecutive) at which point the holders of the Series B Preferred Stock are entitled to elect two additional directors. Holders of the Series B Preferred Stock are entitled to receive quarterly cash dividends at an annual rate of 12.5% of the liquidation preference of $100 per share. RFS may redeem shares of the Series B Preferred Stock in whole but not in part, on or after December 31, 2003 at a price equal to its liquidation preference. If RFS does not redeem the

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Series B Preferred Stock by January 1, 2006, the dividend rate increases by 2% per annum up to a maximum annual rate of 20.5%. The holders of the Series B Preferred Stock can require RFS to redeem the Series B Preferred Stock at varying premiums over the liquidation preference depending on when the shares are redeemed, upon a change of control, dissolution or winding up of RFS or on RFS's failure to qualify as a REIT.

        As of March 15, 2002, to our knowledge, CT Mezzanine Partners I LLC was the beneficial owner of all 250,000 shares of our Series B Preferred Stock. The address for CT Mezzanine Partners I LLC is 410 Park Avenue, 14^th Floor, New York, New York.

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DESCRIPTION OF THE EXCHANGE NOTES

        The outstanding notes were, and the exchange notes will be issued under an indenture (the "Indenture") dated as of February 26, 2002, by and among RFS Partnership, L.P. and RFS 2002 Financing, Inc. ("Finance" and, together with the Company (as defined below), the "Issuers"), the Guarantors and U.S. Bank National Association, as trustee (the "Trustee"). Finance was incorporated in 2002 for the sole purpose of acting as co-obligor for the exchange notes. Finance has no assets, will not conduct any operations and will not provide additional security for the exchange notes. In this section, the exchange notes are referred to as the "Notes."

The following descriptions of certain provisions of the Indenture are summaries only, do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Indenture. We urge you to read the Indenture because it, and not these descriptions, defines your rights as a holder of the Notes. A copy of the Indenture is being filed as an Exhibit to this registration statement.

        You can find the definitions of certain capitalized terms used in this section under the subheading "—Certain Definitions." For purposes of this section, references to the "Company," include only RFS Partnership, L.P. and its successors in accordance with the terms of the Indenture and, except pursuant to the terms of the Guarantees, not its Subsidiaries. For purposes of this section, references to "we," "our," or "us" include only the Issuers and their successors in accordance with the terms of the Indenture and, except pursuant to the terms of the Guarantees, not their Subsidiaries. Whenever particular defined terms of the Indenture not otherwise defined herein are referred to, such defined terms are incorporated herein by reference.

        The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). The Notes are subject to all such terms, and holders of the Notes are referred to the Indenture and the TIA for a statement of such terms.

Brief Description of the Exchange Notes and the Guarantees

The Exchange Notes

        The Notes are:

•

our general unsecured obligations,



•

ranked equal in right of payment with all of our existing, including the outstanding notes, and future unsecured senior Indebtedness,



•

ranked senior in right of payment to our outstanding Preferred Stock and all of our existing and future Subordinated Indebtedness,



•

effectively subordinated to all of our existing and future secured Indebtedness,



•

effectively senior to all indebtedness and preferred stock of our Parent,



•

effectively subordinated to all indebtedness and preferred stock of any of our Subsidiaries that are not Guarantors, and



•

unconditionally guaranteed by the Guarantors.

        On a pro forma basis, as of December 31, 2001, after giving effect to the issuance of the outstanding notes and our sale of common stock on February 20, 2002 and the application of the proceeds therefrom as discussed herein, we and our Subsidiaries would have had outstanding an aggregate of approximately $175.2 million of secured Indebtedness, and our Subsidiaries that are not

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Guarantors would have had outstanding an aggregate of approximately $161.8 million of Indebtedness, all of which would effectively be senior to the Notes.

        The Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof.

        The term "Subsidiaries" as used in this "Description of the Exchange Notes" does not include Unrestricted Subsidiaries and, except as expressly set forth herein, does not include the Issuers. As of the date of the Indenture, none of our Subsidiaries will be Unrestricted Subsidiaries. However, under certain circumstances, we will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive covenants set forth in the Indenture.

The Guarantees

        The Notes will be jointly and severally irrevocably and unconditionally guaranteed (the "Guarantees") on a senior unsecured basis by the Parent and each of the other Guarantors. The obligations of each Guarantor under its Guarantee, however, will be limited in a manner intended to avoid it being subject to avoidance as a fraudulent transfer under applicable law. See "Certain Bankruptcy Limitations" below.

Principal Maturity and Interest; Additional Notes

        We will issue the Notes in a maximum aggregate principal amount of $125 million in this exchange offer. The Indenture provides, in addition to the $125 million aggregate principal amount of Notes being issued, for the issuance of additional notes having identical terms and conditions to the Notes offered hereby (the "Additional Notes"), subject to compliance with the terms of the Indenture, including the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Interest will accrue on the Additional Notes issued pursuant to the Indenture from and including the date of issuance of such Additional Notes. Any such Additional Notes will be issued on the same terms as the Notes and will constitute part of the same series of securities as the Notes and will vote together as one series on all matters with respect to the Notes. All references to "Notes" herein includes the Additional Notes. We will issue Notes in denominations of $1,000 and integral multiples of $1,000.

        The Notes will mature on March 1, 2012. The Notes will bear interest at the rate per annum stated on the cover page hereof from the date of issuance or from the most recent date to which interest has been paid or provided for (the "Interest Payment Date"), payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2002, to the Persons in whose names such Notes are registered at the close of business on the February 15 or August 15 immediately preceding such Interest Payment Date. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Methods of Receiving Payments on the Notes

        Principal of, premium, if any, and interest (and Liquidated Damages, if any) on the Notes will be payable, and the Notes may be presented for registration of transfer or exchange, at our office or agency maintained for such purpose, which office or agency shall be maintained in the Borough of Manhattan, The City of New York. Except as set forth below, at our option, payment of interest may be made by check mailed to the holders of the Notes (the "Holders") at the addresses set forth in our registry books. See "Book-Entry; Delivery; Form and Transfer—Same Day Settlement and Payment" below. No service charge will be made for any registration of transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Until otherwise designated by us, our office or agency will be the corporate trust

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office of the Trustee presently located at the office of the Trustee in the Borough of Manhattan, the City of New York.

Certain Bankruptcy Limitations

        We conduct a substantial portion of our operations through our Subsidiaries and Unrestricted Subsidiaries. Accordingly, our ability to meet our cash obligations is dependent in part upon the ability of these subsidiaries to make cash distributions to us. In addition, any right we have to receive the assets of any such subsidiary upon its liquidation or reorganization (and the consequent right of the Holders of the Notes to participate in the distribution of the proceeds of those assets) will effectively be subordinated by operation of law to the claims of such subsidiary's creditors (including trade creditors) and holders of its preferred stock, except to the extent that we are recognized as a creditor or preferred stockholder of such subsidiary, in which case our claims would still be subordinate to any indebtedness or preferred stock of such subsidiary senior in right of payment to the Indebtedness or stock held by the Company or the Parent. See "Risk Factors."

        Holders of the Notes will be direct creditors of each Guarantor by virtue of its Guarantee. Nonetheless, in the event of the bankruptcy or financial difficulty of a Guarantor, such Guarantor's obligations under its Guarantee may be subject to review and avoidance under state and federal fraudulent transfer laws. Among other things, a court may avoid (i.e., cancel) a Guarantor's obligations if it concludes that the Guarantor received less than reasonably equivalent value or fair consideration for entering into its Guarantee, and that, when it did so (or, in some jurisdictions, when it became obligated to make payments thereunder), it was or was rendered insolvent, left with inadequate capital with which to conduct its business, or believed (or reasonably should have believed) that it would incur debts beyond its ability to pay.

        A court would likely conclude that a Guarantor did not receive reasonably equivalent value or fair consideration to the extent that the aggregate amount of its liability on its Guarantee exceeds the economic benefits it receives from the issuance of the Notes. The obligations of each Guarantor under its Guarantee will be limited in a manner intended to cause it not to be a fraudulent conveyance under applicable law, although we cannot assure you that a court would give Holders the benefit of this provision. See "Risk Factors—Under certain circumstances, courts may void the guarantees under fraudulent transfer laws."

        If a court avoided the obligations of a Guarantor under its Guarantee, Holders of the Notes would have to return payments (if any) already received from that Guarantor on its Guarantee and to look to the assets of the Company and any remaining Guarantors for payment. There can be no assurance that those remaining assets would suffice to pay the outstanding principal of, premium, if any, and interest on the Notes.

        Substantially all of the Partnership's subsidiaries are non-guarantor subsidiaries. Currently, RFS Leasing VII, Inc. is the sole guarantor subsidiary of the notes and will guarantee the Notes on a full and unconditional basis. This subsidiary was recently formed and had no substantial operations through January 1, 2001. Since that date, the subsidiary's only activities relate to the 23 hotels it leases directly

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or indirectly from the Company. Summarized financial data for this subsidiary as of and for the year ended December 31, 2001 is as follows (in millions):

Cash	$	1.8
Hotel receivables		1.6
Deferred income taxes		7.7
Other assets		0.3
Total assets	$	11.4
Accounts payable and accrued expenses	$	4.7
Shareholders' equity		6.7
Total liabilities and shareholders' equity	$	11.4
Total hotel revenue	$	84.0
Percentage lease rental expense		32.2
Hotel operating expense		72.6
Operating loss		(20.8	)
Interest expense		(0.4	)
Benefit from income taxes		7.7
Net loss	$	(13.5	)

Optional Redemption

        At any time prior to March 1, 2005, the Company may on any one or more occasions redeem the Notes issued under the Indenture at a redemption price of 109.750% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, with cash in an amount not in excess of the Net Cash Proceeds of one or more public offerings of the Parent's Qualified Capital Stock; provided, that:

(1)

at least 65% of the aggregate principal amount of the Notes (but in no event less than $100 million aggregate principal amount of the Notes) issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company, the Parent and their respective Subsidiaries); and



(2)

the redemption occurs within 90 days of the date of the closing of such offering.

        At any time on or after March 1, 2007, we may redeem the Notes for cash at our option, in whole or in part, upon not less than 30 days' nor more than 60 days' notice to each Holder of Notes, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing March 1 of the years indicated below, in each case together with accrued and unpaid interest thereon to the date of redemption of the Notes ("Redemption Date"):

Year	Percentage
2007	104.875	%
2008	103.250	%
2009	101.625	%
2010 and thereafter	100.000	%

        In addition, at any time prior to March 1, 2007, the Company may, at its option, redeem the Notes, in whole or in part, from time to time, upon not less than 30 days' nor more than 60 days' notice at a redemption price equal to the greater of (i) 104.875% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest and (ii) the Make-Whole Premium, plus, to the extent

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not included in the Make-Whole Premium, accrued and unpaid interest to, but not including, the redemption date.

        If the Redemption Date hereunder is on or after an interest payment record date ("Record Date") on which the Holders of record have a right to receive the corresponding interest due on or before the associated Interest Payment Date, any accrued and unpaid interest due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Record Date.

Mandatory Redemption

        The Notes will not have the benefit of any sinking fund, and we will not be required to make any mandatory redemption payments with respect to the Notes.

Selection and Notice

        In the case of a partial redemption, the Trustee shall select the Notes or portions thereof for redemption on a pro rata basis, by lot or in such other manner it deems appropriate and fair. The Notes may be redeemed in part in multiples of $1,000 only.

        Notice of any redemption will be sent, by first class mail, at least 30 days' and not more than 60 days' prior to the date fixed for redemption to the Holder of each Note to be redeemed to such Holder's last address as then shown upon the registry books of our registrar. Any notice which relates to a Note to be redeemed in part only must state the portion of the principal amount equal to the unredeemed portion thereof and must state that on and after the date of redemption, upon surrender of such Note, a new Note or Notes in a principal amount equal to the unredeemed portion thereof will be issued. On and after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption, unless we default in the payment thereof.

Certain Covenants

        The Indenture contains certain covenants that will, among other things, restrict our ability to borrow money, pay dividends on or repurchase capital stock, make investments, and sell assets or enter into mergers or consolidations. The following summaries of certain covenants of the Indenture are summaries only, do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Indenture. The Indenture, and not this description, details your rights as a Holder of the Notes.

Repurchase of Notes at the Option of the Holder Upon a Change of Control

        The Indenture provides that in the event that a Change of Control has occurred, each Holder of Notes will have the right, at such Holder's option, pursuant to an offer (subject only to conditions required by applicable law, if any) by us (the "Change of Control Offer"), to require us to repurchase all or any part of such Holder's Notes (provided, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later than 35 Business Days after the occurrence of such Change of Control, at a cash price equal to 101% of the principal amount thereof (the "Change of Control Purchase Price"), together with accrued and unpaid interest to the Change of Control Purchase Date.

        The Change of Control Offer shall be made within 10 Business Days following a Change of Control and shall remain open for 20 Business Days following its commencement (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, we shall promptly purchase all Notes properly tendered in response to the Change of Control Offer.

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        As used herein, a "Change of Control" means:

        (1)  any "person" (including any group that is deemed to be a "person") is or becomes the "beneficial owner," directly or indirectly, of more than 35% of the aggregate Voting Equity Interests of the Parent or (other than the Parent or a wholly owned Subsidiary of the Parent) the Company (including as a result of any merger or consolidation of the Company or the Parent with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the Parent's or the Company's assets, in either case, on a consolidated basis, in one transaction or a series of related transactions),

        (2)  any merger or consolidation of the Parent with or into another Person or the merger of another Person with or into the Parent, or the sale of all or substantially all of the Parent's assets to another Person, if the Parent's Voting Equity Interests that are outstanding immediately prior to such transaction are changed into or exchanged for, cash, securities or property, unless pursuant to such transaction such Voting Equity Interests are changed into or exchanged for, in addition to any other consideration, securities of the surviving person or transferee that represent, immediately after such transaction, a majority of the aggregate voting power of the Voting Equity Interests of the surviving person or transferee,

        (3)  the Parent shall cease to own beneficially a majority of the voting power of the Voting Equity Interests of the Company or the consolidated financial statements of the Parent would not include the Company and its Subsidiaries, determined in accordance with GAAP,

        (4)  the Continuing Directors cease for any reason to constitute a majority of our Board of Directors then in office, or

        (5)  either or both of the Company and the Parent adopt a plan of liquidation.

        As used in this covenant, "person" (including any group that is deemed to be a "person") has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable.

        On or before the Change of Control Purchase Date, we will:

        (1)  accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer,

        (2)  deposit with our paying agent (the "Paying Agent") cash sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest to the Change of Control Payment Date) of all Notes so tendered, and

        (3)  deliver to the Trustee the Notes so accepted together with an Officers' Certificate listing the Notes or portions thereof being purchased by us.

        The Paying Agent will promptly pay the Holders of Notes so accepted an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest to the Change of Control Payment Date) and the Trustee will promptly authenticate and deliver to each such Holder a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted will be delivered promptly by us to the Holders thereof. We will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

        The Change of Control Offer feature of the Notes may make more difficult or discourage a takeover of us, and, thus, the removal of incumbent management.

        The phrase "all or substantially all" of our assets will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" of our assets has

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occurred. In addition, no assurances can be given that we will be able to acquire Notes tendered upon the occurrence of a Change of Control.

        Any Change of Control Offer will be made in compliance with all applicable laws, rules and regulations, including, if applicable, Regulation 14E under the Exchange Act and the rules thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, our compliance or compliance by any of the Guarantors with such laws and regulations shall not in and of itself cause a breach of our or their obligations under such covenant.

        If the Change of Control Purchase Date hereunder is on or after a Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Record Date.

Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock

        The Indenture provides that, except as set forth in this covenant, the Company and the Parent will not, and neither the Company nor the Parent will permit any of their respective Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness (including Disqualified Capital Stock and Acquired Indebtedness), other than Permitted Indebtedness. Notwithstanding the foregoing if, on the date of such incurrence (the "Incurrence Date"), (x) no Default or Event of Default shall have occurred and be continuing at the time of, or would exist after giving effect on a pro forma basis to, such incurrence of Indebtedness, and (y) the Consolidated Coverage Ratio of the Parent for the Reference Period immediately preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.00 to 1.00 (the "Debt Incurrence Ratio"), then:

        (1)  the Company and the Parent and their respective Subsidiaries may incur Indebtedness (other than Secured Indebtedness and Subsidiary Indebtedness), (including Disqualified Capital Stock) if, after giving effect to, on a pro forma basis, such incurrence and the receipt and application of proceeds therefrom, the aggregate amount of all outstanding Indebtedness and Disqualified Capital Stock of the Parent and its Subsidiaries, (including outstanding amounts of Refinancing Indebtedness), including the Company and its Subsidiaries, determined on a consolidated basis, without duplication, is less than or equal to 65% of the Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries; and

        (2)  the Company and the Parent and their respective Subsidiaries may incur Secured Indebtedness and the Parent's Subsidiaries, excluding the Company but including the Company's Subsidiaries, may incur Subsidiary Indebtedness (including Disqualified Capital Stock), if, after giving effect, on a pro forma basis, to such incurrence of Indebtedness and the receipt and application of proceeds therefrom, the aggregate amount of all outstanding Secured Indebtedness and Subsidiary Indebtedness (including Disqualified Capital Stock), of the Parent and its Subsidiaries (including outstanding amounts of Refinancing Indebtedness in respect of Secured Indebtedness and Subsidiary Indebtedness and Disqualified Capital Stock), including for purposes of Secured Indebtedness only, the Secured Indebtedness of the Company, determined on a consolidated basis, without duplication, is less than or equal to 45% of the Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries.

        The foregoing limitations of this covenant will not prohibit the Company's incurrence or the incurrence by any Guarantor of Indebtedness pursuant to the Credit Agreement in an aggregate

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amount incurred and outstanding at any time pursuant to this paragraph (plus any Refinancing Indebtedness incurred to retire, defease, refinance, replace or refund such Indebtedness) of up to $175 million, minus the amount of any such Indebtedness (1) retired with the Net Cash Proceeds from any Asset Sale applied to permanently reduce the outstanding amounts or the commitments with respect to such Indebtedness pursuant to the covenant "Limitation on Sale of Assets and Subsidiary Stock" or (2) assumed by a transferee in an Asset Sale so long as neither the Company, any of Guarantors nor any the Parent's or the Company's Subsidiaries continues to be an obligor under such Indebtedness.

        Indebtedness (including Disqualified Capital Stock) of any Person that is outstanding at the time such Person becomes a Subsidiary (including upon designation of any subsidiary or other Person as a Subsidiary) of either or both of the Company or the Parent or is merged with or into or consolidated with either or both of the Company or the Parent or a Subsidiary of either or both of the Company and the Parent shall be deemed to have been incurred at the time such Person becomes or is designated a Subsidiary of either or both of the Company and the Parent or is merged with or into or consolidated with either or both of the Company and the Parent or a Subsidiary, as applicable.

        Notwithstanding any other provision of this covenant, but only to avoid duplication, subject to clause (2) of the first paragraph above, a guarantee of Indebtedness of either or both of the Company or the Parent or of the Indebtedness of another Guarantor incurred in accordance with the terms of the Indenture issued at the time such Indebtedness was incurred or, if later, at the time the guarantor thereof became a Subsidiary of the Company or the Parent will not constitute a separate incurrence, or amount outstanding, of Indebtedness for purposes of the foregoing provisions (other than clause (2) of the first paragraph above). Upon each incurrence of Indebtedness, the Company may designate pursuant to which provision of this covenant such Indebtedness is being incurred and the Company may subdivide an amount of Indebtedness and designate more than one provision pursuant to which such amount of Indebtedness is being incurred and such Indebtedness shall not be deemed to have been incurred or outstanding under any other provision of this covenant, except as stated otherwise in the foregoing provisions.

Limitation on Issuances of Guarantees by Subsidiaries

        The Company will not permit any of its Subsidiaries and the Parent will not permit any of its Subsidiaries, directly or indirectly, to guarantee any Indebtedness of either or both of the Company or the Parent or of any Guarantor, including any Indebtedness under the Credit Agreement that ranks equally with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"), unless:

        (1)  such Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a guarantee of the Notes by such Subsidiary, and

        (2)  such Subsidiary waives and agrees not to, in any manner whatsoever, claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company, the Parent or any other Subsidiary as a result of any payment by such Subsidiary under its Guarantee;

provided, that this provision shall not be applicable to any guarantee of any Subsidiary that existed at the time such Person became a Subsidiary and which was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary. If the Guaranteed Indebtedness ranks equally in right of payment with the Notes, then the guarantee of such Guaranteed Indebtedness shall rank equally in right of payment with, or subordinate in right of payment to, the Guarantee. If the Guaranteed Indebtedness is subordinate in right of payment to the Notes, then the guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated in right of payment to the Notes.

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Limitations on Liens

        The Company and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind upon any of their respective assets now owned or acquired on or after the Issue Date or upon any income or profits therefrom securing any Indebtedness, unless the Company and the Parent provide, and cause their respective Subsidiaries to provide, concurrently therewith, that the Notes and the applicable Guarantees are equally and ratably so secured.

        Notwithstanding the foregoing, the Company and the Parent may, and may permit their respective Subsidiaries to incur, assume or suffer to exist Liens of any kind upon any of their respective assets now owned or acquired on or after the Issue Date or upon any income or profits therefrom securing Indebtedness in an aggregate amount outstanding at any time (including outstanding amounts of Refinancing Indebtedness), without duplication, less than or equal to 45% of Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries, determined on a consolidated basis.

Limitation on Restricted Payments

        The Indenture provides that the Company and the Parent will not, and will not permit any of their respective Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect to such Restricted Payment on a pro forma basis:

        (1)  a Default or an Event of Default shall have occurred and be continuing,

        (2)  the Company is not permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio and clauses (1) or (2) of the first paragraph in the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or

        (3)  the aggregate amount of all Restricted Payments made by the Company and the Parent and their respective Subsidiaries, including after giving effect to such proposed Restricted Payment, on and after the Issue Date, would exceed, without duplication, the sum of:

        (a)  95% of the aggregate Funds From Operations (determined by excluding income resulting from transfers of assets by the Company or the Parent or any of their respective Subsidiaries to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period), commencing on the first day of the fiscal quarter in which the Issue Date occurs, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calculation for which the Company's and the Parent's consolidated financial statements are required to be delivered to the Trustee or, if sooner, filed with the Securities and Exchange Commission (the "Commission") (or, in the event Funds From Operations for such period is a deficit, then minus 100% of such deficit), plus

        (b)  the aggregate Net Cash Proceeds received by the Company or the Parent from the sale of Qualified Capital Stock (other than (i) to a Subsidiary of either or both of the Company or the Parent and (ii) to the extent applied in connection with a Qualified Exchange or a Permitted Investment or, to avoid duplication, otherwise given credit for in any provision of the following paragraph), after the Issue Date, plus

        (c)  except in each case, in order to avoid duplication, to the extent any such payment or proceeds have been included in the calculation of Funds From Operations, an amount equal to the net reduction in Investments (other than returns of or from Permitted Investments) in any Person resulting from cash distributions on or cash repayments of any Investments, including payments of interest on Indebtedness, dividends, repayments of loans or advances, or other distributions or other transfers of assets, in each case to the Company or the Parent

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or any of their respective Subsidiaries or from the Net Cash Proceeds from the sale of any such Investment or from redesignations of Unrestricted Subsidiaries as Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or the Parent or any of their Subsidiaries in such Person, including, if applicable, such Unrestricted Subsidiary, less the cost of disposition, plus

        (d)  the purchase price of noncash tangible assets acquired in exchange for an issuance of Qualified Capital Stock of either of the Company or the Parent on or after the Issue Date (other than, in order to avoid duplication, acquisitions that constitute Permitted Investments and other than from the Parent, the Company or any of their respective Subsidiaries).

Notwithstanding the foregoing, so long as the Parent is otherwise maintaining its status as a REIT under the Code, the Company or the Parent may declare or pay any dividend or make any distribution that is necessary to maintain the Parent's status as a REIT under the Code if at the time of such declaration (or, if there is no declaration, at the time of payment):

        (x)  the aggregate principal amount of all outstanding Indebtedness of the Parent and its Subsidiaries, including the Company and its Subsidiaries, on a consolidated basis at such time is less than 65% of Adjusted Total Assets; and

        (y)  no Default or Event of Default shall have occurred and be continuing.

        The full amount of all Restricted Payments made pursuant to the foregoing paragraph, however, will be counted as Restricted Payments for purposes of the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (3) of the first paragraph under the heading "Limitation on Restricted Payments."

        The provisions of the first paragraph under this section shall not prohibit:

        (a)  a Qualified Exchange, or

        (b)  the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions.

        Clauses (2) and (3) of the first paragraph under this section shall not prohibit:

        (c)  repurchases of Capital Stock from the Company's or the Parent's employees or directors (or their heirs or estates) or from employees or directors (or their heirs or estates) of Company's or the Parent's Subsidiaries upon the death, disability or termination of employment in an aggregate amount to all employees and directors (or their heirs and estates) not to exceed $500,000 per year or $3 million in the aggregate on and after the Issue Date, or

        (d)  any dividend, distribution or other payments by any Subsidiary of the Company or the Parent (other than the Company) on its Equity Interests that is paid pro rata to all holders of such Equity Interests.

        The provisions of the first paragraph under this section shall not prohibit:

        (e)  Restricted Payments pursuant to this clause (e) in an aggregate amount not to exceed $25 million.

        The full amount of any Restricted Payment made pursuant to the foregoing clauses (b), (c), (d) and (e) (but not pursuant to clause (a)) of the preceding paragraph, however, will be counted as Restricted Payments for purposes of the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (3) of the first paragraph under the heading "—Limitation on Restricted Payments."

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        For purposes of this covenant, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the good faith reasonable judgment of the Board of Directors, unless stated otherwise, at the time made or returned, as applicable. Not later than (1) 45 days following the end of any calendar quarter in which any Restricted Payment is made, and (2) 10 days after the making of any Restricted Payment which, when added to the sum of all Restricted Payments made in a calendar quarter, would cause the aggregate of all Restricted Payments made in such quarter to exceed $5 million (other than payments of quarterly dividends on Capital Stock of the Company or the Parent in the ordinary course of business), the Parent and the Company shall deliver an Officers' Certificate to the Trustee describing in reasonable detail the nature of such Restricted Payments, stating the amount of such Restricted Payments, stating in reasonable detail the provisions of the Indenture pursuant to which such Restricted Payments were made and certifying that such Restricted Payments were made in compliance with the terms of the Indenture.

Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries

        The Indenture provides that the Company and the Parent will not, and will not permit any of their respective Subsidiaries to, directly or indirectly, create, assume or suffer to exist any consensual restriction on the ability of any of their respective Subsidiaries to pay dividends or make other distributions to or on behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay loans or advances to or on behalf of the Company or the Parent or any of their respective Subsidiaries, except:

        (1)    restrictions imposed by the Notes or the Indenture or by other Indebtedness ranking pari passu with the Notes or the Guarantees, as applicable; provided, that such restrictions are not more restrictive, taken as a whole, than those imposed by the Indenture and the Notes,

        (2)    restrictions imposed by applicable law;

        (3)    existing restrictions under Existing Indebtedness;

        (4)    restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement (including any Equity Interest) relating to any property, asset, or business acquired by the Company or the Parent or any of their respective Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any Person, other than the Person acquired, or to any property, asset or business, other than the property, assets and business so acquired;

        (5)    restrictions imposed by Indebtedness incurred under the Credit Agreement permitted to be incurred pursuant to the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock"; provided, that such restrictions or requirement are no more restrictive in any material respect than that imposed by the Credit Agreement as of the Issue Date;

        (6)    restrictions with respect solely to any Subsidiary of either or both of the Company or the Parent imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all of the Equity Interests or assets of such Subsidiary; provided, that such restrictions apply solely to the Equity Interests or assets of such Subsidiary which are being sold;

        (7)    in connection with and pursuant to permitted Refinancings, replacements of restrictions imposed pursuant to clauses (1), (3) or (4) or this clause (7) of this paragraph that are not more restrictive in any material respect than those being replaced and do not apply to any other Person or assets than those that would have been covered by the restrictions in the Indebtedness so refinanced;

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        (8)    customary provisions restricting subletting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice;

        (9)    any asset subject to a Lien which is not prohibited to exist with respect to such asset pursuant to the terms of the Indenture may be subject to customary restrictions on the transfer or disposition thereof pursuant to such Lien; and

        (10)    restrictions imposed by or, to the extent set forth in the Indenture, in connection with Indebtedness incurred under clause (2) of the first paragraph of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock."

Limitations on Layering Indebtedness

        The Indenture provides that the Company or the Parent will not and will not permit any of their respective Subsidiaries to incur any Indebtedness that is contractually subordinated in right of payment to any of either or both of the Company's or the Parent's Indebtedness or the Indebtedness of any Guarantor unless such Indebtedness is as contractually subordinated in right of payment to the Notes or such Guarantor's Guarantee, as applicable, at least to the same extent as it is to such other Indebtedness.

Limitation on Sale of Assets and Subsidiary Stock

        The Indenture provides that the Company or the Parent will not and will not permit any of their respective Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of our or their property, business or assets, including by merger or consolidation (in the case of a Subsidiary or Unrestricted Subsidiary), and including any sale or other transfer or issuance of any Equity Interests of any Subsidiary, whether by the Company or the Parent or one of their respective Subsidiaries or through the issuance, sale or transfer of Equity Interests by one of our Subsidiaries or Unrestricted Subsidiary and including any sale and leaseback transaction (any of the foregoing, an "Asset Sale"), unless:

        (1)    at least 75% of the total consideration for such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents; provided, that with respect to the sale of one or more hotel properties, up to 75% of the consideration may consist of Indebtedness of the purchaser of such hotel properties so long as such Indebtedness is secured by a first priority Lien on the hotel property or properties sold;

        (2)    no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect, on a pro forma basis, to such Asset Sale; and

        (3)    the Parent and the Company determine in good faith that the consideration received by the Parent, the Company or their respective Subsidiaries, as applicable, equals the fair market value for such Asset Sale.

        In the event and to the extent that immediately following any Asset Sale the Net Cash Proceeds received by the Company or the Parent or any of their respective Subsidiaries from such Asset Sale, plus the Net Cash Proceeds of any other Asset Sale(s) which occurred (i) on or after the Issue Date and (ii) within the 360-day period proceeding such Asset Sale, exceed 10% of Adjusted Consolidated Net Tangible Assets, the Indenture provides that within 360 days following such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Amount") shall be:

        (a)    invested in assets and property (except in connection with the acquisition of a Subsidiary which is a Guarantor in a Related Business, other than notes, bonds, obligation and securities) which will immediately constitute or be a part of a Related Business of the Company or the Parent or such Subsidiary (if it continues to be a Subsidiary) immediately following such transaction, or

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        (b)    used to retire Indebtedness incurred under the Credit Agreement and to permanently reduce the amount of such Indebtedness permitted to be incurred pursuant to the second paragraph under the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock."

Pending the final application of any Net Cash Proceeds, the Company or the Parent may temporarily reduce revolving credit borrowings or otherwise invest the Net Cash Proceeds in any manner that is not prohibited by the Indenture.

        The accumulated Net Cash Proceeds from Asset Sales not applied as set forth in (a) or (b) of the preceding paragraph shall constitute "Excess Proceeds." Within 30 days after the date that the amount of Excess Proceeds exceeds $10 million, which date will not be prior to 390 days after the Asset Sale that generated such Excess Proceeds, the Company shall apply an amount (the "Asset Sale Offer Amount") equal to the Excess Proceeds to the repurchase of the Notes and such other Indebtedness ranking on a parity with the Notes and with provisions requiring us to make an offer to purchase such Indebtedness with the proceeds from such Asset Sale(s) pursuant to a cash offer (subject only to conditions required by applicable law, if any) (pro rata in proportion to the respective principal amounts (or accreted values in the case of Indebtedness issued with an original issue discount) of the Notes and such other Indebtedness then outstanding) (the "Asset Sale Offer") at a purchase price of 100% of the principal amount (or accreted value in the case of Indebtedness issued with an original issue discount) (the "Asset Sale Offer Price") together with accrued and unpaid interest to the date of payment. Each Asset Sale Offer shall remain open for 20 Business Days following its commencement (the "Asset Sale Offer Period").

        Upon expiration of the Asset Sale Offer Period, we shall apply the Asset Sale Offer Amount plus an amount equal to accrued and unpaid interest to the purchase of all Indebtedness properly tendered in accordance with the provisions hereof (on a pro rata basis if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together with accrued interest). To the extent that the aggregate amount of Notes and such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, we may use any remaining Net Cash Proceeds as otherwise permitted by the Indenture and following the consummation of each Asset Sale Offer the Excess Proceeds amount shall be reset to zero.

        Notwithstanding, and without complying with, the other provisions of this covenant:

        (1)    the Company or the Parent may and their respective Subsidiaries may, in the ordinary course of business, (a) convey, sell, transfer, assign or otherwise dispose of inventory and other assets acquired and held for resale in the ordinary course of business and (b) liquidate Cash Equivalents;

        (2)    the Company and the Parent may and their respective Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the covenant "Limitation on Merger, Sale or Consolidation";

        (3)    the Company and the Parent may and their respective Subsidiaries may sell or dispose of damaged, worn out or other obsolete personal property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of the Company's or the Parent's business or the business of such Subsidiary, as applicable;

        (4)    the Company and the Parent may and the Guarantors may convey, sell, transfer, assign or otherwise dispose of assets to the Company or the Parent or any of the Guarantors;

        (5)    the Company and the Parent may and their respective Subsidiaries may, in the ordinary course of business, convey, sell, transfer, assign, or otherwise dispose of assets (or related assets or in related transactions) with a fair market value of less than $2 million;

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        (6)    the Company and the Parent may and their respective Subsidiaries may surrender or waive or settle, release or surrender tort or other litigation claims in the ordinary course of business or grant Liens not prohibited by the Indenture; and

        (7)    the Company and the Parent may and their respective Subsidiaries may make Permitted Investments pursuant to clause (d) in the definition thereof and Restricted Investments permitted under the covenant "Limitation on Restricted Payments".

        All Net Cash Proceeds from an Event of Loss shall be reinvested or used as otherwise provided above in clauses (a) or (b) of the second paragraph of this covenant.

        Any Asset Sale Offer shall be made in compliance with all applicable laws, rules, and regulations, including, if applicable, Regulation 14E of the Exchange Act and the rules and regulations thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this paragraph, our compliance or the compliance of any of our subsidiaries with such laws and regulations shall not in and of itself cause a breach of our obligations under such covenant.

        If the payment date in connection with an Asset Sale Offer hereunder is on or after an interest payment Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such Record Date.

Limitation on Transactions with Affiliates

        The Indenture provides that neither the Company, the Parent nor any of their respective Subsidiaries will be permitted on or after the Issue Date to enter into or suffer to exist any contract, agreement, arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or any series of related Affiliate Transactions, (other than Exempted Affiliate Transactions), (1) unless it is determined that the terms of such Affiliate Transaction are fair and reasonable to the Company or the Parent, as the case may be, and no less favorable to the Company or the Parent than could have been obtained in an arm's length transaction with a non-Affiliate, and (2) if involving consideration to either party in excess of $2 million, unless such Affiliate Transaction(s) is evidenced by an Officers' Certificate addressed and delivered to the Trustee certifying that such Affiliate Transaction (or Transactions) has been approved by a majority of the members of the Parent's Board of Directors that are disinterested in such transaction, if there are any directors who are so disinterested, and (3) if involving consideration to either party in excess of $10 million, unless in addition the Company or the Parent, prior to the consummation thereof, obtains a written favorable opinion as to the fairness of such transaction to the Company or the Parent from a financial point of view from an independent investment banking firm of national reputation in the United States or, if pertaining to a matter for which such investment banking firms do not customarily render such opinions, an appraisal or valuation firm of national reputation in the United States.

Limitation on Merger, Sale or Consolidation

        The Indenture provides that neither Company nor the Parent will consolidate with or merge with or into another Person or, directly or indirectly, sell, lease, convey or transfer all or substantially all of their assets (such amounts to be computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless:

        (1)    either (a) the Company or the Parent, as applicable, is the continuing entity or (b) the resulting, surviving or transferee entity, as applicable, is an entity organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental

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indenture all of the Company's or the Parent's, as applicable, obligations in connection with the Notes or the Guarantee, as applicable;

        (2)    no Default or Event of Default shall exist or shall occur immediately after giving effect on a pro forma basis to such transaction;

        (3)    unless such transaction is solely the merger of the Company or the Parent and one of a Wholly Owned Subsidiaries which is also a Guarantor for the purpose of reorganization into another jurisdiction and which transaction is not for the purpose of evading this provision and not in connection with any other transaction, immediately after giving effect to such transaction on a pro forma basis, the consolidated resulting, surviving or transferee entity would immediately thereafter be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio and clauses (1) or (2) of the first paragraph of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock"; and

        (4)    each Guarantor shall have, if necessary, confirmed in writing that its Guarantee shall apply to the obligations of the Company, or the surviving entity in accordance with the Notes and the Indenture.

        Upon any consolidation or merger, the successor entity formed by such consolidation or into which the Company or the Parent is merged shall succeed to and (except in the case of a lease or any transfer of all or substantially all of the Company's or the Parent's assets) be substituted for, and may exercise every right and power of, the Company or the Parent, as applicable, under the Indenture with the same effect as if such successor entity had been named therein as the Company or the Parent, as applicable, and (except in the case of a lease or any transfer of all or substantially all of the Company's or the Parent's assets) the Company or the Parent, as applicable, shall be released from the obligations under the Indenture, the Notes and the Guarantee, as applicable, except with respect to any obligations that arise from, or are related to, such transaction.

        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of all or substantially all of the properties and assets of one or more Subsidiaries, the Company's or the Parent's interest in which constitutes all or substantially all of the Company's or the Parent's properties and assets, shall be deemed to be the transfer of all or substantially all of the Company's or the Parent's properties and assets.

Limitation on Lines of Business

        The Indenture provides that neither the Company, the Parent, nor any of their respective Subsidiaries or Unrestricted Subsidiaries will directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Board of Directors, is a Related Business.

Release of Guarantors

        The Indenture provides that no Guarantor (other than the Parent) will consolidate or merge with or into (whether or not such Guarantor is the surviving Person) another Person unless, subject to the provisions of the following paragraph and the other provisions of the Indenture, (1) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such Person shall guarantee, on a senior basis, all of such Guarantor's obligations under such Guarantor's Guarantee on the terms set forth in the Indenture; and (2) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred or be continuing. The provisions of clause (2) of this

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paragraph shall not apply to the merger of any Guarantors with and into each other or with or into the Company or the Parent.

        Upon the sale or disposition (including by merger or stock purchase) of a Guarantor (other than the Parent) as an entirety to an entity which is not and is not required to become a Guarantor, or the designation of a Guarantor (other than the Parent) to become an Unrestricted Subsidiary, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of the covenant "—Limitations on Sale of Assets and Subsidiary Stock"), such Guarantor will be deemed released from its obligations under its guarantee of the Notes; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees, and under all of its pledges of assets or other security interests which secure, any of the Company's or the Parent's Indebtedness or Indebtedness of any other of their respective Subsidiaries shall also terminate upon such release, sale or transfer and none of its Equity Interests are pledged for the benefit of any holder of any of the Company's or the Parent's Indebtedness or any Indebtedness of any of their respective Subsidiaries.

Limitation on Status as Investment Company

        The Indenture prohibits the Company and the Parent and their respective Subsidiaries from being required to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended), or from otherwise becoming subject to regulation under the Investment Company Act.

Restrictions on Activities of Finance

        Notwithstanding anything in the Indenture to the contrary, Finance will not (a) own any material assets, (b) become liable for any obligations or Indebtedness other than the Notes (including any additional Notes incurred pursuant to the covenant described above under the caption "Limitation on Incurrence of Indebtedness") pursuant to the terms of the Indenture, or (c) engage in any business activities other than the co-issuance of the Notes (including any additional Notes incurred pursuant to the covenant described above under the caption "Limitation on Incurrence of Indebtedness").

Future Guarantors

        The Issuers and the Parent shall cause RFS Financing Partnership, L.P., RFS Leasing II, Inc. and RFS Financing Corp. (the "Future Guarantors") to fully and unconditionally guarantee on a senior basis the performance of the Notes and the other obligations of the Issuers under the Indenture to the same extent as such obligations are guaranteed by the other Guarantors, and within 120 days of the Issue Date, to cause each such Future Guarantor to execute and deliver to the Trustee a supplemental indenture making such Future Guarantor a party to the Indenture.

Reports

        The Indenture provides that whether or not the Company and the Parent are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company and the Parent will deliver to the Trustee (and if the Company and the Parent are not subject to such reporting requirements to each Holder) within five days after the Company and the Parent are or would have been (if they were subject to such reporting obligations) required to file such statements with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if the Company and the Parent were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by our certified independent public accountants would be required in such reports to the Commission, and, in each case, together with a management's discussion

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and analysis of financial condition and results of operations which would be so required and, unless the Commission will not accept such reports, file with the Commission the annual, quarterly and other reports which it is or would have been required to file with the Commission.

Events of Default and Remedies

        The Indenture defines an "Event of Default" as:

        (1)    the Company's failure to pay any installment of interest (or liquidated damages, if any) on the Notes as and when the same becomes due and payable and the continuance of any such failure for 30 days,

        (2)    the Company's failure to pay all or any part of the principal, or premium, if any, on the Notes when and as the same becomes due and payable at maturity, upon redemption, by acceleration or otherwise, including, without limitation, payment of the Change of Control Purchase Price or the Asset Sale Offer Price, on Notes validly tendered and not withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as applicable,

        (3)    the Company's failure or the failure by the Parent or any of their respective Subsidiaries to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, except for the provisions under "Repurchase of Notes at the Option of the Holder Upon a Change of Control," "Limitations on Sale of Assets and Subsidiary Stock," and "Limitation on Merger, Sale or Consolidation," the continuance of such failure for a period of 30 days,

        (4)    certain events of bankruptcy, insolvency or reorganization in respect of the Company, the Parent or any of their respective Significant Subsidiaries,

        (5)    a default occurs (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) in any of the Company's or the Parent's Indebtedness or the Indebtedness of any of their respective Subsidiaries with an aggregate amount outstanding in excess of $7.5 million (or if such Indebtedness is Non-Recourse Indebtedness, $20 million) (a) resulting from the obligor's failure to pay principal of or interest on such Indebtedness, or (b) as a result of such default, the maturity of such Indebtedness has been accelerated prior to its stated maturity,

        (6)    final unsatisfied judgments not covered by insurance aggregating in excess of $7.5 million, at any one time rendered against the Company or the Parent or any of their respective Subsidiaries and not stayed, bonded or discharged within 60 days, and

        (7)    any Guarantee of a Guarantor ceases to be in full force and effect or becomes unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Guarantee and the Indenture) or any Guarantor denies or disaffirms its Obligations under its Guarantee.

        The Indenture provides that if a Default occurs and is continuing, the Trustee must, within 90 days after the occurrence of such Default, give to the Holders notice of such Default.

        If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (4) above relating to the Company or the Parent or any of their respective Significant Subsidiaries,) then in every such case, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all principal, determined as set forth below, and accrued and unpaid interest thereon to be due and payable immediately. If an Event of Default specified in clause (4) above relating to the Company or the Parent or any of their respective Significant Subsidiaries occurs, all principal and accrued and unpaid interest thereon will be

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immediately due and payable on all outstanding Notes without any declaration or other act on the part of the Trustee or the Holders. The Holders of a majority in aggregate principal amount of Notes generally are authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes which have become due solely by reason of such acceleration have been cured or waived.

        Prior to the declaration of acceleration of the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Holders any Default or Event of Default, and except a Default in the payment of principal of or interest on any Note not yet cured or a Default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable security or indemnity.

        Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee.

Legal Defeasance and Covenant Defeasance

        The Indenture provides that we may, at our option, elect to discharge our obligations and the Guarantors' obligations with respect to the outstanding Notes ("Legal Defeasance"). If Legal Defeasance occurs, we shall be deemed to have paid and discharged all amounts owed under the Notes, and the Indenture shall cease to be of further effect as to the Notes and Guarantees, except that:

        (1)    Holders will be entitled to receive timely payments for the principal of, premium, if any, and interest on the Notes, from the funds deposited for that purpose (as explained below);

        (2)    Our obligations will continue with respect to the issuance of temporary Notes, the registration of Notes, and the replacement of mutilated, destroyed, lost or stolen Notes;

        (3)    The Trustee will retain its rights, powers, duties and immunities, and we will retain our obligations in connection therewith; and

        (4)    Other Legal Defeasance provisions of the Indenture will remain in effect.

        In addition, we may, at our option and at any time, elect to cause the release of our obligations and the Guarantors' obligations with respect to most of the covenants in the Indenture (except as described otherwise therein) ("Covenant Defeasance"). If Covenant Defeasance occurs, certain events (not including non-payment and bankruptcy, receivership, rehabilitation and insolvency events) relating to the Company, the Parent or any of their respective Subsidiaries described under "Events of Default" will no longer constitute Events of Default with respect to the Notes. We may exercise Legal Defeasance regardless of whether we previously exercised Covenant Defeasance.

        In order to exercise either Legal Defeasance or Covenant Defeasance (each, a "Defeasance"):

        (1)    We must irrevocably deposit with the Trustee, in trust, for the benefit of Holders of the Notes, U.S. legal tender, U.S. Government Obligations or a combination thereof, in amounts that will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment or any redemption date thereof, and the Trustee must have, for the benefit of Holders of the Notes, a valid, perfected, exclusive security interest in the trust;

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        (2)    In the case of Legal Defeasance, we must deliver to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that:

        (A)    we have received from, or there has been published by the Internal Revenue Service, a ruling or

        (B)    since the date of the Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that Holders of Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred;

        (3)    In the case of Covenant Defeasance, we must deliver to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that Holders of Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred;

        (4)    No Default or Event of Default may have occurred and be continuing on the date of the deposit. In addition, in order to exercise Legal Defeasance, no Event of Default relating to bankruptcy or insolvency may occur at any time from the date of the deposit to the 91^st calendar day thereafter;

        (5)    The Defeasance may not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Company, the Parent or any of their respective Subsidiaries are a party or by which the Company, the Parent or any of their Subsidiaries are bound;

        (6)    We must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by us with the intent to hinder, delay or defraud any other of our creditors; and

        (7)    We must deliver to the Trustee an Officers' Certificate confirming the satisfaction of conditions in clauses (1) through (6) above, and an opinion of counsel confirming the satisfaction of the conditions in clauses (1) (with respect to the validity and perfection of the security interest), (2), (3) and (5) above.

        The Defeasance will be effective on the earlier of (i) the 91^st day after the deposit, and (ii) the day on which all the conditions above have been satisfied.

        If the amount deposited with the Trustee to effect a Covenant Defeasance is insufficient to pay the principal of, premium, if any, and interest on the Notes when due, or if any court enters an order directing the repayment of the deposit to us or otherwise making the deposit unavailable to make payments under the Notes when due, then (so long as the insufficiency exists or the order remains in effect) our and the Guarantors' obligations under the Indenture and the Notes and the Guarantees will be revived, and the Defeasance will be deemed not to have occurred.

Amendments and Supplements

        The Indenture contains provisions permitting us, the Guarantors and the Trustee to enter into supplemental indentures for certain limited purposes without the consent of the Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, we, the Guarantors and the Trustee are permitted to amend or supplement the

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Indenture or any supplemental indenture or modify the rights of the Holders; provided, that no such modification may, without the consent of each Holder affected thereby:

        (1)    change the Stated Maturity on any Note, or reduce the principal amount thereof or the rate (or extend the time for payment) of interest thereon or any premium payable upon the redemption thereof at our option, or change the city of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption at our option, on or after the Redemption Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer Price or otherwise modify such covenants in a manner adverse to the Holders after the corresponding Asset Sale or Change of Control has occurred or alter the provisions (including the defined terms used therein) regarding our right to redeem the Notes as a right, or at our option, in a manner adverse to the Holders, or

        (2)    reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such amendment, supplemental indenture or waiver provided for in the Indenture,

        (3)    modify any of the waiver provisions, except to increase any required percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby, or

        (4)    cause the Notes or any Guarantee to become contractually subordinate in right of payment to any other Indebtedness of the Company or the applicable Guarantor, as the case may be.

Governing Law

        The Indenture provides that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York including, without limitation, Sections 5-1401 and 5-1402 of the New York General Obligations Law and New York Civil Practice Laws and Rules 327(b).

No Personal Liability of Partners, Stockholders, Officers, Directors

        The Indenture provides that no direct or indirect partner, stockholder, employee, officer or director, as such, past, present or future of the Company, the Parent, the Guarantors or any successor entity shall have any personal liability in respect of our obligations or the obligations of the Guarantors under the Indenture or the Notes solely by reason of his or its status as such stockholder, employee, officer or director, except that this provision shall in no way limit the obligation of any Guarantor pursuant to any guarantee of the Notes.

Certain Definitions

        "Acquired Indebtedness" means Indebtedness (including Disqualified Capital Stock) of any Person existing at the time such Person becomes a Subsidiary of either of or both of the Company and the Parent, including by designation, or is merged or consolidated into or with either of the Company or the Parent or one of their respective Subsidiaries.

        "Acquisition" means (i) the purchase or other acquisition of any Person or all or substantially all the assets of any Person by any other Person, whether by purchase, merger, consolidation, or other transfer, and whether or not for consideration, or (ii) an acquisition by the Company or the Parent or any of their respective Subsidiaries from any other Person of one or more hotel properties.

        "Adjusted Consolidated Net Income" means, with respect to the Parent, the net income (or loss) of the Parent and its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries,

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(determined on a consolidated basis in accordance with GAAP) (it being understood that the net income of a Subsidiary shall be consolidated with the Parent only to the extent of the Parent's proportionate interest in such Subsidiary; provided, that the minority interest of the Company attributable to outstanding Units held by Persons other than the Parent shall not be deducted for purposes hereof), adjusted to exclude (only to the extent included in computing such net income (or loss) and without duplication):

        (a)    all gains and losses which are either extraordinary (as determined in accordance with GAAP) or are unusual and nonrecurring (including any gain from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any Capital Stock),

        (b)    the net income, if positive, of any Person, other than a Consolidated Subsidiary, in which the Company or the Parent or any of their respective Consolidated Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to the Company or the Parent or a Consolidated Subsidiary of either or both of the Company and the Parent during such period, but in any case not in excess of such Person's pro rata share of their net income for such period,

        (c)    the net income or loss of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition,

        (d)    the net income, if positive, of any of the Company's or the Parent's respective Consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions to the Company is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary, and

        (e)    the net income of, and all dividends and distributions from any Unrestricted Subsidiary of either or both of the Company and the Parent, up to an aggregate amount equal to all Investments made by either or both of the Company and the Parent and their respective Subsidiaries prior to the date of determination.

        "Adjusted Consolidated Net Tangible Assets" means, at the date of determination, the total amount of assets of the Parent and its respective Subsidiaries, including the Company and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting from the total amount of assets:

        (1)    all current liabilities of the Company and the Parent and their respective Subsidiaries, excluding intercompany items, and

        (2)    all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other intangibles,

all as set forth on the most recent quarterly or annual consolidated balance sheet of the Company and the Parent and their respective Subsidiaries, in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to the "Reports" covenant.

        "Adjusted Total Assets" means, at the date of determination, for the Parent and its Subsidiaries, including the Company and its Subsidiaries, the sum of:

        (1)    Total Assets for the Parent as of the end of the calendar quarter preceding the date of determination as set forth on the most recent quarterly or annual consolidated balance sheet of the Parent and its Subsidiaries, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to the "Reports" covenant, and

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        (2)    any increase in Total Assets following the end of such quarter including, without limitation, any increase in Total Assets resulting from the application of the proceeds of any additional Indebtedness.

        "Affiliate" means any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company and the Parent. For purposes of this definition, the term "control" means the power to direct the management and policies of a Person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise; provided, that with respect to ownership interest in the Parent and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting power normally entitled to vote in the election of directors, managers or trustees, as applicable, shall for such purposes be deemed to constitute control. Notwithstanding the foregoing, "Affiliate" shall not include Wholly Owned Subsidiaries.

        "Average Life" means, as of the date of determination, with respect to any security or instrument, the quotient obtained by dividing (1) the sum of the products (a) of the number of years from the date of determination to the date or dates of each successive scheduled principal (or redemption) payment of such security or instrument and (b) the amount of each such respective principal (or redemption) payment by (2) the sum of all such principal (or redemption) payments.

        "Beneficial Owner" or "beneficial owner" for purposes of the definition of Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not applicable.

        "Board of Directors"    means, with respect to any Person, the board of directors (or if such Person is not a corporation, the equivalent board of managers or members or body performing similar functions for such Person) of such Person or any committee of the Board of Directors of such Person authorized, with respect to any particular matter, to exercise the power of the board of directors of such Person.

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

        "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

        "Capital Stock" means, with respect to any entity, any and all shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness that is not itself otherwise capital stock), warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that entity, including partnership units in the case of a partnership).

        "Cash Equivalent" means:

        (1)    securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof);

        (2)    time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500 million; or

        (3)    commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc.

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and in the case of each of clauses (1), (2) and (3) above maturing within one year after the date of acquisition.

"Comparable Treasury Issue" means the U.S. Treasury security selected by an Independent Investment Banker as having maturity comparable to March 1, 2007 that would be utilized at the time of selection and in accordance with customary financial practice, in pricing new issue of corporate debt securities of comparable maturity to March 1, 2007. "Independent Investment Banker" means Credit Suisse First Boston Corporation, Banc of America Securities LLC or, if such firms are unwilling or unable to select the Comparable Treasury Issue, an investment banking firm of national reputation selected by the Company.

"Comparable Treasury Price" means with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations for such redemption date, or (ii) the Company obtains fewer than three such Reference Security Dealer Quotations, the average of all such quotations.

"Consolidation" means, with respect to the Company and the Parent, the consolidation of the accounts of the Subsidiaries with those of the Company and the Parent, all in accordance with GAAP; provided, that "consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary with the accounts of the Company and the Parent. The term "Consolidated" has a correlative meaning to the foregoing.

        "Consolidated Coverage Ratio" of the Parent on any date of determination (the "Transaction Date") means the ratio, on a pro forma basis, of (a) the aggregate amount of Consolidated EBITDA of the Parent attributable to continuing operations and businesses (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of) for the Reference Period to (b) the aggregate Consolidated Fixed Charges of the Parent (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges would no longer be obligations contributing to the Parent's Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; provided, that for purposes of such calculation:

        (1)    Acquisitions which occurred during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date shall be assumed to have occurred on the first day of the Reference Period without regard to the effect of clause (c) of the definition of "Adjusted Consolidated Net Income,"

        (2)    transactions giving rise to the need to calculate the Consolidated Coverage Ratio shall be assumed to have occurred on the first day of the Reference Period without regard to the effect of clause (c) of the definition of "Adjusted Consolidated Net Income,"

        (3)    the incurrence of any Indebtedness, (including the issuance of any Disqualified Capital Stock), (other than Indebtedness incurred under any revolving credit facility) during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to refinance or retire other Indebtedness) shall be assumed to have occurred on the first day of the Reference Period,

        (4)    the Consolidated Fixed Charges of the Parent attributable to interest on any Indebtedness or dividends on any Disqualified Capital Stock bearing a floating interest (or dividend) rate shall be computed on a pro forma basis as if the average rate in effect from the beginning of the Reference Period to the Transaction Date had been the applicable rate for the entire period, unless such Person or any of its Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall remain in effect for the 12-month period immediately following the Transaction Date) that has the effect of fixing the interest rate on the date of computation, in which case such rate (whether higher or lower) shall be used, and

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        (5)    for any Reference Period that includes the full fiscal quarter ended March 31, 2001, the aggregate Consolidated EBITDA of the Parent shall be adjusted to add thereto (to the extent deducted from net revenues in determining Consolidated Net Income and actually paid), up to $65,496,000 for the cash payments and related expenses by Subsidiaries of the Parent to subsidiaries of Hilton Hotels Corporation for the cancellation of executory contracts that was recorded by the Parent as an expense on January 1, 2001, as described in the Parent's annual report on Form 10-K for the fiscal year ended December 31, 2000, as filed with the Commission prior to the Issue Date.

        "Consolidated EBITDA" means, for any period, the Adjusted Consolidated Net Income for such period adjusted to add thereto (to the extent deducted from net revenues in determining Adjusted Consolidated Net Income), without duplication, the sum of

        (1)    Consolidated income tax expense,

        (2)    Consolidated depreciation and amortization expense,

        (3)    Consolidated Fixed Charges, and

        (4)    all other non-cash charges attributable to the grant, exercise or repurchase of options for or shares of Qualified Capital Stock to or from employees of the Company or the Parent or any of their respective Consolidated Subsidiaries, less the amount of all cash payments made by the Company or the Parent or any of their respective Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period; provided, that consolidated income tax expense and depreciation and amortization of a Subsidiary that is not a Wholly Owned Subsidiary shall only be added to the extent of the equity interest of the Parent or the Company in such Subsidiary; provided, further, that if any Subsidiary of either of the Company or the Parent is not a Wholly Owned Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to: (x) the amount of Adjusted Consolidated Net Income attributable to such Subsidiary, multiplied by (y) the percentage ownership interest in the income of such Subsidiary not owned on the last day of such period by the Company or the Parent or any of their respective Subsidiaries.

        "Consolidated Fixed Charges" of the Parent means, for any period, the aggregate amount (without duplication and determined in each case in accordance with GAAP) of:

        (a)    interest expensed or capitalized, paid, accrued, or scheduled to be paid or accrued (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) of the Parent and its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries, during such period, and, in any case, including (1) original issue discount and non-cash interest payments or accruals on any Indebtedness, (2) the interest portion of all deferred payment obligations, and (3) all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings and currency and Interest Swap and Hedging Obligations, in each case to the extent attributable to such period, and

        (b)    the amount of dividends accrued or payable (or guaranteed) by the Parent or any of its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries, in respect of Preferred Stock (other than by Subsidiaries of the Parent to the Parent or the Parent's Wholly Owned Subsidiaries, including the Company and its Subsidiaries), and

        (c)    for any period the aggregate Consolidated Fixed Charges of the Parent shall be adjusted to subtract therefrom (to the extent added thereto in such period and to the extent actually paid), up to the aggregate Transaction Costs.

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For purposes of this definition, (x) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined in good faith by the Parent to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP, and (y) interest expense attributable to any Indebtedness represented by the guaranty by the Parent or a Subsidiary of the Parent, including the Company and its Subsidiaries, of an obligation of another Person shall be deemed to be the interest expense attributable to the Indebtedness guaranteed.

        "Consolidated Subsidiary" means, for any Person, each Subsidiary of such Person (whether now existing or hereafter created or acquired) the financial statements of which are consolidated for financial statement reporting purposes with the financial statements of such Person in accordance with GAAP.

        "Continuing Director" means during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the Parent (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Parent was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, including new directors designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company or the Parent, if such agreement was approved by a vote of such majority of directors).

        "Credit Agreement" means the Fifth Amended and Restated Credit Agreement dated as of July 16, 2001 by and among the Company, certain financial institutions and Bank of America, N.A., as agent, as amended by the First Amendment thereto dated November 19, 2001, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement and/or related documents may be amended, restated, supplemented, renewed, replaced or otherwise modified from time to time whether or not with the same agent, trustee, representative lenders or holders, and, subject to the proviso to the next succeeding sentence, irrespective of any changes in the terms and conditions thereof. Without limiting the generality of the foregoing, the term "Credit Agreement" shall include agreements in respect of Interest Swap and Hedging Obligations with lenders (or Affiliates thereof) party to the Credit Agreement with respect to Indebtedness incurred under the Credit Agreement and shall also include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to any Credit Agreement and all refundings, refinancings and replacements of any Credit Agreement, including any credit agreement:

        (1)    extending the maturity of any Indebtedness incurred thereunder or contemplated thereby,

        (2)    adding or deleting borrowers or guarantors thereunder, so long as borrowers and issuers include one or more of the Company, the Parent and Guarantors and their respective successors and assigns,

        (3)    increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder; provided, that on the date such Indebtedness is incurred it would not be prohibited by the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or

        (4)    otherwise altering the terms and conditions thereof in a manner not prohibited by the terms of the Indenture.

        "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

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        "Disqualified Capital Stock" means with respect to any Person, (a) Equity Interests of such Person that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time or both would be, required to be redeemed or repurchased (except for (i) customary change of control and asset sale provisions, (ii) the Units, and (iii) if in effect on the Issue Date, provisions relating to the loss of such Person's status as a REIT; provided, that such Person shall be deemed to have incurred an amount of Indebtedness equal to the amount of Disqualified Capital Stock equal to the greater of the voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends at the time such Person's status as a REIT is lost) including at the option of the holder thereof, by such Person, the Parent, the Company, or any of their respective Subsidiaries, in whole or in part, on or prior to 91 days following the Stated Maturity of the Notes and (b) any Equity Interests of any Subsidiary of such Person other than any common equity with no preferences, privileges, and no redemption or repayment provisions.

        "Equity Interests" means Capital Stock or partnership, participation or membership interests and all warrants, options or other rights to acquire Capital Stock or partnership, participation or membership interests (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock or partnership, participation or membership interests).

        "Event of Loss" means, with respect to any property or asset, any (1) loss, destruction or damage of such property or asset or (2) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exempted Affiliate Transaction" means (a) customary employee or director compensation and indemnification arrangements approved by a majority of independent (as to such transactions) members of the Board of Directors of the Parent or (b) any Restricted Payment permitted under the terms of the covenant discussed above under "Limitation on Restricted Payments" above and payable, in form and amount, on a pro rata basis to all holders of either (i) operating partnership units of the Company, or (ii) common stock of the Parent, and (c) transactions solely between or among the Company and the Parent or solely between and among the Company or the Parent and any of their Consolidated Subsidiaries or solely among Consolidated Subsidiaries of the Company or the Parent or solely among any combination of the foregoing.

        "Existing Indebtedness" means the Indebtedness of the Company, the Parent and their respective Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the Issue Date, reduced to the extent such amounts are repaid, refinanced or retired.

        "Funds From Operations" for any period means the consolidated net income of the Parent and its Subsidiaries for such period determined in conformity with GAAP excluding gains or losses from debt restructurings which would be extraordinary items in accordance with GAAP and sales of depreciable operating property, plus depreciation of real property (including furniture, fixtures and equipment) and after adjustments for unconsolidated partnerships and joint ventures plus the minority interest in the Company, if applicable, and to the extent actually paid or accrued in such period, plus Transaction Costs.

        "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession in the United States as in effect from time to time.

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        "Guarantee" means a guarantee by each Guarantor for payment of the Notes by such Guarantor. The Guarantee will be an unsecured senior obligation of each Guarantor and will be unconditional regardless of the enforceability of the Notes and the Indenture.

        "Guarantor" means RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. and each Subsidiary of either of the Company or the Parent that executes a Guarantee in accordance with the provisions of the Indenture.

        "Indebtedness" of any Person means, without duplication,

        (a)    all liabilities and obligations, contingent or otherwise, of any such Person, to the extent such liabilities and obligations would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP, (1) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (2) evidenced by bonds, notes, debentures or similar instruments, or (3) representing the balance deferred and unpaid of the purchase price of any property or services, except (other than accounts payable or other obligations to trade creditors which have remained unpaid for greater than 60 days past their original due date) those incurred in the ordinary course of its business that would ordinarily constitute a trade payable to trade creditors;

        (b)    all liabilities and obligations, contingent or otherwise, of such Person (1) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (2) relating to any Capitalized Lease Obligation, or (3) evidenced by a letter of credit or a reimbursement obligation of such Person with respect to any letter of credit;

        (c)    all net obligations of such Person under Interest Swap and Hedging Obligations;

        (d)    all liabilities and obligations of others of the kind described in the preceding clause (a), (b) or (c) that such Person has guaranteed or provided credit support for or that are otherwise its legal liability or which are secured by any assets or property of such Person;

        (e)    any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not between or among the same parties; and

        (f)    all Disqualified Capital Stock of such Person (measured at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends).

provided, that any indebtedness which has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Government Securities (in an amount sufficient to satisfy all such indebtedness obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, and subject to no other Liens, and the other applicable terms of the instrument governing such indebtedness, shall not constitute "Indebtedness."

        For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair Market Value to be determined in good faith by the board of directors of the issuer (or managing general partner of the issuer) of such Disqualified Capital Stock.

        The amount of any Indebtedness outstanding as of any date shall be (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, but the accretion of original

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issue discount in accordance with the original terms of Indebtedness issued with an original issue discount will not be deemed to be an incurrence and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

        "Interest Swap and Hedging Obligation" means any obligation of any Person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates or currency values, including, without limitation, any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount.

        "Investment" by any Person in any other Person means (without duplication):

        (a)    the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of Equity Interests, capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other Person or any agreement to make any such acquisition;

        (b)    the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable, endorsements for collection or deposits arising in the ordinary course of business);

        (c)    other than guarantees of Indebtedness of the Company or any Guarantor to the extent permitted by the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," the entering into by such Person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other Person;

        (d)    the making of any capital contribution by such Person to such other Person; and

        (e)    the designation by the Board of Directors of the Company of any Person to be an Unrestricted Subsidiary.

The Company and the Parent shall be deemed to make an Investment in an amount equal to the fair market value of the net assets of any subsidiary (or, if neither the Company, the Parent nor any of their respective Subsidiaries has theretofore made an Investment in such subsidiary, in an amount equal to the Investments being made), at the time that such subsidiary is designated an Unrestricted Subsidiary, and any property transferred to an Unrestricted Subsidiary from the Company or the Parent or any of their respective Subsidiaries shall be deemed an Investment valued at its fair market value at the time of such transfer. The Company, the Parent or any of their respective Subsidiaries shall be deemed to have made an Investment in a Person that is or was a Wholly Owned Subsidiary and a Guarantor if, upon the issuance, sale or other disposition of any portion of Company's, the Parent's or the Subsidiary's ownership in the Capital Stock of such Person, such Person ceases to be a Wholly Owned Subsidiary. The fair market value of each Investment shall be measured at the time made or returned, as applicable.

        "Issue Date" means the date of first issuance of the outstanding notes under the Indenture.

        "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired.

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        "Make-Whole Premium" means, with respect to a Note, the sum of the present values of the remaining scheduled payments of interest, principal and premium thereon (not including any portion of such payments of interest accrued as of the date of redemption) as if the Notes were redeemed on March 1, 2007 pursuant to "—Optional Redemption" on such date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points.

        "Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents received by the Company or the Parent in the case of a sale of Qualified Capital Stock and by the Company or the Parent and their Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Company or the Parent that were issued for cash on or after the Issue Date, the amount of cash originally received by the Company or the Parent upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the sum of all payments, fees, commissions and expenses (including, without limitation, the fees and expenses of legal counsel and investment banking fees and expenses) incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only, less the amount (estimated reasonably and in good faith by the Company) of income, franchise, sales and other applicable taxes required to be paid by the Company or the Parent or any of their Subsidiaries in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carryforwards, and similar tax attributes.

        "Non-Recourse Indebtedness" means Indebtedness (a) as to which neither the Company, the Parent nor any of their respective Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than in the form of a Lien on an asset serving as security for Non-Recourse Indebtedness of the Company, the Parent or any of their respective Subsidiaries, (2) is directly or indirectly liable (as a guarantor or otherwise) other than in the form of a Lien on an asset serving as security for Non-Recourse Indebtedness of the Company, the Parent or any of their respective Subsidiaries, or (3) constitutes the lender, and (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Parent, the Company or any of the Guarantors to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.

        "Obligation" means any principal, premium or interest payment, or monetary penalty, or damages, due by the Company or any Guarantor under the terms of the Notes or the Indenture, including any liquidated damages due pursuant to the terms of the Registration Rights Agreement.

"Offering" means the offering of the Notes by the Company and Finance.

        "Officers' Certificate" means the officers' certificate to be delivered upon the occurrence of certain events as set forth in the Indenture.

        "Parent" means RFS Hotel Investors, Inc. or its successor.

        "Permitted Indebtedness" means that:

        (a)    the Company and the Guarantors may incur Indebtedness evidenced by the Notes and the Guarantees issued pursuant to the Indenture up to the amounts being issued on the original Issue Date less any amounts repaid or retired;

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        (b)    the Company, the Parent and their respective Subsidiaries as applicable, may incur Refinancing Indebtedness with respect to any Existing Indebtedness or any Indebtedness (including Disqualified Capital Stock), described in clause (a) or incurred pursuant to the Debt Incurrence Ratio test and clause (1) or (2) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or which was refinanced pursuant to this clause (b);

        (c)    the Company, the Parent and their respective Subsidiaries may incur Indebtedness solely in respect of bankers acceptances, letters of credit and performance bonds (to the extent that such incurrence does not result in the incurrence of any obligation to repay any obligation relating to borrowed money or other Indebtedness), all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Company's industry; provided, that the aggregate principal amount outstanding of such Indebtedness (including any Refinancing Indebtedness and any other Indebtedness issued to retire, refinance, refund, defease or replace such Indebtedness) shall at no time exceed $2,000,000;

        (d)    the Company may incur Indebtedness owed to (borrowed from) any Guarantor, and any Guarantor may incur Indebtedness owed to (borrowed from) any other Guarantor or the Company; provided, that in the case of Indebtedness of the Company, such obligations shall be unsecured and contractually subordinated in all respects to the Company's obligations pursuant to the Notes and in the case of Indebtedness of a Guarantor such Indebtedness shall be unsecured and contractually subordinated in all respects to such Guarantor's obligations pursuant to such Guarantor's Guarantee and any event that causes such Guarantor no longer to be a Guarantor (including by designation to be an Unrestricted Subsidiary) shall be deemed to be a new incurrence by such issuer of such Indebtedness and any guarantor thereof subject to the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Stock;"

        (e)    the Company, the Parent and their respective Subsidiaries may incur Interest Swap and Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by the Indenture to be outstanding or any receivable or liability the payment of which is determined by reference to a foreign currency; provided, that the notional amount of any such Interest Swap and Hedging Obligation does not exceed the principal amount of Indebtedness to which such Interest Swap and Hedging Obligation relates.

        "Permitted Investment" means:

        (a)    any Investment in any of the Notes;

        (b)    any Investment in Cash Equivalents;

        (c)    intercompany notes to the extent permitted under clause (d) of the definition of "Permitted Indebtedness";

        (d)    Investments in a Person in a Related Business if as a result of such Investment such Person immediately becomes a Subsidiary of the Company or the Parent or such Person is immediately merged with or into the Company or the Parent or one of their respective Subsidiaries;

        (e)    any Investment in any Person in exchange for the Company's or the Parent's Qualified Capital Stock or made with the Net Cash Proceeds of any substantially concurrent sale of the Company's or the Parent's Qualified Capital Stock; and

        (f)    any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "—Limitations on Sale of Assets and Subsidiary Stock."

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"Person" or "person" means any corporation, individual, limited liability company, joint stock company, joint venture, partnership, unincorporated association, governmental regulatory entity, country, state or political subdivision thereof, trust, municipality or other entity.

        "Preferred Stock" means any Equity Interest of any class or classes of a Person (however designated) which is preferred as to payments of dividends, or as to distributions upon any liquidation or dissolution, over Equity Interests of any other class of such Person.

        "Pro Forma" or "pro forma" shall have the meaning set forth in Regulation S-X of the Securities Act of 1933, as amended, unless and to the extent otherwise specifically stated herein.

        "Qualified Capital Stock" means any Capital Stock of the Company or the Parent that is not Disqualified Capital Stock.

"Qualified Exchange" means:

        (1)    any legal defeasance, redemption, retirement, repurchase or other acquisition of Capital Stock, or Indebtedness of the Company or the Parent issued on or after the Issue Date with the Net Cash Proceeds received by the Company or the Parent from the substantially concurrent sale of its Qualified Capital Stock (other than to a Subsidiary); and

        (2)    any issuance of Qualified Capital Stock of the Company or the Parent in exchange for any Capital Stock or Indebtedness of the Company or the Parent issued on or after the Issue Date.

        "Reference Period" with regard to any Person means the four full fiscal quarters (or such lesser period during which such Person has been in existence) ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Notes or the Indenture.

        "Reference Treasury Dealer Quotations" means, with respect of each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by the each Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

        "Refinancing Indebtedness" means Indebtedness, including Disqualified Capital Stock, (a) issued in exchange for, or the proceeds from the issuance and sale of which are used substantially concurrently to repay, redeem, defease, refund, refinance, discharge or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to, or a deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any Indebtedness (including Disqualified Capital Stock) in a principal amount or, in the case of Disqualified Capital Stock, liquidation preference, not to exceed (after deduction of reasonable and customary fees and expenses incurred in connection with the Refinancing) the lesser of (1) the principal amount or, in the case of Disqualified Capital Stock, liquidation preference, of the Indebtedness (including Disqualified Capital Stock) so Refinanced and (2) if such Indebtedness being Refinanced was issued with an original issue discount, the accreted value thereof (as determined in accordance with GAAP) at the time of such Refinancing (plus, in each case, the amount of any premium paid in connection with such Refinancing in accordance with the terms of the documents governing the Indebtedness refinanced without giving effect to any modification thereof made in connection with or in contemplation of such refinancing); provided, that (A) such Refinancing Indebtedness shall only be used to refinance outstanding Indebtedness (including Disqualified Capital Stock) of such Person issuing such Refinancing Indebtedness, (B) such Refinancing Indebtedness shall (x) not have an Average Life shorter than the Indebtedness (including Disqualified Capital Stock) to be so refinanced at the time of such Refinancing and (y) in all respects, be no less contractually subordinated or junior, if applicable, to the rights of Holders of the Notes than was the Indebtedness (including Disqualified Capital Stock) to be refinanced, (C) such Refinancing Indebtedness shall have a final stated maturity or redemption date, as applicable, no earlier than the final stated maturity or

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redemption date, as applicable, of the Indebtedness (including Disqualified Capital Stock) to be so refinanced or, if sooner, 91 days after the Stated Maturity of the Notes, and (D) such Refinancing Indebtedness shall be secured (if secured) in a manner no more adverse to the Holders of the Notes than the terms of the Liens (if any) securing such refinanced Indebtedness, including, without limitation, the amount of Indebtedness secured shall not be increased.

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time.

        "Related Business" means the business conducted (or proposed to be conducted) by the Company, the Parent and their Subsidiaries as of the Issue Date and any and all businesses that in the good faith judgment of the Board of Directors of the Parent are materially related to such businesses.

        "Restricted Investment" means, in one or a series of related transactions, any Investment, other than other Permitted Investments.

        "Restricted Payment" means, with respect to any Person:

        (a)    the declaration or payment of any dividend or other distribution in respect of Equity Interests of such Person;

        (b)    any payment (except to the extent made with Qualified Capital Stock) on account of the purchase, redemption or other acquisition or retirement for value of Equity Interests of such Person;

        (c)    other than with the proceeds from the substantially concurrent sale of or in exchange for Refinancing Indebtedness any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms of or any defeasance of, any Subordinated Indebtedness, directly or indirectly, by such Person or a parent or Subsidiary of such Person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness; and

        (d)    any Restricted Investment by such Person;

provided, that the term "Restricted Payment" does not include (1) any dividend, distribution or other payment on or with respect to Equity Interests of the Company or the Parent to the extent payable solely in shares of Qualified Capital Stock of such issuer or (2) any dividend, distribution or other payment to the Company or the Parent, or to any of the Guarantors, by the Company or the Parent or any of their Subsidiaries and any Investment in any Subsidiary of the Company or the Parent by the Company or the Parent.

        "Secured Indebtedness" means any Indebtedness or Disqualified Capital Stock secured by a Lien upon property of either of the Company or the Parent or any of their respective Subsidiaries.

        "Stated Maturity" when used with respect to any Note, means March 1, 2012.

        "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment by its terms or the terms of any document or instrument or instrument relating thereto ("contractually") to the Notes or such Guarantee, as applicable.

        "Subsidiary" with respect to any Person, means (1) a corporation a majority of whose Equity Interests with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person, and (2) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person, or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof has majority ownership interest,

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or (3) a partnership in which such Person or a Subsidiary of such Person is, at the time, a general partner and in which such Person, directly or indirectly, at the date of determination thereof has a majority ownership interest. Notwithstanding the foregoing, (i) except as expressly set forth in the Indenture, the Company shall not be considered a Subsidiary of the Parent for any purpose under the Indenture (including the definitions used therein), but each direct and indirect Subsidiary of the Company will be considered a Subsidiary of the Parent, and (ii) an Unrestricted Subsidiary shall not be a Subsidiary of the Company or the Parent or of any of their Subsidiaries for any purpose under the Indenture (including the definitions used therein). Unless the context requires otherwise, Subsidiary means each direct and indirect Subsidiary of the Company and the Parent.

        "Subsidiary Indebtedness" means, without duplication, all Unsecured Indebtedness (including guarantees other than guarantees by Subsidiaries of Secured Indebtedness) of which a Subsidiary of the Company or the Parent other than a Guarantor is the obligor. A release of the Guarantee of a Guarantor which remains a Subsidiary of either of the Company or the Parent shall be deemed to be an incurrence of Subsidiary Indebtedness in an amount equal to the proportionate interest of the Company or the Parent in the Unsecured Indebtedness of such Guarantor.

        "Total Assets" means, at the date of determination, the sum of:

        (1)    Undepreciated Real Estate Assets, and

        (2)    all other assets of the Parent, the Company and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP (but excluding intangibles and accounts receivable).

        "Transaction Costs" means (i) the payment of a yield maintenance premium of up to $6.5 million in connection with the redemption or repurchase of the RFS Financing Partnership, L.P. Commercial Mortgage Bonds, Series 1996-1; (ii) up to $3.2 million of termination fees in connection with the termination of Interest Swap and Hedging Obligations in connection with the termination of interest swap agreements in connection with the issuance of the Notes, each as described in this prospectus.

        "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, assuming a price for the comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

        "Undepreciated Real Estate Assets" means, as of any date, the cost (being the original cost to the Company, the Parent or the applicable Subsidiary plus capital improvements) of real estate assets of the Parent and its Subsidiaries on such date, before depreciation and amortization of such real estate assets, determined on a consolidated basis in conformity with GAAP.

        "Units" means limited partnership units of the Company that by their terms are redeemable at the option of the holder thereof and that, if so redeemed, at the election of the Company are redeemable for cash or common stock of the Parent.

        "Unsecured Indebtedness" means any Indebtedness or Disqualified Capital Stock of the Company or the Parent or any of their Subsidiaries that is not Secured Indebtedness.

        "Unrestricted Subsidiary" means any subsidiary of either of the Company or the Parent that does not own any Capital Stock of, or own or hold any Lien on any property of, the Company or the Parent or any other Subsidiary of the Company or the Parent and that, at the time of determination, shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company); provided, that such Subsidiary at the time of such designation (a) is not party to any agreement, contract, arrangement or understanding with the Company, the Parent or any Subsidiary of the Company or the Parent unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company, the Parent or such Subsidiary than those that might be obtained at the time

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from Persons who are not Affiliates of the Company or the Parent; (b) is a Person with respect to which neither of the Company, the Parent nor any of their Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (c) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of either of the Company, the Parent or any of their Subsidiaries.

        The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Subsidiary, provided, that (1) no Default or Event of Default is existing or will occur as a consequence thereof and (2) immediately after giving effect to such designation, on a pro forma basis, the Company could incur at least $1.00 of Indebtedness pursuant to clauses (1) and (2) of the first paragraph of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Each such designation shall be evidenced by filing with the Trustee a certified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions.

        "U.S. Government Obligations" means direct non-callable obligations of, or noncallable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged.

"Voting Equity Interests" means Equity Interests which at the time are entitled to vote in the election of, as applicable, directors, members or partners generally.

        "Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of which (other than directors' qualifying Shares) are owned by either or both of the Company or the Parent or one or more Wholly Owned Subsidiaries of either or both of the Company and the Parent or a combination thereof.

Book-Entry; Delivery; Form and Transfer

        The certificates representing the exchange notes will be issued in fully registered form without interest coupons. The exchange notes will be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (each a "Global Note") and will be deposited with the Trustee as custodian for, and registered in the name of a nominee of, DTC.

        The Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee in certain limited circumstances. Beneficial interests in the Global Notes may be exchanged for Notes in certificated form in certain limited circumstances. See "—Transfer of Interests in Global Notes for Certificated Notes." Initially, the Trustee will act as Paying Agent and Registrar. The Global Notes may be presented for registration of transfer and exchange at the offices of the Registrar.

Depositary Procedures

        DTC has advised us that it is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Direct Participants") and to facilitate the clearance and settlement of transactions in those securities between Direct Participants through electronic book-entry changes in accounts of Participants. The Direct Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities that clear through or maintain a direct or indirect, custodial relationship with a Direct Participant (collectively, the "Indirect Participants"), including the Euroclear System ("Euroclear") and Clearstream, Luxembourg (formerly Cedelbank). DTC may hold securities beneficially owned by other persons only through the Direct Participants or Indirect Participants and such other person's ownership interest and transfer of

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ownership interest will be recorded only on the records of the Direct Participant and/or Indirect Participant and not on the records maintained by DTC.

        DTC has advised us that, pursuant to DTC's procedures, (i) upon deposit of the Global Notes, DTC will credit the accounts of the Direct Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes that have been allocated to them by the Initial Purchasers, and (ii) DTC will maintain records of the ownership interests of such Direct Participants in the Global Notes and the transfer of ownership interests by and between Direct Participants. DTC will not maintain records of the ownership interests of, or the transfer of ownership interests by and between, Indirect Participants or other owners of beneficial interests in the Global Notes. Direct Participants and Indirect Participants must maintain their own records of the ownership interests of, and the transfer of ownership interests by and between, Indirect Participants and other owners of beneficial interests in the Global Notes.

        The laws of some states in the United States require that certain persons take physical delivery in definitive, certificated form, of securities that they own. This may limit or curtail the ability to transfer beneficial interests in a Global Note to such persons. Because DTC can act only on behalf of Direct Participants, which in turn act on behalf of Indirect Participants and others, the ability of a person having a beneficial interest in a Global Note to pledge such interest to persons or entities that are not Direct Participants in DTC, or to otherwise take actions in respect of such interests, may be affected by the lack of physical certificates evidencing such interests. For certain other restrictions on the transferability of the Notes see "—Transfers of Interests in Global Notes for Certificated Notes."

        Except as described in "—Transfers of Interests in Global Notes for Certificated Notes," owners of beneficial interests in the Global Notes will not have Notes registered in their names, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose.

        Under the terms of the Indenture, we, the Guarantors and the Trustee will treat the persons in whose names the Notes are registered (including Notes represented by Global Notes) as the owners thereof for the purpose of receiving payments and for any and all other purposes whatsoever. Payments in respect of the principal, premium and interest on Global Notes registered in the name of DTC or its nominee will be payable by the Trustee to DTC or its nominee as the registered holder under the Indenture. Consequently, neither we, the Guarantors, the Trustee nor any agent of ours, the Guarantors or the Trustee has or will have any responsibility or liability for (i) any aspect of DTC's records or any Direct Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Direct Participant's or Indirect Participant's records relating to the beneficial ownership interests in any Global Note or (ii) any other matter relating to the actions and practices of DTC or any of its Direct Participants or Indirect Participants.

        DTC has advised us that its current payment practice (for payments of principal, interest and the like) with respect to securities such as the Notes is to credit the accounts of the relevant Direct Participants with such payment on the payment date in amounts proportionate to such Direct Participant's respective ownership interests in the Global Notes as shown on DTC's records. Payments by Direct Participants and Indirect Participants to the beneficial owners of the Notes will be governed by standing instructions and customary practices between them and will not be the responsibility of DTC, the Trustee, us or the Guarantors. None of we, the Guarantors or the Trustee will be liable for any delay by DTC or its Direct Participants or Indirect Participants in identifying the beneficial owners of the Notes, and we, the Guarantors and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the Notes for all purposes.

        The Global Notes will trade in DTC's Same-Day Funds Settlement System and, therefore, transfers between Direct Participants in DTC will be effected in accordance with DTC's procedures, and will be

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settled in immediately available funds. Transfers between Indirect Participants (other than Indirect Participants who hold an interest in the Notes through Euroclear or Clearstream, Luxembourg) who hold an interest through a Direct Participant will be effected in accordance with the procedures of such Direct Participant but generally will settle in immediately available funds. Transfers between and among Indirect Participants who hold interests in the Notes through Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures.

        DTC has advised us that it will take any action permitted to be taken by a holder of Global Notes only at the direction of one or more Direct Participants to whose account interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such Direct Participant or Direct Participants has or have given direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange Global Notes (without the direction of one or more of its Direct Participants) for legended Notes in certificated form, and to distribute such certificated forms of Notes to its Direct Participants. See "—Transfers of Interests in Global Notes for Certificated Notes."

        The information in this section concerning DTC, Euroclear and Clearstream, Luxembourg and their book-entry systems has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof and you should make yourself generally aware of the rules and procedures discussed herein.

Transfers of Interests in Global Notes for Certificated Notes

        An entire Global Note may be exchanged for definitive Notes in registered, certificated form without interest coupons ("Certificated Notes") if (i) DTC (x) notifies us that it is unwilling or unable to continue as depositary for the Global Notes and we thereupon fail to appoint a successor depositary within 90 days or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) we, at our option, notify the Trustee in writing that we elect to cause the issuance of Certificated Notes or (iii) upon the request of the Trustee or Holders of a majority of the outstanding principal amount of Notes, after there shall have occurred and be continuing a Default or an Event of Default with respect to the Notes. In any such case, we will notify the Trustee in writing that, upon surrender by the Direct and Indirect Participants of their interest in such Global Note, Certificated Notes will be issued to each person that such Direct and Indirect Participants and DTC identify as being the beneficial owner of the related Notes.

        Beneficial interests in Global Notes held by any Direct or Indirect Participant may be exchanged for Certificated Notes upon request to DTC, by such Direct Participant (for itself or on behalf of an Indirect Participant), to the Trustee in accordance with customary DTC procedures. Certificated Notes delivered in exchange for any beneficial interest in any Global Note will be registered in the names, and issued in any approved denominations, requested by DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's customary procedures).

        None of we, the Guarantors or the Trustee will be liable for any delay by the holder of any Global Note or DTC in identifying the beneficial owners of Notes, and we and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the holder of the Global Note or DTC for all purposes.

Same Day Settlement and Payment

        The Indenture requires that payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, and interest be made by wire transfer of immediately available same day funds to the accounts specified by the holder of interests in such Global Note. With respect to Certificated Notes, we will make all payments of principal, premium, if any, and interest by wire transfer of immediately available same day funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. We expect that secondary trading in the Certificated Notes will also be settled in immediately available funds.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

        The following summary describes material United States federal income tax consequences relating to the purchase, ownership, and disposition of the notes as of the date hereof. Except where noted, this summary deals only with notes held as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, tax-exempt organizations, partnerships or other pass-through entities, individual retirement accounts and other tax deferred accounts, financial institutions, life insurance companies, persons holding notes as a part of a hedging or conversion transaction or a straddle, persons subject to the alternative minimum tax, or holders of notes whose "functional currency" is not the U.S. dollar. This disclosure is addressed only to persons who acquire the notes at original issue at the initial issue price and does not address the tax consequences to subsequent purchasers of the notes. Furthermore, the discussion below is based upon the current federal income tax laws and interpretations thereof as of the date hereof. Such authorities may be repealed, revoked, or modified so as to result in federal income tax consequences different from those discussed below. In addition, except as otherwise indicated, the following summary does not consider the effect of any applicable foreign, state, local, or other tax laws or estate or gift tax considerations.

        Persons considering the purchase, ownership, or disposition of notes should consult their tax advisors concerning the federal income tax consequences of such purchase, ownership, or disposition in light of their particular situations, as well as any consequences arising under the laws of any other taxing jurisdiction.

Exchange Offer

        Because the exchange notes will be identical to the outstanding notes in all relevant economic respects, the exchange of the outstanding notes for the exchange notes will not be treated as an exchange for United States federal income tax purposes. Consequently, there will be no United States federal income tax consequences to the exchange, and holders of the exchange notes will continue to account for the notes for federal income tax purposes as if the exchange had not taken place.

U.S. Holders

        As used herein, a "U.S. holder" of a note means a holder that for U.S. federal income tax purposes is:

•

a citizen or resident of the United States;



•

a corporation created or organized in or under the laws of the United States or any political subdivision thereof;



•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or



•

a trust if (a) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has a valid election in place to be treated as a U.S. person.

        A "non-U.S. holder" of a note is a holder that for U.S. federal income tax purposes is a non-resident alien or a corporation, trust, or estate that is not a U.S. holder.

Stated Interest on Notes

        Except as set forth below, interest on a note generally will be taxable to a U.S. holder as ordinary income from domestic sources at the time it is paid or accrued in accordance with the U.S. holder's method of accounting for tax purposes. In general, interest paid to U.S. holders who report the income on the cash receipts and disbursements method of accounting will be taxable to them when received.

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Interest earned by U.S. holders who report their income on the accrual method of accounting will be taxable when accrued, regardless of when it is actually received. A principal payment on a note will be treated as a tax-free return of capital to the extent that the U.S. holder's tax basis in the note is allocable to that payment. The notes are not expected to be issued with original issue discount, as defined in the Internal Revenue Code of 1986, as amended.

Market Discount

        If a U.S. holder purchases a note for an amount that is less than its principal amount as of the purchase date, the amount of the difference will be treated as "market discount" for U.S. federal income tax purposes, unless such difference is less than a specified de minimis amount. Under the market discount rules, a U.S. holder will be required to treat any principal payment in respect of, or any gain realized on the sale, exchange, retirement, or other disposition of, a note as ordinary income to the extent of the lesser of (1) the amount of such payment or realized gain or (2) the accrued, but not previously taxed, market discount at the time of such payment or disposition. In addition, the U.S. holder may be required to defer, until the maturity of the note or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or maintained to purchase or carry such note. The amount of deferred interest expense for a taxable year is limited to the amount of market discount that accrues, but is not recognized currently. Any such deferred interest expense generally is allowed as a deduction not later than the year in which the related market discount income is recognized, the note matures, or the U.S. holder sells the note.

        Any market discount generally will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the note, unless the U.S. holder irrevocably elects to accrue such market discount on the basis of a constant interest rate. In addition, a U.S. holder may elect to include market discount in income currently as it accrues. If a U.S. holder makes a current inclusion election, the rule described above regarding deferral of interest deductions will not apply. Once made, the current inclusion election applies to all market discount obligations acquired by the holder on or after the first day of the first taxable year to which the election applies and may be revoked only with the consent of the Internal Revenue Service ("IRS").

        Treasury regulations implementing the market discount rules have not yet been issued, and uncertainty exists with respect to many aspects of those rules. Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for the notes. Prospective investors should consult their tax advisors regarding the application of the market discount rules to the notes.

Amortizable Bond Premium

        A U.S. holder that purchases a note for an amount in excess of its principal amount will be considered to have purchased the note at a "premium." A U.S. holder generally may elect to amortize the premium over the remaining term of the note using a constant yield method that reflects semiannual compounding. The amount amortized in any year will be treated as a reduction of the U.S. holder's interest income from the note. Bond premium on a note held by a U.S. holder that does not make such an election to amortize the premium will decrease the gain or increase the loss otherwise recognized on disposition of the note. The election to amortize premium on a constant yield method, once made, applies to all taxable debt obligations held or subsequently acquired by the electing U.S. holder on or after the first day of the first taxable year to which the election applies and may be revoked only with the consent of the IRS.

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Sale, Exchange, and Retirement of Notes

        Upon the sale, exchange, redemption, retirement, or other disposition of a note (other than an exchange of outstanding notes for exchange notes), a U.S. holder generally will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, redemption, retirement, or other disposition and such holder's adjusted tax basis in the note. A U.S. holder's adjusted tax basis in a note, in general, will be the U.S. holder's cost therefor, increased by any accrued market discount previously included in income by the U.S. holder with respect to the note and reduced by the amount of any payments, other than qualified stated interest payments, received and any amortized premium previously deducted from income by the U.S. holder with respect to the note. Except as described above with respect to market discount or except to the extent that the gain or loss is attributable to accrued but unpaid stated interest, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if, at the time of sale, exchange, redemption, retirement, or other disposition, the note has been held for more than one year. Under current law, long-term capital gains of noncorporate taxpayers are, under certain circumstances, taxed at lower rates than items of ordinary income and the deductibility of capital losses is subject to limitations.

        The exchange of a note by a U.S. holder for a registered exchange note in the exchange offer should not constitute a taxable exchange. A U.S. holder will have the same tax basis and holding period in the exchange note as it did in the note.

Non-U.S. Holders

Stated Interest on Notes

        Under present U.S. federal income and estate tax law, and subject to the discussion below concerning backup withholding, no U.S. federal withholding tax will be imposed with respect to the payment by us or our paying agent of interest on a note owned by a non-U.S. holder (the "portfolio interest exception"), provided that (1) such non-U.S. holder does not actually or constructively own 10% or more of the capital or profits interest in the Partnership, (2) such non-U.S. holder is not a controlled foreign corporation (as defined in the federal income tax laws) that is related, directly or indirectly, to us, (3) such non-U.S. holder is not a bank whose receipt of interest on a note is pursuant to a loan agreement entered into in the ordinary course of its business, and (4) such non-U.S. holder provides us or our withholding agent with appropriate documentation of the non-U.S. holder's foreign status.

        To satisfy the requirement referred to in clause (4) of the preceding paragraph, the beneficial owner of such note, or a financial institution holding the note on behalf of such owner, must provide, in accordance with specified procedures, us or our paying agent with a statement to the effect that the beneficial owner is not a U.S. holder. That requirement will be met if:

•

the beneficial owner provides an IRS Form W-8BEN that contains, among other information, his name and address, and certifies, under penalties of perjury, that he is not a U.S. holder;



•

a financial institution holding the note on behalf of the beneficial owner provides an IRS Form W-8IMY, an acceptable substitute form, or such other form as the IRS may provide that is signed under penalties of perjury and contains the appropriate information; or



•

in the case of a foreign partnership and certain foreign trusts, such partnership or trust provides additional documentation (typically a Form W-8IMY to which are attached Forms W-8BEN from each partner or beneficiary) certifying that the individual partners, beneficiaries, or other owners of the partnership or trust are not U.S. holders and providing such persons' names and addresses.

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        If a non-U.S. holder cannot satisfy the requirements of the portfolio interest exception described above, interest payments on a note made to such non-U.S. holder will be subject to a 30% withholding tax unless the beneficial owner of the note provides us or our paying agent with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from withholding or eligibility for a reduced rate under the benefit of a tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with the beneficial owner's conduct of a trade or business in the United States.

        If a non-U.S. holder is engaged in a trade or business in the U.S. and payments on a note are effectively connected with the conduct of such trade or business, the non-U.S. holder, although exempt from U.S. federal withholding tax as discussed above, will be subject to U.S. federal income tax on such payments at regular graduated rates in the same manner as if it were a U.S. holder. In addition, if such holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this purpose, payments on a note, to the extent included in taxable income, will also be included in such foreign corporation's earnings and profits.

Sale, Exchange, and Retirement of Notes

        In general, no U.S. federal withholding tax will be imposed with respect to any gain or income realized by a non-U.S. holder upon the sale, exchange, redemption, retirement, or other disposition of a note. However, any such gain or income will be subject to U.S. federal income tax if either (1) such gain or income is effectively connected with a U.S. trade or business of the non-U.S. holder, in which case the non-U.S. holder will be subject to U.S. federal income tax on such gain or income at regular graduated rates in the same manner as if it were a U.S. holder, or (2) the non-U.S. holder is an individual who is present in the U.S. for 183 days or more in the taxable year of such sale, exchange, retirement or other disposition, and certain other conditions are met, in which case the non-U.S. holder will incur a 30% tax on such gain or income.

Estate Tax

        A note beneficially owned by an individual who at the time of death is a non-U.S. holder will not be subject to U.S. federal estate tax as a result of such individual's death, provided that such individual does not actually or constructively own 10% or more of the capital or profit interests in the Partnership and provided that the interest payments with respect to such note, if received at the time of such individual's death, would not have been effectively connected with the conduct of a U.S. trade or business by such individual.

Information Reporting and Backup Withholding

        A noteholder may, under certain circumstances, be subject to "backup withholding" with respect to "reportable payments." Backup withholding generally applies if the holder of a note (1) fails to furnish us or our withholding agent its social security number or other taxpayer identification number ("TIN"), (2) furnishes us or our withholding agent an incorrect TIN, (3) fails to report properly interest, dividends, or other "reportable payments," or (4) under certain circumstances, fails to provide us, our withholding agent, or such noteholder's securities broker with a certified statement, signed under penalty of perjury, that the TIN is its correct taxpayer identification number and that the noteholder is not subject to backup withholding. Backup withholding will not apply with respect to payments made to certain noteholders, including corporations, certain tax-exempt recipients, and certain non-U.S. holders that comply with the requisite certification procedures. Noteholders should consult their tax advisors as to the application of backup withholding to payments received by them with respect to the notes.

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        We will report to the noteholders (other than certain exempt U.S. holders, including corporations, tax-exempt organizations, and qualified pension and profit-sharing plans) and to the IRS within a reasonable time after the end of each calendar year the amount of any "reportable payments" during such year and the amount of tax withheld, if any, with respect to payments on the notes.

        Due to the complexity of the U.S. federal income tax rules applicable to noteholders and the considerable uncertainty that exists with respect to many aspects of those rules, potential investors should consult their tax advisors regarding the tax treatment of the acquisition, ownership, and disposition of the notes.

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PLAN OF DISTRIBUTION

        Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. The issuers have agreed that, for a period of 180 days after the expiration date for this exchange offer, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                        , 2002, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

        The issuers will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal to be delivered by broker-dealers states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        For a period of 180 days after the expiration date of the exchange offer the issuers will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in a letter of transmittal. The issuers have agreed to pay all expenses related to the exchange offer as described in "The Exchange Offer—Fees and Expenses," other than commissions or concessions of any brokers or dealers and any transfer taxes and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

        Prior to the exchange offer, there has been no public market for the outstanding notes. We do not intend to apply for listing of the exchange notes on any securities exchange. There can be no assurance that an active market for the exchange notes will develop. To the extent that a market for the exchange notes develops, the market value of the exchange notes will depend on market conditions (including yields on alternative investments and general economic conditions), our financial condition and other conditions. Those conditions might cause the exchange notes, to the extent that they are actively traded, to trade at a significant discount from face value. We have not entered into any arrangement or understanding with any person to distribute the exchange notes to be received in the exchange offer.

        We have not agreed to compensate broker-dealers who effect the exchange of outstanding notes on behalf of holders.

LEGAL MATTERS

        Certain legal matters in connection with the exchange notes and the guarantees offered hereby will be passed upon for us by Hunton & Williams.

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EXPERTS

        The consolidated financial statements of RFS Hotel Investors, Inc. and RFS Partnership, L.P. as of December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999, all included or incorporated by reference in this prospectus, have been so included or incorporated in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

        This prospectus is part of a registration statement on Form S-4 that we have filed with the SEC. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the exchange notes, you should refer to the registration statement on file with the SEC. This prospectus summarizes material provisions of agreements and other documents. Since these summaries may not contain all of the information that you may find important, you should review the full text of these documents, which can be found as either exhibits to the registration statement or exhibits to other filings we have made. This prospectus incorporates important business and financial information about our company that is not included in or delivered with this document.

        RFS is, and as a result of this exchange offer the Partnership will be, subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and accordingly RFS files, and the Partnership will file, periodic reports, proxy statements (RFS only) and other information with the SEC. In addition, under the indenture governing the notes, we have agreed that during any period in which RFS and the Partnership are not subject to the reporting and informational requirements of the Exchange Act, so long as any notes remain outstanding, we will distribute to the holders of the notes, copies of the financial information that we would have been required to file with the SEC pursuant to the Exchange Act.

        This registration statement, as well as such reports, proxy statements and other information filed by us with the SEC, can be inspected and copied at prescribed rates at the Public Reference Section of the SEC's office at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call 1-800-732-0330 for further information on the operations of the public reference facilities. In addition, the SEC maintains a web site that contains reports, proxy statements and other information regarding registrants, such as RFS and the Partnership, that file electronically with the Commission. The address of this web site is http:/ /www.sec.gov.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

        The SEC allows us to "incorporate by reference" into this prospectus certain information from other documents that we file with them, which means that we can disclose important information by referring to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the termination of the exchange offer:

•

RFS's Annual Report on Form 10-K for the year ended December 31, 2001;



•

RFS's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders; and



•

RFS's Current Reports on Form 8-K dated February 26, 2002; February 19, 2002; February 15, 2002; February 8, 2002; and January 31, 2002.

        Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to be modified or superseded for

129

purposes of this prospectus to the extent that a statement contained in this prospectus or in any other document subsequently filed with the SEC which is or is deemed to be incorporated by reference in this prospectus 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 prospectus. You should rely only on the information incorporated by reference or provided in this prospectus. You should not assume that the information incorporated by reference or provided in this prospectus is accurate as of any date other than its date.

        We will provide without charge to you, upon your written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus. Requests for such copies should be directed to the Chief Financial Officer, at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120, telephone number (901) 767-7005.

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INDEX TO FINANCIAL STATEMENTS

RFS Hotel Investors, Inc.
Report of Independent Accountants	F-2
Consolidated Balance Sheets—December 31, 2001 and 2000	F-3
Consolidated Statements of Operations—For the Years Ended December 31, 2001, 2000 and 1999	F-4
Consolidated Statements of Comprehensive Income (Loss)—For the Years Ended December 31, 2001, 2000 and 1999	F-5
Consolidated Statements of Shareholders' Equity—For the Years Ended December 31, 2001, 2000 and 1999	F-6
Consolidated Statements of Cash Flows—For the Years Ended December 31, 2001, 2000 and 1999	F-7
Notes to Consolidated Financial Statements	F-9
Unaudited Pro Forma Consolidated Statement of Operations—For the Year Ended December 31, 2001	F-22
Notes to Unaudited Pro Forma Consolidated Statement of Operations	F-24
Unaudited Pro Forma Consolidated Balance Sheet—December 31, 2001	F-25
Notes to Unaudited Pro Forma Consolidated Balance Sheet	F-27
RFS Partnership, L.P.
Report of Independent Accountants	F-28
Consolidated Balance Sheets—December 31, 2001 and 2000	F-29
Consolidated Statements of Operations—For the Years Ended December 31, 2001, 2000 and 1999	F-30
Consolidated Statements of Comprehensive Income (Loss)—For the Years Ended December 31, 2001, 2000 and 1999	F-31
Consolidated Statements of Partners' Capital—For the Years Ended December 31, 2001, 2000 and 1999	F-32
Consolidated Statements of Cash Flows—For the Years Ended December 31, 2001, 2000 and 1999	F-33
Notes to Consolidated Financial Statements	F-34
Report of Independent Accountants	F-51
Schedule III—Real Estate and Accumulated Depreciation—December 31, 2001	F-52
Unaudited Pro Forma Consolidated Statement of Operations—For the Year Ended December 31, 2001	F-57
Notes to Unaudited Pro Forma Consolidated Statement of Operations	F-59
Unaudited Pro Forma Consolidated Balance Sheet—December 31, 2001	F-60
Notes to Unaudited Pro Forma Consolidated Balance Sheet	F-62

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of RFS Hotel Investors, Inc.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of RFS Hotel Investors, Inc. (the "Company") at December 31, 2001 and 2000, and the results of its operations and cash flows for the three years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 2 to the consolidated financial statements, effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities."

PricewaterhouseCoopers LLP

Dallas, Texas
February 7, 2002,
except for Note 10 as to which the
date is February 26, 2002

F-2

RFS HOTEL INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

			December 31, 2001			December 31, 2000
ASSETS
	Investment in hotel properties, net		$	615,562		$	635,997
	Cash and cash equivalents			5,735			3,681
	Restricted cash			6,817			4,929
	Accounts receivable			5,533			13,041
	Deferred expenses, net			6,964			6,814
	Other assets			3,517			9,005
	Deferred income taxes			24,734
		Total assets	$	668,862		$	673,467
LIABILITIES AND SHAREHOLDERS' EQUITY
	Accounts payable and accrued expenses		$	20,857		$	12,734
	Borrowings on Line of Credit			81,188			50,273
	Mortgage notes payable			219,947			227,158
	Minority interest in Operating Partnership, 2,458 and 2,562 units issued and outstanding at December 31, 2001 and 2000, respectively and other consolidated subsidiaries			31,059			34,848
		Total liabilities		353,051			325,013
	Series B Preferred Stock, $0.01 par value, 5,000 shares authorized, 250 shares issued and outstanding			25,000
	Commitments and contingencies
	Shareholders' equity:
		Series A Preferred Stock, $.01 par value, 5,000 shares authorized, 974 shares issued and outstanding at December 31, 2000					10
		Common Stock, $.01 par value, 100,000 shares authorized, 25,811 and 25,088 shares issued at December 31, 2001 and 2000, respectively		258			251
	Additional paid-in capital			368,361			374,910
	Other comprehensive income			(3,220	)
	Treasury stock, at cost, 576 shares			(8,100	)		(8,100	)
	Distributions in excess of earnings			(66,488	)		(18,617	)
		Total shareholders' equity		290,811			348,454
		Total liabilities and shareholders' equity	$	668,862		$	673,467

The accompanying notes are an integral part of these consolidated financial statements.

F-3

RFS HOTEL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands, except per share data)

			2001			2000			1999
Revenue:
	Rooms		$	188,725
	Food and beverage			17,695
	Other operating departments			9,103
	Lease revenue			5,782		$	106,574		$	98,962
	Other			573			785			700
		Total hotel revenue		221,878			107,359			99,662
Hotel operating expenses:
	Rooms			37,000
	Food and beverage			13,533
	Other operating departments			2,201
	Undistributed operating expenses:
	Property operating costs			22,550
	Property taxes, insurance and other			12,848			10,747			9,859
	Franchise costs			17,007
	Maintenance and repair			9,741
	Management fees			5,762
	Depreciation			29,605			27,198			24,210
	Lease termination			65,496
	Amortization of deferred expenses and unearned compensation			1,384			674			858
	General and administrative			19,436			6,304			3,687
		Total operating expenses		236,563			44,923			38,614
Operating income (loss)				(14,685	)		62,436			61,048
Interest expense				26,042			24,052			20,836
Income (loss) before minority interest, (gain) loss on sale
	of hotels, and income taxes			(40,727	)		38,384			40,212
	Minority interests			(1,157	)		3,218			3,620
	(Gain) loss on sale of hotel properties			(1,127	)		4,376			1,602
	Benefit from income taxes			(24,714	)
Net income (loss)				(13,729	)		30,790			34,990
Preferred stock dividends				(3,125	)		(1,412	)		(1,412	)
Gain on redemption of Series A preferred Stock				5,141
Net income (loss) applicable to common shareholders			$	(11,713	)	$	29,378		$	33,578
Earnings (loss) per share—basic and diluted			$	(0.47	)	$	1.20		$	1.34
Weighted average common shares outstanding—basic				25,045			24,559			25,002
Weighted average common shares outstanding—diluted				25,045			24,580			25,002

The accompanying notes are an integral part of these consolidated financial statements.

F-4

RFS HOTEL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands)

	2001			2000		1999
Net income (loss)	$	(13,729	)	$	30,790	$	34,990
Unrealized holding losses arising on interest rate swaps		(3,220	)		—		—
Comprehensive income (loss)	$	(16,949	)	$	30,790	$	34,990

The accompanying notes are an integral part of these consolidated financial statements.

F-5

RFS HOTEL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands, except per share data)

				Common Stock
	Preferred Stock			Number of Shares	Amount		Additional Paid-In Capital			Other Comprehensive Income			Treasury Stock			Distributions in Excess of Income			Total
Balances at December 31, 1998	$	10		25,021	$	251	$	373,156					$	(2,012	)	$	(4,468	)	$	366,937
Purchase of treasury shares								205						(1,644	)					(1,439	)
Issuance of restricted common shares to officers and directors				41
Distributions on common shares, ($1.54 per share)																	(38,519	)		(38,519	)
Distributions on preferred shares, ($1.45 per share)																	(1,412	)		(1,412	)
Amortization of unearned compensation								726												726
Net income																	34,990			34,990
Balances at December 31, 1999	$	10		25,062	$	251	$	374,087					$	(3,656	)	$	(9,409	)	$	361,283
Purchase of treasury shares														(4,444	)					(4,444	)
Issuance of common shares				13				162												162
Issuance of restricted common shares to officers and directors				13
Distributions on common shares, ($1.54 per share)																	(38,586	)		(38,586	)
Distributions on preferred shares, ($1.54 per share)																	(1,412	)		(1,412	)
Amortization of unearned compensation								661												661
Net income																	30,790			30,790
Balances at December 31, 2000	$	10		25,088	$	251	$	374,910					$	(8,100	)	$	(18,617	)	$	348,454
Purchase of preferred shares		(10	)					(12,990	)											(13,000	)
Issuance of common shares				453		4		5,112												5,116
Issuance of restricted common shares to officers and directors				270		3														3
Distributions on common shares, ($1.255 per share)																	(30,661	)		(30,661	)
Distributions on preferred shares, ($3.125 per Series B share)																	(3,481	)		(3,481	)
Unrealized holding losses arising on interest rate swaps										$	(3,220	)								(3,220	)
Amortization of unearned compensation								1,329												1,329
Net income (loss)																	(13,729	)		(13,729	)
Balances at December 31, 2001				25,811	$	258	$	368,361		$	(3,220	)	$	(8,100	)	$	(66,488	)	$	290,811

The accompanying notes are an integral part of these consolidated financial statements.

F-6

RFS HOTEL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands)

				2001			2000			1999
Cash flows from operating activities:
	Net income (loss)			$	(13,729	)	$	30,790		$	34,990
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			32,343			28,908			26,281
		Minority interest in Operating Partnership			(1,157	)		3,218			3,620
		(Gain) loss on sale of hotel properties			(1,127	)		4,376			79
		Changes in assets and liabilities:
			Accounts receivable		7,508			(2,240	)		(145	)
			Other assets		5,432			(3,473	)		2,277
			Deferred income taxes		(24,734	)
			Accounts payable and accrued expenses		5,930			3,644			(218	)
			Net cash provided by operating activities		10,466			65,223			66,884
Cash flows from investing activities:
	Investment in hotel properties and hotels under development				(18,013	)		(32,551	)		(34,066	)
	Cash paid for franchise fees				(65	)					(49	)
	Restricted cash				(1,888	)		(379	)		6,727
	Proceeds from sale of hotel properties				11,324			22,087			808
			Net cash used by investing activities		(8,642	)		(10,843	)		(26,580	)
Cash flows from financing activities:
	Purchase of treasury stock							(4,444	)		(1,439	)
	Proceeds from borrowings				66,688			81,200			16,500
	Payments on debt				(42,984	)		(86,047	)		(7,021	)
	Redemption of preferred stock				(13,000	)
	Distributions to common and preferred shareholders				(34,142	)		(39,972	)		(39,931	)
	Distributions to limited partners				(3,135	)		(3,988	)		(3,954	)
	Redemption of units										(22	)
	Issuance of common and preferred stock, net of $1,060 issuance costs				28,439			162
	Loan fees paid				(1,636	)		(3,523	)		(538	)
			Net cash provided (used) by financing activities		230			(56,612	)		(36,405	)
Net increase (decrease) in cash and cash equivalents					2,054			(2,232	)		3,899
Cash and cash equivalents at beginning of period					3,681			5,913			2,014
Cash and cash equivalents at end of period				$	5,735		$	3,681		$	5,913
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	24,403		$	22,970		$	20,172

F-7

        Supplemental disclosure of non-cash activities:

        In 2001, the Company:

            i.  Issued 103 thousand shares of common stock with a value of $1.6 million in exchange for 103 thousand Operating Partnership units and issued 7 thousand shares of common stock with a value of $0.1 million for an interest in a subsidiary partnership.

          ii.  Recorded a liability of $3.2 million for the fair value of the interest rate swaps at December 31, 2001.

          iii.  Sold a hotel that closed on February 20, 2001 in which a loss and related liability of $1.0 million was recorded in the financial statements in 2000 as a non-cash transaction at December 31, 2000.

        In 2000, the Company recorded a $0.1 million allocation to paid-in capital from minority interest.

The accompanying notes are an integral part of these consolidated financial statements.

F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF RFS HOTEL INVESTORS, INC.

Note 1. Organization

        RFS Hotel Investors, Inc. ("RFS" or the "Company") is a hotel real estate investment trust which, at December 31, 2001, owned interests in 58 hotels with 8,424 rooms located in 24 states (collectively the "Hotels") through its approximate 91% equity interest in RFS Partnership L.P. (the "Operating Partnership"). RFS, the Operating Partnership, and their subsidiaries are herein referred to, collectively, as the "Company".

        The following table provides a schedule of the hotels by brand at December 31, 2001:

Franchise Affiliation		Hotel Properties	Rooms/Suites
Full Service hotels:
	Sheraton	4	864
	Holiday Inn	5	954
	Independent	2	331
	Sheraton Four Points	2	412
	Hilton	1	234
	Doubletree	1	221
		15	3,016
Extended Stay hotels:
	Residence Inn by Marriott	14	1,851
	TownePlace Suites by Marriott	3	285
	Homewood Suites by Hilton	1	83
		18	2,219
Limited Service hotels:
	Hampton Inn	17	2,113
	Holiday Inn Express	5	637
	Comfort Inn	2	337
	Courtyard by Marriott	1	102
		25	3,189
Total		58	8,424

        The following summarizes the number of hotels owned for the periods presented:

	2001		2000		1999
Hotels owned at beginning of years	60		62		60
Acquisitions and developed hotels placed into service					2
Sales of hotels	(2	)	(2	)
Hotels owned at end of years	58		60		62

        Under the REIT Modernization Act (the "RMA") that became effective January 1, 2001, the Company is permitted to lease its hotels to wholly-owned taxable real estate investment trust ("REIT") subsidiaries of the Company ("TRS Lessees"), provided that the TRS Lessees engage a third-party management company to manage the hotels. Effective January 1, 2001, the Company terminated its operating leases, management contracts and related ancillary agreements with Hilton Hotels Corporation ("Hilton") for approximately $65.5 million. This transaction represents the cancellation of

F-9

certain executory contracts some of which extended through 2012. The cancellation of these agreements entitles the TRS Lessees to retain the operating profits or losses from the hotels, which previously accrued to Hilton under these contracts and, in the opinion of management, gives the Company (i) more control over the daily operations of the hotels, (ii) the benefits from any cost efficiencies or ancillary revenues generated at the hotels, and (iii) flexibility, in that the hotels are not encumbered by long term leases which are difficult to amend and expensive to terminate. As a result of this transaction, the Company began reporting hotel revenues and expenses rather than lease revenue. All of the hotels continue to operate under the same franchise affiliation as prior to the contract termination.

        Simultaneous with the termination of the leases, management contracts and related agreements, the TRS Lessees entered into new management contracts with Flagstone Hospitality Management ("Flagstone"). At December 31, 2001, Flagstone manages 51 of the Company's 58 hotels and the remaining seven hotels are managed by four other third-party management companies. Only five of the Company's hotels are operated under long-term leases with third parties as of December 31, 2001.

        In connection with the termination of the leases and related agreements, the Company redeemed 973,684 shares of its Series A Preferred Stock owned by Hilton for cash consideration of $13.0 million, which resulted in a gain on redemption of $5.1 million that was included in net income available to common shareholders in the first quarter 2001.

Note 2. Summary of Significant Accounting Policies

        Principles of Consolidation.    The consolidated financial statements include the accounts of RFS, the Operating Partnership and their consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

        Use of Estimates.    The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

        Fair Value of Financial Instruments.    The Company's financial instruments include rents receivable, accounts payable, other accrued expenses, mortgage loans payable and interest rate swap agreements. The fair values of these financial instruments other than the interest rate swap agreements and mortgage loans payable are not materially different from their carrying or contract values. The fair value of the interest rate swaps are estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Company would expect to pay to terminate the agreements. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net loss on these instruments was approximately $3.2 million and $0.8 million at December 31, 2001 and 2000. The carrying values of the Company's borrowings are estimated to be below fair value by approximately $11.5 million due to changes in comparable interest rates.

        Investment in Hotel Properties.    Hotel properties are recorded at cost and are depreciated using the straight-line method over estimated useful lives of 40 years for buildings and improvements and five to seven years for furniture and equipment. Repairs and maintenance costs are charged to expense as incurred. The Company periodically reviews the carrying value of each Hotel to determine if circumstances exist indicating impairment in the carrying value of the investment in the hotel or that

F-10

depreciation periods should be modified. If circumstances support the possibility of impairment, the Company will prepare a projection of the undiscounted future cash flows, without interest charges, of the specific hotel and determine if the investment in such hotel is recoverable based on the undiscounted cash flows. If impairment is indicated, an adjustment will be made to the carrying value of the hotel based on discounted future cash flows. The Company does not believe that there are any facts or circumstances indicating impairment of any of its investment in hotel properties.

        Cash and Cash Equivalents.    All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

        Restricted Cash.    Restricted cash includes amounts the Company must make available for the replacement and refurbishment of furniture and equipment and amounts held in escrow by certain lenders for the payment of taxes and insurance.

        Deferred Expenses.    Deferred expenses, consisting of initial fees paid to franchisors, loan fees and other costs incurred in issuing debt, are recorded at cost. Amortization of franchise fees is computed using the straight-line method over the lives of the franchise agreements, which range from 10 to 15 years. Amortization of loan fees and other costs incurred in issuing debt are computed using the interest method over the maturity period of the related debt. Accumulated amortization of deferred expenses is $6.6 million and $5.0 million at December 31, 2001 and 2000, respectively.

        Minority Interest in Operating Partnership and other Consolidated Subsidiaries.    Minority interest in the Operating Partnership and other Consolidated Subsidiaries represents the limited partners' proportionate share of the equity in the Operating Partnership and other Consolidated Subsidiaries. Income (loss) is allocated to minority interest based on the weighted average percentage ownership throughout the year.

        Treasury Stock.    The Board of Directors approved a stock repurchase program to buy back up to 3 million shares of common stock on the open market subject to certain market conditions and other factors. During 2000, the Company repurchased 409 thousand shares of common stock at an average price per share of $10.88 or $4.4 million, bringing the total number of shares repurchased under the program to 576 thousand.

        Revenue Recognition.    In accordance with Staff Accounting Bulletin (SAB) 101, lease revenue is recognized as income after certain specific annual hurdles have been achieved by the lessee in accordance with the provisions of the Percentage Lease agreements. The lessees are in compliance with their rental obligations under the Percentage Leases. For the years ended December 31, 2001 and 2000, five and fifty-six hotels were leased to third party lessees, respectively.

        Income Taxes.    The Company has elected to be treated as a REIT under Sections 856 to 860 of the Internal Revenue Code. Prior to January 1, 2001, the Company, as a REIT, was not subject to federal income taxes. Under the RMA that became effective January 1, 2001, the Company leases its hotels to wholly-owned taxable REIT subsidiaries that are subject to federal and state income taxes. The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS 109, the Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

F-11

        Basic and Diluted Earnings Per Share.    Basic earnings per share is computed by dividing net income (loss) applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) applicable to common shareholders by the weighted average number of common shares and equivalents outstanding during the period. Common share equivalents represent shares issuable upon exercise of options. For the year ended December 31, 2001, the common share equivalents would be antidilutive, and accordingly are not assumed to be outstanding for the computation of diluted earnings per share. For the years ended December 31, 2000, 1999, the Company's Series A Preferred Stock, if converted to common shares, would be antidilutive; accordingly, the Series A Preferred Stock is not assumed to be converted in the computation of diluted earnings per share. In addition, the Series B Preferred Stock is non-convertible and accordingly, is not included in the computation of diluted earning per share.

        Derivatives.    Effective January 1, 2001, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Upon adoption of SFAS 133 on January 1, 2001, the Company recorded a liability of approximately $0.8 million with a corresponding charge to other comprehensive income representing the fair value of its interest rate swap agreements. At December 31, 2001, the fair value of the Company's interest rate swap agreements was a liability of approximately $3.2 million and is included in "Accounts payable and accrued expenses" with the related unrealized loss recorded in other comprehensive income within shareholders' equity. If LIBOR interest rates remain unchanged for the next twelve months, the Company estimates that interest expense will be $2.5 million higher than if the Company had not entered into the swaps. In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company limits these risks by following established risk management policies and procedures including the use of derivatives (cash flow hedges). Derivatives are used primarily to fix the rate on debt based on floating-rate indices. The Company does not use derivatives for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

        Segment Information.    SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," requires the disclosure of selected information about operating segments. Based on the guidance provided in the standard, the Company has determined that its business is conducted in one operating segment.

        Distributions.    The Company intends to pay regular quarterly distributions on its common shares and Operating Partnership units and the current quarterly distribution is $0.25 per share or unit, declared on January 31, 2002. Additionally, the Company pays regular quarterly dividends on its Series B Preferred Stock in accordance with its dividend requirements. The Company's ability to make distributions is dependent upon receipt of its quarterly distributions from the Operating Partnership.

F-12

Note 3. Investment in Hotel Properties

        Investment in hotel properties consists of the following at December 31, 2001, and 2000, respectively (in thousands):

	2001			2000
Land	$	70,401		$	71,886
Building and improvements		543,912			541,847
Furniture and equipment		115,479			106,554
Capital improvements program expenditures		16,422			19,245
		746,214			739,532
Accumulated depreciation		(130,652	)		(103,535	)
	$	615,562		$	635,997

        Capitalized interest was $0 and $0.6 million for the years ended December 31 2001 and 2000, respectively.

Note 4. Debt

        The following details the Company's debt outstanding at December 31, 2001 and 2000 and the net book value of the collateral pledged against the debt at December 31, 2001 (dollar amounts in thousands):

				Collateral
	Interest Rate		Maturity	# of Hotels	Net Book Value		2001		2000
Variable Rate Debt:
Line of Credit	LIBOR + 200bp		July 2004	24	$	216,228	$	11,188	$	10,273
Fixed Rate Debt:
Line of Credit	6.54	%	July 2003	(a)		(a)		40,000		40,000
Line of Credit	4.78	%	July 2003	(a)		(a)		30,000
Mortgage	6.83	%	August 2008	15		143,522		33,181		36,971
Mortgage	7.30	%	November 2011	(b)		(b)		25,000		25,000
Mortgage	7.83	%	December 2008	10		126,404		92,087		93,460
Mortgage	8.22	%	November 2007	1		44,421		18,271		18,556
Mortgage	4.50	%	January 2001							1,125
Mortgage	8.00	%	August 2010	8		84,987		51,408		52,046
					$	615,562	$	301,135	$	277,431

(a)

Interest rate swaps have fixed the rate of interest on these portions of the Line of Credit and these portions are also collateralized by the twenty-four properties pledged against the variable portion of the Line. The interest rate swaps mature in July 2003.

(b)

This mortgage is also collateralized by the fifteen properties pledged against the previous mortgage in the table.

F-13

        The interest rate on the $140 million Line of Credit that matures in July 2004 ranges from 150 basis points to 250 basis points above LIBOR, depending on the Company's ratio of total debt to its investment in hotel properties (as defined). The interest rate on the variable contracts of the Line of Credit outstanding at December 31, 2001 was 4.03%, calculated as the LIBOR interest rate of 2.03% plus 200 basis points. The Line of Credit is collateralized by first priority mortgages on 24 hotels that restrict the transfer, pledge or other hypothecation of the hotels (collectively, the "Collateral Pool"). The Company may obtain a release of the pledge of any hotel in the Collateral Pool if the Company provides a substitute hotel or reduces the total availability under the Line of Credit. Borrowings under the Line of Credit are limited to the Borrowing Base Value, which was $111.4 million at December 31, 2001. The Line of Credit contains various covenants including the maintenance of a minimum net worth, minimum debt and interest coverage ratios, and total indebtedness and liability limitations. The Company was in compliance with these covenants at December 31, 2001.

        The Company participates in two interest rate swap agreements. One of the interest rate swap agreements is for a notional amount of $30 million maturing in July 2003. Under this interest rate swap agreement, the Company receives payments based on the one month LIBOR rate of 2.14% and pays a fixed rate of 4.775% at December 31, 2001. In addition, the Company participates in a second interest rate swap agreement for a notional amount of $40 million maturing in July 2003. Under the second interest rate swap agreement, the Company receives payments based on the one-month LIBOR rate of 2.14% and pays a fixed rate of 6.535% at December 31, 2001.

        The differences to be paid or received by the Company under the terms of the interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense by the Company pursuant to the terms of the agreements and have a corresponding effect on its future cash flows. Agreements such as these contain a credit risk that the counterparties may be unable to meet the terms of the agreement. The Company minimizes that risk by evaluating the creditworthiness of its counterparties, which is limited to major banks and financial institutions, and does not anticipate non-performance by the counterparties. Net receipts (payments) under the interest rate swap agreements were $(1.3) million, $0.1 million and $0 for the years ended December 31, 2001, 2000 and 1999.

        The fair value of the interest rate swap agreements are estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Company would expect to receive or pay to terminate the agreements. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net loss on these instruments was approximately $3.2 million and $0.8 million at December 31, 2001 and 2000.

        The Company's other borrowings are nonrecourse to the Company and contain provisions allowing for the substitution of collateral (except for the 1996 CMBS debt which matures in two tranches in August 2008 and November 2011), upon satisfaction of certain conditions, after the respective loans have been outstanding for approximately four years. Most of the mortgage borrowings are repayable and subject to various prepayment penalties, yield maintenance, or defeasance obligations. At December 31, 2001 and 2000, approximately 96% of RFS' debt is fixed at an average interest rate of 7.7%.

F-14

Note 4. Debt (Continued)

        Future scheduled principal payments of debt obligations at December 31, 2001 are as follows (in thousands):

	Amount
2002	$	6,547
2003		7,044
2004		88,735
2005		8,152
2006		8,772
Thereafter		181,885
	$	301,135

        The Company in the future may seek to increase further the amount of its credit facilities, negotiate additional credit facilities, or issue corporate debt instruments. Although the Company has no charter restrictions on the amount of indebtedness the Company may incur, the Board of Directors of the Company has adopted a current policy limiting the amount of indebtedness that the Company will incur to an amount not in excess of approximately 45% of the Company's investment in hotel properties, at cost, (as defined). The Board of Directors may change the debt policy at any time without shareholder approval.

        The Company may incur, or cause the Operating Partnership to incur, indebtedness to meet distribution requirements imposed on a REIT under the Internal Revenue Code including the requirement that a REIT distribute to its shareholders annually at least 90% (effective January 1, 2001) of its taxable income to the extent that working capital and cash flow from the Company's investments are insufficient to make such distributions.

Note 5. Income Taxes

        The Company elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute as least 90% of its taxable income to its stockholders. It is management's current intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal income taxes on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes.

        Prior to January 1, 2001, the Company was not subject to federal income taxes. Under the RMA that became effective January 1, 2001, the Company leases its hotels to wholly-owned taxable REIT subsidiaries that are subject to federal and state income taxes. The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS 109, the Company accounts for income taxes using the

F-15

asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

        The components of income tax expense (benefit) for the year ended December 31, 2001 are as follows:

Current:
	State	$	20
Deferred:
	Federal	$	(24,734	)
Benefit from income taxes		$	(24,714	)

        The deferred tax benefit was calculated using an effective tax rate of 38% applied to the income of the TRS Lessees, adjusted for temporary differences related to the Hilton lease termination transaction. The deferred tax asset relates mainly to the payments to terminate the operating leases, management contracts and ancillary agreements with Hilton that were expensed for financial reporting purposes whereas, for tax purposes, these payments will be amortized over the lives of the leases. The Company believes that the TRS Lessees will generate sufficient future taxable income to realize in full this deferred tax asset. Accordingly, no valuation allowance has been recorded at December 31, 2001.

        The reconciliation of the Company's statutory income tax rate to effective tax rate for the year ended December 31, 2001 is as follows:

Statutory U.S. Federal income tax benefit		35	%
State income tax benefit		3	%
Non-taxable REIT income		25	%
Other		1	%
	Effective tax rate	64	%

F-16

Reconciliation between GAAP net income (loss) and REIT taxable income:

        The following table reconciles GAAP net income (loss) to taxable income for the years ended December 31, 2001, 2000 and 1999:

		2001			2000			1999
GAAP net income (loss)		$	(13,729	)	$	30,790		$	34,990
	Plus GAAP net loss on taxable subsidiaries included above		40,234			889			1,302
GAAP net income from REIT operations (a)			26,505			31,679			36,292
	Book/tax differences on minority interest share of TRS Lessees' loss		(3,206	)
	Book/tax differences on depreciation and amortization		4,333			(2,005	)		(4,609	)
	Book/tax differences on gains/losses from capital transactions		4,781			3,745			52
	Other book/tax differences, net		(180	)		915			1,689
Adjusted taxable income subject to distribution requirement (b)		$	32,233		$	34,334		$	33,424

(a)    All adjustments to "GAAP net income from REIT operations" are net of amounts attributable to taxable REIT subsidiaries and non-qualified REIT subsidiaries.

(b)    The dividend requirement was 90% in 2001 and 95% in 1999 and 2000, respectively.

Characterization of distributions:

        The following table characterizes distributions paid per common share for the years ended December 31, 2001, 2000 and 1999:

	2001				2000				1999
	$		%		$		%		$		%
Ordinary income	$	1.13	89.8	%	$	1.43	92.8	%	$	1.54	100	%
Return of capital		0.09	6.7	%		0.02	1.3	%
Capital gains						0.01	0.3	%
Unrecaptured Section 1250 gain		0.04	3.5	%		0.08	5.6	%
	$	1.26	100	%	$	1.54	100	%	$	1.54	100	%

Note 6. Capital Stock

        Preferred Stock.    The Board of Directors is authorized to provide for the issuance of up to 5 million shares of 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.

        In 1996, the Company issued to one of the lessees 973,684 shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock"). The Company redeemed the Series A Preferred Stock on January 1, 2001 for cash consideration of $13.0 million, which resulted in a gain on redemption of $5.1 million that is included in net income (loss) applicable to common shareholders in 2001.

F-17

        On January 2, 2001, the Company issued 250 thousand shares of non-convertible mandatorily redeemable Series B Preferred Stock for $25 million prior to fees and expenses of approximately $1 million. Holders of the Series B Preferred Stock are entitled to receive quarterly cash dividends commencing March 31, 2001 at an annual rate of 12.5%. If not redeemed prior to January 1, 2006, the dividend rate increases 2.0% per annum up to a maximum rate of 20.5%. The Company may redeem shares of the Series B Preferred Stock in whole but not in part, on or after December 31, 2003 at the original price of $25 million. If the shares are redeemed before December 31, 2003, the redemption price is at varying amounts over the original share price. The shares are mandatorily redeemable by the holders at varying premiums over the original share price upon a change of control, dissolution, or winding up of the Company or on the Company's failure to qualify as a REIT.

        Operating Partnership Units.    RFS is the sole general partner of the Operating Partnership and is obligated to contribute the net proceeds from any issuance of its equity securities to the Operating Partnership in exchange for units of partnership interest ("Units") corresponding in number and terms to the equity securities issued. The Operating Partnership may also issue Units to third parties in exchange for cash or property, and Units so issued to third parties are redeemable at the option of the holder for a like number of shares of common stock of the Company, or cash, or a combination thereof, at the election of the Company.

Note 7. Commitments and Contingencies

        The Company maintains comprehensive insurance on each of its hotels, including liability, fire and extended coverage, of the type and amount customarily obtained for or by hotel owners. All 10 of the Company's hotels in California are located in areas that are subject to earthquake activity. These hotels are located in areas of high seismic risk and some were constructed under building codes which were less stringent with regard to earthquake related requirements. An earthquake could render significant damage to the Company's hotels. Additionally, areas in Florida where six of the Company's hotels are located may experience hurricane or high-wind activity. The Company has earthquake insurance policies on its hotels in California and wind insurance policies on certain of its hotels located in Florida. However, various types of catastrophic losses, like earthquakes and floods may not be fully insurable or may not be economically insurable. With respect to its hotels in California, in addition to the applicable deductibles under its earthquake insurance policies, the Company is self-insured for the first $5 million per earthquake. The Company believes its current property insurance, which expires June 30, 2002, will protect it against losses resulting from a terrorist attack. Upon renewal, the Company does not know whether its property insurance will protect it against losses resulting from a terrorist attack. The Company believes that such losses may not be economically insurable. In the event of a substantial loss, the Company's insurance coverage may not be able to cover the full current market value or replacement cost of its lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also affect our ability to replace or renovate a hotel after it has been damaged or destroyed.

        As of December 31, 2001, the Company had a $0.6 million letter of credit outstanding. The letter of credit serves as collateral on the worker's compensation plan set-up on behalf of the hotel employees of Flagstone. On January 1, 2002, the letter of credit was increased to $2.0 million. There are no outstandings on the letter of credit.

F-18

        Effective January 1, 2001, the Company receives rental income from five hotels leased to third parties under the Percentage Leases which expire in 2007 (1 hotel), 2008 (2 hotels) and 2009 (2 hotels).

        Minimum future rental income (base rents) due the Company under these noncancelable operating leases at December 31, 2001, is as follows (in thousands):

Year	Amount
2002	$	2,489
2003		2,489
2004		2,489
2005		2,489
2006		2,489
2007 and thereafter		3,853
	$	16,298

        Lease revenue is based on a percentage of room revenues, food and beverage revenues and other revenues of the Hotels. Both the base rent and the threshold room revenue in each lease computation are adjusted annually for changes in the Consumer Price Index ("CPI"). The adjustment is calculated at the beginning of each calendar year. The CPI adjustments made in January 2001 and 2000 were 3.4% and 2.7%, respectively.

        The Company may terminate any lease agreement with respect to a hotel property upon the sale of a hotel property in exchange for a termination payment to the lessee. Under the Percentage Leases, the Company is obligated to pay the costs of real estate taxes, property insurance, maintenance of underground utilities and structural elements of the Hotels, and to set aside a portion of the Hotels' revenues to fund capital expenditures for the periodic replacement or refurbishment of furniture, fixtures and equipment required for the retention of the franchise licenses with respect to the Hotels.

Note 8. Stock-Based Compensation Plans

        The Company's Restricted Stock and Stock Option Plan (the "Plan") provides for the grant of stock options to purchase a specified number of shares of common stock ("Options") and grants of restricted shares of common stock ("Restricted Stock"). Under the Plan, approximately 2.3 million shares of common stock, of which 650 thousand shares may be restricted stock, are available for awards to the officers and key employees of the Company and 675 thousand shares of common stock, of which 120 thousand shares may be restricted stock, are available for awards to Directors of the Company who are not officers or employees. Options issued under the plan have a maximum term of ten years from the date of grant. The exercise price of the options shall be determined on the date of each grant.

        The Company applies APB Opinion No. 25 and related Interpretations in accounting for the Plan. In 1995, the Financial Accounting Standards Board issued SFAS Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") which, if fully adopted by the Company, would change the methods the Company applies in recognizing the cost of the Plan. Adoption of the cost recognition provisions of SFAS 123 is optional and the Company has decided not to adopt the provisions of SFAS 123. However, pro forma disclosures, as if the Company adopted the cost recognition requirements of SFAS 123, are required by SFAS 123 and are presented below.

F-19

        A summary of the Company's stock options under the Plan as of December 31, 2001, 2000 and 1999, and the changes during the years are presented below (in thousands, except per share data):

	2001					2000					1999
	Number of Shares Underlying Options			Weighted Average Exercise Price		Number of Shares Underlying Options			Weighted Average Exercise Price		Number of Shares Underlying Options			Weighted Average Exercise Price
Outstanding at beginning of years		1,207		$	13.43		1,484		$	13.83		1,091		$	14.99
Granted		680			11.47		50			11.06		600			11.99
Exercised		(343	)		12.30		(30	)		11.88
Forfeited		(156	)		13.72		(297	)		14.64		(207	)		14.64
Outstanding at end of years		1,388		$	12.76		1,207		$	13.43		1,484		$	13.83
Exercisable at end of years		519		$	14.28		700		$	14.25		604		$	15.34
Weighted-average fair value				$	1.10				$	0.60				$	1.75
Price range of shares under option	$ $	10.50 to 16.87				$ $	10.50 to 16.87				$ $	10.50 to 16.87

        The weighted average remaining contractual life of options outstanding as of December 31, 2001 is 8.0 years.

        The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend of $1.10; volatility of 26.7% for 2001 grants, volatility of 26.2% for 2000 grants and 29% for 1999 grants, risk-free interest rate of 4.8% for 2001, 6.2% for 2000 and 5.9% for 1999 and expected life of 6 years for 2001, 2000, and 1999.

        Had compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS 123, the Company's net income (loss) and earnings per share would have been reduced to the pro forma amounts indicated below:

		2001			2000		1999
Net income (loss) applicable to common shareholders:
	As reported	$	(11,713	)	$	29,378	$	33,578
	Pro forma	$	(12,013	)	$	29,045		33,279
Basic and diluted earnings (loss) per share:
	As reported	$	(0.47	)	$	1.20	$	1.34
	Pro forma	$	(0.48	)	$	1.18	$	1.33

        The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.

F-20

        Restricted Stock.    A summary of the status of the Company's restricted stock grants as of December 31, 2001, 2000 and 1999 and the changes during the years are presented below (value is computed as the weighted average fair market value of the restricted stock at grant date):

	2001				2000			1999
	# Shares		Value		# Shares	Value		# Shares	Value
Outstanding at beginning of year	343,000		$	13.42	329,000	$	13.56	288,000	$	13.82
Granted, subject to vesting	270,000		$	13.11	14,000	$	11.36	41,000	$	11.75
Forfeited	(1,333	)	$	11.88
Outstanding at end of year	611,667		$	13.31	343,000	$	13.42	329,000	$	13.56
Vested at end of year	314,000		$	13.65	270,662	$	13.89	211,999	$	14.40

Note 9. Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") approved SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement requires that long-lived assets to be disposed of other than by sale be considered held and used until they are disposed of. The Statement requires that long-lived assets to be disposed of by sale be accounted for under the requirements of SFAS No. 121 which requires that such assets be measured at the lower of carrying amounts or fair value less cost to sell and to cease depreciation. SFAS No. 144 requires a probability-weighted cash flow estimation approach with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range of possible future cash flow amounts are estimated. As a result, discontinued operations will no longer be measured on a net realizable basis, and future operating losses will no longer be recognized before they occur. Additionally, goodwill will be removed from the scope SFAS No. 144 and as a result will no longer be required to be allocated to long-lived assets to be tested for impairment. The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company is not currently affected by the Statement's requirements.

Note 10. Subsequent Events

        In January, the Company sold its interest in an investment in an unconsolidated partnership for approximately $1.2 million, recognizing a gain on sale of approximately $1.1 million.

        On February 20, 2002, the Company sold 1.15 million shares of common stock. Net proceeds of approximately $14.2 million from the sale of the common stock were used to reduce the outstanding balance on the line of credit.

        On February 26, 2002, the Company sold $125 million of senior notes. The senior notes are unsecured and guaranteed by the Company and certain of its subsidiaries. The Company has or is expected to use the net proceeds to retire the 1996 CMBS mortgage debt ($58.2 million outstanding at December 13, 2001), pay the prepayment penalty on the 1996 CMBS mortgage debt of approximately $6.5 million, terminate the two outstanding interest rate swap agreements for approximately $3.2 million, with the balance used to reduce outstanding borrowings under the line of credit. As a result of the prepayment of the 1996 CMBS debt, the Company will also expense as an extraordinary item $1.4 million in unamortized debt costs.

F-21

RFS Hotel Investors, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2001

        The following unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2001 is based in part on the Consolidated Statement of Operations of RFS Hotel Investors, Inc. ("RFS") for the year ended December 31, 2001 and assumes that the following occurred on January 1, 2001:

•

The sale of 1.15 million shares of common stock resulting in net proceeds of approximately $14.2 million that were used to reduce the outstanding balance on the line of credit. This transaction is referred to as the "Equity Offering".



•

The sale of $125 million of senior notes payable bearing interest at 9.75%. The net proceeds from the senior notes offering of approximately $121.5 million will be used as follows: (1) $58.2 million to redeem our 1996 commercial mortgage bonds and $6.5 million to pay a yield maintenance premium, (2) $53.6 million to pay down the outstanding balance under our line of credit and (3) $3.2 million to pay interest rate swap termination fees. As a result of the prepayment of the 1996 commercial mortgage bonds, the Company will also expense, as an extraordinary item, $1.4 million in unamortized debt costs. These transactions are collectively referred to as the "Debt Offering".

        In the opinion of our management, all material adjustments necessary to reflect the effects of the preceding transactions have been made. This unaudited Pro Forma Consolidated Statement of Operations is presented for illustrative purposes only and is not necessarily indicative of what RFS Hotel Investors, Inc.'s actual results of operations would have been assuming the transactions described above occurred on the indicated dates, nor does it purport to represent RFS Hotel Investors, Inc.'s results of operations for future periods. The unaudited Pro Forma Consolidated Statement of Operations should be read in conjunction with the RFS Hotel Investors, Inc.'s unaudited Pro Forma Consolidated Balance Sheet at December 31, 2001 and the historical audited financial statements of RFS Hotel Investors, Inc.

F-22

RFS Hotel Investors, Inc
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2001
(in thousands)

		Historical RFS Hotel Investors, Inc.			Equity Offering			Debt Offering			Pro Forma RFS Hotel Investors, Inc.
		(note a)
Revenue:
	Rooms	$	188,725								$	188,725
	Food and beverage		17,695									17,695
	Other operating departments		9,103									9,103
	Lease revenue		5,782									5,782
	Other		573									573
	Total hotel revenue		221,878			—			—			221,878
Hotel operating expenses:
	Rooms		37,000									37,000
	Food and beverage		13,533									13,533
	Other operating departments		2,201									2,201
Undistributed operating expenses:
	Property operating costs		22,550									22,550
	Property taxes, insurance and other		12,848									12,848
	Franchise costs		17,007									17,007
	Maintenance and repair		9,741									9,741
	Management fees		5,762									5,762
	Depreciation		29,605									29,605
	Lease termination		65,496									65,496
	Amortization of deferred expenses and unearned compensation		1,384									1,384
	General and administrative		19,436									19,436
	Total operating expenses		236,563			—			—			236,563
	Operating loss		(14,685	)		—			—			(14,685	)
	Interest expense		26,042		$	(1,116	)(b)	$	3,938	(c)		28,864
	Loss before gain on sale of hotels and income taxes		(40,727	)		1,116			(3,938	)		(43,549	)
	Minority interests		(1,157	)		95	(d)		(335	)(d)		(1,397	)
	Gain on sale of hotels		(1,127	)								(1,127	)
	Benefit from income taxes (note e)		(24,714	)								(24,714	)
	Loss from continuing operations		(13,729	)		1,021			(3,603	)		(16,311	)
	Preferred stock dividends		(3,125	)								(3,125	)
	Gain on redemption of Series A preferred stock		5,141									5,141
	Loss from continuing operations applicable to common shareholders	$	(11,713	)	$	1,021		$	(3,603	)	$	(14,295	)
	Loss from continuing operations per share—basic and diluted	$	(0.47	)							$	(0.57	)
	Weighted average common shares outstanding—basic and diluted		25,045									25,045

F-23

RFS Hotel Investors, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Operations

(a)

Represents RFS Hotel Investors, Inc.'s historical results of operations.

(b)

To record the decrease in interest expense resulting from the application of the $14.2 million in net proceeds from the Equity Offering to reduce borrowings on the line of credit (computed using the line of credit's 2001 weighted average interest rate of 7.87%).

(c)

To record the net impact on interest expense from the Debt Offering, calculated as follows:

1)

Increase in interest expense of $12.2 million on the $125 million senior notes at 9.75%;

2)

Decrease in interest expense of $4.3 million resulting from the $53.6 million reduction in the line of credit balance (computed using the line of credit's 2001 weighted average interest rate of 7.87%);

3)

Decrease in interest expense of $4.2 million due to the $58.2 million redemption of the 1996 commercial mortgage bonds (computed using the 2001 weighted average interest rate of 7.03%); and

4)

Increase in interest expense of $0.2 million due to the amortization of the senior notes debt issuance costs ($350 thousand), offset by the elimination of the historical amortization of the 1996 commercial mortgage bonds debt issuance costs ($153 thousand).

(d)

To record the allocation to minority interest in Operating Partnership for its 8.5% share of the change in interest expense arising from the application of the net proceeds from the Equity Offering and the Debt Offering.

(e)

There is no pro forma tax adjustment from the $2.6 million increase in loss from continuing operations as the taxable income or loss of the taxable REIT subsidiaries is not impacted by the pro forma adjustments.

F-24

RFS Hotel Investors, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2001

        The following unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2001 is based in part on the Consolidated Balance Sheet of RFS Hotel Investors, Inc. and assumes the following occurred on December 31, 2001:

•

The sale of 1.15 million shares of common stock resulting in net proceeds of approximately $14.2 million that were used to reduce the outstanding balance on the line of credit. This transaction is referred to as the "Equity Offering".



•

The sale of $125 million of senior notes payable bearing interest at 9.75%. The net proceeds from the senior notes offering of approximately $121.5 million will be used as follows: (1) $58.2 million to redeem our 1996 commercial mortgage bonds and $6.5 million to pay a yield maintenance premium, (2) $53.6 million to pay down the outstanding balance under our line of credit and (3) $3.2 million to pay interest rate swap termination fees. As a result of the prepayment of the 1996 commercial mortgage bonds, the Company will also expense, as an extraordinary item, $1.4 million in unamortized debt costs. These transactions are collectively referred to as the "Debt Offering".

        In the opinion of our management, all material adjustments necessary to reflect the effects of the preceding transactions have been made. The unaudited Pro Forma Consolidated Balance Sheet is presented for illustrative purposes only and is not necessarily indicative of what RFS Hotel Investors, Inc.'s actual financial position would have been had the transactions described above occurred on December 31, 2001, nor does it purport to represent RFS Hotel Investors, Inc.'s future financial position. The unaudited Pro Forma Consolidated Balance Sheet should be read in conjunction with the RFS Hotel Investors, Inc.'s Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2001 and the historical audited financial statements of RFS Hotel Investors, Inc.

F-25

RFS Hotel Investors, Inc
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2001
(in thousands)

			Historical RFS Hotel Investors, Inc.			Equity Offering			Debt Offering			Pro Forma RFS Hotel Investors, Inc.
			(note a)
ASSETS
Investment in hotel properties, net			$	615,562								$	615,562
Cash and cash equivalents				5,735									5,735
Restricted cash				6,817									6,817
Accounts receivable				5,533									5,533
Deferred expenses, net				6,964					$	2,137	(d)		9,101
Other assets				3,517									3,517
Deferred income taxes				24,734									24,734
	Total assets		$	668,862		$	—		$	2,137		$	670,999
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses			$	20,857					$	(3,220)	(e)	$	17,637
Borrowings on Line of Credit				81,188		$	(14,175)	(b)		(53,599)	(f)		13,414
Senior notes payable										125,000	(h)		125,000
Mortgage notes payable				219,947						(58,181)	(i)		161,766
Minority interest in Operating Partnership				31,059			(149)	(c)		(945)	(g)		29,965
	Total liabilities			353,051			(14,324	)		9,055			347,782
Series B Preferred Stock				25,000									25,000
Commitments and contingencies
Shareholders' equity:
Common Stock				258			12	(b)					270
Additional paid-in capital				368,361			14,312	(b)					382,673
Other comprehensive income				(3,220	)					3,220	(e)		—
Treasury stock, at cost, 576 shares				(8,100	)								(8,100	)
Distributions in excess of earnings				(66,488	)					(10,138)	(j)		(76,626	)
	Total shareholders' equity			290,811			14,324			(6,918	)		298,217
		Total liabilities and shareholders' equity	$	668,862		$	—		$	2,137		$	670,999

F-26

RFS Hotel Investors, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet

(a)

Represents RFS Hotel Investors, Inc.'s historical balance sheet.

(b)

Represents the issuance of 1.15 million shares of common stock and the application of the $14.2 million in net proceeds to reduce the balance outstanding on the line of credit and the allocation from minority interest in Operating Partnership as discussed in (c) below.

(c)

To record the net impact of the Equity Offering on minority interest in Operating Partnership, specifically (1) a decrease of $1.4 million due to the decrease in the minority interest ownership percentage in the Operating Partnership from 9% to 8.5% and (2) a increase of $1.2 million representing the minority interest in Operating Partnership's share of the Equity Offering.

(d)

To record (1) the debt issuance costs of $3.5 million on the $125 million senior notes offering, and (2) to write-off the unamortized debt issuance costs ($1.4 million) on the 1996 commercial mortgage bonds that were retired.

(e)

To remove the $3.2 million liability and other comprehensive income associated with the interest rate swaps that were terminated.

(f)

To record the payment of $53.6 million to reduce borrowings outstanding on the line of credit.

(g)

To record the minority interest in Operating Partnership's share of the $11.1 million in expenses from the Debt Offering.

(h)

To record the issuance of $125 million senior notes.

(i)

To record the payment of $58.2 million to retire the 1996 commercial mortgage bonds.

(j)

To record the following expenses from the Debt Offering, net of the $0.9 million allocation to the minority interest in Operating Partnership:

1)

$6.5 million yield maintenance premium to retire the 1996 commercial mortgage bonds;

2)

$3.2 million to terminate the interest rate swaps; and

3)

$1.4 million write-off of unamortized debt issuance costs associated with the 1996 commercial mortgage bonds.

F-27

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
RFS Hotel Investors, Inc.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of partners' capital and of cash flows present fairly, in all material respects, the financial position of RFS Partnership, L.P. (the "Partnership") at December 31, 2001 and 2000, and the results of its operations and cash flows for the three years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 2 to the consolidated financial statements, effective January 1, 2001, the Partnership adopted the provisions of Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities."

PricewaterhouseCoopers LLP

Dallas, Texas
February 7, 2002,
except for Note 11 as to which the
date is February 26, 2002

F-28

RFS PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(in thousands)

					December 31, 2001			December 31, 2000
ASSETS
	Investment in hotel properties, net				$	615,562		$	635,997
	Cash and cash equivalents					5,735			3,681
	Restricted cash					6,817			4,929
	Accounts receivable					5,533			13,041
	Deferred expenses, net					6,964			6,814
	Other assets					3,517			9,005
	Deferred income taxes					24,734
		Total assets			$	668,862		$	673,467
LIABILITIES AND PARTNERS' CAPITAL
	Accounts payable and accrued expenses				$	23,032		$	12,908
	Borrowings on Line of Credit					81,188			50,273
	Mortgage notes payable					219,947			227,158
		Total liabilities				324,167			290,339
	Commitments and contingencies
	Series B Preferred Units, $0.01 par value, 5,000 units authorized, 250 units issued and outstanding					25,000
	Redeemable limited partnership units at redemption value, 2,458 units and 2,562 units at December 31, 2001 and 2000, respectively					27,980			33,461
	Partners' Capital:
		Series A Preferred Units, $.01 par value, 5,000 units authorized, 974 units issued and outstanding at December 30, 2000							18,141
		Other comprehensive income				(3,220	)
		General partnership units, 25,235 units and 24,512 units at December 31, 2001 and 2000, respectively				294,935			331,526
			Total partners' capital			291,715			349,667
				Total liabilities and partners' capital	$	668,862		$	673,467

The accompanying notes are an integral part of these consolidated financial statements.

F-29

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands, except per unit data)

			2001			2000			1999
Revenue:
	Rooms		$	188,725
	Food and beverage			17,695
	Other operating departments			9,103
	Lease revenue			5,782		$	106,574		$	98,962
	Other			573			785			700
		Total hotel revenue		221,878			107,359			99,662
Hotel operating expenses:
	Rooms			37,000
	Food and beverage			13,533
	Other operating departments			2,201
	Undistributed operating expenses:
	Property operating costs			22,550
	Property taxes, insurance and other			12,848			10,747			9,859
	Franchise costs			17,007
	Maintenance and repair			9,741
	Management fees			5,762
	Depreciation			29,605			27,198			24,210
	Lease termination			65,496
	Amortization of deferred expenses and unearned compensation			1,384			674			858
	General and administrative			19,436			6,304			3,687
		Total operating expenses		236,563			44,923			38,614
Operating income (loss)				(14,685	)		62,436			61,048
Interest expense				26,042			24,052			20,836
Income (loss before (gain) loss on sale
	of hotels and income taxes			(40,727	)		38,384			40,212
	(Gain) loss on sale of hotel properties			(1,127	)		4,376			1,602
	Benefit from income taxes			(24,714	)
Net income (loss)				(14,886	)		34,008			38,610
Preferred unit dividends				(3,125	)		(1,412	)		(1,412	)
Gain on redemption of Series A preferred units				5,141
Net income (loss) applicable to unitholders			$	(12,870	)	$	32,596		$	37,198
Net income (loss) allocated to general partnership units			$	(11,713	)	$	29,378		$	33,578
Net income (loss) allocated to limited partnership units			$	(1,157	)	$	3,218		$	3,620
Earnings (loss) per unit—basic and diluted			$	(0.47	)	$	1.20		$	1.35
Weighted average common units outstanding—basic				27,520			27,121			27,569
Weighted average common units outstanding—diluted				27,520			27,127			27,569

The accompanying notes are an integral part of these consolidated financial statements.

F-30

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands)

	2001			2000		1999
Net income (loss)	$	(14,886	)	$	34,008	$	38,610
Unrealized holding losses arising on interest rate swaps		(3,220	)		—		—
Comprehensive income (loss)	$	(18,106	)	$	34,008	$	38,610

The accompanying notes are an integral part of these consolidated financial statements.

F-31

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

For The Years Ended December 31, 2001, 2000 and 1999

(IN THOUSANDS)

Balance, December 31, 1998	$	371,283
Redemption of units		(1,439	)
Distributions		(43,885	)
Allocation from redeemable units		4,652
Contribution from general partner related to amortization of stock-based compensation		726
Net income		38,610
Balance, December 31, 1999		369,947
Contributions		162
Redemption of units		(4,444	)
Distributions		(43,985	)
Allocation to redeemable units		(6,682	)
Contribution from general partner related to amortization of stock-based compensation		661
Net income		34,008
Balance, December 31, 2000		349,667
Issuance of units		3,621
Redemption of Series A Preferred units		(13,000	)
Distributions		(37,277	)
Allocation from redeemable units		5,481
Contribution from general partner related to amortization of stock-based compensation		1,329
Unrealized holding loss on interest rate swaps		(3,220	)
Net loss		(14,886	)
Balance, December 31, 2001	$	291,715

The accompanying notes are an integral part of these consolidated financial statements.

F-32

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2001, 2000 and 1999

(in thousands)

				2001			2000			1999
Cash flows from operating activities:
	Net income (loss)			$	(14,886	)	$	34,008		$	38,610
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			32,343			28,908			26,281
		(Gain) loss on sale of hotel properties			(1,127	)		4,376			79
		Changes in assets and liabilities:
			Accounts receivable		7,508			(2,240	)		(145	)
			Other assets		5,432			(3,473	)		2,277
			Deferred income taxes		(24,734	)
			Accounts payable and accrued expenses		5,930			3,644			(218	)
			Net cash provided by operating activities		10,466			65,223			66,884
Cash flows from investing activities:
	Investment in hotel properties and hotels under development				(18,013	)		(32,551	)		(34,066	)
	Cash paid for franchise fees				(65	)					(49	)
	Restricted cash				(1,888	)		(379	)		6,727
	Proceeds from sale of hotel properties				11,324			22,087			808
			Net cash used by investing activities		(8,642	)		(10,843	)		(26,580	)
Cash flows from financing activities:
	Redemption of units							(4,444	)		(1,461	)
	Proceeds from borrowings				66,688			81,200			16,500
	Payments on debt				(42,984	)		(86,047	)		(7,021	)
	Redemption of Series A preferred units				(13,000	)
	Distributions to unitholders				(37,277	)		(43,960	)		(43,885	)
	Proceeds from issuance of units, net of $1,060 issuance costs in 2001				28,439			162
	Loan fees paid				(1,636	)		(3,523	)		(538	)
			Net cash provided (used) by financing activities		230			(56,612	)		(36,405	)
Net increase (decrease) in cash and cash equivalents					2,054			(2,232	)		3,899
Cash and cash equivalents at beginning of period					3,681			5,913			2,014
Cash and cash equivalents at end of period				$	5,735		$	3,681		$	5,913
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	24,403		$	22,970		$	20,172

Supplemental disclosure of non-cash activities:

In 2001, the Partnership:

            i.  Recorded a liability of $3.2 million for the fair value of the interest rate swaps at December 31, 2001.

            ii.  Sold a hotel that closed on February 20, 2001 in which a loss and related liability of $1.0 million was recorded in the financial statements in 2000 as a non-cash transaction at December 31, 2000.

The accompanying notes are an integral part of these consolidated financial statements.

F-33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF RFS PARTNERSHIP, L.P.

Note 1. Organization

        RFS Partnership, L.P. (the "Partnership") owns interests in 58 hotels with 8,424 rooms located in 24 states (collectively the "Hotels") at December 31, 2001.    RFS Hotel Investors, Inc. ("RFS") is the general partner and owns an approximate 91% ownership in the Partnership. At December 31, 2001, third party limited partners own the remaining 9%.

        The following table provides a schedule of the hotels by brand at December 31, 2001:

Franchise Affiliation		Hotel Properties	Rooms/Suites
Full Service hotels:
	Sheraton	4	864
	Holiday Inn	5	954
	Independent	2	331
	Sheraton Four Points	2	412
	Hilton	1	234
	Doubletree	1	221
		15	3,016
Extended Stay hotels:
	Residence Inn by Marriott	14	1,851
	TownePlace Suites by Marriott	3	285
	Homewood Suites by Hilton	1	83
		18	2,219
Limited Service hotels:
	Hampton Inn	17	2,113
	Holiday Inn Express	5	637
	Comfort Inn	2	337
	Courtyard by Marriott	1	102
		25	3,189
Total		58	8,424

        The following summarizes the number of hotels owned for the periods presented:

	2001		2000		1999
Hotels owned at beginning of years	60		62		60
Acquisitions and developed hotels placed into service					2
Sales of hotels	(2	)	(2	)
Hotels owned at end of years	58		60		62

        Under the REIT Modernization Act (the "RMA") that became effective January 1, 2001, the Partnership is permitted to lease its hotels to wholly-owned taxable real estate investment trust ("REIT") subsidiaries of the Partnership ("TRS Lessees"), provided that the TRS Lessees engage a third-party management company to manage the hotels. Effective January 1, 2001, the Partnership terminated its operating leases, management contracts and related ancillary agreements with Hilton Hotels Corporation ("Hilton") for approximately $65.5 million. This transaction represents the cancellation of certain executory contracts some of which extended through 2012. The cancellation of

F-34

these agreements entitles the TRS Lessees to retain the operating profits or losses from the hotels, which previously accrued to Hilton under these contracts and, in the opinion of management, gives the Partnership (i) more control over the daily operations of the hotels, (ii) the benefits from any cost efficiencies or ancillary revenues generated at the hotels, and (iii) flexibility, in that the hotels are not encumbered by long term leases which are difficult to amend and expensive to terminate. As a result of this transaction, the Partnership began reporting hotel revenues and expenses rather than lease revenue. All of the hotels continue to operate under the same franchise affiliation as prior to the contract termination.

        Simultaneous with the termination of the leases, management contracts and related agreements, the TRS Lessees entered into new management contracts with Flagstone Hospitality Management ("Flagstone"). At December 31, 2001, Flagstone manages 51 of the Partnership's 58 hotels and the remaining seven hotels are managed by four other third-party management companies. Only five of the Partnership's hotels are operated under long-term leases with third parties as of December 31, 2001.

        In connection with the termination of the leases and related agreements, the Partnership redeemed 973,684 units of its Series A Preferred units owned by Hilton for cash consideration of $13.0 million, which resulted in a gain on redemption of $5.1 million that was included in net income available to common unitholders in the first quarter 2001.

Note 2. Summary of Significant Accounting Policies

        Principles of Consolidation.    The consolidated financial statements include the accounts of the Partnership and their consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

        Use of Estimates.    The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

        Fair Value of Financial Instruments.    The Partnership's financial instruments include rents receivable, accounts payable, other accrued expenses, mortgage loans payable and interest rate swap agreements. The fair values of these financial instruments other than the interest rate swap agreements and mortgage loans payable are not materially different from their carrying or contract values. The fair value of the interest rate swaps are estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Partnership would expect to pay to terminate the agreements. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net loss on these instruments was approximately $3.2 million and $0.8 million at December 31, 2001 and 2000. The carrying values of the Partnership's borrowings are estimated to be below fair value by approximately $11.5 million due to changes in comparable interest rates.

        Investment in Hotel Properties.    Hotel properties are recorded at cost and are depreciated using the straight-line method over estimated useful lives of 40 years for buildings and improvements and five to seven years for furniture and equipment. Repairs and maintenance costs are charged to expense as incurred. The Partnership periodically reviews the carrying value of each Hotel to determine if circumstances exist indicating impairment in the carrying value of the investment in the hotel or that depreciation periods should be modified. If circumstances support the possibility of impairment, the Partnership will prepare a projection of the undiscounted future cash flows, without interest charges, of

F-35

the specific hotel and determine if the investment in such hotel is recoverable based on the undiscounted cash flows. If impairment is indicated, an adjustment will be made to the carrying value of the hotel based on discounted future cash flows. The Partnership does not believe that there are any facts or circumstances indicating impairment of any of its investment in hotel properties.

        Cash and Cash Equivalents.    All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

        Restricted Cash.    Restricted cash includes amounts the Partnership must make available for the replacement and refurbishment of furniture and equipment and amounts held in escrow by certain lenders for the payment of taxes and insurance.

        Deferred Expenses.    Deferred expenses, consisting of initial fees paid to franchisors, loan fees and other costs incurred in issuing debt, are recorded at cost. Amortization of franchise fees is computed using the straight-line method over the lives of the franchise agreements, which range from 10 to 15 years. Amortization of loan fees and other costs incurred in issuing debt are computed using the interest method over the maturity period of the related debt. Accumulated amortization of deferred expenses is $6.6 million and $5.0 million at December 31, 2001 and 2000, respectively.

        Revenue Recognition.    In accordance with Staff Accounting Bulletin (SAB) 101, lease revenue is recognized as income after certain specific annual hurdles have been achieved by the lessee in accordance with the provisions of the Percentage Lease agreements. The lessees are in compliance with their rental obligations under the Percentage Leases. For the year ended December 31, 2001 and 2000, five and fifty-six hotels were leased to third party lessees, respectively.

        Income Taxes.    Prior to January 1, 2001, the Partnership was not subject to federal income taxes. Under the RMA that became effective January 1, 2001, the Partnership leases its hotels to wholly-owned taxable REIT subsidiaries that are subject to federal and state income taxes. The Partnership accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS 109, the Partnership accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

        Basic and Diluted Earnings Per Unit.    Basic earnings per unit is computed by dividing net income (loss) applicable to unitholders by the weighted average number of units outstanding during the period. Diluted earnings per unit is computed by dividing net income (loss) applicable to unitholders by the weighted average number of units and equivalents outstanding during the period. Unit equivalents represent units issuable upon exercise of options. For the year ended December 31, 2001, the unit equivalents would be antidilutive, and accordingly are not assumed to be outstanding for the computation of diluted earnings per unit. For the years ended December 31, 2000, 1999, the Partnership's Series A Preferred Units, if converted to general partnership units, would be antidilutive; accordingly, the Series A Preferred Units are not assumed to be converted in the computation of diluted earnings per unit. In addition, the Series B Preferred Units are non-convertible and accordingly, are not included in the computation of diluted earnings per unit.

        Derivatives.    Effective January 1, 2001, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either

F-36

assets or liabilities in the balance sheet and measure those instruments at fair value. Upon adoption of SFAS 133 on January 1, 2001, the Partnership recorded a liability of approximately $0.8 million with a corresponding charge to other comprehensive income representing the fair value of its interest rate swap agreements. At December 31, 2001, the fair value of the Partnership's interest rate swap agreements was a liability of approximately $3.2 million and is included in "Accounts payable and accrued expenses" with the related unrealized loss recorded in other comprehensive income within partners' capital. If LIBOR interest rates remain unchanged for the next twelve months, the Partnership estimates that interest expense will be $2.5 million higher than if the Partnership had not entered into the swaps. In the normal course of business, the Partnership is exposed to the effect of interest rate changes. The Partnership limits these risks by following established risk management policies and procedures including the use of derivatives (cash flow hedges). Derivatives are used primarily to fix the rate on debt based on floating-rate indices. The Partnership does not use derivatives for trading or speculative purposes. Further, the Partnership has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

        Segment Information.    SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," requires the disclosure of selected information about operating segments. Based on the guidance provided in the standard, the Partnership has determined that its business is conducted in one operating segment.

        Distributions.    The Partnership intends to pay regular quarterly distributions on its units and the current quarterly distribution is $0.25 per share or unit, declared on January 31, 2002. Additionally, the Partnership pays regular quarterly dividends on its Series B Preferred Units in accordance with its dividend requirements.

Note 3. Investment in Hotel Properties

        Investment in hotel properties consists of the following at December 31, 2001, and 2000, respectively (in thousands):

	2001			2000
Land	$	70,401		$	71,886
Building and improvements		543,912			541,847
Furniture and equipment		115,479			106,554
Capital improvements program expenditures		16,422			19,245
		746,214			739,532
Accumulated depreciation		(130,652	)		(103,535	)
	$	615,562		$	635,997

        Capitalized interest was $0 and $0.6 million for the years ended December 31 2001 and 2000, respectively.

F-37

Note 4. Debt

        The following details the Partnership's debt outstanding at December 31, 2001 and 2000 and the net book value of the collateral pledged against the debt at December 31, 2001 (dollar amounts in thousands):

				Collateral
	Interest Rate		Maturity	# of Hotels	Net Book Value		2001		2000
Variable Rate Debt:
Line of Credit	LIBOR + 200bp		July 2004	24	$	216,228	$	11,188	$	10,273
Fixed Rate Debt:
Line of Credit	6.54	%	July 2003	(a)		(a)		40,000		40,000
Line of Credit	4.78	%	July 2003	(a)		(a)		30,000
Mortgage	6.83	%	August 2008	15		143,522		33,181		36,971
Mortgage	7.30	%	November 2011	(b)		(b)		25,000		25,000
Mortgage	7.83	%	December 2008	10		126,404		92,087		93,460
Mortgage	8.22	%	November 2007	1		44,421		18,271		18,556
Mortgage	4.50	%	January 2001							1,125
Mortgage	8.00	%	August 2010	8		84,987		51,408		52,046
					$	615,562	$	301,135	$	277,431

(a)

Interest rate swaps have fixed the rate of interest on these portions of the Line of Credit and these portions are also collateralized by the twenty-four properties pledged against the variable portion of the Line. The interest rate swaps mature in July 2003.

(b)

This mortgage is also collateralized by the fifteen properties pledged against the previous mortgage in the table.

        The interest rate on the $140 million Line of Credit that matures in July 2004 ranges from 150 basis points to 250 basis points above LIBOR, depending on the Partnership's ratio of total debt to its investment in hotel properties (as defined). The interest rate on the variable contracts of the Line of Credit outstanding at December 31, 2001 was 4.03%, calculated as the LIBOR interest rate of 2.03% plus 200 basis points. The Line of Credit is collateralized by first priority mortgages on 24 hotels that restrict the transfer, pledge or other hypothecation of the hotels (collectively, the "Collateral Pool"). The Partnership may obtain a release of the pledge of any hotel in the Collateral Pool if the Partnership provides a substitute hotel or reduces the total availability under the Line of Credit. Borrowings under the Line of Credit are limited to the Borrowing Base Value, which was $111.4 million at December 31, 2001. The Line of Credit contains various covenants including the maintenance of a minimum net worth, minimum debt and interest coverage ratios, and total indebtedness and liability limitations. The Partnership was in compliance with these covenants at December 31, 2001.

        The Partnership participates in two interest rate swap agreements. One of the interest rate swap agreements is for a notional amount of $30 million maturing in July 2003. Under this interest rate swap agreement, the Partnership receives payments based on the one month LIBOR rate of 2.14% and pays a fixed rate of 4.775% at December 31, 2001. In addition, the Partnership participates in a second interest rate swap agreement for a notional amount of $40 million maturing in July 2003. Under the

F-38

second interest rate swap agreement, the Partnership receives payments based on the one-month LIBOR rate of 2.14% and pays a fixed rate of 6.535% at December 31, 2001.

        The differences to be paid or received by the Partnership under the terms of the interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense by the Partnership pursuant to the terms of the agreements and have a corresponding effect on its future cash flows. Agreements such as these contain a credit risk that the counterparties may be unable to meet the terms of the agreement. The Partnership minimizes that risk by evaluating the creditworthiness of its counterparties, which is limited to major banks and financial institutions, and does not anticipate non-performance by the counterparties. Net receipts (payments) under the interest rate swap agreements were $(1.3) million, $0.1 million and $0 for the years ended December 31, 2001, 2000 and 1999.

        The fair value of the interest rate swap agreements are estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Partnership would expect to receive or pay to terminate the agreements. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net loss on these instruments was approximately $3.2 million and $0.8 million at December 31, 2001 and 2000.

        The Partnership's other borrowings are nonrecourse to the Partnership and contain provisions allowing for the substitution of collateral (except for the 1996 CMBS debt which matures in two tranches in August 2008 and November 2011), upon satisfaction of certain conditions, after the respective loans have been outstanding for approximately four years. Most of the mortgage borrowings are repayable and subject to various prepayment penalties, yield maintenance, or defeasance obligations. At December 31, 2001 and 2000, approximately 96% of the Partnership's debt is fixed at an average interest rate of 7.7%.

        Future scheduled principal payments of debt obligations at December 31, 2001 are as follows (in thousands):

	Amount
2002	$	6,547
2003		7,044
2004		88,735
2005		8,152
2006		8,772
Thereafter		181,885
	$	301,135

        The Partnership in the future may seek to increase further the amount of its credit facilities, negotiate additional credit facilities, or issue corporate debt instruments. Although the Partnership has no charter restrictions on the amount of indebtedness the Partnership may incur, the Board of Directors of RFS have adopted a current policy limiting the amount of indebtedness that RFS will incur to an amount not in excess of approximately 45% of RFS's investment in hotel properties, at cost, (as defined). The Board of Directors may change the debt policy at any time without shareholder approval.

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        The Partnership may incur indebtedness to meet its distribution requirements to the extent that working capital and cash flow from the Partnership's investments are insufficient to make such distributions.

Note 5. Income Taxes

        Prior to January 1, 2001, the Partnership was not subject to federal income taxes. Under the RMA that became effective January 1, 2001, the Partnership leases its hotels to wholly owned taxable REIT subsidiaries that are subject to federal and state income taxes. The Partnership accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS 109, the Partnership accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

        The components of income tax expense (benefit) for the year ended December 31, 2001 are as follows:

Current:
	State	$	20
Deferred:
	Federal	$	(24,734	)
Benefit from income taxes		$	(24,714	)

        The deferred tax benefit was calculated using an effective tax rate of 38% applied to the loss of the TRS Lessees, adjusted for temporary differences related to the Hilton lease termination transaction. The deferred tax asset relates mainly to the payments to terminate the operating leases, management contracts and ancillary agreements with Hilton that were expensed for financial reporting purposes whereas, for tax purposes, these payments will be amortized over the lives of the leases. The Partnership believes that the TRS Lessees will generate sufficient future taxable income to realize in full this deferred tax asset. Accordingly, no valuation allowance has been recorded at December 31, 2001.

        The reconciliation of the TRS's statutory income tax rate to effective tax rate for the year ended December 31, 2001 is as follows:

Statutory U.S. Federal income tax benefit of the Partnership		0	%
Items of taxable income applicable to the TRS Lessees:
	Statutory U.S. Federal income tax benefit	35	%
	State income tax benefit	3	%
	Non-taxable REIT income	25	%
	Other	1	%
	Effective tax rate	64	%

F-40

Note 6. Partnership Units

        Preferred Units.    The Board of Directors is authorized to provide for the issuance of up to 5 million units of Preferred Units in one or more series, to establish the number of units in each series and to fix the designation, powers, preferences and rights of each such series and the qualifications, limitations or restrictions thereof.

        In 1996, the Partnership issued to one of the lessees 973,684 units of Series A Convertible Preferred Units (the "Series A Preferred Units"). The Partnership redeemed the Series A Preferred Units on January 1, 2001 for cash consideration of $13.0 million, which resulted in a gain on redemption of $5.1 million that is included in net income (loss) applicable to unitholders in 2001.

        On January 2, 2001, the Partnership issued 250 thousand shares of non-convertible mandatorily redeemable Series B Preferred Units for $25 million prior to fees and expenses of approximately $1 million. Holders of the Series B Preferred Units are entitled to receive quarterly cash dividends commencing March 31, 2001 at an annual rate of 12.5%. If not redeemed prior to January 1, 2006, the dividend rate increases 2.0% per annum up to a maximum rate of 20.5%. The Partnership may redeem units of the Series B Preferred Units in whole but not in part, on or after December 31, 2003 at the original price of $25 million. If the units are redeemed before December 31, 2003, the redemption price is at varying amounts over the original unit price. The units are mandatorily redeemable by the holders at varying premiums over the original unit price upon a change of control, dissolution, or winding up of the Partnership.

        When RFS, the general partner, repurchases its outstanding common stock, the Partnership repurchases a matching number of units held by RFS at an equal price. The Board of Directors of RFS approved a stock repurchase program to buy back up to 3 million shares of common stock on the open market subject to certain market conditions and other factors. During 2000, RFS repurchased 409 thousand shares at an average price per share of $10.88 or $4.4 million which has been recorded as a reduction to partners' capital as a result of the redemption of units held by RFS to fund the repurchase, bringing the total number of shares repurchased under the program to 576 thousand.

        Redeemable Limited Partnership Units.    The Partnership may also issue limited partnership units to third parties in exchange for cash or property. The outstanding units of limited partnership interest in the Partnership are redeemable at the option of the holder for a like number of shares of common stock of RFS, or cash, or a combination thereof, at the election of RFS. Due to these redemption rights, these limited partnership units have been excluded from partners' capital and are included in redeemable limited partnership units and measured at redemption value as of the end of the periods presented based on the closing market price of RFS's common stock at December 31, 2001 and 2000, which was $11.38 and $13.06 respectively.

        General Partnership Units.    RFS is the sole general partner of the Partnership and is obligated to contribute the net proceeds from any issuance of its equity securities to the Partnership in exchange for Units of partnership interest corresponding in number and terms to the equity securities issued.

Note 7. Commitments and Contingencies

        The Partnership maintains comprehensive insurance on each of its hotels, including liability, fire and extended coverage, of the type and amount customarily obtained for or by hotel owners. All 10 of the Partnership's hotels in California are located in areas that are subject to earthquake activity. These hotels are located in areas of high seismic risk and some were constructed under building codes which were less stringent with regard to earthquake related requirements. An earthquake could render

F-41

significant damage to the Partnership's hotels. Additionally, areas in Florida where six of the Partnership's hotels are located may experience hurricane or high-wind activity. The Partnership has earthquake insurance policies on its hotels in California and wind insurance policies on certain of its hotels located in Florida. However, various types of catastrophic losses, like earthquakes and floods may not be fully insurable or may not be economically insurable. With respect to its hotels in California, in addition to the applicable deductibles under its earthquake insurance policies, the Partnership is self-insured for the first $5 million per earthquake. The Partnership believes its current property insurance, which expires June 30, 2002, will protect it against losses resulting from a terrorist attack. Upon renewal, the Partnership does not know whether its property insurance will protect it against losses resulting from a terrorist attack. The Partnership believes that such losses may not be economically insurable. In the event of a substantial loss, the Partnership's insurance coverage may not be able to cover the full current market value or replacement cost of its lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also affect our ability to replace or renovate a hotel after it has been damaged or destroyed.

        As of December 31, 2001, the Partnership had a $0.6 million Letter of Credit outstanding. The Letter of Credit serves as collateral on the worker's compensation plan set-up on behalf of the hotel employees of Flagstone. On January 1, 2002, the Letter of Credit was increased to $2.0 million. There are no outstandings on the Letter of Credit.

        Effective January 1, 2001, the Partnership receives rental income from five hotels leased to third parties under the Percentage Leases which expire in 2007 (1 hotel), 2008 (2 hotels) and 2009 (2 hotels). Minimum future rental income (base rents) due the Partnership under these noncancelable operating leases at December 31, 2001, is as follows (in thousands):

Year	Amount
2002	$	2,489
2003		2,489
2004		2,489
2005		2,489
2006		2,489
2007 and thereafter		3,853
	$	16,298

        Lease revenue is based on a percentage of room revenues, food and beverage revenues and other revenues of the Hotels. Both the base rent and the threshold room revenue in each lease computation are adjusted annually for changes in the Consumer Price Index ("CPI"). The adjustment is calculated at the beginning of each calendar year. The CPI adjustments made in January 2001 and 2000 were 3.4% and 2.7%, respectively.

        The Partnership may terminate any lease agreement with respect to a hotel property upon the sale of a hotel property in exchange for a termination payment to the lessee. Under the Percentage Leases, the Partnership is obligated to pay the costs of real estate taxes, property insurance, maintenance of underground utilities and structural elements of the Hotels, and to set aside a portion of the Hotels' revenues to fund capital expenditures for the periodic replacement or refurbishment of furniture, fixtures and equipment required for the retention of the franchise licenses with respect to the Hotels.

F-42

Note 8. Stock-Based Compensation Plans

        RFS sponsors a Restricted Stock and Stock Option Plan (the "Plan") that provides for the grant of stock options to purchase a specified number of shares of common stock ("Options") and grants of restricted shares of common stock ("Restricted Stock"). Upon issuance of any stock, RFS is obligated to contribute the proceeds to the Partnership in exchange for an equal number of Partnership units. Under the Plan, approximately 2.3 million shares of common stock, of which 650 thousand shares may be restricted stock, are available for awards to the officers and key employees of RFS and 675 thousand shares of common stock, of which 120 thousand shares may be restricted stock, are available for awards to Directors of RFS who are not officers or employees. Options issued under the plan have a maximum term of ten years from the date of grant. The exercise price of the options shall be determined on the date of each grant.

        A summary of RFS's stock options under the Plan as of December 31, 2001, 2000 and 1999, and the changes during the years are presented below (in thousands, except per share data):

	2001					2000					1999
	Number of Shares Underlying Options			Weighted Average Exercise Price		Number of Shares Underlying Options			Weighted Average Exercise Price		Number of Shares Underlying Options			Weighted Average Exercise Price
Outstanding at beginning of years		1,207		$	13.43		1,484		$	13.83		1,091		$	14.99
Granted		680			11.47		50			11.06		600			11.99
Exercised		(343	)		12.30		(30	)		11.88
Forfeited		(156	)		13.72		(297	)		14.64		(207	)		14.64
Outstanding at end of years		1,388		$	12.76		1,207		$	13.43		1,484		$	13.83
Exercisable at end of years		519		$	14.28		700		$	14.25		604		$	15.34
Weighted-average fair value				$	1.10				$	0.60				$	1.75
Price range of shares under option	$ $	10.50 to 16.87				$ $	10.50 to 16.87				$ $	10.50 to 16.87

        The weighted average remaining contractual life of options outstanding as of December 31, 2001 is 8.0 years.

        The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend of $1.10; volatility of 26.7% for 2001 grants, volatility of 26.2% for 2000 grants and 29% for 1999 grants, risk-free interest rate of 4.8% for 2001, 6.2% for 2000 and 5.9% for 1999 and expected life of 6 years for 2001, 2000, and 1999.

F-43

        Restricted Stock.    A summary of the status of RFS's restricted stock grants as of December 31, 2001, 2000 and 1999 and the changes during the years are presented below (value is computed as the weighted average fair market value of the restricted stock at grant date):

	2001				2000			1999
	# Shares		Value		# Shares	Value		# Shares	Value
Outstanding at beginning of year	343,000		$	13.42	329,000	$	13.56	288,000	$	13.82
Granted, subject to vesting	270,000		$	13.11	14,000	$	11.36	41,000	$	11.75
Forfeited	(1,333	)	$	11.88
Outstanding at end of year	611,667		$	13.31	343,000	$	13.42	329,000	$	13.56
Vested at end of year	314,000		$	13.65	270,662	$	13.89	211,999	$	14.40

Note 9. Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") approved SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement requires that long-lived assets to be disposed of other than by sale be considered held and used until they are disposed of. The Statement requires that long-lived assets to be disposed of by sale be accounted for under the requirements of SFAS No. 121 which requires that such assets be measured at the lower of carrying amounts or fair value less cost to sell and to cease depreciation. SFAS No. 144 requires a probability-weighted cash flow estimation approach with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range of possible future cash flow amounts are estimated. As a result, discontinued operations will no longer be measured on a net realizable basis, and future operating losses will no longer be recognized before they occur. Additionally, goodwill will be removed from the scope SFAS No. 144 and as a result will no longer be required to be allocated to long-lived assets to be tested for impairment. The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Partnership is not currently affected by the Statement's requirements.

Note 10. Consolidating Financial Information

        RFS Leasing VII, Inc., a wholly-owned subsidiary of the Partnership, has guaranteed on a full and unconditional basis, the payment of amounts due under the Partnership's $125 million senior notes. RFS Leasing VII, Inc. (Guarantor Subsidiary) is the only subsidiary of the Partnership that has guaranteed the senior notes. The following tables present consolidating information for the Partnership, the Guarantor Subsidiary, and the non guarantor subsidiaries. The Guarantor Subsidiary leases 24 hotels from the Partnership.

F-44

Consolidating Balance Sheet
December 31, 2001
(in thousands)

		RFS Partnership, L.P.			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Investment in hotel properties, net		$	216,228				$	399,334				$	615,562
Investment in consolidated entities			195,290					6,723	$	(202,013	)		—
Cash and cash equivalents			263		$	1,846		3,626					5,735
Restricted cash			20					6,797					6,817
Accounts receivable			15,556			1,592		3,664		(15,279	)		5,533
Deferred expenses, net			3,077					3,887					6,964
Other assets			1,814			299		1,404					3,517
Deferred income taxes						7,695		17,039					24,734
	Total assets	$	432,248		$	11,432	$	442,474	$	(217,292	)	$	668,862
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses		$	6,365		$	4,709	$	12,237	$	(279	)	$	23,032
Borrowings on Line of Credit			81,188										81,188
Mortgage notes payable								234,947		(15,000	)		219,947
	Total liabilities		87,553			4,709		247,184		(15,279	)		324,167
Series B Preferred Units, $.01 par value, 5,000 units authorized, 250 units issued and outstanding			25,000										25,000
Redeemable units at redemption value			27,980										27,980
Other comprehensive income			(3,220	)									(3,220	)
General partnership units			294,935			6,723		195,290		(202,013	)		294,935
	Total partners' capital		291,715			6,723		195,290		(202,013	)		291,715
	Total liabilities and partners' capital	$	432,248		$	11,432	$	442,474	$	(217,292	)	$	668,862

F-45

Consolidating Balance Sheet
December 31, 2000
(in thousands)

		RFS Partnership, L.P.		Guarantor Subsidiary	Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Investment in hotel properties, net		$	189,759		$	446,238				$	635,997
Investment in consolidated entities			217,872			—		(217,872	)		—
Cash and cash equivalents			1,049			2,632					3,681
Restricted cash			309			4,620					4,929
Accounts receivable			23,410			8,894		(19,263	)		13,041
Deferred expenses, net			2,384			4,430					6,814
Other assets			5,352			3,653					9,005
	Total assets	$	440,135		$	470,467	$	(237,135	)	$	673,467
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses		$	6,734		$	10,437	$	(4,263	)	$	12,908
Borrowings on Line of Credit			50,273								50,273
Mortgage notes payable						242,158		(15,000	)		227,158
	Total liabilities		57,007			252,595		(19,263	)		290,339
Redeemable units at redemption value			33,461								33,461
Series A Preferred Units			18,141								18,141
General partnership units			331,526			217,872		(217,872	)		331,526
	Total partners' capital		349,667			217,872		(217,872	)		349,667
	Total liabilities and partners' capital	$	440,135		$	470,467	$	(237,135	)	$	673,467

F-46

Note 10. Consolidating Financial Information (Continued)

Consolidating Statement of Operations
For the Year Ended December 31, 2001
(in thousands)

			RFS Partnership, L.P.			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenue:
	Rooms					$	72,800		$	115,925					$	188,725
	Food and beverage						8,014			9,681						17,695
	Other operating departments						3,126			5,977						9,103
	Lease revenue		$	29,455						2,651		$	(26,324	)		5,782
	Other			1,715			63			312			(1,517	)		573
		Total hotel revenue		31,170			84,003			134,546			(27,841	)		221,878
Hotel operating expenses:
	Rooms						15,203			21,797						37,000
	Food and beverage						6,983			6,550						13,533
	Other operating departments						969			1,232						2,201
Undistributed operating expenses:
	Property operating costs			(216	)		9,316			13,450						22,550
	Property taxes, insurance and other			3,392			783			8,673						12,848
	Franchise costs						5,854			11,153						17,007
	Maintenance and repair						3,911			5,830						9,741
	Management fees						2,761			3,001						5,762
	Percentage lease expense						32,231			(5,907	)		(26,324	)		—
	Depreciation			9,037						20,568						29,605
	Lease termination						20,250			45,246						65,496
	Amortization of deferred expenses and unearned compensation			64						1,320						1,384
	General and administrative			1,384			6,547			11,505						19,436
		Total operating expenses		13,661			104,808			144,418			(26,324	)		236,563
	Operating income (loss)			17,509			(20,805	)		(9,872	)		(1,517	)		(14,685	)
	Interest expense			8,257			417			18,885			(1,517	)		26,042
	Equity in loss of consolidated subsidiaries			(24,138	)		—			(13,527	)		37,665			—
	Income (loss) before (gain) loss on sale of hotels and income taxes			(14,886	)		(21,222	)		(42,284	)		37,665			(40,727	)
	Gain on sale of hotels						—			(1,127	)					(1,127	)
	Benefit from income taxes						(7,695	)		(17,019	)					(24,714	)
	Net income (loss)			(14,886	)		(13,527	)		(24,138	)		37,665			(14,886	)
	Preferred unit dividends			(3,125	)											(3,125	)
	Gain on redemption of Series A preferred units			5,141												5,141
	Net income (loss) applicable to unitholders		$	(12,870	)	$	(13,527	)	$	(24,138	)	$	37,665		$	(12,870	)

F-47

Consolidating Statement of Operations
For the Year Ended December 31, 2000
(in thousands)

			RFS Partnership, L.P.			Guarantor Subsidiary	Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Revenue:
	Lease revenue		$	43,716			$	62,858				$	106,574
	Other			2,221				214	$	(1,650	)		785
		Total hotel revenue		45,937				63,072		(1,650	)		107,359
Undistributed operating expenses:
	Property taxes, insurance and other			4,529				6,218					10,747
	Depreciation			11,687				15,511					27,198
	Amortization of deferred expenses and unearned compensation			67				607					674
	General and administrative			3,617				2,687					6,304
		Total operating expenses		19,900				25,023					44,923
	Operating income			26,037				38,049		(1,650	)		62,436
	Interest expense			9,301				16,401		(1,650	)		24,052
	Equity in earnings of consolidated subsidiaries			20,621		—		—		(20,621	)		—
	Income before loss on sale of hotels			37,357				21,648		(20,621	)		38,384
	Loss on sale of hotels			3,349				1,027					4,376
	Net income			34,008				20,621		(20,621	)		34,008
	Preferred unit dividends			(1,412	)								(1,412	)
	Net income applicable to unitholders		$	32,596			$	20,621	$	(20,621	)	$	32,596

F-48

Consolidating Statement of Operations
For the Year Ended December 31, 1999
(in thousands)

			RFS Partnership, L.P.			Guarantor Subsidiary	Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Revenue:
	Lease revenue		$	46,927			$	52,035				$	98,962
	Other			2,174				176		(1,650	)		700
		Total hotel revenue		49,101				52,211		(1,650	)		99,662
Undistributed operating expenses:
	Property taxes, insurance and other			4,401				5,458					9,859
	Depreciation			11,275				12,935					24,210
	Amortization of deferred expenses and unearned compensation			76				782					858
	General and administrative			1,807				1,880					3,687
		Total operating expenses		17,559				21,055					38,614
	Operating income			31,542				31,156		(1,650	)		61,048
	Interest expense			6,535				15,951		(1,650	)		20,836
	Equity in earnings of consolidated subsidiaries			15,205		—		—		(15,205	)		—
	Income before loss on sale of hotels			40,212				15,205		(15,205	)		40,212
	Loss on sale of hotels			1,602									1,602
	Net income			38,610				15,205		(15,205	)		38,610
	Preferred unit dividends			(1,412	)								(1,412	)
	Net income applicable to unitholders		$	37,198			$	15,205	$	(15,205	)	$	37,198

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands)

	LP Only			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Total Consolidated
Cash flows from (used in) operating activities	$	26,229		$	(18,404	)	$	2,641		$	10,466
Cash flows from (used in) investing activities		(34,462	)		—			25,820			(8,642	)
Cash flows from (used in) financing activities		7,447			20,250			(27,467	)		230
Net increase (decrease) in cash and cash equivalents		(786	)		1,846			994			2,054
Cash and cash equivalents at beginning of period		1,049			—			2,632			3,681
Cash and cash equivalents at end of period	$	263		$	1,846		$	3,626		$	5,735

F-49

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)

	LP Only			Guarantor Subsidiary		Non-Guarantor Subsidiaries			Total Consolidated
Cash flows from (used in) operating activities	$	28,142		$	—	$	37,081		$	65,223
Cash flows from (used in) investing activities		67,997			—		(78,840	)		(10,843	)
Cash flows from (used in) financing activities		(98,741	)		—		42,129			(56,612	)
Net increase (decrease) in cash and cash equivalents		(2,602	)		—		370			(2,232	)
Cash and cash equivalents at beginning of period		3,651			—		2,262			5,913
Cash and cash equivalents at end of period	$	1,049		$	—	$	2,632		$	3,681

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands)

	LP Only			Guarantor Subsidiary		Non-Guarantor Subsidiaries			Total Consolidated
Cash flows from (used in) operating activities	$	37,786		$	—	$	29,098		$	66,884
Cash flows from (used in) investing activities		(3,855	)		—		(22,725	)		(26,580	)
Cash flows from (used in) financing activities		(31,157	)		—		(5,248	)		(36,405	)
Net increase (decrease) in cash and cash equivalents		2,774			—		1,125			3,899
Cash and cash equivalents at beginning of period		877			—		1,137			2,014
Cash and cash equivalents at end of period	$	3,651		$	—	$	2,262		$	5,913

Note 11. Subsequent Events

        In January, the Partnership sold its interest in an investment in an unconsolidated partnership for approximately $1.2 million, recognizing a gain on sale of approximately $1.1 million.

        On February 20, 2002, RFS sold 1.15 million shares of common stock and contributed the net proceeds to the Partnership in exchange for 1.15 million common units. The Partnership used the net proceeds of approximately $14.2 million to reduce the outstanding balance on the line of credit.

        On February 26, 2002, the Partnership sold $125 million of senior notes. The senior notes are unsecured and guaranteed by the Partnership and certain of its subsidiaries. The Partnership has or is expected to use the net proceeds to retire the 1996 CMBS mortgage debt ($58.2 million outstanding at December 31, 2001), pay the prepayment penalty on the 1996 CMBS mortgage debt of approximately $6.5 million, terminate the two outstanding interest rate swap agreements for approximately $3.2 million, with the balance used to reduce outstanding borrowings under the line of credit. As a result of the prepayment of the 1996 CMBS debt, the Partnership will also expense as an extraordinary item $1.4 million in unamortized debt costs.

F-50

REPORT OF INDEPENDENT ACCOUNTANTS

         To the Board of Directors of
RFS Hotel Investors, Inc.

        Our audits of the consolidated financial statements referred to in our report dated February 7, 2002, except for Note 11, as to which the date is February 26, 2002, of RFS Partnership, L.P. also included an audit of the financial statement schedule included in this prospectus. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Dallas, Texas
February 7, 2002

F-51

RFS PARTNERSHIP, L.P.
SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2001
(in thousands)

							Cost Capitalized Subsequent to Acquisition				Gross Amount at Which Carried at end of Period
			Initial Cost																			Life upon Which Depreciation in Latest Income Statement is Calculated
																	Accumulated Depreciation Buildings and Improvements		Net Book Value Buildings and Improvements
Description	Encumbrances		Land		Buildings and Improvements		Land		Buildings and Improvements		Land		Buildings and Improvements		Total						Date of Acquisition
Sheraton Hotel Clayton, MO	(1	)	$	1,599	$	4,968			$	7,343	$	1,599	$	12,311	$	13,910	$	1,626	$	10,685	1993	40
Holiday Inn Columbia, SC	(1	)		790		3,573				1,417		790		4,990		5,780		876		4,114	1993	40
Holiday Inn Louisville, KY	(1	)		1,328		3,808				1,491		1,328		5,299		6,627		945		4,354	1993	40
Comfort Inn Marietta, GA	(2	)		989		5,509				667		989		6,176		7,165		1,146		5,030	1993	40
Holiday Inn Lafayette, LA	(1	)		700		8,858				1,621		700		10,479		11,179		1,969		8,510	1993	40
Residence Inn Kansas City, MO	(2	)		392		5,344				503		392		5,847		6,239		1,084		4,763	1994	40
Comfort Inn Ft Mill, SC	(2	)		763		6,612				481		763		7,093		7,856		1,310		5,783	1994	40
Hampton Inn Ft Lauderdale, FL	(1	)		590		4,664				699		590		5,363		5,953		946		4,417	1994	40
Holiday Inn Express Arlington Heights, IL	(1	)		350		4,121				569		350		4,690		5,040		786		3,904	1994	40
Hampton Inn Denver, CO	(1	)		500		8,098				450		500		8,548		9,048		1,584		6,964	1994	40
Holiday Inn Express Downers Grove, IL	(1	)		400		5,784				513		400		6,297		6,697		1,145		5,152	1994	40
Hampton Inn Indianapolis, IN	(2	)		475		8,008				517		475		8,525		9,000		1,563		6,962	1994	40
Hampton Inn Lincoln, NE	(1	)		350		4,829				466		350		5,295		5,645		966		4,329	1994	40
Hampton Inn Bloomington, MN	(2	)		375		8,657				304		375		8,961		9,336		1,664		7,297	1994	40
Holiday Inn Express Bloomington, MN	(1	)		780		6,910	$	152		997		932		7,907		8,839		1,379		6,528	1994	40
Hampton Inn Minnetonka, MN	(1	)		475		5,066				264		475		5,330		5,805		980		4,350	1994	40

F-52

RFS PARTNERSHIP, L.P.
SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2001
(in thousands)

							Cost Capitalized Subsequent to Acquisition				Gross Amount at Which Carried at end of Period
			Initial Cost																			Life upon Which Depreciation in Latest Income Statement is Calculated
																	Accumulated Depreciation Buildings and Improvements		Net Book Value Buildings and Improvements
Description	Encumbrances		Land		Buildings and Improvements		Land		Buildings and Improvements		Land		Buildings and Improvements		Total						Date of Acquisition
Hampton Inn Oklahoma City, OK	(2	)	$	530	$	6,826			$	578	$	530	$	7,404	$	7,934	$	1,351	$	6,053	1994	40
Hampton Inn Omaha, NE	(2	)		450		6,362				566		450		6,928		7,378		1,267		5,661	1994	40
Hampton Inn Tulsa, OK	(1	)		350		5,715				753		350		6,468		6,818		1,150		5,318	1994	40
Holiday Inn Express Wauwatosa, WI	(2	)		700		4,926				662		700		5,588		6,288		996		4,592	1994	40
Residence Inn Fishkill, NY	(1	)		2,280		10,484				915		2,280		11,399		13,679		1,971		9,428	1994	40
Residence Inn Providence, RI	(2	)		1,385		7,742				513		1,385		8,255		9,640		1,472		6,783	1994	40
Residence Inn Tyler, TX	(1	)		855		6,212				670		855		6,882		7,737		1,193		5,689	1994	40
Hampton Inn Memphis, TN	(2	)		980		6,157				156		980		6,313		7,293		1,126		5,187	1994	40
Residence Inn Ft Worth, TX	(2	)		985		10,726				957		985		11,683		12,668		1,978		9,705	1994	40
Residence Inn Wilmington, DE	(1	)		1,100		8,488				358		1,100		8,846		9,946		1,586		7,260	1994	40
Residence Inn Torrance, CA	(1	)		2,600		17,789				1,810		2,600		19,599		22,199		3,342		16,257	1994	40
Residence Inn Ann Arbor, MI	(2	)		525		4,461	$	227		3,279		752		7,740		8,492		1,154		6,586	1994	40
Holiday Inn Flint, MI	(1	)		1,220		11,994				515		1,220		12,509		13,729		2,192		10,317	1994	40
Residence Inn Charlotte, NC	(2	)		850		3,844		159		3,402		1,009		7,246		8,255		910		6,336	1994	40
Holiday Inn Express Austin, TX	(2	)		500		4,737				477		500		5,214		5,714		852		4,362	1995	40
Hampton Inn Lakewood, CO	(2	)		957		6,790				393		957		7,183		8,140		1,179		6,004	1995	40

F-53

RFS PARTNERSHIP, L.P.
SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2001
(in thousands)

							Cost Capitalized Subsequent to Acquisition				Gross Amount at Which Carried at end of Period
			Initial Cost																			Life upon Which Depreciation in Latest Income Statement is Calculated
																	Accumulated Depreciation Buildings and Improvements		Net Book Value Buildings and Improvements
Description	Encumbrances		Land		Buildings and Improvements		Land		Buildings and Improvements		Land		Buildings and Improvements		Total						Date of Acquisition
Hampton Inn Hattiesburg, MS	(2	)	$	785	$	4,653			$	1,798	$	785	$	6,451	$	7,236	$	1,005	$	5,446	1995	40
Hampton Inn Laredo, TX	(1	)		1,037		4,116				31		1,037		4,147		5,184		661		3,486	1995	40
Residence Inn Atlanta, GA	(1	)		1,306		10,200				772		1,306		10,972		12,278		1,631		9,341	1995	40
Holiday Inn Crystal Lake, IL	(2	)		1,665		10,932				736		1,665		11,668		13,333		1,738		9,930	1995	40
Residence Inn Orlando, FL	(2	)		1,045		8,880				342		1,045		9,222		10,267		1,408		7,814	1995	40
Residence Inn Sacramento, CA	(2	)		1,000		13,122				163		1,000		13,285		14,285		1,983		11,302	1996	40
Doubletree Hotel Del Mar, CA	(2	)		1,500		13,535	$	294		284		1,794		13,819		15,613		1,928		11,891	1996	40
Courtyard by Marriott Flint, MI	(1	)		600		4,852				196		600		5,048		5,648		638		4,410	1996	40
Hampton Inn Sedona, AZ	(1	)		1,464		3,858				148		1,464		4,006		5,470		432		3,574	1997	40
Hampton Inn Chandler, AZ	(1	)		485		3,950				46		485		3,996		4,481		453		3,543	1997	40
Hampton Inn Houston, TX	(1	)		606		4,919				49		606		4,968		5,574		607		4,361	1997	40
Sheraton Hotel Milpitas, CA	(2	)		5,253		23,169				666		5,253		23,835		29,088		2,917		20,918	1997	40
Sheraton Hotel Sunnyvale, CA	(2	)		785		22,401				774		785		23,175		23,960		2,836		20,339	1997	40
Sheraton Four Points Pleasanton, CA	(2	)		1,935		19,251				495		1,935		19,746		21,681		2,430		17,316	1997	40
Sheraton Four Points Bakersfield, CA	(2	)		1,390		7,554				626		1,390		8,180		9,570		968		7,212	1997	40
Beverly Heritage Milpitas, CA	(1	)		5,250		25,118				4,878		5,250		29,996		35,246		3,073		26,923	1997	40

F-54

RFS PARTNERSHIP, L.P.
SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2001
(in thousands)

								Cost Capitalized Subsequent to Acquisition				Gross Amount at Which Carried at end of Period
				Initial Cost																			Life upon Which Depreciation in Latest Income Statement is Calculated
																		Accumulated Depreciation Buildings and Improvements		Net Book Value Buildings and Improvements
Description	Encumbrances			Land		Buildings and Improvements		Land		Buildings and Improvements		Land		Buildings and Improvements		Total						Date of Acquisition
Sheraton Hotel Birmingham, AL		(1	)	$	3,103	$	13,491			$	1,067	$	3,103	$	14,558	$	17,661	$	1,475	$	13,083	1997	40
Residence Inn Jacksonville, FL		(1	)		1,339		4,990				63		1,339		5,053		6,392		521		4,532	1997	40
Residence Inn West Palm Beach, FL		(1	)		1,293		4,025				9		1,293		4,034		5,327		385		3,649	1998	40
Hampton Inn Jacksonville, FL		(1	)		1,047		4,375				11		1,047		4,386		5,433		419		3,967	1998	40
Homewood Suites Chandler, AZ		(1	)		485		4,601				24		485		4,625		5,110		430		4,195	1998	40
Hotel Rex San Francisco, CA		(1	)		3,000		11,039				112		3,000		11,151		14,151		1,015		10,136	1998	40
Hilton San Francisco, CA	$	18,556			3,007		28,308				11,498		3,007		39,806		42,813		2,813		36,993	1998	40
TownPlace Suites Ft. Worth, TX		(1	)		753		4,721				99		753		4,820		5,573		359		4,461	1998	40
TownPlace Suites Miami, FL		(1	)		895		5,187				30		895		5,217		6,112		334		4,883	1999	40
TownPlace Suites Miami (West), FL		(1	)		914		5,210				170		914		5,380		6,294		290		5,090	1999	40
Unimproved land Crystal Lake, IL		none			504								504				504				0	1995	n/a
Totals				$	69,569	$	484,519	$	832	$	59,393	$	70,401	$	543,912	$	614,313	$	76,437	$	467,475

(1)

Property is collateral for the Line of Credit.

(2)

Property is collateral for long-term, fixed rate debt.

F-55

		2001			2000			1999
Cost of land and improvements, buildings and improvements:
	Balance at beginning of year	$	613,733		$	618,066		$	573,912
	Additions		11,849			17,179			44,154
	Disposals		(11,269	)		(21,512	)
	Balance at end of year	$	614,313		$	613,733		$	618,066
Accumulated depreciation on land improvements, buldings and improvements
	Balance at beginning of year	$	64,247		$	53,124		$	40,979
	Additions		13,571			16,994			12,145
	Disposals		(1,381	)		(5,871	)
	Balance at end of year	$	76,437		$	64,247		$	53,124

F-56

RFS Partnership, L.P.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2001

        The following unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2001 is based in part on the Consolidated Statement of Operations of RFS Partnership, L.P. (the "Partnership") for the year ended December 31, 2001 and assumes that the following occurred on January 1, 2001:

•

The sale of 1.15 million units to RFS Hotel Investors, Inc., the general partner, resulting in net proceeds of approximately $14.2 million that were used to reduce the outstanding balance on the line of credit. This transaction is referred to as the "Capital Offering".



•

The sale of $125 million of senior notes payable bearing interest at 9.75%. The net proceeds from the senior notes offering of approximately $121.5 million will be used as follows: (1) $58.2 million to redeem our 1996 commercial mortgage bonds and $6.5 million to pay a yield maintenance premium, (2) $53.6 million to pay down the outstanding balance under our line of credit and (3) $3.2 million to pay interest rate swap termination fees. As a result of the prepayment of the 1996 commercial mortgage bonds, the Partnership will also expense, as an extraordinary item, $1.4 million in unamortized debt costs. These transactions are collectively referred to as the "Debt Offering".

        In the opinion of our management, all material adjustments necessary to reflect the effects of the preceding transactions have been made. This unaudited Pro Forma Consolidated Statement of Operations is presented for illustrative purposes only and is not necessarily indicative of what RFS Partnership, L.P.'s actual results of operations would have been assuming the transactions described above occurred on the indicated dates, nor does it purport to represent RFS Partnership, L.P.'s results of operations for future periods. The unaudited Pro Forma Consolidated Statement of Operations should be read in conjunction with the RFS Partnership, L.P.'s unaudited Pro Forma Consolidated Balance Sheet at December 31, 2001 and the historical audited financial statements of RFS Partnership, L.P.

F-57

RFS Partnership, L.P.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2001
(in thousands)

			Historical RFS Partnership, L.P.			Capital Offering			Debt Offering			Pro Forma RFS Partnership, L.P.
			(note a)
Revenue:
	Rooms		$	188,725								$	188,725
	Food and beverage			17,695									17,695
	Other operating departments			9,103									9,103
	Lease revenue			5,782									5,782
	Other			573									573
		Total hotel revenue		221,878			—			—			221,878
Hotel operating expenses:
	Rooms		$	37,000									37,000
	Food and beverage			13,533									13,533
	Other operating departments			2,201									2,201
Undistributed operating expenses:
	Property operating costs			22,550									22,550
	Property taxes, insurance and other			12,848									12,848
	Franchise costs			17,007									17,007
	Maintenance and repair			9,741									9,741
	Management fees			5,762									5,762
	Depreciation			29,605									29,605
	Lease termination			65,496									65,496
	Amortization of deferred expenses and unearned compensation			1,384									1,384
	General and administrative			19,436									19,436
		Total operating expenses		236,563			—			—			236,563
	Operating loss			(14,685	)		—			—			(14,685	)
	Interest expense			26,042		$	(1,116)	(b)	$	3,938	(c)		28,864
	Loss before gain on sale of hotels and income taxes			(40,727	)		1,116			(3,938	)		(43,549	)
	Gain on sale of hotels			(1,127	)								(1,127	)
	Benefit from income taxes (note d)			(24,714	)								(24,714	)
	Loss from continuing operations			(14,886	)		1,116			(3,938	)		(17,708	)
	Preferred unit dividends			(3,125	)								(3,125	)
	Gain on redemption of Series A preferred units			5,141									5,141
	Loss from continuing operations applicable to unitholders		$	(12,870	)	$	1,116		$	(3,938	)	$	(15,692	)
	Loss from continuing operations per unit — basic and diluted		$	(0.47	)							$	(0.57	)
	Weighted average units outstanding — basic and diluted			27,520									27,520

F-58

RFS Partnership, L.P.
Notes to Unaudited Pro Forma Consolidated Statement of Operations

(a)

Represents RFS Partnership, L.P.'s historical results of operations.

(b)

To record the decrease in interest expense resulting from the application of the $14.2 million in net proceeds from the Capital Offering to reduce borrowings on the line of credit (computed using the line of credit's 2001 weighted average interest rate of 7.87%).

(c)

To record the net impact on interest expense from the Debt Offering, calculated as follows:

1)

Increase in interest expense of $12.2 million on the $125 million senior notes at 9.75%;

2)

Decrease in interest expense of $4.3 million resulting from the $53.6 million reduction in the line of credit balance (computed using the line of credit's 2001 weighted average interest rate of 7.87%);

3)

Decrease in interest expense of $4.2 million due to the $58.2 million redemption of the 1996 commercial mortgage bonds (computed using the 2001 weighted average interest rate of 7.03%); and

4)

Increase in interest expense of $0.2 million due to the amortization of the senior notes debt issuance costs ($350 thousand), offset by the elimination of the historical amortization of the 1996 commercial mortgage bonds debt issuance costs ($153 thousand).

(d)

There is no pro forma tax adjustment from the $2.8 million increase in loss from continuing operations as the taxable income or loss of the taxable REIT subsidiaries is not impacted by the pro forma adjustments.

F-59

RFS Partnership, L.P.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2001

        The following unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2001 is based in part on the Consolidated Balance Sheet of RFS Partnership, L.P. and assumes the following occurred on December 31, 2001:

•

The sale of 1.15 million common units to RFS Hotel Investors, Inc., the general partner, resulting in net proceeds of approximately $14.2 million that were used to reduce the outstanding balance on the line of credit. This transaction is referred to as the "Capital Offering".



•

The sale of $125 million of senior notes payable bearing interest at 9.75%. The net proceeds from the senior notes offering of approximately $121.5 million will be used as follows: (1) $58.2 million to redeem our 1996 commercial mortgage bonds and $6.5 million to pay a yield maintenance premium, (2) $53.6 million to pay down the outstanding balance under our line of credit and (3) $3.2 million to pay interest rate swap termination fees. As a result of the prepayment of the 1996 commercial mortgage bonds, the Partnership will also expense, as an extraordinary item, $1.4 million in unamortized debt costs. These transactions are collectively referred to as the "Debt Offering".

        In the opinion of our management, all material adjustments necessary to reflect the effects of the preceding transactions have been made. The unaudited Pro Forma Consolidated Balance Sheet is presented for illustrative purposes only and is not necessarily indicative of what RFS Partnership, L.P.'s actual financial position would have been had the transactions described above occurred on December 31, 2001, nor does it purport to represent RFS Partnership, L.P.'s future financial position. The unaudited Pro Forma Consolidated Balance Sheet should be read in conjunction with the RFS Partnership, L.P.'s unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2001 and the historical audited financial statements of RFS Partnership, L.P.

F-60

RFS Partnership, L.P.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2001
(in thousands)

				Historical RFS Partnership, L.P.			Capital Offering			Debt Offering			Pro Forma RFS Partnership, L.P.
				(note a)
ASSETS
Investment in hotel properties, net				$	615,562								$	615,562
Cash and cash equivalents					5,735									5,735
Restricted cash					6,817									6,817
Accounts receivable					5,533									5,533
Deferred expenses, net					6,964					$	2,137	(c)		9,101
Deferred income taxes					24,734									24,734
Other assets					3,517									3,517
			Total assets	$	668,862		$	—		$	2,137		$	670,999
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses				$	23,032					$	(3,220	)(d)	$	19,812
Borrowings on Line of Credit					81,188		$	(14,175	)(b)		(53,599	)(e)		13,414
Senior notes payable											125,000	(f)		125,000
Mortgage notes payable					219,947						(58,181	)(g)		161,766
			Total liabilities		324,167			(14,175	)		10,000			319,992
Commitments and contingencies
Series B Preferred Units					25,000									25,000
Redeemable limited partnership units					27,980									27,980
Partners' Capital
	Other comprehensive income				(3,220	)					3,220	(d)		—
	General partnership units				294,935			14,175	(b)		(11,083	)(h)		298,027
		Total partners' capital			291,715			14,175			(7,863	)		298,027
			Total liabilities and partners' capital	$	668,862		$	—		$	2,137		$	670,999

F-61

RFS Partnership, L.P.
Notes to Unaudited Pro Forma Consolidated Balance Sheet

(a)

Represents the RFS Partnership, L.P.'s historical balance sheet.

(b)

Represents the issuance of 1.15 million common units and the application of the $14.2 million in net proceeds to reduce the balance outstanding on the line of credit.

(c)

To record (1) the debt issuance costs of $3.5 million on the $125 million senior notes offering, and (2) to write-off the unamortized debt issuance costs ($1.4 million) on the 1996 commercial mortgage bonds that were retired.

(d)

To remove the $3.2 million liability and other comprehensive income associated with the interest rate swaps that were terminated.

(e)

To record the payment of $53.6 million to reduce borrowings outstanding on the line of credit.

(f)

To record the issuance of $125 million senior notes.

(g)

To record the payment of $58.2 million to retire the 1996 commercial mortgage bonds.

(h)

To record the following expenses from the Debt Offering:

1)

$6.5 million yield maintenance premium to retire the 1996 commercial mortgage bonds;

2)

$3.2 million to terminate the interest rate swaps; and

3)

$1.4 million write-off of unamortized debt issuance costs associated with the 1996 commercial mortgage bonds.

F-62

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 20. Indemnification of Directors and Officers

RFS Hotel Investors, Inc., RFS 2002 Financing, Inc., RFS Leasing VII, Inc.

        The charter of RFS Hotel Investors, Inc. (the "Company") obligates the Company 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 (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. The Company has entered into indemnification agreements with its executive officers and directors providing for indemnification by the Company of its executive officers and directors to the fullest extent permitted by applicable law.

        Any indemnification by the Company pursuant to the provisions of the Charter or indemnification agreements described above shall be paid out of the assets of the Company 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, 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, without violating the TBCA or the corporation's charter. The Company's Charter contains a provision eliminating the personal liability of its directors or officers to the Company or its shareholders for money damages to the maximum extent permitted by Tennessee law from time to time.

        The Company may purchase director and officer liability insurance for the purpose of providing a source of funds to pay any indemnification described above. The laws of Tennessee authorize Tennessee corporations to purchase and maintain insurance for former or existing directors or officers of the corporation against any liability assisted against and incurred by such person in that capacity or arising out of such person's position, whether or not the corporation would have the power to indemnify against liability under the laws of Tennessee. The Company's Charter does not limit this authority to obtain insurance.

        The charters for RFS 2002 Financing, Inc. ("Financing") and RFS Leasing VII, Inc. ("RFS Leasing") provide for substantially the same indemnification as set forth above for the present and former directors and officers of Financing and RFS Leasing, respectively, provided, however, that neither Financing nor RFS Leasing has entered into such separate indemnification agreements with its executive officers and directors providing for indemnification by the company of its executive officers and directors to the fullest extent permitted by applicable law.

II-1

RFS Partnership, L.P.

        The Fifth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. (the "Partnership"), as amended, (the "Partnership Agreement") provides, generally, for the indemnification of an "indemnitee" against any and all losses, claims, damages, liabilities, judgments, fines, settlements and other amounts (including reasonable expenses) that relate to the operations of the Partnership unless it is established that (i) the act or omission of the Indemnitee was material and either was committed in bad faith or pursuant to active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. For purposes of this Item 20, the term "Indemnitee" includes any person made a party to a proceeding by reason of his status as a director or officer of the Partnership, or the General Partner, and such other persons (including affiliates of the General Partner or the Partnership) as the General Partner, may designate from time to time in its discretion. Any such indemnification will be made only out of assets of the Partnership, and in no event may an Indemnitee subject the limited partners of the Partnership to personal liability by reason of the indemnification provisions in the Partnership Agreement. For purposes of this Item 20, the term "General Partner" means the Company and any person who becomes a substitute or additional General Partner, and any of their successors.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted pursuant to the foregoing provisions or otherwise, the Partnership has been advised that, in the opinion of the Commission, such indemnification is against public policy and, therefore, unenforceable.

        The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such person against such liability under the provisions of the Partnership Agreement.

Item 21. Exhibits and Financial Statement Schedules

EXHIBIT NUMBER	EXHIBIT
*3.1	Second Restated Charter of RFS Hotel Investors, Inc. dated March 6, 1995.
*3.1(a)	Articles of Amendment to Second Restated Charter of RFS Hotel Investors, Inc. dated February 27, 1996.
3.1(b)	Second Articles of Amendment to Second Restated Charter of RFS Hotel Investors, Inc. dated June 27, 1996 (previously filed as Exhibit 3.1 to RFS's Report on Form 8-K dated July 8, 1996 and incorporated herein by reference).
3.1(c)	Articles of Amendment to the Second Restated Charter of RFS Hotel Investors, Inc. dated December 27, 2000 (previously filed as Exhibit 3.1 to RFS's current report on Form 8-K dated January 16, 2001 and incorporated herein by reference).
*3.1(d)	Articles of Amendment to the Second Restated Charter of RFS Hotel Investors, Inc. dated December 13, 2001.
3.2	By-Laws of RFS Hotel Investors, Inc. (previously filed as Exhibit 3.2 to RFS's form S-11 Registration Statement, Registration No. 33-63696 and incorporated herein by reference).
3.3	Fifth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. dated January 2, 2001 (previously filed as Exhibit 3.3 to RFS's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
*3.4	Charter of RFS 2002 Financing, Inc. dated February 8, 2002.

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*3.5	By-Laws of RFS 2002 Financing, Inc. dated February 8, 2002.
*3.6	Charter of RFS Leasing VII, Inc. dated November 13, 2000.
*3.6(a)	Articles of Amendment to the Charter of RFS Leasing VII, Inc. dated December 10, 2001.
*3.7	By-Laws of RFS Leasing VII, Inc. dated November 13, 2000.
*4.1	Indenture dated February 26, 2002 among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc. and U.S. Bank National Association (the "Indenture").
*4.2	Form of Global Note evidencing the 9.75% Series B Senior Notes due 2012 of RFS Partnership, L.P. and RFS 2002 Financing, Inc. (included as Exhibit A to Exhibit 4.1 of this registration statement).
*4.3	Form of Guaranty by RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. (included as Exhibit A to Exhibit 4.1 of this registration statement).
*4.4	Registration Rights Agreement dated February 26, 2002 among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc., Credit Suisse First Boston Corporation and Banc of America Securities LLC.
*5.1	Opinion of Hunton & Williams regarding Legality.
*12.1	Statement regarding Computation of Ratios of RFS Hotel Investors, Inc.
*12.2	Statement regarding Computation of Ratios of RFS Partnership, L.P.
*21.1	List of Subsidiaries of RFS Hotel Investors, Inc.
*23.1	Consent of Hunton & Williams (contained in Exhibit 5.1).
*23.2	Consents of PricewaterhouseCoopers LLP.
**24.1	Power of Attorney.
*25.1	Statement of Eligibility and Qualification on Form T-1 of the U.S. Bank National Association, as Trustee under the Indenture.
*99.1	Form of Letter of Transmittal.
*99.2	Form of Letter to Registered Holders.
*99.3	Form of Letter to Clients.
*99.4	Form of Notice of Guaranteed Delivery.

*

Filed herewith

**

Included on the signature pages of, and incorporated herein by reference from, Registration Statement on Form S-4 (333-84334), filed on March 15, 2002.

Item 22. Undertakings

        A. The undersigned registrants hereby undertake:

        1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

        (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

        (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information described

II-3

in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price described in the "Calculation of Registration Fee" table in the effective registration statement; and

        (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to the information in this Registration Statement.

        2. That, for the purpose of determining any liability under the Securities Act of 1933, each the post-effective amendment will be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of the securities at that time will be deemed to be the initial bona fide offering thereof.

        3. To remove from registration by means of a post-effective amendment any of the securities being registered which have not been exchanged at the termination of this exchange offer.

        B. The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant's annual report pursuant to Section 13(a) or 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.

        C. The undersigned registrants hereby undertake to supply by means of a 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.

        D. The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of the request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in the documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

        E. 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 the indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against the liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of that registrant in the successful defense of any action, suit or proceeding) is asserted by the director, officer or controlling person in connection with the securities being registered, that 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 the indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of the issue.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrants have duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Memphis, State of Tennessee, on March 18, 2002.

RFS HOTEL INVESTORS, INC.
By:	/s/  KEVIN M. LUEBBERS
Name:	Kevin M. Luebbers
Title:	Executive Vice President, Treasurer and Chief Financial Officer

RFS PARTNERSHIP, L.P. a Tennessee limited partnership
By:	RFS HOTEL INVESTORS, INC.
Its:	General Partner
	By:	/s/  KEVIN M. LUEBBERS
	Name:	Kevin M. Luebbers
	Title:	Executive Vice President, Treasurer and Chief Financial Officer

        Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT M. SOLMSON* Robert M. Solmson	Chairman of the Board and Chief Executive Officer	March 18, 2002
/s/  RANDALL L. CHURCHEY* Randall L. Churchey	President, Chief Operating Officer and Director	March 18, 2002
/s/  KEVIN M. LUEBBERS Kevin M. Luebbers	Executive Vice President, Treasurer and Chief Financial Officer	March 18, 2002
/s/  DENNIS M. CRAVEN* Dennis M. Craven	Vice President and Chief Accounting Officer	March 18, 2002
/s/  BRUCE E. CAMPBELL, JR.* Bruce E. Campbell, Jr.	Independent Director	March 18, 2002
/s/  H. LANCE FORSDICK, SR.* H. Lance Forsdick, Sr.	Independent Director	March 18, 2002
/s/  R. LEE JENKINS* R. Lee Jenkins	Independent Director	March 18, 2002

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/s/  KARL MATTHIES* Karl Matthies	Independent Director	March 18, 2002
/s/  RICHARD REISS, JR.* Richard Reiss, Jr.	Independent Director	March 18, 2002
/s/  MICHAEL S. STARNES* Michael S. Starnes	Independent Director	March 18, 2002
/s/  JOHN W. STOKES, JR.* John W. Stokes, Jr.	Independent Director	March 18, 2002

*By:	/s/  KEVIN M. LUEBBERS
	Kevin M. Luebbers Attorney-in-Fact

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrants have duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Memphis, State of Tennessee, on March 18, 2002.

RFS 2002 FINANCING, INC.
By:	/s/  KEVIN M. LUEBBERS
Name:	Kevin M. Luebbers
Title:	Executive Vice President, Treasurer and Chief Financial Officer

        Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT M. SOLMSON* Robert M. Solmson	Chairman of the Board and Chief Executive Officer	March 18, 2002
/s/  RANDALL L. CHURCHEY* Randall L. Churchey	President, Chief Operating Officer and Director	March 18, 2002
/s/  KEVIN M. LUEBBERS Kevin M. Luebbers	Executive Vice President, Treasurer and Chief Financial Officer (Principal Accounting Officer)	March 18, 2002

*By:	/s/  KEVIN M. LUEBBERS
	Kevin M. Luebbers Attorney-in-Fact

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrants have duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Memphis, State of Tennessee, on March 18, 2002.

RFS LEASING VII, INC.
By:	/s/  KEVIN M. LUEBBERS
Name:	Kevin M. Luebbers
Title:	Executive Vice President, Treasurer and Chief Financial Officer

        Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT M. SOLMSON* Robert M. Solmson	Chairman of the Board and Chief Executive Officer	March 18, 2002
/s/  RANDALL L. CHURCHEY* Randall L. Churchey	President, Chief Operating Officer and Director	March 18, 2002
/s/  KEVIN M. LUEBBERS Kevin M. Luebbers	Executive Vice President, Treasurer and Chief Financial Officer	March 18, 2002
/s/  DENNIS M. CRAVEN* Dennis M. Craven	Chief Accounting Officer	March 18, 2002

*By:	/s/  KEVIN M. LUEBBERS
	Kevin M. Luebbers Attorney-in-Fact

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EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT
*3.1	Second Restated Charter of RFS Hotel Investors, Inc. dated March 6, 1995.
*3.1(a)	Articles of Amendment to Second Restated Charter of RFS Hotel Investors, Inc. dated February 27, 1996.
3.1(b)	Second Articles of Amendment to Second Restated Charter of RFS Hotel Investors, Inc. dated June 27, 1996 (previously filed as Exhibit 3.1 to RFS's Report on Form 8-K dated July 8, 1996 and incorporated herein by reference).
3.1(c)	Articles of Amendment to the Second Restated Charter of RFS Hotel Investors, Inc. dated December 27, 2000 (previously filed as Exhibit 3.1 to RFS's current report on Form 8-K dated January 16, 2001 and incorporated herein by reference).
*3.1(d)	Articles of Amendment to the Second Restated Charter of RFS Hotel Investors, Inc. dated December 13, 2001.
3.2	By-Laws of RFS Hotel Investors, Inc. (previously filed as Exhibit 3.2 to RFS's form S-11 Registration Statement, Registration No. 33-63696 and incorporated herein by reference).
3.3	Fifth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. dated January 2, 2001 (previously filed as Exhibit 3.3 to RFS's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
*3.4	Charter of RFS 2002 Financing, Inc. dated February 8, 2002.
*3.5	By-Laws of RFS 2002 Financing, Inc. dated February 8, 2002.
*3.6	Charter of RFS Leasing VII, Inc. dated November 13, 2000.
*3.6(a)	Articles of Amendment to the Charter of RFS Leasing VII, Inc. dated December 10, 2001.
*3.7	By-Laws of RFS Leasing VII, Inc. dated November 13, 2000.
*4.1	Indenture dated February 26, 2002 among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc. and U.S. Bank National Association (the "Indenture").
*4.2	Form of Global Note evidencing the 9.75% Series B Senior Notes due 2012 of RFS Partnership, L.P. and RFS 2002 Financing, Inc. (included as Exhibit A to Exhibit 4.1 of this registration statement).
*4.3	Form of Guaranty by RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. (included as Exhibit A to Exhibit 4.1 of this registration statement).
*4.4	Registration Rights Agreement dated February 26, 2002 among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc., Credit Suisse First Boston Corporation and Banc of America Securities LLC.
*5.1	Opinion of Hunton & Williams regarding Legality.
*12.1	Statement regarding Computation of Ratios of RFS Hotel Investors, Inc.
*12.2	Statement regarding Computation of Ratios of RFS Partnership, L.P.
*21.1	List of Subsidiaries of RFS Hotel Investors, Inc.
*23.1	Consent of Hunton & Williams (contained in Exhibit 5.1).
*23.2	Consents of PricewaterhouseCoopers LLP.
**24.1	Power of Attorney.
*25.1	Statement of Eligibility and Qualification on Form T-1 of the U.S. Bank National Association, as Trustee under the Indenture.
*99.1	Form of Letter of Transmittal.
*99.2	Form of Letter to Registered Holders.
*99.3	Form of Letter to Clients.
*99.4	Form of Notice of Guaranteed Delivery.

*

Filed herewith

**

Included on the signature pages of, and incorporated herein by reference from, Registration Statement on Form S-4 (333-84334), filed on March 15, 2002.

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EXPLANATORY NOTE
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
CERTAIN DEFINITIONS
PROSPECTUS SUMMARY
The Company
Competitive Strengths
Business Strategy
Recent Developments
Risk Factors
Our Organizational Structure
Summary of the Exchange Offer
Summary of the Terms of the Exchange Notes
Summary Historical and Unaudited Pro Forma Consolidated Financial Data
RISK FACTORS
USE OF PROCEEDS
CAPITALIZATION
THE EXCHANGE OFFER
SELECTED HISTORICAL FINANCIAL DATA
SUPPLEMENTARY QUARTERLY RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RFS AND THE PARTNERSHIP
Comparable Hotels Operating Statistics For the Year Ended December 31, 2001
Comparable Hotels Operating Statistics For the Year Ended December 31, 2000 and 1999
Expected Principal Cash Flows (in thousands)
BUSINESS AND PROPERTIES
MANAGEMENT
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK
DESCRIPTION OF THE EXCHANGE NOTES
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
RFS HOTEL INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
RFS HOTEL INVESTORS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999 (in thousands, except per share data)
RFS HOTEL INVESTORS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, 2001, 2000 and 1999 (in thousands)
RFS HOTEL INVESTORS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended December 31, 2001, 2000 and 1999 (in thousands, except per share data)
RFS HOTEL INVESTORS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001, 2000 and 1999 (in thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF RFS HOTEL INVESTORS, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
RFS PARTNERSHIP, L.P. CONSOLIDATED BALANCE SHEETS (in thousands)
RFS PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999 (in thousands, except per unit data)
RFS PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, 2001, 2000 and 1999 (in thousands)
RFS PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL For The Years Ended December 31, 2001, 2000 and 1999 (IN THOUSANDS)
RFS PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001, 2000 and 1999 (in thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF RFS PARTNERSHIP, L.P.
Consolidating Balance Sheet December 31, 2001 (in thousands)
Consolidating Balance Sheet December 31, 2000 (in thousands)
Consolidating Statement of Operations For the Year Ended December 31, 2001 (in thousands)
Consolidating Statement of Operations For the Year Ended December 31, 2000 (in thousands)
Consolidating Statement of Operations For the Year Ended December 31, 1999 (in thousands)
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands)
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 (in thousands)
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (in thousands)
REPORT OF INDEPENDENT ACCOUNTANTS
RFS PARTNERSHIP, L.P. SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2001 (in thousands)
RFS PARTNERSHIP, L.P. SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2001 (in thousands)
RFS PARTNERSHIP, L.P. SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2001 (in thousands)
RFS PARTNERSHIP, L.P. SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2001 (in thousands)
RFS Partnership, L.P. Unaudited Pro Forma Consolidated Balance Sheet As of December 31, 2001
RFS Partnership, L.P. Unaudited Pro Forma Consolidated Balance Sheet As of December 31, 2001 (in thousands)
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
SIGNATURES
SIGNATURES
SIGNATURES
EXHIBIT INDEX

EX-3.1

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EXHIBIT 3.1

SECOND
RESTATED CHARTER
OF
RFS HOTEL INVESTORS, INC.

        1.    Name.    The name of the corporation (which is hereinafter called the "Corporation") is RFS Hotel Investors, Inc.

        2.    For Profit.    The Corporation is for profit.

        3.    Principal and Registered Office.    The address of the Corporation's registered office and its principal office is 1213 Park Place Center, Suite 200, Memphis, Shelby County, Tennessee 38119.

        4.    Registered Agent.    The name of the Corporation's registered agent at that office is Robert M. Solmson.

        5.    Authorized Capital Stock.    The total number of shares of stock which the Corporation has authority to issue is one hundred million (100,000,000) shares of Common Stock, $.01 par value per share, and five million (5,000,000) shares of Preferred Stock, $.01 par value per share.

        The Preferred Stock may be issued from time to time by the Board of Directors of the Corporation, in such series and with such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or other provisions as may be fixed by the Board of Directors.

        6.    Directors.

        (a)  The Corporation shall have a Board of Directors consisting of not less than three (3) nor more than nine (9) members unless otherwise determined from time to time by resolution adopted by the affirmative vote of at least 80% of the members of the Board of Directors. However, the number of directors shall never be less than the minimum number required by the Tennessee Business Corporation Act. A director need not be a shareholder. Directors shall be divided into three (3) classes as nearly equal in number as possible. The initial term of Class I directors shall expire at the annual shareholder meeting in 1994. The initial term of Class II directors shall expire at the annual shareholder meeting in 1995 and the initial term of the Class III director shall expire at the annual shareholder meeting in 1996. At each annual shareholder meeting, the shareholders shall elect one or more directors to serve a three-year term of the class of directors whose term is expiring at such annual meeting and until their successors are elected and qualify.

        (b)    Initial Directors.    The following persons are the initial directors of the Corporation, to serve until their successors are elected and qualified:

Name	Class	Term Expires
John W. Stokes, Jr.	Class I	1994
Michael S. Starnes	Class I	1994
Bruce E. Campbell, Jr.	Class II	1995
H. Lance Forsdick	Class II	1995
Robert M. Solmson	Class III	1996

        (c)    Independent Directors.    Notwithstanding anything herein to the contrary, at all times (except during a period not to exceed sixty (60) days following the death, resignation, incapacity or removal from office of a director prior to expiration of the director's term of office), a majority of the Board of Directors shall be comprised of persons who are not officers or employees of the Corporation or "Affiliates" of (i) any advisor to the Corporation under an advisory agreement, (ii) any lessee of any property of the Corporation, (iii) any subsidiary of the Corporation or (iv) any partnership which is an Affiliate of the Corporation.

        (d)    Definition of Affiliate.    For purposes of the foregoing subsection, "Affiliate" of a person shall mean (i) any person that, directly or indirectly, controls or is controlled by or is under common control with such person, (ii) any other 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). The term "person" means and includes individuals, corporations, general and limited partnerships, stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof. For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, through the ownership of voting securities, partnership interests or other equity interests.

        (e)    Amendment of this Article.    Notwithstanding any other provisions of this Charter or the Bylaws of the Corporation (and notwithstanding that some lesser percentage may be specified by law, this Charter or the Bylaws of the Corporation), the provisions of this Article 6 shall not be amended, altered, changed or repealed without the affirmative vote of at least 80% of the members of the Board of Directors or the affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting separately as a class.

        7.    Limitation on Indebtedness.    The Corporation may not incur or allow to exist as of the end of any month Indebtedness (as defined below) in an amount in excess of thirty percent (30%) of the Corporation's investment in hotel properties, at cost, and after giving effect to the Corporation's use of proceeds from any Indebtedness. For purposes of the foregoing restrictions, "Indebtedness" of the Corporation shall mean all obligations of the Corporation, its subsidiaries or any partnership in which the Corporation serves as general partner, for borrowed money (including all notes payable and drafts accepted representing extensions of credit) and all obligations evidenced by bonds, debentures, notes or other similar instruments on which interest charges are customarily paid, including obligations under capital leases.

        8.    Dividends.    All shares of Common Stock will participate equally in dividends payable to holders of shares of Common Stock when and as declared by the Board of Directors and in net assets available for distribution to holders of shares of Common Stock upon liquidation or dissolution.

        9.    Preemptive Rights.    No holder of shares of capital stock of the Corporation shall have any preemptive or preferential right to subscribe to or purchase (i) any shares of any class of the Corporation, whether now or hereafter authorized; (ii) any warrants, rights, or options to purchase any such shares; or (iii) any securities or obligations convertible into any such shares or into warrants, rights, or options to purchase any such shares.

        10.    Limitation on Liability to Shareholders.    To the maximum extent that Tennessee law in effect from time to time permits limitation of the liability of directors and officers, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for money damages. Neither the amendment nor repeal of this provision, nor the adoption or amendment of any other provision of the Charter or Bylaws inconsistent with this provision, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

2

        11.    Indemnification.    Any word or words defined in Part 5 of Chapter 18 of Title 48 of the Tennessee Code Annotated, as amended from time to time (the "Indemnification Section") used in this Article 11, shall have the same meaning as provided in the Indemnification Section.

        The Corporation shall indemnify and advance expenses to a director, officer, employee or agent of the Corporation in connection with a proceeding to the fullest extent permitted by and in accordance with the Indemnification Section.

        12.    Insurance.    The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or who, while a director, officer, employee or agent of the Corporation is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee or agent, whether or not the Corporation would have power to indemnify such person against the same liability under the Indemnification Section.

        13.    REIT Status.    The Corporation shall seek to elect and maintain status as a real estate investment trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). It shall be the duty of the Board of Directors to ensure that the Corporation satisfies the requirements for qualification as a REIT under the Code, including, but not limited to, the ownership of its outstanding stock, the nature of its assets, the sources of its income, and the amount and timing of its distributions to its shareholders.

        14.    Restrictions on Transfer.

        (a)    Affidavits of Transferees.    Whenever it is deemed by the Board of Directors to be prudent in protecting the tax status of the Corporation as a REIT under the Code and regulations issued under the Code, the Board of Directors may require to be filed with the Corporation a statement or affidavit from each proposed transferee of shares of capital stock of the Corporation setting forth the number of shares already owned by the transferee and any related person(s) specified in the form prescribed by the Board of Directors for that purpose. Any contract for the sale or other transfer of shares of capital stock of the Corporation shall be subject to this provision.

        (b)    Affidavits of Shareholders.    Prior to any transfer or transaction which would cause a shareholder to own, directly or indirectly, shares in excess of the "Limit" as defined in paragraph (d) of this Article 14, and in any event upon demand of the Board of Directors, such shareholder shall file with the Corporation an affidavit setting forth the number of shares of capital stock of the Corporation (a) owned directly and (b) owned indirectly by the person filing the affidavit. For purposes of this paragraph (b), shares of capital stock not owned directly shall be deemed to be owned indirectly by a person if that person would be the beneficial owner of such shares for purposes of Rule 13d-3, or any successor rule thereto, promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") and/or would be considered to own such shares by reason of the attribution rules in Section 544 (as modified by Section 856(h)) of the Code or the regulations issued thereunder.

        The affidavit to be filed with the Corporation shall set forth all information required to be reported in returns filed by shareholders under Treasury Regulation § 1.857-9 issued under the Code or similar provisions of any successor regulation, and in reports to be filed under Section 13(d), or any successor rule thereto, of the Exchange Act. The affidavit, or an amendment thereto, shall be filed with the Corporation within ten (10) days after demand therefor and at least fifteen (15) days prior to any transfer or transaction which, if consummated, would cause the filing person to hold a number of shares of capital stock of the Corporation in excess of the "Limit" as defined in paragraph (d) of this Article 14. The Board of Directors shall have the right but shall not be required, to cause the

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Corporation to refuse to permit the transfer of any shares of capital stock of the Corporation purportedly transferred other than in compliance with the provisions of this paragraph (b).

        (c)    Void Transfers.    Any acquisition of shares of capital stock that (i) causes any person's ownership to exceed the Limit (as defined in Section 14(d)) or (ii) would result in the disqualification of the Corporation as a REIT under the Code shall be void ab initio to the fullest extent permitted under applicable law and the intended transferee of those shares shall be deemed never to have had an interest therein. If the foregoing provision is determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the transferee of those shares shall be deemed, at the option of the Corporation, to have acted as agent on behalf of the Corporation in acquiring those shares and to hold those shares on behalf of the Corporation.

        (d)    Excess Shares.    Notwithstanding any other provision hereof to the contrary and subject to the provisions of paragraph (e) of this Article 14, no person shall at any time directly or indirectly own in the aggregate more than 9.9% of the outstanding shares of capital stock of the Corporation (the "Limit"). Shares which but for this Article 14 would be owned by a person and would, at any time, be in excess of the Limit shall be deemed "Excess Shares." For the purpose of determining ownership of Excess Shares, "ownership" of shares shall be deemed to include shares constructively owned by a person under the provisions of Section 544 (as modified by Section 856(h)) of the Code. All shares of capital stock of the Corporation which any person has the right to acquire upon exercise of outstanding rights, options and warrants, and upon conversion of any securities convertible into those shares, if any, shall be considered outstanding for purposes of determining the applicable Limit if such inclusion will cause such person to own more than the Limit. The Board of Directors shall have the right, but shall not be required, to refuse to permit the transfer of shares of capital stock on the books of the Corporation if, as a result of the proposed transfer, any person would hold or be deemed to hold Excess Shares.

        (e)    Exemptions.    The Limit set forth in paragraph (d) of this Article 14 shall not apply to the acquisition of shares of capital stock of the Corporation by an underwriter in a public offering of those shares or in any transaction involving the issuance of shares of capital stock by the Corporation in which the Board of Directors determines that the underwriter or other person or party initially acquiring those shares will timely distribute those shares to or among others so that, following such distribution, none of those shares will be deemed to be Excess Shares. The Board of Directors in its discretion may exempt from the Limit and from the filing requirements of paragraph (b) of this Article 14 ownership or transfers of certain designated shares of capital stock of the Corporation while owned by or transferred to a person who has provided the Board of Directors with evidence and assurances acceptable to the Board of Directors that the qualification of the Corporation as a REIT under the Code and the regulations issued under the Code would not be jeopardized thereby.

        (f)    Redemption of Excess Shares.    At the discretion of the Board of Directors, any or all Excess Shares may be redeemed by the Corporation. Written notice of redemption (the "Notice") shall be provided to the purported transferee of the Excess Shares not less than one week prior to the redemption date (the "Redemption Date") determined by the Board of Directors and included in the Notice. The redemption price per share to be paid for Excess Shares will be equal to the lesser of (i) (a) the closing price per share of the shares on the principal national securities exchange on which the shares are listed or admitted to trading on the date of Notice, or (b) if the shares are not so listed or admitted to trading, the closing bid price on the date of Notice as reported on the National Association of Securities Dealers, Inc. System, if quoted thereon (the price per share determined under clause (a) or (b) being herein defined as the "Market Price"), or (c) if a Market Price is not determinable in accordance with either clause (a) or (b) of this sentence, the net asset value per share on the date of Notice determined in good faith by the Board of Directors, (ii) the Market Price on the date on which the person would but for this

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Article 14 have been deemed to acquire ownership of the Excess Shares, or (iii) the maximum price allowed under Part 5 of Chapter 35 of Title 48 of the Tennessee Code Annotated. The redemption price for any shares of capital stock of the Corporation so redeemed shall be paid on the Redemption Date. From and after the Redemption Date, the holder of any redeemed shares of capital stock of the Corporation shall cease to be entitled to any distributions or other benefits with respect to redeemed shares, except the right to receive payment of the redemption price fixed as aforesaid.

        (g)    Application of Article.    Nothing contained in this Article 14 or in any other provision hereof shall limit the authority of the Board of Directors to take any and all other action as it in its sole discretion deems necessary or advisable to protect the Corporation and the interests of its shareholders by maintaining the Corporation's eligibility to be, and preserving the Corporation's status as, a REIT under the Code.

        (h)    Definition of "Person".    For purposes of this Article only, the term "person" shall include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, consortia, companies, trusts, banks, trust companies, land trusts, common law trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof.

        (i)    Severability.    If any provision of this Article 14 or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issue, the validity of the remaining provisions shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of that court.

        (j)    Legend.    Certificates representing shares of capital stock of the Corporation shall bear a legend referencing the restrictions set forth in this Article 14.

Dated: _________________________, 1995.

[Filed with the State of Tennessee on March 6, 1995]

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SECOND RESTATED CHARTER OF RFS HOTEL INVESTORS, INC.

EX-3.1(A)

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EXHIBIT 3.1(a)

ARTICLES OF AMENDMENT
TO THE
SECOND RESTATED CHARTER OF
RFS HOTEL INVESTORS, INC.

Under Section 48-16-102(d) of the Tennessee Business Corporate Act.

        1.    The name of the Corporation is RFS Hotel Investors, Inc.

        2.    Article 5 of the Corporation's Amended and Restated Charter is hereby amended to add the following at the end thereof:

        "The distinctions, designations, rights, preferences and restrictions of the Series A Convertible Preferred Stock are determined and fixed as follows:

        A.    Designation.    A series of the Preferred Stock designated Convertible Preferred Stock, Series A (hereinafter referred to as the "Series A Preferred Stock") is hereby established, and the number of shares constituting the series shall be Nine Hundred Seventy Three Thousand Six Hundred Eighty Four (973,684). Shares of this series shall have an initial preference value of $19.00 per share (the "Stated Value") and a par value of $0.01.

        B.    Relative Seniority.    In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Corporation, the Series A Preferred Stock shall rank senior to the Common Stock and any other capital stock of the Corporation which does not, by its terms, rank senior to or pari passu with, as to dividends and/or upon liquidation, the Series A Preferred Stock (collectively, "Junior Stock").

        C.    Voting Rights.    Except as otherwise required by law, the holders of the Series A Preferred Stock shall be entitled to that number of votes equal to the number of shares of the Corporation's Common Stock, $0.01 par value per share, into which the Series A Preferred Stock may then be converted (or would be converted, if not then convertible), voting together as a single voting group with the holders of the shares of the Common Stock, on all matters submitted to the Corporation's shareholders for approval. The holders of Series A Preferred Stock shall have the right to vote separately as a class on any amendment to the Charter which creates a class of preferred stock ranking senior to the Series A Preferred Stock as to dividends and/or upon liquidation, which amendment shall require the approval of the holders of 66²/3% of the outstanding shares of Series A Preferred Stock.

        D.    Dividends.

        (i)    Holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, dividends on their shares of the Series A Preferred Stock as provided in this Section D.

        (ii)  Dividends on shares of Series A Preferred Stock shall accumulate from the date of issue of the Series A Preferred Stock, prorated for any partial period on the basis of a 360-day year consisting of twelve 30-day months, and shall be paid, when, as, and if declared by the Board of Directors, in cumulative cash dividends, only out of funds legally available therefor, at the fixed per annum rate of $1.45 per share of Series A Preferred Stock. The term "date of issue" or any similar phrase herein shall mean the date on which the Corporation initially issues the Series A Preferred Stock, regardless of any transfer or re-issuance of share certificates representing the Series A Preferred Stock, including, without limitation, any re-issuance of share certificates pursuant to Section H(i) or H(ii).

        (iii)  Dividends on shares of Series A Preferred Stock shall accrue at the rate and in the manner described herein, whether or not such dividends shall have been declared and whether

or not there shall be (at the time such dividends accrue or become payable or at any other time), profits, surplus or other funds of the Corporation legally available for the payment of cash dividends. Dividends on shares of Series A Preferred Stock, if declared, shall be payable at the fixed quarterly rate of $0.3625 per share at such time as quarterly dividends are paid on the Common Stock, commencing with the first such dividend following the Closing Date (each of such dates referred to herein as a "Dividend Payment Date"). The first quarterly dividend on the Series A Preferred Stock shall be pro rated as described in Section D(ii) above. All accumulated but unpaid dividends on Series A Preferred Stock shall be payable in preference to and in priority over any dividends or distributions on Junior Stock.

        (iv)  So long as any shares of Series A Preferred Stock shall remain outstanding, no cash dividend shall be declared or paid upon, nor shall any cash distribution be made upon, any Junior Stock, nor shall any shares of Junior Stock be purchased or redeemed by the Corporation, nor shall any moneys be paid to or made available for a sinking fund for the purchase or redemption of any Junior Stock, unless in each instance accrued dividends on all outstanding shares of the Series A Preferred Stock for all Dividend Payment Dates shall have been paid in full.

        (v)  The amount of any dividends accrued on any shares of Series A Preferred Stock at any Dividend Payment Date shall be the amount of any unpaid dividends accumulated thereon, to and including such Dividend Payment Date, whether or not earned or declared, and the amount of dividends accrued on any shares of Series A Preferred Stock at any date other than a Dividend Payment Date shall be equal to the sum of the amount of any unpaid dividends accumulated thereon, to and including the last preceding Dividend Payment Date, whether or not earned or declared, plus an amount calculated on the basis of the annual dividend rate for the period after such last preceding Dividend Payment Date to and including the date as of which the calculation is made, based on a 360-day year of twelve 30-day months.

        (vi)  No holder of shares of Series A Preferred Stock shall be entitled to any dividends in excess of full cumulative dividends at the fixed annual rate provided herein, on shares of Series A Preferred Stock. Accumulated but unpaid dividends on the Series A Preferred Stock shall bear interest at a per annum rate of 7.6%. Except as provided herein, the Series A Preferred Stock shall not be entitled to participate in the earnings or assets of the corporation.

        E.    Conversion.

        (i)    Optional Conversion.    No holder of shares of Series A Preferred Stock shall have the right to convert any shares of Series A Preferred Stock prior to the seventh (7^th) anniversary of the date of the initial issuance of the Series A Preferred Stock. On and after the seventh anniversary of the date of the initial issuance of the Series A Preferred Stock, each holder of shares of Series A Preferred Stock shall have the right, at such holder's option, to convert, without payment of any additional consideration, any or all of the shares of Series A Preferred Stock held by such holder into the number of shares of Common Stock obtained by multiplying the number of shares of Series A Preferred Stock to be converted by the conversion rate determined from time to time pursuant to this Section E (the "Conversion Rate"). The initial Conversion Rate shall be 1.0.

        (ii)    Mechanics of Conversion.    In order for the any holder of shares of Series A Preferred Stock to convert any such shares into shares of Common Stock, such holder shall surrender the certificate or certificates evidencing the shares to be converted, duly endorsed, at the principal office of the Corporation and shall give written notice to the Corporation at such office of the election to convert such shares into shares of Common Stock. The notice shall state the number of shares of Series A Preferred Stock to be converted and the name of

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the holder or the name(s) of the nominee(s) of such holder in which any certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder or such nominee(s), a certificate or certificates for the number of full shares of Common Stock to which such holder or such nominee(s) is entitled, together with a new certificate for the number of any shares of Preferred Stock not converted. Any conversion shall be deemed to occur immediately prior to the close of business on the date of surrender of the shares to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

        (iii)    No Fractional Shares.    No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series A Preferred Stock. If a holder surrenders for conversion more than one share of Series A Preferred Stock at any time, the number of full shares of Common Stock issuable upon conversion thereof shall be computed using the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of issuing any fractional shares of Common Stock that would otherwise be issuable upon conversion of any of the shares of Series A Preferred Stock, the Corporation shall round down to the nearest whole number of shares of Common Stock and pay to such holder cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors).

        (iv)    Adjustment of Number of Shares of Common Stock Issuable upon Conversion of the Series A Preferred Stock.    The Conversion Rate shall be subject to adjustment from time to time as follows:

        (a)    Effect of "Split-ups" and "Split-downs"; Stock Dividends.    If at any time or from time to time the Corporation shall subdivide as a whole, by reclassification, by the issuance of a stock dividend or by making a distribution on the Common Stock payable in Common Stock, or otherwise, the number of shares of Common Stock, the Conversion Rate shall be increased proportionately as of the effective or record date of such action. The issuance of such a stock dividend shall be treated as a subdivision of the whole number of shares of Common Stock outstanding immediately before the record date for such dividend into a number of shares equal to such whole number of shares so outstanding plus the number of shares issued as a stock dividend. In case at any time or from time to time the Corporation shall combine as a whole, by reclassification or otherwise, the number of shares of Common Stock then outstanding into a lesser number of shares of Common Stock, with or without par value, the Conversion Rate shall be reduced proportionately as of the effective date of such action.

        (b)    Effect of a Diluting Issue.    For purposes of this Section D(iv)(b) and Section D(iv)(c), Current Market Price shall mean, per share of Common Stock, a price equal to the weighted average of the sales prices for the Common Stock on the Nasdaq Stock Market or principal exchange on which the Common Stock is then traded on the date of determination. If the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price of the Common Stock (determined on the record date for the determination of shareholders entitled to receive such rights or warrants), then the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect on such record date by a fraction of which the numerator shall be the sum of: (A) the number of shares of Common Stock outstanding immediately prior to such record date and (B) the number of additional shares of Common Stock issuable upon exercise of the rights or warrants, and of which the denominator shall be the sum of: (1) the number

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of shares of Common Stock outstanding immediately prior to such record date and (2) the number of shares of Common Stock that could be purchased, at the Current Market Price, on the record date, using the aggregate consideration that would be received by the Corporation from the exercise of all such rights or warrants. If all shares of Common Stock issuable upon exercise of the rights or warrants are not issued pursuant to the exercise of such rights or warrants prior to the expiration thereof, the Conversion Rate shall be adjusted to the Conversion Rate that would then be in effect had the adjustment to the Conversion Rate made upon the issuance of such rights or warrants been made upon the basis of the issuance of rights or warrants in respect of only the number of shares of Common Stock actually issued pursuant to the exercise of the rights or warrants.

        (c)    Effect of Other Distributions.    If the Corporation shall pay a dividend or make a distribution to all holders of the Common Stock consisting of evidences of its indebtedness, cash or other assets (including shares of capital stock of the Corporation other than Common Stock but excluding: (i) rights or warrants referred to in subsection (b) of this Section D and (ii) subject to the provisions of Section D(iv) above, any regular quarterly dividend or distribution paid in cash or any special dividend or distribution necessary to maintain the Corporation's status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code")) then the Conversion Rate in effect on the record date for such dividend or distribution shall be adjusted by multiplying such Conversion Rate by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on such record date and of which the denominator shall be the Current Market Price less the fair market value (as determined in good faith by the Board of Directors of the Corporation) on such record date of the portion of the assets or evidences of indebtedness so paid or distributed applicable to one share of Common Stock.

        (d)    Effect of Merger or Consolidation.    If the Corporation shall, while any shares of Series A Preferred Stock remain outstanding, enter into any consolidation with or merge into any other corporation wherein the Corporation is not the surviving corporation, or wherein cash or securities of a corporation other than the Corporation are distributable to holders of Common Stock of the Corporation, or sell or convey its property as an entirety or substantially as an entirety, and in connection with such consolidation, merger, sale or conveyance, cash, shares of stock or other securities shall be issuable or deliverable in exchange for the Common Stock of the Corporation, the holder of any shares of Series A Preferred Stock shall be entitled to receive in connection with such merger or consolidation, in lieu of the number of shares of Common Stock that such holder would have been entitled to receive upon conversion of the holder's Series A Preferred Stock immediately before the effective date of such consolidation, merger, sale or conveyance, the cash, shares of stock or other securities to which such number of shares of Common Stock would have been entitled at the time of such consolidation, merger, sale or conveyance.

        (e)    Reorganization and Reclassification.    In case of any capital reorganization or any reclassification of the capital stock of the Corporation (except as provided in paragraph D(iv)(a) above) while any shares of Series A Preferred Stock remain outstanding, the holder of any shares of Series A Preferred Stock shall be entitled to receive upon such reorganization or reclassification, in lieu of the number of shares of Common Stock that such holder would have been entitled to receive if such holder had converted immediately before such reorganization or reclassification, the shares of stock of any class or classes or other securities or property to which such number of shares of

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Common Stock would have been entitled if such shares of Series A Preferred Stock had been converted immediately before such reorganization or reclassification.

        (f)    Definitions.    For all purposes of this section E(iv), unless the context otherwise requires, the following terms have the following respective meanings:

        "Common Stock":    (i) the Corporation's presently authorized Common Stock, (ii) securities issued upon conversion of the Series A Preferred Stock and (iii) stock of the Corporation of any class hereafter authorized that ranks, or is entitled to a participation, as to assets or dividends, substantially on a parity with Common Stock.

        "Corporation":    RFS Hotel Investors, Inc., a Tennessee corporation, and any other corporation assuming the Corporation's obligations with respect to the Series A Preferred Stock pursuant to this section E.

        (v)    Notice to Holders.    In the event the Corporation shall propose to take any action of the types described in paragraph E(iv)(d), the Corporation shall give notice to each holder of shares of Series A Preferred Stock, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Rate and the amount, number, kind or class of shares or other securities, cash or property which shall be deliverable or purchasable upon the occurrence of such action or deliverable upon conversion of the shares of Series A Preferred Stock. In the case of any action that would require the fixing of a record date, such notice shall be given at least ten (10) days prior to the date so fixed, and in case of all other action, such notice shall be given at least ten (10) days prior to the taking of such proposed action.

        (vi)    Shares Free and Clear.    All shares of Common Stock issued in connection with the conversion provisions set forth herein shall be, upon issuance by the Corporation, validly issued, fully paid and nonassessable and free from all taxes, liens or charges with respect thereto created or imposed by the Corporation.

        (vii)    Certificate as to Adjustments.    Upon the occurrence of each adjustment or readjustment of the Conversion Rate pursuant to Section E(iv) hereof, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of shares of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts and computations upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of the shares of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustments and readjustments, (b) the Conversion Rate at that time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the shares of Series A Preferred Stock. The Corporation shall file a like certificate among its permanent records and at all reasonable times during business hours shall permit inspection of such certificate by any holder of shares of Series A Preferred Stock requesting such inspection.

        (viii)    Common Stock Reserved.    The Corporation shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of the shares of Series A Preferred Stock. The Corporation shall pay any stamp or transfer taxes payable as a result of the issuance of Common Stock upon conversion of the Series A Preferred Stock.

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        F.    Liquidation Preference.    Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series A Preferred Stock then outstanding will be entitled to receive and to be paid out of the assets of the Corporation available for distribution to its shareholders the Stated Value per share plus all accrued and unpaid dividends through the date of liquidation, dissolution or winding up, as adjusted for any stock dividends, combinations or splits with respect to such shares, before any distribution or payment is made upon any of the shares of Junior Stock of the Corporation or any other shares of capital stock not ranking at least pari passu with the Series A Preferred Stock. After the payment to the holders of the shares of the Series A Preferred Stock of the full liquidation preference provided for in this Section F, the holders of the Series A Preferred Stock, as such, shall have no right or claim to any of the remaining assets of the Corporation. If upon such liquidation, dissolution or winding up, the assets of the Corporation are insufficient to pay the applicable liquidation preference to the holders of shares of Series A Preferred Stock and the holders of any other shares of capital stock of the Corporation ranking pari passu with the Series A Preferred Stock, the assets of the Corporation will be distributed among the holders of the shares of Series A Preferred Stock and such other shares on a pro ratabasis. The Corporation will mail written notice of such liquidation, dissolution or winding up, not less than ten (10) days prior to the payment date stated therein, to each record holder of shares of Series A Preferred Stock. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not for the purpose of this Section F be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section F.

        G.    Redemption.

        (i)    Mandatory Redemption.    The Corporation shall redeem all of the outstanding shares of Series A Preferred Stock then held by Doubletree Corporation or any affiliate of Doubletree Corporation in the event the Corporation's status as a real estate investment trust under the Code is terminated and RFS Partnership, L.P. (the "Partnership") elects to terminate all leases for hotel properties then leased by the Partnership to RFS, Inc. (the "Lessee") by paying to the Lessee the amounts specified in Section 10 of the Master Agreement dated February 1, 1996 (the "Master Agreement") among the Corporation, the Partnership, Doubletree Corporation and the Lessee, for a redemption price per share equal to the greater of (i) the Stated Value plus any accrued and unpaid dividends with respect to each share as of the date of redemption, or (ii) the product of (A) the weighted average of the sales prices for the Corporation's Common Stock as reported on the Nasdaq Stock Market, or the principal exchange on which the Corporation's Common Stock is then traded, for the ten (10) business days prior to the second business day preceding the date of repurchase, or if the Common Stock is no longer traded on the Nasdaq Stock Market or a recognized exchange, the fair market value thereof as mutually agreed by the Corporation and the Lessee, or if the Corporation and the Lessee cannot so agree, by appraisal by an independent third party designated by the Corporation and the Lessee or their respective designees, multiplied by (B) the number of shares of Common Stock into which a share of Preferred Stock then held by a holder of the Series A Preferred Stock would be convertible, if converted on the business day preceding the date of redemption.

        (ii)    Right of Optional Redemption.    At any time after the seventh (7th) anniversary of the date of issuance of the Series A Preferred Stock, the Corporation may, at its option following notice as described below, redeem at any time all or, from time to time, part of the Series A Preferred Stock at a price per share, payable in cash, equal at the Stated Value (the

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"Series A Redemption Price"), together with all accrued and unpaid dividends to and including the date fixed for redemption (the "Series A Redemption Date"). The record holder of any shares of Series A Preferred Stock called for redemption may convert the Series A Preferred Stock in accordance with the provisions of Section E at any time prior to the Series A Redemption Date.

        (iii)    Procedures for Redemption.

        (a)  Notice of any redemption will be mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the Series A Redemption Date, addressed to the respective holders of record of the Series A Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records on the Corporation. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred Stock except as to the holder to whom the Corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law or by the applicable rules of any exchange upon which Series A Preferred Stock may be listed or admitted to trading, such notice shall state: (a) the Series A Redemption Date; (b) the Series A Redemption Price; (c) the number of shares of Series A Preferred Stock to be redeemed; (d) the place or places where certificates for such shares are to be surrendered for payment of the Series A Redemption Price; and (e) that dividends on the shares to be redeemed will cease to accumulate on the Series A Redemption Date. If less than all the shares of Series A Preferred held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series A Preferred Stock held by such holder to be redeemed.

        (b)  If notice of redemption of any shares of Series A Preferred Stock has been mailed in accordance with Section G(iii)(a) above and provided that on or before the Series A Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the Corporation, separate and apart from its other funds in trust for the benefit of any holders of the shares of Series A Preferred Stock so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Series A Redemption Date, dividends on such shares of Series A Preferred Stock shall cease to accrue, and such shares shall no longer be deemed to be outstanding and shall not have the status of Series A Preferred Stock and all rights of the holders thereof as shareholders of the Corporation (except the right to receive the Series A Redemption Price) shall terminate. Upon surrender, in accordance with said notice, of the certificates for any shares of Series A Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series A Preferred Stock shall be redeemed by the Corporation at the Series A Redemption Price. In case less than all the shares of Series A Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series A Preferred Stock without cost to the holder thereof.

        (c)  The deposit of funds with a bank or trust company for the purpose of redeeming Series A Preferred shall be irrevocable except that:

        (1)  the Corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and

A-7

        (2)  any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series A Preferred Stock entitled thereto at the expiration of one hundred and ninety (190) days from the applicable Series A Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.

        (iv)    Rights to Dividends on Shares Called for Redemption.    If the Series A Redemption Date is after the record date for a Dividend Payment Date and before the related Dividend Payment Date, the dividend payable on such Dividend Payment Date shall be paid to the holder in whose name the shares of Series A Preferred Stock to be redeemed are registered at the close of business on such record date, notwithstanding the redemption thereof between such date and the related Dividend Payment Date or the Corporation's default in the payment of the dividend due. Except as provided in this Section G, the Corporation will make no payment or allowance for unpaid dividends on Series A Preferred Stock which has been called for redemption.

        H.    Miscellaneous.

        (i)    Registration of Transfer.    The Corporation shall keep at its principal office a register for the registration of shares of Series A Preferred Stock. Upon the surrender at its principal office of any certificate representing shares of Series A Preferred Stock, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

        (ii)    Replacement.    Upon receipt of evidence, and an agreement to indemnify reasonably satisfactory to the Corporation of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of Series A Preferred Stock, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate.

        (iii)    Notices.    All notices referred to herein, except as otherwise expressly provided, will be hand delivered or made by registered or certified mail, return receipt requested, postage prepaid, or by overnight courier or telefax, and will be deemed to have been given when so hand delivered or mailed or confirmed as received by telefax.

        (iv)    No Other Rights.    The holders of Series A Preferred Stock shall have no other rights or preferences except as set forth herein or pursuant to applicable law."

        3.    The Articles of Amendment to the Amended and Restated Charter was duly adopted by the Board of Directors of the Corporation on January 24, 1996. Shareholder action was not required.

	RFS HOTEL INVESTORS, INC.
Dated February 27, 1996	By:	/s/  MICHAEL J. PASCAL
		Name:	Michael J. Pascal
		Title:	CFO/Secretary/Treaurer

A-8

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ARTICLES OF AMENDMENT TO THE SECOND RESTATED CHARTER OF RFS HOTEL INVESTORS, INC.

EX-3.1(D)

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EXHIBIT 3.1(d)

ARTICLES OF AMENDMENT TO THE CHARTER
OF RFS HOTEL INVESTORS, INC.

To the Secretary of State of the State of Tennessee:

        Pursuant to the provisions of Section 48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following amendment to its charter.

1.

The name of the corporation is RFS Hotel Investors, Inc.



2.

Article 3 of the Second Restated Charter of RFS Hotel Investors, Inc., as amended, Principal and Registered Office, is changed from "The address of the Corporation's registered office and its principal office is 850 Ridge Lake Boulevard, Suite 220, Memphis, Shelby County, Tennessee 38119" to "The address of the Corporation's registered office and its principal office is 850 Ridge Lake Boulevard, Suite 300, Memphis, Shelby County, Tennessee 38120."



3.

The amendment does not provide for the exchange, reclassification or cancellation of existing shares.



4.

The amendment was duly adopted by the Board of Directors of RFS Hotel Investors, Inc. on August 1, 2001. Pursuant to Section 48-20-102(3) of the Tennessee Business Corporation Act, shareholder approval is not required for adoption of the amendment.



5.

The amendment is to be effective when these articles are filed by the Secretary of State.

Dated: December 10, 2001

RFS HOTEL INVESTORS, INC.
By:	/s/  KEVIN M. LUEBBERS
Title:	Secretary and Treasurer

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ARTICLES OF AMENDMENT TO THE CHARTER OF RFS HOTEL INVESTORS, INC.

EX-3.4

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Exhibit 3.4

CHARTER
OF
RFS 2002 FINANCING, INC.

        The undersigned, acting as Incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation:

ARTICLE I

        The name of the corporation is RFS 2002 Financing, Inc.

ARTICLE II

        The maximum number of shares that the corporation shall have the authority to issue is one thousand (1,000) shares of common stock, $.01 par value, that have unlimited voting rights and that are entitled to receive the net assets of the corporation upon dissolution.

ARTICLE III

        The street address of the registered office of the corporation shall be 850 Ridge Lake Boulevard, Shelby County, Memphis, Tennessee 38120. The name of the corporation's initial registered agent at its registered office is Robert M. Solmson.

ARTICLE IV

        The name and address of the incorporator are Jack H. McCall, c/o Hunton & Williams, 2000 Riverview Tower, 900 South Gay Street, Knox County, Tennessee 37902.

ARTICLE V

        The address of the principal office of the corporation is 850 Ridge Lake Boulevard, Shelby County, Memphis, Tennessee 38120

ARTICLE VI

        The corporation is for profit.

ARTICLE VII

        The corporation shall have the power and authority to carry on any business permitted by, and to have and exercise all of the powers and rights conferred by, the Tennessee Business Corporation Act as amended from time to time or any successor provisions thereto.

ARTICLE VIII

        The business and affairs of the corporation shall be managed by a Board of Directors.

        a.    The number of directors and their terms shall be as specified in the By-laws of the corporation.

        b.    The Board of Directors is expressly authorized to make, alter, or repeal the By-Laws of the corporation by a vote of the majority of the Board of Directors.

        c.    Whenever the Board of Directors is required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, if all of the directors entitled to vote thereon consent to the taking of action on written consent without a

meeting; any such action shall be as valid and effective as any resolution duly adopted at an annual or regularly scheduled or special meeting of the Board of Directors.

        d.    Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders and may be removed with cause by a majority vote of the entire Board of Directors.

ARTICLE IX

        Any corporate action upon which a vote of shareholders is required or permitted may be taken without a meeting on written consent, setting forth the action so taken, if all of the persons entitled to vote thereon consent to the taking of action on written consent without a meeting, and such action shall be as valid and effective as any action taken at a general or special meeting of the shareholders.

ARTICLE X

        a.    To the fullest extent that the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended permits the limitations or elimination of the liability of directors, a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except for liability (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 law, or (iii) under Section 48-18-304 of the Tennessee Business Corporation Act, as the same exists or hereafter may be amended. If the Tennessee Business Corporation Act hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Tennessee Business Corporation Act. This Article X shall not eliminate or limit the liability of a director for any act or omission occurring prior to the date when Article X became effective, if such a limitation or elimination of liability of a director for such acts or omission is prohibited by the Tennessee Business Corporation Act as then in effect. Any repeal or modification of this Article X by the shareholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification.

        b.    The corporation shall have the power to indemnify any director, officer, employee, agent of the corporation, or any other person who is serving at the request of the corporation in any such capacity with another corporation, partnership, joint venture, trust, or other enterprise (including, without limitation, any employee benefit plan) to the fullest extent permitted by the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended, and any such indemnification may continue as to any person who has ceased to be a director, officer, employee, or agent and may inure to the benefit of the heirs, executors, and administrators of such a person.

        c.    By action of its Board of Directors, notwithstanding any interest of the directors in the action, the corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, to protect any director, officer, employee, or agent of the corporation or any other person who is serving at the request of the corporation in any such capacity with another corporation, partnership, joint venture, trust, or other enterprise (including, without limitation, any employee benefit plan) against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such (including, without limitation, expenses, judgments, fines, and amounts paid in settlement) to the fullest extent permitted by the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended, and whether or not the corporation would have the power or would be required to indemnify such person under the terms of any agreement or by-law or the Tennessee Business Corporation Act. For purposes of this paragraph (c), "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan.

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ARTICLE XI

        The Incorporator shall have the power to act as the first Board of Directors of the corporation pursuant to Tennessee Code Annotated Section 48-12-105 and, in that capacity, may adopt By-Laws for the operation of the corporation, elect officers, appoint an initial board of directors, authorize the sale and issuance of stock, and take such other action as may be necessary or appropriate to organize the corporation.

Dated: February 8, 2002

/s/  JACK H. MCCALL Jack H. McCall, Incorporator

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CHARTER OF RFS 2002 FINANCING, INC.

EX-3.5

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Exhibit 3.5

BY-LAWS

OF

RFS 2002 FINANCING, INC.

BY-LAWS
OF
RFS 2002 FINANCING, INC.

ARTICLE I: MEETINGS OF SHAREHOLDERS

        1.    Annual Meeting. The annual meeting of the shareholders shall be held at such time and place, either within or without the State of Tennessee, as may be designated from time to time by the directors. Unless the time is otherwise specified by the directors, the meeting shall be held on the first day in May of each year, if that day is not a legal holiday, or as close to that date as practicable. Failure to hold an annual meeting does not invalidate the corporation's existence or affect otherwise valid corporate acts.

        2.    Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the board of directors, or by the holders of at least ten percent (10%) of all the votes entitled to be cast on any issue proposed to be considered at such a meeting. The directors shall designate the place of a special meeting.

        3.    Notice of Shareholder Meetings. Written or printed notice stating the place, date, and time of the meeting, and, in the case of a special meeting, the purpose or purposes for which the special meeting is called and the person or persons calling the special meeting, shall be delivered either personally or by mail by or at the direction of the president, the secretary, or the officer or person calling the meeting to each shareholder entitled to vote at the meeting. If mailed, the notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and the notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation. If delivered personally, the notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting and shall be deemed to be delivered when actually received by the shareholder. The person giving the notice shall certify that the notice required by this paragraph has been given. Any shareholder may waive his right to notice of annual or special meetings of shareholders either before, during, or after any such meeting.

        4.    Quorum Requirements. A majority of the shares entitled to vote shall constitute a quorum for the transaction of business on any matter at a meeting of shareholders. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting is not necessary if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken before such adjournment. When a quorum is present at any meeting and votes cast in favor of an action exceed votes cast in opposition to such action, then such action shall constitute corporate action and shall decide any matter brought before that meeting, unless the matter is one upon which, by express provision of the corporation's charter, these By-Laws, or by the laws of the State of Tennessee, a larger or different vote is required, in which case any such express provision shall govern the vote required with respect to that matter.

        5.    Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by written proxy, which proxy shall be filed with the secretary of the meeting before being voted. Any such proxy shall entitle the holders of that proxy to vote at any adjournment of that meeting, but shall not be valid after the final adjournment of that meeting. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless the proxy provides otherwise.

ARTICLE II: BOARD OF DIRECTORS

        1.    Qualification and Election. Directors need not be shareholders or residents of the State of Tennessee but must be of legal age. A plurality of the votes cast at an annual meeting of the shareholders (or a special meeting called for such purpose) shall be sufficient to elect a director. Each

director shall hold office until the expiration of the term for which he is elected and thereafter until his successor has been elected and qualified.

        2.    Number. The number of directors shall be fixed from time to time by the shareholders or by a majority of the entire board of directors.

        3.    Meetings. The annual meeting of the board of directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the board of directors shall elect the officers of the corporation. The board of directors also may designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, the president, or (if the number of directors exceeds two (2)) any two (2) directors.

        4.    Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice. Special meetings shall be held upon notice sent by any usual means of communication not less than two (2) days before the special meeting. A director may waive the right to receive notice before, during, or after a meeting.

        5.    Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting is not necessary if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed one month in any one adjournment. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the vote of a greater number is required by the corporation's charter, these By-Laws, or the laws of the State of Tennessee, in which case any such express provision shall govern the vote required with respect to that matter.

        6.    Executive and Other Committees. The board of directors, by a resolution adopted by a majority of its members, may designate committees, consisting of one or more persons who may or may not be directors, and may delegate to any such committee or committees any and all authority that the board of directors deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the board of directors, in the management of the affairs and property of the corporation. All members of committees that exercise powers of the board of directors must be duly elected and qualified members of the board of directors.

ARTICLE III: OFFICERS

        1.    Number. The corporation shall have a president and a secretary, and any other officer that the board of directors from time to time shall deem necessary. The same person may hold any two (2) or more offices, except the offices of president and secretary.

        2.    Election and Term. The board of directors shall elect the officers at its annual meeting (or at a special meeting called for such purpose). Each officer shall serve until the expiration of the term for which he is elected and thereafter until his successor has been duly elected and qualified.

        3.    Duties. All officers shall have that authority and perform those duties in the management of the corporation which are normally incident to their offices and as the board of directors from time to time may provide. The secretary shall be responsible for the recording of the minutes of shareholders' and directors' meetings and shall have custody of the stock ledgers and minute books of the corporation.

ARTICLE IV: RESIGNATIONS, REMOVALS, AND VACANCIES

        1.    Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board of directors, the president, or the secretary. Any such resignation shall take

2

effect at the time specified in the resignation, or, if no time is specified, then upon its acceptance by the board of directors.

        2.    Removal of Officers. The board of directors may remove any officer or agent whenever in the judgment of the board of directors the best interests of the corporation will be served by the removal.

        3.    Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders.

        4.    Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors then in office, even if less than a quorum exits.

ARTICLE V: INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHERS

        1.    Right to Indemnification. The corporation, to the fullest extent permitted by applicable law as then in effect, shall indemnify any person (an "Indemnitee") who was or is involved in any manner (including, without limitation, as a party or a witness), or is threatened to be made so involved, in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal (including, without limitation, any action, suit, or proceeding by or in the right of the corporation to procure a judgment in its favor) (a "Proceeding") by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise against all expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with any such Proceedings. This indemnification shall be a contract right and shall include the right to receive payment in advance of any expenses incurred by an Indemnitee in connection with a Proceeding, consistent with the provisions of applicable law as then in effect.

        2.    Contracts and Funding. The corporation may enter into contracts with any director, officer, employee, or agent of the corporation in furtherance of the provisions of this Article V, and may create a trust fund, grant a security interest, or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article V.

        3.    Employee Benefit Plans. For purposes of this Article V, references to "other enterprises" shall include employee benefit plans and employee welfare benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee, or agent of the corporation which imposes duties on, or otherwise involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of a corporation.

        4.    Indemnification Not Exclusive Right. The right of indemnification and advancement of expenses provided in this Article V shall not be exclusive of any other rights to which a person seeking indemnification may otherwise be entitled, under any statute, by-law, agreement, vote of shareholders, or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The provisions of this Article V shall inure to the benefit of the heirs and legal representatives of any person entitled to indemnification under this Article V and

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shall be applicable to Proceedings commenced or continuing after the adoption of this Article V, whether arising from acts or omissions occurring before or after such adoption.

        5.    Advancement of Expenses; Procedures. In furtherance, but not in limitation, of the foregoing provisions, the following procedures and remedies shall apply with respect to advancement of expenses and the right to indemnification under this Article V:

        (a)  Advancement of Expenses. All reasonable expenses incurred by or on behalf of an Indemnitee in connection with any proceeding shall be advanced to the Indemnitee by the corporation within twenty (20) days after the receipt by the corporation of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of a Proceeding. The statement or statements shall reasonably evidence the expenses incurred by the Indemnitee, shall include a written affirmation of the Indemnitee's belief that the Indemnitee has met the standard of conduct required for indemnification under Tennessee law, and, if required by law at the time of such advance, shall include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the Indemnitee is not entitled to be indemnified against such expenses.

        (b)  Written Request for Indemnification. To obtain indemnification under this Article V, an Indemnitee shall submit to the secretary of the corporation a written request, including such documentation and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification (the "Supporting Documentation"). The determination of the Indemnitee's entitlement to indemnification shall be made within a reasonable time after receipt by the corporation of the written request for indemnification together with the Supporting Documentation. The secretary of the corporation, promptly upon receipt of such a request for indemnification, shall advise the board of directors in writing that the Indemnitee has requested indemnification.

        (c)  Procedure for Determination. An Indemnitee's entitlement to indemnification under this Article V shall be determined:

        (i)    By the board of directors by majority vote of a quorum (as defined in Article II of these By-Laws), consisting of directors not at the time parties to the Proceeding;

        (ii)  If a quorum cannot be obtained under subdivision (i), by majority vote of a committee duly designated by the board of directors (in which designation directors who are parties may participate), consisting solely of two (2) or more directors not at the time parties to the Proceeding;

        (iii)  By independent special legal counsel:

        (A)  selected by the board of directors or its committee in the manner prescribed in subdivision (i) or (ii): or

        (B)  if a quorum of the board of directors cannot be obtained under subdivision (i) and a committee cannot be designated under subdivision (ii), selected by majority vote of the full board of directors (in which selection directors who are parties may participate); or

        (iv)  By the shareholders, but shares owned by or voted under the control of directors who are the time parties to the Proceeding may not be voted on the determination.

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ARTICLE VI: CAPITAL STOCK

        1.    Stock Certificates. The board of directors may determine to issue to each shareholder a certificate or certificates of capital stock of the corporation in the form prescribed by the board of directors. The certificates shall be signed by the president and the secretary of the corporation. The board of directors also may elect, in lieu of issuing certificates, to provide for the issuance of uncertificated shares of the capital stock of the corporation, provided, however, that all shares of the same class must be either certificated or uncertificated.

        2.    Transfer of Shares. Subject to any restrictions on transfer imposed by either the applicable federal or stock securities laws or any shareholder agreement, shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate or, with respect to a transfer of uncertificated shares, a written order to the corporation, in a form acceptable to the corporation, authorizing and instructing the corporation to effect the transfer.

        3.    Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon the terms that the board of director shall prescribe.

ARTICLE VII: ACTION BY WRITTEN CONSENT

        Whenever the shareholders or directors are required or permitted to take any action by vote, the action may be taken without a meeting on written consent. Such written consent shall (i) set forth the action so taken, (ii) be signed by all the persons or entities entitled to vote on that action, (iii) indicate each shareholder's or director's vote or abstention, as the case may be, and (iv) be delivered to the corporation for inclusion in the corporate records.

ARTICLE VIII: AMENDMENT OF BY-LAWS

        These By-Laws may be amended, supplemented, or repealed either by (i) a shareholders' vote in which an affirmative vote of the shares represented at any duly constituted shareholders' meeting exceeds the shares voted in opposition thereto, or (ii) a majority vote of the entire board of directors. The shareholders, however, may amend or repeal any change in the by-laws that may be made by the board of directors.

CERTIFICATION

        These By-Laws were adopted by written consent of the incorporator of the corporation on the 8^th day of February, 2002.

/s/  JACK H. MCCALL Jack H. McCall, Incorporator

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BY-LAWS OF RFS 2002 FINANCING, INC.

EX-3.6

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Exhibit 3.6

CHARTER
OF
RFS LEASING VII, INC.

        The undersigned, acting as incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation:

ARTICLE I

        The name of the corporation is RFS Leasing VII, Inc. (the "Corporation")

ARTICLE II

        The maximum number of shares that the Corporation shall have the authority to issue is five thousand (5,000) shares of common stock with $.01 par value that have unlimited voting rights and that are entitled to receive the net assets of the Corporation upon dissolution.

ARTICLE III

        The street address of the registered office of the Corporation shall be 850 Ridge Lake Boulevard, Suite 220, Memphis, County of Shelby, Tennessee 38120. The name of the Corporation's initial registered agent at its registered office is Robert M. Solmson.

ARTICLE IV

        The name and address of the incorporator are Jack H. McCall, 2000 Riverview Tower, 900 South Gay Street, County of Knox, Knoxville, Tennessee 37902.

ARTICLE V

        The address of the principal office of the Corporation is 850 Ridge Lake Boulevard, Suite 220, Memphis, County of Shelby, Tennessee 38120.

ARTICLE VI

        The Corporation is for profit.

ARTICLE VII

        The Corporation shall have the power and authority to carry on any business permitted by, and to have and exercise all of the powers and rights conferred by, the Tennessee Business Corporation Act as amended from time to time or any successor provisions thereto.

ARTICLE VIII

        The business and affairs of the Corporation shall be managed by a Board of Directors.

        A.    The number of Directors of the Corporation shall be as from time to time fixed by, or set in the manner provided in, the By-Laws of the Corporation. Election of Directors need not be by written ballot unless the By-Laws so provide. The number of Directors constituting the initial Board of Directors shall be two, and the names of the persons who are to serve as the initial Directors are as follows:

Robert M. Solmson
Randall L. Churchey

        B.    The Board of Directors is expressly authorized to make, alter, or repeal the By-Laws of the Corporation by a vote of the majority of the Board of Directors.

        C.    Whenever the Board of Directors is required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, if all of the directors entitled to vote thereon consent to the taking of action on written consent without a meeting; any such action shall be as valid and effective as any resolution duly adopted at an annual or regularly scheduled or special meeting of the Board of Directors.

        D.    Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders and may be removed with cause by a majority vote of the entire Board of Directors.

ARTICLE IX

        Any corporate action upon which a vote of shareholders is required or permitted may be taken without a meeting on written consent, setting forth the action so taken, if all of the persons entitled to vote thereon consent to the taking of action on written consent without a meeting, and such action shall be as valid and effective as any action taken at a general or special meeting of the shareholders.

ARTICLE X

        A.    To the fullest extent that the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended permits the limitations or elimination of the liability of directors, a director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except for liability (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 law, or (iii) under Section 48-18-304 of the Tennessee Business Corporation Act, as the same exists or hereafter may be amended. If the Tennessee Business Corporation Act hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Tennessee Business Corporation Act. This Article X shall not eliminate or limit the liability of a director for any act or omission occurring prior to the date when Article X became effective, if such a limitation or elimination of liability of a director for such acts or omission is prohibited by the Tennessee Business Corporation Act as then in effect. Any repeal or modification of this Article X by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.

        B.    The Corporation shall have the power to indemnify any director, officer, employee, agent of the Corporation, or any other person who is serving at the request of the Corporation in any such capacity with another corporation, partnership, joint venture, trust, or other enterprise (including, without limitation, any employee benefit plan) to the fullest extent permitted by the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended, and any such indemnification may continue as to any person who has ceased to be a director, officer, employee, or agent and may inure to the benefit of the heirs, executors, and administrators of such a person.

        C.    By action of its Board of Directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, to protect any director, officer, employee, or agent of the Corporation or any other person who is serving at the request of the Corporation in any such capacity with another corporation, partnership, joint venture, trust, or other enterprise (including, without limitation, any employee benefit plan) against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such (including, without limitation, expenses, judgments, fines, and amounts paid in

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settlement) to the fullest extent permitted by the Tennessee Business Corporation Act as it exists on the date hereof or as it may hereafter be amended, and whether or not the Corporation would have the power or would be required to indemnify such person under the terms of any agreement or by-law or the Tennessee Business Corporation Act. For purposes of this paragraph C, "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan.

ARTICLE XI

        The Incorporator shall have the power to act as the first Board of Directors of the Corporation pursuant to Tennessee Code Annotated Section 48-12-105 and, in that capacity, may adopt By-Laws for the operation of the Corporation, elect officers, appoint an initial board of directors, authorize the sale and issuance of stock, and take such other action as may be necessary or appropriate to organize the Corporation.

Dated: November 13, 2000

/s/  JACK H. MCCALL Jack H. McCall, Incorporator

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CHARTER OF RFS LEASING VII, INC.

EX-3.6(A)

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Exhibit 3.6(a)

ARTICLES OF AMENDMENT TO THE CHARTER
OF RFS LEASING VII, INC.

To the Secretary of State of the State of Tennessee:

        Pursuant to the provisions of Section 48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following amendment to its charter.

1.

The name of the corporation is RFS Leasing VII, Inc.



2.

The first sentence of Article III of the Charter of RFS Leasing VII, Inc., Principal and Registered Office, is changed from "The street address of the registered office of the Corporation shall be 850 Ridge Lake Boulevard, Suite 220, Memphis, County of Shelby, Tennessee 38120" to "The address of the Corporation's registered office and its principal office is 850 Ridge Lake Boulevard, Suite 300, Memphis, Shelby County, Tennessee 38120."



3.

The amendment does not provide for the exchange, reclassification or cancellation of existing shares.



4.

The amendment was duly adopted by the Board of Directors of RFS Leasing VII, Inc. on August 1, 2001. Pursuant to Section 48-20-102(3) of the Tennessee Business Corporation Act, shareholder approval is not required for adoption of the amendment.



5.

The amendment is to be effective when these articles are filed by the Secretary of State.

Dated: December 10, 2001

RFS LEASING VII, INC.
By:	/s/  KEVIN M. LUEBBERS
	Kevin M. Luebbers
Title:	Secretary and Treasurer

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ARTICLES OF AMENDMENT TO THE CHARTER OF RFS LEASING VII, INC.

EX-3.7

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Exhibit 3.7

BY-LAWS

OF

RFS LEASING VII, INC.

ARTICLE I

MEETINGS OF SHAREHOLDERS

        1.    Annual Meeting. The annual meeting of the shareholders shall be held at such time and place, either within or without the State of Tennessee, as may be designated from time to time by the board of directors.

        2.    Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the board of directors, or by the holders of not less than one-tenth (¹/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors.

        3.    Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting, shall be delivered either personally or by mail by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. If mailed, such notice shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. If delivered personally, such notice shall be delivered not less than five (5) nor more than sixty (60) days before the date of the meeting, and shall be deemed delivered when actually received by the shareholder. The person giving such notice shall certify that the notice required by this paragraph has been given.

        4.    Quorum Requirements. A majority of the shares entitled to vote shall constitute a quorum for the transactions of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter, these By-Laws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question.

        5.    Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by written proxy, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless otherwise provided in the proxy.

ARTICLE II

BOARD OF DIRECTORS

        1.    Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the

shareholders. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified.

        2.    Number. The number of directors shall be fixed from time to time by the shareholders, or by a majority of the entire board of directors, but shall never be less than the number required by the law.

        3.    Meetings. The annual meeting of the board of directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The board may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two (2) directors.

        4.    Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice. Special meetings shall be held upon notice sent by any usual means of communication not less than three (3) days before the meeting.

        5.    Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these By-Laws, or by the laws of Tennessee.

        6.    Executive and Other Committees. The board of directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the board of directors in the management of the affairs and property of the corporation.

ARTICLE III

OFFICERS

        1.    Number. The corporation shall have a president and a secretary, and such other officers as the board of directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of president and secretary.

        2.    Election and Term. The officers shall be elected by the board at its annual meeting. Each officer shall serve until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified.

        3.    Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the board of directors may from time to time provide.

ARTICLE IV

RESIGNATIONS, REMOVALS AND VACANCIES

        1.    Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its acceptance by the board of directors.

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        2.    Removal of Officers. Any officer or agent may be removed by the board whenever in its judgment the best interests of the corporation will be served thereby.

        3.    Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board.

        4.    Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors then in office, even if less than a quorum exists.

ARTICLE V

CAPITAL STOCK

        1.    Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the board of directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation.

        2.    Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by either the applicable securities laws or any shareholder agreement.

        3.    Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the board of directors shall prescribe.

ARTICLE VI

ACTION BY CONSENT

        Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon.

ARTICLE VII

AMENDMENT OF BY-LAWS

        These By-Laws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting, or (2) a majority vote of the entire board of directors. Any change in the By-Laws made by the board of directors, however, may be amended or repealed by the shareholders.

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BY-LAWS OF RFS LEASING VII, INC.

EX-4.1

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Exhibit 4.1

RFS PARTNERSHIP, L.P.
RFS 2002 FINANCING, INC.
(as Issuers)

RFS HOTEL INVESTORS, INC.
RFS LEASING VII, INC.
(each a Guarantor)

9.75% Senior Notes due 2012

INDENTURE

Dated as of February 26, 2002

U.S. Bank National Association
(as Trustee)

TABLE OF CONTENTS

			Page
ARTICLE I
	DEFINITIONS AND INCORPORATION BY REFERENCE		2
	SECTION 1.1	DEFINITIONS	2
	SECTION 1.2	OTHER DEFINITIONS	19
	SECTION 1.3	INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT	20
	SECTION 1.4	RULES OF CONSTRUCTION	20
ARTICLE II
	THE NOTES		20
	SECTION 2.1	FORM AND DATING	20
	SECTION 2.2	EXECUTION AND AUTHENTICATION	21
	SECTION 2.3	REGISTRAR, PAYING AGENT AND DEPOSITARY	21
	SECTION 2.4	PAYING AGENT TO HOLD MONEY IN TRUST	22
	SECTION 2.5	HOLDER LISTS	22
	SECTION 2.6	TRANSFER AND EXCHANGE	22
	SECTION 2.7	REPLACEMENT NOTES	33
	SECTION 2.8	OUTSTANDING NOTES	33
	SECTION 2.9	TREASURY NOTES	33
	SECTION 2.10	TEMPORARY NOTES	33
	SECTION 2.11	CANCELLATION	33
	SECTION 2.12	DEFAULTED INTEREST	34
	SECTION 2.13	CUSIP NUMBERS	35
	SECTION 2.14	ISSUANCE OF ADDITIONAL NOTES	35
ARTICLE III
	REDEMPTION		35
	SECTION 3.1	NOTICES TO TRUSTEE	35
	SECTION 3.2	SELECTION OF NOTES TO BE REDEEMED	35
	SECTION 3.3	NOTICE OF REDEMPTION	35
	SECTION 3.4	EFFECT OF NOTICE OF REDEMPTION	36
	SECTION 3.5	DEPOSIT OF REDEMPTION PRICE	36
	SECTION 3.6	NOTES REDEEMED IN PART	37
	SECTION 3.7	OPTIONAL REDEMPTION	37
	SECTION 3.8	NO MANDATORY REDEMPTION	38
ARTICLE IV
	COVENANTS		38
	SECTION 4.1	PAYMENT OF NOTES	38
	SECTION 4.2	MAINTENANCE OF OFFICE OR AGENCY	38
	SECTION 4.3	SEC REPORTS AND REPORTS TO HOLDERS	38
	SECTION 4.4	COMPLIANCE CERTIFICATE	39
	SECTION 4.5	TAXES	39
	SECTION 4.6	STAY, EXTENSION AND USURY LAWS	39
	SECTION 4.7	LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK	40
	SECTION 4.8	LIMITATION ON LIENS	41
	SECTION 4.9	LIMITATION ON RESTRICTED PAYMENTS	41
	SECTION 4.10	LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES	43

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	SECTION 4.11	LIMITATION ON LINES OF BUSINESS	44
	SECTION 4.12	LIMITATION ON TRANSACTIONS WITH AFFILIATES	44
	SECTION 4.13	LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK	45
	SECTION 4.14	REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL	47
	SECTION 4.15	LIMITATION ON ISSUANCES OF GUARANTEES BY SUBSIDIARIES	48
	SECTION 4.16	LIMITATION ON LAYERING INDEBTEDNESS	48
	SECTION 4.17	RESTRICTION ON ACTIVITIES OF FINANCE	48
	SECTION 4.18	LIMITATION ON STATUS AS INVESTMENT COMPANY	49
	SECTION 4.19	MAINTENANCE OF PROPERTIES AND INSURANCE	49
	SECTION 4.20	CORPORATE EXISTENCE	49
ARTICLE V
	SUCCESSORS		49
	SECTION 5.1	MERGER, CONSOLIDATION OR SALE OF ASSETS	49
	SECTION 5.2	SUCCESSOR CORPORATION SUBSTITUTED	50
ARTICLE VI
	DEFAULTS AND REMEDIES		50
	SECTION 6.1	EVENTS OF DEFAULT	50
	SECTION 6.2	ACCELERATION	51
	SECTION 6.3	OTHER REMEDIES	53
	SECTION 6.4	WAIVER OF PAST DEFAULTS	53
	SECTION 6.5	CONTROL BY MAJORITY	53
	SECTION 6.6	LIMITATION ON SUITS	53
	SECTION 6.7	RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT	54
	SECTION 6.8	COLLECTION SUIT BY TRUSTEE	54
	SECTION 6.9	TRUSTEE MAY FILE PROOFS OF CLAIM	54
	SECTION 6.10	PRIORITIES	55
	SECTION 6.11	UNDERTAKING FOR COSTS	55
ARTICLE VII
	TRUSTEE		55
	SECTION 7.1	DUTIES OF TRUSTEE	55
	SECTION 7.2	RIGHTS OF TRUSTEE	56
	SECTION 7.3	INDIVIDUAL RIGHTS OF TRUSTEE	57
	SECTION 7.4	TRUSTEE'S DISCLAIMER	57
	SECTION 7.5	NOTICE OF DEFAULTS	57
	SECTION 7.6	REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES	57
	SECTION 7.7	COMPENSATION AND INDEMNITY	58
	SECTION 7.8	REPLACEMENT OF TRUSTEE	58
	SECTION 7.9	SUCCESSOR TRUSTEE BY MERGER, ETC.	59
	SECTION 7.10	ELIGIBILITY; DISQUALIFICATION	59
	SECTION 7.11	PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY	59
ARTICLE VIII
	LEGAL DEFEASANCE AND COVENANT DEFEASANCE		60
	SECTION 8.1	OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE	60
	SECTION 8.2	LEGAL DEFEASANCE AND DISCHARGE	60
	SECTION 8.3	COVENANT DEFEASANCE	60
	SECTION 8.4	CONDITIONS TO LEGAL OR COVENANT DEFEASANCE	61

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	SECTION 8.5	DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS	62
	SECTION 8.6	REPAYMENT TO COMPANY	62
	SECTION 8.7	REINSTATEMENT	62
ARTICLE IX
	AMENDMENT, SUPPLEMENT AND WAIVER		63
	SECTION 9.1	WITHOUT CONSENT OF HOLDERS OF NOTES	63
	SECTION 9.2	WITH CONSENT OF HOLDERS OF NOTES	63
	SECTION 9.3	COMPLIANCE WITH TRUST INDENTURE ACT	65
	SECTION 9.4	REVOCATION AND EFFECT OF CONSENTS	65
	SECTION 9.5	NOTATION ON OR EXCHANGE OF NOTES	65
	SECTION 9.6	TRUSTEE TO SIGN AMENDMENTS, ETC.	65
ARTICLE X
	GUARANTEES		66
	SECTION 10.1	GUARANTEES	66
	SECTION 10.2	EXECUTION AND DELIVERY OF GUARANTEES	67
	SECTION 10.3	GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS	67
	SECTION 10.4	RELEASE OF GUARANTORS	68
	SECTION 10.5	LIMITATION OF GUARANTOR'S LIABILITY; CERTAIN BANKRUPTCY EVENTS	68
	SECTION 10.6	APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE GUARANTORS	69
	SECTION 10.7	FUTURE GUARANTORS	69
ARTICLE XI
	MISCELLANEOUS		69
	SECTION 11.1	TRUST INDENTURE ACT CONTROLS	69
	SECTION 11.2	NOTICES	70
	SECTION 11.3	COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES	70
	SECTION 11.4	CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT	71
	SECTION 11.5	STATEMENTS REQUIRED IN CERTIFICATE OR OPINION	71
	SECTION 11.6	RULES BY TRUSTEE AND AGENTS	71
	SECTION 11.7	NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS	71
	SECTION 11.8	GOVERNING LAW	71
	SECTION 11.9	NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS	72
	SECTION 11.10	SUCCESSORS	72
	SECTION 11.11	SEVERABILITY	72
	SECTION 11.12	COUNTERPART ORIGINALS	72
	SECTION 11.13	TABLE OF CONTENTS, HEADINGS, ETC.	72

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EXHIBIT A
	FORM OF NOTE	A-1
EXHIBIT B
	FORM OF CERTIFICATE OF TRANSFER	B-1
EXHIBIT C
	FORM OF CERTIFICATE OF EXCHANGE	C-1
EXHIBIT D
	FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR	D-1
EXHIBIT E
	FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS	E-1

iv

CROSS-REFERENCE TABLE*

TIA Section		Indenture Section
310(a)(1)		7.10
	(a)(2)	7.10
	(a)(3)	N.A.
	(a)(4)	N.A.
	(a)(5)	7.8; 7.10
	(b)	7.8; 7.10; 11.2
	(c)	N.A.
311(a)		7.11
	(b)	7.11
	(c)	N.A.
312(a)		2.5
	(b)	11.3
	(c)	11.3
313(a)		7.6
	(b)(1)	N.A.
	(b)(2)	7.6
	(c)	7.6; 11.2
	(d)	7.6
314(a)		4.3; 4.4; 11.2
	(b)	N.A.
	(c)(1)	11.4
	(c)(2)	11.4
	(c)(3)	N.A.
	(d)	N.A.
	(e)	11.5
	(f)	N.A.
315(a)		7.1(b	)
	(b)	7.5; 11.2
	(c)	7.1(a	)
	(d)	7.1(c	)
	(e)	6.11
316(a)(last sentence)		2.9
	(a)(1)(A)	6.5
	(a)(1)(B)	6.4
	(a)(2)	N.A.
	(b)	6.7
	(c)	6.4
317(a)(1)		6.8
	(a)(2)	6.9
	(b)	2.4
318(a)		11.1
	(c)	11.1

N.A. means not applicable
*    This Cross-Reference table shall not, for any purpose, be deemed to be part of this Indenture.

1

        INDENTURE, dated as of February 26, 2002, among RFS Partnership, L.P., a Tennessee limited partnership (the "Company") and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance" and together with the Company, the "Issuers"), the Guarantors (as defined), and U.S. Bank National Association, as trustee (the "Trustee").

        Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 9.75% Senior Notes due 2012 (the "Notes"):

ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE

SECTION 1.1    DEFINITIONS

        "144A Global Note" means one or more Global Notes bearing the Private Placement Legend, that shall be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

        "Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all interest accruing thereon after the filing of a petition by or against the Company or any of its Subsidiaries or any Parent under any Bankruptcy Law, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents evidencing or governing such Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such Bankruptcy Law.

        "Acquired Indebtedness" means Indebtedness (including Disqualified Capital Stock) of any Person existing at the time such Person becomes a Subsidiary of either of or both of the Company and the Parent, including by designation, or is merged or consolidated into or with either of the Company or the Parent or one of their respective Subsidiaries.

        "Acquisition" means (i) the purchase or other acquisition of any Person or all or substantially all the assets of any Person by any other Person, whether by purchase, merger, consolidation, or other transfer, and whether or not for consideration, or (ii) an acquisition by the Company or the Parent or any of their respective Subsidiaries from any other Person of one or more hotel properties.

        "Additional Notes" means additional Notes which may be issued after the Issue Date pursuant to this Indenture (other than pursuant to an Exchange Offer or otherwise in exchange for or in replacement of outstanding Notes). All references herein to "Notes" shall be deemed to include Additional Notes.

        "Adjusted Consolidated Net Income" means, with respect to the Parent, the net income (or loss) of the Parent and its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries, (determined on a consolidated basis in accordance with GAAP) (it being understood that the net income of a Subsidiary shall be consolidated with the Parent only to the extent of the Parent's proportionate interest in such Subsidiary; provided, that the minority interest of the Company attributable to outstanding Units held by Persons other than the Parent shall not be deducted for purposes hereof), adjusted to exclude (only to the extent included in computing such net income (or loss) and without duplication):

        (a)  all gains and losses which are either extraordinary (as determined in accordance with GAAP) or are unusual and nonrecurring (including any gain from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any Capital Stock),

        (b)  the net income, if positive, of any Person, other than a Consolidated Subsidiary, in which the Company or the Parent or any of their respective Consolidated Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to the

2

Company or the Parent or a Consolidated Subsidiary of either or both of the Company and the Parent during such period, but in any case not in excess of such Person's pro rata share of their net income for such period,

        (c)  the net income or loss of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition,

        (d)  the net income, if positive, of any of the Company's or the Parent's respective Consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions to the Company is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary, and

        (e)  the net income of, and all dividends and distributions from any Unrestricted Subsidiary of either or both of the Company and the Parent, up to an aggregate amount equal to all Investments made by either or both of the Company and the Parent and their respective Subsidiaries prior to the date of determination.

        "Adjusted Consolidated Net Tangible Assets" means, at the date of determination, the total amount of assets of the Parent and its respective Subsidiaries, including the Company and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting from the total amount of assets:

        (1)  all current liabilities of the Company and the Parent and their respective Subsidiaries, excluding intercompany items, and

        (2)  all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other intangibles,

all as set forth on the most recent quarterly or annual consolidated balance sheet of the Company and the Parent and their respective Subsidiaries, in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to Section 4.3.

        "Adjusted Total Assets" means, at the date of determination, for the Parent and its Subsidiaries, including the Company and its Subsidiaries, the sum of:

        (1)  Total Assets for the Parent as of the end of the calendar quarter preceding the date of determination as set forth on the most recent quarterly or annual consolidated balance sheet of the Parent and its Subsidiaries, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to Section 4.3, and

        (2)  any increase in Total Assets following the end of such quarter including, without limitation, any increase in Total Assets resulting from the application of the proceeds of any additional Indebtedness.

        "Affiliate" means any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company and the Parent. For purposes of this definition, the term "control" means the power to direct the management and policies of a Person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise; provided, that with respect to ownership interest in the Parent and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting power normally entitled to vote in the election of directors, managers or trustees, as applicable, shall for such purposes be deemed to constitute control. Notwithstanding the foregoing, "Affiliate" shall not include Wholly Owned Subsidiaries.

        "Agent" means any Registrar, Paying Agent or co-registrar.

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        "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange at the relevant time.

        "Average Life" means, as of the date of determination, with respect to any security or instrument, the quotient obtained by dividing (1) the sum of the products (a) of the number of years from the date of determination to the date or dates of each successive scheduled principal (or redemption) payment of such security or instrument and (b) the amount of each such respective principal (or redemption) payment by (2) the sum of all such principal (or redemption) payments.

        "Bankruptcy Code" means the United States Bankruptcy Code, codified at 11 U.S.C. §101-1330, as amended.

        "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal, state or foreign law for the relief of debtors.

        "Beneficial Owner" or "beneficial owner" for purposes of the definition of Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not applicable.

        "Board of Directors" means, with respect to any Person, the board of directors (or if such Person is not a corporation, the equivalent board of managers or members or body performing similar functions for such Person) of such Person or any committee of the Board of Directors of such Person authorized, with respect to any particular matter, to exercise the power of the board of directors of such Person.

        "Broker-Dealer" means any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities.

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

        "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

        "Capital Stock" means, with respect to any entity, any and all shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness that is not itself otherwise capital stock), warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that entity, including partnership units in the case of a partnership).

        "Cash Equivalent" means:

        (1)  securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof),

        (2)  time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500 million, or

        (3)  commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc.

and in the case of each of clauses (1), (2) and (3) above maturing within one year after the date of acquisition.

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        "Change of Control" means:

        (1)  any "person" (including any group that is deemed to be a "person") is or becomes the "beneficial owner," directly or indirectly, of more than 35% of the aggregate Voting Equity Interests of the Parent or (other than the Parent or a wholly owned Subsidiary of the Parent) the Company (including as a result of any merger or consolidation of the Company or the Parent with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the Parent's or the Company's assets, in either case, on a consolidated basis, in one transaction or a series of related transactions),

        (2)  any merger or consolidation of the Parent with or into another Person or the merger of another Person with or into the Parent, or the sale of all or substantially all of the Parent's assets to another Person, if the Parent's Voting Equity Interests that are outstanding immediately prior to such transaction are changed into or exchanged for, cash, securities or property, unless pursuant to such transaction such Voting Equity Interests are changed into or exchanged for, in addition to any other consideration, securities of the surviving person or transferee that represent, immediately after such transaction, a majority of the aggregate voting power of the Voting Equity Interests of the surviving person or transferee.

        (3)  the Parent shall cease to own beneficially a majority of the voting power of the Voting Equity Interests of the Company or the consolidated financial statements of the Parent would not include the Company and its Subsidiaries, determined in accordance with GAAP;

        (4)  the Continuing Directors cease for any reason to constitute a majority of our Board of Directors then in office, or

        (5)  either or both of the Company and the Parent adopt a plan of liquidation.

As used in this definition, "person" (including any group that is deemed to be a "person") has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable.

        "Clearstream" means Clearstream Banking Luxembourg, or its successors.

        "Comparable Treasury Issue" means the U.S. Treasury security selected by an Independent Investment Banker as having maturity comparable to March 1, 2007 that would be utilized at the time of selection and in accordance with customary financial practice, in pricing new issue of corporate debt securities of comparable maturity to March 1, 2007. "Independent Investment Banker" means Credit Suisse First Boston Corporation, Banc of America Securities LLC or, if such firms are unwilling or unable to select the Comparable Treasury Issue, an investment banking firm of national reputation selected by the Company.

        "Comparable Treasury Price" means with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations for such redemption date, or (ii) the Company obtains fewer than three such Reference Security Dealer Quotations, the average of all such quotations.

        "Consolidation" means, with respect to the Company and the Parent, the consolidation of the accounts of the Subsidiaries with those of the Company and the Parent, all in accordance with GAAP; provided, that "consolidation" shall not include consolidation of the accounts of any Unrestricted Subsidiary with the accounts of the Company and the Parent. The term "Consolidated" has a correlative meaning to the foregoing.

        "Consolidated Coverage Ratio" of the Parent on any date of determination (the "Transaction Date") means the ratio, on a pro forma basis, of (a) the aggregate amount of Consolidated EBITDA of the Parent attributable to continuing operations and businesses (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of) for the Reference Period to (b) the

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aggregate Consolidated Fixed Charges of the Parent (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges would no longer be obligations contributing to the Parent's Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; provided, that for purposes of such calculation:

        (1)  Acquisitions which occurred during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date shall be assumed to have occurred on the first day of the Reference Period without regard to the effect of clause (c) of the definition of "Adjusted Consolidated Net Income,"

        (2)  transactions giving rise to the need to calculate the Consolidated Coverage Ratio shall be assumed to have occurred on the first day of the Reference Period without regard to the effect of clause (c) of the definition of "Adjusted Consolidated Net Income,"

        (3)  the incurrence of any Indebtedness, (including the issuance of any Disqualified Capital Stock), (other than Indebtedness incurred under any revolving credit facility) during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to refinance or retire other Indebtedness) shall be assumed to have occurred on the first day of the Reference Period,

        (4)  the Consolidated Fixed Charges of the Parent attributable to interest on any Indebtedness or dividends on any Disqualified Capital Stock bearing a floating interest (or dividend) rate shall be computed on a pro forma basis as if the average rate in effect from the beginning of the Reference Period to the Transaction Date had been the applicable rate for the entire period, unless such Person or any of its Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall remain in effect for the 12-month period immediately following the Transaction Date) that has the effect of fixing the interest rate on the date of computation, in which case such rate (whether higher or lower) shall be used, and

        (5)  for any Reference Period that includes the full fiscal quarter ended March 31, 2001, the aggregate Consolidated EBITDA of the Parent shall be adjusted to add thereto (to the extent deducted from net revenues in determining Consolidated Net Income and actually paid), up to $65,496,000 for the cash payments and related expenses by Subsidiaries of the Parent to subsidiaries of Hilton Hotels Corporation for the cancellation of executory contracts that was recorded by the Parent as an expense on January 1, 2001, as described in the Parent's annual report on Form 10-K for the fiscal year ended December 31, 2000, as filed with the Commission prior to the Issue Date.

        "Consolidated EBITDA"means, for any period, the Adjusted Consolidated Net Income for such period adjusted to add thereto (to the extent deducted from net revenues in determining Adjusted Consolidated Net Income), without duplication, the sum of

        (1)  Consolidated income tax expense,

        (2)  Consolidated depreciation and amortization expense,

        (3)  Consolidated Fixed Charges, and

        (4)  all other non-cash charges attributable to the grant, exercise or repurchase of options for or shares of Qualified Capital Stock to or from employees of the Company or the Parent or any of their respective Consolidated Subsidiaries, less the amount of all cash payments made by the Company or the Parent or any of their respective Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period; provided, that consolidated income tax expense and depreciation and amortization of a Subsidiary that is not a Wholly Owned Subsidiary shall only be added to the extent of the equity interest of the Parent or the Company in such Subsidiary; provided, further, that if any Subsidiary of

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either of the Company or the Parent is not a Wholly Owned Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to: (x) the amount of Adjusted Consolidated Net Income attributable to such Subsidiary, multiplied by (y) the percentage ownership interest in the income of such Subsidiary not owned on the last day of such period by the Company or the Parent or any of their respective Subsidiaries.

        "Consolidated Fixed Charges" of the Parent means, for any period, the aggregate amount (without duplication and determined in each case in accordance with GAAP) of:

        (a)  interest expensed or capitalized, paid, accrued, or scheduled to be paid or accrued (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) of the Parent and its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries, during such period, and, in any case, including (1) original issue discount and non-cash interest payments or accruals on any Indebtedness, (2) the interest portion of all deferred payment obligations, and (3) all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings and currency and Interest Swap and Hedging Obligations, in each case to the extent attributable to such period, and

        (b)  the amount of dividends accrued or payable (or guaranteed) by the Parent or any of its Consolidated Subsidiaries, including the Company and its Consolidated Subsidiaries, in respect of Preferred Stock (other than by Subsidiaries of the Parent to the Parent or the Parent's Wholly Owned Subsidiaries, including the Company and its Subsidiaries), and

        (c)  for any period the aggregate Consolidated Fixed Charges of the Parent shall be adjusted to subtract therefrom (to the extent added thereto in such period and to the extent actually paid), up to the aggregate Transaction Costs.

For purposes of this definition, (x) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined in good faith by the Parent to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP, and (y) interest expense attributable to any Indebtedness represented by the guaranty by the Parent or a Subsidiary of the Parent, including the Company and its Subsidiaries, of an obligation of another Person shall be deemed to be the interest expense attributable to the Indebtedness guaranteed.

        "Consolidated Subsidiary" means, for any Person, each Subsidiary of such Person (whether now existing or hereafter created or acquired) the financial statements of which are Consolidated for financial statement reporting purposes with the financial statements of such Person in accordance with GAAP.

        "Continuing Director" means during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the Parent (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Parent was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, including new directors designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company or the Parent, if such agreement was approved by a vote of such majority of directors).

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        "Corporate Trust Office" shall be at the address of the Trustee specified in Section 11.2 hereof or such other address as to which the Trustee may give notice to the Company.

        "Credit Agreement" means the Fifth Amended and Restated Credit Agreement dated as of July 16, 2001 by and among the Company, certain financial institutions and Bank of America, N.A., as agent, as amended by the First Amendment thereto dated November 19, 2001, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement and/or related documents may be amended, restated, supplemented, renewed, replaced or otherwise modified from time to time whether or not with the same agent, trustee, representative lenders or holders, and, subject to the proviso to the next succeeding sentence, irrespective of any changes in the terms and conditions thereof. Without limiting the generality of the foregoing, the term "Credit Agreement" shall include agreements in respect of Interest Swap and Hedging Obligations with lenders (or Affiliates thereof) party to the Credit Agreement with respect to Indebtedness incurred under the Credit Agreement and shall also include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to any Credit Agreement and all refundings, refinancings and replacements of any Credit Agreement, including any credit agreement:

        (1)  extending the maturity of any Indebtedness incurred thereunder or contemplated thereby,

        (2)  adding or deleting borrowers or guarantors thereunder, so long as borrowers and issuers include one or more of the Company, the Parent and Guarantors and their respective successors and assigns,

        (3)  increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder; provided, that on the date such Indebtedness is incurred it would not be prohibited by Section 4.7 hereof, or

        (4)  otherwise altering the terms and conditions thereof in a manner not prohibited by the terms of this Indenture.

        "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

        "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

        "Definitive Note" means one or more certificated Notes registered in the name of the Holder thereof and issued in accordance with Section 2.6 hereof, in the form of Exhibit A hereto except that such Note shall not include the information called for by footnotes 3, 4, 5 and 9 thereof.

        "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.3 hereof as the Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include such successor.

        "Disqualified Capital Stock" means with respect to any Person, (a) Equity Interests of such Person that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time or both would be, required to be redeemed or repurchased (except for (i) customary change of control and asset sale provisions, (ii) the Units, and (iii) if in effect on the Issue Date, provisions relating to the loss of such Person's status as a REIT; provided, that such Person shall be deemed to have incurred an amount of Indebtedness equal to the amount of Disqualified Capital Stock equal to the greater of the voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends at the time such Person's status as a REIT is lost) including at the option of the holder thereof, by such Person, the Parent, the Company, or any of their respective Subsidiaries, in whole or in part, on or prior to 91 days

8

following the Stated Maturity of the Notes and (b) any Equity Interests of any Subsidiary of such Person other than any common equity with no preferences, privileges, and no redemption or repayment provisions.

        "Distribution Compliance Period" means the 40-day restricted period as defined in Regulation S.

        "Equity Interests" means Capital Stock or partnership, participation or membership interests and all warrants, options or other rights to acquire Capital Stock or partnership, participation or membership interests (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock or partnership, participation or membership interests).

        "Euroclear" means Euroclear Bank S.A./N.V., or its successor, as operator of the Euroclear system.

        "Event of Loss" means, with respect to any property or asset, any (1) loss, destruction or damage of such property or asset or (2) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exchange Notes" means the Series B Notes issued pursuant to the Exchange Offer.

        "Exchange Offer" means an offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Exchange Notes for the Notes issued on the Issue Date.

        "Exchange Offer Registration Statement" shall have the meaning set forth in the Registration Rights Agreement.

        "Exempted Affiliate Transaction" means (a) customary employee or director compensation and indemnification arrangements approved by a majority of independent (as to such transactions) members of the Board of Directors of the Parent or (b) any Restricted Payment permitted under the terms of Section 4.9 hereof and payable, in form and amount, on a pro rata basis to all holders of either (i) operating partnership units of the Company, or (ii) common stock of the Parent, and (c) transactions solely between or among the Company and the Parent or solely between and among the Company or the Parent and any of their Consolidated Subsidiaries or solely among Consolidated Subsidiaries of the Company or the Parent or solely among any combination of the foregoing.

        "Existing Indebtedness" means the Indebtedness of the Company, the Parent and their respective Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the Issue Date, reduced to the extent such amounts are repaid, refinanced or retired.

        "fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Company.

        "Funds From Operations" for any period means the consolidated net income of the Parent and its Subsidiaries for such period determined in conformity with GAAP excluding gains or losses from debt restructurings which would be extraordinary items in accordance with GAAP and sales of depreciable operating property, plus depreciation of real property (including furniture, fixtures and equipment) and after adjustments for unconsolidated partnerships and joint ventures plus the minority interest in the Company, if applicable, and to the extent actually paid or accrued in such period, plus Transaction Costs.

        "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in

9

such other statements by such other entity as approved by a significant segment of the accounting profession in the United States as in effect from time to time.

        "Global Notes" means one or more Notes in the form of Exhibit A hereto that includes, as applicable, the information referred to in footnotes 3, 4, 5 and 9 to the form of Note, attached hereto as Exhibit A, issued under this Indenture, that is deposited with or on behalf of and registered in the name of the Depositary or its nominee.

        "Global Note Legend" means the legend set forth in Section 2.6(g)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture.

        "Guarantee" means a guarantee by each Guarantor for payment of the Notes by such Guarantor. The Guarantee shall be an unsecured senior obligation of each Guarantor and shall be unconditional regardless of the enforceability of the Notes and this Indenture.

        "Guarantor" means RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. and each Subsidiary of either of the Company or the Parent that executes a Guarantee in accordance with the provisions of this Indenture.

        "Holder" means a Person in whose name a Note is registered on the Registrar's books.

        "Indebtedness" of any Person means, without duplication,

        (a)  all liabilities and obligations, contingent or otherwise, of any such Person, to the extent such liabilities and obligations would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP, (1) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (2) evidenced by bonds, notes, debentures or similar instruments, or (3) representing the balance deferred and unpaid of the purchase price of any property or services, except (other than accounts payable or other obligations to trade creditors which have remained unpaid for greater than 60 days past their original due date) those incurred in the ordinary course of its business that would ordinarily constitute a trade payable to trade creditors;

        (b)  all liabilities and obligations, contingent or otherwise, of such Person (1) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (2) relating to any Capitalized Lease Obligation, or (3) evidenced by a letter of credit or a reimbursement obligation of such Person with respect to any letter of credit;

        (c)  all net obligations of such Person under Interest Swap and Hedging Obligations;

        (d)  all liabilities and obligations of others of the kind described in the preceding clause (a), (b) or (c) that such Person has guaranteed or provided credit support for or that are otherwise its legal liability or which are secured by any assets or property of such Person;

        (e)  any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not between or among the same parties; and

        (f)    all Disqualified Capital Stock of such Person (measured at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends).

provided, that any indebtedness which has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Government Securities (in an amount sufficient to satisfy all such indebtedness obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such

10

indebtedness, and subject to no other Liens, and the other applicable terms of the instrument governing such indebtedness, shall not constitute "Indebtedness."

For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer (or managing general partner of the issuer) of such Disqualified Capital Stock.

        The amount of any Indebtedness outstanding as of any date shall be (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, but the accretion of original issue discount in accordance with the original terms of Indebtedness issued with an original issue discount shall not be deemed to be an incurrence and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

        "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof.

        "Indirect Participant" means an entity that clears through, maintains a direct or indirect custodial relationship with, or holds a beneficial interest through a Participant.

        "Initial Purchasers" mean the initial purchasers of the Notes under the Purchase Agreement, dated February 21, 2002, among the initial purchasers, the Issuers and the Guarantors party thereto.

        "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB.

        "Interest Payment Date" means the stated due date of an installment of interest on the Notes.

        "Interest Swap and Hedging Obligation" means any obligation of any Person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates or currency values, including, without limitation, any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount.

        "Investment" by any Person in any other Person means, without duplication,

        (a)  the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of Equity Interests, capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other Person or any agreement to make any such acquisition;

        (b)  the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable, endorsements for collection or deposits arising in the ordinary course of business);

        (c)  other than guarantees of Indebtedness of the Company or any Guarantor to the extent permitted by Section 4.7 hereof, the entering into by such Person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other Person;

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        (d)  the making of any capital contribution by such Person to such other Person; and

        (e)  the designation by the Board of Directors of the Company of any Person to be an Unrestricted Subsidiary.

The Company and the Parent shall be deemed to make an Investment in an amount equal to the fair market value of the net assets of any subsidiary (or, if neither the Company, the Parent nor any of their respective Subsidiaries has theretofore made an Investment in such subsidiary, in an amount equal to the Investments being made), at the time that such subsidiary is designated an Unrestricted Subsidiary, and any property transferred to an Unrestricted Subsidiary from the Company or the Parent or any of their respective Subsidiaries shall be deemed an Investment valued at its fair market value at the time of such transfer. The Company, the Parent or any of their respective Subsidiaries shall be deemed to have made an Investment in a Person that is or was a Wholly Owned Subsidiary and a Guarantor if, upon the issuance, sale or other disposition of any portion of Company's, the Parent's or the Subsidiary's ownership in the Capital Stock of such Person, such Person ceases to be a Wholly Owned Subsidiary. The fair market value of each Investment shall be measured at the time made or returned, as applicable.

        "Issue Date" means the date of first issuance of the Notes under this Indenture.

        "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.

        "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired.

        "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement.

        "Make-Whole Premium" means, with respect to a note, the sum of the present values of the remaining scheduled payments of interest, principal and premium thereon (not including any portion of such payments of interest accrued as of the date of redemption) as if the notes were redeemed on March 1, 2007 pursuant to Section 3.7 on such date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points.

        "Moody's" means Moody's Investors Service, Inc. and its successors.

        "Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents received by the Company or the Parent in the case of a sale of Qualified Capital Stock and by the Company or the Parent and their Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Company or the Parent that were issued for cash on or after the Issue Date, the amount of cash originally received by the Company or the Parent upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the sum of all payments, fees, commissions and expenses (including, without limitation, the fees and expenses of legal counsel and investment banking fees and expenses) incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only, less the amount (estimated reasonably and in good faith by the Company) of income, franchise, sales and other applicable taxes required to be paid by the Company or the Parent or any of their Subsidiaries in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carryforwards, and similar tax attributes.

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        "Non-Recourse Indebtedness" means Indebtedness (a) as to which neither the Company, the Parent nor any of their respective Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than in the form of a Lien on an asset serving as security for Non-Recourse Indebtedness of the Company, the Parent or any of their respective Subsidiaries, (2) is directly or indirectly liable (as a guarantor or otherwise) other than in the form of a Lien on an asset serving as security for Non-Recourse Indebtedness of the Company, the Parent or any of their respective Subsidiaries, or (3) constitutes the lender, and (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Parent, the Company or any of the Guarantors to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.

        "Non-U.S. Person" means any Person other than a U.S. Person.

        "Notes Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

        "Obligation" means any principal, premium or interest payment, or monetary penalty, or damages, due by the Company or any Guarantor under the terms of the Notes or this Indenture, including any Liquidated Damages due pursuant to the terms of the Registration Rights Agreement.

        "Offering" means the offering of the Notes by the Company.

        "Offering Circular" means the Offering Circular, dated February 21, 2002, relating to the initial offering of the Notes.

        "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person.

        "Officers' Certificate"means the officers' certificate to be delivered upon the occurrence of certain events as set forth in this Indenture.

        "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Sections 11.4 and 11.5 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company.

        "Parent" means RFS Hotel Investors, Inc. or its successor

        "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream).

        "Permitted Indebtedness"means that:

        (a)  the Company and the Guarantors may incur Indebtedness evidenced by the Notes and the Guarantees issued pursuant to this Indenture up to the amounts being issued on the original Issue Date less any amounts repaid or retired;

        (b)  the Company, the Parent and their respective Subsidiaries as applicable, may incur Refinancing Indebtedness with respect to any Existing Indebtedness or any Indebtedness (including Disqualified Capital Stock), described in clause (a) or incurred pursuant to the Debt Incurrence Ratio test and clause (1) or (2) of Section 4.7 hereof or which was refinanced pursuant to this clause (b);

        (c)  the Company, the Parent and their respective Subsidiaries may incur Indebtedness solely in respect of bankers acceptances, letters of credit and performance bonds (to the extent that such

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incurrence does not result in the incurrence of any obligation to repay any obligation relating to borrowed money or other Indebtedness), all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Company's industry; provided, that the aggregate principal amount outstanding of such Indebtedness (including any Refinancing Indebtedness and any other Indebtedness issued to retire, refinance, refund, defease or replace such Indebtedness) shall at no time exceed $2,000,000;

        (d)  the Company may incur Indebtedness owed to (borrowed from) any Guarantor, and any Guarantor may incur Indebtedness owed to (borrowed from) any other Guarantor or the Company; provided, that in the case of Indebtedness of the Company, such obligations shall be unsecured and contractually subordinated in all respects to the Company's obligations pursuant to the Notes and in the case of Indebtedness of a Guarantor such Indebtedness shall be unsecured and contractually subordinated in all respects to such Guarantor's obligations pursuant to such Guarantor's Guarantee and any event that causes such Guarantor no longer to be a Guarantor (including by designation to be an Unrestricted Subsidiary) shall be deemed to be a new incurrence by such issuer of such Indebtedness and any guarantor thereof subject to Section 4.7 hereof;

        (e)  the Company, the Parent and their respective Subsidiaries may incur Interest Swap and Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by this Indenture to be outstanding or any receivable or liability the payment of which is determined by reference to a foreign currency; provided, that the notional amount of any such Interest Swap and Hedging Obligation does not exceed the principal amount of Indebtedness to which such Interest Swap and Hedging Obligation relates.

        "Permitted Investment"means:

        (a)  any Investment in any of the Notes;

        (b)  any Investment in Cash Equivalents;

        (c)  intercompany notes to the extent permitted under clause (d) of the definition of "Permitted Indebtedness";

        (d)  Investments in a Person in a Related Business if as a result of such Investment such Person immediately becomes a Subsidiary of the Company or the Parent or such Person is immediately merged with or into the Company or the Parent or one of their respective Subsidiaries;

        (e)  any Investment in any Person in exchange for the Company's or the Parent's Qualified Capital Stock or made with the Net Cash Proceeds of any substantially concurrent sale of the Company's or the Parent's Qualified Capital Stock; and

        (f)    any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.13 hereof.

        "Person" or "person" means any corporation, individual, limited liability company, joint stock company, joint venture, partnership, unincorporated association, governmental regulatory entity, country, state or political subdivision thereof, trust, municipality or other entity.

        "Preferred Stock" means any Equity Interest of any class or classes of a Person (however designated) which is preferred as to payments of dividends, or as to distributions upon any liquidation or dissolution, over Equity Interests of any other class of such Person.

"Private Placement Legend" means the legend set forth in Section 2.6(g)(i) hereof to be placed on all Notes issued under this Indenture except where specifically stated otherwise by the provisions of this Indenture.

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        "Pro Forma" or "pro forma" shall have the meaning set forth in Regulation S-X of the Securities Act of 1933, as amended, unless and to the extent otherwise specifically stated herein.

        "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

        "Qualified Capital Stock" means any Capital Stock of the Company or the Parent that is not Disqualified Capital Stock.

        "Qualified Exchange"means:

        (1)  any legal defeasance, redemption, retirement, repurchase or other acquisition of Capital Stock, or Indebtedness of the Company or the Parent issued on or after the Issue Date with the Net Cash Proceeds received by the Company or the Parent from the substantially concurrent sale of its Qualified Capital Stock (other than to a Subsidiary), and

        (2)  any issuance of Qualified Capital Stock of the Company or the Parent in exchange for any Capital Stock or Indebtedness of the Company or the Parent issued on or after the Issue Date.

        "Record Date" means a Record Date specified in the Notes, whether or not such date is a Business Day.

        "Reference Period" with regard to any Person means the four full fiscal quarters (or such lesser period during which such Person has been in existence) ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Notes or this Indenture.

        "Reference Treasury Dealer Quotations" means, with respect of each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by the each Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

        "Refinancing Indebtedness"means Indebtedness, including Disqualified Capital Stock, (a) issued in exchange for, or the proceeds from the issuance and sale of which are used substantially concurrently to repay, redeem, defease, refund, refinance, discharge or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to, or a deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any Indebtedness (including Disqualified Capital Stock) in a principal amount or, in the case of Disqualified Capital Stock, liquidation preference, not to exceed (after deduction of reasonable and customary fees and expenses incurred in connection with the Refinancing) the lesser of (1) the principal amount or, in the case of Disqualified Capital Stock, liquidation preference, of the Indebtedness (including Disqualified Capital Stock) so Refinanced and (2) if such Indebtedness being Refinanced was issued with an original issue discount, the accreted value thereof (as determined in accordance with GAAP) at the time of such Refinancing (plus, in each case, the amount of any premium paid in connection with such Refinancing in accordance with the terms of the documents governing the Indebtedness refinanced without giving effect to any modification thereof made in connection with or in contemplation of such refinancing); provided, that (A) such Refinancing Indebtedness shall only be used to refinance outstanding Indebtedness (including Disqualified Capital Stock) of such Person issuing such Refinancing Indebtedness, (B) such Refinancing Indebtedness shall (x) not have an Average Life shorter than the Indebtedness (including Disqualified Capital Stock) to be so refinanced at the time of such Refinancing and (y) in all respects, be no less contractually subordinated or junior, if applicable, to the rights of Holders of the Notes than was the Indebtedness (including Disqualified Capital Stock) to be refinanced, (C) such Refinancing Indebtedness shall have a final stated maturity or redemption date, as applicable, no earlier than the final stated maturity or redemption date, as applicable, of the Indebtedness (including Disqualified Capital Stock) to be so refinanced or, if sooner, 91 days after the Stated Maturity of the Notes, and (D) such Refinancing Indebtedness shall be secured (if secured) in a manner no more adverse to the Holders of the Notes

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than the terms of the Liens (if any) securing such refinanced Indebtedness, including, without limitation, the amount of Indebtedness secured shall not be increased.

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of Issue Date, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time.

        "Reg S Permanent Global Note" means one or more permanent Global Notes bearing the Private Placement Legend, that shall be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Reg S Temporary Global Note upon expiration of the Distribution Compliance Period.

        "Reg S Temporary Global Note" means one or more temporary Global Notes bearing the Private Placement Legend and the Reg S Temporary Global Note Legend, issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.

        "Reg S Temporary Global Note Legend" means the legend set forth in Section 2.6(g)(iii) hereof, which is required to be placed on all Reg S Temporary Global Notes issued under this Indenture.

        "Regulation S" means Regulation S promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto.

        "Regulation S Global Note" means a Reg S Temporary Global Note or a Reg S Permanent Global Note, as the case may be.

        "Related Business"means the business conducted (or proposed to be conducted) by the Company, the Parent and their Subsidiaries as of the Issue Date and any and all businesses that in the good faith judgment of the Board of Directors of the Parent are materially related to such businesses.

        "Restricted Definitive Note" means one or more Definitive Notes bearing the Private Placement Legend, issued under this Indenture.

        "Restricted Global Note" means one or more Global Notes bearing the Private Placement Legend, issued under this Indenture.

        "Restricted Investment" means, in one or a series of related transactions, any Investment, other than other Permitted Investments.

        "Restricted Payment" means, with respect to any Person:

        (1)  the declaration or payment of any dividend or other distribution in respect of Equity Interests of such Person,

        (2)  any payment (except to the extent made with Qualified Capital Stock) on account of the purchase, redemption or other acquisition or retirement for value of Equity Interests of such Person,

        (3)  other than with the proceeds from the substantially concurrent sale of or in exchange for Refinancing Indebtedness any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms of or any defeasance of, any Subordinated Indebtedness, directly or indirectly, by such Person or a parent or Subsidiary of such Person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness, and

        (4)  any Restricted Investment by such Person;

provided, that the term "Restricted Payment" does not include (a) any dividend, distribution or other payment on or with respect to Equity Interests of the Company or the Parent to the extent payable solely in shares of Qualified Capital Stock of such issuer or (b) any dividend, distribution or other payment to the Company or the Parent, or to any of the Guarantors, by the Company or the Parent or

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any of their Subsidiaries and any Investment in any Subsidiary of the Company or the Parent by the Company or the Parent.

        "Rule 144" means Rule 144 promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto.

        "Rule 144A" means Rule 144A promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto.

        "SEC" means the United States Securities and Exchange Commission, or any successor agency.

        "Secured Indebtedness"means any Indebtedness or Disqualified Capital Stock secured by a Lien upon property of either of the Company or the Parent or any of their respective Subsidiaries.

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder.

        "Series A Notes" means the 9.75% Series A Senior Notes due 2012 issued on the Issue Date.

        "Series B Notes" means the 9.75% Series B Senior Notes due 2012 issued pursuant to the Exchange Offer.

        "Shelf Registration Statement" shall have the meaning set forth in the Registration Rights Agreement.

        "Significant Subsidiary" shall have the meaning provided under Regulation S-X of the Securities Act as in effect on the Issue Date.

        "Special Record Date" means, for payment of any Defaulted Interest, a date fixed by the Paying Agent pursuant to Section 2.12 hereof.

        "Stated Maturity" when used with respect to any Note, means March 1, 2012.

        "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment by its terms or the terms of any document or instrument or instrument relating thereto ("contractually") to the Notes or such Guarantee, as applicable.

        "Subsidiary" with respect to any Person, means (1) a corporation a majority of whose Equity Interests with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person, and (2) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person, or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof has majority ownership interest, or (3) a partnership in which such Person or a Subsidiary of such Person is, at the time, a general partner and in which such Person, directly or indirectly, at the date of determination thereof has a majority ownership interest. Notwithstanding the foregoing, (i) except as expressly set forth in this Indenture, the Company shall not be considered a Subsidiary of the Parent for any purpose under this Indenture (including the definitions used therein), but each direct and indirect Subsidiary of the Company shall be considered a Subsidiary of the Parent, and (ii) an Unrestricted Subsidiary shall not be a Subsidiary of the Company or the Parent or of any of their Subsidiaries for any purpose under this Indenture (including the definitions used therein). Unless the context requires otherwise, Subsidiary means each direct and indirect Subsidiary of the Company and the Parent.

        "Subsidiary Indebtedness"means, without duplication, all Unsecured Indebtedness (including guarantees other than guarantees by Subsidiaries of Secured Indebtedness) of which a Subsidiary of the Company or the Parent other than a Guarantor is the obligor. A release of the Guarantee of a Guarantor which remains a Subsidiary of either of the Company or the Parent shall be deemed to be an incurrence of Subsidiary Indebtedness in an amount equal to the proportionate interest of the Company or the Parent in the Unsecured Indebtedness of such Guarantor.

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        "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

        "Total Assets" means, at the date of determination, the sum of:

        (1)  Undepreciated Real Estate Assets, and

        (2)  all other assets of the Parent, the Company and their respective Subsidiaries on a consolidated basis determined in conformity with GAAP (but excluding intangibles and accounts receivable).

        "Transaction Costs" means (i) the payment of a yield maintenance premium of up to $6.5 million in connection with the redemption or repurchase of the RFS Financing Partnership, L.P. Commercial Mortgage Bonds, Series 1996-1; (ii) up to $3.2 million of termination fees in connection with the termination of Interest Swap and Hedging Obligations in connection with the termination of interest swap agreements in connection with the issuance of the Notes, each as described in the Offering Circular.

        "Transfer Restricted Notes" means Global Notes and Definitive Notes that bear or are required to bear the Private Placement Legend, issued under this Indenture.

        "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

        "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means such successor serving hereunder.

        "Undepreciated Real Estate Assets" means, as of any date, the cost (being the original cost to the Company, the Parent or the applicable Subsidiary plus capital improvements) of real estate assets of the Parent and its Subsidiaries on such date, before depreciation and amortization of such real estate assets, determined on a consolidated basis in conformity with GAAP.

        "Units" means limited partnership units of the Company that by their terms are redeemable at the option of the holder thereof and that, if so redeemed, at the election of the Company are redeemable for cash or common stock of the Parent.

        "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend, issued under this Indenture.

        "Unrestricted Global Note" means one or more permanent Global Notes that do not bear and are not required to bear the Private Placement Legend, issued under this Indenture.

        "Unrestricted Subsidiary" means any subsidiary of either of the Company or the Parent that does not own any Capital Stock of, or own or hold any Lien on any property of, the Company or the Parent or any other Subsidiary of the Company or the Parent and that, at the time of determination, shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company); provided, that such Subsidiary at the time of such designation (a) is not party to any agreement, contract, arrangement or understanding with the Company, the Parent or any Subsidiary of the Company or the Parent unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company, the Parent or such Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company or the Parent; (b) is a Person with respect to which neither of the Company, the Parent nor any of their Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (c) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of either of the Company, the Parent or any of their Subsidiaries.

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The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Subsidiary, provided, that (1) no Default or Event of Default is existing or shall occur as a consequence thereof and (2) immediately after giving effect to such designation, on a pro forma basis, the Company could incur at least $1.00 of Indebtedness pursuant to clauses (a)(1) and (a)(2) of Section 4.7 hereof. Each such designation shall be evidenced by filing with the Trustee a certified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions.

        "Unsecured Indebtedness" means any Indebtedness or Disqualified Capital Stock of the Company or the Parent or any of their Subsidiaries that is not Secured Indebtedness.

        "U.S. Government Obligations" means direct non-callable obligations of, or noncallable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged.

        "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act.

        "Voting Equity Interests" means Equity Interests which at the time are entitled to vote in the election of, as applicable, directors, members or partners generally.

        "Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of which (other than directors' qualifying shares) are owned by either or both of the Company or the Parent or one or more Wholly Owned Subsidiaries of either or both of the Company and the Parent or a combination thereof.

SECTION 1.2    OTHER DEFINITIONS

Term	Defined in Section
"Acceleration Notice"	6.2
"Affiliate Transaction"	4.12
"Asset Sale"	4.13
"Asset Sale Offer"	4.13
"Asset Sale Offer Amount"	4.13
"Asset Sale Offer Period"	4.13
"Asset Sale Offer Price"	4.13
"Authentication Order"	2.2
"Benefitted Party"	10.1
"Change of Control Offer"	4.14
"Change of Control Offer Period"	4.14
"Change of Control Purchase Date"	4.14
"Change of Control Purchase Price"	4.14
"Code"	4.9
"Covenant Defeasance"	8.3
"Debt Incurrence Ratio"	4.7
"Defaulted Interest"	2.12
"DTC"	2.3
"Event of Default"	6.1
"Excess Proceeds"	4.13
"Future Guarantors"	10.7
"Guaranteed Indebtedness"	4.15
"Guarantee Obligations"	10.1
"incur" or "incurrence"	4.7
"Incurrence Date"	4.7
"Investment Company Act"	4.18
"Legal Defeasance"	8.2
"Paying Agent"	2.3
"Registrar"	2.3

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SECTION 1.3    INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT

        Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture.

        The following TIA terms used in this Indenture have the following meanings:

        "Commission" means the Securities and Exchange Commission;

        "obligor" on the Notes means the Company, each Guarantor and any successor obligor upon the Notes.

        All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.

SECTION 1.4    RULES OF CONSTRUCTION

        Unless the context otherwise requires:

        (1)  a term has the meaning assigned to it;

        (2)  an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

        (3)  "or" is not exclusive;

        (4)  words in the singular include the plural, and in the plural include the singular;

        (5)  provisions apply to successive events and transactions;

        (6)  "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and

        (7)  references to sections of or rules under the Securities Act and the Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time.

ARTICLE II
THE NOTES

SECTION 2.1    FORM AND DATING

        (a)    General.    The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof.

        The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

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        (b)    Global Notes.    Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.6 hereof.

        (c)    Euroclear and Clearstream Procedures Applicable.    The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking Luxembourg" and "Customer Handbook" of Clearstream in effect at the relevant time shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream.

SECTION 2.2    EXECUTION AND AUTHENTICATION

        Two Officers shall sign the Notes for the Company by manual or facsimile signature. In the case of Definitive Notes, such signatures may be imprinted or otherwise reproduced on such Notes. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for issuance up to the aggregate principal amount stated in such Authentication Order; provided that Notes authenticated for issuance on the Issue Date shall not exceed $125,000,000 in aggregate principal amount. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

SECTION 2.3    REGISTRAR, PAYING AGENT AND DEPOSITARY

        The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Notes Custodian with respect to the Global Notes.

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SECTION 2.4    PAYING AGENT TO HOLD MONEY IN TRUST

        The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.

SECTION 2.5    HOLDER LISTS

        The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company shall furnish, or shall cause the Registrar (if other than the Company) to furnish, to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA § 312(a).

SECTION 2.6    TRANSFER AND EXCHANGE

        (a)    Transfer and Exchange of Global Notes.    A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that (x) the Depositary is unwilling or unable to continue to act as Depositary for the Global Notes and the Company thereupon fails to appoint a successor Depositary within 90 days or (y) the Depositary is no longer a clearing agency registered under the Exchange Act, (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) upon request of the Trustee or Holders of a majority of the aggregate principal amount of outstanding Notes if there shall have occurred and be continuing a Default or Event of Default with respect to the Notes; provided that in no event shall the Reg S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificate identified by the Company and its counsel to be required pursuant to Rule 903 or Rule 904 under the Securities Act. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as otherwise provided in this Section 2.6 or as provided in Sections 2.7 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.6(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.6(b), (c) or (f) hereof.

        (b)    Transfer and Exchange of Beneficial Interests in the Global Notes.    The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with

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the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

        (i)    Transfer of Beneficial Interests in the Same Global Note.    Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Reg S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.6(b)(i).

        (ii)    All Other Transfers and Exchanges of Beneficial Interests in Global Notes.    In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.6(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above; provided, that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Reg S Temporary Global Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates identified by the Company or its counsel to be required pursuant to Rule 903 and Rule 904 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.6(f) hereof, the requirements of this Section 2.6(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.6(h) hereof.

        (iii)    Transfer of Beneficial Interests to Another Restricted Global Note.    A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.6(b)(ii) above and the Registrar receives the following:

        (A)  if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

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        (B)  if the transferee shall take delivery in the form of a beneficial interest in the Reg S Temporary Global Note or the Reg S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

        (iv)    Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note.    A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.6(b)(ii) above and:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

        (B)  such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (C)  such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (D)  the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

        (c)    Transfer or Exchange of Beneficial Interests for Definitive Notes.

        (i)    Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes.    If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes

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delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

        (A)  if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

        (B)  if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

        (C)  if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

        (D)  if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(d) thereof;

        (E)  if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

        (F)  if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

        (G)  if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2 hereof, the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

        (ii)    Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes.    A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person

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participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

        (B)  such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (C)  such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (D)  the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        (iii)    Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.    If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2 hereof, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall not bear the Private Placement Legend.

        (iv)    Transfer or Exchange of Reg S Temporary Global Notes.    Notwithstanding the other provisions of this Section 2.6, a beneficial interest in the Reg S Temporary Global Note may not be (A) exchanged for a Definitive Note prior to (x) the expiration of the Distribution Compliance Period (unless such exchange is effected by the Company, does not require an investment decision on the part of the holder thereof and does not violate the provisions of Regulation S) and (y) the receipt by the Registrar of any certificates identified by the Company or its counsel to be required pursuant to Rule 903(c)(3)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to the events set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.

        (d)    Transfer and Exchange of Definitive Notes for Beneficial Interests.

        (i)    Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes.    If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a

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Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

        (A)  if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

        (B)  if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or

        (C)  if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof,

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note.

        (ii)    Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.    A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

        (B)  such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (C)  such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (D)  the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.6(d)(ii), the Trustee shall cancel the Restricted Definitive Notes so transferred or exchanged and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

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        (iii)    Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.    A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

        (iv)    Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interest in Restricted Notes Prohibited.    An Unrestricted Definitive Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note.

        (v)    Issuance of Unrestricted Global Notes.    If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) of this Section 2.6(d) at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

        (e)    Transfer and Exchange of Definitive Notes for Definitive Notes.     Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.6(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(e).

        (i)    Restricted Definitive Notes to Restricted Definitive Notes.    Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

        (A)  if the transfer shall be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

        (B)  if the transfer shall be made pursuant to Rule 903 or Rule 904 under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

        (C)  if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

        (ii)    Restricted Definitive Notes to Unrestricted Definitive Notes.    Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

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        (B)  any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (C)  any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (D)  the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        (iii)    Unrestricted Definitive Notes to Unrestricted Definitive Notes.    A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

        (f)    Exchange Offer.    Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof and an Opinion of Counsel for the Company as to certain matters discussed in this Section 2.6(f), the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the sum of (A) the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (B) the principal amount of Definitive Notes exchanged or transferred for beneficial interests in Unrestricted Global Notes in connection with the Exchange Offer pursuant to Section 2.6(d)(ii) hereof and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer (other than Definitive Notes described in clause (i)(B) immediately above). Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2 hereof, the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount.

        The Opinion of Counsel for the Company referenced above shall state, in form and substance satisfactory to the Trustee, that:

        (1)  the issuance and sale of the Exchange Notes by the Company have been duly authorized and, when executed and authenticated in accordance with the provisions of this Indenture and delivered in exchange for Series A Notes in accordance with this Indenture and the Exchange Offer, shall be entitled to the benefits of this Indenture and shall be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except as the enforceability thereof may be limited by (x) bankruptcy, fraudulent transfer, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and (y) equitable

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principles of general applicability (regardless of whether enforceability is considered at equity or in law); and

        (2)  when the Exchange Notes are executed and authenticated in accordance with the provisions of this Indenture and delivered in exchange for Series A Notes in accordance with this Indenture and the Exchange Offer, the Guarantees by the Guarantors endorsed thereon shall be entitled to the benefits of this Indenture and shall be valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms except as the enforceability thereof may be limited by (x) bankruptcy, fraudulent transfer, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and (y) equitable principles of general applicability (regardless of whether enforceability is considered at equity or in law).

        (g)    Legends.    The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

        (i)    Private Placement Legend.

        (A)  Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER."

"THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED SATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."

        (B)  Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.6 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.

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        (ii)    Global Note Legend.    To the extent required by the Depositary, each Global Note shall bear legends in substantially the following forms:

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."

"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

        (iii)    Reg S Temporary Global Note Legend.    To the extent required by the Depositary, each Reg S Temporary Global Note shall bear a legend in substantially the following form:

"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE."

        (h)    Cancellation and/or Adjustment of Global Notes.    At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced

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accordingly and an endorsement may be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement may be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

        (i)    General Provisions Relating to Transfers and Exchanges.

          (i)  To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order.

        (ii)  No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.6, 4.13 and 4.14 hereof).

        (iii)  The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

        (iv)  All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

        (v)  The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.2 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a Record Date and the next succeeding Interest Payment Date.

        (vi)  Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

      (vii)  The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.2 hereof.

      (viii)  All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.6 to effect a registration of transfer or exchange may be submitted by facsimile.

        Notwithstanding anything herein to the contrary, as to any certifications and certificates delivered to the Registrar pursuant to this Section 2.6, the Registrar's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibits A, B, C and D attached hereto. The Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates.

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SECTION 2.7    REPLACEMENT NOTES

        If any mutilated Note is surrendered to the Trustee or the Company and the Trustee and the Company receive evidence (which evidence may be from the Trustee) to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

SECTION 2.8    OUTSTANDING NOTES

        The Notes outstanding at any time are all the Notes authenticated by the Trustee (including any Note represented by a Global Note) except for those cancelled by it or at its direction, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.8 as not outstanding. Except as set forth in Section 2.9 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.7 hereof, such Note, together with the Guarantee of that particular Note endorsed thereon, ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or the maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

SECTION 2.9    TREASURY NOTES

        In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded.

SECTION 2.10    TEMPORARY NOTES

        Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture.

SECTION 2.11    CANCELLATION

        The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent

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(other than the Company or an Affiliate of the Company), and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

SECTION 2.12    DEFAULTED INTEREST

        Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date plus, to the extent lawful, any interest payable on the defaulted interest at the rate and in the manner provided in Section 4.1 hereof and in the Note (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant Record Date, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

        (1)  The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee and the Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Paying Agent an amount of cash equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements reasonably satisfactory to the Paying Agent for such deposit prior to the date of the proposed payment, such cash when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause (1). Thereupon the Paying Agent shall fix a "Special Record Date" for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Paying Agent of the notice of the proposed payment. The Paying Agent shall promptly notify the Company and the Trustee of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at its address as it appears in the Note register maintained by the Registrar not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Notes (or their respective predecessor Notes) are registered on such Special Record Date and shall no longer be payable pursuant to the following clause (2).

        (2)  The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee and the Paying Agent of the proposed payment pursuant to this clause, such manner shall be deemed practicable by the Trustee and the Paying Agent.

        Subject to the foregoing provisions of this Section 2.12, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

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SECTION 2.13    CUSIP NUMBERS

        The Company in issuing the Notes may use "CUSIP"and/or "ISIN" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP"and/or "ISIN" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" and/or "ISIN" numbers.

SECTION 2.14    ISSUANCE OF ADDITIONAL NOTES

        The Company may, subject to Section 4.7 hereof and applicable law, issue Additional Notes under this Indenture. The Notes issued on the Issue Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture.

ARTICLE III
REDEMPTION

SECTION 3.1    NOTICES TO TRUSTEE

        If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days (unless a longer period is acceptable to the Trustee) before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price.

SECTION 3.2    SELECTION OF NOTES TO BE REDEEMED

        If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes or portions thereof to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption.

        The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes in denominations of larger than $1,000 selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

SECTION 3.3    NOTICE OF REDEMPTION

        Subject to the provisions of Section 3.7 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address.

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        The notice shall identify the Notes to be redeemed and shall state:

        (a)  the redemption date;

        (b)  the redemption price;

        (c)  if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, on or after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note;

        (d)  the name and address of the Paying Agent;

        (e)  that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

        (f)    that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

        (g)  the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

        (h)  that no representation is made as to the correctness or accuracy of the CUSIP or ISIN number, if any, listed in such notice or printed on the Notes.

        At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date (unless a shorter period shall be acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

SECTION 3.4    EFFECT OF NOTICE OF REDEMPTION

        Once notice of redemption is mailed in accordance with Section 3.3 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional.

SECTION 3.5    DEPOSIT OF REDEMPTION PRICE

        On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued and unpaid interest (and Liquidated Damages, if any) on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest (and Liquidated Damages, if any) on, all Notes to be redeemed.

        If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest (and Liquidated Damages, if any) shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date.

        If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any

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interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.1 hereof.

SECTION 3.6    NOTES REDEEMED IN PART

        Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

SECTION 3.7    OPTIONAL REDEMPTION

        (a)  The Company shall have the option to redeem the Notes, in whole or in part, in cash from time to time, upon not less than 30 days' nor more than 60 days' notice, prior to March 1, 2007 at a redemption price equal to the greater of (i) 104.875% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest (and Liquidated Damages, if any) and (ii) the Make-Whole Premium, plus to the extent not included in the Make-Whole Premium, accrued and unpaid interest (and Liquidated Damages, if any) to, but not including, the redemption date.

        (b)  The Notes shall be redeemable for cash at the option of the Company, in whole or in part, at any time on or after March 1, 2007, upon not less than 30 days nor more than 60 days prior notice mailed by first class mail to each Holder at its last registered address, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing March 1 of the years indicated below, in each case (subject to the right of Holders of record on a Record Date to receive the corresponding interest due (and the corresponding Liquidated Damages, if any) on the corresponding Interest Payment Date that is on or prior to such redemption date) together with accrued and unpaid interest (and Liquidated Damages, if any), thereon to the date of redemption of the Notes (the "Redemption Date"):

Year	Percentage
2007	104.875	%
2008	103.250	%
2009	101.625	%
2010 and thereafter	100.000	%

        (c)  Notwithstanding the provisions of clauses (a) and (b) of this Section 3.7, at any time or from time to time on or prior to March 1, 2005, upon one or more public equity offerings of the Parent's Qualified Capital Stock, up to 35% of the aggregate principal amount of the Notes issued pursuant to this Indenture (only as necessary to avoid any duplication, excluding any replacement Notes) may be redeemed at the Company's option within 90 days of such public equity offering, on not less than 30 days, but not more than 60 days, notice to each Holder of the Notes to be redeemed, with cash in an amount not in excess of the Net Cash Proceeds of such public equity offering, at a redemption price equal to 109.750% of principal, together with accrued and unpaid interest and Liquidated Damages, if any, to, but not including, the Redemption Date; provided, however, that immediately following each such redemption not less than 65% of the aggregate principal amount of the Notes (but in no event less than $100 million aggregate principal amount of the Notes) originally issued pursuant to this Indenture on the Issue Date remain outstanding (only as necessary to avoid any duplication, excluding any replacement Notes).

        (d)  Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof.

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SECTION 3.8    NO MANDATORY REDEMPTION

        The Issuers shall not be required to make mandatory redemption payments with respect to the Notes (however, the Issuers are required to offer to repurchase Notes in accordance with the provisions of Sections 4.13 and 4.14 below). The Notes shall not have the benefit of any sinking fund.

ARTICLE IV
COVENANTS

SECTION 4.1    PAYMENT OF NOTES

        The Issuers shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof, holds as of 12:00 noon Eastern time on the due date money deposited by the Issuers in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Issuers shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement and herein.

        The Issuers shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal at the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (and Liquidated Damages, if any) (without regard to any applicable grace period) at the same rate to the extent lawful.

SECTION 4.2    MAINTENANCE OF OFFICE OR AGENCY

        The Issuers and the Guarantors shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers and the Guarantors in respect of the Notes and this Indenture may be served. The Issuers and the Guarantors shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers and the Guarantors shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office.

        The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such additional designations; provided that no such designation or rescission shall in any manner relieve the Issuers and the Guarantors of their obligation to maintain an office or agency in the Borough of Manhattan, The City of New York. The Issuers shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

        The Issuers hereby designate the Corporate Trust Office as one such office or agency of the Issuers in accordance with Section 2.3 hereof.

SECTION 4.3    SEC REPORTS AND REPORTS TO HOLDERS

        Whether or not the Company and the Parent are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company and the Parent shall deliver or make available to the Trustee (and if the Company and the Parent are not subject to such reporting requirements, to each Holder of Notes), within five days after the Company and the Parent are or would have been (if the Company and the Parent were subject to such reporting obligations) required to file such

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statements with the SEC, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the SEC, if the Company and the Parent were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by the Company's certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required and, unless the Commission shall not accept such reports, file with the Commission the annual, quarterly and other reports which it is or would have been required to file with the Commission. In addition, the Issuers and the Guarantors agree that, prior to consummation of the Exchange Offer, they shall make available to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

SECTION 4.4    COMPLIANCE CERTIFICATE

        (a)  The Issuers shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Issuers, the Parent and their respective Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuers, the Parent and their respective Subsidiaries have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to his or her knowledge the Issuers, the Parent and their respective Subsidiaries are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuers are taking or proposes to take with respect thereto) and that to his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Issuers are taking or proposes to take with respect thereto. The Issuers shall provide the Trustee with timely written notice of any change in its fiscal year end, which is currently December 31.

        (b)  The Issuers shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Issuers are taking or proposes to take with respect thereto.

SECTION 4.5    TAXES

        The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment would not have a material adverse effect on the ability of the Company and the Guarantors to satisfy their obligations under the Notes, the Guarantees and this Indenture.

SECTION 4.6    STAY, EXTENSION AND USURY LAWS

        The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not,

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by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

SECTION 4.7    LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK

        (a)  Except as set forth in this Section 4.7, the Company and the Parent shall not, and neither the Company nor the Parent shall permit any of their respective Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness (including Disqualified Capital Stock and Acquired Indebtedness), other than Permitted Indebtedness. Notwithstanding the foregoing if, on the date of such incurrence (the "Incurrence Date"), (x) no Default or Event of Default shall have occurred and be continuing at the time of, or would exist after giving effect on a pro forma basis to, such incurrence of Indebtedness, and (y) the Consolidated Coverage Ratio of the Parent for the Reference Period immediately preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.00 to 1.00 (the "Debt Incurrence Ratio"), then:

        (1)  the Company and the Parent and their respective Subsidiaries may incur Indebtedness (other than Secured Indebtedness and Subsidiary Indebtedness), (including Disqualified Capital Stock) if, after giving effect to, on a pro forma basis, such incurrence and the receipt and application of proceeds therefrom, the aggregate amount of all outstanding Indebtedness and Disqualified Capital Stock of the Parent and its Subsidiaries, including the Company and its Subsidiaries, determined on a consolidated basis, without duplication, is less than or equal to 65% of the Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries; and

        (2)  the Company and the Parent and their respective Subsidiaries may incur Secured Indebtedness and the Parent's Subsidiaries, excluding the Company but including the Company's Subsidiaries, may incur Subsidiary Indebtedness (including Disqualified Capital Stock), if, after giving effect, on a pro forma basis, to such incurrence of Indebtedness and the receipt and application of proceeds therefrom, the aggregate amount of all outstanding Secured Indebtedness and Subsidiary Indebtedness (including Disqualified Capital Stock), of the Parent and its Subsidiaries (including outstanding amounts of Refinancing Indebtedness in respect of Secured Indebtedness and Subsidiary Indebtedness and Disqualified Capital Stock), including for purposes of Secured Indebtedness only, the Secured Indebtedness of the Company, determined on a consolidated basis, without duplication, is less than or equal to 45% of the Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries.

        (b)  The foregoing limitations of this Section 4.7 shall not prohibit the Company's incurrence or the incurrence by any Guarantor of Indebtedness pursuant to the Credit Agreement in an aggregate amount incurred and outstanding at any time pursuant to this clause (b) (plus any Refinancing Indebtedness incurred to retire, defease, refinance, replace or refund such Indebtedness) of up to $175 million, minus the amount of any such Indebtedness (1) retired with the Net Cash Proceeds from any Asset Sale applied to permanently reduce the outstanding amounts or the commitments with respect to such Indebtedness pursuant to Section 4.13 herein or (2) assumed by a transferee in an Asset Sale so long as neither the Company, any of Guarantors nor any the Parent's or the Company's Subsidiaries continues to be an obligor under such Indebtedness.

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        (c)  Indebtedness (including Disqualified Capital Stock) of any Person that is outstanding at the time such Person becomes a Subsidiary (including upon designation of any subsidiary or other Person as a Subsidiary) of either or both of the Company or the Parent or is merged with or into or consolidated with either or both of the Company or the Parent or a Subsidiary of either or both of the Company and the Parent shall be deemed to have been incurred at the time such Person becomes or is designated a Subsidiary of either or both of the Company and the Parent or is merged with or into or consolidated with either or both of the Company and the Parent or a Subsidiary, as applicable.

        (d)  Notwithstanding any other provision of this Section 4.7, but only to avoid duplication, subject to clause (a)(2) of this Section 4.7, a guarantee of Indebtedness of either or both of the Company or the Parent or of the Indebtedness of another Guarantor incurred in accordance with the terms of this Indenture issued at the time such Indebtedness was incurred or, if later, at the time the guarantor thereof became a Subsidiary of the Company or the Parent shall not constitute a separate incurrence, or amount outstanding, of Indebtedness for purposes of the foregoing provisions (other than clause (a)(2) of this Section 4.7). Upon each incurrence of Indebtedness, the Company may designate pursuant to which provision of this Section 4.7 such Indebtedness is being incurred and the Company may subdivide an amount of Indebtedness and designate more than one provision pursuant to which such amount of Indebtedness is being incurred and such Indebtedness shall not be deemed to have been incurred or outstanding under any other provision of this Section 4.7, except as stated otherwise in the foregoing provisions.

SECTION 4.8    LIMITATION ON LIENS

        (a)  The Company and the Parent shall not, and shall not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind upon any of their respective assets now owned or acquired on or after the Issue Date or upon any income or profits therefrom securing any Indebtedness, unless the Company and the Parent provide, and cause their respective Subsidiaries to provide, concurrently therewith, that the Notes and the applicable Guarantees are equally and ratably so secured.

        (b)  Notwithstanding the foregoing, the Company and the Parent may, and may permit their respective Subsidiaries to incur, assume or suffer to exist Liens of any kind upon any of their respective assets now owned or acquired on or after the Issue Date or upon any income or profits therefrom securing Indebtedness in an aggregate amount outstanding at any time (including outstanding amounts of Refinancing Indebtedness), without duplication, less than or equal to 45% of Adjusted Total Assets of the Parent and its Subsidiaries, including the Company and its Subsidiaries, determined on a consolidated basis.

SECTION 4.9    LIMITATION ON RESTRICTED PAYMENTS

        (a)  The Company and the Parent shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect to such Restricted Payment on a pro forma basis:

        (1)  a Default or an Event of Default shall have occurred and be continuing,

        (2)  the Company is not permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio and clauses (a)(1) or (a)(2) of Section 4.7 hereof, or

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        (3)  the aggregate amount of all Restricted Payments made by the Company and the Parent and their respective Subsidiaries, including after giving effect to such proposed Restricted Payment, on and after the Issue Date, would exceed, without duplication, the sum of:

        (A)  95% of the aggregate Funds From Operations (determined by excluding income resulting from transfers of assets by the Company or the Parent or any of their respective Subsidiaries to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period), commencing on the first day of the fiscal quarter in which the Issue Date occurs, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calculation for which the Company's and the Parent's consolidated financial statements are required to be delivered to the Trustee or, if sooner, filed with the SEC (or, in the event Funds From Operations for such period is a deficit, then minus 100% of such deficit), plus

        (B)  the aggregate Net Cash Proceeds received by the Company or the Parent from the sale of Qualified Capital Stock (other than (i) to a Subsidiary of either or both of the Company or the Parent and (ii) to the extent applied in connection with a Qualified Exchange or a Permitted Investment or, to avoid duplication, otherwise given credit for in any provision of clauses (b) or (c) hereof), after the Issue Date, plus

        (C)  except in each case, in order to avoid duplication, to the extent any such payment or proceeds have been included in the calculation of Funds From Operations, an amount equal to the net reduction in Investments (other than returns of or from Permitted Investments) in any Person resulting from cash distributions on or cash repayments of any Investments, including payments of interest on Indebtedness, dividends, repayments of loans or advances, or other distributions or other transfers of assets, in each case to the Company or the Parent or any of their respective Subsidiaries or from the Net Cash Proceeds from the sale of any such Investment or from redesignations of Unrestricted Subsidiaries as Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or the Parent or any of their Subsidiaries in such Person, including, if applicable, such Unrestricted Subsidiary, less the cost of disposition, plus

        (D)  the purchase price of noncash tangible assets acquired in exchange for an issuance of Qualified Capital Stock of either of the Company or the Parent on or after the Issue Date (other than, in order to avoid duplication, acquisitions that constitute Permitted Investments and other than from the Parent, the Company or any of their respective Subsidiaries).

        (b)  Notwithstanding clause (a) of this Section 4.9, so long as the Parent is otherwise maintaining its status as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), the Company or the Parent may declare or pay any dividend or make any distribution that is necessary to maintain the Parent's status as a REIT under the Code if at the time of such declaration (or, if there is no declaration, at the time of payment):

        (1)  the aggregate principal amount of all outstanding Indebtedness of the Parent and its Subsidiaries, including the Company and its Subsidiaries, on a consolidated basis at such time is less than 65% of Adjusted Total Assets; and

        (2)  no Default or Event of Default shall have occurred and be continuing.

        The full amount of all Restricted Payments made pursuant to clause (b) of this Section 4.9, however, shall be counted as Restricted Payments for purposes of the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (a)(3) of this Section 4.9.

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        (c)  Clause (a) under this section 4.9 shall not prohibit:

        (1)  a Qualified Exchange, or

        (2)  the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions.

        Clauses (a)(2) and (a)(3) of this Section 4.9 shall not prohibit:

        (3)  repurchases of Capital Stock from the Company's or the Parent's employees or directors (or their heirs or estates) or from employees or directors (or their heirs or estates) of Company's or the Parent's Subsidiaries upon the death, disability or termination of employment in an aggregate amount to all employees and directors (or their heirs and estates) not to exceed $500,000 per year or $3 million in the aggregate on and after the Issue Date, or

        (4)  any dividend, distribution or other payments by any Subsidiary of the Company or the Parent (other than the Company) on its Equity Interests that is paid pro rata to all holders of such Equity Interests.

        The provisions of clause (a) under this Section 4.9 shall not prohibit:

        (5)  Restricted Payments pursuant to this clause (c)(5) in an aggregate amount not to exceed $25 million.

        (d)  The full amount of any Restricted Payment made pursuant to the foregoing clauses (c)(2), (c)(3), (c)(4) and (c)(5) (but not pursuant to clause (c)(1)), however, shall be counted as Restricted Payments for purposes of the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (a)(3) of this Section 4.9.

        (e)  For purposes of this Section 4.9, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the good faith reasonable judgment of the Board of Directors, unless stated otherwise, at the time made or returned, as applicable. Not later than (1) 45 days following the end of any calendar quarter in which any Restricted Payment is made, and (2) 10 days after the making of any Restricted Payment which, when added to the sum of all Restricted Payments made in a calendar quarter, would cause the aggregate of all Restricted Payments made in such quarter to exceed $5 million (other than payments of quarterly dividends on Capital Stock of the Company or the Parent in the ordinary course of business), the Parent and the Company shall deliver an Officers' Certificate to the Trustee describing in reasonable detail the nature of such Restricted Payments, stating the amount of such Restricted Payments, stating in reasonable detail the provisions of this Indenture pursuant to which such Restricted Payments were made and certifying that such Restricted Payments were made in compliance with the terms of this Indenture.

SECTION 4.10    LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES

        The Company and the Parent shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, create, assume or suffer to exist any consensual restriction on the ability of any of their respective Subsidiaries to pay dividends or make other distributions to or on behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay loans or advances to or on behalf of the Company or the Parent or any of their respective Subsidiaries, except:

        (1)  restrictions imposed by the Notes or this Indenture or by other Indebtedness ranking pari passu with the Notes or the Guarantees, as applicable; provided, that such restrictions are not more restrictive, taken as a whole, than those imposed by this Indenture and the Notes;

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        (2)  restrictions imposed by applicable law;

        (3)  existing restrictions under Existing Indebtedness;

        (4)  restrictions under any Acquired Indebtedness not incurred in violation of this Indenture or any agreement (including any Equity Interest) relating to any property, asset, or business acquired by the Company or the Parent or any of their respective Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any Person, other than the Person acquired, or to any property, asset or business, other than the property, assets and business so acquired;

        (5)  restrictions imposed by Indebtedness incurred under the Credit Agreement permitted to be incurred pursuant to Section 4.7; provided, that such restrictions or requirement are no more restrictive in any material respect than that imposed by the Credit Agreement as of the Issue Date,

        (6)  restrictions with respect solely to any Subsidiary of either or both of the Company or the Parent imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all of the Equity Interests or assets of such Subsidiary; provided, that such restrictions apply solely to the Equity Interests or assets of such Subsidiary which are being sold;

        (7)  in connection with and pursuant to permitted Refinancings, replacements of restrictions imposed pursuant to clauses (1), (3) or (4) or this clause (7) of this Section 4.10 that are not more restrictive in any material respect than those being replaced and do not apply to any other Person or assets than those that would have been covered by the restrictions in the Indebtedness so refinanced;

        (8)  customary provisions restricting subletting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice;

        (9)  any asset subject to a Lien which is not prohibited to exist with respect to such asset pursuant to the terms of this Indenture may be subject to customary restrictions on the transfer or disposition thereof pursuant to such Lien; and

      (10)  restrictions imposed by Indebtedness incurred under clause (a)(2) of Section 4.7 hereof (whether such restrictions are contained in the terms of such Indebtedness or are required by the terms of agreements governing such Indebtedness to be contained in the organizational documents governing the Subsidiary which incurred such Indebtedness).

SECTION 4.11    LIMITATION ON LINES OF BUSINESS

        Neither the Company, the Parent, nor any of their respective Subsidiaries or Unrestricted Subsidiaries shall directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Board of Directors, is a Related Business.

SECTION 4.12    LIMITATION ON TRANSACTIONS WITH AFFILIATES

        Neither the Company, the Parent nor any of their respective Subsidiaries shall be permitted on or after the Issue Date to enter into or suffer to exist any contract, agreement, arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or any series of related Affiliate Transactions, (other than Exempted Affiliate Transactions), (1) unless it is determined that the terms of such Affiliate Transaction are fair and reasonable to the Company or the Parent, as the case may be, and no less favorable to the Company or the Parent than could have been obtained in an arm's length transaction with a non-Affiliate, and (2) if involving consideration to either party in excess of $2 million, unless such Affiliate Transaction(s) is evidenced by an Officers' Certificate addressed and delivered to the

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Trustee certifying that such Affiliate Transaction (or Transactions) has been approved by a majority of the members of the Parent's Board of Directors that are disinterested in such transaction, if there are any directors who are so disinterested, and (3) if involving consideration to either party in excess of $10 million, unless in addition the Company or the Parent, prior to the consummation thereof, obtains a written favorable opinion as to the fairness of such transaction to the Company or the Parent from a financial point of view from an independent investment banking firm of national reputation in the United States or, if pertaining to a matter for which such investment banking firms do not customarily render such opinions, an appraisal or valuation firm of national reputation in the United States.

SECTION 4.13    LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK

        (a)  The Company or the Parent shall not and shall not permit any of their respective Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of their property, business or assets, including by merger or consolidation (in the case of a Subsidiary or Unrestricted Subsidiary), and including any sale or other transfer or issuance of any Equity Interests of any Subsidiary, whether by the Company or the Parent or one of their respective Subsidiaries or through the issuance, sale or transfer of Equity Interests by one of the Company's Subsidiaries or Unrestricted Subsidiary and including any sale and leaseback transaction (any of the foregoing, an "Asset Sale"), unless:

        (1)  at least 75% of the total consideration for such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents; provided, that with respect to the sale of one or more hotel properties, up to 75% of the consideration may consist of Indebtedness of the purchaser of such hotel properties so long as such Indebtedness is secured by a first priority Lien on the hotel property or properties sold;

        (2)  no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect, on a pro forma basis, to such Asset Sale; and

        (3)  the Parent and the Company determine in good faith that the consideration received by the Parent, the Company or their respective Subsidiaries, as applicable, equals the fair market value for such Asset Sale.

        (b)  In the event and to the extent that immediately following any Asset Sale the Net Cash Proceeds received by the Company or the Parent or any of their respective Subsidiaries from such Asset Sale, plus the Net Cash Proceeds of any other Asset Sale(s) which occurred (i) on or after the Issue Date and (ii) within the 360-day period proceeding such Asset Sale, exceed 10% of Adjusted Consolidated Net Tangible Assets, within 360 days following such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Amount") shall be:

        (1)  invested in assets and property (except in connection with the acquisition of a Subsidiary which is a Guarantor in a Related Business, other than notes, bonds, obligation and securities) which shall immediately constitute or be a part of a Related Business of the Company or the Parent or such Subsidiary (if it continues to be a Subsidiary) immediately following such transaction, or

        (2)  used to retire Indebtedness incurred under the Credit Agreement and to permanently reduce the amount of such Indebtedness permitted to be incurred pursuant to Section 4.7(b) hereof.

        Pending the final application of any Net Cash Proceeds, the Company or the Parent may temporarily reduce revolving credit borrowings or otherwise invest the Net Cash Proceeds in any manner that is not prohibited by this Indenture.

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        (c)  The accumulated Net Cash Proceeds from Asset Sales not applied as set forth in (b)(1) or (b)(2) shall constitute "Excess Proceeds." Within 30 days after the date that the amount of Excess Proceeds exceeds $10 million, which date shall not be prior to 390 days after the Asset Sale that generated such Excess Proceeds, the Company shall apply an amount (the "Asset Sale Offer Amount") equal to the Excess Proceeds to the repurchase of the Notes and such other Indebtedness ranking on a parity with the Notes and with provisions requiring the Company to make an offer to purchase such Indebtedness with the proceeds from such Asset Sale pursuant to a cash offer (subject only to conditions required by applicable law, if any) (pro rata in proportion to the respective principal amounts (or accreted values in the case of Indebtedness issued with an original issue discount) of the Notes and such other Indebtedness then outstanding) (the "Asset Sale Offer") at a purchase price of 100% of the principal amount (or accreted value in the case of Indebtedness issued with an original issue discount) (the "Asset Sale Offer Price") together with accrued and unpaid interest and Liquidated Damages, if any, to the date of payment. Each Asset Sale Offer shall remain open for 20 Business Days following its commencement (the "Asset Sale Offer Period").

        (d)  Upon expiration of the Asset Sale Offer Period, the Company shall apply the Asset Sale Offer Amount plus an amount equal to accrued and unpaid interest and Liquidated Damages, if any, to the purchase of all Indebtedness properly tendered in accordance with the provisions hereof (on a pro rata basis if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together with accrued interest and Liquidated Damages, if any). To the extent that the aggregate amount of Notes and such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the Company may use any remaining Net Cash Proceeds as otherwise permitted by this Indenture and following the consummation of each Asset Sale Offer the Excess Proceeds amount shall be reset to zero.

        (e)  Notwithstanding, and without complying with, the other provisions of this Section 4.13:

        (1)  the Company or the Parent may and their respective Subsidiaries may, in the ordinary course of business, (a) convey, sell, transfer, assign or otherwise dispose of inventory and other assets acquired and held for resale in the ordinary course of business and (b) liquidate Cash Equivalents;

        (2)  the Company and the Parent may and their respective Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with Section 5.1;

        (3)  the Company and the Parent may and their respective Subsidiaries may sell or dispose of damaged, worn out or other obsolete personal property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of the Company's or the Parent's business or the business of such Subsidiary, as applicable;

        (4)  the Company and the Parent may and the Guarantors may convey, sell, transfer, assign or otherwise dispose of assets to the Company or the Parent or any of the Guarantors;

        (5)  the Company and the Parent may and their respective Subsidiaries may, in the ordinary course of business, convey, sell, transfer, assign, or otherwise dispose of assets (or related assets or in related transactions) with a fair market value of less than $2 million;

        (6)  the Company and the Parent may and their respective Subsidiaries may surrender or waive or settle, release or surrender tort or other litigation claims in the ordinary course of business or grant Liens not prohibited by this Indenture; and

        (7)  the Company and the Parent may and their respective Subsidiaries may make Permitted Investments pursuant to clause (d) in the definition thereof and Restricted Investments permitted under Section 4.9.

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        All Net Cash Proceeds from an Event of Loss shall be reinvested or used as otherwise provided above in clauses (b)(1) or (b)(2) of this Section 4.13.

        Any Asset Sale Offer shall be made in compliance with all applicable laws, rules, and regulations, including, if applicable, Regulation 14E of the Exchange Act and the rules and regulations thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.13, the Company's compliance or the compliance of any of the Company's subsidiaries with such laws and regulations shall not in and of itself cause a breach of the Company's obligations under this Section 4.13.

        If the payment date in connection with an Asset Sale Offer hereunder is on or after an interest payment Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on such Interest Payment Date shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date.

SECTION 4.14    REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL

        In the event that a Change of Control has occurred, each Holder of Notes shall have the right, at such Holder's option, pursuant to an offer (subject only to conditions required by applicable law, if any) by the Company (the "Change of Control Offer"), to require the Company to repurchase all or any part of such Holder's Notes (provided, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later than 35 Business Days after the occurrence of such Change of Control, at a cash price equal to 101% of the principal amount thereof (the "Change of Control Purchase Price"), together with accrued and unpaid interest (and Liquidated Damages, if any) to the Change of Control Purchase Date.

        The Change of Control Offer shall be made within 10 Business Days following a Change of Control and shall remain open for 20 Business Days following its commencement (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Company shall promptly purchase all Notes properly tendered in response to the Change of Control Offer.

        On or before the Change of Control Purchase Date, the Company shall:

        (1)  accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer,

        (2)  deposit with the Paying Agent cash sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any to the Change of Control Payment Date) of all Notes so tendered, and

        (3)  deliver to the Trustee the Notes so accepted together with an Officers' Certificate listing the Notes or portions thereof being purchased by the Company.

        The Paying Agent shall promptly pay the Holders of Notes so accepted an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any to the Change of Control Payment Date) and the Trustee shall promptly authenticate and deliver to each such Holder a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be delivered promptly by the Company to the Holders thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

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        Any Change of Control Offer shall be made in compliance with all applicable laws, rules and regulations, including, if applicable, Regulation 14E under the Exchange Act and the rules thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.14, the Company's compliance or compliance by any of the Guarantors with such laws and regulations shall not in and of itself cause a breach of their obligations under such covenant.

        If the Change of Control Purchase Date hereunder is on or after a Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on such Interest Payment Date shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date.

SECTION 4.15    LIMITATION ON ISSUANCES OF GUARANTEES BY SUBSIDIARIES

        The Company shall not permit any of its Subsidiaries and the Parent shall not permit any of its Subsidiaries, directly or indirectly, to guarantee any Indebtedness of either or both of the Company or the Parent or of any Guarantor, including any Indebtedness under the Credit Agreement that ranks equally with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"), unless:

        (1)  such Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a guarantee of the Notes by such Subsidiary, and

        (2)  such Subsidiary waives and agrees not to, in any manner whatsoever, claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company, the Parent or any other Subsidiary as a result of any payment by such Subsidiary under its Guarantee;

provided, that this provision shall not be applicable to any guarantee of any Subsidiary that existed at the time such Person became a Subsidiary and which was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary. If the Guaranteed Indebtedness ranks equally in right of payment with the Notes, then the guarantee of such Guaranteed Indebtedness shall rank equally in right of payment with, or subordinate in right of payment to, the Guarantee. If the Guaranteed Indebtedness is subordinate in right of payment to the Notes, then the guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated in right of payment to the Notes.

SECTION 4.16    LIMITATION ON LAYERING INDEBTEDNESS

        The Company or the Parent shall not and shall not permit any of their respective Subsidiaries to incur any Indebtedness that is contractually subordinated in right of payment to any of either or both of the Company's or the Parent's Indebtedness or the Indebtedness of any Guarantor unless such Indebtedness is as contractually subordinated in right of payment to the Notes or such Guarantor's Guarantee, as applicable, at least to the same extent as it is to such other Indebtedness.

SECTION 4.17    RESTRICTION ON ACTIVITIES OF FINANCE

        Notwithstanding anything in this Indenture to the contrary, Finance shall not (a) own any material assets, (b) become liable for any obligations or Indebtedness other than the Notes (including any additional Notes incurred pursuant to Section 4.7 hereof) pursuant to the terms of this Indenture, or (c) engage in any business activities other than the co-issuance of the Notes (including any additional Notes incurred pursuant to Section 4.7 hereof).

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SECTION 4.18    LIMITATION ON STATUS AS INVESTMENT COMPANY

        The Company and the Parent and their respective Subsidiaries shall be prohibited from being required to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act")), or from otherwise becoming subject to regulation under the Investment Company Act.

SECTION 4.19    MAINTENANCE OF PROPERTIES AND INSURANCE

        The Company and the Guarantors shall cause all material properties used or useful to the conduct of their business and the business of each of their Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in their reasonable judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 4.20 shall prevent the Company or any Guarantor from discontinuing any operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is (a) (i) in the judgment of the Board of Directors of the Company, desirable in the conduct of the business of such entity and (ii) would not have a material adverse effect on the ability of the Company and the Guarantors to satisfy their obligations under the Notes, the Guarantees and this Indenture, and, to the extent applicable, (b) as otherwise permitted under Section 4.13 hereof.

        The Company and Guarantors shall provide, or cause to be provided, for themselves and each of their Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, good faith opinion of the Board of Directors of the Company is adequate and appropriate for the conduct of the business of the Company, the Guarantors and such Subsidiaries.

SECTION 4.20    CORPORATE EXISTENCE

        Subject to Section 4.14 and Article V hereof, the Company and the Parent shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of their respective Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, the Parent or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company, the Parent and their respective Subsidiaries; provided, however, that the Company and the Parent shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Parent and their respective Subsidiaries, taken as a whole, and that the loss thereof would not have a material adverse effect on the ability of the Company and the Guarantors to satisfy their obligations under the Notes, the Guarantees and this Indenture.

ARTICLE V
SUCCESSORS

SECTION 5.1    MERGER, CONSOLIDATION OR SALE OF ASSETS

        Neither the Company nor the Parent shall consolidate with or merge with or into another Person or, directly or indirectly, sell, lease, convey or transfer all or substantially all of their assets (such

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amounts to be computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless:

        (a)  either (1) the Company or the Parent, as applicable, is the continuing entity or (2) the resulting, surviving or transferee entity, as applicable, is an entity organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the Company's or the Parent's, as applicable, obligations in connection with the Notes or the Guarantee, as applicable;

        (b)  no Default or Event of Default shall exist or shall occur immediately after giving effect on a pro forma basis to such transaction;

        (c)  unless such transaction is solely the merger of the Company or the Parent and one of a Wholly Owned Subsidiaries which is also a Guarantor for the purpose of reorganization into another jurisdiction and which transaction is not for the purpose of evading this provision and not in connection with any other transaction, immediately after giving effect to such transaction on a pro forma basis, the consolidated resulting, surviving or transferee entity would immediately thereafter be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio and clauses (a)(1) or (a)(2) of Section 4.7 hereof; and

        (d)  each Guarantor shall have, if necessary, confirmed in writing that its Guarantee shall apply to the obligations of the Company, or the surviving entity in accordance with the Notes and this Indenture.

SECTION 5.2    SUCCESSOR CORPORATION SUBSTITUTED

        Upon any consolidation or merger, the successor entity formed by such consolidation or into which the Company or the Parent is merged shall succeed to and (except in the case of a lease or any transfer of all or substantially all of the Company's or the Parent's assets) be substituted for, and may exercise every right and power of, the Company or the Parent, as applicable, under this Indenture with the same effect as if such successor entity had been named therein as the Company or the Parent, as applicable, and (except in the case of a lease or any transfer of all or substantially all of the Company's or the Parent's assets) the Company or the Parent, as applicable, shall be released from the obligations under this Indenture, the Notes and the Guarantee, as applicable, except with respect to any obligations that arise from, or are related to, such transaction.

        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of all or substantially all of the properties and assets of one or more Subsidiaries, the Company's or the Parent's interest in which constitutes all or substantially all of the Company's or the Parent's properties and assets, shall be deemed to be the transfer of all or substantially all of the Company's or the Parent's properties and assets.

ARTICLE VI
DEFAULTS AND REMEDIES

SECTION 6.1    EVENTS OF DEFAULT

        An "Event of Default," wherever used herein, means any one of the following events:

        (1)  the Company's failure to pay any installment of interest (or Liquidated Damages, if any) on the Notes as and when the same becomes due and payable and the continuance of any such failure for 30 days;

        (2)  the Company's failure to pay all or any part of the principal, or premium, if any, on the Notes when and as the same becomes due and payable at maturity, upon redemption, by

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acceleration or otherwise, including, without limitation, payment of the Change of Control Purchase Price or the Asset Sale Offer Price, on Notes validly tendered and not withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as applicable;

        (3)  the Company's failure or the failure by the Parent or any of their respective Subsidiaries to observe or perform any other covenant or agreement contained in the Notes or this Indenture and, except for the provisions under Section 4.13, 4.14 and 5.1, the continuance of such failure for a period of 30 days;

        (4)  a court having jurisdiction in the premises enters a decree or order for (a) relief in respect of the Company, the Parent or any of their respective Significant Subsidiaries in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (b) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Parent or any of their respective Significant Subsidiaries or for all or substantially all of the property and assets of the Company, the Parent or any of their respective Significant Subsidiaries or (c) the winding up or liquidation of the affairs of the Company, the Parent or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or,

        (5)  the Company, the Parent or any of their respective Significant Subsidiaries (a) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Parent or any of their respective Significant Subsidiaries or for all or substantially all of the property and assets of the Company, the Parent or any of their respective Significant Subsidiaries or (c) effects any general assignment for the benefit of creditors;

        (6)  a default occurs (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) in any of the Company's or the Parent's Indebtedness or the Indebtedness of any of their respective Subsidiaries with an aggregate amount outstanding in excess of $7.5 million (or if such Indebtedness is Non-Recourse Indebtedness, $20 million) (a) resulting from the obligor's failure to pay principal of or interest on such Indebtedness, or (b) as a result of such default, the maturity of such Indebtedness has been accelerated prior to its stated maturity;

        (7)  final unsatisfied judgments not covered by insurance aggregating in excess of $7.5 million, at any one time rendered against the Company or the Parent or any of their respective Subsidiaries and not stayed, bonded or discharged within 60 days; and

        (8)  any Guarantee of a Guarantor ceases to be in full force and effect or becomes unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Guarantee and this Indenture) or any Guarantor denies or disaffirms its Obligations under its Guarantee.

SECTION 6.2    ACCELERATION

        (a)  If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (4) or (5) of Section 6.1 relating to the Company or the Parent or any of their respective Significant Subsidiaries,) then in every such case, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all principal, determined as set forth below, and accrued and unpaid interest (and Liquidated Damages, if any) thereon to be due and

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payable immediately. If an Event of Default specified in clause (4) or (5) of Section 6.1 herein relating to the Company or the Parent or any of their respective Significant Subsidiaries occurs, all principal and accrued and unpaid interest (and Liquidated Damages, if any) thereon shall be immediately due and payable on all outstanding Notes without any declaration or other act on the part of the Trustee or the Holders. The Holders of a majority in aggregate principal amount of Notes generally are authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes which have become due solely by reason of such acceleration have been cured or waived.

        (b)  Prior to the declaration of acceleration of the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Holders any Default or Event of Default, and except a Default in the payment of principal of or interest on any Note not yet cured or a Default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Subject to the provisions of this Indenture relating to the duties of the Trustee, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable security or indemnity.

        Subject to all provisions of this Indenture and applicable law, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee.

        (c)  At any time after such a declaration of acceleration being made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article VI, the Holders of not less than a majority in aggregate principal amount of then outstanding Notes, by written notice to the Company and the Trustee, may rescind, on behalf of all Holders, any such declaration of acceleration and its consequences if:

        (1)  the Company has paid or deposited with the Trustee cash sufficient to pay: (a) all overdue interest and Liquidated Damages, if any, on all Notes; (b) the principal of (and premium, if any, applicable to) any Notes which would become due other than by reason of such declaration of acceleration, and to the extent such interest is lawful, interest thereon at the rate borne by the Notes; (c) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (d) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, and all other amounts due the Trustee under Section 7.7 hereof; and

        (2)  all Events of Default, other than the non-payment of the principal of, premium, if any, and interest (and Liquidated Damages, if any) on the Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.4 hereof.

        (d)  Notwithstanding clause (c)(2) of this Section 6.2, no waiver shall be effective against any Holder for any Event of Default or event which with notice or lapse of time or both would be an Event of Default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected thereby, unless all such affected Holders agree, in writing, to waive such Event of Default or other event. No such waiver shall cure or waive any subsequent default or impair any right consequent thereon.

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SECTION 6.3    OTHER REMEDIES

        If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, Liquidated Damages, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

        The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

SECTION 6.4    WAIVER OF PAST DEFAULTS

        Subject to Section 6.7 hereof, and notwithstanding anything contained in Section 6.2(b) the Holders of a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may, on behalf of all Holders, waive any existing or past Default or Event of Default hereunder and its consequences under this Indenture, except a default:

(1)

in the payment of principal of, premium, if any, Liquidated Damages, if any, or interest on any Note not yet cured as specified in clauses (c)(1) and (c)(2) of Section 6.2 hereof;



(2)

in respect of a covenant or provision hereof which, under Article IX, cannot be modified or amended without the consent of the Holder of each outstanding Note affected, unless all such affected Holders agree, in writing, to waive such default; or



(3)

the rescission of which would conflict with any judgment or decree of a court of competent jurisdiction.

        Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right arising therefrom.

SECTION 6.5    CONTROL BY MAJORITY

        Holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines in good faith may be unduly prejudicial to the rights of other Holders of Notes not joining in the giving of such direction or that may involve the Trustee in personal liability and the Trustee may take any other action it deems proper that is not inconsistent with any such direction received from Holders of the Notes.

SECTION 6.6    LIMITATION ON SUITS

        A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if:

        (a)  the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;

        (b)  the Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy;

        (c)  such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense;

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        (d)  the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

        (e)  during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.

        A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.

SECTION 6.7    RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT

        Notwithstanding any other provision of this Indenture, except as permitted by Section 9.2 hereof, the right of any Holder of a Note to receive payment of the principal of, premium and interest (and Liquidated Damages, if any) on the Notes, on or after the respective due dates expressed in the Notes (including in connection with an offer to purchase) or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.8    COLLECTION SUIT BY TRUSTEE

        If an Event of Default specified in Section 6.1 hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and, to the extent lawful, interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 6.9    TRUSTEE MAY FILE PROOFS OF CLAIM

        The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditor's committee.

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SECTION 6.10    PRIORITIES

        If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

        First:    to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection (including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel);

        Second:    to Holders of Notes for amounts due and unpaid on the Notes for principal and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and

        Third:    to the Company or to such party as a court of competent jurisdiction shall direct.

        The Trustee may fix a Record Date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

SECTION 6.11    UNDERTAKING FOR COSTS

        In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.

ARTICLE VII
TRUSTEE

SECTION 7.1    DUTIES OF TRUSTEE

        (a)  If an Event of Default of which the Trustee has knowledge has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of its own affairs.

        (b)  Except during the continuance of an Event of Default of which the Trustee has knowledge:

        (1)  the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

        (2)  in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

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        (c)  The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

        (1)  this clause (c) does not limit the effect of clause (b) of this Section 7.1;

        (2)  the Trustee shall not be liable for any error of judgment made in good faith by an Officer of the Trustee, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

        (3)  the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof.

        (d)  Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.1 and 7.2 hereof.

        (e)  No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

          (f)  The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

SECTION 7.2    RIGHTS OF TRUSTEE

        (a)  In connection with the Trustee's rights and duties under this Indenture, the Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

        (b)  Before the Trustee acts or refrains from acting under this Indenture, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

        (c)  The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

        (d)  The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

        (e)  Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

        (f)    The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

        (g)  Except with respect to Section 4.1 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article IV hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.1(1), 6.1(2) and 4.1 hereof or (ii) any Default or Event of Default of which the Trustee shall have received written notification in the manner set forth in this Indenture or an officer in the corporate trust administration of the Trustee shall have obtained actual knowledge.

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Delivery of reports, information and documents to the Trustee under Section 4.3 hereof is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's or any Guarantor's, as applicable, compliance with any of their covenants thereunder (as to which the Trustee is entitled to rely exclusively on an Officer's Certificate).

        (h)  The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit.

SECTION 7.3    INDIVIDUAL RIGHTS OF TRUSTEE

        The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

SECTION 7.4    TRUSTEE'S DISCLAIMER

        The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

SECTION 7.5    NOTICE OF DEFAULTS

        If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice in the manner and to the extent provided by Section 313(c) of the TIA of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.

SECTION 7.6    REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES

        Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the 12 months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

        A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange.

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SECTION 7.7    COMPENSATION AND INDEMNITY

        The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.

        The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.7) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.

        The obligations of the Company under this Section 7.7 shall survive the satisfaction and discharge of this Indenture.

        To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.

        When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.1(4) or 6.1(5) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

        The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent applicable.

SECTION 7.8    REPLACEMENT OF TRUSTEE

        A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.8.

        The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

        (a)  the Trustee fails to comply with Section 7.10 hereof;

        (b)  the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

        (c)  a Custodian or public officer takes charge of the Trustee or its property; or

        (d)  the Trustee becomes incapable of acting.

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        If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

        If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

        If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee.

SECTION 7.9    SUCCESSOR TRUSTEE BY MERGER, ETC.

        If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

SECTION 7.10    ELIGIBILITY; DISQUALIFICATION

        There shall at all times be a Trustee hereunder that is a corporation or trust company (or a member of a bank holding company) organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has (or the bank holding company of which it is a member has) a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

        This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b).

SECTION 7.11    PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY

        The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

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ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SECTION 8.1    OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE

        The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII.

SECTION 8.2    LEGAL DEFEASANCE AND DISCHARGE

        Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.2, each of the Company and the Guarantors, as applicable, shall, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Guarantees, as applicable, on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged all amounts owed under the outstanding Notes and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, such Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.4 hereof, and as more fully set forth in Section 8.4, payments in respect of the principal of, premium, if any, and interest (and Liquidated Damages, if any) on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Sections 2.6, 2.7 and 2.10 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article VIII. Subject to compliance with this Article VIII, the Company may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof.

SECTION 8.3    COVENANT DEFEASANCE

        Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, the Company and the Guarantors shall be released from their respective obligations under Sections 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.18 and Article V hereof and the Guarantors shall be released from their obligations under Article X hereof, in each case on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Guarantees shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under

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Section 8.1 hereof of the option applicable to this Section 8.3, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, (x) Sections 6.1(3), (6) and (7) hereof shall not constitute Events of Default and (y) Sections 6.1(4) and 6.1(5) hereof shall not constitute an Event of Default to the extent they occur after the 91st day following the occurrence of the Company's exercise of Covenant Defeasance; provided, however that for all other purposes as set forth herein, such Covenant Defeasance provisions shall be effective.

SECTION 8.4    CONDITIONS TO LEGAL OR COVENANT DEFEASANCE

        The following shall be the conditions to the application of either Section 8.2 or 8.3 hereof to the outstanding Notes:

        In order to exercise either Legal Defeasance or Covenant Defeasance:

        (a)  the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States legal tender, U.S. Government Obligations, or a combination thereof, in amounts that shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Trustee must have, for the benefit of Holders of the Notes, a valid, perfected exclusive security interest in such trust;

        (b)  in the case of an election under Section 8.2 hereof, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service, a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred;

        (c)  in the case of an election under Section 8.3 hereof, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred;

        (d)  in the case of an election under Section 8.2 or 8.3 hereof, (x) no Default or Event of Default shall have occurred and be continuing on the date of the deposit, and (y) in the case of Legal Defeasance no Event of Default specified in Section 6.1(4) or 6.1(5) hereof shall have occurred at any time from the date of the deposit to the 91^st calendar day thereafter;

        (e)  the Defeasance may not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company, the Parent or any of their respective Subsidiaries are a party or by which the Company, the Parent or any of their Subsidiaries are bound;

        (f)    the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent to hinder, delay or defraud any other of the Company's creditors; and

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        (g)  the Company must deliver to the Trustee an Officers' Certificate confirming the satisfaction of the conditions in clauses (a) through (f) above, and an Opinion of Counsel, confirming the satisfaction of the conditions in clauses (a) (with respect to the validity and perfection of the security interest), (b), (c) and (e).

        Legal Defeasance and Covenant Defeasance shall be deemed effective on the earlier of (i) the 91^st day after the deposit and (ii) the day all of the applicable conditions set forth in this Section 8.4 are satisfied.

SECTION 8.5    DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS

        Subject to Section 8.6 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest (and Liquidated Damages, if any), but such money need not be segregated from other funds except to the extent required by law.

        The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the money or U.S. Government Obligations deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

        Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or U.S. Government Obligations held by it as provided in Section 8.4 hereof which, in the opinion of a firm of independent public accountants nationally recognized in the United States expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.4(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.6    REPAYMENT TO COMPANY

        Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company.

SECTION 8.7    REINSTATEMENT

        If the amount deposited with the Trustee to effect a Covenant Defeasance is insufficient to pay the principal of, premium, if any, and interest on the Notes when due, or if any court enters an order

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directing the repayment of the deposit to us or otherwise making the deposit unavailable to make payments under the Notes when due, then (so long as the insufficiency exists or the order remains in effect) our and the Guarantors' obligations under the Indenture and the Notes and the Guarantees will be revived, and the Defeasance will be deemed not to have occurred.

ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER

SECTION 9.1    WITHOUT CONSENT OF HOLDERS OF NOTES

        Notwithstanding Section 9.2 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes or any Guarantee, without the consent of any Holder of a Note:

        (a)  to cure any ambiguity, defect or inconsistency;

        (b)  to provide for uncertificated Notes in addition to or in place of certificated Notes;

        (c)  to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article V hereof;

        (d)  to provide for the release or assumption of a Guarantee in compliance with this Indenture;

        (e)  to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the rights hereunder of any Holder of the Note;

        (f)    to comply with the provisions of the Depositary, Euroclear or Clearstream or the Trustee with respect to the provisions of this Indenture or the Notes relating to transfers and exchanges of Notes or beneficial interests therein;

        (g)  to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or

        (h)  to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof.

        Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that adversely affects its own rights, duties or immunities under this Indenture or otherwise.

SECTION 9.2    WITH CONSENT OF HOLDERS OF NOTES

        Except as expressly stated otherwise in this Section 9.2, and subject to Sections 6.4 and 6.7 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes and the Guarantees, with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes).

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        Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company or any Subsidiary with any provision of this Indenture or the Notes.

        However, without the consent of each Holder affected (it being understood that, except as expressly stated otherwise in clauses (a) through (e) below, Section 4.13 and 4.14 hereof may be amended, waived or modified in accordance with the first paragraph of this Section 9.2) an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder):

        (a)  change the Stated Maturity on any Note, or reduce the principal amount thereof or the rate (or extend the time for payment) of interest thereon or any premium payable upon the redemption thereof at the Company's option, or change the city of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption at our option, on or after the Redemption Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer Price or otherwise modify such covenants in a manner adverse to the Holders after the corresponding Asset Sale or Change of Control has occurred or alter the provisions (including the defined terms used therein) regarding the Company's right to redeem the Notes as a right, or at the Company's option, in a manner adverse to the Holders;

        (b)  reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such amendment, supplemental indenture or waiver provided for in this Indenture;

        (c)  modify any of the waiver provisions, except to increase any required percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby;

        (d)  cause the Notes or any Guarantee to become contractually subordinate in right of payment to any other Indebtedness of the Company or the applicable Guarantor, as the case may be; or

        (e)  make any changes in the foregoing clauses (a) through (d) or this clause (e) hereof, in a manner adverse to the Holders of the Notes.

        In connection with any amendment, supplement or waiver under this Article IX, the Company may, but shall not be obligated to, offer to any Holder who consents to such amendment, supplement or waiver, or to all Holders, consideration for such Holder's consent to such amendment, supplement or waiver.

        Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.

        It shall not be necessary for the consent of the Holders of Notes under this Section 9.2 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

        After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not,

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however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver.

SECTION 9.3    COMPLIANCE WITH TRUST INDENTURE ACT

        Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect.

SECTION 9.4    REVOCATION AND EFFECT OF CONSENTS

        Until an amendment, supplement or waiver becomes effective (as determined by the Company and which may be prior to any such amendment, supplement or waiver becoming operative), a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same Indebtedness as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective (as determined by the Company), which may be prior to any such amendment, supplement or waiver becoming operative.

        The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be the date so fixed by the Company notwithstanding the provisions of the TIA. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date, and only those Persons (or their duly designated proxies), shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date.

        After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it makes a change described in any of clauses (a) through (e) of Section 9.2 hereof, in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal and premium of and interest (and Liquidated Damages, if any) on a Note, on or after the respective dates set for such amounts to become due and payable expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates.

SECTION 9.5    NOTATION ON OR EXCHANGE OF NOTES

        The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver.

        Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

SECTION 9.6    TRUSTEE TO SIGN AMENDMENTS, ETC.

        The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental Indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to

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Section 7.1 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture.

ARTICLE X
GUARANTEES

SECTION 10.1    GUARANTEES

        By its execution hereof, each of the Guarantors acknowledges and agrees that it receives substantial benefits from the Company and that such party is providing its Guarantee for good and valuable consideration, including, without limitation, such substantial benefits and services.

        Accordingly, subject to the provisions of this Article X, each Guarantor, jointly and severally, hereby unconditionally guarantees on a senior unsecured basis to each Holder of a Note authenticated and delivered by the Trustee and its successors and assigns that: (i) the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer or otherwise, and interest on overdue principal, premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other Obligations of the Company to the Holders or the Trustee hereunder or under the Notes (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control, upon an Asset Sale Offer or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 10.5 hereof (collectively, the "Guarantee Obligations").

        Subject to the provisions of this Article X, each Guarantor hereby agrees that its Guarantee hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any thereof, the entry of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives and relinquishes: (a) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company, the Subsidiaries or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any secured party's power before proceeding against the Guarantors; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or Persons or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person or Persons; (c) demand, protest and notice of any kind (except as expressly required by this Indenture), including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of the Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of the Guarantors, the Company or the Subsidiaries or on the part of any other Person whomsoever in connection with any Obligations the performance of which are hereby guaranteed; (d) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against the Guarantors for reimbursement; (e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Bankruptcy Law, of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a security interest under Section 364 of the

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Bankruptcy Code. The Guarantors hereby covenant that, except as otherwise provided therein, the Guarantees shall not be discharged except by payment in full of all Guarantee Obligations, including the principal, premium, if any, and interest on the Notes and all other costs provided for under this Indenture.

        If any Holder or the Trustee is required by any court or otherwise to return to either the Company or the Guarantors, or any trustee or similar official acting in relation to either the Company or the Guarantors, any amount paid by the Company or the Guarantors to the Trustee or such Holder, the Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. Each of the Guarantors agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guarantee Obligations hereby until payment in full of all such Obligations guaranteed hereby. Each Guarantor agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI hereof for the purposes hereof, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guarantee Obligations, and (y) in the event of any acceleration of such Obligations as provided in Article VI hereof, such Guarantee Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of the Guarantee.

SECTION 10.2    EXECUTION AND DELIVERY OF GUARANTEES

        To evidence its Guarantees set forth in Section 10.1 hereof, each of the Guarantors agrees that a notation of its Guarantees substantially in the form included in Exhibit A hereto shall be endorsed on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantors by an Officer of such Guarantors.

        Each of the Guarantors agree that its Guarantees set forth in this Article X shall remain in full force and effect and apply to all the Notes notwithstanding any failure to endorse on each Note a notation of the Guarantees.

        If an Officer whose facsimile signature is on a Note or a notation of Guarantee no longer holds that office at the time the Trustee authenticates the Note on which the Guarantee is endorsed, the Guarantee shall be valid nevertheless.

        The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantees set forth in this Indenture on behalf of the Guarantors.

SECTION 10.3    GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS

        (a)  Subject to Article V, nothing contained in this Indenture or in the Notes shall prevent any consolidation or merger of any Guarantor with or into each other or with or into the Company. Upon any such consolidation or merger, the Guarantee of the Guarantor that does not survive the consolidation or merger shall no longer be of any force or effect.

        (b)  Except for a merger or consolidation in which a Guarantor is sold and its Guarantee is released in compliance with the provisions of Section 10.4 hereof or as permitted by Section 10.3(a), no Guarantor (other than the Parent) shall consolidate or merge with or into (whether or not such Guarantor is the surviving Person) another Person unless, subject to the provisions of the following clause (c) and the other provisions of this Indenture, (i) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such Person shall guarantee, on a senior basis, all of such Guarantor's obligations under such Guarantor's Guarantee on the terms set forth herein; and (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have

67

occurred or be continuing. In case of any such consolidation or merger and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Guarantees endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by such Guarantor, such successor corporation shall succeed to and be substituted for such Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Guarantees had been issued at the date of the execution hereof.

        (c)  The Trustee, subject to the provisions of Section 11.4 hereof, shall be entitled to receive an Officers' Certificate as conclusive evidence that any such consolidation or merger, and any such assumption of Guarantee Obligations, comply with the provisions of this Section 10.3. Such Officers' Certificate shall comply with the provisions of Section 11.5 hereof.

SECTION 10.4    RELEASE OF GUARANTORS

        Upon the sale or disposition (including by merger or stock purchase) of a Guarantor (other than the Parent) as an entirety to an entity which is not and is not required to become a Guarantor, or the designation of a Guarantor (other than the Parent) to become an Unrestricted Subsidiary, which transaction is otherwise in compliance with this Indenture (including, without limitation, the provisions of Section 4.13, such Guarantor shall be deemed released from its obligations under its guarantee of the Notes; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees, and under all of its pledges of assets or other security interests which secure, any of the Company's or the Parent's Indebtedness or Indebtedness of any other of their respective Subsidiaries shall also terminate upon such release, sale or transfer and none of its Equity Interests are pledged for the benefit of any holder of any of the Company's or the Parent's Indebtedness or any Indebtedness of any of their respective Subsidiaries.

        Upon delivery by the Company to the Trustee of an Officer's Certificate, to the effect that such sale or other disposition or that such designation was made by the Company in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any such Guarantor from its obligations under its Guarantee. Except as provided in Section 10.3(a) hereof, any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article X.

        Notwithstanding the foregoing provisions of this Article X, (i) any Guarantor whose Guarantee would otherwise be released pursuant to the provisions of this Section 10.4 may elect, at its sole discretion, by written notice to the Trustee, to maintain such Guarantee in effect notwithstanding the event or events that otherwise would cause the release of such Guarantee (which election to maintain such Guarantee in effect may be conditional or for a limited period of time), and (ii) any Subsidiary of the Company which is not a Guarantor may elect, at its sole discretion, by written notice to the Trustee, to become a Guarantor (which election may be conditional or for a limited period of time).

SECTION 10.5    LIMITATION OF GUARANTOR'S LIABILITY; CERTAIN BANKRUPTCY EVENTS

        (a)  Each Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee Obligation of such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or

68

state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the Guarantee Obligations of such Guarantor under this Article X shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the Guarantee Obligations of such other Guarantor under this Article X, result in the Guarantee Obligations of such Guarantor under the Guarantee of such Guarantor not constituting a fraudulent transfer or conveyance.

        (b)  Each Guarantor hereby covenants and agrees, to the fullest extent that it may do so under applicable law, that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company, such Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees, to the fullest extent that it may do so under applicable law, not to take the benefit of any such stay of execution, whether under Section 362 or 105 of the Bankruptcy Law or otherwise.

SECTION 10.6    APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE GUARANTORS

        (a)  For purposes of any provision of this Indenture which provides for the delivery by any Guarantor of an Officers' Certificate and/or an Opinion of Counsel, the definitions of such terms in Section 1.1 hereof shall apply to such Guarantor as if references therein to the Company were references to such Guarantor.

        (b)  Any request, direction, order or demand which by any provision of this Indenture is to be made by any Guarantor, shall be sufficient if evidenced as described in Section 11.2 hereof as if references therein to the Company were references to such Guarantor.

        (c)  Any notice or communication which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Notes to or on any Guarantor may be given or served as described in Section 11.2 hereof as if references therein to the Company were references to such Guarantor.

        (d)  Upon any demand, request or application by any Guarantor to the Trustee to take any action under this Indenture, such Guarantor shall furnish to the Trustee such certificates and opinions as are required in Section 11.4 hereof as if all references therein to the Company were references to such Guarantor.

SECTION 10.7    FUTURE GUARANTORS

        The Issuers and the Parent shall cause RFS Financing Partnership, L.P., RFS Leasing II, Inc. and RFS Financing Corp. (the "Future Guarantors") to fully and unconditionally guarantee on a senior basis the performance of the Notes and the other obligations of the Issuers under this Indenture to the same extent as such obligations are guaranteed by the other Guarantors, and within 120 days of the Issue Date, to cause each such Future Guarantor to execute and deliver to the Trustee a supplemental indenture making such Future Guarantor a party to this Indenture.

ARTICLE XI
MISCELLANEOUS

SECTION 11.1    TRUST INDENTURE ACT CONTROLS

        If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the TIA, the imposed duties shall control.

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SECTION 11.2    NOTICES

        Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address:

If to the Company or the Guarantors:
	RFS Partnership, L.P. 850 Ridge Lake Boulevard, Suite 300 Memphis, Tennessee 38120 Attention: Chief Financial Officer
with copies (which shall not constitute notice) to:
	Hunton & Williams Riverfront Plaza—East Tower Richmond, Virginia 23219 Attention: David Wright, Esq.
If to the Trustee:
	U.S. Bank National Association 180 East Fifth Street St. Paul, Minnesota 55101 Attention: Corporate Trust Services

        The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications.

        All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered; (ii) the third Business Day after sent by mail; (iii) when receipt acknowledged, if telecopied; and (iv) the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

        Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

        If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

        If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

SECTION 11.3    COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES

        Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

70

SECTION 11.4    CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT

        Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

        (a)  an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

        (b)  an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

SECTION 11.5    STATEMENTS REQUIRED IN CERTIFICATE OR OPINION

        Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include:

        (a)  a statement that the Person making such certificate or opinion has read such covenant or condition;

        (b)  a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (c)  a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

        (d)  a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificate of public officials.

SECTION 11.6    RULES BY TRUSTEE AND AGENTS

        The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

SECTION 11.7    NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

        No past, present or future partner, director, officer, employee, incorporator or stockholder (direct or indirect) of the Issuers or the Guarantors (or any such successor entity), as such, shall have any liability for any Obligations of the Issuers or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation, except in their capacity as an obligor or Guarantor of the Notes in accordance with this Indenture. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

SECTION 11.8    GOVERNING LAW

        THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b).

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SECTION 11.9    NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS

        This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 11.10    SUCCESSORS

        All agreements of the Company and the Guarantors in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 11.11    SEVERABILITY

        In case any one or more of the provisions of this Indenture or in the Notes or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law.

SECTION 11.12    COUNTERPART ORIGINALS

        The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

SECTION 11.13    TABLE OF CONTENTS, HEADINGS, ETC.

        The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Signatures on following pages]

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SIGNATURES

        IN WITNESS WHEREOF, the parties hereto have executed this Indenture as of the date first written above.

THE ISSUERS:
RFS PARTNERSHIP, L.P.
By:	RFS HOTEL INVESTORS, INC.
Its:	General Partner
By:	/s/  KEVIN M. LUEBBERS
	Name:    Kevin M. Luebbers
	Title:    Chief Financial Officer
RFS 2002 FINANCING, INC.
By:	/s/  KEVIN M. LUEBBERS
	Name:    Kevin M. Luebbers
	Title:    Chief Financial Officer
THE GUARANTORS:
RFS HOTEL INVESTORS, INC.
By:	/s/  KEVIN M. LUEBBERS
	Name:    Kevin M. Luebbers
	Title:    Chief Financial Officer
RFS LEASING VII, INC.
By:	/s/  KEVIN M. LUEBBERS
	Name:    Kevin M. Luebbers
	Title:    Chief Financial Officer
THE TRUSTEE:
U.S. BANK NATIONAL ASSOCIATION
By:	/s/  FRANK P. LESLIE
	Name:    Frank P. Leslie
	Title:    Vice President

EXHIBIT A

FORM OF NOTE

RFS PARTNERSHIP, L.P.
RFS 2002 FINANCING, INC.

9.75% [SERIES A] [SERIES B](1) SENIOR NOTE
DUE 2012

	CUSIP:
	ISIN:
No.	$

        RFS Partnership, L.P., a Tennessee limited partnership, (the "Company", which term includes any successors under the Indenture hereinafter referred to), and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance", which term includes any successors under the Indenture hereinafter referred to, and together with the Company, the "Issuers"), for value received, hereby promise to pay to                        , or registered assigns, the principal sum of                        Dollars, on March 1, 2012.

        Interest Payment Dates: March 1 and September 1; commencing September 1, 2002.

        Record Dates: February 15 and August 15.

        Reference is made to the further provisions of this Note on the reverse side, which shall, for all purposes, have the same effect as if set forth at this place.

(1)

Series A should be replaced with Series B in the Exchange Notes.

A-1

        IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly executed.

RFS PARTNERSHIP, L.P. a Tennessee limited partnership
By:	RFS HOTEL INVESTORS, INC.
Its:	General Partner
	By:
		Name:
		Title:
	By:
		Name:
		Title:
RFS 2002 FINANCING, INC. a Tennessee corporation
By:
	Name:
	Title:
By:
	Name:
	Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

        This is one of the Notes described in the within-mentioned Indenture.

	U.S. BANK NATIONAL ASSOCIATION
	By:	Authorized Signatory
Dated: February     , 2002

(Back of Note)

9.75% [Series A] [Series B]² Senior Notes due 2012]

        [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.]³

        [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]⁴

        [THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE.]⁵

        [THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

²

Series A should be replaced with Series B in the Exchange Notes.

³

To be included only on Global Notes deposited with DTC as Depostary.

⁴

To be included only on Global Notes deposited with DTC as Depostary.

⁵

To be included only on Reg S Temporary Global Notes.

A-4

        THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED SATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]⁶

        Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

        1.    Interest.    RFS Partnership, L.P., a Tennessee limited partnership (the "Company") and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance," and together with the Company, the "Issuers"), promise to pay interest on the principal amount of this Note at 9.75% per annum from the Issue Date until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Issuers shall pay interest and Liquidated Damages, if any, semi-annually on March 1 and September 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). The first Interest Payment Date shall be September 1, 2002. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a Record Date (defined below) referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The Issuers shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

        2.    Method of Payment.    The Issuers shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the February 15 or August 15 next preceding the Interest Payment Date (each a "Record Date"), even if such Notes are cancelled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes shall be payable as to principal, interest, premium, if any, and Liquidated Damages, if any, at the office or agency of the Issuers maintained within the City and State of New York for such purpose, or, at the option of the Issuers, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds to an account within the United States shall be required with respect to principal of and interest, premium, if any, and Liquidated Damages, if any, on all Global Notes. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

⁶

To be included only on Transfer Restricted Notes.

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        3.    Paying Agent and Registrar.    Initially, U.S. Bank National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity.

        4.    Indenture.    The Issuers issued the Notes under an Indenture dated as of the Issue Date, ("Indenture") by and among the Issuers, the Guarantors party thereto and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms.

        5.    Optional Redemption.

        (a)  The Company shall have the option to redeem the Notes, in whole or in part, in cash from time to time, upon not less than 30 days' nor more than 60 days' notice, prior to March 1, 2007 at a redemption price equal to the greater of (i) 104.875% of the principal amount of the Notes so redeemed, plus accrued and unpaid interest (and Liquidated Damages, if any) and (ii) the Make-Whole Premium, plus to the extent not included in the Make-Whole Premium, accrued and unpaid interest (and Liquidated Damages, if any) to, but not including, the redemption date.

        (b)  The Notes shall be redeemable for cash at the option of the Company, in whole or in part, at any time on or after March 1, 2007, upon not less than 30 days nor more than 60 days prior notice mailed by first class mail to each Holder at its last registered address, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing March 1 of the years indicated below, in each case (subject to the right of Holders of record on a Record Date to receive the corresponding interest due (and the corresponding Liquidated Damages, if any) on the corresponding Interest Payment Date that is on or prior to such redemption date) together with accrued and unpaid interest (and Liquidated Damages, if any), thereon to the date of redemption of the Notes (the "Redemption Date"):

Year	Percentage
2007	104.875	%
2008	103.250	%
2009	101.625	%
2010 and thereafter	100.000	%

        (c)  Notwithstanding the provisions of clauses (a) and (b) of this Section, at any time or from time to time until March 1, 2005, upon one or more public equity offerings of the Parent's Qualified Capital Stock, up to 35% of the aggregate principal amount of the Notes issued pursuant to the Indenture (only as necessary to avoid any duplication, excluding any replacement Notes) may be redeemed at the Company's option within 90 days of such public equity offering, on not less than 30 days, but not more than 60 days, notice to each Holder of the Notes to be redeemed, with cash in an amount not in excess of the Net Cash Proceeds of such public equity offering, at a redemption price equal to 109.750% of principal, together with accrued and unpaid interest and Liquidated Damages, if any, to, but not including, the Redemption Date; provided, however, that immediately following each such redemption not less than 65% of the aggregate principal amount of the Notes (but in no event less than $100 million aggregate principal amount of the Notes) originally issued pursuant to the Indenture on the Issue Date remain outstanding (only as necessary to avoid any duplication, excluding any replacement Notes).

        (d)  Notice of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its

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registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption unless the Company defaults in such payments due on the redemption date.

        6.    Mandatory Redemption.    The Issuers shall not be required to make mandatory redemption payments with respect to the Notes. The Notes shall not have the benefit of any sinking fund.

        7.    Offers to Purchase.

        (a)    Change of Control.    In the event that a Change of Control has occurred, each Holder of Notes shall have the right, at such Holder's option, pursuant to an offer (subject only to conditions required by applicable law, if any) by the Issuers (the "Change of Control Offer"), to require the Issuers to repurchase all or any part of such Holder's Notes
(provided, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later than 35 Business Days after the occurrence of such Change of Control, at a cash price equal to 101% of the principal amount thereof (the "Change of Control Purchase Price"), together with accrued and unpaid interest (and Liquidated Damages, if any) to the Change of Control Purchase Date.

        The Change of Control Offer shall be made within 10 Business Days following a Change of Control and shall remain open for 20 Business Days following its commencement (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Issuers shall promptly purchase all Notes properly tendered in response to the Change of Control Offer.

        (b)    Asset Sale.    The Company or the Parent shall not and shall not permit any of their respective Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of their property, business or assets, including by merger or consolidation (in the case of a Subsidiary or Unrestricted Subsidiary), and including any sale or other transfer or issuance of any Equity Interests of any Subsidiary, whether by the Company or the Parent or one of their respective Subsidiaries or through the issuance, sale or transfer of Equity Interests by one of their respective Subsidiaries or Unrestricted Subsidiaries and including any sale and leaseback transaction (any of the foregoing, an "Asset Sale"), unless: (1) at least 75% of the total consideration for such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents; provided, that with respect to the sale of one or more hotel properties, up to 75% of the consideration may consist of Indebtedness of the purchaser of such hotel properties so long as such Indebtedness is secured by a first priority Lien on the hotel property or properties sold; (2) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect, on a pro forma basis, to such Asset Sale; and (3) the Parent and the Company determine in good faith that the consideration received by the Parent, the Company or their respective Subsidiaries, as applicable, equals the fair market value for such Asset Sale.

        In the event and to the extent that immediately following any Asset Sale the Net Cash Proceeds received by the Company or the Parent or any of their respective Subsidiaries from such Asset Sale, plus the Net Cash Proceeds of any other Asset Sale(s) which occurred (i) on or after the Issue Date and (ii) within the 360-day period proceeding such Asset Sale, exceed 10% of Adjusted Consolidated Net Tangible Assets, the Indenture provides that within 360 days following such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Amount") shall be: (1) invested in assets and property (except in connection with the acquisition of a Subsidiary which is a Guarantor in a Related Business, other than notes, bonds, obligation and securities) which shall immediately constitute or be a part of a Related Business of the Company or the Parent or such Subsidiary (if it continues to be a Subsidiary) immediately following such transaction, or (2) used

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to retire Indebtedness incurred under the Credit Agreement and to permanently reduce the amount of such Indebtedness permitted to be incurred pursuant to Section 4.7(b) of the Indenture.

        Pending the final application of any Net Cash Proceeds, the Company or the Parent may temporarily reduce revolving credit borrowings or otherwise invest the Net Cash Proceeds in any manner that is not prohibited by the Indenture.

        The accumulated Net Cash Proceeds from Asset Sales not applied as set forth above shall constitute "Excess Proceeds." Within 30 days after the date that the amount of Excess Proceeds exceeds $10 million, which date shall not be prior to 390 days after the Asset Sale that generated such Excess Proceeds, the Company shall apply an amount (the "Asset Sale Offer Amount") equal to the Excess Proceeds to the repurchase of the Notes and such other Indebtedness ranking on a parity with the Notes and with provisions requiring the Company to make an offer to purchase such Indebtedness with the proceeds from such Asset Sale pursuant to a cash offer (subject only to conditions required by applicable law, if any) (pro rata in proportion to the respective principal amounts (or accreted values in the case of Indebtedness issued with an original issue discount) of the Notes and such other Indebtedness then outstanding) (the "Asset Sale Offer") at a purchase price of 100% of the principal amount (or accreted value in the case of Indebtedness issued with an original issue discount) (the "Asset Sale Offer Price") together with accrued and unpaid interest and Liquidated Damages, if any, to the date of payment. Each Asset Sale Offer shall remain open for 20 Business Days following its commencement (the "Asset Sale Offer Period").

        8.    Denominations, Transfer, Exchange.    The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a Record Date and the corresponding Interest Payment Date.

        9.    Persons Deemed Owners.    The registered Holder of a Note may be treated as its owner for all purposes.

        10.    Amendment, Supplement and Waiver.    Subject to certain exceptions, the Indenture, the Notes or the Guarantees may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes, and any existing Default or compliance with any provision of the Indenture, the Notes or the Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture, the Notes or the Guarantees may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuers' obligations to Holders of the Notes in case of a merger or consolidation, to provide for additional Guarantees as set forth in the Indenture or for the release or assumption of Guarantees in compliance with the Indenture, to make any change that would provide any additional rights or benefits to the Holders of the Notes (including the addition of any Guarantor) or that does not adversely affect the rights under the Indenture of any such Holder, to comply with the provisions of the Depositary, Euroclear or Clearstream or the Trustee with respect to the provisions of the Indenture or the Notes relating to transfers and exchanges of Notes or beneficial interests therein, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA.

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        11.    Defaults and Remedies.    The Indenture provides that each of the following constitutes an Event of Default:

        (1)  the Company's failure to pay any installment of interest (or Liquidated Damages, if any) on the Notes as and when the same becomes due and payable and the continuance of any such failure for 30 days,

        (2)  the Company's failure to pay all or any part of the principal, or premium, if any, on the Notes when and as the same becomes due and payable at maturity, upon redemption, by acceleration or otherwise, including, without limitation, payment of the Change of Control Purchase Price or the Asset Sale Offer Price, on Notes validly tendered and not withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as applicable,

        (3)  the Company's failure or the failure by the Parent or any of their respective Subsidiaries to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, except for the provisions under Sections 4.13, 4.14 and 5.1 of the Indenture, the continuance of such failure for a period of 30 days,

        (4)  a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, the Parent or any of their respective Significant Subsidiaries in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Parent or any of their respective Significant Subsidiaries or for all or substantially all of the property and assets of the Company, the Parent or any of their respective Significant Subsidiaries or (C) the winding up or liquidation of the affairs of the Company, the Parent or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or,

        (5)  the Company, the Parent or any of their respective Significant Subsidiaries (a) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Parent or any of their respective Significant Subsidiaries or for all or substantially all of the property and assets of the Company, the Parent or any of their respective Significant Subsidiaries or (c) effects any general assignment for the benefit of creditors,

        (6)  a default occurs (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) in any of the Company's or the Parent's Indebtedness or the Indebtedness of any of their respective Subsidiaries with an aggregate amount outstanding in excess of $7.5 million (or if such Indebtedness is Non-Recourse Indebtedness, $20 million) (a) resulting from the obligor's failure to pay principal of or interest on such Indebtedness, or (b) as a result of such default, the maturity of such Indebtedness has been accelerated prior to its stated maturity,

        (7)  final unsatisfied judgments not covered by insurance aggregating in excess of $7.5 million, at any one time rendered against the Company or the Parent or any of their respective Subsidiaries and not stayed, bonded or discharged within 60 days, and

A-9

        (8)  any Guarantee of a Guarantor ceases to be in full force and effect or becomes unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Guarantee and the Indenture) or any Guarantor denies or disaffirms its Obligations under its Guarantee.

        12.    Trustee Dealings with Company.    The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

        13.    No Recourse Against Others.    No past, present or future partner, director, officer, employee, incorporator or stockholder (direct or indirect) of the Issuers or the Guarantors (or any such successor entity), as such, shall have any liability for any Obligations of the Issuers or the Guarantors under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation, except in their capacity as an obligor or Guarantor of the Notes in accordance with the Indenture. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

        14.    Authentication.    This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

        15.    Abbreviations.    Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

        16.    Additional Rights of Holders of Transfer Restricted Notes.⁷    In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, among the Issuers, the guarantors party thereto and the Initial Purchasers (the "Registration Rights Agreement").

⁷

To be included only on Transfer Restricted Notes.

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        17.    CUSIP Numbers.    Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon, and any such redemption shall not be affected by any defect in or omission of such numbers.

        18.    Notation of Guarantee.    As more fully set forth in the Indenture, to the extent permitted by law, each of the Guarantors from time to time, in accordance with Article X of the Indenture, unconditionally and jointly and severally guarantees, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: it receives substantial benefits from the Company and that such party is providing its Guarantee for good and valuable consideration, including, without limitation, such substantial benefits and services.

        When a successor assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor may be released from those obligations.

        19.    Governing Law.    THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL LAWS AND RULES 327(b).

        The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture [and/or the Registration Rights Agreement]⁸. Requests may be made to:

RFS Partnership, L.P.
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120
(901) 767-7005

⁸

To be included only on Transfer Restricted Notes.

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Assignment Form

        To assign this Note, fill in the form below: (I) or (We) assign and transfer this Note to

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

and irrevocably appoint                                                                          
to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*

*NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee program acceptable to the Trustee.

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Option of Holder to Elect Purchase

        If you want to elect to have this Note purchased by the Company pursuant to Section 4.13 or Section 4.14 of the Indenture, check the box below:

o    Section 4.13 o    Section 4.14

        If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state the amount you elect to have purchased (in denominations of $1,000 only, except if you have elected to have all of your Notes purchased): $                         

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)
	Social Security or Tax Identification No.:
Signature Guarantee*

*NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee program acceptable to the Trustee.

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE⁹

        The following exchanges of an interest in this Global Note for an interest in another Global Notes or for a Definitive Note, or exchanges of an interest in another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange
Amount of Decrease in Principal Amount of this Global Note Amount of Increase in Principal Amount of this Global Note Principal Amount of this Global Note Following Such Decrease (or Increase) Signature of Authorized Officer of Trustee or Note Custodian

⁹

This should be included only if the Note is issued in global form.

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GUARANTEE

        The Guarantors listed below (hereinafter referred to as the "Guarantors," which term includes any successors or assigns under the Indenture, dated the date hereof (the "Indenture"), among the Guarantors, the Issuers (defined below) and U.S. Bank National Association, as trustee (the "Trustee") and any additional Guarantors, have irrevocably and unconditionally guaranteed on a senior basis the Guarantee Obligations (as defined in Section 10.1 of the Indenture), which include (i) the due and punctual payment of the principal of, premium, if any, and interest and Liquidated Damages, if any, on the 9.75% Senior Notes due 2012 (the "Notes") of RFS Partnership, L.P., a Tennessee limited partnership (the "Company," which term includes any successors or assigns under the Indenture), and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance," which term includes any successors or assigns under the Indenture, and together with the Company, the "Issuers"), whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer or otherwise, the due and punctual payment of interest on the overdue principal and premium, if any, and (to the extent permitted by law) interest on any interest on the Notes, and the due and punctual performance of all other obligations of the Issuers, to the Holders or the Trustee all in accordance with the terms set forth in Article X of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer, or otherwise.

        The obligations of each Guarantor to the Holders and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to such Indenture for the precise terms of this Guarantee.

        No past, present or future partner, director, officer, employee, incorporator or stockholder (direct or indirect) of the Guarantors (or any such successor entity), as such, shall have any liability for any obligations of the Guarantors under this Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation, except in their capacity as an obligor or Guarantor of the Notes in accordance with the Indenture.

        This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Issuers' obligations under the Notes and Indenture or until released or legally defeased in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and performance and not of collectibility.

        This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers.

        The obligations of each Guarantor under this Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law.

        THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE.

        Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated.

[remainder of page intentionally left blank; signature page follows]

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        IN WITNESS WHEREOF, each of the Guarantors has caused this instrument to be duly executed.

RFS HOTEL INVESTORS, INC.
By:
	Name: Title:
RFS LEASING VII, INC.
By:
	Name: Title:

EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER

RFS Partnership, L.P.
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services

        Re: 9.75% Senior Notes due 2012

Dear Sirs:

        Reference is hereby made to the Indenture, dated as of February 26, 2002 (the "Indenture"), among RFS Partnership, L.P. (the "Company") and RFS 2002 Financing, Inc. ("Finance"), as issuers, the Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.                        , (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $                        in such Note[s] or interests (the "Transfer"), to                        (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

        1.    o    Check if Transferee shall take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A.    The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

        2.    o    Check if Transferee shall take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S.    The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or

B-1

for the account or benefit of a U.S. Person (other than an Initial Purchaser) and the interest transferred shall be held immediately thereafter through Euroclear or Clearstream. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

        3.    o    Check and complete if Transferee shall take delivery of a beneficial interest in a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S.    The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any State of the United States, and accordingly the Transferor hereby further certifies that (check one):

        (a)o    Such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or

        (b)o    Such Transfer is being effected to the Company or a subsidiary thereof; or

        (c)o    Such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or

        (d)o    Such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in a form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification and provided to the Company, which has confirmed its acceptability), to the effect that such Transfer is in compliance with the Securities Act and with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act.

        4.    o    Check if Transferee shall take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

        (a)    oCheck if Transfer is Pursuant to Rule 144.    (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture and the Securities Act.

        (b)    oCheck if Transfer is Pursuant to Regulation S.    (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky

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securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture and the Securities Act.

        (c)    oCheck if Transfer is Pursuant to Other Exemption.    (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

        This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

[Insert Name of Transferor]		Dated:
By:
	Name:
	Title:

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ANNEX A TO CERTIFICATE OF TRANSFER

1.	The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
	(a)	o	a beneficial interest in the:
		(i)	o	144A Global Note (CUSIP            ), or
		(ii)	o	Regulation S Global Note (CUSIP or ISIN            ), or
	(b)	o	a Restricted Definitive Note.
2.	After the Transfer the Transferee shall hold:
[CHECK ONE]
	(a)	o	a beneficial interest in the:
		(i)	o	144A Global Note (CUSIP ), or
		(ii)	o	Regulation S Global Note (CUSIP or ISIN            ), or
		(iii)	o	Unrestricted Global Note (CUSIP ); or
	(b)	o	a Restricted Definitive Note; or
	(c)	o	an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.

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EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE

RFS Partnership, L.P.
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services

        Re: 9.75% Senior Notes due 2012

Dear Sirs:

        Reference is hereby made to the Indenture, dated as of February 26, 2002 (the "Indenture"), among RFS Partnership, L.P. (the "Company") and RFS 2002 Financing, Inc. ("Finance"), as issuers, the Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                , (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $                        in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:

          1.  Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note.

        (a)  / /    Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.

        (b)  / /    Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.

        (c)  / /    Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on

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transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.

        (d)  / /    Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.

          2.  Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

        (a)  / /    Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued shall continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

        (b)  / /    Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the: [CHECK ONE] / / 144A Global Note or / / Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

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This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

[Insert Name of Owner]
By:
	Name: Title:
Dated:

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EXHIBIT D
FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR

RFS Partnership, L.P.
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38120

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services

        Re: 9.75% Senior Notes due 2012

Dear Sirs:

        Reference is hereby made to the Indenture, dated as of February 26, 2002 (the "Indenture"), among RFS Partnership, L.P. (the "Company") and RFS 2002 Financing, Inc. ("Finance"), as issuers, the Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

        In connection with our proposed purchase of $                        aggregate principal amount of: (a) a beneficial interest in a Global Note, or (b) a Definitive Note, we confirm that:

          1.  We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act").

          2.  We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we shall do so only (A) to the Company or any Guarantor or any of their respective subsidiaries, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if the proposed transfer is in respect of an aggregate principal amount of Notes of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144 under the Securities Act, (F) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to the Company) or (G) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note from us in a transaction meeting the requirements of clauses (A) through (F) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein.

          3.  We understand that, on any proposed resale of the Notes or beneficial interest therein, we shall be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us shall bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the

D-1

Notes or beneficial interest therein acquired by us must be effected through one of the Initial Purchasers.

          4.  We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

          5.  We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion.

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        You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

	Dated:                        ,
[Insert Name of Accredited Investor]
By:
Name: Title:

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EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT
GUARANTORS

        Supplemental Indenture (this "Supplemental Indenture"), dated as of            , among                        (the "Guaranteeing Subsidiary"), a subsidiary of RFS Partnership, L.P. (or its permitted successor), a Tennessee limited partnership (the "Company"), the Company and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee").

W I T N E S S E T H

        WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of February 26, 2002, providing for the issuance of 9.75% Senior Notes due 2012 (the "Notes");

        WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which any newly-acquired or created Guarantor shall unconditionally guarantee all of the Company's obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and

        WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

        NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

        1.    Capitalized Terms.    Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

        2.    Agreement to Guarantee.    The Guaranteeing Subsidiary irrevocably and unconditionally guarantees the Guarantee Obligations, which include (i) the due and punctual payment of the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer or otherwise, the due and punctual payment of interest on the overdue principal and premium, if any, and (to the extent permitted by law) interest on any interest on the Notes, and payment of expenses, and the due and punctual performance of all other obligations of the Company, to the Holders or the Trustee all in accordance with the terms set forth in Article X of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer or otherwise.

        The obligations of Guaranteeing Subsidiary to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee.

        No past, present or future partner, director, officer, employee, incorporator or stockholder (direct or indirect) of the Guaranteeing Subsidiary (or any such successor entity), as such, shall have any liability for any obligations of the Guaranteeing Subsidiary under this Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation, except in their capacity as an obligor or Guarantor of the Notes in accordance with the Indenture.

        This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon the Guaranteeing Subsidiary and its successors and assigns until full and final payment of all of the

E-1

Company's obligations under the Notes and Indenture or until released in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and performance and not of collectibility.

        The obligations of the Guaranteeing Subsidiary under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law.

        THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE.

        3.    NEW YORK LAW TO GOVERN.    THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

        4.    Counterparts.    The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

        5.    Effect of Headings.    The Section headings herein are for convenience only and shall not affect the construction hereof.

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        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

THE ISSUERS: RFS PARTNERSHIP, L.P.
By:	RFS Hotel Investors, Inc.
Its:	General Partner
By:
	Name: Title:
RFS 2002 FINANCING, INC.
By:
	Name: Title:
GUARANTEEING SUBSIDIARY: NAME:
By:
	Name: Title:
THE TRUSTEE: U.S BANK NATIONAL ASSOCIATION
By:
	Name: Title:

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TABLE OF CONTENTS
CROSS-REFERENCE TABLE
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE II THE NOTES
ARTICLE III REDEMPTION
ARTICLE IV COVENANTS
ARTICLE V SUCCESSORS
ARTICLE VI DEFAULTS AND REMEDIES
ARTICLE VII TRUSTEE
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER
ARTICLE X GUARANTEES
ARTICLE XI MISCELLANEOUS
SIGNATURES
EXHIBIT A
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Assignment Form
Option of Holder to Elect Purchase
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE⁹
GUARANTEE
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER
ANNEX A TO CERTIFICATE OF TRANSFER
EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS

EX-4.4

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EXHIBIT 4.4

$125,000,000

RFS PARTNERSHIP, L.P.
RFS 2002 FINANCING, INC.

9.75% Senior Notes due 2012

REGISTRATION RIGHTS AGREEMENT

February 26, 2002

Credit Suisse First Boston Corporation
Banc of America Securities LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629

Dear Sirs:

        RFS Partnership L.P., a Tennessee limited partnership (the "Company"), and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance," and together with the Company, the "Issuers"), proposes to issue and sell to Credit Suisse First Boston Corporation and Banc of America Securities LLC (collectively, the "Initial Purchasers"), as representatives of the purchasers listed on Schedule A to the Purchase Agreement, dated February 21, 2002 (the "Purchase Agreement"), among the Issuers, the Guarantors (as defined below) and the Initial Purchasers, upon the terms set forth in the Purchase Agreement, $125,000,000 aggregate principal amount of their 9.75% Senior Notes due 2012 (the "Initial Notes") to be guaranteed by RFS Hotel Investors, Inc., a Tennessee corporation, and RFS Leasing VII, Inc., a Tennessee corporation (collectively, the "Guarantors," and together with the Issuers and any future guarantor of the Notes, the "Obligors"). The Initial Notes will be issued pursuant to an Indenture, dated February 26, 2002 (the "Indenture"), among the Issuers, the Guarantors and U.S. Bank National Association, as trustee (the "Trustee"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Obligors hereby agree with the Initial Purchasers, for the benefit of the Initial Purchasers and the holders of the Notes (as defined below) (collectively the "Holders"), as follows:

        1.    Registered Exchange Offer. Unless not permitted by applicable law, the Obligors shall prepare and, not later than 60 days (such 60th day being a "Filing Deadline") after the date on which the Initial Purchasers purchase the Initial Notes pursuant to the Purchase Agreement (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of debt securities of the Obligors issued under the Indenture, identical (other than with respect to registration rights, liquidated damages and transfer restrictions) in all material respects to the Initial Notes and registered under the Securities Act (the "Exchange Notes"). The Obligors shall use their best efforts to (i) cause such Exchange Offer Registration Statement to become effective under the Securities Act at the earliest possible time, but in any event within 150 days after the Closing Date (such 150th day being an "Effectiveness Deadline") and (ii) keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period").

        If the Obligors commence the Registered Exchange Offer, the Obligors (i) will be entitled to consummate the Registered Exchange Offer 20 business days after such commencement (provided that the Obligors have accepted all the Initial Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will be required to consummate the Registered Exchange Offer no later than 30 business days after the date on which the Exchange Offer Registration Statement is declared effective (such 30th business day being the "Consummation Deadline"). Subject to the provisions contained in Section 2 hereof, following the consummation of the Registered Exchange Offer and the issuance of the Exchange Notes thereunder, the Company will have no further obligation to register any Initial Notes hereunder.

        Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Obligors shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Notes for Exchange Notes (assuming that such Holder is not an affiliate of any Obligor within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings (or any intention to engage in any arrangement or understanding) with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the Notes laws of the several states of the United States.

        The Obligors and Initial Purchasers acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information in substantially the same form set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Notes (as defined below) acquired in exchange for Initial Notes constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The content and location of Annexes A, B and C may be altered if so requested by the staff of the Commission.

        The Obligors shall use their best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Obligors shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period of not less than 180 days after the consummation of the Registered Exchange Offer.

        If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Notes acquired by it as part of its initial distribution, the Obligors, simultaneously with the delivery of the Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser (delivered at least two days in advance of the consummation of the Registered Exchange Offer), in exchange (the "Private Exchange") for the Initial Notes held by such Initial Purchaser, a like principal amount of debt securities of the Obligors

issued under the Indenture and identical in all material respects to the Initial Notes (the "Private Exchange Notes"). The Initial Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the "Notes".

        In connection with the Registered Exchange Offer, the Obligors shall:

        (a)  mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

        (b)  keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders;

        (c)  utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee;

        (d)  permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and

        (e)  otherwise comply with all applicable laws.

        As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Obligors shall:

        (x)  accept for exchange all the Notes validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;

        (y)  deliver to the Trustee for cancellation (or authorize the Trustee as custodian of the Initial Notes to cancel) all the Initial Notes so accepted for exchange; and

        (z)  cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Initial Notes of such Holder so accepted for exchange.

        The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Notes will vote and consent together on all matters as one class and that none of the Notes will have the right to vote or consent as a class separate from one another on any matter.

        Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Notes surrendered in exchange therefor or, if no interest has been paid on the Initial Notes, from the date of original issue of the Initial Notes.

        Each Holder participating in the Registered Exchange Offer shall be required to represent to the Obligors that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Obligors or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes, (v) if such Holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes, and (vi) any other representations and warranties required by law or Commission policy..

        Notwithstanding any other provisions hereof, the Obligors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any

supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain 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 not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

        2.    Shelf Registration. If, (i) because of any change in law or Commission policy or in applicable interpretations of such law or policy by the staff of the Commission, the Obligors are not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the Consummation Deadline and such consummation could not reasonably be expected to occur within 45 days after the Consummation Deadline, or (iii) any Holder of Notes which are Transfer Restricted Securities notifies the Company prior to the 20^thbusiness day following the consummation of the Registered Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Registered Exchange Offer, (b) it may not resell the Notes acquired by it in the Registered Exchange Offer to the public without delivering a prospectus, and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by it, or (c) it is a broker-dealer and holds Notes acquired directly from the Issuers or any of the Issuer's affiliates, the Obligors shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i), (ii) or (iii) occur, including in the case of clause (iii) the receipt of the required notice, being a "Trigger Date"):

        (a)  The Obligors shall promptly (but in no event more than 30 days after the Trigger Date (such 30th day being a "Filing Deadline")) file with the Commission and thereafter use their best efforts to cause to be declared effective no later than 60 days after the Trigger Date (such 60th day being an "Effectiveness Deadline") a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Notes held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

        (b)  The Obligors shall use their best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Notes, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Notes covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). The Obligors shall be deemed not to have used their best efforts to keep the Shelf Registration Statement effective during the requisite period if any of them voluntarily takes any action that would result in Holders of Notes covered thereby not being able to offer and sell such Notes during that period, unless such action is required by applicable law.

        (c)  Notwithstanding any other provisions of this Agreement to the contrary, the Obligors shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a 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.

        3.    Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

        (a)  The Obligors shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration, the Obligors shall use their best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose in a timely manner so as not to interfere materially with the Obligors' ability to meet the deadlines provided herein; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Notes Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Notes pursuant to the Shelf Registration Statement as selling securityholders. Any information required by Initial Purchasers or Holders, or their respective representatives, shall be provided to the Obligors in a timely manner so as not to interfere materially with the Obligors' ability to meet any deadline provided herein.

        (b)  The Obligors shall give written notice to the Initial Purchasers, the Holders of the Notes and any Participating Broker-Dealer from whom the Obligors have received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

        (i)    when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;

        (ii)  of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;

        (iii)  of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;

        (iv)  of the receipt by the Obligors or their legal counsel of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

        (v)  of the happening of any event that requires the Obligors to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

        (c)  The Obligors shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement.

        (d)  The Obligors shall furnish to each Holder of Notes included within the coverage of the Shelf Registration, without charge, one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

        (e)  The Obligors shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

        (f)    The Obligors shall, during the Shelf Registration Period, deliver to each Holder of Notes included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Obligors hereby consent, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Notes in connection with the offering and sale of the Notes covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

        (g)  The Obligors shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Obligors hereby consent, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.

        (h)  Prior to any public offering of the Notes pursuant to any Registration Statement the Obligors shall register or qualify or cooperate with the Holders of the Notes included therein and their respective counsel in connection with the registration or qualification of the Notes for offer and sale under the Notes or "blue sky" laws of such states of the United States as any Holder of Notes reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Notes covered by such Registration Statement; provided, however, that the Obligors shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

        (i)    The Obligors shall cooperate with the Holders of the Notes to facilitate the timely preparation and delivery of certificates representing the Notes to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Notes pursuant to such Registration Statement.

        (j)    Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Obligors are required to maintain an effective Registration Statement, the Obligors shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Notes or purchasers of Notes, the prospectus will not contain an untrue statement of a material fact or omit to state any 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. If the Obligors notify the Initial Purchasers, the Holders of the Notes and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Notes and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Notes and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j).

        (k)  Not later than the effective date of the applicable Registration Statement, the Obligors will provide a CUSIP number for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company.

        (l)    The Obligors will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to their security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Obligors' first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.

        (m)  The Obligors shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Obligors shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

        (n)  The Obligors may require each Holder of Notes to be sold pursuant to the Shelf Registration Statement to furnish to the Obligors such information regarding the Holder and the distribution of the Notes as the Obligors may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Obligors may exclude from such registration the Notes of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. To the extent any such Holder is excluded from the Shelf Registration Statement pursuant to this clause (n), such Holder shall not be entitled to Liquidated Damages provided for herein from and after the date of such exclusion.

        (o)  The Obligors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of Notes shall reasonably request in order to facilitate the disposition of the Notes pursuant to any Shelf Registration; provided that in no event shall the Obligors be responsible for the payment of broker, dealer or underwriting discounts or commissions (or their attorney's or expert's fees or expenses) or transfer taxes with respect to the sale of the Notes.

        (p)  In the case of any Shelf Registration, the Obligors shall (i) make reasonably available for inspection by the Holders of the Notes, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Notes or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Obligors and (ii) cause the Obligors' officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Notes or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof.

        (q)  In the case of any Shelf Registration, the Obligors, if requested by any Holder of Notes covered thereby, shall cause (i) their counsel to deliver an opinion and updates thereof relating to the Notes in customary form and substantially similar in scope to the opinion provided under the Purchase Agreement, with such changes as are customary with the preparation of a Registration Statement (and (if appropriate) such changes as are customary in connection with an underwritten offering) addressed to such Holders and the Managing Underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Obligors and their subsidiaries; the qualification of the Obligors and their subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of any relevant agreement referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Notes; the absence of material legal or governmental proceedings involving the Obligors and their subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Notes, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) their respective officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Notes and (iii) their independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Notes and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

        (r)  In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Obligors shall cause (i) their counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) their independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance

thereof as set forth in Sections 6(a) and 6(f) of the Purchase Agreement, with appropriate date changes.

        (s)  If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Notes by Holders to the Obligors (or to such other Person as directed by the Obligors) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Obligors shall mark, or caused to be marked, on the Initial Notes so exchanged that such Initial Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Initial Notes be marked as paid or otherwise satisfied.

        (t)    The Obligors will use their best efforts to (a) if the Initial Notes have been rated prior to the initial sale of such Initial Notes, confirm such ratings will apply to the Notes covered by a Registration Statement, or (b) if the Initial Notes were not previously rated, cause the Notes covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Notes covered by such Registration Statement, or by the Managing Underwriters, if any.

        (u)  In the event that any broker-dealer registered under the Exchange Act shall underwrite any Notes or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Notes Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Notes or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Obligors will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Notes, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Notes, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

        (v)  The Obligors shall use their best efforts to take all other steps reasonably necessary to effect the registration of the Notes covered by a Registration Statement contemplated hereby.

        4.    Registration Expenses. (a) All expenses incident to the Obligors' performance of and compliance with this Agreement will be borne by the Obligors, regardless of whether a Registration Statement is ever filed or becomes effective, including, without limitation:

        (i)    all registration and filing fees and expenses;

        (ii)  all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;

        (iii)  all expenses of printing (including printing certificates for the Notes to be issued in the Registered Exchange Offer and the Private Exchange and printing of prospectuses), reasonable messenger and delivery services and telephone;

        (iv)  all fees and disbursements of counsel for the Obligors; and

        (v)  all fees and disbursements of independent certified public accountants of the Obligors (including the expenses of any customary audit and comfort letters required by or incident to such performance).

        The Obligors will bear their internal expenses (including, without limitation, all salaries and expenses of their respective officers and employees performing legal or accounting duties), the expenses of any annual audit, the fees and expenses of any person, including special experts, retained by the

Obligors; provided, however, that the Obligors shall not be responsible for the payment of broker, dealer or underwriter discounts (or their attorney's or expert's fees) or commissions or transfer taxes.

        5.    Indemnification. (a) The Obligors agree to indemnify and hold harmless each Holder of Notes, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Notes) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Obligors shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Obligors by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Notes concerned, to the extent that a prospectus relating to such Notes was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Notes to such person, a copy of the final prospectus if the Obligors had previously furnished copies thereof to such Holder or Participating Broker-Dealer; and provided, further, that this indemnity agreement will be in addition to any liability which the Obligors may otherwise have to such Indemnified Party. The Obligors shall also indemnify any underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Notes if requested by such Holders.

        (b)  Each Holder of Notes, severally and not jointly, will indemnify and hold harmless the Obligors and each person, if any, who controls the Obligors within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Obligors or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Obligors by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Obligors for any legal or other expenses reasonably incurred by the Obligors or any such controlling person in

connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Obligors or any of their controlling persons.

        (c)  Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above, unless such failure to notify materially prejudices the indemnifying party's ability to defend the against the action. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

        (d)  If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Notes, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Obligors on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Notes shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Notes pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to

contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Obligors within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Obligors.

        (e)  The agreements contained in this Section 5 shall survive the sale of the Notes pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

        6.    Liquidated Damages Under Certain Circumstances. (a) Liquidated damages ("Liquidated Damages") with respect to the Notes shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "Registration Default"):

        (i)    the Exchange Offer Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline;

        (ii)  the Shelf Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline;

        (iii)  any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline;

        (iv)  the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or

        (v)  any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

        Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Obligors or pursuant to operation of law or as a result of any action or inaction by the Commission.

        (b)  The Obligors jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected by a Registration Default an amount equal to $0.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of Liquidated Damages shall increase by an additional $0.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured. The Obligors shall not be required to pay Liquidated Damages for more than one Registration Default at any given time. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease.

        (c)  A Registration Default referred to in Section 6(a)(v) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Obligors where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Obligors that would need to be described in such Shelf

Registration Statement or the related prospectus and (ii) in the case of clause (y), the Obligors are proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Liquidated Damages shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured.

        (d)  Any amount of Liquidated Damages due pursuant to Section 6(a) hereof will be payable in cash on the regular interest payment dates with respect to the Notes.

        (e)  "Transfer Restricted Securities" means each Note until the earliest of: (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Note for an Exchange Note, the date on which such Exchange Note is sold pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

        7.    Rules 144 and 144A. The Obligors shall use their best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Obligors are not required to file such reports, they will, upon the reasonable request of any Holder of Notes, make publicly available other information so long as legally required to permit sales of their Notes pursuant to Rules 144 and 144A under the Securities Act. The Obligors covenant that it will take such further action as any Holder of Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A under the Securities Act (including the requirements of Rule 144A(d)(4) under the Securities Act). The Obligors will provide a copy of this Agreement to prospective purchasers of Initial Notes identified to the Obligors by the Initial Purchasers upon request. Upon the request of any Holder of Initial Notes, the Obligors shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Obligors to register any of their Notes pursuant to the Exchange Act.

        8.    Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering (the "Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering.

        No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

        In any underwritten registration, the Obligors shall not be responsible for (i) the payment of brokers' dealers' and underwriting discounts and commissions and brokers', dealers' and underwriters' counsel or other expert fees, or (ii) transfer taxes with respect to the sale of the Notes.

        9.    Miscellaneous.

        (a)  Remedies. The Obligors hereby acknowledge and agree that any failure by any of them to comply with their obligations under Sections 1 and 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that

it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Obligors' obligations under Sections 1 and 2 hereof. The Obligors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate.

        (b)  No Inconsistent Agreements. The Obligors will not on or after the date of this Agreement enter into any agreement with respect to the Notes that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Obligors' Notes under any agreement in effect on the date hereof.

        (c)  Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Obligors and the written consent of the Holders of a majority in principal amount of the Notes affected by such amendment, modification, supplement, waiver or consents.

        (d)  Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission or air courier which guarantees overnight delivery:

        (1)  if to a Holder of Notes, at the most current address given by such Holder to the Obligors.

        (2)  if to the Initial Purchasers, to:

Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group


with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Fax No.: (213) 687-5600
Attention: Nicholas P. Saggese, Esq.


        (3)  if to any Obligor, at its address as follows:

850 Ridge Lake Boulevard, Suite 300
Memphis, TN 38120
Fax No.: (901) 818-5260
Attention: Kevin Luebbers, Executive Vice President, Treasurer and Chief Financial Officer


with a copy to:

Hunton & Williams
Riverfront Plaza—East Tower
951 E. Byrd Street
Richmond, VA 23219
Fax No.: (804) 788-8218
Attention: David C. Wright, Esq.

        All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage

prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

        (e)  Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Obligors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

        (f)    Successors and Assigns. This Agreement shall be binding upon the Obligors and their respective successors and assigns.

        (g)  Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

        (h)  Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

        (i)    Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

        (j)    Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

        (k)  Notes Held by the Obligors. Whenever the consent or approval of Holders of a specified percentage of principal amount of Notes is required hereunder, any Notes held by the Obligors or their affiliates (other than subsequent Holders of Notes if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

        (l)    Service of Process; Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Agreement, each of the Obligors hereby (i) submits to the nonexclusive jurisdiction of any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York or brought under federal or state securities laws, and (ii) agrees that service of process to its address in Section 9(d) hereof shall be deemed in every respect effective service of process upon it in any such suit or proceeding. To the extent that any Obligor may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law.

        (m)  Business Days. For purposes of this Agreement, a "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. If any deadline contained herein falls on a day that is not a business day, such deadline shall be deemed to be the next business day. In connection with any Effectiveness Deadline or Filing Deadline, in addition to the foregoing a "day" shall mean a day the Commission is open during normal business hours and accepting filings.

[remainder of page intentionally left blank; signature pages follow]

        If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchasers and the Obligors in accordance with its terms.

Very truly yours,
RFS PARTNERSHIP, L.P.
By:	/s/  RFS HOTEL INVESTORS, INC.
Its:	General Partner
By:	/s/  KEVIN M. LUEBBERS
Title:	Chief Financial Officer
RFS 2002 FINANCING, INC.
By:	/s/  KEVIN M. LUEBBERS
Title:	Chief Financial Officer
RFS HOTEL INVESTORS, INC.
By:	/s/  KEVIN M. LUEBBERS
Title:	Chief Financial Officer
RFS LEASING VII, INC.
By:	/s/  KEVIN M. LUEBBERS
Title:	Chief Financial Officer

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By:	/s/  DON KINSEY
Title:	Managing Director
BANC OF AMERICA SECURITIES LLC
By:	/s/  STEPHAN JAEGER
Title:	Vice President

ANNEX A

        Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

ANNEX B

        Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution."

ANNEX C

PLAN OF DISTRIBUTION

        Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                         , 200    , all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.⁽¹⁾

⁽¹⁾

In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus.

        The Issuers will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        For a period of 180 days after the Expiration Date the Issuers will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Issuers have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

ANNEX D

o    CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:

Address:

        If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

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$125,000,000 RFS PARTNERSHIP, L.P. RFS 2002 FINANCING, INC. 9.75% Senior Notes due 2012 REGISTRATION RIGHTS AGREEMENT

EX-5.1

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EXHIBIT 5.1

[Letterhead of Hunton & Williams]

March 15, 2002

RFS Hotel Investors, Inc.
RFS Partnership, L.P.
RFS 2002 Financing, Inc.
RFS Leasing VII, Inc.
c/o RFS Hotel Investors, Inc.
850 Ridge Lake Boulevard, Suite 300
Memphis, Tennessee 38102

RFS Partnership, L.P. and RFS 2002 Financing, Inc.
9.75% Series B Senior Notes due 2012

Ladies and Gentlemen:

        We have acted as counsel to RFS Partnership, L.P., a Tennessee limited partnership (the "Company") and RFS 2002 Financing, Inc., a Tennessee corporation ("Finance" and, together with the Company, the "Issuers"), in connection with the registration by the Issuers of $125,000,000 in aggregate principal amount of the Issuers' 9.75% Series B Senior Notes due 2012 (the "Exchange Notes"), pursuant to a Registration Statement on Form S-4 (as may be amended and supplemented, the "Registration Statement") filed with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"), for the purpose of effecting an exchange offer (the "Exchange Offer") for the Issuers' outstanding 9.75% Series A Senior Notes due 2012 (the "Old Notes"). The Exchange Notes are to be issued in the Exchange Offer pursuant to the Indenture (the "Indenture"), dated as of February 26, 2002, among the Issuers, RFS Hotel Investors, Inc., a Tennessee corporation ("RFS"), RFS Leasing VII, Inc., a Tennessee corporation ("Leasing" and, together with RFS, the "Guarantors") and U.S. Bank National Association, as Trustee, in exchange for the Old Notes, of which $125,000,000 in aggregate principal amount is outstanding.

        In connection with the foregoing, we have examined the following documents:

(i)

the Registration Statement, including the Prospectus contained therein;



(ii)

the Indenture;



(iii)

the global securities representing the Old Notes;



(iv)

a specimen of the global security representing the Exchange Notes;



(v)

the guarantees dated February 26, 2002 issued by each of the Guarantors in connection with the issuance of the Old Notes;



(vi)

the form of guarantees (the "Guarantees") to be issued by each of the Guarantors in connection with the issuance of the Exchange Notes; and



(vii)

the originals (or copies identified to our satisfaction) of such documents and records of the Issuers and Guarantors, together with certificates of public officials and officers of the Issuers and Guarantors, and such other documents, certificates, records and papers as we have deemed necessary for purposes of the opinions set forth in this letter.

        For purposes of the opinions expressed below, we have assumed (i) the authenticity of all documents submitted to us as originals, (ii) the conformity to originals of all documents submitted to us as certified or photostatic copies and the authenticity of the originals, and (iii) the genuineness of all signatures.

        Based upon the foregoing and such other information and documents as we have considered necessary for the purposes hereof, we are of the opinion that:

        1.    The Company is a limited partnership duly formed and validly existing in good standing under the laws of the State of Tennessee.

        2.    Finance and each of the Guarantors has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Tennessee.

        3.    The Indenture has been duly authorized by the Issuers and the Guarantors and constitutes a valid and legally binding obligation of the Issuers and the Guarantors.

        4.    The execution of the Guarantees to be endorsed on the Exchange Notes has been duly authorized by all necessary corporate action of the Guarantors, and when executed and issued, the Guarantees to be endorsed on the Exchange Notes will constitute valid and legally binding obligations of each of the Guarantors enforceable against each of the Guarantors in accordance with their terms, except as may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.

        5.    The issuance of the Exchange Notes has been duly authorized by all necessary corporate action of the Issuers and, when executed by the Issuers, authenticated and delivered by the Trustee, and issued in accordance with the Indenture and as described in the Registration Statement, the Exchange Notes will constitute valid and legally binding obligations of the Issuers entitled to the benefits of the Indenture and will be enforceable against the Issuers in accordance with their terms, except as may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.

        We consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the references to us included therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933 or the rules and regulations promulgated thereunder by the Commission.

Very truly yours,

/s/  HUNTON & WILLIAMS

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RFS Partnership, L.P. and RFS 2002 Financing, Inc. 9.75% Series B Senior Notes due 2012

EX-12.1

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Exhibit 12.1

RFS Hotel Investors, Inc.
Computation of Ratio of Earnings to Fixed Charges

			1997		1998		1999		2000		2001		2001 Adjusted		2001 Supplemental
													(Note A)		(Note B)
Ratio of Earnings to Fixed Charges:
	Earnings
		Net income (loss)	34,232		34,068		34,990		30,790		(13,729	)	(16,297	)	23,381
		Add minority interest in consolidated subsidiaries	3,615		3,655		3,620		3,218		(1,157	)	(1,411	)	2,495
		Add fixed charges	13,475		18,935		21,936		24,652		26,042		28,864		26,042
		Add amortization of capitalized interest	38		73		100		115		115		115		115
		Deduct capitalized interest	(1,000	)	(1,400	)	(1,100	)	(600	)
	Total Earnings		50,360		55,331		59,546		58,175		11,271		11,271		52,033
Fixed Charges
		Interest expensed, including amortization of debt costs	12,475		17,535		20,836		24,052		26,042		28,864		26,042
		Capitalized interest	1,000		1,400		1,100		600
	Total Fixed Charges		13,475		18,935		21,936		24,652		26,042		28,864		26,042
Ratio of Earnings to Fixed Charges:			3.7x		2.9x		2.7x		2.4x		0.4x		0.4x		2.0x

A.

For the purpose of computing the ratio of earnings to fixed charges, earnings consist of net income plus minority interest in consolidated subsidiaries, plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the year ended December 31, 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $14.8 million.

B.

The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (A) except that net income is adjusted to add back the Hilton lease termination expense, net of deferred income taxes, of $40.8 million.

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RFS Hotel Investors, Inc. Computation of Ratio of Earnings to Fixed Charges

EX-12.2

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Exhibit 12.2

RFS Partnership, L.P.
Computation of Ratio of Earnings to Fixed Charges

			1997		1998		1999		2000		2001		2001 Adjusted		2001 Supplemental
													(Note A)		(Note B)
Ratio of Earnings to Fixed Charges:
	Earnings
		Net income (loss)	37,847		37,723		38,610		34,008		(14,886	)	(17,708	)	25,876
		Add fixed charges	13,475		18,935		21,936		24,652		26,042		28,864		26,042
		Add amortization of capitalized interest	38		73		100		115		115		115		115
		Deduct capitalized interest	(1,000	)	(1,400	)	(1,100	)	(600	)
	Total Earnings		50,360		55,331		59,546		58,175		11,271		11,271		52,033
	Fixed Charges
		Interest expensed, including amortization of debt costs	12,475		17,535		20,836		24,052		26,042		28,864		26,042
		Capitalized interest	1,000		1,400		1,100		600
	Total Fixed Charges		13,475		18,935		21,936		24,652		26,042		28,864		26,042
Ratio of Earnings to Fixed Charges:			3.7x		2.9x		2.7x		2.4x		0.4x		0.4x		2.0x

A.

For the purpose of computing the ratio of earnings to fixed charges, earnings consist of net income plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the year ended December 31, 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $14.8 million.

B.

The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (A) except that net income is adjusted to add back the Hilton lease termination expense, net of deferred income taxes, of $40.8 million.

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RFS Partnership, L.P. Computation of Ratio of Earnings to Fixed Charges

EX-21.1

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EXHIBIT 21.1

SUBSIDIARIES OF RFS HOTEL INVESTORS, INC.

(1)	RFS Partnership, L.P.
(2)	Ridge Lake LLC
(3)	Ridge Lake General Partner, Inc.
(4)	Ridge Lake L.P.
(5)	RFS Managers, Inc.
(6)	RFS Financing Corporation
(7)	RFS Financing Partnership, L.P.
(8)	RFS MM 1 1998 Corporation
(9)	RFS SPE 1 1998 LLC
(10)	RFS MM 2 1998 Corporation
(11)	RFS SPE 2 1998 LLC
(12)	RFS MM 2000 Corporation
(13)	RFS SPE 2000 LLC
(14)	RFS MM 2 2000 Corporation
(15)	RFS SPE 2 2000 LLC
(16)	RFS TRS Holdings, Inc.
(17)	RFS Leasing II, Inc.
(18)	RFS Leasing III, Inc.
(19)	RFS Leasing IV, Inc.
(20)	RFS Leasing V, Inc.
(21)	RFS Leasing VI, Inc.
(22)	RFS Leasing VII, Inc
(23)	RFS Wharf Property Corporation
(24)	RFS Financing Partnership II, LP
(25)	Wharf Associates
(26)	RFS 2002 Financing, Inc.

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SUBSIDIARIES OF RFS HOTEL INVESTORS, INC.

EX-23.2

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EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

        We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of RFS Partnership, L.P. of the following:

(1)

our report dated February 7, 2002, except for note 10 as to which the date is February 26, 2002, relating to the financial statements of RFS Hotel Investors, Inc. which appears in the RFS Hotel Investors, Inc. Annual Report on Form 10-K for the year ended December 31, 2001;



(2)

our report dated February 7, 2002, relating to the financial statement schedule of RFS Hotel Investors, Inc. which appears in the RFS Hotel Investors, Inc. Annual Report on Form 10-K for the year ended December 31, 2001; and



(3)

our report dated February 7, 2002, relating to the financial statements of RFS Hotel Investors, Inc., which appears in the RFS Hotel Investors, Inc. Current Report on Form 8-K dated February 8, 2002.

        We hereby consent to the use in this Registration Statement on Form S-4 of RFS Partnership, L.P. of the following:

(1)

our report dated February 7, 2002 except for note 10, as to which the date is February 26, 2002, relating to the financial statements of RFS Hotel Investors, Inc.;



(2)

our report dated February 7, 2002, except for note 11, as to which the date is February 26, 2002, relating to the financial statements of RFS Partnership, L.P.; and



(3)

our report dated February 7, 2002, relating to the financial statement schedule of RFS Partnership, L.P.

        We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Registration Statement.

/s/  PRICEWATERHOUSECOOPERS LLP

Dallas, TX
March 15, 2002

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CONSENT OF INDEPENDENT ACCOUNTANTS

EX-25.1

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Exhibit 25.1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of
a Trustee Pursuant to Section 305(b)(2)

U.S. BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)

31-0841368
I.R.S. Employer Identification No.

180 East Fifth Street
St. Paul, Minnesota
(Address of principal executive offices)
55101
(Zip Code)

Frank Leslie
U.S. Bank National Association
180 East Fifth Street
St. Paul, MN 55101
(651) 244-8677
(Name, address and telephone number of agent for service)

RFS PARTNERSHIP, L.P.
RFS 2002 FINANCING, INC.
(Co-Issuers with respect to the Securities)

Tennessee	62-1541639 (RFS Partnership)
Tennessee	42-1530460 (RFS 2002 Financing)
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
850 Ridge Lake Boulevard, Suite 300 Memphis, TN (Address of Principal Executive Offices)	38120 (Zip Code)

9.75% Series B Senior Notes due 2012
(Title of the Indenture Securities)

FORM T-1

Item 1.	GENERAL INFORMATION.    Furnish the following information as to the Trustee.
	a)	Name and address of each examining or supervising authority to which it is subject.
		Comptroller of the Currency         Washington, D.C.
	b)	Whether it is authorized to exercise corporate trust powers.
		Yes
Item 2.	AFFILIATIONS WITH OBLIGOR.    If the obligor is an affiliate of the Trustee, describe each such affiliation.
		None
Items 3-15	Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee.
Item 16.	LIST OF EXHIBITS: List below all exhibits filed as a part of this statement of eligibility and qualification.
	1.	A copy of the Articles of Association of the Trustee.*
	2.	A copy of the certificate of authority of the Trustee to commence business.*
	3.	A copy of the certificate of authority of the Trustee to exercise corporate trust powers.*
	4.	A copy of the existing bylaws of the Trustee.*
	5.	A copy of each Indenture referred to in Item 4. Not applicable.
	6.	The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6.
	7.	Report of Condition of the Trustee as of December 31, 2001, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7.

*

Incorporated by reference to Registration Number 333-67188.

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NOTE

        The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor.

SIGNATURE

        Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 4^th day of March, 2002.

U.S. BANK NATIONAL ASSOCIATION
By:	/s/  JULIE EDDINGTON Julie Eddington Assistant Vice President

By: /s/  LORI-ANNE ROSENBERG Lori-Anne Rosenberg
Assistant Vice President

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Exhibit 6

CONSENT

        In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Dated: March 4, 2002

U.S. BANK NATIONAL ASSOCIATION
By:	/s/  JULIE EDDINGTON Julie Eddington Assistant Vice President

By: /s/  LORI-ANNE ROSENBERG Lori-Anne Rosenberg
Assistant Vice President

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Exhibit 7
U.S. Bank National Association
Statement of Financial Condition
As of 12/31/2001

($000's)

			12/31/2001
Assets
	Cash and Due From Depository Institutions		$	9,775,116
	Federal Reserve Stock			0
	Securities			26,316,516
	Federal Funds			1,261,731
	Loans & Lease Financing Receivables			109,012,892
	Fixed Assets			1,414,464
	Intangible Assets			8,158,687
	Other Assets			6,637,699
		Total Assets	$	162,577,105
Liabilities
	Deposits		$	104,077,584
	Fed Funds			4,365,180
	Treasury Demand Notes			0
	Trading Liabilities			313,719
	Other Borrowed Money			25,030,765
	Acceptances			201,492
	Subordinated Notes and Debentures			5,348,437
	Other Liabilities			3,894,231
	Total Liabilities		$	143,231,408
Equity
	Minority Interest in Subsidiaries		$	981,870
	Common and Preferred Stock			18,200
	Surplus			12,068,893
	Undivided Profits			6,276,734
		Total Equity Capital	$	19,345,697
Total Liabilities and Equity Capital			$	162,577,105

        To the best of the undersigned's determination, as of the date hereof, the above financial information is true and correct.

U.S. Bank National Association
By:	/s/  JULIE EDDINGTON Assistant Vice President

Date:    March 4, 2002

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FORM T-1
SIGNATURE

EX-99.1

EXHIBIT 99.1

LETTER OF TRANSMITTAL

RFS Partnership, L.P.
RFS 2002 Financing, Inc.

Offer To Exchange Their 9.75% Series B Senior Notes due 2012
Which Have Been Registered Under The Securities Act of 1933
For Any And All Of Their Outstanding 9.75% Series A Senior Notes due 2012
Pursuant To The Prospectus Dated                        , 2002

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON                        2002,
UNLESS EXTENDED.

The exchange agent for the exchange offer is:
U.S. BANK NATIONAL ASSOCIATION

By Facsimile:	By Mail or Hand (9:00 a.m. to 5:00 p.m., local time):
(651)-244-0711 Attention: Frank P. Leslie Confirm by Telephone to: (651)-244-8677	U.S. Bank National Association 180 East Fifth Street St. Paul, Minnesota 55101 Attention: Frank P. Leslie

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

        This Letter of Transmittal is to be completed by holders of outstanding notes (as defined below) if either (i) outstanding notes are to be forwarded herewith, or (ii) tenders of outstanding notes are to be made by book-entry transfer to an account maintained by U.S. Bank National Association (the "exchange agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer—Procedures for Tendering" in the prospectus. An "agents message" (as defined below) may also be used in lieu of physically completing, executing and delivering to the exchange agent this Letter of Transmittal, if delivery of the outstanding notes is to be made through the DTC's automated tender offer program. The "agent's message" means a message, transmitted by the DTC and received by the exchange agent and forming part of the confirmation of book-entry ("book-entry confirmation"), which states that the DTC has received an express acknowledgment from a participant tendering outstanding notes which are the subject of such book-entry confirmation and that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the agreement may be enforced against such participant. For additional information regarding DTC's automated tender offer program, please refer to "The Exchange Offer—Procedures for Tendering—Tendering Through DTC's Automated Tender Offer Program" section of the prospectus.

        Holders of outstanding notes whose certificates for such outstanding notes are not immediately available or who cannot deliver their certificates, this Letter of Transmittal and all other required documents to the exchange agent on or prior to the expiration date or who cannot complete the procedures for book-entry transfer on a timely basis, may tender their outstanding notes according to the guaranteed delivery procedures set forth in "The Exchange Offer—Procedures for Tendering" in the prospectus.

Delivery of documents to DTC does not constitute delivery to the exchange agent.

NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

        List below the outstanding notes of which you are a holder. If the space provided below is inadequate, list the certificate numbers and principal amount on a separate signed schedule and attach that schedule to this Letter of Transmittal. See Instruction 3.

ALL TENDERING HOLDERS COMPLETE THIS BOX:

Description of Outstanding Notes Tendered
Name(s) and Address(es) of Registered Holder(s) (Fill in, if blank)	Outstanding Notes Tendered
	Certificate Number(s)* (Attach additional list if necessary)	Principal Amount (Attach additional list if necessary)	Principal Amount Tendered (if less than all)**
		$	$
Total Amount Tendered:		$	$

o

Check here if any additional lists are attached.

*

Need not be completed by book-entry holders. Such holders should check the appropriate box below and provide the requested information.

**

Need not be completed if tendering for exchange all outstanding notes held. Outstanding notes may be tendered in whole or in part only in integral multiples of $1,000. All outstanding notes held shall be deemed tendered unless a lesser number is specified in this column. See Instruction 4.

(Boxes Below To Be Checked By Eligible Institutions Only. See Instruction 1.)

o

Check here if tendered outstanding notes are enclosed herewith.

o

Check here if tendered outstanding notes are being delivered by book-entry transfer made to the account maintained by the exchange agent at DTC and complete the following:

Name of Tendering Institution:

DTC Account Number:

Transaction Code Number:

By crediting notes to the exchange agent's account at the book-entry transfer facility in accordance with the book-entry transfer facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the exchange offer, including transmitting an agent's message to the exchange agent in which the holder of notes acknowledges and agrees to be bound by the terms of this letter, the participant in ATOP confirms on behalf of itself and the beneficial owners of such notes all provisions of this letter applicable to it and such beneficial owners as if it had completed the information required herein and executed and transmitted this letter to the exchange agent.

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o

Check here and enclose a photocopy of the Notice of Guaranteed Delivery if tendered outstanding notes are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the exchange agent and complete the following:

Name(s) of Registered Holder(s):

Window Ticket Number (if any):

Date of Notice of Guaranteed Delivery:

Institution Which Guaranteed Delivery:

If Guaranteed Delivery is to be made by book-entry transfer:

Name of Tendering Institution:

DTC Account Number:

Transaction Code Number:

o

Check here if you are a broker-dealer who acquired outstanding notes for your own account as a result of market-making activities or other trading activities (a "Participating Broker-Dealer") and wish to receive 10 additional copies of the prospectus and 10 copies of any amendments or supplements thereto.

Name:

Address:

Telephone Number and Contact Person:

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

Ladies and Gentlemen:

        The undersigned hereby tenders to RFS Partnership, L.P., a Tennessee limited partnership (the "Company") and RFS 2002 Financing, Inc. ("Finance" and, together with the Company, the "Issuers"), the above described principal amount of the Issuers' 9.75% Series A Senior Notes due 2012 (the "outstanding notes") in exchange for a like principal amount of the Issuers' 9.75% Series B Senior Notes due 2012 (the "exchange notes"), which have been registered under the Securities Act of 1933 (the "Securities Act"), upon the terms and subject to the conditions set forth in the prospectus dated                        , 2002 (as the same may be amended or supplemented from time to time, the "prospectus"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the prospectus, constitute the "exchange offer").

        Subject to and effective upon the acceptance for exchange of the outstanding notes tendered herewith, the undersigned hereby sells, assigns and transfers to or upon the order of the Issuers all right, title and interest in and to such outstanding notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the exchange agent as its agent and attorney-in-fact (with full knowledge that the exchange agent is also acting as agent of the Issuers in connection with the exchange offer and as trustee under the indenture for the outstanding notes and the exchange notes) with respect to the tendered outstanding notes, with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), subject only to the right

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of withdrawal described in the prospectus, to: (i) deliver such outstanding notes to the Issuers together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuers upon receipt by the exchange agent, as the undersigned's agent, of the exchange notes to be issued in exchange for such outstanding notes; (ii) present certificates for such outstanding notes for transfer, and to transfer such outstanding notes on the account books maintained by DTC; and (iii) receive for the account of the Issuers all benefits and otherwise exercise all rights of beneficial ownership of such outstanding notes, all in accordance with the terms and conditions of the exchange offer.

The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, sell, assign and transfer the outstanding notes tendered hereby and that, when the same are accepted for exchange, the Issuers will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that the outstanding notes tendered hereby are not subject to any adverse claims or proxies. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuers or the exchange agent to be necessary or desirable to complete the exchange, sale, assignment and transfer of the outstanding notes tendered hereby. The undersigned has read and agrees to all of the terms of the exchange offer.

        The name(s) and address(es) of the registered holder(s) of the outstanding notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the certificates representing such outstanding notes. The certificate number(s) and the outstanding notes that the undersigned wishes to tender should be indicated in the appropriate boxes above.

        The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuers to be necessary or desirable to complete the sale, assignment and transfer of the notes tendered hereby.

        If any tendered outstanding notes are not exchanged pursuant to the exchange offer for any reason, or if certificates are submitted for more outstanding notes than are tendered or accepted for exchange, certificates for such nonexchanged or nontendered outstanding notes will be returned (or, in the case of outstanding notes tendered by book-entry transfer, such outstanding notes will be credited to an account maintained at DTC), without expense to the tendering holder promptly following the expiration or termination of the exchange offer.

        The undersigned understands that tenders of outstanding notes pursuant to any one of the procedures described in "The Exchange Offer—Procedures for Tendering" in the prospectus and in the instructions herein will, upon the Issuers' acceptance for exchange of such tendered outstanding notes, constitute a binding agreement between the undersigned and the Issuers upon the terms and subject to the conditions of the exchange offer. The undersigned recognizes that, under certain circumstances set forth in the prospectus, the Issuers may not be required to accept for exchange any of the outstanding notes tendered hereby.

        Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the exchange notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of outstanding notes, that such exchange notes be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing outstanding notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of outstanding notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver exchange notes to the undersigned at the address shown below the undersigned's signature.

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By tendering outstanding notes and executing this Letter of Transmittal, the undersigned hereby represents and agrees that:

(i)

The undersigned is not an "affiliate" of either of the Issuers (within the meaning of Rule 405 under the Securities Act), or if the undersigned is an affiliate, the undersigned will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;

(ii)

Any exchange notes to be received by the undersigned are being acquired in the ordinary course of its business; and

(iii)

The undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of exchange notes to be received in the exchange offer.

If the undersigned is not a broker-dealer, by tendering outstanding notes and executing this Letter of Transmittal, the undersigned represents and agrees that it is not engaged in, and does not intend to engage in, a distribution of exchange notes. If the undersigned is a broker-dealer that will receive exchange notes for its own account in exchange for outstanding notes pursuant to the exchange offer, by tendering outstanding notes and executing this Letter of Transmittal, the undersigned represents and agrees that such outstanding notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of exchange notes (provided that, by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act). The Issuers have agreed that for a period of 180 days after the expiration date, they will make the prospectus available to any participating broker-dealer in connection with any such resale.

        All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the prospectus and in the instructions contained in this Letter of Transmittal, this tender is irrevocable.

PLEASE SIGN HERE		PLEASE SIGN HERE
Authorized Signature	Authorized Signature
Name:	Name:
Title:	Title:
Address:	Address:
Telephone Number:	Telephone Number:
Dated:	Dated:
Taxpayer Identification or Social Security Number	Taxpayer Identification or Social Security Number

        (NOTE: Signature(s) must be guaranteed if required by Instructions 2 and 5. This Letter of Transmittal must be signed by the registered holder(s) exactly as the name(s) appear(s) on certificate(s) for the outstanding notes hereby tendered or on a security position listing, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith, including such opinions of counsel, certifications and other information as may be required by the Issuers or the trustee for the outstanding notes to comply with the restrictions on transfer applicable to the outstanding notes. If signature is by an attorney-in-fact, executor, administrator, trustee, guardian,

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officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instructions 2 and 5. Please complete substitute Form W-9 below.)

Guarantee of Signature(s)
(If required—see Instructions 2 and 5)

Signature(s) Guaranteed by an Eligible Institution:		Date:
	Authorized Signature
Name of Eligible Institution Guaranteeing Signature:
Address:
Capacity (full title):
Telephone Number:

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SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 2, 5 and 6)	SPECIAL DELIVERY INSTRUCTIONS (See Instructions 2, 5 and 6)
To be completed ONLY if the exchange notes or any outstanding notes that are not tendered are to be issued in the name of someone other than the registered holder(s) of the outstanding notes whose name(s) appear(s) above.	To be completed ONLY if exchange notes or any outstanding notes that are not tendered are to be sent to someone other than the registered holder(s) of the outstanding notes whose name(s) appear(s) above, or to such registered holder(s) at an address other than that shown above.
Issue:	Mail:
o Outstanding notes not tendered, to:	o Outstanding notes not tendered, to:
o Exchange notes, to:	o Exchange notes, to:

Name(s)	Name(s)
Address	Address
Telephone Number	Telephone Number
(Tax Identification or Social Security Number)	(Tax Identification or Social Security Number)

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INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER

        1.    Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures.    This Letter of Transmittal is to be completed either if (a) certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer—Procedures for Tendering" in the prospectus. Certificates, or timely confirmation of a book-entry transfer of such outstanding notes into the exchange agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal (or if applicable, an "agents message" (as defined above)), must be received by the exchange agent at its address set forth herein on or prior to the expiration date. The term "book-entry confirmation" means a timely confirmation of book-entry transfer of outstanding notes into the exchange agent's account at DTC. Outstanding notes may be tendered in whole or in part only in integral multiples of $1,000.

        Holders who wish to tender their outstanding notes and: (i) whose certificates for such outstanding notes are not immediately available; (ii) who cannot deliver their certificates, this Letter of Transmittal and all other required documents to the exchange agent prior to the expiration date; or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their outstanding notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer—Procedures for Tendering" in the prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying this Letter of Transmittal, must be received by the exchange agent prior to the expiration date; and (iii) the certificates (or a book-entry confirmation) representing all tendered outstanding notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the exchange agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer—Procedures for Tendering" in the prospectus.

        The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the exchange agent and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. For outstanding notes to be properly tendered pursuant to the guaranteed delivery procedure, the exchange agent must receive a Notice of Guaranteed Delivery prior to the expiration date. As used herein and in the prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association.

The method of delivery of outstanding notes, this Letter of Transmittal and all other required documents is at the option and sole risk of the tendering holder, and delivery will be deemed made only when actually received by the exchange agent. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery and proper insurance should be obtained. No Letter of Transmittal or outstanding notes should be sent to the Issuers. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect these transactions for such holders.

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        The Issuers will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender.

        2.    Guarantee of Signatures.    No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which shall include any participant in DTC whose name appears on a security position listing as the owner of the outstanding notes) of outstanding notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above; or (ii) such outstanding notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5.

        3.    Inadequate Space.    If the space provided in the box captioned "Description of Outstanding Notes Tendered" is inadequate, the certificate number(s) and/or the principal amount of outstanding notes and any other required information should be listed on a separate signed schedule and attached to this Letter of Transmittal.

        4.    Partial Tenders and Withdrawal Rights.    Tenders of outstanding notes will be accepted only in integral multiples of $1,000. If less than all the outstanding notes evidenced by any certificate submitted are to be tendered, fill in the principal amount of outstanding notes which are to be tendered in the box entitled "Principal Amount Tendered (if less than all)." In such case, new certificate(s) for the remainder of the outstanding notes that were evidenced by the outstanding certificate(s) will be sent to the tendering holder, unless the appropriate boxes on this Letter of Transmittal are completed, promptly after the expiration date. All outstanding notes represented by certificates delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated.

        Except as otherwise provided herein, tenders of outstanding notes may be withdrawn at any time prior to the expiration date. In order for a withdrawal to be effective, a written, telegraphic or facsimile transmission of such notice of withdrawal must be timely received by the exchange agent at its address set forth above prior to the expiration date. Any such notice of withdrawal must specify the name of the person who tendered the outstanding notes to be withdrawn, the aggregate principal amount of outstanding notes to be withdrawn, and (if certificates for such outstanding notes have been tendered) the name of the registered holder of the outstanding notes as set forth on the certificate(s), if different from that of the person who tendered such outstanding notes. If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, the notice of withdrawal must specify the serial numbers on the particular certificates for the outstanding notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of outstanding notes tendered for the account of an Eligible Institution. If outstanding notes have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer—Procedures for Tendering," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of outstanding notes and must otherwise comply with the procedures of DTC. Withdrawals of tenders of outstanding notes may not be rescinded. Outstanding notes properly withdrawn will not be deemed validly tendered for purposes of the exchange offer, but may be retendered at any subsequent time prior to the expiration date by following any of the procedures described in the prospectus under "The Exchange Offer—Procedures for Tendering."

        All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Issuers, in their sole discretion, which determination shall be final and binding on all parties. None of the Issuers, any affiliates of the Issuers, the exchange agent or any other person shall be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any outstanding

9

notes which have been tendered but which are withdrawn will be returned to the holder thereof promptly after withdrawal.

        5.    Signatures on Letter of Transmittal, Assignments and Endorsements.    If this Letter of Transmittal is signed by the registered holder(s) of the outstanding notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) or on a security position listing, without alteration, enlargement or any change whatsoever.

        If any of the outstanding notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered outstanding notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are names in which certificates are registered.

        If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Issuers, in their sole discretion, of such persons' authority to so act.

        If this Letter of Transmittal is signed by a person other than the registered holder(s) of the outstanding notes listed and transmitted hereby, the certificate(s) must be endorsed or accompanied by appropriate bond power(s), signed exactly as the name(s) of the registered owner appear(s) on the certificate(s), and also must be accompanied by such opinions of counsel, certifications and other information as the Issuers or the trustee for the outstanding notes may require in accordance with the restrictions on transfer applicable to the outstanding notes. Signature(s) on such certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.

        6.    Special Issuance and Delivery Instructions.    If exchange notes or certificates for outstanding notes not exchanged are to be issued in the name of a person other than the signer of this Letter of Transmittal, or are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. In the case of issuance in a different name, the taxpayer identification number of the person named must also be indicated. Holders tendering outstanding notes by book-entry transfer may request that outstanding notes not exchanged be credited to such account maintained at DTC as such holder may designate. If no such instructions are given, outstanding notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC.

        7.    Irregularities.    The Issuers will determine, in their sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of outstanding notes, which determination shall be final and binding on all parties. The Issuers reserve the absolute right, in their sole and absolute discretion, to reject any and all tenders determined by them not to be in proper form or the acceptance for exchange of which may, in the view of counsel to the Issuers, be unlawful. The Issuers also reserve the right, exercising reasonable discretion and subject to applicable law, to waive any of the conditions of the exchange offer set forth in the prospectus under "The Exchange Offer—Conditions to the Exchange Offer" or any defect or irregularity in any tender of outstanding notes of any particular holder whether or not similar defects or irregularities are waived in the case of other holders. The Issuers' interpretation of the terms and conditions of the exchange offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of outstanding notes will be deemed to have been validly made until all defects or irregularities with respect to such tender have been cured or waived. None of the Issuers, any affiliates of the Issuers, the exchange agent, or any other person shall be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

10

        8.    Questions, Requests for Assistance and Additional Copies.    Questions and requests for assistance may be directed to the exchange agent at its address and telephone number set forth above. Additional copies of the prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the exchange agent or from your broker, dealer, commercial bank, trust company or other nominee.

        9.    Backup Withholding; Substitute Form W-9.    A holder whose tendered outstanding notes are accepted for exchange is required to provide the exchange agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the exchange agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, any payments to such holders or other payees pursuant to the exchange offer may be subject to backup withholding at a rate of up to 30%.

        The box in Part III of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part III is checked, the holder or other payee must also complete the certificate of Awaiting Taxpayer Identification Number below. Notwithstanding that the box in Part III is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the exchange agent will withhold 30% of all payments made prior to the time a properly certified TIN is provided to the exchange agent. The exchange agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the exchange agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the exchange agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 30% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided.

        The holder is required to give the exchange agent the TIN (e.g., social security number or employer identification number) of the registered owner of the outstanding notes or of the last transferee appearing on the transfers attached to, or endorsed on, the outstanding notes. If the outstanding notes are registered in more than one name or are not in the name of the actual owner, consult the Instructions to Form W-9 (Request for Identification Number and Certification) for additional guidance on which number to report.

        Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a certified statement, signed under penalties of perjury, stating that its TIN is the correct taxpayer identification number and attesting to that holder's exempt status from backup withholding. Please consult the Instructions to Form W-9 (Request for Identification Number and Certification) for additional guidance on which holders are exempt from backup withholding.

        Backup withholding is not an additional U.S. federal income tax. Rather, the U.S. federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.

        10.    Mutilated, Lost, Destroyed or Stolen Certificates.    If any certificate representing outstanding notes has been mutilated, lost, destroyed or stolen, the holder should promptly notify the exchange agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing mutilated, lost, destroyed or stolen certificates have been followed.

11

        11.    Security Transfer Taxes.    Holders who tender their outstanding notes for exchange will be obligated to pay any transfer taxes in connection therewith, including in the event that the exchange notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the outstanding notes tendered, or if a transfer tax is imposed for any reason other than the exchange of outstanding notes in connection with the exchange offer. The amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such transfer tax or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer tax will be billed directly to such tendering holder.

        12.    Waiver of Conditions.    The Issuers reserve the absolute right to waive satisfaction of any or all conditions enumerated in the prospectus.

        13.    No Conditional Tenders.    No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of notes, by execution of this letter, shall waive any right to receive notice of the acceptance of their notes for exchange.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OUTSTANDING NOTES OR A BOOK ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

12

TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 9)

PAYER'S NAME: U.S. BANK NATIONAL ASSOCIATION

SUBSTITUTE FORM W-9	Part I—PLEASE PROVIDE YOUR TIN ON THE LINE AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW		Social Security Number OR Employer Identification Number
Payer's Request for Taxpayer Identification Number (TIN)	Part II—CERTIFICATION—Under penalties of perjury, I certify that:
	(1)	The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me);
	(2)	I am not subject to backup withholding either because: (a) I am exempt from backup withholding; (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends; or (c) the IRS has notified me that I am no longer subject to backup withholding;
	(3)	I am a U.S. person; and
	(4)	Any other information provided on this form is true and correct.
	Certification Instructions—You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
	SIGNATURE
	PRINTED NAME
	DATE
	Part III—Awaiting TIN [            ]

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 30% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 30% of all payments made to me on account of the Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 30% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number.

SIGNATURE: DATE:

13

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer.—Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.

For this type of account:			Give the SOCIAL SECURITY number of:	For this type of account:		Give the EMPLOYER IDENTIFICATION number of:
1.	An individual's account		The individual	8.	Sole Proprietorship account	The owner(4)
2.	Two or more individuals (joint account)		The actual owner of the account or if combined funds, any one of the individuals(1)	9.	A valid trust, estate or pension trust	The legal entity (Do not furnish the identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5)
3.	Husband and wife (joint account)		The actual owner of the account or, if joint funds, either person(1)	10.	Corporate account	The corporation
4.	Custodian account of a minor (Uniform Gift to Minors Act)		The minor (2)	11.	Religious, charitable, or educational organization account	The organization
5.	Adult and minor (joint account)		The adult or, if the minor is the only contributor, the minor(1)	12.	Partnership account	The partnership
6.	Account in the name of guardian or committee for a designated ward, minor, or incompetent person		The ward, minor, or incompetent person(3)	13.	Association, club, or other tax-exempt organization	The organization
7.	a.	The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)	14.	A broker or registered nominee	The broker or nominee
	b.	So-called trust account that is not a legal or valid trust under state law	The actual owner(1)	15.	Account with the Department of Agriculture in the name of a public entity (such as State or local government, school district, or prison), that received agricultural program payments.	The public entity.

(1)

List first and circle the name of the person whose number you furnish.

(2)

Circle the minor's name and furnish the minor's social security number.

(3)

Circle the ward's, minor's or incompetent person's name and furnish such person's social security number.

(4)

Show the name of the owner.

(5)

List first and circle the name of the legal trust, estate or pension trust.

Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.

14

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9

Obtaining a Number

If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, for Form SS-4, Application for Employer Identification Number at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number.

Payees Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments include the following:

•

A corporation.



•

A financial institution.



•

An organization exempt from tax under section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan.



•

The United States or any agency or instrumentality thereof.



•

A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof.



•

An international organization or any agency or instrumentality thereof.



•

A registered dealer in securities or commodities registered in the United States or a possession of the United States.



•

A real estate investment trust.



•

A common trust fund operated by a bank under section 584(a) of the Code.



•

An exempt charitable remainder trust, or a nonexempt trust described in section 4947(a) (1) of the Code.



•

An entity registered at all times under the Investment Company Act of 1940.



•

A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to backup withholding include the following:

•

Payments to nonresident aliens subject to withholding under section 1441 of the Code.



•

Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner.



•

Payments of patronage dividends where the amount received is not paid in money.



•

Payments made by certain foreign organizations.



•

Payments made to a nominee.

Payments of interest not generally subject to backup withholding include the following:

•

Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer.

15

•

Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code).



•

Payments described in section 6049(b)(5) of the Code to non-resident aliens.



•

Payments on tax-free covenant notes under section 1451 of the Code.



•

Payments made by certain foreign organizations.



•

Payments made to a nominee.

Exempt payees described above must still complete the Substitute Form W-9 to avoid possible erroneous backup withholding. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER IDENTIFICATION NUMBER ON THE FORM, WRITE "EXEMPT" ON THE FACE OF THE FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.

Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041(A) (a), 6042, 6044, 6045, 6049, 6050A, and 6050N of the Code and their regulations.

Privacy Act Notice.—Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 30% of taxable interest, dividends and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty for Failure to Furnish Taxpayer Identification Number.—If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information with Respect to Withholding.—If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.—Falsifying certificates or affirmations may subject you to criminal penalties including fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.

16

EX-99.2

EXHIBIT 99.2

RFS Partnership, L.P.
RFS 2002 Finance, Inc.

Offer to Exchange their
9.75% Series B Senior Notes due 2012
Which Have Been Registered Under
the Securities Act of 1933
For Any and All of their Outstanding
9.75% Series A Senior Notes due 2012
Pursuant to the Prospectus Dated            , 2002

TO: REGISTERED HOLDERS AND DEPOSITORY TRUST COMPANY PARTICIPANTS:

        RFS Partnership, L.P. and RFS 2002 Finance, Inc. (collectively, the "Issuers") are offering to exchange, upon and subject to the terms and conditions set forth in the enclosed prospectus, dated                        , 2002 (the "Prospectus"), and the enclosed letter of transmittal (the "Letter of Transmittal"), up to $125,000,000 in aggregate principal amount of their 9.75% Series B Senior Notes due 2012, which have been registered under the Securities Act of 1933 (the "exchange notes"), for up to $125,000,000 in aggregate principal amount of their outstanding 9.75% Series A Senior Notes due 2012 (the "outstanding notes"). The exchange offer is being made in order to satisfy certain of Issuers' obligations contained in the Registration Rights Agreement dated as of February 26, 2002, among the Issuers, Credit Suisse First Boston Corporation and Banc of America Securities LLC.

        In connection with the exchange offer, we are requesting that you contact your clients for whom you hold outstanding notes registered in your name or in the name of your nominee, or who hold outstanding notes registered in their own names. The Issuers, Credit Suisse First Boston Corporation and Banc of America Securities LLC will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the exchange offer. However, you will, upon request, be reimbursed for reasonable out-of-pocket expenses incurred in connection with soliciting acceptances of the exchange offer. You will be responsible for the payment of any transfer taxes applicable to the exchange of outstanding notes pursuant to the exchange offer.

        For your information and for forwarding to your clients, we are enclosing the following documents:

1.

Prospectus dated                        , 2002;



2.

A Letter of Transmittal for your use and for the information of your clients;



3.

A form of Notice of Guaranteed Delivery; and



4.

A form of letter which may be sent to your clients for whose account you hold outstanding notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the exchange offer.

YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON          , 2002 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE ISSUERS (IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED). THE OUTSTANDING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN, SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL, AT ANY TIME PRIOR TO THE EXPIRATION DATE.

        To participate in the exchange offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the exchange agent and certificates representing the outstanding notes should be delivered to the exchange agent, all in accordance with the instructions set forth in the Prospectus and the Letter of Transmittal.

        If holders of outstanding notes wish to tender, but it is impracticable for them to forward their certificates for outstanding notes prior to the expiration of the exchange offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus and the Letter of Transmittal.

        Any inquiries you may have with respect to the exchange offer, or requests for additional copies of the enclosed materials, should be directed to the exchange agent for the outstanding notes, at its address and telephone number set forth in the Prospectus.

Very truly yours,

RFS Partnership, L.P.
RFS 2002 Financing, Inc.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.

2

EX-99.3

EXHIBIT 99.3

RFS Partnership, L.P.
RFS 2002 Financing, Inc.

Offer to Exchange their
9.75% Series B Senior Notes Due 2012
Which Have Been Registered Under the Securities Act of 1933
For Any and All of their Outstanding
9.75% Series A Senior Notes Due 2012

TO OUR CLIENTS:

        Enclosed for your consideration is a prospectus, dated                        , 2002 (the "prospectus"), and a form of Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "exchange offer") of RFS Partnership, L.P. and RFS 2002 Financing, Inc. (the "Issuers") to exchange their 9.75% Series B Senior Notes due 2012, which have been registered under the Securities Act of 1933 (the "exchange notes"), for any and all of their outstanding 9.75% Series A Senior Notes due 2012 (the "outstanding notes"), upon the terms and subject to the conditions described in the prospectus and the Letter of Transmittal. The exchange offer is being made in order to satisfy certain of the Issuers' obligations contained in the Registration Rights Agreement dated as of February 26, 2002, among the Issuers, Credit Suisse Boston Corporation and Banc of America Securities LLC.

        This material is being forwarded to you as the beneficial owner of the outstanding notes carried by us in your account but not registered in your name. A tender of such outstanding notes may only be made by us as the holder of record and pursuant to your instructions.

        Accordingly, we request instructions as to whether you wish us to tender on your behalf the outstanding notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender any outstanding notes you hold.

        Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the outstanding notes on your behalf in accordance with the provisions of the exchange offer. The exchange offer will expire at 5:00 p.m., New York City time, on                        , 2002, unless extended by the Issuers (the "expiration date"). Any outstanding notes tendered pursuant to the exchange offer may be withdrawn, subject to the procedures described in the prospectus and the Letter of Transmittal, at any time prior to the expiration date.

        If you wish to have us tender your outstanding notes, please so instruct us by completing, executing and returning to us the instruction form included with this letter.

The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender outstanding notes.

INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER

        The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein, including the prospectus and the accompanying form of Letter of Transmittal, relating to the exchange offer made by the Issuers with respect to its outstanding notes.

        This will instruct you as to the action to be taken by you relating to the exchange offer with respect to the outstanding notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the prospectus and the Letter of Transmittal.

        The aggregate principal amount of the outstanding notes held by you for the account of the undersigned is (fill in amount):

        $                          of the 9.75% Series A Senior Notes due 2012

With respect to the exchange offer, the undersigned hereby instructs you (check appropriate box):

[    ] TO TENDER the following outstanding notes held by you for the account of the undersigned (insert aggregate principal amount at maturity of outstanding notes to be tendered, in integral multiples of $1,000):

        $                          of the 9.75% Series A Senior Notes due 2012

[    ] NOT to tender any outstanding notes held by you for the account of the undersigned.

        If the undersigned instructs you to tender the outstanding notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations, warranties and agreements contained in the Letter of Transmittal that are to be made with respect to the undersigned as beneficial owner.

SIGN HERE

Name of beneficial owner(s):                                                              

Signature(s):                                                              

Name(s) (please print):                                                              

Address:                                                              

Telephone Number:                                                              

Taxpayer Identification or Social Security Number(s) :                                                             

Date:                                                              

        None of the outstanding notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the outstanding notes held by us for your account.

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EX-99.4

EXHIBIT 99.4

NOTICE OF GUARANTEED DELIVERY

for Tender of
9.75% Series A Senior Notes Due 2012
(the "outstanding notes")
of
RFS Partnership, L.P.
RFS 2002 Financing, Inc.

        This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to tender outstanding notes pursuant to the exchange offer described in the prospectus dated                        , 2002 (as the same may be amended or supplemented from time to time, the "prospectus") of RFS Partnership, L.P., a Tennessee limited partnership and RFS 2002 Financing, Inc., a Tennessee corporation (collectively, the "Issuers"), if certificates for the outstanding notes are not immediately available, or time will not permit the outstanding notes, the Letter of Transmittal and all other required documents to be delivered to U.S. Bank National Association (the "exchange agent") prior to 5:00 p.m., New York City time, on            , 2002 or such later date and time to which the exchange offer may be extended (the "expiration date"), or the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be delivered by hand or sent by facsimile transmission or mail to the exchange agent, and must be received by the exchange agent prior to the expiration date. See "The Exchange Offer—Procedures for Tendering Outstanding Notes" in the prospectus. Capitalized terms used but not defined herein shall have the same meaning given them in the prospectus.

The exchange agent
for the exchange offer is:

U.S. BANK NATIONAL ASSOCIATION

By Facsimile:	By Mail or Hand Delivery:
(651)-244-0711 Attention: Frank P. Leslie Confirm by Telephone to: (651)-244-8677	U.S. Bank National Association 180 East Fifth Street St. Paul, Minnesota 55101 Attention: Frank P. Leslie

Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of this Notice of Guaranteed Delivery via facsimile other than as set forth above does not constitute a valid delivery.

        This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.

Ladies and Gentlemen:

        The undersigned hereby tenders to the Issuers, upon the terms and subject to the conditions set forth in the prospectus and the related Letter of Transmittal, the outstanding notes indicated below pursuant to the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer—Procedures for Tendering Outstanding Notes."

Name(s) of Registered Holder(s):	(Please Print or Type)
Signature(s):
Address(es):
Area Code(s) and Telephone Number(s):
Account Number:
Date:
Certificate No(s). (if available)	Principal Amount of Outstanding Notes Tendered *

* Must be in integral multiples of $1,000 principal amount.

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GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)

        The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or a correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees that the undersigned will deliver to the exchange agent the certificates representing the outstanding notes being tendered hereby in proper form for transfer (or a confirmation of book-entry transfer of such outstanding notes, into the exchange agent's account at the book-entry transfer facility of The Depository Trust Company ("DTC")) with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, all within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.

Name of Firm:	Authorized Signature:
Address:	Name: Please Print or Type
	Title:
Telephone Number:	Dated:

        The institution that completes this form must communicate the guarantee to the exchange agent and must deliver the certificates representing any outstanding notes (or a confirmation of book-entry transfer of such outstanding notes into the exchange agent's account at DTC) and the Letter of Transmittal to the exchange agent within the time period shown herein. Failure to do so could result in a financial loss to such institution.

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