10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission file number 1-14236

FelCor Lodging Trust Incorporated

(Exact name of registrant as specified in its charter)

Maryland	75-2541756
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

545 E. John Carpenter Frwy., Suite 1300, Irving, Texas
(Address of principal executive offices) 75062
(Zip Code)

(972) 444-4900
(Registrant’s telephone number, including area code)

     Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each class	on which registered
Common Stock $1.95 Series A Cumulative Convertible Preferred Stock	New York Stock Exchange, Inc. New York Stock Exchange, Inc.
Depositary Shares representing 9% Series B Cumulative
Redeemable Preferred Stock	New York Stock Exchange, Inc.

     Securities registered pursuant to Section 12(g) of the Act:

None
(Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). þ Yes o No

     The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant, computed by reference to the price at which registrants common stock was last sold at the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $577 million.

     As of March 1, 2005, the registrant had issued and outstanding 59,816,504 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive Proxy Statement pertaining to the 2005 Annual Meeting of Stockholders (the “Proxy Statement”), filed or to be filed not later than 120 days after the end of the fiscal year pursuant to Regulation 14A, is incorporated herein by reference into Part III.

FELCOR LODGING TRUST INCORPORATED

INDEX

		Form 10-K
		Report
Item No.		Page
	PART I
1.	Business		1
2.	Properties		16
3.	Legal Proceedings		27
4.	Submission of Matters to a Vote of Security Holders		27
	PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities		28
6.	Selected Financial Data		30
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
7A.	Quantitative and Qualitative Disclosures About Market Risk		52
8.	Financial Statements and Supplementary Data		52
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		52
9A.	Controls and Procedures		53
9B.	Other Information		54
	PART III
10.	Directors and Executive Officers of the Registrant		55
11.	Executive Compensation		55
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		55
13.	Certain Relationships and Related Transactions		55
14.	Principal Accountant Fees and Services		55
	PART IV
15.	Exhibits and Financial Statement Schedules		56
Form of Management Agreement
Form of Nonstatutory Stock Option Contract
Form of Employee Stock Grant Contract
Summary of Annual Compensation Program for Directors
Code of Business Conduct and Ethics
List of Subsidiaries
Consent of PricewaterhouseCoopers LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

   This Annual Report on Form 10-K contains registered trademarks owned or licensed by companies other than us, including but not limited to Candlewood Suites®, Courtyard by Marriott®, Crowne Plaza®, Disneyland®, Doubletree®, Doubletree Guest Suites®, Embassy Suites Hotels®, Fairfield Inn®, Four Points® by Sheraton, Hampton Inn®, Harvey Hotel®, Harvey Suites®, Hilton®, Hilton Garden Inn®, Hilton Suites®, Holiday Inn®, Holiday Inn & Suites®, Holiday Inn Express®, Holiday Inn Express & Suites®, Holiday Inn Select®, Homewood Suites® by Hilton, InterContinental®, Priority Club®, Sheraton®, Sheraton Suites®, St. Regis®, Staybridge Suites®, The Luxury Collection®, W®, Walt Disney World®, Worlds of Fun® and Westin®.

PART I

Item 1. Business

     FelCor Lodging Trust Incorporated, or FelCor, is a Maryland corporation and the nation’s second largest public lodging real estate investment trust, or REIT, based on total assets and number of hotels owned. We are the sole general partner of, and the owner of a greater than 95% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 149 hotels at December 31, 2004, with approximately 41,000 rooms and suites. When used in this Annual Report on Form 10-K, “we” and “our” refer to FelCor and its consolidated subsidiaries, unless otherwise indicated.

     At December 31, 2004, we owned a 100% interest in 112 hotels, a 90% or greater interest in entities owing seven hotels, a 60% interest in an entity owning two hotels, a 51% interest in an entity owning eight hotels and a 50% interest in entities owning 20 hotels. As the result of our ownership interests in the operating lessees of 144 of these hotels, we reflect their operating revenues and expenses in our consolidated statements of operations. The operations of 143 of the 144 consolidated hotels were included in continuing operations at December 31, 2004. The remaining one hotel was subject to a firm sale contract at December 31, 2004, and its operations were included in discontinued operations. The operating revenues and expenses of the remaining five hotels were reported on the equity method.

     Our hotels included in continuing operations are located in the United States (31 states) and Canada, with concentrations in Texas (31 hotels), California (19 hotels), Florida (16 hotels) and Georgia (14 hotels). We own the largest number of Embassy Suites Hotels, Crowne Plaza and independently owned Doubletree-branded hotels. At December 31, 2004, we had 19 hotels that had been identified as non-strategic assets to be sold, one of which was subject to a firm sale contract and was classified as “held for sale.”

     Our business is conducted in one reportable segment, which is hospitality. During 2004, we derived 98% of our revenues from hotels located within the United States and the balance from our Canadian hotels.

     We seek to increase operating cash flow through aggressive asset management and the competitive positioning of our hotels, to maintain a sound and flexible capital structure, and to reposition our portfolio through the sale of non-strategic hotels and investment in newer, higher quality hotels in major urban and resort markets with greater growth potential. The hotels in which we may invest are expected to be affiliated with, or to benefit from affiliation with, one of the premium brands available to us through our strategic brand owner and manager relationships with Hilton Hotels Corporation, or Hilton, InterContinental Hotels Group, or IHG, and Starwood Hotels & Resorts Worldwide Inc., or Starwood.

     At December 31, 2004, we had an aggregate of 62,605,439 shares and units outstanding, consisting of 59,817,304 shares of FelCor common stock and 2,788,135 units of limited partnership interest of FelCor LP not owned by FelCor.

     Additional information relating to our hotels and our business, including the charters of our corporate governance and nominating committee, compensation committee and audit committee; our corporate governance guidelines; and our code of business conduct and ethics can be found on our website at www.felcor.com. Information relating to our hotels and our business can also be found in the Notes to Consolidated Financial Statements located elsewhere in this Annual Report on Form 10-K. Our annual, quarterly and current reports, and amendments to these reports, filed with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, or Exchange Act, are made available on our website, free of charge, under the “SEC Filings” tab on our “Investor Relations” page, as soon as practicable following their filing.

Developments During 2004

     We completed 2004 with a 4.9% increase in our hotel revenue per available room, or RevPAR, compared to 2003, in contrast to the unprecedented consecutive three year decline in RevPAR that we had experienced prior to 2004. The fundamentals of the lodging industry appear to be in the early stages of a recovery, as evidenced by the national trend of increased RevPAR and increases in average daily room rates, or ADR, which are beginning to represent a major portion of the increase in RevPAR. The increase in ADR generally results in increases in hotel operating margins, which we also saw during the last two quarters of 2004.

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     During 2004, we reduced our debt outstanding and significantly reduced our weighted average cost of debt through the following capital transactions and use of cash on hand:

•   We completed the early retirement of $775 million in senior notes:

o   $600 million of senior notes maturing in 2008; and

o   $175 million of senior notes maturing in 2004;

•   We issued $290 million of floating rate senior notes;

•   We issued $234 million in mortgage debt; and

•   We issued $160 million of convertible preferred stock.

     Of the hotels previously identified for sale, we sold 17 during 2004 for gross proceeds of $157 million and terminated the lease on one hotel at a cost of $5 million. At December 31, 2004, we had one hotel designated as “held for sale,” which subsequently was sold in January 2005, for $1 million, leaving 18 hotels that had been identified for sale, substantially all of which are expected to be sold over the next 18 months for anticipated gross proceeds of approximately $155 million.

     For 2004, we paid preferred dividends of $1.95 per share on our Series A preferred stock and preferred dividends of $2.25 per depository share on our Series B preferred stock. No dividends were paid on our common stock during 2004.

Recent Developments

     During the first quarter of 2005, one of the 18 hotels previously identified for sale was placed under a firm sale contract with a non-refundable deposit. We currently expect this sale to close in the late first or early second quarter, generating gross proceeds of approximately $38 million.

The Industry

     After three consecutive years of declining or flat RevPAR, the industry finally experienced the long awaited turn-around in 2004. Industry RevPAR grew 7.8% in 2004 according to Smith Travel Research, or STR. Demand for U.S. hotel rooms increased by 4.6% in 2004. The improvement in demand was driven by the return of the business traveler and the continuing strength of the leisure market. In 2004, the average number of rooms sold on Wednesdays, the peak day for business demand, increased by more than 210,000 rooms, compared to 2003, and represented an increase over the same measure in 2000.

     Supply growth, one of the most critical factors in the health of the lodging industry, continues to be held in check. Over the past seven years, supply growth has steadily declined from 3.9% in 1998 to 1.0% in 2004 according to STR. This level of growth is the lowest since 1993 and is well below the historical 15-year average supply growth of 2.6% per year.

     With demand growing and supply stable, hotel operators were able to increase prices in 2004. According to STR, the industry’s ADR increased 4.0%, as compared to declining rates in 2001 and 2002 and flat rates in 2003. ADR growth contributed 51% of the industry’s growth in RevPAR in 2004. This newfound pricing power contributed to the industry’s 29.9% growth in profits to $16.6 billion during 2004, according to a January 18, 2005, press release by PricewaterhouseCoopers, or PwC.

     A number of sources predict that the recovery in the lodging industry will continue during 2005. The U.S. economy’s recovery, the re-emergence of the corporate business traveler and the limited new supply growth allow us to look optimistically towards the future. Macroeconomic Advisers forecasts Real GDP (GDP adjusted for inflation) growth to be 3.7% in 2005 and 3.9% in 2006. However, the road to recovery varies significantly across the country, with each market having its own dynamics between demand and supply.

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     STR classifies hotel chains into seven distinct categories: Luxury, Upper Upscale, Upscale, Midscale with Food & Beverage, Midscale without Food & Beverage, Economy and Independent. Our hotels are principally in the following categories: Upper Upscale (including Doubletree Guest Suites, Doubletree, Embassy Suites Hotels, Sheraton and Westin hotels); Upscale (including Crowne Plaza and Courtyard); and Midscale With Food & Beverage (including Holiday Inn and Holiday Inn Select hotels). Our hotels in these categories generated 99% of our 2004 earnings before interest, taxes, depreciation and amortization, or EBITDA. Our Upper Upscale all-suite hotels accounted for more than 59% of our EBITDA in 2004.

     STR also categorizes hotels based upon their relative market positions, as measured by ADR, as Luxury, Upscale, Midprice, Economy and Budget. The following table contains information with respect to average occupancy (determined by dividing occupied rooms by available rooms), ADR and RevPAR for our hotels, as well as all Upscale U.S. hotels, all Midprice U.S. hotels and all U.S. hotels, as reported by STR, for the periods indicated.

	Year Ended December 31,
	2004			2003			2002			2001			2000			1999
Number of FelCor Hotels		142			159			183			183			186			188
Occupancy:
FelCor hotels (1)		65.5	%		62.4	%		62.1	%		63.9	%		70.4	%		68.2	%
All Upscale U.S. hotels (2)		63.0			60.8			60.8			60.8			64.0			63.9
All Midprice U.S. hotels (3)		59.4			57.2			56.8			57.8			61.1			61.0
All U.S. hotels		61.3			59.2			59.0			59.7			63.3			62.8
ADR:
FelCor hotels (1)	$	99.07		$	94.92		$	96.84		$	102.18		$	104.42		$	100.72
All Upscale U.S. hotels (2)		94.05			90.55			90.47			91.87			93.01			88.87
All Midprice U.S. hotels (3)		69.81			67.54			67.96			69.76			70.23			67.32
All U.S. hotels		86.20			82.92			82.83			84.10			85.33			80.97
RevPAR:
FelCor hotels (1)	$	64.91		$	59.19		$	60.16		$	65.34		$	73.73		$	68.93
All Upscale U.S. hotels (2)		59.26			55.06			55.02			55.87			59.54			56.82
All Midprice U.S. hotels (3)		41.47			38.60			38.58			40.30			42.93			41.04
All U.S. hotels		52.88			49.07			48.87			50.24			54.00			50.88

(1)	Information is historical, including periods prior to ownership by FelCor.
(2)	This category includes hotels in the “upscale price level,” defined as hotels with ADRs in the 70th to 85th percentiles in their respective markets.
(3)	This category includes hotels in the “midprice level,” defined as hotels with ADRs in the 40th to 70th percentiles in their respective markets.

Business Strategy

     We have identified three long-term strategic objectives: growth in our earnings; improvement in our return on invested capital; and a reduction in our overall financial leverage. In order to achieve these strategic objectives, our business strategy is to: dispose of non-strategic hotels; acquire hotels that meet our refined investment strategy; improve the competitive positioning of our core hotels through aggressive asset management and the judicious application of capital; and pay down debt through a combination of operational cash flow, the sale of non-strategic hotels and, if appropriate, other capital transactions. We continue to examine our portfolio to address market supply and concentration of risk issued. Additionally, we are considering external growth, through acquisition of hotels, that does three things: increases long-term shareholder value, improves the quality of our portfolio and improves both our market distribution and future EBITDA growth.

Sale of Non-Strategic Hotels

     In 2003, we completed a comprehensive review of our investment strategy and of our existing hotel portfolio, as a result of which we decided to sell certain under-performing smaller hotels in secondary and tertiary markets, markets with high supply growth, and markets in which we had an undesirable concentration, such as Dallas. We continue to review and evaluate our hotel portfolio on an ongoing basis and may identify additional non-strategic hotels for sale based upon changing market conditions and other factors.

     During 2004, we sold 17 of the non-strategic hotels previously identified for sale, terminated the lease on one hotel, had one hotel under a firm contract of sale with a non-refundable deposit (which was classified as “held for sale” and included in our discontinued operations), leaving 18 non-strategic hotels remaining to be sold at year end, substantially all of which are expected to be sold over the next 18 months. The 17 hotels sold in 2004, had 4,335 rooms and were sold for aggregate gross proceeds of $157 million. We expect the aggregate

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gross sale proceeds from the 18 remaining non-strategic hotels previously identified for sale to be approximately $155 million. The composition, by brand, of the 18 hotels identified for sale at December 31, 2004, is as follows: Holiday Inn-branded (11 hotels); Embassy Suites (three hotels); Doubletree-branded (two hotels); Hampton Inn (one hotel); and Independent (one hotel).

     During the first quarter of 2005, one of the 18 hotels previously identified for sale was placed under a firm sale contract with a non-refundable deposit. We currently expect this sale to close in the late first or early second quarter, generating gross proceeds of approximately $38 million.

     Under the management agreement entered into with IHG in July 2001, we were obligated to reinvest the net proceeds from the sale of any IHG managed hotel in other IHG managed hotels or pay substantial liquidated damages to IHG. This potential exposure to liquidated damages made it impractical to sell certain hotels and use the proceeds to pay down debt. In September 2003, we completed an amendment to the IHG management agreement covering 78 of our hotels, pursuant to which we extended the term of the management contracts on 27 hotels from 2013 to 2018 and, in exchange, we received from IHG a liquidated damage credit of $25 million to apply to the satisfaction of liquidated damages otherwise payable to IHG upon the sale of certain IHG managed hotels where the proceeds of sale were applied to the reduction of our debt rather than to reinvestment in IHG managed hotels. At the end of December 2004, we had utilized all of the $25 million liquidated damages credit available to us. Following the full utilization of this credit, we were again required to reinvest the proceeds from the further sale of IHG managed hotels in other hotels to be managed by IHG or pay substantial liquidated damages to IHG.

     At March 1, 2005, we had a reinvestment requirement of $17 million. If we do not fulfill this reinvestment obligation within 12 months of the date of sale, we will be required to pay liquidated damages to IHG aggregating $5.3 million. Thirteen of the 18 remaining hotels identified for sale are managed by IHG and subject to the reinvestment obligations in the event they are sold. We will incur additional reinvestment obligations of approximately $76 million if these hotels are sold at currently estimated prices or, if the proceeds of sale are not so reinvested, we will incur approximately $19 million in additional liquidated damages for which we would be liable to IHG.

     The 18 non-strategic hotels included in our continuing operations at December 31, 2004, represented 12% of the rooms in our hotel portfolio, but only 5% of our consolidated hotel operating profit in 2004. The 2004 operating margin for these 18 hotels averaged approximately 1,000 basis points below the remainder of our portfolio.

   Refined Investment Strategy

     We plan to focus our future acquisition efforts on higher quality hotels in markets with significant barriers to entry, such as central business districts and resort locations. Hotel brand and market segment will be secondary concerns when we are considering investment opportunities. We anticipate that this focus will lead to an increase in the number of our upper upscale properties, group and resort destination properties, and greater diversification of our portfolio by geographic location, brand, and customer base. In keeping with this strategy, in March 2004, we purchased the 132-room Santa Monica Holiday Inn. This hotel has a premier location across from the Santa Monica Pier and the Santa Monica beaches and will continue to be operated as a full service upscale hotel.

   Improving the Competitive Positioning of Our Hotels

     We seek to improve the competitive position of our hotels through aggressive asset management and the maintenance of strong relationships with our brand-owner managers. While REIT requirements prohibit us from directly managing our hotels, we work closely with our brand-owner managers to actively monitor and review hotel operations. We strongly urge our managers to implement best practices in expense management at our hotels, and we strive to influence brand strategy on marketing and revenue enhancement programs. Consistent with our commitment to position our hotels for the recovery in the lodging industry, we have continued making both revenue enhancing and maintenance capital improvements at our hotels. During 2004, we spent $102 million on capital expenditures, including our pro rata share of capital improvements made by

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our unconsolidated joint ventures. These capital expenditures included quality upgrades at 20 of our hotels. Additionally, in 2004, our repair and maintenance expense represented 5.7% of our hotel room revenue from continuing operations. We intend to focus our 2005 capital expenditures on those hotels with the potential to provide the highest return on investment.

   Paydown of Debt

     We are committed to pay down our debt, while maintaining short-term liquidity. In 2004, we reduced our debt by $270 million and lowered our average cost of debt from 7.8% to 7.4%. This was accomplished through the following capital transactions:

•   We completed the early retirement of $775 million in senior notes consisting of:

o   $600 million of senior notes maturing in 2008 that bore interest at 10%; and

o   $175 million of senior notes maturing in October 2004.

•   We issued $290 million of floating rate senior notes.

•   We issued $234 million in mortgage debt.

•   We issued $160 million of convertible preferred stock.

     At December 31, 2004, we had cash balances of $119 million. Our cash balances included $28 million held under our hotel management agreements to meet our hotel minimum working capital requirements. We have no significant nonextendable debt maturities until 2007, when approximately $246 million in debt matures in excess of normal recurring principal payments. We will continue to seek opportunities to reduce our debt and our cost of capital on an economically sound basis.

Strategic Relationships

     We benefit from our brand-owner and manager alliances with Hilton Hotels Corporation (Embassy Suites Hotels, Hilton and Doubletree), InterContinental Hotels Group PLC (Crowne Plaza and Holiday Inn) and Starwood Hotels & Resorts Worldwide, Inc. (Sheraton and Westin). These relationships enable us to work effectively with our managers to maximize operating margins and operating cash flow from our hotels .

•   Hilton Hotels Corporation (www.hiltonworldwide.com) is recognized internationally as a preeminent hospitality company. Hilton develops, owns, manages or franchises more than 2,200 hotels, resorts and vacation ownership properties, including approximately 353,000 rooms in the United States. Its portfolio includes many of the world’s best known and most highly regarded hotel brands, including Hilton, Hilton Garden Inn, Doubletree, Embassy Suites Hotels, Hampton Inn and Homewood Suites by Hilton, among others. Subsidiaries of Hilton managed 66 of our hotels at December 31, 2004. Hilton is a 50% partner in joint ventures with us in the ownership of 12 hotels and the development and management of residential luxury condominiums, and is the holder of a 10% equity interest in certain of our consolidated subsidiaries owning six hotels.

•   InterContinental Hotels Group PLC (www.ichotelsgroup.com) of the United Kingdom is the world’s most global hotel company and the largest by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, more than 3,500 hotels and 536,000 guest rooms in nearly 100 countries and territories around the world. IHG owns a portfolio of well recognized and respected hotel brands including InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn, Holiday Inn Express, Holiday Inn Select, Staybridge Suites, Candlewood Suites, and also manages the world’s largest hotel loyalty program, Priority Club Rewards, with more than 23 million members worldwide. Building on more than 50 years of innovation, IHG has contributed to a wide-range of industry “firsts.” Among these innovations, IHG was the first hotel company to recognize and reward customer loyalty through a customer frequency program, Priority Club Rewards, and the first hotel company to receive reservations via the Internet. Subsidiaries of IHG managed 55 of our hotels at December 31, 2004, and also own approximately 17% of our outstanding common stock.

•   Starwood Hotels & Resorts Worldwide, Inc. (www.starwoodhotels.com) is one of the leading hotel and leisure companies in the world with approximately 750 properties in 80 countries and 110,000 employees. With internationally renowned brands, Starwood is a fully integrated owner, operator and franchisor of hotels and resorts including: St. Regis, The Luxury Collection, Sheraton, Westin, Four Points by Sheraton

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and W brands. Subsidiaries of Starwood managed 11 of our hotels at December 31, 2004. Starwood is a 40% joint venture partner with us in the ownership of two hotels and a 50% joint venture partner with us in the ownership of one hotel.

Competition

     The hotel industry is highly competitive. Each of our hotels is located in a developed area that includes other hotel properties and competes for guests primarily with other full service and limited service hotels in its immediate vicinity and secondarily with other hotel properties in its geographic market. We believe that location, brand recognition, the quality of the hotel, the services provided, and price are the principal competitive factors affecting our hotels.

Environmental Matters

     We customarily obtain a Phase I environmental survey from an independent environmental consultant before acquiring a hotel. The principal purpose of a Phase I survey is to identify indications of potential environmental contamination for which a property owner may have liability and, secondarily, to assess, to a limited extent, the potential for environmental regulatory compliance liabilities. The Phase I surveys of our hotels were designed to meet the requirements of the then current industry standards governing Phase I surveys, and consistent with those requirements, none of the surveys involved testing of groundwater, soil or air. Accordingly, they do not represent evaluations of conditions at the studied sites that would be revealed only through such testing. In addition, their assessment of environmental regulatory compliance issues was general in scope and was not a detailed determination of the hotel’s complete environmental compliance status. Similarly, the surveys did not involve comprehensive analysis of potential offsite liability. The Phase I survey reports did not reveal any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, nor are we aware of any such liability. Nevertheless, it is possible that these reports do not reveal or accurately assess all environmental liabilities and that there are material environmental liabilities of which we are unaware.

     We believe that our hotels are in compliance, in all material respects, with all federal, state, local and foreign laws and regulations regarding hazardous substances and other environmental matters, the violation of which would have a material adverse effect on us. We have not been notified by any governmental authority or private party of any noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our current or former properties that we believe would have a material adverse effect on our business, assets or results of operations. However, obligations for compliance with environmental laws that arise or are discovered in the future may adversely affect our financial condition.

Tax Status

     We elected to be taxed as a REIT under the federal income tax laws, commencing with our initial taxable year ended December 31, 1994. As a REIT, we generally are not subject to federal income taxation at the corporate level on taxable income that is distributed to our stockholders. We may, however, be subject to certain state and local taxes on our income and property. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its annual taxable income. In connection with our election to be taxed as a REIT, our charter imposes restrictions on the ownership and transfer of shares of our common stock. FelCor LP expects to make distributions on its units sufficient to enable us to meet our distribution obligations as a REIT. As a result of the passage of the REIT Modernization Act, in 2001 we acquired or terminated all of our hotel leases and contributed them to taxable REIT subsidiaries, or TRSs. These TRSs are subject to both federal and state income taxes. At December 31, 2004, our TRSs had a federal tax loss carry forward of $296 million.

Employees

     Mr. Thomas J. Corcoran, Jr., our President and Chief Executive Officer, entered into an employment agreement with us in 1994 that continues in effect until December 31, 2005, and automatically renews for successive one-year terms unless terminated by either party. All of our executive officers, including Mr. Corcoran, have change in control contracts that renew annually. We had 70 full-time employees at December 31, 2004.

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     All persons employed in the day-to-day operation of our hotels are employees of the management companies engaged by us and are not our employees.

Cautionary Factors That May Affect Future Results

     Certain statements and analyses contained in this Annual Report on Form 10-K, in our 2005 Annual Report to Shareholders, or that may in the future be made by, or be attributable to, us, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations thereon or comparable terminology. All of such forward-looking statements are based upon present expectations and assumptions that may or may not actually occur. The following factors constitute cautionary statements identifying important factors, including material risks and uncertainties, with respect to such forward-looking statements that could cause actual results to differ materially from those reflected in such forward-looking statements or in our historical results. Each of the following factors, among others, could adversely affect our ability to meet the current expectations of management.

Future terrorist activities and United States military involvement in the Middle East and elsewhere may result in reducing business and leisure travel, which would reduce our revenues.

     The terrorist attacks of September 11, 2001, caused a significant disruption in travel-related businesses in the United States. Consistent with the rest of the lodging industry, we experienced substantial declines in occupancy and ADR, due to a decline in both business and leisure travel in 2001 and the continued decline in business travel in 2002. In 2003, the continuing sluggish economy, the crisis in the Middle East, culminating in Operation Iraqi Freedom, continued United States military involvement in the Middle East and ongoing threats of terrorism acted to restrict travel and lodging demand. While the lodging industry experienced the beginnings of a recovery in 2004, another act of terrorism in the United States, protracted or expanded United States military involvement in the War on Terrorism, heightened “Threat Levels,” contractions in the airline industry, or increased security precautions making air travel more difficult could limit or delay any recovery, or result in further decreases, in travel and our revenues. We are unable to predict with certainty when or if travel and lodging demand will be fully restored to levels experienced prior to 2001. The factors described above, as well as other political or economic events, may limit or delay any recovery in the lodging industry, thereby extending the already lengthy period of uncertainty that has adversely affected the lodging industry, including us, as a result of reduced public travel.

Our financial leverage is high and is exacerbated by depressed operating cash flows.

     At December 31, 2004, our consolidated debt of $1.8 billion represented 56% of our total market capitalization. The decline in our revenues and cash flow from operations during 2001, 2002 and 2003, have resulted in a reduction of our public debt ratings and may limit our access to additional debt capital. Our senior unsecured public notes currently are rated B1 by Moody’s Investors Service, and B- by Standard & Poor’s, which are considered below investment grade. Historically, we have incurred debt for acquisitions and to fund our renovation, redevelopment and rebranding programs. Limitations upon our access to debt financing could adversely affect our ability to fund these activities and programs in the future.

     The economic slowdown, which began in early 2001 and which was accelerated by the terrorist attacks of September 11, 2001, resulted in consecutive declines in our RevPAR during 2001, 2002 and 2003, compared to the prior years. While we had a 4.9% increase in RevPAR in 2004, if RevPAR continues at current levels for a protracted period of time, or worsens, it could result in a continuation, or worsening, of our net losses and reduce our ability to pay dividends and service our debt.

     Our financial leverage could have important consequences. For example, it could:

•   limit our ability to obtain additional financing for working capital, renovation, redevelopment and rebranding plans, acquisitions, debt service requirements and other purposes;

•   require us to agree to additional restrictions and limitations on our business operations and capital structure to obtain additional financing;

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•   increase our vulnerability to adverse economic and industry conditions, as well as to fluctuations in interest rates;

•   require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for capital expenditures, future business opportunities, the payment of dividends or other purposes;

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

•   place us at a competitive disadvantage, compared to our competitors that have less debt.

     We may be able to incur substantial debt in the future, which could increase the risk described above. Based upon our calculation of the limitations described below, assuming additional debt was borrowed at a 7% annual interest rate and invested in assets generating annual EBITDA equal to 7% of their cost, at December 31, 2004, we could have incurred approximately $900 million of additional indebtedness, all of which could have been secured indebtedness. In addition, we may be able to borrow up to the greater of $50 million or 1.5 times our consolidated EBITDA for the trailing four quarters under a line of credit and incur indebtedness to refinance or refund existing indebtedness, even if the incurrence tests described below are not satisfied.

We have restrictive debt covenants that could adversely affect our ability to finance our operations or engage in other business activities.

     The indentures governing our outstanding senior unsecured notes contain various restrictive covenants and incurrence tests, including, among others, provisions that can restrict our ability to:

•   incur any additional indebtedness if, after giving effect thereto, our consolidated indebtedness would exceed 60% of our adjusted total assets or our interest coverage ratio, as defined in the indentures, would be less than 2.0 to 1;

•   incur any additional secured indebtedness or subsidiary debt if, after giving effect thereto, our consolidated secured indebtedness and subsidiary debt exceeds 40% of our adjusted total assets;

•   make common and preferred distributions;

•   make investments;

•   engage in transactions with affiliates;

•   incur liens;

•   merge or consolidate with another person;

•   dispose of all or substantially all of our assets; and

•   permit 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.

     Under the terms of the indentures governing one of our outstanding senior notes, we are prohibited from repurchasing any of our capital stock, whether common or preferred, subject to certain exceptions, so long as our debt-to-EBITDA ratio, as defined in the indenture, exceeds 4.85 to 1. Because our debt-to-EBITDA ratio was greater than 4.85 to 1 during fiscal 2003 and 2004, we were restricted in making capital stock repurchases during such periods. Although our current debt-to-EBITDA ratio is slightly below that threshold, a decline in our EBITDA, or an increase in our debt could raise our ratio above the 4.85 to 1 threshold. Accordingly, we may again be prohibited from purchasing any of our capital stock, except as permitted under limited exceptions, such as from the proceeds of a substantially concurrent issuance of other capital stock.

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     If actual operating results were to be significantly below our current expectations, as reflected in our public guidance, or if interest rates increase significantly more than we expect, we may be unable to continue to satisfy the incurrence test under the indentures governing our senior unsecured notes. In such an event, we may be prohibited from incurring additional indebtedness, except to repay or refinance maturing debt with debt of similar priority in the capital structure, and may be prohibited from, among other things, paying distributions on our preferred or common stock, except to the extent necessary to satisfy the REIT qualification requirement that we distribute currently at least 90% of our taxable income.

     Our failure to timely satisfy any judgment or recourse indebtedness, if in the amount of $10 million or more, could result in the acceleration of most of our unsecured recourse indebtedness. We may not be able to refinance or repay our debt in full under those circumstances.

Future or existing relationships may result in certain of our directors and officers having interests that conflict with ours.

     Adverse tax consequences to affiliates upon a sale of certain hotels. Thomas J. Corcoran, Jr., our President and Chief Executive Officer and a director, and Robert A. Mathewson, a director, may incur additional tax liability if we sell our investments in six hotels that we acquired in July 1994 from partnerships in which they were investors. Consequently, our interests could differ from Messrs. Corcoran’s and Mathewson’s interests in the event that we consider a sale of any of these hotels. Decisions regarding a sale of any of these six hotels must be made by a majority of our independent directors.

     Conflicts of interest. A director who has a conflict of interest with respect to an issue presented to our board will have no legal obligation to abstain from voting upon that issue. We do not have provisions in our bylaws or charter that require an interested director to abstain from voting upon an issue, and we do not expect to add provisions in our charter and bylaws to this effect. Although each director has a duty of loyalty to us, there is a risk that, should an interested director vote upon an issue in which he or one of his affiliates has an interest, his vote may reflect a bias that could be contrary to our best interests. In addition, even if an interested director abstains from voting, the director’s participation in the meeting and discussion of an issue in which he has, or companies with which he is associated have, an interest could influence the votes of other directors regarding the issue.

We are subject to the risks inherent in the hospitality industry.

     The economic slowdown that began in 2001 has had a significant adverse effect on our RevPAR performance and results of operations. Unless the current economic recovery continues, the effects on our financial condition could be material. We experienced declines in RevPAR, beginning in March 2001 through 2003. A sharp reduction in business travel was the primary cause of the RevPAR decline. The decreased occupancies led to declines in room rates, as hotels competed more aggressively for guests. Both of these factors have had a significant adverse effect on our RevPAR, operating margins and results of operations. Primarily as a result of the concentration of our hotels in certain markets, the RevPAR performance of our hotels has been below the national average. The following table reflects the RevPAR changes experienced by our hotels, as a group on a same-store basis, compared to all U.S. hotels, as a group, for the past three calendar years.

	Change in RevPAR
	Year Ended December 31,
	2004			2003			2002
All FelCor hotels		+4.9	%		–4.0	%		–7.6	%
All U.S. hotels		+7.8	%		+0.4	%		–2.7	%

     If the current economic recovery stalls, or if the lodging industry fails to benefit from the recovery for a protracted period of time, or if the markets in which we have significant concentrations should fail to participate in any recovery in the industry, our results of operations and financial condition could deteriorate.

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     Investing in hotel assets involves special risks. We have invested 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, and generally include:

•   competition from other hotels;

•   construction of more hotel rooms in a particular area than needed to meet demand;

•   the current high cost of, and any further increases in, fuel costs and other travel expenses, inconveniences and other events that reduce business and leisure travel;

•   adverse effects of declines in general and local economic activity;

•   fluctuations in our revenue caused by the seasonal nature of the hotel industry;

•   a downturn in the hotel industry; and

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

     We could face increased competition. Each of our hotels competes with other hotels in its geographic area. A number of additional hotel rooms have been, or may be, built in a number of the geographic areas in which our hotels are located, which could adversely affect both occupancy and rates in the markets in which our hotels are located. A significant increase in the supply of Midprice, Upscale and Upper Upscale hotel rooms and suites, if demand fails to increase at least proportionately, could have a severe adverse effect on our business, financial condition and results of operations.

     We face reduced coverages and increased costs of insurance. In an effort to keep our cost of insurance within reasonable limits, we have only purchased terrorism insurance for those hotels that are secured by mortgage debt, as required by our lenders. Our terrorism insurance policies have both per occurrence and aggregate limits of $52.5 million with regard to 77 hotels and $75 million with regard to 16 hotels. We have established a self-insured retention of $250,000 per occurrence for general liability insurance with regard to 79 of our hotels. The remainder of our hotels participate in general liability programs sponsored by our managers, with no deductible. Our property insurance has a $100,000 all risk deductible, a deductible of 2% of insured value for named windstorm coverage and a deductible of 5% of insured value for California earthquake coverage. Should uninsured or not fully insured losses be substantial, they could have a material adverse impact on our operating results, cash flows and financial condition.

     We have geographic concentrations that may create risks from regional or local economic, seismic or weather conditions. At December 31, 2004, approximately 58% of our hotel rooms were located in, and 50% of our 2004 hotel operating profits were generated from, four states: California, Florida, Georgia and Texas. Additionally, at December 31, 2004, we had concentrations in three major metropolitan areas, Atlanta, the Los Angeles area and Dallas, which together represented approximately 19% of our hotel operating profits for the year ended December 31, 2004. Therefore, adverse economic, seismic or weather conditions in these states or metropolitan areas will have a greater adverse effect on us than on the industry as a whole.

     We had 18 hotels at December 31, 2004, that we intend to sell within 18 months. We may be unable to sell these hotels at acceptable prices, or at all, within the proposed time frame. If we are unable to sell these hotels at anticipated prices, we may realize additional losses upon sale. Even if we are successful in selling these hotels as contemplated, if we fail to reinvest the net proceeds in a manner that will generate returns equal to, or better than, the hotels sold, our results of operations will be adversely affected.

     The sale of IHG managed hotels could result in reinvestment requirements or liquidated damages. In September 2003, we completed an amendment to the IHG management agreement covering 78 of our hotels, pursuant to which we extended the term of the management contracts on 27 hotels from 2013 to 2018 and, in exchange, we received from IHG a liquidated damage credit of $25 million to apply to the satisfaction of liquidated damages otherwise payable to IHG upon the sale of certain IHG managed hotels. We agreed that the proceeds of hotel sales for which the credit was utilized would be applied to the reduction of our debt. In the fourth quarter of 2004, we utilized the remaining balance of the $25 million liquidated damages credit available to us. As a result of the full utilization of this credit, we are again required to reinvest the proceeds from the further sale of IHG managed hotels in other hotels to be managed by IHG or pay substantial

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termination fees. Termination fees, stated in terms of liquidated damages for the termination of the management agreement, vary by hotel, depending upon the remaining term of the applicable management agreement, and are based upon a multiple of the trailing 12 months’ management fees paid to IHG. The multiples for 2005, range from 6.0 to 8.7 times the past year’s management fees and decline annually through the term of the agreement. No termination fee or liquidated damages will be incurred by us if we timely reinvest the net proceeds from the sale of an IHG managed hotel in an approved substitute hotel to be managed by IHG under the master management agreement. As of March 1, 2005, we had an unsatisfied reinvestment obligation of $17 million. If we do not fulfill this reinvestment obligation within 12 months of the date of sale, we will be required to pay liquidated damages to IHG aggregating $5.3 million. Additionally, until the earlier of either our satisfaction of the reinvestment requirement, or the payment of liquidated damages, we are required to pay monthly termination fees of $57,000 (based on the hotels we have sold through March 1, 2005), which payments will be offset against any liquidated damages payable with respect to these properties. In addition, 13 of the 18 remaining hotels previously identified for sale are managed by IHG and subject to the reinvestment obligations in the event they are sold. We will incur additional reinvestment obligations of approximately $76 million if these hotels are sold at currently estimated prices or, if the proceeds of sale are not so reinvested, we will incur approximately $19 million in additional liquidated damages for which we would be liable to IHG.

     We are subject to possible adverse effects of franchise and license agreement requirements. Substantially all of our hotels are operated under existing franchise or license agreements with nationally recognized hotel brands. Each agreement requires that the licensed hotel be maintained and operated in accordance with specific standards and restrictions in order to maintain uniformity within the franchisor system. Compliance with these standards, and changes in these standards, could require us to incur significant expenses or capital expenditures, which could adversely affect our results of operations and ability to pay dividends to our stockholders and service on our indebtedness. In 2004, we were notified of certain unsatisfied demands relating to two hotels franchised by affiliates of Hilton and four hotels licensed by affiliates of IHG that we make certain capital improvements to those hotels or that the applicable franchise or license could be terminated. Capital improvement plans have been submitted to, and approved by, the brand owners for these hotels, with an aggregate estimated cost of $4 million. The work is in progress, or substantially completed, on each of these improvement plans. No assurance can be provided that we will be able to timely satisfy all of these capital requirements or that, if satisfied, additional requirements will not be imposed.

     If a franchise or license agreement terminates due to our failure to make required improvements, we may be liable to the brand manager or franchisor for a termination payment. These termination payments vary by agreement and hotel, but are generally measured by a multiple of between three and 8.7 times the annual fees received by the franchisor or brand manager. The loss of a substantial number of brand licenses could have a material adverse effect on our business because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the brand manager or franchisor. Our franchise agreements also expire or terminate, subject to certain specified renewal rights, at various times. As a condition of the renewal or extension of the franchise agreements, the brand owner may require the payment of substantial fees and may require substantial capital improvements to be made to the hotels for which we would be responsible. During the next five years, the franchise or license agreements applicable in respect of 15 of our hotels are scheduled to expire in accordance with their terms.

     We are subject to the risks of brand concentration. We are subject to the potential risks associated with the concentration of our hotels under a limited number of brands. A negative public image or other adverse event that becomes associated with the brand could adversely affect hotels operated under that brand.

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The following table reflects the operating profit from our consolidated portfolio of 143 hotels included in continuing operations as of December 31, 2004, generated by hotels operated under each of the indicated brands during the year ended December 31, 2004:

			% of 2004
			Hotel
			Operating
	Hotels		Profit
Embassy Suites Hotels		56		52	%
Holiday Inn-branded hotels		39		21
Sheraton-branded hotels		10		10
Doubletree-branded hotels		10		6
Crowne Plaza hotels		12		5

     Should any of these brands suffer a significant decline in popularity with the traveling public, it could adversely affect our revenues and profitability.

     We are subject to the risks of hotel operations. Through our ownership of the lessees of our hotels, we are subject to the risk of fluctuating hotel operating expenses at our hotels, including, but not limited to:

•   wage and benefit costs;

•   repair and maintenance expenses;

•   gas and electricity costs;

•   insurance costs, including health, general liability and workers compensation; and

•   other operating expenses.

     In addition, we are subject to the risks of a decline in operating margins, which occurs when hotel operating expenses increase disproportionately to revenues. These operating expenses and margins are within the control of our brand-owner managers, over which we have limited control, resulting in an increased risk of volatility in our results of operations.

     The lodging business is seasonal in nature. Generally, hotel revenues for our hotel portfolio are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel.

     We lack control over the management and operations of our hotels. We are dependent on the ability of independent third party managers to operate and manage our hotels. In order to maintain our REIT status, we cannot operate our hotels or any subsequently acquired hotels. As a result, we are unable to directly implement strategic business decisions for the operation and marketing of our hotels, such as decisions with respect to the setting of room rates, the salary and benefits provided to hotel employees, the conduct of food and beverage operations and similar matters.

Our ability to grow or sustain our business may be limited by our ability to attract debt or equity financing, and we may have difficulty accessing capital on attractive terms.

     We may not be able to fund future growth and operations solely from cash provided from operating activities because of recent declines in cash flows and our obligation to distribute at least 90% of our taxable income each year to maintain our status as a REIT. Consequently, we may be forced to rely upon the proceeds of hotel sales or the availability of debt or equity capital to fund hotel acquisitions and necessary capital improvements, and we may be dependent upon our ability to attract debt financing from public or institutional lenders. The capital markets have been, and in the future may be, adversely affected by various events beyond our control, such as the United States’ military involvement in the Middle East and elsewhere, the terrorist

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attacks on September 11, 2001, the ongoing War on Terrorism by the United States and the bankruptcy of major companies, such as Enron Corp. Similar events, such as an escalation in the War on Terrorism, new terrorist attacks, or additional bankruptcies in the future, as well as other events beyond our control, could adversely affect the availability and cost of capital for our business. We cannot assure you that we will be successful in attracting sufficient debt or equity financing to fund future growth and operations, or to pay or refinance existing debt, at an acceptable cost, or at all.

We own, and may acquire, interests in hotel joint ventures with third parties that expose us to some risk of additional liabilities or capital requirements.

     We own, through our subsidiaries, interests in several real estate joint ventures with third parties. Joint ventures that are not consolidated into our financial statements owned a total of 20 hotels, in which we had an aggregate investment of $111 million at December 31, 2004. The operations of 15 of these hotels are included in our consolidated results of operations due to our majority ownership of the lessees of these hotels. None of our directors or officers hold any interest in any of these ventures. Our joint venture partners are affiliates of Hilton, with respect to 12 hotels, affiliates of Starwood, with respect to one hotel, and private entities or individuals with respect to seven hotels. The ventures and hotels were subject to non-recourse mortgage loans aggregating $218 million at December 31, 2004.

     The personal liability of our subsidiaries under existing non-recourse loans secured by the hotels of our joint ventures is generally limited to the guaranty of the borrowing ventures’ personal obligations to pay for the lender’s losses caused by misconduct, fraud or misappropriation of funds by the ventures and other typical exceptions from the non-recourse covenants in the mortgages, such as those relating to environmental liability. We may invest in other ventures in the future that own hotels and have recourse or non-recourse debt financing. If a venture defaults under its mortgage loan, the lender may accelerate the loan and demand payment in full before taking action to foreclose on the hotel. As a partner or member in any of these ventures, our subsidiary may be exposed to liability for claims asserted against the venture, and the venture may not have sufficient assets or insurance to discharge the liability.

     Our subsidiaries may not legally be able to control decisions being made regarding these ventures and their hotels. In addition, the hotels in a venture may perform at levels below expectations, resulting in the potential for insolvency of the venture unless the partners or members provide additional funds. In some ventures, the partners or members may elect to make additional capital contributions. We may be faced with the choice of losing our investment in a venture or investing additional capital in it with no guaranty of receiving a return on that investment.

     Interstate Hotels & Resorts, which is our partner in the ownership of eight hotels declined to make further capital contributions to the venture, beginning in 2004. In order to sustain this venture, we made $3 million in advances in 2004, and an additional $1 million in 2005, with a priority in right (but no assurance) of return. We have received a request for additional funding of $2.5 million; however, we have determined that it is not in our best interest to continue funding the further cash shortfalls related to this venture, and have notified the lender to that effect. This venture, which we consolidate, currently has $49 million in non-recourse debt secured by the eight hotels owned by the venture. We have written down our investment in this venture below the current debt balance. We are considering our options with regard to this venture, one of which is to surrender the hotels to the lender.

As a REIT, we are subject to specific tax laws and regulations, the violation of which could subject us to significant tax liabilities.

     The federal income tax laws governing REITs are complex. We have operated, and intend to continue to operate, in a manner that is intended to enable us to qualify as a REIT under the federal income tax laws. The REIT qualification requirements are extremely complicated, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we have 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 relating to, or the federal income tax consequences of, qualification as a REIT.

     Failure to make required distributions would subject us to tax. Each year, a REIT must pay out to its stockholders at least 90% of its taxable income, other than any net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible tax if the actual amount we pay out to our stockholders in a calendar year is less than the

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minimum amount specified under federal tax laws. FelCor’s only source of funds to make such distributions comes from distributions from FelCor LP. Accordingly, we may be required to borrow money or sell assets to enable us to pay out enough of our taxable income to satisfy the distribution requirements and to avoid corporate income tax and the 4% tax in a particular year.

     Failure to qualify as a REIT would subject FelCor to federal income tax. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax at regular corporate rates on our taxable income for any such taxable year for which the statute of limitations remains open. We might need to borrow money or sell hotels in order to obtain the funds necessary to pay any such tax. If we cease to be a REIT, we no longer would be required to distribute most of our taxable income to our stockholders. Unless our failure to qualify as a REIT was excused under federal income tax laws, we could not re-elect REIT status until the fifth calendar year following the year in which we failed to qualify.

     A sale of assets acquired from Bristol Hotel Company, or Bristol, within ten years after the merger may result in us incurring corporate income tax. If we sell any asset acquired from Bristol within ten years after our 1998 merger with Bristol, and we recognize a taxable gain on the sale, we will be taxed at the highest corporate rate on an amount equal to the lesser of^:

•   the amount of gain recognized at the time of the sale; or

•   the amount of gain that we would have recognized if we had sold the asset at the time of the Bristol merger for its then fair market value.

     The sales of Bristol hotels that have been made to date have not resulted in any material amount of tax liability to us. If we are successful in selling the hotels that we have designated as sale hotels, the majority of which are Bristol hotels, we could incur corporate income tax with respect to the related built-in gain.

Departure of key personnel, including Mr. Corcoran, would deprive us of the institutional knowledge, expertise and leadership they provide.

     Our management includes four senior-level executive positions, including the President and Chief Executive Officer, currently Mr. Corcoran, and three Executive Vice Presidents. The persons in these positions generally possess institutional knowledge about our organization or the hospitality or real estate industries, have significant expertise in their fields, and possess leadership skills that are important to our operations. The loss of any of our senior executive officers could adversely affect our ability to execute our business strategy.

We are subject to the risks of real estate ownership, which could increase our costs of operations.

     General Risks. 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;

•   increases in supply or competition;

•   changes in traffic patterns and neighborhood characteristics;

•   increases in assessed valuation and real estate tax rates;

•   increases in the cost of property insurance;

•   recent and future increases in the cost of wood, steel, concrete and other building materials, which increase the cost of renovations, expansions and new construction;

•   costly governmental regulations and fiscal policies;

•   the potential for uninsured or underinsured property losses;

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•   the potential that we are unable to meet all requirements under the Americans with Disabilities Act;

•   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 adjust our portfolio in a timely manner to respond to changes in economic and other conditions.

     Compliance with environmental laws may adversely affect our financial condition. Owners of real estate are subject to numerous federal, state, local and foreign environmental laws and regulations. Under these laws and regulations, a current or former owner of real estate may be liable for the costs of remediating hazardous substances found on its property, whether or not it was responsible for their presence. In addition, if an owner of real property arranges for the disposal of hazardous substances at another site, it may also be liable for the costs of remediating the disposal site, even if it did not own or operate the disposal site. Such liability may be imposed without regard to fault or the legality of a party’s conduct and may, in certain circumstances, be joint and several. A property owner may also be liable to third parties for personal injuries or property damage sustained as a result of its release of hazardous or toxic substances, including asbestos-containing materials, into the environment. Environmental laws and regulations may require us to incur substantial expenses and limit the use of our properties. We could have substantial liability for a failure to comply with applicable environmental laws and regulations, which may be enforced by the government or, in certain instances, by private parties. The existence of hazardous substances on a property can also adversely affect the value of, and the owner’s ability to use, sell or borrow against, the property.

     We cannot provide assurances that future or amended laws or regulations, or more stringent interpretations or enforcement of existing environmental requirements, will not impose any material environmental liability, or that the environmental condition or liability relating to the hotels will not be affected by new information or changed circumstances, by the condition of properties in the vicinity of such hotels, such as the presence of leaking underground storage tanks, or by the actions of unrelated third parties.

     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. Various state and local jurisdictions have also adopted requirements relating to the accessibility of buildings to disabled persons. We believe that our hotels substantially comply with the requirements of the Americans with Disabilities Act and other applicable laws. However, a determination that the hotels are not in compliance with these laws could result in liability for both governmental fines and payments to private parties. If we were required to make unanticipated major modifications to our hotels to comply with the requirements of the Americans with Disabilities Act and other similar laws, it could adversely affect our ability to make distributions to our stockholders and to pay our obligations.

Our charter contains limitations on ownership and transfer of shares of our stock that could adversely affect attempted transfers of our capital stock.

     To maintain our status as a REIT, no more than 50% in value of our outstanding stock may be owned, actually or constructively, under the applicable tax rules, by five or fewer persons during the last half of any taxable year. Our charter prohibits, subject to some exceptions, any person from owning more than 9.9%, as determined in accordance with the Internal Revenue Code and the Exchange Act, of the number of outstanding shares of any class of our stock. Our charter also prohibits any transfer of our stock that would result in a violation of the 9.9% ownership limit, reduce the number of stockholders below 100 or otherwise result in our failure to qualify as a REIT. Any attempted transfer of shares in violation of the charter prohibitions will be void, and the intended transferee will not acquire any right in those shares. We have the right to take any lawful action that we believe is necessary or advisable to ensure compliance with these ownership and transfer restrictions and to preserve our status as a REIT, including refusing to recognize any transfer of stock in violation of our charter.

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Some provisions in our charter and bylaws and Maryland law make a takeover of us more difficult.

     Ownership Limit. The ownership and transfer restrictions of our charter may have the effect of discouraging or preventing a third party from attempting to gain control of us without the approval of our board of directors. Accordingly, it is less likely that a change in control, even if beneficial to stockholders, could be effected without the approval of our board.

     Staggered Board. Our board of directors is divided into three classes. Directors in each class are elected for terms of three years. As a result, the ability of stockholders to effect a change in control of us through the election of new directors is limited by the inability of stockholders to elect a majority of our board at any particular meeting.

     Authority to Issue Additional Shares. Under our charter, our board of directors may issue up to an aggregate of 20 million shares of preferred stock without stockholder action. The preferred stock may be issued, in one or more series, with the preferences and other terms designated by our board that may delay or prevent a change in control of us, even if the change is in the best interests of stockholders. As of December 31, 2004, we had outstanding 12,880,475 shares of our Series A preferred stock and 67,758 shares, represented by 6,775,800 depositary shares, of our Series B preferred stock.

     Maryland Takeover Statutes. As a Maryland corporation, we are subject to various provisions under the Maryland General Corporation Law, including the Maryland Business Combination Act, that may have the effect of delaying or preventing a transaction or a change in control that might involve a premium price for the stock or otherwise be in the best interests of stockholders. Under the Maryland business combination statute, some “business combinations,” including some issuances of equity securities, between a Maryland corporation and an “interested stockholder,” which is any person who beneficially owns 10% or more of the voting power of the corporation’s shares, or an affiliate of that stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Any of these business combinations must be approved by a stockholder vote meeting two separate super majority requirements, unless, among other conditions, the corporation’s common stockholders receive a minimum price, as defined in the statute, for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its common shares. IHG is an interested stockholder. Our charter currently provides that the Maryland Control Share Acquisition Act will not apply to any of our existing or future stock. That statute may deny voting rights to shares involved in an acquisition of one-tenth or more of the voting stock of a Maryland corporation. To the extent these or other laws are applicable to us, they may have the effect of delaying or preventing a change in control of us even though beneficial to our stockholders.

Item 2. Properties

     We own a diversified portfolio of nationally branded, upscale and full-service hotels managed principally by the brand owners, which are Hilton, IHG, and Starwood. We are competitively positioned, with a strong management team, brand manager alliances, diversified upscale and full-service hotels, and value creation expertise.

     We consider our hotels, generally, to be high quality lodging properties with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Our hotels are designed to appeal to a broad range of hotel customers, including frequent business travelers, groups and conventions, as well as leisure travelers. The hotels generally feature comfortable, modern guest rooms, meeting and convention facilities and full-service restaurant and catering facilities. Our hotels included in continuing operations, are located in 31 states and Canada, and are situated primarily in major

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markets near airport, suburban or downtown areas. The following tables illustrate the distribution of our 143 consolidated hotels included in continuing operations at December 31, 2004.

					% of			% of 2004 Hotel
Top Markets	Hotels		Rooms		Total Rooms			Operating Profit(b)
Atlanta		12		3,514		9	%		9	%
Dallas		13		3,789		9			5
Los Angeles Area		6		1,492		4			5
Boca Raton/Ft. Lauderdale		4		1,118		3			4
New Orleans		2		746		2			4
Orlando		6		2,219		6			4
San Francisco Bay Area		8		2,690		7			3
Minneapolis		4		955		2			3
San Diego		1		600		2			3
Phoenix		4		1,016		3			3
Houston		8		1,969		5			3
Chicago		4		1,239		3			3
Philadelphia		3		1,174		3			3

					% of			% of 2004 Hotel
Top Four States	Hotels		Rooms		Total Rooms			Operating Profit
California		19		5,593		14	%		15	%
Texas		31		8,284		21			14
Florida		16		5,343		13			11
Georgia		14		3,868		10			10

					% of			% of 2004 Hotel
Location	Hotels		Rooms		Total Rooms			Operating Profit
Suburban		63		15,671		39	%		40	%
Urban		37		11,338		29			28
Airport		28		8,509		21			21
Resort		13		4,044		10			11
Interstate		2		418		1			0

					% of			% of 2004 Hotel
Segment	Hotels		Rooms		Total Rooms			Operating Profit
Upscale all-suite		69		17,145		43	%		59	%
Full service		40		13,004		32			22
Upscale		25		8,263		21			18
Limited service		9		1,568		4			1

					% of			% of 2004 Hotel
	Hotels		Rooms		Total Rooms			Operating Profit
Core Hotels		125		35,256		88	%		95	%
Sale Hotels(a)		18		4,724		12			5

(a)	Excludes one hotel that met held for sale accounting requirements, and was included in discontinued operations at December 31, 2004.
(b)	A detailed description and computation of Hotel Operating Profit is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

     Our hotels have an average of approximately 275 rooms, with six hotels having 500 or more rooms. Although obsolescence arising from age and condition of facilities can adversely affect our hotels, we have invested in excess of $600 million, in the aggregate, during the past six years to upgrade, renovate and/or redevelop our hotels to enhance or maintain their competitive position. We are committed to maintaining the high standards of our hotels. In 2004, we spent $102 million on capital expenditures, including our pro rata share of unconsolidated joint venture capital expenditures of $6 million, and spent 5.7% of our consolidated room revenue on maintenance and repair expense.

17

Hotel Brands

     A key part of our business strategy is to have our hotels managed by one of our brand-owner manager alliances. Our hotels are operated under some of the nation’s most recognized and respected hotel brands. We maintain relationships with our brand owners, who also manage substantially all of our hotels. We are the owner of the largest number of Embassy Suites Hotels, Crowne Plaza, Holiday Inn and independently owned Doubletree-branded hotels. The following table illustrates the distribution of our hotels among these premier brands.

Brand Distribution

					% of			% of 2004 Hotel
Brand	Hotels		Rooms		Total Rooms			Operating Profit
Embassy Suites Hotels		56		14,279		36	%		52	%
Holiday Inn-branded hotels		39		12,769		32			21
Sheraton-branded hotels		10		3,269		8			10
Doubletree-branded hotels		10		2,206		6			6
Crowne Plaza hotels		12		4,025		10			5
Other		16		3,432		8			6

Hotel Operating Statistics

     The following tables set forth historical occupied rooms, or Occupancy, ADR and RevPAR at December 31, 2004 and 2003, and the percentage changes therein between the periods presented for our consolidated hotels included in continuing operations (excluding Holiday Inn Cocoa Beach, which was closed during the fourth quarter of 2004 because of hurricane damage):

Operating Statistics by Brand

	Occupancy (%)
	Year Ended December 31,
	2004		2003		% Variance
Embassy Suites Hotels		69.5		67.3		3.1
Holiday Inn-branded hotels		64.7		62.9		2.9
Sheraton-branded hotels		63.1		59.8		5.5
Crowne Plaza hotels		63.4		60.5		4.9
Doubletree-branded hotels		66.0		65.9		0.1
Other hotels		56.5		55.9		1.0
Total hotels		65.5		63.6		3.1

	ADR ($)
	Year Ended December 31,
	2004		2003		% Variance
Embassy Suites Hotels		117.49		115.85		1.4
Holiday Inn-branded hotels		81.06		80.20		1.1
Sheraton-branded hotels		98.33		94.53		4.0
Crowne Plaza hotels		93.83		93.50		0.4
Doubletree-branded hotels		103.79		100.07		3.7
Other hotels		82.68		79.71		3.7
Total hotels		99.07		97.38		1.7

	RevPAR ($)
	Year Ended December 31,
	2004		2003		% Variance
Embassy Suites Hotels		81.61		78.02		4.6
Holiday Inn-branded hotels		52.45		50.42		4.0
Sheraton-branded hotels		62.08		56.57		9.7
Crowne Plaza hotels		59.53		56.55		5.3
Doubletree-branded hotels		68.50		65.98		3.8
Other hotels		46.70		44.58		4.8
Total hotels		64.91		61.89		4.9

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Operating Statistics for Our Top Markets

	Occupancy (%)
	Year Ended December 31,
	2004		2003		% Variance
Atlanta		67.2		64.6		4.1
Dallas		48.8		47.0		3.9
Los Angeles Area		68.7		69.8		(1.5	)
Boca Raton/Ft. Lauderdale		79.0		73.5		7.5
New Orleans		66.3		65.8		0.7
San Francisco Bay Area		65.3		64.2		1.6
Orlando		76.1		68.8		10.7
Minneapolis		68.0		65.2		4.2
San Diego		80.9		79.9		1.3
Phoenix		66.2		65.9		0.3
Houston		65.5		65.3		0.3
Chicago		69.7		67.6		3.2
Philadelphia		68.0		61.8		10.1

	ADR ($)
	Year Ended December 31,
	2004		2003		% Variance
Atlanta		86.68		85.26		1.7
Dallas		89.77		87.74		2.3
Los Angeles Area		110.30		102.32		7.8
Boca Raton/Ft. Lauderdale		115.01		113.65		1.2
New Orleans		136.96		133.17		2.9
San Francisco Bay Area		112.44		112.34		0.1
Orlando		77.32		74.68		3.5
Minneapolis		125.48		122.82		2.2
San Diego		120.16		116.95		2.7
Phoenix		105.43		98.98		6.5
Houston		69.32		69.92		(0.9	)
Chicago		106.44		109.36		(2.7	)
Philadelphia		105.99		105.96		0.0

	ADR ($)
	Year Ended December 31,
	2004		2003		% Variance
Atlanta		58.28		55.08		5.8
Dallas		43.81		41.23		6.3
Los Angeles Area		75.83		71.42		6.2
Boca Raton/Ft. Lauderdale		90.90		83.58		8.8
New Orleans		90.78		87.66		3.6
San Francisco Bay Area		73.39		72.18		1.7
Orlando		58.85		51.35		14.6
Minneapolis		85.30		80.14		6.4
San Diego		97.26		93.41		4.1
Phoenix		69.76		65.28		6.9
Houston		45.40		45.64		(0.5	)
Chicago		74.22		73.88		0.5
Philadelphia		72.07		65.43		10.1

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   Embassy Suites Hotels

     Embassy Suites Hotels are upscale, full-service, all-suite hotels that cater to both business travelers and leisure guests. Part of the Hilton family of hotels, each Embassy Suites Hotel features convenient, value-added guest services and amenities including:

•   spacious two-room suites featuring a separate living area, private bedroom and a mini-kitchen;

•   two remote-controlled televisions, two telephones with voice mail and data ports, iron and ironing board, refrigerator, microwave oven, wet bar, and coffee maker in every suite;

•   complimentary, full cooked-to-order breakfast every morning;

•   complimentary beverages at two-hour Managers’ Receptions each evening, subject to local laws and regulations, in an atrium environment; and

•   business centers equipped with fax and copy machines.

Doubletree and Doubletree Guest Suites Hotels

     Doubletree hotels and Doubletree Guest Suites are, respectively, the full-service and all-suite hotel brands that provide all the conveniences travelers might expect, in a warm and welcoming environment. Part of the Hilton family, these brands offer comfortable accommodations, meeting facilities, exceptional dining options, health and fitness facilities, state-of-the art technology, and other amenities and services to both business and leisure travelers. These brands primarily serve major metropolitan areas and leisure destinations.

Holiday Inn Branded Hotels

     The Holiday Inn brand is one of the most widely recognized lodging brands in the world, with more than 1,500 properties worldwide. The brand offers today’s travelers dependability, friendly service and modern, attractive facilities at an excellent value. Holiday Inn hotels offer guests dependable services and amenities for both business and leisure travelers. Guests enjoy amenities such as restaurants and room service, relaxing lounges, swimming pools and fitness centers. Properties also feature guest rooms equipped with coffee makers, hair dryers and irons. Holiday Inn hotels also offer 24-hour business services and meeting facilities.

     The Holiday Inn Select hotels provide business travelers with special services and amenities to make their stay as comfortable and productive as possible. All Holiday Inn Select hotels feature meeting facilities equipped with video conferencing capabilities, on-site meeting specialists, 24-business services and professional support, and outstanding guest rooms equipped for business. Holiday Inn Select hotels are located throughout North and South America near business centers and airports.

     With more than approximately 1,500 properties worldwide, Holiday Inn Express, is the mid-priced hotel for value-oriented travelers. Guests receive a complimentary breakfast bar, free local phone calls and free high speed internet access, among other amenities.

Crowne Plaza Hotels

     Crowne Plaza hotels is the ideal hotel choice for small- to mid-sized business meetings and offers personalized service and one point of contact for hassle-free, successful meetings as “The Place To Meet.” Crowne Plaza hotels provide comfortably appointed guest rooms, upscale dining, quality fitness facilities, concierge services and full-service meeting rooms. With more than 200 hotels and 59,000 guest rooms in over 40 countries, Crowne Plaza hotels are located in major urban centers, gateway cities and resort destinations worldwide.

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Sheraton and Sheraton Suites

     With more than 396 hotels and resorts in 66 countries, Sheraton Hotels & Resorts is the largest of the Starwood Hotels & Resorts Worldwide, Inc. brands. Located in the world’s most sought-after cities and resort destinations, Sheraton hotels serve the needs of both business and leisure travelers with unique programs and unusual amenities designed to make travel as hassle-free and enjoyable as possible.

     At all Sheraton Hotels & Resorts, travelers will find full-service dining facilities and room service, on-site fitness centers with a swimming pool, on-site business services, laundry/valet services and meeting facilities for groups of all sizes. Guestrooms worldwide include generous work desks, televisions with cable/satellite channels and a complimentary newspaper delivered to the door daily.

Other Hotels

     As of December 31, 2004, 16 of our hotels were operated under brands other than described above, as follows:

•   Fairfield by Marriott (5 hotels);

•   Hampton Inn (3 hotels);

•   Courtyard by Marriott (2 hotels);

•   Harvey Suites (1 hotel);

•   Hilton Hotel (1 hotel);

•   Hilton Suites (1 hotel);

•   Staybridge Suites (1 hotel);

•   Westin (1 hotel); and

•   Independent (1 hotel).

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Hotel Portfolio

     The following table sets forth certain descriptive information regarding the 149 hotels in which we owned an interest at December 31, 2004:

	State	Rooms	% Owned(1)	Brand
Consolidated Continuing Operations
Birmingham(2)	AL	242		Embassy Suites
Montgomery – East I-85(2)	AL	210		Holiday Inn
Phoenix – Biltmore(2)	AZ	232		Embassy Suites
Phoenix Crescent Hotel(2)	AZ	342		Sheraton
Phoenix Scottsdale/Downtown(b)	AZ	218	51%(b)	Fairfield Inn
Phoenix Tempe(2)	AZ	224		Embassy Suites
Dana Point – Doheny Beach	CA	195		Doubletree Guest Suites
Irvine – Orange County Airport (Newport Beach)	CA	335		Crowne Plaza
Los Angeles – Anaheim (Located near Disneyland Park)(2)	CA	222		Embassy Suites
Los Angeles – Covina/I-10(2)	CA	259	50%(a)	Embassy Suites
Los Angeles – El Segundo – International Airport – South	CA	349	97%(c)	Embassy Suites
Milpitas – Silicon Valley(2)	CA	266		Embassy Suites
Milpitas – San Jose-North (Milpitas – Silicon Valley)	CA	305		Crowne Plaza
Napa Valley(2)	CA	205		Embassy Suites
Oxnard – Mandalay Beach Resort & Conference Center(2)	CA	248		Embassy Suites
Palm Desert – Palm Desert Resort(2)	CA	198		Embassy Suites
Pleasanton (San Ramon Area)	CA	244		Crowne Plaza
San Diego – On the Bay	CA	600		Holiday Inn
San Francisco – Burlingame Airport	CA	340		Embassy Suites
San Francisco – South San Francisco Airport(2)	CA	312		Embassy Suites
San Francisco – Fisherman’s Wharf	CA	585		Holiday Inn
San Francisco – Union Square	CA	403		Crowne Plaza
San Rafael – Marin County/Conference Center(2)	CA	235	50%(a)	Embassy Suites
Santa Barbara – Goleta(2)	CA	160		Holiday Inn
Santa Monica – Beach at the Pier	CA	132		Holiday Inn
Denver – Aurora(2)	CO	248	90%(a)	Doubletree
Stamford	CT	380		Holiday Inn Select
Wilmington(2)	DE	244	90%(a)	Doubletree
Boca Raton(2)	FL	263		Embassy Suites
Cocoa Beach – Oceanfront	FL	500		Holiday Inn
Deerfield Beach – Boca Raton/Deerfield Beach Resort(2)	FL	244		Embassy Suites
Ft. Lauderdale – 17th Street(2)	FL	358		Embassy Suites
Ft. Lauderdale – Cypress Creek(2)	FL	253		Sheraton Suites
Jacksonville – Baymeadows(2)	FL	277		Embassy Suites
Miami – International Airport(2)	FL	316		Embassy Suites
Miami – International Airport (LeJeune Center)	FL	304		Crowne Plaza
Orlando – International Airport(2)	FL	288		Holiday Inn Select
Orlando – International Drive – Resort(2)	FL	651		Holiday Inn
Orlando – International Drive South/Convention Center(2)	FL	244		Embassy Suites
Orlando– Nikki Bird (Maingate – Walt Disney World Area)	FL	530		Holiday Inn
Orlando– (North)	FL	277		Embassy Suites
Orlando – Walt Disney World Resort(2)	FL	229		Doubletree Guest Suites

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	State	Rooms	% Owned(1)	Brand
Tampa – Busch Gardens	FL	406		Holiday Inn
Tampa– On Tampa Bay(2)	FL	203		Doubletree Guest Suites
Atlanta – Airport(2)	GA	378		Crowne Plaza
Atlanta – Airport(2)	GA	233		Embassy Suites
Atlanta – Airport-North(2)	GA	493		Holiday Inn
Atlanta – Buckhead(2)	GA	317		Embassy Suites
Atlanta – Downtown(2)	GA	211	51%(b)	Courtyard by Marriott
Atlanta – Downtown(2)	GA	242	51%(b)	Fairfield Inn
Atlanta – Galleria(2)	GA	278		Sheraton Suites
Atlanta – Gateway – Atlanta Airport	GA	395		Sheraton
Atlanta – Perimeter – Dunwoody(2)	GA	250		Holiday Inn Select
Atlanta – Perimeter Center(2)	GA	241	50%(b)	Embassy Suites
Atlanta – Powers Ferry(2)	GA	296		Crowne Plaza
Atlanta – South (I-75 & US 41)(2)	GA	180		Holiday Inn
Brunswick(2)	GA	130		Embassy Suites
Columbus – North (I-185 at Peachtree Mall)	GA	224		Holiday Inn
Davenport	IA	288		Holiday Inn
Chicago – The Allerton	IL	443		Crowne Plaza
Chicago – Lombard/Oak Brook(2)	IL	262	50%(a)	Embassy Suites
Chicago – Northshore/Deerfield (Northbrook)(2)	IL	237		Embassy Suites
Chicago O’Hare Airport(2)	IL	297		Sheraton Suites
Moline – Airport	IL	216		Holiday Inn
Moline – Airport Area	IL	110		Holiday Inn Express
Indianapolis – North(2)	IN	221	50%(e)	Embassy Suites
Kansas City – Overland Park(2)	KS	199	50%(a)	Embassy Suites
Lexington(2)	KY	155		Sheraton Suites
Lexington – Lexington Green(2)	KY	174		Hilton Suites
Baton Rouge(2)	LA	223		Embassy Suites
New Orleans(2)	LA	372		Embassy Suites
New Orleans – French Quarter(2)	LA	374		Holiday Inn
Boston – Government Center	MA	303		Holiday Inn Select
Boston – Marlborough(2)	MA	229		Embassy Suites
Baltimore – BWI Airport(2)	MD	251	90%(a)	Embassy Suites
Troy – North (Auburn Hills)(2)	MI	251	90%(a)	Embassy Suites
Bloomington(2)	MN	219		Embassy Suites
Minneapolis – Airport(2)	MN	310		Embassy Suites
Minneapolis – Downtown	MN	216		Embassy Suites
St. Paul – Downtown(2)	MN	210		Embassy Suites
Kansas City – NE I-435 North (At Worlds of Fun)(2)	MO	165		Holiday Inn
Kansas City – Plaza(2)	MO	266	50%(a)	Embassy Suites
St. Louis – Downtown	MO	297		Embassy Suites
Jackson – North	MS	222		Holiday Inn & Suites
Olive Branch Whispering Woods Hotel and Conference Center	MS	181		Independent
Charlotte(2)	NC	274	50%(e)	Embassy Suites
Charlotte SouthPark	NC	208		Doubletree Guest Suites
Raleigh(2)	NC	203		Doubletree Guest Suites
Raleigh – Crabtree(2)	NC	225	50%(a)	Embassy Suites
Omaha – Central	NE	187		Doubletree Guest Suites
Omaha – Central	NE	129		Hampton Inn
Omaha – Central (I-80)	NE	383		Holiday Inn
Omaha – Old Mill(2)	NE	223		Crowne Plaza
Parsippany(2)	NJ	274	50%(a)	Embassy Suites
Piscataway – Somerset(2)	NJ	224		Embassy Suites
Secaucus – Meadowlands(2)	NJ	261	50%(a)	Embassy Suites
Cleveland – Downtown	OH	268		Embassy Suites

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	State	Rooms	% Owned(1)	Brand
Tulsa – I-44(2)	OK	244		Embassy Suites
Philadelphia – Center City	PA	445		Crowne Plaza
Philadelphia – Historic District(2)	PA	364		Holiday Inn
Philadelphia – Society Hill(2)	PA	365		Sheraton
Pittsburgh – At University Center (Oakland)(2)	PA	251		Holiday Inn Select
Charleston – Mills House (Historic Downtown)(2)	SC	214		Holiday Inn
Myrtle Beach – At Kingston Plantation	SC	255		Embassy Suites
Myrtle Beach Resort	SC	385		Hilton
Knoxville – Central At Papermill Road(2)	TN	240		Holiday Inn
Nashville – Airport/Opryland Area	TN	296		Embassy Suites
Nashville – Opryland/Airport (Briley Parkway)	TN	382		Holiday Inn Select
Amarillo – I-40	TX	248		Holiday Inn
Austin(2)	TX	189	90%(a)	Doubletree Guest Suites
Austin – North(2)	TX	260	50%(a)	Embassy Suites
Austin – Town Lake (Downtown Area)(2)	TX	320		Holiday Inn
Corpus Christi(2)	TX	150		Embassy Suites
Dallas	TX	295		Crowne Plaza Suites
Dallas – At Campbell Centre	TX	300	90%(a)	Doubletree
Dallas – Dallas Park Central	TX	114		Staybridge Suites
Dallas – DFW International Airport-North(2)	TX	164		Harvey Suites
Dallas – DFW International Airport-South(2)	TX	305		Embassy Suites
Dallas – Love Field(2)	TX	248		Embassy Suites
Dallas – Market Center(2)	TX	354		Crowne Plaza
Dallas – Market Center(2)	TX	244		Embassy Suites
Dallas – Park Central	TX	438	60%(c)	Sheraton
Dallas – Park Central	TX	536	60%(c)	Westin
Dallas – Park Central Area(2)	TX	279		Embassy Suites
Dallas – Regal Row(2)	TX	203	51%(b)	Fairfield Inn
Dallas – West End/Convention Center	TX	309		Hampton Inn
Houston – Greenway Plaza Area(2)	TX	355		Holiday Inn Select
Houston – I-10 East(2)	TX	160	51%(b)	Fairfield Inn
Houston – I-10 East(2)	TX	90	51%(b)	Hampton Inn
Houston – I-10 West & Hwy. 6 (Park 10 Area)	TX	349		Holiday Inn Select
Houston – Intercontinental Airport(2)	TX	415		Holiday Inn
Houston – Medical Center(2)	TX	284		Holiday Inn & Suites
Houston – Near the Galleria(2)	TX	209	51%(b)	Courtyard by Marriott
Houston – Near the Galleria(2)	TX	107	51%(b)	Fairfield Inn
San Antonio – Downtown (Market Square)	TX	315		Holiday Inn
San Antonio – International Airport(2)	TX	261	50%(a)	Embassy Suites
San Antonio – International Airport(2)	TX	397		Holiday Inn Select
San Antonio – N.W. I-10(2)	TX	216	50%(a)	Embassy Suites
Waco – I-35	TX	170		Holiday Inn
Burlington Hotel & Conference Center(2)	VT	309		Sheraton
Vienna – At Tysons Corner(2)	VA	437	50%(c)	Sheraton
Canada
Toronto – Airport	Ontario	445		Holiday Inn Select
Toronto – Yorkdale	Ontario	370		Holiday Inn
Hotel Included in Discontinued Operations Salt Lake City – Airport(3)	UT	191		Holiday Inn

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	State	Rooms	% Owned(1)	Brand
Unconsolidated Operations Hays(2)	KS	114	50%(d)	Hampton Inn
Hays(2)	KS	191	50%(d)	Holiday Inn
Salina(2)	KS	192	50%(d)	Holiday Inn
Salina – I-70(2)	KS	93	50%(d)	Holiday Inn Express &
				Suites
New Orleans – Chateau LeMoyne (In French Quarter/Historic Area)(2)	LA	171	50%(e)	Holiday Inn

(1)	We own 100% of the real estate interests unless otherwise noted. Where our ownership interest is less than 100%, the remaining interest is owned by one of the following parties, as noted: (a) affiliates of Hilton Hotels Corporation (b) affiliates of Interstate Hotels & Resorts (c) affiliates of Starwood Hotels and Resorts (d) Great Plains Investments, LLC; or (e) other private individuals or partnerships not affiliated with us or any manager or franchisor of the hotel.
	With respect to hotels in which we own less than a 100% interest, we serve as the administrative agent or managing member, which allows us to handle administrative functions and to conduct the day-to-day operations of the venture. Generally, however, and in all cases in which we own less than a 51% interest, the consent of the other partner or partners is required to permit us to make major decisions, such as selling or encumbering the hotel, acquiring assets, borrowing money or entering into other capital transactions.
(2)	This hotel is encumbered by mortgage debt or capitalized lease obligations.
(3)	This hotel was sold subsequent to December 31, 2004.

Management Agreements

     The management agreements governing the operation of 75 of our hotels that are (i) managed by IHG or Starwood under brands owned by them, or (ii) managed by Hilton under the Doubletree brand, contain the right and license to operate the hotels under the specified brands. No separate franchise agreements or payment of separate franchise fees are required for the operation of these hotels.

     Management Fees and Performance Standards. Under the management agreements with IHG for 52 of our hotels operated under Holiday Inn and Crowne Plaza names, the TRS lessees generally pay IHG a basic management fee for each hotel equal to 2% of total revenue of the hotel plus 5% of the room revenue of the hotel (which is the equivalent of a franchise fee) for each fiscal month during the initial term and any renewal term. The minimum basic management fees owed under the other management agreements are generally as follows:

•   Embassy Suites Hotels (56 hotels) — 2% of the hotel’s total revenue per month;

•   Sheraton – Westin (11 hotels) — 2% of the hotel’s total revenue per month; and

•   Doubletree (10 hotels) — between 2% and 3% of the hotel’s total revenue per month.

     Under the management agreements with IHG, the TRS lessees are required to pay an incentive management fee based on the performance of all the managed hotels, considered in the aggregate. The incentive management fee is computed as a percentage of hotel profits in excess of specified returns to us, based on our investment in the managed hotels. The management agreements with the other managers generally provide for an incentive management fee based on a percentage of the TRS lessee’s net income before overhead up to an additional 2% of revenues, on a hotel by hotel basis, or, in the case of seven Embassy Suites Hotels whose management agreements expired in 2004 and were renewed for a five-year term, an incentive management fee measured as a percentage of cash flow, subordinate to a 12% return on our book

25

investment, subject to the same 2% of revenues maximum. The management fees we paid with respect to hotels in continuing operations during each of the past three years are as follows:

	Management Fees Paid During
	Year Ended December 31,
Brand	2004		2003		2002
	(dollars in thousands)
Holiday Inn	$	18,196	$	17,291	$	18,202
Crowne Plaza		6,695		6,366		6,925
Embassy Suites		10,015		10,205		11,119
Sheraton – Westin		4,721		4,243		1,962
Doubletree		1,914		1,848		1,822
Other		1,546		1,424		1,310
Total	$	43,087	$	41,377	$	41,340

     Term and Termination. The management agreements with IHG terminate in 2013 for 48 hotels and 2018 for the remainder. IHG may renew the management agreements under certain circumstances, for one additional five-year term on mutually acceptable terms and conditions. The TRSs may elect not to continue to operate the hotels under the brand beyond the expiration of the initial term; however, that election will give IHG the right to force us to sell that hotel to it at an appraised value. The management agreements with the other managers generally have initial terms of between 10 and 20 years, and the agreements are generally renewable beyond the initial term for a period or periods of between five and 10 years only upon the mutual written agreement of the parties. The management agreements covering our hotels expire, subject to any renewal rights, as follows:

	Number of Management Agreements Expiring in
Brand	2005		2006		2007		2008		2009		Thereafter
Embassy Suites		10		19		9		5		11		2
Sheraton – Westin		0		0		0		1		0		10
Doubletree		0		0		4		2		0		4
Holiday Inn		0		0		0		0		1		43
Crowne Plaza		0		0		0		0		0		12
Other		0		1		0		0		0		15
Total		10		20		13		8		12		86

     The management agreements are generally terminable upon the occurrence of standard events of default or if the hotel subject to the agreement fails to meet certain financial expectations. Upon termination by either party for any reason, the TRSs generally will pay all amounts due and owing under the management agreement through the effective date of termination. If an agreement is terminated as a result of a default by us, we may also be liable for damages suffered by the manager. Under the IHG management agreements, if we sell certain hotels, we may be required to pay IHG a monthly replacement management fee equal to the existing fee structure for up to one year. In addition, if a TRS breaches the agreement, resulting in a default and its termination, or otherwise causes or suffers a termination for any reason other than an event of default by IHG, the TRS may be liable for liquidated damages under the terms of the management agreement. However, if the termination results from the sale of a hotel, no liquidated damages will be owed if the net proceeds of the sold hotel are reinvested to purchase additional, or add rooms to existing, hotels licensed and managed by IHG within one year from the sale of the hotel.

     Assignment. Generally, neither party to the management agreements has the right to sell, assign or transfer the agreements to an unaffiliated third party without the prior written consent of the other party to the agreement, which consent shall not be unreasonably withheld. A change in control of either party will generally require the other’s consent, which may not be unreasonably withheld.

Franchise Agreements

     Other than our 77 hotels, whose license to use a brand name are contained in the management agreement governing their operations, and our hotel that does not operate under a nationally recognized brand name, each of our remaining hotels operates under a separate franchise or license agreement. Of our 71 hotels that are operated under a separate franchise or license agreement, 56 are operated under the Embassy Suites Hotels brand.

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     The Embassy Suites Hotels franchise license agreements to which we are a party grant us the right to the use of the Embassy Suites Hotels name, system and marks with respect to specified hotels and establish various management, operational, record-keeping, accounting, reporting and marketing standards and procedures with which the licensed hotel must comply. In addition, the franchisor establishes requirements for the quality and condition of the hotel and its furnishings, furniture and equipment, and we are obligated to expend such funds as may be required to maintain the hotel in compliance with those requirements.

     Typically, our Embassy Suites Hotels franchise license agreements provide for payment to the franchisor of a license fee or royalty of 4% of suite revenues. In addition, we pay approximately 3.5% of suite revenues as marketing and reservation system contributions for the systemwide benefit of Embassy Suites Hotels. The license fees we paid with respect to hotels in continuing operations, during each of the past three years are as follows:

	License Fees Paid During
	Year Ended December 31,
Brand	2004		2003		2002
Embassy Suites Hotels	$	17,060	$	16,265	$	16,523
Other		1,432		1,069		642
Total	$	18,492	$	17,334	$	17,165

     Our typical Embassy Suites Hotels franchise license agreement provides for a term of 20 years, but we have a right to terminate the license for any particular hotel on the 10th or 15th anniversary of the agreement upon payment by us of an amount equal to the fees paid to the franchisor with respect to that hotel during the two preceding years. The agreements provide us with no renewal or extension rights. The agreements are not assignable by us and a change in control of the franchisee will constitute a default on our part. In the event we breach one of these agreements, in addition to losing the right to use the Embassy Suites Hotels name for the operation of the applicable hotel, we may be liable, under certain circumstances, for liquidated damages equal to the fees paid to the franchisor with respect to that hotel during the three preceding years. Franchise license agreements covering 13 of our Embassy Suites Hotels expire within the next five years. Franchise license agreements covering our hotels expire as follows:

	Number of Franchise Agreements Expiring in
Brand	2005		2006		2007		2008		2009		Thereafter
Embassy Suites Hotels		1		0		7		1		4		43
Other(1)		0		2		0		0		0		9
Total		1		2		7		1		4		52

⁽¹⁾ Included in “Other” are the following brands: Fairfield Inn (5 hotels); Hampton Inn (3 hotels); Hilton Suites (1 hotel); and Courtyard by Marriott (2 hotels).

Item 3. Legal Proceedings

     At December 31, 2004, there was 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 these ordinary course of business 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.

Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities

Market Information

     Our common stock is traded on the New York Stock Exchange under the symbol “FCH.” The following table sets forth for the indicated periods the high and low sale prices for our common stock, as traded on that exchange.

	High		Low
2003
First quarter	$	11.87	$	5.80
Second quarter		8.93		6.05
Third quarter		11.71		7.46
Fourth quarter		11.85		10.00
2004
First quarter	$	12.60	$	9.92
Second quarter		12.30		9.50
Third quarter		12.35		10.50
Fourth quarter		14.97		10.92

Stockholder Information

     At February 15, 2005, we had approximately 360 holders of record of our common stock and approximately 50 holders of record of our Series A preferred stock (which is convertible into common stock). It is estimated that there were approximately 12,000 beneficial owners, in the aggregate, of our common stock and Series A preferred stock at that date.

     IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS RELATED TO OUR QUALIFICATION AS A REIT, OUR CHARTER LIMITS, SUBJECT TO CERTAIN EXCEPTIONS, THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE OWNED BY ANY SINGLE PERSON OR AFFILIATED GROUP TO 9.9% OF THE OUTSTANDING COMMON STOCK.

     Although we had declared a quarterly common dividend on our common stock from our inception through 2002, as a result of the uncertain geopolitical environment and soft business climate, together with the decline in margins resulting from continued declines in our portfolio’s average daily rate, our board of directors suspended the payment of dividends on our common stock in 2003. We have, however, continued to pay the full accrued dividends on our outstanding preferred stock throughout 2003 and 2004.

     Our current 2005 operating plan contemplates the continued payment of full preferred stock dividends, assuming that our announced expectations of 2005 operating performance are met, but not the resumption of dividends on our common stock. This operating plan, and our policy regarding dividends, may change, depending upon our actual results of operations, our continued ability to meet the incurrence test under our outstanding senior notes, our success in selling non-strategic hotels and other factors. We currently expect our board of directors to consider the amount, if any, to be distributed on a quarterly basis in preferred and common dividends, based upon the actual operating results of that quarter, economic conditions and other operating trends. Accordingly, future distributions, if any, paid by us will be at the discretion of our board of directors and will depend on our actual cash flow, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our board of directors deems relevant.

     We did not declare any dividends on FelCor’s common stock during 2003 or 2004.

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     In order to maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our taxable income (which does not include net capital gains). For the years ended December 31, 2003 and 2004, distributions to preferred stockholders satisfied our annual distribution requirements. Under certain circumstances we may be required to make distributions in excess of cash available for distribution in order to meet REIT distribution requirements. In that event, we presently would expect to borrow funds, or to sell assets for cash, to the extent necessary to obtain cash sufficient to make the distributions required to retain our qualification as a REIT for federal income tax purposes.

Issuances Of Unregistered Securities

     During the year ended December 31, 2004, we issued an aggregate of 245,398 shares of our common stock, all of which were issued to holders of FelCor LP units upon redemption of a like number of units. For the foregoing issuances of shares of common stock by us, we relied upon the exemption from registration provided by Section 4(2) of the Securities Act as each was a transaction not involving a public offering.

Equity Compensation Plan Information

     The following table sets forth as of December 31, 2004, information concerning our equity compensation plans, including the number of shares issuable and available for issuances under our plans, options, warrants and rights; weighted average exercise price of outstanding options, warrants and rights; and the number of securities remaining available for future issuance.

Equity Compensation Plan Information

	Number of shares to
	be issued upon		Weighted average
	exercise of		exercise price of
	outstanding		outstanding		Number of shares
	options, warrants		options, warrants		remaining available
Plan category	and rights		and rights		for future issuance
Equity compensation plans approved by security holders:
Stock Options		1,478,760	$	24.72
Unvested Restricted Stock		629,455
Total		2,108,215				695,787

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Item 6. Selected Financial Data

     The following tables set forth selected financial data for us for the years ended December 31, 2004, 2003, 2002, 2001, and 2000 that has been derived from our audited financial statements and the notes thereto. This data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the consolidated financial statements and notes thereto, appearing elsewhere in this Annual Report on Form 10-K.

SELECTED FINANCIAL DATA
(in thousands, except per share data)

	Year Ended December 31,
	2004			2003			2002(1)			2001(2)			2000
Statement of Operations Data:(3)
Total revenues	$	1,191,584		$	1,111,750		$	1,145,614		$	1,068,773		$	471,295
Net income (loss) from continuing operations(4)		(111,311	)		(180,589	)		(61,021	)		(51,156	)		41,942
Net income (loss) from continuing operations applicable to common stockholders(4)		(146,441	)		(207,497	)		(87,313	)		(75,756	)		17,260
Diluted earnings per share:
Net income (loss) from continuing operations applicable to common stockholders	$	(2.48	)	$	(3.54	)	$	(1.61	)	$	(1.44	)	$	0.31
Other Data:
Cash distributions declared per common share(5)	$	—		$	—		$	0.60		$	1.70		$	2.20
Funds From Operations (6)		(30,608	)		(207,462	)		(60,018	)		105,492			221,771
EBITDA(6)		184,950			(532	)		150,024			353,435			406,591
Cash flows provided by operating activities		33,281			52,914			106,037			144,766			294,268
Balance Sheet Data (at end of period):
Total assets	$	3,317,658		$	3,590,893		$	3,780,363		$	4,079,485		$	4,103,603
Total debt, net of discount		1,767,122			2,037,355			1,877,134			1,938,408			1,838,241

(1)	Includes hotel revenue and expenses with respect to 88 hotels that were leased to IHG prior to July 1, 2001. Prior to acquisition of these leases, our revenues with respect to these 88 hotels were comprised mainly of percentage lease revenues. Accordingly, revenues, expenses and operating results for the year ended December 31, 2002, are not directly comparable to the same period in 2001.
(2)	Includes hotel revenues and expenses with respect to 96 hotels that were leased to either DJONT or subsidiaries of IHG prior to January 1, 2001, and 88 hotels that were leased to IHG prior to July 1, 2001. Prior to the acquisition of the leases, our revenues were comprised mainly of percentage lease revenues. Accordingly, revenues, expenses and operating results for the year ended December 31, 2001, are not directly comparable to the same periods in 2000 or 2002.
(3)	All years prior to 2004 have been adjusted to reflect those hotels disposed of in 2004 and 2003, or considered held for sale at December 31, 2004, as discontinued operations.
(4)	Included in net income (loss) from continuing operations are the following amounts (in thousands):

	Years Ended December 31,
	2004			2003			2002			2001			2000
Impairment loss	$	(33,760	)	$	(107,409	)	$	(19,247	)	$	(6,273	)	$	(53,856	)
Minority interest share of impairment loss		—			1,770			—			—			—
Loss on early extinguishment of debt		(44,216	)		—			—			—			—
Charge-off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)		(1,270	)		(3,865	)
Abandoned projects		—			—			(1,663	)		(837	)		—
Lease acquisition costs		—			—			—			(36,604	)		—
Merger termination costs		—			—			—			(19,919	)		—
Merger related financing costs		—			—			—			(5,486	)		—
Gain (loss) on swap termination		1,005			—			—			(7,049	)		—
Gain on sale of assets		1,167			284			5,861			2,935			4,388

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(5)	Although we had declared a quarterly common dividend on our common stock from our inception through 2002, as a result of the uncertain geopolitical environment and soft business climate, together with the decline in margins resulting from continued declines in our portfolio’s average daily rate, our board of directors suspended the payment of dividends on our common stock in 2003. We have, however, continued to pay the full accrued dividends on our outstanding preferred stock throughout 2004 and 2003.
(6)	A more detailed description and computation of FFO and EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.
	Consistent with SEC guidance, FFO has not been adjusted for the following amounts included in net income (loss) (in thousands):

	Year Ended December 31,
	2004			2003			2002			2001			2000
Impairment loss	$	(38,289	)	$	(245,509	)	$	(157,505	)	$	(7,000	)	$	(63,000	)
Minority interest share of impairment loss		—			1,770			—			—			—
Charge-off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)		(1,270	)		(3,865	)
Loss on early extinguishment of debt		(44,216	)		1,611			—			—			—
Lease termination costs from asset disposition		(4,900	)		—			—			—			—
Abandoned projects		—			—			(1,663	)		(837	)		—
Lease acquisition costs		—			—			—			(36,604	)		—
Merger termination costs		—			—			—			(19,919	)		—
Merger related financing costs		—			—			—			(5,486	)		—
Gain (loss) on swap termination		1,005			—			—			(7,049	)		—

Consistent with SEC guidance, EBITDA has not been adjusted for the following amounts included in net income (loss) (in thousands):

	Years Ended December 31,
	2004			2003			2002			2001			2000
Impairment loss	$	(38,289	)	$	(245,509	)	$	(157,505	)	$	(7,000	)	$	(63,000	)
Minority interest share of impairment loss		—			1,770			—			—			—
Charge-off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)		(1,270	)		(3,865	)
Gain (loss) on early extinguishment of debt		(44,216	)		1,611			—			—			—
Gain (loss) on swap termination		1,005			—			—			(7,049	)		—
Lease termination costs		(4,900	)		—			—			—			—
Abandoned projects		—			—			(1,663	)		(837	)		—
Gain on sale of depreciable assets		19,422			2,660			5,861			—			2,595

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

     We completed 2004 with a 4.9% increase in our hotel revenue per available room, or RevPAR, compared to 2003, in contrast to the unprecedented consecutive three year decline in RevPAR that we had experienced prior to 2004. The fundamentals of the lodging industry appear to be in the early stages of a recovery, as evidenced by the national trend of increasing RevPAR and increasing average daily room rates, or ADR, which are beginning to represent a major portion of the increases in RevPAR.

     During 2004, we reduced our debt outstanding and our weighted average cost of debt through the following capital transactions and use of cash on hand:

•   We completed the early retirement of $775 million in senior notes:

º	$600 million of senior notes maturing in 2008 that bore interest at 10%; and
º	$175 million of senior notes maturing in October 2004;

•   We issued $290 million of floating rate senior notes;

•   We issued $234 million in mortgage debt; and

•   We issued $160 million of convertible preferred stock.

     Of the non-strategic hotels previously identified for sale, we sold 17 during 2004 for gross proceeds of $157 million and terminated the lease on one hotel at a cost of $5 million. At December 31, 2004, we had one hotel designated as “held for sale,” which subsequently was sold in January 2005, for $1 million. During the first quarter of 2005, one of the 18 hotels previously identified for sale that remained at year end was placed under a firm sale contract with a non-refundable deposit. We currently expect this sale to close in the late first or early second quarter, generating gross proceeds of approximately $38 million. This will leave us with 17 hotels that have previously been identified for sale, substantially all of which are expected to be sold over the next 18 months with anticipated gross proceeds of approximately $117 million.

Financial Comparison (in thousands, except RevPAR, operating margin and percentage change)

	Years Ended December 31,
							% Change						% Change
	2004			2003			2004-2003			2002			2003-2002
RevPAR	$	64.91		$	61.89			4.9	%	$	64.49			(4.0	)%
Hotel operating profit(1)		231,380			215,475			7.4	%		265,274			(18.7	)%
Operating margin(1)		19.5	%		19.4	%		1.0	%		23.2	%		(16.4	)%
Net loss from continuing operations(2)		(111,311	)		(180,589	)		38.4	%		(61,021	)		(195.9	)%
Funds From Operations (“FFO”)(1) (3)		(30,608	)		(207,462	)		85.2	%		(60,018	)		(245.7	)%
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)(1) (4)		184,950			(532	)		348.7	%		150,024			(100.4	)%

(1)	Included in the Financial Comparison are non-GAAP financial measures, including hotel operating profit, hotel operating margin, FFO and EBITDA. Further discussion and a detailed reconciliation of these non-GAAP financial measures to our financial statements are found elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(2)	Included in net loss from continuing operations are the following amounts (in thousands):

	Years Ended December 31,
	2004			2003			2002
Impairment loss	$	(33,760	)	$	(107,409	)	$	(32,666	)
Minority interest share of impairment loss		—			1,770			—
Loss on early extinguishment of debt		(44,216	)		—			—
Charge-off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)
Abandoned projects		—			—			(1,663	)
Gain on swap termination		1,005			—			—
Gain on sale of assets		1,167			284			5,861

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(3)   Consistent with SEC guidance on non-GAAP financial measures, FFO has not been adjusted for the following amounts included in net loss (in thousands, except per share amounts).

	2004						2003						2002
				Per Share						Per Share						Per Share
	Dollars			Amount			Dollars			Amount			Dollars			Amount
Impairment loss	$	(38,289	)	$	(0.62	)	$	(245,509	)	$	(3.97	)	$	(157,505	)	$	(2.55	)
Minority interest share of impairment loss	$	—		$	—		$	1,770		$	0.03		$	—		$	—
Charge-off of deferred debt costs	$	(6,960	)	$	(0.11	)	$	(2,834	)	$	(0.05	)	$	(3,222	)	$	(0.05	)
Gain (loss) on early extinguishment of debt	$	(44,216	)	$	(0.71	)	$	1,611		$	0.03		$	—		$	—
Abandoned projects	$	—		$	—		$	—		$	—		$	(1,663	)	$	(0.03	)
Lease acquisition costs	$	(4,900	)	$			$	—		$	—		$	—		$	—
Gain on swap termination	$	1,005		$	0.02		$	—		$	—		$	—		$	—

(4)   Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been adjusted for the following amounts included in net loss (in thousands).

	Years Ended December 31,
	2004			2003			2002
Impairment loss	$	(38,289	)	$	(245,509	)	$	(157,505	)
Minority interest share of impairment loss		—			1,770			—
Charge off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)
Gain (loss) on early extinguishment of debt		(44,216	)		1,611			—
Gain on swap termination		1,005			—			—
Lease termination costs		(4,900	)		—			—
Abandoned projects		—			—			(1,663	)
Gain on sale of assets		20,589			2,660			6,061

RevPAR and Hotel Operating Margin

     In 2004, we had our first year-over-year increase in RevPAR since 2000. For the year, our RevPAR increased 4.9% from $61.89 to $64.91. The increase in RevPAR was comprised of a 3.1% increase in occupancy to 65.5% and a 1.7% increase in average daily room rate, or ADR. We attribute the increase in RevPAR largely to the beginning of a nationwide lodging industry recovery. In 2004, a significant portion of the improvement came from an increase in occupancy; however, over the last six months of 2004, a more significant portion of the increase in RevPAR was derived from the increase in ADR. We expect this trend of increasing RevPAR to continue in 2005 and further believe that improvements in ADR will continue to become an increasing portion of the growth in RevPAR. This is significant to the lodging industry, because increases in room rate generally result in increases in hotel operating margins. We have seen a gradual firming of the hotel operating margins at our hotels, which improved from 19.4% in 2003 to 19.5% in 2004, and we expect to see further improvements in 2005 as ADR continues to become a larger percentage of the RevPAR improvement. Our current hotel operating margins remain well below 2000 levels and present one of our major challenges and opportunities. We are focused on working with our brand managers to control the expense creep that generally occurs during the early years of a lodging industry recovery, to improve our hotel operating margins.

Sale of Non-Strategic Hotels

     In 2003, we completed a comprehensive review of our investment strategy and of our existing hotel portfolio, as a result of which we decided to sell certain under-performing smaller hotels in secondary and tertiary markets, markets with high supply growth, and markets in which we had an undesirable concentration, such as Dallas. We continue to review and evaluate our hotel portfolio on an ongoing basis and may identify additional non-strategic hotels for sale based upon changing market conditions and other factors.

     During 2004, we sold 17 of the non-strategic hotels previously identified for sale, terminated the lease on one hotel, had one hotel under a firm contract of sale with a non-refundable deposit (which was classified as “held for sale” and included in our discontinued operations) leaving 18 non-strategic hotels remaining to be sold at year end, substantially all of which are expected to be sold over the next 18 months. The 17 hotels sold in

33

2004 had 4,335 rooms and were sold for aggregate gross proceeds of $157 million. We expect the aggregate gross sale proceeds from the 18 remaining non-strategic hotels previously identified for sale to be approximately $155 million. The composition, by brand, of the 18 hotels identified as held for sale at December 31, 2004, is as follows: Holiday Inn-branded (11 hotels); Embassy Suites (three hotels); Doubletree-branded (two hotels); Hampton Inn (one hotel); and Independent (one hotel).

     The following table summarizes information on hotels sold during 2004 and 2003 (in thousands):

	Investment		Accumulated		Impairment		Net Investment		Net Sale		Gain (loss)
Year of Sale	in Hotel		Depreciation		Charge		in Hotel		Proceeds		on Sale
2004	$	356,148	$	66,448	$	157,800	$	131,900	$	151,322	$	19,422
2003	$	212,336	$	36,255	$	83,492	$	92,589	$	94,965	$	2,376

     During the first quarter of 2005, one of the 18 hotels previously identified for sale that remained at year end was placed under a firm sale contract with a non-refundable deposit. We currently expect this sale to close in the late first or early second quarter, generating gross proceeds of approximately $38 million.

     Under the management agreement entered into with IHG in July 2001, we were obligated to reinvest the net proceeds from the sale of any IHG managed hotel in other IHG managed hotels or pay substantial liquidated damages to IHG. This potential exposure to liquidated damages made it impractical to sell certain hotels and use the proceeds to pay down debt. In September 2003, we completed an amendment to the IHG management agreement covering 78 of our hotels, pursuant to which we extended the term of the management contracts on 27 hotels from 2013 to 2018 and, in exchange, we received from IHG a liquidated damage credit of $25 million to apply to the satisfaction of liquidated damages otherwise payable to IHG upon the sale of certain IHG managed hotels where the proceeds of sale were applied to the reduction of our debt rather than to reinvestment in IHG managed hotels. At the end of December 2004, we had utilized all of the $25 million liquidated damages credit available to us. Following the full utilization of this credit, we were again required to reinvest the proceeds from the further sale of IHG managed hotels in other hotels to be managed by IHG or pay substantial liquidated damages to IHG.

     At March 1, 2005, we had a reinvestment requirement of $17 million. If we do not fulfill this reinvestment obligation within 12 months of the date of sale, we will be required to pay liquidated damages to IHG aggregating $5.3 million. Thirteen of the 18 remaining hotels identified for sale at year end are managed by IHG and subject to the reinvestment obligation in the event that they are sold. We will incur additional aggregate reinvestment obligations of approximately $76 million if these hotels are sold at currently estimated prices or, if the proceeds of sale are not so reinvested, we will incur approximately $19 million in additional liquidated damages for which we would be liable to IHG.

     The 18 non-strategic hotels identified for sale that were included in our continuing operations at December 31, 2004, represented 12% of the rooms in our hotel portfolio, but only 5% of our consolidated hotel operating profit in 2004. The 2004 operating margin for these 18 hotels averaged approximately 1,000 basis points below the remainder of our portfolio.

  Refined Investment Strategy

     We plan to focus our future acquisition efforts on higher quality hotels in markets with significant barriers to entry, such as central business districts and resort locations. Hotel brand and market segment will be secondary concerns when we are considering investment opportunities. We anticipate that this focus will lead to an increase in the number of our upper upscale properties, group and resort destination properties, and greater diversification of our portfolio by geographic location, brand, and customer base. In keeping with this strategy, in March 2004, we purchased the 132-room Santa Monica Holiday Inn. This hotel has a premier location across from the Santa Monica Pier and the Santa Monica beaches and will continue to be operated as a full service upscale hotel.

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Results of Operations

Comparison of the Years Ended December 31, 2004 and 2003

     For the year ended December 31, 2004, we recorded a loss applicable to common shareholders of $135 million, compared to a loss in 2003 of $337 million. During 2004 our hotel operating revenue from continuing operations increased by $78 million, reflecting the 4.9% increase in RevPAR for the year. This RevPAR improvement came on the heels of an unprecedented three year decline in our RevPAR, which has resulted in hotel revenues remaining well below historical levels. Also contributing to the current year loss were; $50 million of net costs associated with the early retirement of $775 million in senior notes; $38 million of impairment charges on our hotels; a $5 million charge associated with the early termination of a hotel lease; $2 million of hurricane losses sustained in the third quarter at 13 of our hotels; and a gain of $12 million from the development and sale of the 251-unit Margate condominium tower at the Kingston Plantation in Myrtle Beach, South Carolina.

     Our revenues from continuing operations for 2004 were $1.2 billion, which reflected a 7% increase, over 2003. The increase in revenues principally resulted from the 4.9% increase in hotel RevPAR. Our hotel portfolio occupancy increased by 3.1% over the prior year and its ADR increased by 1.7%. We attribute the increase in RevPAR to the general firming of the US economy resulting in increased business travel, from which we derive a significant portion of out hotel business. Business travelers generally pay a higher room rate than other types of hotel guests and, as business travel increases, we are able to accept smaller amounts of lower room rate business.

     Also contributing to the increase in revenues for 2004 was the consolidation of our eight-hotel joint venture with Interstate Hotels & Resorts in June 2003 and the acquisition in March 2004 of the Holiday Inn in Santa Monica, California. These hotels contributed $13 million of our consolidated revenues in 2003 and $29 million in 2004.

     The hotel operating margin of our hotels included in continuing operations at December 31, 2004, was 19.5% compared to 19.4% in 2003. The slight increase in hotel operating margins is attributed primarily to decreases in property tax and insurance expenses, which were largely offset by increased labor related costs. Property tax expense decreased in 2004, compared to 2003, largely from reductions in assessed values and resolution of prior years’ property tax appeals. The reduction in insurance expense, compared to prior year, reflects the softening in the property insurance markets and reductions in general liability losses.

     Our interest expense included in continuing operations decreased by 9%, to $150 million, as compared to 2003. The reduction in interest expense is related to a $270 million reduction in outstanding debt and a reduction in our weighted average interest rate by 23 basis points, compared to 2003. The change in debt outstanding and the reduction in average interest rate resulted from the capital transactions described above under the caption “General.”

     The impairment charge of $38 million recorded in 2004 related to 17 hotels, with $34 million being included in continuing operations and $4 million being recorded in discontinued operations. Seven of the hotels had significantly lower operating cash flows, compared to the prior year and budget, and their estimated holding periods were reduced. With respect to one hotel, we entered into an option to sell it for less than its book value and for six hotels, whose expected holding periods had been shortened, we recorded an impairment loss to reduce their carrying value to our then current estimate of fair value. In 2003, we had recorded impairment charges of $246 million, $108 million of which was recorded in continuing operations, $138 million of which was recorded in discontinued operations and $2 million was recorded in equity in income from unconsolidated entities.

     At December 31, 2004, the 18 hotels included in continuing operations that had been identified for sale, represented 12% of the rooms in our hotel portfolio, but only 5% of our consolidated hotel operating profit, in 2004. The 2004 hotel operating margin for these 18 hotels averaged 1,000 basis points below the remainder of our portfolio.

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     During 2004 we completed the early retirement of $775 million of senior notes. Associated with this early retirement we recorded a charge-off of deferred financing costs of $7 million, a loss on early retirement of debt (representing the premium paid at retirement) of $44 million and we had a gain of $1 million related to the termination of an interest rate swap on a portion of these notes.

     Equity in income from unconsolidated entities increased $15 million compared to 2003. The principal component of this increase was our portion of the gain on the development and sale of the Margate condominium tower at the Kingston Plantation in Myrtle Beach, South Carolina, by an unconsolidated entity in which we owned a 50% interest.

     Included in the loss from discontinued operations are the results of operations of the 18 hotels disposed of in 2004, the one hotel designated as held for sale at December 31, 2004, and the 16 hotels sold in 2003.

Comparison of the Years Ended December 31, 2003 and 2002

     For the year ended December 31, 2003, we recorded a loss applicable to common shareholders of $337 million, compared to a loss in 2002 of $205 million. The principal components of the loss in 2003 were: impairment charges of $246 million, primarily related to our decision to sell 18 additional hotels over the next two years; the decrease in hotel RevPAR of 4.0%, compared to 2002; and a 380 basis point decrease in hotel operating margin, and increases in workers compensation and employee health insurance, compared to 2002.

     Our revenues from continuing operations for the full year 2003 were $1.1 billion, which reflected a decline of 3.0%, compared to 2002. This decline in revenue principally resulted from a 4.0% decline in hotel portfolio RevPAR, compared to 2002. Occupancy decreased 0.4%, to 63.6%, and ADR decreased 3.6%, to $97.38, compared to 2002. We attribute the decrease in ADR principally to the continued weakness in corporate travel, from which we derive a significant portion of our hotel business. Business travelers generally pay a higher room rate than other types of hotel guests and, in an effort to maintain hotel occupancies, we have been accepting a larger amount of lower room rate business, which adversely affects our operating margins.

     The revenue decrease related to the RevPAR decline during 2003 was partially offset by $13 million of increased revenues from the consolidation of our joint venture with Interstate Hotels & Resorts, and the operating results of its eight hotels, in June 2003. This joint venture had been previously accounted for by the equity method.

     The hotel operating margin of our hotels included in continuing operations at December 31, 2003, was 19.4%, which represents a 380 basis point decrease, compared to 2002. The 2003 decrease in operating margin principally resulted from the $3.65, or 3.6% decline in ADR during the year. The decrease in ADR, together with the slight decrease in occupancy, meant that our hotels served approximately the same number of guests in 2003 as in 2002, but with lower revenues. In addition, increases in health and workers compensation insurance and energy costs further decreased our operating margins, compared to 2002.

     We recorded impairment losses of $246 million in 2003 ($108 million of which was included in continuing operations and $138 million were included in discontinued operations) and $158 million in 2002 ($33 million of which was included in continuing operations and $125 million were included in discontinued operations). The impairment losses in 2003 and 2002 principally resulted from our decision to sell non-strategic hotels and reflects the difference between the book value and the current estimated fair market value of these hotels. After the completion of a comprehensive review of our investment strategy and our hotel portfolio, we refined our investment strategy and decided to sell smaller hotels in secondary and tertiary markets, emphasize the acquisition of higher quality hotels in low supply growth markets, and better diversify our portfolio by geographic market, brand, and customer base.

     Discontinued operations represent the hotel operating income, direct interest costs, impairment losses and gains or losses on sale of the 18 hotels disposed of in 2004, the one hotel designated as held for sale at December 31, 2004, and 16 hotels sold during 2003.

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Non-GAAP Financial Measures

     We refer in this annual report on Form 10-K to certain “non-GAAP financial measures.” These measures, including FFO, EBITDA, hotel operating profit and hotel operating margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles (“GAAP”). The following tables reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and of the limitations upon such measures.

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     The following tables detail our computation of FFO (in thousands, except for per share data):

Reconciliation of Net Income (Loss) to FFO
(in thousands, except per share data)

	Year Ended December 31,
	2004								2003								2002
						Per Share								Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	(100,127	)						$	(310,144	)						$	(178,581	)
Preferred dividends		(35,130	)							(26,908	)							(26,292	)
Net income (loss) applicable to common stockholders		(135,257	)		59,045	$	(2.29	)		(337,052	)		58,657	$	(5.75	)		(204,873	)		54,173	$	(3.78	)
Depreciation from continuing operations		118,855					2.01			123,968					2.11			129,565					2.39
Depreciation from unconsolidated entities and discontinued operations		11,897					0.20			26,067					0.44			34,868					0.65
Gain on sale of assets		(19,422	)				(0.33	)		(2,668	)				(0.05	)		(5,861	)				(0.11	)
Minority interest in FelCor LP		(6,681	)		2,939		(0.08	)		(17,777	)		3,188		(0.10	)		(13,717	)		7,564		(0.12	)
FFO	$	(30,608	)		61,984	$	(0.49	)	$	(207,462	)		61,845	$	(3.35	)	$	(60,018	)		61,737	$	(0.97	)

	Year Ended December 31,
	2001								2000
						Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	(39,276	)						$	61,700
Preferred dividends		(24,600	)							(24,682	)
Net income (loss) applicable to common stockholders		(63,876	)		52,622	$	(1.21	)		37,018			55,519	$	0.67
Depreciation from continuing operations		136,952					2.60			141,501					2.55
Depreciation from unconsolidated entities and discontinued operations		31,622					0.61			29,411					0.53
Gain on sale of assets		—					—			(2,595	)				(0.05	)
Preferred dividends		11,662			4,636		2.52			11,744			4,683		2.51
Stock options and unvested restricted shares		—			404		—			—			—		—
Minority interest in FelCor LP		(10,868	)		9,013		(2.94	)		4,692			7,037		(2.91	)
FFO	$	105,492			66,675	$	1.58		$	221,771			67,239	$	3.30

     Consistent with SEC guidance on non-GAAP financial measures, FFO has not been adjusted for the following amounts included in net income (loss) (in thousands, except for per share amounts):

	Year Ended December 31,
	2004						2003						2002						2001						2000
				Per Share						Per Share						Per Share						Per Share						Per Share
	Dollars			Amount			Dollars			Amount			Dollars			Amount			Dollars			Amount			Dollars			Amount
Impairment loss	$	(38,289	)	$	(0.62	)	$	(245,509	)	$	(3.97	)	$	(157,505	)	$	(2.55	)	$	(7,000	)	$	(0.10	)	$	(63,000	)	$	(0.94	)
Minority interest share of impairment loss	$	—		$	—		$	1,770		$	0.03		$	—		$	—		$	—		$	—		$	—		$	—
Charge-off of deferred debt costs	$	(6,960	)	$	(0.10	)	$	(2,834	)	$	(0.05	)	$	(3,222	)	$	(0.05	)	$	(1,270	)	$	(0.02	)	$	(3,865	)	$	(0.06	)
Loss on early extinguishment of debt	$	(44,216	)	$	(0.71	)	$	1,611		$	0.03		$	—		$	—		$	—		$	—		$	—		$	—
Abandoned projects	$	—		$	—		$	—		$	—		$	(1,663	)	$	(0.03	)	$	(837	)	$	(0.01	)	$	—		$	—
Lease termination cost from asset disposition	$	(4,900	)	$	(0.08	)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Lease acquisition costs	$	—		$	—		$	—		$	—		$	—		$	—		$	(36,604	)	$	(0.55	)	$	—		$	—
Merger termination costs	$	—		$	—		$	—		$	—		$	—		$	—		$	(19,919	)	$	(0.30	)	$	—		$	—
Merger related financing costs	$	—		$	—		$	—		$	—		$	—		$	—		$	(5,486	)	$	(0.08	)	$	—		$	—
Gain (loss) from swap termination	$	1,005		$	0.02		$	—		$	—		$	—		$	—		$	(7,049	)	$	(0.11	)	$	—		$	—

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     The following table details our computation of EBITDA (in thousands):

Reconciliation of Net Income (Loss) to EBITDA
(in thousands, except per share data)

	Year Ended December 31,
	2004			2003			2002			2001			2000
Net income (loss)	$	(100,127	)	$	(310,144	)	$	(178,581	)	$	(39,276	)	$	61,700
Depreciation from continuing operations		118,855			123,968			129,565			136,952			141,501
Depreciation from unconsolidated entities and discontinued operations		11,897			26,067			34,868			31,622			29,411
Merger termination costs		—			—			—			19,919			—
Merger financing costs		—			—			—			5,486			—
Lease acquisition costs		—			—			—			36,604			—
Interest expense		152,394			167,431			164,368			159,179			158,620
Interest expense from unconsolidated entities and discontinued operations		5,667			7,713			11,433			11,724			9,187
Amortization expense		2,945			2,210			2,088			2,093			1,480
Minority interest in FelCor LP		(6,681	)		(17,777	)		(13,717	)		(10,868	)		4,692
EBITDA	$	184,950		$	(532	)	$	150,024		$	353,435		$	406,591

     Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been adjusted for the following amounts included in net income (loss) (in thousands):

	Year Ended December 31,
	2004			2003			2002			2001			2000
Impairment loss	$	(38,289	)	$	(245,509	)	$	(157,505	)	$	(7,000	)	$	(63,000	)
Minority interest share of impairment loss		—			1,770			—			—			—
Charge-off of deferred debt costs		(6,960	)		(2,834	)		(3,222	)		(1,270	)		(3,865	)
Gain (loss) on early extinguishment of debt		(44,216	)		1,611			—			—			—
Gain (loss) from swap termination		1,005			—			—			(7,049	)		—
Lease termination costs from asset disposition		(4,900	)		—			—			—			—
Abandoned projects		—			—			(1,663	)		(837	)		—
Gain on sale of assets		19,422			2,668			5,861			—			2,595

Hotel Operating Profit and Hotel Operating Margin
(dollars in thousands)

	Year Ended December 31,
	2004			2003			2002
Continuing Operations
Total revenue	$	1,191,584		$	1,111,750		$	1,145,614
Retail space rental and other revenue		(2,721	)		(1,022	)		(1,646	)
Hotel revenue		1,188,863			1,110,728			1,143,968
Hotel operating expenses		(957,483	)		(895,253	)		(878,694	)
Hotel operating profit	$	231,380		$	215,475		$	265,274
Hotel operating margin(1)		19.5	%		19.4	%		23.2	%

⁽¹⁾ Hotel operating profit as a percentage of hotel revenue.

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Hotel Operating Expense Composition
(dollars in thousands)

	Year Ended December 31,
	2004			2003			2002
Continuing Operations
Hotel departmental expenses:
Room	$	257,016		$	234,242		$	228,739
Food and beverage		143,079			133,412			134,694
Other operating departments		31,887			27,024			27,426
Other property related costs:
Administrative and general		115,422			106,466			105,236
Marketing and advertising		102,897			96,400			92,185
Repairs and maintenance		67,827			63,696			59,775
Energy		63,128			57,640			53,419
Taxes, insurance and lease expense		114,648			117,662			118,715
Total other property related costs		895,904			836,542			820,189
Management and franchise fees		61,579			58,711			58,505
Hotel operating expenses	$	957,483		$	895,253		$	878,694
Reconciliation of total operating expense to hotel operating expense:
Total operating expenses	$	1,093,432		$	1,033,487		$	1,023,678
Abandoned projects		—			—			(1,663	)
Corporate expenses		(17,094	)		(14,266	)		(13,756	)
Depreciation		(118,855	)		(123,968	)		(129,565	)
Hotel operating expenses	$	957,483		$	895,253		$	878,694

Reconciliation of Net Loss to Hotel Operating Profit
(in thousands)

	Year Ended December 31,
	Actual			Actual			Actual
	2004			2003			2002
Net loss	$	(100,127	)	$	(310,144	)	$	(178,581	)
Discontinued operations		(11,184	)		129,555			117,560
Equity in income from unconsolidated entities		(17,121	)		(2,370	)		10,127
Gain on sale of assets		(1,167	)		(284	)		(5,861	)
Minority interests		(7,928	)		(13,912	)		(6,041	)
Interest expense, net		149,623			165,175			162,263
Charge-off of deferred financing costs		6,960			2,834			3,222
Swap termination costs		(1,005	)		—			—
Impairment loss		33,760			107,409			19,247
Abandoned projects		—			—			1,663
Hurricane loss		2,125			—			—
Loss on early extinguishment of debt		44,216			—			—
Corporate expenses		17,094			14,266			13,756
Depreciation		118,855			123,968			129,565
Retail space rental and other revenue		(2,721	)		(1,022	)		(1,646	)
Hotel operating profit	$	231,380		$	215,475		$	265,274

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Reconciliation of Ratio of Operating Income to Total Revenue to Hotel Operating Margin

	Year Ended December 31,
	Actual			Actual			Actual
	2004			2003			2002
Ratio of operating income to total revenues		8.2	%		7.0	%		10.6	%
Less:
Retail space rental and other revenue		(0.2	)		(0.1	)		(0.1	)
Plus:
Abandoned projects		—			—			0.1
Corporate expenses		1.5			1.3			1.2
Depreciation		10.0			11.2			11.4
Hotel operating margin		19.5	%		19.4	%		23.2	%

     Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures, including FFO, EBITDA, hotel operating profit and hotel operating margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a REIT’s performance and should be considered along with, but not as an alternative to, net income as a measure of our operating performance.

FFO and EBITDA

     The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT,”) defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do.

     EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Hotel Operating Profit and Operating Margin

     Hotel operating profit and operating margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and operating managers have direct control. We believe that hotel operating profit and operating margin is useful to investors by providing greater transparency with respect to two significant measures used by us in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present hotel operating profit and hotel operating margin by eliminating corporate-level expenses, depreciation and expenses related to our capital structure. We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time.

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Use and Limitations of Non-GAAP Measures

     Our management and Board of Directors use FFO and EBITDA to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use hotel operating profit and hotel operating margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.

     The use of these non-GAAP financial measures has certain limitations. FFO, EBITDA, hotel operating profit and hotel operating margin, as presented by us, may not be comparable to FFO, EBITDA, hotel operating profit and hotel operating margin as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

     These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. Neither should FFO, FFO per share or EBITDA be considered as measures of our liquidity or indicative of funds available for our cash needs, including our ability to make cash distributions or service our debt. FFO per share does not measure, and should not be used as a measure of, amounts that accrue directly to the benefit of stockholders. FFO, EBITDA, hotel operating profit and hotel operating margin reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.

Liquidity and Capital Resources

     Our principal source of cash to meet our cash requirements, including distributions to stockholders and repayments of indebtedness, is from the results of operations of our hotels. For the year ended December 31, 2004, net cash flow provided by operating activities, consisting primarily of hotel operations, was $33 million. At December 31, 2004, we had cash on hand of $119 million. Included in cash on hand was $28 million held under our hotel management agreements to meet our hotel minimum working capital requirements.

     We currently expect that our cash flow provided by operating activities for 2005 will be approximately $119 million to $126 million. These cash flow forecasts assume a RevPAR increase of 5% to 6%, hotel operating margin of 19.9% to 20.2%, and the sale of one hotel for $38 million. Our current operating plan contemplates that we will make preferred dividend payments of $40 million, capital expenditures of approximately $100 million, debt maturities of $11 million (which we currently anticipate refinancing), and $22 million in normal recurring principal payments, leaving a cash flow shortfall of approximately $9 million to $16 million. We expect the cash necessary to fund this cash flow shortfall and distributions, if any, on our common stock, will come from our cash balances or the proceeds from the sale of hotels. We anticipate that our board of directors will develop a policy with respect to the payment of common dividends during 2005, and to determine the amount of preferred and common dividends, if any, for each quarterly period, based upon the actual operating results of that quarter, economic conditions, other operating trends, our financial condition and capital requirements, as well as the minimum REIT distribution requirements.

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     Events, including the threat of additional terrorist attacks, U.S. military involvement in the Middle East and the bankruptcy of several major corporations, had an adverse impact on the capital markets in prior years. Similar events, such as new terrorist attacks or additional bankruptcies could further adversely affect the availability and cost of capital for our business. In addition, should the recovery of the overall economy and of the lodging industry stall, that could also adversely affect our operating cash flow and the availability and cost of capital for our business.

     As a consequence of the recent prolonged economic slowdown from 2001 through 2003, its impact on the travel and lodging industries, and our higher secured debt levels, Moody’s and Standard & Poor’s lowered their ratings on our senior unsecured debt in 2003, to B1 and B-, respectively. This downgrade triggered a 50 basis point step-up in interest rates applicable to $300 million of our senior unsecured debt outstanding at December 31, 2004. The obligation to pay this increased interest rate will continue to be in effect unless and until either Moody’s raises its rating on our senior unsecured debt to Ba3 or Standard & Poor’s increases its rating to BB-.

     We are also subject to the risks of fluctuating hotel operating margins at our hotels, including but not limited to increases in wage and benefit costs, repair and maintenance expenses, utilities, insurance, and other operating expenses that can fluctuate disproportionately to revenues. These operating expenses are difficult to predict and control, resulting in an increased risk of volatility in our results of operations. The recent economic slowdown that began in 2001, led to a sharp drop in occupancy and ADR resulting both in declines in RevPAR and in the erosion in our operating margins through 2003. Our operating margins from continuing operations have dropped from 23.2% in 2002 to 19.4% in 2003 and increased slightly to 19.5% in 2004. If our hotel RevPAR and/or operating margins worsen, or continue at current levels for a protracted time, they could have a material adverse effect on our operations, earnings and cash flow.

     In March 2004, we elected to terminate our line of credit, which resulted in a charge-off of unamortized loan costs of $0.2 million and produced cash savings of approximately $0.4 million during 2004. At the date of termination of the line of credit, there were no borrowings under the line, and we were in compliance with all the applicable covenants.

     In April 2004, we completed the sale of 4,600,000 shares of our $1.95 Series A Cumulative Convertible Preferred Stock. The shares were sold at a price of $23.79 per share, which included accrued dividends of $0.51 per share through April 5, 2004, resulting in net proceeds to us of $105 million. In August 2004, we completed the sale of an additional 2,300,000 shares of our Series A preferred stock. These shares were sold at a price of $23.22 per share, which included accrued dividends of $0.28 per share through August 22, 2004, resulting in proceeds to us of $52 million. The proceeds of both offerings were used to retire senior unsecured debt.

     In May 2004, we issued $175 million in aggregate principal amount of Senior Floating Notes due 2011, or 2011 Notes. We received net proceeds of $174.1 million. The 2011 Notes will mature on June 1, 2011 and bear interest, adjusted semi annually, at the six-month LIBOR rate, plus 4.25%. The Notes are callable on or after December 1, 2006, and will rank equally with our other existing senior unsecured debt. In July 2004, we issued an additional $115 million of the 2011 Notes. The proceeds were used to retire senior unsecured debt.

     In June 2004, we redeemed all $175 million in principal amount of our outstanding 7.375% Senior Notes due 2004. The redemption price was $1,018.14 per $1,000 of the principal amount plus accrued interest. With the retirement of this debt, we recorded a loss on redemption of $3 million and wrote off $0.3 million of debt issue costs. The loss was partially offset by a $1 million gain on the termination of interest rate swaps tied to this debt.

     During 2004, we purchased all $600 million principal amount of our 9.5% Senior Notes due 2008 (which bore interest at 10% as a result of the 2003 downgrade of the credit ratings on our senior notes) through tender offers, redemptions and purchases in the open market. With the retirement of this debt, we recorded a loss on early extinguishment of debt of $41 million, of which $38 million related to the premium paid in

43

excess of par and $3 million related to the charge off of unamortized discount. We also wrote off debt issue costs of $6 million.

     In June 2003, we entered into a new secured delayed draw facility with JPMorgan Chase Bank for up to $200 million. In 2004, we borrowed $194 million under this facility (collateralized by 15 hotels). The amount borrowed under the facility was converted into: (i) $107 million under nine separate fixed rate CMBS loans secured by nine hotels, with a weighted average interest rate of 6.5% and with maturity dates ranging from 2009 to 2014, and (ii) $87 million under a cross-collateralized floating rate CMBS loan secured by six hotels with an interest rate of LIBOR plus 2.11% and with a maturity date of 2009, including extension options which are subject to our satisfaction of certain conditions. On July 28, 2004, we cancelled the unused balance of this $200 million facility.

     In December 2004, we closed on $40 million second mortgage financing with regard to seven of our hotels. The second mortgage loan has a fixed interest rate of 6.82% and contains the same terms and conditions as the first mortgage, including the maturity date of March 2009.

     At December 31, 2004, we had aggregate mortgage indebtedness of $1.1 billion that was secured by 79 of our consolidated hotels, with an aggregate book value of $1.8 billion. Substantially all of this debt is recourse solely to the specific assets securing the debt, except in the case of fraud, misapplication of funds and other customary recourse provisions. Loans secured by 41 hotels provide for lock-box arrangements. With respect to loans secured by 23 of these hotels, if the debt service coverage ratios fall below certain levels, the lender is entitled to apply the revenues from the hotels securing the loan to satisfy current requirements for debt service, taxes, insurance and other reserves, before the balance of the revenues, if any, would be available to the owner to pay the expenses of hotel operations and provide a return to the owner. Eight of these 23 hotels, which accounted for 2% of our total revenues in 2004, are currently below the prescribed debt service coverage ratios and are subject to these lock-box requirements. These eight hotels, in the aggregate, are currently covering their hotel operating expenses, before capital expenditures.

     With respect to loans secured by the remaining 18 hotels, the owner is permitted to retain 115% of budgeted hotel operating expenses before the remaining revenues would become subject to a similar lock-box arrangement if a specified debt service coverage ratio is not met. The mortgage loans secured by 16 of these 18 hotels also provide that, so long as the debt service coverage ratios remain below a second, even lower minimum level, the lender may retain any excess cash (after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements) and, if the debt service coverage ratio remains below this lower minimum level for 12 consecutive months, any accumulated excess cash may be applied to the prepayment of the principal amount of the debt. If the debt service coverage ratio exceeds the lower minimum level for three consecutive months, any then accumulated excess cash will be returned to the owner. Ten of these 18 hotels, which accounted for 6% of our total revenues in 2004, are currently below the applicable debt service coverage ratio and are subject to the lock-box provisions. None of the hotels are currently below the second, even lower minimum debt service coverage ratio that would permit the lender to retain excess cash after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements.

     Most of our mortgage debt is non-recourse to us and contains provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of our mortgage debt is prepayable, subject to various prepayment penalties, yield maintenance or defeasance obligations.

     Our publicly-traded senior unsecured notes require that we satisfy total leverage, secured leverage and an interest coverage tests in order to: incur additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; pay dividends in excess of the minimum dividend required to meet the REIT qualification test; repurchase capital stock; or merge. As of the date of this filing, we have satisfied all such tests. Under the terms of certain of our indentures, we are prohibited from repurchasing any of our capital stock, whether common or preferred, subject to certain exceptions, so long as our debt-to-EBITDA ratio, as defined in the indentures, exceeds 4.85 to 1. Debt, as defined in the indentures, approximates our consolidated debt. EBITDA is defined in the indentures as consolidated GAAP net income, adjusted for minority interest in FelCor LP, actual cash distributions by unconsolidated entities, gains or losses from asset sales, dividends on preferred stock and extraordinary gains and losses (as defined at the date of the

44

indentures), plus interest expense, income taxes, depreciation expense, amortization expense and other non-cash items. Our debt-to-EBITDA ratio, as defined, was 4.8 to 1, 6.0 to 1 and 5.3 to 1 for the years ended December 31, 2004, 2003 and 2002, respectively. The ratio increased in 2002 and 2003 principally because of the decline in our EBITDA as a result of the recession that began in March of 2001 and was exacerbated by the terrorist attacks of September 11, 2001. These events contributed to a deep and protracted recession in the hospitality industry. Our EBITDA has also decreased due to the sale of non-strategic hotels. Although our current debt-to-EDITDA ratio is slightly below 4.85 to 1, a decline in our EBITDA, as a result of asset sales or adverse economic developments, or an increase in our debt, could again make us subject to this limitation. Accordingly, we may again be prohibited from purchasing any of our capital stock, except as permitted under limited exceptions, such as from the proceeds of a substantially concurrent issuance of other capital stock.

     If actual operating results fall significantly below our current expectations, as reflected in our current public guidance, or if interest rates increase substantially above expected levels, we may be unable to continue to satisfy the incurrence test under the indentures governing our senior unsecured notes. In such an event, we may be prohibited from, among other things, incurring any additional indebtedness, except under certain specific exceptions, or paying dividends on our preferred or common stock, except to the extent necessary to satisfy the REIT qualification requirement that we distribute currently at least 90% of our taxable income. In the event of our failure of this incurrence test, based upon our current estimates of taxable income for 2005, we would be unable to distribute the full amount of dividends accruing under our outstanding preferred stock in 2005 and, accordingly, could pay no dividends on our common stock.

     We currently anticipate that we will meet our financial covenant and incurrence tests under the RevPAR guidance provided by us at our fourth quarter earnings conference call on February 10, 2005. For the first quarter of 2005, we currently anticipate that our portfolio RevPAR will be 4% to 5% above the comparable period of the prior year. The RevPAR increase in 2005, compared to the same periods in 2004, was approximately 7.1% for January and 7.3% for February 2005. We currently anticipate that full year 2005 hotel portfolio RevPAR will increase approximately 5% to 6%. For 2005 we expect to make capital expenditures of approximately $100 million, and we are currently under contract to sell one hotel for $38 million, which is expected to close in March 2005. We estimate that our net loss for 2005 will be in the range of $35 to $29 million or $0.59 to $0.49 per share. FFO for the year 2005, is anticipated to be within the range of $70 to $76 million, and EBITDA is expected to be within the range of $259 to $265 million. No other asset sales or capital transactions are assumed in the preparation of our guidance.

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Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
(in millions, except per share and unit data)

	Full Year 2005 Guidance
	Low Guidance						High Guidance
				Per Share						Per Share
	Dollars			Amount(a)			Dollars			Amount (a)
Net loss	$	(35	)	$	(0.59	)	$	(29	)	$	(0.49	)
Depreciation		147						147
Preferred Dividends		(40	)					(40	)
Minority interest in FelCor LP		(2	)					(2	)
FFO	$	70		$	1.11		$	76		$	1.21
Net loss	$	(35	)				$	(29	)
Depreciation		147						147
Minority interest in FelCor LP		(2	)					(2	)
Interest expense		139						139
Interest expense from unconsolidated entities		7						7
Amortization expense		3						3
EBITDA	$	259					$	265

(a) Weighted average shares are 59.4 million. Adding minority interest and unvested restricted stock of 3.4 million shares to weighted average shares, provides the weighted average shares and units of 62.8 million used to compute FFO per share.

The following table details our debt outstanding at December 31, 2004 and 2003 (in thousands):

						Balance Outstanding
	Encumbered	Interest Rate at			Maturity	December 31,
	Hotels	December 31, 2004			Date	2004		2003
Promissory note	none		4.31	(a)	June 2016	$	650	$	650
Senior unsecured term notes	none		—		Oct. 2004		—		174,888
Senior unsecured term notes	none		7.63		Oct. 2007		122,426		124,617
Senior unsecured term notes	none		—		Sept. 2008		—		596,865
Senior unsecured term notes	none		9.00		June 2011		298,409		298,158
Senior unsecured term notes	None		7.19	(b)	June 2011		290,000		—
Total unsecured debt(c)			8.02				711,485		1,195,178
Mortgage debt	15 hotels		5.50		July 2009-2014		192,363		—
Mortgage debt	10 hotels		4.63	(d)	May 2006		144,669		148,080
Mortgage debt	15 hotels		7.24		Nov. 2007		127,316		131,721
Mortgage debt	7 hotels		7.32		April 2009		130,458		92,445
Mortgage debt	6 hotels		7.55		June 2009		67,959		69,566
Mortgage debt	8 hotels		8.70		May 2010		175,504		178,118
Mortgage debt	7 hotels		8.73		May 2010		135,690		138,200
Mortgage debt	1 hotel		4.06	(a)	August 2008		15,500		15,500
Mortgage debt	1 hotel		7.23		September 2005		10,521		11,286
Mortgage debt	8 hotels		7.48		April 2011		49,476		50,305
Other	1 hotel		9.17		August 2011		6,181		6,956
Total secured debt(c)	79 hotels		7.00				1,055,637		842,177
Total(c)			7.41	%		$	1,767,122	$	2,037,355

(a)	Variable interest rate based on LIBOR.The six month LIBOR was 2.78% at December 31, 2004.
(b)	$100 million of these notes were matched with interest rate swap agreements that effectively converted the variable interest rate of LIBOR plus 425 basis points to a fixed rate of 7.8% through December 2007.
(c)	Interest rates are calculated based on the weighted average outstanding debt at December 31, 2004.
(d)	Variable interest rate based on LIBOR. This debt may be extended at our option for up to two, one-year periods, subject to certain contingencies.

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     At December 31, 2004, we had three interest rate swaps with an aggregate notional amount of $100 million, maturing in December 2007. The interest rate received on these interest rate swaps is 4.25% plus LIBOR and the interest rate paid is 7.80%.

     During 2004, we spent an aggregate of $102 million on capital expenditures, including our pro rata share of capital improvements made by our unconsolidated joint ventures.

Contractual Obligations

     We have obligations and commitments to make certain future payments under debt agreements and various contracts. The following schedule details these obligations at December 31, 2004 (in thousands):

			Less		1 – 3		4 – 5		After
	Total		Than 1 Year		Years		Years		5 Years
Debt	$	1,771,651	$	32,319	$	424,841	$	315,363	$	999,128
Operating leases		239,096		38,459		51,407		23,351		125,879
Purchase obligations		48,327		48,327		—		—		—
Liquidated damages related to the sale of hotels managed by IHG(a)		4,382		4,382		—		—		—
Total contractual obligations	$	2,063,456	$	123,487	$	476,248	$	338,714	$	1,125,007

^(a)   This obligation can be satisfied by our investment of $16 million in one or more hotels licensed and managed by IHG.

Off-Balance Sheet Arrangements

     At December 31, 2004, we had unconsolidated 50% investments in ventures that own an aggregate of 20 hotels (referred to as hotel joint ventures), and we had unconsolidated 50% investments in ventures that operate four of those 20 hotels (referred to as operating joint ventures). We own 100% of the lessees operating three hotels owned by the hotel joint ventures, 51% of the lessees operating 12 hotels owned by the hotel joint ventures and one hotel joint venture is operated without a lease. We also owned a 50% interest in entities that provide condominium management services and develop condominiums in Myrtle Beach, South Carolina. None of our directors, officers or employees owns any interest in any of these joint ventures or entities. The hotel joint ventures had $218 million of non-recourse mortgage debt relating to the 20 hotels. This debt is not reflected as a liability on our consolidated balance sheet.

     Our liability with regard to non-recourse debt and the liability of our subsidiaries that are members or partners in joint ventures are generally limited to the guarantee of the borrowing entity’s obligations to pay for the lender’s losses caused by misconduct, fraud or misappropriation of funds by the venture and other typical exceptions from the non-recourse provisions in the mortgages, such as for environmental liabilities.

     We have recorded equity in income (loss) of unconsolidated entities of $17 million, including a gain of $11 million related to the development and sale of condominiums, $2 million, and $(10) million, including an impairment loss of $13 million for the years ended December 31, 2004, 2003 and 2002, respectively, and received distributions of $23 million (of which $11 million was provided by operations and $12 million was provided by investing activities), $9 million, and $11 million for the years 2004, 2003 and 2002, respectively. The principal source of income for our hotel joint ventures is percentage lease revenue from the operating lessees. We own 51% of the operating lessees for 12 of the hotel joint ventures and 100% of the operating lessees for three of the hotel joint ventures. The three 100% owned operating lessees incurred aggregate net losses, which were included in our consolidated statements of operations, of $2 million during the past three years.

     Capital expenditures on the hotels owned by our hotel joint ventures are generally paid from their capital reserve account, which is funded from the income from operations of these ventures. However, if a venture has insufficient cash flow to meet operating expenses or make necessary capital improvements, the venture may make a capital call upon the venture members or partners to fund such necessary improvements. It is possible that, in the event of a capital call, the other joint venture member or partner may be unwilling or unable to make the necessary capital contributions. Under such circumstances, we may elect to make the other party’s contribution as a loan to the venture or as an additional capital contribution by us. Under certain

47

circumstances, a capital contribution by us may increase our equity investment to greater than 50% and may require that we consolidate the venture, including all of its assets and liabilities, into our consolidated financial statements.

     With respect to those ventures that are partnerships, any of our subsidiaries that serve as a general partner will be liable for all of the recourse obligations of the venture, to the extent that the venture does not have sufficient assets or insurance to satisfy the obligations. In addition, the hotels owned by these ventures could perform below expectations and result in the insolvency of the ventures and the acceleration of their debts, unless the members or partners provide additional capital. In some ventures, the members or partners may be required to make additional capital contributions or have their interest in the venture be reduced or offset for the benefit of any party making the required investment on their behalf. We may be faced with the choice of losing our investment in a venture or investing additional capital under circumstances that do not assure a return on that investment.

     Interstate Hotels & Resorts, which is our venture partner in the ownership of eight hotels, declined to make further capital contributions to the venture beginning in 2004. In order to sustain this venture, we made $3 million in advances in 2004, and an additional $1 million in 2005, with a priority in right (but no assurance) of return. We have received a request for additional funding of $2.5 million; however, we have determined that it is not in our best interest to continue funding the further cash shortfalls related to this venture, and have notified the lender to that effect. This venture, which we consolidate, currently has $49 million in non-recourse debt secured by the eight hotels owned by the venture. We have written down our investment in this venture, one of which is to surrender the hotels to the lender. We do not expect any such action to have a material adverse effect on our financial statements.

Quantitative and Qualitative Disclosures About Market Risk

     At December 31, 2004, approximately 75% of our consolidated debt had fixed interest rates. In some cases, market rates of interest are below the rates we are obligated to pay on our fixed-rate debt.

     The following tables provide information about our financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the tables present scheduled maturities and weighted average interest rates, by maturity dates. For interest rate swaps, the tables present the notional amount and weighted average interest rate, by contractual maturity date. The fair value of our fixed rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates. The fair value of our fixed to variable interest rate swaps indicates the estimated amount that would have been received or paid by us had the swaps been terminated at the date presented.

Expected Maturity Date
at December 31, 2004
(dollars in thousands)

																						Fair
	2005			2006			2007			2008			2009			Thereafter			Total			Value
Liabilities
Fixed rate:
Debt	$	26,927		$	18,025		$	261,783		$	16,977		$	202,231		$	708,478		$	1,234,421		$	1,235,442
Average interest rate		7.54	%		7.78	%		7.46	%		7.93	%		7.40	%		8.50	%		8.06	%
Floating rate:
Debt		5,392			143,018			2,015			17,618			78,537			190,650			437,230			437,230
Average interest rate(a)		4.50	%		4.62	%		4.20	%		4.77	%		4.24	%		6.86	%		5.53	%
Interest rate swaps (floating to fixed)(b)
Notional amount		—			—			—			—			—			100,000			100,000			100,067
Pay rate		—			—			—			—			—			7.80	%
Receive rate		—			—			—			—			—			6.87	%
Total debt	$	32,319		$	161,043		$	263,798		$	34,595		$	280,768		$	999,128			1,771,651
Average interest rate		7.04	%		4.98	%		7.44	%		6.32	%		6.51	%		8.53	%		7.41	%
Net discount																				(4,529	)
Total debt																			$	1,767,122

(a)	The average floating rate of interest represents the implied forward rates in the yield curve at December 31, 2004.
(b)	The interest rate swaps in effect during 2004 decreased our interest expense by a net $4 million during 2004. The interest rate swaps in effect at December 31, 2004, mature in 2007 but are matched with debt maturing in 2011.

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Expected Maturity Date
at December 31, 2003
(dollars in thousands)

																						Fair
	2004			2005			2006			2007			2008			Thereafter			Total			Value
Liabilities
Fixed rate:
Debt	$	188,922		$	24,521		$	15,227		$	258,793		$	613,800		$	776,115		$	1,877,378		$	1,975,819
Average interest rate		7.42	%		7.67	%		8.00	%		7.47	%		9.96	%		8.54	%		8.73	%
Floating rate:
Debt		3,411			3,568			141,101			—			15,500			650			164,230			164,230
Average interest rate(a)		3.62	%		3.62	%		3.62	%		—			3.97	%		3.12	%		3.65	%
Interest rate swaps (fixed to floating)(b)
Notional amount		175,000			—			—			225,000			—			—			400,000			5,468
Pay rate		4.31	%		—			—			5.29	%		—			—			4.87	%
Receive rate		7.38	%		—			—			7.45	%		—			—			7.42	%
Total debt	$	192,333		$	28,089		$	156,328		$	258,793		$	629,300		$	776,765			2,041,608
Average interest rate		4.57	%		7.16	%		4.05	%		5.60	%		9.71	%		8.53	%		7.82	%
Net discount																				(4,253	)
Total debt																			$	2,037,355

(a)	The average floating rate of interest represents the implied forward rate in the yield curve at December 31, 2003.
(b)	The interest rate swaps decreased our interest expense by $7 million during 2003.

     Swap contracts, such as described above, contain a credit risk, in that the counterparties may be unable to fulfill the terms of the agreement. We minimize that risk by evaluating the creditworthiness of our counterparties, who are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties. The Standard & Poor’s credit ratings for each of the financial institutions that are counterparties to the interest rate swap agreements are AA-.

Sarbanes-Oxley Act Compliance

     During 2004, we devoted an extraordinary amount of internal resources to assure the proper documentation, testing and assessment of our internal control structure, to assure compliance with the Sarbanes-Oxley Act of 2002. In addition to the commitment of internal resources, we estimate that we spent approximately $1 million during 2004 related to this compliance effort. At least a portion of these compliance related costs should not recur in future years.

     For a more detailed discussion of our internal controls and procedures, and of management’s assessment of the effectiveness thereof, see Item 9A of this Annual Report on Form 10-K.

Inflation

     Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses disproportionately to revenues.

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Seasonality

     The lodging business is seasonal in nature. Generally, hotel revenues are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy our obligations or make distributions to our equity holders.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. 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.

     On an on-going basis, we evaluate our estimates, including those related to bad debts, the carrying value of investments in hotels, litigation, and other contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

•   We are required by GAAP to record an impairment charge when we believe that an investment in one or more of our hotels has been impaired, such that future undiscounted cash flows would not recover the book basis, or net book value, of the investment. We test for impairment when certain events occur, including one or more of the following: projected cash flows are significantly less than recent historical cash flows; significant changes in legal factors or actions by a regulator that could affect the value of our hotels; events that could cause changes or uncertainty in travel patterns; and a current expectation that, more likely than not, a hotel will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. In 2004, we identified two hotels, in 2003, we identified 18 hotels, and in 2002 we identified 33 hotels, that we expect to sell. The shorter probable holding periods related to our decision to sell these hotels was the primary factor that led to impairment charges on these hotels. As we sell these hotels, we may recognize additional losses or gains on sale. In the evaluation of impairment of our hotel assets, and in establishing the impairment charge, we made many assumptions and estimates on a hotel by hotel basis, which included the following:

º	Annual cash flow growth rates for revenues and expenses;
º	Holding periods;
º	Expected remaining useful lives of assets;
º	Estimates in fair values taking into consideration future cash flows, capitalization rates, discount rates and comparable selling prices; and
º	Future capital expenditures.

Changes in these estimates, future adverse changes in market conditions or poor operating results of underlying hotels could result in losses or an inability to recover the carrying value of the hotels that may not be reflected in the hotel’s current carrying value, thereby requiring additional impairment charges in the future.

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•   We own a 50% interest in various real estate joint ventures reported under the equity method of accounting. In accordance with GAAP, we record an impairment of these equity method investments when they experience an other than temporary decline in value. Changes in our estimates or future adverse changes in the market conditions of the hotels owned by equity method investments could result in additional declines in value that could be considered other than temporary.

•   We make estimates with respect to contingent liabilities for losses covered by insurance in accordance with Financial Accounting Standard 5, Accounting for Contingencies. We record liabilities for self insured losses under our insurance programs when it becomes probable that an asset has been impaired or a liability has been incurred at the date of our financial statements and the amount of the loss can be reasonably estimated. In 2002, we initially became self-insured for the first $250,000, per occurrence, of our general liability claims with regard to 68 of our hotels. At December 31, 2004, we had 79 of our hotels participating in this program. We review the adequacy of our reserves for our self-insured claims on a regular basis. Our reserves are intended to cover the estimated ultimate uninsured liability for losses with respect to reported and unreported claims incurred as of the end of each accounting period. These reserves represent estimates at a given accounting date, generally utilizing projections based on claims, historical settlement of claims and estimates of future costs to settle claims. Estimates are also required since there may be reporting lags between the occurrence of the insured event and the time it is actually reported. Because establishment of insurance reserves is an inherently uncertain process involving estimates, currently established reserves may not be sufficient. If our insurance reserves of $4 million, at December 31, 2004, for general liability losses are insufficient, we will record an additional expense in future periods. Property and catastrophic losses are event-driven losses and, as such, until a loss occurs and the amount of loss can be reasonably estimated, no liability is recorded. We had recorded no contingent liabilities with regard to property or catastrophic losses at December 31, 2004.

•   SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” establishes accounting and reporting standards for derivative instruments. In accordance with these pronouncements, all of our interest rate swap agreements outstanding at December 31, 2004, were designated as cash flow hedges because they are hedging our exposure to the changes in interest payments on our floating rate debt. These instruments are adjusted to our estimate of their fair market value through accumulated other comprehensive income within stockholders’ equity. We estimate the fair value of our interest rate swaps and fixed rate debt through the use of a third party valuation. We may use other methods and assumptions to validate the fair market value. At December 31, 2004, our estimate of the fair market value of the interest rate swaps was approximately $0.1 million and represents the amount that we estimate we would currently receive upon termination of these instruments, based on current market rates and reasonable assumptions about relevant future market conditions.

•   Our Taxable REIT Subsidiaries, or TRSs, have cumulative potential future tax deductions totaling $349 million. The gross deferred income tax asset associated with these potential future tax deductions was $133 million. We have recorded a valuation allowance equal to 100% of our $133 million deferred tax asset related to our TRSs, because of the uncertainty of realizing the benefit of the deferred tax asset. SFAS 109, “Accounting for Income Taxes,” establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. In accordance with SFAS 109, we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In the event we were to determine that we would be able to realize all or a portion of our deferred tax assets in the future, an adjustment to the deferred tax asset would increase operating income in the period such determination was made.

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Recent Accounting Announcements

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No.123R”) which is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”). SFAS No. 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB Opinion No. 25”) and its related implementation guidance. SFAS No. 123R requires companies to record compensation expense for share-based payments to employees, including grants of employee stock options, at fair value. SFAS No. 123R is effective for most public companies at the beginning of the first interim or annual period beginning after June 15, 2005. We believe that the implementation of the provisions of SFAS No. 123R will not have a material impact on our financial position or results of operations.

     In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29.” The statement addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We believe that the implementation of the provisions of SFAS No. 153 will not have a material impact on our financial position or results of operations.

Disclosure Regarding Forward Looking Statements

With the exception of historical information, the matters discussed in this Annual Report on Form 10-K include “forward looking statements” within the meaning of the federal securities laws. Forward looking statements are not guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause actual results to differ materially from those currently anticipated. General economic conditions, including the timing and magnitude of the current recovery in the economy, the realization of anticipated job growth, the impact of U.S. military involvement in the Middle East and elsewhere, future acts of terrorism, the impact on the travel industry of increased security precautions, the availability of capital, the ability to effect sales of non-strategic hotels at anticipated prices, and numerous other factors may affect our future results, performance and achievements. Certain of these risks and uncertainties are described in greater detail under “Cautionary Factors That May Affect Future Results” in Item 1 above, or in our other filings with the Securities and Exchange Commission. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     Information and disclosures regarding market risks applicable to us are incorporated herein by reference to the discussion under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” contained elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2004.

Item 8. Financial Statements and Supplementary Data

Included herein beginning at page F-1.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

     Under the supervision and with the participation of FelCor’s management, including its chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and principal financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective, such that the information relating to us required to be disclosed in our reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

     There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) during the fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting.

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

     Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we have concluded that, as of December 31, 2004, our internal control over financial reporting is effective, based on those criteria.

     Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in their report, which appears on page F-2 of this Annual Report on Form 10-K.

Item 9B. Other Information

     On October 26, 2004, pursuant to a recommendation of the Compensation Committee, our board of directors modified the compensation payable to our non-employee directors commencing in 2005. Each non-employee director will receive for his or her annual service a base amount of $35,000, or $40,000 for any member of the Audit Committee other than the Chairman and $45,000 for the Chairman of the Audit Committee, payable in common stock. In addition, each director not otherwise being compensated by us will receive $1,000 for each Board of Directors meeting attended in person and $500 for each additional telephonic meeting in which he or she participates, payable in common stock or cash, at each director’s election.

     Each of our non-employee directors will also receive additional compensation for service on particular committees, all payable either in common stock or cash, at each director’s election. If a member of the Audit Committee attends more than five Audit Committee meetings during the year, he or she will receive $1,000 for each additional meeting attended in person and $500 for each additional telephonic meeting in which he or she participates. Members of the Compensation, Corporate Governance and Executive Committees will receive $1,000 for each meeting of the respective committees attended in person and $500 for each telephonic meeting of the respective committees attended telephonically.

     Finally, each of our non-employee directors will receive for their service an annual equity award equal to the lesser of (i) 2,000 shares of our common stock or (ii) the number of shares of our common stock equal to $20,000 for 2005, $25,000 for 2006, $30,000 for 2007, $35,000 for 2008 and $40,000 for 2009 and thereafter.

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     The compensation payable for the prior fiscal year to non-employee directors will be determined at the first meeting of the Board of Directors following the end of the fiscal year. With respect to compensation payable in common stock, all shares of common stock will be issued under one or more of the Company’s Restricted Stock and Stock Option Plans, but such shares will be fully vested upon the date of grant. The number of shares to be issued shall be determined by dividing (i) the applicable dollar amount (including amounts for which the director has elected to receive common stock), by (ii) the closing price of our common stock on the date of grant, and rounded to the nearest whole lot of 100 shares

     Also on October 26, 2004, the Compensation Committee approved the terms of compensation payable to our new Chief Financial Officer, Richard A. Smith. Included in that compensation was an initial grant of 150,000 shares of restricted stock. The shares were issued under the Company’s 2001 Restricted Stock and Stock Option Plan and will be subject to vesting as follows: 50,000 shares vested on January 1, 2005; and the balance will vest at the rate of 20,000 shares per year from January 1, 2006 through January 1, 2010, subject to his continued employment with us. The shares were issued through means of our standard form of employee stock grant contract.

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PART III. — OTHER INFORMATION

Item 10. Directors and Executive Officers of the Registrant

     The information called for by this Item is contained in our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 11. Executive Compensation

     The information called for by this Item is contained in our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The information called for by this Item is contained in our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, or in Item 5 of this Annual Report on Form 10-K for the year ended December 31, 2004, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

     The information called for by this Item is contained in our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

     The information called for by this Item is contained in our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, and is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)   The following is a list of documents filed as a part of this report:

(1)   Financial Statements.

Included herein at pages F-1 through F-34.

(2)   Financial Statement Schedules.

The following financial statement schedule is included herein at page F-35 through F-40.

Schedule III — Real Estate and Accumulated Depreciation for FelCor Lodging Trust Incorporated

     All other schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions, are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted.

(b)   Exhibits.

The following exhibits are provided pursuant to the provisions of Item 601 of Regulation S-K:

Exhibit
Number	Description of Exhibit
3.1.1	Articles of Amendment and Restatement dated June 22, 1995, amending and restating the Charter of FelCor Lodging Trust Incorporated (“FelCor”), as amended or supplemented by Articles of Merger dated June 23, 1995, Articles Supplementary dated April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of Amendment dated June 16, 1997, Articles of Amendment dated October 30, 1997, Articles Supplementary dated May 6, 1998, Articles of Merger and Articles of Amendment dated July 27, 1998, and Certificate of Correction dated March 11, 1999 (filed as Exhibit 3.1 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the “1998 10-K”) and incorporated herein by reference).
3.1.2	Certificate of Correction to the Articles of Merger between FelCor and Bristol Hotel Company, dated August 31, 1999 (filed as Exhibit 3.1.1 to FelCor’s Form 10-Q for the quarter ended September 30, 1999 (the “September 1999 10-Q”) and incorporated herein by reference).
3.1.3	Articles Supplementary, dated April 1, 2002 (filed as Exhibit 3.1.2 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
3.1.4	Articles Supplementary designating additional shares of $1.95 Series A Cumulative Convertible Preferred Stock filed April 2, 2004 (filed as Exhibit 3.1.3 to FelCor’s Form 8-K dated as of April 5, 2005, and filed on April 6, 2004, and incorporated herein by reference).
3.1.5	Articles Supplementary designating additional shares of $1.95 Series A Cumulative Convertible Preferred Stock filed August 20, 2004 (filed as Exhibit 3.1.4 to FelCor’s Form 8-K dated as of, and filed on, August 26, 2004, and incorporated herein by reference).
3.2	Bylaws of FelCor, as amended (filed as Exhibit 3.2 to FelCor’s Registration Statement on Form S-11 (Registration File No. 333-98332) and incorporated herein by reference).

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Exhibit
Number	Description of Exhibit
4.1	Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference).
4.2	Form of Share Certificate for $1.95 Series A Cumulative Convertible Preferred Stock (filed as Exhibit 4.4 to FelCor’s Form 8-K dated May 1, 1996, and incorporated herein by reference).
4.3	Form of Share Certificate for 9% Series B Cumulative Redeemable Preferred Stock (filed as Exhibit 4.5 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.4.1	Deposit Agreement dated April 30, 1998, between FelCor and SunTrust Bank, Atlanta, as preferred share depositary (filed as Exhibit 4.6 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.4.2	Supplement and Amendment to Deposit Agreement dated April 4, 2002, among FelCor, SunTrust Bank and the holders (filed as Exhibit 4.4.1 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
4.5	Form of Depositary Receipt evidencing the Depositary Shares (filed as Exhibit 4.7 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.6	Indenture, dated as of April 22, 1996, by and between FelCor and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to FelCor’s Form 8-K dated May 1, 1996 and incorporated herein by reference).
4.7.1	Indenture, dated as of October 1, 1997, by and among FelCor Lodging Limited Partnership, formerly FelCor Suites Limited Partnership (“FelCor LP”), FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to the Registration Statement on Form S-4 (Registration File No. 333-39595) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.2	First Amendment to Indenture, dated as of February 5, 1998, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to the Registration Statement on Form S-4 (Registration File No. 333-39595) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.3	Second Amendment to Indenture and First Supplemental Indenture, dated as of December 30, 1998, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and incorporated herein by reference).
4.7.4	Third Amendment to Indenture, dated as of March 30, 1999, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.3 to FelCor’s Form 10-Q for the quarter ended March 31, 1999 (the “March 1999 10-Q”) and incorporated herein by reference).
4.7.5	Second Supplemental Indenture, dated as of August 1, 2000, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.2.4 to the Registration Statement on Form S-4 (Registration File No. 333-47506) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).

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Exhibit
Number	Description of Exhibit
4.7.6	Third Supplemental Indenture, dated as of July 26, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.2.5 to the Registration Statement on Form S-4 (Registration File No. 333-63092) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.7	Fourth Supplemental Indenture, dated October 1, 2002, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.6 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “2002 Form 10-K”) and incorporated herein by reference).
4.8.1	Indenture, dated as of June 4, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9 to FelCor’s Form 8-K dated as of June 4, 2001, and filed June 14, 2001, and incorporated herein by reference).
4.8.2	First Supplemental Indenture, dated as of July 26, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.4.1 to the Registration Statement on Form S-4 (Registration File No. 333-63092) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.8.3	Second Supplemental Indenture, dated October 1, 2002, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9.2 to the 2002 Form 10-K and incorporated herein by reference).
4.9.1	Indenture, dated as of May 26, 2004, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.5 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.1.1	Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of December 31, 2001 (filed as Exhibit 10.1 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the “2001 Form 10-K”), and incorporated herein by reference.)
10.1.2	First Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated April 1, 2002 (filed as Exhibit 10.1.1 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
10.1.3	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated August 31, 2002 (filed as Exhibit 10.1.2 to the 2002 Form 10-K and incorporated herein by reference).
10.1.4	Third Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated October 1, 2002 (filed as Exhibit 10.1.3 to the 2002 Form 10-K and incorporated herein by reference).
10.1.5	Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of July 1, 2003 (filed as Exhibit 10.1.4 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.1.6	Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of April 2, 2004 (filed as Exhibit 10.1.5 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.1.7	Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of August 23, 2004 (filed as Exhibit 10.1.6 to FelCor’s Form 8-K dated as of, and filed on, August 26, 2004, and incorporated herein by reference).

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Exhibit
Number	Description of Exhibit
10.2.1	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of InterContinental Hotels, as manager, with respect to FelCor’s InterContinental Hotels branded hotels (included as an exhibit to the Leasehold Acquisition Agreement, which was filed as Exhibit 10.28 to FelCor’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference).
10.2.2	Master Amendment to Management Agreements, dated September 17, 2003, by and among FelCor, FelCor LP, FelCor TRS I, L.L.C., FelCor TRS Holdings, L.P., BHR Operations, L.L.C., BHR Lodging Tenant Company, BHR Salt Lake Tenant Company, L.L.C., BHR Hotels Finance, Inc., BHR Dallas Tenant Company, L.P. and BHR Plano Tenant Company, L.P. (filed as Exhibit 10.4.1 to FelCor’s Form 10-Q for the quarter ended September 30, 2003, and incorporated herein by reference).
10.3.1	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective prior to July 28, 2004 (filed as Exhibit 10.5 to the 2001 Form 10-K and incorporated herein by reference).
10.3.2*	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective July 28, 2004.
10.4	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Doubletree and Doubletree Guest Suites branded hotels (filed as Exhibit 10.6 to the 2001 Form 10-K and incorporated herein by reference).
10.5	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Starwood Hotels & Resorts, Inc., as manager, with respect to FelCor’s Sheraton and Westin branded hotels (filed as Exhibit 10.7 to the 2001 Form 10-K and incorporated herein by reference).
10.6	Employment Agreement, dated as of July 28, 1994, between FelCor and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to FelCor’s Annual Report on Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994 (the “1994 10-K/A”) and incorporated herein by reference).
10.7	Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.9 to the 1994 10-K/A and incorporated herein by reference).
10.8	Savings and Investment Plan of FelCor (filed as Exhibit 10.10 to the 2001 Form 10-K and incorporated herein by reference).
10.9	1995 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.9.2 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference).
10.10	Non-Qualified Deferred Compensation Plan, as amended and restated July 1999 (filed as Exhibit 10.9 to the September 1999 10-Q and incorporated herein by reference).
10.11	1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor’s Registration Statement on Form S-8 (Registration File No. 333-66041) and incorporated herein by reference).

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Exhibit
Number	Description of Exhibit
10.12	2001 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.14 to the 2002 Form 10-K and incorporated herein by reference).
10.13	Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).
10.14	Amended and Restated Stock Option Plan for Non-Employee Directors (filed as Exhibit 99.2 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).
10.15	Form of Severance Agreement for executive officers and certain key employees of FelCor (filed as Exhibit 10.13 to the 1998 10-K and incorporated herein by reference).
10.16*	Form of Nonstatutory Stock Option Contract under Restricted Stock and Stock Option Plans of FelCor.
10.17*	Form of Employee Stock Grant Contract under Restricted Stock and Stock Option Plans of FelCor.
10.18*	Summary of Annual Compensation Program for Directors of FelCor.
10.19	Loan Agreement, dated as of October 10, 1997, among Bristol Lodging Company, Bristol Lodging Holding Company, Nomura Asset Capital Corporation, as administrative agent and collateral agent for Lenders, and Bankers Trust Company, as co-agent for Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and incorporated herein by reference).
10.20.1	Form of Mortgage, Security Agreement and Fixture Filing by and between FelCor/CSS Holdings, L.P., as Mortgagor, and The Prudential Insurance Company of America, as Mortgagee (filed as Exhibit 10.23 to the March 1999 10-Q and incorporated herein by reference).
10.20.2	Promissory Note, dated April 1, 1999, in the original principal amount of $100,000,000, made by FelCor/CSS Holdings, Ltd., payable to the order of The Prudential Insurance Company of America (filed as Exhibit 10.23.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1999 (the “June 1999 10-Q”) and incorporated herein by reference).
10.21.1	Form of Deed of Trust, Security Agreement and Fixture Filing, each dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as
	Borrower, in favor of Fidelity National Title Insurance Company, as Trustee, and Massachusetts Mutual Life Insurance Company, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.21.2, also executed by FelCor/CSS Holdings, L.P. with respect to the Embassy Suites Hotel-Anaheim and Embassy Suites Hotel-Deerfield Beach, and by FelCor LP with respect to the Embassy Suites Hotel-Palm Desert (filed as Exhibit 10.24.2 to the June 1999 10-Q and incorporated herein by reference).
10.21.2	Form of six separate Promissory Notes, each dated May 12, 1999, made by FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual Life Insurance Company in the respective original principal amounts of $12,500,000 (Embassy Suites Hotel-Dallas Market Center), $14,000,000 (Embassy Suites Hotel-Dallas Love Field), $12,450,000 (Embassy Suites Hotel-Tempe), $11,550,000 (Embassy Suites Hotel-Anaheim), $8,900,000 (Embassy Suites Hotel-Palm Desert), $15,600,000 (Embassy Suites Hotel-Deerfield Beach) (filed as Exhibit 10.24.1 to the June 1999 10-Q and incorporated herein by reference).
10.22.1	Form Deed of Trust and Security Agreement and Fixture Filing with Assignment of Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7 Holdings, L.P., as

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Exhibit
Number	Description of Exhibit
	Mortgagor, in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, as Mortgagee, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.22.3 (filed as Exhibit 10.24 to FelCor’s Form 10-Q for the quarter ended June 30, 2000 (the “June 2000 10-Q”) and incorporated herein by reference).
10.22.2	Form of Accommodation Cross-Collateralization Mortgage and Security Agreement, each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to the June 2000 10-Q and incorporated herein by reference).
10.22.3	Form of fourteen separate Promissory Notes, each dated April 20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, respectively, in the respective original principal amounts of $13,500,000 (Phoenix (Crescent), Arizona), $13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia), $12,500,000 (Chicago O’Hare Airport, Illinois), $12,500,000 (Chicago O’Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill, Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia), $10,500,000 (South Burlington, Vermont) and $10,500,000 (South Burlington, Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated herein by reference).
10.23.1	Form Deed of Trust and Security Agreement, each dated as of May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each as Borrower, in favor of The Chase Manhattan Bank, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.23.2 (filed as Exhibit 10.25 to the June 2000 10-Q and incorporated herein by reference).
10.23.2	Form of eight separate Promissory Notes, each dated May 2, 2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C. and FelCor/CMB SSF Holdings, L.P., each separately payable to the order of The Chase Manhattan Bank in the respective original principal amounts of $38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans, Louisiana), $20,728,000 (Piscataway, New Jersey) and $26,268,000 (South San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q and incorporated herein by reference).
10.24.1	Loan Agreement, dated April 24, 2003, by and between FelCor/JPM Hotels, L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $115 million loan from lender to borrower (the “Mortgage Loan”) (filed as Exhibit 10.28 to FelCor’s Form 10-Q for the quarter ended March 31, 2003 (the “March 2003 10-Q”) and incorporated herein by reference).
10.24.2	Form of Mortgage, Deed of Trust and Security Agreement, each dated April 24, 2003, from FelCor/JPM Hotels, L.L.C., as borrower, and DJONT/JPM Leasing, L.L.C., as lessee, (and, in the case of the Mortgages with respect to the properties located in the State of Florida, FelCor LP) in favor of JPMorgan Chase Bank, as lender, each covering a separate hotel and securing the Mortgage Loan (filed as Exhibit 10.28.1 to the March 2003 10-Q and incorporated herein by reference).

61

Exhibit
Number	Description of Exhibit
10.24.3	Promissory Note, dated April 24, 2003, made by FelCor/JPM Hotels, L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $115 million (filed as Exhibit 10.28.2 to the March 2003 10-Q and incorporated herein by reference).
10.25.1	Mezzanine Loan Agreement, dated April 24, 2003, by and between FelCor/JPM Holdings, L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $10 million senior mezzanine loan from lender to borrower (the “Senior Mezzanine Loan”) (filed as Exhibit 10.29 to the March 2003 10-Q and incorporated herein by reference).
10.25.2	Pledge and Security Agreement, dated April 24, 2003, from FelCor/JPM Holdings, L.L.C., as pledgor, in favor of JPMorgan Chase Bank, as lender, securing the Senior Mezzanine Loan (filed as Exhibit 10.29.1 to the March 2003 10-Q and incorporated herein by reference).
10.25.3	Promissory Note, dated April 24, 2003, made by FelCor/JPM Holdings, L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $10 million (filed as Exhibit 10.29.2 to the March 2003 10-Q and incorporated herein by reference).
10.26.1	Junior Mezzanine Loan Agreement, dated April 24, 2003, by and between DJONT/JPM Tenant Co., L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $25 million junior mezzanine loan from lender to borrower (the “Junior Mezzanine Loan”) (filed as Exhibit 10.30 to the March 2003 10-Q and incorporated herein by reference).
10.26.2	Pledge and Security Agreement, dated April 24, 2003, from DJONT/JPM Tenant Co., L.L.C., as pledgor, in favor of JPMorgan Chase Bank, as lender, securing the Junior Mezzanine Loan (filed as Exhibit 10.30.1 to the March 2003 10-Q and incorporated herein by reference).
10.26.3	Promissory Note, dated April 24, 2003, made by DJONT/JPM Tenant Co., L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $25 million (filed as Exhibit 10.30.2 to the March 2003 10-Q and incorporated herein by reference).
10.26.4	Security Agreement, dated April 24, 2003, from DJONT/JPM Tenant Co., L.L.C. in favor of JPMorgan Chase Bank, securing the Junior Mezzanine Loan (filed as Exhibit 10.30.3 to the March 2003 10-Q and incorporated herein by reference).
10.27	Registration Rights Agreement, dated as of May 26, 2004, among FelCor, FelCor LP and Deutsche Bank Securities Inc., as initial purchaser (filed as Exhibit 10.32 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.28	Registration Rights Agreement, dated as of July 6, 2004, among FelCor, FelCor LP and Deutsche Bank Securities Inc., as initial purchaser (filed as Exhibit 10.33 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.29	Termination Agreement, dated July 28, 2004, by and among FCH/DT BWI Hotel, L.L.C., FCH/DT BWI Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM BWI Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C., FelCor/JPM Nashville Hotel, L.L.C., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., BHR Operations, L.L.C., DJONT Leasing, L.L.C., DJONT Operations, L.L.C., DJONT/JPM

62

Exhibit
Number	Description of Exhibit
	Atlanta CP Leasing, L.L.C., DJONT/JPM Atlanta ES Leasing, L.L.C., DJONT/JPM Austin HI Leasing, L.P., DJONT/JPM Austin Leasing, L.P., DJONT/JPM Boca Raton Leasing, L.L.C., DJONT/JPM BWI Leasing, L.L.C., DJONT/JPM Denver Leasing, L.L.C., DJONT/JPM LBV Leasing, L.L.C., DJONT/JPM Mandalay Leasing, L.L.C., DJONT/JPM Orlando I-Drive Leasing, L.L.C., DJONT/JPM Orlando Leasing, L.L.C., DJONT/JPM Phoenix Leasing, L.L.C., DJONT/JPM Troy Leasing, L.L.C., DJONT/JPM Wilmington Leasing, L.L.C., FCH/DT Leasing, L.L.C., FCH/DT Leasing II, L.L.C., FelCor TRS Holdings, L.P., FelCor LP and JPMorgan Chase Bank (filed as Exhibit 10.31.6 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.1	Form of Loan Agreement, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, between JPMorgan Chase Bank, as lender, and each of FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C. and FelCor/JPM BWI Hotel, L.L.C. and FCH/DT BWI Hotel, L.L.C., as borrowers, and acknowledged and agreed by FelCor LP (filed as Exhibit 10.34 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.2	Form of Mortgage, Renewal Mortgage, Deed of Trust, Deed to Secure Debt, Indemnity Deed of Trust and Assignment of Leases and Rents, Security Agreement and Fixture Filing, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, from FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM Wilmington Leasing, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., DJONT/JPM Phoenix Leasing, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM Boca Raton Leasing, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., DJONT/JPM Atlanta ES Leasing, L.L.C., FelCor/JPM Austin Holdings, L.P., DJONT/JPM Austin Leasing, L.P., FelCor/JPM Orlando Hotel, L.L.C., DJONT/JPM Orlando Leasing, L.L.C., FelCor/JPM Denver Hotel, L.L.C., DJONT/JPM Denver Leasing, L.L.C., FelCor/JPM Troy Hotel, L.L.C., DJONT/JPM Troy Leasing, L.L.C., FCH/DT BWI Holdings, L.P., FCH/DT BWI Hotel, L.L.C. and DJONT/JPM BWI Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase Bank, as mortgagee or beneficiary (filed as Exhibit 10.34.1 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.3	Form of nine separate Promissory Notes, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C. and FelCor/JPM BWI Hotel, L.L.C., each separately payable to the order of JPMorgan Chase Bank in the respective original principal amounts of $11,000,000 (Wilmington, Delaware), $21,368,000 (Phoenix, Arizona), $5,500,000 (Boca Raton, Florida), $13,500,000 (Atlanta, Georgia), $9,616,000 (Austin, Texas), $9,798,000 (Orlando, Florida), $5,000,000 (Aurora, Colorado), $6,900,000 (Troy, Michigan) and $24,120,000 (Linthicum, Maryland) (filed as Exhibit 10.34.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.4	Form of Guaranty of Recourse Obligations of Borrower, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor LP in favor of JPMorgan Chase Bank (filed as Exhibit 10.34.3 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.1	Loan Agreement, dated July 28, 2004, by and among FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Brunswick Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C. and FelCor/JPM Orlando I-Drive Hotel, L.L.C., as borrowers, and JPMorgan Chase Bank, as lender, and acknowledged and agreed to by FelCor LP (filed as Exhibit 10.35 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

63

Exhibit
Number	Description of Exhibit
10.31.2	Form of Mortgage, Leasehold Mortgage, Deed of Trust, Deed to Secure Debt and Assignment of Leases and Rents, Security Agreement and Fixture Filing, each dated July 28, 2004, from FelCor/JPM Atlanta CP Hotel, L.L.C., DJONT/JPM Atlanta CP Leasing, L.L.C., FelCor/JPM Austin HI Holdings, L.P., DJONT/JPM Austin HI Leasing, L.P., FelCor/JPM Brunswick Hotel, L.L.C., DJONT/JPM Brunswick Leasing, L.L.C., FelCor/JPM LBV Hotel, L.L.C., DJONT/JPM LBV Leasing, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C., DJONT/JPM Mandalay Leasing, L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C. and DJONT/JPM Orlando I-Drive Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase Bank, as mortgagee or beneficiary (filed as Exhibit 10.35.1 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.3	Promissory Note, dated July 28, 2004, in the original principal amount of $87,000,000 made by FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Brunswick Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C. and FelCor/JPM Orlando I-Drive Hotel, L.L.C., payable to the order of JPMorgan Chase Bank (filed as Exhibit 10.35.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.4	Guaranty of Recourse Obligations of Borrower, dated July 28, 2004, made by FelCor LP in favor of JPMorgan Chase Bank (filed as Exhibit 10.35.3 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
14.1*	FelCor Code of Business Conduct and Ethics.
21.1*	List of Subsidiaries of FelCor.
23.1*	Consent of PricewaterhouseCoopers LLP.
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).
32.1*	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2*	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

* Indicates that the document is filed herewith.

64

SIGNATURES

     Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FELCOR LODGING TRUST INCORPORATED
	By:	/s/ Lawrence D. Robinson
		Lawrence D. Robinson
		Executive Vice President
Date: March 2, 2005

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date	Signature
March 1, 2005	/s/ Donald J. McNamara
	Donald J. McNamara
	Chairman of the Board and Director
March 2, 2005	/s/ Thomas J. Corcoran, Jr.
	Thomas J. Corcoran, Jr.
	President and Director (Chief Executive Officer)
March 2, 2005	/s/ Richard A. Smith
	Richard A. Smith
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
March 2, 2005	/s/ Lester C. Johnson
	Lester C. Johnson
	Senior Vice President and Controller
	(Principal Accounting Officer)
	Melinda J. Bush, Director
March 3, 2005	/s/ Richard S. Ellwood
	Richard S. Ellwood, Director
	Richard O. Jacobson, Director
March 1, 2005	/s/ David C. Kloeppel
	David C. Kloeppel, Director
March 1, 2005	/s/ Charles A. Ledsinger, Jr.
	Charles A. Ledsinger, Jr., Director
March 2, 2005	/s/ Robert H. Lutz, Jr.
	Robert H. Lutz, Jr., Director
	Robert A. Mathewson, Director
March 1, 2005	/s/ Michael D. Rose
	Michael D. Rose, Director

65

FELCOR LODGING TRUST INCORPORATED

INDEX TO FINANCIAL STATEMENTS

PART I – FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets – December, 2004 and 2003	F-4
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002	F-5
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2004, 2003 and 2002	F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002	F-8
Notes to Consolidated Financial Statements	F-9
Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2004	F-36

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of FelCor Lodging Trust Incorporated:

We have completed an integrated audit of FelCor Lodging Trust Incorporated’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of FelCor Lodging Trust Incorporated and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements 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.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing in Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

F-2

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Dallas, Texas
March 2, 2005

F-3

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS

December 31, 2004 and 2003
(in thousands)

	2004			2003
ASSETS
Investment in hotels, net of accumulated depreciation of $948,631 in 2004 and $886,168 in 2003	$	2,960,390		$	3,103,796
Investment in unconsolidated entities		110,843			116,553
Hotels held for sale		255			21,838
Cash and cash equivalents		119,310			231,885
Restricted cash		34,736			19,424
Accounts receivable, net of allowance for doubtful accounts of $905 in 2004 and $1,104 in 2003		47,221			45,385
Deferred expenses, net of accumulated amortization of $14,935 in 2004 and $16,080 in 2003		18,804			24,278
Other assets		26,099			27,734
Total assets	$	3,317,658		$	3,590,893
LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt, net of discount of $4,529 in 2004 and $4,253 in 2003	$	1,767,122		$	2,037,355
Distributions payable		8,867			5,504
Accrued expenses and other liabilities		124,922			151,423
Minority interest in FelCor LP, 2,788 and 3,034 units issued and outstanding at December 31, 2004 and 2003, respectively		39,659			50,142
Minority interest in other partnerships		46,765			50,197
Total liabilities		1,987,335			2,294,621
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,880 and 5,980 shares issued and outstanding at December 31, 2004 and December 31, 2003, respectively		309,362			149,512
Series B Cumulative Redeemable Preferred Stock, 68 shares issued and outstanding at December 31, 2004 and 2003		169,395			169,395
Common stock, $.01 par value, 200,000 shares authorized and 69,436 and 69,429 shares issued, including shares in treasury, at December 31, 2004 and 2003, respectively		694			694
Additional paid-in capital		2,085,189			2,095,356
Accumulated other comprehensive income		15,780			9,478
Accumulated deficit		(1,066,143	)		(930,886	)
Less: Common stock in treasury, at cost, of 9,619 and 10,309 shares at December 31, 2004 and 2003, respectively		(183,954	)		(197,277	)
Total stockholders’ equity		1,330,323			1,296,272
Total liabilities and stockholders’ equity	$	3,317,658		$	3,590,893

The accompanying notes are an integral part of these consolidated financial statements.

F-4

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended December 31, 2004, 2003 and 2002
(in thousands, except per share data)

	2004			2003			2002
Revenues:
Hotel operating revenue	$	1,188,863		$	1,110,728		$	1,143,968
Retail space rental and other revenue		2,721			1,022			1,646
Total revenues		1,191,584			1,111,750			1,145,614
Expenses:
Hotel departmental expenses		431,982			394,678			390,859
Other property operating costs		349,274			324,202			310,615
Management and franchise fees		61,579			58,711			58,505
Taxes, insurance and lease expense		114,648			117,662			118,715
Abandoned projects		—			—			1,663
Corporate expenses		17,094			14,266			13,756
Depreciation		118,855			123,968			129,565
Total operating expenses		1,093,432			1,033,487			1,023,678
Operating income		98,152			78,263			121,936
Interest expense, net		(149,623	)		(165,175	)		(162,263	)
Impairment loss		(33,760	)		(107,409	)		(19,247	)
Hurricane loss		(2,125	)		—			—
Charge-off of deferred financing costs		(6,960	)		(2,834	)		(3,222	)
Loss on early extinguishment of debt		(44,216	)		—			—
Gain on swap termination		1,005			—			—
Loss before equity in income of unconsolidated entities, minority interests and gain on sale of assets		(137,527	)		(197,155	)		(62,796	)
Equity in income (loss) from unconsolidated entities		17,121			2,370			(10,127	)
Gain on sale of assets		1,167			284			5,861
Minority interests		7,928			13,912			6,041
Loss from continuing operations		(111,311	)		(180,589	)		(61,021	)
Discontinued operations		11,184			(129,555	)		(117,560	)
Net loss		(100,127	)		(310,144	)		(178,581	)
Preferred dividends		(35,130	)		(26,908	)		(26,292	)
Net loss applicable to common stockholders	$	(135,257	)	$	(337,052	)	$	(204,873	)
Loss per common share data:
Basic and diluted:
Net loss from continuing operations	$	(2.48	)	$	(3.54	)	$	(1.61	)
Net loss	$	(2.29	)	$	(5.75	)	$	(3.78	)
Weighted average common shares outstanding		59,045			58,657			54,173
Cash dividends declared on common stock	$	—		$	—		$	0.60

The accompanying notes are an integral part of these consolidated financial statements.

F-5

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the years ended December 31, 2004, 2003 and 2002
(in thousands)

	2004			2003			2002
Net loss	$	(100,127	)	$	(310,144	)	$	(178,581	)
Unrealized holding gains from interest rate swaps		147			—			—
Foreign currency translation adjustment		6,155			9,577			277
Comprehensive loss	$	(93,825	)	$	(300,567	)	$	(178,304	)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the years ended December 31, 2004, 2003, and 2002
(in thousands)

				Common Stock
				Number						Additional			Accumulated Other									Total
	Preferred			of						Paid-in			Comprehensive			Accumulated			Treasury			Stockholders’
	Stock			Shares			Amount			Capital			Income (Loss)			Deficit			Stock			Equity
Balance at December 31, 2001	$	293,265			69,418		$	694		$	2,059,448		$	(376	)	$	(355,391	)	$	(314,446	)	$	1,683,194
Foreign exchange translation		—			—			—			—			277			—			—			277
Issuance of Series B preferred stock		25,645			—			—			(1,836	)		—			—			—			23,809
Issuance of stock awards		—			5			—			(1,121	)		—			—			1,121			—
Amortization of stock awards		—			—			—			2,088			—			—			—			2,088
Conversion of preferred stock		(3	)		—			—			3			—			—			—			—
Conversion of operating partnership units into common shares		—			5,713			57			73,414			—			—			—			73,471
Allocation from minority units		—			—			—			72,534			—			—			—			72,534
Dividends declared:
$0.60 per common share		—			—			—			—			—			(33,570	)		—			(33,570	)
$1.95 per Series A preferred share		—			—			—			—			—			(11,662	)		—			(11,662	)
$2.25 per Series B depositary preferred share		—			—			—			—			—			(14,630	)		—			(14,630	)
Net loss		—			—			—			—			—			(178,581	)		—			(178,581	)
Other, net		—			—			—			—			—			—			(113	)		(113	)
Balance at December 31, 2002		318,907			75,136			751			2,204,530			(99	)		(593,834	)		(313,438	)		1,616,817
Foreign exchange translation		—			—			—			—			9,577			—			—			9,577
Issuance of stock awards		—			6			—			(1,873	)		—			—			1,873			—
Amortization of stock awards		—			—			—			2,210			—			—			—			2,210
Common stock exchange for treasury stock		—			(5,713	)		(57	)		(109,295	)		—			—			109,352
Conversion of operating partnership																							—
units into common shares		—			—			—			(2,495	)		—			—			4,936			2,441
Allocation from minority units		—			—			—			2,279			—			—			—			2,279
Dividends declared:		—			—			—			—			—			—			—			—
$1.95 per Series A preferred share		—			—			—			—			—			(11,662	)		—			(11,662	)
$2.25 per Series B depositary preferred share		—			—			—			—			—			(15,246	)		—			(15,246	)
Net loss		—			—			—			—			—			(310,144	)		—			(310,144	)
Balance at December 31, 2003		318,907			69,429			694			2,095,356			9,478			(930,886	)		(197,277	)		1,296,272
Foreign exchange translation		—			—			—			—			6,155			—			—			6,155
Issuance of Series A preferred stock		159,850			—			—			(3,850	)		—			—			—			156,000
Issuance of stock awards		—			7			—			(9,067	)		—			—			9,092			25
Amortization of stock awards		—			—			—			3,179			—			—			—			3,179
Unrealized gain on hedging transaction		—			—			—			—			147			—			—			147
Conversion of operating partnership units into common shares		—			—			—			(1,999	)		—			—			4,692			2,693
Allocation from minority units		—			—			—			1,109			—			—			—			1,109
Forfeitures of stock awards		—			—			—			461			—			—			(461	)		—
Dividends declared:		—			—			—			—			—			—			—			—
$1.95 per Series A preferred share		—			—			—			—			—			(19,884	)		—			(19,884	)
$2.25 per Series B depositary preferred share		—			—			—			—			—			(15,246	)		—			(15,246	)
Net loss		—			—			—			—			—			(100,127	)		—			(100,127	)
Balance at December 31, 2004	$	478,757			69,436		$	694		$	2,085,189		$	15,780		$	(1,066,143	)	$	(183,954	)	$	1,330,323

The accompanying notes are an integral part of these consolidated financial statements.

F-7

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2004, 2003, and 2002
(in thousands)

	2004			2003			2002
Cash flows from operating activities:
Net loss	$	(100,127	)	$	(310,144	)	$	(178,581	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		122,653			140,225			152,817
Gain on sale of assets		(20,589	)		(2,660	)		(6,061	)
Amortization of deferred financing fees		4,161			4,996			5,297
Accretion (amortization) of debt		510			590			407
Allowance for doubtful accounts		199			309			(9	)
Amortization of unearned officers’ and directors’ compensation		2,945			2,210			2,088
Equity in loss (income) from unconsolidated entities		(17,121	)		(2,370	)		10,127
Distributions of income from unconsolidated entities		11,932			2,212			2,196
Charge-off of deferred financing costs		6,960			2,834			3,222
Loss (gain) on early extinguishment of debt		44,216			(1,611	)		—
Impairment loss on investment in hotels and hotels held for sale		38,289			245,509			144,085
Minority interests		(7,375	)		(20,588	)		(12,622	)
Changes in assets and liabilities:
Accounts receivable		(2,412	)		2,597			4,524
Restricted cash operations		(23,467	)		2,826			(3,459	)
Other assets		(424	)		(7,043	)		(6,244	)
Accrued expenses and other liabilities		(27,069	)		(6,978	)		(11,750	)
Net cash flow provided by operating activities		33,281			52,914			106,037
Cash flows provided by (used in) investing activities:
Acquisition of hotels		(27,759	)		—			(49,778	)
Improvements and additions to hotels		(95,599	)		(64,045	)		(60,793	)
Cash from consolidation of venture		—			2,705			—
Proceeds from sale of assets		152,686			104,131			29,001
Decrease (increase) in restricted cash-investing		8,155			(689	)		239
Cash distributions from unconsolidated entities, net		10,899			6,636			9,114
Net cash flow provided by (used in) investing activities		48,382			48,738			(72,217	)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings		523,802			321,119			—
Net proceeds from sale of preferred stock		158,990			—			23,809
Repayment of borrowings		(838,891	)		(198,426	)		(62,460	)
Payment of debt issue costs		(5,517	)		(6,656	)		(1,455	)
Purchase of treasury stock, stock grants, and assumed stock options		—			—			(113	)
Proceeds from exercise of stock options		—			—			—
Distributions paid to other partnerships’ minority interests		(4,000	)		—			(2,058	)
Contribution from minority interest holders		3,247			—			—
Distributions paid to FelCor LP limited partners		—			(492	)		(3,696	)
Distributions paid to preferred stockholders		(34,757	)		(26,908	)		(25,907	)
Distributions paid to common stockholders		—			(8,796	)		(27,378	)
Net cash flow provided by (used in) financing activities		(197,126	)		79,841			(99,258	)
Effect of exchange rate changes on cash		2,888			229			27
Net change in cash and cash equivalents		(112,575	)		181,722			(65,411	)
Cash and cash equivalents at beginning of periods		231,885			50,163			115,574
Cash and cash equivalents at end of periods	$	119,310		$	231,885		$	50,163
Supplemental cash flow information – Interest paid	$	162,324		$	160,407		$	159,401

The accompanying notes are an integral part of these consolidated financial statements.

F-8

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

     In 1994, FelCor Lodging Trust Incorporated, or FelCor, went public as a real estate investment trust, or REIT, with six hotels and a market capitalization of $120 million. We are now the nation’s second largest lodging REIT based on total assets and number of hotels owned, holding ownership interests in 149 hotels at December 31, 2004. We are the owner of the largest number of Embassy Suites Hotels^®, Crowne Plaza^® and independently owned Doubletree^®-branded hotels in North America. Our portfolio also includes 69 full, all-suite hotels.

     FelCor is the sole general partner of, and the owner of an approximately 95% limited partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP. All of our operations are conducted solely through FelCor LP, or its subsidiaries.

     At December 31, 2004, we had ownership interests in 149 hotels. We owned a 100% real estate interest in 112 hotels, a 90% or greater interest in entities owning seven hotels, a 60% interest in an entity owning two hotels, a 51% interest in an entity owning eight hotels and 50% interests in unconsolidated entities that own 20 hotels. As a result of our ownership interests in the operating lessees of 144 of these hotels, we reflect their operating revenues and expenses in our consolidated statements of operations. Effective July 1, 2004, we transferred a 49% interest in the lessee of 12 jointly-owned hotels to our joint venture partner, which will share proportionately in the income or loss of the lessee with respect to these hotels. As of December 31, 2004, we own 100% of the consolidated operating lessees of 129 hotels and 51% of the consolidated operating lessees of 20 hotels. The operations of 143 of the 144 hotels were included in continuing operations at December 31, 2004. The remaining hotel was held for sale as of December 31, 2004, and its operations are included in discontinued operations. The operating revenues and expenses of the remaining five hotels are unconsolidated.

     At December 31, 2004, we had 59,817,304 shares of FelCor common stock and 2,788,135 units of FelCor LP limited partnership interest outstanding.

     The following table reflects the distribution, by brand, of the 143 hotels included in our consolidated hotel continuing operations at December 31, 2004:

Brand	Hotels		Rooms
Embassy Suites Hotels		56		14,279
Doubletree and Doubletree Guest Suites®		10		2,206
Holiday Inn® – branded		39		12,769
Crowne Plaza and Crowne Plaza Suites®		12		4,025
Sheraton® and Sheraton Suites®		10		3,269
Other brands		16		3,432
Total hotels		143

     The hotels shown in the above table are located in the United States (31 states) and Canada (two hotels), with concentrations in Texas (31 hotels), California (19 hotels), Florida (16 hotels) and Georgia (14 hotels). Approximately 56% of our hotel room revenues were generated from hotels in these four states during 2004.

     At December 31, 2004, of the 143 consolidated hotels included in continuing operations, (i) subsidiaries of Hilton Hotels corporation, or Hilton, managed 66, (ii) subsidiaries of InterContinental Hotels Group, or IHG, managed 55, (iii) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed 11, (iv) subsidiaries of Interstate Hotels & Resorts, or Interstate, managed 10, and (v) an independent management company manages one.

     Certain reclassifications have been made to prior period financial information to conform to the current period’s presentation with no effect to previously reported net loss or stockholders’ equity.

F-9

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

     Principles of Consolidation – Our accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. Investments in unconsolidated entities (50 percent owned ventures) are accounted for by the equity method.

     Use of Estimates – The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     Investment in Hotels – Our hotels are stated at cost and are depreciated using the straight-line method over estimated useful lives of 40 years for buildings, 15 to 20 years for improvements and three to seven years for furniture, fixtures, and equipment.

     We periodically review the carrying value of each of our hotels to determine if circumstances exist indicating an impairment in the carrying value of the investment in the hotel or that depreciation periods should be modified. If facts or circumstances support the possibility of impairment, we prepare a projection of the undiscounted future cash flows over the shorter of the hotel’s estimated useful life or the expected hold period, without interest charges, of the specific hotel and determine if the investment in such hotel is recoverable based on the undiscounted future cash flows. If impairment is indicated, we make an adjustment to reduce carrying value of the hotel to its then fair value. We use recent operating results and current market information to arrive at our estimates of fair value.

     Maintenance and repairs are expensed and major renewals and improvements are capitalized. Upon the sale or disposition of a fixed asset, the asset and related accumulated depreciation are removed from our accounts and the related gain or loss is included in operations.

     Acquisition of Hotels – Our hotel acquisitions consist almost exclusively of land, building, furniture, fixtures and equipment, and inventory. We allocate the purchase price among these asset classes based upon their respective values determined in accordance with Statement of Financial Accounting Standards, or SFAS, 141, “Business Combinations.” When we acquire properties, we acquire them for use. The only intangible assets typically acquired consist of miscellaneous operating agreements all of which are of short duration and at market rates. We do not generally acquire any significant in-place leases or other intangible assets (e.g., management agreements, franchise agreements or trademarks) when we acquire hotels. In conjunction with the acquisition of a hotel, we typically negotiate new franchise and management agreements with the selected brand owner and manager.

     Investment in Unconsolidated Entities – We own a 50% interest in various real estate ventures in which the partners or members jointly make all material decisions concerning the business affairs and operations. Additionally, we also own a preferred equity interest in one of these real estate ventures. Because we do not control these entities, we carry our investment in unconsolidated entities at cost, plus our equity in net earnings or losses, less distributions received since the date of acquisition and any adjustment for impairment. Our equity in net earnings or losses is adjusted for the straight-line depreciation, over the lower of 40 years or the remaining life of the venture, of the difference between our cost and our proportionate share of the underlying net assets at the date of acquisition. We periodically review our investment in unconsolidated entities for other than temporary declines in market value. Any decline that is not expected to recover in the next 12 months is considered other than temporary and an impairment is recorded as a reduction in the carrying value of the investment. Estimated fair values are based on our projections of cash flows and market capitalization rates.

F-10

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies – (continued)

     Hotels Held for Sale – We consider each individual hotel to be an identifiable component of our business. In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we do not consider hotels as “held for sale” until it is probable that the sale will be completed within one year. Once a hotel is “held for sale” the operations related to the hotel are included in discontinued operations. We consider a hotel as “held for sale” once we have executed a contract for sale, allowed the buyer to complete their due diligence review, and received a substantial non-refundable deposit. Until a buyer has completed its due diligence review of the asset, necessary approvals have been received and substantive conditions to the buyer’s obligation to perform have been satisfied, we do not consider a sale to be probable.

     We do not depreciate hotel assets so long as they are classified as “held for sale.” Upon designation of a hotel as being “held for sale,” and quarterly thereafter, we review the carrying value of the hotel and, as appropriate, adjust its carrying value to the lesser of depreciated cost for fair value, less cost to sell, in accordance with SFAS 144. Any such adjustment in the carrying value of a hotel classified as “held for sale” is reflected in discontinued operations. We include in discontinued operations the operating results of those hotels that are classified as “held for sale” or that have been sold.

     Cash and Cash Equivalents – All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

     We place cash deposits at major banks. Our bank account balances may exceed the Federal Depository Insurance Limits of $100,000; however, management believes the credit risk related to these deposits is minimal.

     Restricted Cash –Restricted cash includes reserves for capital expenditures, real estate taxes, and insurance, as well as cash collateral deposits due to mortgage debt agreement provisions.

     Deferred Expenses – Deferred expenses, consisting primarily of loan costs, are recorded at cost. Amortization is computed using a method that approximates the interest method over the maturity of the related debt.

     Other Assets – Other assets consist primarily of hotel operating inventories, prepaid expenses and deposits.

     Revenue Recognition – Approximately 99.8% to 99.9% of our revenue is comprised of hotel operating revenues, such as room revenue, food and beverage revenue, and revenue from other hotel operating departments (such as telephone, parking and business centers). These revenues are recorded net of any sales or occupancy taxes collected from our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for doubtful accounts and are recorded as a bad debt expense. The remaining 0.1% to 0.2% of our revenue is from retail space rental revenue and other sources.

     We do not have any time-share arrangements and do not sponsor any frequent guest programs for which we would have any contingent liability. We participate in frequent guest programs sponsored by the brand owners of our hotels and we expense the charges associated with those programs (typically consisting of a percentage of the total guest charges incurred by a participating guest), as incurred. When a guest redeems accumulated frequent guest points at one of our hotels, the hotel bills the sponsor for the services provided in redemption of such points and records revenue in the amount of the charges billed to the sponsor. Associated with the frequent guest programs, we have no loss contingencies or ongoing obligation beyond what is paid to the brand owner at the time of the guest’s stay.

F-11

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies – (continued)

     Foreign Currency Translation – Results of operations for our Canadian hotels are maintained in Canadian dollars and translated using the average exchange rates during the period. Assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the balance sheet date. Resulting translation adjustments are reflected in accumulated other comprehensive income.

     Capitalized Cost – We capitalize interest and certain other costs, such as property taxes, land leases, and property insurance relating to hotels undergoing major renovations and redevelopments. Such costs capitalized in 2004, 2003, and 2002, were $3.6 million, $2.0 million and $1.4 million, respectively.

     Net Income (Loss) Per Common Share – We compute basic earnings per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. We compute diluted earnings per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares and equivalents outstanding. Common stock equivalents represent shares issuable upon exercise of stock options and unvested officers’ restricted stock grants.

     For all years presented, our Series A Cumulative Preferred Stock, or Series A preferred stock, if converted to common shares, would be antidilutive; accordingly we do not assume conversion of the Series A preferred stock in the computation of diluted earnings per share. For all years presented, stock options granted are not included in the computation of diluted earnings per share because the average market price of the common stock during each respective year exceeded the exercise price of the options.

     Stock Compensation – We apply Accounting Principles Board, or APB, Opinion 25 and related interpretations in accounting for our stock based compensation plans for stock based compensation issued prior to January 1, 2003. In 1995, SFAS 123, “Accounting for Stock-Based Compensation,” was issued, which, if fully adopted by us, would have changed the methods we apply in recognizing the cost of the plans. As permitted under the transition provisions of SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” we began recognizing compensation expense in accordance with SFAS 123 for all new awards issued after December 31, 2002. Had the compensation cost for our stock-based compensation plans been determined in accordance with SFAS 123 prior to January 1, 2003, our net income or loss and net income or loss per common share for the periods presented would approximate the pro forma amounts below (in thousands, except per share data):

	2004			2003			2002
Loss from continuing operations, as reported	$	(111,311	)	$	(180,589	)	$	(61,021	)
Add stock based compensation included in the net loss, as reported		2,945			2,210			2,088
Less stock based compensation expense that would have been included in the determination of net loss if the fair value method had been applied to all awards		(3,001	)		(2,355	)		(2,617	)
Loss from continuing operations, pro forma	$	(111,367	)	$	(180,734	)	$	(61,550	)
Basic and diluted net loss from continuing operations per common share:
As reported	$	(2.48	)	$	(3.54	)	$	(1.61	)
Pro forma	$	(2.48	)	$	(3.54	)	$	(1.62	)

     The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.

     Derivatives – We record derivatives in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments. Specifically, SFAS 133 requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders’ equity or net income, depending on whether the derivative instrument qualifies as a hedge for accounting purposes and the nature of the hedging activity.

F-12

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies – (continued)

     Segment Information – SFAS 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, we have determined that our business is conducted in one operating segment.

     Distributions and Dividends – We and FelCor LP have historically paid regular quarterly distributions on our common stock and partnership units. Additionally, we have paid regular quarterly dividends on our preferred stock in accordance with our preferred stock dividend requirements. In 2003, we announced that, as the result of declines in our portfolio’s average daily rate, which was attributed to the uncertain geopolitical environment and soft business climate, along with the risk of further margin deterioration, we suspended payment of regular common dividends. Our ability to make distributions is dependent on our receipt of quarterly distributions from FelCor LP, and FelCor LP’s ability to make distributions is dependent upon the results of operations of our hotels.

     Minority Interests – Minority interests in FelCor LP and other consolidated subsidiaries represent the proportionate share of the equity in FelCor LP and other consolidated subsidiaries not owned by us. We allocate income and loss to minority interest based on the weighted average percentage ownership throughout the year.

     Income Taxes – We have elected to be treated as a REIT under Sections 856 to 860 of the Internal Revenue Code. We generally lease our hotels to wholly-owned taxable REIT subsidiaries, or TRSs, that are subject to federal and state income taxes. Through these leases we record room revenue, food and beverage revenue and other revenue related to the operations of our hotels. We account for income taxes in accordance with the provisions of SFAS 109. Under SFAS 109, we account 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.

3. Investment in Hotels

     Investment in hotels at December 31, 2004 and 2003 consists of the following (in thousands):

	2004			2003
Building and improvements	$	3,032,766		$	3,142,853
Furniture, fixtures and equipment		520,441			512,927
Land		316,364			333,060
Construction in progress		39,450			1,124
		3,909,021			3,989,964
Accumulated depreciation		(948,631	)		(886,168	)
	$	2,960,390		$	3,103,796

     In 2004, we acquired the 132 room Santa Monica Hotel in California for $27.8 million. We entered into a 14-year management agreement with IHG for the hotel. We utilized cash on hand to acquire this hotel. Discussions of 2004 hotel dispositions are included in our Discontinued Operations footnote.

     In 2003, we sold parking garages adjacent to our hotels in Philadelphia, Pennsylvania, and San Francisco, California, for net sales proceeds of $12.1 million and realized aggregate gains of $0.3 million. Discussions of 2003 hotel dispositions are included in our Discontinued Operations footnote.

     In June 2002, we sold retail space associated with the Allerton Hotel located in Chicago, Illinois, for net proceeds of $16.7 million and recorded a net gain of $5.1 million. In addition, in 2002 we also recognized a $0.2 million gain related to the condemnation of land adjacent to one of our hotels.

F-13

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Investment in Hotels – (continued)

     In April 2002, we sold our 183-room Doubletree Guest Suites hotel in Boca Raton, Florida, and received net sales proceeds of $6.5 million. We recorded a net gain of $0.8 million on the sale.

     We invested $96 million and $64 million in additions and improvements to our consolidated hotels during the years ended December 31, 2004 and 2003, respectively. Additionally our pro rata share of capital expenditures for our unconsolidated hotels were $6 million and $4 million during the years ended December 31, 2004 and 2003, respectively.

4. Impairment Charge

     Our hotels are comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the remainder of our operations. Accordingly, we consider our hotels to be components as defined by SFAS 144 for purposes of determining impairment charges and reporting discontinued operations.

     When testing for recoverability we generally use historical and projected cash flows over the expected hold period. When determining fair value for purposes of determining impairment we use a combination of historical and projected cash flows and other available market information, such as recent sales prices for similar assets in specific markets.

     The estimated cash flows used to test for recoverability are undiscounted cash flow while the cash flows used for determining fair values are discounted using a reasonable capitalization rate, or as earlier noted based on the local market conditions using recent sales of similar assets.

     In 2004, we recorded impairment charges, under the provisions of SFAS 144, of $38.3 million ($33.8 million of which is included in continuing operations and the remainder is included in discontinued operations). The 2004 charges primarily related to 17 assets of which 14 non-strategic hotels were held for investment at December 31, 2004, two were sold during the year and one was held for sale at year end. Ten of these assets were written down to their fair value because the projected undiscounted cash flows for the remaining holding period did not exceed their carrying value. With respect to one hotel, we entered into an option in the third quarter 2004 that would permit the option holder to purchase the hotel for substantially less than its carrying value. The remaining seven hotels experienced lower than expected operating results, compared to prior year and budget, and recently forecasted 2005 hotel operating margins continue to be depressed for these hotels. These seven hotels, among others, are currently being reviewed for possible disposition.

     In 2003, we recorded impairment charges, under the provisions of SFAS 144, of $245.5 million ($107.4 million of which is included in continuing operations and the remainder is included in discontinued operations). The 2003 charges were primarily related to our third quarter decision to sell 11 IHG-managed hotels, following an amendment to the management agreements on these hotels, and our fourth quarter decision to sell an additional seven hotels. We tested certain of our previously impaired non-strategic hotels for recoverability during the fourth quarter of 2003 as the result of one or more of the following circumstances: continued operating losses; further declines in revenue, in excess of that in our core portfolio; further reductions in the estimated hold periods; and revised estimates of fair value. As result, we recorded additional impairment charges on certain of the non-strategic hotels identified for sale in 2002.

     In 2002, we recorded impairment charges of $144.1 million under the provisions of SFAS 144 ($19.2 million of which is included in continuing operations and the remainder is included in discontinued operations). This impairment charge related principally to our fourth quarter 2002 decision to sell 33 hotels.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Impairment Charge – (continued)

     In 2002, we also recorded an impairment charge of $13.4 million related to an other than temporary decline in value of certain equity method investments under the provisions of Accounting Principles Board Opinion 18, “The Equity Method of Accounting for Common Stocks,” or APB 18. In accordance with APB 18, other than temporary declines in fair value of our investment in unconsolidated entities result in reductions in the carrying value of these investments. We consider a decline in value in our equity method investments that is not estimated to recover within 12 months to be other than temporary.

     The non-strategic hotels held for investment, which are included in our continuing operations, were tested for impairment as required by SFAS 144 using the undiscounted cash flows for the shorter of the estimated remaining holding periods or the useful life of the hotels. Those hotels that failed the impairment test described in SFAS 144 were written down to their current estimated fair value, before any selling expenses. These hotels continue to be depreciated over their remaining useful lives.

     We may be subject to additional impairment charges in the event that operating results of individual hotels are materially different from our forecasts, the economy and lodging industry remains weak, or if we shorten our contemplated holding period for certain of our hotels.

5. Discontinued Operations

     The results of operations of the 16 hotels sold during 2003, 18 hotels disposed of in 2004 and the one hotel subject to a firm sale contract and designated as held for sale at December 31, 2004, are presented in discontinued operations for the periods presented.

     Condensed combined financial information for the 35 hotels included in discontinued operations is as follows:

	Year Ended December 31,
	2004			2003			2002
Hotel operating revenue	$	69,298		$	146,317		$	172,345
Operating expenses		67,566			147,798			169,815
Operating income (loss)		1,732			(1,481	)		2,530
Direct interest costs, net		12			(636	)		(2,030	)
Impairment		(4,529	)		(138,100	)		(124,839	)
Lease termination expense from asset disposition		(4,900	)		—			—
Gain on the early extinguishment of debt		—			1,611			—
Gain on disposition		19,422			2,376			200
Minority interest		(553	)		6,675			6,579
Income (loss) from discontinued operations	$	11,184		$	(129,555	)	$	(117,560	)

     In the first quarter of 2004 we sold four hotels (Holiday Inn Plano, Texas; Hampton Inn Omaha - - South West, Nebraska and Crowne Plaza hotels in Jackson, Mississippi and Houston, Texas), for gross proceeds of $30 million.

     In the second quarter of 2004 we sold three hotels (Holiday Inn St. Louis, Missouri and two Holiday Inn & Suites in Odessa, Texas), for gross proceeds of $12 million.

     In the third quarter of 2004 we sold five hotels (Holiday Inn hotels in Beaumont, Texas; Midland, Texas and Albuquerque, New Mexico; an independent hotel in Avon, Colorado and a Holiday Inn & Suites in Omaha, Nebraska), for gross proceeds of $29 million.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Discontinued Operations – (continued)

     In the fourth quarter of 2004 we sold five hotels (a Harvey Hotel in Dallas, Texas; a Homewood Suites in Omaha, Nebraska and Crowne Plaza hotels in Dallas, Texas, Hartford, Connecticut, and Secaucus, New Jersey) for gross proceeds of $86 million.

     From the sale of these hotels we recorded a net gain of $19.4 million.

     We leased the San Francisco Holiday Inn Select Downtown & Spa hotel under a lease that was scheduled to expire in December 2004. In May 2003, the lessor asserted that we were in default of our obligations for maintenance, repair and replacement under the lease, and asserted that the cost of correcting the alleged deficiencies was $13.9 million. The lessor subsequently asserted that we were also in default of our capital expenditure obligations under the lease in the amount of $3 million. In October 2003, we reached a partial settlement with the lessor, pursuant to which we paid the lessor $296,000 in full satisfaction and discharge of certain maintenance obligations that the lessor had valued in its original claim at $470,300. On May 3, 2004, we executed a settlement agreement. Under the terms of the settlement, we paid the lessor $5 million which has been recorded as lease termination expense in the accompanying financial statements. We transferred our interest in the hotel to the lessor as of June 30, 2004, and have been relieved of the obligation to make any additional capital improvements to the hotel and have received a full release of all known and unknown claims and further obligations under the lease. We have also received a release of termination liability to IHG under its management agreement with respect to this hotel upon its termination in connection with the above settlement.

     In October 2003, we sold four Holiday Inn-branded hotels in Ontario, Canada for net proceeds of $30.6 million; five hotels (Embassy Suites Hotels in Syracuse, New York, Phoenix, and Flagstaff, Arizona, and Doubletree Guest Suites hotels in Columbus, and Dayton, Ohio), for net proceeds of $48.2 million; a Crowne Plaza hotel in Greenville, South Carolina, for net proceeds of $4.2 million; and a Holiday Inn in Texarkana, Arkansas, for net proceeds of $2.5 million. From the sale of these hotels, we realized a net gain of $3.0 million on disposition, which included a $3.5 million gain from foreign currency translation previously recorded in other comprehensive income.

     In August 2003, we relinquished title to two low rise Harvey hotels in Dallas through a foreclosure action. This resulted in a gain of $0.3 million from the extinguishment of $9.7 million of debt (net of escrow balances).

     In July 2003, we sold our Doubletree Guest Suites in Nashville, Tennessee, for net proceeds of $3.0 million. In May 2003, we sold two non-strategic hotels, the 138-room Hampton Inn in Moline, Illinois, and the 132-room Hampton Inn in Davenport, Iowa, for aggregate net sales proceeds of $6.4 million. From the sale of these hotels we realized a net loss on disposition of $0.9 million.

6. Investment in Unconsolidated Entities

     We owned 50% interests in joint venture entities that owned 20 hotels at December 31, 2004, and December 31, 2003. We also owned a 50% interest in entities that own real estate in Myrtle Beach, South Carolina, provide condominium management services, and lease four hotels. We account for our investments in these unconsolidated entities under the equity method. We do not have any majority-owned subsidiaries that are not consolidated in our financial statements. We make adjustments to our equity in income from unconsolidated entities related to the difference between our basis in investment in unconsolidated entities compared to the historical basis of the assets recorded by the joint ventures.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Investment in Unconsolidated Entities – (continued)

     Summarized unaudited combined financial information for 100% of these unconsolidated entities is as follows (in thousands):

	December 31,
	2004		2003
Balance sheet information:
Investment in hotels, net of accumulated depreciation	$	282,028	$	326,835
Total assets	$	313,104	$	384,825
Debt	$	218,292	$	275,209
Total liabilities	$	237,597	$	295,552
Equity	$	75,507	$	89,273

     Debt of our unconsolidated entities at December 31, 2004, consisted of $218.3 million of non-recourse mortgage debt, of which our pro rata share is $109.1 million.

     Summarized unaudited combined statement of operations information for 100% of our unconsolidated entities is as follows (in thousands):

	2004			2003			2002
Total revenues	$	67,902		$	75,456		$	84,926
Net income	$	16,247	(a)	$	9,438		$	8,818
Net income attributable to FelCor	$	18,483		$	4,459		$	4,409
Preferred return		516			514			1,341
Depreciation of cost in excess of book value		(1,878	)		(2,603	)		(2,458	)
Impairment loss		—			—			(13,419	)
Equity in income (loss) from unconsolidated entities	$	17,121		$	2,370		$	(10,127	)

(a) Includes $17.5 million from the gain on the sale of residential condominium development in Myrtle Beach, South Carolina, which was realized in 2004. Our share of the gain was $8.8 million. We also recorded additional gains of $1.9 million in our equity in income from unconsolidated entities to reflect the differences between our historical basis in the assets sold and the basis recorded by the condominium joint venture.

     A summary of the components of our investment in unconsolidated entities as of December 31, 2004 and 2003 is as follows:

	2004			2003
Hotel investments	$	107,421		$	114,178
Land and condominium investments		4,124			2,523
Hotel lessee investments		(702	)		(148	)
	$	110,843		$	116,553

     A summary of the components of our equity in income (loss) of unconsolidated entities for the years ended December 31, 2004, 2003, and 2002, are as follows:

	2004			2003			2002
Hotel investments, including an impairment loss in 2002 of $13,419	$	17,673		$	2,981		$	(8,852	)
Hotel lessee operations		(552	)		(611	)		(1,275	)
	$	17,121		$	2,370		$	(10,127	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt

Debt at December 31, 2004 and 2003, consists of the following (in thousands):

						Balance Outstanding
	Encumbered	Interest Rate at			Maturity	December 31,
	Hotels	December 31, 2004			Date	2004		2003
Promissory note	none		4.31	(a)	June 2016	$	650	$	650
Senior unsecured term notes	none		—		Oct. 2004		—		174,888
Senior unsecured term notes	none		7.63		Oct. 2007		122,426		124,617
Senior unsecured term notes	none		—		Sept. 2008		—		596,865
Senior unsecured term notes	none		9.00		June 2011		298,409		298,158
Senior unsecured term notes	None		7.19	(b)	June 2011		290,000		—
Total unsecured debt(c)			8.02				711,485		1,195,178
Mortgage debt	15 hotels		5.50		July 2009-2014		192,363		—
Mortgage debt	10 hotels		4.63	(d)	May 2006		144,669		148,080
Mortgage debt	15 hotels		7.24		Nov. 2007		127,316		131,721
Mortgage debt	7 hotels		7.32		April 2009		130,458		92,445
Mortgage debt	6 hotels		7.55		June 2009		67,959		69,566
Mortgage debt	8 hotels		8.70		May 2010		175,504		178,118
Mortgage debt	7 hotels		8.73		May 2010		135,690		138,200
Mortgage debt	1 hotel		4.06	(a)	August 2008		15,500		15,500
Mortgage debt	1 hotel		7.23		September 2005		10,521		11,286
Mortgage debt	8 hotels		7.48		April 2011		49,476		50,305
Other	1 hotel		9.17		August 2011		6,181		6,956
Total secured debt(c)	79 hotels		7.00				1,055,637		842,177
Total(c)			7.41	%		$	1,767,122	$	2,037,355

(a)	Variable interest rate based on LIBOR. The six month LIBOR was 2.78% at December 31, 2004.
(b)	$100 million of these notes were matched with interest rate swap agreements that effectively converted the variable interest rate to a fixed rate.
(c)	Interest rates are calculated based on the weighted average outstanding debt at December 31, 2004.
(d)	Variable interest rate based on LIBOR. This debt may be extended at our option for up to two, one-year periods.

     We reported interest expense net of interest income of $2.8 million, $2.3 million and $2.1 million for the years ended December 31, 2004, 2003 and 2002, respectively. We capitalized interest of $1.5 million, $0.6 million and $0.8 million, for the years ended December 31, 2004, 2003 and 2002, respectively.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt – (continued)

     In May 2004, we issued $175 million in aggregate principal amount of Senior Floating Notes due June 1, 2011, or the 2011 Notes, and we received net proceeds of $174.1 million. The 2011 Notes bear interest, adjusted semi annually, at the six-month LIBOR plus 4.25% and rank equally with our other existing senior unsecured debt. The 2011 Notes are callable on or after December 1, 2006, at an initial redemption price of 102%. In July 2004, we issued an additional $115 million of the 2011 Notes with identical terms and conditions as the $175 million issued in May 2004.

     On June 9, 2004, we redeemed all $175 million in principal amount of our outstanding 7.375% Senior Notes due 2004. The redemption price was $1,018 per $1,000 of the principal amount, plus accrued interest. With the retirement of this debt, we recorded a loss on redemption of $3.2 million and wrote off $0.3 million of debt issue costs. We also recorded a $1 million gain on the unwinding of the interest rate swaps tied to this debt.

     During 2004, we purchased all $600 million of our 9.5% Senior Notes due 2008 (which bore interest at 10% as a result of the 2003 downgrade of the credit ratings on our senior notes) through tender offers, redemptions and by purchases in the open market, at an average price of $1,063.55 per $1,000 in principal amount. With the retirement of this debt, we recorded a loss on early extinguishment of debt of $41 million of which $38.2 million related to the premium paid in excess of par and $2.8 million related to the charge off of unamortized discount. We also wrote off debt issue costs of $6.5 million.

     In 2004 we also elected to terminate our line of credit and wrote off debt issue costs of $0.2 million. We charged off $2.8 million and $3.2 million of unamortized deferred costs as a result of a reduction of the line of credit commitments in 2003 and 2002, respectively.

     In June 2003, we entered in to a new secured delayed draw facility with JPMorgan Chase Bank for up to $200 million. In 2004, we borrowed $194 million under this facility (collateralized by 15 hotels). The amount drawn under the facility was converted into: (i) $107 million of nine separate fixed rate CMBS loans secured by nine hotels with a weighted average interest rate of 6.5% and with maturity dates ranging form 2009 to 2014, and (ii) $87 million under a cross-collateralized floating rate CMBS loan secured by six hotels with an interest rate of LIBOR plus 2.11% and with a maturity date of 2009, including extension options which are subject to our satisfaction of certain conditions. On July 28, 2004, we cancelled the unused balance of this $200 million facility.

     In December 2004, we closed on $40 million second mortgage financing with regard to seven of our hotels. The second mortgage loan has a fixed interest rate of 6.82% and contains the same terms and conditions as the first mortgage, including the maturity date of March 2009.

     At December 31, 2004, we had aggregate mortgage indebtedness of $1.1 billion that was secured by 79 of our consolidated hotels with an aggregate book value of $1.8 billion. Substantially all of this debt is recourse solely to the specific assets securing the debt, except in the case of fraud, misapplication of funds and other customary recourse provisions. Loans secured by 41 hotels provide for lock-box arrangements. With respect to loans secured by 23 of these hotels, if the debt service coverage ratios fall below certain levels, the lender is entitled to apply the revenues from the hotels securing the loan to satisfy current requirements for debt service, taxes, insurance and other reserves, before the balance of the revenues, if any, would be available to the owner to pay the expenses of hotel operations and provide a return to the owner. Eight of these 23 hotels, which accounted for 2% of our total revenues in 2004, are currently below the prescribed debt service coverage ratios and are subject to these lock-box requirements. These eight hotels, in the aggregate, are currently covering their hotel operating expenses, before capital expenditures.

     With respect to loans secured by the remaining 18 hotels, the owner is permitted to retain 115% of budgeted hotel operating expenses before the remaining revenues would become subject to a similar lock-box arrangement if a specified debt service coverage ratio was not met. The mortgage loans secured by 16 of these 18 hotels also provide that, so long as the debt service coverage ratios remain below a second, even lower minimum level, the lender may retain any excess cash (after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements) and, if the debt service coverage ratio remains below this lower minimum level for 12 consecutive months, apply any accumulated excess cash to the

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt – (continued)

prepayment of the principal amount of the debt. If the debt service coverage ratio exceeds the lower minimum level for three consecutive months, any then accumulated excess cash will be returned to the owner. Ten of these 18 hotels, which accounted for 6% of our total revenues in 2004, are currently below the applicable debt service coverage ratio and are subject to the lock-box provisions. None of the hotels are currently below the second, even lower minimum debt service coverage ratio that would permit the lender to retain excess cash after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements.

     Our publicly-traded senior unsecured notes require that we satisfy total leverage, secured leverage and an interest coverage tests in order to: incur additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; pay dividends in excess of the minimum dividend required to meet the REIT qualification test; repurchase capital stock; or merge. As of the date of this filing, we have satisfied all such tests. Under the terms of certain of our indentures, we are prohibited from repurchasing any of our capital stock, whether common or preferred, subject to certain exceptions, so long as our debt-to-EBITDA ratio, as defined in the indentures, exceeds 4.85 to 1. Debt, as defined in the indentures, approximates our consolidated debt. EBITDA is defined in the indentures as consolidated GAAP net income, adjusted for minority interest in FelCor LP, actual cash distributions by unconsolidated entities, gains or losses from asset sales, dividends on preferred stock and extraordinary gains and losses (as defined at the date of the indentures), plus interest expense, income taxes, depreciation expense, amortization expense and other non-cash items. Our debt-to-EBITDA ratio, as defined, was 4.8 to 1, 6.0 to 1 and 5.3 to 1 for the years ended December 31, 2004, 2003 and 2002, respectively. The ratio increased in 2002 and 2003 principally because of the decline in our EBITDA as a result of the recession that began in March of 2001 and was exacerbated by the terrorist attacks of September 11, 2001. These events contributed to a deep and protracted recession in the hospitality industry. Our EBITDA has also decreased due to the sale of non-strategic hotels. Although our current debt-to-EDITDA ratio is slightly below 4.85 to 1 a decline in our EBITDA, as a result of asset sales or adverse economic developments, or an increase in our debt, could again make us subject to this limitation.

     If actual operating results fall significantly below our current expectations, as reflected in our current public guidance, or if interest rates increase substantially above expected levels, we may be unable to continue to satisfy the incurrence test under the indentures governing our senior unsecured notes. In such event we may be prohibited from, among other things, incurring any additional indebtedness, except under certain specific exceptions, or paying dividends on our preferred or common stock, except to the extent necessary to satisfy the REIT qualification requirement that we distribute currently at least 90% of our taxable income. In the event of our failure of this incurrence test, based upon our current estimates of taxable income for 2005, we would be unable to distribute the full amount of dividends accruing under our outstanding preferred stock in 2005 and, accordingly, could pay no dividends on our common stock.

     Future scheduled principal payments on debt obligations at December 31, 2004, are as follows (in thousands):

Year
2005	$	32,319
2006(a)		161,043
2007		263,798
2008		34,595
2009		280,768
2010 and thereafter		999,128
		1,771,651
Discount accretion over term		(4,529	)
	$	1,767,122

(a) Includes $145 million non-recourse mortgage loan maturing in 2006, that may be extended at our option for up to two, one-year periods, subject to certain contingencies.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Derivatives

     On the date we enter into a derivative contract, we designate the derivative as a hedge to the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), or the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge). For a fair value hedge, the gain or loss is recognized in earnings in the period of change, together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. At December 31, 2004, all of our outstanding hedges were cash flow hedges.

     We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy, relating to our various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or specific firm commitments. We also formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows or fair values of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When we determine that a derivative is not (or has ceased to be) highly effective as a hedge, we will discontinue hedge accounting, prospectively.

     In the normal course of business, we are exposed to the effect of interest rate changes. We limit these risks by following established risk management policies and procedures including the use of derivatives. It is our objective to use interest rate hedges to manage our fixed and floating interest rate position and not to engage in speculation on interest rates. We manage interest rate risk based on the varying circumstances of anticipated borrowings, and existing floating and fixed rate debt. We will generally seek to pursue interest rate risk mitigation strategies that will result in the least amount of reported earnings volatility under generally accepted accounting principles, while still meeting strategic economic objectives and maintaining adequate liquidity and flexibility. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

     In June 2004, we unwound six interest rate swap agreements with an aggregate notional amount of $175 million that were matched with the $175 million in senior unsecured notes due 2004 that we redeemed. A $1 million gain was recorded, offsetting the loss on the redemption of the debt. Also during June 2004, five additional swaps with an aggregate amount of $125 million that were matched to the $125 million senior unsecured notes due 2007 were unwound at a cost of $2.3 million. The $2.3 million was applied to the principal balance of these notes and will be amortized to interest expense over the remaining life of the debt. During July 2004, four interest rate swap agreements with a notional value of $100 million, that were matched to mortgage debt maturing in November 2007, were unwound at a cost of $1.3 million. The $1.3 million was applied to the principal balance of this debt and will be amortized to interest expense over the remaining life of this debt.

     To manage the relative mix of our debt between fixed and variable rate instruments, at December 31, 2004, we had three cash flow interest rate swap agreements with three financial institutions with an aggregate notional value of $100 million. These cash flow swap agreements modify a portion of the interest characteristics of our outstanding variable rate debt, without an exchange of the underlying principal amount, and effectively convert variable rate debt to a fixed rate. These swaps have been 100% effective through December 31, 2004.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Derivatives — (continued)

     To determine the fair values of our derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

     At December 31, 2004, we had three interest rate swaps with aggregate notional amount of $100 million, maturing in December 2007. These interest rate swaps are designated as cash flow hedges, and are marked to market through other comprehensive income. The estimated unrealized net gain on these interest rate swap agreements was approximately $0.1 million at December 31, 2004, and represents the amount we would receive if the agreements were terminated, based on current market rates. The interest rate received on these interest rate swaps is 4.25% plus LIBOR and the interest rate paid is 7.80%.

     The amounts paid or received by us under the terms of the interest rate swap agreements are accrued as interest rates change, and we recognize them as an adjustment to interest expense, which will have a corresponding effect on our future cash flows. The interest rate swaps decreased interest expense by $4.1 million, $7.2 million and $4.0 million during the years ended December 31, 2004, 2003 and 2002, respectively. Our interest rate swaps have monthly to semi-annual settlement dates. Agreements such as these contain a credit risk in that the counterparties may be unable to fulfill the terms of the agreement. We minimize that risk by evaluating the creditworthiness of our counterparties, who are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties. The Standard & Poor’s credit ratings for each of the financial institutions that are counterparties to our interest rate swap agreements are AA-.

     To fulfill requirements under the $150 million secured loan facility executed in April 2003, we purchased 6% interest rate caps with a notional amount of $144.7 million. We concurrently sold interest rate caps with identical terms. In July 2004, we purchased 6.5% interest rate caps on LIBOR with a notional amount of $86.4 million to fulfill requirements under an $87 million cross-collateralized floating rate CMBS loan and concurrently sold interest rate caps with identical terms. These interest rate cap agreements have not been designated as hedges. The fair value of both the purchased and sold interest rate caps was $0.02 million at December 31, 2004, resulting in no net earnings impact.

9. Fair Value of Financial Instruments

     SFAS 107 requires disclosures about the fair value of all financial instruments, whether or not recognized for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of December 31, 2004. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

     Our estimates of the fair value of (i) accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) debt is based upon effective borrowing rates for issuance of debt with similar terms and remaining maturities; and (iii) our interest rate swaps and the hedged debt are recorded at estimates of fair value, which are based on the amount that we estimate we would currently receive upon termination of these instruments at current market rates and with reasonable assumptions about relevant future market conditions. The book value and estimated fair value of our debt is $1.8 billion at December 31, 2004.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes

     We have elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our taxable income to our stockholders. We currently intend to adhere to these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income taxes on net income we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we 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 four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and to federal income and excise taxes on our undistributed taxable income. In addition, taxable income from non-REIT activities managed through TRSs is subject to federal, state and local taxes.

     We generally lease our hotels to wholly-owned TRSs that are subject to federal and state income taxes. In 2004 and 2003, we also contributed certain hotel assets to our wholly-owned TRSs. We account for income taxes in accordance with the provisions of SFAS 109, “Accounting for Income Taxes.” Under SFAS 109, we account 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.

Reconciliation between TRSs GAAP net loss and taxable loss:

     The following table reconciles the TRS GAAP net loss to taxable loss for the years ended December 31, 2004, 2003, and 2002 (in thousands):

	2004			2003			2002
GAAP net loss	$	(100,127	)	$	(310,144	)	$	(178,581	)
GAAP net loss from REIT operations		35,168			171,463			123,595
GAAP net loss of taxable subsidiaries		(64,959	)		(138,681	)		(54,986	)
Impairment loss not deductible for tax		8,509			39,303			—
Tax loss in excess of book gains on sale of hotels		(12,128	)		(31,423	)		—
Depreciation and amortization(a)		(4,948	)		(1,625	)		—
Employee benefits not deductible for tax		1,040			2,381			(2,924	)
Other book/tax differences		(3,216	)		(2,997	)		9
Tax loss of taxable subsidiaries	$	(75,702	)	$	(133,042	)	$	(57,901	)

(a) The changes in book/tax differences in depreciation and amortization principally resulting from book and tax basis differences, differences in depreciable lives and accelerated depreciation methods.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes - (continued)

Summary of TRSs net deferred tax asset:

     At December 31, 2004 and 2003, our TRS had a deferred tax asset, prior to any valuation allowance, primarily comprised of the following (in thousands):

	2004			2003
Accumulated net operating losses of our TRS	$	112,682		$	81,542
Tax property basis in excess of book		10,524			14,476
Accrued employee benefits net deductible for tax		9,046			8,651
Bad debt allowance not deductible for tax		344			420
Gross deferred tax assets		132,596			105,089
Valuation allowance		(132,596	)		(105,089	)
Net deferred tax asset	$	—		$	—

     We have provided a 100% valuation allowance against our deferred tax asset as of December 31, 2004 and 2003, due to the uncertainty of realization (because of ongoing operating losses) and, accordingly, no provision or benefit for income taxes is reflected in the accompanying Consolidated Statements of Operations. As of December 31, 2004, the TRS has net operating loss carryforwards for federal income tax purposes of $296 million which are available to offset future taxable income, if any, through 2024.

Reconciliation between REIT GAAP net loss and taxable income loss:

     The following table reconciles REIT GAAP net loss to taxable income (loss) for the years ended December 31, 2004, 2003 and 2002 (in thousands):

	2004			2003			2002
GAAP net loss from REIT operations	$	(35,168	)	$	(171,463	)	$	(123,595	)
Book/tax differences, net:
Depreciation and amortization(a)		2,386			14,236			32,719
Minority interests		(2,724	)		(19,241	)		(19,780	)
Tax loss in excess of book gains on sale of hotels		(10,893	)		(2,736	)		(4,681	)
Impairment loss not deductible for tax		29,779			206,206			157,504
Other		1,314			(184	)		1,355
Taxable income (loss) subject to distribution requirement(b)	$	(15,306	)	$	26,818		$	43,522

(a)	Book/tax differences in depreciation and amortization principally result from differences in depreciable lives and accelerated depreciation methods.
(b)	The dividend distribution requirement is 90%.

     If we sell any asset acquired from Bristol Hotel Company, or Bristol, within 10 years after our merger with Bristol in 1998, and we recognize a taxable gain on the sale, we will be taxed at the highest corporate rate on an amount equal to the lesser of the amount of gain that we recognize at the time of the sale, or the amount of gain that we would have recognized if we had sold the asset at the time of the Bristol merger for its then fair market value. The sales of Bristol hotels that have been made to date have not resulted in any material amount of tax liability. If we are successful in selling the hotels that we have designated as non-strategic, the majority of which are Bristol hotels, we could incur corporate income tax with respect to the related built in gain, the amount of which cannot yet be determined. At the current time, we believe that we will be able to avoid any substantial built in gain tax on these sales through offsetting built in losses, like kind exchanges and other tax planning strategies.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes — (continued)

Characterization of distributions:

     For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. For the years ended December 31, 2004, 2003 and 2002, distributions paid per share were characterized as follows:

	2004				2003				2002
	Amount		%		Amount		%		Amount		%
Common Stock
Ordinary income	$	—		—	$	—		—	$	0.42		70.10
Return of capital		—		—		—		—		0.18		29.90
	$	—		—	$	—		—	$	0.60		100.00
Preferred Stock – Series A
Ordinary income	$	0.0425		2.18	$	1.95		100.00	$	1.95		100.00
Return of capital		1.9075		97.82		—		—		—		—
	$	1.9500		100.00	$	1.95		100.00	$	1.95		100.00
Preferred Stock – Series B
Ordinary income	$	0.0491		2.18	$	2.25		100.00	$	2.25		100.00
Return of capital		2.2009		97.82		—		—		—		—
	$	2.2500		100.00	$	2.25		100.00	$	2.25		100.00

11. Capital Stock

     As of December 31, 2004, we had $757 million of common stock, preferred stock, debt securities, and/or common stock warrants available for offerings under shelf registration statements previously declared effective.

Preferred Stock

     Our board of directors is authorized to provide for the issuance of up to 20 million shares of preferred stock in one or more series, to establish the number of shares in each series, to fix the designation, powers, preferences and rights of each such series, and the qualifications, limitations or restrictions thereof.

     In 1996, we issued 6.1 million shares of our Series A preferred stock at $25 per share. In April 2004, we completed the sale of 4.6 million shares of our $1.95 Series A Cumulative Convertible Preferred Stock. The shares were sold at a price of $23.79 per share, which included accrued dividends of $0.51 per share through April 5, 2004, resulting in net proceeds of $104 million. In August 2004, we completed the sale of an additional 2.3 million shares of our $1.95 Series A Cumulative Convertible Preferred Stock. The shares were sold at a price of $23.22 per share, which included accrued dividends of $0.28 per share through August 22, 2004, resulting in net proceeds of $52 million.

     The Series A preferred stock bears an annual cumulative dividend payable in arrears equal to the greater of $1.95 per share or the cash distributions declared or paid for the corresponding period on the number of shares of common stock into which the Series A preferred stock is then convertible. Each share of the Series A preferred stock is convertible at the stockholder’s option to 0.7752 shares of common stock, subject to certain adjustments. During 2000, holders of 69,400 shares of Series A preferred stock converted their shares to 53,798 common shares, which were issued from treasury shares.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Capital Stock — (continued)

     In 1998, we issued 5.75 million depositary shares, representing 57,500 shares of our Series B preferred stock at $25 per depositary share. In 2002, we issued 1,025,800 depositary shares, representing 10,258 shares of our Series B preferred stock at $24.37 per depositary share to yield 9.4%. We may call the Series B preferred stock and the corresponding depositary shares at $25 per depositary share. These shares have no stated maturity, sinking fund or mandatory redemption, and are not convertible into any of our other securities. The Series B preferred stock has a liquidation preference of $2,500 per share (equivalent to $25 per depositary share) and is entitled to annual cumulative dividends at the rate of 9% of the liquidation preference (equivalent to $2.25 annually per depositary share).

     Accrued dividends payable of $9 million at December 31, 2004, were paid in January 2005.

FelCor LP Units

     We are the sole general partner of FelCor LP and are obligated to contribute the net proceeds from any issuance of our equity securities to FelCor LP in exchange for units of partnership interest, or Units, corresponding in number and terms to the equity securities issued by us. Units of limited partner interest may also be issued by FelCor LP to third parties in exchange for cash or property, and Units so issued to third parties are redeemable at the option of the holders thereof for a like number of shares of our common stock or, at our option, for the cash equivalent thereof. During 2004, 245,398 Units were exchanged for a like number of our common stock issued from treasury stock. During 2003, 256,118 Units were exchanged for a like number of common stock issued from treasury stock. During 2002, 5,713,185 Units owned by a subsidiary of IHG, were exchanged for a like number of shares of our newly issued common stock, and 2,492 Units were redeemed for $49,000 in cash. The exchange with IHG resulted in an increase in our ownership of limited partnership interests in FelCor LP from approximately 85% to 95%, which decreased the minority interest liability related to FelCor LP by $145 million.

     During 2003, we retired 5,713,185 shares of common stock for a like number of treasury shares.

12. Hotel Operating Revenue, Departmental Expenses, and Other Property Operating Costs

     Hotel operating revenue from continuing operations was comprised of the following (in thousands):

	Year Ended December 31,
	2004		2003		2002
Room revenue	$	945,938	$	883,834	$	910,052
Food and beverage revenue		180,398		167,883		172,917
Other operating departments		62,527		59,011		60,999
Total hotel operating revenues	$	1,188,863	$	1,110,728	$	1,143,968

     Approximately 99.8% of our revenue in 2004 was comprised of hotel operating revenues, which includes room revenue, food and beverage revenue, and revenue from other operating departments (such as telephone, parking and business centers) and 99.9% in 2003 and 2002. These revenues are recorded net of any sales or occupancy taxes collected from our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for doubtful accounts and are recorded as a bad debt expense. The remaining percentage of our revenue was from retail space rental revenue and other sources in 2004 and 2003. During 2004 we recorded $1 million of other revenue that we received in development fees from the successful completion of a condominium project.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs — (continued)

     We do not have any time-share arrangements and do not sponsor any guest frequency programs for which we would have any contingent liability. We participate in guest frequency programs sponsored by the brand owners of our hotels, and we expense the charges associated with those programs (typically consisting of a percentage of the total guest charges incurred by a participating guest), as incurred. When a guest redeems accumulated guest frequency points at one of our hotels, the hotel bills the sponsor for the services provided in redemption of such points and records revenue in the amount of the charges billed to the sponsor. Associated with the guest frequency programs, we have no loss contingencies or ongoing obligation beyond what is paid to the brand owner at the time of the guest’s stay.

     Included in total hotel operating revenue were $23.6 million and $12.9 million for the year ended December 31, 2004 and 2003, respectively, of hotel operating revenue from the consolidation of our joint venture with Interstate in June 2003. This joint venture had been previously accounted for by the equity method.

     Hotel departmental expenses from continuing operations were comprised of the following (in thousands):

	Year Ended December 31,
	2004		2003		2002
Room	$	257,016	$	234,242	$	228,739
Food and beverage		143,079		133,412		134,694
Other operating departments		31,887		27,024		27,426
Total hotel departmental expenses	$	431,982	$	394,678	$	390,859

     Other property operating costs from continuing operations were comprised of the following (in thousands):

	Year Ended December 31,
	2004		2003		2002
Hotel general and administrative expense	$	115,422	$	106,466	$	105,236
Marketing		102,897		96,400		92,185
Repair and maintenance		67,827		63,696		59,775
Utilities		63,128		57,640		53,419
Total other property operating costs	$	349,274	$	324,202	$	310,615

     Included in hotel departmental expenses and other property operating costs were hotel compensation and benefit expenses of $392.6 million, $366.2 million and $344.8 million for the year ended December 31, 2004, 2003 and 2002, respectively.

     Included in hotel operating expenses were $18.0 million and $9.7 million of hotel operating expense from the consolidation of our joint venture with Interstate in June 2003. This joint venture had been previously accounted for by the equity method.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Taxes, Insurance and Lease Expense

     Taxes, insurance and lease expense from continuing operations is comprised of the following (in thousands):

	Year Ended December 31,
	2004		2003		2002
Operating lease expense (a)	$	60,543	$	56,577	$	58,108
Real estate and other taxes		41,102		44,915		46,107
Property, general liability insurance and other		13,003		16,170		14,500
Total taxes, insurance and lease expense	$	114,648	$	117,662	$	118,715

(a) Includes lease expense associated with 15 hotels owned by unconsolidated entities. Included in lease expense is $17.1 million, $13.0 million and $15.4 million in percentage rent related to these hotels for the year ended December 31, 2004, 2003 and 2002, respectively.

14. Land Leases and Hotel Rent

     We lease land occupied by certain hotels from third parties under various operating leases that expire through 2073. Certain land leases contain contingent rent features based on gross revenue at the respective hotels. In addition, we recognize rent expense for 15 hotels that are owned by unconsolidated entities and are leased to our consolidated lessees. These leases expire through 2015 and require the payment of base rents and contingent rent based on revenues at the respective hotels. Future minimum lease payments under our land lease obligations and hotel leases at December 31, 2004, are as follows (in thousands):

Year
2005	$	38,459
2006		35,236
2007		16,171
2008		11,672
2009		11,679
2010 and thereafter		125,879
	$	239,096

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Earnings Per Share

     The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2004, 2003 and 2002 (in thousands, except per share data):

	2004			2003			2002
Numerator:
Loss from continuing operations	$	(111,311	)	$	(180,589	)	$	(61,021	)
Less: Preferred dividends		(35,130	)		(26,908	)		(26,292	)
Loss from continuing operations and applicable to common stockholders		(146,441	)		(207,497	)		(87,313	)
Discontinued operations		11,184			(129,555	)		(117,560	)
Net loss applicable to common stockholders	$	(135,257	)	$	(337,052	)	$	(204,873	)
Denominator:
Denominator for basic loss per share – weighted average shares		59,045			58,657			54,173
Denominator for diluted loss per share – adjusted weighted average shares and assumed conversions		59,045			58,657			54,173
Loss per share data:
Basic:
Loss from continuing operations	$	(2.48	)	$	(3.54	)	$	(1.61	)
Discontinued operations	$	0.19		$	(2.21	)	$	(2.17	)
Net loss	$	(2.29	)	$	(5.75	)	$	(3.78	)
Diluted:
Loss from continuing operations	$	(2.48	)	$	(3.54	)	$	(1.61	)
Discontinued operations	$	0.19		$	(2.21	)	$	(2.17	)
Net loss	$	(2.29	)	$	(5.75	)	$	(3.78	)

     Securities that could potentially dilute basic earnings per share in the future that were not included in computation of diluted earnings per share, because they would have been antidilutive for the periods presented, are as follows (unaudited, in thousands):

	2004		2003		2002
Stock Options		—		—		7
Restricted shares granted but not vested		395		303		317
Series A preferred shares		9,985		4,636		4,636

     Series A preferred dividends that would be excluded from net income (loss) applicable to common stockholders, if the Series A preferred shares were dilutive, were $19.9 million in 2004 and $11.7 million for 2003 and 2002.

16. Commitments, Contingencies and Related Party Transactions

     We shared the executive offices and certain employees with FelCor, Inc. (controlled by Thomas J. Corcoran, Jr., President and CEO), and it paid its share of the costs thereof, including an allocated portion of the rent, compensation of certain personnel, office supplies, telephones, and depreciation of office furniture, fixtures, and equipment. Any such allocation of shared expenses must be approved by a majority of our independent directors. FelCor, Inc. had a 10% ownership interest in one hotel and limited other investments. FelCor, Inc. paid $50,000, $46,000 and $50,000 for shared office costs in 2004, 2003 and 2002, respectively.

F-29

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Commitments, Contingencies and Related Party Transactions — (continued)

     In an effort to keep our cost of insurance within reasonable limits, we have only purchased terrorism insurance for those hotels that are secured by mortgage debt, as required by our lenders. Our terrorism insurance has per occurrence and aggregate limits of $50 million. We have established a self-insured retention of $250,000 per occurrence for general liability insurance with regard to 79 of our hotels; the remainder of our hotels participate in general liability programs of our managers, with no deductible. Due to our general liability deductible for the 79 hotels, we maintain reserves to cover the estimated ultimate uninsured liability for losses with respect to reported and unreported claims incurred as of the end of each accounting period. At December 31, 2004 and 2003, our reserve for this self-insured portion of general liability claims was $3.9 million and $4.2 million, respectively. Our property program has a $100,000 all risk deductible, a deductible of 2% of insured value for named windstorm and a deductible of 5% of insured value for California quake. No reserves have been established as of December 31, 2004, for these property deductibles, as no related losses are estimated to have been incurred. Should such uninsured or not fully insured losses be substantial, they could have a material adverse impact on our operating results and cash flows.

     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 these 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.

     Our hotels are operated under various management agreements that call for base management fees, which range from 2% to 7% of hotel room revenue and generally have an incentive provision related to the hotel’s profitability. In addition, the management agreements generally require us to invest approximately 3% to 4% of revenues in capital maintenance. The management agreements have terms from 10 to 20 years and generally have renewal options.

     With the exception of 77 hotels whose rights to use a brand name are contained in the management agreement governing their operations, and our one hotel that does not operate under a nationally recognized brand name, each of our hotels operates under a franchise or license agreement. Typically, our franchise or license agreements provide for a royalty fee of 4% of room revenues to be paid to the franchisor.

     In the event we breach one of our Embassy Suites Hotels franchise license agreements, in addition to losing the right to use the Embassy Suites Hotels name for the operation of the applicable hotel, we may be liable, under certain circumstances, for liquidated damages equal to the fees paid to the franchisor with respect to that hotel during the three preceding years.

     Under the management agreement entered into with IHG in July 2001, we were obligated to reinvest the net proceeds from the sale of any IHG managed hotel in other IHG managed hotels or pay substantial liquidated damages to IHG. This potential exposure to liquidated damages made it impractical to see certain hotels and use the proceeds to pay down debt. In September 2003, we completed an amendment to the IHG management agreement covering 78 of our hotels, pursuant to which we extended the term of the management contracts on 27 hotels from 2013 to 2018 and, in exchange, we received from IHG a liquidated damage credit of $25 million to apply to the satisfaction of liquidated damages otherwise payable to IHG upon the sale of certain IHG managed hotels where the proceeds of sale were applied to the reduction of our debt rather than to reinvestment in IHG managed hotels. At the end of December 2004, we had utilized all of the $25 million liquidated damages credit available to us. Following the full utilization of this credit, we were again required to reinvest the proceeds from the further sale of IHG managed hotels in other hotels to be managed by IHG or pay substantial liquidated damages to IHG.

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FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Commitments, Contingencies and Related Party Transactions — (continued)

     At March 1, 2004, we had a reinvestment requirement of $17 million. If we do not fulfill this reinvestment obligation within 12 months of the date of sale, we will be required to pay liquidated damages to IHG aggregating $5.3 million. Thirteen of the 18 remaining hotels identified for sale are managed by IHG and subject to the reinvestment obligations in the event they are sold. We will incur additional reinvestment obligations of approximately $76 million if these hotels are sold at currently estimated prices or, if the proceeds of sale are not so reinvested, we will incur approximately $19 million in additional liquidated damages for which we would be liable to IHG.

     Interstate Hotels & Resorts, which is our partner in the ownership of eight hotels, declined to make further capital contributions to the venture, beginning in 2004. In order to sustain this venture, we made $3 million in advances in 2004, and an additional $1 million in 2005, with a priority in right (but no assurance) of return. We have received a request for additional funding of $2.5 million; however, we have determined that it is not in our best interest to continue funding the further cash shortfalls related to this venture, and have notified the lender to that effect. This venture, which we consolidate, currently has $49 million in non-recourse debt secured by the eight hotels owned by the venture. We have written down our investment in this venture below the current debt balance. We are considering our options with regard to this venture, one of which is to surrender the hotels to the lender. We do not expect any such action to have a material adverse effect on our financial statements.

17. Supplemental Cash Flow Disclosure

     At December 31, 2004, $10.1 million of aggregate preferred stock dividends had been declared for payment in January 2005. At December 31, 2003, and 2002 $6 million and $15 million, respectively, of aggregate preferred stock dividends, common stock and FelCor LP unit distributions had been declared for payment in the following January.

     We allocated $1.1 million and $2.3 million of minority interest to additional paid in capital due to the exchange of 245,398 units and 256,118 units for common stock in 2004 and 2003, respectively.

     As the result of IHG’s 2002 exchange of 5,713,185 units for common stock, we allocated $72.5 million of minority interest to additional paid in capital.

     Depreciation expense is comprised of the following (in thousands):

	For the years ending December 31,
	2004		2003		2002
Depreciation from continuing operations	$	118,855	$	123,968	$	129,565
Depreciation from discontinued operations		3,798		16,257		23,252
Total depreciation expense	$	122,653	$	140,225	$	152,817

     For the year ended December 31, 2004, repayment of borrowings of $838.9 million consisted of $775.0 million early retirement of senior notes, $18.9 million of normal recurring principal payments, $41.3 million of premium paid in excess of par on the retirement of the senior notes and $3.7 million to retire interest rate swaps. For the years ended December 31, 2003 and 2002, the repayment of borrowings consisted entirely of debt repayment and normal recurring principal payments.

18. Stock Based Compensation Plans

     We sponsor four restricted stock and stock option plans, or the FelCor Plans. In addition, upon completion of the merger with Bristol in 1998, we assumed two stock option plans previously sponsored by Bristol, or the Bristol Plans. We were initially obligated to issue up to 1,271,103 shares of our common stock pursuant to the Bristol Plans. No additional options may be awarded under the Bristol Plans. The FelCor Plans and the Bristol Plans are referred to collectively as the Plans.

     We are authorized to issue 3,700,000 shares of common stock under the FelCor Plans pursuant to awards granted in the form of incentive stock options, non-qualified stock options, and restricted stock. All options have 10-year contractual terms and vest either over five equal annual installments (20% per year), beginning in the year following the date of grant or 100% at the end of a four-year vesting term. Under the FelCor Plans, there were 695,787 shares available for grant at December 31, 2004.

F-31

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Stock Based Compensation Plans — (continued)

     The options outstanding under the Bristol Plans generally vest either in four equal annual installments (25% per year) beginning in the second year following the original date of award, in five equal annual installments (20% per year) beginning in the year following the original date of award, or on a single date that is three to five years following the original date of the award. Options covering 75,693 shares were outstanding under the Bristol Plans at December 31, 2004.

Stock Options

     A summary of the status of our non-qualified stock options under the Plans as of December 31, 2004, 2003 and 2002, and the changes during these years are presented in the following tables:

	2004					2003					2002
				Weighted					Weighted					Weighted
	No. Shares of			Average		No. Shares of			Average		No. Shares of			Average
	Underlying			Exercise		Underlying			Exercise		Underlying			Exercise
	Options			Prices		Options			Prices		Options			Prices
Outstanding at beginning of the year		1,911,544		$	22.72		1,990,830		$	22.70		2,054,568		$	22.70
Forfeited		(432,784	)	$	15.91		(79,286	)	$	22.15		(63,738	)	$	22.82
Outstanding at end of year		1,478,760		$	24.72		1,911,544		$	22.72		1,990,830		$	22.70
Exercisable at end of year		1,333,760		$	24.24		1,664,594		$	23.70		1,655,300		$	23.74

	Options Outstanding						Options Exercisable
	Number		Wgtd. Avg.				Number
Range of	Outstanding		Remaining		Wgtd Avg.		Exercisable		Wgtd. Avg.
Exercise Prices	at 12/31/04		Life		Exercise Price		at 12/31/04		Exercise Price
$15.62 to $22.56		1,117,480		4.36	$	21.05		972,480	$	19.03
$24.18 to $36.12		296,280		1.62	$	29.34		296,280	$	29.34
$36.63		65,000		2.47	$	36.63		65,000	$	36.63
$15.62 to $36.63		1,478,760		3.73	$	23.40		1,333,760	$	24.24

     The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2001 and 2000 when options were granted: dividend yield of 12.44% to 11.28%; risk free interest rates are different for each grant and range from 4.33% to 6.58%; the expected lives of options are six years; and volatility of 21.04% for 2001 grants and 18.22% for 2000 grants. The weighted average fair value of options granted during 2001, was $0.85 per share. We issued no stock options in 2004, 2003 and 2002.

Restricted Stock

     A summary of the status of our restricted stock grants as of December 31, 2004, 2003, and 2002, and the changes during these years are presented below:

F-32

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Stock Based Compensation Plans — (continued)

	2004					2003				2002
				Weighted				Weighted				Weighted
				Average				Average				Average
				Fair Market				Fair Market				Fair Market
				Value				Value				Value
	No. Shares			at Grant		No. Shares		at Grant		No. Shares		at Grant
Outstanding at beginning of the year		731,031		$	22.03		633,281	$	23.73		570,575	$	24.40
Granted(a):
With immediate vesting(b)		26,500		$	10.00		27,400	$	10.98		19,100	$	17.55
With 4-year pro rata vesting		295,040		$	10.00
Vesting within 12 months of grant		50,000		$	12.47
With 5-year pro rata vesting		110,000		$	12.25		70,350	$	10.98		43,606	$	17.71
Forfeited		(25,365	)	$	18.19
Outstanding at end of year		1,187,206		$	17.54		731,031	$	22.03		633,281	$	23.73
Vested at end of year		557,766		$	20.52		431,150	$	21.49		316,715	$	21.78

(a)	All shares granted are issued out of treasury except for 6,300, 6,900 and 4,100 of the restricted shares issued to directors during the years ended December 31, 2004, 2003 and 2002, respectively.
(b)	Shares awarded to directors.

19. Employee Benefits

     We offer a 401(k) plan, health insurance benefits and a deferred compensation plan to our employees. Our matching contribution to our 401(k) plan was $0.6 million, for 2004 and 2003 and $0.5 million for 2002. The cost of health insurance benefits were $0.6 million during each of the years ended December 31, 2004, 2003 and 2002. The deferred compensation plan we offer is available only to directors and qualifying senior officers. We make no matching or other contributions to the deferred compensation plan, other than the payment of its operating and administrative expenses.

     The employees at our hotels are employees of the respective management companies. Under the management agreements, we reimburse the management companies for the compensation and benefits related to the employees who work at our hotels. We are not, however, the sponsors of their employee benefit plans and have no obligation to fund these plans.

20. Segment Information

     SFAS 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, we have determined that our business is conducted in one operating segment.

     The following table sets forth revenues for continuing operations, and investment in hotel assets represented by, the following geographical areas as of and for the years ended December 31, 2004, 2003 and 2002 (in thousands):

	Revenue						Investment in Hotel Assets
	2004		2003		2002		2004		2003		2002
California	$	194,951	$	183,803	$	190,980	$	727,375	$	677,381	$	689,761
Texas		185,283		172,987		175,787		674,590		766,134		839,192
Florida		145,619		132,963		133,995		529,480		515,640		547,627
Georgia		105,390		94,636		96,862		356,925		359,004		320,890
Other states		535,561		506,076		526,000		1,559,156		1,615,529		1,780,837
Canada		24,780		21,285		21,990		61,495		56,276		77,311
Total	$	1,191,584	$	1,111,750	$	1,145,614	$	3,909,021	$	3,989,964	$	4,255,618

F-33

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. Recently Issued Statements of Financial Accounting Standards

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No.123R”) which is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”). SFAS No. 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB Opinion No. 25”) and its related implementation guidance. SFAS No. 123R requires companies to record compensation expense for share-based payments to employees, including grants of employee stock options, at fair value. SFAS No. 123R is effective for most public companies at the beginning of the first interim or annual period beginning after June 15, 2005. We believe that the implementation of the provisions of SFAS No. 123R will not have a material impact on our financial position or results of operations.

     In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29.” The statement addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We believe that the implementation of the provisions of SFAS No. 153 will not have a material impact on our financial position or results of operations.

22. Quarterly Operating Results (unaudited)

     Our unaudited consolidated quarterly operating data for the years ended December 31, 2004 and 2003, follows (in thousands, except per share data). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of quarterly results have been reflected in the data. It is also management’s opinion, however, that quarterly operating data for hotel enterprises are not indicative of results to be achieved in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in stockholders’ equity and cash flows for a period of several years.

F-34

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. Quarterly Operating Results (unaudited) – (continued)

	First			Second			Third			Fourth
2004	Quarter			Quarter			Quarter			Quarter
Total revenues	$	289,326		$	312,662		$	304,975		$	284,621
Net income (loss) from continuing operations	$	(17,427	)	$	(31,573	)	$	(35,444	)	$	(26,867	)
Discontinued operations	$	(3,272	)	$	(100	)	$	(1,541	)	$	16,097
Net loss(a)	$	(20,699	)	$	(31,673	)	$	(36,985	)	$	(10,770	)
Net loss applicable to common stockholders	$	(27,425	)	$	(40,643	)	$	(46,328	)	$	(20,861	)
Comprehensive loss	$	(21,160	)	$	(32,182	)	$	(32,496	)	$	(7,987	)
Diluted per common share data:
Net loss from continuing operations	$	(0.41	)	$	(0.69	)	$	(0.75	)	$	(0.62	)
Discontinued operations	$	(0.06	)	$	(0.00	)	$	(0.03	)	$	0.27
Net loss	$	(0.47	)	$	(0.69	)	$	(0.78	)	$	(0.35	)
Weighted average common shares outstanding		58,937			58,950			59,075			59,192

	First			Second			Third			Fourth
2003	Quarter			Quarter			Quarter			Quarter
Total revenues	$	268,187		$	287,988		$	285,616		$	269,959
Net loss from continuing operations	$	(20,716	)	$	(12,337	)	$	(69,270	)	$	(78,266	)
Discontinued operations	$	(375	)	$	(7,866	)	$	(56,647	)	$	(64,667	)
Net loss(b)	$	(21,091	)	$	(20,203	)	$	(125,917	)	$	(142,933	)
Net loss applicable to common stockholders	$	(27,817	)	$	(26,931	)	$	(132,644	)	$	(149,660	)
Comprehensive loss	$	(16,272	)	$	(13,987	)	$	(126,098	)	$	(144,210	)
Diluted per common share data:
Net loss from continuing operations	$	(0.47	)	$	(0.33	)	$	(1.29	)	$	(1.45	)
Discontinued operations	$	(0.01	)	$	(0.13	)	$	(0.97	)	$	(1.10	)
Net loss	$	(0.48	)	$	(0.46	)	$	(2.26	)	$	(2.55	)
Weighted average common shares outstanding		58,532			58,591			58,690			58,801

(a)	The third and fourth quarter’s net loss in 2004 include impairment charges of $33.0 million and $5.3 million, respectively. The second, third and fourth quarter’s net loss in 2004 also includes loss from earlier retirement of debt of $31.2 million, $12.9 million and $5.8 million, respectively.
(b)	The second, third, and fourth quarter’s net loss in 2003 include impairment charges of $7.8 million, $112.7 million and $125.0 million, respectively.

     In accordance with SFAS 144, amounts previously reported in continuing operations have been reclassified to discontinued operations upon sale of hotels or the designation of hotels as “held for sale” in subsequent periods.

F-35

FELCOR LODGING TRUST INCORPORATED

Schedule III - Real Estate and Accumulated Depreciation

as of December 31, 2004

(in thousands)

							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings				Buildings				Which						Which
					and					and				and				Depreciation		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Birmingham, AL (1)	$	16,438	$	2,843	$	29,286	$	0		$	784	$	2,843	$	30,070	$	32,913	$	6,892		1987		1/3/1996	15 - 40 Yrs
Montgomery East I-85, AL (2)		569		830		7,222		9			2,801		839		10,023		10,862		1,684		1964		7/28/1998	15 - 40 Yrs
Phoenix - Biltmore, AZ (1)		21,209		0		38,998		4,695			1,388		4,695		40,386		45,081		9,184		1985		1/3/1996	15 - 40 Yrs
Phoenix Crescent Hotel, AZ (3)		25,266		3,608		29,583		0			1,337		3,608		30,920		34,528		5,658		1986		6/30/1997	15 - 40 Yrs
Phoenix Scottsdale/Downtown, AZ (4)		3,125		0		7,622		0			34		0		7,656		7,656		1,497		1970		7/28/1998	15 - 40 Yrs
Phoenix Tempe, AZ (1)		11,281		3,951		34,371		0			1,032		3,951		35,403		39,354		5,858		1986		5/4/1998	15 - 40 Yrs
Dana Point – Doheny Beach, CA (5)		0		1,787		15,545		0			1,262		1,787		16,807		18,594		3,247		1992		2/21/1997	15 - 40 Yrs
Irvine - Orange County Airport (Newport Beach), CA (6)		0		4,953		43,109		0			1,995		4,953		45,104		50,057		7,355		1986		7/28/1998	15 - 40 Yrs
Los Angeles - Anaheim (Located near Disneyland Park®), CA (1)		10,466		2,548		14,832		0			1,056		2,548		15,888		18,436		3,762		1987		1/3/1996	15 - 40 Yrs
Los Angeles International Airport - South, CA (1)		0		2,660		17,997		0			1,069		2,660		19,066		21,726		5,086		1985		3/27/1996	15 - 40 Yrs
Milpitas – Silicon Valley, CA (1)		28,309		4,021		23,677		0			1,709		4,021		25,386		29,407		5,837		1987		1/3/1996	15 - 40 Yrs
Milpitas - San Jose North (Milpitas – Silicon Valley), CA (6)		0		4,127		35,917		0			6,040		4,127		41,957		46,084		7,019		1987		7/28/1998	15 - 40 Yrs
Napa Valley, CA (1)		14,872		3,287		14,205		0			1,234		3,287		15,439		18,726		3,450		1985		5/8/1996	15 - 40 Yrs
Oxnard - Mandalay Beach Resort & Conference Center, CA (1)		33,509		2,930		22,125		1			2,085		2,931		24,210		27,141		5,301		1986		5/8/1996	15 - 40 Yrs
Palm Desert – Palm Desert Resort, CA (1)		8,065		2,368		20,598		5			1,943		2,373		22,541		24,914		3,768		1984		5/4/1998	15 - 40 Yrs
Pleasanton (San Ramon Area), CA (6)		0		3,152		27,428		0			268		3,152		27,696		30,848		4,441		1986		7/28/1998	15 - 40 Yrs
San Diego - On the Bay, CA (2)		0		0		68,229		0			4,303		0		72,532		72,532		11,967		1965		7/28/1998	15 - 40 Yrs
San Francisco – Airport – Burlingame, CA (1)		0		0		39,929		0			396		0		40,325		40,325		9,264		1986		11/6/1995	15 - 40 Yrs
San Francisco – Airport - South San Francisco, CA (1)		24,800		3,418		31,737		0			1,241		3,418		32,978		36,396		7,506		1988		1/3/1996	15 - 40 Yrs
San Francisco - Fisherman’s Wharf, CA (2)		0		0		61,883		0			1,642		0		63,525		63,525		12,418		1970		7/28/1998	15 - 40 Yrs
San Francisco - Union Square, CA (6)		0		8,466		73,684		(453	)		3,581		8,013		77,265		85,278		12,336		1970		7/28/1998	15 - 40 Yrs
Santa Barbara, CA (2)		5,029		1,683		14,647		0			357		1,683		15,004		16,687		2,376		1969		7/28/1998	15-40 Yrs
Santa Monica, CA (2)		0		10,200		16,570		0			9		10,200		16,579		26,779		346		1967		3/11/2004	15-40 Yrs
Toronto - Airport, Canada (9)		0		0		21,041		0			9,787		0		30,828		30,828		4,397		1970		7/28/1998	15 - 40 Yrs
Toronto - Yorkdale, Canada (2)		0		1,566		13,633		408			9,044		1974		22,677		24,651		3,434		1970		7/28/1998	15 - 40 Yrs
Denver, CO (7)		4,963		2,432		21,158		0			792		2,432		21,950		24,382		3,612		1989		3/15/1998	15 - 40 Yrs
Stamford, CT (9)		0		0		37,154		0			3,807		0		40,961		40,961		6,354		1984		7/28/1998	15 - 40 Yrs
Wilmington, DE (7)		10,918		1,379		12,487		0			9,808		1,379		22,295		23,674		3,609		1972		3/20/1998	15 - 40 Yrs
Boca Raton, FL (1)		5,459		1,868		16,253		0			131		1,868		16,384		18,252		3,836		1989		2/28/1996	15 - 40 Yrs
Cocoa Beach - Oceanfront, FL (2)		0		2,285		19,892		0			12,283		2,285		32,175		34,460		6,037		1960		7/28/1998	15 - 40 Yrs
Deerfield Beach, FL (1)		14,136		4,523		29,443		68			1,281		4,591		30,724		35,315		7,051		1987		1/3/1996	15 - 40 Yrs

F-36

FELCOR LODGING TRUST INCORPORATED
Schedule III - Real Estate and Accumulated Depreciation — (continued)
as of December 31, 2004
(in thousands)

							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings				Buildings				Which						Which
					and					and				and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Ft. Lauderdale – 17th Street, FL (1)		21,786		5,329		47,850		(163	)		2,166		5,166		50,016		55,182		11,495		1986		1/3/1996	15 - 40 Yrs
Ft. Lauderdale (Cypress Creek), FL (11)		12,165		3,009		26,177		0			1,181		3,009		27,358		30,367		4,559		1986		5/4/1998	15 - 40 Yrs
Jacksonville - Baymeadows, FL (1)		14,901		1,130		9,608		0			6,420		1,130		16,028		17,158		3,511		1986		7/28/1994	15 - 40 Yrs
Miami International Airport, FL (1)		17,612		4,135		24,950		0			1,122		4,135		26,072		30,207		6,020		1983		7/28/1998	15 - 40 Yrs
Miami International Airport (LeJeune Center), FL (6)		0		0		26,007		0			1,251		0		27,258		27,258		4,372		1987		1/3/1996	15 - 40 Yrs
Orlando - International Airport, FL (9)		9,725		2,549		22,188		0			1,817		2,549		24,005		26,554		4,018		1984		7/28/1998	15 - 40 Yrs
Orlando - International Drive - Resort, FL (2)		10,898		5,108		44,460		0			9,297		5,108		53,757		58,865		9,052		1972		7/28/1998	15 - 40 Yrs
Orlando International Drive/Convention Center, FL (1)		24,153		1,632		13,870		0			988		1,632		14,858		16,490		3,916		1985		7/28/1994	15 - 40 Yrs
Orlando - Nikki Bird (Maingate – Disney World Area®, FL (2)		0		0		31,457		0			6,552		0		38,009		38,009		5,951		1974		7/28/1998	15 - 40 Yrs
Orlando (North), FL (1)		0		1,673		14,218		4			6,221		1,677		20,439		22,116		5,056		1985		7/28/1994	15 - 40 Yrs
Orlando- Walt Disney World Resort®, FL (5)		12,779		2,896		25,196		0			499		2,896		25,695		28,591		4,833		1987		7/28/1997	15 - 40 Yrs
Tampa - Busch Gardens, FL (2)		0		0		9,426		0			11,475		0		20,901		20,901		3,871		1966		7/28/1998	15 - 40 Yrs
Tampa – On Tampa Bay, FL (5)		14,539		2,142		18,639		1			1,549		2,143		20,188		22,331		3,799		1986		7/28/1997	15 - 40 Yrs
Atlanta - Airport, GA (6)		15,370		0		40,734		0			294		0		41,028		41,028		7,347		1975		7/28/1998	15 - 40 Yrs
Atlanta - Airport, GA (1)		13,400		0		22,342		2,568			1,261		2,568		23,603		26,171		3,848		1989		5/4/1998	15 - 40 Yrs
Atlanta - Airport - North, GA (2)		15,676		0		34,353		0			507		0		34,860		34,860		6,087		1967		7/28/1998	15 - 40 Yrs
Atlanta - Buckhead, GA (1)		36,113		7,303		38,996		0			1,381		7,303		40,377		47,680		8,130		1988		10/17/1996	15 - 40 Yrs
Atlanta - Downtown, GA (10)		13,215		2,025		17,618		0			1,443		2,025		19,061		21,086		4,320		1963		7/28/1998	15 - 40 Yrs
Atlanta - Downtown, GA (24)		8,800		1,268		11,017		0			1,758		1,268		12,775		14,043		2,415		1963		7/28/1998	15 - 40 Yrs
Atlanta - Galleria, GA (11)		16,844		5,052		28,507		0			1,055		5,052		29,562		34,614		5,515		1990		6/30/1997	15 - 40 Yrs
Atlanta – Gateway-Atlanta Airport, GA (3)		0		5,113		22,857		1			233		5,114		23,090		28,204		4,331		1986		6/30/1997	15 - 40 Yrs
Atlanta - Perimeter - Dunwoody, GA (9)		9,728		0		20,449		0			468		0		20,917		20,917		3,351		1985		7/28/1998	15 - 40 Yrs
Atlanta - Powers Ferry, GA (6)		9,488		3,391		29,517		0			717		3,391		30,234		33,625		4,870		1981		7/28/1998	15 - 40 Yrs
Atlanta – South (I-75 & US 41), GA (2)		2,606		859		7,475		0			251		859		7,726		8,585		1,223		1973		7/28/1998	15 - 40 Yrs
Brunswick, GA (1)		5,891		705		6,067		0			308		705		6,375		7,080		1,436		1988		7/19/1995	15 - 40 Yrs
Columbus – North I-185 at Peachtree Mall, GA (2)		0		0		6,978		0			2,058		0		9,036		9,036		1,757		1969		7/28/1998	15 - 40 Yrs
Davenport, IA (2)		0		547		2,192		0			890		547		3,082		3,629		93		1966		7/28/1998	15 - 40 Yrs
Chicago - The Allerton, IL (6)		0		3,298		28,723		15,589			28,311		18,887		57,034		75,921		11,291		1923		7/28/1998	15 - 40 Yrs
Chicago – Northshore/Deerfield (Northbrook), IL (1)		15,649		2,305		20,054		0			689		2,305		20,743		23,048		4,356		1987		6/20/1996	15 - 40 Yrs
Chicago O’Hare Airport, IL (3)		23,395		8,178		37,043		0			1,627		8,178		38,670		46,848		7,104		1994		6/30/1997	15 - 40 Yrs
Moline - Airport, IL (2)		0		822		2,015		0			121		822		2,136		2,958		59		1961		7/28/1998	15 - 40 Yrs
Moline - Airport Area, IL (13)		0		232		1,603		0			227		232		1,830		2,062		75		1996		7/28/1998	15 - 40 Yrs

F-37

FELCOR LODGING TRUST INCORPORATED
Schedule III - Real Estate and Accumulated Depreciation — (continued)
as of December 31, 2004
(in thousands)

							Cost Capitalized						Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition						Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings					Buildings				Depreciation						Which
					and					and					and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements			Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Lexington, KY (11)		6,551		0		21,644		2,488			883			2,488		22,527		25,015		3,663		1989		5/4/1998	15 - 40 Yrs
Lexington – Lexington Green, KY (14)		16,767		1,955		13,604		0			251			1,955		13,855		15,810		3,052		1987		1/10/1996	15 - 40 Yrs
Baton Rouge, LA (1)		10,567		2,350		19,092		1			1,038			2,351		20,130		22,481		4,653		1985		1/3/1996	15 - 40 Yrs
New Orleans, LA (1)		30,825		3,647		31,993		0			7,175			3,647		39,168		42,815		9,817		1984		12/1/1994	15 - 40 Yrs
New Orleans - French Quarter, LA (2)		21,936		5,228		45,504		0			8,334			5,228		53,838		59,066		8,759		1969		7/28/1998	15 - 40 Yrs
Boston - Government Center, MA (9)		0		0		45,192		0			5,950			0		51,142		51,142		9,012		1968		7/28/1998	15 - 40 Yrs
Boston - Marlborough, MA (1)		19,354		948		8,143		761			13,216			1,709		21,359		23,068		4,314		1988		6/30/1995	15 - 40 Yrs
Baltimore - BWI Airport, MD (1)		23,941		2,568		22,433		(2	)		1,377			2,566		23,810		26,376		4,675		1987		3/20/1997	15 - 40 Yrs
Troy, MI (1)		6,849		2,968		25,905		0			1,599			2,968		27,504		30,472		5,356		1987		3/20/1997	15 - 40 Yrs
Minneapolis - Airport, MN (1)		20,873		5,417		36,508		14			386			5,431		36,894		42,325		8,540		1986		11/6/1995	15 - 40 Yrs
Minneapolis - Bloomington, MN (1)		11,530		2,038		17,731		2			629			2,040		18,360		20,400		3,594		1980		2/1/1997	15 - 40 Yrs
Minneapolis -Downtown, MN (1)		0		818		16,820		11			1,138			829		17,958		18,787		3,918		1984		11/15/1995	15 - 40 Yrs
St Paul- Downtown, MN (1)		5,880		1,156		17,315		0			188			1,156		17,503		18,659		4,206		1983		11/15/1995	15 - 40 Yrs
Kansas City NE I-435 North (At Worlds of Fun), MO (2)		4,940		967		8,415		0			83			967		8,498		9,465		1,795		1975		7/28/1998	15 - 40 Yrs
St. Louis - Downtown, MO (1)		0		3,179		27,659		0			1,466			3,179		29,125		32,304		4,921		1985		5/4/1998	15 - 40 Yrs
Jackson - North, MS (15)		0		1,643		14,296		0			305			1,643		14,601		16,244		1,798		1957		7/28/1998	15 - 40 Yrs
Olive Branch - Whispering Woods Hotel and Conference Center), MS (8)		0		1,238		12,085		(158	)		1,705			1,080		13,790		14,870		2,206		1972		7/28/1998	15 - 40 Yrs
Charlotte SouthPark, NC (5)		0		1,458		12,681		1			2,213			1,459		14,894		16,353		939		N/A		7/12/2002	15 - 40 Yrs
Raleigh, NC (5)		14,539		2,124		18,476		0			1,071			2,124		19,547		21,671		3,558		1987		7/28/1997	15 - 40 Yrs
Omaha - Central, NE (5)		0		1,877		16,328		0			1,334			1,877		17,662		19,539		2,921		1973		2/1/1997	15 - 40 Yrs
Omaha - Central, NE (12)		0		514		4,477		0			941			514		5,418		5,932		970		1965		7/28/1998	15 - 40 Yrs
Omaha – Central (I-80), NE (2)		0		1,782		15,513		0			3,444			1,782		18,957		20,739		2,975		1991		7/28/1998	15 - 40 Yrs
Omaha - Old Mill, NE (6)		7,422		971		8,449		0			5,140			971		13,589		14,560		2,799		1974		7/28/1998	15 - 40 Yrs
Piscataway-Somerset, NJ (1)		19,570		1,755		17,424		0			1,306			1,755		18,730		20,485		4,086		1988		1/10/1996	15 - 40 Yrs
Cleveland - Downtown, OH (1)		0		1,755		15,329		0			3,215			1,755		18,544		20,299		3,799		1990		11/17/1995	15 - 40 Yrs
Tulsa – I-44, OK (1)		10,460		525		7,344		0			750			525		8,094		8,619		2,945		1985		7/28/1994	15 - 40 Yrs
Philadelphia -Center City, PA (6)		0		5,759		50,127		(452	)		(3,098	)		5,307		47,029		52,336		7,647		1970		7/28/1998	15 - 40 Yrs
Philadelphia –Historic District, PA (2)		10,521		3,164		27,535		0			6,176			3,164		33,711		36,875		6,150		1972		7/28/1998	15 - 40 Yrs
Philadelphia Society Hill, PA (3)		31,817		4,542		45,121		0			1,813			4,542		46,934		51,476		8,563		1986		10/1/1997	15 - 40 Yrs
Pittsburgh at University Center (Oakland), PA (9)		15,500		0		25,031		0			1,773			0		26,804		26,804		4,515		1988		7/28/1998	15 - 40 Yrs
Charleston -Mills House (Historic Downtown), SC (2)		21,700		3,251		28,295		0			474			3,251		28,769		32,020		4,586		1982		7/28/1998	15 - 40 Yrs

F-38

FELCOR LODGING TRUST INCORPORATED
Schedule III – Real Estate and Accumulated Depreciation — (continued)
as of December 31, 2004
(in thousands)

							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings		Depreciation		Buildings				Depreciation						Which
					and					and				and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Myrtle Beach – At Kingston Plantation, SC (1)		0		2,940		24,988		0			2,272		2,940		27,260		30,200		5,769		1987		12/5/1996	15 - 40 Yrs
Myrtle Beach Resort (22)		0		12,000		17,689		6			6,011		12,006		23,700		35,706		3,113		1974		7/23/2002	15 - 40 Yrs
Knoxville - Central At Papermill Road, TN (2)		4,575		0		11,518		0			1,688		0		13,206		13,206		2,146		1966		7/28/1998	15 - 40 Yrs
Nashville- Airport/Opryland Area, TN (1)		0		1,118		9,506		0			682		1,118		10,188		11,306		3,212		1985		7/28/1994	15 - 40 Yrs
Nashville - Opryland/Airport (Briley Parkway), TN (9)		0		0		27,734		0			2,310		0		30,044		30,044		5,266		1981		7/28/1998	15 - 40 Yrs
Amarillo - I-40, TX (2)		0		0		5,754		0			2,939		0		8,693		8,693		1,603		1970		7/28/1998	15 - 40 Yrs
Austin, TX (5)		9,545		2,508		21,908		0			2,155		2,508		24,063		26,571		4,581		1987		3/20/1997	15 - 40 Yrs
Austin -Town Lake (Downtown Area), TX (2)		7,906		0		21,433		0			878		0		22,311		22,311		3,600		1967		7/28/1998	15 - 40 Yrs
Corpus Christi, TX (1)		5,040		1,113		9,618		51			2,318		1,164		11,936		13,100		2,531		1984		7/19/1995	15 - 40 Yrs
Dallas, TX (6)		0		0		30,346		5,603			435		5,603		30,781		36,384		4,910		1981		7/28/1998	15 - 40 Yrs
Dallas – At Campbell Center, TX (7)		0		3,208		27,907		0			1,554		3,208		29,461		32,669		4,354		1982		5/29/1998	15 - 40 Yrs
Dallas – DFW International Airport North TX (21)		9,780		1,537		13,379		0			451		1,537		13,830		15,367		2,175		1989		7/28/1998	15 - 40 Yrs
Dallas - DFW International Airport South, TX (1)		16,058		0		35,156		4,041			604		4,041		35,760		39,801		5,902		1985		7/28/1998	15 - 40 Yrs
Dallas - Love Field, TX (1)		12,686		1,934		16,674		0			597		1,934		17,271		19,205		4,119		1986		3/29/1995	15 - 40 Yrs
Dallas - Market Center, TX (6)		11,655		4,056		35,302		0			1,169		4,056		36,471		40,527		5,718		1983		7/28/1998	15 - 40 Yrs
Dallas - Market Center, TX (1)		11,327		2,560		23,751		0			571		2,560		24,322		26,882		4,556		1980		6/30/1997	15 - 40 Yrs
Dallas - Park Central, TX (3)		0		1,720		28,550		(474	)		553		1,246		29,103		30,349		4,325		1972		11/1/1998	15 - 40 Yrs
Dallas – Park Central, TX (17)		0		0		8,053		1,619			268		1,619		8,321		9,940		2,796		1997		7/28/1998	15 - 40 Yrs
Dallas - Park Central, TX (20)		0		4,513		43,125		0			4,684		4,513		47,809		52,322		8,835		1983		6/30/1997	15 - 40 Yrs
Dallas - Park Central Area, TX (1)		5,645		1,497		12,722		(19	)		937		1,478		13,659		15,137		3,715		1985		7/28/1994	15 - 40 Yrs
Dallas Regal Row, TX (4)		3,077		741		4,290		0			396		741		4,686		5,427		805		1969		7/28/1998	15 - 40 Yrs
Dallas - West End/Convention Center, TX (12)		0		1,953		16,989		0			1,945		1,953		18,934		20,887		2,890		1969		7/28/1998	15 - 40 Yrs
Houston – Greenway Plaza Area, TX (9)		6,308		3,398		29,578		0			585		3,398		30,163		33,561		4,870		1984		7/28/1998	15 - 40 Yrs
Houston - I-10 East, TX (4)		1,608		586		2,605		0			246		586		2,851		3,437		547		1969		7/28/1998	15 - 40 Yrs
Houston - I-10 East, TX (12)		1,895		478		3,564		0			3		478		3,567		4,045		809		1969		7/28/1998	15 - 40 Yrs
Houston - I-10 West & Hwy. 6 (Park 10 Area), TX (9)		0		3,037		26,431		4			1,297		3,041		27,728		30,769		4,079		1969		7/28/1998	15 - 40 Yrs
Houston - Intercontinental Airport, TX (2)		11,889		3,868		33,664		0			869		3,868		34,533		38,401		5,533		1971		7/28/1998	15 - 40 Yrs
Houston - Medical Center, TX (15)		7,493		2,270		19,757		0			2,428		2,270		22,185		24,455		3,687		1984		7/28/1998	15 - 40 Yrs
Houston – Near the Galleria, TX (10)		13,783		1,855		17,202		0			2,230		1,855		19,432		21,287		4,404		1968		7/28/1998	15 - 40 Yrs
Houston – Near the Galleria, TX (4)		3,972		465		4,047		0			1,617		465		5,664		6,129		983		1968		7/28/1998	15 - 40 Yrs
San Antonio – Downtown (Market Square), TX (2)		0		0		22,129		1			990		1		23,119		23,120		3,753		1968		7/28/1998	15 - 40 Yrs

F-39

FELCOR LODGING TRUST INCORPORATED
Schedule III – Real Estate and Accumulated Depreciation — (continued)
as of December 31, 2004
(in thousands)

							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings				Buildings				Depreciation						Which
					and					and				and				Building and		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
San Antonio - International Airport, TX (9)		16,753		3,351		29,168		(196	)		2,235		3,155		31,403		34,558		5,323		1981		7/28/1998	15 - 40 Yrs
Waco - I-35, TX (2)		0		574		4,994		0			164		574		5,158		5,732		815		1970		7/28/1998	15 - 40 Yrs
Burlington Hotel & Conference Center, VT (3)		19,652		3,136		27,283		(2	)		730		3,134		28,013		31,147		4,966		1967		12/4/1997	15 - 40 Yrs
	$	1,055,336	$	283,599	$	2,896,124	$	36,033		$	299,722	$	319,632	$	3,195,846	$	3,515,478	$	590,065

(1)	Embassy Suites
(2)	Holiday Inn
(3)	Sheraton
(4)	Fairfield Inn
(5)	Doubletree Guest Suites
(6)	Crowne Plaza
(7)	Doubletree
(8)	Independents
(9)	Holiday Inn Select
(10)	Courtyard by Marriott
(11)	Sheraton Suites
(12)	Hampton Inn
(13)	Holiday Inn Express
(14)	Hilton Suites
(15)	Holiday Inn Hotel & Suites
(16)	Homewood Suites
(17)	Staybridge Suites
(18)	Crowne Plaza Suites
(19)	Harvey Hotel
(20)	Westin
(21)	Harvey Suites
(22)	Hilton

	Year Ended December 31,
	2004			2003
Reconciliation of Land and building and Improvements
Balance at beginning of period	$	3,776,887		$	3,896,588
Additions during period:
Acquisitions		26,780			81,881
Improvements		20,431			30,942
Deductions during period:
Sale of properties		(300,529	)		(83,083	)
Hotels held for sale		(8,090	)		(122,607	)
Foreclosures		—			(26,834	)
Balance at end of period before impairment charges		3,515,478			3,776,887
Cumulative impairment charges on real estate assets owned at end of period		(166,349	)		(300,974	)
Balance at end of period	$	3,349,130		$	3,475,913
Reconciliation of Accumulated Depreciation
Balance at beginning of period	$	545,355		$	466,833
Additions during period:
Depreciation for the period		87,561			107,261
Deductions during period:
Sale of properties		(42,851	)		(28,739	)
Balance at end of period	$	590,065		$	545,355

F-40

Index to Exhibits

Exhibit
Number	Description of Exhibit
3.1.1	Articles of Amendment and Restatement dated June 22, 1995, amending and restating the Charter of FelCor Lodging Trust Incorporated (“FelCor”), as amended or supplemented by Articles of Merger dated June 23, 1995, Articles Supplementary dated April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of Amendment dated June 16, 1997, Articles of Amendment dated October 30, 1997, Articles Supplementary dated May 6, 1998, Articles of Merger and Articles of Amendment dated July 27, 1998, and Certificate of Correction dated March 11, 1999 (filed as Exhibit 3.1 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the “1998 10-K”) and incorporated herein by reference).
3.1.2	Certificate of Correction to the Articles of Merger between FelCor and Bristol Hotel Company, dated August 31, 1999 (filed as Exhibit 3.1.1 to FelCor’s Form 10-Q for the quarter ended September 30, 1999 (the “September 1999 10-Q”) and incorporated herein by reference).
3.1.3	Articles Supplementary, dated April 1, 2002 (filed as Exhibit 3.1.2 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
3.1.4	Articles Supplementary designating additional shares of $1.95 Series A Cumulative Convertible Preferred Stock filed April 2, 2004 (filed as Exhibit 3.1.3 to FelCor’s Form 8-K dated as of April 5, 2005, and filed on April 6, 2004, and incorporated herein by reference).
3.1.5	Articles Supplementary designating additional shares of $1.95 Series A Cumulative Convertible Preferred Stock filed August 20, 2004 (filed as Exhibit 3.1.4 to FelCor’s Form 8-K dated as of, and filed on, August 26, 2004, and incorporated herein by reference).
3.2	Bylaws of FelCor, as amended (filed as Exhibit 3.2 to FelCor’s Registration Statement on Form S-11 (Registration File No. 333-98332) and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
4.1	Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference).
4.2	Form of Share Certificate for $1.95 Series A Cumulative Convertible Preferred Stock (filed as Exhibit 4.4 to FelCor’s Form 8-K dated May 1, 1996, and incorporated herein by reference).
4.3	Form of Share Certificate for 9% Series B Cumulative Redeemable Preferred Stock (filed as Exhibit 4.5 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.4.1	Deposit Agreement dated April 30, 1998, between FelCor and SunTrust Bank, Atlanta, as preferred share depositary (filed as Exhibit 4.6 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.4.2	Supplement and Amendment to Deposit Agreement dated April 4, 2002, among FelCor, SunTrust Bank and the holders (filed as Exhibit 4.4.1 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
4.5	Form of Depositary Receipt evidencing the Depositary Shares (filed as Exhibit 4.7 to FelCor’s Form 8-K dated May 29, 1998, and incorporated herein by reference).
4.6	Indenture, dated as of April 22, 1996, by and between FelCor and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to FelCor’s Form 8-K dated May 1, 1996 and incorporated herein by reference).
4.7.1	Indenture, dated as of October 1, 1997, by and among FelCor Lodging Limited Partnership, formerly FelCor Suites Limited Partnership (“FelCor LP”), FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to the Registration Statement on Form S-4 (Registration File No. 333-39595) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.2	First Amendment to Indenture, dated as of February 5, 1998, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to the Registration Statement on Form S-4 (Registration File No. 333-39595) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.3	Second Amendment to Indenture and First Supplemental Indenture, dated as of December 30, 1998, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and incorporated herein by reference).
4.7.4	Third Amendment to Indenture, dated as of March 30, 1999, by and among FelCor, FelCor LP, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.3 to FelCor’s Form 10-Q for the quarter ended March 31, 1999 (the “March 1999 10-Q”) and incorporated herein by reference).
4.7.5	Second Supplemental Indenture, dated as of August 1, 2000, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.2.4 to the Registration Statement on Form S-4 (Registration File No. 333-47506) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
4.7.6	Third Supplemental Indenture, dated as of July 26, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.2.5 to the Registration Statement on Form S-4 (Registration File No. 333-63092) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.7.7	Fourth Supplemental Indenture, dated October 1, 2002, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.7.6 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “2002 Form 10-K”) and incorporated herein by reference).
4.8.1	Indenture, dated as of June 4, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9 to FelCor’s Form 8-K dated as of June 4, 2001, and filed June 14, 2001, and incorporated herein by reference).
4.8.2	First Supplemental Indenture, dated as of July 26, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.4.1 to the Registration Statement on Form S-4 (Registration File No. 333-63092) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
4.8.3	Second Supplemental Indenture, dated October 1, 2002, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9.2 to the 2002 Form 10-K and incorporated herein by reference).
4.9.1	Indenture, dated as of May 26, 2004, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.5 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.1.1	Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of December 31, 2001 (filed as Exhibit 10.1 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the “2001 Form 10-K”), and incorporated herein by reference.)
10.1.2	First Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated April 1, 2002 (filed as Exhibit 10.1.1 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).
10.1.3	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated August 31, 2002 (filed as Exhibit 10.1.2 to the 2002 Form 10-K and incorporated herein by reference).
10.1.4	Third Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated October 1, 2002 (filed as Exhibit 10.1.3 to the 2002 Form 10-K and incorporated herein by reference).
10.1.5	Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of July 1, 2003 (filed as Exhibit 10.1.4 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.1.6	Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of April 2, 2004 (filed as Exhibit 10.1.5 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.1.7	Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of August 23, 2004 (filed as Exhibit 10.1.6 to FelCor’s Form 8-K dated as of, and filed on, August 26, 2004, and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
10.2.1	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of InterContinental Hotels, as manager, with respect to FelCor’s InterContinental Hotels branded hotels (included as an exhibit to the Leasehold Acquisition Agreement, which was filed as Exhibit 10.28 to FelCor’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference).
10.2.2	Master Amendment to Management Agreements, dated September 17, 2003, by and among FelCor, FelCor LP, FelCor TRS I, L.L.C., FelCor TRS Holdings, L.P., BHR Operations, L.L.C., BHR Lodging Tenant Company, BHR Salt Lake Tenant Company, L.L.C., BHR Hotels Finance, Inc., BHR Dallas Tenant Company, L.P. and BHR Plano Tenant Company, L.P. (filed as Exhibit 10.4.1 to FelCor’s Form 10-Q for the quarter ended September 30, 2003, and incorporated herein by reference).
10.3.1	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective prior to ___, 2004 (filed as Exhibit 10.5 to the 2001 Form 10-K and incorporated herein by reference).
10.3.2*	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective ___, 2004.
10.4	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Doubletree and Doubletree Guest Suites branded hotels (filed as Exhibit 10.6 to the 2001 Form 10-K and incorporated herein by reference).
10.5	Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Starwood Hotels & Resorts, Inc., as manager, with respect to FelCor’s Sheraton and Westin branded hotels (filed as Exhibit 10.7 to the 2001 Form 10-K and incorporated herein by reference).
10.6	Employment Agreement, dated as of July 28, 1994, between FelCor and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to FelCor’s Annual Report on Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994 (the “1994 10-K/A”) and incorporated herein by reference).
10.7	Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.9 to the 1994 10-K/A and incorporated herein by reference).
10.8	Savings and Investment Plan of FelCor (filed as Exhibit 10.10 to the 2001 Form 10-K and incorporated herein by reference).
10.9	1995 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.9.2 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference).
10.10	Non-Qualified Deferred Compensation Plan, as amended and restated July 1999 (filed as Exhibit 10.9 to the September 1999 10-Q and incorporated herein by reference).
10.11	1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor’s Registration Statement on Form S-8 (Registration File No. 333-66041) and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
10.12	2001 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.14 to the 2002 Form 10-K and incorporated herein by reference).
10.13	Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).
10.14	Amended and Restated Stock Option Plan for Non-Employee Directors (filed as Exhibit 99.2 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).
10.15	Form of Severance Agreement for executive officers and certain key employees of FelCor (filed as Exhibit 10.13 to the 1998 10-K and incorporated herein by reference).
10.16*	Form of Nonstatutory Stock Option Contract under Restricted Stock and Stock Option Plans of FelCor.
10.17*	Form of Employee Stock Grant Contract under Restricted Stock and Stock Option Plans of FelCor.
10.18*	Summary of Annual Compensation Program for Directors of FelCor.
10.19	Loan Agreement, dated as of October 10, 1997, among Bristol Lodging Company, Bristol Lodging Holding Company, Nomura Asset Capital Corporation, as administrative agent and collateral agent for Lenders, and Bankers Trust Company, as co-agent for Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and incorporated herein by reference).
10.20.1	Form of Mortgage, Security Agreement and Fixture Filing by and between FelCor/CSS Holdings, L.P., as Mortgagor, and The Prudential Insurance Company of America, as Mortgagee (filed as Exhibit 10.23 to the March 1999 10-Q and incorporated herein by reference).
10.20.2	Promissory Note, dated April 1, 1999, in the original principal amount of $100,000,000, made by FelCor/CSS Holdings, Ltd., payable to the order of The Prudential Insurance Company of America (filed as Exhibit 10.23.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1999 (the “June 1999 10-Q”) and incorporated herein by reference).
10.21.1	Form of Deed of Trust, Security Agreement and Fixture Filing, each dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as Borrower, in favor of Fidelity National Title Insurance Company, as Trustee, and Massachusetts Mutual Life Insurance Company, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.21.2, also executed by FelCor/CSS Holdings, L.P. with respect to the Embassy Suites Hotel-Anaheim and Embassy Suites Hotel-Deerfield Beach, and by FelCor LP with respect to the Embassy Suites Hotel-Palm Desert (filed as Exhibit 10.24.2 to the June 1999 10-Q and incorporated herein by reference).
10.21.2	Form of six separate Promissory Notes, each dated May 12, 1999, made by FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual Life Insurance Company in the respective original principal amounts of $12,500,000 (Embassy Suites Hotel-Dallas Market Center), $14,000,000 (Embassy Suites Hotel-Dallas Love Field), $12,450,000 (Embassy Suites Hotel-Tempe), $11,550,000 (Embassy Suites Hotel-Anaheim), $8,900,000 (Embassy Suites Hotel-Palm Desert), $15,600,000 (Embassy Suites Hotel-Deerfield Beach) (filed as Exhibit 10.24.1 to the June 1999 10-Q and incorporated herein by reference).
10.22.1	Form Deed of Trust and Security Agreement and Fixture Filing with Assignment of Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7 Holdings, L.P., as

Exhibit
Number	Description of Exhibit
	Mortgagor, in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, as Mortgagee, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.22.3 (filed as Exhibit 10.24 to FelCor’s Form 10-Q for the quarter ended June 30, 2000 (the “June 2000 10-Q”) and incorporated herein by reference).
10.22.2	Form of Accommodation Cross-Collateralization Mortgage and Security Agreement, each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to the June 2000 10-Q and incorporated herein by reference).
10.22.3	Form of fourteen separate Promissory Notes, each dated April 20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, respectively, in the respective original principal amounts of $13,500,000 (Phoenix (Crescent), Arizona), $13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia), $12,500,000 (Chicago O’Hare Airport, Illinois), $12,500,000 (Chicago O’Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill, Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia), $10,500,000 (South Burlington, Vermont) and $10,500,000 (South Burlington, Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated herein by reference).
10.23.1	Form Deed of Trust and Security Agreement, each dated as of May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each as Borrower, in favor of The Chase Manhattan Bank, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.23.2 (filed as Exhibit 10.25 to the June 2000 10-Q and incorporated herein by reference).
10.23.2	Form of eight separate Promissory Notes, each dated May 2, 2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C. and FelCor/CMB SSF Holdings, L.P., each separately payable to the order of The Chase Manhattan Bank in the respective original principal amounts of $38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans, Louisiana), $20,728,000 (Piscataway, New Jersey) and $26,268,000 (South San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q and incorporated herein by reference).
10.24.1	Loan Agreement, dated April 24, 2003, by and between FelCor/JPM Hotels, L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $115 million loan from lender to borrower (the “Mortgage Loan”) (filed as Exhibit 10.28 to FelCor’s Form 10-Q for the quarter ended March 31, 2003 (the “March 2003 10-Q”) and incorporated herein by reference).
10.24.2	Form of Mortgage, Deed of Trust and Security Agreement, each dated April 24, 2003, from FelCor/JPM Hotels, L.L.C., as borrower, and DJONT/JPM Leasing, L.L.C., as lessee, (and, in the case of the Mortgages with respect to the properties located in the State of Florida, FelCor LP) in favor of JPMorgan Chase Bank, as lender, each covering a separate hotel and securing the Mortgage Loan (filed as Exhibit 10.28.1 to the March 2003 10-Q and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
10.24.3	Promissory Note, dated April 24, 2003, made by FelCor/JPM Hotels, L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $115 million (filed as Exhibit 10.28.2 to the March 2003 10-Q and incorporated herein by reference).
10.25.1	Mezzanine Loan Agreement, dated April 24, 2003, by and between FelCor/JPM Holdings, L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $10 million senior mezzanine loan from lender to borrower (the “Senior Mezzanine Loan”) (filed as Exhibit 10.29 to the March 2003 10-Q and incorporated herein by reference).
10.25.2	Pledge and Security Agreement, dated April 24, 2003, from FelCor/JPM Holdings, L.L.C., as pledgor, in favor of JPMorgan Chase Bank, as lender, securing the Senior Mezzanine Loan (filed as Exhibit 10.29.1 to the March 2003 10-Q and incorporated herein by reference).
10.25.3	Promissory Note, dated April 24, 2003, made by FelCor/JPM Holdings, L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $10 million (filed as Exhibit 10.29.2 to the March 2003 10-Q and incorporated herein by reference).
10.26.1	Junior Mezzanine Loan Agreement, dated April 24, 2003, by and between DJONT/JPM Tenant Co., L.L.C., as borrower, and JPMorgan Chase Bank, as lender, relating to a $25 million junior mezzanine loan from lender to borrower (the “Junior Mezzanine Loan”) (filed as Exhibit 10.30 to the March 2003 10-Q and incorporated herein by reference).
10.26.2	Pledge and Security Agreement, dated April 24, 2003, from DJONT/JPM Tenant Co., L.L.C., as pledgor, in favor of JPMorgan Chase Bank, as lender, securing the Junior Mezzanine Loan (filed as Exhibit 10.30.1 to the March 2003 10-Q and incorporated herein by reference).
10.26.3	Promissory Note, dated April 24, 2003, made by DJONT/JPM Tenant Co., L.L.C. payable to the order of JPMorgan Chase Bank in the original principal amount of $25 million (filed as Exhibit 10.30.2 to the March 2003 10-Q and incorporated herein by reference).
10.26.4	Security Agreement, dated April 24, 2003, from DJONT/JPM Tenant Co., L.L.C. in favor of JPMorgan Chase Bank, securing the Junior Mezzanine Loan (filed as Exhibit 10.30.3 to the March 2003 10-Q and incorporated herein by reference).
10.27	Registration Rights Agreement, dated as of May 26, 2004, among FelCor, FelCor LP and Deutsche Bank Securities Inc., as initial purchaser (filed as Exhibit 10.32 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.28	Registration Rights Agreement, dated as of July 6, 2004, among FelCor, FelCor LP and Deutsche Bank Securities Inc., as initial purchaser (filed as Exhibit 10.33 to the Registration Statement on Form S-4 (Registration File No. 333-117598) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).
10.29	Termination Agreement, dated July 28, 2004, by and among FCH/DT BWI Hotel, L.L.C., FCH/DT BWI Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM BWI Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C., FelCor/JPM Nashville Hotel, L.L.C., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., BHR Operations, L.L.C., DJONT Leasing, L.L.C., DJONT Operations, L.L.C., DJONT/JPM

Exhibit
Number	Description of Exhibit
	Atlanta CP Leasing, L.L.C., DJONT/JPM Atlanta ES Leasing, L.L.C., DJONT/JPM Austin HI Leasing, L.P., DJONT/JPM Austin Leasing, L.P., DJONT/JPM Boca Raton Leasing, L.L.C., DJONT/JPM BWI Leasing, L.L.C., DJONT/JPM Denver Leasing, L.L.C., DJONT/JPM LBV Leasing, L.L.C., DJONT/JPM Mandalay Leasing, L.L.C., DJONT/JPM Orlando I-Drive Leasing, L.L.C., DJONT/JPM Orlando Leasing, L.L.C., DJONT/JPM Phoenix Leasing, L.L.C., DJONT/JPM Troy Leasing, L.L.C., DJONT/JPM Wilmington Leasing, L.L.C., FCH/DT Leasing, L.L.C., FCH/DT Leasing II, L.L.C., FelCor TRS Holdings, L.P., FelCor LP and JPMorgan Chase Bank (filed as Exhibit 10.31.6 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.1	Form of Loan Agreement, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, between JPMorgan Chase Bank, as lender, and each of FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C. and FelCor/JPM BWI Hotel, L.L.C. and FCH/DT BWI Hotel, L.L.C., as borrowers, and acknowledged and agreed by FelCor LP (filed as Exhibit 10.34 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.2	Form of Mortgage, Renewal Mortgage, Deed of Trust, Deed to Secure Debt, Indemnity Deed of Trust and Assignment of Leases and Rents, Security Agreement and Fixture Filing, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, from FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM Wilmington Leasing, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., DJONT/JPM Phoenix Leasing, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM Boca Raton Leasing, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., DJONT/JPM Atlanta ES Leasing, L.L.C., FelCor/JPM Austin Holdings, L.P., DJONT/JPM Austin Leasing, L.P., FelCor/JPM Orlando Hotel, L.L.C., DJONT/JPM Orlando Leasing, L.L.C., FelCor/JPM Denver Hotel, L.L.C., DJONT/JPM Denver Leasing, L.L.C., FelCor/JPM Troy Hotel, L.L.C., DJONT/JPM Troy Leasing, L.L.C., FCH/DT BWI Holdings, L.P., FCH/DT BWI Hotel, L.L.C. and DJONT/JPM BWI Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase Bank, as mortgagee or beneficiary (filed as Exhibit 10.34.1 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.3	Form of nine separate Promissory Notes, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM Troy Hotel, L.L.C. and FelCor/JPM BWI Hotel, L.L.C., each separately payable to the order of JPMorgan Chase Bank in the respective original principal amounts of $11,000,000 (Wilmington, Delaware), $21,368,000 (Phoenix, Arizona), $5,500,000 (Boca Raton, Florida), $13,500,000 (Atlanta, Georgia), $9,616,000 (Austin, Texas), $9,798,000 (Orlando, Florida), $5,000,000 (Aurora, Colorado), $6,900,000 (Troy, Michigan) and $24,120,000 (Linthicum, Maryland) (filed as Exhibit 10.34.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.30.4	Form of Guaranty of Recourse Obligations of Borrower, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor LP in favor of JPMorgan Chase Bank (filed as Exhibit 10.34.3 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.1	Loan Agreement, dated July 28, 2004, by and among FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Brunswick Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C. and FelCor/JPM Orlando I-Drive Hotel, L.L.C., as borrowers, and JPMorgan Chase Bank, as lender, and acknowledged and agreed to by FelCor LP (filed as Exhibit 10.35 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

Exhibit
Number	Description of Exhibit
10.31.2	Form of Mortgage, Leasehold Mortgage, Deed of Trust, Deed to Secure Debt and Assignment of Leases and Rents, Security Agreement and Fixture Filing, each dated July 28, 2004, from FelCor/JPM Atlanta CP Hotel, L.L.C., DJONT/JPM Atlanta CP Leasing, L.L.C., FelCor/JPM Austin HI Holdings, L.P., DJONT/JPM Austin HI Leasing, L.P., FelCor/JPM Brunswick Hotel, L.L.C., DJONT/JPM Brunswick Leasing, L.L.C., FelCor/JPM LBV Hotel, L.L.C., DJONT/JPM LBV Leasing, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C., DJONT/JPM Mandalay Leasing, L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C. and DJONT/JPM Orlando I-Drive Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase Bank, as mortgagee or beneficiary (filed as Exhibit 10.35.1 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.3	Promissory Note, dated July 28, 2004, in the original principal amount of $87,000,000 made by FelCor/JPM Atlanta CP Hotel, L.L.C., FelCor/JPM Austin HI Holdings, L.P., FelCor/JPM Brunswick Hotel, L.L.C., FelCor/JPM LBV Hotel, L.L.C., FelCor/JPM Mandalay Hotel, L.L.C. and FelCor/JPM Orlando I-Drive Hotel, L.L.C., payable to the order of JPMorgan Chase Bank (filed as Exhibit 10.35.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
10.31.4	Guaranty of Recourse Obligations of Borrower, dated July 28, 2004, made by FelCor LP in favor of JPMorgan Chase Bank (filed as Exhibit 10.35.3 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
14.1*	FelCor Code of Business Conduct and Ethics.
21.1*	List of Subsidiaries of FelCor.
23.1*	Consent of PricewaterhouseCoopers LLP.
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).
32.1*	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2*	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

* Indicates that the document is filed herewith.

EX-10.3.2

                                                                  EXHIBIT 10.3.2

   [THIS AGREEMENT IS SUBJECT TO A CONFIDENTIALITY PROVISION - SECTION 12.21]

                          [EMBASSY SUITES HOTELS LOGO]

                              MANAGEMENT AGREEMENT

LOCATION: EMBASSY SUITES __________
DATED:    __________, 200_
          BY AND BETWEEN
OWNER:    __________
MANAGER:  PROMUS HOTELS INC.

                                  Embassy Suites __________ Management Agreement

                                       i


                              MANAGEMENT AGREEMENT

      THIS AGREEMENT is made as of ____________________, 2004 by and between
__________, a __________ ("Owner"), having a principal office at 545 East John
Carpenter Freeway, Suite 1300, Irving, Texas 75062, and PROMUS HOTELS INC., a
Delaware corporation ("Manager"), having a principal office at 9336 Civic Center
Drive, Beverly Hills, California 90210.

                              PRELIMINARY STATEMENT

      WHEREAS, Owner and Manager are parties to that certain Management
Agreement dated as of __________, as amended by the First Amendment to
Management Agreement dated as of __________ (collectively, "Prior Agreement"),
which provides, among other things, for the operation and management of that
certain Embassy Suites hotel located at __________ in __________ ("Hotel") upon
the terms and conditions set forth therein.

      WHEREAS, the Prior Agreement expires as of __________;

      WHEREAS, Owner desires to continue utilizing the services and experience
of Manager in connection with the operation of the Hotel, and Manager desires to
render such services, all upon the terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which hereby are acknowledged, Owner and Manager agree
as follows:

                                   ARTICLE I
                                  DEFINITIONS

      1.01 Definitions. In addition to terms previously defined in the Preamble
and Preliminary Statement, the following terms shall have the meanings
specified:

            1.01.1 Affiliate(s) - with respect to any entity, any natural person
      or firm, corporation, partnership, association, trust or other entity
      which, directly or indirectly, controls, is controlled by, or is under
      common control with, the subject entity. For purposes hereof the term
      "control" shall mean the possession, directly or indirectly, of the power
      to direct or cause the direction of the management and policies of any
      such entity, or the power to veto major policy decisions of any such
      entity, whether through the ownership of voting securities, by contract,
      or otherwise.

            1.01.2 Brand - Embassy Suites.

            1.01.3 CPI - as defined in Subsection 4.02.3.

            1.01.4 Capital Renewals - a collective term for (a) normal capital
      replacements of, or additions to, FF&E, and (b) special projects designed
      to maintain the Hotel in a first-class condition in accordance with the
      standards contemplated by this Agreement, including renovation of the
      guest room areas, public space, food and beverage facilities, or back of
      the

                                  Embassy Suites __________ Management Agreement

                                       1


      house areas, which projects will generally comprise replacements of, or
      additions to, FF&E, but may include revisions and alterations in the
      Improvements; most of the expenditures for such special projects will be
      capitalized, but a portion thereof may be currently expended, such as the
      purchase of smaller items of FF&E, or expenditures which are ancillary to
      the overall project but which are properly chargeable to "Property
      Operations and Maintenance" under the Uniform System of Accounts.

            1.01.5 Capital Renewals Budget(s) - as defined in Paragraph
      4.02.1(b).

            1.01.6 Capital Renewals Reserve and Capital Renewals Account - each
      term as defined in Subsection 4.02.5.

            1.01.7 Commencement Date - __________, 2004.

            1.01.8 Compensation - the direct salaries and wages paid to, or
      accrued for the benefit of, any executive or other employee together with
      all fringe benefits payable to, or accrued for the benefit of, such
      executive or other employee, including employer's contributions required
      pursuant to any Legal Requirement, or other employment taxes, pension fund
      contributions, group life and accident and health insurance premiums, and
      profit sharing, retirement, disability and other similar benefits.

            1.01.9 Controlling Person - as defined in Section 12.05.

            1.01.10 Corporate Personnel - personnel from the corporate offices
      of Manager and/or its Affiliates who perform activities in connection with
      the services provided by Manager under this Agreement.

            1.01.11 Executive Staff - the Managing Director (if any), General
      Manager, Resident Manager (if any), Executive Assistant Manager (if any),
      and all non-clerical or administrative positions reporting directly to any
      such persons.

            1.01.12 FF&E - all furniture, furnishings, equipment, fixtures,
      apparatus and other personal property used in, or held in storage for use
      in (or if the context so dictates, required in connection with), the
      operation of the Hotel, other than Operating Equipment, Operating Supplies
      and fixtures attached to and forming part of the Improvements.

            1.01.13 Full Operating Year - those Operating Years which are
      co-extensive with full calendar years and excluding any partial Operating
      Years at the beginning or the end of the Term.

            1.01.14 Gross Revenues - as defined in the Management Fee Rider.

            1.01.15 Ground Lease - the ground lease, if any, described in
      Exhibit I.

            1.01.16 Hotel - the hotel referred to in the Preliminary Statement,
      including the Land and Improvements, and Owner's interest therein, and any
      greater estate or interest hereafter

                                  Embassy Suites __________ Management Agreement

                                       2


      acquired, together with all entrances, exits, rights of ingress and
      egress, easements and appurtenances belonging or pertaining thereto.

            1.01.17 Hotel Accounts - as defined in Section 7.01.

            1.01.18 Hotel Personnel - all individuals performing services in the
      name of the Hotel at the Hotel who are employed by Manager or an Affiliate
      of Manager.

            1.01.19 Impositions - all taxes, assessments, water, sewer or other
      similar rents, rates and charges, levies, license fees, permit fees,
      inspection fees and other authorization fees and charges, which at any
      time may be assessed, levied, confirmed or imposed on the Hotel or the
      operation thereof.

            1.01.20 Improvements - the buildings, structures (surface and
      subsurface) and other improvements now or hereafter located on the Land.

            1.01.21 Intellectual Property - as defined in Section 11.01

            1.01.22 Land - the parcel or parcels of land described in Exhibit I.

            1.01.23 Legal Requirements - all public laws, statutes, ordinances,
      orders, rules, regulations, permits, licenses, authorizations, directions
      and requirements of all governments and governmental authorities, which,
      now or hereafter, may be applicable to the Hotel and the operation
      thereof, including those relating to zoning, building, life/safety,
      environmental and health, employee benefits, and providing continued
      health care coverage under the Employees Retirement Income Security Act of
      1974, as amended.

            1.01.24 License Agreement - the franchise license agreement dated
      __________, 2004 by and between __________, as licensee, and __________,
      as licensor.

            1.01.25 Major Capital Improvements - as defined in Subsection
      12.08.1.

            1.01.26 Managed Hotels - a collective term for the Hotel and all
      Other Managed Hotels.

            1.01.27 Management Fee - as defined in the Management Fee Rider.

            1.01.28 Manager - the person or entity named in the preamble hereto,
      or the successor of Manager's interest with respect to this Agreement.

            1.01.29 Manager Software - as defined in Section 11.01

            1.01.30 Manager's Grossly Negligent or Willful Acts - any gross
      negligence, willful misconduct or fraud committed by Manager, its
      Affiliates, the Corporate Personnel or any of the Executive Staff of the
      Hotel in the performance of Manager's duties under this Agreement. The
      acts or omissions (including grossly negligent, willful or fraudulent acts
      or omissions) of Hotel Personnel other than the Executive Staff of the
      Hotel shall not be imputed to Manager or its

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      Affiliates, or to the Corporate Personnel, nor be deemed to constitute
      Manager's Grossly Negligent or Willful Acts, unless such acts or omissions
      resulted directly from the gross negligence or willful misconduct of the
      Corporate Personnel or the Executive Staff of the Hotel in supervising
      such Hotel Personnel.

            1.01.31 Mortgage and Mortgagee - each term as defined in Subsection
      9.03.3.

            1.01.32 Operating Budgets - as defined in Paragraph 4.02.1(a).

            1.01.33 Operating Equipment - non-consumable items (other than FF&E)
      used in, or held in storage for use in (or if the context so dictates,
      required in connection with), the operation of the Hotel, including all
      china, glassware, linens, silverware and uniforms.

            1.01.34 Operating Manual - the Operating Manual issued by Manager
      and revised from time to time which sets out Manager's services and the
      policies, practices and standards of Managed Hotels for hotel operations,
      identification, advertising and accounting.

            1.01.35 Operating Period - the period beginning with the
      Commencement Date and ending upon the expiration or termination of this
      Agreement.

            1.01.36 Operating Supplies - consumable items used in, or held in
      storage for use in (or if the context so dictates, required in connection
      with), the operation of the Hotel, including food and beverages, fuel,
      soap, cleaning materials, matches, stationery, folios, invoices, contract
      forms, brochures and other forms of advertising or promotional materials
      and other similar items.

            1.01.37 Operating Years - the Operating Years shall coincide with,
      and be identical to, the calendar years, except that the first Operating
      Year shall be a partial year beginning on the Commencement Date and ending
      on the following December 31, and if this Agreement shall be terminated
      effective on a date other than December 31 in any year, then the partial
      year from January 1 of the year in which such termination occurs to such
      effective date of termination shall be treated as an Operating Year.

            1.01.38 Other Managed Hotels - all full-service hotels and inns
      within the United States other than the Hotel which are owned, leased
      and/or operated by Manager or any of its Affiliates under the Brand name.

            1.01.39 Owner - the person or entity named in the preamble hereto,
      or the successor of Owner's interest with respect to this Agreement.

            1.01.40 Owner's Invested Capital - as defined in the Management Fee
      Rider.

            1.01.41 Permitted Exceptions - (i) the Ground Lease, if any, and the
      terms thereof; (ii) the Permitted Mortgage(s) and the terms thereof; (iii)
      liens for Impositions not delinquent; (iv) undetermined or inchoate liens
      or charges for labor or materials supplied to the Hotel in connection with
      the construction or current operation thereof, which have not at the time
      been filed or recorded pursuant to law; and (v) easements, restrictions on
      use, zoning laws and

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      ordinances, rights of way and other encumbrances and minor irregularities
      in title, which do not individually or in the aggregate impair the use of
      the Hotel for hotel purposes.

            1.01.42 Permitted Mortgage - as defined in Subsection 9.03.3.

            1.01.43 Project - a collective term for the real and personal
      property comprising the Hotel.

            1.01.44 Technical Services - those advisory and consulting services
      which Manager and its Affiliates render to Managed Hotels in connection
      with the design, planning, construction, organization and operation
      thereof, through which Manager's experience in the field is made available
      to such hotels and inns.

            1.01.45 Term - as defined in Section 2.01.

            1.01.46 Uniform System of Accounts - for purposes of this Agreement
      other than the Management Fee Rider, the Uniform System of Accounts for
      the Lodging Industry (Ninth Revised Edition, 1996) including any
      subsequent revisions of the Uniform System of Accounts; for purposes of
      the Management Fee Rider, the Uniform System of Accounts for the Lodging
      Industry (Ninth Revised Edition, 1996) not including any subsequent
      revisions of the Uniform System of Accounts.

      1.02 References and Construction. Except as otherwise specifically
indicated, all references to Article, Section, Subsection and Paragraph numbers
refer to Articles, Sections, Subsections and Paragraphs of this Agreement, and
all references to Exhibits refer to the Exhibits attached hereto. Unless
expressly stated to the contrary, reference to any Section includes the
following Subsections thereof. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as
appropriate. The words "herein", "hereof", "hereunder", "hereinafter" and words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection or Paragraph hereof. The terms "include" and
"including" shall each be construed as if followed by the phrase "without being
limited to". This Agreement will be interpreted without interpreting any
provision in favor of or against either party by reason of the drafting of the
provision.

      1.03 Preamble and Recitals. The preamble and foregoing recitals are true
and correct and are incorporated herein by reference.

                                   ARTICLE II
                                      TERM

      2.01 The Term. The "Term" of this Agreement shall commence on __________,
2004 and shall expire at midnight of __________, 2009.

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                                  ARTICLE III
                             [INTENTIONALLY OMITTED]

                                   ARTICLE IV
                                OPERATING PERIOD

      4.01 Authority and Duty of Manager. Manager shall have the sole and
exclusive right and obligation to manage and operate the Hotel pursuant to the
terms of this Agreement and Manager agrees that it shall manage and operate the
Hotel as a first-class hotel comparable to Other Managed Hotels in accordance
with the standards for full-service Managed Hotels set forth in the Operating
Manual, taking into account the size, location and character of the Hotel. In
connection therewith, Manager shall have the authority and responsibility,
subject to the provisions of this Agreement, to (i) determine operating policy,
standards of operation, quality of service, the maintenance and physical
appearance of the Hotel and any other matters affecting operations and
management; (ii) subject to reasonable conformity with the approved Operating
Budget and Capital Renewals Budget, supervise and direct all phases of
advertising, sales and business promotion for the Hotel; and (iii) subject to
reasonable conformity with the approved Operating Budget and Capital Renewals
Budget, carry out all programs contemplated by the Operating Budgets and Capital
Renewals Budgets, which have been approved by Owner pursuant to Section 4.02.
Owner agrees that it will cooperate reasonably with Manager to permit and assist
Manager to carry out its duties hereunder.

Owner and Manager further agree that this Agreement provides for management in
respect of the Hotel, that Owner and Manager do not intend, nor does this
Agreement grant or create, a franchise within the meaning of the Federal Trade
Commission Act, any rule or regulation promulgated thereunder, or any other
applicable law, rule, regulation or judicial decision.

Manager acknowledges that this Agreement is subject and subordinate to the Hotel
Lease (it being understood that such subordination does not affect Manager's
right to receive the Base Management Fee when due including during a default by
Owner which has continued beyond the applicable cure period under the Hotel
Lease) and that Manager, on behalf of Owner and at Owner's sole expense, shall
use its reasonable efforts to fulfill Owner's duties and obligations under the
Hotel Lease. Owner shall not pursue any amendments or modifications of the Hotel
Lease if such amendment or modification would affect Manager's rights,
obligations or liabilities under this Agreement, without the prior written
approval of Manager, such approval of Manager not to be unreasonably withheld;
provided, however, that a copy of any amendment, modification or other related
documents shall be delivered to Manager upon execution thereof.

      4.02 Operating Budgets and Capital Renewals Budgets.

            4.02.1 Preparation. Manager will submit to Owner, not less than
      forty-five (45) days in advance of each Operating Year, the following
      budgets for such Operating Year:

            (a)   an operating budget composed of an estimate of profit and loss
                  by month, an estimated cash flow projection by month, and
                  departmental forecast of operations (collectively the
                  "Operating Budgets"); and

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            (b)   a budget covering estimated Capital Renewals, which indicates
                  in reasonable detail the replacements of, or additions to,
                  FF&E, and the nature of the special projects covered thereby
                  (the "Capital Renewals Budget(s)").

      Budgets for Major Capital Improvements initiated under Section 12.08 shall
      be treated separately and shall not be included in the Capital Renewals
      Budget.

            4.02.2 Review. In connection with the submission of the Operating
      Budgets and the Capital Renewals Budgets, representatives of Manager will
      meet with Owner to have an in-depth discussion thereof, including a
      comparison with the previous year's performance of the Hotel, a discussion
      of marketing strategy, identity of markets and the proposed expenditures
      contained in the Capital Renewals Budget.

            4.02.3 Approval of Budgets. The Operating Budget and the Capital
      Renewals Budget shall be subject to the approval of Owner, it being
      contemplated that each such Operating Budget and Capital Renewals Budget
      shall be agreed upon by Owner and Manager within thirty (30) days after
      the submission of the same by Manager to Owner. If Owner shall fail to
      approve any Operating Budget or Capital Renewals Budget within thirty (30)
      days after its submittal by Manager, or to submit its written objections
      thereof to Manager within such period, then Owner shall be deemed to have
      approved the same. In case of a dispute with regard to any Operating
      Budget, then pending the settlement thereof, or until such dispute is
      resolved in accordance with Section 12.04, Manager shall be entitled to
      continue to operate the Hotel in accordance with the standards set forth
      herein and shall be entitled to make expenditures which are contemplated
      by and consistent with the Operating Budget proposed by Manager for such
      Operating Year; provided that, subject to the standards of performance
      described in Subsection 4.02.4 below, the maximum approved amount of such
      expenditures shall be equal to (a) the aggregate of all items set forth in
      the Operating Budget which are not disputed by Owner, plus (b) with
      respect to all items in the Operating Budget which are disputed or
      objected to by Owner, the amount allocated to such item(s) in the
      Operating Budget for the immediately preceding Operating Year increased by
      the greater of (i) five percent (5%), or (ii) the difference between the
      Consumer Price Index (All Cities - All Items) (1982-84 = 100) (the "CPI"),
      on January 1 of the Operating Year immediately preceding the Operating
      Year in question and the CPI on January 1 of the Operating Year in
      question. In case of a dispute with regard to any Capital Renewals Budget,
      then, pending the settlement thereof, or until such dispute is resolved in
      accordance with Section 12.04, Manager shall be entitled to make
      expenditures for Capital Renewals during the then current Operating Year
      (a) as contemplated by the Capital Renewals Budget proposed by Manager for
      all items which are not disputed by Owner plus (b) up to such additional
      amount, if any, by which the aggregate amount of such items not disputed
      by Owner is less than half the percentage of the Gross Revenues of the
      Hotel applicable to the Operating Year then in effect which are to be
      deposited in the Capital Renewals Reserve. Manager shall act reasonably
      and exercise prudent business judgment in preparing and submitting to
      Owner the Operating Budget and the Capital Renewals Budget. Owner shall
      act reasonably and exercise prudent business judgment in approving or
      disapproving all or any portion of the Operating Budget and the Capital
      Renewals Budget and act in a manner that shall permit maintenance and
      operation of the Hotel in compliance with the Operating Manual.

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            4.02.4 Performance Under Operating Budget. Manager shall use
      commercially reasonable efforts to achieve the results set forth in the
      Operating Budget with respect to any Operating Year; provided, however,
      that Owner acknowledges that the Operating Budget is a composition of
      estimates and, therefore, Manager cannot and does not guarantee or warrant
      that the actual operation of the Hotel for any Operating Year will be as
      set forth in the Operating Budget for such Operating Year. During each
      Operating Year, Manager shall use its commercially reasonable efforts to
      operate the Hotel within the approved Operating Budget and the Capital
      Renewals Budget (subject, in the case of any disputed items, to Subsection
      4.02.3). Notwithstanding the foregoing, Owner understands and agrees as
      follows:

            (a)   Certain expenses provided for in the Operating Budget and the
                  Capital Renewals Budget for any Operating Year will vary based
                  on the occupancy of the Hotel; and, accordingly, to the extent
                  that occupancy of the Hotel for any Operating Year exceeds the
                  occupancy projected in the approved Operating Budget and the
                  Capital Renewals Budget for such Operating Year, such approved
                  Operating Budget and the Capital Renewals Budget shall be
                  deemed to include corresponding increases in such variable
                  expenses.

            (b)   The amount of certain expenses including Impositions,
                  utilities, insurance premiums, and charges provided for in
                  contracts and leases entered into pursuant to this Agreement,
                  are not within the ability of Manager to control. Manager
                  shall have the right to pay all such expenses without
                  reference to the amounts provided for in respect thereof in
                  the approved Operating Budget and the Capital Renewals Budget
                  for any Operating Year.

            (c)   If any expenditures are required on an emergency basis to
                  avoid damage to the Hotel or injury to persons or property,
                  Manager may make such expenditures, as may reasonably be
                  required to avoid or mitigate such damage or injury, even if
                  the amounts of such expenditures are not provided for or
                  within the amounts provided for in the approved Operating
                  Budget and the Capital Renewals Budget for the Operating Year
                  in question; provided Manager shall not expend more than
                  $100,000 (which figure shall be adjusted annually to reflect
                  increases in CPI) on any one occasion pursuant to this
                  paragraph 4.02.4(c) without Owner's prior approval unless
                  Manager determines that the emergency condition constitutes an
                  immediate threat to the life or safety of Hotel guests or
                  employees. Manager shall notify Owner as promptly as
                  reasonably possible of the making of any such expenditures.

            (d)   If any expenditures are required to comply with any Legal
                  Requirements or to cure or prevent any violation thereof,
                  Manager may make such expenditures as may be necessary to
                  comply with such Legal Requirements or to remove or prevent
                  the violation thereof even if the amounts of such expenditures
                  are not provided for or within the amounts provided for in the
                  approved Operating Budget and the Capital Renewals Budget for
                  the Operating Year in question.

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      Manager shall have the right from time to time during each Operating Year
      to propose modifications to the approved Operating Budget and the Capital
      Renewals Budget then in effect based on actual operations during the
      elapsed portion of the Operating Year in question and on Manager's
      judgment as to what will transpire during the remainder of such Operating
      Year. Any such modifications shall be subject to Owner's approval. Any
      dispute relating to a proposed modification of an approved Operating
      Budget and the Capital Renewals Budget may be submitted by either party
      for resolution in accordance with Section 12.04.

            4.02.5 Capital Renewals Reserve. From the revenues from the
      operation of the Hotel, or with funds provided by Owner under Section 7.03
      or otherwise, Manager will establish and maintain a reserve (the "Capital
      Renewals Reserve") for Capital Renewals. The amount of the required
      additions to the Capital Renewals Reserve shall be calculated monthly
      concurrently with the delivery to Owner of the reports required under
      Paragraph 7.05(a) and shall be an amount equal to four percent (4%) of
      Gross Revenues of the Hotel (determined as provided in Section B of the
      Management Fee Rider).

      The Capital Renewals Reserve shall be used solely for the purpose of
      paying for Capital Renewals. Any amounts remaining in the Capital Renewals
      Reserve at the end of each Operating Year will be carried forward until
      fully expended, but shall not be credited against required contributions
      to the Capital Renewals Reserve for any subsequent Operating Year. It is
      understood that the amounts to be reserved for Capital Renewals under this
      Subsection 4.02.5 are minimum and do not represent the amounts which may
      be required in later years to maintain the Hotel in the condition
      contemplated by this Agreement and, accordingly, Owner and Manager
      recognize that the Capital Renewals Budgets in future years may call for
      expenditures in excess of the amounts being reserved therefor under this
      Subsection 4.02.5.

      Except as may otherwise be agreed between Owner and Manager (a) the
      additions to the Capital Renewals Reserve will be deposited in an
      interest-bearing account (the "Capital Renewals Account") at a banking
      institution to be selected in accordance with Section 7.01, (b) interest
      earned on the Capital Renewals Account shall be added to the Capital
      Renewals Reserve but shall not be credited against amounts required to be
      added thereto, and (c) any funds remaining in the Capital Renewals Account
      at the expiration or termination of this Agreement will be disbursed to
      Owner.

            4.02.6 Compliance with Capital Renewals Budget. Manager shall at all
      times comply with the applicable Capital Renewals Budget, and shall not
      deviate in any substantial respect therefrom; provided that the Capital
      Renewals Budget includes appropriate amounts for contingencies.
      Notwithstanding the foregoing, Manager shall be entitled to make
      additional expenditures not authorized under the then applicable Capital
      Renewals Budget in case of emergencies arising out of fire or any other
      like or unlike casualty, or in order to comply with any applicable Legal
      Requirements. If Manager at any time determines that expenditures are
      required to be made pursuant to Paragraphs 4.02.4(c) or 4.02.4(d), Manager
      may make such expenditures out of the Capital Renewals Reserve; provided
      further that Manager may reallocate up to five percent (5%) of the Capital
      Renewals Reserve during each Operating Year to pay any expenses for
      Capital Renewals that Manager may reasonably determine to be appropriate
      to maintain the Hotel in a manner consistent with the Operating Manual,
      regardless of whether such

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      Capital Renewals were specifically included in the Capital Renewals Budget
      for such Operating Year. Subject to Subsection 4.02.4, in connection with
      any expenditure from the Capital Renewals Reserve that was not
      specifically contemplated in the Capital Renewals Budget, Manager shall
      attempt to notify Owner at least thirty (30) days prior to the time that
      the expenditures in question are made. Subject to the availability of
      sufficient amounts in the Capital Renewals Reserve or otherwise provided
      by Owner, Manager shall arrange for the completion of all Capital Renewals
      approved by Owner in the Capital Renewals Budget for any Operating Year or
      otherwise. The lack of sufficient monies in the Capital Renewals Reserve
      shall not limit Owner's obligations to make Capital Renewals required to
      maintain the Hotel in a manner consistent with the Operating Manual or to
      provide funds sufficient (in addition to the amounts in the Capital
      Renewals Reserve) to enable Manager to complete and pay for all Capital
      Renewals provided for in an approved Capital Renewals Budget or otherwise
      approved by Owner or authorized under the terms of this Agreement.

      4.03 Management Group Services.. The License Agreement contemplates that,
in consideration of the Monthly Program Fee (as defined therein) and other fees
set forth in the License Agreement, Manager and its Affiliates will provide
pursuant thereto such programs as advertising and other marketing programs, a
centralized reservation service and other programs which benefit the Embassy
Suites hotel system. Manager and its Affiliates will also furnish or cause to be
furnished to the Hotel the benefits of "Management Group Services", which phrase
shall mean such services which Manager or its Affiliates may hereafter furnish
to Other Managed Hotels but not to Embassy Suites hotels that are not Managed
Hotels. Management Group Services currently include:

            (a)   Purchasing;

            (b)   Operations support, including performance management and
                  improvement and functional discipline support;

            (c)   Operations finance, including supervision and support for
                  hotel accounting operations (such as accounts payable
                  processing and payroll processing), reporting and analysis;

            (d)   Information technology;

            (e)   Human resources, including recruitment, benefits
                  administration and training and development;

            (f)   Legal; and

            (g)   Risk management.

Management Group Services are not rendered in consideration of the Monthly
Program Fee and may require additional payment by Owner. However, except for any
third party expenses, operations support services, operations finance services,
human resources services (other than training and development charges) and legal
services are provided in consideration of the Management Fee.

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      4.04 Technical Services. During the Operating Period, Manager, through its
Technical Services program, will provide, as needed, supervisory and control
services to the Hotel's front office, food, personnel and other operating
departments.

      4.05 Personnel.

            4.05.1 General. Manager shall hire, train, discharge, promote and
      supervise the Executive Staff of the Hotel, and shall supervise through
      the Executive Staff the hiring, training, discharging, promotion and work
      of all other Hotel Personnel. All members of the Executive Staff of the
      Hotel shall be properly qualified for their positions, and the direct
      compensation payable to such persons shall be comparable to the direct
      compensation paid to the members of the Executive Staff of other
      comparable first-class hotels, taking into account the location and size
      of the Hotel. Notwithstanding anything contained in the foregoing to the
      contrary, Owner shall have the right to approve the selection of any such
      individual as the general manager of the Hotel; provided that Owner shall
      be deemed to have approved the appointment of any such individual unless
      Owner delivers notice of its disapproval of such appointment within seven
      (7) days after Manager's delivery to Owner of (a) a written summary of
      such individual's professional experience and qualifications and (b)
      notice of Manager's desire to arrange an interview between Owner and such
      individual at the Hotel or at another mutually acceptable location (it
      being agreed that Owner will forego its right to interview any such
      individual if Owner is unwilling or unable to have an authorized
      representative participate in the interview within seven (7) days
      following Manager's notice to Owner of Manager's desire to arrange such an
      interview). Moreover, Owner acknowledges that it may not reject more than
      three (3) candidates proposed by Manager for the position of general
      manager each time the position is being filled.

            4.05.2 Manager as Employer. All employees of the Hotel shall be
      employees of Manager, and all Compensation of such employees shall be paid
      by Manager, and subject to the approved Forecast (with such variances and
      modifications as contemplated by Section 4.02.4) the amount of such
      payments shall immediately be reimbursed to Manager by Owner in accordance
      with Section 4.07 hereof. Accordingly, Manager shall establish appropriate
      payroll accounts covering all such employees of the Hotel. Arrangements
      shall be made such that Manager can draw on the Hotel Accounts to transfer
      funds to such payroll accounts immediately upon its payment of such
      Compensation.

            4.05.3 Labor Relations. Manager shall negotiate for the best
      interest of Owner with any labor unions representing Hotel Personnel, but
      any collective bargaining agreement or labor contract resulting therefrom
      will be executed by Manager as the employer. In addition, it is understood
      that, with respect to labor negotiations not involving multi-employer
      bargaining arrangements applicable to the Hotel and other hotel properties
      not owned or managed by Manager, Manager shall consult with Owner in
      advance of, and, to the extent practicable, during the course of,
      negotiations with any labor union.

            4.05.4 Manager Personnel. If Manager shall reasonably deem it
      advisable in the best interests of the Hotel, or with Owner's reasonable
      consent, Manager may temporarily assign the general manager, the director
      of finance and other members of the Executive Staff of the Hotel

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      from the Corporate Personnel or from the staff of Other Managed Hotels.
      All such employees will be paid their regular Compensation, such
      Compensation to be paid by the Hotel, or if Manager deems it advisable, by
      Manager, in which case Manager will be reimbursed by Owner therefor as
      provided in Section 4.07.

            4.05.5 Business Expenses. The Executive Staff and other appropriate
      Hotel Personnel shall be reimbursed for all reasonable business expenses,
      including business entertainment and travel expenses, in accordance with
      the standard practices in effect at Other Managed Hotels.

            4.05.6 Benefit Plans, etc. Manager shall have the right to provide
      to Hotel Personnel who are eligible therefor and who are not covered by
      collective bargaining or similar arrangements, with benefits of the
      incentive plans, and the pension, profit sharing or other employee
      retirement, disability, health or welfare or other benefit plan or plans
      now or hereafter applicable to employees of Other Managed Hotels, and to
      charge the Hotel with the Hotel's pro rata share of the costs and expenses
      of such plan or plans allocated to the Hotel on the same basis as
      allocated to participating Other Managed Hotels; provided, however, that
      without the prior consent of Owner (not to be unreasonably withheld,
      delayed or conditioned), Manager shall not:

            (a)   Increase, from the amounts in effect as of the date of this
                  Agreement, the overall annual cash incentive bonus plan payout
                  targets (expressed as a percentage of annual base salary)
                  applicable to the General Manager, other members of the
                  Executive Staff and members of the sales department of the
                  Hotel, except to the extent, if any, that Manager, at its sole
                  discretion, elects to fund the amount of such increase;

            (b)   Reduce, from the amounts in effect as of the date of this
                  Agreement, the amount of the annual cash incentive bonus plan
                  payout target (expressed as a percentage of the annual
                  incentive = bonus) payment of which is dependent upon one or
                  more financial measures including, but not limited to, total
                  revenues, food and beverage revenues, catering revenues,
                  revenues per available guest room, Yield Index, Income After
                  Undistributed Operating Expenses (also referred to as "Gross
                  Operating Profit" or "GOP"), GOP margin (i.e., GOP as a
                  percentage of total revenues) and GOP flow through (i.e.,
                  marginal GOP as a percentage of marginal total revenues); or

            (c)   To the extent that payment of all or part of the annual cash
                  incentive bonus plan payout target not otherwise dependent
                  upon the financial measures referenced in clause (b) above is
                  conditioned on achieving threshold levels of one or more
                  financial measures referenced in clause (b) above, reduce,
                  from the levels in effect as of the date of this Agreement,
                  the threshold levels which must be so achieved.

      Owner agrees and acknowledges that Manager may (but shall not be required
      to) provide benefits and allow participation in such plans on whatever
      modified basis as it may determine appropriate under the circumstances,
      and may waive any waiting period or any preconditions to coverage or
      participation otherwise applicable to such employees. No statement,
      promise,

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                                      12


      representation or warranty regarding the terms of such plans or the
      participation or coverage of employees shall be enforceable, binding or
      effective in any way unless made in writing and signed by an authorized
      representative of Manager.

      Notwithstanding the foregoing, in no event shall Manager initiate or adopt
      any plans, programs or benefits for Hotel Personnel not otherwise in
      effect at Other Managed Hotels unless required by applicable collective
      bargaining agreements.

            4.05.7 Termination of Hotel Personnel. Owner acknowledges that
      Manager or its Affiliates may have an obligation under federal, state or
      local law to give advance notice to Hotel Personnel of any termination of
      their employment, and that failure to comply with any such notification
      obligation could give rise to civil liabilities. Therefore,
      notwithstanding anything to the contrary contained in this Agreement,
      Owner shall indemnify, hold harmless and defend Manager and its Affiliates
      from and against any such liabilities based on Owner's actions (including
      terminating this Agreement) which give rise to such a notification
      obligation on the part of Manager or any of its Affiliates, unless Manager
      (or its Affiliates) is given adequate opportunity to comply with such
      obligation.

            4.05.8 Non-Solicitation. Owner, on behalf of itself, and its
      Affiliates and its and their successors, hereby agrees not to solicit the
      employment of any of the Executive Staff of the Hotel or Corporate
      Personnel at any time during the Term of this Agreement or within twelve
      (12) months following the expiration or termination of this Agreement
      without Manager's prior written approval.

      4.06 Additional Responsibilities of Manager. Manager is authorized to
perform and shall, on behalf of Owner, either in its own name, or in the name of
Owner, perform the following additional services, or cause the same to be
performed for the Hotel:

            (a)   establish and revise, as necessary, administrative policies
                  and procedures, including policies and procedures for the
                  control of revenue and expenditures, for the purchasing of
                  supplies and services, for the control of credit, and for the
                  scheduling of maintenance, and verify that the foregoing
                  procedures are operating in a sound manner;

            (b)   consummate leases with respect to the commercial and office
                  space, and concession or other arrangements with respect to
                  other space and facilities, in the Hotel; provided that
                  Owner's prior written approval shall be required for any
                  lease, concession or other such arrangement having a
                  non-terminable term in excess of one year, if the amount of
                  the expenditures thereunder would, or is reasonably
                  anticipated to, exceed $50,000 in the aggregate per annum, or
                  if Owner would be obligated thereunder to indemnify, defend,
                  hold harmless or otherwise protect a third party;

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            (c)   enter into any contracts for goods or services to the Hotel;
                  provided that:

                  (i)   Owner's prior written approval shall be required for any
                        contract for goods or services to the Hotel (A) having a
                        non-terminable term in excess of one year, (B) if the
                        amount of the expenditures thereunder would, or is
                        reasonably anticipated to, exceed $50,000 in the
                        aggregate per annum, or (C) if Owner would be obligated
                        thereunder to indemnify, defend, hold harmless or
                        otherwise protect a third party; and

                  (ii)  any contract for goods or services to the Hotel entered
                        into with Manager or an Affiliate of Manager = (other
                        than the License Agreement, contracts entered into as
                        contemplated by the License Agreement and contracts
                        specifically authorized by another provision of this
                        Agreement, including Section 12.01), Owner's prior
                        approval of the costs thereunder shall be required
                        (which approval shall be deemed given if such costs are
                        included in identified in (A) the attached Exhibit ___
                        or (B) the then applicable approved Operating Budget as
                        being payable to = Manager or an Affiliate of Manager);

            (d)   subject to compliance with the applicable Capital Renewals
                  Budget, make all repairs, decorations, revisions, alterations
                  and improvements to the Hotel as shall be reasonably necessary
                  for the proper maintenance thereof in good order, condition
                  and repair;

            (e)   purchase such Operating Equipment and Operating Supplies as
                  shall be reasonably necessary for the proper operation of the
                  Hotel;

            (f)   apply for, and use its best effort to obtain and maintain, all
                  licenses and permits required of Owner or Manager in
                  connection with the operation and management of the Hotel;
                  Owner agrees to execute and deliver any and all applications
                  and other documents as shall be reasonably required and to
                  otherwise cooperate, in all reasonable respects, with Manager
                  in applying for, obtaining and maintaining such licenses and
                  permits;

            (g)   use its reasonable efforts to do, or cause to be done, all
                  such acts and things in and about the Hotel as shall be
                  reasonably necessary to comply with Legal Requirements and the
                  terms of all insurance policies, and to discharge any lien,
                  encumbrance or charge on or with respect to the Hotel and the
                  operation thereof, other than Permitted Exceptions;

            (h)   provided sufficient funds are then available in the Hotel
                  Accounts, pay all Impositions and insurance premiums, when due
                  (or reimburse Owner, to the extent Owner pays any such
                  Impositions or insurance premiums on behalf of the Hotel);

            (i)   use commercially reasonable efforts to cause the Hotel to
                  comply with all applicable covenants and provisions of the
                  Ground Lease (if any) and Mortgage,

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                  and pay, when due, the installments of rental under the Ground
                  Lease (if any) and of principal and interest on the Mortgage;

            (j)   retain legal counsel for the Hotel, which legal counsel shall
                  perform legal services under the direction of Manager;

            (k)   cooperate with Owner and any prospective purchaser, lessee,
                  Mortgagee or other lender in connection with any proposed
                  sale, lease or financing of or relating to the Hotel;
                  provided, however, that Manager shall not be required to
                  release any information that is confidential or proprietary to
                  Manager or its Affiliates; and provided further that Owner
                  shall reimburse Manager for any expenses incurred by Manager
                  in connection with such cooperation when such expense is not
                  otherwise paid or reimbursed under this Agreement;

            (l)   institute in its own name or in the name of Owner or the
                  Hotel, and as an operating expense of the Hotel, any and all
                  legal actions or proceedings to collect charges, rent or other
                  income derived from the Hotel's operations or to oust or
                  dispossess guests, tenants or other persons in possession
                  therefrom, or to cancel or terminate any lease, license or
                  concession agreement for the breach thereof or default
                  thereunder by the tenant, licensee or concessionaire; and at
                  the direction and expense of Owner (and not as an operating
                  expense of the Hotel), Manager shall take appropriate steps to
                  challenge, protest, appeal and/or litigate to final decision
                  in any appropriate court or forum any alleged non-compliance
                  with Legal Requirements affecting the Hotel or any alleged
                  violation of any law, but only provided that (a)
                  non-compliance with the Legal Requirements or violation of law
                  in question during such challenge, protest, appeal or
                  litigation does not result in the closing of any portion of
                  the Hotel or any facility thereof and does not impose any risk
                  of criminal or civil liability on Manager or (b) Owner
                  complies with such Legal Requirements or remedies such
                  violation of law to the extent necessary to prevent any such
                  closure or risk of liability; provided further that if such
                  non-compliance with Legal Requirements or violation of law
                  resulted from the actions of Manager in the operation of the
                  Hotel, Manager shall bear the expense of such legal costs,
                  which costs shall be an operating expense of the Hotel unless
                  Manager would be obligated to indemnify Owner against the same
                  pursuant to Subsection 12.03.2 of this Agreement;

            (m)   collect on behalf of Owner and account for and remit to
                  governmental authorities all Impositions collectible by the
                  Hotel directly from patrons or guests, or as part of the sales
                  price of any goods, services or displays, including gross
                  receipts, admissions or similar or equivalent taxes, duties,
                  levies or charges;

            (n)   collect all charges, rent and other amounts due from guests,
                  lessees and concessionaires of the Hotel and use those funds,
                  as well as funds from other sources as may be available to the
                  Hotel, first to pay for the expenditures stipulated in Section
                  7.02 and then any other financial obligations of the Hotel as
                  Owner may direct; and

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            (o)   perform such other tasks as are customary and usual in the
                  operation of a hotel of the class and standing of the Hotel.

Owner shall be entitled to meet with the area vice president of Manager, or
other responsible Manager representative, on a quarterly basis to review and
discuss the operation of the Hotel, including any substantial deviation from the
operating strategies, policies or procedures which form the basis on which the
current Operating Budgets were made. Manager shall reasonably consider any
comments or suggestions of Owner.

      4.07 Reimbursements to Manager. In addition to the Management Fee provided
for in Article VI, Manager and its Affiliates shall be entitled to be reimbursed
for the following costs and expenses incurred in rendering services to the
Hotel:

            (a)   the Hotel's share of all costs and expenses incurred in
                  connection with the rendition of Management Group Services,
                  allocated on the same basis as allocated to Other Managed
                  Hotels;

            (b)   the Compensation paid by Manager or its Affiliates to Hotel
                  Personnel;

            (c)   the Compensation payable to Corporate Personnel (other than
                  Vice Presidents, and higher ranking executive officers), who
                  are not assigned to the Hotel, under Subsection 4.05.4, while
                  working on an assignment for the specific benefit of the
                  Hotel, Owner or its Affiliates;

            (d)   reasonable travel and entertainment expenses of officers and
                  employees of Manager and its Affiliates incurred in performing
                  Manager's duties hereunder in connection with any phase of the
                  operation of the Hotel in accordance with the policies of
                  Manager then in effect;

            (e)   the Compensation and expenses paid or reimbursed by Manager or
                  its Affiliates to all independent consultants rendering
                  services to the Hotel if and to the extent contemplated in the
                  Operating Budget or Capital Renewals Budget for such Operating
                  Year or as otherwise approved by Owner;

            (f)   payments made or incurred by Manager or its Affiliates, or its
                  or their employees to third parties for goods and services in
                  the ordinary course of business in the operation of the Hotel,
                  in accordance with the Operating Budget or Capital Renewals
                  Budget or as otherwise approved by Owner or permitted under
                  this Agreement;

            (g)   all taxes and similar assessments (other than Manager's income
                  taxes) levied against any reimbursements payable to Manager
                  under this Agreement for expenses incurred for Owner's
                  account, including the reimbursable expenses described in this
                  Section 4.07; and

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            (h)   all other expenditures which are authorized, permitted or
                  required under the provisions of this Agreement which have
                  been paid or funded by Manager on Owner's behalf.

It is agreed that, to the extent the entire amount of Compensation or other
expense reimbursable to Manager or its Affiliates under this Section 4.07, or
under any other provisions of this Agreement, is not incurred solely for the
benefit of the Hotel, then such amount or expense shall be appropriately
allocated.

Manager shall be entitled to reimburse itself and its Affiliates for the above
items out of the Hotel Accounts, or may submit statements covering such items to
Owner, and Owner will pay to Manager or its Affiliate(s), as applicable, the
amount indicated thereon promptly upon the receipt of such statements.

                                   ARTICLE V
                                   INSURANCE

      5.01 Coverage.

            5.01.1 Required Insurance. The following insurance shall be secured
      and maintained with respect to the Hotel at all times during the Term of
      this Agreement:

            (a)   Property insurance provided by an all risk policy form,
                  including coverage for the perils of fire, windstorm, flood,
                  earthquake and other risks covered by extended coverage
                  endorsements on the Improvements and contents in an amount
                  equal to the full replacement value thereof;

            (b)   Business interruption insurance provided by an all risk policy
                  form, including business interruption resulting from the
                  perils of fire, windstorm, flood, earthquake and other risks
                  covered by extended coverage endorsements for full recovery of
                  the net profits and continuing expenses of the Hotel
                  (including the Management Fee) for not less than twelve months
                  of any such business interruption;

            (c)   Insurance against loss from accidental damage to, or from the
                  explosion of, boilers, electrical apparatus, air conditioning
                  systems, including refrigeration and heating apparatus,
                  pressure vessels and pressure pipes in an amount equal to the
                  full replacement value of such items;

            (d)   Business interruption insurance against loss arising from
                  accidental damage to, or from the explosion of, boilers,
                  electrical apparatus, air conditioning systems, including
                  refrigeration and heating apparatus, pressure vessels and
                  pressure pipes for full recovery of the net profits and
                  continuing expenses of the Hotel (including the Management
                  Fee) for not less than twelve months of any such business
                  interruption;

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            (e)   Commercial general liability, commercial automobile liability
                  insurance including coverage for owned, non-owned and leased
                  automobiles, garage keepers liability, products and completed
                  operations, contractual liability, liquor liability and
                  innkeepers' liability in an amount not less than
                  $100,000,000.00 per occurrence;

            (f)   Comprehensive crime insurance in an amount equal to not less
                  than $5,000,000.00;

            (g)   Workers' compensation insurance providing statutory benefits
                  and employers' liability insurance in an amount equal to not
                  less than (i) $1,000,000.00 each accident, (ii) $1,000,000.00
                  each disease-policy limit and (iii) $1,000,000.00 each
                  disease-each employee;

            (h)   Employment practices liability insurance in the amount of
                  $2,000,000.00 per claim; and

            (i)   Insurance against such other insurable risks as Manager may,
                  from time to time, reasonably require.

            5.01.2 Responsibility to Maintain. During the Term, Owner, or if and
      to the extent requested by Owner, Manager at the expense of Owner, shall
      procure and maintain the above insurance policies, including those
      required under clauses (a) through (i) excluding clause (g) of Subsection
      5.01.1. Owner may satisfy this requirement by participating in Manager's
      insurance programs.

            5.01.3 Changes in Coverage. Manager shall have the right to raise
      the minimum amount of insurance to be maintained with respect to the Hotel
      under the above Subsection 5.01.1 to make such insurance comparable to the
      amount of insurance carried with respect to Other Managed Hotels, taking
      into account the size and location of the Hotel. In addition, neither
      party shall unreasonably withhold its consent to a request by the other
      party that such minimum limits of insurance be lowered on the basis that
      such insurance cannot be obtained in such amounts, or can be obtained only
      at a prohibitive cost. Similarly, if during the Term of this Agreement
      changes in the insurance industry shall make any description of the
      required insurance coverage inaccurate or inappropriate, then Manager
      shall have the right, by notice to and with the prior written approval of
      Owner, to change such requirements to accurately describe, in the then
      current vernacular, the type of insurance which would be comparable to the
      coverage described in the above Subsection 5.01.1.

            5.01.4 Requirements. All policies of insurance shall be written on
      an "occurrence" basis, if possible, and if any policy is written on a
      "claims made" basis, then such policy must, if possible, be continued in
      effect for a period of two (2) years following the expiration or early
      termination of this Agreement. The insurance coverage shall in any event
      comply with the requirements of the Mortgage, if any.

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      5.02 Policies and Endorsements.

            5.02.1 Policies. All insurance provided for under Section 5.01 shall
      be effected by policies issued by insurance companies of good reputation
      and of sound and adequate financial responsibility. The party procuring
      such insurance shall deliver to the other party certificates of insurance
      with respect to the policies of insurance so procured, including existing,
      additional and renewal policies, and in the case of insurance about to
      expire, shall deliver certificates of insurance with respect to the
      renewal policies to the other party not less than thirty (30) days after
      the respective dates of expiration.

            5.02.2 Endorsements. All policies of insurance provided for under
      this Article V shall provide that (a) such policy shall not be canceled or
      materially changed without at least thirty (30) days prior written notice
      to Owner and Manager, and (b) to the maximum extent reasonably obtainable
      from the insurer, no act or omission of Owner or Manager shall affect the
      obligation of the insurer to pay the full amount of any loss sustained.
      All insurance policies procured by Owner pursuant to Subsection 5.01.1
      shall contain an endorsement or otherwise provide that such insurance is
      primary to any similar coverage provided by Manager.

            5.02.3 Named Insureds. All policies of insurance required under
      clauses (a) through (i) of Subsection 5.01.1 (excluding clause (g) which
      shall be carried in the name of Manager only) shall be carried in the name
      of Owner, Manager and, if required, Mortgagee and/or the lessor under any
      Ground Lease. Losses thereunder shall be payable to the parties as their
      respective interests may appear (excluding insurance required under
      clauses (a) and (c) which shall be payable to Owner). Notwithstanding the
      foregoing, if Mortgagee is an Institutional Lender and so requires, losses
      may be made payable to Mortgagee, or to a bank or trust company qualified
      to do business in the state where the Hotel is located, in either instance
      as trustee for the custody and disposition of the proceeds therefrom.
      Owner agrees to use reasonable efforts to cause Mortgagee to agree that
      its Mortgage shall contain a provision to the effect that proceeds from
      property insurance shall be made available for restoration of the Hotel.
      All insurance policies required in clauses (a) through (i) of Subsection
      5.01.1 (excluding clause (g)) procured by Owner shall name Owner and its
      Affiliates, directors, officers, agents and employees of each such entity
      as named insureds, and Manager, its Affiliates, directors, officers,
      agents and employees of each such entity as named insureds or additional
      insureds as their interests appear.

            5.02.4 Evidence of Insurance. As soon as practicable prior to the
      effective date of the applicable coverages, the party obtaining the
      insurance coverages under this Article V shall provide the other party
      with binders evidencing that the applicable insurance requirements of this
      Agreement have been satisfied and, as soon as practicable thereafter,
      shall provide certified copies of policies for such insurance. As soon as
      practicable prior to the expiration date of each such policy, the party
      obtaining such insurance shall provide the other party with binders
      evidencing renewal of existing or acquisition of new coverages. Certified
      copies of renewed or new policies or certificates of insurance shall be
      provided by the party obtaining insurance coverage under this Article V to
      the other party as soon as practicable after renewed or new coverages
      become effective. On request of the other party, each party shall furnish
      the other with a schedule of insurance obtained by such party under this
      Article V, listing the policy

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      numbers of the insurance obtained, the names of the companies issuing such
      policies, the names of the parties insured, the amounts of coverage, the
      expiration date or dates of such policies and the risks covered thereby.

            5.02.5 Review of Insurance. All insurance policy limits provided
      under this Article V shall be reviewed by Owner and Manager every three
      (3) years following the Commencement Date, or sooner if reasonably
      requested by Manager, to determine the suitability of such insurance
      limits in view of exposures reasonably anticipated over the ensuing three
      (3) years. Owner and Manager hereby acknowledge that changing practices in
      the insurance industry and changes in the local law and custom may
      necessitate additions to types or amounts of coverage during the Operating
      Period. Owner agrees to comply with any other insurance requirements
      Manager reasonably requests in order to protect the Hotel and the
      respective interests of Owner and Manager.

      5.03 Waiver of Liability. Neither Manager nor Owner shall assert against
the other, and do hereby waive with respect to each other, or against any other
entity or person named as additional insureds on any policies carried under this
Article V, any claims for any losses, damages, liability or expenses (including
attorneys' fees) incurred or sustained by either of them on account of injury to
persons or damage to property arising out of the ownership, development,
construction, completion, operation or maintenance of the Hotel, to the extent
that the same are covered by the insurance required under this Article V. Each
policy of insurance shall contain a specific waiver of subrogation reflecting
this Section 5.03, and a provision to the effect that the existence of the
preceding waiver shall not affect the validity of any such policy or the
obligation of the insurer to pay the full amount of any loss sustained.

      5.04 Insurance by Manager. Any insurance provided by Manager under this
Article V may, at its option, be effected under policies of blanket insurance
which cover other properties of Manager and its Affiliates, and Manager shall
have the right to charge the Hotel with the Hotel's pro rata share of the
aggregate premiums charged by Manager to all participating Managed Hotels, such
share to be allocated to the Hotel on the same basis as allocated to
participating Other Managed Hotels. Subject to Owner and Manager agreeing upon
such matters as the identification of the relevant records, the procedures for
reviewing such records, and limitations on use or disclosure of the information
contained in such records, to the extent any insurance coverage relating to this
Agreement is effected under a policy of blanket insurance, Manager shall make
its books and records available, upon Owner's request and at Owner's expense, in
sufficient detail for Owner to verify the allocation and calculation of
premiums. Any policies of insurance maintained by Manager pursuant to this
Article V may contain deductible provisions in such amounts as are maintained
with respect to Other Managed Hotels, for which Owner shall be responsible or
which Manager, at Owner's expense, may pay. Further, in lieu of all or a part of
commercial general liability insurance, workers' compensation and employer's
liability insurance and employment practices liability insurance under clauses
(e), (g) and (h) of Subsection 5.01.1, any or all of the risks covered by such
insurance, at Manager's option, may be self-insured or self-assumed by Owner
under a self-insurance or assumption of risk program similar to those in effect
at Other Managed Hotels, up to such amounts which such risks are self-insured or
assumed at Other Managed Hotels.

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      5.05 Business Interruption Insurance. Subject to the terms of any Mortgage
and the Ground Lease, if any, any proceeds from business interruption insurance
payable to Owner hereunder shall be fairly and equitably apportioned between
Owner and Manager in accordance with their respective interests and equities to
the end that the fair value of Manager's expectable compensation under this
Agreement for the period covered by such business interruption insurance shall
be paid to Manager.

                                   ARTICLE VI
                                 MANAGEMENT FEE

      6.01 Management Fee. In addition to the reimbursements required under
Section 4.07 for Manager's services hereunder during the Operating Period, Owner
shall pay Manager the Management Fee computed and made payable as provided in
the Management Fee Rider attached hereto.

      6.02 Place and Means of Payment. All amounts payable to Manager or its
Affiliates under this Agreement (a) shall be paid to Manager in United States
dollars, in immediately available funds, without reduction for any withholding
tax, value added tax and any other assessment, tax, duty, levy or charge
required under the applicable laws of any applicable jurisdiction; (b) shall be
made to Manager at the place for the giving of notice to Manager set forth in or
pursuant to Section 12.10, or to such other place as Manager shall designate to
Owner; and (c) at Manager's option, shall be made by Manager electronically out
of the Hotel Accounts on the dates specified for payment in the Management Fee
Rider attached hereto, or as elsewhere provided in this Agreement, as
applicable. Any and all amounts that may become due to Manager from Owner under
this Agreement shall bear interest from and after the respective due dates
thereof until the date on which the amount is received in the bank account
designated by Manager, at an annual rate of interest equal to the lesser of (i)
the prevailing lending rate of Manager's principal bank for working capital
loans to Manager plus three percent (3%) and (ii) the maximum amount permitted
by applicable law; provided, however, the foregoing shall not apply if the
delinquency shall have occurred because of the fault of Manager.

      6.03 Taxes. If any gross receipts, sales, use, excise or similar tax that
is based upon gross income or revenues is imposed upon Manager for the receipt
of any payments Owner is required to make to Manager hereunder (including the
Management Fee) then Owner shall also pay Manager an amount equal to such tax.
If any gross receipts, sales, use, excise or similar tax that is based upon
gross income or revenues is imposed upon the payment made pursuant to this
Section 6.03, the amount due under this Section 6.03 will be an amount such that
the net amount retained by Manager, after payment of such tax, equals the tax
imposed on all payments made hereunder other than Section 6.03.

                                  ARTICLE VII
                  ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS

      7.01 Bank Accounts. Bank accounts for the Hotel will be established at a
banking institution or institutions mutually approved by Owner and Manager, such
accounts to be in the name of Owner or the Hotel (the "Hotel Accounts"). Manager
will deposit in such Hotel Accounts all monies furnished by Owner as working
funds under Section 7.03 and all monies received from the operation of the
Hotel, and shall disburse the same for the purposes set forth in Section 7.02.
Notwithstanding the foregoing, Manager shall be entitled to maintain such funds
as it reasonably deems proper in house banks or in petty cash funds at the
Hotel.

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With Owner's consent, funds in the Hotel Accounts, the Capital Renewals Account
or any other fund or account under the control of Manager that contains monies
belonging to the Hotel or to the Owner may be combined or commingled with any
other accounts or funds controlled by Manager or any Affiliate thereof with
respect to other hotels operated by Manager or any Affiliate thereof on behalf
of Owner.

Manager's designees shall be the only authorized signatories on the Hotel
Accounts.

      7.02 Expenditures. From the Hotel Accounts (or, if appropriate, from house
banks or petty cash funds available at the Hotel), Manager is hereby authorized
to pay such amounts and at such times as are required in connection with the
ownership, maintenance and operation of the Hotel and related facilities,
including the following (subject to the approval of Owner where such approval is
required hereunder):

            (a)   the Compensation and expenses of the Executive Staff and other
                  Hotel Personnel;

            (b)   all costs and expenditures incurred or made in connection with
                  the authorized items under Section 4.06 and all other
                  expenditures which Manager is permitted or required to make
                  under any other provision of this Agreement;

            (c)   deposits into the Capital Renewals Account to be established
                  pursuant to Subsection 4.02.5;

            (d)   reimbursements and other amounts due to Manager and its
                  Affiliates under Section 4.07, or under any other provision of
                  this Agreement;

            (e)   premiums for any insurance maintained by Manager in accordance
                  with Article V;

            (f)   all fees, charges and contributions payable to the licensor
                  and its Affiliates under the License Agreement; and

            (g)   the Management Fee computed in accordance with the Management
                  Fee Rider.

Subject to the working capital requirements of Section 7.03 and the requirements
of the then applicable Operating Budget and Capital Renewals Budget, Manager, as
frequently as Owner and Manager may agree, but no less frequently than monthly,
shall distribute excess funds from the Hotel Accounts to Owner. Any amounts
remaining in the Hotel Accounts on the termination of this Agreement shall be
disbursed to Owner; provided, however, that Manager may deduct and retain prior
to such disbursement any and all amounts owed by Owner to Manager under this
Agreement.

Manager's designees shall be the only persons authorized to draw from the Hotel
Accounts, and Manager shall be entitled to make deposits in all Hotel Accounts,
in accordance with the terms of this Agreement and Manager's standard accounting
policies and practices. Manager shall establish controls to ensure accurate
reporting of all transactions involving the Hotel Accounts. Unless due to
Manager's Grossly Negligent or Willful Acts, any loss suffered in the Hotel
Accounts or any other bank account established pursuant to this Article VII, or
in any investment of funds into any such account, shall be borne by Owner, and
Manager shall have no liability or responsibility therefor.

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      7.03 Working Fund Requirements. From time to time, but not less frequently
than weekly, Owner shall make deposits to the Hotel Accounts in amounts
necessary to restore the balance thereof to not less than $__________ or such
greater amount as may be necessary (after taking into account anticipated
deposits of monies received from the operation of the Hotel) sufficient at all
times to assure the uninterrupted and efficient operation of the Hotel, in
accordance with this Agreement and the Operating Manual, including, without
limitation, sufficient funds to pay all of the items described or specified in
the preceding Section 7.02. Such greater amount, if any, shall be set forth by
notice from Manager to Owner specifically setting forth the amount of the
required funds and an explanation of the necessity for such funds. If Manager is
unable to perform any of its agreements or covenants under this Agreement
because of such failure on the part of Owner to provide the required funds, such
failure of performance on the part of Manager shall not be deemed a default on
the part of Manager and shall not give rise to any right of termination, damages
or any other remedy on the part of Owner against Manager. If Owner fails to
deposit all or any portion of the funds so requested and if Manager uses or
pledges its credit (Owner agreeing that Manager shall have no obligation to do
so) in making ordinary and customary purchases of goods and payments for
services for the Hotel on Owner's behalf, Owner shall pay for such purchases
when payment is due and shall indemnify and defend Manager against all losses,
costs and expenses, including attorneys' fees and costs, interest and any late
payment fees, that may be incurred by or asserted against Manager by reason of
Owner's failure to pay for such purchases. Owner shall pay interest to Manager
on any advances that Manager may elect, without obligation, to make on Owner's
behalf in payment of any due and unpaid obligations of Owner to third parties at
the rate specified in Section 6.02; and such advances, with the interest thereon
at the rate aforesaid, shall be due and payable by Owner to Manager on demand
and Manager shall be entitled to reimburse itself therefor, with interest as
aforesaid, out of any available funds from the operation of the Hotel.

      7.04 Books and Records. Manager shall keep full and adequate books of
account and such other records as are necessary to reflect the results of the
operation of the Hotel. For this purpose, Owner agrees that it will make
available to Manager, or its representatives, all books and records, including
contract documents, invoices and all other construction records pertaining to
the initial development of the Hotel and any Major Capital Improvements. Owner
acknowledges that, if any such books and records are not made available to
Manager, Manager may be unable to keep books of account which fully and
adequately reflect the results of the operation of the Hotel. Manager shall keep
the books and records for the Hotel in all material respects in accordance with
the Uniform System of Accounts, on an accrual basis in accordance with generally
accepted accounting principles consistently applied. All of the financial books
and records pertaining to the Hotel, including books of account, front office
records and guest information, shall be the property of Owner; provided,
however, that guest information shall also be the property of Manager and may be
used by Manager for any of its business purposes. Notwithstanding the foregoing,
Manager may make and retain copies of all such financial books and records
pertaining to the Hotel. Upon the expiration or termination of this Agreement,
all of such books of account and financial records shall be turned over
forthwith to Owner so as to ensure the orderly continuance of the operation of
the Hotel, but all of such information shall be retained by Owner and made
available to Manager at the Hotel, at all reasonable times, for inspection,
audit, examination and copying (at Manager's expense) for at least five (5)
years subsequent to the date of such expiration or termination. Manager shall
have no obligation to turn over to Owner the proprietary guest information of
Manager. Solely by way of example, proprietary guest information of Manager
shall include, but not be limited to, information not specific to a guest's
experience with the Hotel. Solely by way of example,

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information not specific to a guest's experience with the Hotel shall include,
but not be limited to, information derived from the reservations services
provided by Hilton Reservations Worldwide, L.L.C. and from the HHonors guest
reward program administered by Hilton HHonors Worldwide, L.L.C.

      7.05 Reports to Owner. Manager shall deliver, or cause to be delivered, to
Owner the following statements:

            (a)   within twenty (20) days after the end of each calendar month
                  during the Operating Period, a detailed profit and loss
                  statement, substantially in the form used at Other Managed
                  Hotels, showing the results of operation of the Hotel for such
                  month and the year-to-date, and a statement of departmental
                  operations, for such month and year-to-date;

            (b)   within ninety (90) days after the end of each Operating Year,
                  a balance sheet, a related statement of profit and loss and a
                  statement of cash flows, which Owner and Manager anticipate
                  would reflect the assets employed in the operation of the
                  Hotel and the liabilities incurred in connection therewith as
                  of December 31 of such year, and the results of the
                  operations, and cash flows, of the Hotel during such year
                  (accompanied by, if requested by Owner and at Owner's
                  independent and direct expense, an opinion thereon rendered by
                  a firm of independent certified public accountants of
                  recognized standing in the hotel industry as may be approved
                  by Owner and Manager), and having annexed thereto a
                  computation in reasonable detail of the Management Fee for
                  such year, calculated as provided in the Management Fee Rider.
                  If Owner does not supply any historical information necessary
                  for Manager to cause the financial information required by
                  this Paragraph 7.05(b) to be prepared and delivered, which
                  historical information is not otherwise available to Manager,
                  Manager shall not be obligated to prepare and deliver such
                  financial information. Manager shall, nonetheless, deliver to
                  Owner so much of the required financial information as is
                  possible given the historical information, if any, Owner has
                  provided.

      7.06 Owner's Rights to Inspection and Review. Upon reasonable advance
written notice to the general manager of the Hotel, Manager shall accord to
Owner, its accountants, attorneys and agents, the right to enter upon any part
of the Hotel at all reasonable times during the Term of this Agreement for the
purpose of examining or inspecting the same or examining and making extracts of
the financial books and records of the Hotel or for any other purpose which
Owner, in its discretion, shall deem necessary or advisable, but same shall be
done without material disruption to the operation and business of the Hotel.

      7.07 Centralized Accounting Services. Manager may, in its reasonable
discretion, handle directly, or through an Affiliate or one of the Other Managed
Hotels, any of the accounting functions for the Hotel, including accounts
payable, general ledger, payroll and accounts receivable, or any part thereof,
on a centralized basis with one or more Other Managed Hotels for the purpose of
achieving a more cost-efficient operation of the Hotel. Manager or its Affiliate
or the Other Managed Hotel furnishing such centralized accounting functions
shall be entitled to be reimbursed or paid from the Hotel Accounts for (i) the
pro rata share of the costs and expenses of providing such

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accounting functions allocated to the Hotel on the same basis as allocated to
participating Other Managed Hotels utilizing such centralized accounting
services, and (ii) such amounts required to cover or reimburse Manager, its
Affiliate or Other Managed Hotel for the payment of authorized expenditures by
such entity under Section 7.02 as a part of such centralized accounting
services. Subject to Owner and Manager agreeing upon such matters as the
identification of the relevant records, the procedures for reviewing such
records, and limitations on use or disclosure of the information contained in
such records, Manager shall make its books and records available, upon Owner's
request and at Owner's expense, in sufficient detail for Owner to verify the
pass-through nature of such charges.

      7.08 Quiet and Peaceable Operation. Owner shall ensure that Manager is
able to peaceably and quietly operate the Hotel in accordance with the terms of
this Agreement, free from molestation, eviction and disturbance by Owner or by
any other person or persons claiming by, through or under Owner. Owner shall
undertake and prosecute all reasonable and appropriate actions, judicial or
otherwise, required to assure such quiet and peaceable operations by Manager.

                                  ARTICLE VIII
                               TERMINATION RIGHTS

      8.01 Termination by Owner.

      8.01.1 Each of the following shall be an event of default by Manager
("Manager Event of Default"):

            (a)   Manager shall fail to keep, observe or perform any material
                  covenant, agreement, term or provision of this Agreement to be
                  kept, observed or performed by Manager, and such default shall
                  continue for a period of thirty (30) days after notice thereof
                  by Owner to Manager; or

            (b)   if Manager shall apply for or consent to the appointment of a
                  receiver, trustee or liquidator of Manager or of all or a
                  substantial part of its assets, file a voluntary petition in
                  bankruptcy, or admit in writing its inability to pay its debts
                  as they come due, make a general assignment for the benefit of
                  creditors, file a petition or an answer seeking reorganization
                  or arrangement with creditors or take advantage of any
                  insolvency law, or file an answer admitting the material
                  allegations of a petition filed against Manager in any
                  bankruptcy, reorganization or insolvency proceeding, or if an
                  order, judgment or decree shall be entered by any court of
                  competent jurisdiction, on the application of a creditor,
                  adjudicating Manager a bankrupt or insolvent or approving a
                  petition seeking reorganization of Manager or appointing a
                  receiver, trustee or liquidator of Manager or of all or a
                  substantial part of its assets, and such order, judgment or
                  decree shall continue unstayed and in effect for any period of
                  sixty (60) consecutive days.

            8.01.2 Each of the following shall be an event permitting
      termination of this Agreement by Owner ("Owner Termination Event"):

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            (a)   if a right of termination on the part of Owner shall have
                  arisen under Section 10.01;

            (b)   if a right of termination on the part of Owner shall have
                  arisen under Section 10.02;

            (c)   if, because of Owner's monetary default under a Permitted
                  Mortgage, a Mortgagee has acquired title to the Hotel, whether
                  by foreclosure, taking a deed in lieu of foreclosure, or
                  otherwise;

            (d)   if, because of Manager's Grossly Negligent or Willful Acts,
                  Owner is required by a Mortgagee to terminate this Agreement
                  in accordance with a Permitted Mortgage;

            (e)   if a right of termination on the part of Owner shall have
                  arisen under Section 9.03.2; or

            (f)   if Manager shall at any time during the Term own more than 35%
                  of the shares of FelCor Lodging Trust Incorporated ("FelCor"),
                  or if Manager revenues and net income as of and during the
                  one-year period following the date of this Agreement which are
                  attributable to the management of hotels not owned by Owner or
                  its Affiliates do not equal at least 10% of all of Manager's
                  revenues and net income attributable to the management of
                  hotels at such time and during such period.

            8.01.3 If a Manager Event of Default or Owner Termination Event
      occurs, then Owner shall have the right to terminate this Agreement upon
      written notice to Manager given at any time following the occurrence of
      such event, or if a period of grace is provided, then following the
      expiration of the applicable grace period, and while such event shall be
      continuing, and this Agreement shall terminate upon the date specified
      therein, which date shall be not less than thirty (30) days nor more than
      seventy-five (75) days after the date of the giving of such notice. As a
      condition of any termination of this Agreement by Owner under this Section
      8.01.3, Owner shall pay to Manager, on or before the effective date of
      such termination all amounts due Manager and its Affiliates under this
      Agreement for the period of time prior to the date of termination, but
      Owner shall not be required to pay any penalty or termination fee upon
      such termination.

      8.02 Termination by Manager.

            8.02.1 Each of the following shall be an event of default by Owner
      ("Owner Event of Default"):

            (a)   if Owner shall fail to provide funds to be deposited in the
                  Hotel Accounts in accordance with Section 7.03 within ten (10)
                  days after Manager's request for such additional funds under
                  Section 7.03 and such failure continues for an additional ten
                  (10) day period after written notice by Manager to Owner that
                  such funds have not yet been received;

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            (b)   if Owner shall fail to keep, observe or perform any other
                  material covenant, agreement, term or provision of this
                  Agreement to be kept, observed or performed by Owner, and such
                  default shall continue for a period of thirty (30) days after
                  notice thereof by Manager to Owner;

            (c)   if Owner shall apply for or consent to the appointment of a
                  receiver, trustee or liquidator of Owner or of all or a
                  substantial part of its assets, file a voluntary petition in
                  bankruptcy or admit in writing its inability to pay its debts
                  as they come due, make a general assignment for the benefit of
                  creditors, file a petition or an answer seeking reorganization
                  or arrangement with creditors or to take advantage of any
                  insolvency law, or file an answer admitting the material
                  allegations of a petition filed against Owner in any
                  bankruptcy, reorganization or insolvency proceeding, or if an
                  order, judgment or decree shall be entered by any court of
                  competent jurisdiction, on the application of a creditor,
                  adjudicating Owner a bankrupt or insolvent or approving a
                  petition seeking reorganization of Owner or appointing a
                  receiver, trustee or liquidator of Owner or of all or a
                  substantial part of the assets of Owner, and such order,
                  judgment or decree shall continue unstayed and in effect for
                  any period of sixty (60) consecutive days; or

            (d)   if Owner shall be in default under the License Agreement and
                  the License Agreement shall have been terminated.

            8.02.2 Each of the following shall be an event permitting
      termination of this Agreement by Manager ("Manager Termination Event"):

            (a)   if because of a default under the Ground Lease (if any) or the
                  Mortgage, the Ground Lease shall be terminated or the Mortgage
                  shall be foreclosed (or the Hotel sold in lieu of
                  foreclosure);

            (b)   if for any reason not caused by the act or omission of
                  Manager, any required licenses for the sale of alcoholic
                  beverages are at any time suspended, terminated or revoked and
                  such suspension, termination or revocation shall continue for
                  a period of sixty (60) consecutive days, or if, for any reason
                  not caused by the act or omission of Manager, the right to
                  serve alcoholic beverages in the Hotel shall otherwise be
                  suspended for a period of sixty (60) consecutive days;

            (c)   if any event shall occur or state of facts found to exist,
                  with respect to the ownership or management of the Hotel,
                  which in Manager's opinion, would adversely affect any gaming
                  license or application for gaming license of Manager or its
                  Affiliates anywhere in the world or the current status of
                  Manager or any of its Affiliates with any gaming commission,
                  board or similar governmental or regulatory agency;

            (d)   if a right of termination on the part of Manager shall have
                  arisen under Section 10.01;

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            (e)   if a right of termination on the part of Manager shall have
                  arisen under Section 10.02; or

            (f)   if the License Agreement shall have been terminated for any
                  reason other than a default by Owner thereunder.

            8.02.3 If an Owner Event of Default or Manager Termination Event
      occurs, then Manager shall have the right to terminate this Agreement upon
      written notice to Owner given at any time following the occurrence of any
      such event, or if a period of grace is provided, then following the
      expiration of the applicable period, and while such event shall be
      continuing, and this Agreement shall terminate upon the date specified
      therein, which date shall be not less than thirty (30) days nor more than
      seventy-five (75) days after the date of the giving of such notice;
      provided that notice of termination based upon a termination of the
      License Agreement may be sent concurrently with or any time after any
      notice of termination of the License Agreement.

      8.03 Curing Defaults. Any default by Manager under Paragraph 8.01.1(a) or
Owner under Paragraph 8.02.1(b), as the case may be, which is susceptible of
being cured, shall not constitute a basis of termination if the nature of such
default shall not permit it to be cured within the grace period allotted,
provided that within such grace period either Manager or Owner shall have
commenced to cure such default and shall proceed to complete the same with
reasonable diligence.

      8.04 Effect of Termination. The termination of this Agreement under this
Article VIII shall not affect the rights of the terminating party with respect
to any damages it has suffered as a result of any breach of this Agreement, nor
shall it affect the rights of either party with respect to liability or claims
accrued, or arising out of events occurring, prior to the date of termination.

      8.05 Remedies. If this Agreement is terminated due to an Owner Event of
Default, Manager shall be entitled to all damages incurred by Manager as a
result of such default, including damages resulting from early termination of
the Agreement. If a Manager Event of Default or an Owner Event of Default
occurs, neither the right of termination nor the right to sue for damages nor
any other remedy available to either party hereunder shall be exclusive of any
other remedy given hereunder or now or hereafter existing at law or in equity.

      8.06 Indemnification Regarding Future Business. Owner shall indemnify and
hold Manager and its Affiliates harmless from all costs, expenses, claims and
liabilities, including reasonable attorneys' fees, arising or resulting from the
failure of Owner, following the expiration or earlier termination (for whatever
cause) of this Agreement, to (i) provide all of the services contracted for
within the scope and terms of this Agreement in connection with the business
booked in the ordinary course of business at any time prior to the date of such
expiration or termination (other than any such services which can only be
provided by hotels operating under the "Hilton" name to the extent Manager is
able, using procedures agreed upon by Owner and Manager, to limit any such
costs, expenses, claims and liabilities, whether by notice to the parties
contracting for such services or otherwise), (ii) honor and fulfill all
obligations of Owner under any contracts or leases entered into in the ordinary
course of business by Manager on behalf of Owner within the scope and terms of
this Agreement prior to such expiration or termination, or (iii) honor all
purchase orders and to pay all payables arising out of the operation by Manager
of the Hotel in the ordinary course of business in accordance with the
provisions of this Agreement prior to

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such expiration or termination, or (iv) pay all Compensation due to Hotel
Personnel; or to make all contributions or otherwise meet its obligations under
or with respect to all employee benefit plans as required under Subsection
4.05.2 or 4.05.6.

      8.07 Preservation of Books and Records. In the event of the expiration or
earlier termination of this Agreement, Owner shall preserve all books and
records, files and correspondence remaining at the Hotel in accordance with
Manager's record retention guide then in effect after the expiration or
termination of this Agreement, and Owner shall provide access to Manager, and
its representatives, to such books, records, correspondence and files at all
reasonable times.

      8.08 Extension Date of Termination.

            8.08.1 Except as set forth in this Section 8.08, notwithstanding any
      contrary provision of this Agreement, the date of termination of this
      Agreement, other than upon expiration pursuant to Section 2.01, shall be
      extended so that the date of termination after notice of termination is
      given to or by Manager shall be on a date which is not earlier than
      fifteen (15) days plus the number of days, if any, Manager is required to
      give its employees advance notice of termination of employment as required
      by the Worker Adjustment and Retraining Act, 29 U.S.C. Section 2101 et.
      seq., as hereafter amended, or any similar federal or state statute ("WARN
      Act").

            8.08.2 Owner may nullify the effect of Subsection 8.08.1 by delivery
      to Manager of an indemnification of Manager, in form and substance
      reasonably satisfactory to Manager, against any and all claims, demands,
      actions (including enforcement proceedings initiated by any government
      agency), penalties, suits and liabilities (including the cost of defense,
      settlement, appeal, reasonable attorneys' fees and disbursements and any
      other amounts that Manager is required to pay to third parties) because
      Manager's employees do not receive advance notice of termination of
      employment as required by the WARN Act.

            8.08.3 Manager may nullify the effect of Subsection 8.08.1 in the
      event of a termination of this Agreement by Manager as a result of an
      Owner Event of Default.

      8.09 Actions To Be Taken On Termination. Upon termination of this
Agreement for any reason, the following shall be applicable (in addition, in
case of a termination pursuant to Section 8.01 or 8.02, to the rights of the
non-defaulting party to pursue any remedies provided under this Agreement):

            (a)   Any and all expenses arising as a result of such termination
                  or as a result of the cessation of Hotel operations (including
                  expenses arising under this Section 8.09) shall be for the
                  sole account of Owner, and Owner shall reimburse Manager
                  immediately on receipt of any invoice or invoices from Manager
                  for any expenses, including those arising from or in
                  connection with severing the employment of Hotel Personnel
                  (with severance benefits calculated according to policies
                  applicable generally to employees of Managed Hotels) incurred
                  by Manager in the course of effecting the termination of this
                  Agreement or the cessation of Hotel operations.

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            (b)   Within fifteen (15) days after termination, Owner shall pay
                  Manager all Management Fees, reimbursable expenses and other
                  amounts due Manager under the terms of this Agreement through
                  the termination date. This obligation is unconditional and
                  shall survive the termination of this Agreement, and Owner
                  shall not have or exercise any rights of setoff, except to the
                  extent of any outstanding and undisputed payments owed to
                  Owner by Manager under this Agreement. In addition, Manager
                  shall have the right to pay itself the foregoing Management
                  Fees, reimbursable expenses and other amounts due Manager
                  under the terms of this Agreement out of any available funds
                  in the Hotel Accounts.

            (c)   Manager shall peacefully vacate and surrender the Hotel to
                  Owner on the effective date of such termination.

            (d)   Manager shall assign and transfer to Owner:

                  (i)   all of Owner's books and records, contracts, leases and
                        other documents respecting the Hotel that are not
                        Manager's proprietary information and are in the custody
                        and control of Manager, including those provided for in
                        Section 7.04 (but subject to Manager's rights under the
                        last sentence of Section 7.04); and

                  (ii)  all of Manager's right, title and interest in and to all
                        liquor, restaurant and any other licenses and permits,
                        if any, held by Manager in connection with the operation
                        of the Hotel; but only to the extent such assignment or
                        transfer is permitted under the law of the state in
                        which the Hotel is located; provided, however, that if
                        Manager has expended any of its own funds in the
                        acquisition of licenses or permits, Owner shall
                        reimburse Manager therefor.

            (e)   Owner shall honor all business confirmed for the Hotel with
                  reservations dates after the effective date of termination.

            (f)   Manager shall assign to Owner its interest (if any) in, and
                  Owner shall confirm in writing its continuing responsibility
                  for, all obligations and liabilities relating to, any and all
                  contracts (including collective bargaining agreements and
                  pension plans, leases, licenses or concession agreements and
                  maintenance and service contracts) in effect with respect to
                  the Hotel as of the date of termination of this Agreement.

            (g)   Manager shall have the right to remove from the Hotel, on or
                  before the effective date of termination, the Intellectual
                  Property. Under no circumstances shall Owner copy, reproduce
                  or retain any of these materials.

            (h)   As of the effective date of termination, Manager shall remove
                  the Manager Software from the Hotel and shall disconnect the
                  Hotel from the related software applications. Manager shall
                  provide reasonable assistance to Owner in facilitating

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                  the orderly transfer of Owner's records and data contained in
                  the Manager Software. To the extent necessary to facilitate
                  the orderly transfer of Owner's records and data, and to the
                  extent permitted by the terms of licenses with software
                  producers, Owner and Manager shall execute Manager's current
                  form of software license agreement to provide for the use by
                  Owner of appropriate Manager Software (excluding, in any
                  event, the reservations system) for a reasonable period of
                  time (to be mutually agreed to by Owner and Manager) following
                  the effective date of termination.

      8.10 Performance Termination.

            8.10.1 Performance Test. Beginning at the end of the second full
      Operating Year after the Commencement Date, and continuing for the
      remainder of the Term, Owner shall have the right to terminate this
      Agreement if, for any two consecutive Operating Years, Gross Operating
      Profit (as defined below) for each such Operating Year shall be less than
      ninety percent (90%) of the budgeted Gross Operating Profit as set forth
      in the Operating Budget for such Operating Year.

      Owner may exercise such right to terminate this Agreement, without
      incurring a termination fee or penalty, by giving written notice to
      Manager within ninety (90) days after Owner's receipt of the annual
      financial statement for such Operating Year pursuant to Section 7.05. Such
      performance termination notice shall specify the effective date of such
      termination, which shall not be less than ninety (90) days from the date
      of such performance termination notice.

      "Gross Operating Profit" shall mean the "Income After Undistributed
      Operating Expenses" of the Hotel for each Operating Year as such term is
      referred to and determined in accordance with the Uniform System of
      Accounts on an accrual basis in accordance with generally accepted
      accounting principles consistently applied.

            8.10.2 Fund-Up Cure. In the event that Owner is entitled to provide,
      and does provide, Manager with timely notice of termination of this
      Agreement pursuant to this Section, Manager may elect, but shall not be
      obligated, to nullify such termination notice and the termination of this
      Agreement based thereon, by funding to Owner, within thirty (30) days
      after receipt of Owner's performance termination notice, an amount equal
      to the amount by which the actual Gross Operating Profit for either of the
      applicable Operating Years was less than the budgeted Gross Operating
      Profit as set forth in the Operating Budget for such Operating Year. If
      Manager exercises this cure right, Owner's notice of termination of this
      Agreement pursuant to this Section shall be nullified and of no force and
      effect, and this Agreement shall remain in full force and effect and the
      Operating Year in question shall be deemed not to be an Operating Year in
      which there occurred a shortfall in Gross Operating Profit which would
      give rise to Owner's termination right under this Section.

            8.10.3 Limit on Termination. Notwithstanding anything to the
      contrary contained herein, Owner's right to terminate this Agreement under
      this Section (and the amount of any shortfall to be paid by Manager in the
      event Manager exercises its cure right pursuant to Subsection 8.10.2)
      shall be eliminated, or reduced, as applicable, to the extent that the
      shortfall is

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      attributable to (i) force majeure events or (ii) increases (to the extent
      greater than attributable to increases in CPI) in real estate taxes and
      assessments, utility rates and/or premiums for insurance which Manager is
      responsible to obtain. Any disputes concerning the applicability of this
      Subsection 8.10.3 shall be resolved pursuant to the dispute resolution
      procedure described in Section 12.04, and the time period governing any
      Owner termination right or Manager cure right shall be extended for a
      reasonable period of time (not exceeding 180 days) pending such
      resolution.

      8.11 Liquidated Damages. If Manager terminates this Agreement pursuant to
Paragraph 8.02.1(b) because Owner does not comply with, or does not cooperate
with Manager so that Manager is able to comply with, a revision in the Operating
Manual, Owner shall pay, in addition to any amounts then owing to Manager
pursuant to the terms of this Agreement, as liquidated damages and not as a
penalty, an amount equal to the monthly average Management Fee payable by Owner
to Manager for the preceding twelve (12) months (or, if this Agreement shall
have been in effect for a period less than twelve (12) months, the monthly
average Management Fee for all months this Agreement shall have been in effect)
multiplied by the lesser of (a) thirty-six (36) and (b) the number of months
remaining in the Term.

                                   ARTICLE IX
                                  TITLE MATTERS

      9.01 Title to Hotel. Owner covenants that, as of the date hereof, it has
either good and marketable fee title to, or a valid and subsisting leasehold
estate in, the Land, and that it will continue to have good and marketable fee
simple title or a valid and subsisting leasehold estate in and to the Hotel.
Owner further covenants that, subject to the terms and conditions of this
Article IX, throughout the Term of this Agreement it shall maintain full
ownership in such fee interest or leasehold estate in and to the Hotel, and good
title to the FF&E and the Operating Equipment.

      9.02 Assignment by Manager.

            9.02.1 Prohibited Assignments. Except as provided in the following
      Subsection 9.02.2, Manager shall not assign this Agreement without the
      prior written consent of Owner. The disposition by Manager of its
      controlling interest in any Affiliate to which it has previously assigned
      this Agreement, shall be deemed to be a prohibited assignment hereunder
      requiring the prior written consent of Owner. It is understood and agreed
      that any consent granted by Owner to any such assignment shall not be
      deemed a waiver of the covenant herein contained against assignment in any
      subsequent case. Except as otherwise provided in Subsection 9.02.2, no
      assignment of this Agreement shall operate to release Manager from any of
      its obligations under this Agreement.

            9.02.2 Permitted Assignments. Manager, without the consent of Owner,
      shall have the right to assign this Agreement to any Affiliate of Manager,
      or to any entity which may become an Affiliate as a result of a related
      and substantially concurrent transaction, or to any successor or assign of
      Manager which may result from any merger, consolidation or reorganization
      involving Manager, or to a corporation or other entity which shall acquire
      all or substantially all of the business and assets of Manager. Upon
      execution of any assignment as

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      aforesaid under this Subsection 9.02.2, or with Owner's consent under
      Subsection 9.02.1, notice thereof in the form of a duplicate original of
      such assignment shall be delivered to Owner forthwith, and thereupon,
      except in the case of an assignment to an Affiliate of Manager, Manager
      shall be released of all of its covenants and liabilities hereunder, other
      than liabilities accruing or based upon events occurring prior to the date
      of the delivery of such duplicate original to Owner; provided, however,
      that such release shall be contingent upon the delivery to Owner of an
      appropriate instrument whereby the assignee shall assume all of the
      obligations of Manager hereunder.

      9.03 Sale, Lease or Assignment by Owner.

            9.03.1 Prohibited Transfers. Owner agrees that, without the consent
      of Manager, it will not sell, lease or otherwise transfer or convey the
      Hotel, or any part thereof, or assign this Agreement, or otherwise
      transfer any of its rights hereunder, whether to a transferee of the Hotel
      or otherwise, except as provided in this Section 9.03; such prohibition
      shall apply, without limitation, to any sale and leaseback transaction.

            9.03.2 Effect of Sale or Lease. In the event Owner sells, leases,
      assigns or otherwise transfers or conveys the Hotel to an unrelated third
      party purchaser in a bona fide arm's length transaction, Owner shall have
      the right, at its sole option, to terminate this Agreement by giving
      ninety (90) days' prior written notice (a "Sale Termination Notice") to
      Manager. The Sale Termination Notice shall set forth an estimate of the
      effective termination date of this Agreement, which date shall not be less
      than ninety (90) days subsequent to the date of the Sale Termination
      Notice. The actual effective date of termination shall be on the actual
      date of closing of the sale, lease, assignment or other transfer (the
      "Closing") which was the subject of the Sale Termination Notice,
      regardless of the estimate provided in the Sale Termination Notice.
      Accordingly, Owner shall, upon reasonable notice, have the right to extend
      the effective date of such termination for a reasonable period of time
      based on delays in the date of Closing, provided that Owner shall pay all
      actual costs reasonably incurred by Manager in postponing the
      effectiveness of such termination.

            9.03.3 Permitted Assignments. Owner, without the consent of Manager,
      shall have the right to assign this Agreement to any Affiliate of Owner,
      or to any successor or assign of Owner which may result from any merger,
      consolidation or reorganization involving Owner. Upon execution of any
      assignment as aforesaid under this Subsection 9.03.3, notice thereof in
      the form of a duplicate original of such assignment shall be delivered to
      Manager forthwith, and thereupon, except in the case of an assignment to
      an Affiliate of Owner, Owner shall be released of all of its covenants and
      liabilities hereunder, other than liabilities accruing or based upon
      events occurring prior to the date of the delivery of such duplicate
      original to Manager; provided, however, that such release shall be
      contingent upon the delivery to Manager of an appropriate instrument
      whereby the assignee shall assume all of the obligations of Owner
      hereunder.

      9.04 Permitted Mortgages. Owner shall not grant any mortgage, deed of
trust or trust deed, pledge or encumbrance of or other security interest in the
Hotel or any part thereof or interest therein (a "Mortgage") other than a
Permitted Mortgage (as hereinafter defined). As used herein, the holder of or
trustee under any such Mortgage, and the holder of any indebtedness secured
thereby, are herein

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collectively referred to as the "Mortgagee". As used herein, a "Permitted
Mortgage" shall mean any Mortgage which is listed or described in Exhibit II
attached hereto or which shall hereafter be given; provided that the (i)
principal amount of indebtedness secured by such Mortgage as it relates to the
Hotel when aggregated with all other indebtedness secured by the liens against
the Hotel is not in excess of seventy-five percent (75%) of the then appraised
value of the Hotel as determined by Mortgagee in connection with its
underwriting of the loan secured by such Mortgage, (ii) a copy of the Mortgage
and other loan documents shall be delivered to Manager upon execution thereof,
(iii) the related financing is obtained from an Institutional Lender (as
hereinafter defined) which is not an Affiliate of Owner, and (iv) Mortgagee
enters into a Subordination, Attornment and Non-Disturbance Agreement with
Manager in a form and in substance reasonably satisfactory to Manager. The
foregoing shall be applicable both to original financing and to any refinancing,
and this Agreement shall in any and all events survive the foreclosure of any
such Mortgage, or the granting of a deed in lieu thereof, and shall be binding
upon the purchaser at any such foreclosure, or the grantee of a deed in lieu
thereof, and their respective successors and assigns, except any such
third-party purchaser at foreclosure or any third-party grantee of a deed in
lieu which in either case is unaffiliated with such lender. The term
"Institutional Lender" shall mean a commercial bank, a trust company, a savings
bank, a savings and loan association, an insurance company, a college or
university, a pension fund of a corporation whose shares are listed on a
recognized national stock exchange, or a real estate investment trust whose
shares are listed on such an exchange, in each case having assets of no less
than $500,000,000.00 (which amount is based upon the purchasing power of the
United States dollar as of the Commencement Date and shall be annually
increased, if necessary, on each anniversary of the Commencement Date to reflect
an amount which shall have the equivalent purchasing power to said
$500,000,000.00) and which is regularly engaged in the business of making
commercial loans.

      9.05 Amendments to Ground Lease or Hotel Lease. Owner shall not pursue any
amendments or modifications of the Ground Lease, if any, or the Hotel Lease if
such amendment or modification would affect Manager's rights, obligations or
liabilities under this Agreement, without the prior written approval of Manager,
such approval of Manager not to be unreasonably withheld; provided, however,
that a copy of any amendment, modification or other related documents shall be
delivered to Manager upon execution thereof.

      9.06 Successors and Assigns. Subject to the foregoing, this Agreement
shall inure to the benefit of and be binding upon the parties hereto, their
respective heirs, legal representatives, successors and assigns, and with
respect to Owner, the phrase "successors and assigns" shall include purchasers
and lessees, or sublessees, of Owner's interest in the Hotel.

      9.07 Public Offering or Transfer. Neither any transfer of publicly traded
stock nor any public offering of equity ownership interests (whether partnership
interest, corporate stock, shares or otherwise) in either party or by its parent
company or other owner of such party, or entity that itself or through its
ownership of legal or beneficial interests in one or more other entities holds
legal or beneficial interests or voting power in such an owner shall be deemed
to be a sale, lease or assignment under the provisions of this Article IX.

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                                   ARTICLE X
                      DAMAGE OR DESTRUCTION; EMINENT DOMAIN

      10.01 Damage or Destruction. If the Hotel shall be substantially damaged
by fire or other casualty, and the Mortgagee does not make sufficient proceeds
of insurance available to Owner to permit Owner to rebuild and restore the Hotel
to a condition which permits the continued operation of the Hotel by Manager as
contemplated by this Agreement, then Owner, by written notice to Manager given
within sixty (60) days after the occurrence of such event, shall have the right
to terminate this Agreement on the basis that Owner does not elect to rebuild or
restore the Hotel, and neither party shall have any further obligation to the
other party hereunder, except with respect to liability accruing, or based upon
events occurring, prior to or concurrently with the effective date of such
termination. For the purposes hereof, the Hotel shall be deemed to have been
substantially damaged if the estimated length of time required to restore the
Hotel substantially to its condition and character just prior to the occurrence
of such casualty shall be in excess of one hundred eighty (180) days, as
indicated by an architect's certificate or other evidence reasonably
satisfactory to Manager. If this Agreement shall not terminate in the event of
damage to the Hotel, either because (i) the damage does not amount to
substantial damage as described above, or (ii) notwithstanding substantial
damage to the Hotel, Owner shall elect to restore the Hotel, then Owner shall
proceed with all due diligence to commence and complete the restoration of the
Hotel to its condition and character just prior to the occurrence of such
casualty, and if such restoration is not commenced within sixty (60) days of the
occurrence of the casualty, or completed within two (2) years, following the
occurrence of the casualty, then Manager shall have the right to terminate the
Agreement by notice to Owner as provided in Section 8.02.

      10.02 Eminent Domain. If all of the Hotel, or such substantial portion
thereof as to make it infeasible, in the reasonable opinion of Owner, to restore
and continue to operate the remaining portion for the purposes contemplated
hereby, shall be taken through the exercise, or by agreement in lieu of the
exercise, of the power of eminent domain, then upon the date that Owner shall be
required to surrender possession of the Hotel, or a portion thereof, this
Agreement shall terminate and neither party shall have any further obligation to
the other party hereunder, except with respect to liabilities accruing, or based
upon events occurring, prior to or concurrently with the effective date of such
termination. In the event a substantial portion of the Hotel is taken, but
Mortgagee fails or refuses to make available to Owner sufficient proceeds of
such eminent domain proceedings in order to permit Owner to make appropriate
alterations, restorations or repairs to the remainder of the Hotel, so that the
Hotel would continue to be operable for the purposes herein contemplated, then
Owner shall have the right to terminate this Agreement upon written notice to
Manager and, upon the date that Owner shall be required to surrender possession
of the Hotel to the condemning authority, this Agreement shall terminate and
neither party shall have any further obligation to the other party hereunder,
except with respect to liabilities accruing, or based upon events occurring,
prior to the effective date of such termination. If such taking of a portion of
the Hotel shall not make it infeasible, in the reasonable opinion of Owner, to
restore and continue to operate the remaining portion thereof for the purpose
herein contemplated, then this Agreement shall not terminate, and Owner shall
proceed with all due diligence to repair any damage to the Hotel, or to alter or
modify the Hotel so as to render it a complete architectural unit which can be
operated as a hotel of substantially the same type and class as before; and if
such restoration is not completed within two (2) years following the taking,
then Manager shall have the right to terminate this Agreement by notice to Owner
as provided in Section 8.02.

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Manager, with the full cooperation of Owner, shall have the right to file a
claim with the appropriate authorities for the loss of Management Fee income for
the remainder of the Term because of such taking.

                                   ARTICLE XI
                              INTELLECTUAL PROPERTY

      11.01 Intellectual Property. Owner acknowledges that Manager or one of its
Affiliates is or will become the owner or licensee of certain intellectual
property including its (i) software in use at one or more Other Managed Hotels
and all source and object code versions thereof and all related documentation,
flow charts, user manuals, listing, and service/operator manuals and any
enhancements, modifications or substitutions thereof ("Manager Software"), and
(ii) trade secrets, know-how and other proprietary information relating to the
operating methods, procedures and policies distinctive to Other Managed Hotels
(collectively "Intellectual Property"). Manager shall utilize the Intellectual
Property in connection with the operation of the Hotel to the extent that it
deems appropriate for the purpose of carrying out its agreements and obligations
hereunder, but such use shall be strictly on a non-exclusive basis, and neither
such use nor anything contained in this Agreement shall confer any proprietary
license or other rights in the Intellectual Property upon Owner or any third
parties, provided it is given prompt notice, reasonable assistance and sole
authority to defend or settle the claim. Manager shall indemnify, defend and
hold harmless Owner from and against any and all claims, costs, expenses,
liabilities, charges and fees directly incurred by Owner to the extent arising
from any copyright or patent infringement claim by any third party and relating
to the use by Manager of the Manager Software and Intellectual Property.

                                  ARTICLE XII
                               GENERAL PROVISIONS

      12.01 Purchases from Manager and Manager's Affiliates. In purchasing
goods, supplies, equipment and services for the Hotel, including Operating
Supplies, Operating Equipment, insurance and long distance telephone services,
Manager (i) unless otherwise directed by Owner in writing, may utilize
purchasing procurement services of Affiliates of Manager and/or other group
buying techniques made available by Manager to other hotels managed and/or
franchised by Manager and its Affiliates, provided that the cost thereof shall
be generally no less favorable to Owner than that which would be available
through unrelated third party vendors in an arms-length transaction; or (ii) if
so directed by Owner in writing, utilize such other supplier or provider as may
be designated by Owner (provided such other supplier or provider, and such other
supplier's or provider's goods, supplies, equipment and services, comply with
the Operational Standards and, to the extent Owner or any Affiliate of Owner
receives and retains mark-ups, fees or other compensation from such other
supplier or provider, Owner shall, on a yearly basis, credit to the Hotel the
proportionate share of the pre-tax profits earned by Owner through such mark
ups, fees, or other compensation, after deducting all operating expenses and
capital costs attributable to utilizing such other supplier or provider). For
purposes of this Section 12.01, purchasing or procurement services provided by
an Affiliate of Manager shall be considered provided by Manager. In providing
such purchasing or procurement services, Manager may mark up its costs or
receive and retain a fee or other compensation from vendors and service
providers for its services in making the benefit of volume purchases available
to the Hotel or negotiating and implementing the arrangements with such vendors
or providers; provided, however, that (i) the total cost of goods and

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services (including such mark-up, fee or other compensation charged or retained
by Manager or its Affiliates) so provided to the Hotel by Manager shall be
generally no less favorable to Owner than that which would be available through
unrelated third party vendors in an arms-length transaction, and (ii) Manager
shall, on a yearly basis, remit to Owner the proportionate share of the pre-tax
profits earned by Manager through such mark-ups, fees, or other compensation,
after deducting all operating expenses and capital costs attributable to
providing such services. For purposes of calculating Owner's proportionate share
of such pre-tax profits, Manager shall use the number of available rooms at the
Hotel divided by the total number of available rooms in all hotels participating
in such services, or any other manner that reasonably approximates the
proportionate share of purchases made by the Hotel in relation to the total
purchases made by all hotels participating in Manager's purchasing services.

      12.02 Budgets and Forecasts. In preparing all budgets and forecasts to be
submitted to Owner hereunder, Manager shall base its estimates upon the most
recent and reliable information then available, taking into account the location
of the Hotel and its experience in other comparable hotels. Manager reserves the
right, and shall have the obligation, to update and revise any such budgets and
forecasts from time to time during the periods covered thereby to reflect
variables and events not reasonably within the control of Manager. All such
updatings and revisions of the Capital Renewals Budget and the Operating Budget
(to the extent any such changes in the Operating Budget indicate shortfalls
which would necessitate a need for additional working capital to be provided by
Owner) shall be submitted, together with reasonable explanations of the reasons
for such changes, to Owner for its approval. Owner agrees that it shall promptly
reply to any such submissions giving its approval or stating the grounds on
which it is withholding its approval.

      12.03 Indemnities.

            12.03.1 Indemnification to Manager. Subject to Subsections 12.03.2
      and 12.03.3, Owner shall indemnify, defend and hold Manager harmless from
      and against any and all claims, demands, actions (including enforcement
      proceedings initiated by any government agency), penalties, suits and
      liabilities (including the cost of defense, settlement, appeal, reasonable
      attorneys' fees and disbursements and any other amounts that Manager is
      required to pay to third parties in connection with such matters, but
      excluding consequential damages sustained by Manager) that Manager may
      have alleged against it, incur, become responsible for or pay out for any
      reason related to the design, construction, development, ownership or
      operation of the Hotel including (i) the employment and discharge of Hotel
      Personnel (including alleged discrimination in connection therewith) and
      matters pertaining to the accessibility of the Hotel to persons with
      disabilities; (ii) an Owner Event of Default; (iii) contamination of or
      any adverse effects on the environment with respect to the Hotel; (iv) any
      violation of any Legal Requirements; (v) injury or damage to persons or
      property occurring in or about the Hotel or the Land on which the Hotel is
      located; (vi) breach by Owner of any of its warranties or representations
      set forth in this Agreement; (vii) claims arising under contracts or
      agreements entered into in accordance with the terms of this Agreement; or
      (viii) acts or omissions (whether negligent or otherwise) of Manager in
      the performance of services under this Agreement, or in connection with
      winding up such services on termination or expiration of this Agreement;
      provided, however, that in no event shall Owner's indemnification
      obligations under this Subsection 12.03.1 extend to (a) Manager's Grossly
      Negligent or Willful Acts, (b) a Manager Event of Default or (c) a breach
      by Manager of any of its warranties or representations under this
      Agreement.

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            12.03.2 Indemnification To Owner. Subject to Subsection 12.03.3,
      Manager shall indemnify, defend and hold Owner harmless from and against
      any and all claims, demands, actions (including enforcement proceedings
      initiated by any government agency), penalties, suits and liabilities
      (including the cost of defense, settlement, appeal, reasonable attorneys'
      fees and disbursements and any other amounts that Owner is required to pay
      to third parties in connection with such matters, but excluding
      consequential damages sustained by Owner) that Owner may have alleged
      against it, incur, become responsible for or pay out by reason or to the
      extent caused by (i) Manager's Grossly Negligent or Willful Acts, (ii) a
      Manager Event of Default or (iii) a breach by Manager of any of its
      warranties or representations under this Agreement.

            12.03.3 Effect of Settlements; Insurance. In no event shall the
      settlement by either party in good faith of any claim brought by a third
      party (including Hotel Personnel) in connection with the ownership or
      operation of the Hotel be deemed to create any presumption of the validity
      of the claim, nor shall any such settlement be deemed to create any
      presumption that the acts or omissions giving rise to such claim
      constituted Manager's Grossly Negligent or Willful Acts or a Manager Event
      of Default or a breach of any of Manager's warranties and representations
      under this Agreement. Notwithstanding any contrary provision of this
      Section 12.03, Owner and Manager mutually agree for the benefit of each
      other to look first to the appropriate insurance coverages in effect
      pursuant to this Agreement in the event any claim or liability occurs as a
      result of injury to person or damage to property, regardless of the cause
      of such claim or liability.

            12.03.4 Indemnified Parties. The indemnities contained in this
      Section 12.03 shall run to the benefit of both Manager and Owner and their
      respective Affiliates and the directors, partners, members, managers,
      officers and employees of Manager and Owner and their respective
      Affiliates.

            12.03.5 Expenses Pending Determination. Pending the resolution of
      any question as to whether Manager or any of its Affiliates or any of its
      officers or employees are entitled to indemnification under this Section
      12.03, Manager shall be authorized to pay from the Hotel Accounts all
      expenses of defending or handling any matter referred to in this Section
      12.03, provided that Manager will reimburse Owner for all such expenses to
      the extent that it is ultimately determined that such entities or persons
      are not entitled to indemnification hereunder.

            12.03.6 Survival. The provisions of Section 12.03 shall survive any
      cancellation, termination or expiration of this Agreement and shall remain
      in full force and effect until such time as the applicable statute of
      limitation shall cut off all demands, claims, actions, damages, losses,
      liabilities or expenses which are the subject of this Section 12.03.

            12.03.7 Notice. Promptly after receipt by an indemnified party under
      Subsection 12.03.1 or 12.03.2 above of notice of the commencement of any
      action, such indemnified party shall, if a claim in respect thereof is to
      be made against the indemnifying party under Subsection 12.03.1 or 12.03.2
      above, notify the indemnifying party in writing of the commencement
      thereof; but the omission or delay of such notice shall not relieve the
      indemnifying party from any liability it may have to the indemnified party
      under

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      Subsection 12.03.1 or 12.03.2 above except to the extent the indemnifying
      party is prejudiced as a result of such omission or delay.

      12.04 Dispute Resolution. Any controversy, dispute or claim arising out of
or relating to this Agreement or the performance, enforcement, breach,
termination or validity thereof, including the determination of the scope of
this Agreement to arbitrate, shall be determined by arbitration, and not
litigation, in accordance with the terms of this Section 12.04 as set forth in
Schedule "A" attached hereto. Disputes with respect to financial matters shall
be resolved in accordance with Paragraph 2 of Schedule "A", and disputes with
respect to all other matters shall be resolved in accordance with Paragraph 3 of
Schedule "A".

      12.05 Sale of Securities. In the event Owner, or any person controlling
Owner (a "Controlling Person") shall, at any time or from time to time, sell or
offer to sell, any securities issued by Owner through the medium of any
prospectus or otherwise, it shall do so only in compliance with all applicable
federal and state securities laws, and shall clearly disclose to all purchasers
and offerees that (i) neither Manager nor any of its Affiliates or their
respective officers, directors, agents or employees shall in any way be deemed
an issuer or underwriter of said securities, and (ii) Manager or its Affiliates
and such officers, directors, agents and employees have not assumed and shall
not have any liability whatsoever arising out of or relating to the sale of, or
offer to sell, such securities, including, but not limited to, any liability or
responsibility for any financial statements, prospectuses or other financial
information contained in any prospectus or similar written or oral
communication. Owner agrees to indemnify, defend and hold Manager and its
Affiliates and their respective officers, directors, agents and employees free
and harmless of and from any and all liabilities, costs, damages, claims or
expenses, including reasonable attorneys' fees, arising out of or related to the
sale or offer of any securities of Owner, except to the extent any claim related
thereto is based solely upon misleading financial or other information provided
by Manager to Owner in connection with the preparation of the disclosures
described in and contemplated pursuant to this Section 12.05. Such
indemnification shall be deemed a cure of any breach of the first sentence of
this Section 12.05. All terms used in this Section 12.05 shall have the same
meaning as in the Securities Act of 1933, as amended.

      12.06 License Agreement. The Hotel shall be operated by Manager under the
Embassy Suites brand name in accordance with the License Agreement. Owner shall
comply with all the terms and conditions of the License Agreement (specifically
including Owner's obligation to pay the fees, charges and contributions set
forth in the License Agreement) and keep the License Agreement in full force and
effect throughout the Term of this Agreement. Nothing in this Agreement shall be
interpreted in a manner which would relieve Owner of any of its obligations
under the License Agreement.

      12.07 No Restriction. Owner agrees that Manager and any of its successors
(by purchase, merger, acquisition or otherwise) have and shall retain the right
to own, have an ownership interest in, develop, operate, manage, license,
franchise, sell or rent other hotels or inns of any kind, or shared ownership
projects commonly known as vacation ownership or time-share ownership projects
(or similar real estate projects), under the "Embassy Suites" or other name and
wherever located except on the Land under this Agreement, and nothing contained
in this Agreement shall prohibit or limit Manager from engaging in any such
activities, which shall not give rise to any liability for claims relating to
unfair competition and/or breach of the implied covenant of good faith and fair
dealing.

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      12.08 Major Capital Improvements.

            12.08.1 Major Capital Improvements. Any program of capital
      improvements, involving an addition to the Hotel, or designed to
      substantially upgrade or change the nature or image of the Hotel (as
      opposed to a renovation or refurbishing which takes place as part of the
      normal or cyclical upkeep of the Hotel), shall be deemed to be a "Major
      Capital Improvement." Major Capital Improvements will be undertaken only
      at the request of Owner, whether on its own initiative or at the
      suggestion of Manager, and in any event shall be subject to the approval
      of Manager, and shall not be included in the Capital Renewals Budgets.

            12.08.2 Development. The development of any Major Capital
      Improvement shall be the responsibility of Owner and shall be paid for out
      of separate funds of Owner and not out of Hotel Accounts.

            12.08.3 Prohibition on Casinos. In no event shall a casino be added
      to the Hotel or built as a separate structure on any portion of the Land;
      nor shall any casino or gaming operations be conducted in the Hotel.

      12.09 Manager Programs, etc. The programs, systems and equipment utilized
by Manager in connection with the operation of Other Managed Hotels, including
those relating to security, life/safety, health, communications, and information
management, will from time to time be revised or upgraded and new programs,
systems and equipment will be developed. Accordingly, Manager, from time to
time, shall periodically publish its requirements and any specifications with
respect thereto by appropriate notice to each of the Managed Hotels. Owner
agrees that the Hotel shall comply with such requirements and specifications;
provided that such compliance, with respect to other than security, life/safety
and health related matters, shall be subject to the approved Operating Budget
(with such variances and modifications as contemplated by Subsection 4.02.4).

      12.10 Notices. Except as otherwise provided in this Agreement, all
notices, demands, requests, consents, approvals and other communications (herein
collectively called "Notices") required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing and
shall be addressed to the party to be so notified as follows:

If to Owner: __________

If to Manager: PROMUS HOTELS INC.
               9336 Civic Center Drive
               Beverly Hills, California 90210
               Attention: General Counsel

               And

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               EMBASSY SUITES __________

               Attn: General Manager

Notices may be (i) delivered by registered or certified mail, postage prepaid,
return receipt requested, (ii) sent by overnight air courier service, (iii) hand
delivered, or (iv) sent by telecopy, telegram, telex or other electronic written
communication; provided that in utilizing any form of delivery authorized by
clause (iv) of this sentence, receipt of such Notice is acknowledged by the
addressee through appropriate written communication and an identical Notice is
also sent concurrently by mail, overnight air courier service or hand delivery.
Notices will be effective on (i) the earlier of actual receipt and the seventh
business day after is sent by registered or certified mail, (ii) the day it is
delivered by an overnight air courier service or by hand delivery; or (iii) the
day it is sent by telecopy, telegram, telex or other electronic written
communication. Either party may at any time change the addresses for notices to
such party by delivering a Notice as aforesaid. The means of notice specified in
this Section 12.10 are the sole acceptable means of notice. Refusal to accept
delivery of Notice shall be deemed to constitute delivery of such Notice.

      12.11 Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing signed by the party sought to be
charged therewith, or by its duly authorized agent.

      12.12 Understandings and Agreements. This Agreement constitutes all of the
understandings and agreements of whatsoever nature or kind existing between the
parties with respect to Manager's management of the Hotel. Owner and Manager
each hereby acknowledge, represent and agree that in entering into this
Agreement, they are not relying upon any statement, representation or promise,
or the failure to make any statement, representation or promise, of any other
party (or of any officer, agent, employee, representative or attorney for any
other party), in executing this Agreement except as expressly stated herein.

      12.13 Headings. The Article, Section and Subsection headings contained
herein are for convenience and reference only and are not intended to define,
limit or describe the scope or intent of any provision of this Agreement.

      12.14 Consents. Except as specifically otherwise provided in this
Agreement, each party agrees that it will not unreasonably withhold any consent
or approval requested by the other party pursuant to the terms of the Agreement,
and that any such consent or approval shall not be unreasonably delayed or
qualified. Similarly, each party agrees that any provision of this Agreement
which permits such party to make requests of the other party, shall not be
construed to permit the making of unreasonable requests.

      12.15 Survival of Covenants. Any covenant, term or provision of this
Agreement which, in order to be effective, must survive the termination of this
Agreement, shall survive any such termination.

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      12.16 Third Parties. None of the obligations hereunder of either party
shall run to or be enforceable by any party other than the party to this
Agreement or by a party deriving rights hereunder as a result of an assignment
permitted pursuant to the terms hereof.

      12.17 Waivers. No failure by Manager or Owner to insist upon the strict
performances of any covenant, agreement, term or condition of this Agreement, or
to exercise any right or remedy consequent upon the breach thereof, shall
constitute a waiver of any such breach or any subsequent breach of such
covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.

      12.18 Partial Invalidity. Any provision of this Agreement prohibited by
law or by court decree in any locality or state shall be ineffective to the
extent of such prohibition without in any way invalidating or affecting the
remaining provisions of this Agreement, or without invalidating or affecting the
provisions of this Agreement within the states or localities where not
prohibited or otherwise invalidated by law or by court decree. Further, in the
event that any provision of this Agreement shall be held unenforceable by virtue
of its scope, but may be made enforceable by a limitation thereof, such
provision shall be deemed to be amended to the minimum extent necessary to
render it enforceable under the laws of the jurisdiction in which enforcement is
sought.

      12.19 Applicable Law. Owner and Manager acknowledge that the State of New
York has a well developed history of business decisional law and for that reason
agree that this Agreement shall be construed in accordance with and be governed
by the laws of the State of New York, without recourse to New York or any other
choice of law or conflicts of laws principles (unless the License Agreement
provides that it shall be construed in accordance with and be governed by the
laws of a different state, in which event this Agreement shall also be construed
in accordance with and be governed by the laws of such other state, without
recourse to any choice of law or conflicts of laws principles).

      12.20 Representations and Warranties .

            12.20.1 Representations and Warranties of Manager. Manager
      represents and warrants to Owner, as of the date hereof, as follows:

            (a)   Manager is duly organized, validly existing and in good
                  standing under the laws of the state of its organization, is
                  duly qualified to do business in the state in which the Hotel
                  is located, and has full power, authority and legal right to
                  execute, perform and timely observe all of the provisions of
                  this Agreement to be performed or observed by Manager.
                  Manager's execution, delivery and performance of this
                  Agreement have been duly authorized by all necessary action on
                  the part of Manager.

            (b)   This Agreement constitutes a valid and binding obligation of
                  Manager and does not and will not constitute a breach of or
                  default under the organizational and governing documents of
                  Manager or the terms, conditions or provisions of any

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                  law, order, rule, regulation, judgment, decree, agreement or
                  instrument to which Manager is a party or by which it or any
                  substantial portion of its assets is bound or affected.

            (c)   No approval of any third party that has not been obtained
                  prior to the execution of this Agreement is required for
                  Manager's execution and performance of this Agreement (other
                  than the licenses and permits to be obtained and maintained as
                  contemplated by Paragraph 4.06(f)).

            (d)   Manager, at its own expense, shall maintain in full force and
                  effect throughout the Term of this Agreement its legal
                  existence and the rights required for it timely to observe and
                  perform all of the terms and conditions of this Agreement
                  (other than the licenses and permits to be obtained and
                  maintained as contemplated by Paragraph 4.06(f)).

            (e)   There is no litigation or proceeding pending or threatened
                  against Manager that could adversely affect the validity of
                  this Agreement or the ability of Manager to comply with its
                  obligations under this Agreement.

            12.20.2 Representations and Warranties of Owner. Owner represents
      and warrants to Manager, as of the date hereof, as follows:

            (a)   Owner is duly organized, validly existing and in good standing
                  under the laws of the state of its organization, is duly
                  qualified to do business in the state in which the Hotel is
                  located, and has full power, authority and legal right to
                  execute, perform and timely observe all of the provisions of
                  this Agreement to be performed or observed by Owner. Owner's
                  execution, delivery and performance of this Agreement have
                  been duly authorized by all necessary action on the part of
                  Owner.

            (b)   This Agreement constitutes a valid and binding obligation of
                  Owner and does not and will not constitute a breach of or
                  default under any of the organizational and governing
                  documents of Owner or the terms, conditions or provisions of
                  any law, order, rule, regulation, judgment, decree, agreement
                  or instrument to which Owner is a party or by which it or any
                  substantial portion of its assets (including the Hotel) is
                  bound or affected.

            (c)   No approval of any third party (including any ground lessor or
                  the holder of any Mortgage) that has not been obtained prior
                  to the execution of this Agreement is required for Owner's
                  execution and performance of this Agreement.

            (d)   Owner, at its own expense, shall maintain in full force and
                  effect throughout the Term of this Agreement its legal
                  existence and the rights required for it timely to observe and
                  perform all of the terms and conditions of this Agreement.

                                  Embassy Suites __________ Management Agreement

                                      43


            (e)   Owner is the sole owner of the Hotel building and its contents
                  and the sole owner of the fee title to (or a ground leasehold
                  interest in) the Land on which the Hotel is located. Owner has
                  full power, authority and legal right to own (or lease) such
                  real and personal property.

            (f)   Owner holds (or will hold prior to the Commencement Date) and
                  shall maintain throughout the Operating Period all approvals
                  and permits necessary to permit the ownership and operation of
                  the Hotel in accordance with the Operating Manual and Legal
                  Requirements.

            (g)   There is no litigation or proceeding pending or threatened
                  against Owner or the Project that could adversely affect the
                  validity of this Agreement or the ability of Owner to comply
                  with its obligations under this Agreement.

            (h)   To the best of Owner's knowledge, (i) no hazardous or toxic
                  materials are present in or on or have been released from the
                  Hotel or the Land, (ii) there exist no other soil, water,
                  mineral, chemical or environmental conditions in or at the
                  Hotel or on or under the Land that presently or with the
                  passage of time will require notice or reporting to any
                  governmental authority or employees or patrons of the Hotel,
                  pose any threat to the health and safety of the employees or
                  patrons of the Hotel or otherwise require, based on any Legal
                  Requirement or standard of prudent ownership, any monitoring
                  or remedial action, (iii) there exists no identifiable threat
                  of the contamination of the Land by release of hazardous or
                  toxic materials from existing sources adjacent to the Hotel
                  and (iv) the Land contains no underground tanks.

      12.21 Confidentiality. Owner and Manager agree that all matters disclosed
in the negotiation of this Agreement and that the matters set forth in this
Agreement are strictly confidential. In addition, Owner and Manager agree to
keep strictly confidential all information of a proprietary or confidential
nature about or belonging to either party or to any Affiliate of either party to
which the other party gains or has access by virtue of the relationship between
Owner and Manager. Except as disclosure may be required to obtain the advice of
professionals or consultants, or financing for the Hotel from an Institutional
Lender, or in furtherance of a permitted or proposed assignment of this
Agreement, or as may be required by law or by the order of any government,
regulatory authority or tribunal or otherwise to comply with Legal Requirements
(including reporting requirements applicable to public companies), Owner and
Manager shall make every effort to ensure that such information is not disclosed
to the press or to any other third person without the prior consent of the other
party. The obligations set forth in this Section 12.21 shall survive any
termination or expiration of this Agreement. Owner and Manager shall cooperate
with one another on all public statements, whether written or oral and no matter
how disseminated, regarding their contractual relationship as set forth in this
Agreement or the performance of their respective obligations under this
Agreement.

      12.22 Further Assurance. Owner and Manager shall do and cause to be done
all such acts, matters and things and shall execute and deliver all such
documents and instruments as shall be required to enable Owner and Manager to
perform their respective obligations under, and to give effect to the
transactions contemplated by, this Agreement. Without limiting the generality of
the foregoing, Owner,

                                  Embassy Suites __________ Management Agreement

                                      44


on behalf of itself, its Affiliates, and its and their owners, partners,
principals, officers, successors and assigns, agrees, at the request of Manager,
to complete, execute and furnish to Manager such questionnaires or forms as may
be required for Manager or any of its Affiliates necessary to meet the
requirements of any liquor licensing authority or similar regulatory authority.

      12.23 Counterparts. The parties hereto agree that this Agreement may be
executed in counterparts, each of which shall be deemed an original, and such
counterparts shall together constitute one and the same Agreement, binding all
of the parties hereto, notwithstanding all of the parties are not signatory to
the original or same counterparts. For all purposes, including recordation,
filing and delivery of this Agreement, duplicated unexecuted pages of the
counterparts may be discarded and the remaining pages assembled as one document.

      12.24 Relationship of the Parties; Agency and Agency Waivers. The
relationship created by this Agreement between Owner and Manager shall be that
of principal and agent, respectively. This Agreement does not create a
partnership, joint venture, tenancy, or any relationship other than that of
principal and agent. To the extent allowed by law, this Agreement supercedes any
and all duties and remedies provided by the general law of agency. Any conduct
authorized by this Agreement shall not constitute a breach of any agency duty,
and no breach of this Agreement shall also constitute a breach of any agency
duty. Without limiting the generality of the foregoing, Owner and Manager
acknowledge and agree that:

            (a)   Manager and its Affiliates may own, manage, or franchise any
                  other business of any nature, including hotels, conference
                  centers, time share properties, lodging facilities or similar
                  business, at any location, under any brand name or under no
                  brand name, on its own account, as agent for any other person
                  or entity, or as licensor, regardless of whether or to
                  whatever extent such businesses compete with the Hotel or
                  Owner.

            (b)   Except as provided by Section 7.04, Manager shall own all
                  information and data collected or obtained in the course of
                  operating the Hotel and may use such data for any purpose
                  other than to the material detriment of the Hotel. Owner
                  agrees that it has no claim to or interest in any financial or
                  other benefit obtained by Manager as a result of any such use.

            (c)   To the extent that the interests of any individual owners of
                  Embassy Suites hotels conflict, Manager shall act in the
                  collective best interests of all of its principals, even if
                  doing so may be to the detriment of individual principals,
                  including Owner.

            (d)   Manager has no duty to disclose or to account to Owner beyond
                  the requirements of Sections 4.02, 7.05 and 12.01 except (i)
                  in cases of self-dealing or self-interested transactions
                  except as authorized by Owner and (ii) upon request by Owner
                  to provide sufficient documentation to reasonably demonstrate
                  that charges for goods or services billed by Manager are
                  consistent with the terms of this Agreement. Any such request
                  shall not relieve Owner from its obligation to pay such
                  charges while the request is pending.

                                  Embassy Suites __________ Management Agreement

                                      45


      12.25 Limitation on Liability. In no event shall Manager be deemed in
breach of its duties hereunder, or otherwise at law or in equity, solely be
reason of (i) the failure of the financial performance of the Hotel to meet
Owner expectations, income projections or other matters included in the annual
Operating Budget or Capital Renewal Budgets, (ii) the acts of Hotel Personnel,
(iii) the institution of litigation or the entry of judgments against Owner or
the Hotel with respect to Hotel operations, or (iv) any other acts or omissions
not otherwise constituting a breach of this Agreement, it being the intention
and the agreement of the parties that Manager's sole obligation hereunder shall
be to act in conformity with the standard of skill, care and diligence referred
to in Section 4.01, in conformity with the Operating Manual, and otherwise in
conformity with the express terms of this Agreement.

      12.26 Limitation on Remedies. Owner and Manager hereby agree that neither
shall be liable to the other for punitive, incidental or consequential damages
as a result of any breach of this Agreement. Owner and Manager further agree in
the event of any breach of any agency duty by Manager, Manager shall not be
liable for (i) punitive damages, (ii) disgorgement, forfeiture or restitution of
any compensation paid by Owner to Manager, (iii) disgorgement, forfeiture or
restitution of any benefit received by Manager in connection with any
transaction on behalf of Owner or the Hotel unless the monetary value of such
benefit could have been calculated and passed through to Owner in a commercially
reasonable manner, (iv) divestiture of any financial or other interest held by
Manager, or (v) any other relief that does not take into account the benefits
received by Owner from the services provided by Manager.

      12.27 Waiver of Jury Trial. OWNER AND MANAGER HEREBY JOINTLY WAIVE ANY AND
ALL RIGHTS THAT EITHER MAY HAVE TO TRIAL BY JURY OF ANY DISPUTE ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE RELATIONSHIP CREATED THEREBY.

      12.28 Statement on Sarbanes-Oxley Act of 2002 . In connection with audits
of the financial statements of Owner, Section 404 of Sarbanes-Oxley Act of 2002
as in effect as of the date of this Agreement will require the auditor of such
financial statements to obtain an understanding of Manager's internal controls.
Manager agrees to cooperate reasonably with Owner's auditor to enable such
auditor to obtain such understanding, provided that Owner shall reimburse
Manager for the cost of providing such cooperation.

                            [SIGNATURE PAGE FOLLOWS]

                                  Embassy Suites __________ Management Agreement

                                      46


      IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.

                                    OWNER:

                                    _______

                                    By ___________________________
                                    Its __________________________

                                    MANAGER:

                                    PROMUS HOTELS INC.

                                    By ___________________________

                                  Embassy Suites __________ Management Agreement

                                      47


                              MANAGEMENT FEE RIDER

      A. In consideration of Manager's services during the Operating Period,
Owner shall pay to Manager a management fee (the "Management Fee") equal to the
sum of:

            (i) ___% of the Gross Revenues (determined as hereinafter provided)
      from the operation of the Hotel for each Operating Year (the "Fixed
      Management Fee"), and

            (ii) the "Incentive Management Fee" which shall be the lesser of
      2.0% of the Gross Revenues from the operation of the Hotel for each
      Operating Year, prorated for any partial Operating Year, and:

                  (a) for the period from the Commencement Date through December
            31, 2004, the amount determined in accordance with the Management
            Fee Rider attached to the Prior Agreement as if the Prior Agreement
            were in effect through December 31, 2004; and

                  (b) for the period from January 1, 2005 through the remainder
            of the Term, 20% of the amount of "Cash Flow After Reserves"
            (determined as hereinafter provided) from the operation of the Hotel
            for each Operating Year, reduced (but not to less than zero) if and
            to the extent necessary to provide a return to Owner at the rate of
            12% per annum on "Owner's Invested Capital" (determined as
            hereinafter provided), prorated for any partial Operating Year.

      B. For the purpose of determining the Fixed Management Fee, the term
"Gross Revenues" shall mean "Net Revenues of Total Operated Departments" of the
Hotel for each Operating Year, determined in accordance with the Uniform System
of Accounts, on an accrual basis in accordance with generally accepted
accounting principles consistently applied, excluding interest income.

      C. For the purpose of determining the Incentive Management Fee, the term
"Cash Flow After Reserves" shall mean the "Income Before Interest, Depreciation
and Amortization, and Income Taxes" of the Hotel for each Operating Year as such
term is referred to and determined in accordance with the Uniform System of
Accounts on an accrual basis in accordance with generally accepted accounting
principles consistently applied, but after deducting the amount equal to the
percentage of the Gross Revenues of the Hotel for each Operating Year to be
deposited for the Operating Year in the Capital Renewals Account pursuant to
Subsection 4.02.5.

      D. For the purpose of determining the Incentive Management Fee, the term
"Owner's Invested Capital" shall mean, as of the Commencement Date, $__________
and, as of any subsequent date, such amount increased by aggregate expenditures
in respect of Capital Renewals incurred by Owner after the Commencement Date
pursuant to the Agreement, other than contributions to or disbursements from the
Capital Renewals Account. For purposes of calculating Owner's return on Owner's
Invested Capital, expenditures not made on the first day of a calendar quarter
shall be deemed to have been made on the first day of the immediately following
calendar quarter.

      F. The Management Fee shall be payable in monthly installments
concurrently with the delivery to Owner of the monthly report under clause (a)
of Section 7.05, the installments of the Fixed

                                  Embassy Suites __________ Management Agreement

                              Management Fee Rider
                                     Page 1



Management Fee to be an amount equal to ___% of Gross Revenues from the
operation of the Hotel for the preceding month, and the installments of the
Incentive Management Fee to be an amount equal to the difference found by
subtracting (i) the aggregate of the monthly installments of the Incentive
Management Fee theretofore paid with respect to the preceding months in the then
current Operating Year from (ii) 20% of year-to-date Cash Flow After Reserves
from the operation of the Hotel for such Operating Year; provided that the
installments of the Incentive Management Fee shall be reduced (but not to less
than zero) if and to the extent necessary to provide a return to Owner at the
rate of 12% per annum on Owner's Invested Capital, prorated for any partial
Operating Year.

         If any annual report to be delivered by Manager to Owner under clause
(b) of Section 7.05 shall show that the aggregate of the monthly installments of
the Management Fee paid with respect to the preceding Operating Year shall
exceed or be less than the Management Fee as shown in such annual report for
such Operating Year, then Manager shall deposit into or withdraw from the Hotel
Accounts, the amount of such overpayment or underpayment, as the case may be.

                                  Embassy Suites __________ Management Agreement

                              Management Fee Rider
                                     Page 2



                                   SCHEDULE A
                               DISPUTE RESOLUTION

      1. Arbitration of Financial and Budgetary Disputes. All disputes relating
to any of the following matters shall be resolved by arbitration pursuant to
this Paragraph 1:

                  (i)   the Management Fee;

                  (ii)  Reimbursable Expenses;

                  (iii) adjustments in dollar amounts of insurance coverages
                        required to be maintained;

                  (iv)  approval or modification of the Competitive Set; and

                  (v)   approval of any Operating Budget.

            1.1. Selection of the Expert. The party initiating the arbitration
      shall give notice to the other party setting forth the items to be
      arbitrated. Within five (5) business days, the parties shall confer in
      person or by telephone to agree upon a mutually-acceptable neutral third
      party to resolve the dispute (the "Expert"). If the parties are unable to
      agree upon an Expert, the initiating party shall submit the matter to the
      Chairman of the International Society of Hospitality Consultants, who
      shall designate as the Expert a person who (i) has at least ten (10) years
      experience in the hospitality industry, (ii) is in good standing of the
      International Society of Hospitality Consultants, (iii) has not had any
      direct relationship with either party in the preceding five (5) year
      period, (iv) has demonstrated knowledge of the hotel market where the
      Hotel is located, and (v) has demonstrated knowledge of the operation and
      marketing of [large (over 300 rooms), upscale, full-service, urban -
      replace as necessary w/ appropriate category description] hotels.

            1.2. Procedure. The Expert shall establish in his or her sole
      discretion the procedure for resolving the dispute, including but not
      limited to what evidence to consider, whether to allow written
      submissions, and whether to hold a hearing, subject to the following:

                  (i)   The Expert shall have the power to demand from either
                        party whatever information in that party's possession
                        that the Expert deems necessary to resolve the dispute;

                  (ii)  Except as specifically requested by the Expert, no party
                        may present any evidence that was not shared with the
                        other party before the arbitration was initiated in a
                        good faith attempt to resolve the dispute;

                  (iii) No discovery may be conducted between the parties;

                  (iv)  No attorneys may appear on behalf of either party
                        (although either party may use attorneys for their own
                        consultation or advice); and



                  (v)   The Expert shall schedule and conduct all proceedings
                        with the objective of resolving the dispute as quickly
                        and efficiently as reasonably possible.

            1.3. Fees and Expenses. During the pendency of the arbitration, the
      parties shall share equally the fees and expenses of the Expert. In
      rendering its decision, the Expert shall designate the party whose
      position is substantially upheld, who shall recover from the other party
      its share of the fees and costs so paid. The Expert may determine that
      neither party's position was substantially upheld. The parties shall
      otherwise bear their own costs and expenses of the arbitration.

      2. Arbitration of Other Disputes. All disputes relating to any matter not
encompassed by Paragraph 1 shall be resolved by a two-step process of mediation
and arbitration, as follows.

            2.1. Mediation. As a prerequisite to either party's initiation of
      the arbitration process, the parties must first attempt to settle any
      dispute by participating in at least ten (10) hours of mediation (in a
      single session, unless the parties agree to adjourn to a second session).

            (a)   The Mediator. Unless agreed otherwise by the parties, the
                  mediation process shall be administered by J.A.M.S./Endispute,
                  Inc. or its successors ("JAMS") under its normal rules and
                  procedures. If, at the time a dispute arises, JAMS does not
                  exist or is unable to administer the resolution of the dispute
                  in accordance with the terms of Section 12.04, then the
                  dispute resolution process shall be administered by the
                  American Arbitration Association or its successors ("AAA")
                  under its normal rules and procedures. If, at the time a
                  dispute arises, AAA does not exist or is unable to administer
                  the dispute resolution process and the parties cannot agree on
                  the identity of a substitute service provider, then there
                  shall be no mediation, and the parties shall proceed to
                  arbitration as described in Paragraph 2.2 below. The mediator
                  shall be chosen by the parties or, if the parties are unable
                  to agree, shall be chosen by the organization administering
                  the mediation.

            (b)   Procedure. The party initiating the mediation shall give
                  notice of the dispute to the other party and then contact JAMS
                  to schedule the mediation. Unless otherwise agreed by the
                  parties, the mediation shall take place on a business day not
                  later than fifteen (15) business days, nor earlier than five
                  (5) business days, from the date notice of the dispute is
                  given or as soon thereafter as the mediator is available.
                  Unless otherwise agreed, the mediation shall be conducted at
                  the Hotel. The mediation will be considered complete if: (i)
                  the parties enter into an agreement to resolve the dispute,
                  (ii) the mediator concludes that further mediation would not
                  be productive, (iii) either party fails to appear at or
                  participate in the mediation; or (iv) if the dispute is not
                  resolved within five (5) days after the mediation is
                  completed. The mediator shall certify in writing that the
                  mediation is complete and whether either or both parties
                  participated in good faith.



            2.2. Arbitration. If any dispute remains unresolved between the
      parties after the mediation process has been completed, either party may
      then submit that dispute (and only that dispute) to final and binding
      arbitration. No party may initiate an arbitration unless the mediator has
      certified that the party participated in the mediation in good faith.

            (a)   Selection of the Arbitrators. The party initiating the
                  arbitration shall give notice to the other party setting forth
                  the items to be arbitrated. Within five (5) business days,
                  each party shall select and concurrently designate a
                  party-appointed arbitrator; the two party-appointed
                  arbitrators shall select a third, neutral arbitrator as soon
                  as practicable thereafter.

            (b)   Administration. The arbitration shall be administered by JAMS.
                  If, at the time a dispute arises, JAMS does not exist or is
                  unable to administer the resolution of the dispute, then the
                  dispute resolution process shall be administered in accordance
                  with the terms of this Paragraph 2.2 by AAA. If, at the time a
                  dispute arises, AAA does not exist or is unable to administer
                  the dispute resolution process and the parties cannot agree on
                  the identity of a substitute service provider, then either
                  party may petition the state or federal district court in the
                  city of New York, New York (unless pursuant to Section 12.19
                  the Agreement is to be construed in accordance with and be
                  governed by the laws of a state other than the State of New
                  York, in which event either party may petition a state or
                  federal district court in such state) to appoint an arbitrator
                  to administer the arbitration in accordance with Section
                  12.04. If such court shall refuse to do so, there shall be no
                  arbitration, and the parties may proceed to exercise any and
                  all rights and remedies available to the parties, as if the
                  provisions of Section 12.04 and the references in this
                  Agreement to the dispute resolution process under Section
                  12.04 had not been included in this Agreement.

            (c)   Rules. The arbitration shall be conducted in accordance with
                  the rules of the service provider, except that the parties
                  specifically acknowledge that they have agreed to arbitrate
                  their disputes in order to avoid the expense and delay of
                  court litigation. Accordingly, the arbitrators shall strictly
                  limit discovery, motion practice, and collateral proceedings
                  to resolve the dispute at issue as efficiently and
                  expeditiously as reasonably possible.

            (d)   Equitable Relief. Subject to the limitations on remedies set
                  forth Subsection 12.11.2 and the applicable law, the
                  arbitrators shall have the power to grant equitable relief,
                  both by way of interim relief or as a part of its final award.

            (e)   Fees and Expenses. During the pendency of the arbitration, the
                  parties shall pay the fees and expenses of their respective
                  party-appointed arbitrators and shall share equally the fees
                  and expenses of the neutral arbitrator. As part of the award,
                  the arbitrators shall designate the party whose position is
                  substantially upheld, who shall recover from the other party
                  all of its costs and attorneys' fees, including its share of
                  the fees and costs paid to the neutral arbitrator, expert
                  witness fees, compensation for in-house counsel, and all other
                  fees and expenses


                  incurred in connection with the arbitration. The arbitrators
                  may determine that neither party's position was substantially
                  upheld or otherwise allocate the fees and expenses in
                  accordance with the relative extent to which either party's
                  position was upheld.

            (f)   Venue, Jurisdiction, and Jury Waiver. Each party submits to
                  the jurisdiction of any court of competent jurisdiction for
                  the purpose of confirming or enforcing any arbitration award
                  rendered pursuant to this section.

EX-10.16

                                                                   Exhibit 10.16

                       NONSTATUTORY STOCK OPTION CONTRACT
                                    UNDER THE
                        FELCOR LODGING TRUST INCORPORTED
                              AMENDED AND RESTATED
                     RESTRICTED STOCK AND STOCK OPTION PLAN

      This Contract is made and entered into this day of    ,  , but effective
as of ,  , between FelCor Lodging Trust Incorporated, a Maryland corporation
(the "Company"), and (the "Optionee").

                              W I T N E S S E T H:

      WHEREAS, the Compensation Committee of the Board of Directors of the
Company has adopted the FelCor Lodging Trust Incorporated ____ Restricted Stock
and Stock Option Plan (the "Plan"); and

      WHEREAS, the stockholders of the Company have approved the Plan; and

      WHEREAS, pursuant to the Plan, the Compensation Committee of the Board of
Directors of the Company (the "Committee") has selected the Optionee and has
authorized the Company to grant to the Optionee an option to purchase shares of
common stock of the Company ("Common Stock") on the terms and conditions herein
set forth;

      NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:

      1. Incorporation of the Plan. A copy of the Plan, as amended, is attached
hereto and hereby incorporated herein by reference, and all of the terms,
conditions and provisions contained therein shall be deemed to be terms,
conditions and provisions of this Contract. All terms used herein that are
defined in the Plan shall have the meanings given them in the Plan.



      2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions contained in the Plan and this
Contract, the Company hereby grants to the Optionee, as a matter of separate
inducement and agreement in connection with his employment, but not in lieu of
any salary or other compensation for his services, an option (the "Option") to
purchase from the Company all or any part of an aggregate of     ( ) shares of
Common Stock at the purchase price of Dollars and Cents ($ . ) per share. The
Option shall be deemed to have been granted, and the Date of Grant of the Option
shall be,   , .

      3. Term of Option; Exercise. This Option shall expire with respect to all
of the shares of Company Common Stock subject hereto on   ,  (the "Expiration
Date"), unless it shall be terminated at an earlier date in accordance with the
provisions of the Plan. This Option shall be come exercisable and the Optionee
may purchase all or any portion of the shares subject hereto at any time (i) on
or after the earlier of (A)  ,  and (B) Optionee's retirement at or after the
age of sixty (60) and (ii) before the Expiration Date (or before any earlier
termination date, in accordance with the provisions of the Plan).

      4. Exercise of Options. The Option granted hereunder (to the extent then
exercisable) may be exercised at any time or from time to time by the Optionee
(or, following the death or Disability of the Optionee, the Optionee's executor
or other legal representative) by the giving of written notice of exercise to
the Company, specifying the number of shares of Company Common Stock to be
purchased, and by payment of the purchase price therefor. The purchase price of
Company Common Stock subject to this Option may be paid (i) in cash (including
any personal, certified or bank cashier's check) or (ii) by the surrender to the
Company of shares of Company Common Stock that have been beneficially owned by
the Optionee for more than six (6) months, together with appropriate
endorsements or instruments to effect the transfer thereof to the Company,
valued at its Fair Market Value (as defined in the Plan), or (iii) any
combination of (i) and (ii) above.

      5. Limitations on Exercise. The Optionee shall not be entitled to exercise
any one or more Options if, (i) after taking into account for calculation
purposes all of such Optionee's "applicable employee remuneration" other than
under the Plan, the exercise of such Option would cause the Optionee's
"applicable employee remuneration" to exceed $1,000,000 for such taxable year,
(ii) the exercise thereof would violate Federal or state securities laws or
(iii) such exercise would occur within six (6) months following the grant of
such Option or Options. Prior to the death or Disability of the Optionee,
Options granted hereunder may be exercised only by the Optionee. Upon the death
or Disability of the Optionee, subject to the provisions of Section 6 hereof,
Options granted hereunder also may be exercised by an executor or other legal
representative of the Optionee.



      6. Termination upon Death, Disability or Termination of Employment. In the
event of the death or Disability of the Optionee, any and all Options that have
not been exercised prior to the earlier of (i) the Expiration Date of such
Options and (ii) the date which is twelve (12) months following the death or
Disability of the Optionee, shall terminate and may not thereafter be exercised.
In the event of the Optionee's retirement, at or after the age of sixty (60),
any and all Options shall remain exercisable at any time prior to the Expiration
Date. In the event of the termination of the Optionee's employment by the
Company for any reason other than the Optionee's death, Disability or
retirement, at or after the age of sixty (60), any and all Options that have not
been exercised prior to the earlier of (i) the Expiration Date of such Options
and (ii) the date which is three (3) months following the date of such
termination of employment by the Company, shall terminate and may not thereafter
be exercised.

      7. Notices. All notices, surrenders and other communications required or
allowed to be made or given in connection with the Option granted hereunder
shall be in writing, shall be effective when received and shall be hand
delivered or sent by registered or certified mail (i) if to the Company, to
FelCor Lodging Trust Incorporated, 545 E. John Carpenter Frwy., Suite 1300,
Irving, Texas 75062, Attention: General Counsel, or (ii) if to the Optionee, to
the Optionee at the address set forth beneath his signature hereto, or to such
other address as to which he may have notified the Company pursuant to this
Section.

      8. Binding Effect. This Contract shall bind and, except as specifically
provided in the Plan and this Contract, shall inure to the benefit of, the
respective Successors, heirs, legal representatives and assigns of the parties
hereto.

      9. Governing Law. This Contract and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Maryland.

                                      -3-


      IN WITNESS WHEREOF, the Company has caused this Contract to be executed by
its duly authorized officer and the Optionee has hereunto set his hand, on the
day and year first written above.

                                            COMPANY:

                                            FELCOR LODGING TRUST INCORPORATED

                                            By: _____________________________

                                      -4-


                                            OPTIONEE:

                                            Name:

                                            Address:

                                            ____________________
                                            ____________________

                                      -5-

EX-10.17

                                                                   Exhibit 10.17

                          EMPLOYEE STOCK GRANT CONTRACT
                                    UNDER THE
                        FELCOR LODGING TRUST INCORPORATED
                              AMENDED AND RESTATED
                     RESTRICTED STOCK AND STOCK OPTION PLAN

      This Contract is made and entered into on    , , but effective as of the
day of , between FelCor Lodging Trust Incorporated, a Maryland corporation (the
"Company"), and (the "Grantee").

                              W I T N E S S E T H:

      WHEREAS, the Compensation Committee and Board of Directors of the Company
has adopted the FelCor Lodging Trust Incorporated ______ Restricted Stock and
Stock Option Plan (the "Plan"); and

      WHEREAS, the stockholders of the Company have approved the Plan; and

      WHEREAS, pursuant to the Plan, the Compensation Committee of the Board of
Directors of the Company (the "Committee") has selected the Grantee and has
authorized the Company to grant to the Grantee shares of common stock of the
Company ("Common Stock") on the terms and conditions herein set forth;

      NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:

      1. Incorporation of the Plan. A copy of the Plan, as amended, is attached
hereto and hereby incorporated herein by reference, and all of the terms,
conditions and provisions contained therein shall be deemed to be terms,
conditions and provisions of this Contract. All terms used herein that are
defined in the Plan shall have the meanings given them in the Plan.

                                      -1-


      2. Grant of Restricted Stock. Pursuant to the authorization of the
Committee, and subject to the terms, conditions and provisions contained in the
Plan and this Contract, the Company hereby grants to the Grantee, as a matter of
separate inducement and agreement in connection with his employment, but not in
lieu of any salary or other compensation for his services, an aggregate of   ( )
shares of Common Stock of the Company (the "Restricted Stock"). The Restricted
Stock shall be deemed to have been granted, and the Date of Grant of the
Restricted Stock shall be, .

      3. Period of Restriction; Vesting in Installments. The Restricted Stock
granted pursuant hereto shall be issued and registered in the name of the
Grantee and the Grantee shall be entitled to vote the same (in person or by
proxy) and to receive all dividends and other distributions thereon unless and
until such Restricted Stock is forfeited as hereinafter provided. During the
period prior to the date the Restricted Stock granted pursuant hereto becomes
vested in the Grantee (the "Restricted Period"), the Company shall hold the
certificate(s) evidencing such unvested Restricted Stock, together with stock
powers or other instruments of transfer appropriately endorsed in blank by the
Grantee (and the Grantee hereby agrees to execute and deliver such stock powers
or other instruments of transfer as requested by the Company), as custodian for
the Grantee. At such time, and from time to time, as shares of Restricted Stock
become vested in the Grantee and all obligations of the Grantee hereunder and
under the Plan with respect thereto shall have been fulfilled, the restrictions
set forth in Section 4 hereof and all forfeiture provisions set forth herein or
in the Plan shall cease to be applicable to such Restricted Stock and the
certificate(s) therefor shall be delivered by the Company to the Grantee.

            The Restricted Stock granted pursuant hereto, until the same becomes
vested as herein provided, shall be subject to certain restrictions and to
forfeiture upon the occurrence of certain events, all as set forth in Section 4
hereof. The Restricted Stock granted hereby shall become vested in the Grantee
in installments, as follows:

            (a) Time-Based Criteria. That number of shares of the Restricted
Stock eligible to become vested on each Vesting Date, as set forth below, will
become vested, or be forfeited, on each such Vesting Date, based upon the
satisfaction of (or the failure to satisfy) the performance-based criteria
established by the Committee in advance of and for each such Vesting Date.

      Number of Shares
     Eligible to Become                               Vesting
          Vested                                       Date

                                      -2-


            (b) Performance-Based Criteria. Attached hereto, as an addendum, is
a statement of the performance-based criteria adopted by the Committee that will
be applicable to the first Vesting Date. At least twelve months prior to each
subsequent Vesting Date, the Committee, in the exercise of its sole discretion,
shall adopt a statement of the performance-based criteria that will be
applicable to that Vesting Date, a copy of which statement will be furnished to
each party hereto and, upon delivery, shall become a part of this contract. In
setting performance-based criteria for any Vesting Date subsequent to the first
Vesting Date, the Committee shall have the unrestricted right to vary any or all
components of, to add or delete components of, or otherwise modify the
performance-based criteria in its sole discretion.

      Within the three-month period immediately preceding each Vesting Date, the
Committee will compare the performance-based criteria applicable to that Vesting
Date against the achieved results and determine the number of shares eligible to
become vested on that Vesting Date that will become so vested and/or forfeited
as of that date. The determination of the Committee as to the number of shares
to vest and/or to be forfeited at each such Vesting Date shall be conclusive
upon all parties hereto and shall be communicated to the Grantee on or prior to
such Vesting Date.

      4. Restrictions. During the Restricted Period applicable to any Restricted
Stock granted hereunder:

            (a) The Grantee shall not become vested as to any such Restricted
Stock if, (i) after taking into account for calculation purposes all of such
Grantee's "applicable employee remuneration" other than under the Plan, the
vesting of such Restricted Stock would cause the Grantee's "applicable employee
remuneration" to exceed $1,000,000 for such taxable year or (ii) the vesting
thereof would violate Federal or state securities laws;

            (b) The Restricted Stock and the right to vote the same and to
receive dividends thereon may not, except as otherwise provided in the Plan, be
sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, and no such sale, assignment, transfer, exchange, pledge,
hypothecation, or encumbrance, whether made or created by voluntary act of the
Grantee or by operation of law, shall be recognized by, or be binding upon, or
shall in any manner affect the rights of the Company pursuant hereto or the
Plan; provided, however, that Grantee may at any time transfer the Restricted
Stock to the FelCor Lodging Trust Incorporated Deferred Compensation Plan,
subject to all of the terms and restrictions set forth herein.

            (c) If the status of the Grantee as an Employee under the Plan shall
terminate for any reason other than (i) the death of the Grantee, (ii) the
Disability (as defined in the Plan) of the Grantee, or (iii) the retirement of
the Grantee at or after the age of sixty (60), then, in that event, any
Restricted Shares outstanding shall, upon such termination, be forfeited by the
Grantee to the Company, without the payment of any consideration by the Company,
and

                                      -3-


neither the Grantee nor any of his or her successors, heirs, assigns, or legal
representatives shall thereafter have any further rights or interest in the
Restricted Stock so forfeited or any certificates evidencing the same, and the
Company shall, at any time thereafter, be entitled to effect the transfer of any
Restricted Stock so forfeited into the name of the Company;

            (d) If the status of the Grantee as an Employee under the Plan shall
terminate by reason of the death of the Grantee, the Disability of the Grantee
or the retirement of the Grantee at or after the age of sixty (60), the
Restricted Period (and all restrictions set forth in this Section 4) with
respect to all Restricted Stock granted hereby shall be deemed to have expired
as of the date of such event;

            (e) If the Company (i) is not to be the surviving entity in any
merger or consolidation (or survives only as a subsidiary of another entity),
(ii) sells all or substantially all of its assets to any other person or entity
(other than a subsidiary of the Company) or (iii) is to be dissolved and
liquidated, the Restricted Period (and all restrictions set forth in this
Section 4) with respect to all Restricted Stock granted hereby shall be deemed
to have expired as of the date of next preceding such event;

            (f) Any shares of Restricted Stock eligible to become vested on a
given Vesting Date that do not become so vested in accordance with Section 3
above shall be forfeited as of such Vesting Date and returned to the status of
authorized but unissued shares under the Plan; and

            (g) If a dispute should arise between the Company and the Grantee
relating to the rights, duties or obligations of the Grantee hereunder or under
the Plan with respect to any Restricted Stock granted hereby, such dispute shall
be resolved by the determination of the Committee, acting in good faith, which
determination shall be final and binding upon the Company and the Grantee, and
pending such a determination and the resolution of all such disputes to the
reasonable satisfaction of the Committee, (i) all Restricted Stock then held by
the Company as custodian for the Grantee shall remain in the possession of the
Company and subject to all of the Restrictions set forth in this Section 4,
regardless of any intervening expiration of the Restricted Period, and (ii) any
and all dividends payable upon any Restricted Stock so held by the Company as
custodian for the Grantee shall be received and held by the Company as custodian
until all such disputes have been resolved to the reasonable satisfaction of the
Committee, at which time the accumulated dividends then held by the Company
shall be delivered (without interest thereon) to the person entitled to receive
the Restricted Stock upon which such dividends were originally paid.

                                      -4-


      5. Restrictions on Resale of Company Common Stock. IN THE EVENT THAT
SHARES OF RESTRICTED STOCK GRANTED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, SUCH
SHARES OF RESTRICTED STOCK MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED BY THE
GRANTEE ABSENT SUCH REGISTRATION, UNLESS AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY SHALL HAVE BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH
SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, OR APPLICABLE STATE
SECURITIES LAWS. ANY CERTIFICATE ISSUED TO THE GRANTEE TO EVIDENCE RESTRICTED
STOCK GRANTED PURSUANT HERETO THAT IS NOT SO REGISTERED MAY BEAR A LEGEND TO THE
FOREGOING EFFECT.

      6. Notices. All notices, surrenders and other communications required or
allowed to be made or given in connection with the Restricted Stock granted
hereunder shall be in writing, shall be effective when received and shall be
hand delivered or sent by registered or certified mail (i) if to the Company, to
FelCor Lodging Trust Incorporated, 545 E. John Carpenter Frwy., Suite 1300,
Irving, Texas 75062, Attention: General Counsel; or (ii) if to the Grantee, to
the Grantee at the address set forth beneath his signature hereto, or to such
other address as to which he may have notified the Company pursuant to this
Section.

      7. Binding Effect. This Contract shall bind and, except as specifically
provided in the Plan and this Contract, shall inure to the benefit of, the
respective Successors, heirs, legal representatives and assigns of the parties
hereto.

      8. Governing Law. This Contract and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Maryland.

      IN WITNESS WHEREOF, the Company has caused this Contract to be executed by
its duly authorized officer and the Grantee has hereunto set his hand, as of the
day and year first written above.

                                      -5 -


                                    COMPANY:

                                    FELCOR LODGING TRUST INCORPORATED

                                    By: ______________________________
                                        Thomas J. Corcoran, Jr.
                                        President and CEO

                                    GRANTEE:

                                    Name: ____________________________

                                    Address: _________________________

                                      -6-


                 ADDENDUM TO EMPLOYEE STOCK GRANT CONTRACT DATED
           __________, 200_, BETWEEN FELCOR LODGING TRUST INCORPORATED
                  AND GRANTEE, APPLICABLE TO THE VESTING DATE
                                OF [___________]

      [This addendum shall set forth a statement of the performance-based
criteria adopted by the Compensation Committee that will be applicable to the
initial Vesting Date.]

                                      -7-

EX-10.18

                                                                   EXHIBIT 10.18

                    ANNUAL COMPENSATION PROGRAM FOR DIRECTORS
                                       OF
                        FELCOR LODGING TRUST INCORPORATED

      On October 26, 2004, the Board of Directors adopted the following
compensation program for directors of FelCor Lodging Trust Incorporated (the
"Company") for their service, commencing in 2005:

      1. Annual Service: Each non-employee director will receive a number of
shares of common stock of the Company having a value equal to $35,000, except
that amount shall be $40,000 for members of the Audit Committee other than the
Chairman and $45,000 for the Chairman of the Audit Committee.

      2. Board of Director Meeting Participation: Each director not otherwise
being compensated by the Company will receive $1,000 for each Board of Director
meeting attended in person and $500 for each additional telephonic meeting in
which he or she participates, payable in common stock or cash, at each
director's election.

      3. Committee Compensation: If a member of the Audit Committee attends more
than five Audit Committee meetings during the year, he or she will receive
$1,000 for each additional meeting attended in person and $500 for each
additional telephonic meeting in which he or she participates. Members of the
Compensation, Corporate Governance and Executive Committees will receive $1,000
for each meeting of their respective committees attended by them in person and
$500 for each telephonic meeting of their respective committees attended
telephonically. All are payable either in common stock or cash, at each
director's election.

      4. Annual Equity Award: Each non-employee director will receive an annual
equity award equal to the lesser of (i) 2,000 shares of common stock or (ii) the
number of shares of common stock having a value equal to $20,000 for 2005,
$25,000 for 2006, $30,000 for 2007, $35,000 for 2008 and $40,000 for 2009 and
thereafter.

      All shares of common stock will be issued under one or more of the
Company's Restricted Stock and Stock Option Plans. The number of shares to be
issued will be calculated by dividing (i) the applicable dollar amount
(including amounts for which the director has elected to receive common stock),
by (ii) the closing price of the common stock on the date annual grants are
awarded, and rounded to the nearest whole lot of 100 shares.

EX-14.1

Exhibit 14.1

FREQUENTLY ASKED QUESTIONS

GENERAL INFORMATION

The attached Code of Business Conduct and Ethics has been adopted by the Board of Directors of FelCor Lodging Trust Incorporated to protect our company’s reputation for honesty and integrity and to promote compliance with laws, rules and regulations. The following questions and answers provide important information regarding the code and your obligations under it. These questions and answers are not intended to address all aspects of the code or your obligations, and do not limit or modify your responsibilities under the code.

Who is covered by the code?

If you are a director, officer or employee of FelCor Lodging Trust Incorporated, you are subject to this code. At least annually, you will be required to sign a statement certifying that, among other things, you have read and understand the code and agree to comply with it.

What do I need to do to be sure I comply with the code?

Read the code carefully and consider how it may impact what you do. You are encouraged to make a list of questions that you have about the code and your responsibilities under it. Larry Robinson, our general counsel, will hold one or two information sessions for employees over the next month to explain the code and its application to you. Those sessions will provide you with an opportunity to raise any questions that you may have.

What if I’m not sure what is required under the law?

The code requires you to comply with applicable laws, rules and regulations. If you have questions regarding either the applicability of, or the conduct required to comply with, any law, rule or regulation, you should seek advice from the company’s legal department.

What is a “conflict of interest”?

A “conflict of interest” exists when your personal or private interest interferes in any way with the interests of the company or your ability to perform your work objectively and effectively.

What if I’m not sure of my obligations in a particular situation?

You are encouraged to talk to your supervisors, managers or other appropriate personnel when you are in doubt about the best course of action in a particular circumstance. Tom Corcoran and Larry Robinson are each authorized to determine whether a particular circumstance involving an employee would violate the code.

If I know of, or suspect, a violation of the code, whom should I tell?

You should put it in writing and send it to Tom Corcoran, Larry Robinson or Barbara Lacy. If the violation involves one of those persons, or a director of the company, you should send it to Mr. Ellwood, as the chairman of the Corporate Governance and Nominating Committee of the Board, or Robert W. Dockery, the company’s principal outside legal counsel. Contact information for each of these individuals appears at the end of the code.

What if my supervisor tells me to do something that would violate the code?

Don’t do it, report it. No one has the right to order, or even ask, you to violate this code or the law. If anyone does, THEY are violating this code.

Can I get in trouble for reporting a violation of the code by someone else?

No. You may report a violation or suspected violation anonymously. Even if you identify yourself in the report, it is the policy of our company not to allow actual or threatened retaliation, harassment or discrimination due to reports of misconduct by others that are made, in good faith, by employees.

FELCOR LODGING TRUST INCORPORATED
CODE OF BUSINESS CONDUCT AND ETHICS

Introduction

     Our company’s reputation for honesty and integrity is the sum of the personal reputations of our directors, officers and employees. To protect this reputation and to promote compliance with laws, rules and regulations, this Code of Business Conduct and Ethics has been adopted by our Board of Directors.

     This Code sets out the basic standards of ethics and conduct to which all of our directors, officers and employees are held. These standards are designed to deter wrongdoing and to promote honest and ethical conduct, but will not cover all situations. If you have any doubts whatsoever as to the propriety of a particular situation, you should submit it in writing to Thomas J. Corcoran, Jr., our company’s president, Lawrence D. Robinson, our executive vice president and general counsel, or Barbara Lacy, our vice president and office manager. If your concern relates to one of those individuals, you should submit your concern, in writing, to Richard S. Ellwood, the chairman of the Corporate Governance and Nominating Committee of our Board of Directors, or Robert W. Dockery, our principal outside legal counsel. The mailing and e-mail addresses, as well as the telephone and facsimile numbers, of each of these persons is set forth at the end of this Code.

     Those who violate the standards set out in this Code will be subject to disciplinary action.

1. Scope

     If you are a director, officer or employee of FelCor Lodging Trust Incorporated, you are subject to this Code.

2. Honest and Ethical Conduct

     We, as a company, require honest and ethical conduct from all persons subject to this Code. Each of you has a responsibility to all other directors, officers and employees of our company, and to our company itself, to act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated and otherwise to conduct yourself in a manner that meets with the highest ethical and legal standards. Our reputation, as a company, depends upon the ethical and legal conduct of all of our directors, officers and employees.

3. Compliance with Laws, Rules and Regulations

     You are required to comply with all applicable governmental laws, rules and regulations. Obeying the law, both in letter and in spirit, is the foundation on which our company’s ethical standards are built. Although you are not expected to know the details of all the applicable laws, rules and regulations, it is expected that if you have questions regarding either the applicability of, or the conduct required to comply with, any law, rule or regulation you will seek advice from our company’s legal department.

4. Conflicts of Interest

     You must handle in an ethical manner any actual or apparent conflict of interest between your personal and business relationships. Conflicts of interest are prohibited as a matter of policy. A “conflict of interest” exists when a person’s private interest interferes in any way with the interests of our company, as a whole. For example, a conflict situation arises if you take actions or have interests that interfere with your ability to perform your work for our company objectively and effectively. Conflicts of interest also will arise if you, or a member of your family, receive an improper personal benefit as a result of your position with our company. Loans to, or guarantees of the obligations of, you or your family members by our company or by persons doing business with our company are of special concern to us and must be disclosed, in writing, to the company’s president or general counsel.

     If you become aware of any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest, you should report it to our company’s president or general counsel.

     Conflicts of interest may not always be clear-cut, so if you have a question regarding a situation that may give rise to a conflict of interest, you should consult with our company’s legal department. Certain kinds of transactions or relationships may raise issues of conflict of interest, but are not necessarily improper or adverse to our company’s best interests. The following standards apply to certain common situations where potential conflicts of interest may arise:

     A. Gifts and Entertainment

Personal gifts and entertainment offered by persons doing business with our company may be accepted when offered in the ordinary and normal course of the business relationship. However, the frequency and cost of any such gifts or entertainment may not be so excessive that your ability to exercise independent judgment on behalf of our company is or may appear to be compromised. Accordingly, if you receive or are offered a gift that you believe to have a value in excess of the lesser of (i) one percent (1%) of your annual base compensation and (ii) $500, or entertainment that is in excess of usual and customary levels, by any person providing or offering goods or services to our company, you must promptly disclose the same to our company’s president or general counsel (or the chairman of the Corporate Governance and Nominating Committee of the Board of Directors in the case of the company’s president or a director), who will determine whether the gift or entertainment is improper, based upon the standards set out in this Code. Any gift or entertainment determined to be improper must be returned, reimbursed or refused by you.

     B. Financial Interests In Other Organizations

     The determination of whether any outside investment, financial arrangement or other interest in another organization is improper depends on the facts and circumstances of each case. Your ownership of an interest in another organization may be inappropriate if the other organization has a material business relationship with, or is a direct competitor of, our company and your financial interest is of such a size that your ability to exercise independent judgment on behalf of our company is or may appear to be compromised. As a general rule, a passive investment would not likely be considered improper if it: (1) is in publicly traded shares; (2) represents less than 1% of the outstanding equity of the organization in question; and (3) represents less than 5% of your net worth. If you are not certain whether any investment, financial arrangement or interest in another organization would be inappropriate, the details of your investment, financial arrangement or interest must be fully disclosed to our company’s president or general counsel (or the Board of Directors or the Corporate Governance and Nominating Committee of the Board of Directors, if you are the president or a director of our company), who will make a determination whether it is inappropriate, based upon the standards set out in this Code..

     C. Outside Business Activities

     The determination of whether any outside position you may hold is improper will depend on the facts and circumstances of each case. Your involvement in trade associations, professional societies, and charitable and similar organizations will not normally be viewed as improper. However, if those activities are likely to take substantial time from or otherwise conflict with your responsibilities to our company, you should obtain prior approval from your supervisor. Other outside associations or activities in which you may be involved are likely to be viewed as improper only if they would interfere with your ability to devote proper time and attention to your responsibilities to our company or if your involvement is with another company with which our company does business or competes. For a director, employment or affiliation with a company with which our company does business or competes would be improper unless fully disclosed to and approved by our company’s Board of Directors or the Corporate Governance and Nominating Committee of the Board of Directors and satisfies any other standards established by applicable law, rule (including rule of any applicable stock exchange) or regulation and any other corporate governance guidelines that our company may establish.

     D. Indirect Violations

     You should not indirectly, through a spouse, family member, affiliate, friend, partner, or associate, have any interest or engage in any activity which would violate this Code if you directly had the interest or engaged in the activity. Any such relationship should be fully disclosed to our company’s president or general counsel (or the Board of Directors or the Corporate Governance and Nominating Committee of the Board of Directors if you are the president or a director of our company), who will make a determination whether the relationship is inappropriate, based upon the standards set out in this Code.

5. Corporate Opportunities

     You are prohibited from taking for yourself, personally, opportunities that are discovered through the use of corporate property, information or position. You may not use corporate property, information, or position for personal gain, or to compete with our company directly. You owe a duty to our company to advance its legitimate interests whenever the opportunity to do so arises.

A diversion of a corporate opportunity or competition with our company that is improper may not always be clear-cut, so if you have a question, you should consult with our company’s legal department. Certain kinds of transactions or relationships may raise issues, but are not necessarily improper or adverse to our company’s best interests. Some common situations where these issues can arise are discussed in paragraphs 4 and 10 of this Code. If you are not certain whether an opportunity or activity would be improper, you should not pursue it before disclosing it to our company’s president or general counsel (or the Board of Directors or the Corporate Governance and Nominating Committee if you are our president or a director of our company), who will make a determination whether the opportunity or activity is inappropriate, based upon the standards set out in this Code.

6. Fair Dealing

     You should endeavor to deal fairly with our company’s suppliers, competitors and employees and with other persons with whom our company does business. You should not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

7. Public Disclosures

     It is our company’s policy to provide full, fair, accurate, timely, and understandable disclosure in all reports and documents that we file with, or submit to, the Securities and Exchange Commission and in all other public communications made by our company.

8. Confidentiality

     You should maintain the confidentiality of all confidential information entrusted to you by our company or by persons with whom our company does business, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors of, or harmful to, our company or persons with whom our company does business, if disclosed.

9. Insider Trading

     If you have access to material, non-public information concerning our company, you are not permitted to use or share that information for stock trading purposes, or for any other purpose except the conduct of our company’s business. All non-public information about our company should be considered confidential information. Insider trading, which is the use of material, non-public information for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information, is not only unethical but also illegal. Violations of this prohibition against “insider trading” may subject you to criminal or civil liability, in addition to disciplinary action by our company. If you have any questions, please consult our company’s legal department.

10. Protection and Proper Use of Company Assets

     You should protect our company’s assets and promote their efficient use. Theft, carelessness, and waste have a direct impact on our company’s profitability. All corporate assets should be used for legitimate business purposes.

     In general, if you have any question as to the propriety of any personal usage of our company’s assets, you should disclose the proposed usage to our company’s president or general counsel (or the Board of Directors or the Corporate Governance and Nominating Committee if you are our president or a director), who will make a determination as to the propriety of any proposed usage. However, specific standards applicable to several common situations are discussed below:

     A. Complimentary or Discounted Hotel Services

     Independent third party managers operate all of our company’s hotels, and their decision with respect to the granting of requests for complementary and/or discounted hotel services by directors, officers and employees of our company will be final. Any privileges that may be extended to you by our third party managers should not be abused.

     B. Office Supplies and Services

     Office supplies and equipment belonging to our company should be used for corporate purposes, although we will permit some nominal usage of these items for your personal benefit. For example, you may use the corporation’s copiers to make a limited number of personal copies. However, if you use our company’s Federal Express account, postage meter or long-distance telephone services for personal purposes, you should arrange to reimburse our company for any out-of-pocket expenses incurred by it. If you have any question as to the propriety of any personal usage of our company’s office supplies or equipment, you should discuss the same with our company’s president, general counsel or office manager, who will make a determination as to the propriety of any proposed use.

11. Waivers of the Code of Business Conduct and Ethics

     If you are uncertain whether a particular activity or relationship is improper under this Code or requires a waiver of this Code, you should disclose it to our company’s president or general counsel (or the Board of Directors or Corporate Governance and Nominating Committee if you are our president or director), who will make a determination first whether a waiver of this Code is required and second, if required, whether a waiver will be granted. You may be required to agree to conditions before a waiver or a continuing waiver is granted. However, any waiver of this Code for an executive officer or director may be made only by the Company’s Board of Directors or the Corporate Governance and Nominating Committee of the Board of Directors. In addition, any waiver, or implicit waiver, of this Code for an executive officer or director must be promptly disclosed by our company to the extent required by applicable law, rule (including any rule of any applicable stock exchange) or regulation.

12. Reporting any Illegal or Unethical Behavior

     Our company desires to promote ethical behavior. Employees are encouraged to talk to supervisors, managers or other appropriate personnel when in doubt about the best course of action in a particular situation. Additionally, employees should promptly report violations of laws, rules, regulations or this Code to our company’s president or general counsel. Any report or allegation of a violation of applicable laws, rules, regulations or this Code need not be signed and may be sent anonymously. All reports of violations of this Code, including reports sent anonymously, will be promptly investigated and, if found to be accurate, acted upon in a timely manner. If any report of wrongdoing relates to accounting or financial reporting matters, or relates to persons involved in the development or implementation of our company’s system of internal controls, a copy of the report will be promptly provided to the chairman of the Audit Committee of the Board of Directors, which may participate in the investigation and resolution of the matter. It is the policy of our company not to allow actual or threatened retaliation, harassment or discrimination due to reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct.

13. Compliance Standards and Procedures

     This Code is intended as a statement of basic principles and standards and does not include specific rules that apply to every situation. Its contents have to be viewed within the framework of our company’s other policies, practices, instructions and the requirements of the law. This Code is in addition to other policies, practices or instructions of our company that must be observed. Moreover, the absence of a specific corporate policy, practice or instruction covering a particular situation does not relieve you of the responsibility for exercising the highest ethical standards applicable to the circumstances.

     In some situations, it is difficult to know right from wrong. Because this Code does not anticipate every situation that will arise, it is important that each of you approach a new question or problem in a deliberate fashion:

(a)	Determine if all facts are known.
(b)	Determine what is the specific conduct or action in question.

(c)	Clarify responsibilities and roles.
(d)	Discuss the problem with a supervisor.
(e)	Seek help from other resources such as other management personnel or our company’s legal department.
(f)	Seek guidance before taking any action that you believe may be unethical or dishonest.

You will be governed by the following compliance standards:

•   You are personally responsible for your own conduct and for complying with all provisions of this Code and for properly reporting known or suspected violations;

•   If you are a supervisor, manager, director or officer, you must use your best efforts to ensure that employees understand and comply with this Code;

•   No one has the authority or right to order, request or even influence you to violate this Code or the law; a request or order from another person will not be an excuse for your violation of this Code;

•   Any attempt by you to induce another director, officer or employee of our company to violate this Code, whether successful or not, is itself a violation of this Code and may be a violation of law;

•   Any retaliation or threat of retaliation against any director, officer or employee of our company for refusing to violate this Code, or for reporting in good faith the violation or suspected violation of this Code, is itself a violation of this Code and may be a violation of law; and

•   Our company expects that every reported violation of this Code will be investigated.

     Violation of any of the standards contained in this Code, or in any other policy, practice or instruction of our company, can result in disciplinary actions, including dismissal and civil or criminal action against the violator. This Code should not be construed as a contract of employment and does not change any person’s status as an at-will employee.

     This Code is for the benefit of our company, and no other person is entitled to enforce this Code. This Code does not, and should not be construed to, create any private cause of action or remedy in any other person for a violation of the Code.

8

     The name, address, telephone number, facsimile number and e-mail address of each person designated to receive and take action upon notices or inquiries under this Code is set forth below:

Thomas J. Corcoran, Jr.	Lawrence D. Robinson	Barbara Lacy
President & Chief Executive   Officer	Executive Vice President &   General Counsel	Vice President and   Office Manager
FelCor Lodging Trust Incorporated	FelCor Lodging Trust Incorporated	FelCor Lodging Trust Incorporated
545 E. John Carpenter Freeway	545 E. John Carpenter Freeway	545 E. John Carpenter Freeway
Suite 1300	Suite 1300	Suite 1300
Irving, Texas 75062	Irving, Texas 75062	Irving, Texas 75062
Phone: (972) 444-4901	Phone: (972) 444-4908	Phone: (972) 444-4921
Fax: (972) 444-4949	Fax: (972) 444-4949	Fax: (972)
e-mail: tcorcoran@felcor.com	e-mail: lrobinson@felcor.com	e-mail: blacy@felcor.com

Richard S. Ellwood	Robert W. Dockery
Chairman, Corporate Governance	Outside Legal Counsel
and Nominating Committee	Jenkens & Gilchrist, P.C.
12 Auldwood Lane	1445 Ross Avenue, Suite 3200
Rumson, New Jersey 07760	Dallas, Texas 75202
Phone: (732) 842-6464	Phone: (214) 855-4163
Fax: (732) 842-6473	Fax: (214) 855-4300
e-mail: rsellwood@aol.com	e-mail: rdockery@jenkens.com

9

EX-21.1

EXHIBIT 21.1

LIST OF THE SUBSIDIARIES OF FELCOR LODGING TRUST INCORPORATED
(as of December 31, 2004)

	Name	State and Form of Organization
1.	BHR Canada Tenant Company	Nova Scotia, Canada – Unlimited Liability Company
2.	BHR Hotels Finance, Inc.	Delaware – Corporation
3.	BHR Lodging Tenant Company	Delaware – Corporation
4.	BHR Operations, L.L.C.	Delaware – Limited Liability Company
5.	BHR Salt Lake Tenant Company, L.L.C.	Delaware – Limited Liability Company
6.	BHR Texas Leasing GP, L.L.C.	Delaware – Limited Liability Company
7.	BHR Texas Leasing, L.P.	Delaware – Limited Partnership
8.	Brighton at Kingston Plantation, L.L.C.	Delaware – Limited Liability Company
9.	Center City Hotel Associates	Pennsylvania – Limited Partnership
10.	DJONT Leasing, L.L.C.	Delaware – Limited Liability Company
11.	DJONT Operations, L.L.C.	Delaware – Limited Liability Company
12.	DJONT/CMB Buckhead Leasing, L.L.C.	Delaware – Limited Liability Company
13.	DJONT/CMB Corpus Leasing, L.L.C.	Delaware – Limited Liability Company
14.	DJONT/CMB Deerfield Leasing, L.L.C.	Delaware – Limited Liability Company
15.	DJONT/CMB FCOAM, L.L.C.	Delaware – Limited Liability Company
16.	DJONT/CMB New Orleans Leasing, L.L.C.	Delaware – Limited Liability Company
17.	DJONT/CMB Orsouth Leasing, L.L.C.	Delaware – Limited Liability Company
18.	DJONT/CMB Piscataway Leasing, L.L.C.	Delaware – Limited Liability Company
19.	DJONT/CMB SSF Leasing, L.L.C.	Delaware – Limited Liability Company
20.	DJONT/EPT Leasing, L.L.C.	Delaware – Limited Liability Company
21.	DJONT/EPT Manager, Inc.	Delaware – Corporation
	(f/k/a DJONT/Promus Manager, Inc.)
22.	DJONT/JPM Atlanta CP Leasing, L.L.C.	Delaware – Limited Liability Company
23.	DJONT/JPM Atlanta ES Leasing, L.L.C.	Delaware – Limited Liability Company
24.	DJONT/JPM Austin HI Leasing, L.P.	Delaware – Limited Partnership

-1-

	Name	State and Form of Organization
25.	DJONT/JPM Austin HI Tenant Co., L.L.C.	Delaware – Limited Liability Company
26.	DJONT/JPM Austin Leasing, L.P.	Delaware – Limited Partnership
27.	DJONT/JPM Austin Tenant Co., L.L.C.	Delaware – Limited Liability Company
28.	DJONT/JPM Boca Raton Leasing, L.L.C.	Delaware – Limited Liability Company
29.	DJONT/JPM Brunswick Leasing, L.L.C.	Delaware – Limited Liability Company
30.	DJONT/JPM BWI Leasing, L.L.C.	Delaware – Limited Liability Company
31.	DJONT/JPM Denver Leasing, L.L.C.	Delaware – Limited Liability Company
32.	DJONT/JPM Holdings, L.L.C.	Delaware – Limited Liability Company
33.	DJONT/JPM LBV Leasing, L.L.C.	Delaware – Limited Liability Company
34.	DJONT/JPM Leasing, L.L.C.	Delaware – Limited Liability Company
35.	DJONT/JPM Mandalay Leasing, L.L.C.	Delaware – Limited Liability Company
36.	DJONT/JPM Orlando I-Drive Leasing, L.L.C.	Delaware – Limited Liability Company
37.	DJONT/JPM Orlando Leasing, L.L.C.	Delaware – Limited Liability Company
38.	DJONT/JPM Phoenix Leasing, L.L.C.	Delaware – Limited Liability Company
39.	DJONT/JPM Tenant Co., L.L.C.	Delaware – Limited Liability Company
40.	DJONT/JPM Troy Leasing, L.L.C.	Delaware – Limited Liability Company
41.	DJONT/JPM Wilmington Leasing, L.L.C.	Delaware – Limited Liability Company
42.	E.S. Charlotte Limited Partnership	Minnesota – Limited Partnership
43.	E.S. North, an Indiana Limited Partnership	Indiana – Limited Partnership
44.	EPT Atlanta-Perimeter Center Limited Partnership	Delaware – Limited Partnership
45.	EPT Austin Limited Partnership	Delaware – Limited Partnership
46.	EPT Covina Limited Partnership	Delaware – Limited Partnership
47.	EPT Kansas City Limited Partnership	Delaware – Limited Partnership
48.	EPT Meadowlands Limited Partnership	Delaware – Limited Partnership
49.	EPT Overland Park Limited Partnership	Delaware – Limited Partnership
50.	EPT Raleigh Limited Partnership	Delaware – Limited Partnership
51.	EPT San Antonio Limited Partnership	Delaware – Limited Partnership

-2-

	Name	State and Form of Organization
52.	FCH/DT BWI Holdings, L.P.	Delaware – Limited Partnership
	(f/k/a B.D. Eastrich BWI No. 1 Limited Partnership)
53.	FCH/DT BWI Hotel, L.L.C.	Delaware – Limited Liability Company
54.	FCH/DT Holdings, L.P.	Delaware – Limited Partnership
55.	FCH/DT Hotels, L.L.C.	Delaware – Limited Liability Company
56.	FCH/DT Leasing, L.L.C.	Delaware – Limited Liability Company
57.	FCH/DT Leasing II, L.L.C.	Delaware – Limited Liability Company
58.	FCH/HHC Hotels, L.L.C.	Delaware – Limited Liability Company
59.	FCH/HHC Leasing, L.L.C.	Delaware – Limited Liability Company
60.	FCH/IHC Atlanta Hotels, L.L.C.	Delaware – Limited Liability Company
61.	FCH/IHC Atlanta Leasing, L.L.C.	Delaware – Limited Liability Company
62.	FCH/IHC Dallas Holdings, L.L.C.	Delaware – Limited Liability Company
63.	FCH/IHC Dallas Hotels, L.P.	Delaware – Limited Partnership
64.	FCH/IHC Dallas Leasing, L.P.	Delaware – Limited Partnership
65.	FCH/IHC Dallas Leasing GP, L.L.C.	Delaware – Limited Liability Company
66.	FCH/IHC Hotels, L.P.	Delaware – Limited Partnership
67.	FCH/IHC Houston Holdings, L.L.C.	Delaware – Limited Liability Company
68.	FCH/IHC Houston Hotels, L.P.	Delaware – Limited Partnership
69.	FCH/IHC Houston Leasing, L.P.	Delaware – Limited Partnership
70.	FCH/IHC Houston Leasing GP, L.L.C.	Delaware – Limited Liability Company
71.	FCH/IHC I-10 Holdings, L.L.C.	Delaware – Limited Liability Company
72.	FCH/IHC I-10 Hotels, L.P.	Delaware – Limited Partnership
73.	FCH/IHC I-10 Leasing, L.P.	Delaware – Limited Partnership
74.	FCH/IHC I-10 Leasing GP, L.L.C.	Delaware – Limited Liability Company
75.	FCH/IHC Leasing, L.P.	Delaware – Limited Partnership
76.	FCH/IHC Scottsdale Hotels, L.L.C.	Delaware – Limited Liability Company
77.	FCH/IHC Scottsdale Leasing, L.L.C.	Delaware – Limited Liability Company

-3-

	Name	State and Form of Organization
78.	FCH/JVEIGHT Leasing, L.L.C.	Delaware – Limited Liability Company
	(f/k/a FCH/Interstate Leasing, L.L.C. and
	FCH/Deerfield Development Co., L.L.C.)
79.	FCH/PSH, L.P.	Pennsylvania – Limited Partnership
	(f/k/a Rouse & Associates-SHS)
80.	FCH/SH Leasing, L.L.C.	Delaware – Limited Liability Company
81.	FCH/SH Leasing II, L.L.C.	Delaware – Limited Liability Company
82.	FelCor Airport Utilities, L.L.C.	Delaware – Limited Liability Company
83.	FelCor Canada Co.	Nova Scotia, Canada – Unlimited Liability Company
84.	FelCor Canada Holding GP, L.L.C.	Delaware – Limited Liability Company
85.	FelCor Canada Holding, L.P.	Delaware – Limited Partnership
86.	FelCor Chat-Lem, L.L.C.	Delaware – Limited Liability Company
87.	FelCor Country Villa Hotel, L.L.C.	Delaware – Limited Liability Company
88.	FelCor Eight Hotels, L.L.C.	Delaware – Limited Liability Company
89.	FelCor HHCL Company, L.L.C.	Delaware – Limited Liability Company
90.	FelCor Holdings Trust	Massachusetts – Trust
91.	FelCor Hospitality Company, L.L.C.	Delaware – Limited Liability Company
92.	FelCor Hospitality Holding Company, L.L.C.	Delaware – Limited Liability Company
93.	FelCor Hotel Asset Company, L.L.C.	Delaware – Limited Liability Company
94.	FelCor Hotel Company, Ltd.	Texas – Limited Partnership
95.	FelCor/Hotel Company II, Ltd.	Texas – Limited Partnership
96.	FelCor Hotel Operating Company, L.L.C.	Delaware – Limited Liability Company
97.	FelCor Hotels Financing I, L.L.C.	Delaware – Limited Liability Company
98.	FelCor Hotels Financing II, L.L.C.	Delaware – Limited Liability Company
99.	FelCor Hotels GenPar, L.L.C.	Delaware – Limited Liability Company
100.	FelCor Hotels GenPar II, L.L.C.	Delaware – Limited Liability Company
101.	FelCor Hotels Investments I, Ltd.	Texas – Limited Partnership
102.	FelCor Hotels Investments II, Ltd.	Texas – Limited Partnership
103.	FelCor Hotels LimPar, L.L.C.	Delaware – Limited Liability Company

-4-

	Name	State and Form of Organization
104.	FelCor Lodging Company, L.L.C.	Delaware – Limited Liability Company
105.	FelCor Lodging Holding Company, L.L.C.	Delaware – Limited Liability Company
106.	FelCor Lodging Limited Partnership	Delaware – Limited Partnership
	(f/k/a FelCor Suites Limited Partnership)
107.	FelCor Marshall Motels, L.L.C.	Delaware – Limited Liability Company
108.	FelCor Moline Hotel, L.L.C.	Delaware – Limited Liability Company
109.	FelCor Nevada Holdings, L.L.C.	Nevada – Limited Liability Company
110.	FelCor Omaha Hotel Company, L.L.C.	Delaware – Limited Liability Company
111.	FelCor Pennsylvania Company, L.L.C.	Delaware – Limited Liability Company
112.	FelCor Philadelphia Center, L.L.C.	Delaware – Limited Liability Company
113.	FelCor Salt Lake, L.L.C.	Delaware – Limited Liability Company
114.	FelCor St. Louis Company, L.L.C.	Delaware – Limited Liability Company
115.	FelCor TRS Holdings, L.P.	Delaware – Limited Partnership
116.	FelCor TRS I, L.L.C.	Delaware – Limited Liability Company
117.	FelCor TRS II, Inc.	Delaware – Corporation
118.	FelCor/Charlotte Hotel, L.L.C.	Delaware – Limited Liability Company
119.	FelCor/CMB Buckhead Hotel, L.L.C.	Delaware – Limited Liability Company
120.	FelCor/CMB Corpus Holdings, L.P.	Delaware – Limited Partnership
121.	FelCor/CMB Corpus Hotel, L.L.C.	Delaware – Limited Liability Company
122.	FelCor/CMB Deerfield Hotel, L.L.C.	Delaware – Limited Liability Company
123.	FelCor/CMB Marlborough Hotel, L.L.C.	Delaware – Limited Liability Company
124.	FelCor/CMB New Orleans Hotel, L.L.C.	Delaware – Limited Liability Company
125.	FelCor/CMB Orsouth Holdings, L.P.	Delaware – Limited Partnership
126.	FelCor/CMB Orsouth Hotel, L.L.C.	Delaware – Limited Liability Company
127.	FelCor/CMB Piscataway Hotel, L.L.C.	Delaware – Limited Liability Company
128.	FelCor/CMB SSF Holdings, L.P.	Delaware – Limited Partnership
129.	FelCor/CMB SSF Hotel, L.L.C.	Delaware – Limited Liability Company

-5-

	Name	State and Form of Organization
130.	FelCor/CSS Holdings, L.P.	Delaware – Limited Partnership
131.	FelCor/CSS Hotels, L.L.C.	Delaware – Limited Liability Company
132.	FelCor/Indianapolis Hotel, L.L.C.	Delaware – Limited Liability Company
133.	FelCor/JPM Atlanta CP Hotel, L.L.C.	Delaware – Limited Liability Company
134.	FelCor/JPM Atlanta ES Hotel, L.L.C.	Delaware – Limited Liability Company
135.	FelCor/JPM Austin HI Holdings, L.P.	Delaware – Limited Partnership
136.	FelCor/JPM Austin HI Hotel, L.L.C.	Delaware – Limited Liability Company
137.	FelCor/JPM Austin Holdings, L.P.	Delaware – Limited Partnership
138.	FelCor/JPM Austin Hotel, L.L.C.	Delaware – Limited Liability Company
139.	FelCor/JPM Boca Raton Hotel, L.L.C.	Delaware – Limited Liability Company
140.	FelCor/JPM Brunswick Hotel, L.L.C.	Delaware – Limited Liability Company
141.	FelCor/JPM BWI Hotel, L.L.C.	Delaware – Limited Liability Company
142.	FelCor/JPM Denver Hotel, L.L.C.	Delaware – Limited Liability Company
143.	FelCor/JPM Holdings, L.L.C.	Delaware – Limited Liability Company
144.	FelCor/JPM Hotels, L.L.C.	Delaware – Limited Liability Company
145.	FelCor/JPM LBV Hotel, L.L.C.	Delaware – Limited Liability Company
146.	FelCor/JPM Lodging Co., L.L.C.	Delaware – Limited Liability Company
147.	FelCor/JPM Mandalay Hotel, L.L.C.	Delaware – Limited Liability Company
148.	FelCor/JPM Nashville Hotel, L.L.C.	Delaware – Limited Liability Company
149.	FelCor/JPM Orlando Hotel, L.L.C.	Delaware – Limited Liability Company
150.	FelCor/JPM Orlando I-Drive Hotel, L.L.C.	Delaware – Limited Liability Company
151.	FelCor/JPM Phoenix Hotel, L.L.C.	Delaware – Limited Liability Company
152.	FelCor/JPM Troy Hotel, L.L.C.	Delaware – Limited Liability Company
153.	FelCor/JPM Wilmington Hotel, L.L.C.	Delaware – Limited Liability Company
154.	FelCor/JPM Wilmington Leasing, L.L.C.	Delaware – Limited Liability Company
155.	FelCor/LAX Holdings, L.P.	Delaware – Limited Partnership
156.	FelCor/LAX Hotels, L.L.C.	Delaware – Limited Liability Company

-6-

	Name	State and Form of Organization
157.	FelCor/MM Holdings, L.P.	Delaware – Limited Partnership
158.	FelCor/MM Hotels, L.L.C.	Delaware – Limited Liability Company
159.	FelCor/MM S-7 Holdings, L.P.	Delaware – Limited Partnership
160.	FelCor/MM S-7 Hotels, L.L.C.	Delaware – Limited Liability Company
161.	FelCor/Nashville Hotel, L.L.C.	Delaware – Limited Liability Company
162.	FelCor/New Orleans Annex, L.L.C.	Delaware – Limited Liability Company
163.	FelCor/RGC, L.L.C.	Texas – Limited Liability Company
164.	FelCor/St. Paul Holdings, L.P.	Delaware – Limited Partnership
165.	FelCor/Tysons Corner Hotel Company, L.L.C.	Delaware – Limited Liability Company
166.	FHAC Nevada Holdings, L.L.C.	Nevada – Limited Liability Company
167.	FHAC Texas Holdings, L.P.	Texas – Limited Partnership
168.	Grande Palms, L.L.C.	Delaware – Limited Liability Company
169.	HHHC GenPar, L.P.	Delaware – Limited Partnership
170.	HI Chat-Lem/Iowa-New Orleans Joint Venture	Louisiana – General Partnership
171.	Kingston Plantation Development Corp.	Delaware – Corporation
172.	Los Angeles International Airport Hotel Associates, a Texas Limited Partnership	Texas – Limited Partnership
173.	Margate Towers at Kingston Plantation, L.L.C.	Delaware – Limited Liability Company
174.	MHV Joint Venture	Texas – General Partnership
175.	Myrtle Beach Hotels, L.L.C.	Delaware – Limited Liability Company
176.	Park Central Joint Venture	Texas – General Partnership
177.	Promus/FCH Condominium Company, L.L.C.	Delaware – Limited Liability Company
178.	Promus/FCH Development Company, L.L.C.	Delaware – Limited Liability Company
179.	Promus/FelCor Hotels, L.L.C.	Delaware – Limited Liability Company
180.	Promus/FelCor Lombard Venture	Illinois – General Partnership
181.	Promus/FelCor Manager, Inc.	Delaware – Corporation
182.	Promus/FelCor Parsippany Venture	New Jersey – General Partnership
183.	Promus/FelCor San Antonio Venture	Texas – General Partnership

-7-

	Name	State and Form of Organization
184.	Special Remote I, Inc.	Delaware – Corporation
185.	Suites St. Louis Limited Partnership	Texas – Limited Partnership
186.	TRS/DT Holdings, L.P.	Delaware – Limited Partnership
187.	TRS/DT Hotel, L.L.C.	Delaware – Limited Liability Company
188.	Tysons Corner Hotel Company, L.L.C.	Delaware – Limited Liability Company

-8-

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-04947, 333-25717, 333-46357, 333-50509, 333-62599, and 333-122221) and Form S-8 (File Nos. 333-32579, 333-66041, 333-69869 and 333-102662) of FelCor Lodging Trust Incorporated of our report dated March 2, 2005, relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers LLP
Dallas, Texas
March 2, 2005

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Thomas J. Corcoran, Jr., certify that:

1.   I have reviewed this annual report on Form 10-K of FelCor Lodging Trust Incorporated;

2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2005

/s/ Thomas J.Corcoran, Jr.

Thomas J. Corcoran, Jr.

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Richard A. Smith, certify that:

1.   I have reviewed this annual report on Form 10-K of FelCor Lodging Trust Incorporated;

2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2005

/s/ Richard A. Smith

Richard A. Smith

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of FelCor Lodging Trust Incorporated (the “Registrant”) on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report), the undersigned hereby certifies, in the capacity as indicated below and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

March 2, 2005	/s/Thomas J. Corcoran, Jr.
	Thomas J. Corcoran, Jr.
	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of FelCor Lodging Trust Incorporated (the “Registrant”) on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report), the undersigned hereby certifies, in the capacity as indicated below and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

March 2, 2005	/s/Richard A. Smith
	Richard A. Smith
	Chief Financial Officer