File Pursuant to Rule 424(b)(3)
Registration Number 333-62510
PROSPECTUS

FELCOR LODGING LIMITED PARTNERSHIP

COMMON UNITS OF LIMITED PARTNERSHIP INTEREST
SERIES C PREFERRED UNITS OF LIMITED PARTNERSHIP INTEREST
SERIES D PREFERRED UNITS OF LIMITED PARTNERSHIP INTEREST

This prospectus relates to the issuance by us, FelCor Lodging Limited
Partnership, or FelCor Partnership, of units of limited partnership interest to
holders of units of limited partnership interest in MeriStar Hospitality
Operating Partnership, L.P., or MeriStar Partnership. This issuance will result
from the merger of one of our wholly-owned subsidiaries with and into MeriStar
Partnership under a merger agreement. After this partnership merger, we will
own, either directly or indirectly, all of the interests in MeriStar
Partnership. MeriStar Partnership will be renamed "FelCor Hospitality Operating
Partnership, L.P."

The partnership merger is conditioned on the completion of the merger of
MeriStar Partnership's general partner, MeriStar Hospitality Corporation, or
MeriStar, with and into our general partner, FelCor Lodging Trust Incorporated,
or FelCor, under the same merger agreement. The completion of that merger and
the partnership merger are subject to satisfaction of a number of conditions,
including the approvals of the common stockholders of both FelCor and MeriStar.
FelCor and MeriStar have mailed to their common stockholders a joint proxy
statement/prospectus to obtain their approval of the merger agreement and the
merger. No vote or consent of our limited partners or of the limited partners of
MeriStar Partnership is required or being solicited to complete the merger or
the partnership merger. Our general partner FelCor and MeriStar Partnership's
general partner MeriStar have approved the partnership merger.

In the partnership merger:

- each common unit in MeriStar Partnership, other than units held by FelCor
and its subsidiaries, will be exchanged for $4.60 in cash and 0.784 of
our common units;

- each Class C preferred unit in MeriStar Partnership will be exchanged for
$4.60 in cash and 0.784 of our Series C preferred units;

- each Class D preferred unit in MeriStar Partnership will be exchanged for
one of our Series D preferred units;

- each profits-only partnership unit in MeriStar Partnership, other than
unvested units, will be exchanged for $4.60 in cash and 0.784 of our
common units, and any unvested units will be canceled;

- each common unit in MeriStar held by FelCor and its subsidiaries will
remain outstanding; and

- cash will be paid instead of issuing fractional units.

There is currently no established trading market for any of our units of
limited partnership interest. We do not expect that a trading market for the
units will develop following the completion of the merger. Our common units and
Series C preferred units issued in the partnership merger will be redeemable by
their holders for shares of FelCor common stock or the cash market value of
those shares, at the election of FelCor. FelCor's common stock is traded on the
New York Stock Exchange under the trading symbol "FCH."

WE ENCOURAGE YOU TO READ THIS ENTIRE PROSPECTUS CAREFULLY. WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. IF YOU ALSO
HOLD SHARES OF MERISTAR COMMON STOCK, PLEASE REFER TO THE JOINT PROXY
STATEMENT/PROSPECTUS OF FELCOR AND MERISTAR WITH RESPECT TO THOSE SHARES.

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

FOR A DISCUSSION OF MATERIAL RISK FACTORS, SEE "RISK FACTORS" BEGINNING ON
PAGE 27 OF THIS PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

The date of this prospectus is September 12, 2001.
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TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

Summary..................................................... 1
The Partnerships.......................................... 1
The Partnership Merger.................................... 2
The Merger Agreement...................................... 14
Unaudited Pro Forma Condensed Combined Financial Data..... 20
Selected Historical Consolidated Financial Information.... 22
Equivalent Per Unit Data.................................. 26
Risk Factors................................................ 27
A Warning About Forward-looking Statements.................. 44
The Combined Partnerships................................... 45
General................................................... 45
Relationship with MeriStar Hotels & Resorts............... 46
Indebtedness, Liquidity and Financial Resources........... 47
Management................................................ 48
Management's Discussion and Analysis of Financial Condition
and Results of Operations of FelCor Partnership........... 49
General................................................... 49
Acquisition of Tenants.................................... 50
Proposed Merger........................................... 51
Highlights 2001........................................... 52
Capitalization 2001....................................... 52
Results of Operations..................................... 53
Funds from Operations and EBITDA.......................... 56
The Hotels................................................ 58
Renovations, Redevelopments and Rebrandings............... 62
Liquidity and Capital Resources........................... 63
Inflation................................................. 66
Seasonality............................................... 66
Recently Issued Statements of Financial Accounting
Standards.............................................. 66
Quantitative and Qualitative Disclosures About Market
Risk................................................... 67
Management's Discussion and Analysis of Financial Condition
and Results of Operations of MeriStar Partnership......... 68
General................................................... 68
Financial Condition....................................... 69
Results of Operations..................................... 70
Liquidity and Capital Resources........................... 73
Seasonality............................................... 74
Quantitative and Qualitative Disclosures About Market
Risk................................................... 75
Business and Properties of FelCor Partnership............... 77
General................................................... 77
The Industry.............................................. 77
Business Strategy......................................... 78
Hotels Held for Sale...................................... 79
Hotel Brands.............................................. 80
Hotel Portfolio........................................... 83
Management Agreements..................................... 86
The Leases................................................ 87
Competition............................................... 87
Environmental Matters..................................... 88
Tax Status................................................ 88
Employees................................................. 88
Personnel and Office Sharing Arrangements................. 88
Legal Proceedings......................................... 89
</Table>

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<Table>
<Caption>
PAGE
----

Business and Properties of MeriStar Partnership............. 90
General................................................... 90
Acquisition Strategy...................................... 90
The Intercompany Agreement................................ 91
Competition............................................... 92
Employees................................................. 92
Franchises................................................ 92
Governmental Regulation................................... 93
Properties................................................ 94
Legal Proceedings......................................... 99
Management of FelCor Partnership Following the Partnership
Merger.................................................... 100
Directors and Executive Officers.......................... 100
Executive Compensation.................................... 104
Compensation Committee Interlocks......................... 106
Director Compensation..................................... 106
Certain Relationships and Related Transactions.............. 107
Relationships and Transactions with Former Lessees........ 107
Sharing of Offices and Employees.......................... 108
Transactions Resulting from the Merger.................... 108
Security Ownership of Principal Unitholders and
Management................................................ 109
Security Ownership of Principal Unitholders and
Management............................................. 109
Security Ownership of FelCor by Management................ 110
Security Ownership of MeriStar Partnership by Principal
Unitholders............................................ 112
Security Ownership of MeriStar Principal Stockholders and
Management............................................. 112
The Mergers................................................. 114
Background of the Merger and Partnership Merger........... 114
FelCor's Reasons for the Merger; Approval by FelCor
Board.................................................. 117
Opinions of FelCor's Financial Advisors................... 119
MeriStar's Reasons for the Merger; Approval by MeriStar
Board.................................................. 132
Opinion of MeriStar's Financial Advisor................... 134
Interests of Certain Persons in the Merger and Partnership
Merger................................................. 140
Regulatory Approvals...................................... 142
Accounting Treatment...................................... 142
Restrictions on Resales by Affiliates..................... 142
No Appraisal Rights....................................... 143
The Merger Agreement........................................ 144
General................................................... 144
Treatment of MeriStar Partnership Units in the Partnership
Merger................................................. 144
Treatment of MeriStar Common Stock and FelCor Stock in the
Merger................................................. 145
Contributions by FelCor................................... 145
Indebtedness to Fund Cash Consideration and Bottom
Guarantees............................................. 145
Issuance of Our Units and Payment of Cash Consideration... 146
Distributions Prior to Closing............................ 146
Representations and Warranties............................ 147
Treatment of MeriStar Employees, Stock Options and Other
Benefit Plans.......................................... 148
Certain Covenants......................................... 148
Conditions to the Merger.................................. 153
Termination of the Merger Agreement....................... 155
Expenses and Termination Fees............................. 156
Comparative Distribution Information........................ 157
Comparative Per Share Market Prices and Dividend
Information............................................... 159
Market Information........................................ 159
Dividend Information...................................... 159
Unaudited Pro Forma Combined Financial Information.......... 161
</Table>

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<Table>
<Caption>
PAGE
----

Pro Forma Combined Statements of Operations............... 161
Description of the Partnership Agreement and Units of FelCor
Partnership............................................... 179
Management................................................ 179
Transferability of Interests.............................. 179
Capital Contributions..................................... 179
Operations................................................ 179
Term...................................................... 180
Capitalization............................................ 180
Issuance of Partnership Interests......................... 180
Outstanding Units of FelCor Partnership................... 180
New Series C and D Preferred Units........................ 183
Indemnification........................................... 185
Comparison of Unitholder Rights............................. 186
Issuance of Additional Partnership Interests.............. 186
Distributions............................................. 187
Redemption................................................ 188
Transfers................................................. 189
Amendment of the Partnership Agreements................... 190
Sale of Substantially All of the Partnership Assets....... 191
Meetings.................................................. 191
United States Federal Income Tax Considerations............. 192
Overview.................................................. 192
Tax Status of FelCor Partnership and MeriStar
Partnership............................................ 193
Tax Consequences of the Partnership Merger to MeriStar
Partnership Unitholders................................ 194
Tax Consequences of the Partnership Merger to FelCor
Partnership and MeriStar Partnership................... 203
Effect of Subsequent Events on Holders of FelCor
Partnership Units...................................... 203
Tax Consequences of Ownership of FelCor Partnership Units
After the Partnership Merger........................... 205
Description of FelCor Capital Stock......................... 212
Comparison of Stockholder Rights............................ 218
Legal Matters............................................... 219
Experts..................................................... 220
Where Can You Find More Information......................... 220
What Information You Should Rely On......................... 221
Index to Financial Statements............................... F-1
Appendix A -- Agreement and Plan of Merger, as amended
Appendix B -- Opinion of Deutsche Banc Alex. Brown Inc.
Appendix C -- Opinion of J.P. Morgan Securities Inc.
Appendix D -- Opinion of Salomon Smith Barney Inc.
</Table>

This prospectus contains registered trademarks and servicemarks owned or
licensed by companies other than MeriStar Partnership or us, including but not
limited to Best Western(R), Bristol House(R), Courtyard by Marriott(R), Crowne
Plaza(R), Disney(R), Doral(R), Doubletree(R), Doubletree Guest Suites(R),
Embassy Suites(R), Fairfield Inn(R), Four Points by Sheraton(R), Hampton Inn(R),
Hampton Inn & Suites(R), Harvey Hotel(R), Hilton(R), Hilton HHonors(R), Holiday
Inn(R), Holiday Inn Express(R), Holiday Inn Select(R), Homewood Suites(R) by
Hilton, Howard Johnson(R), Inter-Continental(R), Marriott(R), Radisson(R),
Ramada(R), Renaissance(R), Sheraton(R), Sheraton Suites(R), Six Continents(TM),
Walt Disney World(R), Westin(R) and Wyndham(R).

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SUMMARY

This summary highlights selected information from this prospectus. This
summary does not contain all of the information that may be important to you. We
encourage you to carefully read this entire prospectus and the documents to
which we refer you. Unless otherwise specified, references to "we," "us" or
"our" refer to FelCor Lodging Limited Partnership, and references to "MeriStar
Partnership" refer to MeriStar Hospitality Operating Partnership, L.P. "On a pro
forma basis" refers to the pro forma adjustments set forth in the "Unaudited Pro
Forma Combined Financial Information" beginning on page 161 of this prospectus.
For more information about us, see "Where You Can Find More Information"
beginning on page 220. Some items in this summary refer to the pages where that
subject is discussed more fully.

THE PARTNERSHIPS

FELCOR LODGING LIMITED PARTNERSHIP
545 E. John Carpenter Frwy., Suite 1300
Irving, Texas 75062
Telephone: (972) 444-4900

FelCor Lodging Limited Partnership, a Delaware limited partnership,
principally is engaged in acquiring, owning, and leasing hotels and, on June 30,
2001, had ownership interests in 185 hotels in the United States and Canada,
with nearly 50,000 rooms and suites. Of these hotels, we own a 100% interest in
152 hotels, a 90% or greater interest in entities owning seven hotels, a 60%
interest in entities owning two hotels and a 50% interest in separate entities
owning 24 hotels. Fifteen of our hotels have been designated as held for sale.
We own the largest number of Embassy Suites, Crowne Plaza, Holiday Inn and
independently-owned Doubletree-branded hotels in the world. The controlling
interest in us is owned by FelCor Lodging Trust Incorporated, our sole general
partner. FelCor is one of the nation's largest hotel real estate investment
trusts and owns substantially all of its assets and conducts all of its
operations through us.

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Telephone: (202) 965-4455

MeriStar Hospitality Operating Partnership, L.P., a Delaware limited
partnership, owns a portfolio of primarily upscale, full-service hotels,
diversified geographically as well as by franchise and brand affiliations, in
the United States and Canada. MeriStar Partnership is the operating partnership
of MeriStar Hospitality Corporation, a real estate investment trust, which
operates all of its business through MeriStar Partnership. MeriStar is the sole
general partner of, and controls, MeriStar Partnership. As of June 30, 2001,
MeriStar Partnership owned 113 hotels with 28,877 rooms. The hotels are located
in major metropolitan areas or rapidly growing secondary markets and are well
located within these markets. A majority of the hotels are operated under
nationally recognized brand names such as Hilton, Sheraton, Westin, Marriott,
Radisson, Doubletree and Embassy Suites.

THE COMBINED PARTNERSHIPS

Following the partnership merger, on a consolidated basis, we and our new
subsidiary, MeriStar Partnership, which will be renamed FelCor Hospitality
Operating Partnership, L.P., will have ownership interests in 298 hotels and
approximately 78,000 rooms located in 39 states and Canada. Based on the per
share closing price of FelCor's common stock on August 30, 2001, the latest
practicable date before the mailing of this prospectus, FelCor, on a
consolidated basis subsequent to the merger and partnership merger, is expected
to have an equity market capitalization of approximately $1.6 billion, with
total debt of approximately $3.4 billion. After the partnership merger, we will
have geographic concentrations in Texas with 54 hotels, Florida with 37 hotels
and California with 32 hotels.

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THE PARTNERSHIP MERGER

GENERAL

This prospectus relates to the issuance of our units of limited partnership
interest to the unitholders of MeriStar Partnership as a result of the merger of
our wholly-owned subsidiary with and into MeriStar Partnership. MeriStar
Partnership will survive the partnership merger as one of our subsidiaries.
After the partnership merger, we will own all of the interests in MeriStar
Partnership, either directly or through intervening subsidiaries.

The partnership merger is governed by a merger agreement among FelCor,
MeriStar, MeriStar Partnership and us, a copy of which is attached as Appendix A
to this prospectus. We urge you to read carefully the merger agreement.

The partnership merger is conditioned on the completion of the merger of
MeriStar with and into FelCor under the merger agreement. The completion of that
merger and the partnership merger are subject to satisfaction of a number of
conditions, including the approvals of the common stockholders of both FelCor
and MeriStar. The boards of directors of FelCor and MeriStar have approved and
recommended the merger agreement and the merger for adoption by the common
stockholders of FelCor and MeriStar. They have also caused MeriStar and FelCor,
acting as general partners of MeriStar Partnership and us, to approve the
partnership merger. No vote or approval of our limited partners or the limited
partners of MeriStar Partnership is required or being solicited to complete the
partnership merger.

FelCor and MeriStar have mailed to their respective common stockholders a
joint proxy statement/ prospectus to obtain their approval of the merger
agreement and the merger.

DETERMINATION OF PARTNERSHIP MERGER CONSIDERATION

The terms of the partnership merger, including the partnership merger
consideration, were determined through an arms length negotiation. The parties
determined that the partnership merger consideration receivable by MeriStar
unitholders, because of their rights to exchange their units for shares of
MeriStar common stock, should parallel the merger consideration receivable by
MeriStar stockholders in the merger. The aggregate merger consideration per
share of MeriStar common stock was determined by representatives of FelCor and
MeriStar to be approximately 98% of a share of FelCor common stock, in arms
length negotiations based upon various pricing models, with particular emphasis
being placed on the relative contributions of FelCor and MeriStar to the
combined company's funds from operations and earnings before interest, taxes,
depreciation and amortization and taking into account MeriStar's higher debt
leverage. The allocation of the merger consideration between cash and stock was
determined to be 20% cash and 80% stock as the result of a compromise between
MeriStar's desire for a significant cash payment and FelCor's desire to limit
the amount of the additional leverage to be incurred by it as a result of the
merger. The $4.60 per share cash component was determined based on the
application of the agreed upon percentages to the then current market price of
FelCor's common stock. The 0.784 exchange ratio for the stock component of the
merger consideration resulted from multiplying 80% times the 98% of a share of
FelCor common stock determined to be the per share value of the aggregate merger
consideration.

WHAT MERISTAR UNITHOLDERS WILL RECEIVE (SEE PAGE 144)

In the partnership merger:

- each common unit in MeriStar Partnership, other than units held by FelCor
and its subsidiaries, will be exchanged for $4.60 in cash and 0.784 of
our common units;

- each Class C preferred unit in MeriStar Partnership will be exchanged for
$4.60 in cash and 0.784 of our Series C preferred units;

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- each Class D preferred unit in MeriStar Partnership will be exchanged for
one of our Series D preferred units;

- each profits-only partnership unit in MeriStar Partnership, other than
unvested units, will be exchanged for $4.60 in cash and 0.784 of our
common units, and any unvested units will be cancelled;

- each common unit in MeriStar held by FelCor and its subsidiaries will
remain outstanding; and

- cash will be paid instead of issuing fractional units.

There is currently no established trading market for any of our units of
limited partnership. We do not expect that a trading market for the units will
develop following the completion of the merger. Our limited partnership
agreement prohibits transfers of our units of limited partnership interest
without the consent of FelCor, our general partner.

SUMMARY OF THE TERMS OF OUR UNITS (SEE PAGE 179)

Following the partnership merger, we will be governed by our Second Amended
and Restated Agreement of Limited Partnership.

COMMON UNITS

Units to be Issued.................. 2,763,889 of our common units of
limited partnership interest will be
issued in the partnership merger.

Cash Distributions.................. Holders of common units will be
entitled to receive distributions in an
amount per unit equal to the cash
dividends paid per share of FelCor
common stock. We will pay these
distributions simultaneously with
dividends on FelCor common stock. Our
current quarterly distribution rate is
$0.55 per common unit. On a pro forma
combined equivalent basis, disregarding
the cash portion of the merger
consideration of $4.60 per MeriStar
unit, this rate would equal $0.43 for
each 0.784 of our common units issued
in the partnership merger in exchange
for an outstanding common unit of
MeriStar Partnership. MeriStar
Partnership's current quarterly
distribution rate is $0.505 per common
unit.

Optional Redemption................. Holders of common units will be
entitled to have us redeem each common
unit issued to them in the partnership
merger for an amount of cash equal to
the then average market price of a
share of FelCor common stock, or, at
FelCor's option, one share of FelCor
common stock.

Voting Rights....................... Management authority is vested in
FelCor, the sole general partner. The
holders of common units will only be
entitled to vote under limited
circumstances.

SERIES C PREFERRED UNITS

Units to be Issued.................. 755,954 of our Series C preferred units
of limited partnership interest.

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Cash Distributions.................. As is the case with current holders of
MeriStar Partnership Class C units,
holders of Series C preferred units
will be entitled to receive a quarterly
non-cumulative preferred distribution
equal to $0.5575 per unit until the
distribution rate on our common units
exceeds $0.5575 per unit. On a pro
forma combined equivalent basis,
disregarding the cash portion of the
merger consideration of $4.60 per
MeriStar unit, this distribution rate
would equal $0.437 for each 0.784 of
our Series C preferred units issued in
the partnership merger in exchange for
an outstanding Class C unit of MeriStar
Partnership.

Liquidation Preference.............. Holders of Series C preferred units
will not be entitled to preferred
distributions upon our liquidation,
dissolution or winding-up.

Optional Redemption................. Holders of Series C preferred units
will be entitled to have us redeem each
Series C preferred unit issued to them
in the partnership merger for an amount
of cash equal to the then average
market price of a share of FelCor
common stock, or, at FelCor's option,
for one share of FelCor common stock.

Automatic Conversion................ Once the dividend rate on our common
units exceeds $0.5575 per unit, the
Series C preferred units will
automatically convert into common units
on a one-for-one basis.

Voting Rights....................... Management authority is vested in
FelCor, the sole general partner. The
holders of Series C preferred units
will only be entitled to vote under
limited circumstances.

SERIES D PREFERRED UNITS

Units to be Issued.................. 392,157 of our Series D preferred units
of limited partnership interest.

Cash Distributions.................. Holders of the Series D preferred units
will be entitled to a 6.5% cumulative
annual preferred return on $22.16 per
unit, compounded quarterly to the
extent not paid on a current basis. On
a pro forma basis, this quarterly
distribution rate of $0.3601 per unit
would be the same as that for a
currently outstanding Class D unit of
MeriStar Partnership.

Liquidation Preference.............. Holders of Series D preferred units
will not be entitled to preferred
distributions upon our liquidation,
dissolution or winding-up.

Mandatory Redemption................ We may redeem each Series D preferred
unit at any time at a price of $22.16
in cash or, at our option, for $22.16
worth of FelCor common stock.

Optional Redemption................. Holders of Series D preferred units
have the option to require us to redeem
each Series D preferred unit

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at any time after April 1, 2004 at a
price of $22.16 in cash or, at the
holder's option, for $22.16 worth of
FelCor common stock.

Voting Rights....................... Management authority is vested in
FelCor, the sole general partner. The
holders of Series D preferred units
will only be entitled to vote under
limited circumstances.

APPROVAL BY FELCOR BOARD (SEE PAGE 117)

FELCOR'S REASONS FOR THE MERGER (SEE PAGE 117)

In determining to approve and recommend to FelCor stockholders the merger
agreement and the merger, the FelCor board considered the terms of the merger
agreement, the historical and prospective information concerning FelCor's and
MeriStar's businesses, operations and financial performance, including FelCor's
debt service, financial obligations, and earnings prospects, and considered,
among other factors, the following potentially positive material factors
resulting from or relating to the mergers:

- the increase in the geographic diversity of FelCor's hotels among
regions, the increase in revenue base and room count in key markets,
including East Coast markets, and the reduction of FelCor's dependence on
Texas;

- the increase in FelCor's hotel brand diversity;

- the expansion of FelCor's focus on the upscale and full service business
segments of the hotel industry;

- annual cost savings of approximately $5 million through net decreases in
corporate payroll, the closing and subletting of the MeriStar offices in
Washington, D.C. and the elimination of other duplicate overhead costs;

- improved hotel-level operations through active asset management across a
larger number of hotel rooms;

- enhancement and expansion of relationships with hotel brand owners;

- the fixed, non-adjustable amount of cash payable in the merger, which
reduces the number of shares to be issued in the merger at current market
prices, may benefit FelCor stockholders in the future;

- results of both a due diligence review of MeriStar and its assets, and
FelCor's management's assessment of the overall quality of MeriStar's
hotels;

- letters from the rating agencies indicating that, based upon the
information provided to them regarding the proposed merger and FelCor's
financing plans and subject to customary qualifications, they would
affirm FelCor's existing public debt ratings with a stable outlook; and

- opinions of FelCor's financial advisors that the consideration to be paid
to MeriStar common stockholders by FelCor under the merger agreement is
fair to FelCor.

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The FelCor board of directors also considered the following potentially
negative material factors in connection with its determination:

- the debt of the combined company, on a pro forma basis at March 31, 2001,
as a percentage of investment in hotel assets was 50%, which was greater
than FelCor's corresponding historical leverage at March 31, 2001, of
39.7%;

- the combined company's continued concentration of hotels in some markets,
including California, Florida and Texas, which were expected to represent
approximately 18.1%, 16.2% and 15.4% of the combined company's pro forma
revenues for the twelve months ended March 31, 2001;

- limits on future capital plans, share repurchases and asset acquisitions
which may be necessary to enable FelCor to reduce its indebtedness, as a
percentage of investment in hotel assets, to pre-merger levels;

- financing risks associated with the assumption of an aggregate of $877.8
million of MeriStar debt, including $377.8 million in mortgage debt and
$500.0 million in MeriStar senior notes as of March 31, 2001;

- refinancing risks associated with the satisfaction of an aggregate of
$801.3 million of MeriStar debt, including the repayment of $442.0
million outstanding at March 31, 2001 under MeriStar's revolving credit
facilities, and the purchase of $154.3 million in MeriStar convertible
subordinated notes and $205.0 million in MeriStar subordinated notes;

- the significant cost, estimated at $59 million, involved in completing
the merger and related financings as well as the diversion of management
time and effort;

- the limitation, resulting from MeriStar's existing agreements, on the
ability of the combined company to use a hotel manager other than
MeriStar Hotels & Resorts to manage any hotels not managed by hotel brand
owners;

- the potential conflicts of interest which may arise from the continuing
contractual relationships with, and the payment of management and
termination fees to, MeriStar Hotels & Resorts, of which Paul W. Whetsell
will continue to serve as Chief Executive Officer and a director and of
which Steven D. Jorns will continue to serve as a director;

- the risk that some of the anticipated benefits of the merger may not be
realized due to changes in the hotel market in general and potential
difficulties or costs in integrating the two companies; and

- the risk that termination fees and expenses totaling up to $40 million
may be payable by FelCor under some circumstances.

APPROVAL BY MERISTAR BOARD (SEE PAGE 132)

As the general partner, MeriStar believes that the merger and partnership
merger are in the best interests of MeriStar, MeriStar Partnership and their
respective security holders. The MeriStar board of directors has approved the
merger agreement and the merger and has directed MeriStar, in its capacity as
the general partner of MeriStar Partnership, to approve the partnership merger.
The MeriStar board of directors has recommended that MeriStar common
stockholders approve the merger agreement and the merger at the MeriStar special
stockholders meeting called for October 11, 2001.

MERISTAR'S REASONS FOR THE MERGER (SEE PAGE 132)

In making its determination with respect to the merger agreement and the
merger, the MeriStar board of directors considered the entirety of the terms of
the merger agreement. In addition, the MeriStar

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board of directors considered the following potentially positive material
factors in connection with its determination:

- that the combined company would be the largest hospitality REIT in terms
of number of hotels and number of rooms;

- the enhanced visibility of the combined company to investors in the
hospitality REIT sector due to a more diversified asset portfolio,
expanded stockholder base and increased public float;

- the merger consideration payable to MeriStar common stockholders, which
represented a premium of 9% over the average closing price of MeriStar
common stock during the 20 trading days prior to May 9, 2001, the date of
the merger agreement, and a premium of 12% over the average closing price
of MeriStar common stock during the 20 trading days prior to April 16,
2001, the date of the first MeriStar board meeting relating to the
merger;

- the combined company's potentially increased bargaining power in
negotiations with suppliers;

- the combined company's potentially enhanced negotiating power with
existing hotel brand owners;

- the opportunity for revenue growth due to a larger pool of assets;

- potentially improved access to additional financing because of the larger
size of the combined company;

- the treatment under the merger agreement of MeriStar employees who are
not retained by FelCor;

- the relationship between the combined company and MeriStar Hotels &
Resorts, Inc., the current manager of 109 of MeriStar's hotels;

- anticipated annual savings of approximately $5 million in general and
administrative expenses from reductions in personnel, closing and
subletting MeriStar's corporate offices and the elimination of other
duplicate overhead costs; and

- the opinion to the MeriStar board dated May 9, 2001 of Salomon Smith
Barney Inc., MeriStar's financial advisor, as to the fairness, from a
financial point of view and as of that date, of the merger consideration
to be received by the MeriStar common stockholders.

The MeriStar board of directors also considered the following potentially
negative material factors in connection with its determination:

- the inherent risks involved in integrating two companies the size of
MeriStar and FelCor;

- the negative effect on funds from operations of the combined company
caused by the increase in interest expense resulting from the debt
financing of the cash consideration to be paid in the mergers and the
related transaction costs;

- the combined company's continued concentration of hotels in some markets,
including California, Florida and Texas, which were expected to represent
approximately 18.1%, 16.2%, and 15.4% of the combined company's revenues;
and

- the need for FelCor to hire a qualified chief financial officer.

VOTES OF FELCOR AND MERISTAR STOCKHOLDERS REQUIRED FOR APPROVAL

FelCor Stockholders. Approval of the merger agreement and the merger,
including the election of two new directors to FelCor's board of directors,
requires the affirmative vote of the holders of at least a majority of the votes
entitled to be cast at the FelCor special meeting of stockholders. A total of
2,333,448 shares of FelCor common stock, or 4.4% of the shares of FelCor common
stock entitled to vote at the FelCor special meeting, were held as of August 24,
2001, by FelCor directors, executive officers and their affiliates. The vote of
FelCor preferred stockholders is not required for approval of the merger
agreement or the merger.
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MeriStar Stockholders. Approval of the merger agreement and the merger
requires the affirmative vote of the holders of a majority of the votes entitled
to be cast at the MeriStar special meeting of stockholders. A total of 3,624,228
shares of MeriStar common stock, or 7.7% of the shares of MeriStar common stock
entitled to vote at the MeriStar special meeting, were held as of August 24,
2001, by MeriStar directors, executive officers and their affiliates.

OPINIONS OF FINANCIAL ADVISORS

FelCor (see page 119)

In deciding to approve the merger agreement and the merger, the FelCor
board considered the oral opinions, delivered May 9, 2001, of its financial
advisors, Deutsche Banc Alex. Brown Inc., or DBAB, and J.P. Morgan Securities
Inc., or JPMorgan, that, as of that date, the consideration to be paid to
MeriStar common stockholders by FelCor under the merger agreement was fair, from
a financial point of view, to FelCor. These opinions were confirmed in writing
on May 9, 2001. Under the terms of its engagement, FelCor has agreed to pay DBAB
for its financial advisory services in connection with the merger an aggregate
of $5.0 million, $3.75 million of which is contingent upon the closing of the
merger. JPMorgan will receive $1.0 million for its financial advisory services
in connection with the merger, of which $500,000 is contingent upon the closing
of the merger. DBAB has received or will receive an aggregate of approximately
$7.0 million to $10.5 million and JPMorgan has received or will receive an
aggregate of approximately $5.0 million to $7.0 million in fees for their
services in connection with financing transactions relating to the merger that
have been closed or committed to prior to the date of this prospectus. The DBAB
and JPMorgan opinions, which set forth the assumptions made, procedures
followed, matters considered and limitations on the review undertaken by DBAB
and JPMorgan in connection with their opinions, are attached as Appendices B and
C, respectively, to this document. Neither of these firms conducted or received
any independent evaluations or appraisals of the properties, assets or
liabilities, contingent or otherwise, of FelCor, MeriStar, FelCor Partnership or
MeriStar Partnership in connection with the preparation of their opinions.
DBAB'S AND JPMORGAN'S OPINIONS ARE ADDRESSED TO THE FELCOR BOARD AND ADDRESS
ONLY THE FAIRNESS TO FELCOR, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO BE PAID TO MERISTAR COMMON STOCKHOLDERS BY FELCOR. NEITHER
OPINION ADDRESSES ANY ASPECT OF THE PARTNERSHIP MERGER OR CONSTITUTES A
RECOMMENDATION TO ANY UNITHOLDER OF MERISTAR PARTNERSHIP OR US OR ANY
STOCKHOLDER OF FELCOR OR MERISTAR WITH RESPECT TO ANY MATTERS RELATING TO THE
PROPOSED TRANSACTIONS. THEIR OPINIONS SHOULD NOT BE RELIED UPON BY MERISTAR
PARTNERSHIP OR FELCOR PARTNERSHIP UNITHOLDERS WITH RESPECT TO THE FAIRNESS FROM
A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY THOSE
UNITHOLDERS.

MeriStar (see page 134)

In connection with the proposed merger, the MeriStar board received a
written opinion dated May 9, 2001 from MeriStar's financial advisor, Salomon
Smith Barney, as to the fairness, from a financial point of view, of the merger
consideration to be received by the MeriStar common stockholders. Under the
terms of its engagement, MeriStar has agreed to pay Salomon Smith Barney for its
financial advisory services an aggregate fee of $6.0 million, $4.5 million of
which is contingent upon completion of the merger. The full text of Salomon
Smith Barney's written opinion dated May 9, 2001, which describes the
assumptions made, procedures followed, matters considered and limitations on the
review undertaken, is attached to this prospectus as Appendix D. Salomon Smith
Barney did not conduct or receive any independent evaluation or appraisal of the
properties, assets or liabilities, contingent or otherwise, of MeriStar, FelCor,
MeriStar Partnership or FelCor Partnership in connection with the preparation of
its opinion. SALOMON SMITH BARNEY'S OPINION IS ADDRESSED TO THE MERISTAR BOARD,
DOES NOT ADDRESS ANY ASPECT OF THE PARTNERSHIP MERGER OR THE PARTNERSHIP MERGER
CONSIDERATION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY UNITHOLDER OF
MERISTAR PARTNERSHIP OR US OR STOCKHOLDER OF MERISTAR OR FELCOR WITH RESPECT TO
ANY MATTERS RELATING TO THE PROPOSED TRANSACTIONS. SALOMON SMITH BARNEY'S
OPINION SHOULD NOT BE RELIED UPON BY MERISTAR PARTNERSHIP OR FELCOR PARTNERSHIP
UNITHOLDERS WITH RESPECT TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO BE RECEIVED BY THOSE UNITHOLDERS.

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INTERESTS OF CERTAIN PERSONS IN THE MERGER AND THE PARTNERSHIP MERGER (SEE PAGE
140)

Some FelCor and MeriStar executive officers and directors, because they
will receive material benefits as a result of the merger and partnership merger
that are not available to unitholders in MeriStar Partnership, may have
interests in the merger and partnership merger that may be different from, or in
addition to, your own.

- Paul W. Whetsell, the current Chairman, Chief Executive Officer and a
director of MeriStar, and Steven D. Jorns, the current Vice Chairman and
a director of MeriStar, will become directors of FelCor.

- Bruce G. Wiles, the current President, Chief Investment Officer and a
director of MeriStar, has been offered employment by FelCor.

- We will be obligated to make severance payments totaling approximately
$1,024,000, $405,000, $900,000 and $986,000, to Paul Whetsell, Steven
Jorns, John Emery and Bruce Wiles, under their employment contracts,
which require these payments upon their resignation or termination in
connection with MeriStar's change of control arising from the merger. In
addition, we will be obligated to pay $1,368,000 and $800,000 to Messrs.
Whetsell and Emery, respectively, in consideration of their entering into
a one year covenant not to take comparable positions at another hotel
REIT. Finally, we will be obligated to make tax reimbursement payments to
Messrs. Whetsell, Emery and Wiles in the event any amounts they receive
are subject to an excise tax under Section 4999 of the Internal Revenue
Code, which taxes some payments that are contingent on a change of
control within the meaning of Section 280G of the Internal Revenue Code.
Although the parties currently expect the tax reimbursement obligations
of FelCor to be limited to approximately $500,000, the issues relating to
the determination of those liabilities are complex and subject to varied
interpretations. Depending on the amount, if any, of the payments to be
received by these individuals that are ultimately determined to be
subject to the excise tax, FelCor's reimbursement obligations could be as
much as $6.0 million to Mr. Whetsell, $3.8 million to Mr. Emery and
$550,000 to Mr. Wiles.

- We expect to make severance payments to approximately 40 other legal,
administrative, accounting and clerical employees of MeriStar, totalling
approximately $2 million, because we do not intend to employ them after
the merger and partnership merger. None of these employees is an
executive officer of MeriStar or entitled to tax reimbursements.

- Any unvested restricted stock and options held by officers and directors
of MeriStar will vest as a result of the merger. Mr. Whetsell owns
125,000 unvested shares of restricted stock and unvested options to
purchase 284,580 shares of MeriStar common stock, all of which will vest
as a result of the merger, with an aggregate value of approximately $3.4
million. Mr. Emery owns 67,334 unvested shares of restricted stock and
unvested options to purchase 156,978 shares of MeriStar common stock, all
of which will vest as a result of the merger, with an aggregate value of
approximately $2.0 million. Mr. Jorns owns unvested options to purchase
8,333 shares of MeriStar common stock, all of which will vest as a result
of the merger, with an aggregate value of approximately $11,300. Mr.
Wiles owns 50,667 unvested shares of restricted stock and unvested
options to purchase 116,666 shares of MeriStar common stock, all of which
will vest as a result of the merger, with an aggregate value of
approximately $1.6 million. Mr. Wiles will be required to waive the
accelerated vesting of these options if he accepts employment with us.
All of the values expressed in this paragraph are based on the closing
price of $21.45 per share of MeriStar common stock on May 9, 2001. Option
values are based on the difference between that closing price per share
and the exercise price per share, if positive.

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Mr. Emery owns 221,459 unvested profits-only units in MeriStar
Partnership, all of which will vest as a result of the merger, with an
aggregate value of approximately $4.9 million. Because each of our common
units is redeemable for a share of FelCor common stock, the value of each
profits-only unit is based on 0.784 times the closing price of $22.10 per
share of FelCor common stock on May 9, 2001, plus $4.60. Other officers
and directors of MeriStar collectively own 125,000 profits-only units
that will also be exchanged for cash and common units in FelCor
Partnership, but their unvested profits-only units will be canceled.

- Thomas J. Corcoran, Jr., President, Chief Executive Officer and a
director of FelCor, Richard O. Jacobson, a director of FelCor, and Thomas
L. Wiese, a Vice President of FelCor, collectively own 93,160 common
units in MeriStar Partnership, with an aggregate value of approximately
$2.0 million. Because each MeriStar Partnership common unit is
exchangeable for one share of MeriStar common stock, the aggregate value
of these holdings is based on the closing price of $21.45 per share of
MeriStar common stock on May 9, 2001.

- From and after the effective time of the merger, FelCor will indemnify
the present and former directors and officers of MeriStar and maintain
directors' and officers' liability insurance for these individuals for
six years after the effective time of the merger.

INDEBTEDNESS TO FUND CASH CONSIDERATION AND BOTTOM GUARANTEES (SEE PAGE 145)

In connection with the partnership merger, we will incur debt to pay the
cash consideration due to MeriStar Partnership unitholders. We will pay, subject
to and in accordance with the procedures described below under "Issuance of Our
Units and Payment of Cash Consideration" the cash amounts to the recipients
within 90 days of incurring or increasing that debt and will segregate the
proceeds of the debt that are used to pay the cash amounts so that the proceeds
are allocable to the cash amounts for federal income tax purposes.

In connection with the incurrence or increase of our debt, we will provide
to each MeriStar Partnership unitholder who is entitled to receive cash
consideration in the partnership merger the opportunity, prior to the closing of
the partnership merger, to agree to reimburse FelCor with respect to a portion
of our debt incurred to fund the cash consideration payable to MeriStar
Partnership unitholders up to the amount of cash to which the MeriStar
Partnership unitholder is entitled. If a MeriStar Partnership unitholder elects
to agree to reimburse FelCor with respect to a portion of the debt by executing
and returning to us the form of reimbursement agreement that we will provide to
the unitholder prior to the partnership merger closing, we will agree to
maintain the portion of the debt agreed to be reimbursed until the earlier of
five years following the closing of the partnership merger or the date on which
the unitholder has redeemed or otherwise disposed of all of our units received
by the unitholder in the partnership merger. We also will agree not to assign,
distribute or otherwise dispose of the former MeriStar Partnership unitholder's
MeriStar Partnership units in a taxable transaction, which will not include any
transaction involving a non-taxable merger, consolidation or other
reorganization of MeriStar Partnership or us or a liquidation of MeriStar
Partnership, until the earlier of five years after the closing of the
partnership merger and the date on which the MeriStar Partnership unitholder no
longer owns at least 50% of our units issued to him in the partnership merger.

ISSUANCE OF OUR UNITS AND PAYMENT OF CASH CONSIDERATION (SEE PAGE 146)

Under the merger agreement, MeriStar Partnership unitholders must sign
ratification and joinder agreements as a condition to receiving the unit
certificates and cash consideration to be paid or issued by us to them in the
partnership merger. We will mail these agreements to record holders of MeriStar
Partnership units promptly after the effectiveness of the partnership merger. In
these agreements, the MeriStar Partnership unitholders:

- ratify and agree to be bound by our amended and restated partnership
agreement, which becomes effective upon completion of the partnership
merger;

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- are admitted as our limited partners with respect to the units which they
are entitled to receive because of the partnership merger; and

- waive any rights they have under their exchange rights agreements with
MeriStar and MeriStar Partnership.

Upon our receipt of a properly signed ratification and joinder agreement,
together with other customary documents as we may require from a MeriStar
unitholder, we will send to the unitholder a certificate representing the whole
number of units and any cash payments which the unitholder is entitled to
receive as a result of the partnership merger.

MATERIAL FEDERAL INCOME TAX CONSIDERATIONS (SEE PAGE 192)

A holder of common units, Class C preferred units or profits-only
partnership units in MeriStar Partnership, who will receive both our units and
cash consideration in the partnership merger, generally will not recognize
taxable gain or loss at the time of the partnership merger, except to the extent
that:

- the exchange of MeriStar Partnership units for our units and cash is
characterized as a sale of a portion of the unitholder's MeriStar
Partnership units based on the receipt of cash consideration in the
exchange; or

- the sum of the cash consideration received by the unitholder, other than
cash consideration that is counted as proceeds of a taxable sale of a
portion of the unitholder's MeriStar Partnership units, and any net
reduction of its share of partnership liabilities exceeds the tax basis
that otherwise would be carried over to our units received in the
partnership merger.

A holder of Class D preferred units in MeriStar Partnership, who will receive
only our Series D preferred units in the partnership merger, generally will not
recognize taxable gain or loss at the time of the partnership merger.

Whether and to what extent a holder of MeriStar Partnership common units,
Class C preferred units, or profits-only partnership units will recognize
taxable gain or loss in connection with the partnership merger will depend on a
number of variables. In addition, subsequent events or transactions could cause
a former MeriStar Partnership unitholder to be required to recognize all or part
of any taxable gain deferred at the time of the partnership merger.

The tax consequences of the partnership merger to you will depend on the
facts of your own situation. You should consult your tax advisor for a full
understanding of the tax consequences to you of the partnership merger.

ACCOUNTING TREATMENT (SEE PAGE 142)

The partnership merger will be treated as a purchase of MeriStar
Partnership by us for financial accounting purposes.

NO APPRAISAL RIGHTS (SEE PAGE 143)

Under Delaware law, neither our limited partners nor the limited partners
of MeriStar Partnership have any dissenters' rights or rights to an appraisal.

REGULATORY APPROVALS (SEE PAGE 142)

No material federal or state regulatory requirements must be complied with
or approvals must be obtained by FelCor, MeriStar, MeriStar Partnership or us in
connection with either the merger or the partnership merger.

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DIFFERENCES IN RIGHTS OF UNITHOLDERS (SEE PAGE 186)

At the time of the partnership merger and once they have signed and
delivered ratification and joinder agreements, MeriStar Partnership unitholders
will become our unitholders, and their rights as partners will be determined by
our amended and restated partnership agreement and Delaware law. The rights of
MeriStar Partnership unitholders differ from the rights of our unitholders in a
number of ways as a result of differences in the limited partnership agreements
of the two partnerships. These differences include:

Issuance of Additional Units

We may issue additional partnership units having terms as determined by
FelCor, our general partner, in its sole and complete discretion.

MeriStar Partnership may issue additional partnership units only if that
issuance:

- does not have a material adverse impact on the exchange rights or
economic interests of existing limited partners,

- does not cause the MeriStar Partnership to become, with respect to an
employee benefit plan subject to Title 1 of ERISA, a "party in interest"
or a "disqualified person," and

- does not cause any portion of the assets of MeriStar Partnership to be
assets of any employee benefit plan subject to Section 2510.3-101 of the
regulations of the U.S. Department of Labor.

Transfers of Units

Transferees of our units may not be admitted as limited partners without
FelCor's consent, which may be withheld in its sole discretion. Our units are
represented by physical certificates that must be surrendered to effect a
transfer. The units in MeriStar Partnership are generally not represented by
physical certificates. Except for some exceptions, which are very similar to the
ones provided in the FelCor partnership agreement, a limited partner of MeriStar
Partnership may transfer all or any of its partnership interest to any
transferee without the consent of MeriStar.

Amendments to the Partnership Agreement

FelCor may not amend any provisions of our partnership agreement that
require the approval of a percentage of the outstanding partnership units to
effect a reduction in the votes necessary to approve that action without the
consent or vote of holders of at least that percentage of outstanding
partnership units. An amendment that materially and adversely affects the
distribution, conversion or liquidation rights and preferences of any type or
class of partnership units in relation to other types or classes of units
requires the approval of holders of at least a majority of the affected class or
type of units, excluding those held by FelCor. FelCor may not amend the
partnership agreement to increase the obligations of a limited partner without
that partner's consent.

Under MeriStar Partnership's partnership agreement, the consent of each
adversely affected limited partner is required for any amendment that would:

- convert a limited partner interest into a general partner interest,

- modify the limited liability of a limited partner in a manner adverse to
the partner,

- cause the termination of the MeriStar Partnership prior to the times set
forth in the partnership agreement,

- alter the right of a limited partner to receive distributions,
liquidation amounts or allocations as described in the partnership
agreement, or

- amend any provisions of the partnership agreement dealing with
amendments.

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Sale of Substantially All of the Partnership's Assets

Except in connection with our dissolution and liquidation, a sale,
exchange, or other disposition of all or substantially all of our assets in a
single transaction or a series of related transactions will require the approval
of 80% of the outstanding units.

The partnership agreement of MeriStar Partnership permits MeriStar, as
general partner, to cause MeriStar Partnership to engage in a sale of all or
substantially all of MeriStar Partnership's assets without the consent of the
limited partners.

Preferred Units Outstanding

We have outstanding 5,980,600 Series A preferred units and 57,500 Series B
preferred units. We may issue Series E preferred units to FelCor if FelCor is
able to complete its planned sale of $100 million of a new series of its
perpetual preferred stock.

Following the partnership merger, our common units will rank:

- junior to our Series A, B, C, D and E preferred units as to distributions
and

- junior to our Series A, B and E preferred units and ratably with our
Series C and D preferred units as to amounts payable upon liquidation.

Following the partnership merger, our Series C and D preferred units will
rank:

- ratably with our Series A, B and E preferred units and senior to our
common units as to distributions and

- junior to our Series A, B and E preferred units as to amounts payable
upon liquidation.

The outstanding common units, Class C units and Class D units of MeriStar
Partnership are not currently subject to the rights of any other outstanding
class or series of units of MeriStar Partnership.

Distributions on Profits-Only Partnership Units

The profits-only partnership units of MeriStar Partnership are entitled to
receive distributions only from the proceeds from sales of hotels and other
assets, as determined by MeriStar. The holders of these units will receive our
common units in the partnership merger. We will pay regular quarterly
distributions on our common units from our operating cash flow without any
limitation similar to that applicable to the profits-only partnership units.

Meetings of Partners

Limited partners holding 25% or more of the partnership interests in
MeriStar Partnership may require the call by MeriStar of a meeting of the
partners in MeriStar Partnership. Our limited partnership agreement does not
provide an express right on the part of limited partners to require FelCor to
call a meeting of our partners.

OWNERSHIP OF FELCOR PARTNERSHIP AFTER THE PARTNERSHIP MERGER

Assuming the partnership merger was completed on August 30, 2001, a total
of 2,720,029 of our common units, 755,954 of our Series C preferred units and
392,157 of our Series D preferred units will be issued to unitholders in
MeriStar Partnership, other than FelCor and its subsidiaries.

Following the partnership merger:

- FelCor will own 93,550,062, or 88.8%, of our common units, 5,980,600, or
100%, of our Series A preferred units and 57,500, or 100%, of our Series
B preferred units;

- other holders of our units immediately prior to the partnership merger
will continue to hold an aggregate of 9,014,046, or 8.6%, of our common
units;
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- holders of MeriStar Partnership common units immediately prior to the
partnership merger, other than FelCor and its subsidiaries, will hold an
aggregate of 2,211,083, or 2.1%, of our common units;

- holders of MeriStar Partnership vested profits-only partnership units
immediately prior to the partnership merger will hold an aggregate of
508,946, or 0.5%, of our common units; and

- all of our Series C and Series D preferred units will be held by the
former holders of MeriStar Partnership Class C and Class D preferred
units, respectively.

This information and similar information located elsewhere in this
prospectus are based on the number of our units and the units of MeriStar
Partnership expected to be outstanding at the effective time of the partnership
merger.

THE MERGER AGREEMENT

GENERAL (SEE PAGE 144)

The merger agreement, as amended, is attached at the back of this document
as Appendix A. We urge you to read the merger agreement because it is the legal
document that governs the partnership merger.

The merger agreement contemplates the following transactions:

- the merger, in which MeriStar will merge with and into FelCor, with
FelCor as the surviving entity, and

- the partnership merger, in which our subsidiary will merge with and into
MeriStar Partnership, with MeriStar Partnership surviving as a subsidiary
of us, and the limited partners of MeriStar Partnership, other than
FelCor and its subsidiaries, will exchange their interests in MeriStar
Partnership for interests in us and, where applicable, cash.

No vote or consent of the limited partners of either FelCor Partnership or
MeriStar Partnership is required or being sought. FelCor, as the general partner
of FelCor Partnership, and MeriStar, as the general partner of MeriStar
Partnership, have taken all actions necessary under their respective partnership
agreements to approve the partnership merger. The partnership merger will not
occur unless the merger occurs.

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Structure Diagrams

The following diagrams depict in summary form the structure of FelCor and
MeriStar at June 30, 2001, and after the partnership merger and the merger. The
diagrams assume that:

- no unitholder of MeriStar Partnership or us redeems its units and
receives cash or FelCor or MeriStar common stock, as applicable, and

- no holder of convertible securities of FelCor or MeriStar, including
stock options of FelCor and MeriStar, converts or exercises those
securities for FelCor or MeriStar common stock.

The percentages in the diagrams reflect ownership of our partnership
interests and partnership interests in MeriStar Partnership, other than
preferred interests. All of our outstanding preferred units are owned by FelCor.
All outstanding preferred interests of MeriStar Partnership are owned by limited
partners other than MeriStar.

[CHART]

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NON-SOLICITATION OF COMPETING TRANSACTIONS (SEE PAGE 150)

Under the merger agreement, each of FelCor and MeriStar may not solicit any
competing acquisition proposal. Each party may not respond to an acquisition
proposal except if a disinterested majority of its board of directors determines
in good faith after receipt of advice from outside counsel:

- that furnishing information and engaging in discussions with the
proposing person is required by the duties of the board of directors
under Maryland law; and

- that the proposing person has the ability to complete a superior
proposal.

INTERIM OPERATIONS COVENANTS (SEE PAGE 148)

Each party has agreed to limitations on its operations between the signing
of the merger agreement and the effective time of the merger. The parties have
formed an interim transactions committee composed of one representative from
FelCor and one representative from MeriStar to approve any exceptions to the
limitations.

CONDITIONS TO THE MERGERS (SEE PAGE 153)

Neither FelCor nor MeriStar is obligated to complete the transactions
contemplated by the merger agreement unless the following conditions are
satisfied or, if permitted, waived prior to the effective time of the merger:

- the merger agreement and merger must be approved by the required
stockholder votes of both FelCor and MeriStar;

- receipt of tax opinions that the merger qualifies as a reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code, that each of the
companies has qualified as a REIT and that the merger will not prevent
FelCor from continuing to operate as a REIT;

- no federal legislative or regulatory change is enacted that would cause
FelCor or MeriStar to cease to qualify as a REIT for federal income tax
purposes;

- the absence of a court order or law preventing the completion of the
merger or the partnership merger; and

- other customary conditions precedent for transactions of this type,
including receipt of all necessary SEC and NYSE approvals and receipt of
necessary consents.

The obligations of FelCor and us to effect the merger and partnership
merger and to complete the transactions contemplated by the merger agreement are
also subject to the satisfaction or waiver of the following conditions prior to
the effective time of the merger and partnership merger:

- an amendment to the revolving credit agreement between MeriStar and
MeriStar Hotels & Resorts to set its maturity date at February 28, 2004,
to set the interest rate to 600 basis points over the 30-day London
Interbank Offered Rate and to set the default interest rate to 30-day
LIBOR plus 800 basis points;

- receipt of estoppel certificates from MeriStar Hotels & Resorts regarding
the hotel management agreements between that company and MeriStar; and

- other customary conditions precedent for transactions of this type,
including accuracy of representations and warranties of MeriStar,
material compliance with covenants by MeriStar and absence of a material
adverse change to MeriStar.

The obligations of MeriStar and MeriStar Partnership to effect the merger
and partnership merger and to complete the transactions contemplated by the
merger agreement are also subject to the satisfaction or waiver by MeriStar and
MeriStar Partnership of customary conditions precedent for transactions of this

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type, including accuracy of representations and warranties of FelCor and us,
material compliance with covenants by FelCor and us and absence of a material
adverse change to FelCor and us.

Where the law permits, the parties could decide to complete the merger and
partnership merger even though one or more conditions were not satisfied. By
law, the parties cannot waive:

- the requirement that FelCor and MeriStar common stockholders approve the
merger; or

- the requirement that there be no court order or law preventing the
closing of the merger or the partnership merger.

In addition, the merger agreement provides that the parties cannot waive the
conditions to the merger and partnership merger requiring the receipt of tax
opinions confirming the REIT status of FelCor and MeriStar and the qualification
of the merger as a reorganization under Section 368(a) of the Internal Revenue
Code.

Whether any of the other conditions would be waived would depend on the
facts and circumstances as determined by the reasonable business judgment of the
board of directors of FelCor or MeriStar. If FelCor or MeriStar waived
compliance with one or more of the other conditions and the condition was deemed
material to a vote of FelCor and/or MeriStar common stockholders, FelCor and/or
MeriStar would have to resolicit stockholder approval, as applicable, before
closing the merger and partnership merger.

If, prior to the special meetings, either FelCor or MeriStar waives
compliance with any of the material conditions set forth in the merger agreement
or if the parties elect to amend the merger agreement in any material fashion,
each party will promptly file with the SEC a current report on Form 8-K
describing the nature of the waiver or the amendment and issue a press release
doing the same.

TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 155)

The merger agreement addresses the circumstances when FelCor or MeriStar
may terminate the merger agreement and when FelCor or MeriStar is required to
pay a termination fee. FelCor and MeriStar could agree to terminate the merger
agreement, and either company may terminate the merger agreement if, in general:

- the required stockholder approvals are not obtained;

- the merger is not completed by October 31, 2001;

- a final order, judgment or injunction prevents the merger;

- the average closing price for FelCor common stock is less than $18.40
during any ten consecutive trading days prior to the completion of the
merger;

- the other company breaches, in any material respects, the merger
agreement and cannot cure the breach by October 31, 2001;

- the board of directors of the other company adversely changes its
recommendation of the merger;

- the other company takes specified actions in connection with a competing
transaction; or

- that company's board of directors, in appropriate circumstances,
determines to pursue a superior competing transaction.

PAYMENT OF TERMINATION FEES AND EXPENSES (SEE PAGE 156)

FelCor must pay MeriStar a termination fee of $35.0 million, plus up to
$5.0 million of MeriStar's out-of-pocket transaction expenses, if the merger
agreement is terminated because of:

- prior to the FelCor special meeting, a change in or withdrawal of the
recommendation of the merger by FelCor's board that is materially adverse
to MeriStar or the merger,

17
22

- prior to the FelCor special meeting, entry by FelCor into an agreement,
other than a confidentiality agreement, with respect to another
acquisition proposal, or

- a material breach by FelCor of a representation, warranty or covenant
that could not be cured by October 31, 2001.

Similarly, MeriStar must pay FelCor a termination fee of $35.0 million,
plus up to $5.0 million of FelCor's out-of-pocket transaction expenses, if the
merger agreement is terminated because of:

- prior to the MeriStar special meeting, a change in or withdrawal of the
recommendation of the merger by MeriStar's board that is materially
adverse to FelCor or the merger,

- prior to the MeriStar special meeting, entry by MeriStar into an
agreement, other than a confidentiality agreement, with respect to
another acquisition proposal, or

- a material breach by MeriStar of a representation, warranty or covenant
that could not be cured by October 31, 2001.

If the merger agreement is terminated because the stockholders of either
company fail to give all necessary approvals, that company must pay the other
company up to $5.0 million of its out-of-pocket transaction expenses.

MERGER FINANCING (SEE PAGE 47)

We, together with FelCor, intend to obtain an estimated $1.4 billion of
financing in connection with the merger and partnership merger. Approximately
$225 million of this financing will be used to pay the cash portion of the
consideration to be paid to MeriStar common stockholders and MeriStar
Partnership unitholders, and the balance will be applied to retire outstanding
indebtedness of approximately $1.1 billion and to pay transaction costs. This
financing will consist of a combination of:

- $600 million of unsecured 8 1/2% senior notes due 2011 issued by us in
June 2001;

- an extension of the term of and an increase in our borrowing availability
under our revolving credit facility from $600 million to at least $700
million, effective upon the closing of the merger, and drawing of $330.4
million under that facility;

- new first mortgage and mezzanine financing in the aggregate amount of at
least $325 million to be consummated immediately following the closing of
the merger, having a term of at least three years and an expected blended
interest rate of approximately LIBOR plus 2%; and

- the issuance by FelCor of up to $100 million of a new series of perpetual
preferred stock with a dividend rate expected to be not more than 10.5%.

In addition to this $1.4 billion of financing, we have obtained a
commitment from lenders for up to $500 million in a stock secured term loan
facility which will be available for use to fund, if necessary, our obligation
to repurchase up to $500 million of outstanding senior notes of MeriStar
Partnership after the merger. The stock secured term loan facility will have a
term of between five and one-half years and seven years and bear interest at a
fixed market interest rate not to exceed LIBOR plus 5.25%. In connection with
the acceptance and funding of this commitment, we have paid or agreed to pay an
aggregate of $8.8 million of commitment and related fees. Of these fees, up to
$6.3 million will be applied to offset placement fees payable to such lenders in
connection with a placement of senior notes made through them within one year
following closing, the proceeds of which will be used to repay the $500 million
facility. All of these financings, with the exception of the perpetual preferred
stock, have been obtained or committed. Even if the issuance of the perpetual
preferred stock is not completed, we have sufficient availability under our line
of credit to complete the mergers.

18
23

DIRECTORS AND EXECUTIVE OFFICERS OF FELCOR AFTER THE MERGER (SEE PAGE 100)

The merger agreement provides that, following the merger, Paul W. Whetsell,
current Chairman, Chief Executive Officer and a director of MeriStar, and Steven
D. Jorns, current Vice Chairman and a director of MeriStar, will become members
of the FelCor board of directors. Following the merger, the current executive
officers of FelCor will remain as executive officers of FelCor. Bruce G. Wiles,
the current President, Chief Investment Officer and a director of MeriStar, is
expected to become an executive officer of FelCor following the merger. No other
current executive officers of MeriStar are expected to become executive officers
of FelCor following the merger.

LISTING OF FELCOR COMMON STOCK (SEE PAGE 212)

The shares of FelCor common stock to be issued to holders of MeriStar
common stock in the merger will be listed on the New York Stock Exchange under
the ticker symbol "FCH."

DIFFERENCES IN STOCKHOLDERS' RIGHTS (SEE PAGE 218)

The rights of MeriStar stockholders differ from the rights of FelCor
stockholders in a number of material ways as a result of differences in the
charters and bylaws of the two companies, including:

- The MeriStar board of directors is limited to 15 members by its bylaws,
while the number of members on the FelCor board of directors, which is
currently set at 11 members, can be, and has been, increased to more than
its limit of nine members by a vote of not less than 80% of the members
of the FelCor board of directors.

- The amendment of any stock provisions in MeriStar's charter requires, in
addition to stockholder approval, the approval by all of its independent
directors, while FelCor does not have this requirement.

- The amendment of any provision of FelCor's charter relating to its board
requires, in addition to stockholder approval, the approval of 80% of its
directors, while MeriStar does not have this requirement.

- FelCor has outstanding two series of preferred stock which have
preferences over common stock on dividends or liquidating distributions.
MeriStar has no outstanding preferred stock.

- MeriStar's board, but not FelCor's board, is prohibited by charter
provision from issuing preferred stock for anti-takeover purposes or with
super-majority voting rights.

- Holders of 10% or more of FelCor's outstanding voting stock may call a
stockholders' meeting. For MeriStar, a majority of outstanding voting
shares is required to call a stockholders' meeting and the stockholders
must pay for the costs of the meeting.

- Holders of more than 50% of FelCor's outstanding voting stock may vote to
remove a director for cause. MeriStar's charter permits removal of a
director with or without cause but requires a vote of 75% or more of the
outstanding voting stock.

OWNERSHIP OF FELCOR AFTER THE MERGER

If the merger is completed, FelCor will issue approximately 34.9 million
shares of common stock to MeriStar stockholders. Assuming a market price of
$21.09 for FelCor common stock, which was its closing price on August 30, 2001,
the total value of the merger consideration to be received by MeriStar
stockholders would be approximately $940 million. The shares of FelCor common
stock issued to former MeriStar stockholders will represent approximately 39.5%
of the outstanding common stock of FelCor after completion of the merger.
Stockholders of FelCor immediately prior to the merger will hold approximately
60.5% of the outstanding shares of FelCor common stock following the merger.
This information is based on the number of shares of FelCor and MeriStar common
stock expected to be outstanding at the effective time of the merger.

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24

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table sets forth unaudited pro forma condensed combined
financial data for MeriStar Partnership and us as a combined entity, giving
effect to the partnership merger as if it had occurred on the dates indicated
and after giving effect to the pro forma adjustments. The unaudited pro forma
condensed combined operating data are presented as if the partnership merger had
been completed on January 1, 2000. The unaudited pro forma condensed combined
balance sheet data at June 30, 2001 is presented as if the partnership merger
had occurred on June 30, 2001. In the opinion of our management, all adjustments
necessary to reflect the effects of these transactions have been made. The
partnership merger will be accounted for under the purchase method of accounting
as provided by Financial Accounting Standards No. 141 and 142. Based on FelCor's
current estimate of value for the MeriStar assets to be acquired in the amount
of approximately $3.0 billion and liabilities to be assumed in the amount of
approximately $1.9 billion, no goodwill will be recorded for this transaction.

The unaudited pro forma condensed combined financial data should be read
together with the respective historical audited and unaudited consolidated
financial statements and financial statement notes of FelCor Partnership and of
MeriStar Partnership included in or incorporated by reference into this
prospectus. See "Where You Can Find More Information" on page 220. The unaudited
pro forma condensed combined financial data is presented for comparative
purposes only and are not necessarily indicative of what the actual combined
results of operations of MeriStar Partnership and us would have been for the
periods presented, nor do these data purport to represent the results of future
periods. See "Unaudited Pro Forma Combined Financial Information" beginning on
page 161.

<Table>
<Caption>
PRO FORMA
(UNAUDITED)
-------------------------
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
2000(1) 2001
------------ ----------
(IN THOUSANDS, EXCEPT
PER SHARE
AND
RATIO DATA)

STATEMENT OF OPERATIONS DATA:
Total revenues............................................ $2,864,452 $1,412,155
Net income before extraordinary items..................... $ 159,171 $ 91,603
Net income before extraordinary items applicable to common
unitholders............................................ $ 123,424 $ 73,771
Diluted earnings per share data:
Net income before extraordinary items applicable to
common unitholders.................................... $ 1.21 $ 0.73
Weighted average common units outstanding.............. 101,839 101,352
OTHER DATA:
Funds From Operations(2).................................. $ 451,302 $ 223,177
EBITDA(3)................................................. $ 803,172 $ 396,600
Ratio of earnings to combined fixed charges and preferred
distributions(4)....................................... 1.5x 1.5x
</Table>

<Table>
<Caption>
PRO FORMA
(UNAUDITED)
--------------
JUNE 30,
2001
--------------
(IN THOUSANDS)

BALANCE SHEET DATA:
Net investment in hotels.................................... $6,516,043
Total assets................................................ $7,146,928
Debt........................................................ $3,648,693
Redeemable units............................................ $ 301,983
Partners' capital........................................... $2,701,258
</Table>

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

(1) In the second quarter of 2000, we recorded a $63 million loss relating to
the decision to sell non-strategic hotel assets, which is reflected in the
income statements presented for the period.

(2) We consider Funds From Operations to be a key measure of a real estate
investment trust's, or REIT's performance which should be considered along
with, but not as an alternative to, net income and cash flow as a measure of
operating performance and liquidity.

20
25

excluding gains or losses from extraordinary items in accordance with GAAP
and sales of depreciable operating properties, plus real estate related
depreciation and amortization and after comparable adjustments for our
portion of these items related to unconsolidated entities and joint
ventures. We believe that Funds From Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of our ability to incur and service
debt, to make capital expenditures, and to fund other cash needs. We compute
Funds From Operations in accordance with standards established by NAREIT,
except that we add back rent deferred under Staff Accounting Bulletin No.
101, or SAB 101, the loss on assets held for sale, lease termination costs
and swap termination expense to derive Funds From Operations. This may not
be comparable to Funds From Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition, that
interpret the current NAREIT definition differently than we do or that do
not adjust Funds From Operations for rent deferred under SAB 101, the loss
on assets held for sale, lease termination costs and swap termination
expense. Funds From Operations does not represent cash generated from
operating activities determined by GAAP and should not be considered as an
alternative to net income, determined in accordance with GAAP, as an
indication of our financial performance or to cash flow from operating
activities, determined in accordance with GAAP, as a measure of our
liquidity, nor is it indicative of funds available to fund our cash needs,
including our ability to make cash distributions. Funds From Operations may
include funds that may not be available for management's discretionary use
due to requirements to conserve funds for capital expenditures and property
acquisitions and other commitments and uncertainties.

The following table details our computation of Funds From Operations.

<Table>
<Caption>
PRO FORMA
(UNAUDITED)
-------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
2000 2001
------------ ----------------
(IN THOUSANDS)

Net income before extraordinary charges..................... $159,171 $ 91,603
Loss (gain) on sale of hotels............................... (6,024) 1,081
Loss on assets held for sale................................ 63,000
Swap termination expense.................................... 14,121
Series B redeemable preferred distributions................. (12,937) (6,468)
Series D redeemable preferred distributions................. (565) (282)
New redeemable preferred distributions...................... (10,500) (5,250)
Depreciation................................................ 248,990 123,350
Depreciation from unconsolidated entities................... 10,167 5,022
-------- --------
Funds From Operations....................................... $451,302 $223,177
======== ========
Weighted average units outstanding(a)....................... 106,536 106,041
</Table>

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

(a) Weighted average units outstanding are computed including dilutive
options, unvested stock grants and assuming conversion of Series A
preferred units and Series C preferred units.

(3) EBITDA is computed by adding Funds From Operations, interest expense, our
portion of interest expense from unconsolidated entities, amortization
expense and our redeemable preferred distributions. EBITDA is presented
because it provides useful information regarding our ability to service
debt. EBITDA should not be considered as an alternative measure of operating
results or cash flow from operations, as determined in accordance with GAAP.
EBITDA as presented by us may not be comparable to other similarly titled
measures used by other companies. A reconciliation of Funds From Operations
to EBITDA is as follows:

<Table>
<Caption>
PRO FORMA
(UNAUDITED)
-------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
2000 2001
------------ ----------------
(IN THOUSANDS)

Funds From Operations....................................... $451,302 $223,177
Interest expense............................................ 313,249 153,229
Interest expense from unconsolidated entities............... 9,188 4,742
Amortization expense........................................ 5,431 3,452
Series B redeemable preferred distributions................. 12,937 6,468
Series D redeemable preferred distributions................. 565 282
New redeemable preferred distributions...................... 10,500 5,250
-------- --------
EBITDA...................................................... $803,172 $396,600
======== ========
</Table>

(4) For the purpose of computing the ratio of earnings to combined fixed charges
and preferred distributions, earnings consist of income from continuing
operations plus fixed charges, excluding capitalized interest. Fixed charges
consist of interest, whether expensed or capitalized, and amortization of
loan costs. Preferred distributions consist of distributions on preferred
units.

21
26

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

FELCOR PARTNERSHIP

The following tables set forth our selected historical consolidated
financial information. The selected historical information is presented as of
and for the years ended December 31, 1996, 1997, 1998, 1999 and 2000 and as of
and for the six months ended June 30, 2000 and 2001. We derived the historical
financial information for the years ended December 31, 1996, 1997, 1998, 1999
and 2000 from our consolidated financial statements and the notes to them,
audited by PricewaterhouseCoopers LLP, independent accountants. Certain
reclassifications have been made to previously reported amounts to conform to
current year presentation with no effect to previously reported net income or
partners' capital. The selected historical financial information as of and for
the six months ended June 30, 2000 and 2001 has been derived from the unaudited
financial statements which have been prepared by our management on the same
basis as the audited financial statements and, in the opinion of our management,
include all adjustments consisting of normal recurring accruals that are
considered necessary for a fair presentation of the results for those periods.
The results of operations for the six months ended June 30, 2000 and 2001 are
not necessarily indicative of results to be anticipated for the entire year. The
following information should be read together with our consolidated financial
statements and financial statement notes incorporated by reference in this
prospectus. See "Where You Can Find More Information" beginning on page 220.

<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- -----------------------
1996 1997 1998(1) 1999 2000(2) 2000 2001(3)
--------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA)

STATEMENT OF OPERATIONS DATA:
Total revenues....................... $ 98,934 $ 169,688 $ 332,600 $ 495,517 $ 541,872 $ 258,159 $ 560,302
Net income (loss).................... $ 46,527 $ 69,467 $ 121,339 $ 135,776 $ 66,391 $ (12,372) $ 16,341
Net income (loss) applicable to
common unitholders................. $ 38,793 $ 57,670 $ 99,916 $ 111,041 $ 41,709 $ (24,730) $ 4,041
Diluted earnings per unit:
Net income (loss) applicable to
common unitholders before
extraordinary charge............. $ 1.58 $ 1.68 $ 1.93 $ 1.59 $ 0.73 $ (0.39) $ 0.07
Net income (loss) applicable to
common unitholders............... $ 1.49 $ 1.67 $ 1.87 $ 1.57 $ 0.67 $ (0.39) $ 0.07
Weighted average common units
outstanding...................... 26,004 34,467 53,323 70,561 62,556 63,297 62,069
OTHER DATA:
Cash flows provided by operating
activities......................... $ 67,494 $ 97,478 $ 192,583 $ 282,365 $ 277,304 $ 138,743 $ 93,630
Cash flows (used in) provided by
investing activities............... $(478,428) $ (687,860) $ (550,498) $ (205,517) $ (34,766) $ (28,629) $ (265,414)
Cash flows provided by (used in)
financing activities............... $ 251,906 $ 600,132 $ 375,064 $ (75,417) $ (252,601) $ (95,385) $ 209,944
Cash distributions per common
unit(4)............................ $ 1.92 $ 2.10 $ 2.545 $ 2.20 $ 2.20 $ 1.10 $ 1.10
Funds From Operations(5)............. $ 77,141 $ 129,815 $ 217,363 $ 286,895 $ 288,636 $ 149,380 $ 135,683
EBITDA(6)............................ $ 88,355 $ 165,613 $ 306,361 $ 432,689 $ 470,861 $ 238,753 $ 229,576
Ratio of earnings to combined fixed
charges and preferred
distributions(7)................... 3.5x 2.6x 2.3x 1.9x 1.5x 1.0x 1.2x
BALANCE SHEET DATA:
Investment in hotels, net of
accumulated depreciation........... $ 899,691 $1,489,764 $3,964,484 $4,035,344 $3,750,275 $3,796,755 $3,710,694
Total assets......................... $ 978,788 $1,673,364 $4,175,383 $4,255,751 $4,103,603 $4,176,765 $4,403,528
Debt................................. $ 239,425 $ 476,819 $1,594,734 $1,833,954 $1,838,241 $1,882,743 $2,134,093
Redeemable units..................... $ 98,542 $ 102,933 $ 67,595 $ 52,338 $ 205,800 $ 151,948 $ 210,929
Partners' capital.................... $ 619,496 $1,049,016 $2,337,375 $2,212,651 $1,880,599 $1,963,703 $1,827,756
</Table>

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27

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

(1) On July 28, 1998, FelCor completed the merger of Bristol Hotel Company's
real estate holdings with and into FelCor. The merger resulted in the net
acquisition of 107 primarily full-service hotels in return for approximately
31 million shares of newly issued common stock. FelCor subsequently
contributed all assets and liabilities it acquired in the merger to us in
exchange for approximately 31 million of our common units.

(2) In the second quarter of 2000, we recorded a $63 million loss relating to
non-strategic hotel assets held for sale, which is reflected in the income
statements presented for the period.

(3) Includes hotel revenues and expenses with respect to 96 hotels that were
leased to either DJONT or subsidiaries of Six Continents Hotels, formerly
Bass, prior to the effectiveness of the REIT Modernization Act on January 1,
2001. Prior to January 1, 2001, revenues were comprised mainly of percentage
lease revenues. Additionally, in the first quarter of 2001, we recorded
lease termination costs of $36.2 million with respect to the 96 hotels.

(4) In 1998, we declared a special one-time distribution of accumulated but
undistributed earnings and profits as a result of Bristol Hotel Company
merging with and into FelCor, in addition to the annual dividend of $2.20
per common unit. The amount of the one-time distribution was $0.345 per
common unit.

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

The White Paper on Funds From Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts, or NAREIT,
defines Funds From Operations as net income or loss, computed in accordance
with GAAP, excluding gains or losses from extraordinary items in accordance
with GAAP and sales of depreciable operating properties, plus real estate
related depreciation and amortization and after comparable adjustments for
our portion of these items related to unconsolidated entities and joint
ventures. We believe that Funds From Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of our ability to incur and service
debt, to make capital expenditures, and to fund other cash needs. We compute
Funds From Operations in accordance with standards established by NAREIT,
except that we add back rent deferred under SAB 101, the loss on assets held
for sale, lease termination costs and swap termination expense to derive
Funds From Operations. This may not be comparable to Funds From Operations
reported by other REITs that do not define the term in accordance with the
current NAREIT definition, that interpret the current NAREIT definition
differently than we do or that do not adjust Funds From Operations for rent
deferred under SAB 101, the loss on for assets held for sale, lease
termination costs and swap termination expense. Funds From Operations does
not represent cash generated from operating activities determined by GAAP
and should not be considered as an alternative to net income, determined in
accordance with GAAP, as an indication of our financial performance or to
cash flow from operating activities, determined in accordance with GAAP, as
a measure of our liquidity, nor is it indicative of funds available to fund
our cash needs, including its ability to make cash distributions. Funds From
Operations may include funds that may not be available for discretionary use
by our management due to requirements to conserve funds for capital
expenditures and property acquisitions and other commitments and
uncertainties.

The following table details our computation of Funds From Operations.

<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)

Net income (loss)....................... $46,527 $ 69,467 $121,339 $135,776 $ 66,391 $(12,372) $ 16,341
Deferred rent........................... 18,604
Lease termination costs................. 36,226
Swap termination expense................ 4,824
Gain on sale............................ (2,595)
Loss on assets held for sale............ 63,000 63,000
Series B redeemable preferred
distributions......................... (8,373) (12,937) (12,937) (6,468) (6,468)
Extraordinary charge from write-off of
deferred financing fees............... 2,354 185 3,075 1,113 3,865 225
Depreciation............................ 26,544 50,798 90,835 152,948 160,745 81,480 79,513
Depreciation from unconsolidated
entities.............................. 1,716 9,365 10,487 9,995 10,167 5,136 5,022
------- -------- -------- -------- -------- -------- --------
Funds From Operations................... $77,141 $129,815 $217,363 $286,895 $288,636 $149,380 $135,683
======= ======== ======== ======== ======== ======== ========
Weighted average units outstanding(a)... 29,306 39,157 58,013 75,251 67,239 67,987 66,759
</Table>

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

(a) Weighted average units outstanding are computed including dilutive
options, unvested stock grants and assuming conversion of Series A
preferred units to common units.

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28

(6) EBITDA is computed by adding Funds From Operations, interest expense, our
portion of interest expense from unconsolidated entities, amortization
expense and our Series B redeemable preferred distributions. EBITDA is
presented because it provides useful information regarding our ability to
service debt. EBITDA should not be considered as an alternative measure of
operating results or cash flow from operations, as determined in accordance
with GAAP. EBITDA as presented by us may not be comparable to other
similarly titled measures used by other companies. A reconciliation of Funds
From Operations to EBITDA is as follows:

Funds From Operations................................. $77,141 $129,815 $217,363 $286,895 $288,636 $149,380 $135,683
Interest expense...................................... 9,803 28,792 73,182 125,435 158,620 77,644 81,799
Interest expense from unconsolidated entities......... 818 5,895 6,521 6,729 9,188 4,787 4,742
Amortization expense.................................. 593 1,111 922 693 1,480 474 884
Series B redeemable preferred distributions........... 8,373 12,937 12,937 6,468 6,468
------- -------- -------- -------- -------- -------- --------
EBITDA................................................ $88,355 $165,613 $306,361 $432,689 $470,861 $238,753 $229,576
======= ======== ======== ======== ======== ======== ========
</Table>

(7) For the purpose of computing the ratio of earnings to combined fixed charges
and preferred distributions, earnings consist of income from continuing
operations plus fixed charges, excluding capitalized interest. Fixed charges
consist of interest, whether expensed or capitalized, and amortization of
loan costs. Preferred distributions consist of distributions on preferred
units.

MERISTAR PARTNERSHIP

The following table sets forth selected historical consolidated financial
information for MeriStar Partnership. The selected historical information is
presented as of and for the years ended December 31, 1996, 1997, 1998, 1999 and
2000 and as of and for the six months ended June 30, 2000 and 2001. The
historical financial information for the years ended December 31, 1998, 1999 and
2000 has been derived from the consolidated financial statements and financial
statement notes of MeriStar Partnership which have been audited by KPMG LLP,
independent auditors. The selected historical consolidated financial information
as of and for the years ended December 31, 1996 and 1997 has been derived from
the unaudited financial statements which have been prepared by management of
MeriStar Partnership. The selected historical financial information as of and
for the six months ended June 30, 2000 and 2001 has been derived from the
unaudited financial statements which have been prepared by management of
MeriStar Partnership, on the same basis as the audited financial statements and,
in the opinion of management of MeriStar Partnership, include all adjustments
consisting of normal recurring accruals that are considered necessary for a fair
presentation of the results for those periods. The results of operations for the
six months ended June 30, 2000 and 2001 are not necessarily indicative of
results to be anticipated for the entire year. The following information should
be read together with the consolidated financial statements and financial
statement notes of MeriStar Partnership included in this prospectus. See "Where
You Can Find More Information" beginning on page 220.

<Table>
<Caption>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------------- (UNAUDITED)
1996 1997 -----------------------
(UNAUDITED) (UNAUDITED) 1998(A) 1999 2000 2000 2001(B)
----------- ----------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

RESULTS OF OPERATIONS:
Total revenues....................... $ 102,742 $ 292,554 $ 522,031 $ 374,820 $ 400,685 $ 148,587 $ 609,851
Net operating income................. $ 18,773 $ 58,537 $ 135,910 $ 218,299 $ 230,340 $ 63,899 $ 104,199
Interest expense, net................ $ 12,223 $ 20,968 $ 50,492 $ 100,387 $ 117,524 $ 58,417 $ 60,261
Income before gain (loss) on sale of
assets and extraordinary gain
(loss).............................. $ 3,915 $ 21,290 $ 86,304 $ 116,207 $ 111,197 $ 5,398 $ 42,690
Gain (loss) on sale of assets, net of
tax(C).............................. $ -- $ -- $ -- $ -- $ 3,439 $ 3,439 $ (1,062)
Extraordinary gain (loss), net of
tax(D).............................. $ (1,956) $ (4,092) $ (1,238) $ (4,551) $ 3,400 $ 3,400 $ (1,226)
Net income........................... $ 1,959 $ 17,198 $ 85,066 $ 111,656 $ 118,036 $ 12,237 $ 40,402
Net income applicable to common
unitholders......................... $ 1,959 $ 17,198 $ 84,416 $ 111,091 $ 117,471 $ 10,916 $ 40,120
Basic earnings per unit before
extraordinary gain (loss)(E)........ $ 0.31 $ 1.29 $ 2.38 $ 2.22 $ 2.25 $ 0.16 $ 0.85
</Table>

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29

Diluted earnings per unit before
extraordinary gain (loss)(E)........ $ 0.31 $ 1.27 $ 2.25 $ 2.15 $ 2.18 $ 0.16 $ 0.83
Distributions per common unit(F)..... $ -- $ -- $ 0.82 $ 2.02 $ 2.02 $ 1.01 $ 1.01
Number of partnership units
outstanding(G)...................... 12,754 26,743 51,460 52,193 48,851 50,435 48,712
OTHER FINANCIAL DATA:
EBITDA(H)............................ $ 26,672 $ 78,891 $ 194,752 $ 320,094 $ 341,028 $ 118,001 $ 178,499
Net cash provided by operating
activities.......................... $ 12,147 $ 55,417 $ 186,891 $ 228,329 $ 224,088 $ 120,671 $ 114,562
Net cash (used in) provided by
investing activities................ $(223,425) $ (579,758) $ (785,505) $ (187,952) $ (14,286) $ 13,027 $ (49,534)
Net cash provided by (used in)
financing activities................ $ 226,131 $ 584,220 $ 520,457 $ (41,948) $ (212,173) $ (135,629) $ (45,003)
BALANCE SHEET DATA:
Investments in hotel properties,
gross............................... $ 343,092 $ 950,052 $2,957,543 $3,118,723 $3,193,730 $3,164,045 $3,209,185
Total assets......................... $ 354,795 $1,040,223 $2,989,609 $3,086,096 $3,006,500 $3,036,517 $3,084,981
Long-term debt....................... $ 199,476 $ 491,790 $1,602,352 $1,676,771 $1,638,319 $1,632,433 $1,653,050
Redeemable units..................... $ -- $ 66,847 $ 89,435 $ 81,401 $ 88,545 $ 93,932 $ 99,898
Partners' capital.................... $ 49,141 $ 396,838 $1,170,220 $1,203,518 $1,142,772 $1,111,010 $1,116,934
</Table>

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

(A) MeriStar Partnership was created on August 3, 1998, when American General
Hospitality Corporation, a corporation operating as a REIT, and its
associated entities merged with CapStar Hotel Company and its associated
entities. In connection with the merger between CapStar and American
General, MeriStar Hotels & Resorts, a separate publicly traded company, was
created to be the lessee and manager of nearly all of MeriStar
Partnership's hotels. Prior to August 2, 1998, MeriStar Partnership's
operating results consisted of the revenues and expenses of the hotels.

(B) From August 3, 1998 until January 1, 2001, MeriStar Hotels & Resorts leased
substantially all of MeriStar Partnership's hotels, and MeriStar
Partnership earned lease revenue under the participating lease agreements
with its lessees. Upon assigning the 106 leases with MeriStar Hotels &
Resorts to MeriStar Partnership's taxable REIT subsidiaries on January 1,
2001, in conjunction with the REIT Modernization Act, MeriStar
Partnership's operating results now include the revenues and expenses of
these hotels.

(C) During 2000, MeriStar Partnership sold three limited service hotels that
resulted in a gain on sales of assets. During 2001, MeriStar Partnership
sold one hotel that resulted in a loss on the sale of the asset.

(D) During 1996, 1997, 1998, and 1999 some loan facilities were refinanced and
the write-offs of deferred costs associated with these facilities were
recorded as extraordinary losses in accordance with GAAP. During 2000,
MeriStar Partnership repaid some of its notes payable to MeriStar at a
discount, which resulted in an extraordinary gain. During 2001, MeriStar
Partnership paid down a portion of its revolving credit facility resulting
in an extraordinary loss.

(E) Basic and diluted earnings per unit before extraordinary loss for the year
ended December 31, 1996 is based on earnings for the period from August 20,
1996, the date of CapStar's initial public offering, through December 31,
1996.

(F) No distributions were declared prior to August 3, 1998, the date of the
merger between American General and CapStar.

(G) As of the end of the period presented.

(H) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. MeriStar Partnership's management believes
that EBITDA is a useful measure of operating performance because it is
industry practice to evaluate hotel properties based on operating income
before interest, depreciation and amortization, which is generally
equivalent to EBITDA, and EBITDA is unaffected by the debt and equity
structure of the entity. EBITDA does not represent cash flow from
operations as defined by GAAP, is not necessarily indicative of cash
available to fund all cash flow needs, and should not be considered as an
alternative to net income under GAAP for purposes of evaluating MeriStar
Partnership's results of operations and may not be comparable to other
similarly titled measures used by other companies.

For the six months ended June 30, 2001, EBITDA has been presented before
the effect of non-recurring items: swap termination costs of $9,297; the
write-down of MeriStar Partnership's investment in STS Hotel Net of $2,112;
FelCor merger costs of $3,789; and, costs to terminate leases with Prime
Hospitality Corporation of $1,315.

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EQUIVALENT PER UNIT DATA

We have summarized below specified per common unit information for MeriStar
Partnership and us on a historical basis, pro forma combined basis and pro forma
combined equivalent basis. The pro forma combined amounts are based on the
purchase method of accounting. The MeriStar Partnership per common unit pro
forma combined equivalents are calculated by multiplying the pro forma combined
per common unit amounts by the common unit exchange ratio of 0.784 and
disregards the cash portion of the merger consideration of $4.60 per MeriStar
common unit.

The following information should be read together with the historical and
pro forma financial statements included in or incorporated by reference in this
prospectus. See "Where You Can Find More Information" on page 220.

<Table>
<Caption>
FOR THE SIX MONTHS ENDED
JUNE 30, 2001
-----------------------------------------------------
MERISTAR
PARTNERSHIP
PRO FORMA
FELCOR MERISTAR FELCOR COMBINED
PARTNERSHIP PARTNERSHIP PARTNERSHIP EQUIVALENT
HISTORICAL HISTORICAL PRO FORMA VALUE
----------- ----------- ----------- -----------

Basic net income per common unit before
extraordinary items....................... $ 0.07 $ 0.85 $ 0.74 $ 0.58
Diluted net income per common unit before
extraordinary items....................... $ 0.07 $ 0.83 $ 0.73 $ 0.57
Cash distributions per common unit.......... $ 1.10 $ 1.01 $ 1.10(1) $ 0.86
Book value per common unit.................. $28.15 $25.00 $25.91(2) $20.31
</Table>

<Table>
<Caption>
FOR THE YEAR ENDED
DECEMBER 31, 2000
-----------------------------------------------------
MERISTAR
PARTNERSHIP
PRO FORMA
FELCOR MERISTAR FELCOR COMBINED
PARTNERSHIP PARTNERSHIP PARTNERSHIP EQUIVALENT
HISTORICAL HISTORICAL PRO FORMA VALUE
----------- ----------- ----------- -----------

Basic net income per common unit before
extraordinary items....................... $ 0.74 $ 2.25 $1.23 $0.96
Diluted net income per common unit before
extraordinary items....................... $ 0.74 $ 2.18 $1.21 $0.95
Cash distributions per common unit.......... $ 2.20 $ 2.02 $2.20(2) $1.72
Book value per common unit.................. $29.34 $25.23
</Table>

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

(1) FelCor Partnership does not anticipate that there will be any change from
its historical distribution policy as a result of the merger and related
transactions.

(2) Pro forma book value per common unit is calculated as pro forma partners'
capital and redeemable common units at redemption value less preferred
capital divided by pro forma common units outstanding of 100,387,000 at June
30, 2001.

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RISK FACTORS

You should consider the following material risk factors in evaluating the
units that you will receive in the partnership merger. These factors should be
considered in conjunction with the other information included elsewhere in this
prospectus.

BECAUSE THE AMOUNT OF CASH AND EXCHANGE RATIO ARE FIXED AND OUR UNITS ARE
REDEEMABLE FOR FELCOR COMMON STOCK OR THE CASH MARKET VALUE OF THAT STOCK,
FLUCTUATIONS IN THE MARKET VALUE OF THE FELCOR COMMON STOCK COULD RESULT IN A
DECREASE IN THE VALUE OF THE MERGER CONSIDERATION TO BE RECEIVED BY MERISTAR
PARTNERSHIP UNITHOLDERS.

The exchange ratio for MeriStar Partnership units to be exchanged for our
units in the partnership merger was fixed at the time of the signing of the
merger agreement and is not subject to adjustment based on changes in the
trading price of FelCor common stock or MeriStar common stock before the closing
of the partnership merger. The redemption value of our units you receive in the
partnership merger will depend on the market price of FelCor common stock at the
time of closing of the partnership merger and afterwards.

Each of our units you will receive in the partnership merger will, under
some circumstances, be subject to a unit redemption right at your option
following the partnership merger. Upon exercise by you of your unit redemption
right with respect to your units, we will be required to acquire those units for
cash, based on the market price of FelCor common stock in accordance with our
partnership agreement. However, FelCor may assume, in its sole discretion, our
obligation, in which case FelCor will pay you shares of FelCor common stock or
their cash equivalent. Consequently, the redemption value of our units you
receive in the partnership merger will be directly affected by price
fluctuations of the FelCor common stock. During the 12-month period ending on
August 30, 2001, the most recent date practicable before mailing of this
prospectus, the closing per share price of FelCor common stock varied from a low
of $20.95 to a high of $24.83 and ended that period at $21.09. Historical
trading prices are not necessarily indicative of future performance.

NO FAIRNESS OPINION WAS OBTAINED IN CONNECTION WITH THE PARTNERSHIP MERGER.

Neither MeriStar Partnership nor we obtained a fairness opinion in
connection with the partnership merger. Therefore, no third party has passed on
the fairness of the partnership merger to MeriStar Partnership, holders of
MeriStar Partnership units, us or holders of our units.

THE FEDERAL INCOME TAX CONSEQUENCES TO YOU OF THE PARTNERSHIP MERGER AND THE
OWNERSHIP BY YOU OF OUR UNITS AFTER THE PARTNERSHIP MERGER ARE COMPLEX, AND YOU
SHOULD CAREFULLY CONSIDER THEM.

Tax Consequences of the Partnership Merger. If you are a holder of common
units, Class C preferred units or vested profits-only partnership units in
MeriStar Partnership, you will receive both our units and cash consideration in
the partnership merger and generally will not recognize taxable gain or loss at
the time of the partnership merger, except to the extent that:

- the exchange of MeriStar Partnership units for our units and cash is
characterized as a sale of a portion of your MeriStar Partnership units
based on the receipt of cash consideration in the exchange; or

- the sum of the cash consideration you receive, other than cash
consideration that is counted as proceeds of a taxable sale of a portion
of your MeriStar Partnership units, and any net reduction of your share
of partnership liabilities, exceeds the tax basis that otherwise would be
carried over to our units received in the partnership merger.

A holder of Class D preferred units in MeriStar Partnership who will receive
only our Series D preferred units in the partnership merger generally will not
recognize taxable gain or loss at the time of the partnership merger. However,
the particular tax consequences of the partnership merger to you will depend

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on a number of factors related to your individual tax situation. See "United
States Federal Income Tax Considerations -- Tax Consequences of the Partnership
Merger to MeriStar Partnership Unitholders." We urge you to consult with your
own tax advisor to determine the anticipated tax consequences of the partnership
merger to you in light of your specific circumstances.

Subsequent Events Could Cause You to Recognize Gain. Future events and
transactions could cause you as a former MeriStar Partnership unitholder holding
our units as a result of the partnership merger to recognize part or all of the
taxable gain that has been deferred either through your original contribution of
assets to MeriStar Partnership in exchange for MeriStar Partnership units or
through the partnership merger. See "United States Federal Income Tax
Considerations -- Effect of Subsequent Events on Holders of FelCor Partnership
Units." FelCor generally is not required to take into account the tax
consequences to our limited partners in deciding whether to cause us to
undertake transactions that could cause the limited partners to recognize gain,
and the limited partners generally have no right to approve or disapprove these
transactions. The same risk of gain recognition upon the occurrence of future
events and transactions exists currently with respect to your ownership of your
MeriStar Partnership units.

Our Tax Status. We believe that, and will receive opinions of counsel to
the effect that, at the time of the partnership merger, MeriStar Partnership and
we qualify as partnerships for federal income tax purposes. MeriStar Partnership
and we each intend to continue to operate so as to qualify as partnerships for
federal income tax purposes following the partnership merger. If, however,
either MeriStar Partnership or we were to be taxed as a corporation, either at
the time of the partnership merger or later, the partnership would be required
to pay income tax at corporate rates on its net income, its partners would be
treated as stockholders for tax purposes, and distributions to its partners
would constitute dividends that would not be deductible in computing the
partnership's taxable income. In addition, FelCor would fail to qualify as a
REIT, which would have a material adverse effect on you.

There is a substantial risk that we will be classified as a publicly traded
partnership after the partnership merger. However, even if we are classified as
a publicly traded partnership, we will not be treated as a corporation for
federal income tax purposes because we will be eligible for the "90% passive
income exception." Assuming that we are classified as a publicly traded
partnership after the partnership merger, a unitholder will not be able to use
losses from other passive activities to offset the unitholder's share of our
income and gains. In addition, a unitholder will not be able to use its share of
our losses to offset the unitholder's income and gains from other passive
activities. See "United States Federal Income Tax Considerations -- Tax Status
of FelCor Partnership."

Other Tax Liabilities of Holders of Our Units. In addition to the federal
income tax risks described above, you should consider the potential state and
local tax consequences of owning our units. You may be required to file tax
returns and may incur tax liabilities both in the state or local jurisdiction
where you reside and in the state and local jurisdictions in which we own assets
or otherwise do business. You should consult your own tax advisor with respect
to the state and local income tax implications of owning our units, including
return filing requirements in the various states in which we currently own
properties and will own properties after the partnership merger.

THE INTEGRATION OF MERISTAR WILL MAKE SUBSTANTIAL DEMANDS ON OUR RESOURCES,
WHICH COULD DIVERT NEEDED ATTENTION AWAY FROM OUR OTHER OPERATIONS.

The integration of MeriStar and MeriStar Partnership with us will make
substantial demands on our management, operational resources and financial and
internal control systems. Our future operating results will depend in part on
our ability to continue to implement and improve our operating and financial
controls. The devotion of management's time to the integration of MeriStar may
limit the time available to management to attend to our other operational,
financial and strategic issues.

THERE MAY BE UNDISCLOSED LIABILITIES IN CONNECTION WITH THE MERGER.

We may be subject to undisclosed or otherwise unforeseen environmental,
tax, pension, litigation or other liabilities which are not known to MeriStar,
or we may underestimate the liabilities of MeriStar of
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which we are aware. If unknown liabilities materialize or known liabilities are
greater than are currently estimated, they could result in a material adverse
effect on the merged company's business, financial condition and results of
operations and, going forward, could adversely affect the results of the
combined company and the market price of FelCor's common stock.

OUR OPERATIONS AND MERISTAR PARTNERSHIP'S OPERATIONS MAY NOT BE INTEGRATED
SUCCESSFULLY, AND INTENDED BENEFITS OF THE MERGER AND PARTNERSHIP MERGER MAY NOT
BE REALIZED, WHICH COULD HAVE A NEGATIVE IMPACT ON THE MARKET PRICE OF FELCOR
COMMON STOCK AFTER THE MERGER.

The future operations and earnings of the combined company will depend in
part on our ability to integrate MeriStar Partnership's properties into our
system and operations and realize synergies and cost savings. If we fail to
integrate MeriStar Partnership successfully and/or fail to realize the intended
benefits of the merger and partnership merger, the market price of FelCor common
stock and the value of your units in us could decline after the completion of
the merger. In order to achieve the anticipated benefits of the mergers, we will
need to:

- realize the anticipated $5 million of annual cost savings in general and
administrative expenses from reductions in personnel, closing and
subletting MeriStar's corporate offices and the elimination of other
duplicate overhead costs;

- capitalize on increased purchasing power, including for furniture,
fixtures, equipment, insurance and utilities;

- leverage the increased scale in hotel brand negotiations; and

- effectively control the progress of the integration process and the
associated costs.

Our assessment of the potential synergies and cost savings is preliminary
and subject to change. We may need to incur additional costs to realize them,
none of which costs are currently expected to be material.

Statements regarding the increased earnings estimates, the anticipated
operating efficiencies, cost savings and other benefits we expect to realize
from the integration of MeriStar Partnership are forward-looking statements.
Actual results for the combined operations could differ materially from results
currently anticipated depending upon, among other things:

- MeriStar Partnership's and our future revenues, expenses and other
operating results;

- MeriStar Partnership's and our ability to maintain present efficiency
levels and realize expected cost savings and synergies;

- unforeseen costs and expenses incurred in connection with the integration
of MeriStar Partnership into us; and

- economic or competitive uncertainties and contingencies.

FELCOR AND WE MAY BE UNABLE TO COMPLETE PLANNED FINANCINGS FOR THE MERGERS.

We, together with FelCor, intend to obtain an estimated $1.4 billion of
financing in connection with the mergers. In addition, we have obtained a
commitment for $500 million of financing which will be available for use to
fund, if necessary, our obligation to repurchase up to $500 million of
outstanding senior notes of MeriStar Partnership after the merger. We have
completed $963 million of these planned financings, but only have commitments
from lenders for $825 million of the financings. These commitments are subject
to final documentation. Additionally, FelCor has a term sheet but no commitments
for $100 million of financing in the form of the sale of its perpetual preferred
stock. FelCor may be unable to complete all of these committed or uncommitted
financings.

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34

FELCOR AND WE MAY NOT BE ABLE TO CLOSE COMMITTED FINANCING NECESSARY TO ENABLE
US TO MAKE REQUIRED OFFERS TO PURCHASE ALL OF THE OUTSTANDING MERISTAR
PARTNERSHIP NOTES AS A RESULT OF THE MERGER AND PARTNERSHIP MERGER.

The terms of approximately $856.3 million in aggregate principal amount of
convertible subordinated notes, subordinated notes and senior notes of MeriStar
and MeriStar Partnership will require FelCor and us to make offers to repurchase
those notes because of the completion of the mergers. We have obtained financing
or commitments for financing sufficient to repurchase all of the notes that may
be tendered for repurchase. However, the commitments that we have obtained are
subject to final documentation and may not be completed. The offers to purchase
must be made within ten days after the merger occurs, and the purchases must be
completed within 30 to 60 days after the offers are made. We currently expect,
based on the market prices, that the holders of the convertible subordinated
notes, of which $154.3 million in principal amount is outstanding, and the
subordinated notes, of which $202.6 million in principal amount is outstanding,
will accept our offers to repurchase. If all of these notes are tendered, we
will have to pay 100% of the principal amount of the convertible subordinated
notes and 101% of the principal amount of the subordinated notes plus, in each
case, accrued interest. Based on the current market price of the senior notes in
the principal amount of $500 million, we cannot predict at this time whether the
holders of those senior notes will tender those notes under the offers. If those
noteholders tender their senior notes, we will be required to redeem the
tendered notes at 101% of their principal amount of $500 million outstanding
plus accrued interest.

FAILURE TO COMPLETE THE MERGER AND PARTNERSHIP MERGER MAY REQUIRE, UNDER
SPECIFIED CIRCUMSTANCES, PAYMENT OF TERMINATION FEES AND MAY RESULT IN A
DECREASE IN THE MARKET PRICE OF THE COMMON STOCK OF MERISTAR AND THE VALUE OF
MERISTAR PARTNERSHIP UNITS.

The merger is subject to stockholder approval of both FelCor and MeriStar
and other customary conditions. The parties might not be able to satisfy these
conditions and complete the merger and partnership merger. Failure to complete
the mergers, under specified circumstances, may require MeriStar to pay a
termination fee and FelCor's expenses in connection with the mergers. These
payments could amount to as much as $40 million. In addition, failure to
complete the mergers could result in a possible decline in the market price of
MeriStar common stock and the value of MeriStar Partnership units to the extent
current market prices reflect a market assumption that the mergers will be
completed. See "The Merger Agreement -- Expenses and Termination Fees."

THE DIRECTORS AND EXECUTIVE OFFICERS OF FELCOR AND MERISTAR HAVE INTERESTS IN
THE COMPLETION OF THE MERGER AND PARTNERSHIP MERGER THAT MAY CONFLICT WITH THE
INTERESTS OF THE STOCKHOLDERS OF THEIR RESPECTIVE COMPANIES.

Some FelCor and MeriStar executive officers and directors have interests
in, and will receive benefits from, the merger and the partnership merger that
differ from, or are in addition to, and, therefore, may conflict with the
interests of MeriStar Partnership unitholders generally, including the
following:

- Bruce G. Wiles, the current President, Chief Investment Officer and a
director of MeriStar, has been offered employment by FelCor.

Whetsell, Emery and Wiles in the event any amounts they receive are
subject to an excise tax under Section 4999 of the Code, which taxes some
payments that are contingent on a change of control within the meaning of
Section 280G of the Internal Revenue Code. Although the parties currently
expect the tax reimbursement obligations of FelCor to be limited to
approximately $500,000, the issues relating to the determination of those
liabilities are complex and subject to varied interpretations. Depending
on the amount, if any, of the payments to be received by these
individuals that are ultimately determined to be subject to the excise
tax, FelCor's reimbursement obligations could be as much as $6.0 million
to Mr. Whetsell, $3.8 million to Mr. Emery and $550,000 to Mr. Wiles.

- Each of the profits-only units in MeriStar Partnership of Messrs.
Whetsell and Emery will vest and be exchanged for $4.60 in cash and 0.784
of a common unit in us as a result of the partnership merger. Mr.
Whetsell owns 342,917 unvested profits-only units in MeriStar
Partnership, all of which will vest as a result of the merger, with an
aggregate value of approximately $7.5 million. Mr. Emery owns 221,459
unvested profits-only units in MeriStar Partnership, all of which will
vest as a result of the merger, with an aggregate value of approximately
$4.9 million. Because each of our common units is exchangeable for a
share of FelCor common stock, the value of each profits-only unit is
based on 0.784 times the closing price of $22.10 per share of FelCor
common stock on May 9, 2001, plus $4.60. Other officers and directors of
MeriStar collectively own 125,000 profits-only units that will also be
exchanged for cash and common units in FelCor Partnership, but their
unvested profits-only units will be canceled.

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FAILURE TO COMPLETE THE MERGER AND PARTNERSHIP MERGER MAY RESULT IN OTHER
ADVERSE CONSEQUENCES TO MERISTAR AND MERISTAR PARTNERSHIP.

Under the merger agreement, the parties agreed to some affirmative and
negative covenants, including covenants affecting the conduct of their
respective businesses outside the ordinary course of business. Accordingly, the
parties may forego opportunities which otherwise would be available to them had
the merger agreement not been executed. In addition, transactions such as the
mergers can disrupt relationships with employees and others with whom the
parties have existing or prospective relationships. Accordingly, if the merger
agreement is terminated, the ability of MeriStar and MeriStar Partnership to
continue their pre-merger business plans could be adversely affected. MeriStar
expects to incur approximately $10 million in expenses for the merger and
related transactions, which may not be reimbursable.

WE HAVE HAD AND EXPECT TO HAVE INCREASES IN LEVERAGE THAT COULD ADVERSELY AFFECT
OUR FINANCIAL CONDITION.

Our leverage has increased to fund our renovation, redevelopment and
rebranding program and our share repurchase program. In addition, we expect our
leverage to further increase as a result of the completion of the mergers and
related financings. FelCor's share repurchase program authorizes repurchases of
up to an aggregate maximum of $300 million. Through June 30, 2001, FelCor had
repurchased approximately 10.4 million shares of its common stock under this
program at an aggregate cost of approximately $189 million. Any FelCor share
repurchases result in a like redemption by us of units held by FelCor for
similar consideration.

At June 30, 2001, we alone had:

- Approximately $2.1 billion in consolidated debt, of which approximately
$702.8 million was secured by mortgages or capital leases and $12.1
million had a maturity date of less than 12 months;

- A ratio of total debt to market capitalization of 51.6%;

- A ratio of consolidated debt to investment in hotels at cost of 40%; and

- A ratio of earnings before interest, income tax, depreciation and
amortization, or EBITDA, to interest expense for the six months then
ended of 2.8-to-1.

At the same date, MeriStar alone had:

- Approximately $1.7 billion in consolidated debt, of which approximately
$375.8 million was secured by mortgages or capital leases and $39.6
million had a maturity date of less than 12 months;

- A ratio of total debt to market capitalization of 63.9%; and

- A ratio of EBITDA to interest expense for the same six month period of
2.7-to-1.

At June 30, 2001, on a pro forma basis, we would have had:

- Approximately $3.6 billion in consolidated debt, of which approximately
$1.4 billion would have been secured by mortgages or capital leases and
$26.2 million would have had a maturity date of less than 12 months;

- A ratio of total debt to market capitalization of 57.4%;

- A ratio of consolidated debt to investment in hotels at cost of 50.5%;
and

- A ratio of EBITDA to interest expense for the six months then ended of
2.6-to-1.

The degree to which we will be leveraged could have important consequences
for the combined company going forward and for you. For example, it could:

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

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- increase our vulnerability to adverse economic and industry conditions,
as well as 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
operations, future business opportunities, 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.

THE EARNINGS PER UNIT AND FUNDS FROM OPERATIONS OF THE COMBINED PARTNERSHIP WILL
BE ADVERSELY AFFECTED BY INCREASED INTEREST EXPENSE.

Interest expense of the combined partnership will be increased primarily as
a result of the debt financing of the approximately $225 million in aggregate
cash consideration being paid to MeriStar stockholders and MeriStar Partnership
unitholders in the mergers and the related merger transaction costs and
financing costs of approximately $59 million. On a pro forma basis, for the year
ended December 31, 2000, interest expense of the combined partnership exceeded
historical levels by approximately $32.4 million. The increase in interest
expense will have a negative impact on the combined partnership's earnings per
unit of $0.32 and funds from operations of $32.4 million.

CONFLICTS OF INTEREST COULD ADVERSELY AFFECT OUR BUSINESS.

Certain FelCor directors and executive officers. Six Continents Hotels,
formerly Bass Hotels and Resorts, currently manages 90 of FelCor's hotels.
Richard C. North, who joined FelCor's board during 1998, is the Group Finance
Director of Six Continents, plc, which is the parent of Six Continents Hotels
and, together with its affiliates, owns FelCor common stock and our units
aggregating approximately 16.1% of FelCor's outstanding common stock and units.

Issues may arise under the leases, franchise agreements and management
contracts, and in the allocation of acquisition and management opportunities,
that present conflicts of interest due to the relationship of Mr. North to the
companies with which he is associated. As an example, in the event we enter into
new or additional hotel management contracts or other transactions with Six
Continents Hotels, the interests of Mr. North, by virtue of his relationship
with Six Continents, plc, may conflict with our interests. For example, any
increase in management fees payable to Six Continents Hotels may decrease our
profits to the benefit of Six Continents Hotels. Also, in the selection of
franchises under which our hotels will be operated, Mr. North by virtue of his
relationship with Six Continents plc, may have interests that conflict with our
interests.

Upon completion of the mergers, two of FelCor's directors will serve on the
board of directors of MeriStar Hotels & Resorts, and one of those two directors,
Paul Whetsell, will continue to serve as the Chief Executive Officer of MeriStar
Hotels & Resorts. In addition, Mr. Bruce Wiles, who has been offered employment
with FelCor as an executive officer following the mergers, owns 335,823 units of
limited partnership interest in the operating partnership of MeriStar Hotels &
Resorts, with an aggregate value of $466,794, based on the closing price of
$1.39 per share of MeriStar Hotels & Resorts common stock on August 30, 2001.
Further, our relationship with MeriStar Hotels & Resorts will be governed by the
terms of an intercompany agreement. The initial intercompany agreement was not
negotiated on an arm's-length basis, although the recent amendment to the
intercompany agreement in connection with the REIT Modernization Act was subject
to an arm's-length negotiation. We may have conflicting views with MeriStar
Hotels & Resorts on the manner in which our hotels are operated and managed, and
with respect to acquisitions and dispositions. Conflicts may also arise in
connection with the $50.0 million revolving credit facility, which had $36.0
million outstanding as of June 30, 2001, from MeriStar to MeriStar Hotels &
Resorts and the parties' rights under the intercompany agreement. As a result,
FelCor directors and executive officers who serve at or have interests in
MeriStar Hotels & Resorts may be presented with

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decisions which benefit FelCor to the detriment of MeriStar Hotels & Resorts or
benefit MeriStar Hotels & Resorts to FelCor's detriment. Inherent potential
conflicts of interest will be present in all of the numerous transactions
between MeriStar Hotels & Resorts and us.

We generally will be obligated under each of our management agreements with
MeriStar Hotels & Resorts to pay a termination fee to MeriStar Hotels & Resorts
if we elect to sell a hotel or if we elect not to restore a hotel after a
casualty and do not replace it with another hotel subject to a management
agreement with a fair market value equal to the fair market value of MeriStar
Hotels & Resorts' remaining management fee due under the management agreement to
be terminated. Where applicable, the termination fee is equal to the present
value, using a discount rate of 10%, of the remaining payments under the
agreement, assuming that MeriStar Hotels & Resorts would have been paid a
management fee under the agreement to be terminated, based on the operating
results for the 12 months preceding termination. Based on operating results for
relevant hotels for the 12 months ended June 30, 2001, the aggregate termination
fees payable under all of the management contracts would have ranged between
$170 million and $180 million. A decision to sell a hotel may, therefore, have
significantly different consequences for MeriStar Hotels & Resorts and us.

FelCor anticipates that any director who has a conflict of interest with
respect to an issue presented to the FelCor board will abstain from voting upon
that issue, although he will have no legal obligation to do so. FelCor has no
provisions in its bylaws or charter that require an interested director to
abstain from voting on an issue as a FelCor director. FelCor does not expect to
add provisions in its charter and bylaws to this effect. Although each director
has a duty to FelCor to act in good faith, 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 FelCor's 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
or companies with which he is associated have an interest could influence the
votes of other directors regarding the issue.

The relationship with MeriStar Hotels & Resorts may restrict future
opportunities. MeriStar is a party to an intercompany agreement with MeriStar
Hotels & Resorts, which will be assumed by us in the mergers. The intercompany
agreement will generally grant MeriStar Hotels & Resorts a right of first
refusal with respect to any management opportunity at any of our properties that
we do not elect to have managed by the hotel brand owner. Following the mergers,
each of these opportunities will be made available to MeriStar Hotels & Resorts
only if we determine that:

- consistent with FelCor's status as a REIT, we must enter into a
management agreement with an unaffiliated third party with respect to the
property;

- MeriStar Hotels & Resorts is qualified to be the manager of that
property; and

- we decide not to have the property operated by the owner of a hospitality
brand under that brand.

Although 90% of our current properties are managed by hotel brand owners, the
intercompany agreement will limit our freedom to engage hotel management
companies to manage our hotels that are not managed by hotel brand owners.

In addition, under the intercompany agreement, each party must cooperate
with the other party to effect any securities issuance of the other party by
assisting in the preparation of any registration statement or other document
required in connection with the issuance.

Acquisition of lessees. As a result of the passage of the REIT
Modernization Act, FelCor and MeriStar are able to form taxable REIT
subsidiaries, referred to as TRSs, to acquire the lessee's interest in our
existing hotel leases and to serve as lessees for any hotels acquired beginning
January 1, 2001. A TRS is a fully taxable corporation which may be owned 100% by
a REIT. A TRS generally is permitted to engage in businesses, own assets and
earn income that, if engaged in, owned or earned by the REIT, might jeopardize
REIT status or result in the imposition of penalty taxes on the REIT. A TRS is
permitted to lease hotels from the related REIT as long as it does not directly
or indirectly operate or
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manage hotels, except through an independent hotel management company that
satisfies applicable requirements under the federal income tax laws. A TRS
generally is not allowed to act as a licensor or a franchisor of any brand name
under which any hotel is operated.

The acquisition of one of our primary lessees, DJONT Operations L.L.C., or
DJONT, was completed effective January 1, 2001. In consideration for the
acquisition of DJONT, we issued 416,667 units of limited partnership interest
valued at approximately $10 million. The acquisition of DJONT required
negotiations between FelCor and the owners of DJONT, including Mr. Corcoran and
the children of Charles N. Mathewson, a director of FelCor. The interests of Mr.
Corcoran and Mr. Mathewson were in direct conflict with our interests in these
negotiations. Accordingly, they abstained from participation in the discussion
and vote by the FelCor board on this matter.

In December 2000, we sold one hotel and, effective January 1, 2001,
completed the acquisition of leases with respect to 12 hotels, that had been
leased to and operated by Six Continents Hotels. In consideration for the
acquisition and termination of these leases and the related management
agreements, 413,585 shares of FelCor common stock valued at approximately $10
million were issued to Six Continents Hotels. We acquired the remaining 88
leases held by Six Continents, effective July 1, 2001. We have contributed these
leases to our TRSs. In consideration for these 88 leases, FelCor issued 100
shares of FelCor common stock and our subsidiaries agreed to new long-term
management agreements with Six Continents subsidiaries to manage these hotels.
The acquisition of the leases held by Six Continents Hotels involved
negotiations between FelCor and Six Continents Hotels. Richard C. North, a
director of FelCor, is the Group Finance Director of Six Continents, plc. The
interest of Six Continents, plc in those negotiations was in direct conflict
with FelCor's interests. Mr. North abstained from participating in any
discussion or vote by FelCor's board relating to these transactions.

Adverse tax consequences to some affiliates on a sale of some hotels.
Messrs. Corcoran and Mathewson may incur additional tax liability if we sell our
investments in six hotels that we acquired in July 1994 from partnerships
controlled by these individuals. 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 FelCor through a majority of its independent directors.

EACH OF THE PARTIES HAS, AND THE COMBINED PARTNERSHIP WILL HAVE, RESTRICTIVE
DEBT COVENANTS THAT COULD ADVERSELY AFFECT ITS ABILITY TO RUN ITS BUSINESS.

At June 30, 2001, FelCor and we were parties to indentures governing an
aggregate $1.4 billion in principal amount of our outstanding notes and
agreements governing our $600 million line of credit. At June 30, 2001, MeriStar
and MeriStar Partnership were parties to indentures governing an aggregate
$856.3 million in principal amount of outstanding notes and agreements governing
their $500 million line of credit and $195 million in term loans. At June 30,
2001, on a pro forma basis, the combined partnership would have had an aggregate
of $1.9 billion in indebtedness under its senior notes and an aggregate of
$330.4 million in debt under its line of credit. All of this indebtedness
contains or will contain various restrictive covenants including, among others,
provisions restricting the borrower from:

- incurring indebtedness;

- making distributions;

- making investments;

- engaging in transactions with affiliates;

- incurring liens;

- merging or consolidating with another person;

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- disposing of all or substantially all of its assets; or

- permitting limitations on the ability of the borrower's subsidiaries to
make payments to the borrower.

These restrictions may adversely affect the ability of the combined partnership
to finance its operations or engage in other business activities that may be in
its best interest. For example, on a pro forma basis, under the most restrictive
of these covenants that will be applicable to the combined partnership, the
combined partnership would be able to incur no more than $611 million in
additional indebtedness for the purpose of acquiring additional hotels and $280
million for purposes other than acquiring additional hotels following the merger
and partnership merger, assuming the mergers had occurred on June 30, 2001.

In addition, some of these agreements will require the combined partnership
to maintain specified financial ratios. The ability of the combined partnership
to comply with these ratios going forward may be affected by events beyond its
control. These covenants also may restrict the ability of the combined
partnership to engage in some transactions. In addition, any breach of these
limitations could result in the acceleration of most of the combined
partnership's outstanding debt. The combined partnership may not be able to
refinance or repay its debts in full under those circumstances.

MERISTAR PARTNERSHIP AND WE ENCOUNTER INDUSTRY RELATED RISKS THAT MAY ADVERSELY
AFFECT OUR BUSINESSES, AND THE COMBINED PARTNERSHIP WILL ENCOUNTER THE SAME
RISKS.

The recent economic slowdown has adversely affected the RevPAR performance
of MeriStar Partnership and us and, if it worsens or continues, these effects
could be material. Both MeriStar Partnership and we experienced declines in
revenue per available room, or RevPAR, during the second quarter of 2001, as
compared to the same period of 2000, of 6.0% for MeriStar Partnership and 7.4%
for us. A sharper than anticipated decline in business travel was the primary
cause of the declines, which were principally reflected in decreased
occupancies. Both MeriStar Partnership and we expect that the hotel industry
will experience a RevPAR decline for the full year 2001. The current economic
slowdown and the resulting declines in RevPAR, which began in March 2001, are
currently continuing. MeriStar Partnership and we both anticipate that third
quarter RevPAR will be less than that of the prior year period and less than
that of the second quarter of 2001. The decline in occupancy during the second
and third quarters is expected to lead to declines in room rates as hotels
compete more aggressively for guests. If the economic slowdown worsens or
continues for a protracted time, it could have a material adverse effect on the
operations and earnings of MeriStar Partnership, us and the combined
partnership.

Investing in hotel assets involves special risks. MeriStar Partnership and
we have invested almost entirely in hotel-related assets, and the 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;

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

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

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

- adverse effects of a downturn in the hotel industry; and

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

The combined partnership will have increased concentration of hotels in the
upscale, full-service segment, which may increase its susceptibility to an
economic downturn. As a percentage of total rooms, we currently have 18% of our
hotels in the upscale, full-service segment, MeriStar Partnership currently has
65% of its hotels in this segment, and the combined partnership will have 38% of
its hotels in this segment. In an economic downturn, hotels in this segment,
which generally demand higher room rates,

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may be more susceptible to a decrease in revenues, as compared to hotels in
other segments that have lower room rates. This characteristic may result from
hotels in this segment generally targeting business and high-end leisure
travelers. In periods of economic difficulties, business and leisure travelers
may seek to reduce travel costs by limiting trips or seeking to reduce costs on
the trips that are taken, which could have a material adverse effect on the
revenues and results of operations of the combined partnership.

The combined partnership will have geographic concentration in three states
which may create risks of regional economic and weather conditions. We derived
approximately 48% of our revenues for the twelve months ended June 30, 2001 from
hotels located in three states: California, Florida and Texas. As a result of
the merger and partnership merger, on a pro forma basis, the revenue from these
three states for the twelve months ended June 30, 2001 would be reallocated to
reduce the reliance on any one state but, collectively, would still account for
approximately 48% of the combined partnership's revenues. Therefore, following
the mergers, adverse economic or weather conditions in these states will have a
greater effect on the combined partnership than similar conditions in other
states.

MeriStar Partnership and we could each face increased competition. Each of
MeriStar Partnership's and 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 FelCor and MeriStar hotels are
located, which could adversely affect the results of operations of these hotels.
An oversupply of hotel rooms could adversely affect both occupancy and rates in
the markets in which FelCor and MeriStar hotels are located. A significant
increase in the supply of midprice, upscale and upper upscale hotel rooms and
suites, if demand fails to increase proportionately, could have a severe adverse
effect on the business, financial condition and results of operations of
MeriStar Partnership and us.

Acquisition growth opportunities have decreased. There has been
substantial consolidation in, and capital allocated to, the U.S. lodging
industry since the early 1990's. This generally has resulted in higher prices
for hotels. In addition, current market prices of FelCor's and MeriStar's common
stock make their cost of equity capital relatively high. These conditions have
resulted in fewer attractive acquisition opportunities. An important part of
MeriStar Partnership's and our historical growth strategy has been the
acquisition and, in many instances, the renovation and repositioning of hotels
at less than replacement cost. Continued industry consolidation and competition
for acquisitions could adversely affect the growth prospects of the combined
partnership going forward. MeriStar Partnership and we compete for hotel
investment opportunities with other companies, some of which have greater
financial or other resources than MeriStar Partnership and we have. Competitors
may have a lower cost of capital and may be able to pay higher prices or assume
greater risks than would be prudent for MeriStar Partnership and we to pay or
assume.

MeriStar Partnership and we are subject to possible adverse effects of
franchise and licensing agreement requirements. Substantially all of our hotels
and the hotels of MeriStar Partnership are operated under existing franchise or
license agreements with nationally recognized hotel brands. Each license
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 could
require a franchisee to incur significant expenses or capital expenditures,
which could adversely affect MeriStar Partnership's and our results of
operations and ability to make payments on indebtedness. Also, changes to these
standards could conflict with a hotel's specific business plan or limit a
franchisee's ability to make improvements or modifications to a hotel without
the consent of the franchisor.

If a franchise license terminates due to MeriStar Partnership's or our
failure to make required improvements, MeriStar Partnership or we may be liable
to the franchisor for a termination payment. These termination payments vary by
franchise agreement and hotel. The loss of a substantial number of franchise
licenses and the related termination payments could have a material adverse
effect on MeriStar Partnership's or our business because of the loss of
associated name recognition, marketing support and centralized reservation
systems provided by the franchisor. The franchise agreements could also expire
or terminate, with specified renewal rights, at various times. As a condition to
renew, the franchise

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agreements could involve a renewal application process that would require
substantial capital improvements, for which MeriStar Partnership or we would be
responsible, to be made to the land or hotels.

As a condition to the mergers, both MeriStar Partnership and we must obtain
the consent of a number of MeriStar Partnership's franchisors, and obtaining
those consents may require additional expenditures or impose additional
conditions. If required consents are not obtained, the partnership merger may
not be completed. If the failure to obtain one or more consents is waived and
the partnership merger completed, the related franchises may be terminated, and
we may be liable to the franchisor for termination payments. Assuming all of the
MeriStar Partnership franchises were terminated on June 30, 2001, MeriStar
Partnership and we estimate that the aggregate of these termination payments, if
required, would be in the range of $120 million to $130 million. The loss of a
substantial number of franchises and the related termination payments could have
a material adverse effect on the combined partnership's results of operations.

The combined partnership will be subject to the continued risks of brand
concentrations under a limited number of brands. Following the mergers, the
combined partnership will continue to be subject to the potential risks
associated with concentration of its hotels under a limited number of brands. A
negative public image or other adverse event which becomes associated with the
brand could adversely affect hotels operated under that brand. The following
percentages of the combined partnership's revenues are expected to be generated
by hotels operated under each of the indicated brands based on revenues for the
twelve months ended June 30, 2001:

- Embassy Suites 25.4%

- Holiday Inns 21.0%

- Sheraton and Sheraton
Suites 9.2%

- Crowne Plaza 8.8%

- Hilton and Hilton Suites 8.4%

Should any of these brands suffer a significant decline in popularity with the
traveling public, it could affect the combined partnership's revenues and
profitability.

MeriStar Partnership and we are subject to the additional risks of hotel
operations. Prior to January 1, 2001, substantially all of the hotels of
MeriStar Partnership and us were leased to unaffiliated third parties under
leases providing for the payment of rent based, in part, upon revenues from the
hotels. Accordingly, operating risks to MeriStar Partnership and us were
essentially limited to changes in hotel revenues and to the lessees' ability to
pay the rent due under the leases. On January 1, 2001, TRSs of MeriStar
Partnership acquired the leaseholds of substantially all of MeriStar
Partnership's hotels, and our TRS purchased the leaseholds of 98 of its hotels.
Effective July 1, 2001, we acquired 88 leaseholds held by Six Continents Hotels.
As a result of these acquisitions, MeriStar Partnership and we became subject to
the risk of fluctuating hotel operating expenses, including but not limited to:

- wage and benefit costs;

- repair and maintenance expenses;

- the costs of gas and electricity, which have increased significantly in
recent months;

- the costs of liability insurance; and

- other operating expenses.

These operating expenses are more difficult to predict and control than revenue,
resulting in an increased risk of volatility in MeriStar Partnership's and our
results of operations.

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

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during tourist season than other times of the year. Seasonal variations in
revenue at the hotels of both MeriStar Partnership and us can be expected to
cause quarterly fluctuations in each party's revenues. Quarterly earnings also
may be adversely affected by events beyond the control of both MeriStar
Partnership and us, such as extreme weather conditions, economic factors and
other considerations affecting travel.

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

MERISTAR PARTNERSHIP'S AND OUR ABILITY TO GROW MAY BE LIMITED BY THE ABILITY TO
ATTRACT DEBT FINANCING.

Recently, MeriStar Partnership and we have focused on internal growth
strategies, which include the renovation, redevelopment and rebranding of hotels
to achieve improved revenue performance. MeriStar Partnership and we may not be
able to fund growth solely from cash provided from operating activities because
each of MeriStar and FelCor must distribute at least 90% of its taxable income
each year to maintain its status as a REIT. Consequently, MeriStar Partnership
and we rely upon the availability of debt or equity capital to fund hotel
acquisitions and improvements and may be dependent upon the ability to attract
debt financing from public or institutional lenders. FelCor intends to continue
to operate the combined company as a REIT following the merger. We may not be
successful in attracting sufficient debt financing to fund future growth at an
acceptable cost. In addition, FelCor currently has, and expects to continue
following the merger and partnership merger, a policy of limiting debt to not
more than 55% of its investment in hotel assets, at cost. This policy is a
FelCor board policy only and not a requirement contained in FelCor's or our
organizational documents. Accordingly, the policy may be modified or waived by
the FelCor board, which it has done previously, increasing the limitation from
40% in June 1998 to 50% in February 2000 and to its current 55% in May 2001.
Unless further waived or modified by its board of directors, this limitation
could also limit FelCor's ability to incur additional debt to fund its continued
growth. At June 30, 2001, on a pro forma basis, FelCor's consolidated debt
represented 50.5% of its investment in hotels at cost.

FELCOR AND MERISTAR ARE SUBJECT TO POTENTIAL TAX RISKS.

The federal income tax laws governing REITs are complex. Each of FelCor
and MeriStar has operated and, following the merger, FelCor intends to continue
to operate, in a manner that is intended to qualify it as a REIT under 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, neither FelCor nor MeriStar can be certain that
it has been, and FelCor cannot be certain that it 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 FelCor to tax. Each
year, a REIT must pay out to its stockholders at least 90%, or 95% for taxable
years prior to 2001, of its taxable income, other than any net capital gain. To
the extent that a REIT satisfies the distribution requirement, but distributes
less than 100% of its taxable income, it will be subject to federal corporate
income tax on its undistributed taxable income. In addition, a REIT will be
subject to a 4% nondeductible excise tax if the actual amount it pays out to its
stockholders in a calendar year is less than the minimum amount specified in the
federal income tax laws. Each of FelCor and MeriStar has paid out, and FelCor
intends to continue to pay out, its income to its stockholders in a manner
intended to satisfy the distribution requirement and to avoid corporate income
tax and the 4% excise tax. FelCor's and MeriStar's only source of funds to make
those distributions comes from distributions to FelCor from FelCor Partnership
and to MeriStar from MeriStar Partnership. Accordingly, FelCor or MeriStar may
be required to borrow money or sell assets to pay out

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enough of its taxable income to satisfy the distribution requirement 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 FelCor fails to qualify as a REIT in any taxable year, FelCor would be
subject to federal income tax on its taxable income. FelCor might need to borrow
money or sell hotels in order to pay any such tax. FelCor's payment of income
tax would decrease the amount of its income available to be paid out to its
stockholders. In addition, FelCor would no longer be required to pay out most of
its taxable income to its stockholders. Unless its failure to qualify as a REIT
were excused under federal income tax laws, FelCor could not re-elect REIT
status until the fifth calendar year following the year in which it failed to
qualify. In addition, FelCor's or MeriStar's failure to qualify as a REIT in any
taxable year prior to or ending on completion of the mergers could jeopardize
FelCor's REIT status after the mergers and/or cause FelCor to be subject to
federal income tax.

Failure to have distributed earnings and profits of Bristol Hotel Company
or CapStar Hotel Company in 1998 would cause FelCor or MeriStar to fail to
qualify as a REIT. At the end of any taxable year, a REIT may not have any
accumulated earnings and profits, described generally for federal income tax
purposes as cumulative undistributed net income, from a non-REIT corporation. In
connection with the merger of Bristol Hotel Company, or Bristol, with and into
FelCor in 1998, Arthur Andersen LLP prepared and provided to FelCor its
computation of Bristol's accumulated earnings and profits through the date of
the merger, and FelCor made a corresponding special one-time distribution to its
stockholders. In connection with the merger of CapStar Hotel Company, or
CapStar, with and into American General Hospitality Corporation, the predecessor
to MeriStar, in 1998, KPMG LLP prepared and provided to MeriStar its computation
of CapStar's accumulated earnings and profits through the date of the merger,
and the distribution of the stock of MeriStar Hotels & Resorts, Inc. by CapStar
prior to the CapStar merger was determined to be sufficient to reduce the
earnings and profits of CapStar to zero at the time of the CapStar merger.
However, the determination of accumulated earnings and profits for federal
income tax purposes is extremely complex and the computations of Arthur Andersen
LLP and KPMG LLP are not binding on the Internal Revenue Service. Should the
Internal Revenue Service successfully assert either that Bristol's accumulated
earnings and profits were greater than the amount so distributed by FelCor or
that CapStar's accumulated earnings and profits were greater than the amount so
distributed by CapStar, FelCor may fail to qualify as a REIT. Alternatively, the
Internal Revenue Service may permit FelCor to avoid losing its REIT status by
paying a deficiency dividend, on MeriStar's or its own behalf, to eliminate any
remaining accumulated earnings and profits of Bristol or CapStar. There can be
no assurance, however, that the Internal Revenue Service would not assert loss
of REIT status as the penalty for failing to distribute the accumulated earnings
and profits of Bristol or CapStar in 1998.

A sale of assets acquired from Bristol or CapStar within ten years after
the respective merger will result in corporate income tax. If FelCor sells any
asset that it acquired from Bristol within ten years after FelCor's merger with
Bristol, or FelCor sells any asset that MeriStar acquired from CapStar within
ten years after its merger with CapStar, and FelCor recognizes a taxable gain on
the sale, FelCor will be taxed at the highest corporate rate on an amount equal
to the lesser of:

- the amount of gain that FelCor recognizes at the time of the sale; or

- the amount of gain that FelCor or MeriStar, as appropriate, would have
recognized if it had sold the asset at the time that it acquired the
asset from Bristol or CapStar, as appropriate, for its then fair market
value.

The sales of the Bristol and CapStar hotels that have occurred to date have not
resulted in any material amount of tax liability. If FelCor is successful in
selling the remaining 15 hotels designated as assets held for sale, FelCor could
incur corporate income tax with respect to the related built-in gain, the amount
of which cannot yet be determined.

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DEPARTURE OF KEY PERSONNEL, INCLUDING MR. CORCORAN, COULD ADVERSELY AFFECT OUR
FUTURE OPERATING RESULTS.

MERISTAR PARTNERSHIP AND WE ARE SUBJECT TO RISKS THAT MAY ADVERSELY AFFECT REAL
ESTATE OWNERSHIP.

General Risks. MeriStar Partnership's and our investments in hotels are
subject to the numerous risks generally associated with owning real estate,
including among others:

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

- changes in zoning laws;

- changes in traffic patterns and neighborhood characteristics;

- increases in assessed valuation and tax rates;

- increases in the cost of property insurance;

- governmental regulations and fiscal policies;

- the potential for uninsured or underinsured property losses;

- the impact of environmental laws and regulations; and

- other circumstances beyond their control.

Moreover, real estate investments are relatively illiquid, and neither MeriStar
Partnership nor we may be able to vary our respective portfolios in response to
changes in economic and other conditions.

Compliance with environmental laws may adversely affect MeriStar
Partnership's and 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. This liability may be
imposed without regard to fault or the legality of a party's conduct and may, in
some 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
an owner to incur substantial expenses and limit the use of its properties.
MeriStar Partnership or 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 some 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.

Future or amended laws or regulations, or more stringent interpretations or
enforcement of existing environmental requirements, may impose additional
material environmental liability. In addition, the environmental condition or
liability relating to the hotels of MeriStar Partnership or us may be affected
by new information or changed circumstances, by the condition of properties in
the vicinity of those 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
MeriStar Partnership's and our financial condition. Under the Americans with
Disabilities Act of 1990, all public accommodations, including hotels, are
required to meet some federal requirements for access and use by disabled
persons. Both MeriStar Partnership and we believe that our respective hotels
substantially comply with the requirements of the Americans with Disabilities
Act. However, a determination that the hotels are not in compliance with that
Act could result in liability for both governmental fines and damages to private
parties. If either MeriStar Partnership or we were required to make
unanticipated major modifications to the hotels to comply with the requirements
of the Americans with Disabilities Act, it could adversely affect that
partnership's ability to pay its obligations.

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THE MERGER AND PARTNERSHIP MERGER MAY CAUSE DILUTION TO OUR EARNINGS PER UNIT.

The mergers may have a dilutive effect on earnings per common unit of us
due to our additional units that will be issued as a result of the mergers, the
transaction and integration-related costs, increased interest expense and other
factors such as failure to realize the anticipated benefits from cost savings
and synergies expected from the mergers. Any dilution in earnings per share
could adversely impact the value of our units.

THERE IS NO PUBLIC MARKET FOR OUR UNITS, AND NONE IS EXPECTED TO DEVELOP, WHICH
MAY CAUSE SOME DIFFICULTY IN SELLING ANY OF THE UNITS YOU RECEIVE IN THE
PARTNERSHIP MERGER.

There is no public market for our units, and none is expected to develop.
Our partnership agreement, however, provides that unitholders may, subject to
specified limitations, redeem their units for FelCor common stock on a
one-on-one basis or their cash equivalent, at the election of FelCor. The
determination of whether the redeeming party receives cash or FelCor common
stock is generally, subject to specified exceptions, within the sole discretion
of FelCor. If you are unable to redeem your units in us, you may have difficulty
selling those units because of the lack of a public market and the restrictions
on transfer contained in our partnership agreement. For more information
regarding these restrictions on transfer, see "Comparison of Unitholder
Rights -- Transfers -- FelCor Partnership."

THERE ARE DIFFERENCES IN THE RIGHTS OF MERISTAR PARTNERSHIP UNITHOLDERS AND OUR
UNITHOLDERS THAT MAY BE DETRIMENTAL TO MERISTAR PARTNERSHIP UNITHOLDERS WHO
RECEIVE OUR UNITS IN THE PARTNERSHIP MERGER.

As a result of the partnership merger, MeriStar Partnership unitholders
will no longer own units in MeriStar Partnership and will become limited
partners and unitholders in us. Differences between the MeriStar Partnership
limited partnership agreement and our limited partnership agreement result in
differences in the rights of the MeriStar Partnership unitholders as compared to
our unitholders. The rights of our unitholders may in some cases be considered
less favorable than the rights of MeriStar Partnership unitholders. The material
differences in unitholder rights that may be considered less favorable to
MeriStar Partnership unitholders are:

- We have outstanding two series of preferred units which have preferences
over our common units as to distributions or liquidating distributions
and over our Series C and Series D preferred units as to liquidating
distributions;

- FelCor may, in its discretion, cause us to issue additional units without
limitation, while MeriStar Partnership may not issue additional units if
it would have a material adverse impact on the exchange rights or
economic interests of existing limited partners;

- We require FelCor's consent and the transfer and surrender of physical
certificates in order to transfer units. Except for some exceptions,
which are very similar to those provided in our partnership agreement, no
consent of MeriStar is required to transfer units in MeriStar
Partnership; and

- Our partnership agreement does not expressly permit our limited partners
to call a meeting of partners, while the partnership agreement of
MeriStar Partnership expressly permits limited partners holding at least
25% of its partnership interests to require the call of a partners'
meeting.

FELCOR'S CHARTER CONTAINS LIMITATIONS ON OWNERSHIP AND TRANSFER OF SHARES OF ITS
STOCK THAT COULD ADVERSELY AFFECT ATTEMPTED TRANSFERS OF FELCOR COMMON STOCK.

In order for FelCor to maintain its status as a REIT, no more than 50% in
value of its 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. FelCor's 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 its stock. FelCor's charter also prohibits any transfer of its stock
that would result in a violation of the 9.9% ownership limit, reduce the number
of

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47

stockholders below 100 or otherwise result in FelCor failing 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. FelCor has the right to take any lawful action that it believes
necessary or advisable to ensure compliance with these ownership and transfer
restrictions and to preserve its status as a REIT, including refusing to
recognize any transfer of stock in violation of its charter. MeriStar's charter
contains substantially similar provisions.

SOME PROVISIONS IN FELCOR'S CHARTER AND BYLAWS AND MARYLAND LAW MAKE A TAKEOVER
OF FELCOR MORE DIFFICULT.

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

Staggered Board. FelCor's 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 FelCor
through the election of new directors is limited by the inability of
stockholders to elect a majority of the FelCor board at any particular meeting.
MeriStar's board of directors is also subject to similar provisions.

Authority to Issue Additional Shares. Under the FelCor charter, the FelCor
board of directors may issue preferred stock without stockholder action. The
preferred stock may be issued, in one or more series, with the preferences and
other terms designated by the FelCor board that may delay or prevent a change in
control of FelCor, even if the change is in the best interests of stockholders
or our unitholders. FelCor currently has outstanding 5,980,600 shares of its
$1.95 Series A Cumulative Convertible Preferred Stock and 57,500 shares of its
9% Series B Cumulative Redeemable Preferred Stock. The preferred stock reduces
the amount of dividends available, and has dividend, liquidation and other
rights superior to the holders of FelCor's common stock. MeriStar's charter also
permits the issuance of preferred stock without stockholder approval but
prohibits the issuance of preferred stock for anti-takeover purposes or
preferred stock that has super-majority voting rights.

Maryland Takeover Statutes. As a Maryland corporation, FelCor is subject
to various provisions under the Maryland General Corporation Law, including the
Maryland business combination statute, 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 ten
percent 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 two super-majority stockholder votes
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. FelCor's charter currently provides that the
Maryland control share statute will not apply to any existing or future stock of
FelCor. 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. MeriStar has
also opted out of the control share statute. To the extent these or other laws
are applicable to FelCor, they may have the effect of delaying or preventing a
change in control of FelCor even though beneficial to FelCor's stockholders. For
more information regarding Maryland takeover statutes, see "Description of
FelCor Capital Stock -- Maryland Takeover Statutes."

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THERE ARE DIFFERENCES IN RIGHTS OF FELCOR AND MERISTAR STOCKHOLDERS THAT MAY BE
DETRIMENTAL TO MERISTAR PARTNERSHIP UNITHOLDERS WHO ELECT, AFTER THE PARTNERSHIP
MERGER, TO REDEEM THEIR UNITS FOR FELCOR STOCK AS COMPARED TO MERISTAR STOCK
PRIOR TO THE MERGER.

As a result of the partnership merger, MeriStar Partnership unitholders
will no longer have the right to exchange their units for shares of MeriStar
common stock and will become unitholders in us. Our unitholders may redeem their
units for FelCor common stock or, at FelCor's option, cash equal to the market
value of the FelCor common stock at any time. Differences in the provisions of
the respective corporate charters and bylaws of FelCor and MeriStar result in
differences in the rights of the stockholders of the two corporations. The
rights of FelCor stockholders may in some cases be considered less favorable
than the rights of MeriStar stockholders. The material differences in
stockholder rights that may be considered less favorable to MeriStar
stockholders are:

- FelCor has outstanding two series of preferred stock which have
preferences over common stock on dividends or liquidating distributions.
MeriStar has no outstanding preferred stock;

- MeriStar's board, but not FelCor's board, is prohibited by charter
provision from issuing preferred stock for anti-takeover purposes or with
super-majority voting rights; and

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this document, and in documents
that are incorporated by reference in this document, that are subject to risks
and uncertainties. Forward-looking statements include information concerning
possible or assumed future results of operations of MeriStar Partnership or us.
Also, statements including the words "will," "should," "believes," "expects,"
"anticipates," "intends," "plans," "estimates," or similar expressions are
forward-looking statements. The sections in this document which contain
forward-looking statements include "Summary," "Summary Unaudited Pro Forma
Condensed Combined Financial Data," "Risk Factors," "The Mergers," "Unaudited
Pro Forma Combined Financial Information," "The Combined Partnerships,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of FelCor Partnership," "Management's Discussion and Analysis of
Financial Condition and Results of Operations of MeriStar Partnership,"
"Comparative Per Share Market Prices and Dividend Information," "Comparative
Distribution Information," "Business and Properties of FelCor Partnership,"
"Business and Properties of MeriStar Partnership" and "Management of FelCor
Partnership." Many factors, some of which are discussed elsewhere in this
document and in the documents incorporated by reference in this document, could
affect our future financial results and could cause actual results to differ
materially from those expressed in forward-looking statements contained or
incorporated by reference in this document. Important factors that could cause
actual results to differ materially from current expectations reflected in these
forward-looking statements include, among others, the factors discussed under
the caption "Risk Factors" beginning on page 27.

Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Our future results and unitholder values
following completion of the mergers may differ materially from those expressed
in these forward-looking statements. Many of the factors that will determine
these results and values are beyond the ability of MeriStar Partnership or us to
control or predict. For these forward-looking statements, we claim the
protection of the safe harbor for forward-looking statements contained in
Section 27A of the Securities Act and Section 21E of the Exchange Act.

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49

THE COMBINED PARTNERSHIPS

GENERAL

As a result of the partnership merger, MeriStar Partnership will be merged
with and into our wholly-owned subsidiary, with MeriStar Partnership surviving
as one of our wholly-owned subsidiaries. As a result of the merger, MeriStar
will be merged with and into FelCor, which will be the surviving corporation.
FelCor will continue to operate as a REIT. We will succeed to the ownership,
through MeriStar Partnership and its subsidiaries, of all of MeriStar's owned
and leased hotels. See "Unaudited Pro Forma Consolidated Financial Information."

The following table includes descriptive information about our properties,
MeriStar Partnership's properties and the combined partnership's properties as
of June 30, 2001.

<Table>
<Caption>
NUMBER OF PROPERTIES
-------------------------------------------------------------
COMBINED
FELCOR PARTNERSHIP(1) MERISTAR PARTNERSHIP PARTNERSHIP(1)
--------------------- -------------------- --------------

Hilton Brands:
Embassy Suites........................... 59 3 62
Doubletree and Doubletree Guest Suites... 11 6 17
Hampton Inn.............................. 4 4
Hilton and Hilton Suites................. 1 23 24
Homewood Suites.......................... 1 1
Six Continents Brands:
Holiday Inn.............................. 39 9 48
Crowne Plaza and Crowne Plaza Suites..... 18 5 23
Holiday Inn Select....................... 10 5 15
Holiday Inn Express...................... 2 2
Starwood Brands:
Sheraton and Sheraton Suites............. 10 11 21
Westin................................... 1 4 5
Four Points by Sheraton.................. 1 1
Marriott Brands:
Courtyard by Marriott.................... 2 5 7
Marriott................................. 3 3
Fairfield Inn............................ 5 5
Radisson Brands:
Radisson................................. 12 12
Other Brands............................... 7 26 33
--- --- ---
Total Hotels..................... 170 113 283
=== === ===
</Table>

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

(1) Excludes the 15 hotels designated as held for sale.

All of MeriStar Partnership's hotels, except for four hotels that are
leased and managed by Prime Hospitality, are managed by subsidiaries of MeriStar
Hotels & Resorts, which will continue to manage the hotels after completion of
the mergers. These hotels are leased to taxable REIT subsidiaries of MeriStar
Partnership, which in turn have separate management agreements for each hotel
with a subsidiary of MeriStar Hotels & Resorts.

Of our hotels, including the 15 hotels designated as held for sale, 183 are
leased to our taxable REIT subsidiaries and two are not leased. Ninety hotels
are managed by subsidiaries of Six Continents Hotels, formerly known as Bass
Hotels & Resorts, 72 hotels are managed by subsidiaries of Hilton Hotels
Corporation, 11 hotels are managed by subsidiaries of Starwood Hotels and
Resorts Worldwide, Inc., and eight hotels are managed by an affiliate of
Interstate Hotels Corporation.

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50

RELATIONSHIP WITH MERISTAR HOTELS & RESORTS

The Intercompany Agreement. MeriStar and MeriStar Partnership are parties
to an intercompany agreement with MeriStar Hotels & Resorts. On completion of
the mergers, we will assume MeriStar Partnership's rights and obligations under
the agreement. The intercompany agreement provides that, for so long as the
agreement remains in effect, MeriStar Hotels & Resorts will be prohibited from
making real property investments that a REIT could make unless:

- we are first given the opportunity, but elect not to pursue the
activities or investments;

- it is on land already owned or leased by MeriStar Hotels & Resorts or
subject to a lease or purchase option in favor of MeriStar Hotels &
Resorts;

- MeriStar Hotels & Resorts will operate the property under a brand name
owned by MeriStar Hotels & Resorts; or

- it is a minority investment made as part of a lease or management
agreement arrangement.

We will have a right of first refusal with respect to any real property
investment to be sold by MeriStar Hotels & Resorts.

The intercompany agreement will generally grant MeriStar Hotels & Resorts a
right of first refusal with respect to any management opportunity at any FelCor
property that we do not elect to have managed by the hotel brand owner. This
opportunity will be made available to MeriStar Hotels & Resorts only if we
determine that:

- consistent with our status as a REIT, we must enter into a management
agreement with an unaffiliated third party with respect to the property;

- MeriStar Hotels & Resorts is qualified to be the manager of that
property; and

- the property is not to be operated by the owner of a hospitality brand
under that brand.

Although 90% of our hotels are managed by hotel brand owners, the
intercompany agreement will limit our freedom to engage hotel management
companies to manage our hotels that are not managed by hotel brand owners.

Each party must cooperate with the other party to effect any securities
issuance of the other party by assisting in the preparation of any registration
statement or other document required in connection with the issuance.

The intercompany agreement will terminate on the earlier of August 3, 2008,
and the date of a change in ownership or control of MeriStar Hotels & Resorts.

Credit Facility. MeriStar Partnership is obligated to lend MeriStar Hotels
& Resorts up to $50 million for general corporate purposes under a revolving
credit agreement. On March 1, 2000, the revolving credit agreement was amended
to reduce the maximum borrowing limit from $75 million to $50 million, increase
the interest rate from 350 basis points over the 30-day London Interbank Offered
Rate to 650 basis points over the 30-day London Interbank Offered Rate and set
the maturity date of the loan to the 91st day following the maturity of MeriStar
Hotels & Resorts' senior credit facility, as amended, restated, refinanced or
renewed. As of June 30, 2001, there was $36.0 million outstanding under this
revolving credit agreement. Upon effectiveness of the merger, we will succeed to
MeriStar Partnership's role as lender under this credit facility.

MeriStar Partnership, MeriStar Hotels & Resorts and we have agreed to
amend, effective when the merger and partnership merger are complete, the credit
agreement to fix its maturity at February 28, 2004, set the interest rate at 600
basis points over the 30-day London Interbank Offered Rate and set the default
rate of interest at 800 basis points over the 30-day London Interbank Offered
Rate. MeriStar Partnership

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has agreed to use best efforts to obtain the consents of MeriStar Hotels &
Resorts' senior lenders to these amendments.

INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

Assuming the completion of the partnership merger, at June 30, 2001, the
combined partnership would have had approximately $3.6 billion of pro forma
total indebtedness, as compared to $2.1 billion in actual total indebtedness for
us alone and $1.7 billion in actual total indebtedness for MeriStar Partnership
alone as of June 30, 2001. The pro forma ratio of EBITDA to interest expense for
the six months ended June 30, 2001 would have been 2.6 to 1.0, compared to 2.8
to 1.0 for us alone and 2.7 to 1.0 for MeriStar Partnership alone. Of our pro
forma indebtedness at June 30, 2001, approximately $230 million was at a
floating rate of interest, after giving effect to interest rate swap agreements
currently in effect.

In June 2001, we completed the sale of $600 million of our unsecured 8 1/2%
senior notes to finance the merger and partnership merger. In connection with
this placement, we paid offering expenses of approximately $14 million,
realizing net proceeds of $586 million. Approximately $316 million of the
proceeds of these notes has been escrowed and will be used to redeem a portion
of the notes at 101% of principal plus accrued interest if the merger is not
completed.

In July 2001, FelCor and we entered into an amended and restated revolving
credit facility with a group of existing and new lenders that extended the
maturity of the facility to 2004 and provided for an increase in the amount
which may be borrowed under the facility from $600 million to at least $700
million, effective upon the closing of the merger. We have paid $3.7 million in
amendment and commitment fees to lenders and expect to draw $330.4 million under
this facility in connection with the merger.

In August 2001, we entered into commitments with a group of lenders, to
which we agreed to pay an aggregate of $3.3 million in commitment fees, that
have agreed to provide our special purpose subsidiary with at least $325 million
in non-recourse first mortgage financing and related mezzanine financing. The
mortgage financing will have a term of at least three years and will be secured
by mortgages on specific hotels. The mezzanine financing will be secured by a
pledge of the ownership interests in the special purpose subsidiary. We expect
this mezzanine financing will have a term of at least three years. The mortgage
and mezzanine loans will bear interest at an expected blended rate of
approximately LIBOR plus 2.0% per annum. This financing is scheduled to close
immediately following the merger, and the proceeds will be used to pay the cash
portion of the merger consideration.

In connection with the completion of the mergers, we expect to assume
approximately $500 million of existing MeriStar Partnership senior notes,
although we may be required to purchase these senior notes following the
mergers. In order to have funds available for this purchase, in July 2001,
FelCor and we entered into a commitment with a group of lenders that have agreed
to provide up to $500 million in a stock-secured facility having a term of
between five and one-half years and seven years and bearing interest at a fixed
market interest rate not to exceed LIBOR plus 5.25%. In connection with the
acceptance and funding of this commitment, we have paid or agreed to pay an
aggregate of $8.8 million of commitment and related fees. Of these fees, up to
$6.3 million will be applied to offset placement fees payable to the lenders in
connection with a placement of senior notes made through them within one year
following closing, the proceeds of which will be used to repay this facility.

FelCor has received a term sheet from an investment banking firm with
respect to the sale of preferred stock, but no commitments from purchasers for
the preferred stock have been received. We anticipate that the preferred stock,
if issued, would be substantially similar in terms to its currently outstanding
Series B preferred stock, which is traded on the NYSE under the symbol FCHpb,
and would bear a dividend rate of not more than 10.5%.

The financings that have been closed, together with those for which binding
commitments have been received, are sufficient to enable us to complete the
merger with MeriStar. We may not be successful in

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effecting all of the above financing plans. See "Risk Factors -- FelCor and we
may be unable to complete planned financings for the mergers."

MANAGEMENT

FelCor has agreed in the merger agreement that Paul W. Whetsell, current
Chairman, Chief Executive Officer and a director of MeriStar, and Steven D.
Jorns, current Vice Chairman and a director of MeriStar, will become members of
the FelCor board of directors at the effective time of the merger. By voting to
approve the merger agreement and the merger, FelCor stockholders will be voting
for the election of Mr. Whetsell as director with a term ending at the annual
meeting of stockholders in 2004 and Mr. Jorns as director with a term ending at
the annual meeting of stockholders in 2003. All of FelCor's current directors
will remain as directors of FelCor. Following the merger, the current executive
officers of FelCor will remain as executive officers of FelCor. Bruce G. Wiles,
the current President, Chief Investment Officer and a director of MeriStar, is
expected to become an executive officer of FelCor following the merger. No other
current executive officers of MeriStar are expected to become executive officers
of FelCor following the merger.

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53

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

GENERAL

FelCor, our sole general partner, is the nation's second largest hotel
REIT. At June 30, 2001, we owned interests in 185 hotels with nearly 50,000
rooms and suites. Additional organizational information relating to us, and the
definitions of certain capitalized terms, are contained in the Notes to
Consolidated Financial Statements of FelCor Lodging Limited Partnership
appearing elsewhere in this prospectus.

We are the owner of the largest number of Embassy Suites, Crowne Plaza,
Holiday Inn and independently owned Doubletree branded hotels in the world. Our
hotels are located in 35 states and Canada with concentrations in Texas (41),
California (19), Florida (16) and Georgia (14 hotels). The following table
provides a schedule of the hotels, by brand of hotel, at June 30, 2001:

<Table>
<Caption>
BRAND TOTAL
- ----- -----

Hilton Brands:
Embassy Suites............................................ 59
Doubletree and Doubletree Guest Suites.................... 14
Hampton Inn............................................... 8
Hilton Suites............................................. 1
Homewood Suites........................................... 1
Six Continents Brands:
Holiday Inn............................................... 44
Crowne Plaza and Crowne Plaza Suites...................... 18
Holiday Inn Select........................................ 10
Holiday Inn Express....................................... 5
Starwood Brands:
Sheraton and Sheraton Suites.............................. 10
Westin.................................................... 1
Other Brands................................................ 14
---
Total Hotels...................................... 185
===
</Table>

We seek to increase operating cash flow through both internal growth and
selective acquisitions, while maintaining a flexible and conservative capital
structure. In addition to renovating, redeveloping and repositioning the
Company's acquired hotels, we may seek to acquire existing or new upscale
properties that will benefit from affiliation with one of the premium brands
available to us through our strategic brand owner and manager relationships with
Hilton Hotels Corporation, Six Continents Hotels, formerly known as Bass Hotels
& Resorts, and Starwood Hotels & Resorts Worldwide, Inc.

On July 28, 1998, Bristol Hotel Company merged into FelCor, and we acquired
Bristol's 107 primarily full-service hotels. These hotels added more than 28,000
rooms and suites to our portfolio, more than doubling our size. This merger also
provided diversification, both geographically and by asset class, by adding
hotels in many of our key markets and broadening our portfolio in the
full-service, upscale and midscale hotel markets.

In 1999 and 2000, we completed the major portion of our program of
renovation, redevelopment and rebranding of hotels, which was undertaken to
improve under-performing assets and increase revenues. We spent nearly $220
million in 1998, $222 million in 1999 and $95 million in 2000 on renovations,
redevelopment, rebrandings, room additions to existing hotels and other hotel
improvements. Management believes that its strategy of renovating, redeveloping
and rebranding selected hotels continues to be effective in improving revenue
performance.

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54

Our historical results of operations for the years ended December 31, 2000,
1999, and 1998 and the six months ended June 30, 2001 and 2000 are summarized as
follows (in millions, except percentages and hotel counts):

<Table>
<Caption>
PERCENTAGE CHANGE
SIX MONTHS ENDED -----------------------------------------
YEARS ENDED DECEMBER 31, JUNE 30, SIX MONTHS
--------------------------- ----------------- ENDED JUNE 30,
2000 1999 1998(b) 2001 2000 00 VS 99 99 VS 98(b) 2000 VS 2001
------ ------ ------- ------ ------ -------- ----------- --------------

Hotels owned at year
end................ 186 188 193 185 188 (1.1)% (2.6)% (1.6)%
Revenues............. $556.7 $504.0 $339.6 560.3(c) $258.2 10.5% 48.4% 117.0%(c)
Net income applicable
to unitholders..... $ 41.7(a) $111.0 $ 99.9 4.0(d) (24.7)(d) (62.4)%(a) 11.1% 116.2%(d)
Funds From Operations
(FFO).............. $288.6 $286.9 $217.4 135.7 149.4 0.6% 32.0% 9.2%
Earnings Before
Interest, Taxes,
Depreciation and
Amortization
(EBITDA)........... $470.9 $432.7 $306.4 229.6 238.8 8.9% 41.2% (3.9)%
</Table>

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

(a) Includes an expense of $63 million for the proposed sale of 25 non-strategic
hotels described under "Liquidity and Capital Resources" below.

(b) Reflects the acquisition of the Bristol hotels effective July 28, 1998.

(c) Includes hotel operating revenues from 95 hotels, which were consolidated
effective January 1, 2001. In prior periods revenues from these hotels were
reflected in percentage lease income.

(d) In 2001 includes $36.2 million of lease termination expenses and $4.8
million of expense related to termination of interest rate swaps. In 2000
includes an expense of $63 million for the proposed sale of 25 non-strategic
hotels.

Historically we have been financed primarily with equity, resulting in a
conservative financial structure. Our emphasis on maintaining this conservative
approach is evidenced in part, by the following, as of June 30, 2001:

- Interest coverage ratio of 2.7x

- Borrowing capacity under our line of credit of $560 million

- Consolidated debt equal to 40% of our investment in hotels at cost

- Fixed interest rate debt comprising 98% of total debt

- Secured mortgage debt to total assets of 16%

- Debt of approximately $13 million maturing before June 30, 2002

ACQUISITION OF TENANTS

On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions:

- reduced the percentage of taxable income required to be distributed by a
REIT from 95% to 90% for taxable years after 2000; and

- subject to some limitations, permit a REIT to own taxable subsidiaries
that engage in businesses previously prohibited to a REIT, including,
among other things, leasing hotels from a hotel REIT, provided that the
hotels continue to be managed by unrelated third parties.

We completed the acquisition of DJONT, which leased 85 of our hotels,
effective January 1, 2001. In consideration for the acquisition, we issued
approximately 417,000 units of limited partnership interest, valued at
approximately $10 million which, together with DJONT's accumulated deficit of
$24.5 million, was recorded as a lease termination cost in the first quarter of
2001.

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We acquired leases from Six Continents Hotels on 12 of our hotels,
effective January 1, 2001, for approximately 414,000 shares of common stock,
valued at approximately $10 million, of which $1.7 million was included in lease
termination costs and the remainder had been previously accrued for in the
reserve related to hotels held for sale. Of these hotels, one has been sold,
eight have been contributed to a joint venture with Interstate Hotels
Corporation, two remain to be sold and one will be retained.

We acquired the remaining 88 hotel leases held by Six Continents Hotels,
effective July 1, 2001. In exchange for the assignment of the leases to our
wholly-owned taxable REIT subsidiary, FelCor issued 100 shares of its common
stock and we entered into long-term management agreements with Six Continents
Hotels covering the 88 hotels. The management fees payable to Six Continents
Hotels under the management agreements for the 88 hotels were structured so that
the historical cash flows for the year ended December 31, 2000, for both Six
Continents Hotels and us, would have been approximately the same had the
management agreements replaced the leases on January 1, 2000. These management
fees, which are higher than those paid by us to other managers for comparable
services, include compensation to Six Continents Hotels for both management
services and the acquisition of the 88 leases. Beginning with the third quarter
of 2001, our financial statements will reflect the hotel revenues and expenses
of these 88 hotels.

Unlike the leases, where the rent payable to us would vary only as a result
of changes in hotel revenues, our future cash flow and net income under the
management agreements for the 88 hotels will also vary as a result of changes in
the operating margins of the hotels. We entered into this transaction based upon
our belief that, in the long term, lodging demand will exceed new supply and
that operational efficiencies will increase industry-wide for a variety of
reasons, including the impact of new technologies allowing lower-cost delivery
of services and providing new revenue sources that are not labor-intensive, such
as in-room entertainment and direct and in-room marketing to guests.

The recent economic slowdown has resulted in both declines in RevPAR and in
an erosion in operating margins during the six months ended June 30, 2001, as
compared to the same period of 2000. As a result, had the management agreements
replaced the 88 leases with Six Continents Hotels on January 1, 2000, our cash
flow and net income for the six months ended June 30, 2001 would have been
reduced by $7.9 million and $4.8 million respectively. So long as the operating
margins for the 88 hotels remain below the levels experienced during 2000, we
expect the management agreements to be generally less favorable to us than the
leases would have been.

Our taxable REIT subsidiaries, collectively, are not expected to generate
taxable income for 2001. DJONT, prior to its acquisition by us, had incurred
losses during each of 1999 and 2000. Our taxable REIT subsidiary holding the 88
leases acquired from Six Continents Hotels is expected to generate taxable
income in future years. Until such time as we can reasonably project that our
taxable REIT subsidiaries, collectively, will generate taxable income, we will
provide for a 100% valuation allowance against the deferred tax asset generated
by any losses.

PROPOSED MERGER

On May 9, 2001, FelCor and we entered into an agreement and plan of merger
with MeriStar and MeriStar Partnership. Under the merger agreement, MeriStar
will be merged with and into FelCor, with FelCor as the survivor. Under the
terms of the merger agreement holders of shares of MeriStar common stock will
receive, for each share of common stock, $4.60 in cash and 0.784 shares of
FelCor common stock. We will either assume or refinance approximately $1.6
billion in MeriStar debt. MeriStar Hotels & Resorts, Inc., an independent public
hotel management company, will continue to manage substantially all of the
hotels acquired from MeriStar in the mergers.

The transaction will also involve the merger of our subsidiary with and
into MeriStar's subsidiary operating limited partnership, or MeriStar
Partnership. The holders of common partnership units in MeriStar Partnership
will receive, for each common unit, $4.60 in cash and 0.784 common partnership
units in us. Preferred units in MeriStar Partnership will receive similar
preferred units in us or a combination of cash and units. The proposed mergers
are subject to stockholder approvals of both FelCor

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and MeriStar and other customary conditions. The transaction is structured to
qualify as a tax-free merger with respect to the FelCor stock consideration. The
merger is expected to close in October 2001.

In connection with the merger with MeriStar, we have completed the
following financing transactions:

- We issued $600 million of 10-year, 8 1/2% senior unsecured notes.

- In July 2001, we received a commitment for a $500 million standby loan
facility which we expect will be available to fund any required purchases
of MeriStar's senior notes pursuant to change in control provisions.

- We closed an expanded line of credit facility in July 2001. The new line
of credit will permit borrowing of $700 million, a $100 million increase
from our previous $600 million facility, contingent upon the merger
closing.

- We are also planning mortgage and mezzanine financing of at least $325
million, and FelCor is considering a preferred equity offering, although
the preferred equity offering is not necessary to complete the mergers.

HIGHLIGHTS 2001:

First Quarter

- We contributed seven Marriott-branded hotels and one Hilton-branded hotel
to a 50/50 joint venture between us and IHC. Net cash proceeds to us were
$48 million. In addition to our 50% equity interest in the joint venture,
we retain a $17 million preferred interest.

- Project capital expenditures for improvements totaled $9.7 million during
the quarter. An additional $6.3 million was spent on maintenance capital
expenditures.

Second Quarter

- In June, we sold a hotel previously designated as held for sale with net
sales proceeds of $7.1 million. No gain or loss was recorded on this
sale.

- Project capital expenditures for improvements totaled $8.3 million during
the quarter. An additional $7.8 million was spent on maintenance capital
expenditures.

CAPITALIZATION 2001:

First Quarter

- On January 11, 2001, we completed the private placement of $100 million
of senior unsecured notes that mature in September, 2008 and bear
interest at an effective rate of 9 1/8%. The proceeds were used initially
to pay down our line of credit.

- During the first quarter 2001, FelCor repurchased approximately 179,000
shares of common stock for approximately $4.0 million, and we repurchased
a corresponding number of our common units from FelCor.

- We declared first quarter distributions of $0.55 per common unit, $0.4875
per Series A preferred unit and $0.5625 per depositary unit evidencing
our Series B preferred units.

Second Quarter

- On June 4, 2001, we issued $600 million of 10-year, 8 1/2% senior
unsecured notes. Approximately $315 million of the proceeds were placed
in escrow to be released upon the merger closing. Carrying costs related
to the escrowed funds impacted FFO by $1.4 million. Because of the
issuance of the favorably priced fixed rate debt and the prepayment of
floating rate debt, we terminated $200 million of interest rate swaps,
resulting in a one-time $4.8 million swap termination cost.
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- We declared second quarter distributions of $0.55 per common unit,
$0.4875 per Series A preferred unit and $0.5625 per depositary unit
evidencing our Series B preferred units.

RESULTS OF OPERATIONS

Comparison of the Six Months Ended June 30, 2001 and 2000

Six Months Ended June 30, 2001 and 2000

Until January 1, 2001, we leased 184 hotels to either DJONT or Six
Continents Hotels and reported the lease revenue from the percentage lease
agreements. Effective January 1, 2001, upon acquisition of these leases by our
TRSs, we assumed all operating risks and rewards of these 96 hotels. The
Consolidated Statement of Operations for the six months ending June 30, 2001,
include the revenue and expenses of those hotels and percentage lease revenues
related to the 88 hotels that were leased by Six Continents Hotels through July
1, 2001. Therefore, our operating results for the six months ended June 30,
2001, are not directly comparable to those for the same period in 2000.

Total revenue for the six months ended June 30, 2001 increased $302.1
million over the same period in 2000. The increase is principally associated
with hotel operating revenues for the 96 hotels that we had reported as
percentage lease revenue in previous periods. The 96 hotels contributed
approximately $443.3 million in hotel operating revenue in the first six months
of 2001, compared to $136.7 million in percentage rent revenue for these same
hotels, for the same period in 2000.

At June 30, 2001, we had hotel leases with Six Continents Hotels for 88
hotels which are reflected in percentage lease revenues for both six month
periods. Percentage lease revenue was $115.1 million for the six months ended
June 30, 2001, compared to percentage lease revenue of $256.3 million for the
same period in 2000. The principal reason for the decrease in percentage lease
revenue is related to the previously discussed acquisition of 96 hotel leases
effective January 1, 2001. Percentage lease revenue for the 88 hotels leased by
Six Continents Hotels during the first half of 2001 decreased for those same
hotels in the same period of 2000 by $4.5 million. The principal reasons for the
change in percentage lease revenue for the 88 Six Continents Hotels leased
hotels was rent deferred under SAB 101 in the six months ended June 30, 2000 of
$18.6 million. Other items affecting revenue, compared to the six months ended
June 30, 2000, are:

- a decrease in RevPAR for the 95 hotels of 1.9% for six months, reflected
in hotel revenue; and

- a decrease in RevPAR for the 88 hotels leased to Six Continents Hotels of
4.2% for the six months, reflected in percent rent.

The current economic slowdown and the resulting declines in RevPAR, which
began in March 2001, are currently continuing. We anticipate that third quarter
RevPAR will be less than that of the prior year period and less than that of the
second quarter of 2001. The decline in occupancy during the second and third
quarters is expected to lead to declines in room rates as hotels compete more
aggressively for guests. If the economic slowdown worsens or continues for a
protracted time, it could have a material adverse effect on our operations and
earnings.

Total operating expenses increased by $331.1 million for the six months
ended June 30, 2001 over the same six month period in 2000. This increase is
primarily a result of including hotel operating expenses, management fees and
other property related costs of $267.7 million, which were not included in the
same period of 2000. Also included in total operating expenses are depreciation
expense, lease termination costs and taxes, insurance and lease expense. Taxes,
insurance and lease expense increased by $28.9 million in the six months ended
June 30, 2001, compared to the prior year. The majority of this increase related
to percentage lease expense for hotels whose operations were acquired with the
acquisition of DJONT, but a portion of whose percentage lease is allocated to
our third party partners in some of these hotels. Lease termination costs of
$36.2 million were recorded in the first quarter of 2001 and relate to the
acquisition of DJONT and termination of some leases held by Six Continents
Hotels. Depreciation expense decreased by $2.0 million for the six months, which
principally relates to depreciation for the 25 hotels which we

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designated as held for sale in June 2000. When these hotels were designated as
held for sale, we stopped recording depreciation on them.

Net income increased $28.7 million for the six months ended June 30, 2001
compared to the same period in 2000. Major items affecting the change in net
income are interest expense, swap termination expense, loss on assets held for
sale that were recorded in second quarter 2000, and gain on sale of assets.

Interest expense, net increased $2.8 million principally from increased
interest expense in 2001 compared to the same period in 2000 related to the
repositioning of our debt to increase our fixed rate exposure. This increase was
partially offset by interest income on approximately $315 million of proceeds
from our second quarter $600 million senior debt offering, which was escrowed
pending the completion of the merger. In connection with the issuance of
favorably priced fixed rate debt, and the prepayment of floating rate debt, we
terminated $200 million of interest rate swaps, resulting in a one time $4.8
million swap termination cost. In June 2000, we recorded a $63 million loss for
assets held for sale. Gain on sale of assets increased $2.1 million, principally
from condemnation proceeds received in 2001.

Comparison of the Years Ended December 31, 2000 and 1999

For the year ended December 31, 2000, we recorded net income of $66.4
million compared to $135.8 million for the year ended December 31, 1999.
Included in expense for the year ended December 31, 2000, is a one-time loss on
assets held for sale of $63.0 million related to 25 non-strategic hotels that we
have identified as held for sale. This loss on assets held for sale represents
the difference between the net book value of the hotels and their estimated net
sale proceeds. Net income excluding this item would have been $129.4 million.

Our total revenues increased $52.7 million to $556.7 million for the year
ended December 31, 2000, compared to $504.0 million for the year end December
31, 1999. This increase is principally from increased percentage lease revenues
of $46.0 million, which increased to $536.9 million from $490.9 million in the
prior year.

Changes in our hotels' room and suite revenues significantly affect us
because our principal source of revenue historically has been rent payments from
the lessees under the percentage leases. The percentage leases provide for rent
based on a percentage of room and suite revenue, food and beverage revenue, food
and beverage rents, and in some instances, other hotel revenues. During 2000 and
1999, percentage lease revenue derived from room and suite revenue represented
90% and 91% of total percentage lease revenue, respectively. RevPAR, which is a
measure of room and suite revenue, increased by 7.0% in 2000 for all hotels.
This increase in RevPAR resulted from both increases in average daily rate, or
ADR, at the hotels and increases in occupied rooms. For the year ended December
31, 2000, ADR increased by 3.7% over the prior year and occupancy increased by
2.2%. Our ability to achieve increases in room and suite revenue and RevPAR at
our hotels is affected, among other things, by overall demand in the
marketplace, room supply and the success of our renovation, redevelopment and
rebranding program. We had 59 hotels which had undergone renovation,
redevelopment or rebranding in either 1999 or 2000, which are identified by us
as non-comparable hotels. The non-comparable hotels reflected increases in
RevPAR of 10.1% which was greater than the results for hotels that had not
recently undergone renovation. A more detailed discussion of hotel room and
suite revenue is contained in "The Hotels" section of this Management's
Discussion and Analysis of Financial Condition and Results of Operations.

We generally seek to improve those of our hotels that management believes
can achieve increases in room and suite revenue and RevPAR as a result of
renovation, redevelopment and rebranding. Since the beginning of 1998, we have
spent nearly $440 million on capital improvements to our hotels. Management
attributes much of the improvement in RevPAR to these capital improvements.

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59

Equity in income from unconsolidated entities increased by $6.3 million in
2000 compared to 1999. The principal reasons for this increase in 2000 were:

- a $3.7 million gain recorded in 2000 from the development and sale of the
Brighton Beach condominiums at Kingston Plantation in Myrtle Beach, South
Carolina, by an entity in which we own a 50% equity interest; and

- the operations of a hotel in which we acquired a 50% equity interest in
the fourth quarter of 1999.

Total expenses increased $123.5 million in the year ended December 31,
2000, to $490.8 million from $367.3 million in 1999. Included in total expenses
is a loss on assets held for sale of $63.0 million, recorded in the second
quarter of 2000, related to the 25 non-strategic hotels we have identified as
held for sale. Total expenses, excluding the $63.0 million loss on assets held
for sale, increased by $60.5 million, and as a percentage of total revenue
increased to 77% from 73% in 1999. The major components of the increase in
expenses were interest expense; taxes, insurance and other; and depreciation
expense.

Interest expense increased by $33.2 million for the year ended December 31,
2000, compared to 1999, and increased as a percentage of total revenue from
24.9% to 28.5%. This increase is principally the result of the following items:

- We increased our average debt outstanding in 2000 by approximately $197
million over the prior year. The increase in average debt resulted
principally from stock repurchases in 2000 of approximately $87 million
and capital expenditures in 2000 totaling approximately $101.4 million.

- The average interest rate on our indebtedness increased from about 7% in
1999 to nearly 8% in 2000.

- We capitalized interest related to major renovations of approximately
$5.2 million in 1999, but because of reduced renovation activity in 2000,
we had only $1.1 million of interest capitalized in 2000.

Taxes, insurance and other increased by $11.1 million in 2000, compared to
the prior year, and increased as a percentage of total revenue from 11.8% to
12.6%. This increase in expenses was principally from increases in real estate
and personal property taxes. Our real estate and personal property taxes
increased from higher assessed values generally resulting from the major
renovations completed over the past three years.

Depreciation expense increased by $7.8 million in 2000, compared to the
prior year, and decreased as a percentage of total revenue from 30.3% to 28.9%.
Depreciation expense increased principally as a result of additional
depreciation related to fixed asset additions of $95 million in 2000 and $222
million in 1999.

We also recorded gains on the sale of two hotels of $2.6 million and $1.8
million for the sale of excess land during the year ended December 31, 2000 and
an extraordinary charge of $3.9 million for the write-off of deferred loan costs
associated with debt which was retired prior to maturity.

Comparison of the Years Ended December 31, 1999 and 1998

For the years 1999 and 1998, we had total revenue of $504.0 million and
$339.6 million, respectively, consisting primarily of percentage lease revenue
of $490.9 million and $328.0 million. The increase in revenue is primarily
attributable to our acquisition and subsequent leasing, pursuant to percentage
leases, of interests in more than 100 hotels in 1998, including the hotels that
were acquired through the Bristol merger on July 28, 1998. The hotels which were
acquired during 1998, including those acquired through the Bristol merger,
accounted for $151.1 million, or 93%, of the change in percentage lease revenue
for the twelve months ended December 31, 1999, compared to 1998. The 73 hotels
owned throughout both of the years ended December 31, 1999 and 1998 produced an
increase in percentage lease revenues of $10.9 million, or 1.9%, between 1998
and 1999.

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Changes in room and suite revenues significantly affect us because,
historically, our principal source of revenue is rent payments from the lessees
under the percentage leases. The percentage leases provide for rent based on a
percentage of room and suite revenue, food and beverage revenue, food and
beverage rents, and in some instances, other hotel revenues. In 1999 and 1998,
percentage lease revenue derived from room and suite revenue represented 91% and
93% of total percentage lease revenue, respectively. The 73 hotels owned
throughout both 1999 and 1998 increased room and suite revenue by $11.6 million
(or 2%) in 1999, compared to 1998, and increased RevPAR by 1.4%. The RevPAR
increase was driven by an increase in ADR of 1.5%, despite a slight drop in
occupancy of 0.1%. Of the 73 hotels, 18 had undergone renovation in either 1998
or 1999. Those renovated hotels reflected increases in ADR of 2.2% and in RevPAR
of 1.9%, which was greater than the results for hotels that had not undergone
renovation. This reflects both the improvement from renovation and the impact of
taking rooms out of service for such renovation.

We generally seek to improve those of our hotels that management believes
can achieve increases in room and suite revenue and RevPAR as a result of
renovation, redevelopment and rebranding. However, during the course of such
improvements hotel revenue performance is often adversely affected, compared to
the prior year, by such temporary factors as rooms and suites out of service and
disruptions of hotel operations. During 1999, we spent $177 million on the
renovation, redevelopment and rebranding of our hotels. As a result of the
extensive renovations, our portfolio experienced significant disruption during
1999, with approximately 350,000 room nights out of service, or 2% of our
portfolio. A more detailed discussion of hotel room and suite revenue is
contained in the "The Hotels" section of this Management's Discussion and
Analysis of Financial Condition and Results of Operations.

Total expenses increased $151.7 million in the year ended December 31,
1999, to $367.3 million from $215.7 million in 1998. This increase resulted
primarily from the additional hotels acquired in July 1998 through the merger
with Bristol.

Total expenses as a percentage of total revenue increased to 72.9% for the
twelve months ended December 31, 1999, compared to 63.4% in 1998. The major
components of the increase in expenses, as a percentage of total revenue, are
depreciation, land leases, and interest expense.

Depreciation increased, as a percentage of total revenue, to 30.4% in the
twelve months ended December 31, 1999, from 26.8% in 1998. The relative increase
in depreciation expense is primarily attributed to depreciation on $341.4
million in capital expenditures made over the past two years, approximately 40%
of which are short-lived assets that are depreciated over 3 to 5 years.

Land lease expenses represent 3.5% of total revenue in 1999, as compared to
2.4% in 1998. This increase, as a percentage of total revenue, results primarily
from the larger percentage of hotels subject to land leases among those acquired
through the Bristol merger.

Interest expense increased, as a percentage of total revenue, to 24.9% in
the twelve months ended December 31, 1999, from 21.6% in 1998. This increase in
interest expense is attributed to the increased debt used to finance
renovations, higher interest rates on debt that was refinanced to extend
maturities and convert such debt from variable to fixed rates, the assumption of
debt related to the more highly leveraged Bristol assets, and borrowings to fund
our stock repurchase program.

General and administrative expenses and taxes, insurance and other expense
remained relatively constant as a percentage of total revenue in 1999 and 1998.

FUNDS FROM OPERATIONS AND EBITDA

FelCor and we consider Funds From Operations, or FFO, and earnings before
interest, taxes, depreciation and amortization, or EBITDA, to be key measures of
a REIT's performance and should be considered along with, but not as an
alternative to, net income and cash flow as a measure of FelCor's and our
operating performance and liquidity.

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61

The White Paper on Funds From Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts, or NAREIT, defines
FFO as net income or loss, as computed in accordance with GAAP, excluding gains
or losses from extraordinary items and sales of properties, and real estate
related depreciation and amortization, after comparable adjustments for our
portion of these items related to unconsolidated entities and joint ventures.
FelCor and we believe that FFO and EBITDA are helpful to investors as a measure
of the performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities, they
provide investors with an indication of FelCor's and our ability to incur and
service debt, to make capital expenditures, to pay dividends and to fund other
cash needs. We compute FFO in accordance with standards established by NAREIT
except that we add back rent deferred under SAB 101, lease termination costs and
interest rate swap termination expense to derive FFO. This may not be comparable
to FFO reported by other REITs that do not define the term in accordance with
the current NAREIT definition, that interpret the current NAREIT definition
differently than we do or that do not adjust FFO for rent deferred under SAB
101, lease termination costs and interest rate swap termination expense. FFO and
EBITDA do not represent cash generated from operating activities as determined
by generally accepted accounting principles, or GAAP, and should not be
considered as an alternative to net income, as determined in accordance with
GAAP, as an indication of our financial performance or to cash flow from
operating activities, as determined in accordance with GAAP, as a measure of our
liquidity, nor do they necessarily reflect the funds available to fund our cash
needs, including our ability to make cash distributions. FFO and EBITDA may
include funds that may not be available for management's discretionary use due
to functional requirements to conserve funds for capital expenditures and
property acquisitions, and other commitments and uncertainties.

The following table details the computation of Funds From Operations (in
thousands):

<Table>
<Caption>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
2000 1999 1998 2001 2000
-------- -------- -------- -------- --------

FUNDS FROM OPERATIONS (FFO):
Net income (loss)................. $ 66,391 $135,776 $121,339 $ 16,341 $(12,372)
Deferred rent..................... 18,604
Loss on assets held for sale...... 63,000 63,000
Swap termination expense.......... 4,824
Lease termination costs........... 36,226
Series B preferred unit
distributions................... (12,937) (12,937) (8,373) (6,468) (6,468)
Gain on sale of hotels............ (2,595)
Extraordinary charge from write
off of deferred financing
fees............................ 3,865 1,113 3,075 225
Depreciation...................... 160,745 152,948 90,835 79,513 81,480
Depreciation from unconsolidated
entities........................ 10,167 9,995 10,487 5,022 5,136
-------- -------- -------- -------- --------
FFO..................... $288,636 $286,895 $217,363 $135,683 $149,380
======== ======== ======== ======== ========
Weighted average units
outstanding(a).................. 67,239 75,251 58,013 66,759 67,987
</Table>

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

(a) Weighted average units outstanding are computed including dilutive options,
unvested stock grants and assuming conversion of Series A preferred units to
units.

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

<Table>
<Caption>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
2000 1999 1998 2001 2000
-------- -------- -------- -------- --------

EBITDA:
Funds from operations........... $288,636 $286,895 $217,363 $135,683 $149,380
Interest expense................ 158,620 125,435 73,182 81,799 77,644
Interest expense of
unconsolidated entities....... 9,188 6,729 6,521 4,742 4,787
Amortization expense............ 1,480 693 922 884 474
Series B preferred
distributions................. 12,937 12,937 8,373 6,468 6,468
-------- -------- -------- -------- --------
EBITDA................ $470,861 $432,689 $306,361 $229,576 $238,753
======== ======== ======== ======== ========
Weighted average units
outstanding(a)................ 67,239 75,251 58,013 66,759 67,987
</Table>

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

(a) Weighted average units outstanding are computed including dilutive options,
unvested stock grants and assuming conversion of Series A preferred units to
units.

THE HOTELS

Changes in our room revenues significantly affect us both after the
acquisition of the leases, as well as historically, because room revenue has
been the major component in the computation of our percentage lease income.

Upscale and full service hotels like Embassy Suites, Crowne Plaza, Holiday
Inn and Holiday Inn Select, Doubletree and Doubletree Guest Suites, and Sheraton
and Sheraton Suites hotels account for approximately 97% of our percentage lease
revenue and 98% of our hotels' room and suite revenue.

Comparison of Our Hotels' Operating Statistics for the Six Months ended June
30, 2001

The following table sets forth historical, or occupancy, average daily
rate, or ADR, and RevPAR at June 30, 2001 and 2000, and the percentage changes
therein between the six month periods presented for the hotels in which we had
an ownership interest at June 30, 2001:

<Table>
<Caption>
OCCUPANCY (%)
----------------------
%
2001 2000 VARIANCE
---- ---- --------

Embassy Suites hotels....................................... 71.2 76.0 (6.4)
Holiday-branded hotels...................................... 71.0 72.2 (1.7)
Crowne Plaza hotels......................................... 65.3 72.6 (10.0)
Doubletree-branded hotels................................... 72.2 72.1 0.1
Sheraton-branded hotels..................................... 68.8 73.9 (6.8)
Other hotels................................................ 64.4 67.2 (4.2)
Total hotels excluding hotels held for sale....... 69.6 73.1 (4.8)
Hotels held for sale........................................ 53.4 52.1 2.5
Total hotels...................................... 68.8 72.1 (4.5)
</Table>

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<Table>
<Caption>
ADR (DOLLARS)
--------------------------
%
2001 2000 VARIANCE
------ ------ --------

Embassy Suites hotels...................................... 134.36 128.00 5.0
Holiday-branded hotels..................................... 87.12 87.51 (0.4)
Crowne Plaza hotels........................................ 106.41 104.79 1.5
Doubletree-branded hotels.................................. 112.92 109.53 3.1
Sheraton-branded hotels.................................... 114.74 113.33 1.2
Other hotels............................................... 83.78 85.05 (1.5)
Total hotels excluding hotels held for sale...... 107.87 105.90 1.9
Hotels held for sale....................................... 68.17 67.70 0.7
Total hotels..................................... 106.42 104.60 1.7
</Table>

<Table>
<Caption>
REVPAR (DOLLARS)
------------------------
%
2001 2000 VARIANCE
----- ----- --------

Embassy Suites hotels....................................... 95.66 97.32 (1.7)
Holiday-branded hotels...................................... 61.87 63.21 (2.1)
Crowne Plaza hotels......................................... 69.50 76.03 (8.6)
Doubletree-branded hotels................................... 81.48 78.97 3.2
Sheraton-branded hotels..................................... 78.97 83.70 (5.7)
Other hotels................................................ 53.95 57.18 (5.6)
Total hotels excluding hotels held for sale....... 75.09 77.43 (3.0)
Hotels held for sale........................................ 36.42 35.30 3.2
Total hotels...................................... 73.26 75.44 (2.9)
</Table>

RevPAR Performance for Selected States

Excluding hotels held for sale, hotels in Texas, California, Florida and
Georgia accounted for 55.3% of our hotel room revenues for the six months ended
June 30, 2001. The RevPAR changes during the six months ended June 30, 2001,
versus comparable periods for 2000, from our hotels in these states are as
follows:

<Table>
<Caption>
%
2001 2000 VARIANCE
------ ------ --------

Texas...................................................... 58.83 61.74 (4.7)
California................................................. 102.29 108.74 (5.9)
Florida.................................................... 79.42 81.58 (2.7)
Georgia.................................................... 71.42 70.67 1.1
</Table>

BRAND DISTRIBUTION

<Table>
<Caption>
NUMBER NUMBER PERCENTAGE OF
OF HOTELS OF ROOMS ROOM REVENUE
--------- -------- -------------

Embassy Suites hotels............................... 59 14,840 39.8
Holiday-branded hotels.............................. 51 15,526 26.9
Crowne Plaza hotels................................. 18 5,963 11.6
Doubletree-branded hotels........................... 11 2,330 5.3
Sheraton-branded hotels............................. 10 3,269 7.2
Other hotels........................................ 21 4,470 6.9
Hotels held for sale................................ 15 2,294 2.3
--- ------ -----
Total..................................... 185 48,692 100.0
=== ====== =====
</Table>

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SELECTED STATE DISTRIBUTION

<Table>
<Caption>
PERCENTAGE OF
NUMBER NUMBER ROOM
OF HOTELS OF ROOMS REVENUE
--------- -------- -------------

Texas................................................ 41 11,147 18.4
California........................................... 19 6,028 17.3
Florida.............................................. 16 5,346 11.9
Georgia.............................................. 14 3,868 7.7
--- ------ ----
Total for four states...................... 90 26,389 55.3
=== ====== ====
</Table>

Comparison of Our Hotels' Operating Statistics for the Years Ended December 31,
2000 and 1999

We believe that when analyzing the performance of our hotels, examining
"comparable hotels" is the most meaningful. We define "comparable hotels" as
those not undergoing renovation, redevelopment or rebranding in either of the
comparison years. Major renovations generally have an adverse affect on hotel
earnings by taking rooms out of service and disrupting hotel operations.

The following table sets forth historical occupancy, ADR and RevPAR at
December 31, 2000 and 1999, and the percentage changes in these amounts between
the years presented for the hotels in which we had an ownership interest at
December 31, 2000. This information is presented regardless of the date of
acquisition.

<Table>
<Caption>
OCCUPANCY
---------------------------
2000 1999 VARIANCE
----- ----- ---------

Bristol Comparable Hotels............................... 70.8% 69.9% 0.9 pts
DJONT Comparable Hotels................................. 73.3% 71.7% 1.6 pts
Total Comparable Hotels(a).................... 72.1% 70.8% 1.3 pts
Non-comparable Hotels(b)................................ 70.4% 65.7% 4.7 pts
Total Hotels excluding hotels held for sale... 71.5% 69.0% 2.5 pts
Hotels held for sale(c)................................. 58.2% 59.4% (1.2) pts
Total Hotels.................................. 70.4% 68.2% 2.2 pts
</Table>

<Table>
<Caption>
ADR
----------------------------
2000 1999 VARIANCE
------- ------- --------

Bristol Comparable Hotels................................ $ 94.87 $ 91.23 4.0%
DJONT Comparable Hotels.................................. $126.57 $121.21 4.4%
Total Comparable Hotels(a)..................... $111.71 $107.09 4.3%
Non-comparable Hotels(b)................................. $ 98.08 $ 95.42 2.8%
Total Hotels excluding hotels held for sale.... $106.87 $103.09 3.7%
Hotels held for sale(c).................................. $ 69.58 $ 68.89 1.0%
Total Hotels................................... $104.42 $100.72 3.7%
</Table>

<Table>
<Caption>
REVPAR
----------------------------
2000 1999 VARIANCE
------ ------ --------

Bristol Comparable Hotels................................ $67.13 $63.74 5.3%
DJONT Comparable Hotels.................................. $92.75 $86.91 6.7%
Total Comparable Hotels(a)..................... $80.52 $75.85 6.2%
Non-comparable Hotels(b)................................. $69.03 $62.72 10.1%
Total Hotels excluding hotels held for sale.... $76.37 $71.13 7.4%
Hotels held for sale(c).................................. $40.46 $40.94 (1.2)%
Total Hotels................................... $73.52 $68.72 7.0%
</Table>

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

(a) Bristol comparable hotels include 44 hotels and DJONT comparable hotels
include 59 hotels which were not undergoing renovation, redevelopment, or
rebranding in either the 2000 or 1999 periods reported and exclude hotels
held for sale.
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(b) Non-comparable hotels include 59 hotels undergoing redevelopment in either
the 2000 or 1999 periods reported and exclude hotels held for sale.

(c) Hotels held for sale include three DJONT leased hotels and 21 Bristol leased
hotels, consisting of two Courtyard by Marriott hotels, five Fairfield Inn
hotels, six Hampton Inn hotels, eight Holiday-branded hotels, and three
Doubletree Guest Suites hotels.

For the twelve months ended December 31, 2000, our comparable hotels'
RevPAR increased compared to the same period in 1999, by 6.2%. For the same
period, the comparable hotels' ADR and occupancy increased 4.3% and 1.3
percentage points, respectively. The total hotel portfolio RevPAR, excluding
hotels held for sale, increased 7.4%. The ADR and occupancy for these hotels
increased 3.7% and 2.5 percentage points, respectively.

The DJONT comparable hotels are predominately Embassy Suites, Doubletree
and Doubletree Guest Suites, and Sheraton hotels. The Bristol comparable hotels
are predominately Holiday Inn and Crowne Plaza hotels. The following table shows
the comparable hotel RevPAR changes for the year ended December 31, 2000,
compared to 1999, by brand:

<Table>
<Caption>
PERCENTAGE OF
REVPAR TOTAL ROOM
CHANGE REVENUE
------ -------------

Embassy Suites...................................... 47 hotels 7.0% 41.0%
Holiday Inn......................................... 25 hotels 7.7% 28.1%
Crowne Plaza........................................ 13 hotels 4.6% 13.1%
Doubletree-branded.................................. 6 hotels 6.7% 5.2%
Sheraton............................................ 3 hotels 1.3% 7.7%
Other............................................... 9 hotels 0.5% 4.9%
-----
Total..................................... 103 hotels 6.2% 100.0%
=====
</Table>

We attribute much of the improvement in RevPAR to the renovation,
rebranding and repositioning program in which we and, prior to the Bristol
merger, Bristol Hotel Company has spent nearly $500 million since the beginning
of 1998. Our hotels outperformed most other hotels in their respective markets
during the year and we expect our hotels to continue to favorably compare to
other hotels in their markets.

Through the fourth quarter of 2000, our Embassy Suites hotels had
experienced their sixth consecutive quarterly increase in occupancy. Our 47
comparable Embassy Suites hotels achieved a 7.0% growth in RevPAR for 2000,
compared to the prior year. These hotels, which provide 41.0% of the comparable
hotel room revenues, increased their ADR by 5.2% and occupancy by 1.3 percentage
points. Our comparable Doubletree-branded hotels had a 6.7% RevPAR gain for the
year, made up of increases in both occupancy and ADR of 3.4 percentage points
and 1.7%, respectively. We believe that, in addition to recent renovations at
the majority of these hotels, the Hilton/Promus merger and the addition of the
Hilton HHonors(R) guest frequency program has had and will continue to have a
positive impact on our Embassy Suites and Doubletree-branded hotel revenues.

Six Continents Hotels completed its merger with Bristol Hotels & Resorts at
the end of the first quarter of 2000. We expect the integration of the Bristol
management team with Six Continents Hotels will continue to be beneficial to the
development and strengthening of the Crowne Plaza and Holiday brands.

Our 13 comparable Crowne Plaza hotels, all of which were renovated and
rebranded from Holiday Inn and Harvey hotels, reported increased RevPAR of 4.6%
for 2000, compared to 1999. This increase resulted primarily from a 2.6
percentage point increase in occupancy between the periods. In addition to the
recent renovations, we attribute a portion of this improvement to the change in
marketing for the brand, which now supports the marketing of Crowne Plaza with
the Inter-Continental(R) brand.

Our comparable Holiday Inn-branded hotels increased RevPAR for the year by
7.7%. The increase in RevPAR resulted from a 1.1 percentage point increase in
occupancy and a 6.1% increase in ADR. Our 29 comparable Holiday Inn-branded
hotels with greater than 250 rooms, representing nearly 80% of our

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Holiday Inn-branded revenue, reported an increase in RevPAR of 6.8% for the full
year 2000, which came from occupancy and ADR increases of 2.2 percentage points
and 3.6%, respectively.

Approximately 63% of our 2000 comparable hotel room revenues were derived
from four states: Texas, California, Florida and Georgia. Changes in comparable
hotel RevPAR during 2000 for hotels in these states, compared to the same period
in 1999, are illustrated in the following table:

<Table>
<Caption>
REVPAR PERCENTAGE OF
CHANGE TOTAL ROOM REVENUE
------ ------------------

Texas........................................... 28 hotels 4.0% 20.9%
California...................................... 16 hotels 14.8% 25.7%
Florida......................................... 10 hotels 3.6% 11.0%
Georgia......................................... 7 hotels 2.0% 5.8%
</Table>

The comparable hotels in Texas, which account for approximately 20.9% of
our comparable hotel total room revenue, experienced the fourth consecutive
quarter with positive RevPAR growth compared to prior year. The growth in supply
from new hotels in most major markets in Texas appears to have slowed and
management believes that their recently renovated hotels will continue to
effectively compete in their market segments. Our 14 comparable hotels located
in Dallas, which had been adversely affected by new competition in recent years,
had RevPAR increases of 5.5% for the fourth quarter 2000 and 3.8% for the year.

Our 59 non-comparable hotels reported an increase in RevPAR of 10.1% for
the twelve months ended December 31, 2000. These hotels were profoundly affected
by the Allerton Crowne Plaza (increased RevPAR by 89.5% for the twelve month
period), which was closed for renovation in 1998 and partially reopened in the
second quarter of 1999. The non-comparable hotels, excluding the Allerton,
reported increased RevPAR of 7.5%.

RENOVATIONS, REDEVELOPMENTS AND REBRANDINGS

We have historically sought to enhance the value of our portfolio through:

- our practice of upgrading, renovating and/or redeveloping most of our
recently acquired hotels to enhance their competitive position, and, in
certain instances, rebranding them to improve their revenue generating
capacity; and

- our ongoing program for the maintenance of our upgraded hotel assets,
which includes:

- the contribution of approximately 4% of total annual hotel revenue to a
capital reserve, for routine capital replacements and improvements; and

- ensuring that the lessees' adhere to a rigorous maintenance and repair
program, resulting in the expenditure of more than 4% of annual hotel
revenues on maintenance of the hotels.

Renovation and Redevelopment Program

We have demonstrated our ability to successfully generate returns on
investments in renovations. Our renovation and rebranding of the 18 Crown
Sterling Suites hotels, which were acquired during 1996 and 1997, achieved an
overall RevPAR increase of 47.7% between 1996 and 2000. During 1998, 1999, and
2000, an aggregate of approximately $550 million in capital improvements and
other capital expenditures were made to our hotels, with approximately 3% of
total hotel room nights being lost due to renovation in 1998, 2% in 1999 and 1%
in 2000. During 2000, we spent approximately $55.8 million under our renovation
and redevelopment program.

During 2001, we currently expect to spend approximately $20 million on the
renovation of 8 hotels, approximately $28 million to complete renovations
started in 2000 at 46 hotels, and approximately $50 million for other capital
expenditures. We currently expect an insignificant number of room nights to be
lost during 2001 as a result of renovations. By the end of 2001, we will have
spent more than $1 billion

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since 1994 on renovations and other capital expenditures to our hotel portfolio,
which should limit the need for future renovation expenditures primarily to
those necessary to maintain the hotels in their upgraded condition or to enhance
a hotel's earning capability through room addition or rebranding as deemed
appropriate.

Capital Reserve

During 2000 and the six months ended June 30, 2001, approximately $45.0
million and $25.3 million, respectively, were contributed to the capital reserve
for capital replacements and improvements and approximately $45.6 million and
$14.1 million, respectively, were spent on replacements and improvements. These
expenditures are in addition to the $55.8 million and $18.0 million,
respectively, spent under the renovation and redevelopment program described
above.

Repairs and Maintenance

During the year ended December 31, 2000, approximately $41.0 million and
$66.7 million were spent by the lessees on routine repairs and maintenance at
the hotels leased by DJONT and Bristol, respectively. This represents
approximately 4.4% of total 2000 hotel revenues.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of cash to meet our cash requirements, including
distributions and repayments of indebtedness, has historically been our share of
the cash flow from the percentage leases. For the year ended December 31, 2000,
cash flow provided by operating activities, consisting primarily of percentage
lease revenue, was $277.3 million and Funds From Operations was $288.6 million.
For the six months ended June 30, 2001, net cash flow provided by operating
activities, consisting primarily of hotel operations from consolidated hotels
and percentage lease revenues, was $93.6 million and Funds From Operations was
$135.7 million.

Effective January 1, 2001, we acquired and contributed to a taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, we issued an aggregate of 416,667 units of our limited
partner interest valued at $10 million based upon the $23.125 closing share
price of FelCor common stock on December 29, 2000, 50% to an entity owned by
Thomas J. Corcoran, Jr. and Hervey A. Feldman and 50% to an entity owned by the
children of Charles N. Mathewson. We will treat the acquisition of DJONT, for
financial reporting purposes, as a termination of the DJONT leases and,
accordingly, will expense the value of the units issued as consideration
together with the $24.5 million accumulated shareholders' deficit of DJONT, in
the first quarter of 2001.

Effective January 1, 2001, we completed the acquisition of 12 of the
Bristol leases which were held by Six Continents Hotels. In consideration for
the acquisition of those leases, we issued to Six Continents Hotels 413,585
shares of FelCor common stock valued at approximately $10 million and a
corresponding number of units. Of the 12 hotels, we have entered into an
agreement with Interstate Hotels Corporation to manage eight of the hotels. Of
the remaining hotels, two hotels are being managed by a subsidiary of Six
Continents Hotels under short term management contracts, one hotel is being
managed by a subsidiary of Hilton and one hotel was sold.

Effective July 1, 2001, we acquired the remaining 88 leases from Six
Continents Hotels. In consideration for the acquisition of such leases, our
taxable REIT subsidiaries entered into long term management agreements with Six
Continents Hotels with regard to these hotels and FelCor issued to Six
Continents Hotels 100 shares of FelCor common stock.

As a result of these lease acquisitions, we also became subject to the
risks of fluctuating hotel operating margins at our hotels, including but not
limited to the risk that wage and benefit costs, repair and maintenance
expenses, the cost of utilities, liability insurance, and other operating
expenses will increase disproportionately to revenues. These operating expenses
are more difficult to predict and control than revenue, resulting in increased
risk of volatility in our results of operations. The recent economic

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slowdown has resulted in both declines in RevPAR and an erosion in operating
margins during the six months ended June 30, 2001, as compared to the same
period of 2000. If the economic slowdown worsens or continues for a protracted
time, it could have a material adverse effect on our operations and earnings.

We made the decision to acquire our leases, and the potential profits of
the operation of our hotels, based upon our belief that, in the long term,
lodging demand will exceed new supply and that operational efficiencies will
increase industry-wide for a variety of reasons, including the impact of new
technologies allowing lower-cost delivery of services and providing new revenue
sources that are not labor-intensive, such as in-room entertainment and direct
and in-room marketing to guests.

As a result of the effectiveness of the REIT Modernization Act, which,
among other things, allows us to own our lessees in taxable REIT subsidiaries,
and the acquisition of the hotel leases in 2001, we commenced, for periods after
December 31, 2000, to report the income and expenses of operating hotels rather
than lease income from the percentage leases. Any profits or losses from the TRS
entities holding the hotel leases, after applicable corporate taxes, are
reflected in our results of operations. Pro forma consolidated statements of
operations for the years ended December 31, 2000 and 1999, which reflect the
acquisition of the hotel leases, are contained in the Notes to the Consolidated
Financial Statements of FelCor Lodging Limited Partnership, appearing elsewhere
in this prospectus.

In 2000, we identified 25 non-strategic hotels and indicated our intent to
sell these hotels. We expect gross sale proceeds from these sales to be
approximately $150 million and net proceeds to be approximately $137 million,
after deducting estimated transaction costs. We anticipate that the sale of
these 25 hotels will result in a book loss of approximately $63 million.
Accordingly, FelCor's board of directors approved the establishment of a $63
million loss on assets held for sale in the second quarter of 2000, to reflect
the difference between book value and the estimated market value of these
hotels. In December 2000, we completed the sale of one of these hotels held for
sale and recorded a gain of approximately $135,000. In June 2001, we completed
the sale of one of the hotels held for sale. There was no additional gain or
loss recorded on the sale of this hotel.

In March 2001, we contributed eight of the hotels held for sale to an
entity in which we hold a 50% equity interest, and a subsidiary of Interstate
Hotels holds the other 50% equity interest. Another subsidiary of Interstate
Hotels manages each of these hotels.

In January 2000, FelCor's board of directors authorized an increase in its
share repurchase program to an aggregate of $300 million. The stock repurchases
have been and, at the discretion of FelCor's management, may be made from time
to time at prevailing prices in the open market or through privately negotiated
transactions. FelCor funds the repurchase of stock through redemption of our
units, which redemptions are funded from existing credit facilities and proceeds
from the sale of assets. During 2000 and the six months ended June 30, 2001,
FelCor repurchased approximately 4.7 million shares of its outstanding common
stock on the open market for approximately $90.7 million and we have redeemed a
like number of units. Since inception of the program, FelCor has repurchased an
aggregate of 10.5 million shares of its common stock for a total of
approximately $189.1 million. There have not been any additional stock
repurchases since March 27, 2001.

We may incur indebtedness to make property acquisitions, to redeem units or
to meet distribution requirements imposed on a REIT under the Internal Revenue
Code, to the extent that working capital and cash flow from our investments are
insufficient for those purposes. At June 30, 2001, we had $64.2 million of cash
and cash equivalents and had utilized $40 million under our $600 million
revolving line of credit.

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Debt at June 30, 2001, and December 31, 2000, consisted of the following
(in thousands):

<Table>
<Caption>
DECEMBER 31,
COLLATERAL INTEREST RATE MATURITY DATE JUNE 2001 2000
---------- ------------- -------------- ---------- ------------

FLOATING RATE DEBT:
Line of credit................. None LIBOR + 200bp August 2003 $ 112,000
Mortgage debt.................. 3 hotels LIBOR + 200bp February 2003 61,909
Promissory note................ None LIBOR + 200bp June 2016 $ 650 650
---------- ----------
Total floating rate
debt.................. 650 174,559
---------- ----------
FIXED RATE DEBT:
Line of credit -- swapped...... None 7.66% August 2003 39,900 250,000
Publicly-traded term notes..... None 7.38% October 2004 174,569 174,505
Publicly-traded term notes..... None 7.63% October 2007 124,370 124,320
Publicly-traded term notes..... None 9.50% September 2008 101,699
Publicly-traded term notes..... None 9.50% September 2008 395,073 394,731
Publicly-traded term notes..... None 8.50% June 2011 595,073
Mortgage debt.................. 15 hotels 7.24% November 2007 138,854 140,148
Mortgage debt.................. 7 hotels 7.54% April 2009 96,826 97,604
Mortgage debt.................. 6 hotels 7.55% June 2009 72,810 73,389
Mortgage debt.................. 7 hotels 8.73% May 2010 143,163 144,032
Mortgage debt.................. 8 hotels 8.70% May 2010 183,807 184,829
Other.......................... 13 hotels 6.96%-7.23% 2000-2005 67,299 80,124
---------- ----------
Total fixed rate debt... 2,133,443 1,663,682
---------- ----------
Total debt.............. $2,134,093 $1,838,241
========== ==========
</Table>

30 day LIBOR at June 30, 2001 was 3.835%.

The line of credit contains various affirmative and negative covenants,
including limitations on total indebtedness, total secured indebtedness, and
cash distributions, as well as the obligation to maintain a certain minimum
tangible net worth and certain minimum interest and debt service coverage
ratios. At June 30, 2001, we were not in default with respect to those
covenants.

Our other borrowings contain affirmative and negative covenants that are
generally equal to or less restrictive than the line of credit. The mortgage
debt is nonrecourse to us with some exceptions and contains provisions allowing
for the substitution of collateral upon satisfaction of certain conditions. Most
of the mortgage debt is prepayable, subject to various prepayment penalties,
yield maintenance, or defeasance obligations.

We took several steps, during the year ended December 31, 2000, to increase
our proportion of fixed rate debt, improve our debt maturity profile, diversify
our funding sources and expand our financial flexibility.

On April 26, 2000, we closed a 10-year, $145 million first mortgage term
loan, which is collateralized by seven Sheraton hotels and carries an 8.73%
fixed interest rate. On May 2, 2000, we closed $186 million of 10-year, first
mortgage term loans which are collateralized by eight Embassy Suites hotels and
carry an 8.70% fixed interest rate. These loans are non-recourse, mature in May
2010, and amortize over 25 years. The proceeds of these loans were used to
reduce borrowings under our line of credit.

On August 1, 2000, we renewed our line of credit. The line of credit was
reduced from $850 million to $600 million and the maturity was extended from
July 2001 to August 2003. The effective interest rate on the renewed line of
credit ranges from 87.5 basis points to 250 basis points above LIBOR depending
on our leverage and corporate rating. An extraordinary charge of approximately
$578,000 was recorded to write-off a portion of the deferred financing costs
associated with the line of credit.

On September 15, 2000, we completed the private placement of $400 million
of senior unsecured notes that mature in September 2008 and bear an interest
rate of 9 1/2%. The notes were issued at a discount to yield of 9 3/4%. The
proceeds were used to retire the $375 million floating rate senior term loan,

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which matured in 2004, and to pay down the line of credit. An extraordinary
charge of approximately $3.3 million was recorded to write-off unamortized
deferred financing costs associated with the $375 million loan. We subsequently
completed an offer to exchange $400 million in aggregate principal amount of the
private placement senior notes for notes with identical terms which were
registered under the Securities Act of 1933.

On January 11, 2001, we completed the private placement of an additional
$100 million in 9 1/2% senior unsecured notes that mature in September 2008.
These notes were issued at a premium to yield an effective rate of 9 1/8%. The
proceeds were used initially to pay down our line of credit.

We had an interest rate swap agreement with a notional amount of $50
million at June 30, 2001, which was designated as a cash flow hedge. The
interest rate swap agreement modifies a portion of the interest characteristics
of our outstanding debt under its line of credit without an exchange of the
underlying principal amount and effectively converts variable rate debt to a
fixed rate. The fixed rate to be paid, based on the swap agreement is 5.56%, and
the variable rate to be received by us at June 30, 2001 is 5.28%. The swap
agreement matures July 2003.

To provide for additional financing flexibility, FelCor has approximately
$946 million of common stock, preferred stock, debt securities, and/or common
stock warrants available for offerings under shelf registration statements
previously declared effective.

In the event of a significant economic downturn, we believe that our hotels
will continue to benefit from our extensive capital expenditure programs. Most
future renovation and redevelopment expenditures are discretionary and are
expected to be funded from our cash flow.

Our $252.6 million in cash flow used in financing activities for the year
ended December 31, 2000, relates primarily to the repurchase of approximately
4.5 million shares of FelCor's common stock for approximately $86.7 million and
distributions aggregating $168.8 million. For the six months ended June 30,
2001, our $209.9 million in cash flow provided by financing activities relates
primarily to the issuance in 2001 of $700 million in senior debt net of debt
repayments of $553.7 million and distributions of $82.7 million.

INFLATION

Operators of hotels, in general, possess the ability to adjust room rates
daily to reflect the effects of inflation. Competitive pressures may, however,
limit our ability to raise room rates. Recently, some utility costs have
increased at a faster rate than overall inflation. We may not be able to
increase room rates sufficiently to offset the increased utility costs. However,
in certain markets, our hotels have charged their guests a utility surcharge to
help offset such increases.

SEASONALITY

Our hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in our
quarterly revenue, particularly during the fourth quarter. To the extent cash
flow from operations is insufficient during any quarter, due to temporary or
seasonal fluctuations in revenue, we expect to utilize cash on hand or
borrowings under the line of credit to make distributions to our equity holders.

RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board approved SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142 will
be effective for fiscal years beginning after December 15, 2001 and will require
intangible assets, as defined in SFAS No. 141, to be reclassified into goodwill,
goodwill amortization to cease, and the testing of goodwill for impairment at
transition and at least annually after that, or more often, as appropriate. We
will adopt SFAS No. 142 on June 30, 2001 with respect to the purchase of any
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goodwill and intangible assets acquired after June 30, 2001. We have not yet
determined the impact of SFAS No. 142 on our results of operations and financial
position.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure is to changes in interest rates on our
floating rate debt. We manage the risk of increasing interest rates on our
floating rate debt through the use of interest rate swaps, which effectively
convert variable rate debt to a fixed rate, by locking the interest rates paid.
We had entered into an interest rate swap contract relating to debt of $50
million at June 30, 2001.

The following table provides information about our financial instruments
that are sensitive to changes in interest rates, including interest rate swaps
and debt obligations. For debt obligations at June 30, 2001, the table presents
scheduled maturities and weighted average interest rates by maturity dates. For
our interest rate swap, the table presents the notional amount and weighted
average interest rate by contractual maturity dates. Weighted average variable
rates are based on implied forward rates in the yield curve as of June 30, 2001.
The fair value of our fixed rate debt indicates the estimated principal amount
of debt having the same debt service requirements which could have been borrowed
at June 30, 2001 at then current market interest rates. The fair value of our
variable to fixed interest rate swap indicates the estimated amount that would
have been received by us had it been sold at June 30, 2001.

EXPECTED MATURITY DATE
(IN THOUSANDS)

<Table>
<Caption>
REMAINDER
OF 2001 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE
--------- ------- ------- -------- ------- ---------- ---------- ----------

LIABILITIES
Debt:
Fixed rate................ $5,724 $13,039 $34,906 $189,228 $43,129 $1,811,764 $2,097,790 $1,970,752
Average interest rate... 8.22% 8.19% 8.09% 7.44% 8.67% 8.60%
Variable rate............. $39,900 $ 650 $ 40,550 $ 40,550
Average interest rate... 6.92% 8.26%
Discount accretion.......... $ (4,248)
Total debt.......... $2,134,092
INTEREST RATE DERIVATIVES
Interest rate swap:
Variable to fixed......... $50,000 $ 50,000 $ (899)
Average pay rate........ 5.56%
Average receive rate.... 5.64%
</Table>

Swap contracts, such as those 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 does not anticipate
nonperformance by the counterparties.

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

GENERAL

MeriStar Partnership was created on August 3, 1998, when American General
Hospitality Corporation, a corporation operating as a REIT, and its associated
entities merged with CapStar Hotel Company and its associated entities. In
connection with the merger between CapStar and American General, MeriStar Hotels
& Resorts, Inc., a separate publicly traded company, was created to be the
lessee and manager of all but eight of the MeriStar Partnership hotels. The
eight hotels not leased by MeriStar Hotels & Resorts were leased by affiliates
of Prime Hospitality Corporation.

Prior to January 1, 2001, in order for MeriStar to maintain its tax status
as a REIT, MeriStar Partnership was not permitted to participate in the
operations of the hotel properties. To comply with this requirement through
December 31, 2000, all of the properties were subject to leases involving two
third-party lessees, MeriStar Hotels & Resorts and Prime Hospitality
Corporation.

On January 1, 2001, changes to the federal tax laws governing REITs,
commonly known as the REIT Modernization Act, became effective. The REIT
Modernization Act permits MeriStar Partnership to create taxable REIT
subsidiaries on or after January 1, 2001, which are subject to taxation as C
corporations. Because of the REIT Modernization Act, MeriStar Partnership
created a number of these taxable REIT subsidiaries that are the lessees of its
real property. The REIT Modernization Act prohibits the taxable REIT
subsidiaries from engaging in the following activities:

- they may not manage the properties themselves; they are required to enter
into arms length management agreements with independent third-party
managers that are actively involved in the trade or business of hotel
management and manage properties on behalf of other owners,

- they may not lease a property that contains gambling operations, and

- they may not own a brand or franchise under which hotels are operated.

MeriStar Partnership believes that establishing taxable REIT subsidiaries
to lease the properties provides a more efficient alignment of and ability to
capture the economic interests of property ownership. Under the prior lease
structure with MeriStar Hotels & Resorts, MeriStar Partnership received lease
payments based on the revenues generated by the properties, but MeriStar Hotels
& Resorts operated the properties in order to maximize net operating income from
the properties. This inconsistency could potentially result in the properties
being operated in a way that did not maximize revenues. With the assignment of
the leases for each of the 106 properties managed by MeriStar Hotels & Resorts
to the taxable REIT subsidiaries and the execution of the new management
agreements, MeriStar Partnership gained the economic risks and rewards related
to the properties that are usually associated with ownership of real estate, and
property revenues became the basis for MeriStar Hotels & Resorts' management
fees. During the six months ended June 30, 2001, one hotel was sold, and
MeriStar Partnership terminated four of the eight leases with Prime Hospitality.
At June 30, 2001, MeriStar Hotels & Resorts manages 109 of MeriStar
Partnership's hotels.

Subsidiaries of MeriStar Hotels & Resorts assigned their participating
leases to MeriStar Partnership's wholly-owned taxable REIT subsidiaries as of
January 1, 2001. In connection with the assignment, MeriStar Partnership's
taxable REIT subsidiaries executed new management agreements with a subsidiary
of MeriStar Hotels & Resorts to manage the hotels. Under these management
agreements, the taxable REIT subsidiaries pay a management fee to MeriStar
Hotels & Resorts for each property. The taxable REIT subsidiaries in turn make
rental payments to MeriStar Partnership under the participating leases. The
management agreements have been structured to substantially mirror the economics
of the former leases. The transactions did not result in any cash consideration
exchanged among the parties except in regard to the transfer of hotel operating
assets and liabilities to the taxable REIT subsidiaries. Under the new
management agreements, the base management fee is 2.5% of total hotel revenue
plus incentive

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payments, based on meeting performance thresholds, that could total up to 1.5%
of total hotel revenue. The agreements have an initial term of 10 years with
three renewal periods of five years each at the option of MeriStar Hotels &
Resorts, subject to some exceptions. Because these leases have been assigned to
MeriStar Partnership's taxable REIT subsidiaries, MeriStar Partnership now bears
the operating risk associated with the hotels.

FINANCIAL CONDITION

June 30, 2001 Compared with December 31, 2000

MeriStar Partnership's total assets increased by $78.5 million to $3,085.0
million at June 30, 2001 from $3,006.5 million at December 31, 2000 primarily
due to:

- lending $36.0 million to MeriStar Hotels & Resorts under a revolving
credit agreement;

- deferring $8.1 million in financing costs related to issuing $500 million
of senior unsecured notes;

- capital expenditures at the hotels;

- the increase in cash and other operating assets of $65.7 million related
to the assignment of the hotel leases with MeriStar Hotels & Resorts to
the taxable subsidiaries; partially offset by

- the decrease of $11.3 million due from MeriStar Hotels & Resorts;

- the sale of one hotel and the use of the $7.3 million in proceeds to
paydown debt; and

- depreciation on hotel assets.

Total liabilities increased by $93.0 million to $1,865.5 million at June
30, 2001 from $1,772.5 million at December 31, 2000 due mainly to:

- net borrowings of long-term debt;

- a $16.0 million increase in accrued interest due to the $500 million
senior secured notes sold in January 2001;

- the adoption of FASB 133 and the related recording of a $7.1 million
liability for the derivative instruments; and

- the increase in operating liabilities of $65.7 million related to the
assignment of the hotel leases with MeriStar Hotels & Resorts to the
taxable REIT subsidiaries.

Long-term debt increased by $14.8 million to $1,653.1 million at June 30,
2001 from $1,638.3 million at December 31, 2000 due primarily to:

- $500 million in senior unsecured notes sold, partially offset set by

- the repayment of the revolving credit facility from the proceeds of the
senior unsecured notes borrowings and cash generated by operations.

Partners' capital decreased $25.9 million to $1,116.9 million at June 30,
2001 from $1,142.8 million at December 31, 2000 due primarily to:

- the payment of distributions;

- allocations of capital to redeemable unitholders as a result of increases
in MeriStar's stock price; and

- $7.1 million increase in accumulated other comprehensive loss due mainly
to the adoption of FASB 133 described above; partially offset by

- net income for 2001; and

- the issuance of additional common limited partnership units to MeriStar.
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RESULTS OF OPERATIONS

Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000.

Until January 1, 2001, MeriStar Hotels & Resorts leased substantially all
of MeriStar Partnership's hotels. Under these leases, MeriStar Hotels & Resorts
assumed all of the operating risks and rewards of these hotels and paid MeriStar
Partnership a percentage of each hotel's revenue under the lease agreements.
Therefore, for financial statement purposes through December 31, 2000, MeriStar
Hotels & Resorts recorded all of the operating revenues and expenses of the
hotels in its statements of operations, and MeriStar Partnership recorded lease
revenue earned under the lease agreements in its statements of operations.
Effective January 1, 2001, MeriStar Hotels & Resorts assigned the hotel leases
to MeriStar Partnership's newly created, wholly owned, taxable REIT subsidiaries
and its taxable REIT subsidiaries, in turn, entered into management agreements
with MeriStar Hotels & Resorts to manage the hotels. As a result of this change
in structure, MeriStar Partnership's wholly-owned taxable REIT subsidiaries have
assumed the operating risks and rewards of the hotels and now pay MeriStar
Hotels & Resorts a management fee to manage the hotels. For consolidated
financial statement purposes, effective January 1, 2001, MeriStar Partnership
now records all of the revenues and expenses of the hotels in its statements of
operations, including the management fee paid to MeriStar Hotels & Resorts.

MeriStar Partnership's total revenues and total operating expenses
increased $461.3 million and $421.0 million, respectively, for the six months
ended June 30, 2001 as compared to the same period in 2000. As described in the
preceding paragraph, the significant increases result from the fact that
MeriStar Partnership now records the hotel operating revenue and expenses in its
consolidated financial statements effective January 1, 2001, while it only
recorded lease revenue in 2000. As a result, MeriStar Partnership's operating
results for the six months ended June 30, 2001 are not directly comparable to
the same period in 2000.

For comparative purposes, the following shows the results for the six
months ended June 30, 2000 on a pro forma basis assuming the leases with
MeriStar Hotels & Resorts were converted to management contracts on January 1,
2000 compared to actual results for the six months ended June 30, 2001 (in
thousands):

<Table>
<Caption>
2001 2000
-------- --------

Revenue..................................................... $609,851 $622,945
Total expenses.............................................. 565,913 548,125
Net income before loss on sale of assets and extraordinary
items..................................................... 42,690 73,601
Net income.................................................. 40,402 80,440
Recurring EBITDA............................................ 178,499 187,339
</Table>

The following table provides MeriStar Partnership's hotels' operating
statistics on a same store basis for the six months ended June 30, 2001 and
2000.

<Table>
<Caption>
2001 2000 CHANGE
------- ------- ------

Revenue per available room................................ $ 79.66 $ 81.18 (1.9)%
Average daily rate........................................ $112.28 $110.38 1.7%
Occupancy................................................. 70.9% 73.5% (3.6)%
</Table>

Total revenue decreased $13.0 million to $609.9 million in 2001 from $622.9
million in 2000, on a pro forma basis, due primarily to a $10.1 million decrease
in room revenue related to a 3.5% decrease in occupancy. This decrease is
attributable to the recent slowing of our national economy and its impact on
business and leisure travel.

The current economic slowdown and the resulting declines in RevPAR, which
began in March 2001, are currently continuing. MeriStar Partnership anticipates
that third quarter RevPAR will be less than that of the third quarter of 2000
and less than that of the second quarter of 2001. MeriStar Partnership expects
this decline in occupancy during the second and third quarters to lead to
declines in room rates as hotels compete more aggressively for guests. If the
economic slowdown worsens or continues for a protracted time, it could have a
material adverse effect on MeriStar Partnership's operations and earnings.

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Total expenses increased $17.8 million to $565.9 million for the six months
ended June 30, 2001 from $548.1 million for the same period in 2000 on a pro
forma basis due primarily to:

- $9.3 million in swap termination costs;

- the $2.1 million write down of the investment in STS Hotel Net;

- $3.8 million in FelCor merger costs;

- $1.3 million in costs to terminate leases with Prime Hospitality
Corporation;

- an increase in depreciation on hotel assets; and

- a $4.2 million increase in property operating costs due primarily to a
$3.2 million increase in energy costs.

During the six months ended June 30, 2001, MeriStar Partnership recorded a
charge in the amount of $2.1 million to write-off its investment in STS Hotel
Net, a provider of internet access and related services to the hospitality
industry. During 2000, STS Hotel Net continued to pursue its business strategy
and operate its business. During the first quarter of 2001, STS Hotel Net
secured additional equity from an entity which is also engaged in providing
similar services to the hospitality industry. Also, during the first quarter of
2001, the operating environment for STS Hotel Net deteriorated significantly and
STS Hotel Net was unable to generate adequate revenues or obtain needed
additional financing. As a result, STS Hotel Net significantly curtailed its
operations and, accordingly, MeriStar Partnership wrote off its investment in
STS Hotel Net at March 31, 2001.

Recurring EBITDA is presented before the effect of non-recurring items; the
swap termination costs, the write down of the investment in STS Hotel Net,
FelCor merger costs and costs to terminate leases with Prime Hospitality
Corporation. Recurring EBITDA decreased $8.8 million to $178.5 million in 2001
from $187.3 million in 2000.

In 2001, MeriStar Partnership paid down $300 million of term loans under
its revolving credit facility. This resulted in an extraordinary loss of $1.2
million, net of tax effect.

In 2001, MeriStar Partnership sold one hotel and received $7.3 million.
This resulted in a loss on the sale of the asset of $1.1 million, net of tax.

Year Ended December 31, 2000 compared with the Year Ended December 31, 1999

Until January 1, 2001, substantially all of MeriStar Partnership's hotels
were leased to and operated by MeriStar Hotels & Resorts. Participating lease
revenue represents lease payments from the lessees under the participating lease
agreements. Total revenue increased by $25.9 million to $400.7 million in 2000
compared to $374.8 million in 1999. This increase was primarily attributable to
an increase of $23.7 million in participating lease revenue resulting from an
increase in room revenue at MeriStar Partnership's hotels under lease. The
following table provides MeriStar Partnership's hotels' operating statistics on
a same-store basis for the year:

<Table>
<Caption>
2000 1999 CHANGE
------- ------- ------

Revenue per available room................................ $ 77.71 $ 73.51 5.71%
Average daily rate........................................ $107.60 $101.92 5.57%
Occupancy................................................. 72.2% 72.1% 0.14%
</Table>

Operating expenses increased to $170.3 million for the year ended December
31, 2000 from $156.5 million for the same period in 1999 due primarily to:

- to an increase in depreciation on hotel assets;

- an increase in administrative costs, as MeriStar Partnership added
personnel during 2000 to address the operating changes associated with
the REIT Modernization Act; and

- increased insurance costs.

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Net interest expense increased $17.1 million to $117.5 million for the year
ended December 31, 2000, from $100.4 million in 1999 due mainly to:

- lower capitalized interest due to a decrease in capital expenditures in
2000;

- an increase in variable interest rates during 2000 and higher interest
rates on swap arrangements executed in 2000; partially offset by

- a lower average debt balance during 2000.

In 2000, MeriStar Partnership repaid $18.2 million of its notes payable to
MeriStar at a discount in connection with its repurchase of its convertible
notes at an equal discount. This resulted in an extraordinary gain of $3.4
million.

In 2000, MeriStar Partnership sold three limited service hotels and
received $24.1 million. This resulted in a gain on sale of assets of $3.4
million.

EBITDA grew $20.9 million to $341.0 million in 2000 from $320.1 million in
1999. This growth is due to:

- the increase in participating lease revenue; partially offset by

- the increase in administrative and insurance costs.

Year Ended December 31, 1999 compared with the Year Ended December 31, 1998

Substantially all of MeriStar Partnership's hotels were leased to and
operated by MeriStar Hotels & Resorts. Participating lease revenue represents
lease payments from the lessees under the participating lease agreements. Total
revenue decreased by $147.2 million to $374.8 million in 1999 compared to $522.0
million in 1998. This decrease was primarily attributable to the change in the
types of revenues recorded in MeriStar Partnership's financial statements in
periods before and after August 2, 1998, the date of the merger of CapStar Hotel
Company and American General Hospitality Corporation and the spin-off of
MeriStar Hotels & Resorts.

The following table provides MeriStar Partnership's hotels' operating
statistics on a same-store basis for the year:

<Table>
<Caption>
1999 1998 CHANGE
------- ------- ------

Revenue per available room................................ $ 74.05 $ 71.80 3.1%
Average daily rate........................................ $102.39 $100.96 1.4%
Occupancy................................................. 72.3% 71.1% 1.7%
</Table>

There were no department operating expenses in 1999 compared to $142.5
million in 1998. This decrease was the result of the hotel operations being
leased to MeriStar Hotels & Resorts after August 2, 1998, in conjunction with
the merger and spin-off of MeriStar Hotels & Resorts.

Undistributed operating expenses decreased significantly in 1999 as a
result of the merger. Prior to the spin-off of MeriStar Hotels & Resorts,
MeriStar Partnership was responsible for all hotel operating expenses.
Subsequent to August 3, 1998, MeriStar Partnership, as owner and lessor, was
only responsible for real estate taxes, property insurance and various other
undistributed expenses. Depreciation and amortization increased $43.0 million to
$101.8 million in 1999 from $58.8 million in 1998 as a result of the assets
acquired in the merger.

Net interest expense increased $49.9 million to $100.4 million for the year
ended December 31, 1999, from $50.5 million in 1998. This increase was
attributable to:

- the borrowings used to finance the acquisition of hotels during 1998;

- the borrowings used to finance renovations of hotels during 1998 and
1999;

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- the new debt associated with the merger;

- higher average interest rates; and

- 1999 borrowings made to finance real estate ventures.

In 1999, MeriStar Partnership recognized extraordinary losses of $4.6
million due to the write-off of unamortized deferred financing fees in
conjunction with refinancing some credit facilities.

EBITDA grew $125.3 million to $320.1 million in 1999 from $194.8 million in
1998. This growth is due to:

- the merger;

- other hotel acquisitions which occurred during 1998; partially offset by

- the spin-off of MeriStar Hotels & Resorts.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

MeriStar Partnership's principal sources of liquidity are cash on hand,
cash generated from operations, and funds from external borrowings and debt and
equity offerings. MeriStar Partnership expects to fund its continuing operations
through cash generated by its hotels. MeriStar Partnership also expects to
finance hotel acquisitions, hotel renovations and joint venture investments
through a combination of internally generated cash, external borrowings, and the
issuance of its limited partnership units. Additionally, MeriStar must
distribute to stockholders at least 90% of its taxable income, excluding net
capital gains, to preserve its status as a REIT. MeriStar, as general partner of
MeriStar Partnership, is required to use its best efforts to cause MeriStar
Partnership's partnership distributions to it to be sufficient to comply with
this requirement. MeriStar Partnership expects to fund these distributions
through cash generated from operations, borrowings on the credit facilities or
through the preferred return on the investment in MeriStar Investment Partners,
LP. MeriStar Partnership generated $114.6 million of cash from operations during
the first six months of 2001.

Uses of Cash

MeriStar Partnership used $49.6 million of cash in investing activities
during the six months ended June 30, 2001, primarily for:

- the $36.0 million note receivable from MeriStar Hotels & Resorts; and

- capital expenditures at hotels; partially offset by

- hotel operating cash received on lease conversions; and

- proceeds from selling one hotel.

MeriStar Partnership used $45.0 million of cash from financing activities
during the six months ended June 30, 2001 primarily for:

- payments of financing costs, distributions; and

- additional financing costs related to issuing the $500 million of senior
unsecured notes, partially offset by net borrowings on our credit
facilities.

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In January 2001, MeriStar Partnership sold $500 million of senior unsecured
notes. The senior unsecured notes are structured as:

- $300 million in notes with a 9.0% interest rate which mature on January
15, 2008, and

- $200 million in notes with a 9.13% interest rate which mature on January
15, 2011.

The proceeds were used to repay outstanding debt under MeriStar
Partnership's revolving credit facility and to make payments to terminate some
swap agreements that hedged variable interest rates of the loans that it repaid.
The repayments of the term loans under the credit facility resulted in an
extraordinary loss of $1.2 million, net of tax. As of June 30, 2001, MeriStar
Partnership had $273.0 million available under its senior secured credit
facility. The weighted average interest rate on borrowings outstanding under
MeriStar Partnership's credit facility as of June 30, 2001 was 7.7%.

Capital for renovation work is expected to be provided by a combination of
internally generated cash and external borrowings. Initial renovation programs
for most of the hotels are complete or nearing completion. Once initial
renovation programs for a hotel are completed, MeriStar Partnership expects to
spend approximately 4% annually of hotel revenues for ongoing capital
expenditure programs, including room and facilities refurbishments, renovations,
and furniture and equipment replacements. For the six months ended June 30,
2001, MeriStar Partnership spent $23.8 million on renovation and ongoing
property capital expenditure programs. MeriStar Partnership intends to spend an
additional $28.0 million during 2001 to complete the renovation programs and for
the ongoing capital expenditure programs.

MeriStar Partnership believes cash generated by operations, together with
anticipated borrowing capacity under the credit facilities, will be sufficient
to fund the existing working capital requirements, ongoing capital expenditures,
and debt service requirements. MeriStar Partnership believes, however, that
future capital decisions will also be made in response to specific acquisition
and/or investment opportunities, depending on conditions in the capital and/or
other financial markets. Accordingly, MeriStar Partnership may consider
increasing the borrowing capacity or issuing additional debt or partnership
units and these proceeds could be used to finance acquisitions or investments,
refinance existing debt, or repurchase common stock.

MeriStar Partnership is obligated to lend MeriStar Hotels & Resorts up to
$50 million for general corporate purposes under a revolving credit agreement.
As of June 30, 2001, there was $36 million outstanding under this revolving
credit agreement.

FelCor, MeriStar Hotels & Resorts and MeriStar Partnership have agreed to
amend, effective when the merger is complete, the credit agreement to fix its
maturity at February 28, 2004, set the interest rate at 600 basis points over
the 30-day London Interbank Offered Rate and set the default rate of interest at
800 basis points over the 30-day London Interbank Offered Rate. MeriStar
Partnership has agreed to use best efforts to obtain the consents of MeriStar
Hotels & Resorts' senior lenders to these amendments.

SEASONALITY

Demand in the lodging industry is affected by recurring seasonal patterns.
For non-resort properties, demand is lower in the winter months due to decreased
travel and higher in the spring and summer months during peak travel season. For
resort properties, demand is generally higher in winter and early spring. Since
the majority of the hotels are non-resort properties, the operations generally
reflect non-resort seasonality patterns. MeriStar Partnership has lower revenue,
operating income and cash flow in the first and fourth quarters and higher
revenue, operating income and cash flow in the second and third quarters.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MeriStar Partnership is exposed to market risk from changes in interest
rates on long-term debt obligations that impact the fair value of these
obligations. MeriStar Partnership's policy is to manage interest rate risk
through the use of a combination of fixed and variable rate debt. MeriStar
Partnership's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower the overall
borrowing costs. To achieve these objectives, MeriStar Partnership borrows at a
combination of fixed and variable rates, and may enter into derivative financial
instruments such as interest rate swaps, caps and treasury locks in order to
mitigate their interest rate risk on a related financial instrument. MeriStar
Partnership does not enter into derivative or interest rate transactions for
speculative purposes. MeriStar Partnership does not have cash flow exposure due
to general interest rate changes for fixed long-term debt obligations.

The table below, as of June 30, 2001, presents the principal amounts, in
thousands of dollars, for MeriStar Partnership's fixed and variable rate debt
instruments, weighted-average interest rates by year of expected maturity, and
fair values to evaluate the expected cash flows and sensitivity to interest rate
changes.

<Table>
<Caption>
LONG-TERM DEBT
----------------------------------------------------------
AVERAGE AVERAGE
EXPECTED MATURITY FIXED RATE INTEREST RATE VARIABLE RATE INTEREST RATE
- ----------------- ---------- ------------- ------------- -------------

2001................................. $ 3,697 8.2% $ 16,000 7.8%
2002................................. 15,897 8.6% 32,000 7.8%
2003................................. 8,589 8.2% 305,000 7.7%
2004................................. 171,168 5.1% 69,000 7.7%
2005................................. 9,265 8.1% -- --
Thereafter........................... 1,022,434 8.6% -- --
---------- ---- -------- ----
Total...................... $1,231,050 8.1% $422,000 7.5%
========== ==== ======== ====
Fair Value at 6/30/01...... $1,202,095 $442,000
========== ========
</Table>

Upon the sale of MeriStar Partnership's $500 million senior unsecured notes
in January 2001, MeriStar Partnership reduced the term loans under its senior
secured credit facility by $300 million. At that time, MeriStar Partnership
terminated three swap agreements with a notional amount of $300 million that
were designated to hedge interest rates on the term loans that were repaid. They
made net payments totaling $9.3 million to the counter parties to terminate
these swap agreements.

As of June 30, 2001, MeriStar Partnership had four swap agreements with
notional principal amounts totaling $400 million. These swap agreements provide
hedges against the impact future interest rates have on floating LIBOR rate debt
instruments. The swap agreements effectively fix the 30-day LIBOR between 6.0%
and 6.4%. The swap agreements expire between September 2001 and April 2003. For
the six months ended June 30, 2001 and 2000, MeriStar Partnership
(made)/received net payments of approximately $(1,627,000) and $165,000,
respectively.

On March 22, 2001 MeriStar Partnership entered into a $100 million forward
swap agreement to fix the 30-day LIBOR at 4.77%. The effective date of the
agreement is October 1, 2001 and the agreement expires on July 31, 2003.

In anticipation of the August 1999 completion of MeriStar Partnership's
mortgage-backed secured facility, MeriStar Partnership entered into two separate
hedge transactions during July 1999. Upon completion of the secured facility,
they terminated the underlying treasury lock agreements, resulting in a net
payment of $5.1 million. This amount was deferred and is being recognized as a
reduction to interest expense over the life of the underlying debt. As a result,
the effective interest rate on the secured facility is 7.76%.

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As of June 30, 2001, after consideration of the hedge agreements described
above, 99% of MeriStar Partnership's debt had a fixed interest rate, with an
overall weighted average interest rate of 8.02%.

Although MeriStar Partnership conducts business in Canada, the Canadian
operations were not material to its consolidated financial position, results of
operations or cash flows during the six months ended June 30, 2001 and 2000 and
the years ended December 31, 2000 and 1999. Additionally, foreign currency
transaction gains and losses were not material to its results of operations for
the six months ended June 30, 2001 and 2000 and the years ended December 31,
2000 and 1999. Accordingly, MeriStar Partnership was not subject to material
foreign currency exchange rate risk from the effects that exchange rate
movements of foreign currencies would have on its future costs or on future cash
flows MeriStar Partnership would receive from foreign subsidiaries. To date,
MeriStar Partnership has not entered into any significant foreign currency
forward exchange contracts or other derivative financial instruments to hedge
the effects of adverse fluctuations in foreign currency exchange rates.

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BUSINESS AND PROPERTIES OF FELCOR PARTNERSHIP

GENERAL

At June 30, 2001, we and our subsidiaries owned interests in 185 hotels
with nearly 50,000 rooms and suites. Of these hotels, we own a 100% interest in
152 hotels with 40,309 rooms and suites, a 90% or greater interest in entities
owning seven hotels with 1,745 rooms and suites, a 60% interest in an entity
owning two hotels with 983 rooms and a 50% interest in separate entities that
own 24 hotels with 5,459 rooms and suites. Our hotels are located in the United
States (35 states) and Canada, with concentrations in Texas (41 hotels),
California (19 hotels), Florida (18 hotels) and Georgia (14 hotels). We own the
largest number of Embassy Suites, Crowne Plaza, Holiday Inn and independently
owned Doubletree-branded hotels in the world.

We seek to increase operating cash flow through both internal growth and
selective acquisitions, while maintaining a flexible and conservative capital
structure. In addition to renovating, redeveloping and repositioning our
acquired hotels, we may seek to acquire new upscale properties that will benefit
from affiliation with one of the premium brands available to us through our
strategic brand owner and manager relationships with Hilton, Six Continents
Hotels and Starwood.

In support of this strategy, on July 28, 1998, we merged Bristol Hotel
Company into FelCor, acquiring its 107 primarily full service hotels. These
hotels added more than 28,000 rooms and suites to our portfolio, more than
doubling our size. The merger also provided diversification, both geographically
and by asset class, by adding hotels in many of our key markets and broadening
our portfolio in the full-service, upscale and midscale hotel markets. During
1998, we purchased 16 hotels in addition to those acquired in the merger. During
1999, we sold six of the hotels acquired in the Bristol merger that did not meet
our investment criteria and acquired a 50% joint venture interest in one hotel.

THE INDUSTRY

The United States hotel industry profitability has improved each year since
1992 until 2000, its longest sustained growth in history. According to
PricewaterhouseCoopers LLP's 1999 Lodging Industry Briefing and April 10, 2001
U.S. Lodging Industry Update, after a period of extended unprofitability in the
late 1980's and early 1990's, during which time the increase in the supply of
new hotel rooms significantly outpaced growth in room demand, lodging industry
profit increased every year from 1992 through 2000. The percentage growth in
room demand exceeded percentage growth in new room supply from 1992 through
1996. While 1997 and 1998 experienced the highest number of new room starts in
the prior 10 years, 1999 showed a decline in new room starts of 9.7% from the
1998 level and is expected to decline by 16.2% in 2000, compared to 1999,
according to PricewaterhouseCoopers LLP's January 2001 Hospitality Directions.
In spite of the above-average increases in room supply since 1995, according to
PricewaterhouseCoopers LLP's September 1997 and January 2001 Hospitality
Directions, and April 10, 2001 U.S. Lodging Industry Update, annual revenue per
available room has grown each year from 1991 through 2000. Recent economic
conditions have produced the hotel industry's first declines in RevPar, compared
to prior year periods, since 1991. A decline in our RevPar will likely result in
a corresponding decrease in revenues and net income. Although we had a positive
RevPAR growth of 2.0% in the first quarter of 2001, during the second quarter
our hotels experienced a RevPAR decline of 7.4%, and MeriStar's hotels had a
RevPAR decline of 6.0%, compared to the same period of 2000. According to Smith
Travel Research, the U.S. hospitality industry experienced a 3.7% decline in
RevPAR for the second quarter.

Smith Travel Research, a leading provider of industry data, classifies
hotel chains into five distinct categories: Upper Upscale, Upscale, Midscale
With Food & Beverage, Midscale Without Food & Beverage, and Economy. We remain
focused on properties in the Upper Upscale (including Doubletree Guest Suites,
Embassy Suites, Sheraton and Westin hotels), Upscale (including Crowne Plaza,
Doubletree Hotels and Homewood Suites), and Midscale With Food & Beverage
(including Harvey, Holiday Inn and

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Holiday Inn Select hotels) categories, from which we derived approximately 97%
of our room and suite revenues in 2000.

BUSINESS STRATEGY

We seek to increase our operating cash flow through active asset
management. In addition to actively overseeing the operation of our hotels by
our lessees and their managers, we apply our asset management expertise to the
renovation, redevelopment and rebranding of hotels, the maintenance of strong
strategic relationships with our brand owners and managers and the maintenance
of financial flexibility and a conservative balance sheet.

Hotel Renovation, Redevelopment and Rebranding

We expect to continue to differentiate ourselves from many of our
competitors by:

- our ongoing program for the maintenance of our upgraded hotel assets,
which generally includes:

-- contribution of approximately 4.0% of total annual room and suite
revenue to a capital reserve for routine capital replacements and
improvements; and

-- adherence to a rigorous maintenance and repair program, resulting in
the expenditure of more than 4.0% of annual hotel revenues on
maintenance of the hotels.

We have demonstrated our ability to successfully execute renovations. Our
renovation and rebranding of the 18 Crown Sterling Suites hotels, which were
acquired during 1996 and 1997, achieved an overall RevPAR increase of 47.7%
between 1996 and 2000. During 1998, 1999 and 2000, an aggregate of approximately
$550 million in capital improvements and other capital expenditures were made to
our hotels, with approximately 3% of total hotel room nights being lost in 1998,
2% in 1999 and 1% in 2000, due to renovations. During 2001, we currently expect
to spend approximately $20 million on the renovation of eight hotels,
approximately $28 million to complete renovations started in 2000 at 46 hotels,
and approximately $50 million for other capital expenditures. We expect an
insignificant number of room nights to be lost during 2001 as a result of
renovations. We believe that our historical capital expenditures should limit
the need for future major renovation expenditures.

The largest single renovation project that we completed during 1999 was the
Allerton Crowne Plaza in Chicago, which reopened in July 1999, after having been
closed for more than a year. This project has received numerous awards,
including Lodging Hospitality magazine's Year's Best Design competition in two
categories, Bass Hotels & Resorts 1999 Newcomer of the Year award, and Chicago's
Greater North Michigan Avenue Association 1999 Avenue Enhancement award.

Maintenance of Strong Strategic Relationships

We benefit from strategic brand owner and manager relationships with Hilton
(Embassy Suites, Hilton and Doubletree), Six Continents Hotels (Crowne Plaza and
Holiday Inn) and Starwood (Sheraton and Westin).

- Hilton, which acquired Promus Hotel Corporation in 1999, has a hotel
system of more than 1,960 hotels with more than 325,000 guest rooms
worldwide, and is now the largest operator of full service, all-suite
hotels in the United States. In addition to its Hilton and Conrad
International-branded hotels, Hilton owns the Embassy Suites, Doubletree
and Doubletree Guest Suites brands and at June 30, 2001, managed 72 of
our hotels. As a result of its acquisition of Promus, Hilton acquired an
equity interest in FelCor having an aggregate value of approximately $33
million at June 30, 2001, and it became a 50% partner in joint ventures
with us in the ownership of 12 hotels and the holder of a 10% equity
interest in certain of our subsidiaries owning six hotels. The
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relationship with Promus and its Embassy Suites brand provided the
foundation for our historical growth and we expect to expand our
relationship with Hilton, as a result of the MeriStar merger.

- Six Continents Hotels is one of the largest hotel operating companies in
the world. Six Continents owns, operates or franchises more than 3,200
hotels with more than 500,000 guest rooms in nearly 100 countries around
the world. Among the brands owned by Six Continents Hotels are Crowne
Plaza, Holiday Inn, Holiday Inn Select, Holiday Inn Express and
Inter-Continental. Six Continents Hotels, which acquired Bristol Hotels &
Resorts in March 2000, managed 90 of our hotels at June 30, 2001. Six
Continents Hotels also owns FelCor common stock and our units aggregating
approximately 16.1% of our outstanding common stock and units.

- Starwood is one of the world's largest hotel operating companies.
Directly and through subsidiaries, Starwood owns, leases, manages or
franchises more than 725 properties with approximately 225,000 rooms in
80 countries. Our strategic alliance with Starwood, coupled with the
purchase of seven Sheraton hotels in 1997, provided us with our initial
entry into the upscale, full service, non-suite hotel market. Starwood
manages 11 of our hotels and 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.

Maintenance of Financial Flexibility

We are committed to maintaining substantial financial flexibility. In
funding our growth, we have used a broad selection of financing sources to
minimize our cost of capital, including public equity, collateralized
mortgage-backed securities, public and private debt, and asset divestitures. We
believe that our capital structure will continue to be among the more
conservative in the hotel REIT industry. We believe our financial flexibility
should enable us to pursue selective hotel acquisition and expansion
opportunities and to take advantage of renovation, redevelopment and rebranding
opportunities to help us improve our competitive position.

HOTELS HELD FOR SALE

In 2000, we identified 25 non-strategic hotels which we announced our
intention to sell. These hotels include most of our limited service hotels, a
number of our small market Holiday Inn hotels and all of our Marriott-branded
hotels. Management believes the sale of these non-strategic hotels will allow us
and our brand managers to focus our efforts on our upscale and full service
hotels in more strategic markets. Our board of directors approved a $63 million
loss on assets held for sale, to reflect the difference between our book value
and the estimated market value for these hotels.

We have completed the sale of two of the hotels held for sale, recognizing
a gain of approximately $135,000. In addition, in March 2001, we contributed
eight of the hotels held for sale to an entity in which we own a 50% equity
interest, and an affiliate of IHC holds the other 50% equity interest. We
contributed assets with a book value of approximately $77 million, received net
cash proceeds of $48 million and retained a $17 million preferred interest.

As a result of these transactions, as of June 30, 2001, we have 15
remaining hotels designated as held for sale.

REIT Modernization Act

On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions, among other things, reduce the distribution
requirement for REITs from 95% of taxable income to 90% of taxable income for
taxable years after 2000.

In addition, these provisions allow REITs, subject to certain limitations,
to own, directly or indirectly, up to 100% of the stock of a TRS that can engage
in businesses previously prohibited to a REIT. In particular, these provisions
permit hotel REITs to own a TRS that can lease hotels from the REIT, rather than
requiring the lessee to be a separate, unaffiliated party. Hotels leased to a
TRS still must be managed, however, by an unaffiliated third party. The TRS
provisions are complex and impose several
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conditions on the use of TRSs, generally to assure that TRSs are subject to an
appropriate level of corporate taxation. Further, no more than 20% of a REIT's
assets may consist of securities of TRSs, and no more than 25% of a REIT's
assets may consist of non-qualifying assets, including securities of TRSs and
other taxable subsidiaries. In addition, the TRS legislation provides that a
REIT may not own more than 10% of the voting power or value of a taxable
subsidiary that is not treated as a TRS. Although the TRS provisions became
effective on January 1, 2001, a taxable subsidiary in existence on July 12, 1999
is grandfathered under the new provisions unless and until it engages in a new
line of business or acquires a substantial new asset or FelCor acquires
additional stock in the taxable subsidiary. Such existing taxable subsidiaries
can be converted into TRSs on a tax-free basis at any time before January 1,
2004. As a result of the TRS provisions, we were able to form or acquire one or
more TRSs to acquire all or a portion of our existing hotel leases and to serve
as the lessee for any additional hotels that we acquire. Any "profit" from
leases held by a TRS, after payment of the applicable corporate tax, will be
available for distribution to us in the form of dividends.

As a result of the passage of the REIT Modernization Act, we completed the
acquisition of 100% of DJONT, effective January 1, 2001, and contributed DJONT
to our TRSs. As consideration, we issued 416,667 of our units, valued at
approximately $10 million, and assumed DJONT's accumulated shareholders'
deficit. On January 1, 2001, we acquired from Six Continents Hotels the leases
covering 11 of the hotels and terminated the related management agreements for
413,585 of our units valued at approximately $10 million including the cost of
terminating one additional lease in connection with the sale of the related
hotel. In July 2001, we completed the acquisition from Six Continents Hotels of
the remaining 88 leases. As consideration for the acquisition of such leases, we
entered into long term management agreements with Six Continents Hotels with
regard to these hotels and FelCor issued to Six Continents Hotels 100 shares of
FelCor common stock.

HOTEL BRANDS

The following table lists the number of our hotels operating under each
hotel brand as of June 30, 2001:

<Table>
<Caption>
NUMBER OF
PROPERTIES(1)
-------------

Hilton Brands:
Embassy Suites....................................... 59
Doubletree and Doubletree Guest Suites............... 11
Hampton Inn.......................................... 4
Hilton and Hilton Suites............................. 1
Homewood Suites...................................... 1
Six Continents Brands:
Holiday Inn.......................................... 39
Crowne Plaza and Crowne Plaza Suites................. 18
Holiday Inn Select................................... 10
Holiday Inn Express.................................. 2
Starwood Brands:
Sheraton and Sheraton Suites......................... 10
Westin............................................... 1
Marriott Brands:
Courtyard by Marriott................................ 2
Fairfield Inn........................................ 5
Other Brands........................................... 7
---
Total Hotels................................. 170
===
</Table>

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

(1) Excludes the 15 hotels designated as held for sale.

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Embassy Suites Hotels

Embassy Suites hotels are upscale, full service, all suite hotels designed
to attract frequent business travelers, leisure travelers and weekend guests.
Embassy Suites consistently achieves one of the highest guest satisfaction
ratings in the industry. Embassy Suites hotels offer numerous services and
amenities, such as:

- two-room suites, containing two telephones, a mini-refrigerator, coffee
maker, microwave oven, wet bar, and two color televisions;

- complimentary, full, cooked-to-order breakfast;

- complimentary cocktails during two hours every evening, subject to local
laws and regulations, in an atrium environment;

- fitness center, indoor heated pool, sauna, whirlpool and steam room; and

- guest laundry and valet services.

Restaurant, banquet, in-room dining and lounge services are available to guests
at customary rates. Embassy Suites hotels are constructed, maintained and
operated in accordance with a comprehensive set of building, maintenance,
operational, record keeping and reservation system guidelines designed to ensure
a uniformly high level of service, appearance and quality.

Holiday Inn and Holiday Inn Select Hotels

The Holiday Inn brand is positioned to attract the business and leisure
traveler seeking up-to-date products and features, value and friendly service.
Holiday Inn hotels typically offer a full service restaurant and lounge,
swimming pool, meeting and banquet facilities, optional fitness center and
electronic locks. In-room amenities generally include a hair dryer, coffee
maker, iron and ironing board, alarm/clock radio and 25" television. The Holiday
Inn name is recognized around the world, with more than 1,500 hotels currently
being operated under this brand.

The Holiday Inn Select hotels are focused on the business traveler. Each
room offers a residential decor with a well-lit work area, including a dataport
and voicemail, and in-room coffee makers. Amenities offered at the Holiday Inn
Select hotels generally include full business services such as photocopying and
telecopying, meeting capabilities for small to mid-size groups, swimming pool,
exercise facilities and full service restaurant and lounge. There are more than
70 Holiday Inn Select hotels operating in the Americas.

The Holiday Inn, Holiday Inn Select and Crowne Plaza brands are part of the
family of brands owned, operated and franchised by Six Continents Hotels. Six
Continents Hotels owns, operates or franchises more than 3,000 hotels with more
than 490,000 guest rooms in nearly 100 countries around the world.

Crowne Plaza Hotels

Crowne Plaza hotels offer upscale accommodations for business and leisure
travelers looking for a full range of services. Guests receive personalized
attention, including welcoming valet and bell staff, concierge service and full
health and exercise facilities. Large guest rooms provide a well-lit work area,
two telephones with dataport and voicemail, in-room coffee maker, iron, hair
dryer, make-up mirror and free newspaper delivered every weekday. Full business
services are available to handle guest secretarial requirements. Crowne Plaza
hotels also provide attractive and functional meeting areas that are suitable
for a variety of occasions, ranging from small private gatherings to banquets
and large conferences. There are currently more than 140 Crowne Plaza hotels and
over 40,000 guest rooms in major urban centers, gateway cities and resort
destinations worldwide.

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Sheraton and Sheraton Suites

Sheraton hotels, including Sheraton Suites, are part of Starwood, which
owns the Sheraton, Westin and other brand names. Sheraton Suites hotels
typically offer two-room suites, each with a wet bar, refrigerator, microwave,
coffee maker and two televisions. Restaurant, lounge, swimming pool and fitness
center facilities are also typically available to guests. While each of these
hotels offers some suite accommodations, the substantial percentage of the
accommodations are non-suite rooms.

Sheraton hotels generally offer numerous amenities and facilities, such as
multiple restaurants, banquet and meeting space, recreational facilities,
including indoor and/or outdoor pools and fitness centers, and business centers.
Starwood owns, leases, manages or franchises more than 730 properties with
approximately 227,000 rooms in over 80 countries.

Hilton and Hilton Suites

Hilton hotels are upscale, full service hotels designed to attract business
travelers, leisure guests, and in the many Hilton properties with appropriate
facilities, groups and conventions. Hilton Suites are full service, all-suites
properties with the amenities of the conventional Hilton-branded hotels in an
all-suites format.

Over decades of operation, the Hilton name has achieved 98% brand awareness
worldwide. Conrad Hilton purchased his first hotel in 1919, built the first
Hilton-branded hotel in 1925, and established the first "nationwide" hotel chain
in 1943. Today Hilton has 499 hotels with 147,667 rooms worldwide which are
owned, managed or franchised by Hilton, and is the owner of a number of other
hotel brands as set forth in "Embassy Suites" above.

Doubletree and Doubletree Guest Suites Hotels

The Doubletree Guest Suites all-suite hotels comprise one of the largest
all-suite hotel chains in the United States, as measured by number of suites and
system revenues. The Doubletree Guest Suites all-suite hotels are targeted at
business travelers and families who need or desire greater space than that which
is typically provided at traditional hotels. Each guest suite has a separate
living room and dining/work area, with a color television, refrigerator and wet
bar.

Traditional full service Doubletree hotels are targeted at business
travelers, group meetings and leisure travelers, and typically include a
swimming pool, gift shop, meeting and banquet facilities, at least one
restaurant and cocktail lounge, room service, parking facilities and other
amenities.

Other Hotels

Twenty-nine of our hotels are operated under other brands, as follows:

- Hampton Inn (8 hotels);

- Holiday Inn Express (5 hotels);

- Fairfield Inn (5 hotels);

- Harvey Hotel (4 hotels);

- Courtyard by Marriott (2 hotels);

- Homewood Suites (1 hotel);

- Westin (1 hotel); and

- Independents (3 hotels).

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HOTEL PORTFOLIO

The following table sets forth selected descriptive information regarding
our hotels at June 30, 2001:

<Table>
<Caption>
LOCATION FRANCHISE BRAND ROOMS/SUITES
- -------- --------------- ------------

Birmingham, AL(1)........................................... Embassy Suites 242
Montgomery (East I-85), AL.................................. Holiday Inn 213
Texarkana (I-30), AR(2)..................................... Holiday Inn 210
Flagstaff, AZ............................................... Embassy Suites 119
Phoenix (Airport-44th St.), AZ.............................. Embassy Suites 229
Phoenix (Camelback), AZ..................................... Embassy Suites 233
Phoenix (Crescent), AZ(1)................................... Sheraton 342
Scottsdale (Downtown), AZ(2)(4)............................. Fairfield Inn 218
Tempe (ASU), AZ(1).......................................... Embassy Suites 224
Anaheim (Disney(R) Area), CA(1)............................. Embassy Suites 222
Burlingame (SF Airport So), CA(2)........................... Embassy Suites 339
Covina (I-10), CA(1)(4)..................................... Embassy Suites 264
Dana Point, CA.............................................. Doubletree Guest Suites 198
El Segundo (LAX Airport South), CA.......................... Embassy Suites 350
Irvine (Orange County Airport), CA.......................... Crowne Plaza 335
Milpitas, CA(1)............................................. Embassy Suites 267
Milpitas (San Jose North), CA............................... Crowne Plaza 305
Napa, CA(1)................................................. Embassy Suites 205
Oxnard (Mandalay Beach), CA................................. Embassy Suites 249
Palm Desert, CA(1).......................................... Embassy Suites 198
Pleasanton, CA.............................................. Crowne Plaza 244
Santa Barbara, CA(1)........................................ Holiday Inn 160
San Diego (On the Bay), CA(2)............................... Holiday Inn 600
San Francisco (Financial District), CA(2)................... Holiday Inn 566
San Francisco (Fisherman's Wharf), CA(2).................... Holiday Inn 584
San Francisco (Union Square), CA............................ Crowne Plaza 400
San Rafael (Marin Co.), CA(1)(4)............................ Embassy Suites 235
South San Francisco (SF Airport North), CA(1)............... Embassy Suites 312
Aurora (Denver Southeast), CO(7)............................ Doubletree 248
Avon (Beaver Creek Resort), CO.............................. Independent 72
Hartford (Downtown), CT..................................... Crowne Plaza 342
Stamford, CT(2)............................................. Holiday Inn Select 383
Wilmington, DE(7)........................................... Doubletree 244
Boca Raton, FL(3)........................................... Doubletree Guest Suites 182
Boca Raton, FL.............................................. Embassy Suites 263
Cocoa Beach (Oceanfront Resort), FL......................... Holiday Inn 500
Deerfield Beach, FL(1)...................................... Embassy Suites 244
Ft. Lauderdale, FL(1)....................................... Embassy Suites 359
Ft. Lauderdale (Cypress Creek), FL(1)....................... Sheraton Suites 253
Jacksonville, FL............................................ Embassy Suites 277
Kissimmee (Nikki Bird Resort), FL(2)........................ Holiday Inn 529
Lake Buena Vista (Walt Disney World(R)), FL(2).............. Doubletree Guest Suites 229
Miami (Airport), FL(2)...................................... Crowne Plaza 304
Miami (Airport), FL(1)...................................... Embassy Suites 314
Orlando (North), FL......................................... Embassy Suites 277
Orlando (South), FL(1)...................................... Embassy Suites 244
Orlando (International Drive Resort), FL.................... Holiday Inn 652
Orlando (Airport), FL....................................... Holiday Inn Select 288
Tampa (Busch Gardens), FL(3)................................ Doubletree Guest Suites 129
Tampa (Rocky Point), FL..................................... Doubletree Guest Suites 203
Tampa (Near Busch Gardens), FL(2)........................... Holiday Inn 395
Atlanta (Downtown), GA(4)................................... Courtyard by Marriott 211
Atlanta (Airport), GA....................................... Crowne Plaza 378
</Table>

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<Table>
<Caption>
LOCATION FRANCHISE BRAND ROOMS/SUITES
- -------- --------------- ------------

Atlanta (Powers Ferry), GA(1)............................... Crowne Plaza 296
Atlanta (Buckhead), GA(1)................................... Embassy Suites 317
Atlanta (Airport), GA....................................... Embassy Suites 233
Atlanta (Perimeter Center), GA(1)(4)........................ Embassy Suites 241
Atlanta (Downtown), GA(4)................................... Fairfield Inn 242
Atlanta (Airport North), GA(1).............................. Holiday Inn 493
Atlanta (Jonesboro South), GA(1)............................ Holiday Inn 180
Atlanta (Perimeter Dunwoody), GA(1)......................... Holiday Inn Select 250
Atlanta (Airport Gateway), GA............................... Sheraton 395
Atlanta (Galleria), GA(1)................................... Sheraton Suites 278
Brunswick, GA............................................... Embassy Suites 130
Columbus (Airport North), GA(2)............................. Holiday Inn 223
Davenport, IA(3)............................................ Hampton Inn 132
Davenport, IA(3)............................................ Holiday Inn 287
Chicago (Allerton), IL...................................... Crowne Plaza 443
Chicago (Lombard), IL(1)(4)................................. Embassy Suites 262
Chicago (O'Hare), IL(1)..................................... Sheraton Suites 297
Deerfield, IL(1)............................................ Embassy Suites 237
Moline, IL(3)............................................... Hampton Inn 138
Moline (Airport), IL(3)..................................... Holiday Inn 216
Moline (Airport), IL(3)..................................... Holiday Inn Express 111
Indianapolis (North), IN(1)(4).............................. Embassy Suites 222
Colby, KS(3)................................................ Holiday Inn Express 72
Great Bend, KS(3)........................................... Holiday Inn 175
Hays, KS(3)................................................. Hampton Inn 116
Hays, KS(3)................................................. Holiday Inn 190
Overland Park, KS(1)(4)..................................... Embassy Suites 199
Salina, KS(1)(3)............................................ Holiday Inn 192
Salina (I-70), KS(2)(3)..................................... Holiday Inn Express Hotel
& Suites 93
Lexington, KY............................................... Hilton Suites 174
Lexington, KY(1)............................................ Sheraton Suites 155
Baton Rouge, LA(1).......................................... Embassy Suites 224
New Orleans, LA(1).......................................... Embassy Suites 372
New Orleans (Chateau LeMoyne), LA(1)(2)(4).................. Holiday Inn 171
New Orleans (French Quarter), LA(1)(2)...................... Holiday Inn 276
Boston (Marlborough), MA(1)................................. Embassy Suites 229
Boston (Government Center), MA(2)........................... Holiday Inn Select 303
Baltimore (BWI), MD(7)...................................... Embassy Suites 251
Troy, MI(7)................................................. Embassy Suites 251
Bloomington, MN............................................. Embassy Suites 219
Minneapolis (Airport), MN(1)................................ Embassy Suites 311
Minneapolis (Downtown), MN.................................. Embassy Suites 218
St. Paul, MN(5)............................................. Embassy Suites 210
Kansas City (Country Club Plaza), MO(1)(2)(4)............... Embassy Suites 266
Kansas City (Northeast), MO................................. Holiday Inn 167
St. Louis (Downtown), MO.................................... Embassy Suites 297
St. Louis (Westport), MO(1)................................. Holiday Inn 318
Jackson (Downtown), MS(1)................................... Crowne Plaza 354
Jackson (Briarwood), MS(1)(3)............................... Hampton Inn 119
Jackson (North), MS(1)...................................... Holiday Inn Hotel & Suites 224
Olive Branch (Whispering Woods Hotel and Conference Center),
MS........................................................ Independent 179
Charlotte, NC(1)(4)......................................... Embassy Suites 274
Raleigh/Durham, NC.......................................... Doubletree Guest Suites 203
Raleigh, NC(1)(4)........................................... Embassy Suites 225
Omaha, NE................................................... Doubletree Guest Suites 189
</Table>

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<Table>
<Caption>
LOCATION FRANCHISE BRAND ROOMS/SUITES
- -------- --------------- ------------

Omaha (Central), NE(1)...................................... Hampton Inn 132
Omaha (Southwest), NE....................................... Hampton Inn 131
Omaha (I-80), NE(1)......................................... Holiday Inn 383
Omaha (Old Mill Northwest), NE.............................. Crowne Plaza 213
Omaha (Southwest), NE....................................... Holiday Inn Express Hotel
& Suites 78
Omaha (Southwest), NE....................................... Homewood Suites 108
Parsippany, NJ(1)(4)........................................ Embassy Suites 274
Piscataway, NJ(1)........................................... Embassy Suites 225
Secaucus (Meadowlands), NJ(2)(4)............................ Embassy Suites 261
Secaucus (Meadowlands), NJ.................................. Crowne Plaza 301
Albuquerque (Mountain View), NM............................. Holiday Inn 360
Syracuse, NY................................................ Embassy Suites 215
Cleveland, OH............................................... Embassy Suites 268
Columbus, OH................................................ Doubletree Guest Suites 194
Dayton, OH(1)............................................... Doubletree Guest Suites 138
Tulsa, OK................................................... Embassy Suites 240
Philadelphia (Center City), PA(1)........................... Crowne Plaza 445
Philadelphia (Independence Mall), PA(1)..................... Holiday Inn 364
Philadelphia (Society Hill), PA(1).......................... Sheraton 365
Pittsburgh, PA(1)(2)........................................ Holiday Inn Select 251
Charleston (Mills House), SC................................ Holiday Inn 214
Greenville (Roper), SC...................................... Crowne Plaza 208
Myrtle Beach (Kingston Plantation), SC...................... Embassy Suites 255
Knoxville (Central), TN(2).................................. Holiday Inn 242
Nashville (Airport), TN(3).................................. Doubletree Guest Suites 138
Nashville, TN............................................... Embassy Suites 296
Nashville (Opryland/Airport), TN(2)......................... Holiday Inn Select 385
Addison (North Dallas), TX(1)............................... Crowne Plaza 429
Amarillo (I-40), TX(2)...................................... Holiday Inn 247
Austin (Downtown), TX(7).................................... Doubletree Guest Suites 189
Austin (Airport North), TX(1)(4)............................ Embassy Suites 261
Austin (Town Lake), TX...................................... Holiday Inn 320
Beaumont (Midtown I-10), TX................................. Holiday Inn 253
Corpus Christi, TX(1)....................................... Embassy Suites 150
Dallas (Alpha Road), TX..................................... Bristol House 127
Dallas (Market Center), TX(1)............................... Crowne Plaza 354
Dallas (Park Central), TX(1)................................ Crowne Plaza Suites 295
Dallas (Campbell Centre), TX(7)............................. Doubletree 302
Dallas (DFW Airport South), TX.............................. Embassy Suites 305
Dallas (Love Field), TX(1).................................. Embassy Suites 248
Dallas (Market Center), TX(1)............................... Embassy Suites 244
Dallas (Park Central), TX................................... Embassy Suites 279
Dallas (Regal Row), TX(4)................................... Fairfield Inn 204
Dallas (Downtown West End), TX.............................. Hampton Inn 311
Dallas, TX(1)............................................... Harvey Hotel 313
Dallas (Park Central), TX(6)................................ Sheraton 438
Dallas (Park Central), TX(6)................................ Westin 545
Houston (Near the Galleria), TX(4).......................... Courtyard by Marriott 209
Houston (Medical Center), TX(1)............................. Crowne Plaza 297
Houston (Near the Galleria), TX(4).......................... Fairfield Inn 107
Houston (I-10 East), TX(4).................................. Fairfield Inn 160
Houston (I-10 East), TX(4).................................. Hampton Inn 90
Houston (Medical Center), TX(1)(2).......................... Holiday Inn Hotel & Suites 285
Houston (International Airport), TX(1)...................... Holiday Inn 401
Houston (I-10 West), TX..................................... Holiday Inn Select 345
</Table>

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<Table>
<Caption>
LOCATION FRANCHISE BRAND ROOMS/SUITES
- -------- --------------- ------------

Houston (Near Greenway Plaza), TX(1)........................ Holiday Inn Select 355
Irving (DFW Airport North), TX(1)........................... Harvey Hotel 506
Irving (DFW Airport North), TX(1)........................... Harvey Suites 164
Midland (Country Villa), TX................................. Holiday Inn 250
Odessa (Parkway Blvd), TX................................... Holiday Inn Express Hotel
& Suites 186
Odessa (Centre), TX......................................... Holiday Inn Hotel & Suites 245
Plano, TX(1)................................................ Harvey Hotel 279
Plano, TX................................................... Holiday Inn 161
San Antonio (Airport), TX(1)(2)(4).......................... Embassy Suites 261
San Antonio (Northwest), TX(1)(4)........................... Embassy Suites 217
San Antonio (Downtown), TX(2)............................... Holiday Inn 315
San Antonio (International Airport), TX..................... Holiday Inn Select 397
Waco (I-35), TX............................................. Holiday Inn 171
Salt Lake City (Airport), UT(2)............................. Holiday Inn 191
Tyson's Corner, VA (1)(4)................................... Sheraton 437
Burlington, VT(1)........................................... Sheraton 309
Cambridge, Canada........................................... Holiday Inn 139
Kitchener (Waterloo), Canada................................ Holiday Inn 182
Peterborough (Waterfront), Canada........................... Holiday Inn 155
Sarnia, Canada.............................................. Holiday Inn 151
Toronto (Yorkdale), Canada.................................. Holiday Inn 370
Toronto (Airport), Canada................................... Holiday Inn Select 444
</Table>

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

(1) Encumbered by mortgage debt.

(2) Situated on land leased under a long-term ground lease.

(3) This hotel is one of the 15 remaining non-strategic hotels that we intend to
sell.

(4) This hotel is one of 24 hotels owned by unconsolidated entities in which we
own a 50% equity interest.

(5) Owned subject to a capitalized industrial revenue bond lease that expires in
2011 and permits us to purchase the fee interest at expiration for a nominal
amount.

(6) This hotel is one of two hotels owned by a joint venture in which we own a
60% equity interest.

(7) This hotel is one of six hotels in which we own a 90% equity interest.

MANAGEMENT AGREEMENTS

Effective July 1, 2001, we acquired the leasehold interests in 88 hotels
from Six Continents Hotels. In connection with such acquisition, Six Continents
Hotels assigned the leases to those hotels to our TRSs, and the TRSs executed
new management agreements with Six Continents Hotels for each of the 88 hotels
that was previously leased.

Additionally, as a result of our acquisition of DJONT, our TRSs became
parties to management agreements with subsidiaries of Hilton, including Promus
Hotels, Inc. and its affiliates, DT Management, Inc. and its affiliates, and
subsidiaries of Starwood, including Sheraton Operating Corporation and its
affiliates.

Management Fees and Performance Standards. Under the agreements with Six
Continents Hotels, the TRS lessees generally pay Six Continents Hotels a basic
management fee for each hotel equal to 2% of adjusted gross revenues of the
hotel plus 5% of the room revenue of the hotel for each fiscal month during the
initial term and any renewal term. The basic management fees owed under the
other management agreements are generally as follows:

- Doubletree -- between 2% and 3% of the hotel's total sales per month;

- Sheraton -- 2% of the hotel's total revenue per accounting period; and

- Promus -- 2% of adjusted gross income payable monthly.

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Under the management agreements with Six Continents, 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 on a hotel by hotel
basis.

Term and Termination. The management agreements with Six Continents Hotels
generally have initial terms of 12 to 17 years. Six Continents Hotels may renew
the management agreements for one additional 5-year term on mutually acceptable
terms and conditions, provided the hotel meets certain performance standards.
The TRSs may elect not to continue to operate the hotels under the brand beyond
the expiration of the initial term, however, such election will give Six
Continents Hotels the right to force us to sell such 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 5 and 10 years only
upon the mutual written agreement of the parties.

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 such termination. Under the
Six Continents Hotels management agreements, if we sell any individual hotel, we
may be required to pay Six Continents Hotels 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 termination thereof, or
otherwise causes or suffers a termination for any reason other than an event of
default by Six Continents Hotels, 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 such liquidated damages will be owed if the net
proceeds of the sold hotel are reinvested in one or more hotels licensed by Six
Continents Hotels 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 a 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 shall not be unreasonably withheld.

THE LEASES

As a result of the acquisition of DJONT and the acquisition of the Six
Continents Hotels leases, all of our hotel leases are held by our TRSs. Under
the hotel leases, the lessee is obligated to pay us the greater of a minimum
base rent or percentage rent based on a percentage of revenues. The lessees have
entered into and are responsible for the payment of all fees under the franchise
licenses and management agreements relating to the hotels, may hold the liquor
licenses applicable to the hotels, own and maintain the inventories required for
the operation of the hotels, pay for normal maintenance and repair expenses,
enter into various operating, maintenance and service agreements with respect to
the hotels, and are responsible for compliance with the license, management and
other agreements affecting hotel operations. In addition, the lessees provide
asset management services to the hotels, including the supervision of the
day-to-day operations of the hotels by the management companies engaged to
manage the hotels and the establishment and implementation of capital
expenditure programs.

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 and limited service hotels in its immediate vicinity
and secondarily with other hotel properties in its geographic market. We believe

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that brand recognition, location, the quality of the hotel and services
provided, and price are the principal competitive factors affecting our hotels.

ENVIRONMENTAL MATTERS

We customarily obtain a Phase I environmental audit from independent
environmental consultants before acquiring a hotel. The principal purpose of a
Phase I audit is to identify indications of potential environmental
contamination for which such hotels may have liability and, secondarily, to
assess, to a limited extent, the potential for environmental regulatory
compliance liabilities. The Phase I audits of the hotels were designed to meet
the requirements of the then current industry standards governing Phase I
audits, and consistent with those requirements, none of the audits 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 audits did
not involve comprehensive analysis of potential offsite liability. The Phase I
audit 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 the 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 material noncompliance, liability
or claim relating to hazardous or toxic substances or other environmental
matters in connection with any of our current or former properties. See "Risk
Factors -- MeriStar Partnership and we are subject to risks that may adversely
affect real estate ownership -- Compliance with environmental laws may adversely
affect MeriStar Partnership and our financial condition."

TAX STATUS

FelCor elected to be taxed as a REIT under the federal income tax laws,
commencing with its initial taxable year ended December 31, 1994. As a REIT,
FelCor generally is not subject to federal income taxation at the corporate
level on its taxable income that is distributed to its shareholders. FelCor may,
however, be subject to certain state and local taxes on its income and property.
A REIT is subject to a number of organizational and operational requirements,
including a requirement that it currently distribute annually at least 90% of
its taxable income. In connection with FelCor's election to be taxed as a REIT,
FelCor's charter imposes restrictions on the ownership and transfer of shares of
its common stock. We expect to make distributions on our units sufficient to
enable FelCor to meet its distribution obligations as a REIT. FelCor and we have
adopted the calendar year as our taxable year.

EMPLOYEES

We have no employees. Management functions for us are performed by FelCor
as our sole general partner. Mr. Corcoran entered into an employment agreement
with FelCor in 1994 that continues in effect until December 31, 2001 and
automatically renews for successive one-year terms, unless terminated otherwise.
None of FelCor's other executive officers has an employment agreement with
FelCor. In addition to Mr. Corcoran, FelCor had 50 other full-time employees at
June 30, 2001.

PERSONNEL AND OFFICE SHARING ARRANGEMENTS

We share executive offices with FelCor, Inc., a private company controlled
by Mr. Corcoran and, prior to January 1, 2001, we also shared offices with
DJONT. Each entity bears an allocated share of overhead costs, including rent,
salaries of some personnel, other than Mr. Corcoran, who is compensated solely
by FelCor, office supplies, telephones and depreciation of office furniture,
fixtures and equipment.

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We reimburse FelCor for our share of these allocated costs. The allocations of
shared costs are subject to the approval of a majority of the independent
directors of FelCor. For the year ended December 31, 2000 and the six months
ended June 30, 2001, we bore $7.5 million, or 89.5%, and $4.6 million, or 99.5%,
of all allocable expenses under this arrangement.

LEGAL PROCEEDINGS

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

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BUSINESS AND PROPERTIES OF MERISTAR PARTNERSHIP

GENERAL

MeriStar Partnership believes that the upscale, full-service segment of the
lodging industry is the most attractive segment in which to own hotels. The
upscale, full-service segment is attractive for several reasons. First, the real
estate market has recently experienced a significant slowdown in the
construction of upscale, full-service hotels. Second, upscale, full-service
hotels appeal to a wide variety of customers, thus reducing the risk of
decreasing demand from any particular customer group. Additionally, these hotels
have particular appeal to both business executives and upscale leisure
travelers, customers who are generally less price sensitive than travelers who
use limited-service hotels.

MeriStar Partnership's business strategy is to opportunistically acquire
hotel properties and related businesses with the potential for cash flow growth
and to renovate and reposition each hotel according to the characteristics of
the hotel and its market.

ACQUISITION STRATEGY

MeriStar Partnership focuses its attention on investments in hotels located
in markets with economic, demographic and supply dynamics favorable to hotel
owners. Through an extensive due diligence process, MeriStar Partnership selects
those acquisition targets where it believes selective capital improvements and
well selected third-party management will increase the hotel's ability to
attract key demand segments, enhance hotel operations and increase long-term
value. In order to evaluate the relative merits of each investment opportunity,
MeriStar Partnership's senior management, together with MeriStar Hotels &
Resorts, creates detailed plans covering all areas of renovation and operation.
These plans serve as the basis for MeriStar Partnership's acquisition decisions
and guide subsequent renovation and operating plans which will be carried out by
a third-party hotel operator.

Until January 1, 2001, in order to maintain its qualification as a REIT,
MeriStar was required to make annual distributions to its stockholders of at
least 95% of its real estate investment trust taxable income, determined without
regard to the deduction for dividends paid and by excluding net capital gains.
Beginning January 1, 2001, under the REIT Modernization Act, the percentage of
required annual distributions was reduced to 90%.

Among other things, under the terms of MeriStar Partnership's partnership
agreement, MeriStar Partnership may not take or refrain from taking any action
which, in the judgment of MeriStar, in its sole and absolute discretion:

- could adversely affect the ability of MeriStar to continue to qualify as
a REIT unless MeriStar otherwise ceases to qualify as a REIT; or

- could subject MeriStar to any additional taxes under section 857 or
section 4981 of the Internal Revenue Code.

As a result, to complete acquisitions and renovations, MeriStar Partnership
relies heavily on its ability to raise new capital through debt and equity
offerings. That ability is dependent on the then-current status of the capital
markets.

Although MeriStar Partnership is not currently pursuing direct acquisition
opportunities, due to the current economic environment and the current costs of
its equity capital, it continues to be aware of acquisition opportunities in the
upscale, full-service hotel market. MeriStar Partnership may make investments in
hotels through co-investment with strategic partners if those investments offer
current cash returns.

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THE INTERCOMPANY AGREEMENT

MeriStar and MeriStar Partnership are parties to an intercompany agreement
with MeriStar Hotels & Resorts. On completion of the merger, FelCor will assume
MeriStar's rights and obligations under the agreement. The intercompany
agreement provides that, for so long as the agreement remains in effect,
MeriStar Hotels & Resorts is prohibited from making real property investments
that a REIT could make unless:

- MeriStar and MeriStar Partnership are first given the opportunity, but
elect not to pursue the activities or investments;

- it is on land already owned or leased by MeriStar Hotels & Resorts or
subject to a lease or purchase option in favor of MeriStar Hotels &
Resorts;

- MeriStar Hotels & Resorts will operate the property under a brand name
owned by MeriStar Hotels & Resorts; or

- it is a minority investment made as part of a lease or management
agreement arrangement.

MeriStar and MeriStar Partnership have a right of first refusal with respect to
any real property investment to be sold by MeriStar Hotels & Resorts.

The intercompany agreement will generally grant MeriStar Hotels & Resorts a
right of first refusal with respect to any management opportunity at any of
MeriStar Partnership's properties that it does not elect to have managed by the
hotel brand owner. This opportunity will be made available to MeriStar Hotels &
Resorts only if MeriStar Partnership determines that:

- consistent with MeriStar's status as a REIT, it must enter into a
management agreement with an unaffiliated third party with respect to the
property;

- MeriStar Hotels & Resorts is qualified to be the manager of that
property; and

- MeriStar Partnership decides not to have the property operated by the
owner of a hospitality brand under that brand.

Because of the provisions of the intercompany agreement, the nature of
MeriStar Partnership's business and the opportunities it may pursue will be
restricted.

Provision of Services

MeriStar Hotels & Resorts may provide MeriStar and MeriStar Partnership
with services as MeriStar or MeriStar Partnership may reasonably request from
time to time, including administrative, renovation supervision, corporate,
accounting, financial, insurance, legal, tax, information technology, human
resources, acquisition identification and due diligence, and operational
services. MeriStar compensates MeriStar Hotels & Resorts for services provided
in an amount determined in good faith by MeriStar Hotels & Resorts as the amount
a third party would charge MeriStar for comparable services. The arrangements
relating to the provision of these services were not subject to arms-length
negotiation.

Equity Offerings

If either MeriStar or MeriStar Hotels & Resorts desires to engage in a
securities issuance, the issuing party will give notice to the other party as
promptly as practicable of its desire to engage in a securities issuance. Any
notice will include the proposed material terms of the issuance, to the extent
determined by the issuing party, including whether that issuance is proposed to
be made as a public or private offering, the amount of securities proposed to be
issued and the manner of determining the offering price and other terms thereof.
The non-issuing party will cooperate with the issuing party in every way to
effect any securities issuance of the issuing party by assisting in the
preparation of any registration statement or other document required in
connection with that issuance and, in connection with that issuance, providing
the

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issuing party with that information which may be required to be included in the
registration statement or other document.

Term

The intercompany agreement will terminate upon the earlier of August 3,
2008, and the date of a change in ownership or control of MeriStar Hotels &
Resorts.

Credit Facility

MeriStar Partnership is obligated to lend MeriStar Hotels & Resorts up to
$50 million for general corporate purposes under a revolving credit agreement.
On March 1, 2000, the revolving credit agreement was amended to reduce the
maximum borrowing limit from $75 million to $50 million, increase the interest
rate from 350 basis points over the 30-day London Interbank Offered Rate to 650
basis points over the 30-day London Interbank Offered Rate and set the maturity
date of the loan to the 91st day following the maturity of MeriStar Hotels &
Resorts' senior credit facility, as amended, restated, refinanced or renewed. As
of June 30, 2001, there was $36 million outstanding under this revolving credit
agreement. Upon effectiveness of the merger, FelCor Partnership will succeed to
MeriStar Partnership's role as lender under this credit facility.

COMPETITION

MeriStar Partnership competes primarily in the upscale and mid-priced
sectors of the full-service segment of the lodging industry. In each geographic
market in which MeriStar Partnership's hotels are located, there are other full-
and limited-service hotels that compete with its hotels. Competition in the U.S.
lodging industry is based generally on convenience of location, brand
affiliation, price, range of services and guest amenities offered, and quality
of customer service and overall product.

EMPLOYEES

As of June 30, 2001, MeriStar and MeriStar Partnership employed 50 persons,
all of whom work at their headquarters.

FRANCHISES

MeriStar Partnership employs a flexible strategy in selecting brand names
based on a particular hotel's market environment and the hotel's unique
characteristics. Accordingly, MeriStar Partnership uses various national trade
names under licensing arrangements with national franchisors.

The following is a summary of MeriStar Partnership's brand affiliations:

<Table>
<Caption>
NUMBER OF
PROPERTIES
----------

Hilton Brands:
Embassy Suites............................................ 3
Doubletree and Doubletree Guest Suites.................... 6
Hilton and Hilton Suites.................................. 23
</Table>

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<Table>
<Caption>
NUMBER OF
PROPERTIES
----------

Six Continents Brands:
Holiday Inn............................................... 9
Crowne Plaza and Crowne Plaza Suites...................... 5
Holiday Inn Select........................................ 5
Starwood Brands:
Sheraton and Sheraton Suites.............................. 11
Westin.................................................... 4
Marriott Brands:
Courtyard by Marriott..................................... 5
Marriott.................................................. 3
Radisson Brands:
Radisson.................................................. 12
Other Brands................................................ 27
---
Total Hotels...................................... 113
===
</Table>

GOVERNMENTAL REGULATION

Americans with Disabilities Act.

Under the Americans with Disabilities Act, or ADA, all public
accommodations are required to meet specific requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA required
upgrades to MeriStar Partnership's hotels, a determination that MeriStar
Partnership is not in compliance with the ADA could result in a judicial order
requiring compliance, imposition of fines or an award of damages to private
litigants.

MeriStar Partnership is likely to incur additional costs of complying with
the ADA; however, those costs are not expected to have a material adverse effect
on its results of operations or financial condition.

Environmental Laws

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in property. Laws often impose liability whether or not the owner
or operator knew of, or was responsible for, the presence of hazardous or toxic
substances. In addition, the presence of contamination from hazardous or toxic
substances, or the failure to properly remediate contaminated property, may
adversely affect the owner's ability to sell or rent real property or to borrow
funds using real property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs of
removal or remediation of these substances at the disposal or treatment
facility, whether or not the facility is or ever was owned or operated by those
persons.

The operation and removal of underground storage tanks are also regulated
by federal and state laws. In connection with the ownership and operation of the
hotels, MeriStar Partnership could be held liable for the costs of remedial
action with respect to the regulated substances and storage tanks and claims
related thereto. Activities have been undertaken to close or remove storage
tanks located on the property of several of the hotels.

All of MeriStar Partnership's hotels have undergone Phase I environmental
site assessments, which generally provide a nonintrusive physical inspection and
database search, but not soil or groundwater analyses, by a qualified
independent environmental engineer. The purpose of a Phase I is to identify
potential sources of contamination for which the hotels may be responsible and
to assess the status of environmental regulatory compliance. The Phase Is have
not revealed any environmental liability or

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compliance concerns that MeriStar Partnership believes would have a material
adverse effect on its results of operation or financial condition, nor is
MeriStar Partnership aware of any environmental liability or concerns.
Nevertheless, it is possible that these environmental site assessments did not
reveal all environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which MeriStar
Partnership is currently unaware.

In addition, MeriStar Partnership's hotels have been inspected to determine
the presence of asbestos. Federal, state and local environmental laws,
ordinances and regulations also require abatement or removal of
asbestos-containing materials and govern emissions of and exposure to asbestos
fibers in the air. Asbestos-containing materials are present in various building
materials such as sprayed-on ceiling treatments, roofing materials or floor
tiles at some of the hotels. Operations and maintenance programs for maintaining
asbestos-containing materials have been or are in the process of being designed
and implemented, or the asbestos-containing materials have been scheduled to be
or have been abated, at these hotels. Any liability resulting from
non-compliance or other claims relating to environmental matters are not
expected to have a material adverse effect on MeriStar Partnership's results of
operations or financial condition.

PROPERTIES

MeriStar and MeriStar Partnership maintain their headquarters in
Washington, D.C. MeriStar Partnership owns hotel properties throughout the
United States and Canada. As of June 30, 2001, MeriStar Partnership owned 113
hotels. MeriStar Partnership leases land for seven of its hotels and also leases
part of the land for six of its hotels. No one hotel property is material to
MeriStar Partnership's operations. A typical hotel has meeting and banquet
facilities, food and beverage facilities and guest rooms and suites.

The hotels generally feature comfortable, modern guest rooms, extensive
meeting and convention facilities and full-service restaurant and catering
facilities that attract meeting and convention functions from groups and
associations, upscale business and vacation travelers as well as banquets and
receptions from the local community.

The following table sets forth some information with respect to MeriStar
Partnership's hotels at June 30, 2001:

<Table>
<Caption>
GUEST
HOTEL LOCATION ROOMS
- ----- -------- -----

Sheraton Hotel..................................... Mesa, AZ 273
Crowne Plaza Hotel................................. Phoenix, AZ 250
Embassy Suites..................................... Tucson, AZ 204
Courtyard by Marriott.............................. Century City, CA 134
Hilton Hotel....................................... Irvine, CA 289
Marriott Hotel..................................... Los Angeles, CA 469
Courtyard by Marriott.............................. Marina Del Rey, CA 276
Hilton Hotel....................................... Monterey, CA 204
Doral Palm Springs................................. Palm Springs, CA 285
Hilton Hotel....................................... Sacramento, CA 331
Holiday Inn Select................................. San Diego, CA 317
Sheraton Hotel..................................... San Francisco, CA 525
Crowne Plaza Hotel................................. San Jose, CA 239
Wyndham Hotel...................................... San Jose, CA 355
Hilton Hotel....................................... San Pedro, CA 226
Santa Barbara Inn.................................. Santa Barbara, CA 71
Holiday Inn........................................ Colorado, Springs, CO 200
Sheraton Hotel..................................... Colorado, Springs, CO 500
Embassy Suites..................................... Englewood, CO 236
</Table>

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<Table>
<Caption>
GUEST
HOTEL LOCATION ROOMS
- ----- -------- -----

Hilton Hotel....................................... Hartford, CT 388
Ramada Hotel....................................... Meriden, CT 150
Ramada Hotel....................................... Shelton, CT 155
Doubletree Bradley Airport......................... Windsor Locks, CT 200
Embassy Row Hilton Hotel........................... Washington, DC 193
Georgetown Inn..................................... Washington, DC 96
The Latham Hotel................................... Washington, DC 143
South Seas Plantation.............................. Captiva, FL 579
Hilton Hotel....................................... Clearwater, FL 426
Ramada Hotel....................................... Clearwater, FL 289
Hilton Hotel....................................... Cocoa Beach, FL 296
Holiday Inn........................................ Ft. Lauderdale, FL 240
Howard Johnson Resort.............................. Key Largo, FL 100
Westin Hotel....................................... Key Largo, FL 200
Courtyard by Marriott.............................. Lake Buena Vista, FL 314
Sheraton Hotel..................................... Lake Buena Vista, FL 489
Radisson Hotel..................................... Marco Island, FL 268
Holiday Inn........................................ Madeira Beach, FL 149
Radisson Hotel..................................... Orlando, FL 742
Best Western Hotel................................. Sanibel Island, FL 46
Safety Harbor Resort and Spa....................... Sanibel Island, FL 193
Sanibel Inn........................................ Sanibel Island, FL 96
Seaside Inn........................................ Sanibel Island, FL 32
Song of the Sea.................................... Sanibel Island, FL 30
Sundial Beach Resort............................... Sanibel Island, FL 243
Doubletree Hotel................................... Tampa, FL 496
Doubletree Guest Suites............................ Atlanta, GA 155
Westin Atlanta Airport............................. Atlanta, GA 495
Jekyll Inn......................................... Jekyll Island, GA 262
Wyndham Hotel...................................... Marietta, GA 218
Radisson Hotel..................................... Arlington Heights, IL 201
Radisson Hotels & Suites........................... Chicago, IL 350
Holiday Inn........................................ Rosemont, IL 507
Radisson Hotel..................................... Schaumburg, IL 200
Doubletree Guest Suites............................ Indianapolis, IN 137
Radisson Plaza..................................... Lexington, KY 367
Hilton Hotel....................................... Louisville, KY 321
Holiday Inn Select................................. Kenner, LA 303
Hilton & Towers.................................... Lafayette, LA 327
Maison de Ville.................................... New Orleans, LA 23
Radisson Hotel..................................... Annapolis, MD 219
Radisson Hotel..................................... Baltimore, MD 148
Sheraton Hotel..................................... Columbia, MD 287
Hilton Hotel....................................... Detroit, MI 151
Hilton Hotel....................................... Grand Rapids, MI 224
Holiday Inn Sports Complex......................... Kansas City, MO 163
Sheraton Airport Plaza............................. Charlotte, NC 222
Hilton Hotel....................................... Durham, NC 194
Courtyard by Marriott.............................. Durham, NC 146
Ramada Hotel....................................... Mahwah, NJ 128
Sheraton Hotel..................................... Mahwah, NJ 225
</Table>

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<Table>
<Caption>
GUEST
HOTEL LOCATION ROOMS
- ----- -------- -----

Westin Hotel....................................... Morristown, NJ 199
Four Points Hotel.................................. Mt. Arlington, NJ 124
Doral Forrestal.................................... Princeton, NJ 290
Courtyard by Marriott.............................. Secaucus, NJ 165
Marriott Hotel..................................... Somerset, NJ 440
Doubletree Hotel................................... Albuquerque, NM 295
Wyndham Hotel...................................... Albuquerque, NM 276
Crowne Plaza Hotel................................. Las Vegas, NV 201
St. Tropez Suites.................................. Las Vegas, NV 149
Radisson Hotel..................................... Rochester, NY 171
Radisson Hotel..................................... Middleburg Heights, OH 237
Hilton Hotel....................................... Toledo, OH 213
Westin Hotel....................................... Oklahoma City, OK 395
Crowne Plaza Hotel................................. Lake Oswego, OR 161
Sheraton Hotel..................................... Frazer, PA 198
Embassy Suites..................................... Philadelphia, PA 288
Holiday Inn Select................................. Trevose, PA 215
Hilton Hotel....................................... Arlington, TX 309
Doubletree Hotel................................... Austin, TX 350
Hilton & Towers.................................... Austin, TX 320
Holiday Inn Select................................. Bedford, TX 243
Radisson Hotel..................................... Dallas, TX 304
Renaissance Hotel.................................. Dallas, TX 289
Sheraton Hotel..................................... Dallas, TX 348
Hilton Hotel....................................... Houston, TX 292
Marriott Hotel..................................... Houston, TX 302
Hilton Hotel....................................... Houston, TX 295
Sheraton Hotel..................................... Houston, TX 382
Holiday Inn Select................................. Irving, TX 409
Hilton Hotel....................................... Midland, TX 249
Hilton Hotel....................................... Salt Lake City, UT 287
Holiday Inn........................................ Alexandria, VA 178
Radisson Hotel..................................... Alexandria, VA 253
Hilton Hotel....................................... Arlington, VA 209
Hilton Hotel....................................... Arlington, VA 386
Richmond Hotel and Conference Center............... Richmond, VA 280
Hilton Hotel....................................... Bellevue, WA 179
Crowne Plaza Hotel................................. Madison, WI 226
Holiday Inn........................................ Madison, WI 194
Holiday Inn........................................ Calgary, Alberta, Canada 170
Sheraton Hotel..................................... Guildford, B.C., Canada 278
Holiday Inn........................................ Vancouver, B.C., Canada 100
Ramada Hotel....................................... Vancouver, B.C., Canada 118
------
Total Rooms.............................. 28,877
======
</Table>

The Leases

Until January 1, 2001, subsidiaries of MeriStar Hotels & Resorts leased 106
of the 114 hotels. Each lease provided for an initial term of 12 years. Each
lease provided MeriStar Hotels & Resorts with three

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renewal options of five years each, except in the case of properties with ground
leases having a remaining term of less than 40 years, provided that:

- MeriStar Hotels & Resorts would not have the right to a renewal if a
change in the tax law has occurred that would permit MeriStar Partnership
to operate the hotel directly;

- if MeriStar Hotels & Resorts elected not to renew a lease for any
applicable hotel, then MeriStar Partnership had the right to reject the
exercise of a renewal right on a lease of a comparable hotel; and

- the rent for each renewal term would be adjusted to reflect the then fair
market rental value of the hotel.

If MeriStar and MeriStar Hotels & Resorts were unable to agree upon the
then fair market rental value of a hotel, the lease would have terminated upon
the expiration of the then current term and MeriStar Hotels & Resorts then would
have had a right of first refusal to lease the hotel from MeriStar Partnership
on those terms as MeriStar may have agreed upon with a third-party lessee.

Base Rent; Participating Rent; Additional Charges. Each lease required
MeriStar Hotels & Resorts to pay:

- fixed monthly base rent,

- participating rent, which was payable monthly and based on specified
percentages of room revenue, food and beverage revenue and telephone and
other revenue at each hotel in excess of base rent, and

- some other amounts, including interest accrued on any late payments or
charges.

Base rent and departmental revenue thresholds on which the rent percentage
is based were increased annually by a percentage equal to the percentage
increase in the Consumer Price Index, plus 0.75% in the case of the departmental
revenue thresholds, compared to the prior year. In addition, under some
circumstances, a reduced percentage rate would apply to the revenues
attributable to "discounted rates" that MeriStar Hotels & Resorts might have
offered. Base rent was payable monthly in arrears. Participating rent was
payable in arrears based on a monthly schedule adjusted to reflect the seasonal
variations in the hotel's revenue.

The leases required MeriStar Hotels & Resorts to pay rent, liability
insurance, all costs and expenses and all utility and other charges incurred in
the operation of the hotels. MeriStar Partnership was responsible for real
estate and personal property taxes and assessments, rent payable under ground
leases, casualty insurance, including loss of income insurance, capital
impositions and capital replacements and refurbishments, determined in
accordance with GAAP. The leases also provided for rent reductions and
abatements in the event of damage or destruction or a partial taking of any
hotel.

The leases also provided for a rental adjustment under specified
circumstances in the event of a major renovation of the hotel, or a change in
the franchisor of the hotel.

Lessee Capitalization. The leases required MeriStar Hotels & Resorts, as
guarantor of the leases, to maintain a book net worth of not less than $40
million. Further, as of January 1, 1999, for so long as the tangible net worth
of MeriStar Hotels & Resorts was less than 17.5% of the aggregate rents payable
under the leases for the prior calendar year, MeriStar Hotels & Resorts was
prohibited from paying dividends or making distributions other than dividends or
distributions made for the purpose of permitting the partners of the operating
partnership to pay taxes on the taxable income of the operating partnership
attributable to its partners plus any required preferred distributions existing
to partners.

Termination. MeriStar had the right to terminate the applicable lease upon
the sale of a hotel to a third party or, upon MeriStar's determination not to
rebuild after a casualty, upon payment to MeriStar Hotels & Resorts of the fair
market value of the leasehold estate, except for properties initially identified

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by MeriStar Hotels & Resorts and MeriStar as properties slated to be sold. The
fair market value of the leasehold estate was determined by discounting to
present value at a discount rate of 10% per annum the cash flow for each
remaining year of the then current lease term, which cash flow would be deemed
to be the cash flow realized by MeriStar Hotels & Resorts under the applicable
lease for the 12-month period preceding the termination date. MeriStar was to
receive as a credit against any of those termination payments an amount equal to
any outstanding "New Lease Credits," which means the projected cash flow,
determined on the same basis as the termination payment, of any new leases
entered into between MeriStar Hotels & Resorts and MeriStar after the effective
date for the initial term of the new lease amortized on a straight-line basis
over the initial term of the new lease.

Performance Standards. MeriStar had the right to terminate the applicable
lease if, in any calendar year, the gross revenues from a hotel were less than
95% of the projected gross revenues for that year as set forth in the applicable
budget unless:

- MeriStar Hotels & Resorts could reasonably demonstrate that the gross
revenue shortfall was caused by general market conditions beyond its
control, or

- MeriStar Hotels & Resorts "cured" the shortfall by paying to MeriStar
Partnership the difference between the rent that would have been paid to
MeriStar Partnership had the property achieved gross revenues of 95% of
the budgeted amounts and the rent paid based on actual gross revenues.

MeriStar Hotels & Resorts did not have the cure right for more than two
consecutive years.

The leases also required that MeriStar Hotels & Resorts spend in each
calendar year at least 95% of the amounts budgeted for marketing expenses and
for repair and maintenance expenses.

Assignment and Subleasing. MeriStar Hotels & Resorts did not have the
right to assign a lease or sublet a hotel without MeriStar Partnership's prior
written consent. For purposes of the lease, a change in control of MeriStar
Hotels & Resorts would have been deemed an assignment of the lease and would
require MeriStar Partnership's consent, which could have been granted or
withheld in MeriStar's discretion.

Management Agreements with MeriStar Hotels & Resorts

Until January 1, 2001, MeriStar Partnership leased all but eight of its
hotels to MeriStar Hotels & Resorts under the lease agreements described above.

Changes to the federal tax laws governing REITs were enacted in 1999 and
became effective on January 1, 2001. Under those changes, MeriStar Partnership
is permitted to create taxable REIT subsidiaries, which may lease the property
it currently owns and are taxable as C corporations. Because of these changes in
the tax laws, MeriStar Partnership formed a number of wholly-owned taxable REIT
subsidiaries. MeriStar Partnership and MeriStar Hotels & Resorts assigned the
participating leases to MeriStar Partnership's taxable REIT subsidiaries and the
taxable REIT subsidiaries entered into management agreements with MeriStar
Hotels & Resorts to manage the hotels. Under these management agreements, the
taxable REIT subsidiaries pay MeriStar Hotels & Resorts a management fee. The
taxable REIT subsidiaries in turn make rental payments to MeriStar Partnership
under the participating leases. The management agreements have been structured
to substantially mirror the economics of the former leases.

Management Fees and Performance Standards. Each taxable subsidiary will
pay MeriStar Hotels & Resorts a management fee for each hotel equal to a
specified percentage of aggregate hotel operating revenues, increased or
reduced, as the case may be, by 20% of the positive or negative difference
between:

- the actual excess of total operating revenues over total operating
expenses; and

- the projected excess of total operating revenues over total operating
expenses.

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The total management fee for a hotel in any fiscal year will not be less than
2.5% or greater than 4.0% of aggregate hotel operating revenues.

Term and Termination. The management agreements with MeriStar Hotels &
Resorts have initial terms of 10 years with three renewal periods of five years
each. A renewal will not go into effect if a change in the federal tax laws
permits MeriStar Partnership or one of its subsidiaries to operate the hotel
directly without adversely affecting the ability of MeriStar to qualify as a
REIT or if MeriStar Hotels & Resorts elects not to renew the agreement. MeriStar
Partnership may elect not to renew the management agreements only as provided
below.

MeriStar Partnership's taxable REIT subsidiaries have the right to
terminate a management agreement for a hotel upon the sale of the hotel to a
third party or if the hotel is destroyed and not rebuilt after a casualty. Upon
that termination, MeriStar Partnership's taxable REIT subsidiary will be
required to pay MeriStar Hotels & Resorts the fair market value of the
management agreement. That fair market value will be equal to the present value,
using a discount rate of 10%, of the remaining payments under the agreement,
assuming that MeriStar Hotels & Resorts would have been paid management fees
under the agreement based on the operating results for the 12 months preceding
the termination. MeriStar Partnership's taxable REIT subsidiaries will be able
to credit against any termination payments those projected fees, discounted to
present value at a discount rate of 10%, under any management agreements or
leases entered into between MeriStar Partnership or its subsidiaries on the one
hand and MeriStar Hotels & Resorts on the other hand after August 3, 1998.

If gross operating profit from a hotel is less than 85% of the amount
projected in the hotel's budget in any fiscal year and gross operating profit
from that hotel is less than 90% of the projected amount in the next fiscal
year, MeriStar Partnership's taxable subsidiaries will have the right to
terminate the management agreement for the hotel, unless:

- MeriStar Partnership did not materially comply with the capital
expenditures contemplated by the budget for either or both of the
applicable fiscal years; or

- MeriStar Hotels & Resorts cures the shortfall by agreeing to reduce its
management fee for the next fiscal year by the amount of the shortfall
between the actual operating profit for the second fiscal year and 90% of
the projected gross operating profit for that year.

MeriStar Hotels & Resorts can only use the cure right once during the term of
the management agreement.

Assignment. MeriStar Hotels & Resorts does not have the right to assign a
management agreement without the prior written consent of the relevant taxable
REIT subsidiary. A change in control of MeriStar Hotels & Resorts will require
the consent of the relevant subsidiary, which may be granted or withheld in its
sole discretion.

LEGAL PROCEEDINGS

In the course of MeriStar Partnership's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or asserted
against it. Based on currently available facts, MeriStar Partnership's
management believes that the disposition of matters that are pending or asserted
will not have a material adverse effect on its consolidated financial position,
results of operations or liquidity.

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MANAGEMENT OF FELCOR PARTNERSHIP FOLLOWING THE PARTNERSHIP MERGER

DIRECTORS AND EXECUTIVE OFFICERS

We do not have any directors or officers. Our management functions are
performed by FelCor as our sole general partner. The following information is
provided regarding the persons who will be directors and executive officers of
FelCor following the merger and the partnership merger.

FelCor's board of directors will have 13 members, at least seven of whom
will not be officers or employees of FelCor or the companies who operate
FelCor's hotels. The board of directors is divided into three classes who serve
staggered three-year terms with the term of each director expiring at the annual
meeting of stockholders held three years after his election.

The directors and executive officers will be as follows:

<Table>
<Caption>
YEAR
FIRST TERM
NAME POSITION ELECTED CLASS EXPIRES
- ---- -------- ------- --------- -------

Donald J. McNamara........ Chairman of the Board and Independent Director 1998 Class II 2002
Thomas J. Corcoran, Jr.... President, Chief Executive Officer and Director 1994 Class II 2002
Melinda J. Bush........... Independent Director 2000 Class I 2004
Richard S. Ellwood........ Independent Director 1994 Class III 2003
Richard O. Jacobson....... Independent Director 1994 Class III 2003
Steven D. Jorns........... Director 2001 Class III 2003
Charles A. Ledsinger, Independent Director 1997 Class I 2004
Jr. ....................
Robert H. Lutz, Jr. ...... Independent Director 1998 Class I 2004
Charles N. Mathewson...... Independent Director 1994 Class III 2003
Thomas A. McChristy....... Independent Director 1994 Class II 2002
Richard C. North.......... Director 1998 Class II 2002
Michael D. Rose........... Independent Director 1998 Class I 2004
Paul W. Whetsell.......... Director 2001 Class I 2004
Lawrence D. Robinson...... Executive Vice President, General Counsel and 1996
Secretary
Richard J. O'Brien........ Executive Vice President and Chief Financial 2001
Officer
Jack Eslick............... Senior Vice President, Director of Asset 1996
Management
June H. McCutchen......... Senior Vice President, Director of Design and 1995
Construction
Larry J. Mundy............ Senior Vice President, Director of 1998
Administration and Business Initiatives
Lester C. Johnson......... Senior Vice President and Controller 1995
William P. Stadler........ Senior Vice President, Director of Corporate 1995
Acquisitions
Andrew J. Welch........... Senior Vice President and Treasurer 1998
</Table>

Donald J. McNamara (age 48). Mr. McNamara was the Chairman of the Board of
Bristol Hotel Company from November 1994 until its merger into FelCor in July
1998. Since the merger, he has served as the Chairman of the Board of FelCor.
Mr. McNamara previously served as a director of FelCor from July 1994 until
November 1997. He is also the Chairman of The Hampstead Group, LLC, a private
equity real estate investment company. Mr. McNamara also serves as a director of
Omega Healthcare Investors, Inc. and Franklin Covey Co.

Thomas J. Corcoran, Jr. (age 52). Mr. Corcoran is the President and Chief
Executive Officer of FelCor and has served in that capacity since its formation
in 1994. From 1991 to 1994, Mr. Corcoran held the same positions with the
general partner of the partnerships that were merged into FelCor at its
formation. From October 1990 to December 1991, he served as the Chairman,
President and Chief Executive Officer of Fiesta Foods, Inc., a manufacturer of
tortilla chips and taco shells. From 1979 to 1990, Mr. Corcoran held various
positions with ShowBiz Pizza Time, Inc. (now CEC Entertainment, Inc.), an
operator and franchisor of family entertainment center/pizza restaurants, and
with

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Integra -- A Hotel and Restaurant Company (formerly Brock Hotel Corporation). He
served as the President and Chief Executive Officer of Integra from 1986 to
1990.

Melinda J. Bush (age 61). Mrs. Bush was elected as a director of FelCor in
May 2000. From more than five years ago until September 1996, she was Executive
Vice President of Reed Elsevier's Reed Travel Group/Hotel & Travel Index, which
was engaged in hotel industry marketing and publishing activities on a global
basis. Since that time, she has served as the Executive Vice President,
Editorial and Publishing Director of Premier Hotels & Resorts,
www.premierhotels.com, a division of Advanstar Communications. Mrs. Bush has
more than 20 years experience in the hospitality industry, and is also a
director and trustee of the American Hotel Foundation. She has honorary degrees
from Cornell Hotel School and Johnson & Wales Universities and carries the CHA
("Certified Hotel Administrator") designation awarded by the industry to hotel
operators and general managers. She was also named Woman of the Year in Travel
by the Travel Industry of America and is the recipient of several other industry
awards for her achievements in the industry.

Richard S. Ellwood (age 69). Mr. Ellwood, a director of FelCor since its
formation in 1994, is the founder and president of R.S. Ellwood & Co., Inc., a
real estate investment banking firm which was organized in 1987. Prior to 1987,
as an investment banker, Mr. Ellwood was elected successively in 1963 a vice
president of Morgan Guaranty Trust Company, in 1968 a general partner of White
Weld & Co., in 1978 a managing director of Warburg Paribas Becker, Incorporated
and in 1984 a managing director and senior banker of Merrill Lynch Capital
Markets. Mr. Ellwood has extensive experience in hotel financing. He was a
founder of Hotel Investors Trust, a REIT, and served as a trustee from 1970
until its merger with another REIT in 1987. He is currently a director of
Apartment Investment and Management Company and Florida East Coast Industries,
Inc.

Richard O. Jacobson (age 64). Mr. Jacobson has served as a director of
FelCor since its formation in 1994 and is the Chairman of the Board of Jacobson
Warehouse Company, Inc., a privately held warehouse company with facilities in
53 locations in 19 states, which Mr. Jacobson founded 32 years ago. He is also
Chairman of the Board of Jacobson Transportation Company, Inc., a truckload
common carrier with authority to operate in the United States (48 states),
Canada and Mexico. Mr. Jacobson is a member of the boards of directors of Atrion
Corporation, Firstar Bank Des Moines, N.A. and Heartland Express, Inc.

Steven D. Jorns (age 52). Mr. Jorns will become a director of FelCor upon
completion of the merger. He has been Vice Chairman of the Board of Directors of
MeriStar since August 1988. Mr. Jorns was also Chief Operating Officer of
MeriStar from August 1998 until January 1999. Mr. Jorns has also been Vice
Chairman of the Board of Directors of MeriStar Hotels & Resorts since August
1998. From April 1996 to August 1998, Mr. Jorns had been the Chairman of the
Board of Directors, Chief Executive Officer and President of American General
Hospitality Corporation. Mr. Jorns was also the founder of American General
Hospitality, Inc. and had served since its formation in 1981 until August 1998
as its Chairman of the Board of Directors, Chief Executive Officer and
President.

Charles A. Ledsinger, Jr. (age 51). Mr. Ledsinger has served as a director
of FelCor since November 1997. Mr. Ledsinger became the President and Chief
Executive Officer of Choice Hotels International in August 1998. Prior to that
time, Mr. Ledsinger served as Senior Vice President and Chief Financial Officer
of St. Joe Corporation from May 1997 until his election as President and Chief
Operating Officer of that corporation in February 1998. From June 1995 until May
1997, Mr. Ledsinger was Senior Vice President and Chief Financial Officer of
Harrah's Entertainment, Inc. For more than three years prior to that, Mr.
Ledsinger served as Senior Vice President and Chief Financial Officer of The
Promus Companies Incorporated, the former parent of Harrah's Entertainment, Inc.
He is also a director of Choice Hotels International, TBC Corporation and
Friendly Ice Cream Corporation. He is a member and a past chairman of the Real
Estate Financial Advisory Council of the American Hotel and Motel Association.

Robert H. Lutz, Jr. (age 51). Mr. Lutz served as a director of Bristol
Hotel Company from December 1995 until its merger into FelCor in July 1998, and
has served as a director of FelCor since that
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time. Mr. Lutz is currently the President of R.L. Investments, Inc., a private
investment firm. From 1994 through 2000, Mr. Lutz served as the Chairman and
Chief Executive Officer, and a member of the executive committee, of Amresco,
Inc., a financial services company. From 1991 to 1994, Mr. Lutz served as
President and Chief Operating Officer of Balcor/Allegiance Realty Group, a
subsidiary of the American Express Company engaged in real estate ownership and
management. He is a Trustee and member of the Executive Committee of the Urban
Land Institute and a past Vice Chairman of the National Realty Committee.

Charles N. Mathewson (age 73). Mr. Mathewson has served as a director of
FelCor since its formation in 1994. Additionally, Mr. Mathewson has served, for
more than the past five years, in various positions with International Game
Technology, a company engaged in the design and manufacture of microprocessor
based gaming products and gaming monitoring systems. Since February 1988, he has
served as the Chairman of the Board of IGT. He has served as a director of IGT
since December 1985, as President from December 1986 to February 1988, and as
Chief Executive Officer from December 1986 until June 1993 and from February
1996 until December 2000. Mr. Mathewson is also a member of the board of
directors of Baron Asset Fund.

Thomas A. McChristy (age 74). Mr. McChristy has served as a director of
FelCor since its formation in 1994. He was the President of T.A. McChristy Co.,
Inc., a real estate investment company, from 1957 to 1996. Mr. McChristy also
served as the president and Chief Operating Officer of Syntech International,
Inc., a lottery systems and equipment manufacturing company, from 1986 to 1988
and as its Chief Executive Officer from 1989 to 1992.

Richard C. North (age 51). Mr. North served as a director of Bristol Hotel
Company from 1997 until its merger into FelCor in July 1998, and has served as a
director of FelCor since that time. Mr. North has been the Group Finance
Director of Six Continents plc since 1994. Six Continents plc is the parent of
Six Continents Hotels, which operates or franchises more than 3,000 hotels in
more than 75 countries under various brands, including Inter-Continental, Crowne
Plaza and Holiday Inn. Prior to 1994, Mr. North served as the Group Finance
Director of The Burton Group.

Michael D. Rose (age 59). Mr. Rose has served as a director of FelCor
since July 1998. He served as the Chairman of the Board of Promus Hotel
Corporation from April 1995 through December 1997 and, thereafter, as a director
until December 1998. Mr. Rose served as Chairman of the Board of Harrah's
Entertainment Inc. from June 1995 until his retirement as of December 31, 1996.
He also served as Chairman of the Board of The Promus Companies Incorporated
from November 1989 through June 1995 and as Chief Executive Officer of that
company from November 1989 to April 1994. In May 2001, Mr. Rose was named
Chairman of the Board of Gaylord Entertainment Company, a diversified
entertainment company. Mr. Rose is also a director of First Tennessee National
Corporation, Stein Mart, Inc., and Darden Restaurants, Inc.

Paul W. Whetsell (age 50). Mr. Whetsell will become a director of FelCor
upon completion of the merger. He has been Chairman of the Board of Directors
and Chief Executive Officer of MeriStar since August 1998. Mr. Whetsell has also
been the Chairman of the Board of Directors and Chief Executive Officer of
MeriStar Hotels & Resorts since August 1998. Prior to August 1998, Mr. Whetsell
had been Chairman of the Board of Directors of CapStar Hotel Company since 1996
and had served as President and Chief Executive Officer of CapStar Hotel Company
since its founding in 1987.

Lawrence D. Robinson (age 57). Mr. Robinson, who has served as the Senior
Vice President, General Counsel and Secretary of FelCor since May 1996, was
named Executive Vice President, General Counsel and Secretary in March 2001.
From 1972 to 1989, Mr. Robinson was a partner in the Kansas City-based law firm
of Stinson, Mag & Fizzell, for which he founded and managed a Dallas, Texas
office from 1982 to 1989. From 1989 through April 1996, Mr. Robinson was a
partner in the Houston-based law firm of Bracewell & Patterson, L.L.P., where he
served as the managing partner of its Dallas office until 1992, as the head of
that office's corporate and securities law section and as chairman of its
firmwide hospitality group.

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Richard J. O'Brien (age 39). Mr. O'Brien joined FelCor in June 2001 as its
Executive Vice President and Chief Financial Officer. Prior to joining FelCor,
he was most recently with GE Capital Real Estate where he held a number of
leadership positions, including a Managing Director. Prior to serving as a
Managing Director, he served as the Chief Financial Officer of the Americas
business unit of GE Capital Real Estate. Mr. O'Brien also previously worked with
the GE Capital Corporation's Office of the Controller from 1994 to 1996, serving
as the internal consultant on accounting and finance issues. Prior to his tenure
with GE Capital Corporation, he held management positions with J. P. Morgan
Incorporated and KPMG Peat Marwick.

Jack Eslick (age 49). Mr. Eslick joined FelCor in April 1996 as its Vice
President, Director of Asset Management. He was named Senior Vice President,
Director of Asset Management in 1998. Mr. Eslick has more than 20 years
experience in hotel operations. From April 1991 until he joined FelCor, Mr.
Eslick served as Vice President of Operations of Promus Hotel Corporation, where
he had direct responsibility for all operations in a region that grew from 14
hotels to 26 hotels. Prior to April 1991, he served in various capacities with
Holiday Inns, Inc., including serving as general manager of various hotels and
as a Regional Director of Operations.

Lester C. Johnson (age 48). Mr. Johnson, who was named Senior Vice
President and Controller in March 2001, joined FelCor in September 1995 as its
Vice President and Controller. Prior to joining FelCor, Mr. Johnson held various
positions with Integra -- A Hotel and Restaurant Company and Show Biz Pizza
Time, Inc. (now CEC Entertainment, Inc.) from 1981 to 1995. He served as the
Vice President and Controller of Integra from 1991 to 1995.

June H. McCutchen (age 45). Ms. McCutchen joined FelCor in October 1995 as
Vice President, Director of Design and Construction, and was named Senior Vice
President, Director of Design and Construction in 1998. Prior to her engagement
by FelCor, she was an Account Executive for Hospitality Restoration & Builders,
Inc. From 1992 to 1994 she was Project Manager for American General Hospitality,
Inc. where she managed all capital improvement work for more than 35 properties.
Prior to 1992, Ms. McCutchen was Project Manager for Hilton Hotels, Inc. from
1987 to 1992, and prior to 1987, she served as design coordinator and purchasing
manager for Embassy Suites, Inc.

Larry J. Mundy (age 50). Mr. Mundy joined FelCor in January 1998 and is
the Senior Vice President, Director of Administration and Business Initiatives.
From 1995 until he joined FelCor, he was Vice President of Franchise Development
for Motel 6. From 1987 to 1995, he was Vice President of Development in the
South/Southeast for Hilton Hotels and prior to 1987 he served as corporate
counsel for Residence Inns and Embassy Suites.

William P. Stadler (age 46). Mr. Stadler began his employment with FelCor
in July 1995 as Vice President, Director of Acquisition and Development. On
January 14, 1998, Mr. Stadler was promoted to Senior Vice President, Director of
Corporate Acquisitions. Mr. Stadler has more than 20 years of experience in
hotel acquisition and development, having served as Vice President Development
for Coastal Hotel Group from 1994 until he joined FelCor in 1995, as Vice
President-Development for Embassy Suites, Inc. from 1992 to 1994, as Senior Vice
President-Development for Landmark Hotels, Inc. from 1989 to 1991 and as Vice
President-Development for Marriott Corporation from 1985 to 1989.

Andrew J. Welch (age 39). Mr. Welch joined FelCor in July 1998 as its Vice
President and Treasurer. He was named Senior Vice President and Treasurer in
March 2001. Prior to joining FelCor, Mr. Welch had served as Vice President and
Treasurer of Bristol Hotel Company from August 1997. Prior to joining Bristol,
Mr. Welch was responsible for originating investment banking and corporate
banking business for Bank of America, N.A., from 1991 to 1997, Citibank, N.A.,
from 1990 to 1991, and NationsBank, N.A., from 1984 to 1990.

In addition to the executive officers, Hervey A. Feldman, the founding
Chairman of the Board of FelCor, will continue to serve as the Chairman Emeritus
of FelCor, a position he has held since his retirement from the board of
directors in July 1998. In his capacity as Chairman Emeritus, Mr. Feldman is an
honorary non-voting member of the board of directors who is entitled to attend
meetings of the

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board, although his presence or absence from a meeting is not considered for
purposes of determining a quorum of the board of directors. We expect that Mr.
Feldman will be available from time to time to consult with the board of
directors and senior management on significant strategic and other corporate
matters. Mr. Feldman spent over 25 years in the hotel industry, including
serving in various management positions with Embassy Suites, Inc., Brock Hotel
Corporation, Holiday Inns, Inc. and Brock Residence Inns, Inc.

The officers of FelCor are elected annually by the Board of Directors at a
meeting held following each annual meeting of stockholders, or as soon after the
meeting as necessary and convenient in order to fill vacancies or newly created
offices. Each officer holds office until his successor is duly elected and
qualified or until death, resignation or removal, if earlier. Any officer or
agent elected or appointed by the Board of Directors may be removed by the Board
of Directors whenever in its judgement the best interests of FelCor will be
served by the removal, but the removal will be without prejudice to the
contractual rights, if any, of the person so removed.

There will be no family relationships among any of the directors or
executive officers of FelCor following the merger. Except as described under the
biographical section for each director, none of FelCor's directors hold
directorships in any company with a class of securities registered pursuant to
Section 12 of the Exchange Act or pursuant to Section 15(d) of the Exchange Act
or any company registered as an investment company under the Investment Company
Act of 1940.

Other than the arrangements contained in the merger agreement relating to
the election of Paul W. Whetsell and Steven D. Jorns as directors of FelCor,
there are no arrangements or understandings between any nominee for election as
a director or officer and any other person pursuant to which that director was
nominated or officer was selected.

EXECUTIVE COMPENSATION

The following tables show information regarding the compensation of
FelCor's President and its four other most highly paid executives.

SUMMARY COMPENSATION TABLE

<Table>
<Caption>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- ---------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSATION STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) AWARDS($)(1) SARS(#) ($)(4)
- --------------------------- ---- --------- -------- ------------ ------------ ---------- ------------

Thomas J. Corcoran, Jr. ... 2000 400,000 336,830 None 543,150(2) 25,000 15,750
President and Chief 1999 325,000 None None None None 15,000
Executive Officer 1998 250,000 150,000 None None 324,953 15,000
Lawrence D. Robinson...... 2000 231,750 228,325 None 417,125(3) None 15,750
Executive Vice President, 1999 225,000 40,000 None None None 15,000
General Counsel &
Secretary 1998 175,000 75,000 None None 137,262 14,400
Jack Eslick............... 2000 200,000 172,925 None 417,125(3) None 15,750
Senior Vice President 1999 180,000 50,000 None None None 15,000
Director of Asset
Management 1998 150,000 70,000 None None 66,654 15,000
June H. McCutchen......... 2000 206,000 177,725 None 417,125(3) None 15,750
Senior Vice President,
Director of Design 1999 150,000 62,120 None None None 15,000
and Construction 1998 100,000 112,472 None None 44,804 15,000
Andrew J. Welch........... 2000 140,600 145,405 None 417,125(3) None 15,750
Senior Vice President and 1999 136,500 50,000 None None None 15,000
Treasurer 1998 55,591(5) 25,000 None 53,125 40,702 2,499
</Table>

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

(1) There were 124,600 shares of restricted stock awarded to the above-named
officers during the 2000 fiscal year. Holders of restricted stock are
entitled to vote and receive dividends on such shares from the date of
grant. The amount reported in this table represents the market value of the
shares awarded on the date of grant, determined by the closing price of the
common stock on such date, without giving effect to the diminution of value
attributable to the restrictions on such stock. As of December 31, 2000, the
aggregate unvested restricted stock holdings by the named executive officers
consisted of 132,500 shares as set forth below, with a then current
aggregate market value, determined in the same manner as of December 31,
2000, of $3,171,719, as follows: Mr. Corcoran, 33,600 shares ($804,300 in
value); Mr. Robinson, 26,900 shares ($643,919 in value); Mr. Eslick, 23,500
shares ($562,531 in value); Ms. McCutchen, 23,500 shares ($562,531 in
value); and Mr. Welch, 25,000 shares ($598,438 in value).

(2) Represents an award of 30,600 shares of restricted stock on April 3, 2000
which become vested over a five-year period at the rate of 20% per year. The
value is based upon the closing price of the common stock on the date of
grant of $17.75 per share.

(3) Represents an award of 23,500 shares of restricted stock on April 3, 2000
which become vested over a five-year period at the rate of 20% per year. The
value is based upon the closing price of the common stock on the date of
grant of $17.75 per share.

(4) These amounts represent FelCor's contributions to FelCor's employee savings
and investment plan in the amount of up to $15,750 to each executive
officer. The executive officers receive health and disability insurance
benefits which do not exceed 10% of their respective salaries. These
benefits are also made available to other employees of FelCor.

(5) Includes compensation only from the date of commencement of Mr. Welch's
employment with FelCor (August 1998).

The only grant of stock options or stock appreciation rights, or SARs, to
FelCor's named executive officers during the 2000 fiscal year was the grant of
an option to Mr. Corcoran to purchase an aggregate of 25,000 shares at $19.50
per share. This option vests over five years at 20% per year.

The unexpired stock options to purchase FelCor's common stock held by named
executive officers of FelCor at December 31, 2000, are summarized in the table
below.

FISCAL YEAR END OPTION VALUES

<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000(1)
--------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ------------ --------------

Thomas J. Corcoran, Jr. ...................... 390,421 190,532 $852,014 $397,839
Lawrence D. Robinson.......................... 95,744 41,518 $173,536 $ 75,251
Jack Eslick................................... 44,768 21,796 $ 81,142 $ 39,505
June H. McCutchen............................. 27,360 17,444 $ 49,590 $ 31,617
Andrew J. Welch............................... 37,686 38,979 $ 29,508 $ 44,265
</Table>

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

(1) Based on the difference between the option exercise price for all
outstanding options and the closing sale price for the common stock on the
New York Stock Exchange on December 31, 2000, which was $23.9375 per share.

Employment Arrangements

FelCor has entered into an employment agreement with Mr. Corcoran that
continues in effect until December 31, 2001 and automatically renews for
successive one-year terms, unless otherwise terminated. Under this agreement,
Mr. Corcoran serves as the President and Chief Executive Officer of FelCor. The
agreement provides that Mr. Corcoran be paid a salary in excess of a stated
minimum and that a comprehensive medical plan be maintained for the benefit of
Mr. Corcoran and his dependents. None of the other officers of FelCor has an
employment agreement.

FelCor has entered into change in control and severance agreements with
each of its executive officers and certain other key employees. Each of these
agreements currently extend until December 31, 2001, and will automatically
renew for successive one-year terms, unless terminated. In the event of a
potential change in control, each covered employee agrees to remain in the
employ of FelCor until the earlier of one year following the "potential change
in control" or six months following an actual "change in control." Following a
"change in control," if a covered employee's employment is terminated by FelCor
other than

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for disability, retirement or "cause" or by the employee for "good reason", then
the employee will be entitled to:

- the immediate vesting of all stock options, awards of restricted stock
and other benefits previously awarded or credited to his account and

- a lump sum severance payment of between 2.99 and 0.5 times the employee's
average total annual compensation over the past three years.

FelCor will be required to "gross-up" the severance payment to cover excise
taxes on the benefits, so that the employee receives the same payment after
payment of any excise taxes.

FelCor also maintains a 401(k) Plan, health insurance and other benefits
generally available to all employees. FelCor also provides a deferred
compensation plan that is available only to directors and employees making in
excess of $100,000 per year. FelCor makes no matching or other contributions to
this plan, other than the payment of its operating and administrative expenses.

COMPENSATION COMMITTEE INTERLOCKS

None of the members of the Compensation Committee were officers or
employees of FelCor or had any relationship with FelCor requiring disclosure
under regulations promulgated by Securities and Exchange Commission.

DIRECTOR COMPENSATION

In lieu of cash compensation for their services during 2000, FelCor has
issued to each director, other than Mr. North, who has declined any
compensation, that number of shares of FelCor common stock determined by
dividing:

- the sum of $35,000 plus, if a director attended more than five Board
meetings during the year, $1,000 for each additional meeting attended in
person and $500 for each additional telephonic meeting in which he
participated, by

- $23.80, the closing price of the common stock on February 28, 2001, the
date the issuance was authorized by the Board, and rounding to the
nearest whole lot of 100 shares.

In addition to that compensation, each director is reimbursed for out-of-pocket
expenses incurred in connection with his or her service on the FelCor Board. No
additional compensation is paid to directors for service on various Board
committees.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIPS AND TRANSACTIONS WITH FORMER LESSEES

At December 31, 2000, FelCor and its subsidiaries leased a total of 85
hotels directly to, or to subsidiaries of, DJONT Operations, L.L.C. under
percentage leases. Hervey A. Feldman, who served as the Chairman of the Board of
FelCor until July 1998, and Thomas J. Corcoran, Jr., the President, Chief
Executive Officer and a director of FelCor, beneficially owned all of the voting
common equity interests (50% of the common equity interest) in, and served as
officers and managers of, DJONT. The remaining 50% non-voting common equity
interest in DJONT was held by entities owned by the children of Charles N.
Mathewson, a director of FelCor.

Effective January 1, 2001, FelCor acquired from the prior owners and
contributed to our newly formed taxable REIT subsidiary all of the equity
interests in DJONT. In consideration for the equity interests in DJONT, we
issued an aggregate of 416,667 units of limited partner interest valued at
approximately $10 million. At the time of acquisition, DJONT had an accumulated
shareholders' deficit of approximately $24.5 million. Mr. Corcoran and Mr.
Mathewson, whose personal interests were in conflict with those of FelCor
relating to this acquisition, abstained from participation in the FelCor's board
discussion and vote on this matter.

In May 2000, subsidiaries of Six Continents plc acquired all of the
outstanding stock of Bristol Hotels & Resorts through a merger. As a result of
this acquisition, Six Continents Hotels became the lessee of 88, and the manager
of 91, of our hotels. Richard C. North, a director of FelCor, is the Group
Finance Director of Six Continents plc.

In connection with its acquisition of Bristol, a Six Continents plc
subsidiary has contributed an aggregate of 5,713,185 shares of outstanding
FelCor common stock held by it to us in exchange for a like number of our common
units. If these units were redeemed for FelCor common stock, Six Continents plc
and its affiliates would own approximately 17.1% of FelCor's common stock. The
exchange by Six Continents plc of common stock for units did not affect FelCor's
FFO or earnings per share, although it resulted in the reduction of FelCor's
percentage ownership in us from approximately 95% to approximately 87%.

In December 2000, FelCor sold one hotel licensed by Six Continents Hotels
and, effective January 1, 2001, completed the acquisition of leases with respect
to 12 hotels licensed by Six Continents Hotels. In consideration for the
acquisition and termination of these leases and the related management
agreements, 413,585 shares of FelCor common stock valued at approximately $10
million were issued to Six Continents Hotels. FelCor acquired the remaining 88
leases held by Six Continents Hotels, effective July 1, 2001. FelCor has
contributed these leases to our TRSs. In consideration for these 88 leases,
FelCor issued 100 shares of FelCor common stock, and our subsidiaries agreed to
new long-term management agreements with Six Continents Hotels subsidiaries to
manage the 88 hotels. The acquisition of the leases held by Six Continents
Hotels involved negotiations between FelCor and Six Continents Hotels. The
interest of Six Continents Hotels in those negotiations was in direct conflict
with FelCor's interests. Mr. North abstained from participating in any
discussion or vote by FelCor's board relating to these transactions.

The percentage leases with DJONT and Six Continents Hotels generally had
initial terms of five to 15 years and provided for the payment by the lessees to
our subsidiary which owns the property a minimum base rent or, if greater, rent
measured as a percentage of room or suite revenue and certain other hotel
revenues. The lessees were entitled to all profits from the operation of the
hotels leased by them, after the payment of rent and the operating, management
and certain other expenses of the hotels. During 2000, DJONT paid approximately
$277 million, and Six Continents Hotels and Bristol Hotels & Resorts paid
approximately $260 million, in lease rent to our consolidated subsidiaries.

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112

SHARING OF OFFICES AND EMPLOYEES

FelCor shares its executive offices and certain employees with DJONT and
another entity controlled by Messrs. Feldman and Corcoran, and each company
bears its share of overhead costs, including an allocated portion of the rent,
salaries of some personnel, other than Mr. Corcoran, office supplies, telephones
and depreciation of office furniture, fixtures and equipment. These allocations
of shared expenses to FelCor must be approved by a majority of the independent
directors of FelCor. During 2000, FelCor paid approximately $7.5 million, or
89.4% of all allocable expenses, under this arrangement. Under our partnership
agreement, we are required to reimburse FelCor for its share of these expenses.
Mr. Corcoran's salary is paid solely by FelCor, and he receives no salary from
either of the other entities. Mr. Corcoran is the President, Chief Executive
Officer and a director of FelCor and also serves as a director, or manager, and
the President of each of these other entities. For a description of Mr.
Corcoran's employment agreement and of the change in control and severance
agreements between FelCor and its executive officers and some other key
employees, please see the discussion under "Management of FelCor Partnership
Following the Partnership Merger -- Executive Compensation -- Employment
Arrangements" above.

TRANSACTIONS RESULTING FROM THE MERGERS

Transactions with MeriStar Hotels & Resorts, Inc. Paul W. Whetsell is the
Chairman and Chief Executive Officer of MeriStar Hotels & Resorts, and Steven D.
Jorns is a member of its board of directors. As a result of the merger, Messrs.
Whetsell and Jorns will become directors of FelCor, and FelCor will have
relationships and transactions with MeriStar Hotels & Resorts. These
relationships and transactions are described in this prospectus under the
captions "Risk Factors -- Conflicts of interest could adversely affect our
business -- Certain FelCor directors and executive officers", "The Combined
Partnerships -- Relationship with MeriStar Hotels & Resorts" and "Business and
Properties of MeriStar Partnership -- Properties -- Management Agreements with
MeriStar Hotels & Resorts".

Transactions with Messrs. Whetsell and Jorns. As a result of the merger,
FelCor will also be a party to a number of transactions with Messrs. Whetsell
and Jorns, which are described in this prospectus under the captions "Risk
Factors -- The directors and executive officers of FelCor and MeriStar have
interests in the completion of the merger and partnership merger that may
conflict with the interests of the stockholders of the respective companies" and
"The Mergers -- Interests of Certain Persons in the Merger and Partnership
Merger -- Interests of MeriStar's Directors and Officers."

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113

SECURITY OWNERSHIP OF PRINCIPAL UNITHOLDERS AND MANAGEMENT

SECURITY OWNERSHIP OF FELCOR PARTNERSHIP BY PRINCIPAL UNITHOLDERS AND MANAGEMENT

The following table shows how many common units of partnership interests
were beneficially owned on July 31, 2001, by each person known to us to
beneficially own more than 5% of our common units, and by the executive officers
and directors of FelCor named below, who are the only executive officers and
directors of FelCor who own our common units. Unless otherwise indicated, each
person owns directly the number of common units shown opposite the person's name
in the table below.

<Table>
<Caption>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
- ------------------- ---------- ----------

FelCor Lodging Trust Incorporated..................... 58,688,826(2) 86.7%
545 E. John Carpenter Frwy., Suite 1300
Irving, Texas 75062
Six Continents plc.................................... 5,713,185(3) 8.4%
20 North Audley Street
London, England W1Y1WE
Thomas J. Corcoran, Jr................................ 503,249(4) *
Charles N. Mathewson.................................. 407,524(5) *
</Table>

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

* Represents less than 1%.

(1) Based upon 67,702,848 common units outstanding as of July 31,
2001.

(2) Includes 1,084,978 units representing general partner
interests owned directly by FelCor, and 57,603,848 units
representing limited partner interest owned indirectly
through FelCor Nevada Holdings, L.L.C., a wholly-owned
subsidiary of FelCor.

(3) Represents the aggregate number of units representing limited
partner interests owned by subsidiaries of Six Continents,
plc.

(4) Represents common units held by FelCor, Inc. Mr. Corcoran is
a 50% stockholder and director of FelCor, Inc. and may be
deemed to beneficially own all of the units owned by FelCor,
Inc.

(5) Represents common units held by trusts for Mr. Mathewson and
his spouse.

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114

SECURITY OWNERSHIP OF FELCOR BY MANAGEMENT

The following table shows how much FelCor common stock, Series A Preferred
Stock and Series B Preferred Stock was beneficially owned on July 31, 2001, by
the named executive officers, each director, each person who will become a
director following the merger, and all directors and executive officers as a
group, and, with respect to the common stock, the number of shares to be owned
by these persons on a pro forma basis following completion of the mergers.
Unless otherwise indicated, each person owns directly the number of shares shown
after his or her name in the table below.
<Table>
<Caption>
PRO FORMA
AMOUNT AND AMOUNT AND AMOUNT AND AMOUNT AND
NATURE OF NATURE OF NATURE OF NATURE OF
BENEFICIAL BENEFICIAL BENEFICIAL BENEFICIAL
OWNERSHIP OF PERCENT OWNERSHIP OF PERCENT OWNERSHIP OF PERCENT OWNERSHIP OF
NAME OF COMMON STOCK OF COMMON STOCK OF SERIES A OF SERIES B
BENEFICIAL OWNER PRE-MERGER CLASS(1) POST-MERGER CLASS(1) PREFERRED STOCK CLASS(1) PREFERRED STOCK
- ---------------- ------------ -------- ------------ -------- --------------- -------- ---------------

Melinda J. Bush......... 1,200(2) * 1,200(2) * -- -- --
Thomas J. Corcoran,
Jr. .................. 1,080,905(3) 2.0% 1,112,694(3)(15) 1.3% 3,000 * 800
Richard S. Ellwood...... 16,800(4) * 16,800(4) * -- -- --
Richard O. Jacobson..... 43,558 * 72,203(16) * -- -- --
Steven D. Jorns......... -- -- 666,399(17) * -- -- --
Charles A. Ledsinger,
Jr. .................. 5,475 * 5,475 * -- -- --
Robert H. Lutz, Jr. .... 28,114(5) * 28,114(5) * -- -- --
Charles N. Mathewson.... 1,221,008(6) 2.3% 1,221,008(6) 1.4% 170,000(20) 2.8% 71,600(20)
Thomas A. McChristy..... 146,473(7) * 146,473(7) * -- -- --
Donald J. McNamara...... 800,000(8) 1.5% 800,000(8) * -- -- 1,800(8)
Richard C. North........ -- * -- -- -- -- --
Michael D. Rose......... 69,925(9) * 69,925(9) * -- -- 10,000(21)
Paul W. Whetsell........ -- -- 1,620,876(18) 1.8% -- -- --
Jack Eslick............. 100,581(10) * 100,581(10) * -- -- --
June H. McCutchen....... 75,821(11) * 75,821(11) * -- -- --
Lawrence D. Robinson.... 183,601(12) * 183,601(12) * -- -- 1,306(22)
Andrew J. Welch......... 77,216(13) * 77,216(13) * -- -- --
All executive officers
and directors as a
group (21 persons).... 4,185,202(14) 7.7% 6,532,911(19) 7.2% 173,100 2.9% 82,067

PERCENT
NAME OF OF
BENEFICIAL OWNER CLASS(1)
- ---------------- --------

Melinda J. Bush......... --
Thomas J. Corcoran,
Jr. .................. *
Richard S. Ellwood...... --
Richard O. Jacobson..... --
Steven D. Jorns......... --
Charles A. Ledsinger,
Jr. .................. --
Robert H. Lutz, Jr. .... --
Charles N. Mathewson.... 1.2%
Thomas A. McChristy..... --
Donald J. McNamara...... *
Richard C. North........ --
Michael D. Rose......... *
Paul W. Whetsell........ --
Jack Eslick............. --
June H. McCutchen....... --
Lawrence D. Robinson.... *
Andrew J. Welch......... --
All executive officers
and directors as a
group (21 persons).... 1.4%
</Table>

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

* Represents less than 1% of the outstanding shares of such class.

(1) Based upon 52,975,641 shares of common stock, 5,980,600 shares of Series A
preferred stock and 5,750,000 depository shares representing 57,500 shares
of Series B preferred stock outstanding as of July 31, 2001. On a pro forma
basis, based upon 87,847,641 shares of common stock outstanding following
completion of the merger.

(2) Includes 1,200 shares credited to her account in the FelCor Deferred
Compensation Plan.

(3) Includes 503,249 shares that FelCor, Inc. has the right to receive upon
redemption of our common units. Mr. Corcoran is a 50% stockholder and
director of FelCor, Inc. and may be deemed to beneficially own all of the
units owned by FelCor, Inc. Also includes (i) an aggregate of 94,600 shares
issued pursuant to stock grants (9,000 in February 1995, 9,000 in December
1995, 15,000 in February 1997, 30,600 in April 2000 and 31,000 in March
2001) which vest over a five-year period from the date of grant at 20%
annually and of which 36,120 shares are fully vested, including 6,120
shares that are held in the FelCor Deferred Compensation Plan, (ii) 429,248
shares issuable pursuant to stock options that are currently exercisable or
exercisable within 60 days, (iii) 2,325 shares issuable upon conversion of
3,000 shares of Series A preferred stock, (iv) 400 shares owned by his
spouse, (v) 4,685 shares owned by his children, (vi) 1,995 shares owned by
his IRA and (vi) 500 shares owned by Corcoran Investments, L.L.C., a
limited liability company wholly owned by him.

(4) Includes (i) 2,200 shares held by trusts of which Mr. Ellwood is a
beneficiary and trustee and (ii) 1,500 shares held by R. S. Ellwood & Co.,
Inc., of which Mr. Ellwood is the controlling stockholder.

(5) Includes (i) 15,414 shares issuable pursuant to currently exercisable stock
options and (ii) 2,500 shares owned by Mr. Lutz's spouse.

(6) Includes an aggregate of 407,524 shares of common stock issuable upon
redemption of our common units held by trusts for Mr. Mathewson and his
spouse. Also includes 131,784 shares issuable upon conversion of 170,000
shares of Series A Preferred Stock held by the Charles N. Mathewson Trust.

(7) Includes (i) 101,503 shares held by the T. A. McChristy Living Trust, (ii)
4,200 shares held by his spouse's trust, (iii) 1,800 shares held by his
spouse's IRA and (iv) 3,000 shares held by Mr. McChristy's IRA.

(8) Includes 250 shares of common stock, and 1,000 shares of Series B preferred
stock, held by his IRA.

110
115

(9) Includes (i) 21,600 shares owned by a trust for which Mr. Rose is the
trustee, (ii) 43,275 shares owned by a corporation controlled by Mr. Rose,
(iii) 750 shares owned by Mr. Rose's spouse and (iv) 4,300 shares credited
to his account in the FelCor Deferred Compensation Plan.

(10) Includes (i) 41,500 shares issued pursuant to stock grants (2,000 in April
1996, 23,500 in April 2000 and 16,000 in March 2001), which vest over a
five-year period from the date of grant at 20% annually and of which 6,700
shares are fully vested, including 4,700 shares that are held in the FelCor
Deferred Compensation Plan and (ii) 58,081 shares issuable pursuant to
stock options that are currently exercisable or exercisable within 60 days.

(11) Includes (i) 39,500 shares issued pursuant to stock grants (23,500 in April
2000 and 16,000 in March 2001), which vest over a five-year period from the
date of grant at 20% annually and of which 4,700 shares are fully vested
and held in the FelCor Deferred Compensation Plan, and (ii) 36,321 shares
issuable pursuant to currently exercisable stock options.

(12) Includes (i) 56,000 shares issued pursuant to stock grants (12,000 in May
1996, 2,500 in February 1997, 23,500 in April 2000 and 18,000 in March
2001), which shares vest over a five-year period from the date of grant at
20% annually, of which 18,700 shares are fully vested, including 11,200
shares that are held in the FelCor Deferred Compensation Plan, (ii) 123,196
shares issuable pursuant to stock options that are currently exercisable or
exercisable within 60 days, and (iii) 2,288 shares held by his IRA.

(13) Includes (i) 37,000 shares issued pursuant to stock grants (2,500 in
September 1998, 23,500 in April 2000 and 11,000 in March 2001), which
shares vest over a five-year period from the date of grant at 20% annually,
of which 5,700 shares are fully vested, including 4,700 shares that are
held in the FelCor Deferred Compensation Plan, (ii) 38,114 shares issuable
pursuant to stock options that are currently exercisable or exercisable
within 60 days and (iii) 2,005 shares held by his IRA.

(14) See notes 2 through 13.

(15) On a pro forma basis, includes 12,965 units that will be issued to Mr.
Corcoran, and 29,824 units that will be issued to DFW South Acquisition
Corporation, in connection with the partnership merger. All of these units
will be redeemable for an equivalent number of shares of FelCor common
stock. Mr. Corcoran is a 50% stockholder and director of DFW South
Acquisition Corporation and may be deemed to beneficially own all of the
units to be owned by that entity.

(16) On a pro forma basis, includes 28,645 units that will be issued to Mr.
Jacobson in connection with the partnership merger. All of these units will
be redeemable for an equivalent number of shares of FelCor common stock.

(17) Includes 662,479 shares of FelCor common stock which will be beneficially
owned by Mr. Jorns following the merger as the result of applying the
exchange ratio of 0.784 to the 844,999 shares of MeriStar common stock
owned by Mr. Jorns, as reflected in the table under "Security Ownership of
MeriStar by Principal Stockholders and Management" below, and an additional
3,920 shares of FelCor common stock that may be purchased upon the exercise
of options that will become vested in connection with the merger. See "The
Mergers -- Interests of Certain Persons in the Merger and Partnership
Merger."

(18) Includes 1,030,920 shares of FelCor common stock which will be beneficially
owned by Mr. Whetsell following the merger as the result of applying the
exchange ratio of 0.784 to the 1,314,949 shares of MeriStar common stock
owned by Mr. Whetsell, as reflected in the table under "Security Ownership
of MeriStar by Principal Stockholders and Management" below. Also includes
an additional 223,110 shares of FelCor common stock that may be purchased
upon the exercise of options that will become vested in connection with the
merger, and an additional 98,000 shares of FelCor restricted common stock
that will become vested in connection with the merger. Further includes
268,846 units to be issued in exchange for 342,917 profits-only units in
MeriStar Partnership which will become vested in connection with the
merger. Each of the units will be redeemable for an equivalent number of
shares of FelCor common stock. See "The Mergers -- Interests of Certain
Persons in the Merger and Partnership Merger."

(19) See notes 2 through 13 and 15 through 18.

(20) Represents shares held by the Charles N. Mathewson Trust.

(21) Represents shares held by a corporation controlled by Mr. Rose.

(22) Represents shares held by his IRA.

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116

SECURITY OWNERSHIP OF MERISTAR PARTNERSHIP BY PRINCIPAL UNITHOLDERS

The following table sets forth information regarding the beneficial
ownership of the common units of MeriStar Partnership as of July 31, 2001 by all
persons known by MeriStar Partnership to own beneficially more than 5% of the
common units of MeriStar Partnership.

<Table>
<Caption>
NUMBER OF UNITS
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- ------------------------ ------------------ ----------

MeriStar Hospitality Corporation(1)......................... 44,474,024 91.3%
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
</Table>

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

(1) Includes 495,088 units owned by MeriStar Hospitality Corporation as general
partner of MeriStar Partnership and 43,978,936 units owned by MeriStar LP,
Inc., a wholly owned subsidiary of MeriStar Hospitality Corporation, as
limited partner of MeriStar Partnership.

None of the directors or executive officers of MeriStar owns any common
units of MeriStar Partnership.

SECURITY OWNERSHIP OF MERISTAR BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of the common stock of MeriStar as of July 31, 2001 by:

- all persons known by MeriStar to own beneficially more than 5% of the
MeriStar common stock,

- each director and named executive officer of MeriStar, and

- all directors and executive officers as a group.

<Table>
<Caption>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- ------------------------ ------------------ ----------

Franklin Resources, Inc.(1)................................. 6,729,304 15.1%
Wellington Management Company, LLP(2)....................... 3,544,000 7.9%
Cohen & Steers Capital Management, Inc.(3).................. 2,936,700 6.6%
James F. Dannhauser(4)...................................... 10,001 *
Daniel L. Doctoroff(5)...................................... 332,496 *
John Emery(6)............................................... 465,730 1.0%
William S. Janes(7)......................................... 34,146 *
Steven D. Jorns(8).......................................... 844,999 1.9%
H. Cabot Lodge III(9)....................................... 18,476 *
D. Ellen Shuman............................................. -- --
Paul W. Whetsell(10)........................................ 1,314,949 2.9%
James R. Worms(9)........................................... 39,537 *
Bruce G. Wiles(11).......................................... 563,894 1.3%
Executive officers and directors as a group (10 persons).... 3,624,228 7.7%
</Table>

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

* Represents less than 1% of the class.

(1) Beneficial ownership information is based on a Schedule 13G/A, dated
February 9, 2001, jointly filed by Franklin Resources, Inc., Charles B.
Johnson, Rupert H. Johnson, Jr. and Franklin Advisers, Inc.. All are
located at 777 Mariners Island Boulevard, San Mateo, California 94404.

(2) Beneficial ownership information is based on a Schedule 13G/A, dated
February 14, 2001, filed by Wellington Management Company, LLP, which is
located at 75 State Street, Boston, Massachusetts 02109.

(3) Beneficial ownership information is based on Schedule 13G/A, dated February
13, 2001, filed by Cohen & Steers Capital Management, Inc., which is
located at 757 Third Avenue, New York, New York 10017.

(4) Includes 10,001 shares of common stock purchasable under vested options.

112
117

(5) Includes 53,068 shares of common stock held by Cherwell Investors, Inc.,
75,260 shares held by Penobscot Partners, L.P., 100,000 shares held by PTJ
Merchant Banking Partners, L.P. and 12,132 shares held by Oak Hill
Partners, Inc., as to which shares Mr. Doctoroff disclaims beneficial
ownership except to the extent of his pecuniary interest in them. Mr.
Doctoroff is Managing Director of Oak Hill Partners, Inc., the principal
business of which is serving as an investment consultant to Acadia
Partners, L.P., which is the sole shareholder of Cherwell. Mr. Doctoroff is
also the Executive Vice President of PTJ, Inc., which is the managing
general partner of PTJ Merchant. PTJ Merchant is the sole general partner
of Penobscot. Mr. Doctoroff's beneficial holdings also include 25,001
shares of common stock that purchasable under vested options.

(6) Includes 318,022 shares of common stock purchasable under vested options
and 80,667 shares of restricted common stock granted under stock awards.

(7) Includes 25,001 shares of common stock purchasable under vested options.

(8) Includes 608,743 shares of common stock that are purchasable under vested
options and 30,000 shares of restricted common stock granted under stock
awards.

(9) Includes 18,476 shares of common stock purchasable under vested options.

(10) Includes 168,500 shares of restricted common stock granted under stock
awards, 694,164 shares of common stock purchasable under vested options and
shares held by entities over which Mr. Whetsell has beneficial ownership
within the meaning of Rule 13d-3.

(11) Includes 55,667 shares of restricted common stock granted under stock
awards, 398,429 shares of common stock purchasable under vested options and
5,758 common units in MeriStar Partnership, which units are each
exchangeable for one share of MeriStar common stock.

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118

THE MERGERS

BACKGROUND OF THE MERGER AND PARTNERSHIP MERGER

During the past two years, other than as described in this section, neither
FelCor nor MeriStar engaged in formal discussions regarding potential business
combinations with other companies or strategic alternatives to the proposed
merger between them. During this period, neither party received or made any
other firm offers regarding those types of transactions.

During the spring of 1999, FelCor's President and Chief Executive Officer,
Thomas J. Corcoran, Jr., and MeriStar's Chairman and Chief Executive Officer,
Paul W. Whetsell, had several informal discussions about the potential for a
merger or combination involving FelCor and MeriStar. FelCor's Chairman of the
Board, Donald J. McNamara, also had several conversations with Mr. Whetsell
during the same period regarding the same matters.

On June 4, 2000, Messrs. Corcoran and Whetsell had a dinner meeting in New
York City and discussed a possible merger transaction. They agreed that FelCor
and MeriStar should have discussions regarding that possibility and engage
investment bankers for the purpose of facilitating those discussions. On the
next day, Mr. Whetsell telephoned Mr. Corcoran to indicate that, although he was
interested in a potential transaction between MeriStar and FelCor, he wanted to
defer the discussions at that time.

On January 16, 2001, at a hotel investment conference, Messrs. Whetsell and
Corcoran had a dinner meeting in Los Angeles and discussed a possible merger
between MeriStar and FelCor.

On January 31, 2001, Messrs. Whetsell and Corcoran had an evening meeting
at the Atlantis Hotel in the Bahamas and briefly discussed a possible merger of
MeriStar and FelCor.

On February 7, 2001, in Scottsdale, Arizona, Messrs. Whetsell and Corcoran
had informal discussions regarding a potential merger transaction and how the
transaction might be structured.

On February 9, 2001, Messrs. Whetsell, Corcoran and McNamara had an
informal meeting in Dallas, Texas at which the merger issue again was briefly
discussed.

The meetings listed above were primarily social events at which a potential
business combination of FelCor and MeriStar was discussed in preliminary and
general terms. The primary topics addressed at these meetings were how the
combined company would operate after the merger, who would run the combined
company, whether any additional risks would exist for the combined company as
compared to each company on a standalone basis and whether the consideration
should be all stock or a combination of cash and stock. As a result of these
meetings, Messrs. Corcoran and Whetsell reached a general understanding that the
business combination made sense for both companies from an operational
standpoint because of potential economies of scale and cost savings. They also
determined that FelCor would be the surviving entity in the combination, that
FelCor's existing directors and officers would continue to manage the surviving
entity, and that the merger consideration, which could be FelCor stock or a
combination of FelCor stock and cash, must be accretive for the stockholders of
both companies. They also concluded that no deal between the companies could be
done that favored one company over the other company.

On March 1, 2001, in New York City, Messrs. Corcoran and Whetsell met with
representatives of FelCor's financial advisors and MeriStar's financial advisor
to discuss specifics of a potential merger transaction. FelCor and MeriStar
decided to enter into a confidentiality agreement relating to the merger
discussions and continue the discussions. A confidentiality agreement was signed
on March 7, 2001. In that confidentiality agreement, each company agreed to keep
confidential information provided by the other company and to use that
information only for purposes of considering a transaction between the two
companies. In addition, each company agreed that it would not seek, while the
agreement is in effect and for a period of one year after the date of the
agreement, to employ any executive officer or director of the other company, to
acquire any voting securities or assets of the other company, to propose any
business

114
119

combination or acquisition relating to the other company or to control the
management or board of directors of the other company.

Over the course of the next several weeks, Messrs. Corcoran and Whetsell
had separate meetings and discussions with their own financial advisors,
reviewing and analyzing different pricing models for a potential merger and how
the transaction should be structured. The companies' financial advisors also
discussed the potential merger and transaction structure over the next several
weeks. Each company's management personnel commenced property and market reviews
of the other company's hotels.

On April 4, 2001, at a meeting in Chicago, Messrs. Corcoran and Whetsell
reached a tentative understanding regarding the merger consideration to be
received by MeriStar stockholders in the merger, including the stock exchange
ratio of 0.784 and the cash consideration per share of $4.60. This meeting was
the first meeting at which the total value and relative composition of the
merger consideration were discussed. Although discussed again at subsequent
meetings, the merger consideration discussed at this meeting became the final
agreed merger consideration without further negotiations. This merger
consideration was arrived at through arms length negotiations between Messrs.
Corcoran and Whetsell. Prior to this meeting, each of Mr. Corcoran and Mr.
Whetsell had separately consulted with their respective management teams and
financial advisors to review various pricing models for stock exchange ratios
and per share cash payments to assist the companies in determining a merger
consideration formula that would be acceptable to their respective companies.
The aggregate merger consideration per share of MeriStar common stock was
determined to be approximately 98% of a share of FelCor common stock, based upon
the various pricing models, with particular emphasis being placed on the
relative contributions of FelCor and MeriStar to the combined company's funds
from operations and earnings before interest, taxes, depreciation and
amortization and taking into account MeriStar's higher debt leverage. The
allocation of the merger consideration between cash and stock was determined to
be 20% cash and 80% stock as the result of a compromise between MeriStar's
desire for a significant cash payment and FelCor's desire to limit the amount of
the additional leverage to be incurred by it as a result of the merger. A
maximum of $300 million of additional debt, on a combined basis, was a limit
imposed by FelCor that limited the amount of cash consideration it was willing
to pay. The $4.60 per share cash component was determined based on the
application of the agreed upon percentages to the then current market price of
FelCor's common stock. The 0.784 exchange ratio for the stock component of the
merger consideration resulted from multiplying 80% times the 98% of a share of
FelCor common stock determined to be the per share value of the aggregate merger
consideration.

On April 10, 2001, Mr. Corcoran, Andrew J. Welch, FelCor's Senior Vice
President and Treasurer, Thomas L. Wiese, FelCor's Vice President of Finance and
Planning, Mr. Whetsell, John Emery, MeriStar's Chief Financial Officer, and
Bruce L. Riggins, MeriStar's Director of Finance, met with the financial
advisors for both FelCor and MeriStar in New York City to further discuss the
specifics of a merger, including financing requirements, operating synergies,
the continuing relationships and obligations between MeriStar and MeriStar
Hotels & Resorts and the status of, and plans for additional, due diligence.

On April 11, 2001, Lawrence D. Robinson, FelCor's Executive Vice President
and General Counsel, and representatives of FelCor's outside legal counsel,
Jenkens & Gilchrist, a Professional Corporation, and Hunton & Williams, and
FelCor's financial advisors met in New York City with representatives of
MeriStar's outside legal counsel, Paul, Weiss, Rifkind, Wharton & Garrison and
DeCampo, Diamond and Ash, and MeriStar's financial advisor to discuss and
resolve various issues relating to a potential transaction. At this meeting, the
parties reached general agreement regarding issues such as the structure of the
merger, the merger consideration, the existence of a termination provision
relating to the price of FelCor common stock, the number of MeriStar directors
to be added to FelCor's board and the restrictions on business operations of the
two companies pending completion of the merger. Various issues were left open,
including whether the merger would be subject to FelCor obtaining adequate
financing, the amount of any break-up fee, personnel issues, including the
treatment of MeriStar options and the payment of severance and bonus amounts,
and arrangements with MeriStar Hotels & Resorts, including the continuation of
the intercompany agreement, the assumption of loan obligations to MeriStar
Hotels &
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Resorts and the assumption of office leases. Based on those discussions, an
initial draft of a merger agreement was prepared by FelCor's legal counsel and
sent to MeriStar and its representatives on April 14, 2001.

Over the course of the next several weeks, both parties and their
representatives engaged in due diligence activities, including review of legal
documents relating to the other party's businesses and properties, site visits
to the other party's hotel properties, conversations with the other party's
management, review of the other party's tax issues, and other matters relating
to a potential merger.

During the period from April 14, 2001 to May 9, 2001, FelCor's and
MeriStar's legal counsel and management negotiated the terms of the merger
agreement.

During the first two weeks of April 2001, Mr. Corcoran had separate
conversations with most of the members of the FelCor board of directors
regarding the status of discussions with MeriStar. On April 16, 2001, FelCor's
board of directors held a meeting at which the directors were informed of the
possible merger with MeriStar and related merger between MeriStar Partnership
and us, and were given detailed information regarding MeriStar and its hotels,
including copies of MeriStar's latest public reports, the structure and
economics of the transactions, including the consideration payable to
stockholders of MeriStar and partners of MeriStar Partnership, and the
parameters of a merger agreement. The board authorized continued discussions and
negotiation of a definitive merger agreement. The board was not asked to approve
the merger at this meeting.

During early April, Mr. Whetsell had separate conversations with the
members of the MeriStar board of directors regarding the potential transaction
with FelCor. On April 16, 2001, MeriStar's board of directors held a meeting at
which the directors were informed of the possible merger and related merger
between MeriStar Partnership and us, and were given detailed information
regarding FelCor and its properties, including the structure and economics of
the transactions, including the consideration payable to stockholders of
MeriStar and partners of MeriStar Partnership, and the parameters of the
proposed merger agreement. Representatives of Ballard Spahr Andrews & Ingersoll,
LLP, Maryland counsel to MeriStar, advised the directors of their duties in
connection with the merger. Representatives of Paul, Weiss, Rifkind, Wharton &
Garrison and MeriStar's financial advisor were also present at the meeting. The
board was not asked to approve the merger at this meeting. The board authorized
continued discussions with FelCor and negotiation of a definitive merger
agreement.

On April 24, 2001, MeriStar's board of directors met for a regularly
scheduled board meeting. During the meeting the board was updated on the status
of discussions with FelCor and discussed the open issues still being discussed
by the companies, including the financing contingency, the break-up fee amounts,
the treatment of units held by partners of MeriStar Partnership, including the
profits-only partnership units, personnel issues and agreements with MeriStar
Hotels & Resorts. The board authorized MeriStar to continue its discussions with
FelCor.

On May 2, 2001, the FelCor board of directors had a telephonic meeting at
which the directors were updated on the status of due diligence and discussions
with MeriStar.

On May 2, 2001, Messrs. Corcoran and Whetsell and John Emery, Chief
Operating Officer and a director of MeriStar, met in Washington, D.C. to resolve
various issues relating to the merger. At or shortly following this meeting, the
parties reached general agreement on the treatment of units held by partners of
MeriStar Partnership, including the profits-only partnership units, personnel
issues, including the treatment of MeriStar options and the payment of severance
and bonus amounts, and the agreements with MeriStar Hotels & Resorts, including
the continuation of the intercompany agreement, the assumption of loan
obligations to MeriStar Hotels & Resorts and the assumption of office leases.

On May 9, 2001, FelCor's board of directors met in Dallas, Texas. At the
meeting, representatives of DBAB and JPMorgan each reviewed their firm's
respective financial analyses regarding the proposed transaction and provided
their verbal fairness opinions. The directors were informed of developments in
the discussions and results of due diligence activities. Mr. Robinson and legal
counsel for FelCor presented a summary of the material terms of the merger
agreement and advised the directors of their legal duties in
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connection with the merger. The FelCor board of directors, by unanimous vote,
approved the merger agreement and the transactions contemplated by the merger
agreement, including the merger of MeriStar with and into FelCor and the merger
of MeriStar Partnership with and into FelCor Partnership.

At the May 9, 2001 meeting of FelCor's board of directors, the directors
present unanimously recommended to FelCor stockholders that they vote in favor
of the merger proposal.

On May 9, 2001, MeriStar's board of directors met telephonically. The
directors were informed of developments in the discussions and results of the
due diligence activities. Messrs. Whetsell and Emery and legal counsel for
MeriStar presented a summary of the material terms of the merger agreement. Also
at this meeting, MeriStar's financial advisor delivered to the MeriStar board of
directors its oral opinion, which opinion was confirmed by delivery of a written
opinion dated May 9, 2001, to the effect that, as of that date and based on and
subject to the matters described in the opinion, the merger consideration was
fair, from a financial point of view, to the MeriStar common stockholders. The
MeriStar board of directors, by unanimous vote, approved the merger agreement
and the transactions contemplated by the merger agreement, including the merger
of MeriStar with and into FelCor and the merger of MeriStar Partnership with and
into us.

At the May 9, 2001 meeting of MeriStar's board of directors, the directors
unanimously recommended to MeriStar stockholders that they vote in favor of the
merger proposal.

The parties executed the merger agreement on the evening of May 9, 2001 and
publicly announced the transaction on May 10, 2001 by issuing a joint press
release.

After the merger agreement had been signed, the parties, in consultation
with each other and their respective legal and tax advisors, decided to amend
the merger agreement. The amended merger agreement provides, among other things,
that our subsidiary will merge with and into MeriStar Partnership, with MeriStar
Partnership surviving as our subsidiary. The revised structure of the
partnership merger was designed to be more tax-efficient for the combined
company. On June 18, 2001, a first draft of the amendment was circulated to
MeriStar and its legal counsel by legal counsel to FelCor, and negotiations
proceeded after that date. By July 19, 2001, the parties had negotiated the
final form of the amendment. At a meeting held on August 8, 2001, the MeriStar
board of directors approved the material terms of the amendment. The material
terms of the amendment were approved by the FelCor board of directors at its
regular quarterly meeting on July 6, 2001.

FELCOR'S REASONS FOR THE MERGER; APPROVAL BY FELCOR BOARD

As the general partner, FelCor believes that the merger and partnership
merger are in the best interests of FelCor, us and the respective security
holders of FelCor and us. The FelCor board of directors has approved the merger
agreement and the merger and has directed FelCor, in its capacity as our general
partner, to approve the partnership merger. The FelCor board has recommended
that FelCor stockholders approve the merger agreement and the merger, including
the election of Paul W. Whetsell and Steven D. Jorns to FelCor's board of
directors. In the following discussion of material positive and negative factors
considered by the FelCor board in making its determination to approve the merger
agreement and the mergers, references to the assets and business activities of
FelCor also mean our assets and business activities. FelCor has no material
assets other than its interests in us and conducts all of its business
activities through us.

Positive Factors Considered by the FelCor Board

In making its determination with respect to the merger agreement and the
mergers, the FelCor board considered the entirety of the terms of the merger
agreement and the historical and prospective information concerning FelCor's and
MeriStar's respective businesses, operations and financial performance,
including, among other things, the earnings prospects of FelCor and its debt
service and financial obligations, both before and after the mergers. The board
also discussed with FelCor senior management,

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as well as its financial and legal advisors, and considered a number of factors,
including, among others, the following potentially positive material factors
resulting from or relating to the mergers:

- Geographic distribution of FelCor's hotels will increase from 35 states
to 39 states and FelCor's revenue base and room count will expand in key
geographic markets and in markets where it lacks a significant presence,
including East Coast markets such as Florida, where revenues from that
state, as a percentage of total revenues for the twelve months ended
March 31, 2001, will increase from 11.1% to 16.2%, New Jersey, where
revenues will increase from 3.3% to 4.4%, Virginia, where revenues will
increase from 1.3% to 2.8%, and Washington, D.C., where the revenues will
increase from none to 1.0%. The addition of MeriStar's portfolio will
also reduce FelCor's dependence on Texas, where revenues, as a percentage
of total revenues for the twelve months ended March 31, 2001, will
decrease from 18.7% to 15.4%.

- Brand diversification of FelCor will increase, with no single brand
representing more than approximately 25% of the portfolio after the
mergers.

- FelCor's focus toward the upscale and full service business segments will
expand. MeriStar's portfolio includes 113 primarily upscale full service
hotels, a segment of the hotel industry which FelCor believes is less
likely to be impacted by new supply.

- FelCor anticipates annual cost savings of approximately $5 million
through net decreases in corporate payroll, the closing and subletting of
the MeriStar offices in Washington, D.C. and the elimination of other
duplicate overhead costs.

- Active asset management across a larger number of hotel rooms should
increase opportunities to improve hotel level operations.

- Relationships with FelCor's existing brand owners, Hilton Hotels
Corporation, Six Continents plc, and Starwood Hotels and Resorts
Worldwide, Inc., are expected to be enhanced and a new relationship with
the Radisson brand will be established. The hotels in the MeriStar
portfolio should further strengthen FelCor's relationship with its
existing brand owners.

- The amount of cash payable in the mergers is fixed and will not be
adjusted, which reduces the number of shares to be issued in the merger
at current market prices to the benefit of FelCor stockholders in the
future.

- FelCor management and its advisors conducted a due diligence review of
MeriStar and its assets, and FelCor's management assessed the overall
quality of MeriStar's hotels.

- Letters from the rating agencies indicating that, based upon the
information provided to them regarding the proposed merger and FelCor's
financing plans, and subject to customary qualifications, they would
affirm FelCor's existing public debt ratings, with a stable outlook.

- The opinions, analyses and presentations of DBAB and JPMorgan described
under "-- Opinions of FelCor's Financial Advisors" below, including the
opinions of those firms that, as of the date of their opinions, and based
upon and limited by the matters stated in those opinions, the
consideration to be paid to MeriStar common stockholders by FelCor under
the merger agreement is fair, from a financial point of view, to FelCor.

Negative Factors Considered by the FelCor Board

The FelCor board of directors also considered the following potentially
negative material factors in connection with its determination:

- The debt of the combined company, on a pro forma basis at March 31, 2001,
as a percentage of investment in hotel assets, was 50%, which was greater
than FelCor's corresponding historical leverage at March 31, 2001 of
39.7%.

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- The combined company will continue to have a concentration of hotels in
some markets, including California, Florida and Texas, which were
expected to represent approximately 18.1%,16.2% and 15.4% of the combined
company's pro forma revenues for the twelve months ended March 31, 2001.

- The combined company may have to limit future capital plans, share
repurchases and asset acquisitions to enable FelCor to reduce its
indebtedness, as a percentage of investment in hotel assets, to
pre-merger levels.

- The assumption of an aggregate of $877.8 million of MeriStar debt,
including $377.8 million in mortgage debt and $500.0 million in principal
amount of outstanding MeriStar senior notes as of March 31, 2001, may
increase the risk of refinancing.

- The satisfaction of an aggregate of $801.3 million of MeriStar debt,
including the repayment of $442.0 million outstanding at March 31, 2001
under MeriStar's revolving credit facilities and the purchase of $154.3
million in MeriStar convertible subordinated notes and $205.0 million in
MeriStar subordinated notes may further increase the risk of
refinancings.

- Estimated costs of $59 million, as well as management time and effort,
will be incurred to effect the mergers and related financings and
integrate FelCor and MeriStar.

- MeriStar's existing agreements limit the combined company's ability to
use a hotel manager other than MeriStar Hotels & Resorts to manage any
hotels not managed by hotel brand owners.

- Potential conflicts of interest may arise from the continuing contractual
relationships with, and the payment of management and termination fees
to, MeriStar Hotels & Resorts, of which Mr. Whetsell will continue to
serve as Chief Executive Officer and a director and of which Mr. Jorns
will continue to serve as a director.

- The anticipated benefits of the merger may not be realized due to changes
in the hotel market and difficulties or costs in integrating the two
companies.

- Under some circumstances, FelCor may be required to pay termination fees
and expenses totaling up to $40 million. See "The Merger
Agreement -- Expenses and Termination Fees."

The above discussion of the potentially material factors considered by the
FelCor board of directors is not intended to be exhaustive, but does set forth
the principal positive and negative factors considered by the FelCor board of
directors. The FelCor directors present at the May 9, 2001 special meeting of
the board unanimously approved the merger agreement and the mergers and
recommended approval by FelCor's stockholders in light of the various factors
described above and other factors that each member of the FelCor board of
directors felt were appropriate. In view of the wide variety of factors
considered by the FelCor board in connection with its evaluation of the mergers
and the complexity of these matters, the FelCor board did not consider it
practical, and did not attempt, to quantify, rank or otherwise assign relative
weights to the specific factors it considered in reaching its decision. Rather,
the FelCor board made its determination based on the totality of information
presented to and the investigation conducted by it. In considering the factors
discussed above, individual directors may have given different weights to
different factors.

OPINIONS OF FELCOR'S FINANCIAL ADVISORS

Opinion of DBAB

As described in an engagement letter dated as of March 15, 2001, FelCor
engaged DBAB to act as financial advisor in the merger, and render an opinion as
to the fairness to FelCor, from a financial point of view, of the merger
consideration payable to the holders of MeriStar's common stock.

The DBAB opinion and the procedures and analyses described below are based
on the consideration of 0.784 of a share of FelCor common stock and $4.60 cash
consideration for each share of MeriStar common stock.
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At the May 9, 2001 meeting of FelCor's board of directors, DBAB delivered
its oral opinion, subsequently confirmed in writing as of the same date, to
FelCor's board of directors to the effect that, as of the date of the opinion,
based upon and subject to the assumptions made, matters considered and limits of
the review undertaken by DBAB, the merger consideration payable to the holders
of MeriStar's common stock is fair, from a financial point of view, to FelCor.

The full text of DBAB's written opinion, dated May 9, 2001, which discusses
the assumptions made, matters considered and limits of the review undertaken by
DBAB in connection with its opinion is attached as Appendix B to this prospectus
and is incorporated by reference. FelCor stockholders are urged to read DBAB's
opinion in its entirety. The following summary discusses the material terms of
DBAB's opinion.

In connection with DBAB's role as financial advisor to FelCor, and in
arriving at its opinion, DBAB has reviewed publicly available financial
information and other information concerning FelCor and MeriStar and internal
analyses and other information furnished to it by FelCor and MeriStar. DBAB also
held discussions with the members of the senior managements of FelCor and
MeriStar regarding the businesses and prospects of their respective companies
and the joint prospects of a combined company. In addition, DBAB has:

- reviewed the reported prices and trading activity for the common stock of
both FelCor and MeriStar;

- compared financial and stock market information for FelCor and MeriStar
with similar information for other selected companies whose securities
are publicly traded;

- reviewed the financial terms of some recent business combinations which
it deemed comparable in whole or in part;

- reviewed the terms of the merger agreement; and

- performed other studies and analyses and considered other factors as it
deemed appropriate.

In preparing its opinion, DBAB did not assume responsibility for the
independent verification of, and did not independently verify, any information,
whether publicly available or furnished to it, concerning FelCor and MeriStar,
including any financial information, forecasts or projections, considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, DBAB assumed and relied upon the accuracy and completeness of all of
that information.

DBAB did not conduct a physical inspection of any of the properties or
assets, and did not prepare or obtain any independent evaluation or appraisal of
any of the properties, assets or liabilities of FelCor or MeriStar. DBAB has
assumed that the financial forecasts and projections, including the analyses and
forecasts of some of the cost savings, operating efficiencies, revenue effects
and financial synergies expected by FelCor and MeriStar to be achieved as a
result of the merger and the partnership merger, made available to DBAB and used
in its analysis have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of FelCor. DBAB
refers to these cost savings, operating efficiencies, revenue effects and
financial synergies collectively as synergies. In rendering its opinion, DBAB
expressed no view as to the reasonableness of those forecasts and projections or
the assumptions on which they are based.

The opinion of DBAB was based upon economic, market and other conditions as
in effect on, and the information made available to DBAB as of, the date of its
opinion. Although subsequent developments may affect its opinion, DBAB has no
obligation or current intention to update, revise or reaffirm it. If, however, a
material amendment to the merger agreement is entered into which modifies the
merger consideration, the FelCor board may at that time seek an updated opinion
from DBAB. In making this determination, the FelCor board would consult with its
legal and financial advisors and take into account, consistent with its
fiduciary duties, all relevant factors and circumstances existing at the time,
including general market, economic and business conditions.

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In rendering its opinion, DBAB assumed that, in all respects material to
its analysis,

- the representations and warranties of FelCor, MeriStar, FelCor
Partnership and MeriStar Partnership contained in the merger agreement
are true and correct;

- FelCor, MeriStar, FelCor Partnership and MeriStar Partnership will each
perform all of the covenants and agreements to be performed by them under
the merger agreement;

- all conditions to the obligations of each of FelCor, MeriStar, FelCor
Partnership and MeriStar Partnership to complete the merger and the
partnership merger will be satisfied without any waiver of them;

- all material governmental, regulatory or other approvals and consents
required in connection with the completion of the merger and the
partnership merger will be obtained; and

- in connection with obtaining any necessary governmental, regulatory or
other approvals and consents, or any amendments modifications or waivers
to any agreements, instruments or orders to which either FelCor or
MeriStar is a party or is subject or by which it is bound, no
limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect
on FelCor or MeriStar or materially reduce the contemplated benefits of
the merger and the partnership merger to FelCor.

Below is a summary of the material financial analyses performed by DBAB in
connection with its opinion and reviewed with FelCor's board of directors at its
meeting on May 9, 2001. These summaries of financial analyses include
information presented in a tabular format. In order to understand fully the
financial analyses used by DBAB, the tables must be read with the text of each
summary, because the tables alone are not a complete description of the
financial analyses.

Analysis of Selected Publicly Traded Companies. DBAB compared some of the
financial information and commonly used valuation measurements for MeriStar to
corresponding information and measurements for a group of four publicly traded
lodging REITs that DBAB deemed to be comparable to the business of MeriStar.
DBAB refers to these REITs, which are listed below, as the selected companies.

- FelCor Lodging Trust Incorporated

- Host Marriott Corporation

- Hospitality Properties Trust

- LaSalle Hotel Properties

DBAB compared, among other things, the ratios of:

- enterprise value to earnings before interest, income tax, depreciation
and amortization, or EBITDA; and

- price per share to funds from operations per share.

Enterprise value is common equity market value, assuming the conversion of
all limited partnership units convertible into common stock, adjusted by adding
the amount of any debt, preferred units, preferred stock, minority interest and
option proceeds, assuming exercise, and subtracting the amount of any cash and
cash equivalents, as most recently reported.

DBAB calculated the ratio of enterprise value to EBITDA based on EBITDA for
the last twelve-month period for which financial data for the relevant company
has been reported, referred to as the LTM period, and projected EBITDA for the
2001 fiscal year. DBAB calculated the ratio of price per share to funds from
operations per share based on projected funds from operations for the 2001 and
2002 fiscal years.

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To calculate the trading multiples, DBAB used, for the selected companies,
publicly available historical financial information concerning historical
financial performance and funds from operations per share estimates reported by
First Call, and, for MeriStar, historical financial information and projections
provided by MeriStar's management. First Call is a data service that monitors
and publishes compilations of earnings estimates by selected research analysts
regarding companies of interest to institutional investors.

<Table>
<Caption>
PRICE PER SHARE/FUNDS
FROM OPERATIONS
ENTERPRISE VALUE/EBITDA PER SHARE
----------------------- ---------------------------
2001 2001 2002
LTM (ESTIMATED) (ESTIMATED) (ESTIMATED)
------- ----------- ----------- -----------

Mean:................................ 8.2x 7.9x 6.0x 5.7x
Median:.............................. 8.2 7.8 6.2 5.9
Range:............................... 8.0-8.4 7.7-8.2 5.0-6.5 4.8-6.2
</Table>

DBAB observed that the implied value for MeriStar's common stock based upon
the mean and median for these multiples of the selected companies ranged from
$20.25 to $24.85 per share and compared that range of values with the purchase
price implied in the merger of $22.09. In calculating the implied purchase price
for MeriStar common stock, DBAB assumed a FelCor share price of $22.31 per
share, based on the May 4, 2001 closing price.

None of the selected companies is identical to MeriStar. Accordingly, DBAB
believes the analysis of publicly traded comparable companies is not simply
mathematical. Rather, it involves complex considerations and qualitative
judgments, reflected in DBAB's opinion, concerning differences in financial and
operating characteristics of the selected companies and other factors that could
affect the public trading value of the selected companies.

Premiums Analysis. DBAB reviewed the financial terms, to the extent
publicly available, of 32 proposed, pending or completed merger and acquisition
transactions since January 1, 1998 involving REITs in various sectors within the
REIT industry. These transactions are referred to as the selected transactions.

The transactions reviewed were:

<Table>
<Caption>
ANNOUNCEMENT DATE TARGET ACQUIROR
- ----------------- ------ --------

01/14/1998........... Price REIT Inc. Kimco Realty Corp.
02/25/1998........... FAC Realty Trust Inc. Prometheus Southeast Retail
03/09/1998........... Avalon Properties Inc. Bay Apartment Communities Inc.
03/16/1998........... American General Hospitality CapStar Hotel Co.
04/02/1998........... Security Capital Atlantic Inc. Security Capital Pacific Trust
05/14/1998........... New Plan Realty Trust Excel Realty Trust Inc.
05/29/1998........... Mid-America Realty Investments Bradley Real Estate Inc.
06/08/1998........... Capstone Capital Corp. Healthcare Realty Trust Inc.
07/08/1998........... Merry Land & Investment Co. Inc. Equity Residential Pptys.
Trust
08/05/1998........... Storage Trust Realty Public Storage Inc.
11/17/1998........... Meridian Industrial Trust Inc. ProLogis Trust
12/02/1998........... Irvine Apartment Communities Irvine Co.
12/09/1998........... Tower Realty Trust Inc. Investor Group
03/01/1999........... Weeks Corp. Duke Realty Investments Inc.
04/05/1999........... Sunstone Hotel Investors Inc. Investor Group
04/14/1999........... Berkshire Realty Co. Inc. Aptco LLC
05/13/1999........... Imperial Credit Commercial Mortgage Imperial Credit Industries
Inc.
06/16/1999........... TriNet Corporate Realty Trust Starwood Financial Trust
07/01/1999........... Lexford Residential Trust Equity Residential Pptys.
Trust
08/03/1999........... American Health Properties Inc. Health Care Property Investors
09/24/1999........... Walden Residential Properties Olympus Real Estate Corp.
12/13/1999........... Kranzco Realty Trust CV Reit Inc.
02/11/2000........... Cornerstone Properties Inc. Equity Office Properties Trust
</Table>

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<Table>
<Caption>
ANNOUNCEMENT DATE TARGET ACQUIROR
- ----------------- ------ --------

05/15/2000........... Bradley Real Estate Inc. Heritage Property Invest.
Trust
07/17/2000........... Grove Property Trust Equity Residential Pptys.
Trust
08/22/2000........... Western Properties Trust Pan Pacific Retail Properties
09/26/2000........... Urban Shopping Centers Inc. Rodamco North America NV
11/02/2000........... American Industrial Properties Developers Diversified Realty
02/15/2001........... Westfield America Inc. Westfield America Trust
02/23/2001........... Spieker Properties Trust Equity Office Properties Trust
04/02/2001........... Franchise Finance GE Capital Corp.
05/03/2001........... Charles E. Smith Residential Archstone Communities Trust
</Table>

DBAB calculated for each of the selected transactions the premium or
discount to the acquired company's per share market price one day prior to the
announcement of the transaction, seven days prior to the announcement of the
transaction and thirty days prior to the announcement of the transaction, in
each case represented by the acquisition price in the transaction. The following
table summarizes the results of this analysis.

<Table>
<Caption>
1 DAY PRIOR 7 DAYS PRIOR 30 DAYS PRIOR
------------- ------------ -------------

Mean:...................................... 12.7% 15.8% 14.6%
Median:.................................... 11.7 14.3 14.3
Range:..................................... (12.6) - 41.5 (3.4) - 42.8 (12.9) - 41.3
</Table>

DBAB then calculated the implied value of MeriStar's common stock by
applying the range of premiums paid in the selected transactions to the closing
market prices of MeriStar's common stock one day, seven days and thirty days
prior to May 9, 2001. DBAB observed that the implied value for MeriStar's common
stock based upon the mean and median of premiums of the selected transactions
ranged from $22.43 to $24.24 per share, based upon MeriStar's common stock prior
to May 9, 2001, and compared that range of values to the purchase price implied
in the merger of $22.09.

All premiums for the selected transactions were based on public information
available at the time of announcement of that transaction, without taking into
account differing market and other conditions during the three-year period
during which the selected transactions occurred.

DBAB noted that none of the selected transactions was identical to the
merger. Because the reasons for, and circumstances surrounding, each of the
precedent transactions analyzed were so diverse, and due to the inherent
differences between MeriStar's operations and financial conditions and those of
the companies involved in the selected transactions, DBAB believes that a
comparable transaction analysis is not simply mathematical in nature. Rather,
this analysis involves complex considerations and qualitative judgments,
reflected in DBAB's opinion, concerning differences between the characteristics
of these prior transactions and the merger that could affect the value of the
subject companies and businesses and MeriStar.

Discounted Cash Flow Analysis. DBAB performed a discounted cash flow
analysis of MeriStar. DBAB calculated the discounted cash flow value as the sum
of the net present values of the estimated future cash flow that MeriStar will
generate for the years 2001 through 2005 plus MeriStar's value at the end of
that period, which is referred to as its terminal value. The estimated future
cash flows for the year 2001 are based on the financial projections for MeriStar
for the year 2001 that were prepared by MeriStar's management and revised by
FelCor's management. The estimated cash flows for the years 2002 through 2005
are based on the financial projections for those years, which are in turn based
upon growth rates provided by FelCor. The terminal values were calculated based
on projected EBITDA for 2005 and a range of multiples of enterprise value to
EBITDA ranging from 7.0x to 8.0x, based on the EBITDA multiples on DBAB's review
of the trading characteristics of the selected companies. DBAB used discount
rates ranging from 8.0% to 9.0%. DBAB used these discount rates based on its
analysis and judgment of the estimated weighted average cost of MeriStar's
capital.

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DBAB observed that the implied value of MeriStar's common stock based upon
the discounted cash flow analysis ranged from $28.21 to $35.30 per share, and
compared that range of values to the purchase price implied in the merger of
$22.09.

Pro Forma Funds From Operations and Credit Impact Analysis. DBAB analyzed
some pro forma effects of the merger. Based on its analysis, DBAB computed the
resulting dilution or accretion to the combined company's funds from operations
per share for the 2002 and 2003 fiscal years, based on projections of funds from
operations provided by FelCor's management for FelCor and by MeriStar's
management as revised by FelCor's management for MeriStar, after taking into
account any potential cost savings and other synergies identified by FelCor's
management that MeriStar and FelCor could achieve if the merger was completed
and before non-recurring costs relating to the merger. This analysis assumed a
transaction closing date of September 1, 2001. DBAB noted that after taking into
account the potential cost savings and other synergies and before those
non-recurring costs, the merger would be 4.4% and 4.5% accretive to the combined
company's funds from operations for the 2002 and 2003 fiscal years,
respectively.

DBAB also considered the pro forma impact of the merger on some of FelCor's
leverage ratios. DBAB noted that while the ratios of total debt to EBITDA, total
debt to market capitalization, and total debt to gross investment in hotels, in
each case for the 2000 fiscal year, would be higher on a pro forma basis for the
combined company than for FelCor standing alone, those ratios are projected to
improve by 2002 or 2003, based on financial projections prepared by FelCor's
management for FelCor and by MeriStar's management as revised by FelCor's
management for MeriStar. DBAB also noted that the fixed charge coverage ratio
would be 2.4x for the 2000 fiscal year on a pro forma basis for the combined
company as compared to 2.3x for FelCor standing alone, and that the ratio is
projected to improve through 2003.

Pro Forma Discounted Cash Flow Analysis. DBAB performed a discounted cash
flow analysis for both the combined company on a pro forma basis and FelCor on a
stand-alone basis. The analysis for the combined company was prepared by
combining stand-alone projections for FelCor that were prepared by FelCor's
management and projections for MeriStar that were prepared by MeriStar's
management and revised by FelCor's management. DBAB then applied the same
procedures described above under the caption "Discounted Cash Flow Analysis" and
applied the same enterprise value to EBITDA multiples, ranging from 7.0x to
8.0x, to the projected EBITDA for 2005. DBAB used discount rates ranging from
8.0% to 9.0% for the combined company on a pro forma basis and 8.5% to 9.5% for
FelCor on a stand-alone basis. DBAB used discount rates based on its analysis
and judgment of the weighted average costs of capital for FelCor on a
stand-alone basis and for the combined company on a pro forma basis,
respectively. For purposes of the analysis of the combined company, DBAB
included estimates of potential cost savings, as provided by FelCor's
management, and of transaction expenses. The analysis indicated that the equity
value of the combined company was between 3.2% and 4.7% higher than the equity
value of FelCor on a stand-alone basis.

General. The preceding summary describes all analyses and factors that
DBAB deemed material in its presentation to FelCor's board of directors and in
preparing its opinion but is not a comprehensive description of all analyses
performed and factors considered by DBAB in connection with preparing its
opinion. The preparation of a fairness opinion is a complex process involving
the application of subjective business judgment in determining the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not readily
susceptible to summary description. DBAB believes that its analyses must be
considered as a whole and that considering any portion of these analyses and of
the factors considered without considering all analyses and factors could create
a misleading view of the process underlying the opinion. In arriving at its
fairness determination, DBAB did not assign specific weights to any particular
analyses.

In conducting its analyses and arriving at its opinions, DBAB used a
variety of generally accepted valuation methods. The analyses were prepared
solely for the purposes of enabling DBAB to provide its opinion to FelCor's
board of directors as to the fairness to FelCor of the merger consideration
payable to

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the holders of MeriStar's common stock and do not purport to be appraisals of or
necessarily to reflect the prices at which businesses or securities actually may
be sold, which are inherently subject to uncertainty. In connection with its
analyses, DBAB made, and was provided by FelCor's management with, numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond FelCor's and MeriStar's
control. Analyses based on estimates or forecasts of future results are not
necessarily indicative of actual past or future values or results, which may be
significantly more or less favorable than suggested by these analyses. Because
these analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of FelCor, MeriStar or their respective
advisors, none of FelCor, DBAB nor any other person assumes responsibility if
future results or actual values are materially different from these forecasts or
assumptions.

The terms of the merger were determined through negotiations between FelCor
and MeriStar and were approved by FelCor's board of directors. Although DBAB
provided advice to FelCor during the course of these negotiations, the decision
to enter into the merger was solely that of FelCor's board of directors. As
described above, DBAB's opinion and presentation to FelCor's board of directors
were only one of a number of factors taken into consideration by FelCor's board
of directors in making its determination to approve the merger. DBAB'S OPINION
WAS PROVIDED TO FELCOR'S BOARD OF DIRECTORS TO ASSIST IT IN CONNECTION WITH ITS
CONSIDERATION OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF FELCOR'S COMMON STOCK OR MERISTAR'S COMMON STOCK AS TO HOW TO VOTE
WITH RESPECT TO THE MERGER. THE OPINION ADDRESSES ONLY THE FAIRNESS TO FELCOR,
FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE PAID TO MERISTAR
COMMON STOCKHOLDERS BY FELCOR. DBAB'S OPINION DOES NOT ADDRESS, AMONG OTHER
THINGS, ANY ASPECT OF THE PARTNERSHIP MERGER OR THE PARTNERSHIP MERGER
CONSIDERATION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY UNITHOLDER WITH
RESPECT TO ANY MATTERS RELATED TO THE PROPOSED TRANSACTIONS. THE OPINION SHOULD
NOT BE RELIED UPON BY MERISTAR PARTNERSHIP UNITHOLDERS WITH RESPECT TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY
THOSE UNITHOLDERS.

DBAB is an internationally recognized investment banking firm experienced
in providing advice in connection with mergers and acquisitions and related
transactions. DBAB is an affiliate of Deutsche Bank AG, and DBAB, Deutsche Bank
AG and its affiliates are collectively referred to as the DB Group. One or more
members of the DB Group have, from time to time, provided investment banking,
commercial banking, including extension of credit, and other financial services
to FelCor and MeriStar or their affiliates for which they may have received
compensation. In addition, one or more members of the DB Group have agreed to
provide financing to FelCor in connection with the merger. Bankers Trust
Company, German American Capital Corporation and Deutsche Banc Alex. Brown Inc.,
each members of the DB Group, have provided, or have committed to provide,
together with other institutions, an aggregate of approximately $2.15 billion of
financing in connection with the merger and related transactions. The members of
the DB Group will receive an aggregate of approximately $7.0 million to $10.5
million in fees in connection with those financing transactions of which FelCor
has paid DBAB approximately $7.0 million and the remainder of which is
contingent upon completion of the merger. In the ordinary course of business,
members of the DB Group may actively trade in the securities and other
instruments and obligations of FelCor and MeriStar for their own account or the
account of their customers, and, accordingly, may at any time hold a long or
short position in those securities, instruments and obligations.

Fee Arrangements with DBAB. FelCor selected DBAB as financial advisor in
connection with the merger based on DBAB's qualifications, expertise, reputation
and experience in mergers and acquisitions. FelCor retained DBAB in an
engagement letter dated as of March 15, 2001. As compensation for DBAB's
advisory services in connection with the merger, FelCor has paid DBAB a cash fee
of $1.25 million and has agreed to pay an additional cash fee of $3.75 million
if the merger is completed. Regardless of whether the merger is completed,
FelCor has agreed to reimburse DBAB for reasonable fees and disbursements of
DBAB's counsel and DBAB's reasonable travel and other out-of-pocket expenses
incurred in connection with the merger or otherwise arising out of DBAB's
engagement under the engagement letter. DBAB has agreed to notify FelCor when
those expenses exceed $50,000. FelCor has also agreed to indemnify DBAB

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and related persons to the full extent lawful against some liabilities,
including some liabilities under the federal securities laws arising out of its
engagement or the merger.

Opinion of JPMorgan

Under an engagement letter effective as of March 15, 2001, FelCor engaged
JPMorgan to act as its financial advisor in the merger. FelCor requested
JPMorgan, in its role as a financial advisor, to evaluate the fairness to
FelCor, from a financial point of view, of the consideration to be paid by
FelCor to MeriStar stockholders in the merger. On May 9, 2001, JPMorgan
delivered its oral opinion, subsequently confirmed in writing as of the same
date, to the FelCor board of directors stating that, as of that date and based
upon and subject to qualifications discussed in the opinion, the consideration
paid by FelCor in the merger was fair, from a financial point of view, to
FelCor.

The JPMorgan opinion, the summary of the JPMorgan opinion and the
procedures and analyses described below are based on the consideration of 0.784
of a share of FelCor common stock and $4.60 in cash for each share of MeriStar
common stock outstanding on the date of the JPMorgan opinion.

The full text of the JPMorgan fairness opinion, which discusses the
assumptions made, factors considered and limitations upon the review undertaken
by JPMorgan in rendering its opinion, is included in this prospectus as Appendix
C. JPMORGAN'S WRITTEN OPINION WAS ADDRESSED TO THE FELCOR BOARD OF DIRECTORS AND
WAS DIRECTED ONLY TO THE FAIRNESS TO FELCOR, FROM A FINANCIAL POINT OF VIEW, OF
THE CONSIDERATION PAID IN THE MERGER. THE OPINION DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY FELCOR STOCKHOLDER AS TO HOW THAT STOCKHOLDER SHOULD VOTE
ON THE MERGER OR ANY OTHER MATTER. IN ADDITION, JPMORGAN'S OPINION DOES NOT
ADDRESS, AMONG OTHER THINGS, ANY ASPECT OF THE PARTNERSHIP MERGER OR THE
PARTNERSHIP CONSIDERATION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
UNITHOLDER WITH RESPECT TO THE PARTNERSHIP MERGER. THE OPINION SHOULD NOT BE
RELIED UPON BY MERISTAR PARTNERSHIP UNITHOLDERS WITH RESPECT TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THOSE
UNITHOLDERS. The following summary discusses the material terms of JPMorgan's
opinion.

In arriving at its opinion, JPMorgan, among other things:

- reviewed a draft of the merger agreement dated May 9, 2001;

- reviewed publicly available business and financial information concerning
FelCor and MeriStar and the industries in which they operate;

- reviewed internal, non-public financial analyses and forecasts provided
to JPMorgan by the management of FelCor and MeriStar relating to their
respective businesses, including information regarding the estimated
amount and timing of the cost savings and related expenses and synergies
expected to result from the merger;

- compared the proposed financial terms of the merger with the publicly
available financial terms of other transactions involving companies
JPMorgan deemed relevant and the consideration received for those
companies;

- compared the financial and operating performance of FelCor and MeriStar
with publicly available information concerning other companies JPMorgan
deemed relevant;

- reviewed the current and historical market prices of FelCor common stock
and MeriStar common stock and publicly traded securities of other
companies; and

- performed and reviewed other financial studies and analyses and
considered other information as JPMorgan deemed appropriate for the
purposes of its opinion.

JPMorgan also held discussions with some members of the management of FelCor and
MeriStar with respect to some aspects of the merger. JPMorgan discussed with
FelCor the past and current business operations of FelCor and MeriStar, the
financial condition and future prospects and operations of FelCor

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and MeriStar, the effects of the merger on the financial condition and future
prospects of FelCor and other matters believed necessary or appropriate to
JPMorgan's inquiry.

In rendering its opinion, JPMorgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or that was furnished to it by FelCor and MeriStar or
otherwise reviewed by it, and JPMorgan did not assume any responsibility or
liability for any of the information. JPMorgan did not conduct a physical
inspection of any of the properties, assets or liabilities of FelCor or MeriStar
and did not conduct any valuation or appraisal of any assets or liabilities, nor
were any valuations or appraisals provided to it. In relying on financial
analyses and forecasts provided to it, including the estimated amount and timing
of the cost savings and related expenses and synergies expected to result from
the merger, JPMorgan assumed that they were reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of FelCor and MeriStar to which the analyses or forecasts relate.
JPMorgan also assumed that:

- the merger will have the tax consequences described in discussions with,
and materials furnished to it by, the representatives of FelCor;

- the other transactions contemplated by the merger agreement will be
completed as described in the merger agreement;

- the definitive merger agreement would not differ in any material respects
from the draft merger agreement dated May 9, 2001 furnished to it; and

- all material governmental, regulatory or other consents and approvals
necessary for the completion of the merger will be obtained without any
adverse effect on FelCor or MeriStar or on the contemplated benefits of
the merger.

The projections furnished to JPMorgan for FelCor and MeriStar were prepared
by the managements of FelCor and MeriStar. FelCor and MeriStar do not publicly
disclose internal management projections of the type provided to JPMorgan in
connection with JPMorgan's analysis of the consideration paid in the merger.
Those projections were not prepared with a view toward public disclosure.
Accordingly, actual results could vary significantly from those set forth in the
projections.

JPMorgan's opinion, dated May 9, 2001, speaks only as of that date and was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to JPMorgan as of, that date. Subsequent
developments may affect the opinion, and JPMorgan does not have any obligation
or current intention to update, revise or reaffirm the opinion, including at the
time of the special meeting of the stockholders. If, however, a material
amendment to the merger agreement is entered into which modifies the merger
consideration, the FelCor board may at that time seek an updated opinion from
JPMorgan. In making this determination, the FelCor board would consult with its
legal and financial advisors and take into account, consistent with its
fiduciary duties, all relevant factors and circumstances existing at the time,
including general market, economic and business conditions. JPMorgan's opinion
was limited to the fairness, from a financial point of view, of the
consideration to be paid by FelCor in the merger. JPMorgan expressed no opinion
as to the underlying decision of FelCor to engage in the merger or the price at
which FelCor common stock will trade at any future time.

In accordance with customary investment banking practice, JPMorgan employed
generally accepted valuation methods in reaching its opinion. The following is a
summary of the material financial analyses utilized by JPMorgan in connection
with delivering its opinion. Some of the analyses include information presented
in a tabular format. To fully understand the financial analyses used by
JPMorgan, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses.

Historical Stock Performance. JPMorgan reviewed the trading price of the
shares of MeriStar common stock. This stock performance review indicated that
for the period from May 4, 2000 to May 4, 2001 the high and low closing prices
for shares of MeriStar common stock were $18.38 and $22.81,

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respectively, as compared to the implied offer price of $22.09, which is based
on the May 4, 2001 closing share prices for FelCor and MeriStar.

Historical Exchange Ratio Analysis. JPMorgan reviewed the per share daily
closing market price movements of FelCor common stock and MeriStar common stock
for the one-year period ending May 4, 2001. JPMorgan then calculated the implied
historical exchange ratios during this period by dividing the daily closing
prices per share of MeriStar common stock by those of FelCor common stock and
the average of those historical trading ratios for the 30-day, 90-day and 1-year
periods ending May 4, 2001. The analysis resulted in the following average
historical trading ratios for the periods indicated, rounded to the nearest
hundredth.

<Table>
<Caption>
PERIOD MEAN
- ------ -----

May 4, 2001................................................. 0.96x
30-day...................................................... 0.91x
90-day...................................................... 0.88x
1-year...................................................... 0.91x
</Table>

The highest historical exchange ratio on any single day during the 1-year period
was approximately 1.09x, and the lowest historical exchange ratio on any single
day during this period was approximately 0.80x. Using the high and low exchange
ratios, JPMorgan derived equity values per share of $17.83 to $24.42, as
compared to the implied offer price of $22.09.

Public Comparable Companies Analysis. Using publicly available
information, JPMorgan compared financial and operating information and ratios
for MeriStar with corresponding financial and operating information and ratios
for nine comparable hotel REITs which are referred to as comparable companies.
The comparable companies include all hotel REITs with total market
capitalization greater than $300 million listed below:

- Boykin Lodging Company;

- Equity Inns Inc.;

- FelCor Lodging Trust Incorporated;

- Hospitality Properties Trust;

- Host Marriott Corporation;

- Innkeepers USA Trust;

- LaSalle Hotel Properties;

- RFS Hotel Investors Inc.; and

- Winston Hotels Inc.

JPMorgan's analysis included a review of the following:

- equity market value, assuming the conversion of all of the operating
partnership's units;

- enterprise value, calculated by adding equity market value and total
debt, preferred units and preferred stock, and then subtracting cash;

- ratios of price per share to funds from operations per share; and

- ratios of enterprise value to earnings before interest expense,
depreciation and amortization, or EBITDA.

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The analysis indicated that:

- the ratio of the per share market price of the comparable companies as of
May 4, 2001 to mean projected 2001 funds from operations per share,
reported by First Call, ranged from 4.7x to 6.5x, with a mean of 5.7x and
a median of 5.6x, compared to the implied transaction multiple of 5.3x
for MeriStar. First Call is a data service that monitors and publishes
compilations of earnings estimates by selected research analysts
regarding companies of interest to institutional investors. JPMorgan then
removed the high and low values, creating an adjusted high and low of
6.3x and 5.0x. JPMorgan then multiplied the adjusted high and low by
MeriStar management's projected 2001 funds from operations per share,
which yielded an implied valuation range of $20.85 to $26.27 per share,
as compared to the implied offer price of $22.09.

- the ratio of enterprise value to projected 2001 EBITDA, reported by
various equity research reports published in the first quarter of 2001,
ranged from 6.8x to 8.5x for calendar year 2001, with a mean of 7.8x and
a median of 7.9x, compared to the implied transaction multiple of 7.9x
for MeriStar. EBITDA projections for Boykin Lodging Company, RFS Hotel
Investors and Winston Hotels Inc. were unavailable. Consequently, these
companies were excluded from this particular analysis. JPMorgan removed
the high and low values of the range, creating an adjusted high and low
of 8.3x and 7.3x. JPMorgan then multiplied the adjusted high and low by
MeriStar management's projected 2001 EBITDA. After subtracting net debt,
JPMorgan calculated a valuation range of $18.20 to $25.17 per share, as
compared to the implied offer price of $22.09.

Precedent Transaction Multiples Analysis. JPMorgan reviewed publicly
available information, particularly purchase price and transaction value
multiples, regarding nine selected business combinations in the lodging industry
announced since January 1999 which were deemed relevant by JPMorgan. These
transactions are referred to as the comparable transactions. These comparable
transactions and the month in which each transaction was announced are as
follows:

- Nova Finance Company LLC acquisition of Sunburst Hospitality Corporation
(September 2000);

- Security Capital Group, Inc. acquisition of Homestead Village, Inc. (May
2000);

- NH Hotels SA acquisition of Grand Hotel Krasnapolsky NV (April 2000);

- Hilton Hotels Corp. acquisition of Promus Hotel Corp. (September 1999);

- Accor SA acquisition of Red Roof Inns, Inc. (July 1999);

- Humphrey Hospitality Trust, Inc. acquisition of Supertel Hospitality,
Inc. (June 1999);

- SHP Acquisition, LLC acquisition of Sunstone Hotel Investors, Inc. (April
1999);

- W-Westmont Corp. acquisition of Unihost Corp. (March 1999); and

- Ladbroke Group Plc acquisition of Stakis Plc (February 1999).

The analysis indicated that the implied transaction values as a multiple of
projected 12-month forward EBITDA for the comparable transactions ranged from
approximately 6.4x to 10.2x, with a mean of 8.2x and a median of 8.1x, compared
to a multiple of approximately 7.9x implied by the merger. A range of 7.5x to
8.5x was derived by JPMorgan to approximate the range of transaction value
multiples during 1999 and 2000. From this range, a valuation range of $19.61 to
$26.63 per share was derived, as compared to the implied offer price of $22.09.

Precedent Transaction Premiums Paid Analysis. JPMorgan reviewed publicly
available information regarding 27 selected business combinations in the real
estate and lodging industries above a minimum

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transaction value of $1 billion, announced between January 1996 and February
2001, and deemed relevant by JPMorgan. These transactions and the month in which
each transaction was announced were as follows:

- Equity Office Properties Trust acquisition of Spieker Properties, Inc.
(February 2001);

- Security Capital Group, Inc. acquisition of Security Capital U.S. Realty
(September 2000);

- Rodamco North America NV acquisition of Urban Shopping Centers, Inc.
(September 2000);

- Mack-Cali Realty Corp. acquisition of Prentiss Properties Trust (June
2000);

- Heritage Property Investment Trust, Inc. acquisition of Bradley Real
Estate, Inc. (May 2000);

- Equity Office Properties Trust acquisition of Cornerstone Properties,
Inc. (February 2000);

- Olympus Real Estate Corp. acquisition of Walden Residential Properties,
Inc. (September 1999);

- Hilton Hotels Corp. acquisition of Promus Hotel Corp. (September 1999);

- Accor SA acquisition of Red Roof Inns, Inc. (July 1999);

- Berkshire Realty Holdings, L.P. acquisition of Berkshire Realty Co., Inc.
(March 1999);

- Duke Realty Investments, Inc. acquisition of Weeks Realty Corporation
(February 1999);

- TIC Acquisition LLC acquisition of Irvine Apartment Communities, Inc.
(December 1998);

- ProLogis Trust acquisition of Meridian Industrial Trust (November 1998);

- Equity Residential Properties Trust acquisition of Merry Land &
Investment Co., Inc. (July 1998);

- New Plan Realty Trust acquisition of Excel Realty Trust, Inc. (May 1998);

- CCA Prison Realty Trust acquisition of Corrections Corporation of America
(April 1998);

- Security Capital Pacific Trust acquisition of Security Capital Atlantic
(April 1998);

- FelCor Lodging Trust Incorporated acquisition of Bristol Hotel Company
(March 1998);

- CapStar Hotel Co. acquisition of American General Hospitality Corp.
(March 1998);

- Bay Apartment Communities, Inc. acquisition of Avalon Properties, Inc.
(March 1998);

- Meditrust Corp acquisition of La Quinta Inns, Inc. (January 1998);

- Patriot American Hospitality, Inc. acquisition of Interstate Hotels Corp.
(December 1997);

- Starwood Hotels & Resorts acquisition of ITT Corp. (October 1997);

- Equity Office Properties Trust acquisition of Beacon Properties Corp.
(September 1997);

- Equity Residential Properties Trust acquisition of Wellsford Residential
Property Trust (January 1997);

- Horsham Corporation acquisition of Trizec Corporation, Ltd.(September
1996); and

- Simon Property Group, Inc. acquisition of DeBartolo Realty Corp. (March
1996).

The analysis indicated that:

- offer prices as a percentage premium to the closing prices of the target
companies' stock the day prior to the announcement of the transactions
ranged from approximately -2% to 40%, with a mean and median of
approximately 14%, compared to an approximate 3% premium for the merger
price to the closing price per share of MeriStar common stock on May 4,
2001.

- the percentage premium to the average closing prices of the target
companies' stock the week prior to the announcement of the transaction
ranged from approximately -6% to 43%, with a mean and

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median of approximately 16%, compared to an approximately 5% premium for
the MeriStar merger price to the average closing price per share of
MeriStar common stock for the week ending on May 4, 2001.

- the percentage premium to the average closing prices of the target
companies' stock the month prior to the announcement of the transaction
ranged from approximately -8% to 52%, with a mean of approximately 19%
and a median of approximately 18%, compared to an approximately 11%
premium for the MeriStar merger price to the average closing price per
share of FelCor common stock for the month ending on May 4, 2001.

From this range of mean and median transaction premiums, JPMorgan derived a
transaction premium range of 10% to 20%, which when applied to the May 4, 2001
closing MeriStar share price of $21.50, gives a valuation per share of $23.65 to
$25.80, as compared to the implied offer price of $22.09.

Net Asset Value Analysis. JPMorgan performed a net asset value analysis
for MeriStar using financial forecasts for MeriStar based on management
projections. JPMorgan calculated a net asset value for MeriStar assuming 2001
property-level net operating income capitalization rates ranging from 10.5% to
11.5%. After making necessary balance sheet adjustments, JPMorgan derived net
asset value per share for MeriStar of $21.16 to $26.58 per share, as compared to
the implied offer price of $22.09.

Discounted Cash Flow Analysis. JPMorgan performed a discounted cash flow
analysis for MeriStar using financial forecasts provided by MeriStar. JPMorgan
calculated the net present values of 4.7 years of unlevered cash flows from May
2001 through December 2005 plus an estimated terminal value. The unlevered cash
flows were discounted using a rate of 14.0%, which is JPMorgan's estimate of
MeriStar's weighted average cost of capital. A range of terminal values for
MeriStar was calculated by multiplying projected 2006 EBITDA by a range of
enterprise value to EBITDA multiples of 7.5x to 8.5x. Based upon the assumptions
set forth above, JPMorgan calculated a range of equity values of $22.48 to
$26.89 per share, as compared to the implied offer price of $22.09.

General. The summary set forth above does not purport to be a complete
description of the analyses or data presented by JPMorgan. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. JPMorgan's opinion was not based on any
single factor or analysis, nor did JPMorgan attribute particular weight to any
particular individual factor or analysis over others. Rather, JPMorgan believes
that the totality of factors considered and analyses performed by it in
connection with its opinion collectively supported its determination expressed
in its opinion, that the summary set forth above and its analyses must be
considered as a whole and that selecting portions, without considering all of
its analyses, could create an incomplete view of the processes underlying its
analyses and opinion. JPMorgan based its analyses on assumptions that it deemed
reasonable, including assumptions concerning general business and economic
conditions and industry-specific factors. The other principal assumptions upon
which JPMorgan based its analyses are set forth above under the description of
each analysis. JPMorgan's analyses are not necessarily indicative of actual
values or actual future results that might be achieved. These values or results
may be higher or lower than those indicated. JPMorgan's analyses are not and do
not purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.

None of the public companies used in the public companies analysis
described above is identical to FelCor or MeriStar. None of the precedent
transactions used in the precedent transactions analysis described above is
identical to the merger. Accordingly, an analysis of publicly traded comparable
companies and transactions is not mathematical. Rather the analysis involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the comparable companies and other factors that
could affect the public trading value of the comparable companies.

As a part of its investment banking business, JPMorgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. JPMorgan was
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selected to advise FelCor with respect to the merger and deliver an opinion to
the FelCor board of directors with respect to the consideration per share paid
in the merger on the basis of this experience and its familiarity with FelCor.

In the past, JPMorgan and its affiliates have arranged and/or provided
financing to FelCor, and they may be expected to continue to provide financing
as well as financial advice in the future. JPMorgan and its affiliate, The Chase
Manhattan Bank, have provided or committed to provide or underwrite, together
with other institutions, an aggregate of approximately $2.15 billion of
financing in connection with the merger and related transactions. JPMorgan and
The Chase Manhattan Bank expect to receive approximately $6.0 million to $8.0
million in fees in connection with the merger and financing transactions. Of
these fees, $1 million relates to financial advisory services in connection with
the merger, $500,000 of which is contingent upon the closing of the merger, and
approximately $5.0 million to $7.0 million relates to financing services in
connection with the merger, of which FelCor has paid approximately $4.1 million
and has committed to pay the remainder upon completion of the merger.

In addition, in the ordinary course of their businesses, JPMorgan and its
affiliates may actively trade the debt and equity securities of FelCor or
MeriStar for their own accounts or for the accounts of customers. Accordingly,
they may at any time hold long or short positions in those securities.

MERISTAR'S REASONS FOR THE MERGER; APPROVAL BY MERISTAR BOARD

As the general partner, MeriStar believes that the merger and partnership
merger are in the best interests of MeriStar, MeriStar Partnership and their
respective security holders. The board of directors of MeriStar has approved the
merger agreement and the merger and has directed MeriStar, in its capacity as
the general partner of MeriStar Partnership, to approve the partnership merger.
The board of directors of MeriStar has recommended that the stockholders of
MeriStar approve the merger agreement and the merger.

In reaching the above determination, the MeriStar board gave significant
consideration to a variety of factors, including those described below. In view
of the wide variety of factors bearing on its decision, the MeriStar board did
not consider it practicable to, nor did it attempt to, quantify or assign
relative specific weight to the factors it considered in reaching its decision.
In addition, individual directors may have given different weight to different
factors. The MeriStar board received the advice of its senior management, as
well as its legal and financial advisors, throughout its consideration of the
merger agreement. The MeriStar board does not intend the following discussion of
the information and factors to be exhaustive but believes the discussion
includes the material factors it considered.

In making its determination with respect to the merger agreement, the
mergers and the other transactions contemplated by the merger agreement, the
MeriStar board considered the entirety of the terms of the merger agreement,
including the fixed exchange ratio, the cash consideration of $4.60 per share,
the representations and warranties of the parties, the provisions relating to
its ability to consider third party proposals, the ability for the parties to
terminate the merger agreement if FelCor's stock price falls below a specified
level, the termination fee provisions, the provisions relating to merger
financing and the ability to terminate the merger agreement if economically
prudent senior unsecured note financing were not available, the covenants of the
parties pending the closing of the merger and the provisions relating to the
treatment of MeriStar Partnership. In the following discussion of material
positive and negative factors considered by the MeriStar board in making its
determination to approve the merger agreement and the mergers, references to the
assets and business activities of MeriStar also mean the assets and business
activities of MeriStar Partnership. MeriStar has no material assets other than
its interests in MeriStar Partnership and conducts substantially all of its
business activity through MeriStar Partnership.

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In making its determination, the MeriStar board also considered the
following potentially positive material factors:

- Strong Strategic Fit; Enhanced Visibility to Investors in the Hospitality
REIT Sector. The MeriStar board noted that a significant portion of the
merger consideration was payable in FelCor common stock, rather than
cash, and that following the merger, MeriStar stockholders would own
approximately 39.5% of the combined company. The MeriStar board believed
that the combined company's diverse asset portfolio, expanded stockholder
base and increased public float would make the combined company an
attractive continuing vehicle for investors. Based on FelCor's closing
stock price as of May 9, 2001 of $22.10 and MeriStar's closing stock
price as of May 9, 2001 of $21.45, the combined company would have a
post-merger equity market capitalization of approximately $2.2 billion,
versus approximately $1.1 billion for MeriStar on a stand-alone basis.
The total capitalization of the combined company would be $6.3 billion,
versus $2.7 billion for MeriStar alone. The combined company would be the
largest hospitality REIT in terms of number of hotels and number of
rooms.

- Significant Premium over Average Trading Price. The MeriStar board
considered that the consideration to be paid to MeriStar stockholders in
the merger represented, as of May 9, 2001, a 9% premium over MeriStar's
average closing price over the 20 trading days prior to that date and a
12% premium over MeriStar's average closing price in the 20 trading days
prior to April 16, 2001, the date of the first meeting of the MeriStar
board relating to the merger.

- Opportunity to Leverage Increased Scale and Purchasing Power. The
MeriStar board considered that the merger would create the largest
multi-branded, independent hotel portfolio in the United States. The
combined company, on a pro forma basis after disposition of some
non-strategic hotels, would have 283 hotels with approximately 75,000
rooms. The MeriStar board recognized that the increased scale of the
combined company would likely enable it to exercise increased bargaining
power in negotiations with suppliers of energy, capital equipment, labor
and other products.

- Enhanced Negotiating Leverage with Franchisors. The MeriStar board also
recognized that the combined company would be one of the largest
franchisees of several major brands, including Embassy Suites, Crowne
Plaza, Holiday Inn, Doubletree, Hilton and Sheraton, giving the combined
company enhanced leverage in negotiations with these brands.

- Opportunity for Revenue Growth. The MeriStar board believed that the
merger creates the opportunity for greater revenue growth than MeriStar
was likely to experience on a stand-alone basis because of the larger
pool of assets and the potential for revenue growth stemming from
economies of scale.

- Improved Access to Financing. The MeriStar board considered that the
larger size of the combined company could result in easier access to
additional financing.

- Treatment of Employees. The MeriStar board considered the arrangements
under the merger agreement relating to the treatment of MeriStar
employees who do not continue as FelCor employees.

- Potential Cost Savings. The MeriStar board took into account that by
consolidating corporate headquarters and administration, the combined
company should realize annual savings of approximately $5 million in
general and administrative expenses from reductions in personnel, closing
and subletting MeriStar's corporate offices and the elimination of other
duplicate overhead costs.

- Relationship with MeriStar Hotels & Resorts. The MeriStar board
considered that MeriStar Hotels & Resorts would continue as manager of
105 of the hotels of the combined company and that the "paper clip"
arrangement between MeriStar and MeriStar Hotels & Resorts would no
longer be in place. The MeriStar board also recognized that the
intercompany agreement would

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continue in effect and considered the terms of the amended credit
facility offered to MeriStar Hotels & Resorts.

- Opinion of MeriStar's Financial Advisor. The MeriStar board also
considered the opinion dated May 9, 2001 of Salomon Smith Barney,
MeriStar's financial advisor, as to the fairness, from a financial point
of view and as of that date, of the merger consideration to be received
by the MeriStar common stockholders.

In making its determination, the MeriStar board also considered the
following potentially negative material factors:

- Integration Issues. The MeriStar board noted the risks inherent in
integrating two companies of the size of MeriStar and FelCor.

- Increased Interest Expense. The MeriStar board recognized that the
combined company would have a higher pro forma level of leverage than the
companies together on a historical basis, resulting from the debt
financing of the cash consideration to be paid in the merger and the
related transaction costs. The combined company would therefore have a
higher level of pro forma interest expense than the companies together on
a historical basis, which would have a negative effect on funds from
operations.

- Increased Concentration in Some Markets. The MeriStar board realized
that the combined company would have a larger presence in some markets
than was desirable but also recognized that FelCor had in place plans to
sell some non-strategic hotels in these markets in order to address this
potential issue. The combined company would continue to have
concentrations of hotels in some markets, including California, Florida
and Texas, which were expected to represent approximately 18.1%, 16.2%
and 15.4% of the combined company's revenues based on revenues for the
twelve months ended March 31, 2001.

- FelCor Management Issues. The MeriStar board considered the need for
FelCor to recruit and hire a chief financial officer but also took
account of the fact that FelCor was in the process of a search for a
qualified individual.

OPINION OF MERISTAR'S FINANCIAL ADVISOR

MeriStar retained Salomon Smith Barney to act as its exclusive financial
advisor in connection with the proposed merger and the other transactions
contemplated by the merger agreement, referred to as the transaction. In
connection with its engagement, MeriStar requested that Salomon Smith Barney
evaluate the fairness, from a financial point of view, of the merger
consideration. On May 9, 2001, at a meeting of the MeriStar board held to
evaluate the proposed transaction, Salomon Smith Barney delivered to the
MeriStar board of directors an oral opinion, which opinion was confirmed by
delivery of a written opinion dated May 9, 2001, to the effect that, as of that
date and based on and subject to the matters described in its opinion, the
merger consideration was fair, from a financial point of view, to the MeriStar
common stockholders.

In arriving at its opinion, Salomon Smith Barney:

- reviewed the merger agreement;

- held discussions with senior officers, directors and other
representatives and advisors of MeriStar and with senior officers and
other representatives and advisors of FelCor concerning the businesses,
operations and prospects of MeriStar and FelCor;

- examined publicly available business and financial information relating
to MeriStar and FelCor;

- examined financial forecasts and other information and data for MeriStar
and FelCor which were provided to or otherwise discussed with Salomon
Smith Barney by the managements of MeriStar

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and FelCor, including information relating to the potential strategic
implications and operational benefits anticipated by the managements of
MeriStar and FelCor to result from the transaction;

- reviewed the financial terms of the transaction as described in the
merger agreement in relation to, among other things, current and
historical market prices and trading volumes of MeriStar common stock and
FelCor common stock, the historical and projected operating data of
MeriStar and FelCor, and the financial condition and capitalization of
MeriStar and FelCor;

- analyzed financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon
Smith Barney considered relevant in evaluating those of MeriStar and
FelCor; and

- conducted other analyses and examinations and considered other financial,
economic and market criteria as Salomon Smith Barney deemed appropriate
in arriving at its opinion.

In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, on the accuracy and completeness of all financial and
other information and data that it reviewed or considered. With respect to
financial forecasts and other information and data, the managements of MeriStar
and FelCor advised Salomon Smith Barney that the forecasts and other information
and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of MeriStar and FelCor as
to the future financial performance of MeriStar and FelCor and the potential
strategic implications and operational benefits anticipated to result from the
transaction.

Salomon Smith Barney assumed, with MeriStar's consent, that the transaction
would be completed in accordance with its terms, without waiver, modification or
amendment of any material term, condition or agreement. Salomon Smith Barney
also assumed, with MeriStar's consent, that the merger will be treated as a
reorganization for federal income tax purposes. Salomon Smith Barney further
assumed, with MeriStar's consent, that MeriStar and FelCor were organized and
have operated for federal income tax purposes in conformity with the
requirements for qualification as a REIT, and that the transaction will not
adversely affect the REIT status or operations of MeriStar or FelCor. Salomon
Smith Barney did not express any opinion as to what the value of the FelCor
common stock actually will be when issued in the transaction or the prices at
which the FelCor common stock will trade or otherwise be transferable at any
time. Salomon Smith Barney did not make and was not provided with an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of MeriStar or FelCor. Salomon Smith Barney did not make any physical inspection
of the properties or assets of MeriStar or FelCor.

In connection with its engagement, Salomon Smith Barney was not requested
to, and did not, solicit third party indications of interest in the possible
acquisition of all or a part of MeriStar. Salomon Smith Barney expressed no view
as to, and its opinion does not address, the relative merits of the transaction
as compared to any alternative business strategies that might exist for MeriStar
or the effect of any other transaction in which MeriStar might engage. Salomon
Smith Barney's opinion was necessarily based on information available to Salomon
Smith Barney, and financial, stock market and other conditions and circumstances
existing and disclosed to Salomon Smith Barney, as of the date of its opinion.
Although Salomon Smith Barney evaluated the merger consideration from a
financial point of view, Salomon Smith Barney was not asked to and did not
recommend the specific consideration payable in the transaction, which was
determined through negotiations between MeriStar and FelCor. MeriStar imposed no
other instructions or limitations on Salomon Smith Barney with respect to the
investigations made or procedures followed by Salomon Smith Barney in rendering
its opinion.

THE FULL TEXT OF SALOMON SMITH BARNEY'S WRITTEN OPINION DATED MAY 9, 2001,
WHICH DESCRIBES THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROSPECTUS AS
APPENDIX D. SALOMON SMITH BARNEY'S OPINION IS DIRECTED TO THE MERISTAR BOARD OF
DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE TRANSACTION OR
ANY RELATED TRANSACTION, INCLUDING THE PARTNERSHIP MERGER OR THE PARTNERSHIP
MERGER CONSIDERATION, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER OR UNITHOLDER WITH RESPECT TO ANY MATTERS RELATING TO THE PROPOSED
TRANSACTION. SALOMON
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SMITH BARNEY'S OPINION SHOULD NOT BE RELIED UPON BY MERISTAR PARTNERSHIP
UNITHOLDERS WITH RESPECT TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO BE RECEIVED BY THOSE UNITHOLDERS.

In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The summary
of these analyses is not a complete description of the analyses underlying
Salomon Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. Therefore, a fairness opinion is
not readily susceptible to summary description. Salomon Smith Barney's opinion
was not based on any single factor or analysis, nor did Salomon Smith Barney
attribute particular weight to individual factors or analyses. Rather, Salomon
Smith Barney believed that the totality of the factors considered and analyses
performed by Salomon Smith Barney in connection with its opinion operated
collectively to support its determination as to the fairness of the merger
consideration from a financial point of view. Accordingly, Salomon Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or the narrative
description of the analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.

In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters
existing as of the date of its opinion, many of which are beyond the control of
MeriStar and FelCor. No company or business used in those analyses as a
comparison is identical to MeriStar, FelCor or the proposed transaction, and an
evaluation of those analyses is not entirely mathematical. Rather, the analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies or business segments analyzed.

The estimates contained in Salomon Smith Barney's analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by its analyses. In
addition, analyses relating to the value of businesses or securities do not
necessarily purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Salomon Smith
Barney's analyses and estimates are inherently subject to substantial
uncertainty.

Salomon Smith Barney's opinion and analyses were only one of many factors
considered by the MeriStar board of directors in its evaluation of the
transaction and should not be viewed as determinative of the views of the
MeriStar board of directors or management with respect to the merger
consideration or the proposed transaction. Salomon Smith Barney's opinion to the
board of directors is dated May 9, 2001, the date of the merger agreement.
Salomon Smith Barney does not have any obligation or current intention to
update, revise or reaffirm its opinion, including at the time of the special
meeting of the stockholders. If, however, a material amendment to the merger
agreement is entered into which modifies the merger consideration, the MeriStar
board of directors may at that time seek an updated opinion from Salomon Smith
Barney. In making this determination, the board of directors would consult with
its legal and financial advisors and take into account, consistent with its
fiduciary duties, all relevant factors and circumstances existing at the time,
including general market, economic and business conditions.

The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with the rendering of its opinion dated May
9, 2001. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED
IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND SALOMON SMITH BARNEY'S FINANCIAL
ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
CONSIDERING THE DATA IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL NARRATIVE
DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND
ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE
VIEW OF SALOMON SMITH BARNEY'S FINANCIAL ANALYSES.

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Selected Companies Analyses

MeriStar. Using publicly available information, Salomon Smith Barney
reviewed the market values and trading multiples of MeriStar and the following
seven publicly traded companies in the lodging REIT industry:

Primary Group Companies

- Boykin Lodging Company

- LaSalle Hotel Properties

- Host Marriott Corporation

Secondary Group Companies

- Equity Inns, Inc.

- Innkeepers USA Trust

- RFS Hotel Investors, Inc.

- Winston Hotels, Inc.

For purposes of this analysis, Salomon Smith Barney focused on companies in
the lodging REIT industry which operate upscale, full service hotels, as do
MeriStar and FelCor. These companies are referred to above as primary group
companies. All multiples were based on closing stock prices on May 7, 2001.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates. Estimated financial data for MeriStar
were based on internal estimates of the management of MeriStar.

Salomon Smith Barney compared enterprise values as a multiple of earnings
before interest, taxes, depreciation and amortization, or EBITDA, for the latest
12 months and estimated calendar years 2001 and 2002. Salomon Smith Barney also
compared equity values as a multiple of funds from operations, or FFO, for the
latest 12 months and estimated calendar years 2001 and 2002. Salomon Smith
Barney then applied a range of selected multiples of latest 12 months and
estimated calendar years 2001 and 2002 EBITDA and FFO derived from the primary
group companies to corresponding financial data of MeriStar. This analysis
indicated the following implied per share equity reference range for MeriStar,
as compared to the implied value of the merger consideration based on the cash
consideration and, in the case of the stock portion of the merger consideration,
the exchange ratio and the closing price of FelCor common stock on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE IMPLIED PER SHARE
EQUITY REFERENCE RANGE FOR MERISTAR MERGER CONSIDERATION
- ----------------------------------- --------------------

$18.00-$24.00 $21.97
</Table>

FelCor. Salomon Smith Barney also reviewed the market values and trading
multiples of FelCor and the selected companies described above. For purposes of
this analysis, Salomon Smith Barney focused on the primary group companies. All
multiples were based on closing stock prices on May 7, 2001. Estimated financial
data for the selected companies were based on publicly available research
analysts' estimates. Estimated financial data for FelCor were based on internal
estimates of the management of FelCor.

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Salomon Smith Barney compared enterprise values as a multiple of EBITDA for
the latest 12 months and estimated calendar years 2001 and 2002. Salomon Smith
Barney also compared equity values as a multiple of FFO for the latest 12 months
and estimated calendar years 2001 and 2002. Salomon Smith Barney then applied a
range of selected multiples of latest 12 months and estimated calendar years
2001 and 2002 EBITDA and FFO derived from the primary group companies to
corresponding financial data of FelCor. This analysis indicated the following
implied per share equity reference range for FelCor, as compared to the closing
price of FelCor common stock on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE PER SHARE CLOSING PRICE
EQUITY REFERENCE RANGE FOR FELCOR OF FELCOR COMMON STOCK
- --------------------------------- -----------------------

$19.00-$25.00 $22.16
</Table>

Net Asset Valuation Analyses

MeriStar. Salomon Smith Barney performed a net asset valuation analysis of
MeriStar's assets based on internal estimates of MeriStar's management. The
gross estimated value of MeriStar's assets was estimated by capitalizing
MeriStar's calendar year 2000 net operating income utilizing capitalization
rates of 10.00% to 11.75% depending on the type of assets analyzed. This
analysis indicated the following implied per share equity reference range for
MeriStar, as compared to the implied value of the merger consideration based on
the cash consideration and, in the case of the stock portion of the merger
consideration, the exchange ratio and the closing price of FelCor common stock
on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE IMPLIED PER SHARE
EQUITY REFERENCE RANGE FOR MERISTAR MERGER CONSIDERATION
- ----------------------------------- --------------------

$21.00-$25.50 $21.97
</Table>

FelCor. Salomon Smith Barney also performed a net asset valuation analysis
of FelCor's assets based on internal estimates of FelCor's management. The gross
estimated value of FelCor's assets was estimated by capitalizing FelCor's
calendar year 2000 net operating income utilizing capitalization rates of 10.25%
to 12.50% depending on the type of assets analyzed. This analysis indicated the
following implied per share equity reference range for FelCor, as compared to
the closing price of FelCor common stock on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE PER SHARE CLOSING PRICE
EQUITY REFERENCE RANGE FOR FELCOR OF FELCOR COMMON STOCK
- --------------------------------- -----------------------

$23.00-$27.50 $22.16
</Table>

Premiums Paid Analysis

Salomon Smith Barney reviewed the premiums paid in 23 selected transactions
in which the target company was a lodging company or REIT. Salomon Smith Barney
then applied a range of selected premiums derived from these transactions based
on the closing stock prices of the target company one day, one week, one month
and three months prior to public announcement of the transaction to the closing
prices of MeriStar common stock over corresponding periods, as well as six
months and 12 months, prior to May 7, 2001. This analysis resulted in the
following implied per share equity reference range for MeriStar, as compared to
the implied value of the merger consideration based on the cash consideration
and, in the case of the stock portion of the merger consideration, the exchange
ratio and the closing price of FelCor common stock on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE IMPLIED PER SHARE
EQUITY REFERENCE RANGE FOR MERISTAR MERGER CONSIDERATION
- ----------------------------------- --------------------

$20.50-$23.50 $21.97
</Table>

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Implied Merger Consideration Analysis

Salomon Smith Barney computed an implied value of the merger consideration
by applying the merger consideration to the results of the selected companies
and net asset valuation analyses of FelCor described above. This analysis
indicated the following range of implied values of the merger consideration, as
compared to the implied value of the merger consideration based on the cash
consideration and, in the case of the stock portion of the merger consideration,
the exchange ratio and the closing price of FelCor common stock on May 7, 2001:

<Table>
<Caption>
IMPLIED PER SHARE MERGER
CONSIDERATION BASED ON FELCOR
SELECTED COMPANIES AND NET ASSET IMPLIED PER SHARE
VALUATION ANALYSES MERGER CONSIDERATION
-------------------------------- --------------------

$19.50-$26.16 $21.97
</Table>

Other Factors

In rendering its opinion, Salomon Smith Barney also reviewed and considered
other factors, including:

- historical trading prices and trading volumes for MeriStar common stock
and FelCor common stock;

- the relationship between movements in MeriStar common stock, movements in
FelCor common stock, and movements in the common stock of selected
lodging companies and REITs;

- the potential impact on the merger consideration of varying trading
prices of FelCor common stock;

- selected analysts' reports on MeriStar and FelCor; and

- a stockholder and cross-ownership stockholder profile of MeriStar and
FelCor.

Miscellaneous

Under the terms of its engagement, MeriStar has agreed to pay Salomon Smith
Barney for its financial advisory services an aggregate fee of $6.0 million upon
completion of the transaction. MeriStar also has agreed to reimburse Salomon
Smith Barney for reasonable travel and other expenses incurred by Salomon Smith
Barney in performing its services, including the reasonable fees and expenses of
its legal counsel, and to indemnify Salomon Smith Barney and related persons
against liabilities, including liabilities under the federal securities laws,
arising out of its engagement.

In the ordinary course of business, Salomon Smith Barney and its affiliates
may actively trade or hold the securities of MeriStar and FelCor for their own
account or for the account of customers and, accordingly, may at any time hold a
long or short position in those securities. Salomon Smith Barney and its
affiliates in the past have provided, and are currently providing, services to
MeriStar and its affiliates unrelated to the proposed transaction, for which
services Salomon Smith Barney and its affiliates have received, and will
receive, compensation. Salomon Smith Barney and its affiliates also in the past
have provided services to FelCor unrelated to the proposed transaction, for
which services Salomon Smith Barney and its affiliates have received
compensation. In addition, Salomon Smith Barney and its affiliates, including
Citigroup Inc. and its affiliates, may maintain other relationships with
MeriStar, FelCor and their affiliates.

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

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INTERESTS OF CERTAIN PERSONS IN THE MERGER AND PARTNERSHIP MERGER

General

Some members of the boards and management of each of FelCor and MeriStar
may have interests in the merger and partnership merger that are different from,
or in addition to, your interests as a MeriStar Partnership unitholder resulting
in potential conflicts of interest. Members of the boards and management of each
of FelCor and MeriStar will receive material benefits as a result of the merger
and partnership merger that are not available to MeriStar Partnership
unitholders and MeriStar stockholders in general. The boards of each company
recognized these interests and determined that these interests neither supported
nor detracted from the fairness of the merger and partnership merger.

Interests of FelCor's Directors and Officers

Some of FelCor's officers and directors have interests in the mergers that
are different from, or in addition to, the interests of FelCor stockholders and
our unitholders generally and that may create a potential conflict of interest.

Richard O. Jacobson, a director of FelCor, Thomas J. Corcoran, Jr.,
President, Chief Executive Officer and a director of FelCor, and Thomas L.
Wiese, a Vice President of FelCor, beneficially own, respectively, 36,537,
54,578 and 2,045 common units of limited partnership interest in MeriStar
Partnership, worth $783,719, $1,170,698, and $43,865. Because each MeriStar
Partnership unit is exchangeable for one share of MeriStar common stock, the
values of these holdings are based on the closing price on May 9, 2001 of $21.45
per share of MeriStar common stock.

Interests of MeriStar's Directors and Officers

Some of MeriStar's officers and directors and significant stockholders have
interests in the mergers that are different from, or in addition to, your
interests generally and that may create a potential conflict of interest.

Positions with FelCor after the Merger. Mr. Paul W. Whetsell, currently
Chairman of the Board, director and Chief Executive Officer of MeriStar, along
with Steven D. Jorns, currently Vice Chairman of the Board and a director, will
become directors of FelCor as a result of the merger. Mr. Bruce G. Wiles, a
director and the President and Chief Investment Officer of MeriStar has been
offered employment by FelCor.

Severance Payments and Vesting of Stock Options. MeriStar has pre-existing
employment agreements with Messrs. Whetsell, Jorns, Emery and Wiles, which
entitle each to payments and other benefits in the event his or her employment
is terminated.

Under Mr. Whetsell's employment agreement, if he is terminated by MeriStar
without cause or voluntarily terminates his employment with good reason within
24 months following a change in control of MeriStar, he will receive a lump sum
payment equal to two times the sum of his then annual base salary plus his bonus
for the preceding year. Also, under those circumstances, all of his unvested
stock options and restricted stock awards will immediately vest and be
exercisable for one year, and his health benefits under his employment agreement
will continue for a period equal to two and a half years. In the event that any
accelerated vesting of his rights with respect to stock options, restricted
stock or any other payment, benefit or compensation results in the imposition of
an excise tax payable by him under Section 4999 of the Internal Revenue Code, or
any successor or other provision with respect to "excess parachute payments"
within the meaning of Section 280G(b) of the Internal Revenue Code, MeriStar is
obligated to make a tax reimbursement payment to Mr. Whetsell in an amount which
would put Mr. Whetsell in approximately the same financial position he would
have been if the excise tax did not apply to those payments. The merger is a
change in control of MeriStar under Mr. Whetsell's employment agreement, and the
severance payments under that agreement will become due, since Mr. Whetsell will
not be employed by us after the merger. Accordingly, FelCor expects to pay Mr.
Whetsell a total of approximately $1,024,000 in severance. Although the parties
do not currently expect any tax

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reimbursement obligation to be due Mr. Whetsell, the issues relating to the
determination of those liabilities are complex and subject to varied
interpretations. Depending on the amount, if any, of the payments to be received
by him that are ultimately determined to be subject to the excise tax, FelCor's
reimbursement obligation to him could be as much as $6.0 million. In addition,
Mr. Whetsell owns 125,000 unvested shares of restricted stock, unvested options
to purchase 284,580 shares of MeriStar common stock and 342,917 unvested
profits-only units, all of which will vest as a result of the merger. FelCor
also will be obligated to pay $1,368,000 to Mr. Whetsell in consideration of his
entering into a one year covenant not to take a comparable position at another
hotel REIT.

Under Mr. Emery's employment agreement, if he is terminated by MeriStar
without cause or voluntarily terminates his employment with good reason within
24 months following a change in control of MeriStar, he will receive a lump sum
payment equal to two times the sum of his then annual base salary plus his bonus
for the preceding year. Also, under those circumstances, all of his unvested
stock options and restricted stock awards will immediately vest and be
exercisable for one year, and his health benefits will continue for two years or
until he receives successor health benefits from another employer. In the event
that any accelerated vesting of his rights with respect to stock options,
restricted stock or any other payment, benefit or compensation results in the
imposition of an excise tax payable by him under Section 4999 of the Internal
Revenue Code, or any successor or other provision with respect to "excess
parachute payments" within the meaning of Section 280G(b) of the Internal
Revenue Code, MeriStar is obligated to make a tax reimbursement payment to Mr.
Emery in an amount which, would put Mr. Emery in approximately the same
financial position he would have been if the excise tax did not apply to those
payments. The merger is a change in control of MeriStar under Mr. Emery's
employment agreement, and the severance payments under that agreement will
become due, since Mr. Emery will not be employed by us after the merger.
Accordingly, FelCor expects to pay Mr. Emery a total of approximately $900,000
in severance. Although the parties do not currently expect any tax reimbursement
obligation to be due Mr. Emery, the issues relating to the determination of
those liabilities are complex and subject to varied interpretations. Depending
on the amount, if any, of the payments to be received by him that are ultimately
determined to be subject to the excise tax, FelCor's reimbursement obligation to
him could be as much as $3.8 million. In addition, Mr. Emery owns 67,334
unvested shares of restricted stock, unvested options to purchase 156,978 shares
of MeriStar common stock and 221,459 unvested profits-only units, all of which
will vest as a result of the merger. FelCor also will be obligated to pay
$800,000 to Mr. Emery in consideration of his entering into a one year covenant
not to take a comparable position at another hotel REIT.

The terms of Mr. Jorns' June 1998 employment agreement are substantially
similar to those of Mr. Emery's agreement, except that Mr. Jorns does not have
the right to receive payment for any excise taxes due on account of any "excess
parachute payments," and his unvested profits-only units will not vest as a
result of the merger. Mr. Jorns will not be employed by us after the merger, so
we expect to pay him a total of approximately $405,000 in severance after the
merger. Mr. Jorns is not entitled to any tax reimbursement payments after the
merger. In addition, Mr. Jorns owns unvested options to purchase 8,333 shares of
MeriStar common stock, all of which will vest as a result of the merger.

Under Mr. Wiles' August 1998 employment agreement, if he is terminated by
MeriStar without cause or voluntarily terminates his employment with good reason
within 18 months following a change in control of MeriStar he will receive his
current annual base salary, payable on his regular payroll dates, for a period
of one year, plus his bonus for the preceding year, plus a lump sum equal to the
sum of his then annual base salary and his bonus for the preceding year. In
addition, all of his unrestricted stock options and restricted stock awards will
immediately vest and be exercisable for one year, and his benefits will continue
for one year or until he receives successor health benefits from another
employer. The merger is a change in control of MeriStar under Mr. Wiles'
employment agreement. If Mr. Wiles does not accept employment with us prior to
closing of the merger, we expect to pay him a total of approximately $980,600 in
severance and approximately $550,000 in tax reimbursement payments after the
merger. In addition, Mr. Wiles owns 50,667 unvested shares of restricted stock
and unvested options to purchase 116,666 shares of MeriStar common stock, all of
which will vest as a result of the merger. Mr. Wiles will be required to waive
the accelerated vesting of these options if he accepts employment with FelCor
after the merger.

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The following table sets forth the approximate values of unvested
restricted stock, unvested options and unvested profits-only partnership units
of Messrs. Whetsell, Emery, Jorns and Wiles:

<Table>
<Caption>
VALUE OF UNVESTED
VALUE OF UNVESTED VALUE OF UNVESTED PROFITS-ONLY PARTNERSHIP
RESTRICTED STOCK(1) OPTIONS(2) UNITS(3)
------------------- ----------------- ------------------------

Paul W. Whetsell......................... $2.7 million $744,000 $7.5 million
John Emery............................... $1.4 million $554,000 $4.9 million
Steven D. Jorns.......................... -- $ 11,300 --
Bruce G. Wiles........................... $1.1 million $551,000 --
</Table>

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

(1) The value of unvested restricted stock that will vest as a result of the
merger is based on the closing price of $21.45 per share of MeriStar common
stock on May 9, 2001.

(2) The value of unvested options that will vest as a result of the merger is
based on the difference between the closing price of $21.45 per share of
MeriStar common stock on May 9, 2001 and the exercise price per share, if
positive.

(3) Because each common unit in FelCor Partnership is redeemable for a share of
FelCor common stock, the value of each unvested profits-only partnership
unit that will vest as a result of the merger is based on 0.784 times the
closing price of $22.10 per share of FelCor common stock on May 9, 2001,
plus $4.60.

Approximately 40 other employees of MeriStar will be eligible for severance
payments upon the closing of the merger if they perform their duties in good
faith through the closing date and are not employed by us or MeriStar Hotels &
Resorts with substantially similar duties and compensation. The aggregate amount
of the severance payments to these employees is limited to $2.05 million. We
will not be required to make tax reimbursement payments to these employees.

In addition, under the terms of MeriStar's incentive plan and non-employee
directors' incentive plan, the merger will cause all of the options and
restricted stock issued under those plans to vest. All options will be assumed
by FelCor and continue as options to purchase FelCor common stock. The number of
shares of FelCor common stock for which each option may be exercised will equal
the number of MeriStar common shares purchasable under the option before the
merger multiplied by 0.784. The exercise price per share of each option will be
reduced to an amount equal to the exercise price prior to the merger less $4.60,
divided by 0.784. Any MeriStar employee who is employed by us after the closing
of the merger will be required to waive change-of-control vesting of his or her
options.

Indemnification. FelCor has agreed, from and after the effective time of
the merger, to indemnify the present and former directors and officers of
MeriStar for actions on or prior to the effective time of the merger and has
agreed to maintain directors' and officers' liability insurance for these
individuals in place for six years following completion of the merger. For
further details regarding these arrangements, see "The Merger
Agreement -- Indemnification and Insurance."

REGULATORY APPROVALS

No material federal or state regulatory requirements must be complied with
or approvals must be obtained by FelCor, us, MeriStar or MeriStar Partnership in
connection with either the merger or the partnership merger.

ACCOUNTING TREATMENT

We will treat the partnership merger as a purchase of MeriStar Partnership
for financial accounting purposes. This means that MeriStar Partnership will be
consolidated with us, and we will record the assets acquired and the liabilities
assumed at their estimated fair values at the time the merger is completed.

RESTRICTIONS ON RESALES BY AFFILIATES

Our common units to be issued to MeriStar Partnership unitholders in the
partnership merger will be freely transferable under the Securities Act, subject
to the restrictions on transfers contained in our partnership agreement, except
for units issued to any person who may be deemed to be an "affiliate" of
MeriStar Partnership within the meaning of Rule 145 under the Securities Act or
who will become an "affiliate" of us within the meaning of Rule 144 under the
Securities Act after the partnership merger. Our common units received by
persons who are deemed to be MeriStar Partnership affiliates or who

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become our affiliates may be resold by these persons only in transactions
permitted by the limited resale provisions of Rule 145 or as otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of MeriStar
partnership generally include individuals or entities that, directly or
indirectly through one or more intermediaries, control, are controlled by or are
under common control with MeriStar Partnership and may include officers,
directors and principal stockholders of MeriStar. All persons who may be deemed
to be affiliates of MeriStar Partnership will be so advised before the
completion of the partnership merger.

MeriStar will use its best efforts to obtain an affiliate agreement from
each affiliate of MeriStar Partnership before the completion of the partnership
merger by which each MeriStar Partnership affiliate will agree not to sell,
transfer, pledge or otherwise dispose of our common units received in the
partnership merger in violation of the Securities Act or the rules and
regulations promulgated under the Securities Act. Generally, this will require
that all sales be made as provided by Rule 145 under the Securities Act, which
in turn requires that, for specified periods, sales be made in compliance with
the volume limitations, manner of sale provisions and current information
requirements of Rule 144 under the Securities Act.

Under the affiliate agreements, we will have the right to place legends on
the certificates evidencing our common units issued to MeriStar affiliates in
the partnership merger summarizing the foregoing restrictions until a sale,
transfer, pledge or other disposition of our common units represented by these
certificates has been registered under the Securities Act or is made in
compliance with Rule 145 under the Securities Act.

Persons who are not affiliates of MeriStar Partnership generally may sell
their common units without securities law restrictions. However, any sales would
be subject to the other restrictions on transfer contained in our partnership
agreement.

NO APPRAISAL RIGHTS

Under Delaware law, neither our limited partners nor the limited partners
of MeriStar Partnership have any dissenters' rights or rights to an appraisal.

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THE MERGER AGREEMENT

The following is a summary of the material provisions of the Agreement and
Plan of Merger among FelCor, us, MeriStar and MeriStar Partnership, dated May 9,
2001, as amended. A copy of the merger agreement is attached as Appendix A and
is incorporated into this prospectus by reference. You should read the merger
agreement carefully and in its entirety for a more complete understanding of its
terms.

GENERAL

The merger agreement provides that one of our wholly-owned subsidiaries
will be merged with and into MeriStar Partnership, which will survive as one of
our subsidiaries. After the partnership merger, we will own all of the interests
in MeriStar Partnership, directly or through intervening subsidiaries. MeriStar
Partnership will continue to be organized under the laws of the State of
Delaware and will do business under the name "FelCor Hospitality Operating
Partnership, L.P."

The merger agreement also provides that MeriStar will merge with and into
FelCor, with FelCor being the surviving corporation. The merger between FelCor
and MeriStar is subject to the receipt of the requisite approvals of the FelCor
stockholders and the MeriStar stockholders and the satisfaction or waiver of the
other conditions to the merger. The surviving corporation will continue to be
organized under the laws of the State of Maryland and will continue to do
business under the name "FelCor Lodging Trust Incorporated." FelCor's charter
and bylaws as currently in effect will be those of the surviving corporation.

The partnership merger is conditioned upon the effectiveness of the merger
between FelCor and MeriStar and will be effective upon the filing of a
certificate of merger with the Secretary of State of the State of Delaware
promptly following the effectiveness of the merger of MeriStar into FelCor. The
merger between FelCor and MeriStar will be effective at 9:00 a.m., Eastern time,
on the business day immediately after the closing, or the time the State
Department of Assessments and Taxation of Maryland accepts the articles of
merger for record.

No vote or consent of the limited partners of MeriStar Partnership or us is
required or being sought. FelCor, as our general partner, and MeriStar, as the
general partner of MeriStar Partnership, have taken all necessary actions under
their respective partnership agreements to approve the partnership merger.
Unless agreed otherwise, the closing of the FelCor/MeriStar merger will occur at
10:00 a.m., Central time, on the third business day after the date on which the
conditions set forth in the merger agreement are satisfied or waived.

TREATMENT OF MERISTAR PARTNERSHIP UNITS IN THE PARTNERSHIP MERGER

In the partnership merger, holders of MeriStar Partnership common units,
other than FelCor and its subsidiaries, will receive for each MeriStar
Partnership unit issued and outstanding immediately before the partnership
merger, $4.60 in cash and 0.784 of our common units. The MeriStar Partnership
preferred units and profits-only units of limited partnership interest will be
exchanged as follows:

- each Class C preferred unit in MeriStar Partnership will be exchanged for
$4.60 in cash and 0.784 of our Series C preferred units;

- each Class D preferred unit in MeriStar Partnership will be exchanged for
one of our Series D preferred units; and

- each profits-only partnership unit in MeriStar Partnership, other than
unvested units, will be exchanged for $4.60 in cash and 0.784 of our
common units, and any unvested profits-only partnership units will be
canceled.

Cash will be paid instead of issuing fractional units.

After the completion of the partnership merger, the former MeriStar
Partnership unitholders will have the right to redeem our units issued to them
in the partnership merger in accordance with the terms and limitations of our
partnership agreement. Upon redemption of these units, other than the Series D

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preferred units, unitholders would receive FelCor common stock on a one-for-one
basis or their cash equivalent, at the election of FelCor.

TREATMENT OF MERISTAR COMMON STOCK AND FELCOR STOCK IN THE MERGER

At the effective time of the merger, for each share of MeriStar common
stock, MeriStar stockholders will receive 0.784 of a share of FelCor common
stock and $4.60 in cash. No fractional shares will be issued. FelCor will make
cash payments instead of issuing fractional shares.

Each share of FelCor common stock, Series A Preferred Stock and Series B
Preferred Stock that was issued and outstanding prior to the merger will
continue to represent the same number of shares of FelCor stock after the
effective time of the merger.

CONTRIBUTIONS BY FELCOR

In connection with the partnership merger, FelCor will make various
contributions of the MeriStar Partnership units received by it in the
FelCor/MeriStar merger, as follows:

- immediately following the merger, and prior to the partnership merger,
FelCor will contribute to us each of its MeriStar Partnership common
units, exclusive of general partner units, received by it in the merger,
in exchange for 0.784 of one of our common units and the right to receive
from us $4.60 in cash;

- immediately following the partnership merger, FelCor will contribute each
of the MeriStar Partnership general partner units received by it from
MeriStar in the merger to a taxable REIT subsidiary wholly-owned by
FelCor and then contribute all of the equity interests in that taxable
REIT subsidiary to us, in exchange for 0.784 of one of our common units
and the right to receive from us $4.60 in cash, for each MeriStar
Partnership general partner unit held by the taxable REIT subsidiary; and

- promptly following the partnership merger, we will pay to FelCor the cash
consideration due it in connection with the above contributions.

INDEBTEDNESS TO FUND CASH CONSIDERATION AND BOTTOM GUARANTEES

In connection with the partnership merger, we will incur or increase a debt
that is a recourse liability for federal income tax purposes and use the
proceeds of that debt to pay the cash consideration due to MeriStar Partnership
unitholders. We will provide to each MeriStar Partnership unitholder who is
entitled to receive cash consideration in the partnership merger the
opportunity, prior to the closing of the partnership merger, to agree to
reimburse FelCor with respect to a portion of our debt incurred to fund the cash
consideration payable to MeriStar Partnership unitholders up to the amount of
cash to which the MeriStar Partnership unitholder is entitled. If a MeriStar
Partnership unitholder elects to agree to reimburse FelCor with respect to a
portion of the debt by executing and returning to us the form of reimbursement
agreement that we will provide to the unitholder prior to the partnership merger
closing, we will agree to maintain the portion of the debt agreed to be
reimbursed until the earlier of five years following the closing of the
partnership merger or the date on which the unitholder has redeemed or otherwise
disposed of all of our units received by the unitholder in the partnership
merger. We also will agree not to assign, distribute or otherwise dispose of the
former MeriStar Partnership unitholder's MeriStar Partnership units in a taxable
transaction, which will not include any transaction involving a non-taxable
merger, consolidation or other reorganization of MeriStar Partnership or us or a
liquidation of MeriStar Partnership, until the earlier of five years after the
closing of the partnership merger and the date on which the MeriStar Partnership
unitholder no longer owns at least 50% of our units issued to him in the
partnership merger.

You should consult your tax advisor for a full understanding of the
consequences to you of electing, or failing to elect, to agree to reimburse
FelCor and us with respect to a portion of our debt. See "United

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States Federal Income Tax Considerations -- Tax Consequences of the Partnership
Merger to MeriStar Partnership Unitholders -- Disguised Sale Upon Receipt of
Cash".

ISSUANCE OF OUR UNITS AND PAYMENT OF CASH CONSIDERATION

- ratify and agree to be bound by our amended and restated partnership
agreement, which becomes effective upon completion of the partnership
merger;

- are admitted as our limited partners with respect to the units which they
are entitled to receive because of the partnership merger; and

- waive any rights they have under their exchange rights agreements with
MeriStar and MeriStar Partnership.

Upon our receipt of a properly signed ratification and joinder agreement,
together with other customary documents as we may require, from a MeriStar
unitholder, we will send to the unitholder a certificate representing the whole
number of units and any cash payments which the unitholder is entitled to
receive as a result of the partnership merger.

Instead of issuing fractional units, we will mail each MeriStar unitholder,
after the preceding conditions are satisfied, a check in the amount of the cash
payable by us for any fractional unit. The amount of the cash payable will equal
the product of the fraction of a unit times the average closing price of FelCor
common stock on the NYSE for the ten consecutive trading days ending two trading
days prior to the closing date of the partnership merger.

DISTRIBUTIONS PRIOR TO CLOSING

The merger agreement permits each of MeriStar Partnership and us to pay
distributions in the ordinary and normal course of business, including with
respect to the MeriStar Partnership Class C and Class D preferred units, with
record and payment dates that are consistent with its past practice, not to
exceed the last distribution paid by it.

In addition, each of MeriStar Partnership and us will authorize a partial
quarterly distribution, with the record date being the closing date of the
mergers, covering the period between the last regular quarterly distribution
until the closing date. The partial distribution may not be paid without
FelCor's consent if the closing date of the merger occurs within 15 days after
the record date for a regularly-scheduled dividend by FelCor. The amount of the
partial distribution will be based on a proportionate fraction of the last
quarterly distribution of the party making the partial distribution. The partial
distribution is payable within 30 days after the closing of the mergers.

MeriStar Partnership must also declare a final distribution to the extent
necessary for MeriStar to comply with the distribution requirement in Section
857(a)(1) of the Internal Revenue Code. This distribution would have the same
record and payment dates as any partial quarterly distributions paid by MeriStar
Partnership. The record and payment dates for any partial quarterly distribution
or additional distribution paid by MeriStar Partnership may be accelerated, by
the mutual agreement of MeriStar Partnership, FelCor, MeriStar and us, to avoid
the imposition of federal excise tax on MeriStar.

All other distribution payments by MeriStar Partnership or us are
prohibited by the merger agreement.

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REPRESENTATIONS AND WARRANTIES

FelCor, together with us, and MeriStar, together with MeriStar Partnership,
have made customary representations and warranties to each other in the merger
agreement, relating, among other things, to:

- their organization, the organization of their subsidiaries, their charter
documents, their good standing and similar corporate matters;

- their capital structure;

- their authority to deliver and execute the merger agreement, its legal
force and effect and the absence of conflicts between the agreement and
their charter documents, the material contracts they entered into, and
the laws applicable to them;

- governmental filings and consents in relation to the merger agreement;

- the absence of changes or events that have had material adverse effects,
including the unavailability to FelCor of senior unsecured note financing
for the mergers that is deemed to be economically prudent;

- the disclosure of changes or events that have had material adverse
effects in SEC filings and schedules to the merger agreement;

- litigation issues;

- real estate, property, insurance, franchise and property management
issues;

- expected capital budgets;

- employee benefit plans and labor matters;

- tax matters, including qualification as a REIT, "golden parachute"
payments and qualification of the merger as a reorganization under the
Internal Revenue Code;

- payments to employees, officers and directors;

- brokers' fees and expenses;

- material contracts and debt instruments;

- environmental matters;

- compliance with laws;

- opinions of financial advisors;

- inapplicability of the Maryland Business Combination Act and the Maryland
Control Share Acquisition Act;

- information supplied for inclusion in the merger proxy statement and
registration statement;

- the absence of any requirement to be registered under the Investment
Company Act of 1940; and

- votes required to approve the mergers.

MeriStar and MeriStar Partnership have made additional representations and
warranties to FelCor and us relating to:

- registration rights relating to MeriStar securities; and

- related-party agreements.

None of the representations and warranties made in the merger agreement
will survive the closing of the mergers.

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TREATMENT OF MERISTAR EMPLOYEES, STOCK OPTIONS AND OTHER BENEFIT PLANS

FelCor has agreed that, after the effective time of the merger, it will pay
severance and bonuses to approximately 40 legal, clerical, administrative and
accounting employees of MeriStar and MeriStar Partnership, subject to an
aggregate limitation of $2.05 million for persons not entitled to severance
payments under separate employment agreements, unless the employee does not
continue in good faith to perform his or her duties through the closing date or
is employed by FelCor or by MeriStar Hotels & Resorts with substantially the
same compensation and duties as he or she had as of May 9, 2001. The severance
payments to be paid to employees under their employment agreements are described
above under "The Mergers -- Interests of Certain Persons in the Merger and
Partnership Merger -- Interests of MeriStar's Directors and Officers."

At the effective time of the merger, each option to purchase shares of
MeriStar common stock will become an option to purchase FelCor common stock. The
number of shares purchasable under the new FelCor stock option will be the
number of shares purchasable under the MeriStar option times 0.784. The exercise
price per share of the option will be the exercise price per share of MeriStar
common stock under the MeriStar option minus $4.60, divided by 0.784. Generally,
the completion of the merger will cause all unvested MeriStar stock options to
vest and become exercisable. Employees retained by FelCor will be required to
waive that vesting of their options. The options held by MeriStar employees who
do not continue in the employ of the combined company generally will expire 90
days after the completion of the merger.

Each employee of MeriStar that is retained by FelCor will be eligible to
participate in each FelCor benefit plan that FelCor, in its sole discretion,
determines to be similar to a plan of MeriStar in which the retained former
MeriStar employee participated prior to the merger, and at the level of
similarly situated employees of FelCor. FelCor may also determine that a
retained former MeriStar employee should remain a participant in an existing
MeriStar plan after the effective time of the merger. Generally, each retained
former MeriStar employee will receive credit for his or her service with
MeriStar for purposes of eligibility and vesting under FelCor plans in which
they are designated as eligible to participate. FelCor may impose conditions
that it, in its sole discretion, will reasonably determine are necessary or
appropriate to insure a retained former MeriStar employee does not receive a
duplication of benefits. FelCor has the right to direct MeriStar to terminate
its employee stock purchase plan and any other benefit plans, effective as of
the effective time of the merger.

CERTAIN COVENANTS

Interim Operations

Under the merger agreement, FelCor and MeriStar have formed an interim
transactions committee composed of one representative of FelCor and one
representative of MeriStar. The parties have agreed that between the time the
merger agreement was executed until the effective time of the merger, except
for:

- transactions provided in the merger agreement or a disclosure schedule to
the merger agreement;

- transactions that are consented to by the other party; or

- transactions approved by the interim transactions committee,

each party and its subsidiaries will:

- conduct its business in the ordinary course and in the same manner as
past practice;

- preserve its business organization and goodwill intact and use its
reasonable efforts to keep its employees;

- not acquire or construct any additional real property;

- not encumber assets or incur indebtedness, except under its revolving
credit facility as in effect on the date the merger agreement was
executed;

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- not amend its charter or bylaws, the partnership agreement or the
organizational documents of any subsidiary;

- make no change in the equity interests of itself or its subsidiaries,
other than

- the exercise of options set forth in a schedule to the merger agreement,

- the exchange or redemption of outstanding units of its operating
partnership under existing agreements governing those exchanges and
redemptions, or

- the conversion of outstanding convertible notes, if any;

- not grant rights, options or warrants to acquire equity interests in
itself or its subsidiaries;

- not authorize or pay a dividend or other payments related to common stock
or partnership units except for the dividends described above under the
caption "Distributions Prior to Closing";

- not sell, lease, subject to liens or transfer any material properties
except for leases of rental units and other properties entered into in
the ordinary course of business;

- not make or authorize any material expenditures, including capital
expenditures, individually, in excess of $500,000, or in the aggregate,
in excess of $1,000,000, except as disclosed in its current budget and
schedule attached to the merger agreement;

- not settle any stockholder derivative or class action suit in connection
with the transactions contemplated by the merger agreement;

- not enter into or amend any capital expenditures or employment,
compensation or severance agreements with any director, officer, employee
or affiliate;

- confer with the other party regularly on any material transactions or
material operational matters;

- promptly notify the other party of any material change in its business,
results of operations, financial condition or prospects;

- continue to maintain its accounting records in accordance with GAAP and
not change in any material manner, any methods of accounting, other than
actions in the ordinary course of business and consistent with past
practice or as required under applicable law or GAAP;

- not make or rescind any material tax election that would have a material
adverse effect on it, unless otherwise required by law or necessary to
maintain status as a REIT or partnership;

- not change the ownership of any subsidiary; and

- promptly notify the other party of any suit or similar action against it
or one of its subsidiaries, where there is a reasonable possibility of a
material adverse effect.

MeriStar and its subsidiaries have also agreed to:

- not adopt any new employee benefit plan or amend any existing plans,
except as required by law or as would not be more favorable to
participants;

- continue to maintain all material properties in a manner consistent with
past practices;

- maintain all licenses and permits material to the business of any
MeriStar property or as required by any governmental entity administering
relevant laws;

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- not make any loans, advances, capital contributions or other investments
in any other entity except for investments in wholly-owned subsidiaries
which currently exist or expense advances to employees in the ordinary
course of business in accordance with past practice or as otherwise
permitted by the merger agreement; and

- not permit any change to any existing material contract in a manner
adverse to FelCor without the approval of FelCor or the interim
transactions committee.

Non-Solicitation of Specified Acquisition Proposals

Each of FelCor and MeriStar is subject to substantially identical
non-solicitation provisions in the merger agreement.

Each party and its subsidiaries and their respective directors, officers
and other representatives may not solicit, enter into, or participate in any
negotiations with or provide any nonpublic information to a third party related
to, any specified acquisition proposal, which is:

- a merger, consolidation, share exchange, business combination or other
similar transaction involving it or its subsidiaries; or

- a direct or indirect acquisition of more than a 10% equity interest in
any voting securities of the party or more than 10% of the consolidated
assets of the party.

Each party may furnish information to, and engage in discussions with, any
third party who delivers an unsolicited specified acquisition proposal if a
disinterested majority of its board of directors determines in good faith after
receipt of advice from outside counsel:

- that furnishing the information and engaging in the discussions is
required by the duties of the board of directors under Maryland law; and

- that the third party making the specified acquisition proposal has the
ability to complete a superior proposal.

The board of directors of each party may not withdraw or modify its
recommendation of the merger to the stockholders unless that party receives a
superior proposal. In order for a specified acquisition proposal to be a
superior proposal for purposes of the merger agreement:

- a majority of the party's disinterested directors must determine in good
faith, after consultation with an independent financial advisor, and
taking into account all relevant factors, that the proposal is more
favorable to that party and its stockholders; and

- financing for the proposal, to the extent required, is already fully
committed, or a majority of the party's disinterested directors
determines in good faith, after consultation with an independent
financial advisor, that the proposal is reasonably capable of being
financed.

Each party must advise the other orally and in writing of any specified
acquisition proposal or any inquiry that could reasonably be expected to lead to
a specified acquisition proposal. Each party must give the other one day's
advance notice of any information provided to the third party making the
proposal, and at least three days' advance notice of any agreement to be entered
into with any third party making the proposal.

Other Covenants

Each of FelCor and MeriStar has agreed, among other things, to:

- afford the other party and its representatives access to its properties,
books and records;

- furnish copies of public filings to the other party;

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- file all necessary documentation with governmental authorities and
self-regulatory organizations that may be necessary or appropriate to
complete the transactions contemplated by the merger agreement;

- cooperate with the other party with respect to public disclosures and
news releases with respect to the merger agreement and the transactions
contemplated by the merger agreement;

- not take any actions that would or are reasonably likely to adversely
affect the qualification of the merger as a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code and use all reasonable efforts
to achieve that qualification;

- file, as soon as is practicable, an exchange offer registration statement
with respect to its outstanding debt securities issued in early 2001, to
use commercially reasonable efforts to have the registration statements
declared effective and to use commercially reasonable efforts to complete
the related exchange offer;

- cooperate in the preparation of documents relating to transfer taxes;

- continue to comply with the terms of the existing confidentiality
agreement, dated March 7, 2001;

- continue in the ordinary and normal course of business to pursue the
completion of existing capital expenditure projects in accordance with
budgets provided to the other party; and

- not take, and use commercially reasonable efforts to cause its
subsidiaries not to take, actions that would cause any of its
representations and warranties to be untrue in any material respect or to
cause any of the conditions to the merger not to be satisfied, except as
described above under the caption "Non-Solicitation of Competing
Transactions."

FelCor has agreed to:

- file all reports required to be filed by it under the Exchange Act to
permit sales under Rule 145(d)(1) under the Securities Act of stock
received by MeriStar affiliates in the merger;

- deliver to MeriStar, prior to July 12, 2001,

- a commitment for financing of at least $500 million for a term not less
than seven years and on other terms reasonably acceptable to FelCor and
MeriStar, or

- evidence that holders of a majority in aggregate outstanding principal
amount of the holders of MeriStar's 9% senior notes due 2008 and 9 1/8%
senior notes due 2011 have waived their right to tender their notes as a
result of the completion of the merger;

- file, as soon as practicable after the date of the merger agreement, a
shelf registration statement on Form S-3 covering resales of its common
stock that may be issued to former holders of MeriStar Partnership units
upon redemption of their units in us and to use its reasonable best
efforts to have the registration statement declared effective and remain
effective until all of that common stock is eligible to be sold under
Rule 144(k) under the Securities Act or has been otherwise sold;

- pay, prior to or at the effective time of the merger, the applicable
MeriStar lenders the amount necessary to discharge and terminate the
MeriStar senior secured credit facility, which as of June 30, 2001, was
$422.0 million in unpaid principal amount, plus accrued interest;

- use commercially reasonable efforts to cause the shares of common stock
to be issued in the merger to be listed, prior to the effective time of
the merger, on the NYSE, subject to official notice of issuance; and

- assume all outstanding debt that MeriStar has issued under indentures
qualified under the Trust Indenture Act of 1939, which, if none of this
debt is tendered in the repurchase offer that we will make after
completion of the mergers, would include $154.3 million in principal
amount of convertible subordinated notes and $202.6 million in principal
amount of subordinated notes.

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In addition, we have also agreed to:

- assume all outstanding debt that MeriStar Partnership has issued under
indentures qualified under the Trust Indenture Act, which, if none of
this debt is tendered in the repurchase offer that FelCor or we will make
after completion of the mergers, would include $500 million in principal
amount of MeriStar Partnership's senior notes;

- use the traditional method contained in the Treasury Regulations under
Section 704(c) of the Internal Revenue Code with respect to all
properties contributed to us by MeriStar Partnership in the partnership
merger; and

- provide to each MeriStar Partnership unitholder who is entitled to
receive cash consideration in the partnership merger the opportunity to
agree to reimburse FelCor with respect to a portion of the debt incurred
to fund the cash consideration payable to MeriStar Partnership
unitholders up to the amount of cash to which the MeriStar Partnership
unitholder is entitled and, if a MeriStar Partnership unitholder so
elects to agree to reimburse FelCor with respect to a portion of the
debt:

- to maintain outstanding at least the portion of the debt agreed to be
reimbursed until the earlier of three years following the closing of the
partnership merger or the date on which the unitholder has redeemed or
otherwise disposed of all of his units in us received in the partnership
merger; and

- not to assign, distribute, or otherwise dispose of the former MeriStar
Partnership unitholder's MeriStar Partnership units in a taxable
transaction, which will not include any transaction involving a
non-taxable merger, consolidation or other reorganization of MeriStar
Partnership or us or a liquidation of MeriStar Partnership, until the
earlier of three years after the closing of the partnership merger and
the date on which the MeriStar Partnership unitholder no longer owns at
least 50% of the units in us issued to him in the partnership merger.

MeriStar has agreed to:

- provide to FelCor, prior to the effective time of the merger, a list of
all of its "affiliates," as used in Rule 145(c) and (d) under the
Securities Act, and to use its best efforts to cause those persons to
deliver to FelCor, prior to the effective time of the merger, an
agreement restricting the transfer of the shares of FelCor common stock
that person receives in the merger;

- cause the directors, managers and officers of each of its subsidiaries to
resign from their positions as of the effective time of the merger;

- use reasonable commercial efforts to provide information to potential
sources of financing to FelCor and to cooperate with FelCor in obtaining
that financing;

- deliver to FelCor, on or before the date the merger is scheduled to
close, a fully executed agreement with MeriStar Hotels & Resorts, in form
reasonably satisfactory to FelCor, amending the revolving credit
agreement between MeriStar Partnership and MeriStar Hotels & Resorts as
specified in a schedule to the merger agreement and use its best efforts
to obtain consent to the amendment; and

- request and obtain an estoppel certificate regarding the status of the
management agreements between MeriStar and MeriStar Hotels & Resorts.

In addition, MeriStar Partnership has agreed to complete promptly the audit
of its financial statements for the 1998, 1999 and 2000 fiscal years.

Indemnification and Insurance

After the merger is completed, FelCor has agreed to preserve all rights to
indemnification existing as of the date of the merger agreement in favor of any
directors or officers of MeriStar or its subsidiaries.

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Additionally, FelCor has agreed to extend for six years after the closing
of the merger the liability insurance maintained by MeriStar for its directors
and officers. FelCor will also continue in effect any indemnification agreements
between MeriStar or its subsidiaries and any party, which were existing as of
the date of the merger agreement.

CONDITIONS TO THE MERGERS

Conditions to Obligations of All Parties to Complete the Mergers

The respective obligations of each of the parties to complete the
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of the following conditions prior to the effective time
of the mergers:

- the merger agreement and the merger shall have been approved by the
required stockholder votes of both FelCor and MeriStar;

- the shares of FelCor common stock to be issued in the merger shall have
been authorized for listing on the NYSE, subject to official notice of
issuance;

- FelCor and MeriStar shall have received an opinion from Hunton & Williams
and Paul, Weiss, Rifkind, Wharton & Garrison as to the REIT status of
FelCor and MeriStar, respectively, and the partnership status of us and
MeriStar Partnership, respectively;

- FelCor and MeriStar, respectively, shall have received an opinion from
Jenkens & Gilchrist, a Professional Corporation, and Paul, Weiss,
Rifkind, Wharton & Garrison, respectively, as to the qualification of the
merger as a reorganization under the Internal Revenue Code;

- no federal legislative or regulatory change shall have been enacted that
would cause FelCor or MeriStar to cease to qualify as a REIT for federal
income tax purposes;

- the registration statement of which this prospectus is a part shall have
been declared effective under the Securities Act, no stop order
suspending the effectiveness of the registration statement shall have
been issued, and no proceedings for that purpose shall have been
initiated or be threatened by the SEC; and

- FelCor shall have received all necessary "blue sky" authorizations for
the issuance of the FelCor common stock in the merger.

Additional Conditions to FelCor's and Our Obligations to Complete the Mergers

The obligations of FelCor and us to effect the mergers and complete the
transactions contemplated by the merger agreement are also subject to the
satisfaction or waiver by FelCor and us of the following conditions at or prior
to the effective time of the merger:

- all of MeriStar's and MeriStar Partnership's representations and
warranties shall be true and correct in all material respects;

- MeriStar and MeriStar Partnership shall have complied in all material
respects with its obligations under the merger agreement;

- MeriStar and MeriStar Partnership shall not have experienced a material
adverse change;

- all non-governmental consents and waivers under MeriStar's and MeriStar
Partnership's material agreements that are required to complete the
mergers shall have been obtained, except as would not have a material
adverse effect on FelCor or MeriStar;

- all consents and waivers from franchisors of MeriStar's hotels shall have
been obtained;

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- FelCor shall have received an executed copy of an affiliate agreement
from each person deemed to be an "affiliate" of MeriStar under Rule 145
of the Securities Act; and

- MeriStar shall have fully performed all its obligations under the merger
agreement relating to its agreement to amend its revolving credit
agreement with MeriStar Hotels & Resorts.

Additional Conditions to MeriStar's and MeriStar Partnership's Obligations to
Complete the Mergers

The obligations of MeriStar and MeriStar Partnership to effect the mergers
and complete the transactions contemplated by the merger agreement are also
subject to the satisfaction or waiver by MeriStar and MeriStar Partnership of
the following conditions at or prior to the effective time of the merger:

- all of FelCor's and our representations and warranties shall be true and
correct in all material respects;

- FelCor and we shall have complied in all material respects with its
obligations under the merger agreement;

- all consents and waivers from franchisors of MeriStar's hotels shall have
been obtained;

- FelCor and we shall not have experienced a material adverse change; and

- all non-governmental consents and waivers under FelCor's and our material
agreements that are required to complete the mergers shall have been
obtained, except as would not have a material adverse effect on MeriStar
or FelCor.

Waiver of Conditions

The parties could decide to complete the mergers even though one or more
conditions were not satisfied. All of the conditions of the mergers can be
waived except for the following conditions:

- the requirements that FelCor and MeriStar common stockholders approve the
merger;

- the requirement that there be no court order or law preventing the
closing of the merger or the partnership merger; and

- the requirements for receipt of tax opinions regarding the REIT status of
MeriStar and FelCor and the qualification of the merger as a
reorganization under the Internal Revenue Code.

The first two conditions above may not be waived under applicable law. The
parties have agreed not to waive the receipt of the required tax opinions.

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TERMINATION OF THE MERGER AGREEMENT

The merger agreement may be terminated by mutual written consent of FelCor
and MeriStar.

In addition, either FelCor or MeriStar may terminate the merger agreement
if:

- the required vote of stockholders of MeriStar or the required vote of
stockholders of FelCor is not obtained;

- the merger has not occurred on or before October 31, 2001, except that
the right to terminate the merger agreement will not be available to the
party whose failure to fulfill any obligation under the merger agreement
is the cause of the delay;

- any order, injunction or decree preventing the merger has been entered by
any court or governmental entity and is final and nonappealable; or

- the average closing price of FelCor common stock on the NYSE for any ten
consecutive trading days is less than $18.40 per share.

FelCor may terminate the merger agreement if:

- MeriStar's board of directors:

- withdraws or modifies its approval or recommendation of the merger or
the merger agreement to its stockholders in a manner adverse to FelCor
in connection with a specified acquisition proposal,

- approves or recommends a specified acquisition proposal, or

- resolves to do any of the above;

- prior to MeriStar's stockholders meeting, MeriStar enters into an
agreement, other than a confidentiality agreement, with respect to a
specified acquisition proposal;

- prior to MeriStar's stockholders meeting, FelCor's board of directors
withdraws or modifies its approval or recommendation of the merger or the
merger agreement in connection with, or approves or recommends, a
superior acquisition proposal and pays the required termination fee; or

- MeriStar breaches any representation, warranty, covenant, obligation or
agreement in the merger agreement, so that the related condition to
closing could not be satisfied by October 31, 2001.

MeriStar may terminate the merger agreement if:

- FelCor's board of directors:

- withdraws or modifies its approval or recommendation of the merger or
the merger agreement to its stockholders in a manner adverse to MeriStar
in connection with a specified acquisition proposal,

- approves or recommends a specified acquisition proposal, or

- resolves to do any of the above;

- prior to FelCor's stockholders meeting, FelCor enters into an agreement,
other than a confidentiality agreement, with respect to a specified
acquisition proposal;

- prior to FelCor's stockholders meeting, MeriStar's board of directors
withdraws or modifies its approval or recommendation of the merger or the
merger agreement in connection with, or approves or recommends, a
superior acquisition proposal and pays the required termination fee; or

- FelCor breaches any representation, warranty, covenant, obligation or
agreement in the merger agreement, so that the related condition to
closing could not be satisfied by October 31, 2001.

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EXPENSES AND TERMINATION FEES

Payment of Expenses of the Mergers Generally

Except as otherwise stated in the merger agreement, all expenses incurred
in the merger and partnership merger will be paid by the party incurring the
expenses.

Payments from MeriStar to FelCor upon Termination

MeriStar will be required to pay FelCor a $35 million termination fee and
up to $5 million in out-of-pocket expenses of FelCor if the merger agreement is
terminated:

- by FelCor because MeriStar's board of directors:

- withdrew or modified its approval or recommendation of the merger or the
merger agreement to its stockholders in a manner adverse to FelCor in
connection with a specified acquisition proposal,

- approved or recommended a specified acquisition proposal, or

- resolved to do any of the above;

- by FelCor because MeriStar entered into an agreement, other than a
confidentiality agreement, with respect to a specified acquisition
proposal;

- by MeriStar because MeriStar's board of directors withdrew or modified
its approval or recommendation of the merger or the merger agreement in
connection with, or approved or recommended, a superior acquisition
proposal; or

- by FelCor because MeriStar breached any representation, warranty,
covenant, obligation or agreement set forth in the merger agreement, so
that the related condition to closing could not be satisfied by October
31, 2001.

If the merger agreement is terminated because the stockholders of MeriStar
fail to give all necessary approvals, MeriStar must pay FelCor up to $5 million
of FelCor's out-of-pocket transaction expenses.

Payments from FelCor to MeriStar Upon Termination

FelCor will be required to pay MeriStar a $35 million termination fee and
up to $5 million in out-of-pocket expenses of MeriStar if the merger agreement
is terminated:

- by MeriStar because FelCor's board of directors:

- withdrew or modified its approval or recommendation of the merger or the
merger agreement to its stockholders in a manner adverse to MeriStar in
connection with a specified acquisition proposal,

- approved or recommended a specified acquisition proposal, or

- resolved to do any of the above;

- by MeriStar because FelCor entered into an agreement, other than a
confidentiality agreement, with respect to a specified acquisition
proposal;

- by FelCor because FelCor's board of directors withdrew or modified its
approval or recommendation of the merger or the merger agreement in
connection with, or approved or recommended, a superior acquisition
proposal; or

- by MeriStar because FelCor breached any representation, warranty,
covenant, obligation or agreement set forth in the merger agreement, so
that the related condition to closing could not be satisfied by October
31, 2001.

If the merger agreement is terminated because the stockholders of FelCor
fail to give all necessary approvals, FelCor must pay MeriStar up to $5 million
of MeriStar's out-of-pocket transaction expenses.
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COMPARATIVE DISTRIBUTION INFORMATION

The following table shows, for the periods indicated, the cash
distributions per common unit of MeriStar Partnership and us.

<Table>
<Caption>
CASH DISTRIBUTIONS PER CASH DISTRIBUTIONS PER
FELCOR PARTNERSHIP COMMON UNIT MERISTAR PARTNERSHIP COMMON UNIT
------------------------------ --------------------------------

1998
First Quarter............... $0.55
Second Quarter.............. 0.55
Third Quarter............... 0.55
Fourth Quarter.............. 0.895(1) $0.318(2)
1999
First Quarter............... $0.55 $0.505
Second Quarter.............. 0.55 0.505
Third Quarter............... 0.55 0.505
Fourth Quarter.............. 0.55 0.505
2000
First Quarter............... $0.55 $0.505
Second Quarter.............. 0.55 0.505
Third Quarter............... 0.55 0.505
Fourth Quarter.............. 0.55 0.505
2001
First Quarter............... $0.55 $0.505
Second Quarter.............. 0.55 0.505
Third Quarter............... 0.55 0.505
</Table>

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

(1) Includes a special one-time dividend of $0.345 per share, representing
accumulated earnings and profits of Bristol Hotel Company prior to its
merger with FelCor in July 1998.

(2) No dividends were declared prior to August 3, 1998, the date of the merger
between CapStar Hotel Company and American General Hospitality Corporation,
which created MeriStar.

As described under "Comparative Per Share Market Prices and Dividend
Information," FelCor and MeriStar are subject to REIT distribution requirements.
FelCor, as our general partner, has the power to cause us to make sufficient
distributions to it to enable it to comply with the REIT distribution
requirement. MeriStar, as the general partner of MeriStar Partnership, has the
same power. Under some circumstances, MeriStar Partnership or we may be required
to make distributions in excess of cash available for distribution in order to
meet these REIT distribution requirements. In that event, MeriStar Partnership
or we presently would expect to borrow funds, or to sell assets for cash, to the
extent necessary to obtain cash sufficient to make the dividends required to
retain MeriStar's or FelCor's qualification as a REIT for federal income tax
purposes.

Both MeriStar Partnership and we currently anticipate that each will
maintain at least the current distribution rate for the immediate future, unless
actual results of operations, economic conditions or other factors differ from
our current expectations. Future distributions, if any, paid by either MeriStar
Partnership or us will be at the discretion of the general partner and will
depend on its actual cash flow, its financial condition, capital requirements,
the annual distribution requirements under the REIT provisions of the Internal
Revenue Code and any other facts the general partner deems relevant.

The merger agreement permits MeriStar Partnership and us to pay, prior to
the closing of the partnership merger, regular quarterly cash distributions to
their unitholders. The merger agreement requires both MeriStar Partnership and
us to declare a partial quarterly distribution with a record date on the closing
date of the partnership merger unless the partnership merger closes within 15
days after the record date for a regularly scheduled FelCor distribution. The
respective distributions will be a fraction of each

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partnership's latest regular quarterly distributions based on the number of days
since the last distribution record date. In addition, MeriStar Partnership is
required to declare an additional special distribution, having the same record
date, if necessary to satisfy the REIT tax requirements of MeriStar to
distribute 90% of its taxable income for its shortened final tax year ending
with the completion of the merger. The record and payment dates of any partial
quarterly or additional distributions paid by MeriStar Partnership may be
accelerated by the mutual agreement of FelCor and MeriStar.

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COMPARATIVE PER SHARE MARKET PRICES AND DIVIDEND INFORMATION

MARKET INFORMATION

FelCor and MeriStar common stock are each listed on the New York Stock
Exchange. FelCor's ticker symbol on that exchange is "FCH" and MeriStar's ticker
symbol on that exchange is "MHX." The following table shows, for the periods
indicated, the high and low sales prices per share of FelCor common stock and
the high and low closing prices per share of MeriStar common stock as reported
on the New York Stock Exchange composite tape, and the cash dividends paid per
share.

<Table>
<Caption>
FELCOR COMMON STOCK MERISTAR COMMON STOCK
-------------------------------- --------------------------------
CASH CASH
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------

1998
First Quarter.................. $38 5/16 $34 15/16 $0.55
Second Quarter................. 37 5/16 31 3/16 0.55
Third Quarter.................. 32 1/4 20 0.55 $21 3/8 $14 9/16
Fourth Quarter................. 24 3/16 18 3/16 0.895(1) 20 1/4 12 15/16 $0.318(2)
1999
First Quarter.................. $24 11/16 $21 5/8 $0.55 $19 3/8 $16 1/6 $0.505
Second Quarter................. 26 1/8 20 0.55 24 1/16 18 7/16 0.505
Third Quarter.................. 21 5/8 16 11/16 0.55 22 5/16 15 1/4 0.505
Fourth Quarter................. 18 3/8 16 1/4 0.55 16 3/4 14 3/4 0.505
2000
First Quarter.................. $18 3/4 $16 1/2 $0.55 $17 7/16 $15 1/16 $0.505
Second Quarter................. 22 1/16 17 11/16 0.55 21 1/64 17 5/8 0.505
Third Quarter.................. 23 3/4 19 11/16 0.55 22 13/16 20 1/4 0.505
Fourth Quarter................. 24 1/2 21 1/2 0.55 20 5/8 18 3/8 0.505
2001
First Quarter.................. $24.94 $22.14 $0.55 $22.00 $19.08 $0.505
Second Quarter................. 24.75 20.90 0.55 23.75 18.50 0.505
Third Quarter (through August
30)......................... 24.23 21.04 0.55 23.30 20.90 0.505
</Table>

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

(1) Includes a special one-time dividend of $0.345 per share, representing
accumulated earnings and profits of Bristol prior to its merger in July 1998
with FelCor.

(2) No dividends were declared prior to August 3, 1998, the date of the merger
between CapStar Hotel Company and American General Hospitality Corporation,
which created MeriStar.

On May 9, 2001, the last full trading day prior to the public announcement
of the proposed merger, the last reported closing price was $22.10 for FelCor
common stock and $21.45 for MeriStar common stock. On August 30, 2001, the last
reported closing price was $21.09 for FelCor common stock and $20.93 for
MeriStar common stock.

Following the merger, FelCor common stock will be traded on the New York
Stock Exchange under the ticker symbol "FCH."

DIVIDEND INFORMATION

The dividends described above represent approximately a 0% return of
capital in 2000 for both FelCor and MeriStar and an approximate 7.2% return of
capital for FelCor and a 0% return of capital for MeriStar in 1999. In order to
maintain its qualification as a REIT, each year, each of FelCor and MeriStar
must distribute dividends to its stockholders in an aggregate amount equal to at
least 90%, or 95% prior to January 1, 2001, of its taxable income, which does
not include net capital gains. For the years ended December 31, 2000 and
December 31, 1999, FelCor had annual dividends totaling $2.20 per common share,
of which only $2.09 and $1.84 per share, respectively, were required to satisfy
the then applicable 95% REIT distribution test in the respective years. For the
years ended December 31, 2000 and
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December 31, 1999, MeriStar had annual dividends totaling $2.02 per common
share, of which only $1.40 and $0.64 per share, respectively, were required to
satisfy the then applicable 95% REIT distribution requirement in the respective
years. Under some circumstances FelCor or MeriStar may be required to make
distributions in excess of cash available for distribution in order to meet the
REIT distribution requirements. In that event, FelCor or MeriStar presently
would expect to borrow funds, or to sell assets for cash, to the extent
necessary to obtain cash sufficient to make the dividends required to retain its
qualification as a REIT for federal income tax purposes.

Each of MeriStar and FelCor currently anticipates that it will maintain at
least the current dividend rate for the immediate future, unless actual results
of operations, economic conditions or other factors differ from its current
expectations. Future dividends, if any, paid by either company will be at the
discretion of its board of directors and will depend on its actual cash flow,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code and any
other facts as its board of directors deems relevant.

The merger agreement permits FelCor and MeriStar to pay, prior to the
closing of the merger, regular quarterly cash dividends to their stockholders.
The merger agreement requires both FelCor and MeriStar to declare a partial
quarterly dividend with a record date on the closing date of the merger unless
the merger closes within 15 days after the record date for a regularly scheduled
FelCor dividend. The respective dividends will be a fraction of each company's
latest regular quarterly dividends based on the number of days since the last
dividend record date. In addition, MeriStar is required to declare an additional
special dividend, having the same record date, if necessary to satisfy the REIT
tax requirements to distribute 90% of its taxable income for its shortened final
tax year ending with the completion of the merger. The record and payment dates
of any partial quarterly or additional dividends paid by MeriStar may be
accelerated by the mutual agreement of FelCor and MeriStar.

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

PRO FORMA COMBINED STATEMENTS OF OPERATIONS

The following unaudited Pro Forma Combined Statements of Operations for the
six months ended June 30, 2001 and the year ended December 31, 2000 are based in
part upon the Consolidated Statements of Operations of FelCor Partnership, DJONT
Operations, L.L.C., or DJONT, Bristol Hotels & Resorts Tenant Companies, or
Bristol Tenant, and MeriStar Partnership for the six months ended June 30, 2001
and the year ended December 31, 2000 included herein, except for the
consolidated statement of operations of Bristol Tenant for the six months ended
June 30, 2001 which was provided by Bristol Tenant.

The Pro Forma Combined Statements of Operations for the six months ended
June 30, 2001 and the year ended December 31, 2000 assumes that all the
following occurred on January 1, 2000:

- our acquisition of DJONT, effective January 1, 2001, for 416,667 units of
limited partnership interest in us valued at approximately $10 million;

- our acquisition of 12 leases held by Six Continents Hotels, formerly Bass
Hotels & Resorts, effective January 1, 2001, for 413,585 of our units of
limited partnership interest valued at approximately $10 million;

- our acquisition of the remaining 88 leases held by Six Continents Hotels,
effective July 1, 2001;

- the assignment of the leases from MeriStar Hotels & Resorts, Inc. to
MeriStar's TRSs; and

- the completion of the merger, the partnership merger and the related
financings and application of the net proceeds.

In the opinion of our management, all material adjustments necessary to
reflect the effects of the preceding transactions have been made. The unaudited
Pro Forma Combined Statements of Operations are presented for illustrative
purposes only and are not necessarily indicative of what the actual results of
operations would have been had the transactions described above occurred on the
indicated dates, nor do they purport to represent our results of operations for
future periods.

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FELCOR LODGING LIMITED PARTNERSHIP

PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)

<Table>
<Caption>
FELCOR MERISTAR
PARTNERSHIP PARTNERSHIP MERGER
POST RMA HISTORICAL ADJUSTMENTS PRO FORMA
(a) (b) (c) TOTAL
----------- ----------- ----------- ----------

Revenues:
Room and suite revenue................................ $635,857 $402,760 $1,038,617
Food and beverage revenue............................. 123,930 145,383 269,313
Other operating departments........................... 40,635 46,005 86,640
Percentage lease revenue.............................. 10,736 10,736
Retail space rental and other revenue................. 1,882 4,967 6,849
-------- -------- ----------
Total revenues.......................................... 802,304 609,851 1,412,155
-------- -------- ----------
Expenses:
Hotel operating expenses:
Room................................................ 147,215 92,287 239,502
Food and beverage expenses.......................... 95,409 103,890 199,299
Other operating departments......................... 17,428 25,241 42,669
Management and incentive fees......................... 35,697 14,779 50,476
Other property operating costs........................ 220,601 153,718 374,319
Property taxes, insurance, and other.................. 77,417 36,902 $ 139(F) 114,458
Corporate expenses.................................... 6,372 4,535 10,907
Depreciation.......................................... 79,513 57,787 (13,950)(D) 123,350
Other merger and lease termination costs.............. 5,104 5,104
-------- -------- -------- ----------
Total operating expenses................................ 679,652 494,243 (13,811) 1,160,084
-------- -------- -------- ----------
Operating income........................................ 122,652 115,608 13,811 252,071
-------- -------- -------- ----------
Interest expense, net................................... 79,977 60,261 8,531(E) 148,769
Swap termination costs.................................. 4,824 9,297 14,121
Writedown of investments................................ 2,112 2,112
Other................................................... 1,242 160(F) 1,402
-------- -------- -------- ----------
Income before equity in income from unconsolidated
entities, minority interests, and gain (loss) on sale
of assets............................................. 37,851 42,696 5,120 85,667
Equity in income from unconsolidated entities........... 6,328 6,328
Minority interests in other partnerships................ (2,282) (6) (2,288)
Gain (loss) on sale of assets, net...................... 2,955 (1,062) 3(F) 1,896
-------- -------- -------- ----------
Net income before extraordinary items................... 44,852 41,628 5,123 91,603
Preferred distributions................................. (12,300) (282) (5,250)(G) (17,832)
-------- -------- -------- ----------
Net income before extraordinary items applicable to
common unitholders.................................... $ 32,552 $ 41,346 $ (127) $ 73,771
======== ======== ======== ==========
Basic per unit data:
Net income before extraordinary items applicable to
common unitholders.................................. $ 0.53 $ 0.74
======== ==========
Weighted average units outstanding.................... 61,628 38,392(H) 100,020
======== ======== ==========
Diluted per unit data:
Net income before extraordinary items applicable to
common unitholders.................................. $ 0.53 $ 0.73
======== ==========
Weighted average units outstanding.................... 62,069 39,283(H) 101,352
======== ======== ==========
</Table>

See notes to pro forma combined statements of operations.

162
167

FELCOR LODGING LIMITED PARTNERSHIP

PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)

<Table>
<Caption>
FELCOR MERISTAR
PARTNERSHIP PARTNERSHIP MERGER
POST RMA POST RMA ADJUSTMENTS PRO FORMA
(i) (j) (c) TOTAL
----------- ----------- ----------- ----------

Revenues:
Room and suite revenue.................................... $1,309,292 $ 782,288 $2,091,580
Food and beverage revenue................................. 261,569 290,792 552,361
Other operating departments............................... 93,352 84,660 178,012
Percentage lease revenue.................................. 20,925 20,925
Retail space rental and other revenue..................... 3,057 18,424 $ 93(F) 21,574
---------- ---------- ----------- ----------
Total revenues.............................................. 1,667,270 1,197,089 93 2,864,452
---------- ---------- ----------- ----------
Expenses:
Hotel operating expenses:
Room.................................................... 309,234 184,791 494,025
Food and beverage expenses.............................. 200,855 209,962 410,817
Other operating departments............................. 37,172 48,263 85,435
Management and incentive fees............................. 77,214 28,943 106,157
Other property operating costs............................ 437,763 302,347 740,110
Property taxes, insurance, and other...................... 161,999 72,310 234,309
Corporate expenses........................................ 13,267 9,445 22,712
Depreciation.............................................. 161,316 107,362 (19,688)(D) 248,990
---------- ---------- ----------- ----------
Total operating expenses.................................... 1,398,820 963,423 (19,688) 2,342,555
---------- ---------- ----------- ----------
Operating income............................................ 268,450 233,666 19,781 521,897
---------- ---------- ----------- ----------
Interest expense, net....................................... 156,712 120,850 32,442(E) 310,004
Loss on assets held for sale................................ 63,000 63,000
Other....................................................... 3,376 1,622 406(F) 5,404
---------- ---------- ----------- ----------
Income before equity in income from unconsolidated entities,
minority interests, and gain (loss) on sale of assets..... 45,362 111,194 (13,067) 143,489
Equity in income from unconsolidated entities............... 11,436 11,436
Minority interests in other partnerships.................... (3,570) 3 (3,567)
Gains on sale of assets..................................... 4,388 3,439 (14)(F) 7,813
---------- ---------- ----------- ----------
Net income before extraordinary items....................... 57,616 114,636 (13,081) 159,171
Preferred distributions..................................... (24,682) (565) (10,500)(G) (35,747)
---------- ---------- ----------- ----------
Net income before extraordinary items applicable to common
unitholders............................................... $ 32,934 $ 114,071 $ (23,581) $ 123,424
========== ========== =========== ==========
Basic per unit data:
Net income before extraordinary items applicable to common
unitholders............................................. $ 0.53 $ 1.23
========== ==========
Weighted average units outstanding...................... 62,301 38,392(H) 100,693
========== =========== ==========
Diluted per unit data:
Net income before extraordinary items applicable to common
unitholders............................................. $ 0.53 $ 1.21
========== ==========
Weighted average units outstanding...................... 62,556 39,283(H) 101,839
========== =========== ==========
</Table>

See notes to pro forma combined statements of operations.

163
168

NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001,
AND THE YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)

(A) Represents FelCor Partnership's historical results of operations, excluding
extraordinary items, plus the pro forma effect of FelCor Partnership's
acquisition of 88 hotel leases from Six Continents Hotels as if the
acquisition occurred on January 1, 2000. The computation is as follows (in
thousands, except per share amounts):

<Table>
<Caption>
FELCOR
FELCOR BRISTOL PRO FORMA POST RMA
HISTORICAL(1) TENANT(2) ADJUSTMENTS TOTAL
------------- --------- ----------- --------

Revenues:
Room and suite revenue.............. $365,343 $270,514 $635,857
Food and beverage revenue........... 53,150 70,780 123,930
Other operating departments......... 24,790 15,845 40,635
Percentage lease revenue............ 115,137 $(115,137)(3)
Retail space rental and other
revenue.......................... 1,882 1,882
-------- -------- --------- --------
Total revenues........................ 560,302 357,139 (115,137) 802,304
-------- -------- --------- --------
Expenses:
Hotel operating expenses:
Room............................. 83,404 63,811 147,215
Food and beverage expenses....... 39,141 56,268 95,409
Other operating departments...... 10,922 6,506 17,428
Management and incentive fees......... 12,612 23,085(4) 35,697
Other property operating costs........ 121,642 110,710 (11,751)(5) 220,601
Property taxes, insurance, and
other............................... 76,460 115,924 (114,967)(3) 77,417
Corporate expenses.................... 6,372 6,372
Depreciation.......................... 79,513 79,513
Lease termination costs............... 36,226 (36,226)(6)
-------- -------- --------- --------
Total operating expenses.............. 466,292 353,219 (139,859) 679,652
-------- -------- --------- --------
Operating income...................... 94,010 3,920 24,722 122,652
-------- -------- --------- --------
Interest expense, net................. 79,621 356 79,977
Swap termination costs................ 4,824 4,824
-------- -------- --------- --------
Income (loss) before equity in income
from unconsolidated entities,
minority interests, and gain on sale
of assets........................... 9,565 3,564 24,722 37,851
-------- -------- --------- --------
Equity in income from unconsolidated
entities............................ 6,328 6,328
Minority interests.................... (2,282) (2,282)
Gain on sale of assets, net........... 2,955 2,955
-------- -------- --------- --------
Net income (loss) before extraordinary
items............................... 16,566 3,564 24,722 44,852
Preferred distributions............... (12,300) (12,300)
-------- -------- --------- --------
Net income (loss) before extraordinary
items applicable to common
unitholders......................... $ 4,266 $ 3,564 $ 24,722 $ 32,552
======== ======== ========= ========
Basic per unit data:
Net income (loss) before
extraordinary items applicable to
common unitholders............... $ 0.07 $ 0.53
======== ========
Weighted average units
outstanding...................... 61,628 61,628
======== ========
Diluted per unit data:
Net income (loss) before
extraordinary items applicable to
common unitholders............... $ 0.07 $ 0.53
======== ========
Weighted average units
outstanding...................... 62,069 62,069
======== ========
</Table>

164
169
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

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

(1) Represents the historical results of operations of FelCor Partnership for
the six months ended June 30, 2001, excluding extraordinary items. Effective
January 1, 2001, with the enactment of the REIT Modernization Act, FelCor
Partnership had completed transactions that resulted in its newly formed
taxable REIT subsidiaries acquiring leases for 96 hotels that were
previously leased to either DJONT or Six Continents Hotels, accordingly, the
revenues and expenses associated with these hotels are included in FelCor
Partnership's historical consolidated statement of operations for the six
month period ended June 30, 2001.

(2) Represents the historical results of operations of FelCor Partnership's
hotels leased to subsidiaries of Six Continents Hotels for the six months
ended June 30, 2001, excluding extraordinary items.

(3) Represents the elimination of historical percentage lease revenue and
expense between FelCor Partnership and Six Continents Hotels. The expense
elimination also includes a $170,000 adjustment of an estimate of property
tax expense.

(4) Represents the adjustment required to record the management fees at their
contractual rates. In the negotiation for the acquisition of the 88 leases
and the new long-term management contracts with Six Continents Hotels,
FelCor Partnership was able to spread the cost of the lease acquisition over
the term of the management agreement, by agreeing to pay management fees
that are higher than those paid by FelCor to other managers for comparable
services. Management fees for the 88 hotels are broken out between a base
fee, computed at 2% of total hotel revenue plus 5% of room revenue, and an
incentive fee, computed using a formula incorporating hotel net operating
income and FelCor Partnership's return on its investment in these hotels.
The new management contracts transfer the operating risk and reward of the
hotels to FelCor Partnership, as compared to the percentage leases, under
which FelCor Partnership received percentage lease revenue based solely on
hotel revenues. Additionally, under the new management contracts, FelCor
Partnership has the ability to terminate management contracts for hotels by
substituting hotels with similar revenue streams.

(5) Represents the elimination of historical franchise fees. These agreements
have been replaced with management contracts.

(6) Represents the elimination of lease termination costs associated with the
acquisition of DJONT and Six Continents Hotels leases in January 2001.

165
170
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

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

(B) Represents MeriStar Partnership's historical results of operations,
excluding extraordinary items. Effective January 1, 2001, because of the
enactment of the REIT Modernization Act, taxable REIT subsidiaries of
MeriStar Partnership were assigned the leases on 106 hotels that had
previously been held by MeriStar Hotels & Resorts, Inc. and entered into
management contracts with MeriStar Hotels & Resorts to manage these hotels.
Accordingly, the related hotel revenues, expenses and management fees are
included in MeriStar Partnership's historical results of operations for the
six month period ended June 30, 2001. Some reclassifications have been made
to conform to the presentation of our statement of operations.

(C) On May 10, 2001, FelCor and MeriStar announced that they had signed a
merger agreement, under which MeriStar will merge with and into FelCor, a
wholly-owned subsidiary of FelCor Partnership will merge with and into
MeriStar Partnership, and the limited partners of MeriStar Partnership,
other than FelCor and its subsidiaries, will exchange their interests in
MeriStar Partnership for interests in FelCor Partnership and, where
applicable, cash. Under the merger agreement, each holder of MeriStar
common stock will receive, for each share of MeriStar common stock, $4.60
in cash plus 0.784 of a share of FelCor common stock. Each holder of common
units and profits-only partnership units in MeriStar Partnership, other
than FelCor and its subsidiaries will receive, for each common unit and
profits-only unit, $4.60 in cash plus 0.784 of a common unit of FelCor
Partnership. Each holder of Class C preferred units in MeriStar Partnership
will receive, for each unit, $4.60 in cash plus 0.784 of a Series C
preferred unit in FelCor Partnership. Each holder of Class D preferred
units in MeriStar Partnership will receive, for each unit, one Series D
preferred unit in FelCor Partnership. Amounts represent adjustments to
record the merger and related transactions as if the merger had occurred on
January 1 of the fiscal period presented. Shares of FelCor common stock and
FelCor Partnership common units are valued at $22.10, the closing price of
FelCor common stock on the date of the announcement. The calculation of the
merger acquisition cost is as follows (in thousands, except share and unit
data):

<Table>

Issuance of 37.636 million common units of FelCor
Partnership units in exchange for 48.0 million common and
profits-only units of MeriStar Partnership................ $ 831,759
Issuance of 755,954 FelCor Partnership Series C preferred
units in exchange for 964,227 MeriStar Partnership Class C
preferred units........................................... 16,707
Payment of $4.60 per unit of MeriStar Partnership common
units, Class C preferred units and profits-only units..... 225,260
Issuance of 392,157 FelCor Partnership Series D preferred
units in exchange for a like number of MeriStar
Partnership Class D preferred units....................... 8,690
Issuance of 3.6 million FelCor stock options based on a
0.784 exchange ratio in exchange for MeriStar stock
options, assuming all MeriStar option holders are not
retained by FelCor........................................ 10,600
Assumption of MeriStar's liabilities........................ 1,874,936
Transaction costs........................................... 39,600
----------
Total merger acquisition cost............................... $3,007,552
==========
</Table>

The following is a calculation of estimated transaction costs (in
thousands):

<Table>

Financial advisory fees..................................... $ 12,000
Consent payments in connection with debt agreements......... 10,600
Severance noncompete payments............................... 8,000
Legal fees.................................................. 3,000
Accounting fees............................................. 1,000
Mailing and filing fees..................................... 1,000
Other....................................................... 4,000
----------
Transaction costs................................. $ 39,600
==========
</Table>

166
171
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

(D) Represents the reduction in historical depreciation associated with the
allocation of our purchase price of MeriStar Partnership. The allocation of
basis to the assets acquired from MeriStar Partnership is as follows (in
thousands):

<Table>

Total merger acquisition cost............................... $3,007,552
Less: non-real estate assets acquired at historical cost
(which approximates fair value)........................... 202,203
----------
Allocation to investment in hotels.......................... $2,805,349
==========
</Table>

The basis is anticipated to be allocated $280.5 million to land, $2,384.6
million to buildings and improvements, and $140.3 million to furniture,
fixtures, and equipment. The depreciable lives assigned to buildings and
improvements are forty years and five years for furniture, fixtures, and
equipment. The adjustment is calculated as follows (in thousands):

<Table>
<Caption>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 2000 JUNE 30, 2001
------------------ ------------------------

Buildings and improvements acquired from
MeriStar Partnership.......................... $ 59,618 $ 29,809
Furniture, fixtures, and equipment acquired from
MeriStar Partnership.......................... 28,056 14,028
--------- --------
87,674 43,837
Historical MeriStar Partnership depreciation.... (107,362) (57,787)
--------- --------
Net adjustment.................................. $ (19,688) $(13,950)
========= ========
</Table>

(E) Represents the net adjustment to historical interest expense for the
increase in interest expense related to new borrowings, resulting from
merger related transactions offset by reductions in historical interest
expense related to borrowings, that will be repaid with the proceeds of the
new borrowings, along with the push down of interest expense from MeriStar
to MeriStar Partnership that is not reflected in MeriStar Partnership's
historical interest expense, see also note (H), as follows (in thousands):

<Table>
<Caption>
INTEREST FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
RATE DECEMBER 31, 2000 JUNE 30, 2001
-------- ------------------ ------------------------

Increases:
New senior notes of $600,000........ 8.58%(1) $51,052 $22,965
New mortgage debt of $350,000....... (2) 29,540 11,725
Incremental line of credit
borrowings....................... (3) 6,876 1,019
Amortization of deferred financing
costs of new borrowings of
$19,700 over lives of 1-10
years............................ 5,883 2,942
------- -------
Total increases..................... 93,351 38,651
------- -------
</Table>

167
172
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

<Table>
<Caption>
INTEREST FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
RATE DECEMBER 31, 2000 JUNE 30, 2001
-------- ------------------ ------------------------

Reductions:
FelCor Partnership $61,744 mortgage
debt repaid...................... (4) 5,340 1,940
MeriStar Partnership $356,923 notes
payable to MeriStar repaid....... (5) 24,977 12,489
MeriStar Partnership $227,000 line
of credit repaid................. (6) 16,753 8,535
MeriStar Partnership $195,000 term
loans repaid..................... (6) 16,318 7,739
Historical interest capitalized by
MeriStar Partnership............. (5,805) (2,876)
Historical amortization of MeriStar
Partnership deferred financing
costs............................ 4,585 2,293
------- -------
Total reductions.................... 62,168 30,120
------- -------
31,183 8,531
Plus push down of interest expense.... 1,259(7)
------- -------
Net adjustment........................ $32,442 $ 8,531
======= =======
</Table>

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

(1) Represents effective fixed rate on notes issued in May 2001.

(2) Represents estimated variable rate of LIBOR plus 200 basis points rate to be
committed by lender. Weighted average 30 day LIBOR was 6.44% for the year
ended December 31, 2000 and 4.70% for the six months ended June 30, 2001. An
increase of 0.125% in interest rates would increase interest expense and
decrease net income by $437,500 and $218,750 for the year ended December 31,
2000 and the six months ended June 30, 2001 respectively.

(3) Represents contractual variable rate of LIBOR plus 200 basis points. On a
proforma basis, FelCor Partnership will have a balance outstanding on the
line of credit of $330,373 for the periods presented. This adjustment
represents the incremental interest on this balance in excess of historical
amounts.

(4) Represents the weighted average historical rates which were approximately
8.44% and 6.70% for the periods ended December 31, 2000 and June 30, 2001,
respectively.

(5) Represents contractual fixed rates of 8.71% on subordinated notes with a
principal balance of $202.5 million and 4.75% on convertible notes with a
principal balance of $154.3 million.

(6) Represents the historical weighted average interest rates (adjusted for
historical interest rate hedges) for the periods presented are as follows:

<Table>
<Caption>
2000 2001
----- -----

Line of credit....................................... 7.38% 7.52%
$121 million term loan............................... 8.30% 7.82%
$74 million term loan................................ 8.48% 8.13%
</Table>

We expect to assume approximately $500 million of MeriStar Partnership's
senior notes and approximately $374 million of mortgage debt of MeriStar
Partnership's subsidiaries in connection with the merger.

(7) See note (F).
- ---------------

(F) FelCor has no assets, liabilities, revenues or expenses other than those
derived from its ownership of us. MeriStar has miscellaneous assets,
liabilities, revenues and expenses other than those derived from its
ownership of MeriStar Partnership. Upon completion of the merger and
related transactions, FelCor will contribute to us all assets and
liabilities acquired; accordingly these miscellaneous adjustments are made
to reflect the contribution of the items historically reported only at the
MeriStar level.

168
173
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

(G) Represents distributions on the proposed issuance of $100 million of Series
E cumulative redeemable preferred units at an assumed distribution rate of
10.5%. An increase of 0.125% in the distribution rate would increase the
preferred distributions and decrease net income available to common
unitholders by $125,000 and $62,500 for the year ended December 31, 2000
and the six months ended June 30, 2001, respectively.

(H) Represents the impact of additional units issued in the merger on a basic
and diluted basis, and the dilutive effect of FelCor stock options issued
to MeriStar option holders as follows (in thousands):

<Table>

Basic
Units issued to MeriStar Partnership unitholders.......... 38,392
------
Adjustment to weighted average units-basic................ 38,392
Diluted
Dilutive effect of options issued to MeriStar
optionholders.......................................... 891
------
Adjustment to weighted average units-diluted................ 39,283
======
</Table>

(I) Represents FelCor Partnership's historical results of operations, excluding
extraordinary items, plus the pro forma effect of FelCor Partnership's
acquisition of DJONT and 100 hotel leases from Six Continents Hotels as if
the acquisition occurred on January 1, 2000. The computation is as follows
(in thousands, except per share amounts):
<Table>
<Caption>
FELCOR DJONT
PARTNERSHIP OPERATIONS, BRISTOL BRISTOL TENANT BRISTOL
HISTORICAL LLC TENANT PREDECESSOR TOTAL ELIMINATIONS
(1) (2) (3) (4) HISTORICAL (5)
----------- ----------- -------- -------------- ---------- ------------

Revenues:
Room and suite revenue.......... $709,793 $461,978 $143,952 $1,315,723 $ (6,431)
Food and beverage revenue....... 112,612 115,176 36,645 264,433 (2,864)
Other operating departments..... 56,476 31,859 5,401 93,736 (384)
Percentage lease revenue........ $536,907 536,907
Retail space rental and other
revenue....................... 3,057 3,057
-------- -------- -------- -------- ---------- --------
Total revenues................... 539,964 878,881 609,013 185,998 2,213,856 (9,679)
-------- -------- -------- -------- ---------- --------
Expenses:
Hotel operating expenses:
Room............................ 169,531 109,074 32,163 310,768 (1,534)
Food and beverage expenses...... 84,602 90,025 28,190 202,817 (1,962)
Other operating departments..... 22,168 11,267 3,859 37,294 (122)
Management and incentive fees.... 24,766 16,770 5,589 47,125 (76)
Other property operating costs... 236,186 178,234 53,903 468,323 (5,929)
Percentage lease expense......... 277,491 197,210 62,206 536,907
Property taxes, insurance, and
other........................... 89,257 70,498 2,128 710 162,593 (594)
Corporate expenses............... 12,256 1,011 13,267
Depreciation..................... 160,745 572 161,317 (1)
-------- -------- -------- -------- ---------- --------
Total operating expenses......... 262,258 886,825 604,708 186,620 1,940,411 (10,218)
-------- -------- -------- -------- ---------- --------
Operating income (loss).......... 277,706 (7,944) 4,305 (622) 273,445 539
-------- -------- -------- -------- ---------- --------
Interest expense, net............ 156,712 618 (133) (35) 157,162 168
Loss on assets held for sale..... 63,000 63,000
Other............................ 3,376 3,376
-------- -------- -------- -------- ---------- --------
Income (loss) before equity in
income from unconsolidated
entities, minority interests,
and gain on sale of assets...... 54,618 (8,562) 4,438 (587) 49,907 371
-------- -------- -------- -------- ---------- --------
Equity in income from
unconsolidated entities......... 14,820 593 15,413
Minority interests............... (3,570) (3,243) (6,813)
Gain on sale of assets........... 4,388 4,388

FELCOR
PROFORMA PARTNERSHIP
ADJUSTMENTS POST RMA TOTAL
----------- --------------

Revenues:
Room and suite revenue.......... $1,309,292
Food and beverage revenue....... 261,569
Other operating departments..... 93,352
Percentage lease revenue........ $(536,907)(6)
Retail space rental and other
revenue....................... 3,057
--------- ----------
Total revenues................... (536,907) 1,667,270
--------- ----------
Expenses:
Hotel operating expenses:
Room............................ 309,234
Food and beverage expenses...... 200,855
Other operating departments..... 37,172
Management and incentive fees.... 30,165(7) 77,214
Other property operating costs... (24,631)(8) 437,763
Percentage lease expense......... (536,907)(6)
Property taxes, insurance, and
other........................... 161,999
Corporate expenses............... 13,267
Depreciation..................... 161,316
--------- ----------
Total operating expenses......... (531,373) 1,398,820
--------- ----------
Operating income (loss).......... (5,534) 268,450
--------- ----------
Interest expense, net............ (618)(9) 156,712
Loss on assets held for sale..... 63,000
Other............................ 3,376
--------- ----------
Income (loss) before equity in
income from unconsolidated
entities, minority interests,
and gain on sale of assets...... (4,916) 45,362
--------- ----------
Equity in income from
unconsolidated entities......... (3,977)(10) 11,436
Minority interests............... 3,243(11) (3,570)
Gain on sale of assets........... 4,388
</Table>

169
174
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)
<Table>
<Caption>
FELCOR DJONT
PARTNERSHIP OPERATIONS, BRISTOL BRISTOL TENANT BRISTOL
HISTORICAL LLC TENANT PREDECESSOR TOTAL ELIMINATIONS
(1) (2) (3) (4) HISTORICAL (5)
----------- ----------- -------- -------------- ---------- ------------

Income tax expense (benefit)..... 2,798 (267) 2,531
-------- -------- -------- -------- ---------- --------
Net income (loss) before
extraordinary items............. 70,256 (11,212) 1,640 (320) 60,364 371
Preferred distributions.......... (24,682) (24,682)
-------- -------- -------- -------- ---------- --------
Net income (loss) before
extraordinary items applicable
to common shareholders.......... $ 45,574 $(11,212) $ 1,640 $ (320) $ 35,682 $ 371
======== ======== ======== ======== ========== ========
Basic per share data:
Net income before extraordinary
items applicable to common
shareholders.................. $ 0.73
========
Weighted average shares
outstanding................... 62,301
========
Diluted per share data:
Net income before extraordinary
items applicable to common
shareholders.................. $ 0.73
========
Weighted average shares
outstanding................... 62,556
========

FELCOR
PROFORMA PARTNERSHIP
ADJUSTMENTS POST RMA TOTAL
----------- --------------

Income tax expense (benefit)..... (2,531)(12)
--------- ----------
Net income (loss) before
extraordinary items............. (3,119) 57,616
Preferred distributions.......... (24,682)
--------- ----------
Net income (loss) before
extraordinary items applicable
to common shareholders.......... $ (3,119) $ 32,934
========= ==========
Basic per share data:
Net income before extraordinary
items applicable to common
shareholders.................. $ 0.53
==========
Weighted average shares
outstanding................... 62,301
==========
Diluted per share data:
Net income before extraordinary
items applicable to common
shareholders.................. $ 0.53
==========
Weighted average shares
outstanding................... 62,556
==========
</Table>

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

(1) Represents the historical results of operations of FelCor Partnership for
the year ended December 31, 2000. Certain amounts have been reclassified to
conform to the June 30, 2001 presentation with no effect on previously
reported net income.

(2) Represents the historical results of operations of DJONT for the year ended
December 31, 2000. Certain amounts have been reclassified to conform to the
June 30, 2001 presentation with no effect on previously reported net
income.

(3) Represents the historical results of operations of Bristol Tenant for the
nine months ended December 31, 2000. Certain amounts have been reclassified
to conform to the June 30, 2001 presentation with no effect on previously
reported net income.

(4) Represents the historical results of operations of Bristol Tenant
Predecessor for the three months ended March 31, 2000. Certain amounts have
been reclassified to conform to the June 30, 2001 presentation with no
effect on previously reported net income.

(5) Represents adjustment to eliminate historical amounts related to (i) a
hotel leased by Bristol Tenant not owned by FelCor Partnership and (ii) a
hotel owned by FelCor Partnership but sold in December 2000.

(6) Represents the elimination of historical percentage lease revenues and
expenses between FelCor Partnership and the lessees.

(7) Represents the adjustment required to record the management fees at their
contractual rates. In the negotiation for the acquisition of the 88 leases
and the new long-term management contract with Six Continents Hotels,
FelCor Partnership was able to spread the cost of the lease acquisition
over the term of the management agreement, by agreeing to pay management
fees that are higher than those paid by FelCor to other managers for
comparable services. Management fees for the 88 hotels are broken out
between a base fee, computed at 2% of total hotel revenue plus 5% of room
revenue, and an incentive fee, computed using a formula incorporating hotel
net operating income and FelCor Partnership's return on its investment in
these hotels. The new management contracts transfer the operating risk and
reward of the hotels to FelCor Partnership, as compared to percentage
leases, under which FelCor Partnership received percentage lease revenue
based solely on hotel revenues. Additionally, under the new management
contracts, FelCor

170
175
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

Partnership has the ability to terminate management contracts for hotels by
substituting hotels with similar revenue streams.

(8) Represents the elimination of historical franchise fees paid to Bristol
Tenant. These agreements have been replaced with management contracts.

(9) Represents the elimination of $618,000 in interest expense paid by DJONT to
FelCor.

(10) Represents the elimination of FelCor Partnership's equity in income of
DJONT's consolidated subsidiary.

(11) Represents the elimination of the DJONT minority interest of $3,243,000
represented by FelCor Partnership's ownership discussed in (10) above.

(12) Represents the elimination of the historical tax provisions of the Bristol
Tenant lessees due to the pro forma taxable loss of the TRSs. No benefit
has been recorded for deferred taxes related to these losses due to the
uncertainty of their recoverability, because based on the weight of
available evidence, management has determined it is more likely than not
that the entire balance of deferred tax assets will not be realized by the
TRSs.
- ---------------

171
176
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

(J) Represents MeriStar Partnership's historical results of operations,
excluding extraordinary items, plus the pro forma effect of MeriStar
Partnership's acquisition of 106 hotel leases from MeriStar Hotels &
Resorts, Inc. as if the acquisition occurred on January 1, 2000. The
computation is as follows (in thousands):

<Table>
<Caption>
MERISTAR
PARTNERSHIP MERISTAR
HISTORICAL PRO FORMA PARTNERSHIP
(1) ADJUSTMENTS POST RMA
----------- ----------- -----------

Revenues:
Room and suite revenue............................... $ 782,288(2) $ 782,288
Food and beverage revenue............................ 290,792(2) 290,792
Other operating departments.......................... 84,660(2) 84,660
Percentage lease revenue............................. $385,141 (364,216)(3) 20,925
Retail space rental and other revenue................ 15,544 2,880(4) 18,424
-------- --------- ----------
Total revenues......................................... 400,685 796,404 1,197,089
-------- --------- ----------
Expenses:
Hotel operating expenses:
Rooms................................................ 184,791(2) 184,791
Food and beverage expenses........................... 209,962(2) 209,962
Other operating departments.......................... 48,263(2) 48,263
Management and incentive fees.......................... 28,943(5) 28,943
Other property operating costs......................... 2,731 299,616(6) 302,347
Property taxes, insurance and other.................... 47,481 24,829(2) 72,310
Corporate expenses..................................... 9,445 9,445
Depreciation........................................... 107,362 107,362
-------- --------- ----------
Total operating expenses............................... 167,019 796,404 963,423
-------- --------- ----------
Operating income....................................... 233,666 233,666
-------- --------- ----------
Interest expense, net.................................. 120,850 120,850
Other.................................................. 1,622 1,622
-------- --------- ----------
Income (loss) before minority interest and gain on sale
of assets............................................ 111,194 111,194
Minority interests..................................... 3 3
Gain on sale of assets................................. 3,439 3,439
-------- --------- ----------
Net income (loss) before extraordinary items........... 114,636 114,636
Preferred distributions................................ (565) (565)
-------- --------- ----------
Net income (loss) before extraordinary items applicable
to common shareholders............................... $114,071 $ $ 114,071
======== ========= ==========
</Table>

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

(1) Represents MeriStar Partnership's historical results of operations,
excluding extraordinary items. Certain reclassifications have been made to
conform to the presentation of FelCor Partnership's statement of operations.

(2) Represents the historical hotel revenues and expenses of the 106 hotels
formerly leased to MeriStar Hotels & Resorts, Inc.

(3) Represents the elimination of historical percentage lease revenue received
from MeriStar Hotels & Resorts.

(4) Represents historical other hotel revenue of the 106 hotels formerly leased
to MeriStar Hotels & Resorts.

(5) Represents the contractual management fee which will be paid to MeriStar
Hotels & Resorts under the new management agreements. The base management
fee under the agreements is 2.5% of hotel revenues.

172
177
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED)

Until January 1, 2001, MeriStar Hotels & Resorts leased substantially all
of its hotels from MeriStar Partnership. Under these leases, MeriStar Hotels &
Resorts assumed all of the operating risks and rewards of these hotels and paid
MeriStar Partnership a percentage of revenue at each hotel under the lease
agreements. Therefore, for financial statement purposes through December 31,
2000, MeriStar Hotels & Resorts recorded all of the operating revenues and
expenses of the hotels in its statements of operations, and MeriStar Partnership
recorded lease revenue earned under the lease agreements in its statements of
operations. Effective January 1, 2001, MeriStar Hotels & Resorts assigned the
hotel leases to newly created, wholly owned, taxable REIT subsidiaries of
MeriStar Partnership and these taxable REIT subsidiaries in turn, entered into
management agreements with MeriStar Hotels & Resorts to manage these hotels. As
a result of this change in structure, the wholly owned taxable REIT subsidiaries
of MeriStar Partnership have assumed the operating risks and rewards of the
hotels and now pay MeriStar Hotels & Resorts a management fee to manage the
hotels for it. For consolidated financial statement purposes, effective January
1, 2001, MeriStar Partnership now records all of the revenues and expenses of
the hotels in its statement of operations, including a management fee paid to
MeriStar Hotels & Resorts. The terms of the management agreements are designed
to substantially mirror the economics of the former leases.

(6) Represents historical other undistributed operating costs of the 106 hotels
formerly leased to MeriStar Hotels & Resorts, Inc.

173
178

PRO FORMA COMBINED BALANCE SHEET

The following unaudited Pro Forma Combined Balance Sheet as of June 30,
2001 is based in part upon the Consolidated Balance Sheets of FelCor Partnership
and MeriStar Partnership included or incorporated by reference herein, and the
consolidated balance sheet of Bristol Tenant which was provided to us by Bristol
Tenant.

The Pro Forma Combined Balance Sheet assumes all of the following occurred
on June 30, 2001:

- our acquisition of the remaining 88 leases held by Six Continents Hotels,
effective July 1, 2001; and

- the completion of the merger, the partnership merger and the related
financings and application of the net proceeds.

In the opinion of our management, all material adjustments necessary to
reflect the effects of the foregoing transactions have been made. The unaudited
Pro Forma Combined Balance Sheet is presented for illustrative purposes only and
is not necessarily indicative of what our actual financial position would have
been had the transactions described above occurred on June 30, 2001, nor does it
purport to represent our future financial position.

174
179

FELCOR LODGING LIMITED PARTNERSHIP

PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED, IN THOUSANDS)

<Table>
<Caption>
FELCOR MERISTAR
PARTNERSHIP RMA FELCOR PARTNERSHIP
HISTORICAL ACQUISITION PARTNERSHIP HISTORICAL MERGER PRO FORMA
(A) (B) POST RMA (C) ADJUSTMENTS(D) TOTAL
----------- ----------- ----------- ----------- -------------- ----------

ASSETS

Net investment in hotels.............. $3,710,694 $3,710,694 $2,867,134 $ (61,785)(E) $6,516,043
Investment in unconsolidated
entities............................ 154,980 154,980 41,714 196,694
Assets held for sale.................. 52,122 52,122 52,122
Cash and cash equivalents............. 64,220 $ 1,471 65,691 20,550 86,241
Restricted cash....................... 323,555 323,555 20,201 (316,460)(F) 27,296
Due from MeriStar Hotels & Resorts.... 10,893 10,893
Note receivable from MeriStar Hotels &
Resorts............................. 36,000 36,000
Accounts receivable................... 46,449 33,924 80,373 57,040 137,413
Prepaid expenses...................... 12,056 1,941 13,997 15,765 29,762
Deferred expenses, net................ 32,201 32,201 15,684 (5,734)(G) 42,151
Other assets.......................... 7,251 5,022 12,273 40(H) 12,313
---------- --------- ---------- ---------- ---------- ----------
Total assets.................. $4,403,528 $ 42,358 $4,445,886 $3,084,981 $ (383,939) $7,146,928
========== ========= ========== ========== ========== ==========

LIABILITIES, REDEEMABLE UNITS AND PARTNERS' CAPITAL

Debt.................................. $2,134,093 $2,134,093 $1,653,050 $ (138,450)(I) $3,648,693
Distributions payable................. 34,199 34,199 24,245 58,444
Accrued expenses and other............ 146,077 $ 42,358 188,435 188,161 6,787(H) 383,383
Minority interest in other
partnerships........................ 50,474 50,474 2,693 53,167
---------- --------- ---------- ---------- ---------- ----------
Total liabilities............. 2,364,843 42,358 2,407,201 1,868,149 (131,663) 4,143,687
---------- --------- ---------- ---------- ---------- ----------
Redeemable units at redemption
value............................... 210,929 210,929 99,898 (8,844)(J) 301,983
---------- --------- ---------- ---------- ---------- ----------
Preferred units:
Series A preferred units............ 149,515 149,515 149,515
Series B preferred units............ 143,750 143,750 143,750
New preferred units................. 100,000(K) 100,000
Common units.......................... 1,534,491 1,534,491 1,116,934 (343,432)(L) 2,307,993
---------- --------- ---------- ---------- ---------- ----------
Partners' Capital..................... 1,827,756 1,827,756 1,116,934 (243,432) 2,701,258
---------- --------- ---------- ---------- ---------- ----------
Total liabilities, redeemable
units and partners'
capital..................... $4,403,528 $ 42,358 $4,445,886 $3,084,981 $ (383,939) $7,146,928
========== ========= ========== ========== ========== ==========
</Table>

See notes to pro forma combined balance sheet.

175
180

NOTES TO PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)

(A) Represents the historical consolidated balance sheet of FelCor Partnership
as of June 30, 2001.

(B) Effective January 1, 2001, with the enactment of the REIT Modernization
Act, we had completed transactions that resulted in our newly formed
taxable REIT subsidiaries acquiring leases for 96 hotels that were
previously leased to either DJONT or Six Continents Hotels. Accordingly,
the assets and liabilities associated with these hotels are included in our
historical consolidated balance sheet as of June 30, 2001. In March 2001,
we entered into an agreement with Six Continents Hotels to acquire the
remaining 88 hotel leases effective July 1, 2001. In consideration for the
acquisition of these leases, one of our taxable REIT subsidiaries entered
into long-term management agreements with Six Continents Hotels with regard
to these hotels and issued to Six Continents Hotels 100 shares of FelCor
common stock. The pro forma adjustment column represents the historical
hotel assets and liabilities associated with the 88 hotels as if the Six
Continents Hotels leases were acquired effective June 30, 2001.

(C) Represents the historical consolidated balance sheet of MeriStar
Partnership as of June 30, 2001. Some reclassifications have been made to
conform to the presentation of our balance sheet.

(D) On May 10, 2001, FelCor and MeriStar announced that they had signed a
merger agreement, under which MeriStar will merge with and into FelCor, one
of our wholly-owned subsidiaries will merge with and into MeriStar
Partnership and the limited partners of MeriStar Partnership, other than
FelCor and its subsidiaries, will exchange their interests in MeriStar
Partnership for interests in FelCor Partnership and, where applicable,
cash. Under the merger agreement, each holder of MeriStar common stock will
receive, for each share of MeriStar common stock, $4.60 in cash plus 0.784
of a share of FelCor common stock. Each holder of common units and
profits-only partnership units in MeriStar Partnership, other than FelCor
and its subsidiaries, will receive, for each common unit and profits-only
unit, $4.60 in cash plus 0.784 of a common unit of FelCor Partnership. Each
holder of Class C preferred units in MeriStar Partnership will receive, for
each unit, $4.60 in cash plus 0.784 of a Series C preferred unit in FelCor
Partnership. Each holder of Class D preferred units in MeriStar Partnership
will receive, for each unit, one Series D preferred unit in FelCor
Partnership. Amounts represent adjustments to record the merger and related
transactions as if the merger had occurred on June 30, 2001. Shares of
FelCor common stock and FelCor Partnership common units are valued at
$22.10, the closing price of FelCor common stock on the date of the
announcement. The calculation of the merger acquisition cost is as follows
(in thousands, except share and unit data):

<Table>

Issuance of 37.636 million common units of FelCor
Partnership in exchange for 48.0 million common and
profits-only units of MeriStar Partnership................ $ 831,759
Issuance of 755,954 FelCor Partnership Series C preferred
units in exchange for 964,227 MeriStar Partnership Class C
preferred units........................................... 16,707
Payment of $4.60 per unit of MeriStar Partnership common,
Class C preferred and profits-only units.................. 225,260
Issuance of 392,157 FelCor Partnership Series D preferred
units in exchange for a like number of MeriStar
Partnership Class D preferred units....................... 8,690
Issuance of 3.6 million FelCor stock options based on a
0.784 exchange ratio in exchange for MeriStar stock
options, assuming all MeriStar option holders are not
retained by FelCor........................................ 10,600
Assumption of MeriStar's liabilities........................ 1,874,936
Transaction costs........................................... 39,600
----------
Total merger acquisition cost............................... $3,007,552
==========
</Table>

176
181
NOTES TO PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)

The following is a calculation of estimated transaction costs (in
thousands):

<Table>

Financial advisory fees..................................... $12,000
Consent payments in connection with debt agreements......... 10,600
Severance and noncompete payments........................... 8,000
Legal fees.................................................. 3,000
Accounting fees............................................. 1,000
Mailing and filing fees..................................... 1,000
Other....................................................... 4,000
-------
Transaction costs................................. $39,600
=======
</Table>

(E) Represents the purchase accounting adjustment to the historical carrying
value of MeriStar Partnership investment in hotels as follows (in
thousands):

<Table>

FelCor Partnership allocation to investment in hotels....... $2,805,349
MeriStar Partnership historical carrying amount............. 2,867,134
----------
Adjustment............................................. $ (61,785)
==========
</Table>

(F) Represents the release of a portion of the proceeds of the $600 million
notes placement which will be used to repay MeriStar debt upon the closing
of the merger.

(G) Represents the net effect of the following adjustments (in thousands):

<Table>

Deferred financing costs for new borrowings................. $ 9,950
Elimination of historical MeriStar Partnership deferred
financing costs........................................... (15,684)
--------
Adjustment............................................. $ (5,734)
========
</Table>

(H) FelCor has no assets, liabilities, revenues or expenses other than those
derived from its ownership of us. MeriStar has miscellaneous assets,
liabilities, revenues and expenses other than those derived from its
ownership of MeriStar Partnership. Upon completion of the merger and
related transactions, FelCor will contribute to us all assets and
liabilities acquired; accordingly these miscellaneous adjustments are made
to reflect the contribution of the items historically reported only at the
MeriStar level.

(I) Represents the net increase in debt as a result of the merger and related
transactions as follows (in thousands):

<Table>

Issuance of new mortgage debt............................... $ 350,000
Net borrowings on new line of credit........................ 290,473
Repayment of MeriStar Partnership notes payable to
MeriStar.................................................. (356,923)
Repayment of MeriStar Partnership line of credit............ (227,000)
Repayment of MeriStar Partnership term loans................ (195,000)
---------
Net Adjustment......................................... $(138,450)
=========
</Table>

The issuance of the $600 million senior notes and the repayment of FelCor
mortgage debt are not included as these transactions were completed prior
to June 30, 2001 and are included in the historical amounts.

177
182
NOTES TO PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)

(J) Represents the net change in redeemable units as follows (in thousands):

<Table>

Elimination of MeriStar Partnership historical balance...... $(99,898)
Record at redemption value of $23.40 at June 30, 2001 2.764
million FelCor Partnership common units issued in exchange
for 3.525 million MeriStar Partnership common and
profits-only units, issuance of 755,954 FelCor Partnership
Series C preferred units in exchange for 964,227 MeriStar
Partnership Class C preferred units, and issuance of
392,157 FelCor Partnership Series D preferred units in
exchange for a like number of MeriStar Partnership Class D
preferred units........................................... 91,054
--------
Net adjustment.................................... $ (8,844)
========
</Table>

(K) Represents the proposed issuance of $100 million in Series E cumulative
redeemable preferred units.

(L) Represents the net adjustments resulting from the partnership merger and
related transactions as follows (in thousands, except share and unit data):

<Table>
<Caption>
ADDITIONAL
PAID IN
PARTNERS
CAPITAL
-----------

Issuance of 34.872 million units of FelCor Partnership in
exchange for 44.480 million units of MeriStar
Partnership............................................... $ 770,677
Issuance of 3.6 million FelCor stock options in exchange for
MeriStar stock options.................................... 10,600
Elimination of historical MeriStar balances................. (1,116,934)
Offering expenses of new $100,000 of FelCor Series E
cumulative redeemable preferred units..................... (3,200)
Allocation to state redeemable units issued to MeriStar unit
holders at redemption value of $23.40 over issuance value
of $22.10................................................. (4,575)
-----------
Net adjustments................................... $ (343,432)
===========
</Table>

178
183

DESCRIPTION OF THE PARTNERSHIP AGREEMENT AND
UNITS OF FELCOR PARTNERSHIP

The following summary of the material terms of our limited partnership
agreement and units of partnership interest does not include all of the terms of
the partnership agreement and should be read together with our partnership
agreement and the form of amended and restated partnership agreement that will
become effective at completion of the partnership merger. The partnership
agreement is incorporated by reference in this prospectus. See "Where You Can
Find More Information." The form of our amended and restated partnership
agreement is included as an exhibit to the registration statement, of which this
prospectus is a part.

MANAGEMENT

We are a Delaware limited partnership formed according to the terms of a
limited partnership agreement. Under the partnership agreement, FelCor, as our
sole general partner, has full, exclusive and complete responsibility and
discretion in our management and control. Our limited partners have no authority
to transact business for, or participate in our management activities or
decisions. However, FelCor may not take any action that is contrary to express
limitations or prohibitions in our partnership agreement.

TRANSFERABILITY OF INTERESTS

FelCor may not voluntarily withdraw from us or transfer or assign its
interest in us unless the transaction in which the withdrawal or transfer occurs
results in the limited partners receiving property in an amount equal to the
amount they would have received had they exercised their redemption rights
immediately prior to the transaction, or unless the successor to FelCor
contributes substantially all of its assets to us in return for an interest in
us. Although our limited partners may transfer their units in us without the
consent of FelCor, subject to some limitations, the assignee of transferred
units may not be admitted as a limited partner without the consent of FelCor,
which FelCor may withhold in its sole discretion. No transfer can be made,
however, that would cause us to be treated as a separate corporation for federal
income tax purposes. Additional limitations on a limited partner's right to
transfer our units are discussed below under "Comparison of Rights of
Unitholders -- Transfers."

CAPITAL CONTRIBUTIONS

FelCor and our limited partners have contributed cash and interests in
various hotels to us in exchange for issuance of their units. Under the
partnership agreement, FelCor is required to contribute all of the net proceeds
from the sale of its capital stock to us in exchange for additional units having
distribution, liquidation and conversion provisions substantially identical to
the capital stock issued by FelCor. As required by the partnership agreement,
immediately prior to a capital contribution by FelCor, the partners' capital
accounts and the carrying value of our property must be adjusted to reflect the
unrealized gain or unrealized loss attributable to our property as if those
items had actually been recognized immediately prior to the issuance and had
been allocated to the partners at that time.

The partnership agreement provides that if we require additional funds at
any time in excess of funds available to us from borrowing or capital
contributions, FelCor may borrow those funds from a financial institution or
other lender and lend those funds to us on the same terms and conditions as are
applicable to FelCor's borrowings of those funds. As an alternative to borrowing
funds we require, FelCor may contribute the amount of those required funds to us
as an additional capital contribution. If FelCor contributes additional capital
to us, FelCor will receive additional units.

OPERATIONS

The partnership agreement requires that we be operated in a manner that
enables FelCor to satisfy the requirements for being classified as a REIT and to
avoid any federal income tax liability.

179
184

TERM

We will continue until December 31, 2044, or until sooner dissolved upon:

- the bankruptcy, dissolution or withdrawal of FelCor as general partner
unless the limited partners elect to continue FelCor Partnership;

- the sale or other disposition of all or substantially all of our assets;

- the redemption of all of our limited partnership interests, other than
those held by FelCor, if any; or

- the election by FelCor, as the general partner, to dissolve.

CAPITALIZATION

As of June 30, 2001, we had the following outstanding units:

- 67,663,643 common units;

- 39,229 class B, series II units;

- 5,980,600 series A preferred units; and

- 57,500 series B preferred units.

FelCor owns all of the series A and B preferred units and 86.7% of the
common units.

ISSUANCE OF PARTNERSHIP INTERESTS

FelCor is authorized to cause us to issue partnership units to our
partners, including FelCor and its affiliates, or to other persons. These units
may be issued in one or more classes or series, with designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to those of any existing
units, as determined by FelCor in its sole and complete discretion without the
approval of any limited partner. These units may be issued for any partnership
purpose at any time for any consideration and on the terms and conditions
established by FelCor in its sole discretion. Any partnership unit that is not
specifically designated by FelCor as being of a particular class or series is
deemed a common unit.

FelCor plans to sell up to $100 million of a new Series C preferred stock
with a dividend rate expected to be not more than 10.5%. As of the date of this
prospectus, FelCor has no purchasers or commitments for this stock. If FelCor
successfully completes the sale of this stock, FelCor will contribute the
proceeds of the sale to us and we will issue to FelCor a new series of Series E
preferred units with a distribution rate equal to the dividend rate on the
Series C preferred stock. We expect that the terms of the Series E preferred
units will be substantially similar to the terms of the Series B preferred units
described below, except for the number of units and the per share annual
distribution rate.

OUTSTANDING UNITS OF FELCOR PARTNERSHIP

Common Units

Our common units are held directly or indirectly by FelCor or by limited
partners, including a subsidiary of FelCor. They are our basic units of
partnership interest.

Our common units are entitled to be voted on matters requiring a vote of
limited partners based on the percentage interest in us represented by the
common units.

Our common units rank junior to our series A and B preferred units and will
rank junior to our series C and D preferred units to be issued in the
partnership merger with respect to payment of distributions and junior to our
series A and B preferred units with respect to payment of amounts upon our
liquidation, dissolution or winding-up.

180
185

The partnership agreement provides that we will distribute available cash
from operations quarterly, in amounts determined by FelCor in its sole
discretion, to the preferred unitholders in accordance with the certificate of
designation for those preferred units, with the distributions made pro rata
within each class of preferred units and according to the relative priorities
among each class. Any remaining available cash from operations will be
distributed quarterly to the remaining partners, including the common
unitholders, pro rata according to their percentage interests in us. This
available cash includes net sale or refinancing proceeds but excludes net
proceeds from the sale of our property in connection with our liquidation.

Upon our liquidation, dissolution or winding-up, after payment of, or
adequate provision for, our debts and obligations, including any partner loans,
and distributions on units ranking senior to the common units with respect to
amounts paid upon our liquidation, dissolution or winding-up, our remaining
assets, if any, will be distributed to all partners, including the common
unitholders, with positive capital accounts in accordance with their respective
positive capital account balances. Under our amended and restated partnership
agreement, if any partner, including FelCor, has a negative balance in its
capital account following our liquidation, it will not be obligated to
contribute cash to us equal to the negative balance in its capital account.

Under the partnership agreement, the holders of our common units have
redemption rights, which enable them to cause FelCor to redeem their interests
in us in exchange for shares of FelCor common stock, cash or a combination of
shares and cash, at the election of FelCor. The redemption rights may not be
exercised if the issuance of shares of common stock by FelCor, as general
partner, for any part of the interest in us sought to be redeemed would:

- result in any person violating the ownership limit contained in FelCor's
charter;

- cause FelCor to be "closely held" within the meaning of the Internal
Revenue Code;

- cause FelCor to be treated as owning 10% or more of any lessee, other
than a taxable REIT subsidiary;

- otherwise cause FelCor to fail to qualify as a REIT; or

- violate applicable securities laws.

In any case, either we or FelCor may elect, in our sole and absolute discretion,
to pay the redemption amount in cash. The redemption rights may be exercised by
the holders of common units, in whole or in part, subject to the above
restrictions, at any time or from time to time, following the satisfaction of
any applicable holding period requirements. The number of shares of FelCor
common stock issuable upon the exercise of the redemption rights will be
adjusted for the occurrence of stock splits, mergers, consolidations or similar
pro rata share transactions.

Class B Units

Our class B units have all the same rights, powers, and preferences as our
common units. In addition, any holders of the class B units have the right to
require FelCor to register for resale on their behalf any shares of FelCor
common stock that the holder receives on a redemption of the holder's class B
units. FelCor may alternatively provide the redeeming unitholder an opinion of
counsel that the unitholder may resell the shares publicly without registration
under the Securities Act. The holders also have the right to include any of the
shares of FelCor issuable to them on redemption of their units in any qualified
registration statement filed by FelCor for purposes of resale by the holders.
This so called "piggyback" right is subject to reduction in the number of
unitholders' shares included in any registration statement by the underwriter,
if the registration is for an underwritten offering. FelCor will pay the
expenses of any of these registrations, except for underwriting discounts or
selling commissions attributable to the shares being sold by holders of class B
units.

The class B units are divided into two series, series I and series II. No
series I units are outstanding. FelCor intends to cancel series I of the class B
units in the amended and restated partnership agreement.

181
186

The partnership agreement authorizes 350,000 class B, series II units. In
addition to the registration rights described above, the terms of the series II
units require FelCor to effect a shelf registration covering the resale of any
shares of FelCor common stock that may be issued to the holders of series II
units upon their redemption and to maintain effectiveness of that registration
statement for a period of time. FelCor has complied with this requirement.

Series A Preferred Units

Our series A preferred units rank senior to our common units and class B
units and on a parity with our series B preferred units with respect to payment
of distributions and amounts upon liquidation, dissolution or winding up of us.
Our series A preferred units will rank on a parity with the series C and D
preferred units to be issued in the partnership merger with respect to payment
of distributions and senior to the series C and D preferred units with respect
to payment of amounts upon our liquidation, dissolution or winding-up.

As the holder of our series A preferred units, FelCor is entitled to
receive, out of available cash, if and when declared by FelCor acting as our
general partner, cumulative preferential distributions at the rate equal to the
greater of $1.95 per unit per year or the total cash distributions declared or
paid for the corresponding period on the common units into which the series A
preferred units are convertible. These distributions are cumulative and are
payable quarterly in arrears on the last day of January, April, July and October
of each year. No interest is payable with respect to any distribution payment on
series A preferred units which is in arrears.

Upon our liquidation, dissolution or winding-up, holders of our series A
preferred units are entitled to receive an amount equal to the liquidation
preference of $25 per unit plus any accumulated and unpaid distributions on them
before any distribution of assets is made to holders of our common units, class
B units or any other class or series of units ranking junior to the series A
preferred units as to liquidation rights. If our assets are insufficient to pay
these liquidation amounts in full to holders of the series A preferred units and
holders of our other units ranking on a parity with the series A preferred units
with respect to liquidation rights, all of those holders will share ratably the
available assets based on the liquidation preference of the various units. After
payment in full of the liquidation preference to which they are entitled,
holders of the series A preferred units will not be entitled to any further
participation in any distribution of assets by us.

The FelCor series A preferred stock is currently convertible into FelCor
common stock at a rate of 0.7752 of a share of common stock per share of series
A preferred stock, subject to adjustments because of stock splits, stock
dividends, combinations and other similar transactions. Whenever any shares of
FelCor series A preferred stock are converted into shares of FelCor common
stock, a corresponding number of series A preferred units will be automatically
converted into our common units at an equivalent rate so that the same number of
shares of series A preferred stock and series A preferred units remain
outstanding at all times. The unit conversion rate is subject to the same
adjustments as are made from time to time on the conversion rate for the series
A preferred stock.

The series A preferred units are not entitled to the benefit of any sinking
fund. Our series A preferred units are entitled to be voted on matters requiring
a vote of limited partners based on the percentage interest in us represented by
the series A preferred units.

The series A preferred units will be redeemable by us when and if any
outstanding shares of the corresponding series A preferred stock of FelCor are
redeemed by FelCor and in the same proportion that the shares of series A
preferred stock are redeemed. The number of series A preferred units remaining
unredeemed must equal at all times the number of shares of series A preferred
stock remaining unredeemed. Upon redemption, we will either issue common units
based on the unit conversion rate or deliver cash in the amount equal to the
aggregate market value of the number of shares of common stock of FelCor into
which the corresponding series A preferred stock is then convertible. In either
case, the number of common units issued and amount of cash paid will equal the
number of shares of FelCor common stock or amount of cash paid in the redemption
of the corresponding shares of series A preferred
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stock. Upon redemption, we will also pay any accrued and unpaid distributions
with respect to the redeemed units.

Series B Preferred Units

Our series B preferred units rank senior to our common units and class B
units and on a parity with our series A preferred units with respect to the
payment of distributions and amounts upon liquidation, dissolution or winding up
of us. Our series B preferred units will rank on a parity with the series C and
D preferred units to be issued in the partnership merger with respect to payment
of distributions and senior to the series C and D preferred units with respect
to payment of amounts upon our liquidation, dissolution or winding-up.

As the holder of our series B preferred units, FelCor is entitled to
receive out of available cash if and when declared by FelCor, acting as general
partner, cumulative preferential distributions at the rate of $225 per unit per
year. These distributions are payable quarterly on the last day of each January,
April, July and October. No interest is payable in respect of any distribution
payment on series B preferred units that is in arrears.

Upon our liquidation, dissolution or winding-up, holders of our series B
preferred units are entitled to receive an amount equal to the liquidation
preference of $2,500 per unit plus any accumulated and unpaid distributions on
them before any distribution of assets is made to holders of our common units,
class B units or any other class or series of units ranking junior to the series
B preferred units as to liquidation rights. If our assets are insufficient to
pay these liquidation amounts in full to holders of the series B preferred units
and holders of our other units ranking on a parity with the series B preferred
units with respect to liquidation rights, all of those holders will share
ratably the available assets based on the liquidation preference of the various
units. After payment in full of the liquidation preference to which they are
entitled, holders of the series B preferred units will not be entitled to any
further participation in any distribution of assets by us.

Our series B preferred units are not convertible and are not entitled to
the benefit of any sinking fund. Our series B preferred units are entitled to be
voted on matters requiring a vote of limited partners based on the percentage
interest in us represented by the series B preferred units.

The series B preferred units will be redeemable by us when and if any
shares or fractions of those shares of the corresponding series B preferred
stock of FelCor are redeemed by FelCor and in the same proportion as the shares
or fractions of those shares of series B preferred stock are redeemed.

The number of series B preferred units remaining unredeemed must at all
times equal the number of shares of series B preferred stock remaining
unredeemed. Because the series B preferred stock is not redeemable prior to May
7, 2003, the series B preferred units are not redeemable prior to the date. Upon
redemption, we will pay a cash redemption price of $2,500 per unit, plus all
accrued and unpaid distributions on the redeemed units. The $2,500 redemption
price may only be paid from the sale proceeds of other equity interests of us
and not from any other source.

NEW SERIES C AND D PREFERRED UNITS

Effective as of the closing of the partnership merger, FelCor, in its
capacity as our general partner, will adopt an amended and restated partnership
agreement to restate the partnership agreement to reflect all prior amendments
and to amend the agreement to provide for the creation of:

- 755,954 series C preferred units; and

- 392,157 series D preferred units.

We will issue the new series C and D preferred units in the partnership
merger in exchange for the MeriStar Partnership series C and D preferred units.
None of our preferred units to be issued in the partnership merger will be
issued to FelCor, as successor to MeriStar under the merger.

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Series C Preferred Units to be Issued in the Partnership Merger

Our series C preferred units, when issued, will rank senior to our common
units and class B units and on a parity with our series A, B and D preferred
units with respect to payment of distributions by us. They will also rank junior
to the series A and B preferred units and on a parity with our common units,
class B units and series D preferred units with respect to the payment of
amounts upon liquidation, dissolution or winding up of us.

The holders of our series C preferred units will be entitled to receive
distributions, when and as determined by FelCor acting as our general partner,
prior and in preference to any distribution with respect to our common units or
class B units, at the rate of $0.5575 per series C preferred unit per quarter.
These distributions will be non-cumulative.

When we pay a quarterly distribution on our common units of at least
$0.5575 per unit, the right of the holders of series C preferred units to
receive preferential distributions will cease, and all outstanding series C
preferred units will be automatically converted to common units on a one-for-one
basis. The first quarterly distributions on the series C preferred units will be
a fraction of the regular quarterly distribution based on the number of days
elapsed since the closing of the partnership merger.

Our series C preferred units will not be entitled to the benefit of any
sinking fund. The series C preferred units will be entitled to be voted on
matters requiring a vote of partners based on the number of common units into
which the series C preferred units are then convertible and will vote together
with the common units and not as a separate group or class. Any amendment of our
partnership agreement that would materially and adversely affect the
distribution, liquidation or conversion rights and preferences of the series C
preferred units will require the approval of holders of at least a majority of
the series C preferred units.

In all other respects, the series C preferred units will have the same
rights, preferences and obligations as common units.

Series D Preferred Units to be Issued in the Partnership Merger

Our series D preferred units, when issued, will rank senior to our common
and class B units and on a parity with our series A, B and C preferred units
with respect to the payment of distributions. They will also rank junior to our
series A and B preferred units and on a parity with our common units, class B
units and series C preferred units with respect to the payment of amounts upon
liquidation, dissolution or winding up of us.

The holders of our series D preferred units will be entitled to receive
distributions, unless FelCor acting as general partner determines that we do not
have cash available, prior and in preference to any distribution with respect to
common units or class B units, equal to 6.5% per annum, compounded quarterly to
the extent not distributed, times the amount of $22.16 per series D preferred
unit.

These distributions will be cumulative from the last date on which any
distributions were paid with respect to class D preferred units of MeriStar
Partnership for which the series D preferred units are exchanged in connection
with the partnership merger and will be payable quarterly in arrears on the last
day of January, April, July and October of each year. The first quarterly
distribution on the series D preferred units will be a fraction of the regular
quarterly distribution based on the number of days elapsed since the closing of
the partnership merger.

Our series D preferred units will not be convertible and will not be
entitled to the benefit of any sinking fund. The series D preferred units will
be entitled to be voted on matters requiring a vote of partners based on one
vote per series D preferred unit and will vote together with the common units
and not as a separate group or class. Any amendment of our partnership agreement
that would materially and adversely affect the distribution, liquidation or
conversion rights and preferences of the series D preferred units will require
the approval of holders of at least a majority of the series D preferred units.

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We may redeem any or all of the outstanding series D preferred units for
cash at a redemption price of $22.16 per unit, plus an amount equal to all
distributions accrued and unpaid on the units to the date of redemption, without
interest. FelCor will have the right, in our place, to purchase all or any
portion of the series D preferred units and may elect to issue shares of FelCor
common stock instead of paying the cash purchase price. The number of shares to
be issued for each series D preferred unit will equal $22.16 divided by the
average daily market price of FelCor common stock for the five consecutive
trading days preceding receipt of the notice of redemption.

In addition, the holders of the series D preferred units also have the
right, on one occasion only on or after April 1, 2004, to require us to redeem
all of their series D preferred units at a redemption price of $22.16 per unit.
This redemption will be treated like a standard redemption under the partnership
agreement, except for the redemption price and except that the series D
preferred unit holders, instead of FelCor, will be entitled to determine whether
they receive cash or shares of FelCor common stock in exchange for their units.

In all other respects, the series D preferred units will have the same
rights, preferences and obligations as common units.

INDEMNIFICATION

Under our partnership agreement, we must indemnify, to the fullest extent
provided by law, any existing or former general partner or its director or
officer and any other persons or entities as FelCor may deem advisable, in its
sole discretion, from and against any and all losses, claims, damages,
liabilities, joint or several, judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which the indemnitee may be
involved, or is threatened to be involved, as a party or otherwise. In each
case, this indemnity may only be provided if the indemnitee acted in good faith,
in a manner which the indemnitee believed to be in, or not opposed to, our best
interests, and, with respect to any criminal proceeding, had no reasonable cause
to believe the indemnitee's conduct was unlawful. To the fullest extent
permitted by law, we are also obligated to advance the expenses incurred by an
indemnitee in defending any claim or proceeding upon receipt of a written
undertaking of the indemnitee to repay any advances if the indemnitee is
ultimately determined not to be entitled to indemnification.

These indemnification rights are cumulative with any other rights or
remedies afforded to an indemnitee. Any indemnification will be made only out of
our assets. Limited partners will have no personal obligation to any indemnitee
as a result of these provisions.

An indemnitee will not be denied indemnification in whole or in part
because the indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the
terms of our partnership agreement.

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COMPARISON OF UNITHOLDER RIGHTS

We are a Delaware limited partnership and, accordingly, the rights of our
unitholders will be governed by our partnership agreement and Delaware law.
MeriStar Partnership is a Delaware limited partnership and, accordingly, the
rights of MeriStar Partnership unitholders are governed by the partnership
agreement of MeriStar Partnership and Delaware law.

At the time of the partnership merger, MeriStar Partnership unitholders
automatically will become unitholders of us, and their rights as partners will
be determined by our amended and restated partnership agreement and Delaware
law. FelCor is the general partner of us, and MeriStar is the general partner of
MeriStar Partnership. As general partners, FelCor and MeriStar each has the
exclusive right to manage the business and affairs of the partnership for which
they serve as general partner.

As of August 30, 2001, MeriStar Partnership had the following outstanding
units:

- 47,286,249 class A common units;

- 800,000 profits-only partnership units, of which 649,166 will be fully
vested at the time, or as a consequence, of the merger or the partnership
merger;

- 964,227 class C preferred units; and

- 392,157 class D preferred units.

No class B units of MeriStar Partnership are outstanding.

MeriStar owns 93.9% of the common units. The profits-only partnership units
are held by executive officers of MeriStar. See "The Merger -- Interests of
Certain Persons in the Merger and the Partnership Merger."

The following comparison summarizes the material differences between the
rights of unitholders of us and MeriStar Partnership but is not intended to list
all of the differences. When reading this comparison, you should refer to our
and MeriStar Partnership's partnership agreements, including all amendments, for
complete information.

ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS

FelCor Partnership. FelCor is authorized to cause us to issue partnership
units to our partners, including FelCor and its affiliates, or to other persons.
These units may be issued in one or more classes or series, with designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to those of the
existing classes or series of units, as determined by FelCor in its sole and
complete discretion without the approval of any limited partner. These units may
be issued for any partnership purpose at any time for any consideration and on
the terms and conditions established by FelCor in its sole discretion.

MeriStar Partnership. MeriStar is authorized to cause MeriStar Partnership
to issue partnership units or interests or options in these partnership units or
interests, to its partners, including MeriStar and its affiliates, or other
persons. These units may be issued in one or more classes or in one or more
series of any class, with designations, preferences and relative, participating,
optional or other special rights, powers and duties, including, without
limitation, rights, powers and duties senior to those of the outstanding
MeriStar Partnership units, as determined by MeriStar, in its sole and absolute
discretion without the approval of any limited partner, subject to the
limitations described below.

No partnership unit or interest may be issued to any persons unless that
issuance:

- does not have a material adverse impact on:

- the existing rights of limited partners to exercise their exchange
rights in connection with an exchange rights agreement then in effect,
or

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- the economic interests of the limited partners in the allocations set
forth in an exhibit to the partnership agreement;

- does not cause MeriStar Partnership to become, with respect to an
employee benefit plan subject to Title I of ERISA, a "party in interest"
or a "disqualified person"; and

- does not cause any portion of the assets of MeriStar Partnership to be
assets of any employee benefit plan subject to Section 2510.3-101 of the
regulations of the U.S. Department of Labor.

DISTRIBUTIONS

FelCor Partnership. Our partnership agreement requires the distribution of
cash on at least a quarterly basis in an amount, if any, as determined by FelCor
in its sole discretion to be available and appropriate for distribution. Our
partnership agreement provides that unless FelCor determines that a distribution
would not be in our best interests, it is the intent but not our obligation to
make annual distributions in amounts sufficient for FelCor to meet its REIT
distribution requirements. We make distributions to all partners who are
partners on the record date for the distribution in the following order:

- first, to each partner, including FelCor, who holds a partnership unit of
a class or series that is entitled to a preference according to the
rights of that class or series of partnership unit; and

- second, to the extent that there is available cash after payment of any
preferences, to the partners who hold partnership units that are not
entitled to a preference in distribution, including common units and
class B units, pro rata, in proportion to the partner's percentage
ownership interest in us.

Series C preferred units will be entitled to receive quarterly,
non-cumulative preferred distributions of $0.5575 per unit until the
distribution rate on our common units is at least $0.5575 per unit. Our series C
preferred units rank senior to our common and class B units and on a parity with
our series A, B and D preferred units as to distributions.

Series D preferred units will be entitled to receive distributions at a
cumulative rate of 6.5% per year on $22.16 per unit, compounded quarterly to the
extent not distributed. Our series D preferred units rank senior to our common
and class B units and on a parity with our series A, B and C preferred units as
to distributions.

MeriStar Partnership. The partnership agreement of MeriStar Partnership
requires quarterly distributions of net operating cash flow generated by
MeriStar Partnership during the applicable time period. The partnership
agreement also requires MeriStar to use its best efforts to cause MeriStar
Partnership to distribute sufficient amounts for MeriStar to meet its REIT
distribution requirements. Net operating cash flows for any period are the
excess of:

- the gross cash receipts of MeriStar Partnership for that period,
including capital contributions and asset sale proceeds, over

- the sum of various costs and expenditures specified in the partnership
agreement and any reserves required by the management contracts relating
to MeriStar Partnership hotels or reasonably determined by MeriStar to be
necessary.

MeriStar, as the general partner of MeriStar Partnership, will determine in
its sole and absolute discretion the amount of the partnership distributions to
be made. Distributions will be made to all partners who are partners on the
record date for the distribution.

Class C preferred units are entitled to receive quarterly, non-cumulative
preferred distributions of $0.5575 per unit until the distribution rate on the
common units of MeriStar Partnership is at least $0.5575 per unit. The class C
preferred units rank senior to all common units and on a parity with the class D
preferred units as to distributions.

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Class D preferred units are entitled to receive distributions at a
cumulative rate of 6.5% per year on $22.16 per unit, compounded quarterly to the
extent not distributed. The class D preferred units rank senior to all common
units and on a parity with class C preferred units as to distributions.

The MeriStar Partnership profits-only units are entitled to receive
distributions only from the proceeds from sales of hotels and other assets, as
determined by MeriStar.

Following the payment of preferred distributions, the holders of common
units, including MeriStar, are entitled to distributions pro rata in accordance
with their percentage interests in MeriStar Partnership.

REDEMPTION

FelCor Partnership. Except as provided below, each holder of our common
units has the right to require us to redeem those units for either cash or
shares of FelCor common stock, at the election of FelCor. A holder of our common
units that exercises the unit redemption right is entitled to receive one share
of FelCor common stock for each unit redeemed or, at the option of FelCor, cash
in an amount equal to the market value of the FelCor common stock otherwise
receivable. The market value of a share of FelCor common stock for this purpose
will be equal to the average of the daily market price of a share of FelCor
common stock on the NYSE for the ten consecutive trading days before the day on
which the redemption notice was received by FelCor. No redemption will occur if
the issuance of shares of FelCor common stock would result in any of several
events for FelCor, as described above under the caption "Description of the
Partnership Agreement and Units of FelCor Partnership -- Outstanding Units of
FelCor Partnership -- Common Units."

A notice of redemption delivered to FelCor will serve to exercise the
redemption right. A unitholder may not exercise the redemption right for fewer
than 100 common units, or if the unitholder holds fewer than 100 common units,
all of the common units held by that unitholder. The redeeming partner will have
no right to receive any distributions paid after the redemption date with
respect to those units redeemed.

MeriStar Partnership limited partners who receive our common units in the
partnership merger will be permitted to exercise the unit redemption right at
any time after the partnership merger. Our series C preferred units will have
the same redemption rights as our common units. Our series D preferred units
will be mandatorily redeemable at our election at a redemption price of $22.16
per unit plus all accrued and unpaid distributions on the units to the date of
redemption, without interest. The holders of our series D preferred units may
also elect on one occasion only after April 1, 2004 to require us to redeem
their units at the same redemption price, and this redemption will be treated
like the standard redemption except that the unitholders, not FelCor, determine
whether they will receive cash or shares of FelCor common stock in exchange for
their units.

MeriStar Partnership. Subject to some limitations, each holder of limited
partnership units of MeriStar Partnership, other than class D units, has the
right to exchange all or a portion of those units for cash or, at the option of
MeriStar, common stock of MeriStar, and to sell all or a portion of the
remainder of those partnership units to MeriStar at any time before January 1,
2047 on the terms and subject to the conditions set forth in exchange rights
agreements among MeriStar and the particular limited partners. These agreements
may be amended from time to time.

In general, the exchange rights of the holders of MeriStar Partnership
common units and class C units are substantially the same as the redemption
rights as our common unitholders have, except that MeriStar Partnership common
and class C unitholders may not exercise their exchange rights with respect to
fewer than 1,000 units. You should consult the exchange rights agreement to
which you are a party to determine the nature of your existing exchange rights.

MeriStar Partnership class D preferred units are mandatorily redeemable at
the election of MeriStar Partnership at a redemption price of $22.16 per unit
plus all accrued and unpaid distributions on the units to the date of
redemption, without interest. The holders of the class D preferred units may
also elect on one occasion only after April 1, 2004 to require MeriStar
Partnership to redeem their units at the same redemption price, and this
redemption will be treated like the standard exchange rights except that the
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unitholders, not MeriStar, determine whether they will receive cash or shares of
MeriStar common stock in exchange for their units.

TRANSFERS

FelCor Partnership. FelCor generally may not transfer any of its general
partnership interest except in limited circumstances specified in our
partnership agreement. FelCor may transfer from time to time any or all of its
partnership interests to one or more of its wholly owned subsidiaries, as long
as it retains at all times a one percent general partnership interest and FelCor
and its wholly owned subsidiaries own in the aggregate at least 20% of the
partnership interests.

Limited partners may transfer their partnership units without FelCor's
consent unless:

- the transfer would result in us being treated as an association taxable
as a corporation;

- the transfer is effected through an "established securities market" or
"secondary market" within the meaning of Section 7704 of the Internal
Revenue Code;

- the transfer would result in a violation of federal or state securities
laws or rules; or

- the transfer would affect our qualification as a partnership under
Delaware law.

Transferees of units may not, however, be admitted as limited partners without
FelCor's consent, which FelCor may withhold in its sole discretion. All of our
units are represented by physical certificates. To effect a unit transfer, a
partner must surrender to FelCor the certificate representing the units to be
transferred, together with an application for transfer signed by the transferee.

MeriStar Partnership. MeriStar may not transfer or withdraw its general
partnership interest or transfer its limited partnership interests except in
limited circumstances specified in the partnership agreement of MeriStar
Partnership.

A limited partner may transfer all or any portion of its partnership
interest to any transferee without the consent of MeriStar, unless:

- the transfer, in the opinion of counsel to MeriStar Partnership, would:

- require the filing of a registration statement under the Securities Act
or would otherwise violate the federal securities laws;

- change the tax status of the MeriStar Partnership to a corporation,

- cause MeriStar Partnership to become, with respect to an employee
benefit plan subject to Title I of ERISA, a "party in interest" or a
"disqualified person";

- cause any portion of the assets of MeriStar Partnership to be assets of
any employee benefit plan subject to Section 2510.3-101 of the
regulations of the U.S. Department of Labor; or

- subject MeriStar Partnership to regulation under the Investment Company
Act of 1940, the Investment Advisers Act of 1940 or ERISA;

- the transfer is a sale or exchange, and the transfer would, when
aggregated with all other sales and exchanges during the 12-month period
ending on the date of the transfer, result in 50% or more of the
interests in MeriStar Partnership's capital and profits to be sold or
exchanged during that 12-month period;

- the transfer is effected through an "established securities market" or a
"secondary market" within the meaning of Section 7704 of the Internal
Revenue Code; and

- the transfer is made to a lender to MeriStar Partnership or to a person
or entity that is related to any lender to MeriStar Partnership whose
loan is a nonrecourse liability.

Partnership units in MeriStar Partnership are generally not represented by
certificates.
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AMENDMENT OF THE PARTNERSHIP AGREEMENTS

FelCor Partnership. Except as described below, our partnership agreement
may only be amended by a proposal made by FelCor as general partner and with the
approval of limited partners holding a majority of the outstanding partnership
units, including units owned by FelCor. FelCor, as the general partner, may,
without the approval of any limited partners or assignees, amend any provision
of the partnership agreement to reflect:

- a change in the name of the partnership;

- the admission, substitution, withdrawal or removal of partners in
accordance with the partnership agreement;

- the designations, rights, powers, duties and preferences of any new class
or series of units of partnership interest;

- any change reasonable or necessary, in the discretion of FelCor, that is
appropriate to qualify us as a limited partnership or advisable to ensure
that we are not taxable as a corporation or an entity for federal income
purposes; and

- any change that does not adversely affect the limited partners in any
material respect, is necessary to comply with applicable laws then in
effect, is appropriate to facilitate the trading of the partnership units
or is required by the intent of the partnership agreement.

FelCor may not, however, amend any provisions of our partnership agreement
that require the approval of a percentage of the outstanding partnership units
to effect a reduction in the votes necessary to approve that action without the
consent or vote of holders of at least that percentage of outstanding
partnership units, including units owned by FelCor. An amendment that materially
and adversely affects the distribution, conversion or liquidation rights and
preferences of any type or class of partnership unit in relation to other types
or classes requires the approval of at least a majority of the affected class or
type, excluding those held by FelCor. Additionally, FelCor may not amend the
partnership agreement to increase the obligations of a limited partner without
the limited partner's consent.

MeriStar Partnership. Except as described below, the partnership agreement
of MeriStar Partnership may only be amended with the approval of MeriStar as
general partner and the approval of limited partners holding a majority of the
MeriStar Partnership units, including MeriStar Partnership units owned by
MeriStar.

MeriStar has the power, without the consent of the limited partners, to
amend the partnership agreement of MeriStar Partnership as may be required:

- to add to the obligations of MeriStar or surrender any right or power
granted to MeriStar or any affiliate of MeriStar for the benefit of the
limited partners;

- to reflect the admission, substitution, termination or withdrawal of
partners in compliance with the partnership agreement of MeriStar
Partnership;

- to set forth the designations, rights, powers, duties and preferences of
any additional partnership interests;

- to reflect any change that does not affect the limited partners in any
material respect, or to cure any ambiguity, to correct or supplement any
provision in the partnership agreement of MeriStar Partnership, or to
make other changes with respect to matters arising under the partnership
agreement of MeriStar Partnership that will not be inconsistent with any
other provisions of the partnership agreement or applicable law; and

- to satisfy any requirements, conditions or guidelines contained in any
order, directive, opinion, ruling or regulation of a federal, state or
local law.

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The consent of each adversely affected limited partner is necessary for any
amendment that would:

- convert a limited partner's interest into a general partner's interest;

- modify the limited liability of a limited partner in a manner adverse to
the partner;

- cause the termination of the MeriStar Partnership prior to the times set
forth in the partnership agreement;

- alter the right of a limited partner to receive distributions,
liquidation amounts or allocations as described in the MeriStar
Partnership Agreement; or

- amend any part of the provision of the partnership agreement dealing with
amendments.

SALE OF SUBSTANTIALLY ALL OF THE PARTNERSHIP ASSETS

FelCor Partnership. Except in connection with dissolution and liquidation
of us, a sale, exchange, or other disposition of all or substantially all of our
assets in a single transaction or a series of related transactions will require
the approval of 80% of our outstanding units including units held directly or
indirectly by FelCor.

MeriStar Partnership. The partnership agreement of MeriStar Partnership
permits MeriStar, as general partner, to cause MeriStar Partnership to engage in
a sale of all or substantially all of MeriStar Partnership's assets without the
consent of the limited partners.

MEETINGS

FelCor Partnership. Meetings of the partners may be called at any time by
FelCor. Notice of any meeting is required to be mailed to all partners not less
than 10 days nor more than 60 days before the date of the meeting. Partners may
vote in person or by written consent submitted to FelCor. Whenever the vote or
consent of partners is permitted or required under our partnership agreement,
this vote or consent may be given at a meeting of partners. Except as otherwise
expressly provided in our partnership agreement, the consent of a majority of
the percentage interests held by limited partners, including limited partnership
interests held by FelCor, controls. Any action required or permitted to be taken
at a meeting of the partners may be taken without a meeting if written consents
to the action taken are delivered to FelCor and are signed by the partners
holding at least the percentage of partnership units required by our partnership
agreement to authorize the action.

MeriStar Partnership. Meetings of the partners may be called by MeriStar
and must be called upon receipt of a written request by limited partners holding
25% or more of the partnership interests. The request must state the nature of
the business to be transacted. Notice of any meeting is required to be given to
all partners not less than seven days nor more than 30 days before the date of
the meeting. Partners may vote in person or by proxy at the meeting. Whenever
the vote or consent of limited partners is permitted or required under the
partnership agreement of MeriStar Partnership, this vote or consent may be given
at a meeting of partners or by written consent. Except as otherwise expressly
provided in the MeriStar Partnership agreement, the affirmative vote or consent
of a majority of the percentage interests held by partners, including limited
partnership interests held by MeriStar, controls.

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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

OVERVIEW

The following discussion describes the material federal income tax
consequences of the partnership merger and the subsequent ownership and
disposition of our units by former MeriStar Partnership unitholders, other than
FelCor, as successor to MeriStar. This discussion assumes that we and MeriStar
Partnership will be treated as partnerships for federal income tax purposes and
not as corporations, associations taxable as corporations, or publicly traded
partnerships taxable as corporations. The information in this section is based
on current provisions of the Internal Revenue Code of 1986, or the Code,
current, temporary, and proposed Treasury regulations thereunder, the
legislative history of the Code, and current administrative interpretations and
practices of the Internal Revenue Service, including its practices and policies
as endorsed in private letter rulings, which are not binding on the Internal
Revenue Service except with respect to the taxpayer that receives that ruling,
and court decisions. Future legislation, Treasury regulations, administrative
interpretations, or court decisions, which could apply retroactively, could
affect the accuracy of statements in this prospectus with respect to the
transactions entered into or contemplated prior to the effective date of those
changes. No attempt has been made to comment on all U.S. federal income tax
consequences of the partnership merger and related transactions that may be
relevant to unitholders of MeriStar Partnership who receive our units in the
partnership merger. Unitholders of MeriStar Partnership may not all be affected
in the same manner by the tax considerations discussed below because of their
different tax situations.

Hunton & Williams, special tax counsel to FelCor, and Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to MeriStar, have reviewed this discussion and are
of the opinion that it fairly describes the U.S. federal income tax consequences
that are likely to be material to a MeriStar Partnership unitholder as a result
of the partnership merger. Each of the opinions discussed in this paragraph has
been filed as an exhibit to the registration statement of which this prospectus
forms a part. These opinions are based on various assumptions, including
assumptions regarding the accuracy of factual representations made by FelCor and
MeriStar and the parties to the merger agreement taking actions contemplated by,
and otherwise satisfying their obligations under, the merger agreement, are
subject to limitations, and are not binding on the Internal Revenue Service or
any court. The Internal Revenue Service may challenge part or all of those
opinions and such a challenge could be successful.

THE FOLLOWING DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF
UNITHOLDERS THAT ARE SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX
LAWS, SUCH AS INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS,
ESTATES, TRUSTS, TAX-EXEMPT ORGANIZATIONS, NON-U.S. PERSONS, PERSONS WHO DO NOT
HOLD THEIR MERISTAR PARTNERSHIP UNITS AS A CAPITAL ASSET, UNITHOLDERS WHOSE
UNITS WERE ACQUIRED AS COMPENSATION, AND OTHER PERSONS SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. IN ADDITION, THIS DISCUSSION MAY
NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU AS A HOLDER OF
FELCOR PARTNERSHIP UNITS. UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE TRANSACTIONS AND MATTERS REFERRED
TO IN THIS SECTION, INCLUDING THE STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF THE TRANSACTIONS AND MATTERS REFERRED TO IN THIS SECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

AS NOTED ABOVE, THIS DISCUSSION DOES NOT ADDRESS ANY TAX CONSEQUENCES TO
MERISTAR PARTNERSHIP UNITHOLDERS THAT ARE NON-U.S. PERSONS. SPECIAL TAX
CONSIDERATIONS MAY APPLY TO A MERISTAR PARTNERSHIP UNITHOLDER THAT ITSELF IS A
U.S. PARTNERSHIP OR LIMITED LIABILITY COMPANY BUT WHICH HAS NON-U.S. PERSONS AS
PARTNERS OR MEMBERS. ACCORDINGLY, ANY MERISTAR PARTNERSHIP UNITHOLDER THAT IS A
PARTNERSHIP OR LIMITED LIABILITY COMPANY AND WHOSE PARTNERS OR MEMBERS INCLUDE
NON-U.S. PERSONS SHOULD CONSULT WITH ITS OWN TAX ADVISOR REGARDING ANY SPECIAL
U.S. TAX CONSEQUENCES TO IT AND ITS PARTNERS OR MEMBERS THAT MAY RESULT FROM THE
TRANSACTIONS DESCRIBED IN THIS SECTION.

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TAX STATUS OF FELCOR PARTNERSHIP AND MERISTAR PARTNERSHIP

An entity that is classified as a partnership for federal income tax
purposes generally is not a taxable entity and incurs no federal income tax
liability. Instead, each partner is required to take into account its allocable
share of income, gains, losses, deductions, and credits of the partnership in
computing its federal income tax liability, even if no cash distributions are
made by the partnership to the partner. Distributions of money by a partnership
to a partner generally are not taxable unless the amount of the distribution
exceeds the partner's adjusted basis in its partnership interest.

An organization will be classified as a partnership, rather than as a
corporation, for federal income tax purposes if it:

- is treated as a partnership under Treasury regulations, effective January
1, 1997, relating to entity classification, referred to as the
"check-the-box regulations"; and

- either is not a "publicly traded" partnership or is classified as a
publicly traded partnership but satisfies the 90% passive income
exception described below.

Under the check-the-box regulations, an unincorporated entity with at least
two members may elect to be classified either as a partnership or as an
association taxable as a corporation. If this type of domestic entity fails to
make an election, it generally will be treated as a partnership for federal
income tax purposes. An entity that was treated as a partnership under the
Treasury regulations that were in effect prior to January 1, 1997 will retain
its partnership classification unless it has only one member. In addition, the
federal income tax classification of an entity that was in existence prior to
January 1, 1997 will be respected for all periods prior to January 1, 1997 if:

- the entity had a reasonable basis for its claimed classification;

- the entity and all members of the entity recognized the federal tax
consequences of any changes in the entity's classification within the 60
months prior to January 1, 1997; and

- neither the entity nor any member of the entity was notified in writing
by a taxing authority on or before May 8, 1996 that the classification of
the entity was under examination.

Each of MeriStar Partnership's predecessor and we reasonably claimed
partnership classification under the Treasury regulations relating to entity
classification in effect prior to January 1, 1997. In addition, we and MeriStar
Partnership intend to continue to be classified as partnerships for federal
income tax purposes and will not elect to be treated as associations taxable as
corporations under the check-the-box regulations.

A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market or the substantial equivalent thereof. A publicly traded partnership will
not, however, be treated as a corporation for any taxable year if 90% or more of
the partnership's gross income for that year consists of passive-type income,
including real property rents, which includes rents that would be qualifying
income for purposes of the 75% gross income test, with modifications that
generally make it easier for the rents to qualify for the 90% passive income
exception, gains from the sale or other disposition of real property, interest,
and dividends. That exception from taxation as a corporation is referred to as
the 90% passive income exception.

Treasury regulations referred to as the PTP regulations provide limited
safe harbors from the definition of a publicly traded partnership. Under one of
those safe harbors, referred to as the private placement exclusion, interests in
a partnership will not be treated as readily tradable on a secondary market or
the substantial equivalent thereof if all interests in the partnership were
issued in a transaction or transactions that were not required to be registered
under the Securities Act of 1933 and the partnership does not have more than 100
partners at any time during the partnership's taxable year. In determining the
number of partners in a partnership, a person owning an interest in a
partnership, grantor trust, or S corporation that owns an interest in the
partnership is treated as a partner in the partnership only if substantially all
of the value of the owner's interest in the entity is attributable to the
entity's direct

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or indirect interest in the partnership and a principal purpose of the use of
the entity is to permit the partnership to satisfy the 100-partner limitation.
After the partnership merger, MeriStar Partnership will qualify for the private
placement exclusion. We will not qualify for the private placement exclusion
because we will have more than 100 partners and our units issued to the MeriStar
Partnership unitholders will have been registered under the Securities Act of
1933 according to this prospectus. As a result, there is a substantial risk that
we will be classified as a publicly traded partnership. However, even if we are
classified as a publicly traded partnership, we will not be treated as a
corporation under the PTP regulations because we will be eligible for the 90%
passive income exception.

Assuming that we are classified as a publicly traded partnership after the
partnership merger, our unitholders will not be able to use losses from other
passive activities to offset their share of our income and gains. In addition,
our unitholders only will be able to use their share of our losses, other than a
loss incurred upon a complete disposition of our units, to offset their
allocable share of our income and gains, and will not be able to use the losses
to offset their income and gains from other passive activities.

We have not requested, and do not intend to request, a ruling from the
Internal Revenue Service that we and/or MeriStar Partnership will be treated as
a partnership for federal income tax purposes. Instead, Hunton & Williams,
special tax counsel to FelCor, will deliver an opinion to FelCor and MeriStar at
closing stating that we have been since our formation, and continue to be,
treated for federal income tax purposes as a partnership and not as a
corporation or an association taxable as a corporation. In addition, Paul Weiss,
Rifkind, Wharton & Garrison will deliver an opinion to FelCor and MeriStar at
closing stating that MeriStar Partnership has been since its formation, and
continues to be, treated for federal income tax purposes as a partnership and
not as a corporation or an association taxable as a corporation. The obligation
of FelCor and MeriStar to complete the merger is subject to the non-waivable
condition that each of Hunton & Williams and Paul Weiss deliver these opinions
to FelCor and MeriStar. These opinions will be subject to limitations and will
be based on various assumptions, including assumptions regarding the accuracy of
factual representations made by FelCor and MeriStar and the parties to the
merger agreement taking actions contemplated by, and otherwise satisfying their
obligations under, the merger agreement. Unlike a tax ruling, an opinion of
counsel is not binding upon on the Internal Revenue Service, and the Internal
Revenue Service could challenge the status of either FelCor Partnership or
MeriStar Partnership as a partnership for federal income tax purposes. If that
challenge were sustained by a court, FelCor Partnership or MeriStar Partnership,
as applicable, would be treated as a corporation for federal income tax
purposes, as described below. The opinions of Hunton & Williams and Paul Weiss
will be based on existing law, which to a great extent consists of
administrative and judicial interpretation. Subsequent administrative or
judicial changes could modify the conclusions expressed in the opinions.

If for any reason we were taxable as a corporation, rather than as a
partnership, for federal income tax purposes, most, if not all, of the tax
consequences described below would not apply and distributions to our
unitholders could be materially reduced. If either MeriStar Partnership or we
were taxable as a corporation, the items of income and deduction of MeriStar
Partnership or us would not pass through to our partners, and our partners would
be treated as stockholders for tax purposes. MeriStar Partnership or we, as
applicable, would be required to pay income tax at corporate rates on our net
income, and distributions to our partners would constitute dividends that would
not be deductible in computing the partnership's taxable income. Moreover, if
either partnership were taxable as a corporation, FelCor would not be able to
qualify as a REIT and would be taxable as a regular corporation. This likely
would have the effect of reducing the value of FelCor common stock, which, in
turn, would adversely affect the value of our units because our units are
redeemable for shares of FelCor common stock or their cash equivalent,
generally, subject to specified exceptions at the election of FelCor.

TAX CONSEQUENCES OF THE PARTNERSHIP MERGER TO MERISTAR PARTNERSHIP UNITHOLDERS

In the partnership merger, our wholly-owned subsidiary will be merged with
and into MeriStar Partnership, with MeriStar Partnership surviving as our
subsidiary. After the partnership merger, all of the partnership interests in
MeriStar Partnership will be owned, directly or indirectly through intervening
entities, including a taxable REIT subsidiary, by us. Holders of MeriStar
Partnership common units other
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than FelCor and its subsidiaries, will receive, for each MeriStar Partnership
common unit issued and outstanding immediately before the partnership merger,
$4.60 in cash and 0.784 of our common units. Holders of MeriStar Partnership
Class C preferred units will receive, for each MeriStar Partnership Class C
preferred unit issued and outstanding immediately before the partnership merger,
$4.60 in cash and 0.784 of our Series C preferred units. Holders of MeriStar
Partnership Class D preferred units will receive, for each MeriStar Partnership
Class D preferred unit issued and outstanding immediately before the partnership
merger, one of our Series D preferred units. Holders of MeriStar Partnership
profits-only partnership units will receive, for each MeriStar Partnership
profits-only partnership unit issued and outstanding immediately before the
partnership merger other than unvested units, $4.60 in cash and 0.784 of our
common units. Cash will be paid instead of issuing fractional units.

Taxable Gain or Loss

In the partnership merger, each MeriStar Partnership unitholder will be
treated for tax purposes as contributing its MeriStar Partnership units to us in
exchange for our units and, where applicable, cash in a transaction described in
section 721 of the Internal Revenue Code. In general, under section 721 of the
Internal Revenue Code, no gain or loss is recognized by a partnership or any of
its partners in the case of a contribution of property to the partnership in
exchange for an interest in the partnership unless one of several exceptions
applies. The relevant exceptions to the general rule of nonrecognition are
discussed below.

A holder of MeriStar Partnership units generally will not recognize taxable
gain or loss at the time of the partnership merger unless:

- the MeriStar Partnership unitholder receives a distribution of cash in
the partnership merger, including a deemed cash distribution resulting
from a net reduction in the unitholder's share of partnership liabilities
in excess of the unitholder's adjusted tax basis in its units;

- the contribution of MeriStar Partnership units to us is treated in whole
or in part as a "disguised sale" of the MeriStar Partnership units under
section 707 of the Internal Revenue Code;

- prior to the partnership merger, the MeriStar Partnership unitholder
guaranteed a portion of the indebtedness of MeriStar Partnership but,
after the partnership merger, the unitholder does not guarantee an
equivalent amount of our indebtedness or indebtedness of MeriStar
Partnership that remains outstanding after the partnership merger; or

- the MeriStar Partnership unitholder is required to recognize income or
gain under the "at-risk recapture" rules.

Those potential gain recognition situations are discussed below.

Even if a holder of MeriStar Partnership units does not recognize taxable
gain at the time of the partnership merger, the occurrence of subsequent events
could cause the unitholder to recognize all or part of the gain that was
deferred either through the original contribution of assets to MeriStar
Partnership or through the partnership merger. See "-- Effect of Subsequent
Events on Holders of FelCor Partnership Units" below.

Receipt of Cash

If a partner receives cash from a partnership in a contribution
transaction, the transaction will be treated as a part contribution, part sale
transaction in which the partner will be treated as having sold a part of the
contributed property to the partnership in exchange for the cash received. The
partner generally will recognize gain or loss to the extent that the transaction
is treated as a disguised sale, as described below. To the extent that the
transaction is not treated as a disguised sale, the cash received in the
transaction should be treated as a distribution that is not part of a disguised
sale. The partner will recognize gain with respect to that distribution to the
extent that the amount of the distribution exceeds the partner's adjusted tax
basis in its partnership interest immediately before the distribution.

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Each MeriStar Partnership unitholder who receives cash in exchange for its
MeriStar Partnership units, including cash received instead of a fractional
FelCor Partnership unit, will be treated as having sold part of its MeriStar
Partnership units to us in exchange for the cash received. A MeriStar
Partnership unitholder will recognize gain or loss to the extent that its
contribution of units is treated as a disguised sale, as described in
"-- Disguised Sale Upon Receipt of Cash" below. To the extent that the
unitholder's contribution of units is not treated as a disguised sale, the cash
received in the partnership merger should be treated as a distribution by us, in
which case the MeriStar Partnership unitholder will recognize gain to the extent
that the amount of the distribution exceeds its adjusted tax basis in its FelCor
Partnership units immediately before the distribution. As described in
"-- Disguised Sale Upon Receipt of Cash" below, however, the Internal Revenue
Service may assert that a greater amount of the gain should be recognized.

Disguised Sale Upon Receipt of Cash

The receipt of cash by a MeriStar Partnership unitholder in the partnership
merger may cause the "disguised sale" rules to apply with respect to the
contribution of MeriStar Partnership units to us in the partnership merger.
Section 707 of the Code and the applicable Treasury regulations thereunder,
which are referred to as the disguised sale rules, generally provide that a
disguised sale of property has occurred if a partner contributes property to a
partnership and the partnership transfers money or other consideration to the
partner. Under the disguised sale rules, a contribution to a partnership and any
transfer to a partner that occur within two years of each other are presumed to
be a disguised sale unless the facts and circumstances clearly establish that
the contribution and transfer do not constitute a disguised sale or an exception
to disguised sale treatment applies.

A MeriStar Partnership unitholder who receives cash in the partnership
merger may be deemed to have sold all or a portion of its MeriStar Partnership
units to us in a fully taxable transaction. Under the "debt-financed transfer"
provisions of the disguised sale rules, if a partner transfers property to a
partnership, the partnership incurs a liability, and all or a portion of the
proceeds of that liability are transferred to the partner within 90 days of
incurring the liability, the distribution to the partner is taken into account
for purposes of the disguised sale rules only to the extent that the amount of
money or the fair market value of the other property transferred to the partner
exceeds the partner's allocable share of the partnership liability. The
remainder of the distribution generally would be treated as a distribution that
is not part of a disguised sale, as described below.

For purposes of the disguised sale rules, a partner will be allocated a
share of a recourse liability of a partnership to the extent that the partner,
or a person related to the partner, bears the economic risk of loss for the
liability. A partner generally will be treated as bearing the economic risk of
loss for a liability to the extent that the partner guarantees, or agrees to
reimburse the obligor or guarantor with respect to, indebtedness of the
partnership. A partner will be allocated a share of a nonrecourse liability of a
partnership equal to the partner's share of the partnership's excess nonrecourse
liabilities. We allocate our excess nonrecourse liabilities among our partners
in accordance with their respective percentage interests in us.

Immediately after and in connection with the partnership merger, we or our
wholly-owned subsidiary will incur a recourse liability or increase an existing
recourse liability. To the extent that we increase an existing recourse
liability, the increase should be treated as a liability separate from the
existing liability for purposes of the disguised sale rules. There can be no
assurance, however, that the Internal Revenue Service would not assert
successfully that other increases in the existing liability that occur close in
time to the increase at issue should be aggregated and treated as one liability
for purposes of the disguised sale rules. A portion of the proceeds of the
liability will be distributed to the former MeriStar Partnership unitholders in
payment of the $4.60 per unit of cash consideration in the partnership merger.

We will provide to each MeriStar Partnership unitholder the opportunity,
prior to the closing of the partnership merger, to agree to reimburse FelCor
with respect to a portion of the debt incurred or increased equal to the amount
of cash consideration to be received by that unitholder. This mechanism is
referred to as a "bottom guaranty." If a unitholder elects to agree to reimburse
FelCor with respect to a

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portion of the debt, we will maintain outstanding at least that portion of the
debt until the earlier of five years after the closing of the partnership merger
or the date on which the unitholder has redeemed or disposed of all of our units
received by the unitholder in the partnership merger.

A former MeriStar Partnership unitholder that enters into a bottom guaranty
with respect to a portion of our debt that is at least equal to the amount of
cash consideration to be received by that unitholder in the partnership merger
should not recognize gain under the disguised sale rules because the cash
distributed to the unitholder will not exceed the unitholder's allocable share
of the related liability. Instead, the cash received in the partnership merger
should be treated as a distribution by us, in which case the unitholder will
recognize gain to the extent that the amount of the distribution exceeds the
unitholder's adjusted tax basis in his FelCor Partnership units immediately
before the distribution. There can be no assurance, however, that the bottom
guaranties will be effective to prevent a disguised sale and, therefore, to
defer taxable gain that a former MeriStar Partnership unitholder otherwise would
recognize at the time of the partnership merger. Upon the termination of the
term of the bottom guaranty, a MeriStar Partnership unitholder will be treated
as receiving a deemed cash distribution to the extent that its share of our
liabilities is reduced. A MeriStar Partnership unitholder will recognize gain to
the extent that the deemed cash distribution exceeds the unitholder's adjusted
tax basis in our units.

A former MeriStar Partnership unitholder that elects not to enter into a
bottom guaranty with respect to a portion of our debt will recognize gain upon
the receipt of the cash consideration in the partnership merger because the
unitholder will not be allocated any share of the liability incurred to fund the
cash consideration. As a result, the unitholder will be distributed cash that
exceeds its allocable share of the liability. Accordingly, the distribution of
the cash proceeds will be taken into account for purposes of the debt-financed
transfer provisions of the disguised sale rules, and a disguised sale will be
treated as occurring, to the extent of the cash distributed to the unitholder.
The disguised sale would be treated as a sale for all purposes of the Code.

As a result of the disguised sale, a MeriStar Partnership unitholder will
be required to recognize gain equal to the excess of the sum of the cash
distribution that is taken into account for purposes of the disguised sale rules
and the portion of the unitholder's share of MeriStar Partnership liabilities
allocable to the units treated as sold over the unitholder's adjusted tax basis
in the portion of its MeriStar Partnership units that the unitholder is treated
as having sold. The portion of its MeriStar Partnership units that a unitholder
will be treated as having sold should be equal to a fraction, the numerator of
which is the amount of cash received in the partnership merger, other than any
cash that is treated as a distribution that is not part of a disguised sale, and
the denominator of which is the amount of cash, other than any cash that is
treated as a distribution that is not part of a disguised sale, plus the value
of our units received in the partnership merger. The denominator would also
include any deemed cash distribution that is treated as a part of a disguised
sale as described in "-- Disguised Sale Upon Deemed Receipt of Cash" below. A
MeriStar Partnership unitholder's aggregate adjusted tax basis in its MeriStar
Partnership units should be allocated to the portion of those units that the
unitholder is deemed to sell to us based on the fraction determined above.
Because the law is not entirely clear regarding the allocations of units sold
and adjusted tax basis in part sale, part contribution transactions, it is
possible that the Internal Revenue Service will not respect the allocation of
MeriStar Partnership units sold and adjusted tax basis described in this
paragraph.

The amount of cash received by a MeriStar Partnership unitholder in the
partnership merger that is not taken into account for purposes of the disguised
sale rules, or the amount of the cash that equals the unitholder's allocable
share of the liability, should be treated as a distribution by us that is not
part of a disguised sale. In that case, a MeriStar Partnership unitholder would
recognize gain on the distribution to the extent that the amount of the
distribution exceeds the unitholder's adjusted tax basis in its FelCor
Partnership units immediately before the distribution. As described below, it is
possible that the Internal Revenue Service could contend otherwise and that the
Internal Revenue Service would prevail with that contention.

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Application of the disguised sale and debt-financed transfer rules to
transactions of the kind contemplated by the partnership merger is unclear.
Although the foregoing description is based on the relevant statutory and
regulatory provisions, the Internal Revenue Service may assert that a greater
portion, or all, of the cash received in the partnership merger should be
treated as having been received in a disguised sale. It is possible that the
Internal Revenue Service could be successful with that assertion. In that case,
a former MeriStar Partnership unitholder could be required to recognize more of
the deferred gain associated with its MeriStar Partnership units that is not
otherwise recognized in the partnership merger. Each MeriStar Partnership
unitholder is urged to consult its own tax advisor regarding the application of
the disguised sale rules to the unitholder in the partnership merger.

Character of Gain

In general, any gain or loss recognized on the sale of MeriStar Partnership
units will be capital gain or loss and will be long-term capital gain or loss if
the unitholder has held its MeriStar Partnership units for more than one year.
However, any portion of the MeriStar unitholder's recognized gain on the sale
that is attributable to "unrealized receivables" of MeriStar Partnership, as
defined in section 751 of the Code, will give rise to ordinary income.
Unrealized receivables include, to the extent not previously included in
MeriStar Partnership's income, any rights to payment for services rendered or to
be rendered. Unrealized receivables also include amounts attributable to prior
depreciation deductions that would be subject to recapture as ordinary income if
MeriStar Partnership had sold its assets at their fair market value at the time
of the partnership merger.

A unitholder generally must hold its units for more than one year for gain
or loss derived from the sale or exchange of those units to be treated as
long-term capital gain or loss. On June 7, 2001, President Bush signed into law
the Economic Growth and Tax Relief Reconciliation Act of 2001. That legislation
reduces the highest marginal individual income tax rate of 39.6% to 39.1% for
the period from July 1, 2001 to December 31, 2001, to 38.6% for the period from
January 1, 2002 to December 31, 2003, to 37.6% for the period from January 1,
2004 to December 31, 2005, and to 35% for the period from January 1, 2006 to
December 31, 2010. The maximum tax rate on long-term capital gain applicable to
individuals, trusts, and estates generally is 20% for sales and exchanges of
assets held for more than one year, but is 25% to the extent that the gain is
attributable to specific types of previously taken depreciation deductions. The
applicable Treasury regulations apply the 25% rate to a sale of an interest in a
pass-through entity, such as a partnership, to the extent that the gain realized
on the sale of the interest is attributable to prior depreciation deductions by
the partnership that have not otherwise been recaptured as ordinary income.
Accordingly, any gain on the exchange of MeriStar Partnership units held for
more than one year could be treated partly as long-term capital gain subject to
a 20% tax rate, partly as gain from the sale of depreciable real property
subject to a 25% tax rate to the extent attributable to prior depreciation
deductions by MeriStar Partnership that have not been otherwise recaptured as
ordinary income, and partly as ordinary income to the extent attributable to
unrealized receivables. Thus, gain recognized by non-corporate unitholders upon
the partnership merger may be subject to a combination of three different tax
rates. In addition, the characterization of income as capital gain or ordinary
income may affect the deductibility of capital losses. A non-corporate
unitholder generally may deduct capital losses not offset by capital gains
against its ordinary income only up to a maximum annual amount of $3,000. A
non-corporate unitholder may carry forward unused capital losses indefinitely. A
corporate unitholder must pay tax on its net capital gain at ordinary corporate
rates and may deduct capital losses only to the extent of capital gains, with
unused losses being carried back three years and forward five years. Each
MeriStar Partnership unitholder who receives cash in exchange for its MeriStar
Partnership units in the partnership merger, including cash received instead of
a fractional FelCor Partnership unit, should consult its own tax advisor
regarding the application of the capital gains tax rates to its exchange of
MeriStar Partnership units.

Reduction in Share of Partnership Liabilities/Deemed Cash Distribution

If a MeriStar Partnership unitholder's share of partnership liabilities is
reduced as a result of the partnership merger, the unitholder will be considered
to receive a deemed cash distribution in connection

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with the partnership merger and, accordingly, the MeriStar Partnership
unitholder could recognize taxable gain at the time of the partnership merger.
The MeriStar Partnership unitholder will recognize gain only to the extent that
the deemed cash distribution exceeds the MeriStar Partnership unitholder's
adjusted tax basis in our units received in the partnership merger.

In order to determine whether a MeriStar Partnership unitholder's share of
liabilities is reduced as a result of the partnership merger, the unitholder's
share of MeriStar Partnership's liabilities immediately before the partnership
merger will be compared to the unitholder's share of our liabilities immediately
after the partnership merger. Any reduction in a MeriStar Partnership
unitholder's share of liabilities will be considered to result in a deemed cash
distribution from us to that unitholder, which will be taxable to the extent
that it exceeds the MeriStar Partnership unitholder's adjusted tax basis in our
units received in the partnership merger. Each MeriStar Partnership unitholder
is urged to consult its own tax advisor and take into account its own particular
circumstances in order to assess the potential impact of a reduction of the
unitholder's partnership liabilities and the resulting deemed receipt of a cash
distribution as a result of the partnership merger.

Under section 752 of the Code and the relevant Treasury regulations, the
determination of a partner's share of partnership liabilities depends on whether
the liabilities are "recourse" or "nonrecourse." A partnership liability is a
recourse liability to the extent that any partner, or a person related to any
partner, bears the economic risk of loss for that liability. A partnership
liability is a nonrecourse liability to the extent that no partner, and no
person related to any partner, bears the economic risk of loss for that
liability.

Recourse Liabilities. A former MeriStar Partnership unitholder will not
have any share of our recourse liabilities unless, and only to the extent that,
the unitholder guarantees, or agrees to reimburse a guarantor or obligor for
amounts payable with respect to, our indebtedness or indebtedness of MeriStar
Partnership that remains outstanding following the partnership merger, and that
obligation is effective for federal income tax purposes to cause the former
MeriStar Partnership unitholder to be considered to bear the risk of loss with
respect to that liability. Some of the liabilities of MeriStar Partnership,
including its line of credit, will be repaid in full in connection with the
partnership merger.

Bottom Guarantees. There are existing agreements between MeriStar
Partnership and MeriStar Partnership unitholders under which MeriStar
Partnership agreed to maintain a specific debt balance and the unitholders
guaranteed, or agreed to reimburse the guarantor or other obligor with respect
to, MeriStar Partnership's debt to the extent of, and in proportion to, the debt
balance. This guaranty mechanism is referred to as a "bottom guaranty." MeriStar
Partnership unitholders will continue to have their rights under these bottom
guaranty agreements after the partnership merger. In addition, as described
above under "-- Disguised Sale Upon Receipt of Cash," we will provide to each
MeriStar Partnership unitholder the opportunity, prior to the closing of the
partnership merger, to agree to reimburse FelCor with respect to a portion of
the debt incurred or increased to fund the payment of the cash consideration to
the MeriStar Partnership unitholders in the partnership merger. If a unitholder
elects to agree to reimburse FelCor with respect to a portion of the debt, we
will agree to maintain outstanding at least that portion of the debt until the
earlier of five years after the closing of the partnership merger or the date on
which the unitholder has redeemed or disposed of all of our units received by
the unitholder in the partnership merger. We also will not sell, assign,
transfer, distribute, or otherwise dispose of the former MeriStar Partnership
unitholder's MeriStar Partnership units in a taxable transaction, which will not
include any transaction involving a non-taxable merger, consolidation, or other
reorganization of MeriStar partnership or us or a liquidation of MeriStar
Partnership, until the earlier of five years after the closing of the
partnership merger and the date on which the MeriStar Partnership unitholder no
longer owns at least 50% of our units issued to him in the partnership merger.
Each MeriStar Partnership unitholder is urged to consult its own tax advisor
regarding the tax consequences of the bottom guaranty agreements.

Nonrecourse Liabilities. A partner's share of partnership nonrecourse
liabilities equals the sum of:

- the partner's share of "partnership minimum gain" under section 704(b) of
the Code and the relevant Treasury regulations;
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- the partner's "section 704(c) minimum gain," which is the amount of any
taxable gain that would be allocated to the partner under section 704(c)
of the Code, or in the same manner as under section 704(c) of the Code in
connection with a revaluation of partnership property, if the partnership
disposed of all partnership property subject to one or more nonrecourse
liabilities of the partnership in full satisfaction of those liabilities
and for no other consideration in a taxable transaction; and

- the partner's share of "excess nonrecourse liabilities" that are not
allocable to the partners under one of the two preceding rules.

We allocate excess nonrecourse liabilities among our partners in accordance
with their respective percentage interests in us. However, a significant portion
of our liabilities, including our line of credit and senior notes, are recourse
obligations of FelCor and, therefore, will not be allocated to any unitholder
except to the extent that the unitholder agrees to reimburse FelCor for amounts
payable with respect to those liabilities. We have not made, and will not make,
any assurances to any of the former MeriStar Partnership unitholders as to
whether the unitholders will be allocated a sufficient amount of our nonrecourse
liabilities so that the unitholders' share of partnership liabilities will not
be reduced as a result of the partnership merger.

Disguised Sale Upon Deemed Receipt of Cash

As described above, if a MeriStar Partnership unitholder's share of
MeriStar Partnership liabilities is reduced as a result of the partnership
merger, the unitholder will be considered to receive a deemed cash distribution
in connection with the partnership merger and, accordingly, could recognize
taxable gain at the time of the partnership merger. Even if a MeriStar
Partnership unitholder does not recognize taxable gain as a result of the deemed
cash distribution because the distribution does not exceed the unitholder's
basis in our units, the reduction in the unitholder's share of liabilities could
be treated as a transfer of money from us to the unitholder that gives rise to a
disguised sale.

In addition, as described above under "-- Disguised Sale Upon Receipt of
Cash," we will provide to each MeriStar Partnership unitholder the opportunity
to agree to reimburse FelCor with respect to a portion of the debt incurred or
increased to fund the payment of the cash consideration to the MeriStar
Partnership unitholders in the partnership merger. If a unitholder elects to
agree to reimburse FelCor with respect to a portion of the debt, we will agree
to maintain outstanding at least that portion of the debt for a period of three
years.

For purposes of the disguised sale rules, either an assumption of
liabilities by the partnership or a transfer of properties subject to
liabilities is treated as a transfer of money or other property from the
partnership to the partner which may give rise to a disguised sale, even if that
transaction would not otherwise result in a taxable deemed cash distribution in
excess of the partner's basis. Under the disguised sale rules, however, in
connection with a contribution to a partnership that is not otherwise treated as
part of a disguised sale, neither the assumption of "qualified liabilities" by
the partnership nor the acquisition by the partnership of properties subject to
"qualified liabilities" is treated as part of a disguised sale. Under the
disguised sale rules, a qualified liability includes:

- any liability incurred more than two years prior to the earlier of the
transfer of the property or the date the partner agrees in writing to the
transfer, as long as the liability has encumbered the transferred
property throughout the two-year period;

- a liability that was not incurred in anticipation of the transfer of the
property to a partnership, but that was incurred by the partner within
the two-year period prior to the earlier of the date the partner agrees
in writing to transfer the property or the date the partner transfers the
property to a partnership and that has encumbered the transferred
property since it was incurred;

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- a liability that is traceable under applicable Treasury regulations to
capital expenditures with respect to the property; and

- a liability that was incurred in the ordinary course of the trade or
business in which property transferred to the partnership was used or
held, but only if all of the assets related to that trade or business are
transferred, other than assets that are not material to a continuation of
the trade or business.

A liability incurred within two years of the transfer is presumed to be
incurred in anticipation of the transfer unless the facts and circumstances
clearly establish that the liability was not incurred in anticipation of the
transfer. However, to the extent that a contributing partner incurs a
refinancing liability and the proceeds thereof are allocable under the Treasury
regulations to payments discharging all or part of any other liability of that
partner or of the partnership, the refinancing debt is considered the same as
the other liability for purposes of the disguised sale rules. Finally, if a
partner treats a liability incurred within two years of the transfer as a
qualified liability because the facts clearly establish that it was not incurred
in anticipation of the transfer, treatment must be disclosed to the Internal
Revenue Service on the partner's federal income tax return in the manner set
forth in the disguised sale rules.

It is unclear exactly how the qualified liability rules are applied when a
partner contributes an interest in a partnership, referred to as the "acquired
partnership," to another partnership, referred to as the "acquiring
partnership," in exchange for an interest in the acquiring partnership and the
only liabilities involved are those of the acquired partnership. The better view
appears to be to evaluate whether the liabilities of the acquired partnership
are qualified liabilities of that acquired partnership. MeriStar and MeriStar
Partnership believe that all liabilities of MeriStar Partnership at the time of
the partnership merger should be considered qualified liabilities. Accordingly,
if the contribution of units by a MeriStar Partnership unitholder is not
otherwise treated as part of a disguised sale, the partnership merger should not
result in the recognition of gain under the disguised sale rules to the
unitholder. It is possible, however, that the Internal Revenue Service could
contend otherwise and that the Internal Revenue Service could prevail with that
contention. In addition, if the contribution of units by a MeriStar Partnership
unitholder is treated, in whole or in part, as part of a disguised sale without
regard to our assumption of or taking subject to a qualified liability (i.e.,
under the debt-financed transfer rules described in "-- Disguised Sale Upon
Receipt of Cash), our assumption of or taking subject to the qualified liability
will be treated as a transfer of additional consideration to the transferring
unitholder. The amount of the qualified liability that will be treated as
additional consideration generally is equal to the unitholder's "net equity
percentage" of the qualified liability. A unitholder's net equity percentage
generally is the amount of consideration received by the unitholder, other than
relief from qualified liabilities, divided by the unitholder's net equity in the
property sold, as calculated under the disguised sale rules.

If a MeriStar Partnership unitholder has held its MeriStar Partnership
units for less than two years, it may be necessary to evaluate separately those
liabilities of MeriStar Partnership that were outstanding prior to the
unitholder's acquisition of its interest in MeriStar Partnership. Even under
that approach, however, those liabilities would appear to be qualified
liabilities either because the liabilities were traceable to a capital
expenditure, were incurred in the ordinary course of business of MeriStar
Partnership, or were not incurred in anticipation of the partnership merger. It
is possible, however, that the Internal Revenue Service could contend that the
liability is not a qualified liability and that the Internal Revenue Service
could prevail with that contention. Moreover, a MeriStar Partnership unitholder
who acquired its MeriStar Partnership units within two years of the partnership
merger and is relying on the argument that the liability was not incurred in
anticipation of the partnership merger would be required to disclose that
position to the Internal Revenue Service on its tax return in the manner
required in the disguised sale rules.

If a disguised sale is deemed to occur due to a MeriStar Partnership
unitholder's deemed receipt of cash in the partnership merger, the MeriStar
Partnership unitholder will be required to recognize gain equal to the excess of
the sum of the deemed cash distribution and any qualified liabilities allocable
to the MeriStar Partnership units that the unitholder is treated as having sold
over the unitholder's adjusted tax
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basis in the portion of the units that are treated as having been sold. A
MeriStar Partnership unitholder's aggregate adjusted tax basis in its MeriStar
Partnership units should be allocated to the portion of the units that the
unitholder is deemed to sell to us based on a fraction, the numerator of which
is the amount of the deemed cash distribution, and the denominator of which is
the amount of actual cash received other than cash that is treated as a
distribution that is not part of a disguised sale, plus the amount of the deemed
cash distribution, plus the value of our units received in the partnership
merger. Because the law is not entirely clear regarding the allocation of
adjusted tax basis in part sale, part contribution transactions, it is possible
that the Internal Revenue Service will not respect the allocation of adjusted
tax basis described in this paragraph. Each MeriStar Partnership unitholder is
urged to consult its own tax advisor regarding the application of the disguised
sale rules to the unitholder in the partnership merger.

Section 465(e) Recapture

Under section 465 of the Code, a taxpayer's ability to use losses to offset
taxable income is limited by rules that are referred to as the "at-risk" rules.
See "-- Tax Consequences of Ownership of FelCor Partnership Units After the
Partnership Merger -- Limitations on Deductibility of Losses; Treatment of
Passive Activities and Portfolio Income." In addition, the at-risk rules may
require a taxpayer to recapture losses that were previously taken by the
taxpayer with respect to an activity if the taxpayer's "at-risk amount" for the
activity falls below zero at the close of the taxable year. Losses are
recaptured by including the amount of the losses previously taken by the
taxpayer in the taxpayer's taxable income for the year of the recapture.

The identification and scope of an activity and the calculation of the
at-risk amount under the at-risk rules are highly complex and can involve
uncertainties. Generally, a taxpayer's at-risk amount for an activity is the
amount of the taxpayer's investment in the activity, which is increased by the
taxpayer's income from the activity and the taxpayer's share of the "qualified
nonrecourse financing," as defined in section 465(b)(6) of the Code, with
respect to the activity, and reduced by the taxpayer's losses and distributions
from the activity. It is possible that the partnership merger and/or the
repayment or refinancing of some outstanding indebtedness of MeriStar
Partnership or FelCor Partnership that constitutes qualified nonrecourse
financing, either at the time of or following the partnership merger, could
cause a MeriStar Partnership unitholder's at-risk amount to be reduced below
zero, which could, in turn, cause the MeriStar Partnership unitholder to
recognize taxable income as a result of the section 465(e) recapture provisions.
The definition of qualified nonrecourse financing is different from, and
sometimes more restrictive than, the definition of nonrecourse liabilities for
purposes of determining a partner's basis in its partnership interest, discussed
above. For example, debt that we have issued in the public debt markets may not
qualify as qualified nonrecourse financing even if it qualifies as a nonrecourse
liability. It is, therefore, possible that a former MeriStar Partnership
unitholder could incur a reduction in its share of qualified nonrecourse
financing that causes it to recognize taxable income under the section 465(e)
recapture rules even if the unitholder does not have a reduction in its
nonrecourse liabilities that causes it to recognize gain as the result of a
deemed cash distribution, as described above. In this regard, there can be no
assurance that the bottom guarantees discussed above under "-- Disguised Sale
Upon Receipt of Cash" will be effective to avoid gain under Section 465(e)
recapture rules. Each MeriStar Partnership unitholder is urged to consult its
own tax advisor regarding the application of the section 465(e) recapture rules
to the unitholder in the partnership merger.

Tax Basis of FelCor Partnership Units

A holder of MeriStar Partnership units will receive a tax basis in the
FelCor Partnership units received in the partnership merger equal to the
unitholder's adjusted tax basis in its MeriStar Partnership units that it is
treated as contributing to FelCor Partnership in the part sale, part
contribution transaction. The portion of its MeriStar Partnership units that a
unitholder will be treated as having contributed to us should be equal to a
fraction, the numerator of which is the value of our units received in the
partnership merger, and the denominator of which is the amount of actual and
assumed cash distributions that are treated as part of a disguised sale plus the
value of our units received in the partnership merger. A MeriStar Partnership
unitholder's aggregate adjusted tax basis in its MeriStar Partnership units
should be allocated to the portion of its units that the unitholder is deemed to
contribute to us based on the fraction

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determined in the preceding sentence. Because the law is not entirely clear
regarding the allocations of units contributed and adjusted tax basis in part
sale, part contribution transactions, it is possible that the Internal Revenue
Service will not respect the allocation of MeriStar Partnership units
contributed and adjusted tax basis described in this paragraph.

TAX CONSEQUENCES OF THE PARTNERSHIP MERGER TO FELCOR PARTNERSHIP AND MERISTAR
PARTNERSHIP

Neither MeriStar Partnership nor we will recognize gain or loss upon the
partnership merger.

EFFECT OF SUBSEQUENT EVENTS ON HOLDERS OF FELCOR PARTNERSHIP UNITS

Even if a holder of MeriStar Partnership units does not recognize taxable
gain at the time of the partnership merger, subsequent events could cause the
former MeriStar Partnership unitholder to recognize all or part of the gain that
was deferred either through the original contribution of assets to MeriStar
Partnership or through the partnership merger. Subsequent events that could
cause the recognition of gain to a former MeriStar Partnership unitholder
include:

- the sale or distribution of individual properties by MeriStar
Partnership, particularly those properties with respect to which the
former MeriStar Partnership unitholder had substantial deferred gain
before the partnership merger;

- the refinancing, repayment, or other reduction in the amount of existing
debt of MeriStar Partnership or us;

- the issuance of our additional units, which could reduce the former
MeriStar Partnership unitholder's share of our liabilities;

- the elimination of the disparity between the current tax bases of the
MeriStar Partnership properties and the "book bases" of the properties,
which has the effect of reducing the amount of indebtedness allocable to
former MeriStar Partnership unitholders and, therefore, can result in
deemed cash distributions. See "-- Tax Consequences of Ownership of
FelCor Partnership Units After the Partnership Merger -- Tax Allocations
with Respect to Book-Tax Difference on Contributed Properties."

Sale of MeriStar Partnership Properties

If, after the partnership merger, MeriStar Partnership sells an asset that
was contributed to MeriStar Partnership by a former MeriStar Partnership
unitholder, the former MeriStar Partnership unitholder who contributed the
property will be allocated, for federal income tax purposes, the portion of any
gain from the sale that is attributable to the built-in gain associated with the
asset that existed at the time the property was contributed to MeriStar
Partnership. That built-in gain is equal to the fair market value of the
property at the time of contribution minus the adjusted tax basis of the
property at that time. Moreover, the former MeriStar Partnership unitholders as
a group generally will be required to be allocated, for federal income tax
purposes, the portion of any gain from the sale that is attributable to the
built-in gain that existed at the time of the partnership merger, less the
built-in gain attributable to the original contribution, if any, described in
the preceding sentence. Any remaining gain will be allocated among our
unitholders according to the provisions in our partnership agreement.

If, after the partnership merger, MeriStar Partnership sells an asset that
was not contributed to MeriStar Partnership by a former MeriStar Partnership
unitholder, the former MeriStar Partnership unitholders as a group generally
will be allocated, for federal income tax purposes, the portion of any gain from
the sale that is attributable to the built-in gain associated with the asset
that existed at the time of the partnership merger. That built-in gain is equal
to the fair market value of the property at the time of the partnership merger
minus the adjusted tax basis of the property at that time. In addition, if we
sell any of our interest in MeriStar Partnership, any built-in gain recognized
with respect to those units that existed at the time of the partnership merger
would be specially allocated to the former MeriStar Partnership unitholders.
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Former MeriStar Partnership unitholders who are specially allocated gain
under these rules would report the gain on their individual federal income tax
returns, but generally would not be entitled to any special distributions from
us. Thus, the former MeriStar Partnership unitholders may not receive cash
distributions from us sufficient to pay their additional taxes if MeriStar
Partnership sells properties or we sell any of our interest in MeriStar
Partnership after the partnership merger.

There are existing agreements between MeriStar Partnership and some
MeriStar Partnership unitholders that require MeriStar Partnership either not to
dispose of specified properties in transactions that would produce taxable gain
for those MeriStar Partnership unitholders for a specified time period or to
indemnify those MeriStar Partnership unitholders for the tax liabilities of
those MeriStar Partnership unitholders that arise on the taxable sale or
exchange of those properties. Those MeriStar Partnership unitholders will
continue to have their rights under those existing agreements after the
partnership merger. Each MeriStar Partnership unitholder is urged to consult its
own tax advisor regarding the tax consequences of those agreements. Except with
respect to those agreements, neither FelCor nor we have made any commitment to
any MeriStar Partnership unitholder not to undertake transactions that will
cause the former MeriStar Partnership unitholders to recognize all or part of
the taxable gain that was deferred either through the original contribution of
assets to MeriStar Partnership or through the partnership merger.

Distributions of Property

Upon the distribution by a partnership of property to another partner
within seven years of when the property was contributed to the partnership,
section 704(c)(1)(B) of the Code generally requires that the partner who
contributed that property to the partnership recognize all or a portion of the
gain that existed, but was deferred, for federal income tax purposes with
respect to the property at the time of the contribution, treating the property
as sold for its fair market value at the time of the distribution. Similarly,
section 737 of the Code generally requires the recognition of a contributing
partner's deferred gain upon the distribution by a partnership to that partner
of other partnership property within seven years of when that partner
contributed appreciated property to the partnership. Accordingly, a former
MeriStar Partnership unitholder who contributed appreciated property to MeriStar
Partnership could recognize gain under either of these provisions if a MeriStar
Partnership property is distributed to our unitholder other than the
contributing unitholder. Similarly, gain that is deferred at the time of the
partnership merger with respect to MeriStar Partnership units at the time that
the MeriStar Partnership units are contributed to us, to the extent allocable to
a former MeriStar Partnership unitholder, will be subject to recognition under
these provisions upon a distribution of other property, including interests in
MeriStar Partnership, by us within seven years after the partnership merger.

Refinancing, Repayment, or Reduction in Indebtedness

As described above under "-- Tax Consequences of the Partnership Merger to
MeriStar Partnership Unitholders -- Taxable Gain or Loss -- Reduction in Share
of Partnership Liabilities/Deemed Cash Distribution," a MeriStar Partnership
unitholder could recognize taxable gain as a result of a reduction in the
unitholder's share of partnership liabilities in connection with the partnership
merger. A former MeriStar Partnership unitholder also could recognize taxable
gain as a result of a reduction in the unitholder's share of partnership
liabilities after the partnership merger, to the extent that the reduction
exceeds the unitholder's basis in our units. An issuance of additional units by
us without a corresponding increase in our nonrecourse liabilities could result
in a reduction of a unitholder's share of nonrecourse liabilities and a deemed
cash distribution to the unitholder. We cannot guarantee that a future
refinancing of our indebtedness or MeriStar Partnership's indebtedness that
remains outstanding after the partnership merger would not result in a reduction
of the liabilities allocated to the former MeriStar Partnership unitholders,
causing the former MeriStar Partnership unitholders to recognize taxable gain.
Generally, the maximum amount of gain that any former MeriStar Partnership
unitholder could recognize as a result of a reduction in liabilities is the
amount by which its share of our indebtedness and the indebtedness of MeriStar
Partnership exceeds its tax basis in our units.

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MeriStar Partnership has entered into bottom guaranty agreements with some
MeriStar Partnership unitholders under which MeriStar Partnership agreed to
maintain a debt balance at least equal to a specified amount and the unitholders
guaranteed, or agree to reimburse the guarantor or other obligor for, MeriStar
Partnership's debt to the extent of, and in proportion to, that specified debt
balance. MeriStar Partnership unitholders will continue to have their rights
under those bottom guaranty agreements after the partnership merger. In
addition, as described above under "Tax Consequences of the Partnership Merger
to MeriStar Partnership Unitholders -- Disguised Sale Upon Receipt of Cash," we
will provide to each MeriStar Partnership unitholder the opportunity, prior to
the closing of the partnership merger, to agree to reimburse FelCor with respect
to a portion of the debt incurred or increased to fund the payment of the cash
consideration to the MeriStar Partnership unitholders in the partnership merger.
If a unitholder elects to agree to reimburse FelCor with respect to a portion of
the debt, we will maintain outstanding at least that portion of the debt until
the earlier of five years after the closing of the partnership merger or the
date of which the unitholder has redeemed or disposed of all of our units
received by the unitholder in the partnership merger. We also will not sell,
assign, transfer, distribute, or otherwise dispose of the former MeriStar
Partnership unitholder's MeriStar Partnership units in a taxable transaction,
which will not include any transaction involving a non-taxable merger,
consolidation, or other reorganization of MeriStar Partnership or us or a
liquidation of MeriStar Partnership, until the earlier of five years after the
closing of the partnership merger and the date on which the MeriStar Partnership
unitholder no longer owns at least 50% of our units issued to him in the
partnership merger. Each MeriStar Partnership unitholder is urged to consult its
own tax advisor regarding the tax consequences of the bottom guaranty
agreements.

TAX CONSEQUENCES OF OWNERSHIP OF FELCOR PARTNERSHIP UNITS AFTER THE PARTNERSHIP
MERGER

Income and Deductions in General

We are not a taxable entity for federal income tax purposes. Instead, each
of our unitholders is required to report on its federal income tax return its
allocable share of our income, gains, losses, deductions, and credits for any of
our taxable years ending within or with the taxable year of the unitholder,
without regard to whether the unitholder has received or will receive any cash
distributions from us. For each taxable year, we are required to furnish to each
of our unitholders a Schedule K-1 that sets forth the unitholder's allocable
share of any of our income, gains, losses, deductions, and credits.

Treatment of FelCor Partnership Distributions

Distributions of money by us to our unitholders, including deemed
distributions that result from a reduction in the unitholder's share of our
liabilities, generally will result in taxable gain (but not loss) to the
unitholder only if and to the extent that the distribution exceeds the
unitholder's adjusted tax basis in our units immediately before the
distribution. A portion of the gain may be taxable as ordinary income. Any
reduction in a unitholder's share of our liabilities, whether through repayment,
refinancing, or otherwise, will constitute a deemed distribution of money to the
unitholder. In addition, an issuance of additional units by us without a
corresponding increase in our nonrecourse liabilities could decrease a
unitholder's share of our nonrecourse liabilities, resulting in a deemed cash
distribution to a unitholder.

A distribution of property other than money by us to our unitholders
ordinarily does not result in the recognition of gain or loss by either us or
the unitholder unless the property is a marketable security for purposes of
section 731(c) of the Code and the exceptions to the requirement for recognition
of gain do not apply. Marketable securities, for these purposes, generally
include actively traded securities, equity interests in another entity that are
readily convertible into or exchangeable for money or marketable securities, and
securities the value of which are determined substantially by reference to
marketable securities. Upon a distribution of marketable securities, the
unitholder would recognize gain, but not loss, to the extent that the fair
market value of the marketable securities exceeds the unitholder's adjusted tax
basis in our units immediately before the distribution. It is possible that we
will make distributions of property that are considered marketable securities
and that an exception to the gain recognition requirement would not apply to
that distribution.

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Upon the distribution of property to a partner other than the partner who
contributed the property within seven years of the contribution of the property
to the partnership, section 704(c)(1)(B) of the Code generally requires the
partner who contributed the property to the partnership to recognize any gain
that existed, but was deferred, for federal income tax purposes with respect to
the property at time of the contribution. Similarly, section 737 of the Code
generally requires the recognition of a contributing partner's deferred gain
upon the distribution to that partner of other partnership property within seven
years of that partner's contribution of appreciated property to the partnership.
For a discussion of the effect of these provisions on former MeriStar
Partnership unitholders, see "-- Effect of Subsequent Events on Holders of
FelCor Partnership Units -- Distributions of Property."

Initial Basis of Units

In general, a MeriStar Partnership unitholder who acquires our units in the
partnership merger will have an initial tax basis in our units equal to its
adjusted tax basis in its MeriStar Partnership units that the unitholder is
treated as contributing to us in the part sale, part contribution transaction.
See "Tax Consequences of the Partnership Merger to MeriStar Partnership
Unitholders -- Tax Basis of Units." A MeriStar Partnership unitholder's basis in
our units will be adjusted upward or downward to reflect any increase or
decrease, respectively, in the unitholder's share of MeriStar Partnership
liabilities compared to the unitholder's share of our liabilities immediately
after the partnership merger.

Our unitholder's initial basis in its units generally will be increased by
the unitholder's share of:

- our taxable income;

- any increases in nonrecourse liabilities incurred by us; and

- our recourse liabilities, to the extent that the unitholder incurs the
risk of loss with respect to those liabilities, whether through a
guarantee or indemnification agreement or otherwise.

Generally, our unitholder's initial basis in its units will be decreased,
but not below zero, by the unitholder's share of:

- our distributions;

- decreases in our liabilities, including any decrease in its share of our
nonrecourse liabilities and any recourse liabilities for which it is
considered to bear the economic risk of loss;

- our losses; and

- our nondeductible expenditures that are not chargeable to capital.

Allocations of FelCor Partnership Income, Gain, Loss, and Deductions

Our partnership agreement generally provides that net loss first will be
allocated proportionately among the unitholders in order to cause their capital
accounts to be in proportion to their respective percentage interests. Second,
net loss will be allocated proportionately among the holders of preferred units
in order to reduce their capital accounts to zero. Third, any remaining net loss
will be allocated among the unitholders in proportion to their respective
percentage interests in us. However, a holder of our units will not be allocated
net losses if the allocation would create a deficit balance in its capital
account, as specially adjusted for that purpose, which losses are referred to as
excess losses. Excess losses will be allocated first proportionately to the
other partners and thereafter to FelCor.

Our partnership agreement generally provides that net income will be
allocated first to the holders of preferred units to the extent of the preferred
return required to be paid to those holders. Second, net income will be
allocated proportionately among the unitholders in order to cause their capital
accounts to be in proportion to their respective percentage interests. Third,
any remaining net income will be allocated among the unitholders in proportion
to their respective percentage interests.

Under section 704(b) of the Code, a partnership's allocation of any item of
income, gain, loss, or deduction to a partner will be given effect for federal
income tax purposes so long as it has "substantial

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economic effect," or is otherwise in accordance with the "partner's interest in
the partnership." If an allocation of an item does not satisfy this standard, it
will be reallocated among the partners on the basis of their respective
interests in the partnership, taking into account all facts and circumstances.
We believe that the allocations of items of income, gain, loss, and deduction
under the partnership agreement, as described above, will be considered to have
substantial economic effect under the applicable Treasury regulations.

Depreciation Life Restart with Respect to MeriStar Partnership Properties

The merger of MeriStar with and into FelCor will result in the transfer of
a 50% or greater partnership interest in the MeriStar Partnership. As a result,
there will be a technical termination of MeriStar Partnership for federal income
tax purposes under section 708 of the Code. The only material consequence of the
tax termination is that the useful lives for tax depreciation purposes of all of
the MeriStar Partnership assets will restart at the time of the merger.
Consequently, the remaining depreciation deductions available with respect to
those assets will be recognized over a longer period of time than if the merger
had not occurred.

Tax Allocations with Respect to Book-Tax Difference on Contributed Properties

Under section 704(c) of the Code, income, gain, loss, and deductions
attributable to appreciated or depreciated property that is contributed to a
partnership must be allocated for federal income tax purposes in a manner so
that the contributor is charged with, or benefits from, the unrealized gain or
unrealized loss associated with the property at the time of contribution. The
amount of unrealized gain or unrealized loss generally is equal to the
difference between the fair market value of the contributed property at the time
of contribution and the adjusted tax basis of the property at the time of
contribution, which is referred to as the "book-tax difference." A book-tax
difference also can exist with respect to an asset that has not appreciated or
depreciated in economic terms if that asset has been depreciated for tax
purposes.

Our partnership agreement requires allocations of income, gain, loss, and
deductions attributable to properties for which there is a book-tax difference
to be made in a manner that is consistent with section 704(c) of the Code.
Treasury regulations under section 704(c) require partnerships to use a
"reasonable method" for allocation of items affected by section 704(c) and
outline three methods of allocation. Except as otherwise agreed between MeriStar
Partnership and its unitholders prior to the partnership merger, we are required
to use the traditional method of allocation with respect to MeriStar
Partnership's properties. Under the traditional method, former MeriStar
Partnership unitholders will be allocated less depreciation and, therefore, more
income with respect to the assets owned by MeriStar Partnership at the time of
the partnership merger. The effects of these allocations will be different for
different MeriStar Partnership unitholders and will depend upon which, if any,
properties those unitholders originally contributed to MeriStar Partnership and
the amount of depreciation, if any, that remains to be claimed with respect to
those properties. These reduced allocations of depreciation and increased
allocations of income will be offset, at least in part, by increased allocations
of depreciation with respect to properties owned by us before the partnership
merger.

If a property owned by MeriStar Partnership at the time of the partnership
merger is sold after the partnership merger, gain equal to any book-tax
difference remaining at the time of the sale must be allocated exclusively to
the former MeriStar Partnership unitholders, even though the proceeds of the
sale will be allocated proportionately among all our unitholders. Conversely, no
gain attributable to any book-tax difference remaining in one of our existing
properties at the time of a sale will be allocated to the former MeriStar
Partnership unitholders. Under the traditional method, however, the gain
required to be specially allocated would not exceed the gain that is recognized
on the sale. The amount of gain allocated to specific former MeriStar
Partnership unitholders with respect to MeriStar Partnership assets would depend
upon a number of variables, including:

- the book-tax difference that existed with respect to the assets within
MeriStar Partnership before the partnership merger;

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- whether the former MeriStar Partnership unitholder owns units issued in
exchange for the contribution of that asset to MeriStar Partnership; and

- the amount of the book-tax difference with respect to that asset that has
been amortized since the partnership merger and before the sale of the
asset through the special allocations of depreciation deductions
described above.

Our partnership agreement also requires that any gain allocated to our
unitholders upon the sale or other taxable disposition of any of our assets
must, to the extent possible after taking into account other required
allocations of gain, be characterized as recapture income in the same
proportions and to the same extent as the unitholders previously have been
allocated any deductions directly or indirectly giving rise to the treatment of
the gain as recapture income.

Limitations on Deductibility of Losses; Treatment of Passive Activities and
Portfolio Income

Generally, individuals, estates, trusts, and some closely held corporations
and personal service corporations can deduct losses from passive activities only
to the extent that those losses do not exceed the taxpayer's income from passive
activities. Generally, passive activities are activities or investments in which
the taxpayer does not materially participate, which would include the ownership
of interests in us. As described above, there is a substantial risk that we will
be classified as a publicly traded partnership after the partnership merger. See
"Tax Status of FelCor Partnership." Assuming that we are classified as a
publicly traded partnership after the partnership merger, any losses or
deductions allocable to our unitholders, other than a loss incurred upon a
complete disposition of the unitholder's interest in us, could be used only
against our gains or income and could not be used to offset income from other
passive activities. Similarly, any of our income or gain allocable to our
unitholders could not be offset with losses from other passive activities of the
unitholder. For a more detailed discussion of our possible classification as a
publicly traded partnership, see "-- Tax Status of FelCor Partnership" above.

In addition, our unitholders may not deduct their share of any of our
losses to the extent that those losses exceed the lesser of:

- the adjusted tax basis of its FelCor Partnership units at the end of our
taxable year in which the loss occurs; and

- the amount for which the unitholder is considered "at-risk" at the end of
that year.

In general, our unitholders will be at-risk to the extent of their basis in
their FelCor Partnership units, except to the extent that the unitholders
acquired their units using nonrecourse debt. For these purposes, the
unitholders' basis in their FelCor Partnership units will include all of that
unitholder's share of our recourse liabilities, but only will include the
unitholder's share of our nonrecourse liabilities that are considered "qualified
nonrecourse financing" for purposes of the at-risk rules. Qualified nonrecourse
financing is any debt that is borrowed for the activity of holding real
property, that is borrowed from a qualified person or a government entity or
guaranteed by a government entity, with respect to which no person is personally
liable for repayment, except to the extent provided in Treasury regulations, and
that is not convertible debt. In addition, although the law is unclear,
qualified nonrecourse financing generally must be secured by real property that
is used in the activity of holding real property. It is unclear to what extent
our indebtedness constitutes qualified nonrecourse financing for purposes of the
at-risk rules. In addition, because a significant portion of our indebtedness is
not secured by our properties, it is possible that the Internal Revenue Service
could successfully contend that some or all of our indebtedness is not qualified
nonrecourse financing. Moreover, it is possible that we will repay some or all
of our qualified nonrecourse financing in the future with proceeds from equity
offerings or proceeds of debt financings that do not constitute qualified
nonrecourse financing. MeriStar Partnership unitholders are urged to consult
their own tax advisors regarding the application of the at-risk rules,
including, but not limited to the qualified nonrecourse financing rules, in
connection with the partnership merger.

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After the partnership merger, a former MeriStar Partnership unitholder's
at-risk amount generally will increase or decrease as its adjusted basis in our
units increases or decreases, except for increases or decreases attributable to
our liabilities that do not constitute qualified nonrecourse financing. If one
of our unitholders is not allowed to use losses in a particular taxable year
because of the application of the at-risk rules, the losses can be carried
forward and used by the unitholder to offset income in a subsequent year to the
extent that the unitholder's adjusted basis or at-risk amount, whichever was the
limiting factor, is increased in that subsequent year. The at-risk rules apply
to:

- an individual unitholder;

- an individual shareholder or partner of a unitholder that is an S
corporation or partnership; and

- a unitholder that is a corporation if 50% or more of the value of that
corporation's stock is owned, directly or indirectly, by five or fewer
individuals at any time during the last half of the taxable year.

Disposition of FelCor Partnership Units

If our unitholders sell, transfer as a gift, or otherwise dispose of one of
our units, the unitholder will recognize gain or loss equal to the difference
between the amount realized on the disposition and the unitholder's adjusted tax
basis attributable to the unit transferred. The amount realized on the
disposition of a unit generally will equal the sum of:

- any cash received;

- the fair market value of any other property received; and

- the amount of our liabilities allocated to the unit transferred.

Because the amount realized includes any amount attributable to the relief
from our liabilities attributable to the unit, a unitholder could have taxable
income, or perhaps even a tax liability, in excess of the amount of cash and
property received upon the disposition of the unit.

In general, any gain or loss recognized on the disposition of one of our
units will be capital gain or loss. However, any portion of our unitholder's
amount realized on the disposition of a unit that is attributable to our
"unrealized receivables", as defined in section 751 of the Code, will give rise
to ordinary income. The amount of ordinary income that would be required to be
recognized would be equal to the amount by which the unitholder's share of our
unrealized receivables exceeds the portion of the unitholder's basis that is
attributable to those assets. Unrealized receivables include, to the extent not
previously included in our income, any rights to payment for services rendered
or to be rendered. Unrealized receivables also include amounts attributable to
prior depreciation deductions that would be subject to recapture as ordinary
income if we had sold our assets at their fair market value at the time of the
disposition.

A unitholder generally must hold its units for more than one year for gain
or loss derived from the sale or exchange of the units to be treated as
long-term capital gain or loss. On June 7, 2001, President Bush signed into law
the Economic Growth and Tax Relief Reconciliation Act of 2001. That legislation
reduces the highest marginal individual income tax rate of 39.6% to 39.1% for
the period from July 1, 2001 to December 31, 2001, to 38.6% for the period from
January 1, 2002 to December 31, 2003, to 37.6% for the period from January 1,
2004 to December 31, 2005, and to 35% for the period from January 1, 2006 to
December 31, 2010. The maximum tax rate on long-term capital gain applicable to
individuals, trusts, and estates generally is 20% for sales and exchanges of
assets held for more than one year, but is 25% to the extent that the gain is
attributable to specific types of previously taken depreciation deductions. The
applicable Treasury regulations apply the 25% rate to a sale of an interest in a
pass-through entity, such as a partnership, to the extent that the gain realized
on the sale of the interest is attributable to prior depreciation deductions by
us or MeriStar Partnership that have not otherwise been recaptured as ordinary
income. Accordingly, any gain on the sale of units held for more than one year

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could be treated partly as long-term capital gain subject to a 20% tax rate,
partly as gain from the sale of depreciable real property subject to a 25% tax
rate to the extent attributable to prior depreciation deductions by us or
MeriStar Partnership that have not been otherwise recaptured as ordinary income,
and partly as ordinary income to the extent attributable to unrealized
receivables. Thus, gain recognized by non-corporate unitholders upon a
disposition of our units may be subject to a combination of three different tax
rates. In addition, the characterization of income as capital gain or ordinary
income may affect the deductibility of capital losses. A non-corporate
unitholder generally may deduct capital losses not offset by capital gains
against its ordinary income only up to a maximum annual amount of $3,000. A non-
corporate unitholder may carry forward unused capital losses indefinitely. A
corporate unitholder must pay tax on its net capital gain at ordinary corporate
rates and may deduct capital losses only to the extent of capital gains, with
unused losses being carried back three years and forward five years.

Redemptions of FelCor Partnership Units

If one of our unitholders exercises its redemption right and FelCor elects
to acquire the unitholder's FelCor Partnership units in exchange for cash or
shares of FelCor common stock, the transaction will be a fully taxable sale of
the unitholder's units tendered for redemption. The amount realized by a
unitholder on the redemption of its FelCor Partnership units will equal the sum
of:

- any cash received;

- the fair market value of any shares of FelCor common stock received; and

- the amount of our liabilities allocated to the units redeemed.

The unitholder's taxable gain and the tax consequences of that gain would be
determined as described under "-- Disposition of FelCor Partnership Units"
above.

If we redeem a unitholder's FelCor Partnership units for cash that is
contributed by FelCor in order to effect the redemption, the redemption likely
will be treated as a sale of our units to FelCor in a fully taxable transaction,
although the matter is not free from doubt. Under those circumstances, the
redeeming unitholder's amount realized will equal the sum of the cash received
and the amount of our liabilities allocated to the units redeemed. The
unitholder's taxable gain and the tax consequences of that gain would be
determined as described under "-- Disposition of FelCor Partnership Units"
above.

If one of our units is redeemed for cash that is not contributed by FelCor
to effect the redemption, the unitholder's tax treatment will depend upon
whether or not the redemption results in a disposition of all of the
unitholder's FelCor Partnership units. If all of the unitholder's FelCor
Partnership units are redeemed, the unitholder's taxable gain and the tax
consequences of that gain will be determined as described under "-- Disposition
of FelCor Partnership Units" above. However, if less than all of a unitholder's
FelCor Partnership units are redeemed, the unitholder will not be allowed to
recognize loss on the redemption and will recognize taxable gain only if and to
the extent that the unitholder's amount realized on the redemption, calculated
as described above, exceeds the unitholder's basis in all of its units
immediately before the redemption.

Partnership Audit Procedures

The federal income tax information returns filed by us may be audited by
the Internal Revenue Service. The Code contains partnership audit procedures
governing the manner in which Internal Revenue Service audit adjustments of
partnership items are resolved.

Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of adjustments by the Internal Revenue
Service, and tax settlement proceedings. The tax treatment of partnership items
of income, gain, loss, deduction, and credit is determined at the partnership
level in a unified partnership proceeding, rather than in separate proceedings
with each partner. The Code provides for one partner to be designated as the
"tax matters partner" for these purposes. FelCor is the tax matters partner for
us. The tax matters partner is authorized, but not required, to take actions on
our behalf and
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the unitholders and can extend the statute of limitations for assessment of tax
deficiencies against our unitholders with respect to our items. The tax matters
partner will make a reasonable effort to keep each unitholder informed of
administrative and judicial tax proceedings with respect to our items in
accordance with Treasury regulations issued under section 6223 of the Code. The
tax matters partner may seek judicial review, to which all unitholders will be
bound, of a final partnership administrative adjustment.

Unitholders generally are required to treat our items on their federal
income tax returns in a manner consistent with the treatment of the items on our
information return. In general, that consistency requirement is waived if a
unitholder files a statement with the Internal Revenue Service identifying the
inconsistency. Failure to satisfy the consistency requirement, if not waived,
will result in an adjustment to conform the treatment of the item by the
unitholder to the treatment on our return. Even if the consistency requirement
is waived, adjustments to the unitholder's tax liability with respect to our
items may result from an audit of our or the unitholder's tax return.
Intentional or negligent disregard of the consistency requirement may subject a
unitholder to substantial penalties. In addition, an audit of our return may
lead to an audit of an individual unitholder's tax return, which could result in
adjustment of non-partnership items.

Alternative Minimum Tax on Items of Tax Preference

The Code contains alternative minimum tax rules that are applicable to
corporate and noncorporate taxpayers. We will not be subject to the alternative
minimum tax, but our unitholders are required to take into account on their own
tax returns their respective share of our tax preference items and adjustments
in order to compute their alternative minimum taxable income. Since the impact
of this tax depends on each unitholder's particular situation, unitholders are
urged to consult with their own tax advisors as to the applicability of the
alternative minimum tax following the partnership merger.

State and Local Taxes

In addition to the federal income tax consequences described above, a
MeriStar Partnership unitholder should consider the potential state and local
tax consequences of owning our units. A unitholder may be required to file tax
returns and may incur tax liability both in the state or local jurisdiction
where the unitholder resides and in the state and local jurisdictions in which
we own assets or otherwise do business. We also may be required to withhold
state income tax from distributions otherwise payable to our unitholders. To the
extent that our unitholders pay income tax with respect to our income to a state
where it is not resident or we are required to pay the tax on behalf of the
unitholder, the unitholder may be entitled to a deduction or credit against
income tax that it otherwise would owe to its state of residence with respect to
the same income. We anticipate providing our unitholders with any information
reasonably necessary to permit them to satisfy state and local return filing
requirements. A MeriStar Partnership unitholder should consult with its own tax
advisor regarding the state and local income tax implications of owning our
units, including return filing requirements in the various states in which we
currently own properties and will own properties after the partnership merger.

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DESCRIPTION OF FELCOR CAPITAL STOCK

The following description is a summary of the material terms of FelCor's
capital stock. You should also review FelCor's charter and bylaws, including
articles supplementary to the charter describing the Series A and Series B
preferred stock, copies of which are available from FelCor upon request or
through the SEC or the SEC's website, as described in "Where You Can Find More
Information." FelCor is a Maryland corporation governed by its charter, bylaws
and the Maryland General Corporation Law. Under FelCor's charter, FelCor has the
authority to issue up to 200,000,000 shares of common stock and 20,000,000
shares of preferred stock. Under Maryland law, stockholders generally are not
responsible for the corporation's debts or obligations.

DESCRIPTION OF FELCOR COMMON STOCK

At June 30, 2001, FelCor had outstanding 53,332,541 shares of common stock.

Terms

Subject to the preferential rights of any series of preferred stock
outstanding, the holders of common stock are entitled to one vote per share on
all matters voted on by stockholders, including the election of directors.
FelCor's charter does not provide for cumulative voting in the election of
directors. Except as otherwise required by law or provided in articles
supplementary relating to preferred stock of any series, the holders of common
stock exclusively possess all voting power.

Subject to any preferential rights of any series of preferred stock
outstanding, the holders of common stock are entitled to those dividends, if
any, as may be declared from time to time by the FelCor board of directors from
assets legally available for dividends and, upon liquidation, are entitled to
receive pro rata all assets of FelCor available for distribution to those
holders. All shares of common stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights. FelCor may, however, enter
into contracts with stockholders to grant them preemptive rights.

Holders of shares of common stock have no redemption rights. Subject to the
provisions of the charter regarding the restrictions on transfer of stock,
shares of common stock will have equal dividend, liquidation and other rights.

Under the Maryland General Corporation Law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative vote
of stockholders holding at least two thirds of the shares entitled to vote on
the matter unless a lesser percentage, but not less than a majority of all of
the votes entitled to be cast on the matter, is set forth in the corporation's
charter. FelCor's charter requires the affirmative vote of a majority of the
votes entitled to be cast in those situations.

Restrictions on Ownership and Transfer

Shares of FelCor common stock are subject to restrictions upon their
ownership and transfer which were adopted for the purpose of enabling FelCor to
preserve its status as a REIT. For a description of those restrictions, see the
discussions below under the captions, "-- Selected FelCor Charter Provisions --
Restrictions on Ownership and Transfer".

Exchange Listing

FelCor common stock is listed on the NYSE under the symbol "FCH."

Transfer Agent

The transfer agent and registrar for the common stock is SunTrust Bank,
located in Atlanta, Georgia.

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DESCRIPTION OF FELCOR PREFERRED STOCK

The FelCor board of directors may, without further action of the
stockholders of FelCor, establish and issue shares of preferred stock in one or
more series and fix the rights, preferences and restrictions of the series of
preferred stock. The rights of holders of common stock are subject to, and may
be adversely affected by, the rights of holders of preferred stock. The issuance
of additional shares of preferred stock could adversely affect the voting power
of holders of common stock and could have the effect of delaying or preventing a
change in control of FelCor or other corporate action.

FelCor plans to sell up to $100 million of a new Series C preferred stock
with a dividend rate expected to be not more than 10.5%. As of the date of this
prospectus, FelCor has no purchasers or commitments for this stock. FelCor
expects that the terms of the Series C preferred stock and related depositary
shares will be substantially similar to the terms of the Series B preferred
stock and related depositary shares described below, except for the number of
shares and the per share annual dividend rate.

The board has established two series of preferred stock which are described
below.

Series A Preferred Stock

In April 1996, the board of directors authorized FelCor to classify and
issue the Series A preferred stock as part of the authorized preferred stock. At
June 30, 2001, there were outstanding 5,980,600 shares of Series A preferred
stock.

The outstanding shares of Series A preferred stock are validly issued,
fully paid and nonassessable. The holders of the Series A preferred stock have
no preemptive rights. The shares of Series A preferred stock are not subject to
any sinking fund or other obligation of FelCor to redeem or retire the Series A
preferred stock. Unless converted or redeemed by FelCor into common stock, the
Series A preferred stock will have a perpetual term, with no maturity.

Ranking. The Series A preferred stock ranks on parity with the outstanding
Series B preferred stock and senior to the common stock as to dividends and
liquidation preference. While any shares of Series A preferred stock are
outstanding, FelCor may not authorize, create or increase the authorized amount
of any class or series of stock that ranks senior to the Series A preferred
stock without the consent of the holders of two-thirds of the votes entitled to
be cast by holders of the outstanding Series A preferred stock. However, FelCor
may create additional classes of stock, increase the authorized number of shares
of preferred stock or issue series of preferred stock ranking junior to or on
parity with the Series A preferred stock without the consent of any holder of
Series A preferred stock.

Dividends. If declared by the board of directors of FelCor, dividends on
each share of the Series A preferred stock will be paid quarterly based on
either $0.4875 per share or the cash dividends on the number of shares of common
stock into which a share of Series A preferred stock is then convertible,
whichever is greater. Dividends on the Series A preferred shares will be paid
prior to payment of any dividends on the common stock or preferred stock other
than the Series B preferred stock. Any unpaid dividends will accrue and are
cumulative.

Redemption. FelCor has the right to redeem shares of Series A preferred
stock at any time. FelCor may either issue shares of its common stock based upon
a conversion rate of 0.7752 shares of common stock for each share of Series A
preferred stock or deliver cash in an amount equal to the aggregate market value
of the number of shares of common stock into which the Series A preferred stock
is convertible, plus accrued and unpaid dividends. FelCor may only exercise this
redemption option if the closing price of the common stock on the NYSE equals or
exceeds $32.25 per share for 20 trading days within any period of 30 consecutive
trading days. FelCor may not redeem the Series A preferred stock unless all
dividends have been declared and paid on the Series A and Series B preferred
stock, or unless FelCor is acquiring shares of capital stock to preserve its
status as a REIT or for purposes of a FelCor employee benefit plan.

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Liquidation Preference. Upon liquidation, dissolution or winding up of
FelCor, whether voluntary or involuntary, and before payment of any amount to
any other class or series of capital stock other than holders of Series B
preferred stock, the holders of Series A preferred stock are entitled to receive
$25.00 per share plus any accrued and unpaid dividends. If there are
insufficient assets to pay the liquidation preference, FelCor's assets will be
distributed pro rata among the holders of Series A preferred stock and Series B
preferred stock.

Voting Rights. The holders of Series A preferred stock have no voting
rights. However, if six quarterly dividends payable on the Series A or Series B
preferred stock are in arrears, the holders of the Series A and Series B
preferred stock will have the right to elect two additional members to FelCor's
board of directors until the dividends have been paid or declared and set apart
for payment. FelCor may not amend its charter to materially and adversely affect
the rights, preferences or voting power of the holders of the Series A preferred
stock or the Series B preferred stock or create any class of stock senior to the
Series A and Series B preferred stock without the approval of two-thirds of the
votes entitled to be cast by holders of the outstanding Series A and Series B
preferred stock.

Conversion Rights. Holders of Series A preferred stock have the right, at
any time prior to redemption, to convert their preferred stock into shares of
FelCor common stock at a conversion price of $32.25 per share of common stock.

Exchange Listing. The Series A preferred stock is listed on the NYSE under
the symbol "FCHpA".

Transfer Agent. The transfer agent and registrar for the Series A
preferred stock is SunTrust Bank, Atlanta, Georgia.

Series B Preferred Stock and Depositary Shares

In April 1998, the Board of Directors authorized FelCor to classify and
issue the Series B preferred stock as part of the authorized preferred stock. At
June 30, 2001, there were outstanding 57,500 shares of Series B preferred stock
represented by 5,750,000 depositary shares, each of which represent a 1/100
fractional interest in a share of Series B preferred stock.

Ranking. The Series B preferred stock ranks on parity with the outstanding
Series A preferred stock and senior to the common stock as to dividends and
liquidation preference. While any shares of Series B preferred stock are
outstanding, FelCor may not authorize, create or increase the authorized amount
of any class or series of stock that ranks senior to the Series B preferred
stock without the consent of the holders of two-thirds of the votes entitled to
be cast by holders of the outstanding Series B preferred stock. However, FelCor
may create additional classes of stock, increase the authorized number of
preferred stock or issue series of preferred stock ranking junior to or on a
parity with the Series B preferred stock without the consent of any holder of
Series B preferred stock.

Dividends. If declared by the board of directors of FelCor, dividends on
each share of Series B preferred stock will be paid quarterly at an annual rate
of $225.00 per share. Dividends on the Series B preferred shares will be paid
prior to payment of any dividends on the common stock or preferred stock other
than the Series A preferred stock. Any unpaid dividends will accrue and are
cumulative.

Redemption. FelCor has the right to redeem shares of Series B preferred
stock at any time after May 7, 2003 at a redemption price of $2,500 per share,
or $25 per depositary share, plus any accrued and unpaid dividends. The
redemption price of the Series B preferred stock, other than accrued and unpaid
dividends, may only be paid from proceeds of the sale of other capital stock of
FelCor. The shares of Series B preferred stock have no stated maturity and are
not subject to any sinking fund or mandatory redemption provisions. FelCor may
not redeem the Series B preferred stock unless all dividends have been declared
and paid on the Series A and Series B preferred stock, or unless FelCor is
acquiring shares of capital stock to preserve its status as a REIT or for
purposes of a FelCor employee benefit plan.

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holders of Series B preferred stock, the holders of Series A preferred stock are
entitled to receive $2,500 per share plus any accrued and unpaid dividends. If
there are insufficient assets to pay the liquidation preference, FelCor's assets
will be distributed pro rata among the holders of Series A preferred stock and
Series B preferred stock.

Voting Rights. Each share of Series B preferred stock is entitled to 100
votes, which may be directed separately by the holder or the holder's proxy. If
six quarterly dividends payable on the Series A or Series B preferred stock are
in arrears, the holders of the Series A and Series B preferred stock will have
the right to elect two additional members to FelCor's board of directors until
the dividends have been paid or declared and set apart for payment. FelCor may
not enter into any share exchange or consolidation or merger with any other
entity, unless the rights of the Series B preferred stockholders remain
unchanged, without the approval of two-thirds of the outstanding depositary
shares representing the Series B preferred stock. In addition, FelCor may not
amend its charter to materially and adversely affect the rights, preferences or
voting power of the holders of the Series A preferred stock or the Series B
preferred stock or create any class of stock senior to the Series A and Series B
preferred stock without the approval of two-thirds of the votes entitled to be
cast by holders of the outstanding Series A and Series B preferred stock.

Conversion Rights. Shares of Series B preferred stock are not convertible
into or exchangeable for any other property or securities of FelCor.

Exchange Listing. The Series B preferred stock is listed on the NYSE under
the symbol "FCHpB".

Transfer Agent. The transfer agent and registrar for the depositary shares
is SunTrust Bank, Atlanta, Georgia.

SELECTED FELCOR CHARTER PROVISIONS

Restrictions on Ownership and Transfer

For FelCor to qualify as a REIT under the federal income tax laws, it must
meet some requirements concerning the ownership of its outstanding stock. Not
more than 50% in value of FelCor's outstanding stock may be owned, actually and
constructively under the applicable attribution provisions of the federal income
tax laws, by five or fewer individuals, including some entities, during the last
half of a taxable year. This is known as the 5/50 rule. Also, FelCor stock must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year.

For the purpose of, among other reasons, preserving FelCor's REIT
qualification, the FelCor charter contains provisions that restrict the
ownership and transfer of FelCor's capital stock under some circumstances. These
ownership limitation provisions provide that no person may own more than 9.9% of
the outstanding shares of any class of FelCor's capital stock, subject to
exceptions. The board of directors may waive the ownership limit with respect to
a stockholder if it determines that the stockholder's ownership will not
jeopardize FelCor's status as a REIT. The board has waived these provisions for
some parties in the past.

Transfers of FelCor capital stock that would cause FelCor to become closely
held under the Internal Revenue Code or otherwise fail to qualify as a REIT
under the Internal Revenue Code are prohibited. Any transfer of capital stock of
FelCor or any other event that would cause FelCor to violate the 5/50 rule or to
own 10% or more of the ownership interests in any entity that leases any hotels
or in any sublessee is prohibited. That prohibition does not prevent FelCor from
leasing its hotels to TRSs. All certificates representing shares of capital
stock will bear a legend referring to the restrictions described above.

The provisions described above may have the effect of precluding an
acquisition of control of FelCor without approval of the board of directors.

Operations

FelCor generally is prohibited from engaging in some activities, including
acquiring or holding property or engaging in any activity that would cause
FelCor to fail to qualify as a REIT.

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Classification of the Board of Directors

Under the charter, the board of directors is divided into three classes.
Directors of each class will be chosen for three-year terms upon the expiration
of their current terms, and each year one class of directors will be elected by
the stockholders. FelCor believes that classification of the board of directors
will help to assure the continuity and stability of FelCor's business strategies
and policies as determined by the board of directors. Any vacancy will be
filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors must be filled by a
majority of the entire board of directors.

The classified board provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult. The
staggered terms of directors may delay, defer or prevent a transaction or change
of control of FelCor that might involve a premium price for holders of common
stock or otherwise be in their best interest.

Information regarding removal of directors is contained in "Comparison of
Stockholder Rights" in this prospectus.

MARYLAND TAKEOVER STATUTES

Under the Maryland General Corporation Law, some business combinations,
including a merger, consolidation, share exchange or, in some circumstances, an
asset transfer or issuance or reclassification of equity securities, are
prohibited. These transactions include those between a Maryland corporation and
the following persons:

- an interested stockholder, which is defined as any person who
beneficially owns 10% or more of the voting power of the corporation's
shares, or who is an affiliate or an associate of the corporation who, at
any time within a two-year period prior to the transaction, was the
beneficial owner of 10% or more of the voting power of the corporation's
shares; or

- an affiliate of an interested stockholder.

A person is not an interested stockholder if the board of directors
approved in advance the transaction by which the person otherwise would have
become an interested stockholder. The board of directors may provide that its
approval is subject to compliance with any terms and conditions determined by
the board of directors. Transactions between a corporation and an interested
stockholder are prohibited for five years after the date on which an affiliate
becomes an interested stockholder under the above test. After five years, any
business combination must be recommended by the board of directors of the
corporation and approved by at least 80% of the stockholders of the corporation,
two-thirds of which must be holders of shares other than those held by the
interested stockholder with whom the business combination is to be effected,
unless the corporation's stockholders receive a minimum price as defined by
Maryland law and other conditions under Maryland law are satisfied.

A Maryland corporation may elect not to be governed by these provisions by
either having its board of directors exempt specific interested stockholders, or
by placing a provision in its charter expressly electing not to be governed by
the specific section of the Maryland law or amending its existing charter with
the approval of at least 80% of the votes entitled to be cast by holders of
outstanding shares of voting stock of the corporation and two-thirds of the
votes entitled to be cast by holders of shares other than those held by any
interested stockholder. The FelCor charter contains exemptions from these
provisions for any business combination involving Hervey Feldman, former
Chairman of FelCor, or Mr. Corcoran or any present or future affiliates,
associates or other persons acting in concert or as a group with Mr. Feldman or
Mr. Corcoran.

The Maryland General Corporation Law also prevents, subject to exceptions,
an acquiror who acquires enough shares to exercise specified percentages of
voting power of a corporation from having any voting rights except to the extent
approved by two-thirds of the votes entitled to be cast on the matter not
including shares of stock owned by the acquiring person and any officers or
directors who are employees of the corporation. These provisions are referred to
as the control share statute.

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221

The control share statute does not apply to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a corporation's charter
or bylaws. FelCor's charter contains a provision exempting any and all
acquisitions of FelCor's shares of stock from the control share statute. This
provision could be amended or eliminated in the future. If this exemption in the
charter is eliminated, the control share statute could discourage offers to
acquire FelCor stock and could increase the difficulty of completing an offer.

The Maryland General Corporation Law also provides that Maryland
corporations that are subject to the Exchange Act and have at least three
outside directors can elect by resolution of the board of directors to be
subject to some corporate governance provisions that may be inconsistent with
the corporation's charter and bylaws. Under the applicable statute, a board of
directors may classify itself without the vote of stockholders. A board of
directors classified in that manner cannot be altered by amendment to the
charter of the corporation. Further, the board of directors may, by electing
into the applicable statutory provisions and notwithstanding the charter or
bylaws:

- provide that a special meeting of stockholders, will be called only at
the request of stockholders, entitled to cast at least a majority of the
votes entitled to be cast at the meeting,

- reserve for itself the right to fix the number of directors,

- provide that a director may be removed only by the vote of the holders of
two-thirds of the stock entitled to vote, and

- retain for itself sole authority to fill vacancies created by the death,
removal or resignation of a director.

In addition, a director elected to fill a vacancy under this provision will
serve for the balance of the unexpired term instead of until the next annual
meeting of stockholders. A board of directors may implement all or any of these
provisions without amending the charter or bylaws and without stockholder
approval. A corporation may be prohibited by its charter or by resolution of its
board of directors from electing any of the provisions of the statute. FelCor is
not prohibited from implementing any or all of the statute. If implemented,
these provisions could discourage offers to acquire FelCor stock and could
increase the difficulty of completing an offer.

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COMPARISON OF STOCKHOLDER RIGHTS

Both FelCor and MeriStar are incorporated in Maryland and governed by the
Maryland General Corporation Law. The FelCor charter and bylaws and the MeriStar
charter and bylaws are similar in several respects, including with respect to
the following matters: majority vote required for extraordinary transactions,
absence of cumulative voting, classification of the board of directors, director
qualifications, indemnification of officers and directors, limitations on
director liability, voting rights and inapplicability of the control share
statute. The following is a summary of the material differences between the
rights of holders of FelCor common stock and those of the holders of MeriStar
common stock after the merger. These differences arise from differences between
the FelCor charter and bylaws and the MeriStar charter and bylaws.

NUMBER OF DIRECTORS

The FelCor board of directors must be a minimum of three directors, but not
more than nine, unless otherwise determined by resolution of 80% of the board of
directors. The minimum number of members of the MeriStar board of directors is
three, and the bylaws prescribe a maximum of up to 15 members. Currently,
MeriStar has 10 directors, and FelCor has 11 directors.

AMENDMENTS TO CHARTER

Amendments to the FelCor and MeriStar charters are governed by the
provisions of the Maryland General Corporation Law which require the board of
directors to adopt a resolution which sets forth the proposed amendment, declare
that it is advisable, and direct that the proposed amendment be submitted for
consideration at either an annual or special meeting of the stockholders
entitled to vote to approve the amendment.

FelCor's charter requires that any proposed amendment to the charter will
become effective only upon the affirmative vote of the holders of not less than
a majority of all votes entitled to be cast on the matter. However, any
amendment to or repeal of provisions of the charter relating to ownership
limitations on the stock of FelCor will be effective only if it is adopted upon
the affirmative vote of not less than two-thirds of the aggregate votes entitled
to be cast on the proposed amendment. Any amendment to or repeal of provisions
of FelCor's charter relating to the board of directors requires the affirmative
vote of not less than 80% of the board of directors and 75% of the aggregate
votes entitled to be cast on the proposed amendment.

MeriStar's charter requires that an amendment to the charter addressing any
stock provisions become effective only upon the affirmative vote of all
independent directors and the holders of not less than two-thirds of all votes
entitled to be cast on the matter. To amend any provisions in the MeriStar
charter addressing the classification of directors, the removal of directors,
independent directors, pre-emptive rights, indemnification and liability of
directors and officers and amendments to the charter, approval by the
affirmative vote of the holders of not less than two thirds of all votes
entitled to be cast on the matter is required.

PREFERRED STOCK

MeriStar has no outstanding shares of preferred stock. FelCor has
outstanding shares of two series of preferred stock. The FelCor preferred stock
has preferences over common stock on dividends or liquidating distributions. For
a description of the terms of FelCor's preferred stock, see "Description of
FelCor Capital Stock -- Description of FelCor Preferred Stock."

The FelCor charter expressly provides that the board of directors may set,
change or eliminate any of the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms and
condition of redemption of any of the unissued shares of the preferred stock of
FelCor. The MeriStar charter expressly provides that the board of directors may
designate the rights, preferences and priorities of any of the unissued shares
of the preferred stock of MeriStar, provided that

218
223

the preferred stock will not be used for anti-takeover purposes and will not
have super-majority voting rights.

SPECIAL MEETINGS OF THE STOCKHOLDERS

The bylaws of FelCor provide that a special meeting of the stockholders may
be called by the chairman of the board, the chief executive officer, the
president or the majority of the board of directors or a majority of the
independent directors, or the holders of at least 10% of the outstanding shares
of stock entitled to vote at the meeting.

The bylaws of MeriStar provide that a special meeting of stockholders may
be called by the president, chief executive officer or the board of directors,
or the holders of at least a majority of the outstanding shares of stock
entitled to vote at the meeting. The stockholders must pay for the costs of the
special meeting if called by the stockholders.

REMOVAL OF DIRECTORS

FelCor's charter provides that directors may be removed from office at any
time, but only for cause and then only by the affirmative vote of a majority of
the holders of stock entitled to vote in an election for directors.

MeriStar's charter provides that a director may be removed with or without
cause by the affirmative vote of 75% of the votes entitled to be cast in the
election of directors.

LEGAL MATTERS

The validity of our units to be issued in connection with the partnership
merger will be passed upon for us by Jenkens & Gilchrist, a Professional
Corporation, Dallas, Texas.

The qualification of the merger as a reorganization under section 368(a) of
the Internal Revenue Code will be passed upon for FelCor by Jenkens & Gilchrist,
a Professional Corporation, Dallas, Texas. The qualification of FelCor as a REIT
for federal income tax purposes and our partnership status will be passed upon
by Hunton & Williams, Richmond, Virginia.

The qualification of the merger as a reorganization under section 368(a) of
the Internal Revenue Code will be passed upon for MeriStar and the qualification
of MeriStar as a REIT for federal income tax purposes and the partnership status
of MeriStar Partnership will be passed upon by Paul, Weiss, Rifkind, Wharton &
Garrison, New York, New York.

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224

EXPERTS

The financial statements of FelCor Lodging Limited Partnership and its
subsidiaries as of December 31, 2000 and 1999, and for each of the years in the
three-year period ended December 31, 2000, and the financial statement schedule
of real estate and accumulated depreciation have been included in this
prospectus in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

The financial statements of DJONT Operations, L.L.C. and its subsidiaries
as of December 31, 2000 and 1999, and for each of the years in the three-year
period ended December 31, 2000, and the financial statement schedule of real
estate and accumulated depreciation have been included in this prospectus in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

The combined financial statements of Bristol Hotels & Resorts Tenant
Companies included in this prospectus as of December 31, 2000 and for the nine
months ended December 31, 2000, and of the predecessor thereto for the three
months ended March 31, 2000, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

The financial statements of MeriStar Hospitality Operating Partnership,
L.P. and subsidiaries as of December 31, 2000 and 1999, and for each of the
years in the three-year period ended December 31, 2000 and the financial
statement schedule of real estate and accumulated depreciation have been
included in this prospectus in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-4 of which
this prospectus forms a part. The registration statement registers the
distribution to holders of units of MeriStar Partnership of our units of limited
partnership to be issued in connection with the partnership merger. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about us. The rules and regulations of the SEC
allow us to omit specified information included in the registration statement
from this prospectus. In addition, we file reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy any of this information at the following locations of the SEC:

<Table>

Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</Table>

You may obtain information on the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330.

The SEC also maintains an Internet web site that contains reports, proxy
statements and other information regarding issuers, including us, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
Reports, proxy statements and other information concerning us may also be
inspected at the offices of the New York Stock Exchange, which are located at 20
Broad Street, New York, New York 10005.

FelCor and we supplied all information contained in this prospectus
relating to us, as well as all pro forma financial information, and MeriStar or
MeriStar Partnership has supplied all information contained in this prospectus
relating to MeriStar or MeriStar Partnership. This document constitutes our
prospectus.

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225

WHAT INFORMATION YOU SHOULD RELY ON

No person has been authorized to give any information or to make any
representation that differs from, or adds to, the information discussed in this
document. Therefore, if anyone gives you different or additional information,
you should not rely on it.

This document is dated September 12, 2001. The information contained in
this document speaks only as of its date unless the information specifically
indicates that another date applies. This document does not constitute an offer
to exchange or sell, or a solicitation of an offer to exchange or purchase,
MeriStar Partnership's or our units of limited partnership interest, to or from
any person to whom it is unlawful to direct these activities.

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226

INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
PAGE
-----

FELCOR LODGING LIMITED PARTNERSHIP
Consolidated Balance Sheets -- June 30, 2001 (Unaudited)
and December 31, 2000.................................. F-3
Consolidated Statements of Operations -- For the Six
Months Ended June 30, 2001 and 2000 (Unaudited)........ F-4
Consolidated Statements of Cash Flows -- For the Six
Months Ended June 30, 2001 and 2000 (Unaudited)........ F-5
Notes to Consolidated Financial Statements................ F-6
Report of Independent Accountants......................... F-21
Consolidated Balance Sheets -- December 31, 2000 and
1999................................................... F-22
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998....................... F-23
Consolidated Statements of Partners' Capital for the years
ended December 31, 2000, 1999 and 1998................. F-24
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998....................... F-25
Notes to Consolidated Financial Statements................ F-26
Report of Independent Accountants on Financial Statement
Schedule............................................... F-49
Schedule III -- Real Estate and Accumulated Depreciation
as of December 31, 2000................................ F-50

DJONT OPERATIONS, L.L.C.
Report of Independent Accountants......................... F-58
Consolidated Balance Sheets -- December 31, 2000 and
1999................................................... F-59
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998....................... F-60
Consolidated Statements of Shareholders' Deficit for the
years ended December 31, 2000, 1999 and 1998........... F-61
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998....................... F-62
Notes to Consolidated Financial Statements................ F-63

BRISTOL HOTELS & RESORTS TENANT COMPANIES
Independent Auditors' Report.............................. F-66
Combined Balance Sheet -- December 31, 2000............... F-67
Combined Statements of Operations for the nine months
ended December 31, 2000 and the three months ended
March 31, 2000 (Predecessor)........................... F-68
Combined Statements of Stockholder's Equity -- March 31,
2000 (Predecessor) and December 31, 2000............... F-69
Combined Statements of Cash Flows for the nine months
ended December 31, 2000 and the three months ended
March 31, 2000 (Predecessor)........................... F-70
Notes to the Combined Financial Statements................ F-71
</Table>

F-1
227

<Table>
<Caption>
PAGE
-----

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
Condensed Consolidated Balance Sheets -- June 30, 2001
(unaudited) and December 31, 2000...................... F-78
Condensed Consolidated Statements of Operations and
Comprehensive Income -- Six Months Ended June 30, 2001
and 2000 (unaudited)................................... F-79
Condensed Consolidated Statements of Partners'
Capital -- Six Months Ended June 30, 2001 and 2000
(unaudited)............................................ F-80
Condensed Consolidated Statements of Cash Flows -- Six
Months Ended June 30, 2001 and 2000 (unaudited)........ F-81
Notes to Condensed Consolidated Financial Statements...... F-82
Independent Auditors' Report.............................. F-92
Consolidated Balance Sheets -- December 31, 2000 and
1999................................................... F-93
Consolidated Statements of Operations -- Years Ended
December 31, 2000, 1999 and 1998....................... F-94
Consolidated Statements of Partners' Capital -- Years
Ended December 31, 2000, 1999 and 1998................. F-95
Consolidated Statements of Cash Flows -- Years Ended
December 31, 2000, 1999 and 1998....................... F-96
Notes to the Consolidated Financial Statements............ F-97
Schedule III -- Real Estate and Accumulated
Depreciation........................................... F-119
</Table>

F-2
228

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

ASSETS

Investment in hotels, net of accumulated depreciation of
$553,281 at June 30, 2001 and $473,101 at December 31,
2000...................................................... $3,710,694 $3,750,275
Investment in unconsolidated entities....................... 154,980 128,593
Assets held for sale........................................ 52,122 129,294
Cash and cash equivalents................................... 64,220 26,060
Restricted cash............................................. 323,555
Accounts receivable......................................... 46,449 31,241
Note receivable from unconsolidated entity.................. 7,695
Deferred expenses, net of accumulated amortization of $9,934
at June 30, 2001 and $7,146 at December 31, 2000.......... 32,201 23,944
Other assets................................................ 19,307 6,501
---------- ----------
Total assets...................................... $4,403,528 $4,103,603
========== ==========

LIABILITIES AND PARTNERS' CAPITAL

Debt........................................................ $2,134,093 $1,838,241
Distributions declared but unpaid........................... 34,199 33,957
Accrued expenses and other liabilities...................... 146,077 94,232
Minority interest in other partnerships..................... 50,474 50,774
---------- ----------
Total liabilities................................. 2,364,843 2,017,204
---------- ----------
Commitments and contingencies
Redeemable units at redemption value........................ 210,929 205,800
Preferred units, $.01 par value, 20,000 units authorized:
Series A Cumulative Preferred Units, 5,981 units issued
and outstanding........................................ 149,515 149,515
Series B Redeemable Preferred Units, 58 units issued and
outstanding............................................ 143,750 143,750
Partners' capital........................................... 1,534,491 1,587,334
---------- ----------
Total liabilities and partners' capital........... $4,403,528 $4,103,603
========== ==========
</Table>

The accompanying notes are an integral part of these consolidated financial

F-3
229

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED, IN THOUSANDS EXCEPT FOR PER UNIT DATA)

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------
2001 2000
-------- --------

Revenues:
Hotel operating revenue:
Room................................................... $365,343
Food and beverage...................................... 53,150
Other operating departments............................ 24,790
Percentage lease revenue.................................. 115,137 $256,335
Retail space rental and other revenue..................... 1,882 1,824
-------- --------
Total revenues.................................... 560,302 258,159
-------- --------
Expenses:
Hotel operating expenses:
Room................................................... 83,404
Food and beverage...................................... 39,141
Other operating departments............................ 10,922
Management fees........................................... 12,612
Other property operating costs............................ 121,642
Taxes, insurance and lease expense........................ 76,460 47,588
Corporate expenses........................................ 6,372 6,112
Depreciation.............................................. 79,513 81,480
Lease termination costs................................... 36,226
-------- --------
Total operating expenses.......................... 466,292 135,180
-------- --------
Operating income............................................ 94,010 122,979
Interest expense, net....................................... (79,621) (76,781)
Swap termination expense.................................... (4,824)
Loss on assets held for sale................................ (63,000)
-------- --------
Income (loss) before equity in income from unconsolidated
entities, minority interests, and gain on sale of
assets.................................................... 9,565 (16,802)
Equity in income from unconsolidated entities............... 6,328 5,648
Minority interests in other partnerships.................... (2,282) (2,093)
Gain on sale of assets...................................... 2,955 875
-------- --------
Income (loss) before extraordinary items.................... 16,566 (12,372)
Extraordinary charge from write off of deferred financing
fees...................................................... (225)
-------- --------
Net income (loss)........................................... 16,341 (12,372)
Preferred distributions..................................... (12,300) (12,358)
-------- --------
Net income (loss) applicable to unitholders................. $ 4,041 $(24,730)
======== ========
Per unit data:
Basic:
Net income (loss) applicable to unitholders............ $ 0.07 $ (0.39)
======== ========
Weighted average units outstanding..................... 61,628 63,066
Diluted:
Net income (loss) applicable to unitholders............ $ 0.07 $ (0.39)
======== ========
Weighted average units outstanding..................... 62,069 63,297
</Table>

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

F-4
230

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED, IN THOUSANDS)

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
--------------------
2001 2000
--------- --------

Cash flows from operating activities:
Net income (loss)......................................... $ 16,341 $(12,372)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................ 79,513 81,480
Gain on sale of assets.................................. (2,955) (875)
Amortization of deferred financing fees................. 2,563 2,383
Accretion of debt....................................... (150) (448)
Amortization of unearned officers' and directors'
compensation.......................................... 884 474
Equity in income from unconsolidated entities........... (6,328) (5,648)
Extraordinary write off of deferred financing fees...... 225
Lease termination costs................................. 36,226
Loss on assets held for sale............................ 63,000
Minority interests in other partnerships................ 2,282 2,093
Changes in assets and liabilities:
Accounts receivable..................................... (10,077) (10,204)
Deferred expenses....................................... (11,045) (4,003)
Other assets............................................ (11,297) (1,251)
Deferred rent........................................... 18,604
Accrued expenses and other liabilities.................. (2,552) 5,510
--------- --------
Net cash flow provided by operating activities..... 93,630 138,743
--------- --------
Cash flows provided by (used in) investing activities:
Restricted cash........................................... (323,555)
Improvements and additions to hotels...................... (29,431) (41,408)
Proceeds from sale of interest in hotels.................. 48,049
Operating cash received in acquisition of lessee.......... 25,583
Proceeds from sale of assets.............................. 10,967 1,071
Cash distributions from unconsolidated entities........... 2,973 11,708
--------- --------
Net cash flow used in investing activities......... (265,414) (28,629)
--------- --------
Cash flows provided by (used in) financing activities:
Proceeds from borrowings.................................. 849,748 500,892
Repayment of borrowings................................... (553,746) (451,847)
Purchase of treasury stock................................ (4,046) (56,733)
Proceeds from exercise of stock option.................... 692
Buyback of assumed stock options.......................... (1,860)
Distributions paid to minority interest................... (2,582) (3,054)
Distributions paid to preferred unitholders............... (12,300) (12,368)
Distributions paid to unitholders......................... (67,822) (70,415)
--------- --------
Net cash flow provided by (used in) financing
activities........................................ 209,944 (95,385)
--------- --------
Net change in cash and cash equivalents..................... 38,160 14,729
Cash and cash equivalents at beginning of periods........... 26,060 36,123
--------- --------
Cash and cash equivalents at end of periods................. $ 64,220 $ 50,852
========= ========
Supplemental cash flow information -- interest paid......... $ 84,115 $ 73,259
========= ========
</Table>

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

F-5
231

FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

FelCor Lodging Limited Partnership and its subsidiaries (the "Company") at
June 30, 2001, owned interests in 185 hotels in the United States and Canada
with nearly 50,000 rooms and suites (collectively, the "Hotels"). The sole
general partner of the Company is FelCor Lodging Trust Incorporated ("FelCor")
the nation's second largest hotel real estate investment trust ("REIT"). At June
30, 2001, FelCor owned a greater than 85 percent equity interest in the Company.
At June 30, 2001, the Company owned a 100 percent interest in 152 of the Hotels,
a 90 percent or greater interest in entities owning seven hotels, a 60 percent
interest in an entity owning two hotels and 50 percent interests in entities
that own 24 hotels. Fifteen of the Company's hotels have been designated as held
for sale.

On May 9, 2001, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with MeriStar Hospitality Corporation ("MeriStar").
Pursuant to the Merger Agreement, MeriStar will be merged with and into FelCor
subject to the approval of the shareholders of both companies. Under the terms
of the merger plan holders of MeriStar common shares will receive, for each
common share, $4.60 in cash and 0.784 shares of common stock of FelCor. The
Company also will either assume or refinance $1.6 billion in MeriStar debt. A
separate publicly traded company, MeriStar Hotels & Resorts, will continue to
manage the hotels acquired from MeriStar in the merger. The merger is expected
to close in September of 2001.

The transaction will also involve the merger of the Company's subsidiary
with and into MeriStar's subsidiary operating limited partnership. The holders
of common partnership units in MeriStar's partnership will receive, for each
common unit, $4.60 in cash and 0.784 common partnership units in the Company.
Preferred units in MeriStar's partnership will receive similar preferred units
in the Company or a combination of cash and units. The proposed mergers are
subject to shareholder approval and other customary conditions. The equity
portion of the transaction is structured to qualify as a tax free merger with
respect to the share consideration.

On January 1, 2001, the REIT Modernization Act ("RMA") went into effect.
Among other things, the RMA permits a REIT to form taxable subsidiaries that
lease hotels from the REIT, provided that the hotels continue to be managed by
unrelated third parties. Effective January 1, 2001, the Company completed
transactions that resulted in its newly formed taxable subsidiaries acquiring
leases for 96 hotels that were leased to either DJONT Operations, L.L.C. and its
consolidated subsidiaries (collectively "DJONT") or subsidiaries of Six
Continents Hotels, formerly Bass Hotels and Resorts, ("Six Continents Hotels").
By acquiring these leases through its taxable subsidiaries, the Company acquired
the economic benefits and risks of these hotel operations and reports hotel
revenues and expenses rather than percentage lease revenues. Additionally, in
2001, the Company entered into an agreement to acquire its remaining 88 hotel
leases held by Six Continents Hotels. This transaction was effective July 1,
2001.

F-6
232
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION -- (CONTINUED)

The following table provides a schedule of the Hotels by brand, broken out
between those hotels whose operations are consolidated for purposes of the
Company's financial statements, those hotels whose operations are reported as
unconsolidated entities for purposes of the Company's financial statements and
those hotels operated under leases with Six Continents Hotels at June 30, 2001:

<Table>
<Caption>
UNCONSOLIDATED SIX CONTINENTS
BRAND CONSOLIDATED JOINT VENTURES HOTELS LEASED TOTAL
- ----- ------------ -------------- -------------- -----

Hilton(R) Brands:
Embassy Suites(R)............................ 45 14 59
Doubletree(R) and Doubletree Guest
Suites(R)................................. 14 14
Hampton Inn(R)............................... 2 1 5 8
Hilton Suites(R)............................. 1 1
Homewood Suites(R)........................... 1 1
Six Continents Hotels Brands:
Holiday Inn(R)............................... 1 43 44
Crowne Plaza(R) and Crowne Plaza Suites(R)... 18 18
Holiday Inn Select(R)........................ 10 10
Holiday Inn Express(R)....................... 5 5
Starwood Brands:
Sheraton(R) and Sheraton Suites(R)........... 9 1 10
Westin(R).................................... 1 1
Other Brands................................... 1 7 6 14
-- -- -- ---
Total Hotels......................... 73 24 88 185
== == == ===
</Table>

The Hotels are located in the United States (35 states) and Canada, with a
concentration in Texas (41 hotels), California (19 hotels), Florida (16 hotels)
and Georgia (14 hotels).

At June 30, 2001, (i) subsidiaries of Six Continents Hotels managed 90 of
the Hotels, (ii) subsidiaries of Hilton managed 72 of the Hotels, (iii)
subsidiaries of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") managed
11 of the Hotels, (iv) subsidiaries of Interstate Hotels Corporation ("IHC")
managed eight of the Hotels and (v) three independent management companies
managed the four remaining Hotels.

Effective January 1, 2001, with the enactment of the RMA, the Company
acquired and contributed to a newly formed taxable REIT subsidiary, all the
equity interests in DJONT. In consideration for the acquisition, the Company
issued an aggregate of 416,667 units of limited partnership interest valued at
approximately $10 million, which, together with DJONT's accumulated
shareholders' deficit of $24.5 million, was expensed as a lease termination cost
in the first quarter of 2001.

Effective January 1, 2001, the Company completed the acquisition of 12 of
the leases, which were held by Six Continents Hotels. In consideration for the
acquisition and termination of these leases and the related management
agreements of such leases, FelCor issued to Six Continents Hotels 413,585 shares
of FelCor common stock valued at approximately $10 million and the Company
issued the corresponding number of units. Of this $10 million in consideration
for acquisition of these leases, approximately $8.3 million associated with 11
of the hotels had been previously accrued in connection with the hotels
designated as held for sale and $1.7 million was expensed as lease termination
costs in the first quarter of 2001. Of the 12 hotels, two have been sold, eight
have been contributed to a joint venture with IHC, one remains to be sold and
one will be retained. In March 2001, the Company contributed the eight hotels
managed by IHC to a joint venture with IHC. The Company also entered into an
agreement with Six

F-7
233
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION -- (CONTINUED)

Continents Hotels to acquire the remaining 88 leases, which became effective
July 1, 2001. In consideration for the acquisition of such leases the Company
entered into long-term management agreements with Six Continents Hotels with
regard to these hotels and, on July 1, 2001, FelCor issued to Six Continents
Hotels 100 shares of FelCor common stock.

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 income or partners' capital.

The financial information for the six months ended June 30, 2001 and 2000,
is unaudited but includes all adjustments (consisting only of normal recurring
accruals) which the Company considers necessary for a fair presentation of the
results for the periods. The financial information should be read in conjunction
with the consolidated financial statements for the year ended December 31, 2000,
included in the Company's Annual Report on Form 10-K ("Form 10-K"). Operating
results for the six months ended June 30, 2001 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 2001.

2. DEFERRED RENT

The Company recognized deferred lease income under Staff Accounting
Bulletin No. 101 ("SAB 101") of $18.6 million for the six months ended June 30,
2000, respectively. In accordance with SAB 101, rent deferred in the first
quarter of 2001 was fully earned and recognized as percentage lease revenue in
the second quarter of 2001, because all contingencies related to such revenue
were resolved with regard to the leases acquired July 1, 2001. For the six
months ended June 30, 2001, SAB 101 had no financial impact to the Company.

3. ASSETS HELD FOR SALE

In the second quarter of 2000, the Company identified 25 hotels that it
considered non-strategic and announced its intention to sell such hotels. In
connection with the decision to sell these hotels, the Company recorded, at June
30, 2000, an expense of $63 million representing the difference between the net
book value of these hotels and the estimated net proceeds. No depreciation
expense has been recorded on these hotels since June 30, 2000. Revenues related
to the assets held for sale, less costs associated with those assets, were
included in the Company's results of operations for the six months ended June
30, 2001 and 2000, and represented income of $7.1 million and $6.1 million (net
of depreciation expense in 2000), respectively.

In March 2001, the Company contributed eight of the hotels held for sale to
an entity in which the Company owns a 50 percent equity interest and a
subsidiary of IHC holds the other 50 percent equity interest. The Company
contributed assets with a book value of approximately $77 million, received net
cash proceeds of $48 million and retained a $17 million preferred interest.

In June 2001, the Company sold the 140-room Hampton Inn located in
Marietta, Georgia, for a net sales price of $7.1 million. The Company is
actively marketing the remaining 15 hotels held for sale.

F-8
234
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENT IN UNCONSOLIDATED ENTITIES

The Company owned 50 percent interests in joint venture partnerships that
owned and operated 24 hotels at June 30, 2001, and 16 hotels at June 30, 2000.
The Company also owned a 50% interest in partnerships that owned an undeveloped
parcel of land, a condominium management company and developed and sold
condominiums in Myrtle Beach, South Carolina. The Company accounts for its
investments in these unconsolidated entities under the equity method.

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

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
-------- ------------

Balance sheet information:
Investment in hotels...................................... $342,294 $294,941
Non-recourse mortgage debt................................ $266,660 $225,302
Equity.................................................... $ 96,975 $ 82,986
</Table>

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-----------------
2001 2000
------- -------

Statements of operations information:
Total revenues............................................ $41,300 $39,173
Net income................................................ $14,327 $13,649
Net income attributable to the Company.................... $ 7,399 $ 6,719
Amortization of cost in excess of book value.............. (1,071) (1,071)
------- -------
Equity in income from unconsolidated entities............. $ 6,328 $ 5,648
======= =======
</Table>

F-9
235
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT

Debt at June 30, 2001, and December 31, 2000, consisted of the following
(in thousands):

<Table>
<Caption>
JUNE DECEMBER
COLLATERAL INTEREST RATE MATURITY DATE 2001 2000
---------- ------------- -------------- ---------- ----------

Floating Rate Debt:
Line of credit.................. None LIBOR + 200bp August 2003 $ 112,000
Mortgage debt................... 3 hotels LIBOR + 200bp February 2003 61,909
Promissory note................. None LIBOR + 200bp June 2016 $ 650 650
---------- ----------
Total floating rate
debt................... 650 174,559
---------- ----------
Fixed Rate Debt:
Line of credit -- swapped....... None 7.66% August 2003 39,900 250,000
Publicly-traded term notes...... None 7.38% October 2004 174,569 174,505
Publicly-traded term notes...... None 7.63% October 2007 124,370 124,320
Publicly-traded term notes...... None 9.50% September 2008 101,699
Publicly-traded term notes...... None 9.50% September 2008 395,073 394,731
Publicly-traded term notes...... None 8.50% June 2011 595,073
Mortgage debt................... 15 hotels 7.24% November 2007 138,854 140,148
Mortgage debt................... 7 hotels 7.54% April 2009 96,826 97,604
Mortgage debt................... 6 hotels 7.55% June 2009 72,810 73,389
Mortgage debt................... 7 hotels 8.73% May 2010 143,163 144,032
Mortgage debt................... 8 hotels 8.70% May 2010 183,807 184,829
Other........................... 13 hotels 6.96%-7.23% 2000-2005 67,299 80,124
---------- ----------
Total fixed rate debt.... 2,133,443 1,663,682
---------- ----------
Total debt............... $2,134,093 $1,838,241
========== ==========
</Table>

One month LIBOR at June 30, 2001, was 3.835%.

At June 30, 2001, the Company's line of credit was matched with an interest
rate swap agreement, which effectively converted the floating rate on the line
of credit to a fixed rate.

The line of credit contains various affirmative and negative covenants
including limitations on total indebtedness, total secured indebtedness, and
cash distributions, as well as the obligation to maintain certain minimum
tangible net worth and certain minimum interest and debt service coverage
ratios. At June 30, 2001, the Company was in compliance with all such covenants.

The Company's other borrowings contain affirmative and negative covenants
that are generally equal to or less restrictive than the line of credit. Most of
the mortgage debt is non-recourse to the Company and contains provisions
allowing for the substitution of collateral upon satisfaction of certain
conditions. Most of the mortgage debt is prepayable; subject to various
prepayment penalties, yield maintenance, or defeasance obligations.

Interest expense is reported net of interest income of $2.2 million and
$863,000 for the six months ended June 30, 2001 and 2000, respectively, and
capitalized interest of $229,000 and $497,000, respectively.

On June 4, 2001, the Company completed the private placement of $600
million in 8 1/2 percent senior unsecured notes that mature in June 2001.
Approximately $315 million of the proceeds were placed in escrow pending
completion of the merger with MeriStar. The remaining proceeds were used to pay
down the Line of Credit and other floating rate debt. Associated with the pay
down of the Line of Credit, the Company terminated interest rate swaps with a
notional value of $200 million, resulting in a one-time $4.8 million swap
termination cost, which was expensed in the second quarter. An extraordinary
charge of

F-10
236
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT -- (CONTINUED)

$225,000 was recorded to write-off unamortized deferred financing costs
associated with the prepayment of the floating rate debt.

On January 11, 2001, the Company completed the private placement of $100
million in 9 1/2 percent senior unsecured notes that mature in September 2008.
These notes were issued at a premium to yield an effective rate of 9 1/8
percent. The proceeds were used initially to pay down the company's line of
credit.

6. ADOPTION OF SFAS 133

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments.
Specifically, SFAS No. 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 partners' capital or net income depending on whether the derivative
instrument qualifies as a hedge for accounting purposes and the nature of the
hedging activity.

Upon adoption of SFAS 133, on January 1, 2001, the Company recorded the
fair value of its interest swap rate agreements with a notional value of $250
million as an asset of $248,000 with a corresponding credit to accumulated other
comprehensive income reported in partners' capital.

As of June 30, 2001, the Company held an interest rate swap agreement with
a notional value of $50 million. The fixed interest rate paid on this swap was
5.6 percent and the floating swap rate received was 4.06 percent with a maturity
of July 2003. The fair value of the Company's interest rate swap agreement at
June 30, 2001 was a liability of $899,000 which was recorded in accrued expenses
and accumulated other comprehensive income reported in partners' capital.
Assuming no changes in the index rates over the next twelve months, the swap
currently held by the Company would result in additional interest expense of
$561,000. In June 2001, interest rate swaps with a notional amount of $200
million were terminated at a cost of $4.8 million when the corresponding
floating rate debt was prepaid.

In the normal course of business, the Company is exposed to the effect of
interest rate changes. The Company limits these risks by following established
risk management policies and procedures including the use of derivatives.
Derivatives are used primarily to fix the rate on floating rate debt and manage
the cost of borrowing obligations. The Company requires that hedging derivative
instruments are effective in reducing the interest rate risk exposure that they
are designated to hedge. Instruments that meet these hedging criteria are
formally designated as hedges at the inception of the derivative contract. The
Company does not use derivatives for trading or speculative purposes, and the
Company has a policy of only entering into contracts with major financial
institutions.

To determine the fair values of its derivative instruments, the Company
uses 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 June 30, 2001, the Company's financing facilities consist of a $600
million floating rate line of credit. To reduce the risk of variable interest
rates, the Company currently uses an interest rate swap agreement, to
effectively convert a portion of its floating rate debt to fixed-rate debt. The
differences to be paid or received by the Company under the terms of the
interest rate swap agreements are accrued as interest rates change and
recognized as an adjustment to interest expense.

F-11
237
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income" establishes standards for
reporting and displaying comprehensive income and its components. Total
comprehensive income for the six months ended June 30, 2001 is calculated as
follows (in thousands):

<Table>

Net income.................................................. $16,341
Realized loss on terminated interest rate swap agreements... 4,824
Unrealized loss on interest rate swap agreements............ (5,723)
-------
Total comprehensive income........................ $15,442
=======
</Table>

Although the Company conducts business in Canada, the Canadian operations
were not material to our consolidated financial position, results of operations
or cash flows during the six months ended June 30, 2001 and 2000. Additionally,
foreign currency transaction gains and losses were not material to the Company's
results of operations for the six months ended June 30, 2001 and 2000.

8. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") approved
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. SFAS No.
142 will be effective for fiscal years beginning after December 15, 2001 and
will require (1) intangible assets (as defined in SFAS No. 141) to be
reclassified into goodwill, (2) goodwill amortization to cease, and (3) the
testing of goodwill for impairment at transition and at interim periods (if an
event or circumstance would result in an impairment). The Company will adopt
SFAS No. 142 on June 30, 2001, with the purchase of any goodwill and intangible
assets acquired after June 30, 2001. The Company has not yet determined the
impact of SFAS No. 142 on the Company's results of operations and financial
position.

9. INCOME TAXES

Under the RMA that became effective January 1, 2001, the Company leases
certain of its hotels to wholly-owned taxable REIT subsidiaries that are subject
to federal and state income taxes. The Company accounts for income taxes in
accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes."
Under SFAS 109, the Company accounts for income taxes using the asset and
liability method under which deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The Company has a deferred tax asset of
approximately $100,000, prior to any valuation allowance, relating to losses of
the taxable REIT subsidiaries during the six months ended June 30, 2001.
Management has provided a 100 percent valuation allowance against this asset due
to uncertainty of realization and accordingly, no provision or benefit from
income taxes is reflected in the accompanying Consolidated Statements of
Operations.

10. GAIN ON SALE OF ASSETS

During the six months ended June 30, 2001, the Company received $3.9
million for the condemnation of three parcels of land and recorded a gain of
$3.0 million.

11. PURCHASE OF DJONT

Effective January 1, 2001, the Company acquired all the equity interests in
DJONT. In consideration for the acquisition, the Company issued 416,667 units of
limited partnership interest valued at

F-12
238
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. PURCHASE OF DJONT -- (CONTINUED)

approximately $10 million which, together with DJONT's accumulated shareholders'
deficit of $24.5 million, was expensed as lease termination cost in the first
quarter of 2001.

The Company purchased certain assets and assumed certain liabilities with
this acquisition. The fair values of the acquired assets and liabilities at
January 1, 2001, are as follows (in thousands):

<Table>

Cash and cash equivalents................................... $25,583
Accounts receivable......................................... 30,689
Investment in real estate................................... 10,954
Other assets................................................ 10,358
-------
Total assets acquired............................. 77,584
-------
Accounts payable............................................ 18,656
Due to FelCor Lodging Trust................................. 39,466
Accrued expenses and other liabilities...................... 43,999
-------
Total liabilities assumed......................... 102,121
-------
Liabilities assumed in excess of assets acquired............ 24,537
Value of units issued....................................... 9,896
-------
Lease termination costs..................................... $34,433
=======
</Table>

12. SEGMENT INFORMATION

Following the acquisition of certain of the Company's leases at January 1,
2001, the Company has determined that its reportable segments are those that are
consistent with the Company's method of internal reporting, which segments its
business in 2001 by those hotels that the Company leases to DJONT (whose
operations are consolidated for financial reporting purposes beginning January
1, 2001) and those hotels that the Company leases to Six Continents Hotels.

For the six months ended June 30, 2000, the Company segmented its business
between its two lessees, DJONT and Six Continents Hotels.

The following tables present information for the reportable segments for
the six months ended June 30, 2001 and 2000 (in thousands):

<Table>
<Caption>
SIX
CONTINENTS CORPORATE
DJONT HOTELS SEGMENT NOT ALLOCABLE CONSOLIDATED
SIX MONTHS ENDED JUNE 30, 2001 LEASED LEASED TOTAL TO SEGMENTS TOTAL
- ------------------------------ -------- ---------- -------- ------------- ------------

Total revenues....................... $443,283 $115,137 $558,420 $ 1,882 $560,302
Net income (loss).................... $ 80,431 $ 21,855 $102,286 $(85,945) $ 16,341
Funds from operations................ $160,706 $ 62,161 $222,867 $(87,184) $135,683
Weighted average units
outstanding(1)..................... 66,759
</Table>

<Table>
<Caption>
SIX
CONTINENTS CORPORATE
DJONT HOTELS SEGMENT NOT ALLOCABLE CONSOLIDATED
SIX MONTHS ENDED JUNE 30, 2000 LEASED LEASED TOTAL TO SEGMENTS TOTAL
- ------------------------------ -------- ---------- -------- ------------- ------------

Total revenues....................... $137,813 $118,522 $256,335 $ 1,824 $258,159
Net income (loss).................... $ 69,892 $ (1,059) $ 68,833 $(81,205) $(12,372)
Funds from operations................ $132,459 $104,459 $236,918 $(87,538) $149,380
Weighted average units
outstanding(1)..................... 67,987
</Table>

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

(1) Weighted average units outstanding are computed including dilutive options,
unvested stock grants, and assuming conversion of Series A preferred units
to units.

F-13
239
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. TREASURY STOCK REPURCHASE PROGRAM

On January 4, 2000, FelCor announced that its Board of Directors had
approved a $200 million increase in its stock repurchase program, authorizing
FelCor to purchase up to an aggregate of $300 million of its outstanding common
shares. Approximately 179,000 of FelCor common shares for approximately $4.0
million have been purchased from January 1, 2001 through March 27, 2001. FelCor
has not repurchased any additional shares since March 27, 2001. These
repurchases have been recorded as a reduction to partners' capital as a result
of the redemption of units held by FelCor to fund the repurchases. Since the
inception of the stock repurchase program FelCor has repurchased approximately
10.5 million shares of FelCor common stock for approximately $189.1 million.

14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per unit for the six months ended June 30, 2001 and 2000 (in thousands,
except per unit data):

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------
2001 2000
-------- --------

Numerator:
Income (loss) before extraordinary items.................. $ 16,566 $(12,372)
Extraordinary charge...................................... (225)
-------- --------
Net income (loss)......................................... 16,341 (12,372)
Preferred distributions................................... (12,300) (12,358)
-------- --------
Net income (loss) applicable to unitholders............... $ 4,041 $(24,730)
======== ========
Denominator:
Denominator for basic earnings per unit -- weighted
average units.......................................... 61,628 63,066
Effect of dilutive securities:
Stock options.......................................... 90
Restricted units....................................... 351 231
-------- --------
Denominator for diluted earnings per unit -- adjusted
weighted average units and assumed conversions........ 61,069 63,297
======== ========
Earnings (loss) per unit data:
Basic
Net income (loss) before extraordinary item............ $ 0.07 $ (0.39)
Extraordinary item.....................................
-------- --------
Net income (loss)...................................... $ 0.07 $ (0.39)
======== ========
Diluted
Net income (loss) before extraordinary item............ $ 0.07 $ (0.39)
Extraordinary item.....................................
-------- --------
Net income (loss)...................................... $ 0.07 $ (0.39)
======== ========
</Table>

The Series A preferred units and most of the options granted are
anti-dilutive and not included in the calculation of diluted earnings per unit.

F-14
240
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. CONSOLIDATING FINANCIAL INFORMATION

Certain of the Company's wholly-owned subsidiaries (FelCor/CSS Holdings,
L.P.; FelCor/CSS Hotels, L.L.C.; FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels,
L.L.C.; FelCor/St. Paul Holdings, L.P.; FelCor/LAX Holdings, L.P.; FHAC Nevada
Holding, L.L.C.; FelCor TRS Holdings, L.P.; Kingston Plantation Development
Corp.; FHAC Texas Holdings, L.P.; FelCor Omaha Hotel Company, L.L.C.; FelCor
Country Villa Hotel, L.L.C.; FelCor Moline Hotel, L.L.C.; FelCor Canada Co. and
FelCor Hotel Asset Company, L.L.C., collectively "Subsidiary Guarantors"),
together with FelCor and one of its wholly-owned subsidiaries (FelCor Nevada
Holdings, L.L.C.), are guarantors of senior debt. The following tables present
consolidating information for the Subsidiary Guarantors.

CONSOLIDATING BALANCE SHEET
JUNE 30, 2001
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

ASSETS

Net investment in hotel properties..... $ 512,786 $1,638,108 $1,559,800 $3,710,694
Investment in consolidated entities.... 4,096,294 $(4,096,294)
Investment in unconsolidated
entities............................. 136,814 18,166 154,980
Assets held for sale................... 4,391 43,595 4,136 52,122
Cash and cash equivalents.............. 20,586 27,806 15,828 64,220
Restricted cash........................ 323,555 323,555
Due (to) from subsidiary............... (1,604,725) 478,252 1,126,473
Accounts receivable.................... 10,636 35,813 46,449
Deferred assets........................ 26,594 1,174 4,433 32,201
Other assets........................... 6,412 8,188 4,707 19,307
----------- ---------- ---------- ----------- ----------
Total assets.................. $ 3,533,343 $2,251,102 $2,715,377 $(4,096,294) $4,403,528
=========== ========== ========== =========== ==========

LIABILITIES AND PARTNERS' CAPITAL

Debt................................... $ 1,413,691 $ 145,409 $ 574,993 $2,134,093
Distributions payable.................. 34,199 34,199
Accrued expenses and other
liabilities.......................... 46,436 79,080 20,561 146,077
Minority interest in other
partnerships......................... 332 50,142 50,474
----------- ---------- ---------- ----------
Total liabilities............. 1,494,658 224,489 645,696 2,364,843
----------- ---------- ---------- ----------
Redeemable units at redemption value... 210,929 210,929
Preferred units........................ 293,265 293,265
Partners' capital...................... 1,534,491 2,026,613 2,069,681 $(4,096,294) 1,534,491
----------- ---------- ---------- ----------- ----------
Total liabilities and
partners' capital........... $ 3,533,343 $2,251,102 $2,715,377 $(4,096,294) $4,403,528
=========== ========== ========== =========== ==========
</Table>

F-15
241
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

ASSETS

Net investment in hotel properties...... $ 593,248 $1,663,611 $1,539,896 $3,796,755
Investment in consolidated entities..... 2,814,305 $(2,814,305)
Investment in unconsolidated entities... 116,811 16,227 133,038
Assets held for sale.................... 4,582 118,510 12,555 135,647
Cash and cash equivalents............... 21,582 8,269 21,001 50,852
Due from Lessee......................... 14,278 18,218 (3,898) 28,598
Due (to) from subsidiary................ (244,385) 263,404 (19,019)
Note receivable from unconsolidated
entity................................ 7,728 7,728
Deferred assets......................... 10,772 1,245 5,076 17,093
Other assets............................ 5,215 1,834 5 7,054
---------- ---------- ---------- ----------- ----------
Total assets................... $3,344,136 $2,091,318 $1,555,616 $(2,814,305) $4,176,765
========== ========== ========== =========== ==========

LIABILITIES AND PARTNERS' CAPITAL

Debt.................................... $1,117,360 $ 118,227 $ 647,156 $1,882,743
Distributions payable................... 35,237 35,237
Accrued expenses and other
liabilities........................... 73,335 73,335
Deferred rent........................... 2,068 7,771 8,765 18,604
Minority interest in other
partnerships.......................... 50,710 50,710
---------- ---------- ---------- ----------
Total liabilities.............. 1,228,000 125,998 706,631 2,060,629
---------- ---------- ---------- ----------
Redeemable units at redemption value.... 151,948 151,948
Preferred units......................... 294,515 294,515
Partners' capital....................... 1,669,673 1,965,320 848,985 $(2,814,305) 1,669,673
---------- ---------- ---------- ----------- ----------
Total liabilities and partners'
capital ..................... $3,344,136 $2,091,318 $1,555,616 $(2,814,305) $4,176,765
========== ========== ========== =========== ==========
</Table>

F-16
242
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

Revenues:
Hotel operating revenue................ $441,434 $ 1,849 $443,283
Percentage lease revenue............... $ 42,818 121,932 94,809 $(144,422) 115,137
Other revenue.......................... 1,458 351 73 1,882
-------- -------- -------- --------- --------
Total revenue................. 44,276 563,717 96,731 (144,422) 560,302
-------- -------- -------- --------- --------
Expenses:
Hotel operating expenses............... 266,657 1,064 267,721
Taxes, insurance and other............. 5,215 203,040 12,627 (144,422) 76,460
Corporate expenses..................... 907 3,328 2,137 6,372
Depreciation........................... 13,596 35,719 30,198 79,513
Lease termination costs................ 34,456 1,770 36,226
-------- -------- -------- --------- --------
Total operating expenses...... 54,174 510,514 46,026 (144,422) 466,292
-------- -------- -------- --------- --------
Operating income (loss)................ (9,898) 53,203 50,705 94,010
Interest expense, net.................. (48,343) (5,693) (25,585) (79,621)
Swap termination expense............... (4,824) (4,824)
-------- -------- -------- --------- --------
Income (loss) before equity in income
from unconsolidated entities,
minority interests, and gain on sale
of assets............................ (63,065) 47,510 25,120 9,565
Equity in income from consolidated
entities............................. (72,863) 72,863
-------- ---------
Equity in income from unconsolidated
entities............................. 6,358 (30) 6,328
Minority interests in other
partnerships......................... (235) (2,047) (2,282)
Gain on sale of assets................. 645 2,310 2,955
-------- -------- -------- --------- --------
Income (loss) before extraordinary
items................................ 16,566 47,480 25,383 (72,863) 16,566
Extraordinary charge from writeoff of
deferred financing fees.............. (225) (225) 225 (225)
-------- -------- -------- --------- --------
Net income (loss)...................... 16,341 47,480 25,158 16,341
Preferred distributions................ (12,300) (12,300)
-------- -------- -------- --------- --------
Net income (loss) applicable to
unitholders.......................... $ 4,041 $ 47,480 $ 25,158 $ (72,638) $ 4,041
======== ======== ======== ========= ========
</Table>

F-17
243
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ---------- ------------- ------------

Cash flows from operating activities......... $ (47,075) $ 84,999 $ 55,706 $ 93,630
Cash flows from (used in) investing 19,180 (8,249)
activities................................. (276,345) (265,414)
Cash flows from (used in) financing (79,405) (49,544)
activities................................. 338,893 209,944
--------- -------- -------- --------
Change in cash and cash equivalents.......... 15,473 24,774 (2,087) 38,160
Cash and cash equivalents at beginning of 3,032 17,915
period..................................... 5,113 26,060
--------- -------- -------- --------
Cash and cash equivalents at end of period... $ 20,586 $ 27,806 $ 15,828 $ 64,220
========= ======== ======== ========
</Table>

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

Revenues:
Percent rent...................... $ 55,332 $123,202 $77,801 $256,335
Other revenue..................... 1,824 1,824
-------- -------- ------- -------- --------
Total revenue........... 57,156 123,202 77,801 258,159
-------- -------- ------- -------- --------
Expenses:
General and administrative........ 1,319 2,937 1,856 6,112
Depreciation...................... 17,803 37,591 26,086 81,480
Taxes, insurance and other........ 7,480 15,292 13,105 35,877
Land leases....................... 965 9,491 1,255 11,711
-------- -------- ------- -------- --------
Total operating
expenses.............. 27,567 65,311 42,302 135,180
-------- -------- ------- -------- --------
Operating income.................. 29,589 57,891 35,499 122,979
Interest expense, net............. (53,711) (5,454) (17,616) (76,781)
Loss on assets held for sale...... (6,170) (53,200) (3,630) (63,000)
-------- -------- ------- -------- --------
Income (loss) before equity in
income from unconsolidated
entities, minority interests and
gain on sale of assets.......... (30,292) (763) 14,253 (16,802)
Equity in income from consolidated
entities........................ 14,480 $(14,480)
Equity in income from
unconsolidated entities......... 4,933 715 5,648
Minority interest other
partnerships.................... (1,493) (600) (2,093)
Gain on sale of assets............ 875 875
-------- -------- ------- -------- --------
Net income (loss)................. (12,372) 827 13,653 (14,480) (12,372)
Preferred distributions........... 12,358 12,358
-------- -------- ------- -------- --------
Net income (loss) applicable to
unitholders..................... $(24,730) $ 827 $13,653 $(14,480) $(24,730)
======== ======== ======= ======== ========
</Table>

F-18
244
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ---------- ------------- ------------

Cash flows from operating activities......... $ 4,335 $ 90,052 $ 44,356 $138,743
Cash flows from (used in) investing (16,628) (10,827)
activities................................. (1,174) (28,629)
Cash flows from (used in) financing (77,573) (33,140)
activities................................. 15,328 (95,385)
------- -------- -------- --------
Change in cash and cash equivalents.......... 18,489 (4,149) 389 14,729
Cash and cash equivalents at beginning of 12,418 20,612
period..................................... 3,093 36,123
------- -------- -------- --------
Cash and cash equivalents at end of period... $21,582 $ 8,269 $ 21,001 $ 50,852
======= ======== ======== ========
</Table>

16. PRO FORMA INFORMATION (UNAUDITED)

The following unaudited pro forma information for the six months ended June
30, 2001 and 2000 is based in part upon the Consolidated Statements of
Operations of the Company, DJONT, Six Continents Hotels and MeriStar for the six
months ended June 30, 2001 and 2000.

The Pro Forma Combined Statements of Operations for the six months ended
June 30, 2001 and 2000 assumes that all the following occurred on January 1 of
the fiscal period presented:

- the Company's acquisition of DJONT, effective January 1, 2001, for
416,667 units of limited partnership interest valued at approximately $10
million;

- the Company's acquisition of 12 leases held by Bristol Tenant Company,
effective January 1, 2001, for 413,585 shares of FelCor common stock
valued at approximately $10 million;

- the Company's acquisition of the remaining 88 leases held by Bristol
Tenant Company, effective July 1, 2001;

- the assignment of the leases from MeriStar Hotels & Resorts, Inc. to
taxable REIT subsidiaries; and

- the completion of the MeriStar merger and related financings and the
application of the net proceeds.

In the opinion of FelCor's management, all material adjustments necessary
to reflect the effects of the preceding transactions have been made. The
unaudited Pro Forma Combined Statement of Operations is presented for
illustrative purposes only and is not necessarily indicative of what the actual
results of operations would have been had the MeriStar merger and the other
transactions described above occurred

F-19
245
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. PRO FORMA INFORMATION (UNAUDITED) -- (CONTINUED)

on the indicated dates, nor do they purport to represent the Company's results
of operations for future periods.

<Table>
<Caption>
PRO FORMA
SIX MONTHS ENDED
JUNE 30,
-----------------------
2001 2000
---------- ----------

Total revenue............................................... $1,412,155 $1,471,031
Net income applicable to unitholders........................ 73,771 $ 88,395
Basic:
Net income applicable to unitholders...................... $ 0.74 $ 0.88
Weighted average units outstanding........................ 100,020 100,701
Diluted:
Net income applicable to unitholders...................... $ 0.73 $ 0.87
Weighted average units outstanding........................ 101,352 101,746
</Table>

17. SUBSEQUENT EVENTS

On July 18, 2001, the Company announced the commitment of a $500 million
standby loan facility. The loan facility will be available to fund any purchases
of MeriStar's existing 9 percent Senior Notes due 2009 or 9 1/8 percent Senior
Notes due 2011 pursuant to change in control provisions contained in the
indentures.

On July 26, 2001, the Company announced the increase of its line of credit
from $600 million to $700 million contingent upon the merger with MeriStar
closing. The new unsecured facility has similar terms as the existing facility.
The facility has a term of up to five years, a floating interest rate, and a
tiered spread based on the Company's leverage ratio. The increased line will be
available to refinance a portion of MeriStar's debt and for general corporate
purposes.

The Company has filed a registration statement on Form S-4 with the SEC in
connection with the merger. The registration statement is currently being
reviewed by the SEC but has not been declared effective. The Form S-4 contains a
prospectus, a proxy statement, and other documents for FelCor's and MeriStar's
stockholder meetings at which time the proposed merger will be considered. It is
planned to mail the proxy statement and prospectus contained in the Form S-4 to
our respective stockholders after the registration statement is declared
effective by the SEC. The Form S-4, proxy statement and prospectus will contain
important information about FelCor, MeriStar, the merger and related matters.

F-20
246

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of FelCor Lodging Trust Incorporated:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, partners' capital and cash flows
present fairly, in all material respects, the financial position of FelCor
Lodging Limited Partnership at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Dallas, Texas
February 5, 2001,
except for footnotes 1 and 20,
as to which the date is March 28, 2001

F-21
247

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)

<Table>
<Caption>
2000 1999
---------- ----------

ASSETS

Investment in hotels, net of accumulated depreciation of
$473,101 in 2000 and $330,555 in 1999..................... $3,750,275 $4,035,344
Investment in unconsolidated entities....................... 128,593 136,718
Assets held for sale........................................ 129,294
Cash and cash equivalents................................... 26,060 36,123
Due from Lessees............................................ 28,058 18,394
Note receivable from unconsolidated entity.................. 7,695 7,760
Deferred expenses, net of accumulated amortization of $7,146
in 2000 and $4,491 in 1999................................ 23,944 15,473
Other assets................................................ 9,684 5,939
---------- ----------
Total assets...................................... $4,103,603 $4,255,751
========== ==========

LIABILITIES AND PARTNERS' EQUITY
Debt, net of discount of $6,443 in 2000 and $1,401 in
1999...................................................... $1,838,241 $1,833,954
Distributions payable....................................... 33,957 39,657
Accrued expenses and other liabilities...................... 94,232 65,480
Minority interest in other partnerships..................... 50,774 51,671
---------- ----------
Total liabilities................................. 2,017,204 1,990,762
---------- ----------
Commitments and contingencies
Redeemable units at redemption value........................ 205,800 52,338
Preferred units:
Series A Cumulative Preferred Units, 5,981 and 6,050 units
issued and outstanding at December 31, 2000 and 1999,
respectively........................................... 149,515 151,250
Series B Redeemable Preferred Units, 58 units issued and
outstanding............................................ 143,750 143,750
Partners' Capital........................................... 1,587,334 1,917,651
---------- ----------
Total liabilities and partners' capital........... $4,103,603 $4,255,751
========== ==========
</Table>

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

F-22
248

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>
2000 1999 1998
-------- -------- --------

Revenues:
Percentage lease revenue.................................. $536,907 $490,893 $328,035
Other revenue............................................. 4,965 4,624 4,565
-------- -------- --------
Total revenues.................................... 541,872 495,517 332,600
-------- -------- --------
Expenses:
General and administrative................................ 12,256 9,122 5,254
Depreciation.............................................. 160,745 152,948 90,835
Taxes, insurance and other................................ 70,648 59,572 37,158
Land leases............................................... 21,985 17,558 8,130
-------- -------- --------
Total operating expenses.......................... 265,634 239,200 141,377
-------- -------- --------
Operating income.......................................... 276,238 256,317 191,223
Interest expense.......................................... 158,620 125,435 73,182
Loss on hotels held for sale.............................. 63,000
Income before equity in income from unconsolidated entities,
minority interests, and gain on sale of assets............ 54,618 130,882 118,041
Equity in income from unconsolidated entities............... 14,820 8,484 7,017
Minority interests in other partnerships.................... (3,570) (2,713) (1,121)
Gain on sale of assets...................................... 4,388 236 477
-------- -------- --------
Income before extraordinary item............................ 70,256 136,889 124,414
Extraordinary charge from write off of deferred financing
fees...................................................... (3,865) (1,113) (3,075)
-------- -------- --------
Net income.................................................. 66,391 135,776 121,339
Preferred distributions..................................... (24,682) (24,735) (21,423)
-------- -------- --------
Net income applicable to unitholders........................ $ 41,709 $111,041 $ 99,916
======== ======== ========
Per unit data:
Basic:
Income applicable to unitholders before extraordinary
charge............................................... $ 0.73 $ 1.59 $ 1.95
Extraordinary charge................................... (0.06) (0.01) (0.06)
-------- -------- --------
Net income applicable to unitholders................... $ 0.67 $ 1.58 $ 1.89
======== ======== ========
Weighted average units outstanding..................... 62,301 70,372 52,978
Diluted:
Income applicable to unitholders before extraordinary
charge............................................... $ 0.73 $ 1.59 $ 1.93
Extraordinary charge................................... (0.06) (0.02) (0.06)
-------- -------- --------
Net income applicable to unitholders................... $ 0.67 $ 1.57 $ 1.87
======== ======== ========
Weighted average units outstanding..................... 62,556 70,561 53,323
</Table>

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

F-23
249

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

<Table>

Balance, December 31, 1997.................................. $ 897,766
Contributions............................................... 1,147,739
Distributions............................................... (166,580)
Allocations from redeemable units........................... 42,111
Net income.................................................. 121,339
----------
Balance, December 31, 1998.................................. 2,042,375
Contributions............................................... 583
Redemption of units......................................... (98,387)
Distributions............................................... (179,185)
Allocations from redeemable units........................... 16,489
Net income.................................................. 135,776
----------
Balance, December 31, 1999.................................. 1,917,651
Contributions............................................... 3,410
Redemption of units......................................... (190,416)
Distributions............................................... (158,104)
Allocations to redeemable units............................. (51,598)
Net income.................................................. 66,391
----------
Balance, December 31, 2000.................................. $1,587,334
==========
</Table>

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

F-24
250

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

<Table>
<Caption>
2000 1999 1998
--------- ---------- ----------

Cash flows from operating activities:
Net income............................................. $ 66,391 $ 135,776 $ 121,339
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of assets.............................. (4,388) (236) (477)
Depreciation........................................ 160,745 152,948 90,835
Loss on hotels held for sale........................ 63,000
Amortization of deferred financing fees............. 3,936 1,816 1,985
Amortization of unearned officers' and directors'
compensation...................................... 1,478 652 830
Equity in income from unconsolidated entities....... (14,820) (8,484) (7,017)
Extraordinary charge for write off of deferred
financing fees.................................... 3,865 1,113 3,075
Minority interest in other partnerships............. 3,570 2,713 1,121
Changes in assets and liabilities, net of effects of
acquisitions:
Due from Lessees.................................... (9,664) 574 (3,035)
Deferred financing fees............................. (16,964) (9,313) (4,348)
Other assets........................................ (5,339) (282) (602)
Accrued expenses and other liabilities.............. 25,494 5,088 (11,123)
--------- ---------- ----------
Net cash flow provided by operating
activities................................... 277,304 282,365 192,583
--------- ---------- ----------
Cash flows used in investing activities:
Acquisition of hotels.................................. (10,802) (326,276)
Acquisition of unconsolidated entities................. (7,452) (4,230)
Improvements and additions to hotels................... (95,235) (222,320) (119,107)
Note receivable from unconsolidated entity............. (7,766)
Bristol interim credit facility........................ (120,000)
Sale of assets......................................... 35,111 15,476 7,815
Cash distributions from unconsolidated entities........ 25,358 19,581 19,066
--------- ---------- ----------
Net cash flow used in investing activities..... (34,766) (205,517) (550,498)
--------- ---------- ----------
Cash flows provided by (used in) financing activities:
Proceeds from borrowings............................... 997,424 1,034,667 1,013,003
Repayment of borrowings................................ (992,635) (804,915) (658,524)
Proceeds from sale of preferred units.................. 139,063
Redemption of units.................................... (88,542) (98,387)
Contributions.......................................... 8 3,884
Distributions paid to minority interest unitholders in
other partnerships.................................. (5,229)
Distributions paid to unitholders...................... (138,928) (180,803) (105,425)
Dividends paid to preferred unitholders................ (24,691) (25,987) (16,937)
--------- ---------- ----------
Net cash flow provided by (used in) financing
activities................................... (252,601) (75,417) 375,064
--------- ---------- ----------
Net change in cash and cash equivalents.................. (10,063) 1,431 17,149
Cash and cash equivalents at beginning of years.......... 36,123 34,692 17,543
--------- ---------- ----------
Cash and cash equivalents at end of years................ $ 26,060 $ 36,123 $ 34,692
========= ========== ==========
Supplemental cash flow information -- interest paid...... $ 143,594 $ 125,085 $ 72,215
--------- ---------- ----------
</Table>

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

F-25
251

FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

FelCor Lodging Limited Partnership and its subsidiaries (the "Company") at
December 31, 2000, owned interests in 186 hotels with nearly 50,000 rooms and
suites (collectively the "Hotels"). The sole general partner of the Company is
FelCor Lodging Trust Incorporated ("FelCor") which is the nation's second
largest hotel real estate investment trust ("REIT"). At December 31, 2000,
FelCor owned greater than 86% equity interest in the Company. At December 31,
2000, the Company owned 100% of the interest in 161 of the Hotels, a 90% or
greater interest in entities owning seven hotels, a 60% interest in an entity
owning two hotels and 50% interests in separate entities that own 16 hotels.

The following table provides a schedule of the Hotels, by brand, operated
by each of the Company's lessees at December 31, 2000:

<Table>
<Caption>
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
- ----- ----- ------- ------------- -----

Hilton(R) Brands:
Embassy Suites(R).............................. 59 59
Doubletree(R) and Doubletree Guest Suites(R)... 14 14
Hampton Inn(R)................................. 9 9
Hilton Suites(R)............................... 1 1
Homewood Suites(R)............................. 1 1
Six Continents Brands:
Holiday Inn(R)................................. 43 1 44
Crowne Plaza(R) and Crowne Plaza Suites(R)..... 18 18
Holiday Inn Select(R).......................... 10 10
Holiday Inn Express(R)......................... 5 5
Starwood Brands:
Sheraton(R) and Sheraton Suites(R)............. 10 10
Westin(R)...................................... 1 1
Other Brands..................................... 13 1 14
-- -- -- ---
Total Hotels........................... 85 99 2 186
== == == ===
</Table>

The Hotels are located in the United States (35 states) and Canada, with a
concentration in Texas (41 hotels), California (19 hotels), Florida (18 hotels)
and Georgia (15 hotels). The following table provides information regarding the
net acquisition and disposition of hotels through December 31, 2000:

<Table>
<Caption>
NET HOTELS
ACQUIRED/(DISPOSED OF)
----------------------

1994............................................ 7
1995............................................ 13
1996............................................ 23
1997............................................ 30
1998............................................ 120
1999............................................ (5)
2000............................................ (2)
---
186
===
</Table>

On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions reduce the percentage of taxable income required to
be distributed by a REIT from 95% to 90% for taxable years after 2000 and
subject to certain limitations, permit a REIT to own taxable subsidiaries

F-26
252
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION -- (CONTINUED)

that engage in businesses previously prohibited to a REIT, including, among
other things, leasing hotels from a hotel REIT, provided that the hotels
continue to be managed by unrelated third parties.

At December 31, 2000, the Company leased 85 hotels to DJONT Operations,
L.L.C., a Delaware limited liability company, or a consolidated subsidiary
thereof (collectively "DJONT") and leased 99 hotels to Bristol Hotels & Resorts
and its consolidated subsidiaries ("Bristol" and, together with DJONT, the
"Lessees"). Bristol became a subsidiary of Six Continents by virtue of a merger
between Bristol and a subsidiary of Six Continents on March 31, 2000. Two of the
Hotels were operated without a lease.

At December 31, 2000, DJONT was a private company controlled by Thomas J.
Corcoran, Jr., the President, Chief Executive Officer and a Director of FelCor.
Subject to the receipt of certain lender consents, effective January 1, 2001,
the Company acquired and contributed to a newly formed taxable REIT subsidiary,
all of the equity interests in DJONT. In consideration for the acquisition of
DJONT, the Company issued an aggregate of 416,667 units valued at approximately
$10 million, which, together with DJONT's accumulated shareholders' deficit of
$24.5 million, will be expensed in the first quarter of 2001 as a lease
termination cost.

Effective January 1, 2001, the Company completed the acquisition of the 12
of the Bristol leases which were held by Six Continents. In consideration for
the acquisition of such leases, FelCor issued to Six Continents 413,585 shares
of FelCor common stock valued at approximately $10 million and the Company
issued the corresponding number of units. Of the 12 hotels, (i) the Company has
entered into an agreement with Interstate Hotels Corporation ("IHC") to manage
eight of the hotels, (ii) two hotels are being managed by a subsidiary of Six
Continents under short term management contracts, (iii) one hotel is being
managed by a subsidiary of Hilton Hotels Corporation ("Hilton") and (iv) one
hotel was sold. In March 2001, the Company entered into an agreement with Six
Continents to acquire the remaining 88 leases effective July 1, 2001. In
consideration for the acquisition of such leases, the Company will enter into
long term management agreements with Six Continents with regard to these hotels
and FelCor will issue to Six Continents 100 shares of FelCor common stock.

At January 1, 2001, (i) subsidiaries of Six Continents managed 91 of the
Hotels, (ii) subsidiaries of Hilton managed 72 of the Hotels, (iii) subsidiaries
of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") managed 11 of the
Hotels, (iv) subsidiaries of IHC managed eight of the Hotels and (v) three
independent management companies managed the four remaining Hotels.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its consolidated subsidiaries. All
significant intercompany balances and transactions have been eliminated.

Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles 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.

F-27
253
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Investment in Hotels -- Hotels are stated at cost and are depreciated using
the straight-line method over estimated useful lives ranging from 31 to 40 years
for buildings and improvements and three to seven years for furniture, fixtures,
and equipment.

The Company periodically reviews the carrying value of each Hotel 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, the Company
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the specific hotel and determine if the investment in such
hotel is recoverable based on the undiscounted future cash flows. If impairment
is indicated, an adjustment will be made to the carrying value of the hotel
based on discounted future cash flows. The Company does not believe that there
are any factors or circumstances indicating impairment of any of its investment
in the Hotels except as reflected in losses established for the assets held for
sale.

Maintenance and repairs are the responsibility of the Lessees; major
renewals and betterments by the Company are capitalized. Upon the sale or
disposition of a fixed asset, the asset and related accumulated depreciation are
removed from the accounts and the related gain or loss is included in
operations.

Investment in Unconsolidated Entities -- The Company owns a 50% interest in
various partnerships or limited liability companies in which the partners
jointly make all material decisions concerning the business affairs and
operations. The Company also owns a 97% nonvoting interest in an entity.
Accordingly, the Company does not control these entities and carries its
investment in unconsolidated entities at cost, plus its equity in net earnings,
less distributions received since the date of acquisition. Equity in net
earnings is adjusted for the straight-line amortization, over a 40-year period,
of the difference between the Company's cost and its proportionate share of the
underlying net assets at the date of acquisition.

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

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

Revenue Recognition -- Percentage lease revenue is reported as income when
earned.

Capitalized Interest -- The Company capitalizes interest and certain other
costs relating to hotels undergoing major renovations and redevelopments. Such
costs capitalized in 2000, 1999 and 1998 were approximately $2.0 million, $7.4
million and $5.9 million, respectively.

Net Income Per Unit -- Basic earnings per unit have been computed by
dividing net income available to unitholders by the weighted average number of
units outstanding. Diluted earnings per unit have been computed by dividing net
income available to unitholders by the weighted average number of units and
equivalents outstanding. Unit equivalents represent units issuable upon exercise
of stock options and unvested officers' restricted FelCor stock grants.

At December 31, 2000, 1999, and 1998, the Company's Series A Cumulative
preferred units, if converted to units, would be antidilutive; accordingly the
Series A Cumulative preferred units are not assumed to be converted in the
computation of diluted earnings per unit.

Distributions -- The Company pays regular quarterly distributions on its
units. Additionally, the Company pays regular quarterly distributions on
preferred units in accordance with its preferred units distributions
requirements.

F-28
254
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

For 2000, the Company paid distributions of $2.20 per unit, $1.95 per unit
of $1.95 Series A Cumulative Preferred Units ("Series A preferred units"), and
$2.25 per depositary share evidencing its 9% Series B Redeemable Preferred Units
("Series B preferred units").

Income Taxes -- No provision for federal income taxes has been reflected in
the financial statements because all taxable income or loss, or tax credits are
passed through to the partners.

Foreign Currency Translation -- Financial statements of foreign
subsidiaries are translated into U.S. dollars at current rates, except that
revenues, costs and expenses are translated at average current rates during each
reporting period. Net exchange gains or losses resulting from the translation of
foreign financial statements and the effect of exchange rate changes on
intercompany transactions of a long-term investment nature are accumulated and
credited or charged directly to partners' capital.

3. INVESTMENT IN HOTELS

Investment in hotels at December 31, 2000 and 1999, consists of the
following (in thousands):

<Table>
<Caption>
2000 1999
---------- ----------

Land........................................................ $ 321,994 $ 346,862
Building and improvements................................... 3,477,006 3,616,269
Furniture, fixtures and equipment........................... 409,011 383,931
Construction in progress.................................... 15,365 18,837
---------- ----------
4,223,376 4,365,899
Accumulated depreciation.................................... (473,101) (330,555)
---------- ----------
$3,750,275 $4,035,344
========== ==========
</Table>

4. INVESTMENT IN UNCONSOLIDATED ENTITIES

At December 31, 2000, the Company owned 50% interests in separate entities
owning 16 hotels, a parcel of undeveloped land, and a condominium management
company. The Company also owned a 97% nonvoting interest in an entity that owns
an annex to a hotel owned by the Company and holds a 50% interest in an entity
that has developed condominiums for sale. The Company accounts for its
investments in these unconsolidated entities under the equity method.

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

<Table>
<Caption>
DECEMBER 31,
-------------------
2000 1999
-------- --------

Balance sheet information:
Investment in hotels...................................... $294,941 $337,444
Non-recourse mortgage debt................................ $225,302 $254,668
Equity.................................................... $ 82,986 $101,120
</Table>

F-29
255
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENT IN UNCONSOLIDATED ENTITIES -- (CONTINUED)

<Table>
<Caption>
YEARS ENDED DECEMBER 31,
---------------------------
2000 1999 1998
------- ------- -------

Statements of operations information:
Total revenues........................................ $80,761 $69,146 $57,006
Net income............................................ $30,729 $21,726 $17,438
Net income attributable to the Company................ $16,962 $10,626 $ 8,719
Amortization of cost in excess of book value.......... (2,142) (2,142) (1,702)
------- ------- -------
Equity in income from unconsolidated entities......... $14,820 $ 8,484 $ 7,017
======= ======= =======
</Table>

5. ASSETS HELD FOR SALE

In the second quarter of 2000, the Company identified 25 hotels that it
considered non-strategic and announced its intention to sell such hotels by June
30, 2001. In connection with the decision to sell these hotels, the Company
recorded a loss of $63 million representing the difference between the net book
value of these hotels and the estimated net proceeds. No depreciation expense
has been recorded on these hotels since June 30, 2000. Percentage rent income
related to the assets held for sale, less costs associated with those assets,
were included in the Company's results of operations for the year ended December
31, 2000, and represented net income of approximately $16 million. During 2000,
one of these hotels was sold and the Company recognized a gain of approximately
$135,000. At December 31, 2000, assets held for sale, which represent the 24
remaining hotels, are reported net of the $63 million loss.

6. DEBT

Debt at December 31, 2000 and 1999, consists of the following (in
thousands):

<Table>
<Caption>
DECEMBER 31,
-----------------------
COLLATERAL INTEREST RATE MATURITY DATE 2000 1999
---------- ------------- ------------- ---------- ----------

Floating Rate Debt:
Line of credit.................. None LIBOR + 200bp August 2003 $ 112,000 $ 351,000
Senior term loan................ (a) LIBOR + 250bp March 2004 250,000
Mortgage debt................... 3 hotels LIBOR + 200bp February 2003 61,909 62,553
Other........................... None LIBOR + 200bp Various 650 32,282
---------- ----------
Total floating rate
debt................... 174,559 695,835
---------- ----------
Fixed Rate Debt:
Line of credit -- swapped....... None 7.66% August 2003 250,000 313,000
Publicly-traded term notes...... None 7.38% October 2004 174,505 174,377
Publicly-traded term notes...... None 7.63% October 2007 124,320 124,221
Publicly-traded term notes...... None 9.50% October 2008 394,731
Mortgage debt................... 15 hotels 7.24% November 2007 140,148 142,542
Senior term loan -- swapped..... (a) 8.30% March 2004 125,000
Mortgage debt................... 7 hotels 7.54% April 2009 97,604 99,075
Mortgage debt................... 6 hotels 7.55% June 2009 73,389 74,483
Mortgage debt................... 7 hotels 8.73% May 2010 144,032
Mortgage debt................... 8 hotels 8.70% May 2010 184,829
Other........................... 13 hotels 6.96%-7.23% 2000-2005 80,124 85,421
---------- ----------
Total fixed rate debt.... 1,663,682 1,138,119
---------- ----------
Total debt............... $1,838,241 $1,833,954
========== ==========
</Table>

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

(a) Collateralized by stock and partnership interests in certain subsidiaries
of FelCor. The senior term loan was retired early from the proceeds of
publicly traded term notes issued in 2000.

F-30
256
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT -- (CONTINUED)

One month LIBOR at December 31, 2000 was 6.565%.

The Company's $600 million line of credit (the "Line of Credit") contains
various affirmative and negative covenants including limitations on total
indebtedness, total secured indebtedness, and cash distributions, as well as the
obligation to maintain certain minimum tangible net worth and certain minimum
interest and debt service coverage ratios. At December 31, 2000, the Company was
in compliance with all such covenants.

The Company's other borrowings contain affirmative and negative covenants
that are generally equal to or less restrictive than the Line of Credit. Most of
the mortgage debt is non-recourse to the Company (with certain exceptions) and
contains provisions allowing for the substitution of collateral upon
satisfaction of certain conditions. Most of the mortgage debt is prepayable,
subject, however, to various prepayment penalties, yield maintenance, or
defeasance obligations.

On April 26, 2000, the Company completed a 10-year, $145 million First
Mortgage Term Loan, which is collateralized by seven Sheraton hotels and carries
an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of
10-year, First Mortgage Term Loans which are collateralized by eight Embassy
Suites hotels and carry an 8.70% fixed interest rate. These loans are
non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of
these loans were used to reduce borrowings under the Company's Line of Credit.

On August 1, 2000, the Company renewed its Line of Credit. The Line of
Credit was reduced from $850 million to $600 million and the maturity was
extended from July 2001 to August 2003. The effective interest rate on the
renewed Line of Credit ranges from 87.5 basis points to 250 basis points above
LIBOR depending on the Company's leverage and corporate rating. An extraordinary
charge of approximately $578,000 was recorded to write-off a portion of the
deferred financing costs associated with the Line of Credit.

On September 15, 2000, the Company completed the private placement of $400
million of senior unsecured notes which mature in September, 2008 and bear an
interest rate of 9 1/2%. The notes were issued at a discount to yield 9 3/4%.
The proceeds were used to retire the $375 million floating rate senior term
loan, which matured in 2004, and to pay down the Line of Credit. An
extraordinary charge of approximately $3.3 million was recorded to write-off
unamortized deferred financing costs associated with the $375 million loan.
During the fourth quarter of 2000, the Company exchanged the $400 million in
aggregate principal amount of the private placement senior notes for notes with
identical terms which were registered under the Securities Act of 1933.

Future scheduled principal payments on debt obligations at December 31,
2000 are as follows (in thousands):

<Table>
<Caption>
YEAR
- ----

2001..................................................... $ 23,802
2002..................................................... 13,825
2003..................................................... 457,319
2004..................................................... 189,228
2005..................................................... 43,129
2006 and thereafter...................................... 1,117,381
----------
1,844,684
Discount accretion over term............................. (6,443)
----------
$1,838,241
==========
</Table>

F-31
257
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT -- (CONTINUED)

To manage the relative mix of its debt between fixed and variable rate
instruments, the Company has entered into interest rate swap agreements with
four financial institutions. These interest rate swap agreements modify a
portion of the interest characteristics of the Company's outstanding debt under
its Line of Credit without an exchange of the underlying principal amount and
effectively convert variable rate debt to a fixed rate. The fixed rates to be
paid and the variable rate to be received by the Company at December 31, 2000,
are summarized in the following table:

<Table>
<Caption>
SWAP RATE
RECEIVED
SWAP RATE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) 12/31/00 MATURITY
- --------------- ------------ ------------- ---------

$ 25 million ..................................... 5.5575% 6.8213% July 2001(a)
25 million ..................................... 5.5480% 6.8213% July 2001(a)
75 million ..................................... 5.5550% 6.8213% July 2001(a)
100 million ..................................... 5.7955% 6.8213% July 2003
25 million ..................................... 5.8260% 6.8213% July 2003
------------
$250 million
============
</Table>

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

(a) The variable rate payer has the option to terminate this swap in July 2001;
if not so terminated, it matures July 2003.

The differences to be paid or received by the Company under the terms of
the interest rate swap agreements are accrued as interest rates change and
recognized as an adjustment to interest expense by the Company, pursuant to the
terms of its interest rate agreement, and will have a corresponding effect on
its future cash flows. During 2000, the Company received a net $1.8 million
under the interest rate swaps and paid a net $1.7 million and $383,000 during
1999 and 1998, respectively. Agreements such as these contain a credit risk in
that the counterparties may be unable to meet the terms of the agreement. The
Company minimizes that risk by evaluating the creditworthiness of its
counterparties, who are limited to major banks and financial institutions, and
does not anticipate nonperformance by the counterparties.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 requires disclosures
about the fair value for 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, 2000. Considerable judgement is necessary to interpret market data
and develop estimated fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized 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.

Management estimates 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) the note receivable approximates
carrying value based upon effective borrowing rates for issuance of debt with
similar terms and remaining maturities; (iii) the borrowings under the Line of
Credit and various other mortgage notes approximate carrying value because these
borrowings accrue interest at floating interest rates based on market. The
estimated fair value of the Company's fixed rate debt of $1.4 billion is $1.2
billion at December 31, 2000, based on current market interest rates estimated
by the Company for similar debt with similar maturities.

The Company manages its debt portfolio by using interest rate swaps to
achieve an overall desired position of fixed and floating rates. The fair value
of interest rate hedge contracts is estimated based on

F-32
258
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)

quotes from the market makers of these instruments and represents the estimated
amounts the Company would expect to receive or pay to terminate the contracts.
Credit and market risk exposures are limited to the net interest differentials.
The estimated unrealized net gain on these instruments was approximately
$248,000 at December 31, 2000, which represents the amount the Company would
receive to terminate the agreements based on current market rates.

8. REDEEMABLE OPERATING PARTNERSHIP UNITS AND PREFERRED UNITS

FelCor is the sole general partner of the Company and is obligated to
contribute the net proceeds from any issuance of its equity securities to the
Company in exchange for units corresponding in number and terms to the equity
securities issued by it. Units may also be issued by the Company 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 FelCor common stock or, at the option of FelCor, for the cash equivalent
thereof. Due to these redemption rights, these limited partnership units have
been excluded from partners' capital and are included in redeemable units and
measured at redemption value as of the end of the periods presented. At December
31, 2000 and 1999 there were 8,597,379 and 2,990,762 redeemable units
outstanding. The value of the redeemable units are based on the closing market
price of FelCor's common stock at the balance sheet date, which at December 31,
2000 and 1999 was $23.9375 and $17.50, respectively.

In connection with the efforts of Six Continents to acquire Bristol, a Six
Continents subsidiary contributed approximately 4.7 million and 1 million
outstanding FelCor common shares (valued at $101.9 million) held by it to the
Company in exchange for a like number of units on February 28 and November 1,
2000, respectively. This exchange reduced FelCor's percentage ownership in the
Company from approximately 95% to approximately 86%.

As of December 31, 2000, FelCor had approximately $946 million of common
stock, preferred stock, debt securities, and/or common stock warrants available
for offerings under shelf registration statements previously declared effective.

Preferred Units

FelCor's Board of Directors is authorized to provide for the issuance of up
to 20,000,000 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, FelCor issued 6.1 million shares of its Series A preferred stock
at $25 per share. The Series A preferred stock bears an annual dividend 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 shareholder's option to 0.7752 shares of
common stock, subject to certain adjustments, and may not be redeemed by the
Company before April 30, 2001. The proceeds from the Series A preferred stock
were contributed to the Company in exchange for Series A preferred units. The
preference on these units are the same as FelCor's Series A preferred stock.
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 and
an equivalent number of units were issued.

On May 1, 1998, FelCor issued 5.75 million depositary shares, representing
57,500 shares of its Series B preferred stock, at $25 per depositary share. The
Series B preferred stock and the corresponding depositary shares may be called
by FelCor at par on or after May 7, 2003, have no stated maturity, sinking
F-33
259
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. REDEEMABLE OPERATING PARTNERSHIP UNITS AND PREFERRED UNITS -- (CONTINUED)

fund or mandatory redemption, and are not convertible into any other securities
of FelCor. 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
dividends at the rate of 9% of the liquidation preference (equivalent to $2.25
annually per depositary share). The proceeds from the Series B preferred stock
were contributed to the Company in exchange for Series B preferred units. The
preference on these units are the same as FelCor's Series preferred stock.

At December 31, 2000, all distributions then payable on the Series A and
Series B preferred units had been paid.

Treasury Stock Repurchase Program

On September 3, 1999, FelCor announced that its Board of Directors (the
"Board") had authorized FelCor to repurchase up to $100 million of its
outstanding common shares. On January 4, 2000, the Board approved a $200 million
increase in its stock repurchase program. At December 31, 2000, FelCor had
completed the repurchase of approximately 10.3 million shares of FelCor common
stock at a cost of approximately $185.1 million (of the $300 million
authorized). This has been recorded as a reduction to Partners' Capital as a
result of the redemption of units held by FelCor to fund the repurchase.

9. TAXES, INSURANCE AND OTHER

Taxes, insurance and other is comprised of the following for the years
ended December 31, 2000, 1999, and 1998 (in thousands):

<Table>
<Caption>
2000 1999 1998
------- ------- -------

Real estate and personal property taxes................. $63,207 $52,118 $32,892
Property insurance...................................... 4,065 3,481 2,341
State franchise taxes and Canadian income tax........... 3,376 3,973 1,609
Other................................................... 316
------- ------- -------
Total taxes, insurance, and other............. $70,648 $59,572 $37,158
======= ======= =======
</Table>

10. LAND LEASES

The Company leases land occupied by certain hotels from third parties under
various operating leases. Certain leases contain contingent rent features based
on gross revenue at the respective hotels. Future minimum lease payments under
the Company's land lease obligations at December 31, 2000, are as follows (in
thousands):

<Table>
<Caption>
YEAR
- ----

2001..................................................... $ 4,863
2002..................................................... 4,756
2003..................................................... 4,706
2004..................................................... 4,773
2005..................................................... 4,573
2006 and thereafter...................................... 135,978
--------
$159,649
========
</Table>

F-34
260
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. GAIN ON SALE OF ASSETS

On December 11, 2000, the Company completed the sale of its Four Points by
Sheraton(R) hotel -- Leominster, Massachusetts (one of the 25 hotels designated
as held for sale), for a gross price of $10.5 million which resulted in a gain
of approximately $135,000.

On September 27, 2000, the Company completed the sale of its Embassy Suites
hotel, Los Angeles International Airport -- North, California for a gross price
of approximately $23.3 million. The Company recorded a gain of approximately
$2.5 million.

During the third quarter of 2000, the Company sold two acres of vacant
excess land adjacent to its Embassy Suites hotel -- Fort Lauderdale, Florida and
a billboard in Dallas, Texas, for an aggregate of $1.3 million and recorded a
gain of approximately $0.9 million.

On June 30, 2000, the Company sold 31 acres of vacant excess land adjacent
to its Whispering Woods Hotel in Olive Branch, Mississippi, for approximately $1
million and recorded a gain of $0.9 million.

12. COMMITMENTS AND RELATED PARTY TRANSACTIONS

Through December 31, 2000, the Company's general partner, FelCor, shared
its executive offices and certain employees with FelCor, Inc., and DJONT, and
each company paid its share of the costs thereof, including an allocated portion
of the rent, compensation of certain personnel (other than Mr. Corcoran, whose
compensation is borne solely by FelCor), office supplies, telephones, and
depreciation of office furniture, fixtures, and equipment. The Company
reimburses FelCor for its share of such allocated costs. Any such allocation of
shared expenses to FelCor is required to be approved by a majority of FelCor's
Independent Directors. During 2000, 1999, and 1998, the Company and FelCor paid
approximately $6.7 million (approximately 89.4%), $5.7 million (approximately
89.5%), and $2.8 million (approximately 63%), respectively, of the allocable
expenses under this arrangement.

Included in the mortgage debt of the unconsolidated entities is a mortgage
loan payable to the Company in the amount of $7.7 million and $7.8 million for
2000 and 1999, respectively. The note bears a fixed interest rate of 8% per
annum with a 30 year amortization, matures on December 31, 2004, and is
collateralized by a Mortgage and Assignment of Leases and Rents with respect to
a hotel annex owned by an entity in which the Company has a 97% nonvoting
interest.

13. SUPPLEMENTAL CASH FLOW DISCLOSURE

The Company purchased certain assets and assumed certain liabilities in
connection with the acquisition of hotels in 1998. During 1999 the Company
purchased the land related to three hotels, which previously had been leased.
These purchases were recorded under the purchase method of accounting. The fair
values of the acquired assets and liabilities recorded at the date of
acquisition are as follows (in thousands):

<Table>
<Caption>
1999 1998
------- -----------

Assets acquired............................................. $19,776 $ 2,427,027
Liabilities assumed......................................... (7,800) (940,906)
Units issued................................................ (1,174) (1,152,856)
Minority interest contribution.............................. (6,989)
------- -----------
Net cash paid..................................... $10,802 $ 326,276
======= ===========
</Table>

F-35
261
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SUPPLEMENTAL CASH FLOW DISCLOSURE -- (CONTINUED)

Approximately $34.0 million, $39.7 million, and $67.3 million of aggregate
preferred unit distributions and unit distributions had been declared as of
December 31, 2000, 1999, and 1998, respectively. These amounts were paid in the
following January of each year.

In 1998, the Company entered into a joint venture, in which the Company
contributed a hotel with a net book value of $53.9 million for a 60% equity
interest in the venture. The Company has consolidated this venture in the
financial statements and recorded increases of $34.4 million in investment in
hotels and minority interest in other partnerships.

14. STOCK BASED COMPENSATION PLANS

FelCor sponsors three restricted stock and stock option plans (the "FelCor
Plans"). In addition, upon completion of the merger with Bristol Hotel Company
(the "Merger"), FelCor assumed two stock option plans previously sponsored by
Bristol Hotel Company (the "Bristol Plans"). FelCor was initially obligated to
issue up to 1,271,103 shares of its 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." Upon issuance
of any stock, FelCor is obligated to contribute the proceeds to the Company in
exchange for a like number of units.

Stock Options

FelCor is authorized to issue 2,950,000 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 over five equal annual installments (20% per year),
beginning in the year following the date of grant.

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.

A summary of the status of FelCor's non-qualified stock options under the
Plans as of December 31, 2000, 1999, and 1998, and the changes during the years
are presented below:

<Table>
<Caption>
2000 1999 1998
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
# SHARES OF AVERAGE # SHARES OF AVERAGE # SHARES OF AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES
----------- -------- ----------- -------- ----------- --------

Outstanding at beginning of
the year.................... 2,496,773 $22.32 2,540,466 $22.53 1,670,500 $29.96
Granted(a)(b)................. 69,000 $19.50 9,750 $22.13 2,445,813 $20.54
Exercised..................... (760) $10.33 (332,915) $11.67
Retired(c).................... (349,443) $12.28
Forfeited(b)(c)............... (315,550) $26.75 (52,683) $32.41 (1,242,932) $31.51
--------- --------- ----------
Outstanding at end of year.... 1,900,780 $23.33 2,496,773 $22.32 2,540,466 $22.53
========= ========= ==========
Exercisable at end of year.... 804,066 $24.64 906,675 $24.58 796,499 $24.64
</Table>

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

(a) 1998 grants include options covering 1,271,103 shares of common stock
issuable as a result of the assumption of the Bristol Plans.

F-36
262
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. STOCK BASED COMPENSATION PLANS -- (CONTINUED)

(b) To enable FelCor to preserve its stock options as a meaningful element of
compensation in 1998, existing option holders under the FelCor Plans
employed by FelCor on a full-time basis were offered the opportunity to
exchange their existing options (having exercise prices ranging from $26.44
to $38.56 per share) for a lesser number of new options having an equal
value under the Black-Scholes option pricing model. Twenty-two employees
accepted this offer in 1998, surrendering for cancellation existing options
covering an aggregate of 1,151,500 shares of common stock at a weighted
average exercise price of $32.807 per share for new options covering an
aggregate of 840,393 shares of common stock at an exercise price of $22.125
per share. The new options have the same expiration dates and vesting
schedules as the options surrendered for cancellation; however, none of the
new options were exercisable prior to January 1, 2000.

(c) In the second quarter of 2000 FelCor purchased options covering an
aggregate of 349,443 shares of FelCor's common stock for approximately $1.9
million. These options were held by employees of Bristol and were issued in
substitution for stock options previously granted by Bristol Hotel Company
that were outstanding at the time of its merger with FelCor in 1998. These
options so purchased and retired had exercise prices ranging from $10.33 to
$16.95 per share and the majority of these options were scheduled to vest
in the third quarter of 2000. The purchase price was recorded as a
reduction in partners' capital.

<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------------
NUMBER WGTD. AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WGTD AVG. EXERCISABLE WGTD. AVG.
EXERCISE PRICES AT 12/31/00 LIFE EXERCISE PRICE AT 12/31/00 EXERCISE PRICE
- --------------- ----------- ---------- -------------- ----------- --------------

$10.33 to $29.92.................. 1,735,841 6.46 $22.21 663,155 $22.36
$30.28 to $36.63.................. 164,939 6.48 $35.09 140,911 $35.38
--------- ---- ------ ------- ------
$10.33 to $36.63.................. 1,900,780 6.46 $23.33 804,066 $24.64
</Table>

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: dividend yield of 11.28%; risk free interest rates are
different for each grant and range from 4.65% to 6.58%; the expected lives of
options are 6 years; and volatility of 18.22% for 2000 grants, 18.44% for 1999
grants, and 32.90% for grants issued in 1998. The weighted average fair value of
options granted during 2000, 1999, and 1998 was $0.90, $1.07, and $3.35 per
share, respectively.

Restricted Stock

A summary of the status of FelCor's restricted stock grants as of December
31, 2000, 1999, and 1998 and the changes during the years are presented below:

<Table>
<Caption>
2000 1999 1998
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FAIR MARKET FAIR MARKET FAIR MARKET
VALUE VALUE VALUE
# SHARES AT GRANT # SHARES AT GRANT # SHARES AT GRANT
-------- ----------- -------- ----------- -------- -----------

Outstanding at beginning of the
year......................... 125,375 $28.35 125,375 $28.97 115,500 $29.03
Granted:
With 5-year pro rata
vesting................... 210,100 $23.50 5,000 $21.25
Vest 100% at grant date...... 4,875 $35.63
Forfeited......................
------- ------- -------
Outstanding at end of year..... 335,475 $25.55 125,375 $28.97 125,375 $28.97
======= ======= =======
Vested at end of year.......... 107,975 $28.77 83,575 $28.35 65,175 $28.26
</Table>

F-37
263
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION

The Company has determined that its reportable segments are those that are
consistent with the Company's method of internal reporting, which segments its
business by Lessee. The Company's Lessees at December 31, 2000, were DJONT and
Bristol. Prior to July 28, 1998 (the date of the Merger), the Company had only
one lessee, DJONT.

The following tables present information about the reportable segments for
the years ended December 31, 2000, 1999 and 1998 (in thousands):

<Table>
<Caption>
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ---------------------------- ---------- ---------- ---------- ----------- ------------

Statement of Operations Information:
Percentage lease revenue..................... $ 277,283 $ 259,624 $ 536,907 $ 536,907
Expenses:
Depreciation................................. $ 83,974 $ 76,479 $ 160,453 $ 292 $ 160,745
Loss on assets held for sale................. $ 9,510 $ 53,490 $ 63,000 $ 63,000
Interest expense............................. $ 158,620 $ 158,620
Equity in income from unconsolidated
entities..................................... $ 13,898 $ 922 $ 14,820 $ 14,820
Gain on sale of assets......................... $ 3,105 $ 1,283 $ 4,388 $ 4,388
Income (loss) before extraordinary charge...... $ 159,617 $ 76,842 $ 236,459 $(166,203) $ 70,256
Funds From Operations:
Income (loss) before extraordinary charge.... $ 159,617 $ 76,842 $ 236,459 $(166,203) $ 70,256
Series B preferred distributions............. (12,937) (12,937)
Reserve for hotels held for sale............. 9,510 53,490 63,000 63,000
Gain on sale of hotels....................... (2,461) (134) (2,595) (2,595)
Depreciation................................. 83,974 76,479 160,453 292 160,745
Depreciation from unconsolidated entities.... 9,426 741 10,167 10,167
---------- ---------- ---------- --------- ----------
Funds from operations.......................... $ 260,066 $ 207,418 $ 467,484 $(178,848) $ 288,636
========== ========== ========== ========= ==========
Weighted average units outstanding(a).......... 67,239
Other Information:
Investment in unconsolidated entities........ $ 112,654 $ 15,939 $ 128,593 $ 128,593
Total assets................................. $1,860,847 $2,179,321 $4,040,168 $ 63,435 $4,103,603
Capital expenditures......................... $ 34,865 $ 60,370 $ 95,235 $ 95,235
</Table>

F-38
264
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION -- (CONTINUED)

<Table>
<Caption>
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ---------------------------- ---------- ---------- ---------- ----------- ------------

Statement of Operations Information:
Percentage lease revenue..................... $ 256,128 $ 234,765 $ 490,893 $ 490,893
Expenses:
Depreciation................................. $ 80,969 $ 71,748 $ 152,717 $ 231 $ 152,948
Interest expense............................. $ 125,435 $ 125,435
Equity in income from unconsolidated
entities..................................... $ 7,725 $ 759 $ 8,484 $ 8,484
Gain on sale of hotels......................... $ 236 $ 236
Income (loss) before extraordinary charge...... $ 147,868 $ 118,949 $ 266,817 $(129,928) $ 136,889
Funds From Operations:
Income (loss) before extraordinary charge.... $ 147,868 $ 118,949 $ 266,817 $(129,928) $ 136,889
Series B preferred distributions............. (12,937) (12,937)
Depreciation................................. 80,969 71,748 152,717 231 152,948
Depreciation from unconsolidated entities.... 9,248 747 9,995 9,995
---------- ---------- ---------- --------- ----------
Funds from operations.......................... $ 238,085 $ 191,444 $ 429,529 $(142,634) $ 286,895
========== ========== ========== ========= ==========
Weighted average units outstanding(a).......... 75,251
Other Information:
Investment in unconsolidated entities........ $ 120,556 $ 16,162 $ 136,718 $ 136,718
Total assets................................. $1,940,247 $2,243,916 $4,184,163 $ 68,555 $4,252,718
Capital expenditures......................... $ 51,587 $ 170,733 $ 222,320 $ 222,320
</Table>

<Table>
<Caption>
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1998 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ---------------------------- ---------- ---------- ---------- ----------- ------------

Statement of Operations Information:
Percentage lease revenue..................... $ 237,555 $ 90,480 $ 328,035 $ 328,035
Expenses:
Depreciation................................. $ 71,055 $ 19,619 $ 90,674 $ 161 $ 90,835
Interest expense............................. $ 73,182 $ 73,182
Equity in income from unconsolidated
entities..................................... $ 6,744 $ 273 $ 7,017 $ 7,017
Gain on sale of hotels......................... $ 477 $ 477
Income (loss) before extraordinary charge...... $ 143,736 $ 54,233 $ 197,969 $(73,555) $ 124,414
Funds From Operations:
Income (loss) before extraordinary charge.... $ 143,736 $ 54,233 $ 197,969 $(73,555) $ 124,414
Series B preferred distributions............. (8,373) (8,373)
Depreciation................................. 71,055 19,619 90,674 161 90,835
Depreciation from unconsolidated entities.... 10,254 233 10,487 10,487
---------- ---------- ---------- -------- ----------
Funds from operations.......................... $ 225,045 $ 74,085 $ 299,130 $(81,767) $ 217,363
========== ========== ========== ======== ==========
Weighted average units outstanding(a).......... 58,013
Other Information:
Investment in unconsolidated entities........ $ 123,507 $ 16,792 $ 140,299 $ 140,299
Total assets................................. $2,022,975 $2,093,328 $4,116,303 $ 59,080 $4,175,383
Capital expenditures......................... $ 65,264 $ 65,839 $ 131,103 $ 131,103
</Table>

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

(a) Weighted average units outstanding are computed including dilutive FelCor
options and unvested stock grants, and assuming conversion of Series A
preferred units to units.

F-39
265
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION -- (CONTINUED)

The following table sets forth Percentage Lease revenue and investment in
hotel assets represented by the following geographical areas as of and for the
years ended December 31, 2000, 1999 and 1998 (in thousands):

<Table>
<Caption>
PERCENTAGE LEASE REVENUE INVESTMENT IN HOTEL ASSETS
------------------------------ ------------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- ---------- ---------- ----------

California..................... $118,857 $ 97,283 $ 63,733 $ 681,714 $ 698,942 $ 642,965
Texas.......................... 97,157 94,782 52,220 862,199 891,626 854,558
Florida........................ 66,014 61,516 45,719 530,933 542,298 519,280
Georgia........................ 40,183 39,247 23,691 316,267 355,519 349,429
Other States................... 200,836 186,248 138,437 1,752,303 1,802,220 1,705,220
Canada......................... 13,860 11,817 5,123 79,960 75,294 62,202
-------- -------- -------- ---------- ---------- ----------
Total................ $536,907 $490,893 $328,923 $4,223,376 $4,365,899 $4,133,654
======== ======== ======== ========== ========== ==========
</Table>

16. PRO FORMA INFORMATION (UNAUDITED)

The following unaudited Pro Forma Statements of Operations for the years
ended December 31, 2000 and 1999 are presented as if the acquisition of DJONT
and acquisition of the Bristol leases occurred on January 1, 1999.

The following unaudited Pro Forma Consolidated Statements of Operations for
the periods presented are not necessarily indicative of what actual results
operations of the Company would have been assuming such transactions had been
completed at the beginning of the respective periods presented, nor does it
purport to represent the results of operations for future periods.

<Table>
<Caption>
2000 1999
---------- ----------
(IN THOUSANDS,
EXCEPT PER UNIT DATA)

Revenues:
Hotel operating revenue:
Room and suite revenue................................. $1,309,301 $1,208,954
Food and beverage revenue.............................. 261,551 228,271
Other operating departments............................ 93,616 98,642
Other revenue............................................. 4,965 4,624
---------- ----------
Total revenues.................................... 1,669,433 1,540,491
---------- ----------
Expenses:
Hotel operating expenses.................................. 539,665 519,333
Undistributed operating expenses:
Property operating costs............................... 676,507 592,507
General and administrative............................. 13,329 10,112
Depreciation........................................... 161,836 153,498
---------- ----------
Total operating expenses.......................... 1,391,337 1,275,450
---------- ----------
Operating income............................................ 278,096 265,041
Interest expense.......................................... (166,191) (133,305)
Equity in income from unconsolidated entities............. 11,551 8,534
Loss on assets held for sale........................... (63,000)
Gain on sale of assets................................. 4,388 236
</Table>

F-40
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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. PRO FORMA INFORMATION (UNAUDITED) -- (CONTINUED)

<Table>
<Caption>
2000 1999
---------- ----------
(IN THOUSANDS,
EXCEPT PER UNIT DATA)

---------- ----------
Income before extraordinary items........................... 64,844 140,506
Extraordinary charge...................................... (3,865) (1,113)
---------- ----------
Net income.................................................. 60,979 139,393
Preferred distributions..................................... (24,682) (24,735)
---------- ----------
Net income applicable to unitholders........................ $ 36,297 $ 114,658
========== ==========
Diluted earnings per unit:
Net income (loss) applicable to unitholders............... $ 0.57 $ 1.61
========== ==========
Weighted average units outstanding........................ 63,387 71,391
</Table>

17. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

Effective January 1, 2001, the Company will adopt SFAS No. 133 Accounting
for Derivative Instruments and Hedging Activities, ("SFAS 133" or the
"Statement"). SFAS 133 will be adopted as a change in accounting principle and
cannot be applied retroactively to financial statements of prior periods.

SFAS 133 requires that the Company record derivatives on the balance sheet
as an asset or liability at fair value. The Statement also requires that the
Company record derivatives that are not hedges at fair value through earnings,
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows the Company to offset a derivative instrument's gains
and losses against related results on the hedged item in the income statement,
to the extent effective, and requires that the Company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.

The Company's interest rate swap contracts outstanding as of January 1,
2001, have been designated as cash flow hedges.

Cash flow hedges

The Company has entered into six interest rate swap agreements, with a
total notional amount of $250 million. Three of these agreements, at the option
of the variable rate payer, may be terminated in July 2001 or otherwise
terminate in July 2003 along with the other three agreements. Under these
arrangements, the Company receives the one month LIBOR rate and pays a fixed
rate of 5.548% to 5.826%. Prior to adoption of FAS 133, the Company treated
these swaps as hedges and accounted for them as such. The Company has not
recorded any amounts on the Consolidated Balance Sheet as of December 31, 2000
in connection with these instruments and the net effect of the hedges was to
record interest expense at the fixed rate of 7.548% to 7.826% on $250 million of
variable rated debt. The Company has designated these swaps as cash flow hedges
of variable future cash flows associated with the interest on its Line of Credit
facility through July 2003. Upon adoption, the Company will record the fair
value of these swaps as an asset on its balance sheet valued at $248,000, with a
corresponding credit to other comprehensive income. The Company will record
subsequent changes in fair value of the swaps through other comprehensive
income, except for changes related to ineffectiveness, during the period these
instruments are designated as hedges.

The Company has no other derivative instruments, including embedded
derivatives under SFAS 133.

F-41
267
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. QUARTERLY OPERATING RESULTS (UNAUDITED)

The Company's unaudited consolidated quarterly operating data for the years
ended December 31, 2000 and 1999, follows (in thousands, except per unit 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 partners' equity and cash flows for a period of several years.

<Table>
<Caption>
FIRST SECOND THIRD FOURTH
2000 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------

Total revenues..................................... $126,805 $137,865 $140,476 $151,546
Loss on hotels held for sale....................... $ 63,000
Income (loss) before nonrecurring items............ $ 19,931 $(33,178) $ 33,473 $ 45,642
Extraordinary charge from write off of deferred
financing fee.................................... $ 3,865
Net income (loss) applicable to unitholders........ $ 13,747 $(38,477) $ 26,831 $ 39,608
Diluted per unit data:
Net income (loss) applicable to unitholders...... $ 0.21 $ (0.62) $ 0.43 $ 0.64
Weighted average units outstanding............... 64,029 62,543 62,176 61,462
</Table>

<Table>
<Caption>
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------

Total revenues..................................... $126,917 $135,187 $124,082 $117,815
Income before nonrecurring items................... $ 38,067 $ 43,454 $ 31,115 $ 24,017
Extraordinary charge from write off of deferred
financing fee.................................... $ 1,113
Net income applicable to unitholders............... $ 31,833 $ 36,157 $ 24,931 $ 18,070
Diluted per unit data:
Net income applicable to unitholders............. $ 0.45 $ 0.51 $ 0.35 $ 0.26
Weighted average units outstanding............... 70,964 71,338 71,001 68,533
</Table>

F-42
268
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION

Certain of the Company's wholly-owned subsidiaries (FelCor/CSS Holdings,
L.P.; FelCor/CSS Hotels, L.L.C.; FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels,
L.L.C.; FelCor/St. Paul Holdings, L.P.; FelCor/LAX Holdings, L.P.; FHAC Nevada
Holdings, L.L.C.; FHAC Texas Holdings, L.P., FelCor Omaha Hotel Company, L.L.C.,
FelCor Country Villa Hotel, L.L.C., FelCor Moline Hotel, L.L.C., FelCor Canada
Co. and FelCor Hotel Asset Company, L.L.C., collectively "Subsidiary
Guarantors"), together with FelCor and one of its wholly-owned subsidiaries
(FelCor Nevada Holdings, L.L.C.), are guarantors of senior unsecured debt. The
following tables present consolidating information for the Subsidiary
Guarantors.

CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

ASSETS

Net investment in hotel properties......... $ 519,523 $1,651,019 $1,579,733 $3,750,275
Equity investment in consolidated
entities................................. 2,903,809 $(2,903,809)
Investment in unconsolidated entities...... 112,654 15,939 128,593
Assets held for sale....................... 4,905 120,509 3,880 129,294
Cash and cash equivalents.................. 5,113 3,032 17,915 26,060
Due from Lessee............................ 14,546 7,200 6,312 28,058
Due (to)/from subsidiary................... (339,680) 415,301 (75,621)
Note receivable from unconsolidated
entity................................... 7,695 7,695
Deferred assets............................ 17,443 1,177 5,324 23,944
Other assets............................... 4,464 2,042 3,178 9,684
---------- ---------- ---------- ----------- ----------
Total assets...................... $3,250,472 $2,216,219 $1,540,721 $(2,903,809) $4,103,603
========== ========== ========== =========== ==========

LIABILITIES AND PARTNERS' CAPITAL

Debt....................................... $1,079,222 $ 117,571 $ 641,448 $1,838,241
Distributions payable...................... 33,957 33,957
Accrued expenses and other liabilities..... 50,797 22,274 21,161 94,232
Minority interest -- other partnerships.... 97 50,677 50,774
---------- ---------- ---------- ----------
Total liabilities................. 1,164,073 139,845 713,286 2,017,204
---------- ---------- ---------- ----------
Redeemable units, at redemption value...... 205,800 205,800
Preferred units............................ 293,265 293,265
Partners' capital.......................... 1,587,334 2,076,374 827,435 $(2,903,809) 1,587,334
---------- ---------- ---------- ----------- ----------
Total liabilities and partners'
capital......................... $3,250,472 $2,216,219 $1,540,721 $(2,903,809) $4,103,603
========== ========== ========== =========== ==========
</Table>

F-43
269
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

ASSETS

Net investment in hotel properties......... $ 974,642 $1,884,901 $1,175,801 $4,035,344
Equity investment in consolidated
entities................................. 2,799,824 $(2,799,824)
Investment in unconsolidated entities...... 120,556 16,162 136,718
Cash and cash equivalents.................. 3,093 12,418 20,612 36,123
Due from Lessee............................ 12,615 5,035 744 18,394
Due (to)/from subsidiary................... (191,148) 219,280 (28,132)
Note receivable from unconsolidated
entity................................... 7,760 7,760
Deferred assets............................ 9,842 1,336 4,295 15,473
Other assets............................... 3,796 1,834 309 5,939
---------- ---------- ---------- ----------- ----------
Total assets...................... $3,740,980 $2,140,966 $1,173,629 $(2,799,824) $4,255,751
========== ========== ========== =========== ==========

LIABILITIES AND PARTNERS' CAPITAL

Debt....................................... $1,371,220 $ 142,530 $ 320,204 $1,833,954
Distributions payable...................... 39,657 39,657
Accrued expenses and other liabilities..... 65,480 65,480
Minority interest -- other partnerships.... (366) 52,037 51,671
---------- ---------- ---------- ----------
Total liabilities................. 1,475,991 142,530 372,241 1,990,762
---------- ---------- ---------- ----------
Redeemable units, at redemption value...... 52,338 52,338
Preferred units............................ 295,000 295,000
Partners' capital.......................... 1,917,651 1,998,436 801,388 $(2,799,824) 1,917,651
---------- ---------- ---------- ----------- ----------
Total liabilities and partners'
capital......................... $3,740,980 $2,140,966 $1,173,629 $(2,799,824) $4,255,751
========== ========== ========== =========== ==========
</Table>

F-44
270
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

Revenues:
Percent lease revenue........... $106,797 $259,374 $170,736 $536,907
Other revenue................... 4,770 174 21 4,965
-------- -------- -------- --------
Total revenue........... 111,567 259,548 170,757 541,872
-------- -------- -------- --------
Expenses:
General and administrative...... 4,218 5,019 3,019 12,256
Depreciation.................... 35,636 72,882 52,227 160,745
Taxes, insurance and other...... 18,314 52,004 22,315 92,633
-------- -------- -------- --------
Total operating
expenses.............. 58,168 129,905 77,561 265,634
-------- -------- -------- --------
Operating income (loss)........... (53,399) 129,643 93,196 276,238
Interest expense.................. 96,663 16,164 45,793 158,620
Loss on assets held for sale...... 6,938 52,483 3,579 63,000
Income before equity in income
from unconsolidated entities,
minority interests and gain on
sale of assets.................. (50,202) 60,996 43,824 54,618
Equity in income of consolidated
entities........................ 103,985 $(103,985)
Equity in income from
unconsolidated entities......... 13,898 922 14,820
Minority interests in other
partnerships.................... 114 (3,684) (3,570)
Gain on sale of assets............ 2,461 1,789 138 4,388
-------- -------- -------- --------- --------
Net income before extraordinary
item............................ 70,256 63,707 40,278 (103,985) 70,256
Extraordinary charge for write off
of deferred financing fees...... (3,865) (3,865)
-------- -------- -------- --------- --------
Net income (loss)................. 66,391 63,707 40,278 (103,985) 66,391
Preferred distributions........... 24,682 24,682
-------- -------- -------- --------- --------
Net income (loss) applicable to
unitholders..................... $ 41,709 $ 63,707 $ 40,278 $(103,985) $ 41,709
======== ======== ======== ========= ========
</Table>

F-45
271
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ---------- ------------- ------------

Cash flows from (used in) operating
activities.................................. $ (953) $184,195 $94,062 $277,304
Cash flows from (used in) investing
activities.................................. 33,721 (44,540) (23,947) (34,766)
Cash flows from (used in) financing
activities.................................. (30,748) (149,041) (72,812) (252,601)
-------- -------- ------- --------
Change in cash and cash equivalents........... 2,020 (9,386) (2,697) (10,063)
Cash and cash equivalents at beginning of
period...................................... 3,093 12,418 20,612 36,123
-------- -------- ------- --------
Cash and equivalents at end of year........... $ 5,113 $ 3,032 $17,915 $ 26,060
======== ======== ======= ========
</Table>

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

Revenues:
Percent lease revenue............ $131,706 $228,154 $131,033 $490,893
Other revenue.................... 4,624 4,624
-------- -------- -------- --------
Total revenue............ 136,330 228,154 131,033 495,517
-------- -------- -------- --------
Expenses:
General and administrative....... 2,447 4,240 2,435 9,122
Depreciation..................... 43,090 69,665 40,193 152,948
Taxes, insurance and other....... 17,643 39,460 20,027 77,130
-------- -------- -------- --------
Total operating
expenses............... 63,180 113,365 62,655 239,200
-------- -------- -------- --------
Operating income (loss)............ 73,150 114,789 68,378 256,317
Interest expense................. 95,254 9,327 20,854 125,435
Income before equity from
unconsolidated entities, minority
interests and gain on sale of
assets........................... (22,104) 105,462 47,524 130,882
Equity in earnings of consolidated
entities......................... 152,131 $ 152,131
Equity in income from
unconsolidated entities.......... 7,725 759 8,484
Minority interest in other
partnerships..................... (1,099) (1,614) (2,713)
Gain on sale of assets............. 236 236
-------- -------- -------- --------- --------
Net income before extraordinary
item............................. 136,889 106,221 45,910 (152,131) 136,889
Extraordinary charge for write off
of deferred financing fees....... (1,113) (1,113)
-------- -------- -------- --------- --------
Net income (loss).................. 135,776 106,221 45,910 (152,131) 135,776
Preferred distributions............ 24,735 24,735
-------- -------- -------- --------- --------
Net income (loss) applicable to
unitholders...................... $111,041 $106,221 $ 45,910 $(152,131) $111,041
======== ======== ======== ========= ========
</Table>

F-46
272
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ---------- ------------- ------------

Cash flows from operating activities........... $ 17,555 $183,998 $ 80,812 $ 282,365
Cash flows from (used in) investing
activities................................... 55,786 (99,074) (162,229) (205,517)
Cash flows from (used in) financing
activities................................... (90,248) (77,178) 92,009 (75,417)
-------- -------- --------- ---------
Change in cash and cash equivalents............ (16,907) 7,746 10,592 1,431
Cash and cash equivalents at beginning of
period....................................... 20,000 4,672 10,020 34,692
-------- -------- --------- ---------
Cash and equivalents at end of year............ $ 3,093 $ 12,418 $ 20,612 $ 36,123
======== ======== ========= =========
</Table>

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------- ------------ ------------

Revenues:
Percentage lease revenue......... $125,103 $143,977 $58,955 $328,035
Other revenue.................... 4,504 61 4,565
-------- -------- ------- --------
Total revenue............ 129,607 144,038 58,955 332,600
-------- -------- ------- --------
Expenses:
General and administrative....... 2,117 2,226 911 5,254
Depreciation..................... 36,490 41,021 13,324 90,835
Taxes, insurance and other....... 14,388 23,548 7,352 45,288
-------- -------- ------- --------
Total operating
expenses............... 52,995 66,795 21,587 141,377
Operating income (loss)............ 76,612 77,243 37,368 191,223
Interest expense................. 62,785 3,076 7,321 73,182
Income before equity in income from
unconsolidated entities, minority
interests, and gain on sale of
assets........................... 13,827 74,167 30,047 118,041
Equity in income of consolidated
entities......................... 103,150 $(103,150)
Equity in income from
unconsolidated entities.......... 6,960 57 7,017
Minority interests in other
partnerships..................... (1,121) (1,121)
Gain on sale of assets............. 477 477
-------- -------- ------- --------- --------
Income before extraordinary item... 124,414 74,167 28,983 (103,150) 124,414
Extraordinary charge for write off
of deferred financing fees....... (3,075) (3,075)
-------- -------- ------- --------- --------
Net income (loss).................. 121,339 74,167 28,983 (103,150) 121,339
Preferred distributions............ 21,423 21,423
-------- -------- ------- --------- --------
Net income (loss) applicable to
unitholders...................... $ 99,916 $ 74,167 $28,983 $(103,150) $ 99,916
======== ======== ======= ========= ========
</Table>

F-47
273
FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. CONSOLIDATING FINANCIAL INFORMATION -- (CONTINUED)

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

<Table>
<Caption>
SUBSIDIARY NON-GUARANTOR TOTAL
FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ---------- ------------- ------------

Cash flows from operating activities.......... $ 34,025 $115,187 $ 43,371 $ 192,583
Cash flows from (used in) investing
activities.................................. (444,363) (25,753) (80,382) (550,498)
Cash flows from (used in) financing
activities.................................. 412,795 (84,762) 47,031 375,064
--------- -------- -------- ---------
Change in cash and cash equivalents........... 2,457 4,672 10,020 17,149
Cash and cash equivalents at beginning of
period...................................... 17,543 17,543
--------- -------- -------- ---------
Cash and equivalents at end of year........... $ 20,000 $ 4,672 $ 10,020 $ 34,692
========= ======== ======== =========
</Table>

20. SUBSEQUENT EVENTS

Effective January 1, 2001, subject to the receipt of certain lender
consents, the Company acquired and contributed to a newly formed taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, the Company issued an aggregate of 416,667 units valued at
approximately $10 million, which, together with DJONT's accumulated
shareholders' deficit of $24.5 million, will be expensed in the first quarter of
2001 as a lease termination cost.

Effective January 1, 2001, the Company completed the acquisition of 12 of
the Bristol leases. In consideration for the acquisition of such leases, FelCor
issued to Six Continents 413,585 shares of FelCor common stock valued at
approximately $10 million and the Company issued a like number of units. In
March 2001, the Company entered into an agreement with Six Continents to acquire
the remaining 88 leases effective July 1, 2001. In consideration for the
acquisition of such leases, the Company will enter into long term management
agreements with Six Continents with regard to these hotels and FelCor will issue
to Six Continents 100 shares of FelCor common stock. A portion of the management
fees with respect to the 88 hotels managed by Six Continents under long term
management agreements will be considered to be lease termination costs and the
Company will record a lease termination expense of approximately $125 million in
the third quarter of 2001. At that time, the Company will record a corresponding
liability of approximately $125 million, that will be amortized over the term of
the applicable management agreements.

On January 11, 2001, the Company completed the private placement of an
additional $100 million in 9 1/2% senior unsecured notes that mature in
September, 2008. These notes were issued at a premium to yield an effective rate
of 9 1/8%. The proceeds were used initially to pay down the Company's Line of
Credit.

In March 2001, the Company contributed eight of the hotels held for sale to
an entity in which the Company holds a 50% equity interest and a subsidiary of
IHC holds the other 50% equity interest. The Company contributed assets with a
book value of approximately $77 million. Another subsidiary of IHC manages each
of these hotels.

F-48
274

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of FelCor Lodging Trust Incorporated:

Our audits of the consolidated financial statements referred to in our
report dated February 5, 2001, except for footnotes 1 and 20 as to which the
date is March 28, 2001, appearing on page F-2 of the Annual Report on Form 10-K
of FelCor Lodging Limited Partnership (which report and consolidated financial
statements are included in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Dallas, Texas
February 5, 2001

F-49
275

FELCOR LODGING LIMITED PARTNERSHIP

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
<Table>
<Caption>
COST CAPITALIZED SUBSEQUENT TO
INITIAL COST ACQUISITION
----------------------------------- ----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ -------- ------------ --------- ------- ------------ ---------

Birmingham, AL(1)............ $ 12,298 $ 2,843 $ 29,286 $ 160 $ 653 $ 4,132
Montgomery E. (I-85), AL(2).. 836 7,272 251 2,669 1,038
Texarkana (I-30), AR(2)...... 5,245 162 1,438 521
Flagstaff, AZ(1)............. 900 6,825 268 1,605 1,329
Phoenix (Airport - 44th St.),
AZ(1)....................... 2,969 25,828 891 1,357 2,598
Phoenix (Camelback), AZ(1)... 38,998 612 4,695 935 5,782
Phoenix (Crescent), AZ(3).... 26,820 3,608 29,583 2,886 166 1,159
Tempe (ASU), AZ(1)........... 12,183 3,951 34,371 1,185 915 2,768
Anaheim (Disney(R) Area),
CA(1)....................... 11,302 2,548 14,832 607 546 3,836
Burlingame (San Francisco A/P
So.), CA(1)................. 39,929 818 200 4,426
Dana Point, CA(5)............ 1,787 15,545 536 644 2,907
El Segundo (LAX Airport
South), CA(1)............... 2,660 17,997 798 557 6,392
Irvine (Orange County
Airport), CA(6)............. 4,981 43,338 1,494 1,745 744
Milpitas, CA(1).............. 21,180 4,021 23,677 562 1,041 4,713
Milpitas (San Jose N.),
CA(6)....................... 4,153 36,130 1,246 5,810 1,964
Napa, CA(1).................. 11,127 3,287 14,205 494 997 3,594
Oxnard (Mandalay Beach),
CA(1)....................... 2,930 22,124 879 1,174 5,871
Palm Desert, CA(1)........... 8,709 2,368 20,598 710 1,607 2,855
Pleasanton, CA(6)............ 3,169 27,569 951 159 295
San Diego (On the Bay),
CA(2)....................... 68,633 2,123 282 1,052
San Francisco (Financial
District), CA(2)............ 21,679 670 1,426 2,014
San Francisco (Fisherman's
Wharf), CA(2)............... 62,203 1,924 749 756
San Francisco (Union Square),
CA(6)....................... 8,514 74,075 2,554 3,513 1,390
Santa Barbara, CA(2)......... 5,535 1,692 14,723 508 103 292

<Caption>
GROSS AMOUNTS AT WHICH CARRIED ACCUMULATED NET BOOK
AT CLOSE OF PERIOD DEPRECIATION VALUE
----------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- -------- ------------ --------- ---------- ------------- -------------

Birmingham, AL(1)............ $ 2,843 $ 29,939 $ 4,292 $ 37,074 $ 6,685 $ 30,389
Montgomery E. (I-85), AL(2).. 836 9,941 1,289 12,066 1,056 11,010
Texarkana (I-30), AR(2)...... 6,683 683 7,366 620 6,746
Flagstaff, AZ(1)............. 900 8,430 1,597 10,927 2,558 8,369
Phoenix (Airport - 44th St.),
AZ(1)....................... 2,969 27,185 3,489 33,643 2,447 31,196
Phoenix (Camelback), AZ(1)... 4,695 39,933 6,394 51,022 9,725 41,297
Phoenix (Crescent), AZ(3).... 3,608 29,749 4,045 37,402 4,996 32,406
Tempe (ASU), AZ(1)........... 3,951 35,286 3,953 43,190 3,513 39,677
Anaheim (Disney(R) Area),
CA(1)....................... 2,548 15,378 4,443 22,369 5,600 16,769
Burlingame (San Francisco A/P
So.), CA(1)................. 40,129 5,244 45,373 8,919 36,454
Dana Point, CA(5)............ 1,787 16,189 3,443 21,419 3,488 17,931
El Segundo (LAX Airport
South), CA(1)............... 2,660 18,554 7,190 28,404 7,872 20,532
Irvine (Orange County
Airport), CA(6)............. 4,981 45,083 2,238 52,302 3,547 48,755
Milpitas, CA(1).............. 4,021 24,718 5,275 34,014 6,984 27,030
Milpitas (San Jose N.),
CA(6)....................... 4,153 41,940 3,210 49,303 3,324 45,979
Napa, CA(1).................. 3,287 15,202 4,088 22,577 4,553 18,024
Oxnard (Mandalay Beach),
CA(1)....................... 2,930 23,298 6,750 32,978 7,303 25,675
Palm Desert, CA(1)........... 2,368 22,205 3,565 28,138 2,697 25,441
Pleasanton, CA(6)............ 3,169 27,728 1,246 32,143 2,143 30,000
San Diego (On the Bay),
CA(2)....................... 68,915 3,175 72,090 5,167 66,923
San Francisco (Financial
District), CA(2)............ 23,105 2,684 25,789 2,106 23,683
San Francisco (Fisherman's
Wharf), CA(2)............... 62,952 2,680 65,632 4,722 60,910
San Francisco (Union Square),
CA(6)....................... 8,514 77,588 3,944 90,046 6,077 83,969
Santa Barbara, CA(2)......... 1,692 14,826 800 17,318 1,187 16,131

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

Birmingham, AL(1)............ 1987 01-03-96 5 - 40 Yrs
Montgomery E. (I-85), AL(2).. 1964 07-28-98 5 - 40 Yrs
Texarkana (I-30), AR(2)...... 1970 07-28-98 5 - 40 Yrs
Flagstaff, AZ(1)............. 1988 02-16-95 5 - 40 Yrs
Phoenix (Airport - 44th St.),
AZ(1)....................... 1981 05-04-98 5 - 40 Yrs
Phoenix (Camelback), AZ(1)... 1985 01-03-96 5 - 40 Yrs
Phoenix (Crescent), AZ(3).... 1986 06-30-97 5 - 40 Yrs
Tempe (ASU), AZ(1)........... 1986 05-04-98 5 - 40 Yrs
Anaheim (Disney(R) Area),
CA(1)....................... 1987 01-03-96 5 - 40 Yrs
Burlingame (San Francisco A/P
So.), CA(1)................. 1986 11-06-95 5 - 40 Yrs
Dana Point, CA(5)............ 1992 02-21-97 5 - 40 Yrs
El Segundo (LAX Airport
South), CA(1)............... 1985 03-27-96 5 - 40 Yrs
Irvine (Orange County
Airport), CA(6)............. 1986 07-28-98 5 - 40 Yrs
Milpitas, CA(1).............. 1987 01-03-96 5 - 40 Yrs
Milpitas (San Jose N.),
CA(6)....................... 1987 07-28-98 5 - 40 Yrs
Napa, CA(1).................. 1985 05-08-96 5 - 40 Yrs
Oxnard (Mandalay Beach),
CA(1)....................... 1986 05-08-96 5 - 40 Yrs
Palm Desert, CA(1)........... 1984 05-04-98 5 - 40 Yrs
Pleasanton, CA(6)............ 1986 07-28-98 5 - 40 Yrs
San Diego (On the Bay),
CA(2)....................... 1965 07-28-98 5 - 40 Yrs
San Francisco (Financial
District), CA(2)............ 1970 07-28-98 5 - 40 Yrs
San Francisco (Fisherman's
Wharf), CA(2)............... 1970 07-28-98 5 - 40 Yrs
San Francisco (Union Square),
CA(6)....................... 1970 07-28-98 5 - 40 Yrs
Santa Barbara, CA(2)......... 1969 07-28-98 5 - 40 Yrs
</Table>

F-50
276
FELCOR LODGING LIMITED PARTNERSHIP
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

<Table>
<Caption>
COST CAPITALIZED SUBSEQUENT TO
INITIAL COST ACQUISITION
----------------------------------- ----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ -------- ------------ --------- ------- ------------ ---------

So. San Francisco (SF Airport
No.), CA(1)................. 26,118 3,418 31,737 527 827 5,017
Aurora (Denver Southeast),
CO(7)....................... 2,432 21,158 730 439 2,112
Avon (Beaver Creek Resort),
CO(8)....................... 1,134 9,864 340 (16) 79 1,125
Hartford Downtown, CT(6)..... 2,327 20,243 698 5,981 3,221
Stamford, CT(9).............. 37,356 1,155 1,548 999
Wilmington, DE(7)............ 1,379 12,487 431 9,486 3,582
Boca Raton, FL(1)............ 1,868 16,253 560 90 4,006
Cocoa Beach (Oceanfront
Resort), FL(2).............. 2,304 20,046 691 9,350 3,808
Deerfield Beach, FL(1)....... 15,265 4,522 29,443 917 69 989 5,016
Ft. Lauderdale, FL(1)........ 16,300 5,329 47,850 903 (163) 1,457 5,771
Ft. Lauderdale (Cypress
Creek), FL(11).............. 12,913 3,009 26,177 903 972 2,681
Jacksonville, FL(1).......... 1,130 9,608 456 4,877 2,330
Kissimmee (Nikki Bird
Resort), FL(2).............. 31,652 979 6,261 2,238
Lake Buena Vista (Disney
World(R)), FL(5)............ 2,896 25,196 869 245 2,944
Miami (Airport), FL(6)....... 26,146 809 993 1,429
Miami (Airport), FL(1)....... 13,177 4,135 24,950 1,171 315 6,289
Orlando (Airport), FL(9)..... 2,564 22,310 769 1,675 428
Orlando (Int'l Drive Resort),
FL(2)....................... 5,142 44,735 1,543 4,593 1,948
Orlando (North), FL(1)....... 1,673 14,218 684 5,072 2,711
Orlando (South), FL(1)....... 25,437 1,632 13,870 799 375 2,349
Tampa (Near Busch Gardens),
FL(2)....................... 9,534 295 11,176 2,200
Tampa Rocky Point, FL(5)..... 2,142 18,639 643 1,121 2,473
Atlanta (Airport), GA(6)..... 40,943 1,266 132 623
Atlanta (Airport), GA(1)..... 22,342 770 2,568 1,149 1,568
Atlanta (Airport Gateway),
GA(3)....................... 5,113 22,857 2,105 201 3,988
Atlanta (Airport North),
GA(2)....................... 17,255 34,531 1,068 265 739
Atlanta Buckhead, GA(1)...... 38,031 7,303 38,996 2,437 670 2,557

So. San Francisco (SF Airport
No.), CA(1)................. 3,418 32,564 5,544 41,526 8,121 33,405
Aurora (Denver Southeast),
CO(7)....................... 2,432 21,597 2,842 26,871 2,653 24,218
Avon (Beaver Creek Resort),
CO(8)....................... 1,118 9,943 1,465 12,526 2,449 10,077
Hartford Downtown, CT(6)..... 2,327 26,224 3,919 32,470 2,905 29,565
Stamford, CT(9).............. 38,904 2,154 41,058 3,049 38,009
Wilmington, DE(7)............ 1,379 21,973 4,013 27,365 1,828 25,537
Boca Raton, FL(1)............ 1,868 16,343 4,566 22,777 5,217 17,560
Cocoa Beach (Oceanfront
Resort), FL(2).............. 2,304 29,396 4,499 36,199 2,998 33,201
Deerfield Beach, FL(1)....... 4,591 30,432 5,933 40,956 8,003 32,953
Ft. Lauderdale, FL(1)........ 5,166 49,307 6,674 61,147 11,072 50,075
Ft. Lauderdale (Cypress
Creek), FL(11).............. 3,009 27,149 3,584 33,742 2,609 31,133
Jacksonville, FL(1).......... 1,130 14,485 2,786 18,401 3,777 14,624
Kissimmee (Nikki Bird
Resort), FL(2).............. 37,913 3,217 41,130 3,373 37,757
Lake Buena Vista (Disney
World(R)), FL(5)............ 2,896 25,441 3,813 32,150 3,765 28,385
Miami (Airport), FL(6)....... 27,139 2,238 29,377 2,489 26,888
Miami (Airport), FL(1)....... 4,135 25,265 7,460 36,860 8,560 28,300
Orlando (Airport), FL(9)..... 2,564 23,985 1,197 27,746 1,760 25,986
Orlando (Int'l Drive Resort),
FL(2)....................... 5,142 49,328 3,491 57,961 3,660 54,301
Orlando (North), FL(1)....... 1,673 19,290 3,395 24,358 5,063 19,295
Orlando (South), FL(1)....... 1,632 14,245 3,148 19,025 4,685 14,340
Tampa (Near Busch Gardens),
FL(2)....................... 20,710 2,495 23,205 2,119 21,086
Tampa Rocky Point, FL(5)..... 2,142 19,760 3,116 25,018 2,842 22,176
Atlanta (Airport), GA(6)..... 41,075 1,889 42,964 3,151 39,813
Atlanta (Airport), GA(1)..... 2,568 23,491 2,338 28,397 2,018 26,379
Atlanta (Airport Gateway),
GA(3)....................... 5,113 23,058 6,093 34,264 5,007 29,257
Atlanta (Airport North),
GA(2)....................... 34,796 1,807 36,603 2,612 33,991
Atlanta Buckhead, GA(1)...... 7,303 39,666 4,994 51,963 6,989 44,974

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

So. San Francisco (SF Airport
No.), CA(1)................. 1988 01-03-96 5 - 40 Yrs
Aurora (Denver Southeast),
CO(7)....................... 1989 03-15-98 5 - 40 Yrs
Avon (Beaver Creek Resort),
CO(8)....................... 1989 02-20-96 5 - 40 Yrs
Hartford Downtown, CT(6)..... 1973 07-28-98 5 - 40 Yrs
Stamford, CT(9).............. 1984 07-28-98 5 - 40 Yrs
Wilmington, DE(7)............ 1972 03-20-98 5 - 40 Yrs
Boca Raton, FL(1)............ 1989 02-28-96 5 - 40 Yrs
Cocoa Beach (Oceanfront
Resort), FL(2).............. 1960 07-28-98 5 - 40 Yrs
Deerfield Beach, FL(1)....... 1987 01-03-96 5 - 40 Yrs
Ft. Lauderdale, FL(1)........ 1986 01-03-96 5 - 40 Yrs
Ft. Lauderdale (Cypress
Creek), FL(11).............. 1986 05-04-98 5 - 40 Yrs
Jacksonville, FL(1).......... 1986 07-28-94 5 - 40 Yrs
Kissimmee (Nikki Bird
Resort), FL(2).............. 1974 07-28-98 5 - 40 Yrs
Lake Buena Vista (Disney
World(R)), FL(5)............ 1987 07-28-97 5 - 40 Yrs
Miami (Airport), FL(6)....... 1987 01-03-96 5 - 40 Yrs
Miami (Airport), FL(1)....... 1983 07-28-98 5 - 40 Yrs
Orlando (Airport), FL(9)..... 1984 07-28-98 5 - 40 Yrs
Orlando (Int'l Drive Resort),
FL(2)....................... 1972 07-28-98 5 - 40 Yrs
Orlando (North), FL(1)....... 1985 07-28-94 5 - 40 Yrs
Orlando (South), FL(1)....... 1985 07-28-94 5 - 40 Yrs
Tampa (Near Busch Gardens),
FL(2)....................... 1966 07-28-98 5 - 40 Yrs
Tampa Rocky Point, FL(5)..... 1986 07-28-97 5 - 40 Yrs
Atlanta (Airport), GA(6)..... 1975 07-28-98 5 - 40 Yrs
Atlanta (Airport), GA(1)..... 1989 05-04-98 5 - 40 Yrs
Atlanta (Airport Gateway),
GA(3)....................... 1986 06-30-97 5 - 40 Yrs
Atlanta (Airport North),
GA(2)....................... 1967 07-28-98 5 - 40 Yrs
Atlanta Buckhead, GA(1)...... 1988 10-17-96 5 - 40 Yrs
</Table>

F-51
277
FELCOR LODGING LIMITED PARTNERSHIP
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

Atlanta (Galleria), GA(11)... 17,880 5,052 28,507 2,526 477 626
Atlanta (Jonesboro South),
GA(2)....................... 2,869 864 7,515 259 137 507
Atlanta Perimeter, GA(9)..... 10,708 20,556 636 188 502
Atlanta Powers Ferry,
GA(6)....................... 10,444 3,410 29,672 1,023 555 550
Brunswick, GA(1)............. 705 6,067 247 28 1,067
Columbus (Airport North),
GA(2)....................... 7,026 217 1,965 856
Chicago (Allerton), IL(6).... 3,343 29,086 1,003 54,918 7,758
Chicago (O'Hare), IL(3)...... 24,833 8,178 37,043 2,887 337 1,334
Deerfield, IL(1)............. 16,480 2,305 20,054 692 531 1,570
Lexington, KY(14)............ 1,955 13,604 587 155 1,992
Lexington, KY(11)............ 6,953 21,644 746 2,488 396 669
Baton Rouge, LA(1)........... 7,906 2,350 19,092 525 1 618 4,090
New Orleans (French Quarter),
LA(2)....................... 24,147 5,263 45,793 1,579 272 621
New Orleans, LA(1)........... 32,463 2,570 22,300 895 4,806 3,261
Boston (Government Center),
MA(9)....................... 45,452 1,406 4,495 1,105
Boston (Marlborough), MA(1).. 20,383 948 8,143 325 761 12,994 5,154
Baltimore (BWI), MD(1)....... 2,568 22,433 770 (2) 1,272 2,279
Troy, MI(1).................. 2,968 25,905 909 1,212 2,013
Bloomington, MN(1)........... 2,038 17,731 611 529 3,285
Minneapolis (Airport),
MN(1)....................... 15,617 5,417 36,508 602 249 3,307
Minneapolis (Downtown),
MN(1)....................... 818 16,820 505 227 3,519
St. Paul, MN(1).............. 1,156 17,315 849 90 3,455
Kansas City (Northeast),
MO(2)....................... 973 8,461 292 12 2,602
St. Louis (Downtown), MO(1).. 3,179 27,659 954 1,274 2,332
St. Louis (Westport),
MO(2)....................... 2,767 24,072 830 192 448
Jackson (Downtown), MS(6).... 5,036 2,226 19,370 668 116 329
Jackson (North), MS(15)...... 5,438 1,643 14,296 493 221 394

Atlanta (Galleria), GA(11)... 5,052 28,984 3,152 37,188 4,433 32,755
Atlanta (Jonesboro South),
GA(2)....................... 864 7,652 766 9,282 648 8,634
Atlanta Perimeter, GA(9)..... 20,744 1,138 21,882 1,641 20,241
Atlanta Powers Ferry,
GA(6)....................... 3,410 30,227 1,573 35,210 2,365 32,845
Brunswick, GA(1)............. 705 6,095 1,314 8,114 1,692 6,422
Columbus (Airport North),
GA(2)....................... 8,991 1,073 10,064 931 9,133
Chicago (Allerton), IL(6).... 3,343 84,004 8,761 96,108 5,351 90,757
Chicago (O'Hare), IL(3)...... 8,178 37,380 4,221 49,779 5,676 44,103
Deerfield, IL(1)............. 2,305 20,585 2,262 25,152 3,634 21,518
Lexington, KY(14)............ 1,955 13,759 2,579 18,293 3,390 14,903
Lexington, KY(11)............ 2,488 22,040 1,415 25,943 1,890 24,053
Baton Rouge, LA(1)........... 2,351 19,710 4,615 26,676 5,911 20,765
New Orleans (French Quarter),
LA(2)....................... 5,263 46,065 2,200 53,528 3,575 49,953
New Orleans, LA(1)........... 2,570 27,106 4,156 33,832 6,896 26,936
Boston (Government Center),
MA(9)....................... 49,947 2,511 52,458 3,459 48,999
Boston (Marlborough), MA(1).. 1,709 21,137 5,479 28,325 5,821 22,504
Baltimore (BWI), MD(1)....... 2,566 23,705 3,049 29,320 3,330 25,990
Troy, MI(1).................. 2,968 27,117 2,922 33,007 3,553 29,454
Bloomington, MN(1)........... 2,038 18,260 3,896 24,194 3,151 21,043
Minneapolis (Airport),
MN(1)....................... 5,417 36,757 3,909 46,083 8,013 38,070
Minneapolis (Downtown),
MN(1)....................... 818 17,047 4,024 21,889 5,539 16,350
St. Paul, MN(1).............. 1,156 17,405 4,304 22,865 5,938 16,927
Kansas City (Northeast),
MO(2)....................... 973 8,473 2,894 12,340 1,705 10,635
St. Louis (Downtown), MO(1).. 3,179 28,933 3,286 35,398 2,722 32,676
St. Louis (Westport),
MO(2)....................... 2,767 24,264 1,278 28,309 1,943 26,366
Jackson (Downtown), MS(6).... 2,226 19,486 997 22,709 1,651 21,058
Jackson (North), MS(15)...... 1,643 14,517 887 17,047 1,267 15,780

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

Atlanta (Galleria), GA(11)... 1990 06-30-97 5 - 40 Yrs
Atlanta (Jonesboro South),
GA(2)....................... 1973 07-28-98 5 - 40 Yrs
Atlanta Perimeter, GA(9)..... 1985 07-28-98 5 - 40 Yrs
Atlanta Powers Ferry,
GA(6)....................... 1981 07-28-98 5 - 40 Yrs
Brunswick, GA(1)............. 1988 07-19-95 5 - 40 Yrs
Columbus (Airport North),
GA(2)....................... 1969 07-28-98 5 - 40 Yrs
Chicago (Allerton), IL(6).... 1923 07-28-98 5 - 40 Yrs
Chicago (O'Hare), IL(3)...... 1994 06-30-97 5 - 40 Yrs
Deerfield, IL(1)............. 1987 06-20-96 5 - 40 Yrs
Lexington, KY(14)............ 1987 01-10-96 5 - 40 Yrs
Lexington, KY(11)............ 1989 05-04-98 5 - 40 Yrs
Baton Rouge, LA(1)........... 1985 01-03-96 5 - 40 Yrs
New Orleans (French Quarter),
LA(2)....................... 1969 07-28-98 5 - 40 Yrs
New Orleans, LA(1)........... 1984 12-01-94 5 - 40 Yrs
Boston (Government Center),
MA(9)....................... 1968 07-28-98 5 - 40 Yrs
Boston (Marlborough), MA(1).. 1988 06-30-95 5 - 40 Yrs
Baltimore (BWI), MD(1)....... 1987 03-20-97 5 - 40 Yrs
Troy, MI(1).................. 1987 03-20-97 5 - 40 Yrs
Bloomington, MN(1)........... 1980 02-01-97 5 - 40 Yrs
Minneapolis (Airport),
MN(1)....................... 1986 11-06-95 5 - 40 Yrs
Minneapolis (Downtown),
MN(1)....................... 1984 11-15-95 5 - 40 Yrs
St. Paul, MN(1).............. 1983 11-15-95 5 - 40 Yrs
Kansas City (Northeast),
MO(2)....................... 1975 07-28-98 5 - 40 Yrs
St. Louis (Downtown), MO(1).. 1985 05-04-98 5 - 40 Yrs
St. Louis (Westport),
MO(2)....................... 1979 07-28-98 5 - 40 Yrs
Jackson (Downtown), MS(6).... 1975 07-28-98 5 - 40 Yrs
Jackson (North), MS(15)...... 1957 07-28-98 5 - 40 Yrs
</Table>

F-52
278
FELCOR LODGING LIMITED PARTNERSHIP
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

Olive Branch (Whispering
Woods Conference Center),
MS(8)....................... 1,247 12,155 419 (158) 1,564 1,496
Raleigh/Durham, NC(5)........ 2,124 18,476 637 99 1,890
Omaha (Central), NE(5)....... 1,877 16,328 563 215 1,796
Omaha (Central), NE(12)...... 518 4,504 155 816 484
Omaha (I-80), NE(2).......... 6,154 1,795 15,614 538 2,289 1,853
Omaha (Old Mill Northwest),
NE(6)....................... 979 8,519 294 4,669 2,459
Omaha (Southwest), NE(12).... 464 4,036 139 613 263
Omaha, (Southwest) NE(13).... 923 8,029 277 864 392
Omaha (Southwest), NE(15).... 373 3,245 112 12 118
Piscataway, NJ(1)............ 20,609 1,755 17,563 527 843 2,924
Secaucus (Meadowlands),
NJ(6)....................... 2,356 20,497 707 4,254 5,981
Albuquerque (Mountain View),
NM(2)....................... 1,322 11,505 397 120 547
Syracuse, NY(1).............. 1,483 13,756 1,330 274 417
Cleveland, OH(1)............. 1,755 15,329 527 1,852 2,436
Columbus, OH(5).............. 1,918 16,691 576 760 1,077
Dayton, OH(5)................ 6,707 1,140 11,223 342 149 1,109 391
Tulsa, OK(1)................. 525 7,344 3,117 636 2,591
Philadelphia (Center City),
PA(6)....................... 5,793 50,395 1,738 2,470 1,349
Philadelphia (Independence
Mall), PA(2)................ 14,000 3,184 27,704 955 5,861 2,154
Philadelphia (Society Hill),
PA(3)....................... 33,773 4,542 45,121 1,536 1,056 2,872
Pittsburgh, PA(9)............ 15,500 25,170 773 1,692 1,913
Charleston (Mills House),
SC(2)....................... 3,270 28,446 981 347 2,376
Greenville (Roper), SC(6).... 1,551 13,492 465 670 782
Myrtle Beach (Kingston
Plantation), SC(1).......... 2,940 24,988 1,470 1,557 4,913
Knoxville (Central), TN(2)... 11,586 358 1,512 1,009
Nashville, TN(1)............. 1,118 9,506 961 265 2,201
Nashville (Opryland/Airport),
TN(9)....................... 27,889 863 1,849 1,671

Olive Branch (Whispering
Woods Conference Center),
MS(8)....................... 1,089 13,719 1,915 16,723 1,473 15,250
Raleigh/Durham, NC(5)........ 2,124 18,575 2,527 23,226 2,752 20,474
Omaha (Central), NE(5)....... 1,877 16,543 2,359 20,779 2,930 17,849
Omaha (Central), NE(12)...... 518 5,320 639 6,477 475 6,002
Omaha (I-80), NE(2).......... 1,795 17,903 2,391 22,089 1,338 20,751
Omaha (Old Mill Northwest),
NE(6)....................... 979 13,188 2,753 16,920 1,426 15,494
Omaha (Southwest), NE(12).... 464 4,649 402 5,515 394 5,121
Omaha, (Southwest) NE(13).... 923 8,893 669 10,485 720 9,765
Omaha (Southwest), NE(15).... 373 3,257 230 3,860 351 3,509
Piscataway, NJ(1)............ 1,755 18,406 3,451 23,612 4,493 19,119
Secaucus (Meadowlands),
NJ(6)....................... 2,356 24,751 6,688 33,795 2,890 30,905
Albuquerque (Mountain View),
NM(2)....................... 1,322 11,625 944 13,891 1,070 12,821
Syracuse, NY(1).............. 1,483 14,030 1,747 17,260 2,253 15,007
Cleveland, OH(1)............. 1,755 17,181 2,963 21,899 3,910 17,989
Columbus, OH(5).............. 1,918 17,451 1,653 21,022 1,987 19,035
Dayton, OH(5)................ 1,289 12,332 733 14,354 1,196 13,158
Tulsa, OK(1)................. 525 7,980 5,708 14,213 6,727 7,486
Philadelphia (Center City),
PA(6)....................... 5,793 52,865 3,087 61,745 4,264 57,481
Philadelphia (Independence
Mall), PA(2)................ 3,184 33,565 3,109 39,858 3,021 36,837
Philadelphia (Society Hill),
PA(3)....................... 4,542 46,177 4,408 55,127 5,320 49,807
Pittsburgh, PA(9)............ 26,862 2,686 29,548 2,277 27,271
Charleston (Mills House),
SC(2)....................... 3,270 28,793 3,357 35,420 2,609 32,811
Greenville (Roper), SC(6).... 1,551 14,162 1,247 16,960 1,315 15,645
Myrtle Beach (Kingston
Plantation), SC(1).......... 2,940 26,545 6,383 35,868 6,201 29,667
Knoxville (Central), TN(2)... 13,098 1,367 14,465 1,306 13,159
Nashville, TN(1)............. 1,118 9,771 3,162 14,051 4,493 9,558
Nashville (Opryland/Airport),
TN(9)....................... 29,738 2,534 32,272 2,420 29,852

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

Olive Branch (Whispering
Woods Conference Center),
MS(8)....................... 1972 07-28-98 5 - 40 Yrs
Raleigh/Durham, NC(5)........ 1987 07-28-97 5 - 40 Yrs
Omaha (Central), NE(5)....... 1973 02-01-97 5 - 40 Yrs
Omaha (Central), NE(12)...... 1965 07-28-98 5 - 40 Yrs
Omaha (I-80), NE(2).......... 1991 07-28-98 5 - 40 Yrs
Omaha (Old Mill Northwest),
NE(6)....................... 1974 07-28-98 5 - 40 Yrs
Omaha (Southwest), NE(12).... 1986 07-28-98 5 - 40 Yrs
Omaha, (Southwest) NE(13).... 1989 07-28-98 5 - 40 Yrs
Omaha (Southwest), NE(15).... 1996 07-28-98 5 - 40 Yrs
Piscataway, NJ(1)............ 1988 01-10-96 5 - 40 Yrs
Secaucus (Meadowlands),
NJ(6)....................... N/A 07-28-98 5 - 40 Yrs
Albuquerque (Mountain View),
NM(2)....................... 1968 07-28-98 5 - 40 Yrs
Syracuse, NY(1).............. 1989 06-30-97 5 - 40 Yrs
Cleveland, OH(1)............. 1990 11-17-95 5 - 40 Yrs
Columbus, OH(5).............. 1985 02-04-98 5 - 40 Yrs
Dayton, OH(5)................ 1987 12-30-97 5 - 40 Yrs
Tulsa, OK(1)................. 1985 07-28-94 5 - 40 Yrs
Philadelphia (Center City),
PA(6)....................... 1970 07-28-98 5 - 40 Yrs
Philadelphia (Independence
Mall), PA(2)................ 1972 07-28-98 5 - 40 Yrs
Philadelphia (Society Hill),
PA(3)....................... 1986 10-01-97 5 - 40 Yrs
Pittsburgh, PA(9)............ 1988 07-28-98 5 - 40 Yrs
Charleston (Mills House),
SC(2)....................... 1982 07-28-98 5 - 40 Yrs
Greenville (Roper), SC(6).... 1984 07-28-98 5 - 40 Yrs
Myrtle Beach (Kingston
Plantation), SC(1).......... 1987 12-05-96 5 - 40 Yrs
Knoxville (Central), TN(2)... 1966 07-28-98 5 - 40 Yrs
Nashville, TN(1)............. 1985 07-28-94 5 - 40 Yrs
Nashville (Opryland/Airport),
TN(9)....................... 1981 07-28-98 5 - 40 Yrs
</Table>

F-53
279
FELCOR LODGING LIMITED PARTNERSHIP
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

Addison (North Dallas),
TX(6)....................... 18,180 4,938 42,965 1,482 293 889
Amarillo (I-40), TX(2)....... 5,754 178 2,591 861
Austin (Downtown), TX(5)..... 2,508 21,908 752 829 576
Austin (Town Lake), TX(2).... 21,551 667 750 1,605
Beaumont (Midtown I-10),
TX(2)....................... 685 5,964 206 1,872 703
Corpus Christi, TX(1)........ 5,307 1,113 9,618 390 51 396 1,656
Dallas, TX(19)............... 3,536 13,564 420 2,409 264 617
Dallas (Alpha Road),
TX(17)...................... 9,795 53 1,623 (1,678) 1,713
Dallas (Campbell Center),
TX(7)....................... 3,208 27,907 962 988 1,981
Dallas, (DFW Airport South),
TX(1)....................... 35,156 1,212 4,041 448 3,906
Dallas (Downtown West End),
TX(12)...................... 1,953 16,989 586 155 96
Dallas (Love Field), TX(1)... 13,699 1,934 16,674 757 371 1,775
Dallas (Market Center),
TX(6)....................... 12,830 4,079 35,486 1,224 559 817
Dallas (Market Center),
TX(1)....................... 12,231 2,560 23,751 2,182 413 536
Dallas (Park Central),
TX(6)....................... 15,723 30,513 944 5,623 201 654
Dallas (Park Central),
TX(1)....................... 1,497 12,722 647 703 2,399
Dallas (Park Central),
TX(3)....................... 1,720 28,550 4,130 125 989
Dallas (Park Central),
TX(20)...................... 4,513 43,125 2,507 4,437 2,477
Houston (I-10 West), TX(9)... 3,055 26,575 916 191 316
Houston (Int'l Airport),
TX(2)....................... 13,088 3,890 33,842 1,167 173 438
Houston (Medical Center),
TX(6)....................... 6,214 2,493 21,687 748 581 505
Houston (Medical Center),
TX(15)...................... 8,248 2,284 19,869 685 2,029 1,744
Houston (Near Greenway),
TX(9)....................... 6,944 3,418 29,736 1,025 327 1,104
Irving (DFW Airport North),
TX(19)...................... 28,006 56,714 1,754 10,039 654 1,663

Addison (North Dallas),
TX(6)....................... 4,938 43,258 2,371 50,567 3,702 46,865
Amarillo (I-40), TX(2)....... 8,345 1,039 9,384 793 8,591
Austin (Downtown), TX(5)..... 2,508 22,737 1,328 26,573 2,857 23,716
Austin (Town Lake), TX(2).... 22,301 2,272 24,573 2,116 22,457
Beaumont (Midtown I-10),
TX(2)....................... 685 7,836 909 9,430 731 8,699
Corpus Christi, TX(1)........ 1,164 10,014 2,046 13,224 3,062 10,162
Dallas, TX(19)............... 2,409 13,828 1,037 17,274 1,211 16,063
Dallas (Alpha Road),
TX(17)...................... 1,623 8,117 1,766 11,506 2,787 8,719
Dallas (Campbell Center),
TX(7)....................... 3,208 28,895 2,943 35,046 2,462 32,584
Dallas, (DFW Airport South),
TX(1)....................... 4,041 35,604 5,118 44,763 3,426 41,337
Dallas (Downtown West End),
TX(12)...................... 1,953 17,144 682 19,779 1,287 18,492
Dallas (Love Field), TX(1)... 1,934 17,045 2,532 21,511 4,325 17,186
Dallas (Market Center),
TX(6)....................... 4,079 36,045 2,041 42,165 2,876 39,289
Dallas (Market Center),
TX(1)....................... 2,560 24,164 2,718 29,442 3,772 25,670
Dallas (Park Central),
TX(6)....................... 5,623 30,714 1,598 37,935 2,462 35,473
Dallas (Park Central),
TX(1)....................... 1,497 13,425 3,046 17,968 4,475 13,493
Dallas (Park Central),
TX(3)....................... 1,720 28,675 5,119 35,514 3,169 32,345
Dallas (Park Central),
TX(20)...................... 4,513 47,562 4,984 57,059 6,446 50,613
Houston (I-10 West), TX(9)... 3,055 26,766 1,232 31,053 2,116 28,937
Houston (Int'l Airport),
TX(2)....................... 3,890 34,015 1,605 39,510 2,675 36,835
Houston (Medical Center),
TX(6)....................... 2,493 22,268 1,253 26,014 1,847 24,167
Houston (Medical Center),
TX(15)...................... 2,284 21,898 2,429 26,611 2,206 24,405
Houston (Near Greenway),
TX(9)....................... 3,418 30,063 2,129 35,610 2,502 33,108
Irving (DFW Airport North),
TX(19)...................... 10,039 57,368 3,417 70,824 4,883 65,941

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

Addison (North Dallas),
TX(6)....................... 1985 07-28-98 5 - 40 Yrs
Amarillo (I-40), TX(2)....... 1970 07-28-98 5 - 40 Yrs
Austin (Downtown), TX(5)..... 1987 03-20-97 5 - 40 Yrs
Austin (Town Lake), TX(2).... 1967 07-28-98 5 - 40 Yrs
Beaumont (Midtown I-10),
TX(2)....................... 1967 07-28-98 5 - 40 Yrs
Corpus Christi, TX(1)........ 1984 07-19-95 5 - 40 Yrs
Dallas, TX(19)............... 1988 07-28-98 5 - 40 Yrs
Dallas (Alpha Road),
TX(17)...................... 1997 07-28-98 5 - 40 Yrs
Dallas (Campbell Center),
TX(7)....................... 1982 05-29-98 5 - 40 Yrs
Dallas, (DFW Airport South),
TX(1)....................... 1985 07-28-98 5 - 40 Yrs
Dallas (Downtown West End),
TX(12)...................... 1969 07-28-98 5 - 40 Yrs
Dallas (Love Field), TX(1)... 1986 03-29-95 5 - 40 Yrs
Dallas (Market Center),
TX(6)....................... 1983 07-28-98 5 - 40 Yrs
Dallas (Market Center),
TX(1)....................... 1980 06-30-97 5 - 40 Yrs
Dallas (Park Central),
TX(6)....................... 1981 07-28-98 5 - 40 Yrs
Dallas (Park Central),
TX(1)....................... 1985 07-28-94 5 - 40 Yrs
Dallas (Park Central),
TX(3)....................... 1972 11-01-98 5 - 40 Yrs
Dallas (Park Central),
TX(20)...................... 1983 06-30-97 5 - 40 Yrs
Houston (I-10 West), TX(9)... 1969 07-28-98 5 - 40 Yrs
Houston (Int'l Airport),
TX(2)....................... 1971 07-28-98 5 - 40 Yrs
Houston (Medical Center),
TX(6)....................... 1973 07-28-98 5 - 40 Yrs
Houston (Medical Center),
TX(15)...................... 1984 07-28-98 5 - 40 Yrs
Houston (Near Greenway),
TX(9)....................... 1984 07-28-98 5 - 40 Yrs
Irving (DFW Airport North),
TX(19)...................... 1987 07-28-98 5 - 40 Yrs
</Table>

F-54
280
FELCOR LODGING LIMITED PARTNERSHIP
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

Irving (DFW Airport North),
TX(21)...................... 10,766 1,546 13,453 464 145 2,158
Midland (Country Villa),
TX(2)....................... 404 3,517 121 68 291
Odessa (Centre), TX(15)...... 487 4,238 146 58 363
Odessa (Parkway Blvd),
TX(13)...................... 370 3,218 111 38 202
Plano, TX(19)................ 4,813 1,813 15,775 544 467 1,124
Plano, TX(2)................. 885 7,696 265 113 284
San Antonio (Downtown),
TX(2)....................... 22,246 688 524 562
San Antonio (Int'l Airport),
TX(9)....................... 3,371 29,326 1,011 1,825 778
Waco (I-35), TX(2)........... 574 4,994 172 93 306
Salt Lake City (Airport),
UT(2)....................... 5,346 165 2,725 1,046
Burlington, VT(3)............ 20,860 3,136 27,283 941 446 1,731
Cambridge, Canada(2)......... 481 4,188 144 1,082 841
Kitchener (Waterloo),
Canada(2)................... 9,441 292 1,543 715
Peterbourough (Waterfront),
Canada(2)................... 735 6,391 220 632 593
Sarnia, Canada(2)............ 271 2,359 81 1,093 810
Toronto (Airport),
Canada(9)................... 21,168 655 3,137 1,679
Toronto (Yorkdale),
Canada(2)................... 1,578 13,725 473 4,372 1,261
-------- -------- ---------- -------- ------- -------- --------
Total................. $751,995 $287,816 $3,213,820 $123,687 $34,178 $263,186 $285,324
======== ======== ========== ======== ======= ======== ========

Irving (DFW Airport North),
TX(21)...................... 1,546 13,598 2,622 17,766 1,200 16,566
Midland (Country Villa),
TX(2)....................... 404 3,585 412 4,401 391 4,010
Odessa (Centre), TX(15)...... 487 4,296 509 5,292 393 4,899
Odessa (Parkway Blvd),
TX(13)...................... 370 3,256 313 3,939 305 3,634
Plano, TX(19)................ 1,813 16,242 1,668 19,723 1,530 18,193
Plano, TX(2)................. 885 7,809 549 9,243 704 8,539
San Antonio (Downtown),
TX(2)....................... 22,770 1,250 24,020 1,876 22,144
San Antonio (Int'l Airport),
TX(9)....................... 3,371 31,151 1,789 36,311 2,532 33,779
Waco (I-35), TX(2)........... 574 5,087 478 6,139 494 5,645
Salt Lake City (Airport),
UT(2)....................... 8,071 1,211 9,282 759 8,523
Burlington, VT(3)............ 3,136 27,729 2,672 33,537 2,986 30,551
Cambridge, Canada(2)......... 481 5,270 985 6,736 563 6,173
Kitchener (Waterloo),
Canada(2)................... 10,984 1,007 11,991 882 11,109
Peterbourough (Waterfront),
Canada(2)................... 735 7,023 813 8,571 678 7,893
Sarnia, Canada(2)............ 271 3,452 891 4,614 197 4,417
Toronto (Airport),
Canada(9)................... 24,305 2,334 26,639 2,215 24,424
Toronto (Yorkdale),
Canada(2)................... 1,578 18,097 1,734 21,409 1,409 20,000
-------- ---------- -------- ---------- ---------- ----------
Total................. $321,994 $3,477,006 $409,011 $4,208,011 $ 473,101 $3,734,910
======== ========== ======== ========== ========== ==========

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- ------------

Irving (DFW Airport North),
TX(21)...................... 1989 07-28-98 5 - 40 Yrs
Midland (Country Villa),
TX(2)....................... 1979 07-28-98 5 - 40 Yrs
Odessa (Centre), TX(15)...... 1982 07-28-98 5 - 40 Yrs
Odessa (Parkway Blvd),
TX(13)...................... 1977 07-28-98 5 - 40 Yrs
Plano, TX(19)................ 1983 07-28-98 5 - 40 Yrs
Plano, TX(2)................. 1983 07-28-98 5 - 40 Yrs
San Antonio (Downtown),
TX(2)....................... 1968 07-28-98 5 - 40 Yrs
San Antonio (Int'l Airport),
TX(9)....................... 1981 07-28-98 5 - 40 Yrs
Waco (I-35), TX(2)........... 1970 07-28-98 5 - 40 Yrs
Salt Lake City (Airport),
UT(2)....................... 1963 07-28-98 5 - 40 Yrs
Burlington, VT(3)............ 1967 12-04-97 5 - 40 Yrs
Cambridge, Canada(2)......... 1969 07-28-98 5 - 40 Yrs
Kitchener (Waterloo),
Canada(2)................... 1965 07-28-98 5 - 40 Yrs
Peterbourough (Waterfront),
Canada(2)................... 1965 07-28-98 5 - 40 Yrs
Sarnia, Canada(2)............ 1970 07-28-98 5 - 40 Yrs
Toronto (Airport),
Canada(9)................... 1970 07-28-98 5 - 40 Yrs
Toronto (Yorkdale),
Canada(2)................... 1970 07-28-98 5 - 40 Yrs
---- -------- ----------
Total.................
</Table>

F-55
281

FELCOR LODGING LIMITED PARTNERSHIP

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

<Table>

Balance at December 31, 1997................................ $1,562,724
Additions during the period................................ 2,537,222
----------
Balance at December 31, 1998................................ $4,099,946
Additions during the period................................ 247,116
----------
Balance at December 31, 1999................................ $4,347,062
Sold Hotels in 2000...................................... (31,921)
Hotels Held for Sale..................................... (206,000)
Additions during the period................................ 98,870
----------
Balance at December 31, 2000................................ $4,208,011
----------
Depreciation expense during the period...................... $ 50,682
----------
Balance at December 31, 1997......................... 87,400
Depreciation expense during the period...................... 90,672
----------
Balance at December 31, 1998........................... $ 178,072
Depreciation expense during the period...................... 152,483
----------
Balance at December 31, 1999........................... $ 330,555
Sold Hotels in 2000.................................. (4,200)
Hotels Held for Sale................................. (13,706)
Depreciation expense during the period...................... 160,452
----------
Balance at December 31, 2000........................... $ 473,101
</Table>
<Table>
<Caption>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
---------------------------------- -----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ------- ------------ --------- -------- ------------ ---------

Scottsdale (Downtown), AZ(4).... 12,430 384 24 151
Boca Raton, FL(5)............... 5,433 2,796 468 243 1,316
Tampa (Busch Gardens), FL(5).... 672 12,387 226 134 991
Atlanta (Downtown), GA(10)...... 2,025 17,618 608 25 202
Atlanta, (Downtown), GA(4)...... 1,266 11,017 380 213 494
Marietta, GA(12)................ 952 8,285 286 467 587
Davenport, IA(12)............... 434 3,776 130 405 372
Davenport, IA(2)................ 547 4,763 164 1,333 1,003
Moline, IL(12).................. 505 4,398 152 535 470
Moline (Airport), IL(2)......... 822 7,149 247 1,240 1,039
Moline (Airport), IL(13)........ 232 2,021 70 383 429
Colby, KS(13)................... 339 2,950 102 228 48
Great Bend, KS(2)............... 549 4,780 165 215 372
Hays, KS(12).................... 243 2,112 73 306 267
Hays, KS(2)..................... 597 5,190 179 43 183
Salina, KS(2)................... 4,891 502 4,370 151 66 341
Salina (I-70), KS(13)........... 341 2,964 102 (14) 95
Jackson (Briarwood), MS(12)..... 626 747 6,501 224 144 191
Nashville (Airport), TN(5)...... 1,073 9,331 322 624 1,114
Dallas (Regal Row), TX(4)....... 778 6,770 233 19 76
Houston (Galleria), TX(10)...... 1,855 16,143 557 177 322

<Caption>
GROSS AMOUNTS AT WHICH CARRIED ACCUMULATED NET BOOK
AT CLOSE OF PERIOD DEPRECIATION VALUE
---------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- ------- ------------ --------- -------- ------------- -------------

Scottsdale (Downtown), AZ(4).... 12,454 535 12,989 731 12,258
Boca Raton, FL(5)............... 5,433 3,039 1,784 10,256 1,538 8,718
Tampa (Busch Gardens), FL(5).... 672 12,521 1,217 14,410 2,118 12,292
Atlanta (Downtown), GA(10)...... 2,025 17,643 810 20,478 1,056 19,422
Atlanta, (Downtown), GA(4)...... 1,266 11,230 874 13,370 721 12,649
Marietta, GA(12)................ 952 8,752 873 10,577 631 9,946
Davenport, IA(12)............... 434 4,181 502 5,117 238 4,879
Davenport, IA(2)................ 547 6,096 1,167 7,810 328 7,482
Moline, IL(12).................. 505 4,933 622 6,060 282 5,778
Moline (Airport), IL(2)......... 822 8,389 1,286 10,497 455 10,042
Moline (Airport), IL(13)........ 232 2,404 499 3,135 148 2,987
Colby, KS(13)................... 339 3,178 150 3,667 195 3,472
Great Bend, KS(2)............... 549 4,995 537 6,081 344 5,737
Hays, KS(12).................... 243 2,418 340 3,001 131 2,870
Hays, KS(2)..................... 597 5,233 362 6,192 338 5,854
Salina, KS(2)................... 502 4,436 492 5,430 307 5,123
Salina (I-70), KS(13)........... 341 2,950 197 3,488 186 3,302
Jackson (Briarwood), MS(12)..... 747 6,645 415 7,807 392 7,415
Nashville (Airport), TN(5)...... 1,073 9,955 1,436 12,464 1,240 11,224
Dallas (Regal Row), TX(4)....... 778 6,789 309 7,876 406 7,470
Houston (Galleria), TX(10)...... 1,855 16,320 879 19,054 1,010 18,044

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT IS
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED COMPUTED
- ----------------------- ------------ -------- ------------

Scottsdale (Downtown), AZ(4).... 1970 07-28-98 5 - 40 Yrs
Boca Raton, FL(5)............... 1989 11-15-95 5 - 40 Yrs
Tampa (Busch Gardens), FL(5).... 1985 11-15-95 5 - 40 Yrs
Atlanta (Downtown), GA(10)...... 1963 07-28-98 5 - 40 Yrs
Atlanta, (Downtown), GA(4)...... 1963 07-28-98 5 - 40 Yrs
Marietta, GA(12)................ 1986 07-28-98 5 - 40 Yrs
Davenport, IA(12)............... 1985 07-28-98 5 - 40 Yrs
Davenport, IA(2)................ 1966 07-28-98 5 - 40 Yrs
Moline, IL(12).................. 1985 07-28-98 5 - 40 Yrs
Moline (Airport), IL(2)......... 1961 07-28-98 5 - 40 Yrs
Moline (Airport), IL(13)........ 1996 07-28-98 5 - 40 Yrs
Colby, KS(13)................... 1998 07-28-98 5 - 40 Yrs
Great Bend, KS(2)............... 1964 07-28-98 5 - 40 Yrs
Hays, KS(12).................... 1985 07-28-98 5 - 40 Yrs
Hays, KS(2)..................... 1966 07-28-98 5 - 40 Yrs
Salina, KS(2)................... 1986 07-28-98 5 - 40 Yrs
Salina (I-70), KS(13)........... 1997 07-28-98 5 - 40 Yrs
Jackson (Briarwood), MS(12)..... 1985 07-28-98 5 - 40 Yrs
Nashville (Airport), TN(5)...... 1988 06-05-97 5 - 40 Yrs
Dallas (Regal Row), TX(4)....... 1969 07-28-98 5 - 40 Yrs
Houston (Galleria), TX(10)...... 1968 07-28-98 5 - 40 Yrs
</Table>

F-56
282
<Table>
<Caption>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
---------------------------------- -----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ------- ------------ --------- -------- ------------ ---------

Houston (Galleria), TX(4)....... 465 4,047 140 19 135
Houston (I-10 East), TX(4)...... 586 5,099 176 66 300
Houston (I-10 East), TX(12)..... 478 4,155 143 196 236
------ ------- -------- ------ ------ -------
Total.................... $5,517 $21,441 $161,052 $5,682 $7,091 $10,734
====== ======= ======== ====== ====== =======
Loss on assets held for sale....

Houston (Galleria), TX(4)....... 465 4,066 275 4,806 258 4,548
Houston (I-10 East), TX(4)...... 586 5,165 476 6,227 352 5,875
Houston (I-10 East), TX(12)..... 478 4,351 379 5,208 301 4,907
------- -------- ------- -------- ------- --------
Total.................... $21,441 $168,143 $16,416 $206,000 $13,706 $192,294
======= ======== ======= ======== =======
Loss on assets held for sale.... (63,000)
--------
$129,294
========

<Caption>
LIFE UPON
WHICH
DEPRECIATION
IN
DATE OF DATE STATEMENT IS
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED COMPUTED
- ----------------------- ------------ -------- ------------

Houston (Galleria), TX(4)....... 1968 07-28-98 5 - 40 Yrs
Houston (I-10 East), TX(4)...... 1984 07-28-98 5 - 40 Yrs
Houston (I-10 East), TX(12)..... 1969 07-28-98 5 - 40 Yrs
Total....................
Loss on assets held for sale....
</Table>

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

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. Bristol House(R)
18. Crowne Plaza Suites
19. Harvey Hotel
20. Westin
21. Harvey Suites

F-57
283

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of FelCor Lodging Trust Incorporated:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' deficit and cash
flows present fairly, in all material respects, the financial position of DJONT
Operations, L.L.C. at December 31, 2000 and 1999, and the consolidated results
of its operations and its cash flows for each of the three years ended December
31, 2000, 1999 and 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Dallas, Texas
March 7, 2001

F-58
284

DJONT OPERATIONS, L.L.C.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)

<Table>
<Caption>
2000 1999
-------- --------

ASSETS

Cash and cash equivalents................................... $ 25,583 $ 20,127
Accounts receivable, net.................................... 30,689 28,601
Inventories................................................. 4,367 4,260
Prepaid expenses............................................ 3,084 1,444
Other assets................................................ 2,907 5,791
Investment in real estate, net of accumulated depreciation
of $482 in 2000 and $530 in 1999.......................... 10,954 11,436
-------- --------
Total assets...................................... $ 77,584 $ 71,659
======== ========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Accounts payable............................................ $ 18,656 $ 12,742
Due to FelCor Lodging Trust Incorporated.................... 31,771 22,064
Accrued expenses and other liabilities...................... 40,072 37,121
Minority interest........................................... 3,927 5,113
Debt........................................................ 7,695 7,761
-------- --------
Total liabilities................................. 102,121 84,801
-------- --------

Commitments and contingencies

Shareholders' deficit:
Capital..................................................... 1 1
Accumulated deficit......................................... (24,538) (13,143)
-------- --------
Total shareholders' deficit....................... (24,537) (13,142)
-------- --------
Total liabilities and shareholders' deficit....... $ 77,584 $ 71,659
======== ========
</Table>

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

F-59
285

DJONT OPERATIONS, L.L.C.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

<Table>
<Caption>
2000 1999 1998
-------- -------- --------

Revenues:
Room and suite revenue.................................... $709,802 $649,323 $618,122
Food and beverage revenue................................. 112,594 87,212 77,834
Food and beverage rent.................................... 5,045 5,212 4,792
Other revenue............................................. 48,437 55,903 48,781
-------- -------- --------
Total revenues.................................... 875,878 797,650 749,529
-------- -------- --------
Expenses:
Property operating costs.................................. 194,810 190,798 169,955
General and administrative................................ 65,970 61,025 56,995
Advertising and promotion................................. 67,691 56,450 51,105
Repair and maintenance.................................... 41,048 38,555 36,374
Utilities................................................. 32,039 29,700 28,799
Management and incentive fees............................. 24,766 22,514 23,636
Franchise fees............................................ 20,330 19,253 18,102
Food and beverage expenses................................ 84,542 66,514 65,924
Percentage lease expenses................................. 344,699 307,532 289,891
Lessee overhead expenses.................................. 1,073 991 1,990
Liability insurance....................................... 3,227 2,518 1,258
Interest expense.......................................... 618 682
Depreciation and amortization............................. 482 530
Minority interest......................................... 3,243 (90)
Other..................................................... 6,403 5,589 4,656
-------- -------- --------
Total operating expenses.......................... 887,698 802,651 748,685
-------- -------- --------
Operating income (loss)..................................... (11,820) (5,001) 844
Minority interest........................................... (3,243) 90
Gain on sale of Brighton condos............................. 3,851
-------- -------- --------
Net income (loss)........................................... $(11,212) $ (4,911) $ 844
======== ======== ========
</Table>

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

F-60
286

DJONT OPERATIONS, L.L.C.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

<Table>

Balance at December 31, 1998................................ $ (8,231)
Net loss.................................................... (4,911)
--------
Balance at December 31, 1999................................ $(13,142)
Net loss.................................................... (11,212)
Distributions............................................... (183)
--------
Balance at December 31, 2000................................ $(24,537)
========
</Table>

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

F-61
287

DJONT OPERATIONS, L.L.C.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

<Table>
<Caption>
2000 1999 1998
-------- ------- -------

Cash flows from operating activities:
Net income (loss)......................................... $(11,212) $(4,911) $ 844
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 482 530
Minority interest in partnership income................... 3,243 (90)
Changes in assets and liabilities:
Accounts receivable.................................... (2,088) (1,040) (7,287)
Inventories............................................ (107) 121 (915)
Prepaid expenses....................................... (1,640) (973) 836
Other assets........................................... 2,668 (1,744) 950
Due to FelCor Lodging Trust Incorporated............... 9,707 5,189 (2,033)
Accounts payable, accrued expenses and other
liabilities.......................................... 8,865 (5,488) 10,459
-------- ------- -------
Net cash flow provided by (used in) operating
activities...................................... 9,918 (8,406) 2,854
-------- ------- -------
Cash flows used in financing activities:
Distributions paid to minority interest................... (4,213)
Distributions to owners................................... (183)
Repayment of borrowings................................... (66) (5)
-------- ------- -------
Net cash flow used in financing activities........ (4,462) (5)
-------- ------- -------
Net change in cash and cash equivalents..................... 5,456 (8,411) 2,854
Cash and cash equivalents at beginning of years............. 20,127 28,538 25,684
-------- ------- -------
Cash and cash equivalents at end of years................... $ 25,583 $20,127 $28,538
======== ======= =======
Supplemental cash flow information -- interest paid......... $ 618 $ 682
-------- -------
</Table>

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

F-62
288

DJONT OPERATIONS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Effective January 1, 2001, subject to the receipt of certain lender
consents, FelCor Lodging Limited Partnership (the "Operating Partnership")
acquired and contributed to a wholly owned consolidated subsidiary, all of the
equity interests in DJONT. In consideration for the acquisition of DJONT, the
Operating Partnership issued an aggregate of 416,667 units of limited
partnership interest valued at approximately $10 million to DJONT's
shareholders.

Eighty-five of the hotels in which the Operating Partnership had an
ownership interest at December 31, 2000 (the "Hotels"), were leased to DJONT
pursuant to percentage leases ("Percentage Leases"). Certain entities owning
interests in DJONT and the managers of certain hotels have agreed to make loans
to DJONT of up to an aggregate of approximately $17.3 million to the extent
necessary to enable DJONT to pay rent and other obligations due under the
respective Percentage Leases relating to a total of 38 of the Hotels. No loans
were outstanding under such agreements at December 31, 2000.

At December 31, 2000, 59 of the Hotels were operated as Embassy Suites(R)
hotels, 14 were operated as Doubletree(R) or Doubletree Guest Suites(R) hotels,
ten were operated as Sheraton(R) or Sheraton Suites(R) hotels, one was operated
as a Westin(R) hotel and one was operated as a Hilton Suites(R) hotel.
Seventy-one of the Hotels were managed by subsidiaries of Hilton Hotels
Corporation ("Hilton"). Hilton is the largest operator of all-suite,
full-service hotels in the United States. Of the remaining Hotels, 11 were
managed by subsidiaries of Starwood Hotels and Resorts Worldwide, Inc.
("Starwood") and three were managed by independent management companies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- Investments in affiliates in which the Company has
the ability to exercise significant influence, but not control, are accounted
for by the equity method. All other investments in affiliates are carried at
cost. Intercompany transactions are eliminated.

Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principals 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.

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

Inventories -- Inventories are stated at the lower of cost or market.

Investment in Real Estate -- Hotels are stated at cost and are depreciated
using the straight-line method over estimated useful lives of forty years for
buildings and improvements and five to seven years for furniture, fixtures, and
equipment.

The carrying value of the property is periodically reviewed to determine if
circumstances indicate an impairment in the carrying value of the investment or
that depreciation periods should be modified. If facts or circumstances support
the possibility of impairment, DJONT will prepare a projection of the
undiscounted future cash flows, without interest charges, of the hotel and
determine if the investment in the property is recoverable based on the
undiscounted future cash flows. If impairment is indicated, an adjustment will
be made to the carrying value of the real estate based on discounted future cash
flows. DJONT does not believe that there are any factors or circumstances
indicating impairment of any of its investment in real estate.

F-63
289
DJONT OPERATIONS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition -- Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible. Such losses have been within management's expectations.

Income Taxes -- At December 31, 2000, DJONT was a limited liability company
which is taxed for federal income tax purposes as a partnership and,
accordingly, all taxable income or loss flows through to the shareholders.

3. COMMITMENTS AND RELATED PARTY TRANSACTIONS

The Percentage Lease expense is based on a percentage of room and suite
revenues, food and beverage revenues, and food and beverage rents of the Hotels.
Both the base rent and the threshold room and suite revenue in each lease
computation is subject to adjustments in the Consumer Price Index ("CPI"). The
adjustment is calculated at the beginning of each calendar year for the hotels
acquired prior to July of the previous year. The adjustment in any lease year
may not exceed 7%. The CPI adjustments made in January 2001, 2000 and 1999 were
1.05%, 0.55% and 0.55%, respectively.

Other than real estate and personal property taxes, casualty insurance,
capital improvements and maintenance of underground utilities and structural
elements, which are obligations of the Operating Partnership, the Percentage
Leases require DJONT to pay rent, liability insurance premiums, operating costs,
utilities and other charges incurred in the operation of the leased hotels.

DJONT typically pays a franchise fee ranging from 4% to 5% of suite
revenue, and marketing and reservation fees ranging from 1% to 3.5% of room and
suite revenue. In the cases where there is not a separate franchise agreement,
the right to use the brand name is included in the management agreement. Base
management fees typically range from 2% to 3% of applicable hotel revenues.
Incentive management fees are based upon the hotel's net income before overhead
and typically range from 50% to 100% subject to a maximum annual payment of
between 2% and 3% of total revenues. In many cases managers and franchisors have
agreed to subordinate all or a portion of their fees at a specific hotel or
group of hotels either for a set period of time, or until the hotel or group of
hotels provides a predetermined return to the Lessee, or both.

DJONT shares the executive offices and certain employees with FelCor and
FelCor, Inc., and each company bears 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. Such allocation of shared expenses is approved by a majority of
FelCor's independent directors. During 2000, 1999 and 1998, DJONT paid
approximately $752,000 (approximately 10%), $660,000 (approximately 10%) and
$1.6 million (approximately 37%), respectively, of the allocable expenses under
this agreement.

4. GAIN ON SALE OF ASSETS

DJONT holds 3% equity interest and 100% voting interest in Kingston
Plantation Development Corporation ("KPDC") and records the results of its
operations on a consolidated basis. During 2000, an entity in which KPDC owns a
50% equity interest completed the construction and sale of 200 condominium units
adjacent to the Embassy Suites hotel -- Myrtle Beach at Kingston Plantation, SC.
DJONT has included in total revenue a $3.9 million gain on the sale of the
condominiums by the venture. KPDC's 97% non-voting interest is shown as minority
interest expense. KPDC distributed $4.2 million to its shareholders during the
quarter, of which $126,000 represented DJONT's 3% equity interest.

F-64
290
DJONT OPERATIONS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT

DJONT has reflected as a liability, a mortgage note, dated November 24,
1998, from a wholly-owned subsidiary of KPDC payable to FelCor Lodging Limited
Partnership. The note bears a fixed interest rate of 8% per annum with a 30 year
amortization and matures on December 31, 2004.

The indebtedness is collateralized by a Mortgage and Assignment of Leases
and Rents with respect to the New Orleans Embassy Suites Hotel Annex. Future
scheduled principal payments on the debt are as follows (in thousands):

<Table>

2001....................................................... $ 71
2002....................................................... 77
2003....................................................... 83
2004....................................................... 7,464
------
$7,695
======
</Table>

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Management estimates the fair value of accounts receivable, accounts
payable and accrued expenses approximate carrying value due to the relatively
short maturity of these instruments; and the borrowing under the mortgage note
approximates carrying value because it accrues interest at a fixed rate which
approximates market rates.

7. SUPPLEMENTAL CASH FLOW DISCLOSURE

DJONT recorded certain real estate and assumed certain liabilities in
connection with its investment in KPDC in 1999. The assets and liabilities,
related to KPDC and recorded at December 31, 1999, are as follows (in
thousands):

<Table>

Investment in real estate................................. $11,436
Other assets acquired..................................... 1,458
-------
$12,894
=======
Liabilities assumed....................................... $ 7,781
Minority interest contribution............................ 5,113
-------
$12,894
=======
</Table>

During 2000, KPDC's unconsolidated subsidiary distributed land with a
carrying value of $342,000 to the minority interest holder. Accordingly, KPDC
has reduced its investment in the joint venture and reduced minority interest by
the corresponding amount.

F-65
291

INDEPENDENT AUDITORS' REPORT

To the Stockholder
Bristol Hotels & Resorts Tenant Companies

We have audited the accompanying combined balance sheet of Bristol Hotels &
Resorts Tenant Companies (the "Company") as of December 31, 2000, and the
related combined statements of operations, stockholder's equity, and cash flows
for the nine months ended December 31, 2000. We have also audited the combined
statements of operations, stockholder's equity, and cash flows for the three
months ended March 31, 2000 (Predecessor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2000,
and the results of its operations and its cash flows for the nine months ended
December 31, 2000 and for the three months ended March 31, 2000 (Predecessor) in
conformity with accounting principles generally accepted in the United States of
America.

Deloitte & Touche LLP

March 30, 2001
Atlanta, GA

F-66
292

BRISTOL HOTELS & RESORTS TENANT COMPANIES

COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>
DECEMBER 31,
2000
------------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,494
Accounts receivable -- Net of allowance of $1,067......... 36,214
Inventory................................................. 6,628
Prepaid rent.............................................. 14,672
Deferred tax.............................................. 5,696
Other current assets...................................... 4,683
--------
Total current assets.............................. 71,387
INTANGIBLE ASSET -- Net of amortization of $5,735........... 124,265
DEFERRED INCOME TAX......................................... 354
--------
$196,006
========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 26,725
Accrued occupancy, sales and use tax...................... 6,817
Accrued rent.............................................. 11,117
Advance deposits.......................................... 2,830
Due to parent and affiliates.............................. 17,509
--------
Total current liabilities......................... 64,998
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock ($0.01 par value, 5,000 shares (issued and
outstanding)........................................... --
Paid-in capital........................................... 129,324
Retained earnings......................................... 1,684
--------
Total stockholder's equity........................ 131,008
--------
$196,006
========
</Table>

See notes to combined financial statements.

F-67
293

On April 2, 2000, Bass PLC, through its wholly owned subsidiary Bass
(U.S.A.), Inc. ("Bass"), acquired all of the outstanding shares of common stock
of Bristol Hotels & Resorts. The purchase method of accounting was used to
record assets acquired and liabilities assumed by Bass. As a result of the
acquisition, purchase accounting, and certain costs of the Predecessor, the
accompanying financial statements of the Predecessor and the Company are not
comparable in all material respects since the financial statements report
results of operations, stockholder's equity and cash flows of these two separate
entities.

BRISTOL HOTELS & RESORTS TENANT COMPANIES

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<Table>
<Caption>
COMPANY PREDECESSOR
------------------- --------------------
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, ENDED MARCH 31,
2000 2000
------------------- --------------------

REVENUE
Rooms................................................. $461,978 $143,952
Food and beverage..................................... 115,176 36,645
Other................................................. 27,657 4,000
-------- --------
Total revenue................................. 604,811 184,597
OPERATING COSTS AND EXPENSES
Departmental expenses:
Rooms.............................................. 128,721 40,241
Food and beverage.................................. 84,817 26,454
Other operating departments........................ 11,216 3,842
Undistributed operating expenses:
Administrative and general......................... 57,920 21,159
Marketing.......................................... 42,377 14,171
Property occupancy costs........................... 70,338 16,306
Tenant lease expense............................... 199,338 62,916
Depreciation and amortization...................... 5,735 175
-------- --------
Total operating costs and expenses............ 600,462 185,264
-------- --------
OPERATING INCOME (LOSS)................................. 4,349 (667)
INTEREST INCOME......................................... 133 35
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES....................... 4,482 (632)
INCOME TAX EXPENSE (BENEFIT)............................ 2,798 (267)
-------- --------
NET INCOME (LOSS)....................................... $ 1,684 $ (365)
======== ========
</Table>

See notes to combined financial statements.

F-68
294

On April 2, 2000, Bass PLC, through its wholly owned subsidiary Bass (USA),
Inc. ("Bass"), acquired all of the outstanding shares of common stock of Bristol
Hotels & Resorts. The purchase method of accounting was used to record assets
acquired and liabilities assumed by Six Continents. As a result of the
acquisition, purchase accounting, and certain costs of the Predecessor, the
accompanying financial statements of the Predecessor and the Company are not
comparable in all material respects since the financial statements report
results of operations, stockholder's equity and cash flows of these two separate
entities.

BRISTOL HOTELS & RESORTS TENANT COMPANIES

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)

<Table>
<Caption>
CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED STOCKHOLDER'S
STOCK PAR VALUE EARNINGS EQUITY
------ ---------- -------- -------------

Predecessor:
BALANCES at December 31, 1999..................... -- $ 10,040 $1,105 $ 11,145
Net (Loss)........................................ (365) (365)
---- -------- ------ --------
BALANCES at March 31, 2000........................ -- $ 10,040 $ 740 $ 10,780
==== ======== ====== ========
Company:
Purchase of assets and assumption of
liabilities.................................... -- $129,324 $ -- $129,324
Net Income........................................ -- 1,684 1,684
---- -------- ------ --------
BALANCES at December 31, 2000..................... -- $129,324 $1,684 $131,008
==== ======== ====== ========
</Table>

See notes to combined financial statements.

F-69
295

BRISTOL HOTELS & RESORTS TENANT COMPANIES

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<Table>
<Caption>
COMPANY PREDECESSOR
------------ -------------
FOR THE NINE FOR THE THREE
MONTHS MONTHS
ENDED ENDED
DECEMBER 31, TO MARCH 31,
2000 2000
------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 1,684 $ (365)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 5,735 175
Accounts receivable.................................... 1,992 (5,611)
Inventory.............................................. (473) (257)
Prepaid rent........................................... 958 (1,517)
Deferred income tax.................................... (1,492) (1,182)
Other current assets................................... (3,494) (67)
Other assets........................................... -- 10
Accounts payable and accrued expenses.................. (5,319) 5,637
Accrued sales and use tax.............................. (1,720) 2,211
Accrued rent........................................... (4,828) 7,464
Advance deposits....................................... (613) 1,007
Due to parent and affiliates........................... 7,697 (7,449)
------- -------
Net cash provided by operating activities......... 127 56
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to property and equipment.................... -- (687)
------- -------
Net cash used in investing activities............. -- (687)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 127 (631)
------- -------
CASH AND CASH EQUIVALENTS, beginning of period.............. 3,367 3,998
------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,494 $ 3,367
======= =======
</Table>

See notes to combined financial statements.

F-70
296

BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND
THREE MONTHS ENDED MARCH 31, 2000 (PREDECESSOR)

1. ORGANIZATION

Bristol Hotel & Resorts Tenant Companies (the "Company" and "Predecessor"),
represent five wholly owned subsidiaries of Bristol Hotels & Resorts (BH&R), a
Delaware corporation, which operate as a single segment within the hospitality
industry. On April 2, 2000, Bass PLC, through a subsidiary Bass (USA), Inc.,
completed the acquisition of the remaining outstanding 90.1% of ownership
interest in BH&R for total consideration of $157 million. Together the Company
accounts for the operations of 101 hotels and properties, operated pursuant to
long term operating leases.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principals of Combination -- The accompanying combined financial statements
include the accounts of the following five tenant companies: Bristol Hotel
Tenant Company, Bristol Lodging Tenant Company, Bristol Hospitality Tenant
Company, Bristol Salt Lake Tenant Company, and Bristol Hotel Tenant Company
Canada. All significant intercompany accounts and transactions have been
eliminated. The effects of the purchase transaction on April 2, 2000, mentioned
above, have been reflected within the financial statements of the Company.
Assets and liabilities assumed in the purchase were recorded at fair value as of
March 31, 2000, the effective date of the transaction. Excess of the amount paid
over working capital has been recorded as purchased operating leases.

Cash and Cash Equivalents -- Cash and cash equivalents include unrestricted
cash in banks and cash on hand. Liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents.

Inventory -- Inventory, consisting primarily of food and beverage products
as well as consumable supplies, is carried at the lower of cost or market. Cost
is determined on the first-in, first-out basis.

Prepaid Rent -- In accordance with property leases with FelCor Lodging
Trust ("FelCor"), the Company must prepay each month's base rent on the last day
of the prior month. At December 31, 2000, this amount was approximately $14.7
million.

Intangible Asset -- The cost of purchased operating leases is being
amortized on a straight-line basis over the remaining lives of the lease
contracts, approximately 17 years.

Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect amounts
reported as assets and liabilities and contingent assets and liabilities in
these financial statements. Actual results could differ from these estimates.

Recognition of Revenue -- Revenue is recognized when services are rendered.
Services are deemed to be rendered at the date upon which a guest occupies a
room and/or utilizes the hotel's services.

Long-Lived Assets -- The Company reviews long-lived assets used in
operations and goodwill when indicators of impairment are present. Impairment
losses are recorded when the undiscounted cash flows estimated to be generated
by those assets are less than the asset's carrying amount.

Income Taxes -- The Company accounts for income taxes under the Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
No. 109"). SFAS No. 109 requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement and tax basis

F-71
297
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

of assets and liabilities using currently enacted tax rates in effect for the
years in which the differences are expected to reverse.

New Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities"
and in June 2000, the FASB issued SFAS No. 138, which amends certain provisions
of SFAS 133 to clarify four areas causing difficulties in implementation. The
amendment included expanding the normal purchase and sale exemption for supply
contracts, permitting the offsetting of certain intercompany foreign currency
derivatives and thus reducing the number of third party derivatives, permitting
hedge accounting for foreign-currency denominated assets and liabilities, and
redefining interest rate risk to reduce sources of ineffectiveness. The Company
adopted the provisions of SFAS 133 and the corresponding amendments under SFAS
138 on October 1, 2000. SFAS 133, as amended by SFAS 138, does not have a
material impact on the Company's combined results of operations, financial
position, or cash flows.

3. FELCOR LEASES

Of the 101 hotels operated by the Company, 100 are subject to long-term
operating leases with FelCor. The principal terms of the FelCor leases are
summarized below, although certain terms vary from hotel to hotel.

Term -- The leases are for initial terms of three to 15 years, with renewal
options on the same terms for a total of 15 years. If a lease has been extended
to 15 years, the Company may renew the lease for an additional five years at
then current market rates.

Rent -- The Company will pay rent equal to the greater of base rent or
percentage rent (contingent rent). The percentage rent is based on specified
percentages of various revenue streams. Those percentages will vary within the
following ranges:

<Table>

Room revenues:........................... 0% to 10% up to a first revenue
breakpoint amount specified for each
hotel, then 70% from such first
breakpoint to the second revenue
breakpoint, then 60% thereafter.
Food and beverage revenues:.............. 5% to 25%
Other revenues:.......................... Varying percentages depending on the
nature and source of such revenues.
</Table>

The base rent and the thresholds for computing percentage rent under the
leases will be adjusted annually to reflect changes in the Consumer Price Index.
Rent may be renegotiated if there are material changes in the markets in which
the Company operates. Base rent paid for the nine months ended December 31, 2000
was $138.3 million and for the three months ended March 31, 2000 (Predecessor)
was $43.3 million. The remaining tenant lease expense was percentage rent in
excess of the base amount of $61.0 million and $19.6 million for the nine months
ended December 31, 2000 and for the three months ended March 31, 2000
(Predecessor), respectively.

F-72
298
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum (base) lease payment amounts at December 31, 2000 are as
follows (in thousands):

<Table>

2001..................................................... $ 188,065
2002..................................................... 193,707
2003..................................................... 199,518
2004..................................................... 196,081
2005..................................................... 195,318
Thereafter............................................... 694,067
----------
$1,666,756
==========
</Table>

Termination -- Upon the sale of a property to a third party, FelCor may
terminate the lease. The Company would be entitled to damages upon any
termination to which it did not consent consisting of a monthly payment equal to
one-twelfth of 75% of the cash flow derived from the lease for the prior 12
months. The payment, for the majority of the assets, would be due for a period
equal to the remainder of the lease term for the terminated lease. A lease may
also be terminated by FelCor if the Company fails to satisfy certain performance
targets, liquid net worth tests, defaults under a franchise agreement, or for
other criteria. Either party may terminate upon a breach by the other party of
the agreements under the lease.

Insurance, Property Taxes, and Ground Leases -- FelCor will pay all real
estate and personal property taxes (other than with respect to personal property
of the Company), property insurance premiums, and ground lease payments on the
leased hotels. The Company will pay for all liability insurance on the leased
hotels, which includes extended coverage, comprehensive general public
liability, and other insurance appropriate and customary for properties similar
to the leased hotels.

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at December
31, 2000 (in thousands):

<Table>

Accrued payroll........................................... $12,805
Accrued utilities......................................... 2,666
Accrued franchise fees.................................... 2,509
Trade accounts payable.................................... 686
Other accrued expenses.................................... 8,059
-------
$26,725
=======
</Table>

5. RELATED PARTY TRANSACTIONS

A subsidiary of BH&R maintains centralized disbursement and cash management
systems, and from time to time may advance sums for payment of expenses on
behalf of the Company prior to receiving reimbursement. This may result in
amounts due to or from the Parent and affiliates. As of December 31, 2000, the
Company owed BH&R and affiliates approximately $17.5 million.

F-73
299
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of cash transferred to other BH&R subsidiaries and
expenses paid on behalf of the company by other subsidiaries for the three and
nine months ended March 31, 2000 (Predecessor) and December 31, 2000,
respectively, follows (in thousands):

<Table>

Due to parent and affiliates, December 31, 1999
(Predecessor)......................................... $ 12,755
Net cash transferred to other BH&R subsidiaries......... (178,985)
Expenses paid on behalf of Company...................... 171,536
---------
Due to parent and affiliates, March 31, 2000
(Predecessor)......................................... 5,306
Net cash transferred to other BH&R subsidiaries......... (606,801)
Expenses paid on behalf of Company...................... 619,004
---------
Due to parent and affiliates, December 31, 2000......... $ 17,509
=========
</Table>

A subsidiary of the BH&R provides management services for the leased
properties. The fees are based on a percentage of revenues. The Company paid
management fees for the nine months ended December 31, 2000 of $16.8 million for
the three months ended March 31, 2000 (Predecessor) of $5.6 million. These
amounts are included in property occupancy costs on the accompanying statements
of operations.

A subsidiary of BH&R owns its own proprietary hotel brands, Harvey Hotels
and Bristol. Five properties operated by the Company operate hotels under these
brands, and incurred royalty fees of $1.2 million for the nine months ended
December 31, 2000 and $0.5 million for the three months ended March 31, 2000
(Predecessor). These amounts are included in rooms departmental expense on the
accompanying statements of operations.

The Company has entered into Franchise Agreements with Bass or its
affiliates, that generally require the payment of franchise fees of 5% of room
revenues. Amounts paid to Bass pursuant to franchise agreements and related
marketing, reservation services, frequent guest programs, and royalty fee
agreements were $37.4 million for the nine months ended December 31, 2000 and
$11.3 million for the three months ended March 31, 2000 (Predecessor).

7. INCOME TAXES

The Company files a consolidated federal income tax return with Bass, its
ultimate U.S. parent company. The Company's income tax provision and related tax
asset and liability accounts are computed as if the Company filed a separate
income tax return. The Company's current federal tax liability is shown on the
accompanying balance sheets as a component of the Payable to affiliated company
balance. The state income tax receivable or liability is separately stated.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

F-74
300
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's deferred tax asset balance as of
December 31, 2000 are (in thousands):

<Table>
<Caption>
U.S. CANADA TOTAL
------ ------ ------

Allowance for accounts receivable........................... $ 429 $ 429
Accrued expenses............................................ 2,050 2,050
Accrued reserves............................................ 3,217 3,217
------ ------
Total current deferred tax assets................. 5,696 5,696
Depreciation................................................ 635 $(281) 354
------ ----- ------
Total long-term deferred tax assets............... 635 (281) 354
------ ----- ------
Total deferred tax assets......................... $6,331 $(281) $6,050
====== ===== ======
</Table>

Significant components of the provision (benefit) for income taxes for the
nine months ended December 31, 2000 and the three months ended March 31, 2000
(Predecessor) are as follows (in thousands):

<Table>
<Caption>
COMPANY PREDECESSOR
----------------- ------------------
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2000 MARCH 31, 2000
----------------- ------------------

Federal:
Current......................................... $ 3,216 $ 859
Deferred........................................ (1,292) (989)
State:
Current......................................... 580 56
Deferred........................................ (222) (170)
Canada:
Current......................................... 494
Deferred........................................ 22 (23)
------- -----
$ 2,798 $(267)
======= =====
</Table>

A reconciliation between the income tax expense recognized in the Company's
consolidated statement of operations and the income tax expense computed by
applying the U.S. statutory federal income tax rate to earnings before income
tax is as follows (in thousands):

<Table>
<Caption>
COMPANY PREDECESSOR
------------------------------ -------------------------------
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2000 PERCENTAGE MARCH 31, 2000 PERCENTAGE
----------------- ---------- ------------------ ----------

Income tax expense at the U.S.
federal statutory rate............. $1,569 35.0% $(221) 35.0%
Effect of non-deductible goodwill and
other permanent differences........ 902 20.1% 47 (7.4)%
State income taxes, net of federal
benefit and permanent
differences........................ 148 3.3% (10) 1.6%
Effect of higher Canadian tax
rates.............................. 179 4.0% (83) 13.0%
------ ---- ----- ----
$2,798 62.4% $(267) 42.2%
====== ==== ===== ====
</Table>

8. BENEFITS

The Company offers a Profit Sharing Plan and Trust ("401(k) Plan") to
certain employees. The 401(k) Plan is designed to be a qualified trust under
Section 401 of the Internal Revenue Code. Under

F-75
301
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

the 401(k) Plan, eligible employees are allowed to defer up to 16% of their
income on a pretax basis through contributions to the 401(k) Plan; however, only
the first 6% of pretax income is subject to matching by the Company. The Company
automatically makes matching contributions of 50% of the employees' matchable
contributions and may elect to make matching contributions of up to an
additional 50% of the employees' matchable contributions subject to certain
performance measures of the Company. Management of the Company decided not to
contribute matching contributions for the nine months ended December 31, 2000.
The Company provided for matching contributions for the three months ended March
31, 2000 (Predecessor) of $0.6 million.

9. COMMITMENTS AND CONTINGENCIES

Substantially all of the Company's hotel properties are operated pursuant
to franchise or license agreements ("Franchise Agreements"), primarily with Bass
or its affiliates. The Company also operates hotels under franchise agreements
with Marriott International, Inc. Hilton Hotels Corporation (formerly Promus
Hotels, Inc.), Hawthorn Suites Franchising, Incorporated, and ITT Sheraton
Corporation. The Franchise Agreements generally require the payment of a monthly
royalty fee based on gross room revenue and various other fees associated with
certain marketing or advertising and centralized reservation services, also
generally based on gross room revenues. The Franchise Agreements have various
durations through the year 2018, and generally may not be terminated without the
payment of substantial fees. Franchise marketing and royalty fees of $3.6
million for the nine months ended December 31, 2000 and $1.1 million for the
three months ended March 31, 2000 (Predecessor), were paid.

The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the hotels,
which are established by the franchisors to maintain uniformity in the system
created by each such franchisor. Such standards generally regulate the
appearance of the hotel, quality and type of goods and services offered,
signage, and protection of trademarks. Compliance with such standards may from
time to time require significant expenditures for capital improvements, which
would be paid by the property owner.

The Company is currently involved in certain guest and customer claims,
employee wage claims, and other disputes arising in the ordinary course of
business. In the opinion of management, the pending litigation will not have a
materially adverse effect on the Company's financial position or results of
operations.

11. FAIR VALUE

The Company has estimated the fair value of its financial instruments at
December 31, 2000, as required by Statement of Financial Accounting Standards
No. 107, Disclosure about Fair Value of Financial Instruments. The carrying
values of cash and cash equivalents, accounts receivable, accounts payable, and
accrued expenses are reasonable estimates of the fair values.

12. FOREIGN OPERATIONS

As discussed in Note 1, all operations of the Company are part of the
hospitality services industry and it currently reports as a single industry
segment. Foreign operations were conducted in Canada in 2000. Revenues generated
from Canadian operations were $32.1 million and $9.2 million for the nine months
ended December 31, 2000 and three months ended March 31, 2000 (Predecessor),
respectively. The Company did not allocate values for purchased operating leases
to individual properties. Therefore, an amount related to purchased operating
leases has not been disclosed for the Canadian properties.

F-76
302
BRISTOL HOTELS & RESORTS TENANT COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

13. SUBSEQUENT EVENTS

The Company sold the leases and transferred the assets of 12 hotels
maintained under operating leases to FelCor for consideration of 413,585 shares
of FelCor common stock effective January 1, 2001. FelCor has entered into
short-term management contracts with Bass to manage two of these 12 hotels. In
addition, the Company has entered into an agreement with FelCor to sell the
remaining 88 leases effective July 1, 2001. In consideration for the sale of
such leases, FelCor will enter into long-term management agreements with Bass
and issue 100 shares of FelCor common stock to Bass.

F-77
303

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
------------- -----------------
(UNAUDITED)

ASSETS

Investments in hotel properties............................. $3,209,185 $3,193,730
Accumulated depreciation.................................... (342,051) (287,229)
---------- ----------
2,867,134 2,906,501
Cash and cash equivalents................................... 20,550 242
Accounts receivable, net.................................... 57,040 2,833
Prepaid expenses and other.................................. 15,765 2,767
Note receivable from OpCo................................... 36,000 --
Due from OpCo............................................... 10,893 22,221
Investments in and advances to affiliates................... 41,714 42,196
Restricted cash............................................. 20,201 19,918
Intangible assets, net of accumulated amortization of $6,205
and $5,575................................................ 15,684 9,822
---------- ----------
$3,084,981 $3,006,500
========== ==========

LIABILITIES, MINORITY INTERESTS AND PARTNERS' CAPITAL

Accounts payable, accrued expenses and other liabilities.... $ 126,870 $ 72,197
Accrued interest............................................ 44,352 28,365
Income taxes payable........................................ 1,420 921
Distributions payable....................................... 24,245 24,581
Deferred income taxes....................................... 8,409 8,113
Interest rate swaps......................................... 7,110 --
Notes payable to MeriStar................................... 356,923 356,729
Mortgages and notes payable................................. 1,296,127 1,281,590
---------- ----------
Total liabilities................................. 1,865,456 $1,772,496
---------- ----------
Minority interests.......................................... 2,693 2,687
Redeemable OP units at redemption value..................... 99,898 88,545
Partners' capital -- common OP units 44,479,899 and
44,403,034 issued and outstanding......................... 1,116,934 1,142,772
---------- ----------
$3,084,981 $3,006,500
========== ==========
</Table>

See accompanying notes to condensed consolidated financial statements.

F-78
304

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
UNAUDITED
(IN THOUSANDS)

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------
2001 2000
-------- --------

Revenue:
Hotel operations:
Rooms................................................... $402,760 $ --
Food and beverage....................................... 145,383 --
Other operating departments............................. 46,005 --
Participating lease revenue............................... 10,736 145,031
Office rental and other revenues.......................... 4,967 3,556
-------- --------
Total revenue....................................... 609,851 148,587
-------- --------
Hotel operating expenses by department:
Rooms..................................................... 92,287 --
Food and beverage......................................... 103,890 --
Other operating departments............................... 23,616 --
Office rental, parking and other operating expenses......... 1,625 1,343
Undistributed operating expenses:
Administrative and general................................ 88,055 4,150
Property operating costs.................................. 84,977 --
Property taxes, insurance and other....................... 36,902 25,093
Depreciation and amortization............................. 57,787 54,102
Write down of investment in STS Hotel Net................. 2,112 --
Swap termination costs.................................... 9,297 --
FelCor merger costs....................................... 3,789 --
Cost to terminate leases with Prime Hospitality
Corporation............................................. 1,315 --
-------- --------
Total operating expenses............................ 505,652 84,688
-------- --------
Net operating income........................................ 104,199 63,899
Interest expense, net....................................... 60,261 58,417
-------- --------
Income before minority interests, income taxes, gain (loss)
on sale of asset and extraordinary gain (loss)............ 43,938 5,482
Minority interests.......................................... 6 25
-------- --------
Income before income taxes, gain (loss) on sale of asset and
extraordinary gain (loss)................................. 43,932 5,457
Income tax expense.......................................... 1,242 59
-------- --------
Income before gain (loss) on sale of asset and extraordinary
gain (loss)............................................... 42,690 5,398
Gain (loss) on sale of asset, net of tax effect of ($19) and
($56)..................................................... (1,062) 3,439
Extraordinary gain (loss) on early extinguishments of debt,
net of tax effect of ($17) and $50........................ (1,226) 3,400
-------- --------
Net income.................................................. 40,402 12,237
Other comprehensive income (loss):
Transition adjustment..................................... (2,842) --
Foreign currency translation adjustment................... (159) (534)
Change in fair value of cash flow hedges.................. (4,268) --
-------- --------
Comprehensive income........................................ $ 33,133 $ 11,703
======== ========
Net income applicable to common unitholders................. $ 40,120 $ 11,955
======== ========
Net income applicable to general partner common
unitholder................................................ $ 36,887 $ 10,939
======== ========
Net income applicable to third party limited partner common
unitholders............................................... $ 3,233 $ 1,016
======== ========
Earnings per unit:
Basic:
Income before extraordinary gain (loss)................. $ 0.85 $ 0.16
Extraordinary gain (loss)............................... (0.03) 0.07
-------- --------
Net income.............................................. $ 0.82 $ 0.23
======== ========
Diluted:
Income before extraordinary gain (loss)................. $ 0.83 $ 0.16
Extraordinary gain (loss)............................... (0.02) 0.07
-------- --------
Net income.............................................. $ 0.81 $ 0.23
======== ========
</Table>

See accompanying notes to condensed consolidated financial statements.

F-79
305

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
UNAUDITED
(IN THOUSANDS)

<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
----------- -----------

Balance at beginning of period.............................. $1,142,772 $1,203,518
Contributions............................................... 6,737 10,692
Contribution from general partner related to amortization of
unearned stock-based compensation......................... 1,842 395
Repurchase of units......................................... (3,280) (42,003)
Allocations from redeemable OP units........................ (15,601) (20,344)
Distributions............................................... (48,387) (52,669)
Net income applicable to common unitholders............... 40,120 11,955
Transition adjustment..................................... (2,842) --
Foreign currency translation adjustment................... (159) (534)
Change in fair value of cash flow hedges.................. (4,268) --
---------- ----------
Balance at end of period.................................... $1,116,934 $1,111,010
========== ==========
</Table>

F-80
306

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)

<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
----------- -----------

Operating activities:
Net income................................................ $ 40,402 $ 12,237
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 57,787 54,102
Loss (gain) on sale of assets, before tax effect.......... 1,081 (3,495)
Write down of investment in STS Hotel Net................. 2,112 --
Extraordinary loss (gain) on early extinguishment of debt,
before tax effect...................................... 1,243 (3,450)
Minority interests........................................ 6 24
Amortization of stock based compensation.................. 1,842 395
Deferred income taxes..................................... 296 43
Changes in operating assets and liabilities:
Accounts receivable, net............................... (7,007) (3,638)
Prepaid expenses and other............................. 502 8,295
Due from OpCo.......................................... 11,328 (11,449)
Accounts payable, accrued expenses, accrued interest
and other liabilities................................. 4,471 67,845
Income taxes payable................................... 499 (238)
--------- ---------
Net cash provided by operating activities......... 114,562 120,671
--------- ---------
Investing activities:
Investment in hotel properties, net....................... (23,782) (61,243)
Proceeds from disposition of assets....................... 7,274 24,148
Hotel operating cash received in connection with lease
conversions............................................ 3,257 --
Investments in and advances to affiliates, net............ -- (5,511)
(Increase in) repayments of notes receivable.............. (36,000) 57,110
Change in restricted cash................................. (283) (1,477)
--------- ---------
Net cash (used in) provided by investing
activities...................................... (49,534) 13,027
--------- ---------
Financing activities:
Deferred financing costs.................................. (9,906) (1,412)
Proceeds from mortgages and notes payable................. 599,529 100,194
Principal payments on mortgages and notes payable......... (584,830) (126,469)
Repayments of MeriStar borrowings......................... -- (14,556)
Contributions from partners............................... 3,169 1,286
Repurchase of units....................................... (3,280) (42,003)
Distributions paid to partners............................ (49,685) (52,669)
--------- ---------
Net cash used in financing activities............. (45,003) (135,629)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... 283 (22)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 20,308 (1,953)
Cash and cash equivalents, beginning of period.............. 242 2,549
--------- ---------
Cash and cash equivalents, end of period.......... $ 20,550 $ 596
========= =========
</Table>

See accompanying notes to condensed consolidated financial statements.

F-81
307

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
UNAUDITED
(DOLLARS IN THOUSANDS)

1. ORGANIZATION

MeriStar Hospitality Operating Partnership, L.P. ("the Partnership") owns a
portfolio of primarily upscale, full-service hotels in the United States and
Canada. The portfolio is diversified by franchise and brand affiliations. As of
June 30, 2001, the Partnership owned 113 hotels, with 28,877 rooms, 109 of which
are leased by the Partnership's taxable subsidiaries and managed by MeriStar
Hotels & Resorts, Inc., ("OpCo"). Four of the hotels are leased by affiliates of
Prime Hospitality Corporation. During 2000, substantially all of the hotels were
leased to and operated by OpCo.

The Partnership was formed on August 3, 1998, as a result of the merger
between CapStar Hotel Company ("CapStar") and American General Hospitality
Corporation ("AGH") and the subsequent formation of MeriStar Hospitality
Corporation ("MeriStar") , the merged entity. MeriStar, a real estate investment
trust ("REIT") is the general partner and owns a one percent interest as of June
30, 2001. The limited partners are MeriStar LP, Inc., a wholly owned subsidiary
of MeriStar, which held approximately a 90 percent interest as of June 30, 2001
and various third parties, which owned an aggregate interest of nine percent at
June 30, 2001. Partners' capital includes the partnership interests of MeriStar
and MeriStar LP, Inc. MeriStar held 483,202 and 484,591 common OP units as of
June 30, 2001 and December 31, 2000, respectively. MeriStar LP, Inc. held
43,996,697 and 43,918,443 common OP units as of June 30, 2001 and December 31,
2000 respectively. Due to the redemption rights of the limited partnership units
held by third parties, these units have been excluded from partner's capital and
classified as Redeemable OP units and recorded at redemption value. At June 30,
2001 and December 31, 2000 there were 4,232,497 and 4,448,268 redeemable units
outstanding.

On January 1, 2001, changes to the federal tax laws governing real estate
investment trusts, commonly know as the REIT Modernization Act, or RMA, became
effective. The REIT Modernization Act permits the Partnership to create taxable
REIT subsidiaries on or after January 1, 2001, which are subject to taxation
similar to subchapter C corporations. Because of the RMA, the Partnership has
created a number of these taxable REIT subsidiaries that are the lessees of its
real property. The REIT Modernization Act prohibits the taxable REIT
subsidiaries from engaging in the following activities:

- they may not manage the properties themselves; they need to enter into
"arms length" management agreements with an independent third-party
manager that is actively involved in the trade or business of hotel
management and manages properties on behalf of other owners,

- they may not lease a property that contains gambling operations, and

- they may not own a brand or franchise under which hotels are operated.

The Partnership believes that establishing taxable REIT subsidiaries to
lease the properties provides a more efficient alignment of and ability to
capture the economic interest of property ownership. Under the prior lease
structure with MeriStar Hotels, we received lease payments based on the revenues
generated by the properties, but MeriStar Hotels operated the properties in
order to maximize net operating income from the properties. This inconsistency
could potentially result in the properties being operated in a way that did not
maximize revenues. With the assignment of the leases for each of the 106
properties managed by MeriStar Hotels to the taxable REIT subsidiaries and the
execution of the new management agreements, we gained the economic risks and
rewards related to the properties that are usually associated with ownership of
real estate, and property revenues become the basis for MeriStar Hotels'
management fees.

F-82
308
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Subsidiaries of OpCo assigned their participating leases to the
wholly-owned taxable REIT subsidiaries as of January 1, 2001. In connection with
the assignment, the taxable subsidiaries executed new management agreements with
a subsidiary of OpCo to manage the hotels. Under these management agreements,
the taxable subsidiaries pay a management fee to OpCo for each property. The
taxable subsidiaries in turn make rental payments to the Partnership under the
participating leases. The management agreements have been structured to
substantially mirror the economics of the former leases. The transactions did
not result in any cash consideration exchanged among the parties except in
regard to the transfer of hotel operating assets and liabilities to the taxable
subsidiaries. Under the new management agreements, the base management fee is
2.5% of total hotel revenue plus incentive payments, based on meeting
performance thresholds, that could total up to 1.5% of total hotel revenue. The
agreements have an initial term of 10 years with three renewal periods of five
years each at the option of OpCo, subject to some exceptions. Because these
leases have been assigned to the taxable subsidiaries, the Partnership now bears
the operating risk associated with the hotels.

On May 9, 2001, the Partnership and MeriStar entered into an agreement and
Plan of Merger with FelCor Lodging Trust Incorporated ("FelCor") and its
operating partnership. Under the merger agreement, a wholly-owned subsidiary of
FelCor's operating partnership will merge with and into the Partnership, and
MeriStar will merge with and into FelCor. Holders of MeriStar common stock will
receive 0.784 of a share of FelCor common stock and $4.60 in cash for each share
of MeriStar's common stock. Holders of OP Units will receive $4.60 in cash and
0.784 FelCor operating partnership units. Class D Preferred OP Units will get
Series D preferred units in FelCor operating partnership on a one for one basis.
The merger agreement requires the approval of holders of a majority of
MeriStar's outstanding shares of common stock and holders of a majority of the
outstanding shares of common stock of FelCor. MeriStar currently expects the
merger to close during the third quarter of 2001. The Partnership has incurred
$3,789 of costs related to this merger through June 30, 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim financial statements have been prepared according
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures that are normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These interim financial statements should be read in
conjunction with the financial statements, accompanying notes and other
information for the year ended December 31, 2000. Certain 2000 amounts have been
reclassified to conform to the 2001 presentation.

In management's opinion, the accompanying unaudited condensed consolidated
interim financial statements reflect all adjustments, which are of a normal and
recurring nature, necessary for a fair presentation of the financial condition
and results of operations and cash flows for the periods presented. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities, as well as the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. The actual results could differ from those
estimates. The results of operations for the interim periods are not necessarily
indicative of the results for the entire year.

Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" requires a public entity to
report selected information about operating segments in financial reports issued
to shareholders. Based on the guidance provided in the standard, the Partnership
has determined that its business is conducted in one reportable segment. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Revenues for Canadian operations totaled
$11,583 and $3,178 for the six months ended June 30, 2001 and 2000.

F-83
309
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin or SAB No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 addresses lessor revenue recognition in interim periods
related to rental agreements which provide for minimum rental payments, plus
contingent rents based on the lessee's operations, such as a percentage of sales
in excess of an annual specified revenue target. SAB No. 101 requires the
deferral of contingent rental income until specified targets are met. This SAB
relates only to the recognition of the lease revenue in interim periods for
financial reporting purposes; it has no effect on the timing of rent payments
under the leases. The effect of SAB No. 101 was to defer additional contingent
rental income of $425 and $59,322 for the six months ended June 30, 2001 and
2000.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which requires that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting Standard Board
issued Statement of Financial Accounting Standard No. 137 which amended
Statement of Financial Accounting Standard No. 133 to defer the effective date
to all fiscal quarters of all fiscal years beginning after June 15, 2000. In
June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 138 which provides additional guidance and
amendments to Statement of Financial Accounting Standard No. 133.

The Partnership's interest rate risk management objective is to limit the
impact of interest rate changes on earnings and cash flows. The Partnership
assesses interest rate cash flow risk by continually identifying and monitoring
changes in interest rate exposures that may adversely impact expected future
cash flows, and by evaluating hedging opportunities. The Partnership does not
enter into derivative instruments for any purpose other than cash flow hedging
purposes.

The Partnership's interest rate swap agreements are considered to be a
hedge against changes in the amount of future cash flows associated with the
interest payments of the Partnership's variable rate debt obligations.
Accordingly, the interest rate swap agreements are reflected at fair value in
the Partnership's consolidated balance sheet as of June 30, 2001 and the related
unrealized gains or losses on these contracts are recorded in partner's capital
as a component of accumulated other comprehensive income.

The Partnership recognized a transition adjustment of $2,842 as the fair
value of these derivative instruments at January 1, 2001. The Partnership
recorded a liability and corresponding charge to other comprehensive loss for
this amount. As of June 30, 2001, the fair value of the Partnership's derivative
instruments represents a liability of $7,110. The estimated net amount recorded
in accumulated other comprehensive income expected to be reclassified to the
statement of operations within the next six months is approximately $3,065.

During June, 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 141, "Business Combinations," and
No. 142 "Goodwill and other Intangible Assets". We are currently in the process
of evaluating the effect these new standards will have on our financial
statements.

3. NOTE RECEIVABLE FROM OPCO

The Partnership may lend OpCo up to $50,000 for general corporate purposes
pursuant to a revolving credit agreement. The interest rate on this credit
agreement is 650 basis points over the 30-day London Interbank Offered Rate. As
of June 30, 2001, $36,000 was outstanding under this revolving credit agreement.

F-84
310
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consisted of the following:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------

Senior Unsecured Notes...................................... $ 498,367 $ --
Credit Facility............................................. 422,000 898,000
Secured Facility............................................ 322,218 324,554
Mortgage Debt and Other..................................... 53,542 59,036
---------- ----------
Mortgages and Notes payable............................... $1,296,127 $1,281,590
Notes payable to MeriStar................................... 356,923 356,729
---------- ----------
$1,653,050 $1,638,319
========== ==========
</Table>

As of June 30, 2001, aggregate future maturities of the above obligations
are as follows:

<Table>

2001.................................................... $ 19,697
2002.................................................... 47,897
2003.................................................... 313,589
2004.................................................... 240,168
2005.................................................... 9,265
Thereafter.............................................. 1,022,434
----------
$1,653,050
==========
</Table>

On January 26, 2001, the Partnership sold $300,000 of 9.0% senior notes due
2008 and $200,000 of 9.13% senior notes due 2011. The notes are unsecured
obligations of the Partnership. MeriStar, together with a number of the
subsidiaries of the Partnership, guarantees payment of principal and interest on
the notes on a senior unsecured basis. The net proceeds from the sale of
$492,000 were used to repay amounts outstanding under the Credit Facility and to
make payments to terminate some swap agreements that hedged variable interest
rates of the loans that were repaid. The terminated swap agreements had notional
amounts totaling $300,000. The Partnership recognized a loss of $9,297 to
terminate these swap agreements. The repayments of term loans under the Credit
Facility resulted in an extraordinary loss of $1,243 ($1,226, net of tax) from
the write-off of deferred financing costs.

5. DISTRIBUTIONS PAYABLE

On June 28, 2001, the Partnership declared a distribution for the three
months ended June 30, 2001 of $0.505 per Common and Class B OP Unit and $0.5575
per Class C OP Unit. The distribution was paid on July 13, 2001.

F-85
311
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. EARNINGS PER UNIT

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per unit ("EPU") computations for income before
extraordinary gain (loss):

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-----------------
2001 2000
------- -------

Basic EPU Computation:
Net income before extraordinary gain (loss)............... $41,628 $ 8,837
Distributions paid related to unvested restricted stock of
MeriStar............................................... (403) (335)
Preferred distributions................................... (282) (282)
------- -------
Income before extraordinary gain (loss) available to
common unitholders..................................... 40,943 8,220
Weighted average number of OP Units outstanding........... 48,383 50,269
------- -------
Basic EPU before extraordinary gain (loss)................ $ 0.85 $ 0.16
======= =======
Diluted EPU Computation:
Income before extraordinary gain (loss) available to
common unitholders..................................... 40,943 8,220
Preferred distributions................................... 282 --
Interest on convertible debt of MeriStar.................. 3,591 --
Adjusted net income....................................... 44,816 8,220
Weighted average number of OP units outstanding........... 48,383 50,269
Stock options of MeriStar................................. 359 149
Class D Preferred OP Units................................ 392 --
Convertible debt of MeriStar.............................. 4,538 --
------- -------
Total weighted average number of diluted OP units
outstanding............................................ 53,672 50,418
------- -------
Diluted EPU before extraordinary gain (loss).............. $ 0.83 $ 0.16
======= =======
</Table>

The effects of Class D Preferred OP Units, convertible debt of MeriStar,
and restricted stock of MeriStar were not included in the computation of EPU for
periods in which their effect was anti-dilutive.

F-86
312
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. SUPPLEMENTAL CASH FLOW INFORMATION

<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
------------------
2001 2000
-------- -------

Cash paid for interest and income taxes:
Interest, net of capitalized interest of $3,822 and
$3,530, respectively................................... $ 44,274 $59,471
Income taxes.............................................. 511 211
Non-cash investing and financing activities:
Deferred purchase price................................... -- 8,000
Redemption of redeemable OP Units......................... 2,845 24
Operating assets received and liabilities assumed from
lease conversions:
Accounts receivable.................................... 47,200 --
Prepaid expenses and other............................. 13,500 --
Furniture and fixtures................................. 315 --
Accumulated depreciation............................... (163) --
Investment in affiliates, net.......................... 1,629 --
-------- -------
Total operating assets received................... 62,481 --
======== =======
Accounts payable and accrued expenses.................. (65,706) --
Long-term debt......................................... (32) --
-------- -------
Total liabilities assumed......................... (65,738) --
======== =======
</Table>

8. PARTICIPATING LEASE AGREEMENTS

Changes to the federal tax laws governing REITs became effective on January
1, 2001. Under those changes, the Partnership created taxable REIT subsidiaries
that lease the hotels the Partnership currently owns. The taxable subsidiaries
are wholly-owned and are similar to a subchapter C corporation. Accordingly, as
of January 1, 2001, OpCo assigned the participating leases to the taxable REIT
subsidiaries and the taxable subsidiaries entered into management agreements
with OpCo to manage the properties. Under these management agreements, the
taxable REIT subsidiaries pay OpCo a management fee. The taxable REIT
subsidiaries in turn make rental payments to the Partnership under the
participating leases. The management agreements have been structured to
substantially mirror the economics and terms of the former leases.

As of June 30, 2001, the Partnership leases four hotels to Prime
Hospitality. These leases continue to have non-cancelable remaining terms
ranging from 8 to 10 years, subject to earlier termination on the occurrence of
certain contingencies, as defined. The rent due under each percentage lease is
the greater of base rent or percentage rent, as defined. Percentage rent
applicable to room and food and beverage revenue varies by lease and is
calculated by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. Both the minimum rent and the revenue
thresholds used in computing percentage rents are subject to annual adjustments
based on increases in the United States Consumer Price Index. Percentage rent
applicable to other revenues is calculated by multiplying fixed percentages by
the total amounts of such revenues. During interim reporting periods, the
Partnership defers recognition of revenue for lease payments considered to be
contingent until specified percentage rent thresholds are met.

Total lease payments on the Prime Hospitality leases were $7,536 for the
six months ended June 30, 2001. Total lease payment on all of the leases were
$201,385 for the six months ended June 30, 2000.

F-87
313
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK-BASED COMPENSATION

As of March 31, 2001, MeriStar has granted 586,500 shares of MeriStar
restricted stock to the Partnership's employees. This restricted stock vests
ratably over a three-year or five-year period.

On March 29, 2000, the Partnership granted 462,500 Profits-Only OP Units,
or POPs, to some of the executive officers pursuant to the POPs Plan. The units
vest ratably over three years based on achieving certain operating performance
criteria and upon the occurrence of certain other events. The Profits-Only OP
Units are subject to variable plan accounting.

On April 16, 2001, the Partnership granted 350,000 POPs to some of our
executives pursuant to our POPs plan. The units vest ratably over three years
and upon the occurrence of certain other events.

10. ACQUISITIONS AND DISPOSITIONS

On March 21, 2001, the Partnership sold one hotel and received proceeds of
$7,274. The sale resulted in a loss of $1,081 ($1,062, net of tax).

On May 2, 2001, the Partnership terminated the leases of four hotels from
affiliates of Prime Hospitality Corporation for a total cost of $1,315.
Concurrently, the Partnership signed long-term management agreements with
MeriStar Hotels for these properties.

F-88
314
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. CONSOLIDATING FINANCIAL INFORMATION

Certain of the Partnership's wholly-owned subsidiaries, together with the
Partnership, are guarantors of debt. The following tables present consolidating
information for the guarantor subsidiaries:

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING BALANCE SHEET
JUNE 30, 2001

<Table>
<Caption>
MERISTAR NON-
HOSPITALITY GUARANTOR GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------ ------------

ASSETS

Investments in hotel properties,
net............................... $ 7,864 $1,401,820 $1,457,450 $ -- $2,867,134
Cash and cash equivalents........... 20,550 -- -- -- 20,550
Accounts receivable, net............ 691 1,955 54,394 -- 57,040
Prepaid expenses and other.......... 1,124 587 14,054 -- 15,765
Notes receivable.................... 123,423 -- -- (87,423) 36,000
Due from OpCo....................... (18,407) (3,357) 32,657 -- 10,893
Due from subsidiaries............... (192,998) 262,116 (69,118) -- --
Investments in and advances to
affiliates........................ 2,635,521 58,911 10,116 (2,662,834) 41,714
Restricted cash..................... 13,872 -- 6,329 -- 20,201
Intangible assets, net.............. 13,700 1,149 835 -- 15,684
---------- ---------- ---------- ----------- ----------
$2,605,340 $1,723,181 $1,506,717 $(2,750,257) $3,084,981
========== ========== ========== =========== ==========

LIABILITIES, MINORITY INTERESTS AND PARTNERS' CAPITAL

Accounts payable, accrued expenses
and other liabilities............. $ 29,497 $ 20,260 $ 77,113 $ -- $ 126,870
Accrued interest.................... 39,983 27 4,342 -- 44,352
Income taxes payable................ 1,420 -- -- -- 1,420
Distributions payable............... 24,245 -- -- -- 24,245
Deferred income taxes............... 8,409 -- -- -- 8,409
Interest rate swaps................. 7,110 -- -- -- 7,110
Notes payable to MeriStar........... 356,923 -- -- -- 356,923
Mortgages and notes payable......... 920,921 87,484 375,145 (87,423) 1,296,127
---------- ---------- ---------- ----------- ----------
Total liabilities......... 1,388,508 107,771 456,600 (87,423) 1,865,456
Minority interests.................. -- 2,693 -- -- 2,693
Redeemable OP units at redemption
value............................. 99,898 -- -- -- 99,898
Partners' capital................... 1,116,934 1,612,717 1,050,117 (2,662,834) 1,116,934
---------- ---------- ---------- ----------- ----------
$2,605,340 $1,723,181 $1,506,717 $(2,750,257) $3,084,981
========== ========== ========== =========== ==========
</Table>

F-89
315
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001

<Table>
<Caption>
MERISTAR NON-
HOSPITALITY GUARANTOR GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------ ------------

Revenue:
Hotel operations:
Rooms............................... $ -- $ -- $402,760 $ -- $402,760
Food and beverage................... -- -- 145,383 -- 145,383
Other operating departments......... -- -- 46,005 -- 46,005
Participating lease revenue............ 1,237 90,616 96,414 (177,531) 10,736
Office rental, parking and other
revenue............................. 1,963 153 2,851 -- 4,967
-------- -------- -------- --------- --------
Total revenue.................. 3,200 90,769 693,413 (177,531) 609,851
Hotel operating expenses by department:
Rooms............................... -- -- 92,287 -- 92,287
Food and beverage................... -- -- 103,890 103,890
Other operating departments......... -- -- 23,616 -- 23,616
Office rental, parking and other
operating expenses.................. -- 111 1,514 -- 1,625
Undistributed operating expenses:
Administrative and general.......... 2,350 318 85,387 -- 88,055
Property operating costs............ -- 352 84,625 -- 84,997
Property taxes, insurance and
other............................. 2,787 8,267 203,379 (177,531) 36,902
Depreciation and amortization....... 3,431 27,154 27,202 -- 57,787
Write down of investment in STS
Hotel Net......................... 2,112 -- -- -- 2,112
Swap termination costs.............. 9,297 -- -- -- 9,297
FelCor merger costs................. 3,789 -- -- -- 3,789
Cost to terminate leases with Prime
Hospitality Corporation........... 1,315 -- -- -- 1,315
-------- -------- -------- --------- --------
Total operating expenses....... 25,081 36,202 621,900 (177,531) 505,652
-------- -------- -------- --------- --------
Net operating income (loss).............. (21,881) 54,567 71,513 -- 104,199
Interest expense, net.................... 44,322 2,583 13,356 -- 60,261
Equity in income from consolidated
entities............................... 109,073 -- -- (109,073) --
-------- -------- -------- --------- --------
Income before minority interests, income
taxes, loss on sale of assets and
extraordinary loss..................... 42,870 51,984 58,157 (109,073) 43,938
Minority interests....................... -- 6 -- -- 6
-------- -------- -------- --------- --------
Income before income taxes, loss on sale
of assets and extraordinary loss....... 42,870 51,978 58,157 (109,073) 43,932
Income taxes............................. 1,242 -- -- 1,242
-------- -------- -------- --------- --------
Income before loss on sale of assets and
extraordinary loss..................... 41,628 51,978 58,157 (109,073) 42,690
Loss on sale of assets, net.............. -- (1,062) -- -- (1,062)
Extraordinary loss on early
extinguishment of debt, net of tax
effect................................. (1,226) -- -- -- (1,226)
-------- -------- -------- --------- --------
Net income............................... $ 40,402 $ 50,916 $ 58,157 $(109,073) $ 40,402
======== ======== ======== ========= ========
</Table>

F-90
316
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001

<Table>
<Caption>
MERISTAR NON-
HOSPITALITY GUARANTOR GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------ ------------

Cash flows provided by (used in)
operating activities................. $(164,661) $ 8,714 $ 270,509 $ -- $114,562
Cash flows provided by (used in)
investing activities................. 218,243 7,274 72,488 (347,539) (49,534)
Cash flows provided by (used in)
financing activities................. (33,274) (16,271) (342,997) 347,539 (45,003)
Effect of exchange rate changes on cash
and cash equivalents................. -- 283 -- -- 283
--------- -------- --------- --------- --------
Change in cash and cash equivalents.... 20,308 -- -- -- 20,308
Cash and cash equivalents, beginning of
year................................. 242 -- -- -- 242
--------- -------- --------- --------- --------
Cash and cash equivalents, end of
year................................. $ 20,550 $ -- $ -- $ -- $ 20,550
========= ======== ========= ========= ========
</Table>

12. RECENT DEVELOPMENTS

On May 9, 2001, the Partnership and MeriStar entered into an Agreement and
Plan of Merger with FelCor Lodging Trust Incorporated ("FelCor")and its
operating partnership. Under the merger agreement, a wholly-owned subsidiary of
FelCor's operating partnership will merge with and into the Partnership, and
MeriStar will merge with and into FelCor. Holders of MeriStar common stock will
receive 0.784 of a share of FelCor common stock and $4.60 in cash for each share
of MeriStar's common stock. Holders of OP Units will receive $4.60 in cash and
0.784 of FelCor Operating Partnership Units. Class D Preferred OP Units will get
Series D preferred Units in FelCor Operating Partnership on a one for one basis.
The merger agreement requires the approval of holders of a majority of
MeriStar's outstanding shares of common stock and holders of a majority of the
outstanding shares of common stock of FelCor. MeriStar currently expect the
merger to close during the third quarter of 2001.

FelCor has filed a registration statement on Form S-4 with the SEC in
connection with the merger transaction. The registration statement has not yet
been declared effective. The Form S-4 contains a prospectus, a proxy statement,
and other documents for MeriStar's stockholder meeting and that of FelCor, at
which time the proposed transaction will be considered. MeriStar and FelCor plan
to mail the proxy statement and prospectus contained in the Form S-4 to their
respective stockholders after the registration statement is declared effective
by the SEC. The Form S-4, proxy statement and prospectus will contain important
information about MeriStar, FelCor, the merger and related matters. Investors
and stockholders should read the Form S-4, proxy statement and the prospectus
and the other documents filed with the SEC in connection with the merger
carefully before they make any decision with respect to the merger. For more
information regarding the persons participating in the solicitation and their
interest in the merger, please see MeriStar's Statement on Schedule 14A, filed
on May 10, 2001.

F-91
317

INDEPENDENT AUDITORS' REPORT

The Partners
MeriStar Hospitality Operating Partnership, L.P.

We have audited the accompanying consolidated balance sheets of MeriStar
Hospitality Operating Partnership, L.P. and subsidiaries (the "Partnership") as
of December 31, 2000 and 1999 and the related consolidated statements of
operations, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 2000. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule of real estate and accumulated depreciation. These consolidated
financial statements and financial statement schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MeriStar
Hospitality Operating Partnership, L.P. and subsidiaries as of December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

KPMG LLP

Washington, D.C.
May 30, 2001

F-92
318

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)

<Table>
<Caption>
2000 1999
---------- ----------

ASSETS

Investments in hotel properties............................. $3,193,730 $3,118,723
Accumulated depreciation.................................... (287,229) (182,430)
---------- ----------
2,906,501 2,936,293
Cash and cash equivalents................................... 242 2,549
Accounts receivable, net.................................... 2,833 1,328
Prepaid expenses and other.................................. 2,767 9,137
Note receivable from Lessee................................. -- 57,110
Due from Lessee............................................. 22,221 11,476
Investments in and advances to affiliates................... 42,196 40,085
Restricted cash............................................. 19,918 17,188
Intangible assets, net of accumulated amortization of $5,575
and $2,847................................................ 9,822 10,930
---------- ----------
$3,006,500 $3,086,096
========== ==========

LIABILITIES, MINORITY INTERESTS AND PARTNERS' CAPITAL

Accounts payable, accrued expenses and other liabilities.... $ 72,197 $ 55,866
Accrued interest............................................ 28,365 31,380
Income taxes payable........................................ 921 730
Distributions payable....................................... 24,581 26,263
Deferred income taxes....................................... 8,113 7,477
Notes payable to MeriStar................................... 356,729 374,541
Mortgages and notes payable................................. 1,281,590 1,302,230
---------- ----------
Total liabilities................................. 1,772,496 1,798,487
---------- ----------
Minority interests.......................................... 2,687 2,690
Redeemable OP units at redemption value..................... 88,545 81,401
Partners' capital -- Common OP units, 44,403,034 and
47,256,468 issued and outstanding......................... 1,142,772 1,203,518
---------- ----------
$3,006,500 $3,086,096
========== ==========
</Table>

See accompanying notes to consolidated financial statements.

F-93
319

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)

<Table>
<Caption>
2000 1999 1998
-------- -------- --------

Revenue:
Participating lease revenue.............................. $391,729 $368,012 $135,994
Hotel operations:
Rooms................................................. -- -- 275,610
Food and beverage..................................... -- -- 85,374
Other operating departments........................... -- -- 19,496
Office rental, parking and other revenue................. 8,956 6,808 5,557
-------- -------- --------
Total revenue.................................... 400,685 374,820 522,031
-------- -------- --------
Hotel operating expenses by department:
Rooms................................................. -- -- 65,048
Food and beverage..................................... -- -- 67,493
Other operating departments........................... -- -- 9,975
Office rental, parking and other operating expenses...... 2,731 1,964 2,713
Undistributed operating expenses:
Administrative and general............................ 9,445 5,735 52,213
Property operating costs.............................. -- -- 58,611
Property taxes, insurance and other................... 47,481 47,027 29,240
Lease expense......................................... -- -- 34,641
Depreciation and amortization......................... 110,688 101,795 58,842
Spin-off costs........................................ -- -- 7,345
-------- -------- --------
Total operating expenses......................... 170,345 156,521 386,121
-------- -------- --------
Net operating income....................................... 230,340 218,299 135,910
Interest expense, net...................................... 117,524 100,387 50,492
-------- -------- --------
Income before minority interests, income taxes, gain on
sale of assets, and extraordinary gain (loss)............ 112,816 117,912 85,418
Minority interests......................................... (3) 24 (2,185)
-------- -------- --------
Income before income taxes, gain on sale of assets, and
extraordinary gain (loss)................................ 112,819 117,888 87,603
Income taxes............................................... 1,622 1,681 1,299
-------- -------- --------
Income before gain on sale of assets and extraordinary gain
(loss)................................................... 111,197 116,207 86,304
Gain on sale of assets, net of tax effect of $56........... 3,439 -- --
Extraordinary gain (loss) on early extinguishment of debt,
net of tax effect of $50 in 2000, ($74) in 1999, and
($207) in 1998........................................... 3,400 (4,551) (1,238)
-------- -------- --------
Net income................................................. 118,036 111,656 85,066
Preferred distributions.................................... (565) (565) (650)
-------- -------- --------
Net income available to common unitholders................. $117,471 $111,091 $ 84,416
======== ======== ========
Net income applicable to general partner common
unitholder.......................................... 107,638 101,345 77,225
======== ======== ========
Net income applicable to third party limited partner
common unitholders.................................. 9,833 9,746 7,191
======== ======== ========
Earnings per unit:
Basic:
Income before extraordinary gain...................... $ 2.25 $ 2.22 $ 2.38
Extraordinary gain (loss)............................. 0.07 (0.09) (0.03)
-------- -------- --------
Net income............................................ $ 2.32 $ 2.13 $ 2.35
Diluted:
Income before extraordinary gain...................... $ 2.18 $ 2.15 $ 2.25
Extraordinary gain (loss)............................. 0.06 (0.08) (0.03)
-------- -------- --------
Net income............................................ $ 2.24 $ 2.07 $ 2.22
======== ======== ========
</Table>

See accompanying notes to consolidated financial statements.

F-94
320

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)

<Table>

Balance, January 1, 1998.................................... $ 396,838
Contributions............................................... 777,862
Allocation from redeemable OP units......................... 12,234
Distributions............................................... (97,170)
Net income available to common unitholders................ 84,416
Foreign currency translation adjustment................... (3,960)
----------
Comprehensive income........................................ 80,456
----------
Balance, December 31, 1998.................................. 1,170,220
Contributions............................................... 33,459
Distributions............................................... (117,885)
Allocation from redeemable OP units......................... 11,645
Repurchase of OP units...................................... (6,252)
Net income available to common unitholders................ 111,091
Foreign currency translation adjustment................... 1,240
----------
Comprehensive income........................................ 112,331
----------
Balance, December 31, 1999.................................. 1,203,518
Contributions............................................... 9,872
Distributions............................................... (101,730)
Allocation from redeemable OP units......................... (14,957)
Repurchase of OP units...................................... (73,638)
Contribution from general partner related to amortization of
stock-based compensation.................................. 3,070
Net income available to common unitholders................ 117,471
Foreign currency translation adjustment................... (834)
----------
Comprehensive income........................................ 116,637
----------
Balance, December 31, 2000.................................. $1,142,772
==========
</Table>

See accompanying notes to the consolidated financial statements.

F-95
321

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)

<Table>
<Caption>
2000 1999 1998
--------- --------- ----------

Operating activities:
Net income.............................................. $ 118,036 $ 111,656 $ 85,066
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 110,688 101,795 58,842
Gain on assets sold, before tax effect............... (3,495) --
Extraordinary (gain)loss on early extinguishment of
debt, before tax effect............................ (3,450) 4,625 1,445
Minority interests................................... (3) 24 (2,185)
Non-cash spin-off costs.............................. -- -- 3,205
Amortization of stock based compensation............. 3,070 -- --
Deferred income taxes................................ 636 715 (270)
Changes in operating assets and liabilities:
Accounts receivable, net........................... (1,505) 1,716 29,673
Prepaid expenses and other......................... 6,370 (5,262) 24,760
Due from Lessee.................................... (10,745) (4,039) (7,437)
Accounts payable, accrued expenses, accrued
interest and other liabilities.................. 4,295 16,098 (5,485)
Income taxes payable............................... 191 1,001 (723)
--------- --------- ----------
Net cash provided by operating activities....... 224,088 228,329 186,891
--------- --------- ----------
Investing activities:
Investment in hotel properties, net..................... (90,703) (170,063) (701,710)
Proceeds from disposition of assets..................... 24,148 8,900 --
Purchases of intangible assets.......................... -- -- (5,584)
Investments in and advances to affiliates, net.......... (2,111) (31,298) (2,320)
Purchases of minority interests......................... -- (72) (44)
Repayments of notes receivable.......................... 57,110 9,890 (67,000)
Change in restricted cash............................... (2,730) (5,309) (8,847)
--------- --------- ----------
Net cash used in investing activities........... (14,286) (187,952) (785,505)
--------- --------- ----------
Financing activities:
Deferred financing costs................................ (1,615) (6,005) --
Proceeds from mortgages and notes payable............... 179,388 429,636 1,407,261
Principal payments on mortgages and notes payable....... (200,028) (407,432) (821,051)
Borrowings from MeriStar................................ -- 55,000 --
Repayments to MeriStar on borrowings.................... (14,362) (2,785) --
Repurchase of units..................................... (73,638) (6,252) --
Contributions from partners............................. 1,356 2,249 1,870
Distributions paid to partners.......................... (103,274) (106,359) (67,623)
--------- --------- ----------
Net cash (used in) provided by financing
activities.................................... (212,173) (41,948) 520,457
--------- --------- ----------
Effect of exchange rate changes on cash and cash
equivalents............................................. 64 (53) 204
Net decrease in cash and cash equivalents................. (2,307) (1,624) (77,953)
Cash and cash equivalents, beginning of year.... 2,549 4,173 82,126
--------- --------- ----------
Cash and cash equivalents, end of year.......... $ 242 $ 2,549 $ 4,173
========= ========= ==========
</Table>

See accompanying notes to consolidated financial statements.

F-96
322

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS)

1. ORGANIZATION

MeriStar Hospitality Operating Partnership, L.P. (the "Partnership") owns a
portfolio of primarily upscale, full-service hotels, diversified by franchise
and brand affiliations, in the United States and Canada. Substantially all of
the Partnership's hotels are leased to and operated by MeriStar Hotel & Resorts,
Inc. ("OpCo"), an affiliated entity. As of December 31, 2000, the Partnership
owned 114 hotels with 29,090 rooms, 106 of which are leased and operated by
OpCo.

The Partnership was formed on August 3, 1998, as a result of the merger
("the Merger") between CapStar Hotel Company ("CapStar") and American General
Hospitality Corporation ("AGH") and the subsequent formation of MeriStar
Hospitality Corporation ("MeriStar"), the merged entity. MeriStar, a real estate
investment trust ("REIT") is the general partner and owns a one percent interest
as of December 31, 2000. The limited partners are MeriStar LP, Inc., a wholly
owned subsidiary of MeriStar, which held approximately a 90 percent interest as
of December 31, 2000 and various third parties, which owned an aggregate
interest of nine percent at December 31, 2000. Partners' capital includes the
partnership interests of MeriStar and MeriStar LP, Inc. MeriStar held 484,591
and 518,009 common OP units as of December 31, 2000 and 1999, respectively.
MeriStar LP, Inc. held 43,918,443 and 46,738,459 common OP units as of December
31, 2000 and 1999, respectively. Due to the redemption rights of the limited
partnership units held by third parties, these units have been excluded from
partners' capital and classified as Redeemable OP units and recorded at
redemption value.

In order for MeriStar to maintain its tax status as a REIT, the Partnership
has not been permitted to engage in the operations of its hotel properties. To
comply with this requirement, the Partnership has leased all of its real
property to third-party lessee/managers -- OpCo and Prime Hospitality
Corporation.

On January 1, 2001, the REIT Modernization Act (the "RMA") became law. The
RMA permits the Partnership to create wholly-owned taxable REIT subsidiaries
(the "TRS") on or after January 1, 2001, which will be subject to taxation
similar to a subchapter C-Corporation. A TRS will be allowed to lease the real
property owned by the Partnership. Also, the RMA prohibits a TRS from engaging
in certain activities. First, a TRS may not manage the properties itself; it
will need to enter into an "arms length" management agreement with an
independent third-party manager that is actively involved in the trade or
business of hotel management and manages properties on behalf of other owners.
Second, a TRS may not lease a property that contains gambling operations. Third,
a TRS may not own a brand or franchise. The Partnership believes that
establishing these taxable REIT subsidiaries to lease its properties will
provide a more efficient alignment of and ability to capture the economic
interests of property ownership.

Until January 1, 2001, the Partnership leased 106 hotels to OpCo. Each of
the leases was a 12-year participating lease under which OpCo paid the
Partnership a fixed base rent plus participating rent based on a percentage of
hotel revenues. Because of the RMA, the Partnership has created a number of
taxable REIT subsidiaries. The Partnership and OpCo have also agreed to assign
the leases for the 106 hotels to these taxable REIT subsidiaries. The new
management agreements have been structured to mirror the current economics of
the existing leases. The transactions did not result in any cash consideration
exchanged among the parties. Under the new management agreements, the base
management fee is 2.5 percent of total hotel operating revenue with incentives
up to an additional 1.5 percent of total revenue if certain operating thresholds
are achieved. The agreements have an initial term of 10 years with three renewal
periods of five years each at OpCo's option, subject to some exceptions. Because
of these changes, the Partnership now bears the operating risk associated with
its properties.

F-97
323
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Partnership and all of its majority owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

Investments in unconsolidated joint ventures and affiliated companies in
which the Partnership holds a voting interest of 50% or less and exercises
significant influence are accounted for using the equity method. The Partnership
uses the cost method to account for its investment in entities in which it does
not have the ability to exercise significant influence.

Cash Equivalents and Restricted Cash -- The Partnership considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. Restricted cash represents amounts required to be
maintained in escrow under certain of the Partnership's credit facilities.

Investments in Hotel Properties -- Investments in hotel properties are
recorded at cost, which includes the allocated purchase price for hotel
acquisitions, or at fair value at the time of contribution for contributed
property. Property and equipment balances are depreciated using the
straight-line method over lives ranging from five to 40 years. For the years
ended December 31, 2000, 1999 and 1998, the Partnership capitalized interest of
$8,613, $12,540, and $5,182, respectively. Properties held for sale are carried
at the lower of their carrying values or estimated fair values less costs to
sell. Depreciation of these properties is discontinued when an operating
property is classified as held for sale. Properties held for sale are not
material and, therefore, are included in investments in hotel properties.

Intangible Assets -- Intangible assets consist primarily of deferred
financing fees. These deferred fees are amortized on a straight-line basis over
the lives of the related borrowings for up to 10 years. Total accumulated
amortization at December 31, 2000 and 1999 was $5,575 and $2,847, respectively.
In 1999 and 1998, the Partnership recognized extraordinary losses of $4,551 and
$1,238 (net of tax effect of $74 and $207), respectively, due to the write-off
of unamortized deferred financing fees in conjunction with refinancing certain
credit facilities.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of -- The carrying values of long-lived assets, which include property and
equipment and all intangibles, are evaluated periodically in relation to the
operating performance and future undiscounted cash flows of the underlying
assets. If the analysis indicates that the carrying value is not recoverable
from future cash flows, the long-lived asset is written down to estimated fair
value and an impairment loss is recognized. No impairment losses were recorded
during 2000, 1999 or 1998.

Income Taxes -- No provision for federal income taxes has been reflected in
the financial statements because all taxable income or loss, or tax credits are
passed through to the partners. The Partnership is subject to state, local and
foreign taxes in certain jurisdictions.

Foreign Currency Translation -- Results of operations for the Partnership's
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.

Revenue Recognition -- Prior to the Merger, revenue was earned through the
operations and management of the hotel properties and was recognized when
earned. Subsequent to the Merger, the Partnership earns participating lease
revenue. Participating lease revenue represents lease payments from lessees
pursuant to participating lease agreements. Office, retail and parking rental is
generally recognized on a straight-line basis over the terms of the respective
leases.

F-98
324
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Participating Lease Agreements -- The Partnership's participating leases
have non-cancelable remaining terms ranging from 8 to 10 years, subject to
earlier termination on the occurrence of certain contingencies, as defined. The
rent due under each percentage lease is the greater of base rent or percentage
rent, as defined. Percentage rent applicable to room and food and beverage
revenue varies by lease and is calculated by multiplying fixed percentages by
the total amounts of such revenues over specified threshold amounts. Both the
minimum rent and the revenue thresholds used in computing percentage rents are
subject to annual adjustments based on increases in the United States Consumer
Price Index. Percentage rent applicable to other revenues is calculated by
multiplying fixed percentages by the total amounts of such revenues. During
interim reporting periods, the Partnership defers recognition of revenue for
lease payments considered to be contingent until specified percentage rent
thresholds are met.

Changes to the federal tax laws governing REITs were enacted in 1999 and
became effective on January 1, 2001. Under those changes, the Partnership is
permitted to create subsidiaries that lease the property the Partnership
currently owns and are taxable, similar to a subchapter C-Corporation. The
Partnership's taxable REIT subsidiaries are wholly-owned. Accordingly, the
Partnership and OpCo assigned the participating leases to the taxable REIT
subsidiaries and the taxable REIT subsidiaries entered into management
agreements with OpCo to manage the Partnership's properties. Under these
management agreements, the taxable subsidiaries pay OpCo a management fee. The
taxable REIT subsidiaries in turn make rental payments to the Partnership under
the participating leases. The management agreements have been structured to
substantially mirror the economics of the former leases.

Financial Instruments -- From time to time the Partnership enters into swap
and collar agreements that are designated as, and are effective as, hedges
against the impact of interest rate fluctuation on certain of the Partnership's
existing and probable future long-term debt instruments. Because these
agreements qualify for hedge accounting treatment, any gains or losses are
recognized as adjustments to interest expense over the lives of the underlying
debt instruments. For hedge agreements associated with anticipated future debt
instruments, gains or losses are deferred until those debt instruments are
entered into. If the Partnership determines it is no longer probable that the
Partnership will enter into an anticipated debt instrument, any related deferred
gains or losses are recognized in the current period.

Use of Estimates -- The preparation of 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 reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Segment Information -- SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" requires a public entity to report selected
information about operating segments in financial reports issued to
shareholders. It also establishes standards for related disclosures about
product and services, geographic areas and major customers. Based on the
guidance provided in the standard, the Partnership has determined that its
business is conducted in one operating segment.

The following table summarizes geographic information required to be
disclosed under SFAS No. 131:

<Table>
<Caption>
2000 1999 1998
-------- -------- --------

REVENUE:
U.S. ............................................. $394,264 $367,809 $507,078
Foreign........................................... 6,521 7,011 14,953
-------- -------- --------
$400,785 $374,820 $522,031
======== ======== ========
</Table>

F-99
325
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>

INVESTMENTS IN HOTEL PROPERTIES, NET:
U.S. ............................................. $2,850,348 $2,876,909
Foreign........................................... 56,153 59,384
---------- ----------
$2,906,501 $2,936,293
========== ==========
</Table>

Comprehensive Income -- SFAS No. 130, "Reporting Comprehensive Income,"
requires an enterprise to display comprehensive income and its components in a
financial statement to be included in an enterprise's full set of annual
financial statements or in the notes to financial statements. Comprehensive
income represents a measure of all changes in equity of an enterprise that
result from recognized transactions and other economic events for the period
other than transactions with owners in their capacity as owners. Comprehensive
income of the Partnership includes net income and other comprehensive income
from foreign currency items. Accumulated other comprehensive loss included in
partners' capital was $6,081 and $5,247 as of December 31, 2000 and 1999,
respectively.

New Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires that an entity recognize all
derivatives as either assets or liabilities in balance sheets and measure those
instruments at fair value. In June 1999, the FASB issued SFAS No. 137 which
amended SFAS No. 133 to defer the effective date to all fiscal quarters of
fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138 which provides additional guidance and amendments to SFAS No. 133. The
Partnership recognized a transition adjustment of $2,842 as the fair value of
its derivative instruments at January 1, 2001. The transition adjustment
resulted in an interest rate swap liability and a corresponding charge to other
comprehensive income.

3. INVESTMENTS IN HOTEL PROPERTIES

Investments in hotel properties consists of the following:

<Table>
<Caption>
DECEMBER 31,
-----------------------
2000 1999
---------- ----------

Land........................................................ $ 317,072 $ 318,360
Buildings................................................... 2,461,089 2,378,318
Furniture, fixtures and equipment........................... 338,350 320,787
Construction-in-progress.................................... 77,219 101,258
---------- ----------
Total............................................. $3,193,730 $3,118,723
========== ==========
</Table>

4. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The Partnership has ownership interests in certain unconsolidated joint
ventures and affiliated companies.

In 2000, the Partnership invested $2,100 in STS Hotel Net, a Partnership
that provides high-speed internet portals to guest rooms. This investment is
accounted for using the cost method.

In 1999, the Partnership invested $40,000 in MeriStar Investment Partners,
LP ("MIP"), a joint venture established to acquire upscale, full-service hotels.
The Partnership's investment is in the form of a preferred partnership interest.
The Partnership receives a 16% preferred return on its investment.

F-100
326
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTE RECEIVABLE FROM LESSEE

On March 1, 2000, OpCo repaid the remaining balance of $57,110 on its
revolving credit agreement with the Partnership upon closing its bank revolving
credit facility. At that time, OpCo's revolving credit agreement with the
Partnership was also amended to reduce the maximum borrowing limit from $75,000
to $50,000. Any amounts outstanding will bear interest at the rate of the 30-day
London Interbank Offered Rate plus 650 basis points.

6. LONG-TERM DEBT

Long-term debt consists of the following:

<Table>
<Caption>
DECEMBER 31,
-----------------------
2000 1999
---------- ----------

Credit Facility............................................. $ 898,000 $ 908,000
Secured Facility............................................ 324,554 328,954
Mortgage Debt and Other..................................... 59,036 65,276
---------- ----------
Mortgages and Notes Payable............................... 1,281,590 1,302,230
Notes Payable to MeriStar................................... 356,729 374,541
---------- ----------
$1,638,319 $1,676,771
========== ==========
</Table>

Credit Facility -- In conjunction with the Merger, the Partnership entered
into a $1,000,000 senior secured credit facility (the "Credit Facility"). The
Credit Facility is structured as a $300,000, five-year term loan facility; a
$200,000, five-and-a-half year term loan facility; and a $500,000, three-year
revolving credit facility with two one-year optional extensions. The Credit
Facility is secured by MeriStar's common stock, and the partners' ownership
interests in the Partnership and its subsidiaries. The interest rate on the term
loans and revolving facility ranges from 100 to 200 basis points over the 30-day
London Interbank Offered Rate ("LIBOR"), depending on certain financial
performance covenants and long-term senior unsecured debt ratings. The weighted
average interest rate on borrowings outstanding under the Credit Facility as of
December 31, 2000 and 1999 was 8.3% and 8.4%, respectively. As of December 31,
2000, the Partnership had $98.0 million available under the Credit Facility's
revolving facility.

Secured Facility -- In 1999, the Partnership completed a $330,000 10-year
non-recourse financing ("Secured Facility") secured by a portfolio of 19 hotels.
The loan bears a fixed interest rate of 8.01% and matures in 2009. The
Partnership used most of the net proceeds to repay the amounts outstanding under
prior credit facilities.

Mortgage Debt -- In connection with the Merger, the Partnership assumed
mortgage debt secured by seven hotels. The mortgage debt matures between 2001
and 2012 and the interest rates on the mortgages range from 7.5% to 10.5%.

Notes Payable to MeriStar -- In 1997, MeriStar completed the offering of
$150,000 aggregate principal amount (issue price of $149,799, net of discount)
of its 8.75% senior subordinated notes due 2007 (the "Subordinated Notes"). In
conjunction with this transaction, the Partnership borrowed $150,000 from
MeriStar under terms matching those of the Subordinated Notes; however, the
interest rate on the Partnership's note to MeriStar is 8.69%, the effective rate
on the Subordinated Notes. The indenture pursuant to which the Subordinated
Notes were issued contains certain covenants, including maintenance of certain
financial ratios, reporting requirements, and other customary restrictions. The
note provides for semi-annual payments of interest on February 15 and August 15,
commencing on February 15, 1998.

In 1999, under terms matching those of the Subordinated Notes, MeriStar
completed an "add-on" offering of $55,000 of Subordinated Notes. In conjunction
with the "add-on" sale of Subordinated Notes,

F-101
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Partnership borrowed $55,000 from MeriStar under terms matching those of the
Subordinated Notes however, the interest rate on the Partnership's note to
MeriStar is 8.69%, the effective rate on the Subordinated Notes. The Partnership
used the net proceeds to repay indebtedness under its Credit Facility and to
invest in MIP. These notes are unsecured obligations of the Partnership and
provide for semi-annual payments of interest on February 15 and August 15,
commencing on August 15, 1999. The outstanding balance on these notes payable to
MeriStar is $202,429 and $202,041 at December 31, 2000 and 1999, respectively.

In 1997, MeriStar completed the offering of $172,500 aggregate principal
amount of its 4.75% convertible subordinated notes due 2004 (the "Convertible
Notes"). In conjunction with this transaction, the Partnership borrowed $172,500
from MeriStar under terms matching those of the Convertible Notes. The proceeds
were used to repay outstanding indebtedness under a prior credit facility and to
finance certain hotel acquisitions. The note provides for semi-annual payments
of interest on April 15 and October 15, commencing on April 15, 1998. During
2000, the Partnership repaid $18,200 of its note to MeriStar at a discount in
connection with MeriStar's repurchase of its Convertible Notes at an equal
discount. This resulted in an extraordinary gain of $3,450 ($3,400, net of
taxes). The outstanding balance on this note payable to MeriStar is $154,300 and
$172,500 at December 31, 2000 and 1999, respectively.

Hedge Agreements -- As of December 31, 2000, the Partnership has seven swap
agreements with notional principal amounts totaling $700,000. These swap
agreements provide hedges against the impact future interest rates have on the
Partnership's floating London Interbank Offered Rate ("LIBOR") debt instruments.
The swap agreements effectively fix the 30-day LIBOR between 6.0% and 7.2%. The
swap agreements expire between September 2001 and July 2003. For the year ended
December 31, 2000, the Partnership has received net payments of $3,081 on these
swaps and other similar swaps that expired during the year.

In anticipation of the August 1999 completion of the Secured Facility, the
Partnership entered into two separate hedge transactions during July 1999. Upon
completion of the Secured Facility, the Partnership terminated the underlying
treasury lock agreements, resulting in a net payment to the Partnership of
$5,100. The amount was deferred and is being recognized as a reduction to
interest expense over the life of the underlying debt. As a result, the
effective interest rate on the Secured Facility is 7.76%.

As of December 31, 2000, after consideration of the hedge agreements
described above, the Partnership has fixed the effective interest rate on 88% of
its long-term debt and its overall weighted average interest rate is 7.93%.

Future Maturities -- Aggregate future maturities of the above obligations
are as follows:

<Table>

2001.................................................... $ 28,288
2002.................................................... 47,897
2003.................................................... 667,589
2004.................................................... 361,168
2005.................................................... 9,265
Thereafter.............................................. 524,112
----------
$1,638,319
==========
</Table>

Management has determined that the fair value of the outstanding balance of
the Partnership's long-term debt approximates $1,589,311 at December 31, 2000.

F-102
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

The Partnership's income taxes were allocated as follows:

<Table>
<Caption>
2000 1999 1998
------ ------ ------

Taxes on income before gain on sale of assets, and
extraordinary gain (loss)................................ $1,622 $1,681 $1,299
Taxes on gain on sale of assets............................ 56 -- --
Tax expense or (benefit) on extraordinary gain (loss)...... 50 (74) (207)
------ ------ ------
$1,728 $1,607 $1,092
====== ====== ======
</Table>

The Partnership's effective income tax rate is as follows:

<Table>
<Caption>
2000 1999 1998
---- ---- ----

State and local taxes....................................... 1.1% 1.1% 1.1%
Difference in effective rate on foreign subsidiaries........ 0.3 0.3 0.3
Other....................................................... -- -- 0.1
--- --- ---
1.4% 1.4% 1.5%
=== === ===
</Table>

The components of income tax expense related to income before gain on sale
of assets, and extraordinary gain (loss) are as follows:

<Table>
<Caption>
2000 1999 1998
------ ------ ------

Current:
State.................................................... $ 640 $ 815 $1,408
Foreign.................................................. 346 151 161
------ ------ ------
986 966 1,569
Deferred:
State.................................................... 548 675 (270)
Foreign.................................................. 88 40 --
------ ------ ------
636 715 (270)
------ ------ ------
$1,622 $1,681 $1,299
====== ====== ======
</Table>

The tax effects of the principal temporary differences that give rise to
the Partnership's net deferred tax liability are as follows:

<Table>
<Caption>
DECEMBER 31,
----------------
2000 1999
------ ------

Accelerated depreciation.................................... $2,089 $1,477
Fair value of hotel assets acquired......................... 5,440 5,440
Allowance for doubtful accounts............................. (24) (24)
Accrued vacation............................................ (12) (12)
Accrued expenses............................................ 386 386
Other....................................................... 234 210
------ ------
Net deferred tax liability.................................. $8,113 $7,477
====== ======
</Table>

There is no valuation allowance for deferred tax assets as of December 31,
2000 or 1999 as management believes it is more likely than not that these
deferred tax assets will be fully realized.

F-103
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In conjunction with the Merger and related transactions, the Partnership
established a new accounting basis for AGH's assets and liabilities based on
their fair values. In accordance with accounting principles generally accepted
in the United States of America, the Partnership has provided a deferred income
tax liability for the estimated future tax effect of differences between the
accounting and tax bases of assets acquired from AGH. This deferred income tax
liability, related to future state and local income taxes, is estimated as
$5,440, based on information available at the date of the Merger and
subsequently.

8. PARTNERSHIP UNITS

The outstanding units of limited partnership interest in the Partnership
held by third parties are redeemable at the option of the holder for a like
number of shares of common stock of MeriStar, or cash, or a combination thereof,
at the election of MeriStar. Due to these redemption rights, these limited
partnership units have been excluded from partners' capital and are included in
redeemable OP units and measured at redemption value as of the end of the
periods presented. At December 31, 2000 and 1999 there were 4,056,111 and
4,544,420 redeemable units outstanding, respectively. The value of these
redeemable units is based on the closing market price of MeriStar's common stock
at the balance sheet date, which at December 31, 2000 and 1999 was $19.70 and
$16.00, respectively. In addition, there were 392,157 Class D Preferred OP Units
outstanding at December 31, 2000 and 1999 with a redemption value of $22.16 per
unit.

The Partnership's agreement provides for four classes of partnership
interests ("OP Units"): Common OP Units, Class B OP Units, Class C OP Units and
Class D OP Units. Common OP Units and Class B OP Units receive quarterly
distributions per OP Unit equal to the dividend paid on each share of MeriStar's
common stock. Class C OP Units receive a non-cumulative, quarterly distribution
equal to $0.5575 per Class C OP Unit until such time as the dividend rate on
MeriStar's common stock exceeds $0.5575 whereupon the Class C OP Units
automatically convert into Common OP Units. Class D OP Units pay a 6.5%
cumulative annual preferred return based on an assumed price per common share of
$22.16, compounded quarterly to the extent not paid on a current basis. The
Partnership may redeem them at any time after April 1, 2000 at a price of $22.16
per share for cash or, at MeriStar's option, for shares of MeriStar common stock
having a value equal to the redemption price. The holders have the option to
redeem the Class D OP Units at any time after April 1, 2004 for cash or, at the
holders option, for shares of MeriStar common stock having a value equal to
$22.16. All net income earned and capital proceeds received by the Partnership,
after payment of the annual preferred return on Class D OP units, are shared by
the holders of the Common OP Units. As of December 31, 2000 and 1999,
outstanding OP Units were 48,459,145 and 51,800,888 respectively.

During 1999, 65,875 Common OP Units were issued to partially finance the
purchase of a hotel and 974,588 Common OP units were issued as a conditional
component of a purchase agreement for a hotel purchased in 1998. During 1998,
962,858 Common and Class B OP Units were issued to partially finance the
purchases of certain hotels and 3,305,175 Common OP Units were issued to former
holders of AGH OP Units. During 1997, the Partnership issued 1,483,759 Common
and Class B OP Units and 392,157 Class D OP Units to partially finance the
purchases of certain hotels and lease contracts on other hotels.

On March 21, 2000, June 21, 2000, September 25, 2000, and December 20,
2000, the Partnership declared its first, second, third and fourth quarter
distributions, respectively, equivalent to an annual rate of $2.02 per Common
and Class B OP Unit and $2.23 per Class C OP Unit in the Partnership. The amount
of the distribution for each quarter was $0.505 per Common and Class B OP Unit
and $0.5575 per Class C OP Unit and was paid on April 28, 2000, July 31, 2000,
October 31, 2000 and January 31, 2001, respectively.

F-104
330
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On March 17, 1999, June 21, 1999, September 15, 1999, and December 6, 1999,
the Partnership declared its first, second, third and fourth quarter
distributions, respectively, equivalent to an annual rate of $2.02 per Common
and Class B OP Unit and $2.23 per Class C OP Unit in the Partnership. The amount
of the distribution for each quarter was $0.505 per Common and Class C OP Unit
and $0.5575 per Class C OP Unit and was paid on April 30, 1999, July 30, 1999,
October 29, 1999 and January 31, 2000, respectively.

On September 2, 1998 and November 4, 1998, respectively, the Partnership
declared its third and fourth quarter distributions, equivalent to an annual
rate of $2.02 per Common and Class B OP Unit and $2.23 per Class C OP Unit in
the Partnership. The third quarter distribution was paid on a prorated basis
from August 4, 1998 (the first day of operations following the Merger) through
September 30, 1998. The amount of the distribution was $0.31837 per Common and
Class B OP Unit and was paid on October 30, 1998. The fourth quarter
distribution of $0.505 per Common and Class B OP Unit and $0.5575 per Class C OP
Unit was paid on January 29, 1999.

MeriStar, the General Partner, acting in its primary fiduciary capacity,
directs the operations of the Partnership, including the redemption of
Partnership units it holds, as well as the units held by MeriStar LP,
Inc., its wholly-owned subsidiary. As of December 31, 2000, the Partnership has
redeemed a total of 4,083,204 of its units and the units of MeriStar LP, Inc.
for $72,354 which has been recorded as a reduction to partners' capital.

F-105
331
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. EARNINGS PER UNIT

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per unit ("EPU") computations for income before
extraordinary gain (loss):

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- -------- -------

Basic EPU Computation:
Net income before extraordinary gain (loss)......... $114,636 $116,207 $86,304
Distributions paid related to unvested restricted
stock of MeriStar................................ (1,168) -- --
Preferred distributions............................. (565) (565) (650)
-------- -------- -------
Income before extraordinary gain (loss) available to
common unitholders............................... 112,903 115,642 85,654
Weighted average number of OP Units outstanding..... 50,122 52,153 36,021
-------- -------- -------
Basic EPU before extraordinary gain (loss).......... $ 2.25 $ 2.22 $ 2.38
======== ======== =======
Diluted EPU Computation:
Income before extraordinary gain (loss) available to
common unitholders............................... $112,903 $115,642 $85,654
Preferred distributions............................. 565 565 650
Interest on convertible debt of MeriStar............ 7,338 8,137 6,377
Distributions paid related to unvested restricted
stock of MeriStar................................ 254 -- --
-------- -------- -------
Adjusted net income................................. 121,060 124,344 92,681
Weighted average number of OP units outstanding..... 50,122 52,153 36,021
OP Unit equivalents:
Stock options of MeriStar........................ 208 102 383
Class D Preferred OP Units....................... 392 392 392
Convertible debt of MeriStar..................... 4,612 5,066 4,454
Restricted stock of MeriStar..................... 126 -- --
-------- -------- -------
Weighted average number of diluted OP units
outstanding.................................... 55,460 57,713 41,250
-------- -------- -------
Diluted EPU before extraordinary gain (loss)..... $ 2.18 $ 2.15 $ 2.25
======== ======== =======
</Table>

10. RELATED-PARTY TRANSACTIONS

Pursuant to an intercompany agreement, the Partnership and OpCo provide
each other with, among other things, reciprocal rights to participate in certain
transactions entered into by each party. In particular, OpCo has a right of
first refusal to become the lessee of any real property acquired by the
Partnership. OpCo also may provide the Partnership with certain services
including administrative, renovation supervision, corporate, accounting,
finance, insurance, legal, tax, information technology, human resources,
acquisition identification and due diligence, and operational services, for
which OpCo is compensated in an amount that the Partnership would be charged by
a third party for comparable services. During the years ended December 31, 2000,
1999 and 1998, the Partnership paid OpCo $1,165, $1,600 and $781 respectively,
for such services.

F-106
332
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Summarized financial information of the Partnership's significant lessee,
OpCo, is as follows:

<Table>
<Caption>
2000 1999
---------- ----------

BALANCE SHEET DATA:
Total assets...................................... $ 339,118 $ 258,931
Total liabilities................................. $ 254,673 $ 179,168
</Table>

<Table>
<Caption>
2000 1999 1998
---------- ---------- --------

OPERATING DATA:
Revenue........................................... $1,411,619 $1,292,114 $562,347
Net income (loss)................................. $ (9,380) $ 6,685 $ 3,950
</Table>

OpCo has a revolving credit facility with the Partnership. On March 1,
2000, OpCo repaid the remaining balance of $57,110 on its revolving credit
agreement with the Partnership upon closing its bank revolving credit facility.
At this time, the revolving credit agreement was amended to reduce the maximum
borrowing limit from $75,000 to $50,000 and the interest rate on the facility
was changed from LIBOR plus 350 basis points to LIBOR plus 650 basis points.
During 2000, 1999 and 1998, the Partnership earned interest of $955, $4,907, and
$1,967, respectively, from this facility. There were no amounts outstanding
under this facility at December 31, 2000.

In order for AGH to qualify as a REIT prior to the Merger, AGH's operating
partnership sold certain personal property relating to certain of the hotels
acquired by AGH in connection with its initial public offering to AGH Leasing,
L.P. (which has since come under the control of OpCo) for $315, which amount was
paid by issuance of a promissory note to AGH's operating partnership. The note
was transferred to the Partnership in connection with the Merger. The promissory
note bears interest at the rate of 10.0% per annum and requires the payment of
quarterly installments of principal and interest over a five-year period ending
on July 31, 2000. This note was repaid during 2000.

Certain members of management and their respective affiliates owned equity
interests relating to a hotel which was acquired by the Partnership in January
1999. Such persons and affiliates received an aggregate of $1,488 of the
Partnership's OP Units in exchange for such interests in the hotel.

11. STOCK-BASED COMPENSATION

MeriStar sponsors a restricted stock plan and a stock option plan (the
"Plans") in which Partnership employees participate. Upon issuance of any stock,
MeriStar is obligated to contribute the proceeds to the Company in exchange for
an equal number of OP units.

Stock Options

At the date of the Merger, CapStar had outstanding approximately 1,758,000
options (the "CapStar Options") under an equity incentive plan. As a result of
the Merger, all holders of CapStar Options received one option in MeriStar and
one option in OpCo, and the original exercise price of the CapStar Options was
allocated between the two companies. In addition, approximately 1,060,000 of the
CapStar Options became fully vested as of the Merger date.

In connection with the Merger, a new equity incentive plan (the "Equity
Incentive Plan") was adopted. This plan authorizes 4,549,561 shares of common
stock to be awarded. Awards may be granted to officers or other key employees of
MeriStar or an affiliate. These shares are exercisable in three annual
installments and expire ten years from the grant date.

F-107
333
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock option activity for 2000, 1999 and 1998 is as follows:

<Table>
<Caption>
NUMBER OF AVERAGE
SHARES OPTION PRICE
--------- ------------

Balance, January 1, 1998.................................... 1,601,406 $26.28
Granted................................................... 2,171,796 24.78
Exercised................................................. (37,823) 17.45
Forfeited................................................. (32,000) 29.44
--------- ------
Balance, December 31, 1998.................................. 3,703,379 24.80
Granted................................................... 1,015,750 19.37
Exercised................................................. (94,012) 15.64
Forfeited................................................. (264,064) 27.87
--------- ------
Balance, December 31, 1999.................................. 4,361,053 23.56
Granted................................................... 584,875 16.13
Exercised................................................. (47,153) 17.26
Forfeited................................................. (113,441) 28.62
--------- ------
Balance, December 31, 2000.................................. 4,785,334 $22.68
========= ======
Shares exercisable at December 31, 1998..................... 2,231,072 $24.63
========= ======
Shares exercisable at December 31, 1999..................... 2,577,620 $24.53
========= ======
Shares exercisable at December 31, 2000..................... 3,482,816 $23.99
========= ======
</Table>

The following table summarizes information about stock options outstanding
at December 31, 2000:

<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- -------- ----------- --------

$14.88 to $19.19 1,978,572 7.58 $17.17 1,051,410 $16.59
$19.75 to $25.31 1,160,502 7.04 21.62 852,206 21.68
$25.80 to $31.42 1,435,280 6.02 29.98 1,435,280 29.98
$31.51 to $32.08 210,980 7.00 32.05 143,920 32.04
--------- ---- ------ --------- ------
$14.88 to $32.08 4,785,334 6.96 $22.75 3,482,816 $23.99
========= ==== ====== ========= ======
</Table>

Other Stock Compensation

In conjunction with the Merger, holders of CapStar options were granted a
total of 150,000 shares of stock with a value of $3,205. This restricted stock
vests ratably over a three-year period.

As of December 31, 2000, MeriStar granted 586,500 shares of restricted
stock. This restricted stock vests ratably over a three-year or five-year
period. The Partnership incurred $3,070 in compensation expense in 2000 related
to the amortization of this restricted stock.

As of December 31, 2000, the Partnership has issued 462,500 Profits-Only OP
Units to certain of the Partnership's executive officers pursuant to a
Profits-Only Operating Partnership Units Plan. The units vest over three years
based on achieving certain operating performance criteria and upon the
occurrence of certain other events. The Profits-Only OP Units are subject to
variable plan accounting.

F-108
334
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. COMMITMENTS AND CONTINGENCIES

The Partnership leases land at certain hotels from third parties. Certain
leases contain contingent rent features based on gross revenues at the
respective property. Future minimum lease payments required under these
operating leases as of December 31, 2000 were as follows:

<Table>

2001...................................................... $ 1,556
2002...................................................... 1,556
2003...................................................... 1,556
2004...................................................... 1,559
2005...................................................... 1,559
Thereafter................................................ 57,396
-------
$65,182
=======
</Table>

Until January 1, 2001 the Partnership leased all of its hotels to OpCo and
one other lessee under non-cancelable participating leases that expire from 2009
to 2011. Beginning January 1, 2001, the Partnership will lease eight hotels to
one lessee under non-cancelable participating leases that expire in 2009. The
Partnership also leases certain office, retail and parking space to outside
parties under non-cancelable operating leases with initial or remaining terms in
excess of one year. Future minimum rental receipts under these non-cancelable
leases as of December 31, 2000 were as follows:

<Table>

2001..................................................... $ 20,289
2002..................................................... 19,801
2003..................................................... 18,937
2004..................................................... 18,590
2005..................................................... 16,945
Thereafter............................................... 63,428
--------
$157,990
========
</Table>

In the course of the Partnership's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or asserted
against the Partnership. Based on currently available facts, management believes
that the disposition of matters that are pending or asserted will not have a
material adverse effect on the consolidated financial position, results of
operations or liquidity of the Partnership.

13. ACQUISITIONS AND DISPOSITIONS

During 2000, the Partnership sold three limited service hotels and received
proceeds of $24,148. This resulted in a gain on sale of assets of $3,495
($3,439, net of tax). The Partnership also purchased a full service hotel for
$19,400. Of the $19,400, $11,400 was paid in cash and $8,000 will be paid from
the hotel's future cash flow within the next five years. The acquisition was
funded using existing cash and borrowings on the Credit Facility.

During 1999, the Partnership acquired one hotel for a purchase price of
$10,642 of cash and $1,488 of OP Units. The acquisition was funded using
existing cash and borrowings on the Credit Facility. The Partnership also sold 2
hotels during 1999 for a total price of $8,900. The resulting gain on the sales
was immaterial.

During 1998, the Partnership acquired 70 hotels (containing 17,332 rooms),
of which 53 were acquired pursuant to the Merger. MeriStar purchased AGH for
approximately $1,306,000. MeriStar contributed the net assets acquired to the
Partnership in exchange for approximately 23,913,000 OP Units. The total
purchase price for the remaining 17 acquired hotels during 1998 was $549,068 of
cash and

F-109
335
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$16,932 of OP Units. The cash portions of these acquisitions were funded through
borrowings on the Credit Facility and a prior credit facility.

The following unaudited pro forma information is presented as if the
Merger, the Spin-Off and all 117 hotels owned at December 31, 1998 had been
acquired at the beginning of 1998. The pro forma information is provided for
informational purposes only. It is based on historical information and does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the Company. Pro forma
information for 1998 for total revenue, net income and diluted EPU is $332,299,
$107,698 and $2.44, respectively.

F-110
336
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. CONSOLIDATING FINANCIAL INFORMATION

Certain of the Partnership's wholly-owned subsidiaries, together with the
Partnership, are guarantors of the Credit Facility and $500 million of senior
unsecured notes issued subsequent to December 31, 2000. The following tables
present consolidating information for the guarantor subsidiaries.

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

ASSETS

Investments in hotel
properties, net.............. $ 7,443 $1,448,104 $1,450,954 $ -- $2,906,501
Cash and cash equivalents...... 242 -- -- -- 242
Accounts receivable, net....... 94 1,525 1,214 -- 2,833
Prepaid expenses and other..... 2,563 381 (177) -- 2,767
Notes receivable............... 87,887 -- -- (87,887) --
Due from Lessee................ (12,130) (450) 34,801 -- 22,221
Due from subsidiaries.......... (194,739) 193,304 1,435 -- --
Investments in and advances to
affiliates................... 2,661,521 59,662 8,487 (2,687,474) 42,196
Restricted cash................ 14,709 -- 5,209 -- 19,918
Intangible assets, net......... 7,531 1,432 859 -- 9,822
---------- ---------- ---------- ----------- ----------
$2,575,121 $1,703,958 $1,502,782 $(2,775,361) $3,006,500
========== ========== ========== =========== ==========

LIABILITIES, MINORITY INTERESTS AND PARTNERS' CAPITAL

Accounts payable, accrued
expenses and other
liabilities.................. $ 32,061 $ 24,189 $ 15,947 $ -- $ 72,197
Accrued interest............... 23,701 -- 4,664 -- 28,365
Income taxes payable........... 921 -- -- -- 921
Distributions payable.......... 24,581 -- -- -- 24,581
Deferred income taxes.......... 8,113 -- -- -- 8,113
Notes payable to MeriStar...... 356,729 -- -- -- 356,729
Mortgages and notes payable.... 897,698 88,189 383,590 (87,887) 1,281,590
---------- ---------- ---------- ----------- ----------
Total liabilities.... 1,343,804 112,378 404,201 (87,887) 1,772,496
Minority interests............. -- 2,687 -- -- 2,687
Redeemable OP units at
redemption value............. 88,545 -- -- -- 88,545
Partners' capital.............. 1,142,772 1,588,893 1,098,581 (2,687,474) 1,142,772
---------- ---------- ---------- ----------- ----------
$2,575,121 $1,703,958 $1,502,782 $(2,775,361) $3,006,500
========== ========== ========== =========== ==========
</Table>

F-111
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ -------------- ------------ ------------

ASSETS

Investments in hotel
properties, net............. $ 2,129 $1,378,706 $1,555,458 $ -- $2,936,293
Cash and cash equivalents..... 2,549 -- -- -- 2,549
Accounts receivable, net...... -- 1,076 252 -- 1,328
Prepaid expenses and other.... 5,873 2,698 566 -- 9,137
Notes receivable.............. 144,319 -- -- (87,209) 57,110
Due from Lessee............... (20,583) (3,472) 35,531 -- 11,476
Due from subsidiaries......... (181,843) 70,174 111,669 -- --
Investments in and advances to
affiliates.................. 2,674,559 60,097 8,487 (2,703,058) 40,085
Restricted cash............... 13,100 43 4,045 -- 17,188
Intangible assets, net........ 8,088 2,071 771 -- 10,930
---------- ---------- ---------- ----------- ----------
$2,648,191 $1,511,393 $1,716,779 $(2,790,267) $3,086,096
========== ========== ========== =========== ==========

LIABILITIES, MINORITY INTERESTS AND PARTNERS' CAPITAL

Accounts payable, accrued
expenses and other
liabilities................. $ 23,607 $ 17,793 $ 14,466 $ -- $ 55,866
Accrued interest.............. 26,072 -- 5,308 -- 31,380
Income taxes payable.......... 730 -- -- -- 730
Distributions payable......... 26,263 -- -- -- 26,263
Deferred income taxes......... 7,477 -- -- -- 7,477
Note payable to MeriStar...... 374,541 -- -- -- 374,541
Mortgages and notes payable... 904,582 90,627 394,230 (87,209) 1,302,230
---------- ---------- ---------- ----------- ----------
Total liabilities... 1,363,272 108,420 414,004 (87,209) 1,798,487
Minority interests............ -- 2,690 -- -- 2,690
Redeemable OP units at
redemption value............ 81,401 -- -- -- 81,401
Partners' capital............. 1,203,518 1,400,283 1,302,775 (2,703,058) 1,203,518
---------- ---------- ---------- ----------- ----------
$2,648,191 $1,511,393 $1,716,779 $(2,790,267) $3,086,096
========== ========== ========== =========== ==========
</Table>

F-112
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF OPERATIONS
DECEMBER 31, 2000

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

Revenue:
Participating lease revenue....... $ 6,544 $183,959 $201,226 -- $391,729
Office rental, parking and other
revenue........................ 2,149 2,404 4,403 -- 8,956
-------- -------- -------- --------- --------
Total revenue............. 8,693 186,363 205,629 -- 400,685
Expenses:
Office rental, parking and other
operating expenses............. -- 928 1,803 -- 2,731
Undistributed operating expenses:
Administrative and general..... 8,820 475 150 -- 9,445
Property taxes, insurance and
other........................ 2,732 22,822 21,927 -- 47,481
Depreciation and
amortization................. 4,588 52,767 53,333 -- 110,688
-------- -------- -------- --------- --------
Total operating
expenses................ 16,140 76,992 77,213 -- 170,345
-------- -------- -------- --------- --------
Net operating income (loss)......... (7,447) 109,371 128,416 -- 230,340
Interest expense, net............... 86,748 4,619 26,157 -- 117,524
Equity in earnings of consolidated
entities.......................... 210,453 -- -- (210,453) --
-------- -------- -------- --------- --------
Income before minority interests,
income taxes, gain on sale of
assets, and extraordinary gain.... 116,258 104,752 102,259 (210,453) 112,816
Minority interests.................. -- (3) -- -- (3)
-------- -------- -------- --------- --------
Income before income taxes, gain on
sale of assets, and extraordinary
gain.............................. 116,258 104,755 102,259 (210,453) 112,819
Income taxes........................ 1,622 -- -- -- 1,622
-------- -------- -------- --------- --------
Income before gain on sale of
assets, and extraordinary gain.... 114,636 104,755 102,259 (210,453) 111,197
Gain on sale of assets, net......... -- -- 3,439 -- 3,439
Extraordinary gain on early
extinguishment of debt, net....... 3,400 -- -- -- 3,400
-------- -------- -------- --------- --------
Net income.......................... $118,036 $104,755 $105,698 $(210,453) $118,036
======== ======== ======== ========= ========
</Table>

F-113
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF OPERATIONS
DECEMBER 31, 1999

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL CONSOLIDATED
------------ ------------ -------------- ------------ ------------------

Revenue:
Participating lease revenue.... $ 7,373 $169,392 $191,247 -- $368,012
Office rental, parking and
other revenue............... 656 2,012 4,140 -- 6,808
-------- -------- -------- --------- --------
Total revenue.......... 8,029 171,404 195,387 -- 374,820
Expenses:
Office rental, parking and
other operating expenses.... 21 578 1,365 -- 1,964
Undistributed operating
expenses:
Administrative and
general................... 5,209 444 82 -- 5,735
Property taxes, insurance
and other................. 2,818 23,819 20,390 -- 47,027
Depreciation and
amortization.............. 4,196 46,442 51,157 -- 101,795
-------- -------- -------- --------- --------
Total operating
expenses............. 12,244 71,283 72,994 -- 156,521
-------- -------- -------- --------- --------
Net operating income (loss)...... (4,215) 100,121 122,393 -- 218,299
Interest expense, net............ 80,798 3,083 16,506 -- 100,387
Equity in earnings of
consolidated entities.......... 200,350 -- -- (200,350) --
-------- -------- -------- --------- --------
Income before minority interests,
income taxes, and extraordinary
loss........................... 115,337 97,038 105,887 (200,350) 117,912
Minority interests............... -- 24 -- -- 24
-------- -------- -------- --------- --------
Income before income taxes and
extraordinary loss............. 115,337 97,014 105,887 (200,350) 117,888
Income taxes..................... 1,681 -- -- -- 1,681
-------- -------- -------- --------- --------
Income before extraordinary
loss........................... 113,656 97,014 105,887 (200,350) 116,207
Extraordinary loss on early
extinguishment of debt, net.... (2,000) (703) (1,848) -- (4,551)
-------- -------- -------- --------- --------
Net income....................... $111,656 $ 96,311 $104,039 $(200,350) $111,656
======== ======== ======== ========= ========
</Table>

F-114
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF OPERATIONS
DECEMBER 31, 1998

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ -------------- ------------ ------------

Revenue:
Participating lease
revenue................... $ 411 $ 51,007 $ 84,576 -- $135,994
Hotel operations:
Rooms..................... -- 131,729 143,881 -- 275,610
Food and beverage......... -- 53,437 31,937 -- 85,374
Other operating
departments............ -- 11,298 8,198 -- 19,496
Office rental, parking and
other revenue............. 356 3,014 2,187 -- 5,557
-------- -------- -------- --------- --------
Total revenue.......... 767 250,485 270,779 -- 522,031
Hotel operating expenses by
department:
Rooms..................... -- 32,378 32,670 -- 65,048
Food and beverage......... -- 42,941 24,552 -- 67,493
Other operating
departments............ -- 5,831 4,144 -- 9,975
Office rental, parking and
other operating
expenses.................. 1 1,586 1,126 -- 2,713
Undistributed operating
expenses:
Administrative and
general................ 1,504 27,343 23,366 -- 52,213
Property operating
costs.................. -- 29,920 28,691 -- 58,611
Property taxes, insurance
and other.............. 2,815 14,161 12,264 -- 29,240
Lease expense............. -- 1,449 33,192 -- 34,641
Depreciation and
amortization........... 338 28,095 30,409 -- 58,842
Spin-off costs............ 7,345 -- -- -- 7,345
-------- -------- -------- --------- --------
Total operating
expenses............. 12,003 183,704 190,414 -- 386,121
Net operating income (loss)...... (11,236) 66,781 80,365 -- 135,910
Interest expense, net............ 28,350 12,283 9,859 -- 50,492
Equity in earnings of
consolidated entities.......... 126,635 -- -- (126,635) --
Income before minority interests,
income taxes, and extraordinary
loss........................... 87,049 54,498 70,506 (126,635) 85,418
Minority interests............... -- (2,185) -- -- (2,185)
-------- -------- -------- --------- --------
Income before income taxes and
extraordinary loss............. 87,049 56,683 70,506 (126,635) 87,603
Income taxes..................... 1,299 -- -- -- 1,299
-------- -------- -------- --------- --------
Income before and extraordinary
loss........................... 85,750 56,683 70,506 (126,635) 86,304
Extraordinary loss on early
extinguishment of debt, net of
tax effect..................... (684) (390) (164) -- (1,238)
-------- -------- -------- --------- --------
Net income....................... $ 85,066 $ 56,293 $ 70,342 $(126,635) $ 85,066
======== ======== ======== ========= ========
</Table>

F-115
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 2000

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------

Cash flows provided by (used in)
operating activities........... $ (74,731) $ 31,632 $ 267,187 $ -- $ 224,088
Cash flows provided by (used in)
investing activities........... 360,238 (118,154) 53,522 (309,892) (14,286)
Cash flows provided by (used in)
financing activities........... (287,814) 86,458 (320,709) 309,892 (212,173)
Effect of exchange rate changes
on cash and cash equivalents... -- 64 -- -- 64
--------- --------- --------- --------- ---------
Net decrease in cash and cash
equivalents.................... (2,307) -- -- -- (2,307)
Cash and cash equivalents,
beginning of year.............. 2,549 -- -- -- 2,549
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of
year........................... $ 242 $ -- $ -- $ -- $ 242
========= ========= ========= ========= =========
</Table>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 1999

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

Cash flows provided by (used in)
operating activities........... $(184,109) $126,905 $ 285,533 $ -- $ 228,329
Cash flows provided by (used in)
investing activities........... 277,432 (85,854) 137,685 (517,215) (187,952)
Cash flows provided by (used in)
financing activities........... (93,411) (42,534) (423,218) 517,215 (41,948)
Effect of exchange rate changes
on cash and cash equivalents... -- (53) -- -- (53)
--------- -------- --------- --------- ---------
Net decrease in cash and cash
equivalents.................... (88) (1,536) -- -- (1,624)
Cash and cash equivalents,
beginning of year.............. 2,637 1,536 -- -- 4,173
--------- -------- --------- --------- ---------
Cash and cash equivalents, end of
year........................... $ 2,549 $ -- $ -- $ -- $ 2,549
========= ======== ========= ========= =========
</Table>

F-116
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATING STATEMENT OF CASH FLOWS
DECEMBER 31, 1998

<Table>
<Caption>
MERISTAR
HOSPITALITY GUARANTOR NON-GUARANTOR TOTAL
OP, L.P. SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------------- ------------ -------------- ------------

Cash flows provided by (used in) operating
activities.............................. $(232,033) $ 435,117 $ (16,193) $ 186,891
Cash flows used in investing activities... (134,404) (520,784) (130,317) (785,505)
Cash flows provided by financing
activities.............................. 291,881 84,575 144,001 520,457
Effect of exchange rate changes on cash
and cash equivalents.................... -- 204 -- 204
--------- --------- --------- ---------
Net decrease in cash and cash
equivalents............................. (74,556) (888) (2,509) (77,953)
Cash and cash equivalents, beginning of
year.................................... 77,193 2,424 2,509 82,126
--------- --------- --------- ---------
Cash and cash equivalents, end of year.... $ 2,637 $ 1,536 $ -- $ 4,173
========= ========= ========= =========
</Table>

15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of the Partnership's quarterly results of
operations:

<Table>
<Caption>
2000 1999
--------------------------------------- ---------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- -------- -------- ------- ------- -------- --------

Total revenue........... $67,080 $81,515 $117,607 $134,483 $64,072 $74,034 $103,193 $133,521
Total operating
expenses.............. 41,339 43,331 42,206 43,469 39,210 38,355 37,388 41,568
Net operating income.... 25,741 38,184 75,401 91,014 24,682 35,679 65,805 91,953
Income before
extraordinary (loss)
gain.................. (2,986) 11,851 45,633 60,138 755 9,150 41,145 65,157
Net income.............. 414 11,851 45,633 60,138 755 9,150 36,594 65,157
Diluted earnings per
unit.................. $ (0.06) $ 0.23 $ 0.85 $ 1.15 $ 0.01 $ 0.17 $ 0.75 $ 1.17
</Table>

16. SUPPLEMENTAL CASH FLOW INFORMATION

<Table>
<Caption>
2000 1999 1998
-------- ------- ----------

Cash paid for interest:
Interest, net of capitalized interest of $8,613,
$12,540 and $5,182, respectively................ $120,539 $93,491 $ 48,156
Income taxes....................................... 699 1,009 2,388
Non-cash investing and financing activities:
Long-term debt assumed in purchase of property and
equipment....................................... -- -- 543
OP Units issued in purchase of property and
equipment....................................... -- 1,488 16,932
Redemption of redeemable OP Units.................. 24 29,412 31,430
Deferred purchase price............................ 8,000 -- --
Book value of assets distributed to spun-off
affiliate....................................... -- -- 41,449
Book value of liabilities distributed to spun-off
affiliate....................................... -- -- (11,768)
Book value of debt distributed to spun-off
affiliate....................................... -- -- (1,116)
Fair value of assets acquired in Merger............ -- -- 1,306,018
Fair value of liabilities assumed in Merger........ -- -- (26,167)
Fair value of debt assumed in Merger............... -- -- (523,944)
</Table>

F-117
343
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. SUBSEQUENT EVENTS

On January 26, 2001, the Partnership sold $300,000 of 9.0% senior notes due
2008 and $200,000 of 9.13% senior notes due 2011 (collectively the "Senior
Unsecured Notes"). The notes are unsecured obligations of the Partnership.
MeriStar, together with a number of the Partnership's subsidiaries, guarantee
payment of principal and interest on the notes on a senior unsecured basis. The
net proceeds from the sale of $492,000 were used to repay amounts outstanding
under the Credit Facility and to make payments to terminate certain agreements
that hedged variable interest rates of the loans that were repaid. The
terminated swap agreements had notional amounts of $300,000. The Partnership
recognized a loss of $9,297 on these terminations.

In the first quarter 2001, the Partnership wrote-off its $2,112 investment
in STS Hotel Net after determining that the carrying value of the investment was
not recoverable.

On May 2, 2001, the Partnership paid $1,504 to acquire four hotel leases
from affiliates of Prime Hospitality Corporation. Concurrently, the Partnership
signed long-term management contracts with OpCo for these properties.

On May 9, 2001, the Partnership and MeriStar entered into an Agreement and
Plan of Merger with FelCor Lodging Trust Incorporated ("FelCor")and its
operating partnership. Under the merger agreement, a wholly-owned subsidiary of
FelCor's operating partnership will merge with and into the Partnership, and
MeriStar will merge with and into FelCor. Holders of MeriStar common stock will
receive 0.784 of a share of FelCor common stock and $4.60 in cash for each share
of MeriStar's common stock. Holders of OP Units will receive $4.60 in cash and
0.784 FelCor operating partnership units. Class D Preferred OP Units will get
Series D preferred units in FelCor operating partnership on a one for one basis.
The merger agreement requires the approval of holders of a majority of
MeriStar's outstanding shares of common stock and holders of a majority of the
outstanding shares of common stock of FelCor. MeriStar currently expects the
merger to close during the third quarter of 2001.

F-118
344

MERISTAR HOSPITALITY CORPORATION

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
COSTS SUBSEQUENT
INITIAL COST TO COMPANY TO ACQUISITION
----------------------- ----------------
BUILDING BUILDING
AND AND
ENCUM- IMPROVE- IMPROVE-
DESCRIPTION BRANCES LAND MENTS LAND MENTS
- ----------- ------- --------- ----------- ----- --------

HOTEL ASSETS:
Salt Lake Airport Hilton, UT.............. -- $ 770 $ 12,828 $ -- $ 2,827
Radisson Hotel, Schaumburg, IL............ -- 1,080 5,131 -- 2,282
Sheraton Hotel, Colorado Springs, CO...... (1) 1,071 14,592 1 3,728
Hilton Hotel, Bellevue, WA................ 48 5,211 6,766 -- 3,186
Marriott Hotel, Somerset, NJ.............. (1) 1,978 23,001 -- 4,390
Westin Atlanta Airport, Atlanta, GA....... -- 2,650 15,926 (300) 9,403
Sheraton Hotel, Charlotte, NC............. (1) 4,700 11,057 -- 3,906
Radisson Hotel Southwest, Cleveland, OH... -- 1,330 6,353 -- 4,547
Orange County Airport Hilton, Irvine,
CA...................................... (1) 9,990 7,993 -- 3,133
The Latham Hotel, Washington, DC.......... -- 6,500 5,320 -- 3,889
Hilton Hotel, Arlington, TX............... (1) 1,836 14,689 79 2,828
Hilton Hotel, Arlington, VA............... -- 4,000 15,069 -- 496
Southwest Hilton, Houston, TX............. -- 2,300 15,665 -- 1,244
Embassy Suites, Englewood, CO............. (1) 2,500 20,700 -- 2,782
Holiday Inn, Colorado Springs, CO......... -- 1,600 4,232 -- 1,057
Embassy Row Hilton, Washington, DC........ -- 2,200 13,247 -- 2,240
Hilton Hotel & Towers, Lafayette, LA...... (1) 1,700 16,062 -- 1,808
Hilton Hotel, Sacramento, CA.............. (1) 4,000 16,013 -- 1,678
Santa Barbara Inn, Santa Barbara, CA...... -- 2,600 5,141 -- 1,110
San Pedro Hilton, San Pedro, CA........... -- 640 6,047 -- 2,300
Doubletree Hotel, Albuquerque, NM......... (1) 2,700 15,075 -- 823
Westchase Hilton & Towers, Houston, TX.... (1) 3,000 23,991 -- 1,531
Four Points Hotel, Cherry Hill, NJ........ -- 1,700 4,178 -- 2,181
Sheraton Great Valley Inn, Frazer, PA..... -- 2,150 11,653 11 2,712
Holiday Inn Calgary Airport, Calgary,
Alberta, Canada......................... -- 751 5,011 (36) 1,428
Sheraton Hotel Dallas, Dallas, TX......... -- 1,300 17,268 -- 2,358
Radisson Hotel Dallas, Dallas, TX......... -- 1,800 17,580 -- 1,466
Sheraton Hotel Guildford, Surrey, BC,
Canada.................................. -- 2,366 24,008 (112) (258)
Doubletree Guest Suites, Indianapolis,
IN...................................... 1,000 8,242 -- 893
Ramada Vancouver Centre, Vancouver, BC,
Canada.................................. -- 4,400 7,840 (208) 2,160
Holiday Inn Sports Complex, Kansas City,
MO...................................... -- 420 4,742 -- 1,551
Hilton Crystal City, Arlington, VA........ -- 5,800 29,879 -- 1,036
Doubletree Resort Hotel, Cathedral City,
CA...................................... -- 1,604 16,141 -- 2,837
Radisson Hotel & Suites, Chicago, IL...... 4,870 39,175 -- 1,793
Georgetown Inn, Washington, DC............ -- 6,100 7,103 -- 1,486
Embassy Suites Center City, Philadelphia,
PA...................................... (1) 5,500 26,763 -- 1,457
Doubletree Hotel Austin, Austin, TX....... (1) 2,975 25,678 -- 2,501
Radisson Plaza Hotel, Lexington, KY....... 240 1,100 30,375 -- 6,254
Jekyll Inn, Jekyll Island, GA............. -- -- 7,803 -- 3,218
Holiday Inn Metrotown, Burnaby, BC,
Canada.................................. -- 1,115 5,303 (53) 1,292
Embassy Suites International Airport,
Tucson, AZ.............................. -- 1,640 10,444 -- 2,214
Westin Morristown, NJ..................... -- 2,500 19,128 100 3,501
Doubletree Hotel Bradley International
Airport, Windsor Locks, CT.............. -- 1,013 10,228 87 1,422
Sheraton Hotel, Mesa, AZ.................. -- 1,850 16,938 -- 2,315
Metro Airport Hilton & Suites, Detroit,
MI...................................... -- 1,750 12,639 -- 1,311
Marriott Hotel, Los Angeles, CA........... -- 5,900 48,250 -- 7,208

GROSS AMOUNT AT END OF YEAR
---------------------------------
BUILDING ACCUM-
AND ULATED YEAR OF
IMPROVE- DEPRECIA- CONSTRUC- DATE
DESCRIPTION LAND MENTS TION TION ACQUIRED LIFE
- ----------- -------- ---------- --------- --------- -------- ----

HOTEL ASSETS:
Salt Lake Airport Hilton, UT.............. $ 770 $ 15,655 $ 2,184 1980 3/3/95 40
Radisson Hotel, Schaumburg, IL............ 1,080 7,413 908 1979 6/30/95 40
Sheraton Hotel, Colorado Springs, CO...... 1,072 18,320 2,387 1974 6/30/95 40
Hilton Hotel, Bellevue, WA................ 5,211 9,952 1,108 1979 8/4/95 40
Marriott Hotel, Somerset, NJ.............. 1,978 27,391 3,357 1978 10/3/95 40
Westin Atlanta Airport, Atlanta, GA....... 2,350 25,329 3,084 1982 11/15/95 40
Sheraton Hotel, Charlotte, NC............. 4,700 14,963 1,739 1985 2/2/96 40
Radisson Hotel Southwest, Cleveland, OH... 1,330 10,900 1,190 1978 2/16/96 40
Orange County Airport Hilton, Irvine,
CA...................................... 9,990 11,126 1,255 1976 2/22/96 40
The Latham Hotel, Washington, DC.......... 6,500 9,209 915 1981 3/8/96 40
Hilton Hotel, Arlington, TX............... 1,915 17,517 2,018 1983 4/17/96 40
Hilton Hotel, Arlington, VA............... 4,000 15,565 1,716 1990 8/23/96 40
Southwest Hilton, Houston, TX............. 2,300 16,909 1,728 1979 10/31/96 40
Embassy Suites, Englewood, CO............. 2,500 23,482 2,380 1986 12/12/96 40
Holiday Inn, Colorado Springs, CO......... 1,600 5,289 482 1974 12/17/96 40
Embassy Row Hilton, Washington, DC........ 2,200 15,487 1,482 1969 12/17/96 40
Hilton Hotel & Towers, Lafayette, LA...... 1,700 17,870 1,712 1981 12/17/96 40
Hilton Hotel, Sacramento, CA.............. 4,000 17,691 1,768 1983 12/17/96 40
Santa Barbara Inn, Santa Barbara, CA...... 2,600 6,251 602 1959 12/17/96 40
San Pedro Hilton, San Pedro, CA........... 640 8,347 753 1989 1/28/97 40
Doubletree Hotel, Albuquerque, NM......... 2,700 15,898 1,565 1975 1/31/97 40
Westchase Hilton & Towers, Houston, TX.... 3,000 25,522 2,485 1980 1/31/97 40
Four Points Hotel, Cherry Hill, NJ........ 1,700 6,359 553 1991 3/20/97 40
Sheraton Great Valley Inn, Frazer, PA..... 2,161 14,365 1,190 1971 3/27/97 40
Holiday Inn Calgary Airport, Calgary,
Alberta, Canada......................... 715 6,439 1,261 1981 4/1/97 40
Sheraton Hotel Dallas, Dallas, TX......... 1,300 19,626 1,771 1974 4/1/97 40
Radisson Hotel Dallas, Dallas, TX......... 1,800 19,046 1,746 1972 4/1/97 40
Sheraton Hotel Guildford, Surrey, BC,
Canada.................................. 2,254 23,750 3,558 1992 4/1/97 40
Doubletree Guest Suites, Indianapolis,
IN...................................... 1,000 9,135 824 1987 4/1/97 40
Ramada Vancouver Centre, Vancouver, BC,
Canada.................................. 4,192 10,000 1,605 1968 4/1/97 40
Holiday Inn Sports Complex, Kansas City,
MO...................................... 420 6,293 538 1975 4/30/97 40
Hilton Crystal City, Arlington, VA........ 5,800 30,915 2,681 1974 7/1/97 40
Doubletree Resort Hotel, Cathedral City,
CA...................................... 1,604 18,978 1,557 1985 7/1/97 40
Radisson Hotel & Suites, Chicago, IL...... 4,870 40,968 3,544 1971 7/15/97 40
Georgetown Inn, Washington, DC............ 6,100 8,589 655 1962 7/15/97 40
Embassy Suites Center City, Philadelphia,
PA...................................... 5,500 28,220 2,382 1963 8/12/97 40
Doubletree Hotel Austin, Austin, TX....... 2,975 28,179 2,295 1984 8/14/97 40
Radisson Plaza Hotel, Lexington, KY....... 1,100 36,629 2,876 1982 8/14/97 40
Jekyll Inn, Jekyll Island, GA............. -- 11,021 848 1971 8/20/97 40
Holiday Inn Metrotown, Burnaby, BC,
Canada.................................. 1,062 6,595 890 1989 8/22/97 40
Embassy Suites International Airport,
Tucson, AZ.............................. 1,640 12,658 901 1982 10/23/97 40
Westin Morristown, NJ..................... 2,600 22,629 1,626 1962 11/20/97 40
Doubletree Hotel Bradley International
Airport, Windsor Locks, CT.............. 1,100 11,650 838 1985 11/24/97 40
Sheraton Hotel, Mesa, AZ.................. 1,850 19,253 1,382 1985 12/5/97 40
Metro Airport Hilton & Suites, Detroit,
MI...................................... 1,750 13,950 995 1989 12/16/97 40
Marriott Hotel, Los Angeles, CA........... 5,900 55,458 3,956 1983 12/18/97 40
</Table>

F-119
345
MERISTAR HOSPITALITY CORPORATION

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<Table>
<Caption>
COSTS SUBSEQUENT
INITIAL COST TO COMPANY TO ACQUISITION
----------------------- ----------------
BUILDING BUILDING
AND AND
ENCUM- IMPROVE- IMPROVE-
DESCRIPTION BRANCES LAND MENTS LAND MENTS
- ----------- ------- --------- ----------- ----- --------

Austin Hilton & Towers, TX................ -- 2,700 15,852 -- 2,674
Dallas Renaissance North, TX.............. -- 3,400 20,813 -- 3,550
Houston Sheraton Brookhollow Hotel, TX.... -- 2,500 17,609 -- 2,148
Seelbach Hilton, Louisville, KY........... -- 1,400 38,462 -- 5,550
Midland Hilton & Towers, TX............... -- 150 8,487 -- 1,715
Westin Oklahoma, OK....................... -- 3,500 27,588 -- 1,683
Sheraton Hotel, Columbia, MD.............. -- 3,600 21,393 -- 3,744
Radisson Cross Keys, Baltimore, MD........ -- 1,500 5,615 -- 1,492
Sheraton Fisherman's Wharf, San Francisco,
CA...................................... (1) 19,708 61,751 -- 2,985
Hartford Hilton, CT....................... -- 4,073 24,458 -- 2,824
Holiday Inn Dallas DFW Airport South,
TX...................................... 12,634 3,388 28,847 -- 8
Courtyard by Marriott Meadowlands, NJ..... 3,979 -- 9,649 -- 45
Hotel Maison de Ville, New Orleans, LA.... -- 292 3,015 -- (2)
Hilton Hotel Toledo, OH................... -- -- 11,708 -- 38
Holiday Inn Select Dallas DFW Airport
West, TX................................ -- 947 8,346 -- 213
Holiday Inn Select New Orleans
International Airport, LA............... (1) 3,040 25,616 -- 2,150
Crowne Plaza Madison, WI.................. (1) 2,629 21,634 -- 210
Wyndham Albuquerque Airport Hotel, NM..... -- -- 18,889 -- 112
Wyndham San Jose Airport Hotel, CA........ -- -- 35,743 -- 997
Holiday Inn Select Mission Valley, CA..... 2,410 20,998 -- 176
Sheraton Safari Hotel, Lake Buena Vista,
FL...................................... -- 4,103 35,263 -- 9,062
Hilton Monterey, CA....................... -- 2,141 17,666 -- 4,964
Hilton Hotel Durham, NC................... -- 1,586 15,577 -- 2,390
Wyndham Garden Hotel Marietta, GA......... -- 1,900 17,077 -- 611
Westin Resort Key Largo, FL............... -- 3,167 29,190 -- 340
Doubletree Guest Suites Atlanta, GA....... 8,678 2,236 18,514 -- 3,798
Radisson Hotel Arlington Heights, IL...... -- 1,540 12,645 -- 6,848
Holiday Inn Select Bucks County, PA....... -- 2,610 21,744 -- 2,773
Hilton Hotel Cocoa Beach, FL.............. -- 2,783 23,076 -- 1,784
Radisson Twin Towers Orlando, FL.......... -- 9,555 73,486 -- 8,209
Crowne Plaza Phoenix, AZ.................. -- 1,852 15,957 -- 3,448
Hilton Airport Hotel Grand Rapids, MI..... (1) 2,049 16,657 -- 539
Marriott West Loop Houston, TX............ (1) 2,943 23,934 -- 2,623
Courtyard by Marriott Durham, NC.......... -- 1,406 11,001 -- 47
Courtyard by Marriott, Marina Del Rey,
CA...................................... (1) 3,450 24,534 -- 359
Courtyard by Marriott, Century City, CA... -- 2,165 16,465 -- 20
Courtyard by Marriott, Lake Buena Vista,
FL...................................... -- -- 41,267 -- 2,438
Crowne Plaza, San Jose, CA................ (1) 2,130 23,404 (24) 1,501
Doubletree Hotel Westshore, Tampa, FL..... -- 2,904 23,476 -- 7,312
Howard Johnson Resort Key Largo, FL....... -- 1,784 12,419 -- 507
Radisson Annapolis, MD.................... -- 1,711 13,671 -- 1,945
Holiday Inn Fort Lauderdale, FL........... -- 2,381 19,419 -- 2,126
Holiday Inn Madeira Beach, FL............. -- 1,781 13,349 -- 26
Holiday Inn Chicago O'Hare, IL............ 19,080 4,290 72,631 -- 12,812
Holiday Inn & Suites Alexandria, VA....... -- 1,769 14,064 -- 52
Hilton Clearwater, FL..................... -- -- 69,285 -- 3,608
Radisson Rochester, NY.................... -- -- 6,499 -- 2,520
Radisson Old Towne Alexandria, VA......... -- 2,241 17,796 -- 3,690

Austin Hilton & Towers, TX................ 2,700 18,526 1,291 1974 1/6/98 40
Dallas Renaissance North, TX.............. 3,400 24,363 1,708 1979 1/6/98 40
Houston Sheraton Brookhollow Hotel, TX.... 2,500 19,757 1,467 1980 1/6/98 40
Seelbach Hilton, Louisville, KY........... 1,400 44,012 3,017 1905 1/6/98 40
Midland Hilton & Towers, TX............... 150 10,202 708 1976 1/6/98 40
Westin Oklahoma, OK....................... 3,500 29,271 2,159 1977 1/6/98 40
Sheraton Hotel, Columbia, MD.............. 3,600 25,137 1,513 1972 3/27/98 40
Radisson Cross Keys, Baltimore, MD........ 1,500 7,107 417 1973 3/27/98 40
Sheraton Fisherman's Wharf, San Francisco,
CA...................................... 19,708 64,736 4,356 1975 4/2/98 40
Hartford Hilton, CT....................... 4,073 27,282 1,642 1975 5/21/98 40
Holiday Inn Dallas DFW Airport South,
TX...................................... 3,388 28,855 1,747 1974 8/3/98 --
Courtyard by Marriott Meadowlands, NJ..... -- 9,694 581 1993 8/3/98 40
Hotel Maison de Ville, New Orleans, LA.... 292 3,013 181 1778 8/3/98 40
Hilton Hotel Toledo, OH................... -- 11,746 708 1987 8/3/98 40
Holiday Inn Select Dallas DFW Airport
West, TX................................ 947 8,559 812 1974 8/3/98 40
Holiday Inn Select New Orleans
International Airport, LA............... 3,040 27,766 1,610 1973 8/3/98 40
Crowne Plaza Madison, WI.................. 2,629 21,844 1,384 1987 8/3/98 40
Wyndham Albuquerque Airport Hotel, NM..... -- 19,001 1,146 1972 8/3/98 40
Wyndham San Jose Airport Hotel, CA........ -- 36,740 2,194 1974 8/3/98 40
Holiday Inn Select Mission Valley, CA..... 2,410 21,174 1,282 1970 8/3/98 40
Sheraton Safari Hotel, Lake Buena Vista,
FL...................................... 4,103 44,325 2,437 1985 8/3/98 40
Hilton Monterey, CA....................... 2,141 22,630 1,219 1971 8/3/98 40
Hilton Hotel Durham, NC................... 1,586 17,967 973 1987 8/3/98 40
Wyndham Garden Hotel Marietta, GA......... 1,900 17,688 1,038 1985 8/3/98 40
Westin Resort Key Largo, FL............... 3,167 29,530 1,814 1985 8/3/98 40
Doubletree Guest Suites Atlanta, GA....... 2,236 22,312 1,310 1985 8/3/98 40
Radisson Hotel Arlington Heights, IL...... 1,540 19,493 954 1981 8/3/98 40
Holiday Inn Select Bucks County, PA....... 2,610 24,517 1,335 1987 8/3/98 40
Hilton Hotel Cocoa Beach, FL.............. 2,783 24,860 1,494 1986 8/3/98 40
Radisson Twin Towers Orlando, FL.......... 9,555 81,695 4,701 1972 8/3/98 40
Crowne Plaza Phoenix, AZ.................. 1,852 19,405 1,145 1981 8/3/98 40
Hilton Airport Hotel Grand Rapids, MI..... 2,049 17,196 1,033 1979 8/3/98 40
Marriott West Loop Houston, TX............ 2,943 26,557 1,563 1976 8/3/98 40
Courtyard by Marriott Durham, NC.......... 1,406 11,048 659 1996 8/3/98 40
Courtyard by Marriott, Marina Del Rey,
CA...................................... 3,450 24,893 1,531 1976 8/3/98 40
Courtyard by Marriott, Century City, CA... 2,165 16,485 1,016 1986 8/3/98 40
Courtyard by Marriott, Lake Buena Vista,
FL...................................... -- 43,705 2,565 1972 8/3/98 40
Crowne Plaza, San Jose, CA................ 2,106 24,905 1,501 1975 8/3/98 40
Doubletree Hotel Westshore, Tampa, FL..... 2,904 30,788 1,596 1972 8/3/98 40
Howard Johnson Resort Key Largo, FL....... 1,784 12,926 767 1971 8/3/98 40
Radisson Annapolis, MD.................... 1,711 15,616 829 1975 8/3/98 40
Holiday Inn Fort Lauderdale, FL........... 2,381 21,545 1,225 1969 8/3/98 40
Holiday Inn Madeira Beach, FL............. 1,781 13,375 811 1972 8/3/98 40
Holiday Inn Chicago O'Hare, IL............ 4,290 85,443 4,638 1975 8/3/98 40
Holiday Inn & Suites Alexandria, VA....... 1,769 14,116 882 1985 8/3/98 40
Hilton Clearwater, FL..................... -- 72,893 4,298 1980 8/3/98 40
Radisson Rochester, NY.................... -- 9,019 438 1971 8/3/98 40
Radisson Old Towne Alexandria, VA......... 2,241 21,486 1,223 1975 8/3/98 40
</Table>

F-120
346
MERISTAR HOSPITALITY CORPORATION

Ramada Inn Clearwater, FL................. -- 1,270 13,453 -- 89
Richmond Hotel and Conference Center...... -- 245 3,380 -- 58
Crowne Plaza Las Vegas, NV................ -- 3,006 24,011 -- 15
Crowne Plaza Portland, OR................. 4,917 2,950 23,254 -- 58
Four Points Hotel, Mt Arlington, NJ....... 4,328 6,553 6,058 -- 64
Ramada Inn Mahwah, NJ..................... -- 1,117 8,994 -- 121
Ramada Plaza Meriden, CT.................. -- 1,247 10,057 -- 12
Ramada Plaza Shelton, CT.................. 4,567 2,040 16,235 -- 28
Sheraton Crossroads Mahwah, NJ............ -- 3,258 26,185 -- 188
St. Tropez Suites, Las Vegas, NV.......... -- 3,027 24,429 -- 24
Doral Forrestal, Princeton, NJ............ -- 9,578 57,555 -- 7,135
South Seas Plantation, Captiva, FL........ -- 3,084 83,573 -- 7,161
Radisson Suites Beach Resort, Marco
Island, FL.............................. -- 7,120 35,300 -- 2,103
Best Western Sanibel Island, FL........... -- 3,868 3,984 17 302
The Dunes Golf & Tennis Club, Sanibel
Island, FL.............................. -- 7,705 3,043 9 21
Sanibel Inn, Sanibel Island, FL........... -- 8,482 12,045 -- (74)
Seaside Inn, Sanibel Island, FL........... -- 1,702 6,416 22 73
Song of the Sea, Sanibel Island, FL....... -- 339 3,223 19 31
Sundial Beach Resort, Sanibel Island,
FL...................................... -- 320 12,009 -- 556
Holiday Inn, Madison, WI.................. -- 4,143 6,692 -- 78
Safety Harbor Resort and Spa, Sanibel
Island, FL.............................. -- 732 19,618 -- 1,538
-------- ---------- ----- --------
$317,460 $2,207,320 $(388) $253,769
======== ========== ===== ========

Ramada Inn Clearwater, FL................. 1,270 13,542 1,612 1969 8/3/98 40
Richmond Hotel and Conference Center...... 245 3,438 712 1975 8/3/98 40
Crowne Plaza Las Vegas, NV................ 3,006 24,026 2,593 1989 8/3/98 40
Crowne Plaza Portland, OR................. 2,950 23,312 2,623 1988 8/3/98 40
Four Points Hotel, Mt Arlington, NJ....... 6,553 6,122 645 1984 8/3/98 40
Ramada Inn Mahwah, NJ..................... 1,117 9,115 898 1972 8/3/98 40
Ramada Plaza Meriden, CT.................. 1,247 10,069 974 1985 8/3/98 40
Ramada Plaza Shelton, CT.................. 2,040 16,263 1,529 1989 8/3/98 40
Sheraton Crossroads Mahwah, NJ............ 3,258 26,373 2,785 1986 8/3/98 40
St. Tropez Suites, Las Vegas, NV.......... 3,027 24,453 2,360 1986 8/3/98 40
Doral Forrestal, Princeton, NJ............ 9,578 64,690 3,726 1981 8/11/98 40
South Seas Plantation, Captiva, FL........ 3,084 90,734 6,525 1975 10/1/98 40
Radisson Suites Beach Resort, Marco
Island, FL.............................. 7,120 37,403 4,106 1983 10/1/98 40
Best Western Sanibel Island, FL........... 3,885 4,286 665 1967 10/1/98 40
The Dunes Golf & Tennis Club, Sanibel
Island, FL.............................. 7,714 3,064 246 1964 10/1/98 40
Sanibel Inn, Sanibel Island, FL........... 8,482 11,971 989 1964 10/1/98 40
Seaside Inn, Sanibel Island, FL........... 1,724 6,489 481 1964 10/1/98 40
Song of the Sea, Sanibel Island, FL....... 358 3,254 280 1964 10/1/98 40
Sundial Beach Resort, Sanibel Island,
FL...................................... 320 12,565 806 1975 10/1/98 40
Holiday Inn, Madison, WI.................. 4,143 6,770 337 1965 1/11/99 40
Safety Harbor Resort and Spa, Sanibel
Island, FL.............................. 732 21,156 1,547 1926 5/31/00 40
-------- ---------- --------
$317,072 $2,461,089 $188,647
======== ========== ========
</Table>

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

(1) These properties secure the New Secured Facility which, as of December 31,
2000, had an outstanding balance of $324,554.

F-121
347
MERISTAR HOSPITALITY CORPORATION

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

The components of hotel property and equipment are as follows:

<Table>
<Caption>
PROPERTY AND ACCUMULATED
EQUIPMENT DEPRECIATION
------------ ------------

Land........................................................ $ 317,072 $ --
Building and Improvements................................... 2,461,089 188,647
Furniture and equipment..................................... 338,350 98,582
Construction in progress.................................... 77,219 --
---------- --------
Total property and equipment...................... $3,193,730 $287,229
========== ========
</Table>

A reconciliation of the Company's investment in hotel property and
equipment and related accumulated depreciation is as follows:

<Table>
<Caption>
2000 1999 1998
---------- ---------- ----------

Hotel property and equipment
Balance, beginning of period..................... $3,118,723 $2,957,543 $ 947,597
Acquisitions during period....................... 19,618 12,081 1,865,142
Improvements and construction-in-progress........ 78,911 160,294 144,804
Cost of real estate sold......................... (23,522) (11,195) --
---------- ---------- ----------
Balance, end of period........................... 3,193,730 3,118,723 2,957,543
---------- ---------- ----------
Accumulated depreciation
Balance, beginning of period..................... 182,430 83,797 26,858
Additions-depreciation expense................... 107,363 99,297 56,939
Cost of real estate sold......................... (2,564) (664) --
---------- ---------- ----------
Balance, end of period........................... 287,229 182,430 83,797
---------- ---------- ----------
Net hotel property and equipment, end of
period......................................... $2,906,501 $2,936,293 $2,873,746
========== ========== ==========
</Table>

F-122
348

APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

AMONG
FELCOR LODGING TRUST INCORPORATED,
AND
FELCOR LODGING LIMITED PARTNERSHIP,
ON THE ONE HAND,
AND
MERISTAR HOSPITALITY CORPORATION
AND
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.,
ON THE OTHER HAND

DATED AS OF MAY 9, 2001

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
349

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

ARTICLE 1 -- The Merger.......................................... A-2
1.1 The Merger.................................................. A-2
1.2 Closing..................................................... A-2
1.3 Effective Time.............................................. A-2
1.4 Effects of the Merger....................................... A-2
1.5 Charters and Bylaws......................................... A-2
1.6 Directors and Officers...................................... A-2
ARTICLE 2 -- Treatment of Shares................................. A-3
2.1 Effect of the Merger on Stock............................... A-3
2.2 Delivery of Merger Consideration............................ A-3
ARTICLE 3 -- Certain Transactions Relating to the MeriStar OP.... A-7
3.1 Merger of MeriStar OP and FelCor OP......................... A-7
3.2 Closing and Effectiveness................................... A-7
3.3 Effects of OP Merger........................................ A-7
3.4 Certificate of Limited Partnership and Partnership
Agreement................................................. A-7
3.5 Effect of the OP Merger on Partnership Interests............ A-7
3.6 Issuance of New Certificates for FelCor OP Units............ A-8
ARTICLE 4 -- Representations and Warranties of the MeriStar Parties... A-9
4.1 Organization, Standing and Power of MeriStar................ A-9
4.2 MeriStar Subsidiaries....................................... A-9
4.3 MeriStar Structure.......................................... A-11
4.4 Organization, Standing and Power of MeriStar OP............. A-12
4.5 Registration Rights......................................... A-12
4.6 Authority; Noncontravention; Consents....................... A-12
4.7 SEC Documents; Financial Statements; Undisclosed
Liabilities............................................... A-13
4.8 Absence of Certain Changes or Events........................ A-13
4.9 Litigation.................................................. A-14
4.10 Properties.................................................. A-14
4.11 Employee Benefits........................................... A-15
4.12 Labor Matters; Employees.................................... A-17
4.13 Taxes....................................................... A-17
4.14 No Payments to Employees, Officers or Directors............. A-19
4.15 Brokers, Fees and Expenses.................................. A-19
4.16 Contracts; Debt Instruments................................. A-20
4.17 Environmental Matters....................................... A-20
4.18 Compliance with Laws........................................ A-21
4.19 Opinion of Financial Advisor................................ A-21
4.20 Maryland Takeover Law....................................... A-21
4.21 Information Supplied........................................ A-21
4.22 Investment Company Act of 1940.............................. A-21
4.23 Definition of Knowledge of MeriStar......................... A-21
4.24 Voting Requirements......................................... A-21
4.25 Related Party Agreements.................................... A-22
ARTICLE 5 -- Representations and Warranties of the FelCor Parties... A-22
5.1 Organization, Standing and Power of FelCor.................. A-22
5.2 FelCor Subsidiaries......................................... A-22
5.3 FelCor Structure............................................ A-23
5.4 Organization, Standing and Power of FelCor OP............... A-24
</Table>

A-i
350

<Table>
<Caption>
PAGE
----

5.5 Authority; Noncontravention; Consents....................... A-24
5.6 SEC Documents; Financial Statements; Undisclosed
Liabilities............................................... A-25
5.7 Absence of Certain Changes or Events........................ A-26
5.8 Litigation.................................................. A-26
5.9 Properties.................................................. A-26
5.10 Employee Benefit Plans; Labor Matters....................... A-28
5.11 Taxes....................................................... A-29
5.12 No Payments to Employees, Officers or Directors............. A-31
5.13 Brokers, Fees and Expenses.................................. A-31
5.14 Contracts; Debt Instruments................................. A-31
5.15 Environmental Matters....................................... A-31
5.16 Compliance with Laws........................................ A-32
5.17 Opinion of Financial Advisor................................ A-32
5.18 Maryland Takeover Laws...................................... A-32
5.19 Information Supplied........................................ A-32
5.20 Investment Company Act of 1940.............................. A-32
5.21 Definition of Knowledge of FelCor........................... A-32
5.22 Voting Requirements......................................... A-33
ARTICLE 6 -- Covenants........................................... A-33
6.1 No Solicitation by MeriStar................................. A-33
6.2 No Solicitation by FelCor................................... A-34
6.3 Conduct of MeriStar's Business Pending Merger............... A-35
6.4 Conduct of FelCor's Business Pending Merger................. A-37
6.5 Interim Transactions Committee.............................. A-38
6.6 Compliance with the Securities Act.......................... A-39
6.7 Filing of Certain Reports................................... A-39
6.8 Other Actions............................................... A-39
ARTICLE 7 -- Additional Covenants................................ A-39
7.1 Preparation of the Registration Statement and the Proxy
Statement; MeriStar Stockholders Meeting and FelCor
Stockholders Meeting...................................... A-39
7.2 Access to Information: Confidentiality...................... A-41
7.3 Regulatory Matters.......................................... A-41
7.4 Directors' and Officers' Indemnification.................... A-41
7.5 Public Announcements........................................ A-42
7.6 Employment Agreements and Workforce Matters................. A-42
7.7 Employee Benefit Plans...................................... A-42
7.8 Stock Option and Other Stock Plans.......................... A-43
7.9 Registration Statements..................................... A-44
7.10 Reorganization Status....................................... A-45
7.11 NYSE Listing................................................ A-45
7.12 Transfer Taxes.............................................. A-45
7.13 Payment of MeriStar Debt.................................... A-45
7.14 Resignations................................................ A-45
7.15 Assumption of Debt.......................................... A-45
7.16 Tax Provision............................................... A-45
7.17 Financing................................................... A-45
7.18 Relationship with MeriStar Hotels & Resorts................. A-46
7.19 Completion of Capital Projects.............................. A-46
7.20 Commercially Reasonable Efforts and Cooperation............. A-46
7.21 Financing Commitment........................................ A-46
</Table>

A-ii
351

<Table>
<Caption>
PAGE
----

ARTICLE 8 -- Conditions.......................................... A-47
8.1 Conditions to Each Party's Obligation to Effect the
Merger.................................................... A-47
8.2 Conditions to Obligations of the MeriStar Parties........... A-48
8.3 Conditions to Obligations of the FelCor Parties............. A-48
8.4 Frustration of Closing Conditions........................... A-49
ARTICLE 9 -- Termination, Amendment and Waiver................... A-49
9.1 Termination................................................. A-49
9.2 Certain Fees and Expenses................................... A-50
9.3 Effect of Termination....................................... A-52
9.4 Amendment................................................... A-52
9.5 Extension; Waiver........................................... A-53
ARTICLE 10 -- General Provisions................................. A-53
10.1 Nonsurvival of Representations and Warranties............... A-53
10.2 Notices..................................................... A-53
10.3 Interpretation.............................................. A-54
10.4 Counterparts................................................ A-54
10.5 Entire Agreement; No Third-Party Beneficiaries.............. A-54
10.6 Governing Law............................................... A-54
10.7 Assignment.................................................. A-54
10.8 Enforcement................................................. A-54
10.9 Severability................................................ A-55
EXHIBITS
Exhibit "A" Articles of Merger
Exhibit "B" Certificate of Merger for OP Merger
Exhibit "C" Form of Affiliate Agreement
SCHEDULES
Schedule 1.6(a) List of Directors of Surviving Corporation
Schedule 7.18 Term Sheet
</Table>

A-iii
352

INDEX OF DEFINED TERMS

<Table>
<Caption>
DEFINED TERM SECTION
- ------------ ---------------

1940 Act.................................................... 4.22
Affiliates.................................................. 6.6
Agreement................................................... Preamble
Amended FelCor Bylaws....................................... 1.5
Amended FelCor Charter...................................... 1.5
Articles of Merger.......................................... Recitals
Assumed Option.............................................. 7.8(a)
Assumed Option Shares....................................... 7.8(c)
Base Amount................................................. 9.2(d)
Break-Up Expenses........................................... 9.2(e)
Break-Up Fee................................................ 9.2(d)
Break-Up Fee Ruling......................................... 9.2(d)
Break-Up Fee Tax Opinion.................................... 9.2(d)
Canceled Shares............................................. 2.2(b)
Cash Consideration.......................................... 2.1(a)
Certificate or Certificates................................. 2.2(b)
Closing..................................................... 1.2
Closing Date................................................ 1.2
Closing Price............................................... 9.1(l)
Code........................................................ Recitals
Confidentiality Agreement................................... 7.2
Continuing Employee......................................... 7.7(a)
Controlled Group............................................ 4.11
Department.................................................. 1.3
DRULPA...................................................... 3.1
Effective Time.............................................. 1.3
Encumbrances................................................ 4.10(a)
Environmental Laws.......................................... 4.17
ERISA....................................................... 4.11
Excess Shares............................................... 2.2(d)
Exchange Act................................................ 4.7
Exchange Agent.............................................. 2.2(a)
Exchange Factor............................................. 3.5(e)
Exchange Fund............................................... 2.2(a)
Exchange Ratio.............................................. 2.1(a)
Exchange Registration....................................... 7.9(b)
FelCor...................................................... Preamble
FelCor Acquisition Proposal................................. 6.2(a)
FelCor Benefit Plans........................................ 5.10(a)
FelCor Budget and Schedule.................................. 5.9(e)
FelCor Bylaws............................................... 1.5
FelCor Charter.............................................. 1.5
FelCor Class B Units........................................ 5.2(a)
FelCor Class C Units........................................ 3.5(c)
FelCor Class D Units........................................ 3.5(d)
FelCor Commitment........................................... 6.4(h)
FelCor Common Stock......................................... 2.1(a)
FelCor Common Units......................................... 3.5(a)
FelCor Deferred Stock....................................... 5.3(b)
</Table>

A-iv
353

<Table>
<Caption>
DEFINED TERM SECTION
- ------------ ---------------

FelCor Disclosure Letter.................................... Article 5 Intro
FelCor Financial Statement Date............................. 5.7
FelCor Franchise Agreements................................. 5.9(g)
FelCor Ground Leases........................................ 5.9(f)
FelCor LLC.................................................. 5.2(a)
FelCor Management Agreements................................ 5.9(h)
FelCor Material Adverse Change.............................. 5.7
FelCor Material Adverse Effect.............................. 5.1
FelCor OP................................................... Preamble
FelCor OP Certificate....................................... 3.4
FelCor OP Unit Holder....................................... 5.2(a)
FelCor OP Units............................................. 5.2(a)
FelCor Operating Partnership Agreement...................... 5.2(a)
FelCor Options.............................................. 5.3(a)
FelCor Parties.............................................. Preamble
FelCor Plans................................................ 5.3(a)
FelCor Properties........................................... 5.9(a)
FelCor Restricted Stock Grants.............................. 5.3(b)
FelCor SEC Documents........................................ 5.6
FelCor Series A Preferred Stock............................. 5.3(a)
FelCor Series A Preferred Units............................. 5.2(a)
FelCor Series B Preferred Stock............................. 5.3(a)
FelCor Series B Preferred Units............................. 5.2(a)
FelCor Stockholder Approval................................. 5.5(a)
FelCor Stockholders Meeting................................. 7.1(e)
FelCor Subsidiary(ies)...................................... 5.2(b)
FelCor Superior Proposal.................................... 6.2(b)
FelCor Tax Protection Agreements............................ 5.11(k)
FelCor Title Policies....................................... 5.9(a)
Final MeriStar Dividend..................................... 2.2(c)(ii)
Final MeriStar OP Distribution.............................. 2.2(c)(ii)
GAAP........................................................ 4.7
Governmental Entity......................................... 4.6(b)
Hazardous Materials......................................... 4.17
Indebtedness................................................ 4.16(b)
Indemnified Parties......................................... 7.4(a)
Indentures.................................................. 7.15
Interim Transactions Committee.............................. 6.5
J&G......................................................... 8.1(h)
Knowledge of FelCor......................................... 5.21
Knowledge of MeriStar....................................... 4.23
Laws........................................................ 4.6(b)
Liens....................................................... 4.2(a)
Market Price................................................ 2.2(e)
Merger...................................................... Recitals
Merger Consideration........................................ 2.1(a)
MeriStar.................................................... Preamble
MeriStar Acquisition Proposal............................... 6.1(a)
MeriStar Benefit Plans...................................... 4.11
MeriStar Budget and Schedule................................ 4.10(e)
MeriStar Bylaws............................................. 4.1
</Table>

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<Table>
<Caption>
DEFINED TERM SECTION
- ------------ ---------------

MeriStar Charter............................................ 4.1
MeriStar Class B Units...................................... 3.5(b)
MeriStar Class C Units...................................... 3.5(c)
MeriStar Class D Units...................................... 3.5(d)
MeriStar Commitment......................................... 6.3(h)
MeriStar Common Stock....................................... 2.1(a)
MeriStar Common Units....................................... 3.5(a)
MeriStar Convertible Notes.................................. 4.3(a)
MeriStar Disclosure Letter.................................. Article 4 Intro
MeriStar Financial Statement Date........................... 4.8
MeriStar Franchise Agreements............................... 4.10(g)
MeriStar GP Interest........................................ 3.5(f)
MeriStar Ground Leases...................................... 4.10(f)
MeriStar Hotels & Resorts................................... 4.25
MeriStar Incentive Plan..................................... 4.3(a)
MeriStar LP................................................. 4.2(a)
MeriStar Management Agreements.............................. 4.10(h)
MeriStar Material Adverse Change............................ 4.8
MeriStar Material Adverse Effect............................ 4.1
MeriStar OP................................................. Preamble
MeriStar OP Partnership Agreement........................... 4.2(a)
MeriStar OP Unit Holder..................................... 3.6(a)
MeriStar OP Units........................................... 3.5(g)
MeriStar Options............................................ 4.3(b)
MeriStar Parties............................................ Preamble
MeriStar POP Units.......................................... 3.5(e)
MeriStar Properties......................................... 4.10(a)
MeriStar SEC Documents...................................... 4.7
MeriStar Stock Option....................................... 7.8(a)
MeriStar Stockholder Approvals.............................. 4.6(a)
MeriStar Stockholders Meeting............................... 7.1(d)
MeriStar Subsidiary(ies).................................... 4.2(b)
MeriStar Superior Proposal.................................. 6.1(b)
MeriStar Tax Protection Agreements.......................... 4.13(l)
MeriStar Title Policies..................................... 4.10(a)
MeriStar Transfer Agent..................................... 2.2(c)(ii)
MGCL........................................................ 1.1
New FelCor OP Units......................................... 3.5(g)
NYSE........................................................ 1.2
OP Merger................................................... Recitals
OP Merger Articles.......................................... 3.2
OP Merger Closing........................................... 3.2
POP Unit Plan............................................... 3.5(e)
Paul Weiss.................................................. 8.1(h)
Payor....................................................... 9.2(d)
Person...................................................... 2.2(h)
Proxy Statement............................................. 7.1(a)
Qualifying Income........................................... 9.2(d)
Ratification Agreement...................................... 3.6(a)
Recipient................................................... 9.2(d)
Registration Statement...................................... 7.1(a)
</Table>

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<Table>
<Caption>
DEFINED TERM SECTION
- ------------ ---------------

REIT........................................................ 4.13(g)
REIT Requirements........................................... 9.2(d)
Restated Partnership Agreement.............................. 3.4
SEC......................................................... 4.6(b)
Securities Act.............................................. 4.7
Share Consideration......................................... 2.1(a)
Shelf Registration.......................................... 7.9(a)
Significant Subsidiary...................................... 6.1(a)
Stockholder Approvals....................................... 5.5(a)
Subsidiary.................................................. 4.2(b)
Surviving Corporation....................................... 1.1
Surviving Partnership....................................... 3.1
Tax(es)..................................................... 4.13(m)
Tax Returns................................................. 4.13(m)
Transactions................................................ Recitals
Vested...................................................... 3.5(e)
WARN........................................................ 4.12(d)
</Table>

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 9,
2001, by and among FELCOR LODGING TRUST INCORPORATED, a Maryland corporation
("FelCor"), and FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited
partnership ("FelCor OP" and, together with FelCor, the "FelCor Parties"), on
the one hand, and MERISTAR HOSPITALITY CORPORATION, a Maryland corporation
("MeriStar"), and MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("MeriStar OP" and, together with MeriStar, the "MeriStar
Parties"), on the other hand.

RECITALS:

A. The Board of Directors of FelCor and the Board of Directors of MeriStar
have each determined that a business combination between FelCor and MeriStar on
substantially the terms and conditions set forth in this Agreement is advisable
and in the best interests of their respective companies and stockholders and
presents an opportunity for their respective companies to achieve long-term
strategic and financial benefits and, accordingly, have agreed to effect the
merger (the "Merger") of MeriStar with and into FelCor, with FelCor being the
surviving corporation, upon the terms and subject to the conditions set forth
herein.

B. Upon the terms and conditions set forth herein, MeriStar and FelCor
shall execute Articles of Merger (the "Articles of Merger") in substantially the
form attached hereto as Exhibit "A" and shall file such Articles of Merger in
accordance with applicable Maryland law to effectuate the Merger.

C. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
shall constitute a plan of reorganization within the meaning of Treasury
Regulations Section 1.368-2(g).

D. Concurrent with the Merger, the MeriStar Parties and the FelCor Parties
will effect a merger of MeriStar OP with and into FelCor OP as contemplated by
Section 3.1, with FelCor OP as the survivor (the "OP Merger") (the Merger,
together with the other transactions, including without limitation, the OP
Merger, contemplated by this Agreement, being referred to collectively herein as
the "Transactions").

E. The FelCor Parties and the MeriStar Parties desire to make certain
representations, warranties and agreements in connection with the Transactions.

NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
357

ARTICLE 1

THE MERGER

1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the Maryland General Corporation Law ("MGCL"),
MeriStar shall be merged with and into FelCor at the Effective Time (as defined
in Section 1.3). FelCor shall be the surviving corporation in the Merger and
shall continue its corporate existence under the laws of the State of Maryland
under the name "FelCor Lodging Trust Incorporated." The effects and consequences
of the Merger are set forth in Sections 1.4 through 1.6 and Article 2 hereof.
FelCor, after the Effective Time, is sometimes referred to herein as the
"Surviving Corporation."

1.2 CLOSING. The closing of the Merger (the "Closing") shall take place
at the offices of Jenkens & Gilchrist, a Professional Corporation, 1445 Ross
Avenue, Suite 3200, Dallas, Texas 75202, at 10:00 A.M. local time, on the third
New York Stock Exchange, Inc. ("NYSE") trading day immediately following the
date on which the last of the conditions set forth in Article 8 hereof (other
than conditions with respect to actions the respective parties will take at the
Closing) is first fulfilled or has been waived, if all such conditions continue
to be so satisfied or waived on such third trading day. If all such conditions
are not so satisfied or waived, the Closing shall be automatically extended from
time to time until the first subsequent trading day on which all such conditions
are again so satisfied or waived, subject, however, to Article 9 hereof.
Alternatively, the Closing may occur at such other time, date and place as
MeriStar and FelCor shall mutually agree in writing. The date on which the
Closing occurs is the "Closing Date."

1.3 EFFECTIVE TIME. The Merger shall become effective (the "Effective
Time") at 9:00 a.m., New York City time, on the NYSE trading day immediately
following the Closing Date or, if later, such date and time as the State
Department of Assessments and Taxation of Maryland ("Department") accepts the
Articles of Merger for record, or such other time specified in the Articles of
Merger (not to exceed 30 calendar days after the Articles of Merger are accepted
for record by the Department). Unless otherwise agreed, the parties will cause
the Effective Time to occur at 9:00 a.m., New York City time, on the NYSE
trading day immediately following the Closing Date.

1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the MGCL.

1.5 CHARTERS AND BYLAWS. The charter of FelCor, as in effect on the date
hereof (the "FelCor Charter"), and as amended, prior to or at the Effective
Time, to reflect such matters as the parties may agree upon (the "Amended FelCor
Charter"), shall be the charter of the Surviving Corporation until thereafter
amended as provided by applicable law. The bylaws of FelCor, as in effect on the
date hereof (the "FelCor Bylaws"), and as amended, prior to the Effective Time,
to reflect such matters as the parties may agree upon (the "Amended FelCor
Bylaws"), shall be the bylaws of the Surviving Corporation until thereafter
amended as provided by applicable law, the Amended FelCor Charter and such
Amended FelCor Bylaws.

1.6 DIRECTORS AND OFFICERS.

(a) The directors of the Surviving Corporation immediately following the
Effective Time shall be the persons named on Schedule 1.6(a) to this Agreement,
each of whom shall serve as a "Class I," "Class II" or "Class III" director, as
specified on such schedule, until the earlier of his resignation or removal or
until his successor is duly elected and qualifies.

(b) FelCor and MeriStar agree that, in the event any person set forth on
Schedule 1.6(a) is unable or otherwise fails to serve, for any reason, as a
director of the Surviving Corporation at the Effective Time, then (i) if such
person was a member of the Board of Directors of MeriStar as of the date hereof,
MeriStar shall have the right to designate another individual, subject to
FelCor's reasonable approval, to serve as a director of the Surviving
Corporation at the Effective Time, (ii) if such person was a member of the Board
of Directors of FelCor as of the date hereof, FelCor shall have the right to
designate another individual, subject to MeriStar's reasonable approval, to
serve as a director of the Surviving Corporation at the Effective Time or (iii)
if such person was not a member of the Board of Directors of either MeriStar

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or FelCor as of the date hereof, a majority of the persons set forth on Schedule
1.6(a) shall have the right to designate another individual to serve as a
director of the Surviving Corporation at the Effective Time. FelCor shall use
its best efforts to have any person designated to be a director pursuant to the
previous sentence appointed as a director.

(c) The officers of FelCor immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, each to serve until the earlier of
his resignation or removal or until his successor is duly elected and qualifies.

ARTICLE 2

TREATMENT OF SHARES

2.1 EFFECT OF THE MERGER ON STOCK.

(a) Common Stock of MeriStar. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any stock of
MeriStar, subject to Section 2.1(b), each issued and outstanding share of common
stock, par value $0.01 per share, of MeriStar ("MeriStar Common Stock"), other
than shares of MeriStar Common Stock to be canceled pursuant to Section 2.1(b),
shall be converted into (i) the right to receive cash in the amount of $4.60
(the "Cash Consideration"), without interest, and (ii) 0.784 (the "Exchange
Ratio") of one fully paid and nonassessable share of common stock, par value
$0.01 per share, of FelCor ("FelCor Common Stock"). All such shares of MeriStar
Common Stock automatically shall be canceled and retired and shall cease to
exist and be outstanding, and each certificate previously evidencing any such
shares shall thereafter represent such number of whole shares of FelCor Common
Stock into which such MeriStar Common Stock was converted in accordance with the
Exchange Ratio (the "Share Consideration") and the right to receive, without
interest, the Cash Consideration (collectively with the Share Consideration, the
"Merger Consideration"). The holders of such certificates previously
representing such shares of MeriStar Common Stock outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such shares
of MeriStar Common Stock, except as otherwise provided herein or by law. No
fractional share of FelCor Common Stock shall be issued in connection with the
Merger. In lieu thereof, a cash payment shall be made to each holder of a
fractional share interest pursuant to Section 2.2(d) or Section 2.2(e). If,
between the date of this Agreement and the Effective Time, the outstanding
shares of MeriStar Common Stock or FelCor Common Stock shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Cash Consideration and Exchange Ratio each shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.

(b) Cancellation of Certain Shares of MeriStar Common Stock. As of the
Effective Time, by virtue of the Merger and without any action on the part of
any holder thereof, any shares of MeriStar Common Stock that are owned by
MeriStar or any MeriStar Subsidiary (defined herein) (other than any shares held
in a fiduciary capacity) or by FelCor or any FelCor Subsidiary (as defined
herein) shall be canceled and retired and shall cease to exist, and no Merger
Consideration or other consideration shall be issued or delivered in exchange
therefor.

(c) Stock of FelCor. Each issued and outstanding share of FelCor Common
Stock, FelCor Series A Preferred Stock (as defined herein) and FelCor Series B
Preferred Stock (as defined herein) outstanding immediately prior to the
Effective Time will remain outstanding, and each certificate representing
outstanding shares of FelCor Common Stock, FelCor Series A Preferred Stock and
FelCor Series B Preferred Stock will thereafter represent an equal number of
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock,
as the case may be, of the Surviving Corporation.

2.2 DELIVERY OF MERGER CONSIDERATION.

(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, FelCor shall deposit, in trust for the benefit of holders of
shares of MeriStar Common Stock to be converted pursuant

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359

to Section 2.1, with FelCor's transfer agent (the "Exchange Agent"),
certificates representing that number of shares of FelCor Common Stock required
to effect the issuance of the Share Consideration referred to in Section 2.1(a),
and cash in the amount required to effect the payment of the aggregate Cash
Consideration referred to in Section 2.1(a) and the payment of cash in lieu of
fractional shares pursuant to Section 2.2(d) or 2.2(e) (collectively, the
"Exchange Fund"). The Exchange Fund shall not be used for any purpose other than
as contemplated by this Agreement.

(b) Delivery Procedures. As soon as practicable after the Effective Time,
FelCor shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates (the "Certificate" or the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
MeriStar Common Stock (the "Canceled Shares") that were converted pursuant to
Section 2.1(a): (i) a letter of transmittal in customary and reasonable form
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon actual delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender of
the MeriStar Common Stock. For purposes of the immediately preceding sentence,
FelCor may rely conclusively on the stockholder records of MeriStar in
determining the identity of, and the number of Canceled Shares held by, each
holder of a Certificate at the Effective Time. Without limitation to the rights
under Section 2.2(c), upon surrender of a Certificate to the Exchange Agent for
cancellation (or to such other agent or agents as may be appointed by FelCor),
together with a duly executed letter of transmittal and such other customary
documents as the Exchange Agent shall require, the holder of such Certificate
shall be entitled to receive, with respect to the shares of MeriStar Common
Stock formerly represented thereby (A) a certificate or certificates
representing that number of whole shares of FelCor Common Stock into which such
shares of MeriStar Common Stock were converted pursuant to the provisions of
Section 2.1(a), (B) a check in payment of the Cash Consideration, without
interest, which such holder has the right to receive pursuant to the provisions
of Section 2.1(a), and (C) a check in payment of the cash in lieu of fractional
shares, without interest, which such holder is entitled to receive pursuant to
Section 2.2(d) or (e). Until such surrender of a Certificate in compliance with
the immediately preceding sentence, FelCor shall have no obligation to deliver
the items required by clauses (A) through (C) of such sentence. FelCor shall
cause all shares of FelCor Common Stock issued pursuant to the Merger to be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.

(i) The FelCor Parties and the MeriStar Parties each shall authorize
under applicable law a dividend or distribution to their respective
stockholders and partners, as the case may be, for which the record date
shall be the close of business on the Closing Date; provided, however, that
such authorization shall not be made if the Closing Date occurs within 15
days after the record date for a regularly scheduled dividend or
distribution by the FelCor Parties, unless FelCor elects in its discretion
to require both such authorizations to occur. The dividend or distribution
shall be equal to such parties' most recent quarterly dividend or
distribution rate for such stockholders and partners, as the case may be,
multiplied by a fraction, the numerator of which is the number of days
elapsed since the last dividend record date through and including the
Effective Time, and the denominator of which is 91. Any dividend or
distribution made by the FelCor Parties pursuant to this Section 2.2(c)(i)
shall be paid in the ordinary course of business consistent with the past
practice of such parties as to the manner and timing of payment. Any
dividend or distribution made by the MeriStar Parties pursuant to this
Section 2.2(c)(i) shall be paid pursuant to the procedures set forth in
Section 2.2(c)(ii).

(ii) If, after taking into account (A) the regular quarterly dividends
or distributions declared by MeriStar to its stockholders with respect to
its taxable year ending at the Effective Time and (B) any dividend or
distribution that is to be paid to holders of MeriStar Common Stock under
Section 2.2(c)(i), MeriStar would fail to satisfy the requirements of
Section 857(a)(1) of the Code for the taxable year of MeriStar ending at
the Effective Time, then either (X) the amount of the dividend or
distribution with respect to MeriStar Common Stock under Section 2.2(c)(i)
shall be increased or (Y) if no dividend or distribution was declared by
MeriStar under Section 2.2(c)(i),
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MeriStar shall declare a dividend, in either event in an amount sufficient
for MeriStar to satisfy the requirements of Section 857(a)(1) of the Code
for such period. Any dividend or distribution made by MeriStar pursuant to
Section 2.2(c)(i) and/or pursuant to this Section 2.2(c)(ii) (the "Final
MeriStar Dividend") shall be declared and paid to holders of shares of
MeriStar Common Stock as of a record date which shall be the close of
business on the Closing Date. Any Final MeriStar Dividend shall be paid by
MeriStar to the stock transfer agent of MeriStar (the "MeriStar Transfer
Agent") on the Closing Date, and the MeriStar Transfer Agent shall pay the
Final MeriStar Dividend to the holders of the MeriStar Common Stock on or
before 30 days following the Closing Date. The FelCor Parties and the
MeriStar Parties, by mutual agreement, may accelerate the declaration date,
the record date, and/or the payment date of any Final MeriStar Dividend in
order to enable MeriStar to avoid or minimize excise tax liability under
Section 4981 of the Code for its taxable year ending at the Effective Time.
In the event that MeriStar declares a Final MeriStar Dividend with respect
to the MeriStar Common Stock, MeriStar OP shall simultaneously declare a
distribution (the "Final MeriStar OP Distribution") to holders of MeriStar
OP Units in an amount per unit equal to the Final MeriStar Dividend payable
per share of MeriStar Common Stock, the record date for which shall be the
close of business on the Closing Date. Any Final MeriStar OP Distribution
shall be paid by MeriStar OP to the MeriStar Transfer Agent on the Closing
Date and the MeriStar Transfer Agent shall pay such distribution to the
holders of the MeriStar OP Units on or before 30 days following the Closing
Date. MeriStar shall notify FelCor of the expected amount of any MeriStar
Final Dividend at least 20 days prior to the date for the declaration of
any Final MeriStar Dividend.

(iii) Except for (A) regular quarterly dividends or distributions
declared and paid by the MeriStar Parties and the FelCor Parties to their
respective stockholders and partners in the ordinary and normal course of
business, having record and payment dates consistent with their respective
past practices and being in amounts not greater than the respective party's
last dividend or distribution prior to the date hereof, and (B) the
dividend or distribution contemplated by Section 2.2(c)(i) and Section
2.2(c)(ii), neither the MeriStar Parties nor the FelCor Parties will
declare or pay any dividend or distribution to their respective
stockholders or partners prior to the Effective Time.

(iv) No dividends or other distributions declared or made after the
Effective Time with respect to shares of FelCor Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of FelCor Common Stock
represented thereby until the holder of such Certificate shall surrender
such Certificate in the manner provided in Section 2.2(b). Subject to the
effect of unclaimed property, escheat and other applicable laws, following
surrender of any such Certificate, in addition to the Merger Consideration,
there shall be paid to the holder of the certificates representing whole
shares of FelCor Common Stock issued in consideration therefor, without
interest, (i) at the time of such surrender, the amount of dividends or
other distributions thereon with a record date after the Effective Time and
theretofore paid with respect to such whole shares of FelCor Common Stock
and (ii) at the appropriate payment date, the amount of dividends or other
distributions thereon, with a record date after the Effective Time but
prior to such surrender and having a payment date subsequent to such
surrender.

(d) No Fractional Securities. Notwithstanding any other provision hereof,
no fractional shares of FelCor Common Stock will be issued in connection with
the Merger. No holder of a fractional share interest will be entitled to
dividends, voting rights or any other stockholder rights in respect of such
fractional share. Instead, as soon as practicable after the Effective Time, the
Exchange Agent will determine the excess of (i) the number of whole shares of
FelCor Common Stock delivered to the Exchange Agent by FelCor pursuant to
Section 2.1(a) over (ii) the aggregate number of whole shares of FelCor Common
Stock to be distributed to holders of MeriStar Common Stock pursuant to Section
2.2(b) (such excess, the "Excess Shares"). FelCor will instruct the Exchange
Agent (i) to sell the Excess Shares at then-prevailing prices on the NYSE
through one or more member firms of the NYSE and (ii) to use reasonable efforts
to complete the sale of the Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the
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best execution of such sales in light of prevailing market conditions and, in
any event, within ten calendar days following the Effective Time. The Exchange
Agent will hold such proceeds in trust for the holders of MeriStar Common Stock
who would otherwise be entitled to receive a fraction of a share of FelCor
Common Stock, and will determine the portion of the proceeds to which each such
holder is entitled, if any, by multiplying the amount of the aggregate net
proceeds of such sale by a fraction, the numerator of which is the amount of the
fractional share interest to which each such holder is entitled, and the
denominator of which is the aggregate amount of fractional share interests to
which all such holders of MeriStar Common Stock are entitled. The Surviving
Corporation will pay all commissions, transfer taxes, Exchange Agent's fees and
other out-of-pocket transaction costs incurred in connection with the sale of
such Excess Shares.

(e) Alternative Cash Payment. Notwithstanding the provisions of Section
2.2(d), FelCor may elect at its option, exercised prior to the Effective Time,
in lieu of the issuance and sale of Excess Shares and the making of payments
pursuant to Section 2.2(d), to pay each holder of MeriStar Common Stock who
would otherwise be entitled to receive a fraction of a share of FelCor Common
Stock, an amount in cash equal to the Market Price determined as of the Closing
Date, without interest, multiplied by the fraction of a share of FelCor Common
Stock to which such holder would otherwise be entitled. For purposes of this
Agreement, "Market Price" means the average of the closing sale prices of a
share of FelCor Common Stock (as reported in the NYSE Composite Tape) for the
ten consecutive NYSE trading days ending two trading days prior to the date as
of which such determination is to be made.

(f) Closing of Transfer Books; Etc. From and after the Effective Time, the
stock transfer books of MeriStar shall be closed and no registration of any
transfer of stock of MeriStar shall thereafter be made on the records of
MeriStar. In the event of a transfer of ownership of Canceled Shares which is
not registered in the transfer records of MeriStar, a certificate representing
the proper number of shares of FelCor Common Stock and a check or checks for the
Cash Consideration and cash in lieu of fractional shares may be issued to a
transferee in the proper amount or amounts if the Certificate representing such
Canceled Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the event any Certificate(s)
shall have been lost, stolen or destroyed, upon the making of any affidavit of
that fact by the person claiming such certificates to be lost, stolen or
destroyed and, if required by FelCor or the Exchange Agent, upon the posting by
such person of a bond, in an amount reasonably determined by FelCor or the
Exchange Agent, as indemnity against any claim that may be made against it with
respect to such Certificate(s), the Exchange Agent will issue in respect of such
lost, stolen or destroyed Certificate(s), the Merger Consideration to be
received in exchange therefor (together with any cash in lieu of fractional
shares payable in accordance with Section 2.2(d) or (e)).

(g) Withholding Rights. FelCor or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of shares of MeriStar Common Stock, such amounts as
FelCor or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by FelCor or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of MeriStar Common
Stock in respect of which such deduction and withholding was made by FelCor or
the Exchange Agent.

(h) Termination of Exchange. Any certificates representing Share
Consideration deposited with the Exchange Agent pursuant to Section 2.2(a) and
not exchanged within one year after the Effective Time pursuant to this Section
2.2 shall be returned by the Exchange Agent to FelCor, which shall thereafter
act as Exchange Agent. All funds held by the Exchange Agent for payment to the
holders of unsurrendered Certificates and unclaimed at the end of one year from
the Effective Time shall be returned to FelCor. Thereafter, any holder of
unsurrendered Certificates shall look solely to FelCor for the payment of any
funds to which such holder may be entitled, subject to applicable law. FelCor
shall not be liable to any Person for such shares or funds delivered by it to a
public official pursuant to any applicable abandoned property, escheat or
similar law. As used in this Agreement, the term "Person" shall mean any natural
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person, corporation, general or limited partnership, limited liability company,
joint venture, trust, association, unincorporated organization or entity of any
kind.

ARTICLE 3

CERTAIN TRANSACTIONS RELATING TO THE MERISTAR OP

3.1 MERGER OF MERISTAR OP AND FELCOR OP. At the Effective Time, MeriStar
and FelCor shall cause MeriStar OP to merge with and into FelCor OP in
accordance with the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and the partnership agreements of FelCor OP and MeriStar OP, with FelCor OP as
the surviving entity. The effects and consequences of the OP Merger are set
forth in this Article Three and the DRULPA. FelCor OP, after the effectiveness
of the OP Merger, is sometimes referred to herein as the "Surviving
Partnership."

3.2 CLOSING AND EFFECTIVENESS. The closing of the OP Merger (the "OP
Merger Closing") shall take place at the same time and place as the Closing. All
of the documents and transactions relating to the OP Merger Closing shall be
deemed to be part of the Closing. The OP Merger shall be conditioned upon prior
effectiveness of the Merger and shall be effective at the Effective Time of the
Merger. At the OP Merger Closing, MeriStar shall cause MeriStar OP to execute
the Certificate of Merger (the "OP Merger Articles") in the form attached hereto
as Exhibit "B," which certificate shall then be executed by FelCor OP and filed
with the Delaware Secretary of State.

3.3 EFFECTS OF OP MERGER. The OP Merger shall have the effects set forth
in the DRULPA. FelCor shall be the sole general partner of the Surviving
Partnership.

3.4 CERTIFICATE OF LIMITED PARTNERSHIP AND PARTNERSHIP AGREEMENT. The
certificate of limited partnership of FelCor OP as in effect immediately prior
to the Effective Time (the "FelCor OP Certificate") shall be the certificate of
limited partnership of the Surviving Partnership. The limited partnership
agreement of FelCor OP as amended and restated in a form reasonably satisfactory
to the parties (the "Restated Partnership Agreement") shall be the limited
partnership agreement of the Surviving Partnership, until thereafter amended as
provided by applicable law or therein.

3.5 EFFECT OF THE OP MERGER ON PARTNERSHIP INTERESTS.

(a) Common Units of MeriStar OP. As of the effectiveness of the OP Merger,
by virtue of the OP Merger and without any action on the part of any holder of
the partnership interests in MeriStar OP known as "OP Units" (herein called
"MeriStar Common Units"), each outstanding MeriStar Common Unit shall be
converted into the right to receive (i) the number of units of partnership
interest in FelCor OP known as "Partnership Units" or "Common Units" (herein
called "FelCor Common Units") equal to the Exchange Ratio, and (ii) cash in an
amount equal to the Cash Consideration, without interest.

(b) Class B Units of MeriStar OP. As of the effectiveness of the OP
Merger, there shall be no holders of the partnership interests in MeriStar OP
known as "Class B Units" (herein called "MeriStar Class B Units").

(c) Class C Units of MeriStar OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class C Units"
(herein called "MeriStar Class C Units"), each outstanding MeriStar Class C Unit
shall be converted into the right to receive (i) the number of units of
partnership interest in FelCor OP known as "Class C Units" (herein called
"FelCor Class C Units") equal to the Exchange Ratio, and (ii) cash in an amount
equal to the Cash Consideration, without interest.

(d) Class D Units of MeriStar OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class D Units"
(herein called "MeriStar Class D Units"), each outstanding MeriStar Class D Unit
shall be converted into the right to receive one unit of partnership interest in
FelCor OP known as "Class D Units" (herein called "FelCor Class D Units").

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(e) POP Units of MeriStar OP. As of the effectiveness of the OP Merger, by
virtue of the OP Merger and without any action on the part of any holder of the
partnership interests in MeriStar OP known as "POP Units" (herein called
"MeriStar POP Units"), each outstanding MeriStar POP Unit that is Vested (as
defined below) shall be converted into the right to receive (i) the number of
FelCor Common Units equal to the product of the Exchange Ratio times the
Exchange Factor (as defined below) and (ii) cash in an amount equal to the
product of the Cash Consideration, without interest, times the Exchange Factor
(as defined below). The term "Vested" means those MeriStar POP Units that are
fully vested and not subject to forfeiture as of the Effective Time, assuming
the Merger was completed, under the respective Restricted Unit Agreements (as
defined in the MeriStar Profits-Only Operating Partnership Units Plan (the "POP
Unit Plan")) dated effective as of March 29, 2000 and April 16, 2001 between
MeriStar, MeriStar OP and each of the respective holders of such MeriStar POP
Units. The term "Exchange Factor" shall mean 1.0. As of the effectiveness of the
OP Merger, by virtue of the OP Merger and without any action on the part of any
holder of the POP Units, each outstanding MeriStar POP Unit that is not Vested
shall be cancelled and cease to exist, and no consideration shall be issued or
delivered in exchange therefor.

(f) General Partner Interests of MeriStar OP. As of the effectiveness of
the OP Merger, by virtue of the OP Merger and without any action on the part of
MeriStar as the holder of the general partner's partnership interest in MeriStar
OP (the "MeriStar GP Interest"), each unit of partnership interest that
constitutes part of the MeriStar GP Interest shall be converted into the right
to receive (i) the number of FelCor Common Units equal to the Exchange Ratio,
and (ii) cash in an amount equal to the Cash Consideration, without interest.

(g) Effect on MeriStar OP Units. All MeriStar Common Units, MeriStar Class
B Units, MeriStar Class C Units, MeriStar Class D Units, MeriStar POP Units and
MeriStar GP Interest (collectively, the "MeriStar OP Units") shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each MeriStar OP Unit shall thereafter represent the right to
receive, upon making the deliveries required by Section 3.6(a), such number of
whole FelCor Common Units, FelCor Class C Units, and FelCor Class D Units
(collectively the "New FelCor OP Units"), and certificates representing such
FelCor OP Units, into which such MeriStar OP Units were converted in accordance
with Section 3.5(a)-(f) plus any applicable Cash Consideration, without
interest. The holders of such MeriStar OP Units outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such MeriStar
OP Units except as otherwise provided herein or by law. No fractional New FelCor
OP Units shall be issued, and, in lieu thereof, a cash payment, without
interest, shall be made pursuant to Section 3.6(c).

3.6 ISSUANCE OF NEW CERTIFICATES FOR FELCOR OP UNITS.

(a) Delivery Procedures. As soon as practicable after the Effective Time,
FelCor OP shall mail to each holder of record of a MeriStar OP Unit (a "MeriStar
OP Unit Holder"), a ratification and joinder agreement (a "Ratification
Agreement") by which the MeriStar OP Unit Holder ratifies and agrees to be bound
by the Restated Partnership Agreement, waives any rights they have under their
exchange rights agreements with MeriStar and MeriStar OP, acknowledges the
termination of the MeriStar OP Partnership Agreement and is admitted as a
limited partner in FelCor OP as a holder of the respective New FelCor OP Units
which the MeriStar OP Unit Holder is entitled to receive by virtue of the OP
Merger. The Ratification Agreement to be executed by holders of MeriStar POP
Units will also contain a waiver of any rights they have under the agreements by
which their POP Units were granted or under the POP Unit Plan. Without
limitation to the rights under Section 3.6(b), upon delivery to FelCor OP of a
duly executed Ratification Agreement, together with such other customary
documents as FelCor OP may require, the MeriStar OP Unit Holder shall be
entitled to receive, with respect to such MeriStar OP Units (i) a certificate or
certificates representing that number of whole New FelCor OP Units which such
MeriStar OP Unit Holder has the right to receive pursuant to Section 3.5, (ii) a
check in payment of the Cash Consideration, if any, without interest, which such
MeriStar OP Unit Holder has the right to receive pursuant to Section 3.5, and
(iii) a check in payment of the cash in lieu of fractional New FelCor OP Units,
without interest, which such holder is entitled to receive pursuant to Section
3.6(c). FelCor OP
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shall cause all FelCor OP Units issued pursuant to the OP Merger to be duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights.

(b) Distributions After Effective Time. No distributions declared or made
after the Effective Time with respect to New FelCor OP Units with a record date
after the Effective Time shall be paid to any MeriStar OP Unit Holder with
respect to New FelCor OP Units until such MeriStar OP Unit Holder executes and
delivers to FelCor OP a Ratification Agreement. Subject to the effect of
unclaimed property, escheat and other applicable laws, following delivery to
FelCor OP of any such Ratification Agreement, in addition to the consideration
required by Section 3.5, there shall be paid to the holder of the certificates
representing whole New FelCor OP Units issued in consideration therefor, without
interest, (i) at the time of such delivery, the amount of distributions with a
record date after the Effective Time theretofore paid with respect to such whole
New FelCor OP Units and (ii) at the appropriate payment date, the amount of
distributions with a record date after the Effective Time but prior to delivery
and a payment date subsequent to delivery payable with respect to such whole New
FelCor OP Units.

(c) No Fractional FelCor OP Units. Notwithstanding any other provision
hereof, no fractional New FelCor OP Units will be issued in connection with the
OP Merger. In lieu of issuance of a fractional New FelCor OP Unit, FelCor OP
shall pay each MeriStar OP Unit Holder who would otherwise be entitled to
receive a fraction of a New FelCor OP Unit, an amount in cash, without interest,
equal to the Market Price determined as of the Closing Date multiplied by the
fraction of a New FelCor OP Unit to which such holder would otherwise be
entitled.

(d) Withholding Rights. FelCor OP shall be entitled to deduct and withhold
from the consideration otherwise payable under Section 3.5 to any holder of
MeriStar OP Units, such amounts as FelCor OP is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
FelCor OP, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the MeriStar OP Units, in respect
of which such deduction and withholding was made by FelCor OP.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE MERISTAR PARTIES

Except as set forth in the letter of even date herewith signed by the
Chairman of the Board or President of MeriStar and delivered to the FelCor
Parties prior to the execution hereof (the "MeriStar Disclosure Letter"), the
MeriStar Parties, jointly and severally, represent and warrant to the FelCor
Parties as follows:

4.1 ORGANIZATION, STANDING AND POWER OF MERISTAR. MeriStar is a
corporation duly organized and validly existing under the laws of the State of
Maryland, having the requisite corporate power to carry on its business as now
being conducted. MeriStar is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of MeriStar and the MeriStar
Subsidiaries (as defined below), taken as a whole, or on the ability of the
MeriStar Parties to perform any of their respective substantive obligations
under this Agreement (any such effect, a "MeriStar Material Adverse Effect").
MeriStar has delivered to the FelCor Parties complete and correct copies of
MeriStar's Second Articles of Amendment and Restatement (the "MeriStar Charter")
and the Bylaws of MeriStar (the "MeriStar Bylaws"), in each case, as amended or
supplemented to the date of this Agreement.

4.2 MERISTAR SUBSIDIARIES.

(a) MeriStar is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of MeriStar LP, Inc., a Nevada corporation
("MeriStar LP"). As of the date of hereof,

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MeriStar LP owns 43,978,936 MeriStar Common Units, representing approximately
90.3% of the issued and outstanding MeriStar Common Units. There are issued and
outstanding (i) an aggregate of 2,883,111 MeriStar Common Units, (ii) an
aggregate of 964,227 MeriStar Class C Units, (iii) an aggregate of 392,157
MeriStar Class D Units, and (iv) an aggregate of 802,292 MeriStar POP Units.
MeriStar also owns an approximate 1% general partnership interest in MeriStar
OP, constituting all of the general partner interests in MeriStar OP. All of the
MeriStar OP Units owned by MeriStar LP, the general partner interest in MeriStar
OP owned by MeriStar, and the issued and outstanding capital stock of MeriStar
LP owned by MeriStar, are free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") other than those listed on Schedule 4.2(a) to the
MeriStar Disclosure Letter. The MeriStar OP Units are validly issued and
outstanding, fully paid and nonassessable. Schedule 4.2(a) of the MeriStar
Disclosure Letter sets forth the name of each MeriStar OP Unit Holder and the
number and type of MeriStar OP Units owned by each such MeriStar OP Unit Holder
in MeriStar OP as of the date of this Agreement. The MeriStar OP Units are
subject to no restriction except as set forth in the limited partnership
agreement of MeriStar OP (the "MeriStar OP Partnership Agreement") and pursuant
to applicable securities laws. MeriStar OP has not issued or granted and is not
a party to any outstanding commitments of any kind relating to, or any presently
effective agreements or understandings with respect to, interests in MeriStar
OP, whether issued or unissued, or securities convertible into or exchangeable
for interests in MeriStar OP or preemptive rights to purchase or rights of first
refusal with respect to such interests. Except as listed on Schedule 4.2(a) to
the MeriStar Disclosure Letter, no MeriStar OP Units, or other interests
therein, have been authorized or reserved for issuance to anyone other than
MeriStar LP or MeriStar.

(b) Schedule 4.2(b) to the MeriStar Disclosure Letter sets forth (i) each
Subsidiary (as defined below) of MeriStar (the "MeriStar Subsidiary" or
"MeriStar Subsidiaries"), (ii) the ownership interest therein of MeriStar, (iii)
if not wholly-owned by MeriStar, the identity and ownership interest of each of
the other owners of each MeriStar Subsidiary, (iv) each hotel (identified by
name and location) and other real property owned or leased by such MeriStar
Subsidiary, and (v) each entity not constituting a MeriStar Subsidiary in which
MeriStar or any MeriStar Subsidiary holds an ownership interest, indicating the
name, nature and business of such entity and the ownership interest therein held
by MeriStar, each MeriStar Subsidiary and each other Person. As used in this
Agreement, "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture, trust or other legal entity of which
such Person (either directly or through or together with another Subsidiary of
such Person) owns 50% or more of the capital stock or other equity interests of
such corporation, partnership, limited liability company, joint venture, trust
or other legal entity, except for passive investments held solely for investment
purposes and which are not material in amount.

(c) Except as set forth in Schedule 4.2(c) to the MeriStar Disclosure
Letter, (i) all the outstanding shares of capital stock of each MeriStar
Subsidiary that is a corporation have been duly and validly issued and are (A)
fully paid and nonassessable, (B) owned by MeriStar or by another MeriStar
Subsidiary and (C) owned free and clear of all Liens and (ii) all equity
interests owned by MeriStar or a MeriStar Subsidiary in another MeriStar
Subsidiary that is a partnership, joint venture, limited liability company or
trust are owned free and clear of all Liens. Each MeriStar Subsidiary, that is a
corporation is duly incorporated and validly existing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted, and each MeriStar
Subsidiary that is a partnership, limited liability company or trust is duly
organized and validly existing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its business
as now being conducted. Each MeriStar Subsidiary is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a MeriStar Material Adverse Effect. Copies of the articles or
certificates of incorporation, bylaws, organizational documents and partnership,
joint venture and operating agreements of each MeriStar Subsidiary, in each case
as amended to the date of this Agreement, have been previously delivered or made
available to the FelCor Parties. Neither MeriStar nor any of the MeriStar
Subsidiaries is in breach of any provision of any agreement,
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document or contract governing its rights in or to the interests owned or held
by it other than breaches which could not reasonably be expected to have a
MeriStar Material Adverse Effect. To the Knowledge of MeriStar (as defined in
Section 4.23), the other parties to such agreements, documents or contracts are
not in breach of any of their respective obligations under such agreements,
documents or contracts other than breaches which could not reasonably be
expected to have a MeriStar Material Adverse Effect.

4.3 MERISTAR STRUCTURE.

(a) The authorized shares of stock of MeriStar consist of 100,000,000
shares of preferred stock, $0.01 par value per share, none of which is issued or
outstanding, and 250,000,000 shares of MeriStar Common Stock, of which
44,465,990 shares were issued and outstanding as of the date hereof. On the date
hereof, (i) 4,549,561 shares of MeriStar Common Stock have been reserved for
issuance, and MeriStar has proposed an increase in the number of shares reserved
for issuance to an aggregate of 5,558,249 shares, under MeriStar's Incentive
Plan (the "MeriStar Incentive Plan"), under which options in respect of
4,470,348 shares of MeriStar Common Stock have been granted and are outstanding
on the date hereof, (ii) 125,000 shares of MeriStar Common Stock have been
reserved for issuance, and MeriStar has proposed an increase in the number of
shares reserved for issuance to an aggregate of 500,000 shares, under the
MeriStar Directors' Plan, (iii) 5,782,940 shares of MeriStar Common Stock have
been reserved for issuance upon the exchange of MeriStar OP Units, (iv)
4,538,235 shares of MeriStar Common Stock have been reserved for issuance upon
the conversion of MeriStar's 4.75% Convertible Subordinated Notes due 2004 (the
"MeriStar Convertible Notes"), (v) 500,000 shares of MeriStar Common Stock have
been reserved for issuance under MeriStar's Employee Stock Purchase Plan, and
(vi) 5,000,000 shares of MeriStar Common Stock have been reserved for issuance
under MeriStar's Dividend Reinvestment Plan, which will be terminated prior to
the Effective Time. On the date hereof, except as set forth in this Section 4.3
and the Schedules referenced in this Section 4.3, no shares of MeriStar Common
Stock or other voting securities of MeriStar were issued, reserved for issuance
or outstanding.

(b) Set forth in Schedule 4.3(b) to the MeriStar Disclosure Letter is a
true and complete list of the following: each qualified or nonqualified option
to purchase shares of MeriStar Common Stock granted under the MeriStar Incentive
Plan, the Directors' Plan or any other formal or informal stock-based
compensation arrangement ("MeriStar Options"). As of the date of this Agreement,
other than MeriStar Options, there were no outstanding warrants or other rights
to acquire stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units, restricted stock grants and performance shares
granted under the MeriStar Incentive Plan or rights to receive shares of
MeriStar Common Stock on a deferred basis granted by MeriStar under the MeriStar
Incentive Plan. Schedule 4.3(b) to the MeriStar Disclosure Letter also sets
forth for each MeriStar Option the name of the grantee, the date of the grant,
status of the option as qualified or nonqualified under Section 422 of the Code,
the number of shares of MeriStar Common Stock subject to such option, the number
of shares subject to options that are currently exercisable, the exercise price
per share, the expiration date, and the number of such shares subject to stock
appreciation rights.

(c) All outstanding shares of MeriStar Common Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for the MeriStar Convertible Notes, there are no bonds,
debentures, notes or other indebtedness of MeriStar having the right to vote (or
that are convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of MeriStar may vote.

(d) Except (i) as set forth in this Section 4.3, in Schedule 4.3(b) or
4.3(d) to the MeriStar Disclosure Letter, or in the MeriStar OP Partnership
Agreement (as defined herein) and (ii) for the MeriStar OP Units held by
partners in the MeriStar OP (which, subject to certain restrictions, may be
exchanged by the holders thereof for either cash or, at MeriStar's option,
shares of MeriStar Common Stock on a one-for-one basis), (A) there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which MeriStar or any
MeriStar Subsidiary is a party or by which such entity is bound, obligating
MeriStar or any MeriStar Subsidiary to

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issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of MeriStar Common Stock, voting securities or other ownership interests
of MeriStar or of any MeriStar Subsidiary or obligating MeriStar or any MeriStar
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking (other
than to MeriStar or a MeriStar Subsidiary), and (B) there are no outstanding
obligations of MeriStar or any MeriStar Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock or ownership interest in MeriStar
or any MeriStar Subsidiary.

4.4 ORGANIZATION, STANDING AND POWER OF MERISTAR OP. MeriStar OP is a
limited partnership duly organized and validly existing under the laws of
Delaware and has the requisite power and authority to carry on its business as
now being conducted. MeriStar OP is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
MeriStar Material Adverse Effect. MeriStar has delivered to the FelCor Parties
complete and correct copies of the MeriStar OP Partnership Agreement as amended
or supplemented to the date of this Agreement.

4.5 REGISTRATION RIGHTS. Except as set forth in Schedule 4.5 to the
MeriStar Disclosure Letter, no Person has any right to require the registration
of any shares of MeriStar Common Stock or any other securities of MeriStar or
any MeriStar Subsidiary.

4.6 AUTHORITY; NONCONTRAVENTION; CONSENTS.

(a) MeriStar has the requisite corporate power to enter into this Agreement
and, subject to the requisite stockholder approval of the Merger (the "MeriStar
Stockholder Approvals"), to consummate the transactions contemplated by this
Agreement. MeriStar OP has the requisite partnership power and authority to
enter into this Agreement, and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by the MeriStar
Parties and the consummation by the MeriStar Parties of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of the MeriStar Parties, except for and subject to the MeriStar
Stockholder Approvals with respect to MeriStar and the approvals set forth on
Schedule 4.6(a) to the MeriStar Disclosure Letter. This Agreement has been duly
executed and delivered by the MeriStar Parties and constitutes a valid and
binding obligation of the MeriStar Parties, enforceable against the MeriStar
Parties in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.

(b) Except as set forth in Schedule 4.6(b) to the MeriStar Disclosure
Letter, the execution and delivery of this Agreement by the MeriStar Parties do
not, and the consummation of the transactions contemplated by this Agreement
(including, without limitation, the Transactions), and compliance by the
MeriStar Parties with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any substantive obligation or to loss of a substantive benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the MeriStar Parties or any MeriStar Subsidiary, under, (i) the
MeriStar Charter, the MeriStar Bylaws or the charter, organizational documents,
limited liability company agreement, partnership agreement or other governing
document (as the case may be) of any MeriStar Subsidiary, each as amended or
supplemented to the date of this Agreement, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, reciprocal easement agreement, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
MeriStar or any MeriStar Subsidiary or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation (collectively, "Laws") applicable to MeriStar or any MeriStar
Subsidiary, or their respective properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, loss or
Liens that individually or in the aggregate would not (x) have a MeriStar
Material Adverse Effect or (y) prevent the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with,

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any federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required in connection with
the execution and delivery of this Agreement by the MeriStar Parties or the
consummation by the MeriStar Parties of the transactions contemplated by this
Agreement, except for (i) the filing with the Securities and Exchange Commission
(the "SEC") of the Proxy Statement (as defined in Section 7.1), (ii) the
acceptance for record of the Articles of Merger by the Department, (iii) such
filings as may be required in connection with the payment of any transfer and
gain taxes, and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedules 4.6(a)
and (b) to the MeriStar Disclosure Letter, (B) as may be required under (y)
federal, state or local environmental or Tax laws or (z) the "blue sky" laws of
various states, to the extent applicable; or (C) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the transactions contemplated by this Agreement or otherwise prevent the
MeriStar Parties from performing their obligations under this Agreement in any
material respect or have, individually or in the aggregate, a MeriStar Material
Adverse Effect.

4.7 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES. MeriStar and its predecessors have filed all required reports,
schedules, forms, statements and other documents with the SEC since July 31,
1996 through the date hereof (the "MeriStar SEC Documents"). Except as set forth
on Schedule 4.7 to the MeriStar Disclosure Letter, no MeriStar Subsidiary is
required to file any form, report, registration statement, prospectus or other
document with the SEC. All of the MeriStar SEC Documents (other than preliminary
materials), as of their respective filing dates, complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in each case, the rules and regulations
promulgated thereunder applicable to such MeriStar SEC Documents. None of the
MeriStar SEC Documents at the time of filing contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by later MeriStar SEC Documents
filed and publicly available prior to the date of this Agreement. The
consolidated financial statements of MeriStar included in the MeriStar SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position as of the dates thereof and the consolidated
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments) of MeriStar
and the MeriStar Subsidiaries. Except for liabilities and obligations set forth
in the MeriStar SEC Documents or in Schedule 4.7 to the MeriStar Disclosure
Letter, neither MeriStar nor any of the MeriStar Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), which are required by GAAP to be set forth on a consolidated
balance sheet of MeriStar or in the notes thereto and which, individually or in
the aggregate, would have a MeriStar Material Adverse Effect.

4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters
disclosed in the MeriStar SEC Documents or on Schedule 4.8 to the MeriStar
Disclosure Letter, (ii) the Transactions and the dividends and distributions
contemplated by Section 2.2(c), and (iii) the transactions permitted by Section
6.3, since the date of the most recent audited financial statements included in
the MeriStar SEC Documents (the "MeriStar Financial Statement Date"), MeriStar
and the MeriStar Subsidiaries have conducted their business only in the ordinary
and normal course (taking into account prior practices, including the
acquisition of properties and issuance of securities) and there has not been,
from the MeriStar Financial Statement Date through the date of this Agreement,
(a) any material adverse change in the business, financial condition or results
of operations of MeriStar and the MeriStar Subsidiaries taken as a whole,
including, without limitation, any increase in market rates of interest and
related costs of
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financing which results in yields for new issues of unsecured senior notes
issued by companies with a comparable debt rating to FelCor and MeriStar
exceeding an amount which the members of the Interim Transactions Committee (as
defined in Section 6.5) agree, in the exercise of their good faith business
judgment, makes the issuance of such debt not economically prudent (a "MeriStar
Material Adverse Change"), (b) any occurrence or circumstance that with the
passage of time would reasonably be expected to result in a MeriStar Material
Adverse Change, or (c) any action taken by MeriStar or any MeriStar Subsidiary
during the period from the MeriStar Financial Statement Date through the date of
this Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 6.3.

4.9 LITIGATION. Except as disclosed in the MeriStar SEC Documents or in
Schedule 4.9 to the MeriStar Disclosure Letter, and other than personal injury
and other routine tort litigation arising from the ordinary course of operations
of MeriStar and the MeriStar Subsidiaries (a) which are covered by adequate
insurance or (b) for which all material costs and liabilities arising therefrom
are reimbursable pursuant to common area maintenance or similar agreements,
there is no suit, action or proceeding pending (in which service of process has
been received by an employee or agent of MeriStar or any MeriStar Subsidiary)
or, to the Knowledge of MeriStar, threatened in writing against or affecting
MeriStar or any MeriStar Subsidiary that, individually or in the aggregate,
could reasonably be expected to have a MeriStar Material Adverse Effect or to
prohibit, restrict or interfere with the consummation of any of the
Transactions, nor is there any judgment, decree, injunction, rule or order of
any court or Governmental Entity or arbitrator outstanding against MeriStar or
any of the MeriStar Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future could have, any such Effect.

4.10 PROPERTIES.

(a) Schedule 4.10(a) to the MeriStar Disclosure Letter sets forth a
complete and accurate list and the address of all real property owned or leased
by MeriStar or any MeriStar Subsidiary (collectively, and together with the land
at each address referenced in Schedule 4.10(a) to the MeriStar Disclosure Letter
and all buildings, structures and other improvements and fixtures located on or
under such land and all easements, rights and other appurtenances to such land,
the "MeriStar Properties"). MeriStar or the MeriStar Subsidiaries, owns or own,
as the case may be, good and insurable fee simple title (or, if so indicated in
Schedule 4.10(a) to the MeriStar Disclosure Letter, leasehold title) to each of
the MeriStar Properties, in each case free and clear of liens, mortgages or
deeds of trust, claims against title, charges which are liens, security
interests or other encumbrances on title (collectively, "Encumbrances"), except
for such mortgages as are set forth on Schedule 4.16(b) to the MeriStar
Disclosure Letter or for which no disclosure is required by Section 4.16(b), the
Lien of real estate taxes not yet due and payable and such Encumbrances as
individually, and in the aggregate, could not reasonably be expected to have a
MeriStar Material Adverse Effect. Except for such of the following as
individually, or in the aggregate, could not reasonably be expected to have a
MeriStar Material Adverse Effect, policies of title insurance (or marked title
insurance commitments having the same force and effect as title insurance
policies) have been issued by national title insurance companies insuring the
fee simple or leasehold, as applicable, title of MeriStar or its Subsidiaries,
as applicable, to each of the MeriStar Properties in amounts at least equal to
the portion of the purchase price thereof allocated to real estate (the
"MeriStar Title Policies"), and, to MeriStar's Knowledge, the MeriStar Title
Policies are valid and in full force and effect and no claim has been made under
any such policy (except claims which have previously been fully resolved).

(b) Except as set forth in Schedule 4.10(b) to the MeriStar Disclosure
Letter, and except for matters which would not, individually or in the
aggregate, reasonably be expected to have a MeriStar Material Adverse Effect or
to materially and adversely affect the use or occupancy (or, if applicable, any
proposed development) of the MeriStar Properties, MeriStar has no Knowledge that
any currently required certificate, permit or license (including building
permits and certificates of occupancy) from any Governmental Entity having
jurisdiction over any MeriStar Property or any agreement, easement or other
right which is necessary to permit the lawful use, occupancy or operation of the
existing buildings, structures or other improvements which constitute a part of
any of the MeriStar Properties has not been

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obtained or is not in full force and effect, or of any pending modification or
cancellation of any of the same.

(c) Schedule 4.10(c) to the MeriStar Disclosure Letter sets forth a
complete and accurate list of all definitive agreements made or entered into by
MeriStar or any MeriStar Subsidiary as of the date hereof, which are scheduled
to close or be consummated after the date hereof, (x) to sell, mortgage, pledge,
hypothecate, lease or sublease any MeriStar Property, which, individually or in
the aggregate, are material, (y) to enter into a material transaction in respect
of the ownership or financing of any MeriStar Property or (z) to purchase, lease
or otherwise acquire any real property.

(d) Except as set forth in Schedule 4.10(d) to the MeriStar Disclosure
Letter, none of the MeriStar Properties is subject to any outstanding purchase
option, right of first refusal, right of first offer or similar right, other
than such rights as would not reasonably be expected to have a MeriStar Material
Adverse Effect, nor has MeriStar or any MeriStar Subsidiary entered into any
outstanding contracts with others for the sale, mortgage, pledge, hypothecation,
assignment, sublease or lease of any material portion of any MeriStar Property
or other transfer of all or any material part of any MeriStar Property as of the
date hereof, which are scheduled to close or be consummated after the date
hereof, and no Person has any right or option to acquire, or right of first
refusal or right of first offer with respect to, any interest of MeriStar or any
MeriStar Subsidiary in any MeriStar Property or any material part thereof.

(e) Schedule 4.10(e) to the MeriStar Disclosure Letter sets forth the
capital expenditure budget and schedule of MeriStar and each MeriStar Subsidiary
for each MeriStar Property, describing the capital expenditures which MeriStar
or any MeriStar Subsidiary has budgeted for such MeriStar Property for the
period running through December 31, 2001 (the "MeriStar Budget and Schedule").

(f) The ground leases underlying the leased MeriStar Properties
(collectively, the "MeriStar Ground Leases") are listed on Schedule 4.10(f) to
the MeriStar Disclosure Letter. Each of the MeriStar Ground Leases is valid,
binding and in full force and effect as against MeriStar or any MeriStar
Subsidiary and, to MeriStar's Knowledge, as against the other party thereto,
except to the extent the failure to be binding and in full force and effect
would not reasonably be expected to have a MeriStar Material Adverse Effect.
There does not exist under any of the MeriStar Ground Leases any default, and,
to MeriStar's Knowledge, no event has occurred which, with notice or lapse of
time or both, would constitute such a default, except as would not, individually
or in the aggregate, reasonably be expected to result in a MeriStar Material
Adverse Effect.

(g) Schedule 4.10(g) to the MeriStar Disclosure Letter sets forth a list of
the hotel franchise, license or other agreements relating to the names, marks or
systems (the "MeriStar Franchise Agreements") under which each of the MeriStar
Properties is being operated. Each of the MeriStar Franchise Agreements is in
full force and effect and, to the Knowledge of MeriStar, there are no defaults
thereunder by either party thereto, nor have any events occurred which, with the
giving notice or the passage of time or both would constitute a default or event
of default thereunder, except for those which either individually or in the
aggregate would not constitute a MeriStar Material Adverse Effect.

(h) Schedule 4.10(h) to the MeriStar Disclosure Letter sets forth a list of
the hotel management agreements (the "MeriStar Management Agreements") pursuant
to which each of the MeriStar Properties is being managed. Each of the MeriStar
Management Agreements is in full force and effect and, to the Knowledge of
MeriStar, there are no defaults thereunder by either party thereto, nor have any
events occurred which, with the giving notice or the passage of time or both
would constitute a default or event of default thereunder, except for those
which either individually or in the aggregate would not constitute a MeriStar
Material Adverse Effect.

4.11 EMPLOYEE BENEFITS. With respect to all MeriStar Benefit Plans (as
defined below), except for such matters, as, individually or in the aggregate,
could not reasonably be expected to have a MeriStar Material Adverse Effect, (a)
each MeriStar Benefit Plan and any related trust intended to be qualified under
Sections 401(a) and 501(a) of the Code has received a favorable determination
letter from the IRS that it is so qualified and, to the Knowledge of MeriStar,
nothing has occurred since the date of such letter

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that could reasonably be expected to materially adversely affect the qualified
status of such MeriStar Benefit Plan or related trust, (b) each MeriStar Benefit
Plan has been operated in all material respects in accordance with its terms and
with the terms and requirements of applicable law and all required returns and
filings for each MeriStar Benefit Plan have been timely made, (c) neither
MeriStar nor any MeriStar Subsidiary has incurred any tax, fine, lien, penalty
or other liability imposed under ERISA (defined below), the Code or other
applicable laws, rules and regulations, in connection with any MeriStar Benefit
Plan, and no administrative investigation, audit or other administrative
proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation,
the Internal Revenue Service or other governmental agencies are pending, in
progress or, to the Knowledge of MeriStar or any MeriStar Subsidiary,
threatened, and no fact or event exists that could reasonably be expected to
give rise to any such material liability, (d) all contributions due and payable
on or before the date hereof in respect of each MeriStar Benefit Plan have been
made in full and in proper form, (e) neither MeriStar nor any MeriStar
Subsidiary has ever sponsored or been obligated to contribute to any
"multiemployer plan" (as defined in Section 3(37) of ERISA), any plan subject to
Section 413 of the Code, or any "defined benefit plan" (as defined in Section
3(35) of ERISA), (f) except as otherwise required under ERISA, the Code and
applicable laws, no MeriStar Benefit Plan currently or previously maintained by
MeriStar or any MeriStar Subsidiary provides any post-employment health or life
insurance coverage or benefits, except as required under Section 4980B of the
Code; (g) neither MeriStar, nor any MeriStar Subsidiary, is a member of a
"Controlled Group" (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code Section 414(b),
(c), (m) or (o)), which has members other than themselves; (h) all material
reporting, disclosure and notice obligations imposed under ERISA and the Code
have been satisfied with respect to each MeriStar Benefit Plan, and (i) except
as set forth in Schedule 4.11 to the MeriStar Disclosure Letter, no benefit or
amount payable, or which may become payable in connection with the Transactions,
by MeriStar or any MeriStar Subsidiary pursuant to any MeriStar Benefit Plan,
agreement or contract with any employee, constitutes an "excess parachute
payment" which would not be deductible by reason of Section 280G of the Code.
Schedule 4.11 to the MeriStar Disclosure Letter contains a complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") excluding
"multiemployer plans" within the meaning of ERISA Section 3(37)), and all stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of the transaction
contemplated by this Agreement or otherwise), whether formal or informal, oral
or written, legally binding or not, under which any current or former employee,
officer or director of MeriStar or any MeriStar Subsidiary has any present or
future right to benefits sponsored or maintained by MeriStar or any MeriStar
Subsidiary or under which MeriStar or any MeriStar Subsidiary has had or has any
present or could reasonably be expected to have any future liability. All such
plans, agreements, programs, policies and arrangements shall be collectively
referred to as the "MeriStar Benefit Plans." With respect to each MeriStar
Benefit Plan, MeriStar has provided to FelCor a current, accurate and complete
copy (or, to the extent no such copy exists, an accurate description) thereof
and, to the extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent determination letter, if applicable; (iii) any
summary plan description and other written communications (or a description of
any oral communications) by MeriStar or any MeriStar Subsidiary to their
employees concerning the extent of the benefits provided under a MeriStar
Benefit Plan; and (iv) for the most recent year (A) the Form 5500 and attached
schedules, (B) audited financial statements, and (C) attorney's response to an
auditor's request for information.

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4.12 LABOR MATTERS; EMPLOYEES.

(a) Except as set forth on Schedule 4.12(a) to the MeriStar Disclosure
Letter, neither MeriStar nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor union organization. MeriStar has
delivered true, correct and complete copies of such agreements to the FelCor
Parties. There is no unfair labor practice or labor arbitration proceeding
pending or, to MeriStar's Knowledge, threatened against MeriStar or any of its
Subsidiaries relating to their business which, if determined adversely to
MeriStar or any of its Subsidiaries, would have a MeriStar Material Adverse
Effect.

(b) Schedule 4.12(b) to the MeriStar Disclosure Letter sets forth all
employment agreements between MeriStar or any of its Subsidiaries and any other
Person.

(c) Neither MeriStar, nor any MeriStar Subsidiary, is delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any services or
otherwise arising under any policy, practice, agreement, plan, program or Law,
which delinquency would, in the aggregate, have a MeriStar Material Adverse
Effect. None of MeriStar's or any MeriStar Subsidiary's employment policies or
practices is currently being audited or investigated by any Governmental Entity
or court. There is no pending or, to the Knowledge of MeriStar, threatened
litigation, unfair labor practice charge, or other charge or inquiry against
MeriStar or any MeriStar Subsidiary brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of any of them with respect to employment practices which could
reasonably be expected to have a MeriStar Material Adverse Effect.

(d) Neither MeriStar nor any MeriStar Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation or other order by, any
Governmental Entity relating to employees or employment practices. MeriStar and
each MeriStar Subsidiary are in compliance in all material respects with all
applicable Laws, Contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including the
obligations of the Worker Adjustment and Retraining Notification Act of 1988, as
amended ("WARN"), and has not planned or implemented any early retirement,
separation or window program within the past five years.

4.13 TAXES.

(a) Except as set forth on Schedule 4.13(a) to the MeriStar Disclosure
Letter, each of MeriStar and the MeriStar Subsidiaries has timely filed or
caused to be timely filed all material Tax Returns (as defined below) required
to be filed by it and for any partnerships for which any of them is a general
partner (after giving effect to any filing extension properly granted by a
Governmental Entity having authority to do so) and has paid (or MeriStar has
paid on its behalf) all Taxes (as defined below) required to be paid as shown on
such returns and all such Tax Returns were, when filed, complete and accurate in
all material respects, except where the failure to file such Tax Returns, the
failure to pay such Taxes and the failure of such Tax Returns to be complete and
accurate in all material respects could not be reasonably expected to have a
MeriStar Material Adverse Effect. No material deficiencies for any Taxes have
been or are currently being proposed, asserted or assessed in writing, or to the
Knowledge of MeriStar, threatened in writing by any taxing authority against
MeriStar or any MeriStar Subsidiary. Neither MeriStar nor a MeriStar Subsidiary
has executed or filed with any taxing authority any agreement now in effect
extending the period for assessment of Taxes. No Tax Returns of MeriStar or any
MeriStar Subsidiary have been or are currently being audited by any applicable
taxing authority, and neither MeriStar nor any MeriStar Subsidiary has received
any written notice that such audit is contemplated. There are no material Tax
liens on any properties of MeriStar or any MeriStar Subsidiary other than liens
for current Taxes not yet due and payable. The most recent audited financial
statements contained in the MeriStar SEC Documents reflect an adequate accrual
in accordance with GAAP for all Taxes and deferred Taxes payable by MeriStar and
its Subsidiaries for all taxable periods and portions thereof through the date
of such financial statements. Except as would not have a MeriStar Material
Adverse Effect, MeriStar and each MeriStar Subsidiary have complied with all
applicable Laws relating to the payment, collection, withholding and deposit, as
the case may be, of Taxes and, to the extent required, have paid over to the
appropriate
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governmental authorities or are properly holding for such payment all taxes,
unemployment insurance and other amounts required by law to be withheld or
collected.

(b) MeriStar is not required to include in income any amount for an
adjustment pursuant to Section 481 of the Code, and except as set forth on
Schedule 4.13(b) to the MeriStar Disclosure Letter, is neither a party to nor
obligated under any agreement or other arrangement providing for the payment of
any amount that is not or would not be deductible by MeriStar by reason of
Section 280G of the Code or Section 162(m) of the Code.

(c) Neither MeriStar nor any MeriStar Subsidiary has taken or will take any
action that would create a material risk that the Merger would not qualify as a
reorganization within the meaning of Section 368(a) of the Code.

(d) Neither MeriStar nor any MeriStar Subsidiary is a party to or has any
obligation under any Tax sharing agreements or similar contract or arrangement
that would have a MeriStar Material Adverse Effect. No closing agreement
pursuant to Section 7121 of the Code (or any similar provision of state, local
or foreign law) has been entered into by MeriStar or any MeriStar Subsidiary
that would have a MeriStar Material Adverse Effect.

(e) Except as set forth on Schedule 4.13(e) to the MeriStar Disclosure
Letter, neither MeriStar nor any MeriStar Subsidiary has any material liability
for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise, that would have a MeriStar Material Adverse Effect.

(f) Since the MeriStar Financial Statement Date, (i) MeriStar has incurred
no material liability for Taxes under Section 857(b), 860(c) or 4981 of the
Code, including, without limitation, any Tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and (ii) neither
MeriStar nor a MeriStar Subsidiary has incurred any material liability for Taxes
other than in the ordinary course of business except where such liability for
Taxes could not reasonably be expected to have a MeriStar Material Adverse
Effect. No event has occurred, and no condition or circumstance exists, which
presents a material risk that any material Tax described in this paragraph (f)
will be imposed upon MeriStar.

(g) MeriStar or its predecessors (other than CapStar Hotel Company) (i) for
all taxable years commencing with its taxable year beginning July 31, 1996 and
ended December 31, 1996, and through December 31, 2000 has been subject to
taxation as a real estate investment trust within the meaning of Section 856 of
the Code (a "REIT") and has satisfied all requirements to qualify as a REIT for
such years, and (ii) has operated, and intends to continue to operate, in such
manner as to qualify as a REIT for the taxable year ending at the Effective
Time. To MeriStar's Knowledge, no action, proceeding or investigation that could
reasonably be expected to result in the termination of MeriStar's status as a
REIT has been taken or omitted or is pending or threatened.

(h) Except as set forth on Schedule 4.13(h) to the MeriStar Disclosure
Letter, MeriStar has not made an election under IRS Notice 88-19 or Temporary
Treasury Regulations Section 1.337(d)-5T(b)(3).

(i) Except as set forth on Schedule 4.13(i) to the MeriStar Disclosure
Letter, each of MeriStar OP and each other subsidiary of MeriStar that is
organized as a partnership, limited liability company or trust (including
entities in which MeriStar directly or indirectly owns less than 50% of the
equity ownership interests) has been at all times since August 3, 1998, and will
be through the Closing Date, treated for federal income tax purposes as either
(i) a partnership that is not either an association taxable as a corporation or
a publicly traded partnership under Section 7704 of the Code, (ii) a publicly
traded partnership that is eligible for partnership status under Section 7704(c)
of the Code, or (iii) a disregarded entity.

(j) Except as set forth on Schedule 4.13(j) to the MeriStar Disclosure
Letter, each of the corporations in which MeriStar owns a direct or indirect
equity ownership interest has been at all times since August 3, 1998, and
through the Closing Date will be, treated for federal income tax purposes as

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either (i) a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code or (ii) a "taxable REIT subsidiary" within the meaning of Section
856(l) of the Code.

(k) Schedule 4.13(k) to the MeriStar Disclosure Letter sets forth a list of
the entities for which MeriStar has made taxable REIT subsidiary elections under
Section 856(l) and the effective dates of such elections. MeriStar has made a
taxable REIT subsidiary election for each entity that it intends to treat as a
taxable REIT subsidiary for its 2001 taxable year.

(l) Except for the agreements or with respect to the transactions that will
be set forth on Schedule 4.13(l) to the MeriStar Disclosure Letter (such
Schedule 4.13(l) to be delivered within 14 business days from the date of this
Agreement), neither MeriStar nor any MeriStar Subsidiary has entered into or is
subject to any "MeriStar Tax Protection Agreements." The MeriStar Parties
represent and warrant that the MeriStar Tax Protection Agreements listed on
Schedule 4.13(l) shall contain only such terms and provisions as are usual and
customary in agreements for similar purposes. As used herein, a MeriStar Tax
Protection Agreement is a written agreement (A) that has as one of its purposes
to permit a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer of
property to the MeriStar OP or any other MeriStar Subsidiary that is treated as
a partnership for federal income tax purposes and that as a result of such
purpose (i) prohibits or restricts in any manner the disposition of any assets
of the MeriStar OP or such MeriStar Subsidiary or requires the MeriStar OP or
such MeriStar Subsidiary to indemnify or reimburse any Person for a loss of
federal income tax deferral as a result of any such asset disposition; (ii)
requires that the MeriStar OP or such MeriStar Subsidiary maintain, put in
place, or replace, indebtedness, whether or not secured by one or more of the
MeriStar Properties; or (iii) requires that the MeriStar OP or such MeriStar
Subsidiary offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly (including, without limitation, through
a "deficit restoration obligation," guarantee (including, without limitation, a
"bottom" guarantee), indemnification agreement, reimbursement agreement or other
similar arrangement), the risk of loss for federal income tax purposes for
indebtedness or other liabilities of the MeriStar OP or such MeriStar
Subsidiary, (B) that specifies or relates to a method of taking into account
book-tax disparities under Section 704(c) of the Code or the Treasury
Regulations promulgated thereunder with respect to one or more assets of the
MeriStar OP or such MeriStar Subsidiary or (C) that requires a particular method
for allocating one or more liabilities of MeriStar or such MeriStar Subsidiary
under Section 752 of the Code or the Treasury Regulations promulgated
thereunder. Except as would not have a MeriStar Material Adverse Effect, neither
MeriStar nor any MeriStar Subsidiary is in violation of or in default under any
MeriStar Tax Protection Agreement.

(m) As used in this Agreement, "Tax" or "Taxes" means any federal, state,
local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not. "Tax Returns" means any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.

4.14 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Except as disclosed
on Schedule 4.14 to the MeriStar Disclosure Letter, there are no cash or
non-cash payments which will become payable to any employee, officer or director
of MeriStar or any MeriStar Subsidiary as a result of the Merger and the
Transactions, and there is no employment or severance contract, or other
agreement requiring payments, cancellation of indebtedness or other obligation
to be made upon a change of control or otherwise as a result of the consummation
of any of the transactions contemplated by this Agreement, with respect to any
employee, officer or director of MeriStar or any MeriStar Subsidiary.

4.15 BROKERS, FEES AND EXPENSES. No broker, investment banker, financial
advisor or other person, other than Salomon Smith Barney Inc., the fees and
expenses of which are as described in the engagement letter between Salomon
Smith Barney Inc. and MeriStar, a true and correct copy of which

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has previously been delivered to the FelCor Parties, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby, based upon arrangements
made by or on behalf of MeriStar or any MeriStar Subsidiary.

4.16 CONTRACTS; DEBT INSTRUMENTS.

(a) Except as set forth in Schedule 4.16(a) to the MeriStar Disclosure
Letter, and except as, individually or in the aggregate, would not have a
MeriStar Material Adverse Effect, neither MeriStar nor any MeriStar Subsidiary
has received a written notice that MeriStar or any MeriStar Subsidiary is in
violation of or in default under (nor to the Knowledge of MeriStar does there
exist any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) any loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, nor to the Knowledge of MeriStar does such a violation or
default exist.

(b) Except for any of the following expressly identified in MeriStar SEC
Documents, Schedule 4.16(b) to the MeriStar Disclosure Letter sets forth a list
of each loan or credit agreement, note, bond, mortgage, indenture and any other
agreement and instrument pursuant to which any Indebtedness (as defined below)
in excess of $10,000,000 of MeriStar or of any MeriStar Subsidiary, other than
such Indebtedness payable to MeriStar or a MeriStar Subsidiary, is outstanding
or may be incurred. For purposes of this Agreement, "Indebtedness" shall mean
(i) indebtedness for borrowed money, whether secured or unsecured, (ii)
obligations under conditional sale or other title retention agreements relating
to property purchased by such Person, (iii) capitalized lease obligations, (iv)
obligations under interest rate cap, swap, collar or similar transactions or
currency hedging transactions (valued at the termination value thereof), and (v)
guarantees of any such Indebtedness of any other Person.

4.17 ENVIRONMENTAL MATTERS. Except as, individually or in the aggregate,
would not have a MeriStar Material Adverse Effect and except as disclosed in the
MeriStar SEC Documents filed prior to the date of this Agreement, none of
MeriStar, any of the MeriStar Subsidiaries or, to the Knowledge of MeriStar, any
other Person has caused or permitted (a) the unlawful presence of any Hazardous
Materials (as defined below) on any of the MeriStar Properties or properties
formerly owned by MeriStar or (b) any unlawful spills, releases, discharges or
disposal of Hazardous Materials to have occurred on MeriStar Properties or
properties formerly owned by MeriStar or be presently occurring on or from the
MeriStar Properties, which presence or occurrence, individually or in the
aggregate, could reasonably be expected to have a MeriStar Material Adverse
Effect; and, in connection with the construction on or operation and use of the
MeriStar Properties, neither MeriStar nor any MeriStar Subsidiary has failed to
comply in any material respect with any applicable Environmental Laws (as
defined below), except to the extent such failure to comply, individually or in
the aggregate, could not be reasonably expected to have a MeriStar Material
Adverse Effect. No notice, notification, demand, request for information,
citation, summons, complaint or order has been received by or is pending, or to
the Knowledge of MeriStar, is threatened by, any Person against MeriStar or any
MeriStar Subsidiary, other than where such notice, notification, demand, request
for information, citation, summons, complaint or order has been fully resolved,
or individually and in the aggregate, could not be reasonably expected to result
in a MeriStar Material Adverse Effect. MeriStar has previously delivered or made
available to FelCor or its counsel true and complete copies of all internally
prepared or commissioned environmental studies, assessments and reports in the
possession or under the control of MeriStar that relate to the MeriStar
Properties and/or MeriStar's compliance with Environmental Laws.

As used in this Agreement, "Environmental Laws" means any and all federal,
state, foreign, interstate, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decisions, injunctions, orders, decrees,
requirements of any Governmental Entity, any and all common law requirements,
rules and bases of liability regulating, relating to or imposing liability or
standards of conduct concerning pollution, Hazardous Materials or protection of
human health, safety or the environment, as currently in effect and includes the
Comprehensive Environmental Response Act, 49 U.S.C. sec.sec. 1801,

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et seq., the Resource Conservation and Recovery Act, 42 U.S.C. sec.sec. 6901, et
seq., the Clean Water Act, 33 U.S.C. sec.sec. 1251, et seq., the Clean Air Act,
33 U.S.C. sec.sec. 2601, et seq., the Toxic Substances Control Act, 15 U.S.C.
sec.sec. 2601, et seq., the Federal Insecticide, Fungicide and Rodenticide Act,
7 U.S.C. sec.sec. 136, et seq., Occupational Safety and Health Act, 29 U.S.C.
sec.sec. 651, et seq. and the Oil Pollution Act of 1990, 33 U.S.C.
sec.sec. 2701, et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes. As used in this Agreement, "Hazardous Materials" means any materials
or wastes, defined, listed, classified or regulated as hazardous, toxic, a
pollutant, a contaminant or dangerous in or under any Environmental Laws which
includes, but is not limited to, petroleum, petroleum products, friable
asbestos, urea formaldehyde, radioactive materials and polychlorinated
biphenyls.

4.18 COMPLIANCE WITH LAWS. Except as disclosed in the MeriStar SEC
Documents, neither MeriStar nor any MeriStar Subsidiary has violated or failed
to comply with any Law, permit, judgment, decree or order of any Governmental
Entity applicable to its business, properties or operations, except to the
extent that such violation or failure could not reasonably be expected to have a
MeriStar Material Adverse Effect.

4.19 OPINION OF FINANCIAL ADVISOR. The Board of Directors of MeriStar has
received the opinion of Salomon Smith Barney Inc., dated the date of this
Agreement, to the effect that the Merger Consideration is fair, from a financial
point of view, to the holders of shares of MeriStar Common Stock.

4.20 MARYLAND TAKEOVER LAW. The Maryland Business Combination Act and the
Maryland Control Share Acquisition Act will not apply to MeriStar in connection
with this Agreement and the other transactions contemplated hereby. The
provisions of Article II, Section 10 of the Bylaws of MeriStar relating to the
Maryland Control Share Acquisition Act have not been rescinded or revoked.

4.21 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by MeriStar specifically for inclusion or incorporation by reference in
(i) the Registration Statement (as defined in Section 7.1(a)), at the time the
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, or (ii) the Proxy Statement (as defined in Section
7.1(a)), at the date it is first mailed to MeriStar's stockholders or at the
time of the MeriStar Stockholders Meeting (as defined in Section 7.1(d)), will
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and Proxy Statement will comply in all
material respects with the requirements of the Securities Act and the Exchange
Act, respectively, and the rules and regulations thereunder, except that no
representation or warranty is made by MeriStar with respect to statements made
or incorporated by reference therein based on information supplied by FelCor
specifically for inclusion or incorporated by reference in the Proxy Statement
or contained in any FelCor SEC Documents incorporated by reference in the
Registration Statement or the Proxy Statement.

4.22 INVESTMENT COMPANY ACT OF 1940. Neither MeriStar nor any MeriStar
Subsidiary is, or at the Effective Time will be, required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act").

4.23 DEFINITION OF KNOWLEDGE OF MERISTAR. As used in this Agreement, the
phrase "Knowledge of MeriStar" (or words of similar import) means the knowledge
of those individuals identified in Schedule 4.23 to the MeriStar Disclosure
Letter.

4.24 VOTING REQUIREMENTS. The MeriStar Stockholder Approvals, which shall
consist of the affirmative vote of holders of shares entitled to cast a majority
of all votes entitled to be cast on the matter at the MeriStar Stockholders
Meeting, which shall be a duly convened meeting at which a quorum is present and
acting throughout, to approve the Merger are the only votes of the holders of
any class or series of MeriStar's stock necessary to approve the Merger and the
other transactions contemplated by this Agreement. MeriStar, acting as the
general partner of MeriStar OP, has the power to cause MeriStar OP to effect the
OP Merger without obtaining any consent or approval of the limited partners of
MeriStar OP.

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4.25 RELATED PARTY AGREEMENTS. Except as listed on Schedule 4.25 to the
MeriStar Disclosure Letter, there is no binding contract, agreement,
undertaking, or commitment between MeriStar or any MeriStar Subsidiary, on the
one hand, and MeriStar Hotels & Resorts, Inc. ("MeriStar Hotels & Resorts"), MIP
Lessee, L.P., MeriStar Investment Partners, L.P., or any of their affiliated,
related or associated Persons (other than another MeriStar Subsidiary), on the
other hand.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE FELCOR PARTIES

Except as set forth in the letter of even date herewith signed by the
Chairman of the Board or President of FelCor and delivered to the MeriStar
Parties prior to the execution hereof (the "FelCor Disclosure Letter"), the
FelCor Parties, jointly and severally, represent and warrant to the MeriStar
Parties as follows:

5.1 ORGANIZATION, STANDING AND POWER OF FELCOR. FelCor is a corporation
duly organized and validly existing under the laws of the State of Maryland,
having the requisite corporate power to carry on its business as now being
conducted. FelCor is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of FelCor and the FelCor
Subsidiaries (as defined below), taken as a whole, or the ability of the FelCor
Parties to perform any of their respective substantive obligations under this
Agreement (any such effect a "FelCor Material Adverse Effect"). FelCor has
delivered to the MeriStar Parties complete and correct copies of the FelCor
Charter and the FelCor Bylaws.

5.2 FELCOR SUBSIDIARIES.

(a) FelCor is the record and beneficial owner of all of the issued and
outstanding membership interests of FelCor Nevada Holdings, L.L.C., a Nevada
limited liability company ("FelCor LLC"). As of the date hereof, FelCor LLC owns
57,782,448 FelCor Common Units representing approximately 86.6% of the issued
and outstanding FelCor Common Units. There are issued and outstanding (i) an
aggregate of 66,757,265 FelCor Common Units, (ii) an aggregate of 39,229 Class
B, Series II units of limited partnership interest in FelCor OP (the "FelCor
Class B Units"), (iii) an aggregate of 5,980,600 Series A Cumulative Convertible
Preferred Units (the "FelCor Series A Preferred Units"), and (iv) an aggregate
of 57,500 Series B Cumulative Redeemable Preferred Units (the "FelCor Series B
Preferred Units") (collectively, together with the FelCor Common Units, FelCor
Class B Units, FelCor Series A Preferred Units and FelCor Series B Preferred
Units, the "FelCor OP Units"). FelCor also owns an approximately 1.6% general
partner interest in FelCor OP, constituting all of the general partner interests
in FelCor OP. All of the FelCor OP Units owned by FelCor and FelCor LLC, the
general partner interest in FelCor OP owned by FelCor, and the issued and
outstanding membership interests in FelCor LLC owned by FelCor, are free and
clear of all Liens, other than those listed on Schedule 5.2(a) to the FelCor
Disclosure Letter. The FelCor OP Units are validly issued and outstanding, fully
paid and nonassessable. Schedule 5.2(a) to the FelCor Disclosure Letter sets
forth the name of each holder of a FelCor OP Unit (each a "FelCor OP Unit
Holder") and the number and type of FelCor OP Units owned by each such FelCor OP
Unit Holder in FelCor OP as of the date of this Agreement. The FelCor OP Units
are subject to no restriction except as set forth in the FelCor OP limited
partnership agreement (the "FelCor Operating Partnership Agreement") and
pursuant to applicable securities laws. FelCor OP has not issued or granted and
is not a party to any outstanding commitments of any kind relating to, or any
presently effective agreements or understandings with respect to, interests in
FelCor OP, whether issued or unissued, or securities convertible into or
exchangeable for interests in FelCor OP or preemptive rights to purchase or
rights of first refusal with respect to such interests. Except as listed on
Schedule 5.2(a) to the FelCor Disclosure Letter, no FelCor OP Units, or other
interests therein, have been authorized or reserved for issuance to anyone other
than FelCor LLC or FelCor.
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(b) Schedule 5.2(b) to the FelCor Disclosure Letter sets forth (i) each
Subsidiary of FelCor (the "FelCor Subsidiary" or "FelCor Subsidiaries"), (ii)
the ownership interest therein of FelCor, (iii) if not wholly-owned by FelCor,
the identity and ownership interest of each of the other owners of such FelCor
Subsidiary, (iv) each hotel (identified by name and location) and other real
property owned or leased by such FelCor Subsidiary, and (v) each entity not
constituting a FelCor Subsidiary in which FelCor or any FelCor Subsidiary holds
an ownership interest, indicating the name, nature and business of such entity
and the ownership interest therein held by each FelCor Subsidiary and each other
Person.

(c) Except as set forth in Schedule 5.2(c) to the FelCor Disclosure Letter,
(i) all the outstanding shares of capital stock of each FelCor Subsidiary that
is a corporation have been duly and validly issued and are (A) fully paid and
nonassessable, (B) owned by FelCor or another FelCor Subsidiary and (C) owned
free and clear of all Liens and (ii) all equity interests owned by FelCor or a
FelCor Subsidiary in another FelCor Subsidiary that is a partnership, joint
venture, trust or limited liability company are owned free and clear of all
Liens. Each FelCor Subsidiary, that is a corporation is duly incorporated and
validly existing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted, and each FelCor Subsidiary that is a partnership, limited liability
company, trust or joint venture is duly organized and validly existing under the
laws of its jurisdiction of organization and has the requisite power and
authority to carry on its business as now being conducted. Each FelCor
Subsidiary is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a FelCor Material Adverse
Effect. Copies of the articles or certificates of incorporation, bylaws,
organizational documents and partnership, joint venture and operating agreements
of each FelCor Subsidiary, in each case as amended to the date of this
Agreement, have been previously delivered or made available to the MeriStar
Parties. Neither FelCor nor any of the FelCor Subsidiaries is in breach of any
provision of any agreement, document or contract governing its rights in or to
the interests owned or held by it other than breaches, which could not
reasonably be expected to have a FelCor Material Adverse Effect. To the
Knowledge of FelCor (as defined in Section 5.21), the other parties to such
agreements, documents or contracts are not in breach of any of their respective
obligations under such agreements, documents or contracts other than breaches,
which could not reasonably be expected to have a FelCor Material Adverse Effect.

5.3 FELCOR STRUCTURE.

(a) The authorized shares of stock of FelCor consist of 200,000,000 shares
of FelCor Common Stock and 20,000,000 shares of preferred stock, $0.01 par value
per share, of which 6,050,000 shares have been designated as $1.95 Series A
Cumulative Convertible Preferred Stock ("FelCor Series A Preferred Stock") and
57,500 shares have been designated as 9% Series B Cumulative Redeemable
Preferred Stock ("FelCor Series B Preferred Stock"). As of the date hereof, (i)
53,159,146 shares of FelCor Common Stock were issued and outstanding, (ii)
5,980,600 shares of FelCor Series A Preferred Stock were outstanding, (iii)
57,500 shares of FelCor Series B Preferred Stock were outstanding and
represented by 5,750,000 Depositary Receipts, each representing 1/100 of a share
of FelCor Series B Preferred Stock, (iv) 3,092,614 shares of FelCor Common Stock
have been reserved for issuance, and FelCor may propose an increase in the
number of shares reserved for issuance to an aggregate of 4,092,614 shares,
under FelCor's Restricted Stock and Stock Option Plans, as amended (the "FelCor
Plans"), (v) 1,737,111 shares of FelCor Common Stock were issuable upon exercise
of outstanding stock options (the "FelCor Options") to purchase shares of FelCor
Common Stock, (vi) 5,500 shares of Common Stock issuable pursuant to FelCor's
Deferred Compensation Plan, (vii) 9,014,046 shares of FelCor Common Stock were
reserved for issuance upon redemption of FelCor OP Units, and (viii) 4,636,161
shares of FelCor Common Stock were reserved for issuance upon conversion of the
FelCor Series A Preferred Stock. On the date hereof, except as set forth in this
Section 5.3 and the Schedules referenced in this Section 5.3, no shares of
FelCor Common Stock or other voting securities of FelCor were issued, reserved
for issuance or outstanding.

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(b) Set forth in Schedule 5.3(b) to the FelCor Disclosure Letter is a true
and complete list of the following: (i) each qualified or nonqualified option to
purchase shares of FelCor Common Stock granted under the FelCor Plans or any
other formal or informal stock-based compensation arrangement, (ii) each grant
of shares of FelCor Common Stock to employees which are subject to any risk of
forfeiture ("FelCor Restricted Stock Grants") and (iii) shares issuable pursuant
to the FelCor Deferred Compensation Plan ("FelCor Deferred Stock"). As of the
date of this Agreement, other than FelCor Options, FelCor Restricted Stock
Grants, and FelCor Deferred Stock, there were no outstanding warrants or other
rights to acquire stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units and performance shares granted under the FelCor
Plans or rights to receive shares of FelCor Common Stock on a deferred basis
granted under the FelCor Plans. Schedule 5.3(b) to the FelCor Disclosure Letter
also sets forth for each FelCor Option the name of the grantee, the date of the
grant, status of the option as qualified or nonqualified under Section 422 of
the Code, the number of shares of FelCor Common Stock subject to such option,
the number of shares subject to options that are currently exercisable, the
exercise price per share, the expiration date and the number of such shares
subject to share appreciation rights. For each FelCor Restricted Stock Grant,
Schedule 5.3(b) to the FelCor Disclosure Letter sets forth the name of the
grantee, the date of the grant and the number of shares of FelCor Common Stock
granted and the date any risk of forfeiture with respect to such shares lapses.

(c) All outstanding shares of FelCor Common Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of FelCor
having the right to vote (or that are convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
FelCor may vote.

(d) Except (i) as set forth in this Section 5.3, in Schedule 5.3(b) or
5.3(d) to the FelCor Disclosure Letter, or in the FelCor Operating Partnership
Agreement (as defined herein) and (ii) for FelCor OP Units held by partners in
the FelCor OP (which, subject to certain restrictions, may be redeemed by the
holders thereof for either cash or, at FelCor's option, shares of FelCor Common
Stock on a one-for-one basis), (A) there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which FelCor or any FelCor Subsidiary is a party or by which such
entity is bound, obligating FelCor or any FelCor Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of FelCor
Common Stock, voting securities or other ownership interests of FelCor or of any
FelCor Subsidiary or obligating FelCor or any FelCor Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to FelCor or a
FelCor Subsidiary), and (B) there are no outstanding obligations of FelCor or
any FelCor Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock or ownership interest in FelCor or any FelCor Subsidiary.

5.4 ORGANIZATION, STANDING AND POWER OF FELCOR OP. FelCor OP is a limited
partnership duly organized and validly existing under the laws of Delaware and
has the requisite power and authority to carry on its business as now being
conducted. FelCor OP is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a FelCor Material
Adverse Effect. FelCor has delivered to the MeriStar Parties complete and
correct copies of the FelCor Operating Partnership Agreement as amended or
supplemented to the date of this Agreement.

5.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.

(a) FelCor has the requisite power to enter into this Agreement and,
subject to the requisite stockholder approval of the Merger (the "FelCor
Stockholder Approval" and, together with the MeriStar Stockholder Approval, the
"Stockholder Approvals"), to consummate the transactions contemplated by this
Agreement. Except as set forth in Schedule 5.5(a) to the FelCor Disclosure
Letter, FelCor OP has the requisite partnership power and authority to enter
into this Agreement, and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the FelCor

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Parties and the consummation by the FelCor Parties of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of the FelCor Parties, except for and subject to the FelCor
Stockholder Approval and the approvals set forth on Schedule 5.5(a) to the
FelCor Disclosure Letter. This Agreement has been duly executed and delivered by
the FelCor Parties and constitutes a valid and binding obligation of the FelCor
Parties, enforceable against the FelCor Parties in accordance with and subject
to its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.

(b) Except as set forth in Schedule 5.5(b) to the FelCor Disclosure Letter,
the execution and delivery of this Agreement by the FelCor Parties do not, and
the consummation of the transactions contemplated by this Agreement, (including,
without limitation,) the Transactions, and compliance by the FelCor Parties with
the provisions of this Agreement will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any substantive obligation or to loss of a substantive benefit under, or result
in the creation of any Lien upon any of the properties or assets of the FelCor
Parties or any FelCor Subsidiary under, (i) the FelCor Charter, FelCor Bylaws or
the charter, organizational documents, limited liability company agreement,
partnership agreement or other governing document (as the case may be) of any
FelCor Subsidiary, each as amended or supplemented to the date of this
Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument, permit,
concession, franchise or license applicable to FelCor or any FelCor Subsidiary
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Laws
applicable to FelCor or any FelCor Subsidiary or their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, loss or Liens that individually or in the
aggregate would not (x) have a FelCor Material Adverse Effect or (y) prevent the
consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to FelCor or any
FelCor Subsidiary in connection with the execution and delivery of this
Agreement or the consummation by the FelCor Parties of any of the transactions
contemplated by this Agreement, except for (i) the filing with the SEC of the
Registration Statement and the Proxy Statement, (ii) the acceptance for record
of the Articles of Merger by the Department and the filing of the Certificate of
Merger with the Delaware Secretary of State, (iii) such filings as may be
required in connection with the payment of any transfer and gains taxes, and
(iv) such other consents, approvals, orders, authorizations, registrations,
declarations and filings (A) as are set forth in Schedule 5.5(a) or (b) to the
FelCor Disclosure Letter or (B) as may be required under (y) federal, state or
local environmental or Tax laws or (z) the "blue sky" laws of various states, to
the extent applicable, or (C) which, if not obtained or made, would not prevent
or delay in any material respect the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent the FelCor Parties from
performing their obligations under this Agreement in any material respect or
have, individually or in the aggregate, a FelCor Material Adverse Effect.

5.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. FelCor
has filed all required reports, schedules, forms, statements and other documents
with the SEC since July 28, 1994 through the date hereof (the "FelCor SEC
Documents"). All of the FelCor SEC Documents (other than preliminary material),
as of their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and, in each
case, the rules and regulations promulgated thereunder applicable to such FelCor
SEC Documents. None of the FelCor SEC Documents (other than preliminary
materials) at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later FelCor SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of FelCor and the FelCor Subsidiaries included in the
FelCor SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited
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statements, as permitted by the applicable rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented, in accordance with the
applicable requirements of GAAP and the applicable rules and regulations of the
SEC, the consolidated financial position, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments) of FelCor and the FelCor Subsidiaries. Except for liabilities and
obligations set forth in the FelCor SEC Documents or in Schedule 5.6 to the
FelCor Disclosure Letter, neither FelCor nor any FelCor Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which are required by GAAP to be set forth on a consolidated
balance sheet of FelCor or in the notes thereto and which, individually or in
the aggregate, would have a FelCor Material Adverse Effect.

5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters
disclosed in the FelCor SEC Documents or in Schedule 5.7 to the FelCor
Disclosure Letter, and (ii) the Transactions and the dividends and distributions
contemplated by Section 2.2(c), and (iii) the transactions permitted by Section
6.4, since the date of the most recent audited financial statements included in
the FelCor SEC Documents (the "FelCor Financial Statement Date"), FelCor and the
FelCor Subsidiaries have conducted their business only in the ordinary and
normal course (taking into account prior practices, including the acquisition of
properties and issuance of securities) and there has not been, from the FelCor
Financial Statement Date through the date of this Agreement, (a) any material
adverse change in the business, financial condition or results of operations of
FelCor and the FelCor Subsidiaries taken as a whole, including, without
limitation, any increase in market rates of interest and related costs of
financing which results in yields for new issues of unsecured senior notes
issued by companies with a comparable debt rating to FelCor and MeriStar
exceeding an amount which the members of the Interim Transactions Committee (as
defined in Section 6.5) agree, in the exercise of their good faith business
judgment, makes the issuance of such debt not economically prudent (a "FelCor
Material Adverse Change"), (b) any occurrence or circumstance that with the
passage of time would reasonably be expected to result in a FelCor Material
Adverse Change, or (c) any action taken by FelCor or any FelCor Subsidiary
during the period from the FelCor Financial Statement Date through the date of
this Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 6.4.

5.8 LITIGATION. Except as disclosed in the FelCor SEC Documents or in
Schedule 5.8 to the FelCor Disclosure Letter, and other than personal injury and
other routine tort litigation arising from the ordinary course of operations of
FelCor and the FelCor Subsidiaries (a) which are covered by adequate insurance
or (b) for which all material costs and liabilities arising therefrom are
reimbursable pursuant to common area maintenance or similar agreements, there is
no suit, action or proceeding pending (in which service of process has been
received by an employee or agent of FelCor or a FelCor Subsidiary) or, to the
Knowledge of FelCor, threatened in writing against or affecting FelCor or any
FelCor Subsidiary that, individually or in the aggregate, could reasonably be
expected to have a FelCor Material Adverse Effect or to prohibit, restrict or
interfere with the consummation of any of the Transactions, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against FelCor or any FelCor Subsidiary having, or which,
insofar as reasonably can be foreseen, in the future could have, any such
Effect.

5.9 PROPERTIES.

(a) Schedule 5.9(a) to the FelCor Disclosure Letter sets forth a complete
and accurate list and the address of all real property owned or leased by FelCor
or any FelCor Subsidiary (collectively, and together with the land at each
address referenced in Schedule 5.9(a) to the FelCor Disclosure Letter and all
buildings, structures and other improvements and fixtures located on or under
such land and all easements, rights and other appurtenances to such land, the
"FelCor Properties"). FelCor or the FelCor Subsidiaries, owns or own, as the
case may be, good and insurable fee simple title (or, if so indicated in
Schedule 5.9(a) to the FelCor Disclosure Letter, leasehold title) to each of the
FelCor Properties, in each case free and clear of Encumbrances, except for such
mortgages as are set forth on Schedule 5.14(b) to
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the FelCor Disclosure Letter or for which no disclosure is required by Section
5.14(b), the Lien of real estate taxes not yet due and payable and such
Encumbrances as individually, and in the aggregate, could not reasonably be
expected to have a FelCor Material Adverse Effect. Except for such of the
following as individually, or in the aggregate, could not reasonably be expected
to have a FelCor Material Adverse Effect, policies of title insurance (or marked
title insurance commitments having the same force and effect as title insurance
policies) have been issued by national title insurance companies insuring the
fee simple or leasehold, as applicable, title of FelCor or its Subsidiaries, as
applicable, to each of the FelCor Properties in amounts at least equal to the
portion of the purchase price thereof allocated to real estate (the "FelCor
Title Policies"), and, to FelCor's Knowledge, the FelCor Title Policies are
valid and in full force and effect and no claim has been made under any such
policy (except claims which have previously been fully resolved).

(b) Except as set forth in Schedule 5.9(b) to the FelCor Disclosure Letter,
and except for matters which would not, individually or in the aggregate,
reasonably be expected to have a FelCor Material Adverse Effect or to materially
and adversely affect the use or occupancy (or, if applicable, any proposed
development) of the FelCor Properties, FelCor has no Knowledge that any
currently required certificate, permit or license (including building permits
and certificates of occupancy) from any Governmental Entity having jurisdiction
over any FelCor Property or any agreement, easement or other right which is
necessary to permit the lawful use, occupancy or operation of the existing
buildings, structures or other improvements which constitute a part of any of
the FelCor Properties has not been obtained or is not in full force and effect,
or of any pending modification or cancellation of any of the same.

(c) Schedule 5.9(c) to the FelCor Disclosure Letter sets forth a complete
and accurate list of all definitive agreements made or entered into by FelCor or
any FelCor Subsidiary as of the date hereof, which are scheduled to close or be
consummated after the date hereof, (x) to sell, mortgage, pledge, hypothecate,
lease or sublease any FelCor Property, which, individually or in the aggregate,
are material, (y) to enter into a material transaction in respect of the
ownership or financing of any FelCor Property, or (z) to purchase, lease or
otherwise acquire any real property.

(d) Except as set forth in Schedule 5.9(d) to the FelCor Disclosure Letter,
none of the FelCor Properties is subject to any outstanding purchase option,
right of first refusal, right of first offer or similar right other than such
rights as would not reasonably be expected to have a FelCor Material Adverse
Effect, nor has FelCor or any FelCor Subsidiary entered into any outstanding
contracts with others for the sale, mortgage, pledge, hypothecation, assignment,
sublease or lease of any material portion of any FelCor Property or other
transfer of all or any part of any FelCor Property as of the date hereof, which
are scheduled to close or be consummated after the date hereof, and no Person
has any right or option to acquire, or right of first refusal or right of first
offer with respect to, any interest of FelCor or any FelCor Subsidiary in any
FelCor Property or any material part thereof.

(e) Schedule 5.9(e) to the FelCor Disclosure Letter sets forth the capital
expenditure budget and schedule of FelCor and each FelCor Subsidiary for each
FelCor Property, describing the capital expenditures which FelCor or any FelCor
Subsidiary has budgeted for such FelCor Property for the period running through
December 31, 2001 (the "FelCor Budget and Schedule").

(f) The ground leases underlying the leased FelCor Properties
(collectively, the "FelCor Ground Leases") are listed on Schedule 5.9(f) to the
FelCor Disclosure Letter. Each of the FelCor Ground Leases is valid, binding and
in full force and effect as against FelCor or any FelCor Subsidiary and, to
FelCor's Knowledge, as against the other party thereto, except to the extent the
failure to be binding and in full force and effect would not reasonably be
expected to have a FelCor Material Adverse Effect. There does not exist under
any of the FelCor Ground Leases any default, and, to FelCor's Knowledge, no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, except as would not, individually or in the aggregate,
reasonably be expected to result in a FelCor Material Adverse Effect.

(g) Schedule 5.9(g) to the FelCor Disclosure Letter sets forth a list of
the hotel franchise, license or other agreements relating to the names, marks or
systems (the "FelCor Franchise Agreements") under which each of the FelCor
Properties is being operated. Each of the FelCor Franchise Agreements is in full
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force and effect and, to the Knowledge of FelCor, there are no defaults
thereunder by either party thereto, nor have any events occurred which, with the
giving of notice or the passage of time or both, would constitute a default or
event of default thereunder, except for those which either individually or in
the aggregate would not constitute a FelCor Material Adverse Effect.

(h) Schedule 5.9(h) to the FelCor Disclosure Letter sets forth a list of
the hotel management agreements (the "FelCor Management Agreements") pursuant to
which each of the FelCor Properties is being managed. Each of the FelCor
Management Agreements is in full force and effect and, to the Knowledge of
FelCor, there are no defaults thereunder by either party thereto, nor have any
events occurred which, with the giving notice or the passage of time or both
would constitute a default or event of default thereunder, except for those
which either individually or in the aggregate would not constitute a FelCor
Material Adverse Effect.

5.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.

(a) With respect to all FelCor Benefit Plans (as defined below), except for
such matters, as, individually or in the aggregate, could not reasonably be
expected to have a FelCor Material Adverse Effect, (a) each FelCor Benefit Plan
and any related trust intended to be qualified under Sections 401(a) and 501(a)
of the Code has received a favorable determination letter from the IRS that it
is so qualified and, to the Knowledge of FelCor, nothing has occurred since the
date of such letter that could reasonably be expected to materially adversely
affect the qualified status of such FelCor Benefit Plan or related trust, (b)
each FelCor Benefit Plan has been operated in all material respects in
accordance with its terms and the terms and requirements of applicable law and
all required returns and filings for each FelCor Benefit Plan have been timely
made, (c) neither FelCor nor any FelCor Subsidiary has incurred any tax, fine,
lien, penalty or other liability imposed under ERISA, the Code or other
applicable laws, rules and regulations, in connection with any FelCor Benefit
Plan, and no administrative investigation, audit or other administrative
proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation,
the Internal Revenue Service or other governmental agencies are pending, in
progress or, to the Knowledge of FelCor or any FelCor Subsidiary, threatened,
and no fact or event exists that could reasonably be expected to give rise to
any such material liability, (d) all contributions due and payable on or before
the date hereof in respect of each FelCor Benefit Plan have been made in full
and in proper form, (e) neither FelCor nor any FelCor Subsidiary has ever
sponsored or been obligated to contribute to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), any plan subject to Section 413 of the Code
or any "defined benefit plan" (as defined in Section 3(35) of ERISA), (f) except
as otherwise required under ERISA, the Code and applicable laws, no FelCor
Benefit Plan currently or previously maintained by FelCor or any FelCor
Subsidiary provides any post-employment health or life insurance coverage or
benefits except as required under Section 4980B of the Code; (g) neither FelCor,
nor any FelCor Subsidiary, is a member of a Controlled Group which has members
other than themselves, (h) all material reporting, disclosure and notice
obligations imposed under ERISA and the Code have been satisfied with respect to
each FelCor Benefit Plan, and (i) no benefit or amount payable, or which may
become payable in connection with the Transactions by FelCor or any FelCor
Subsidiary pursuant to any FelCor Benefit Plan, agreement or contract with any
employee, constitutes an "excess parachute payment" which would not be
deductible by reason of Section 280G of the Code. Schedule 5.10 to the FelCor
Disclosure Letter contains a complete list of each "employee benefit plan"
(within the meaning of Section 3(3) of ERISA, excluding "multiemployer plans"
within the meaning of ERISA Section 3(37)), and all stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether or
not subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transaction contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not, under which any current or former employee, officer or director
of FelCor or any FelCor Subsidiary has any present or future right to benefits
sponsored or maintained by FelCor or any FelCor Subsidiary or under which FelCor
or any FelCor Subsidiary has had or has any present or could reasonably be
expected to have any future liability. All such plans, agreements, programs,
policies and arrangements shall be

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collectively referred to as the "FelCor Benefit Plans." With respect to each
FelCor Benefit Plan, FelCor has provided to MeriStar a current, accurate and
complete copy (or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable: (i) any related trust agreement or other
funding instrument; (ii) the most recent determination letter, if applicable;
(iii) any summary plan description and other written communications (or a
description of any oral communications) by FelCor or any FelCor Subsidiary to
their employees concerning the extent of the benefits provided under a FelCor
Benefit Plan; and (iv) for the most recent year (A) the Form 5500 and attached
schedules, (B) audited financial statements, and (C) attorney's response to an
auditor's request for information.

(b) Neither FelCor, nor any FelCor Subsidiary, is delinquent in payments to
any of its employees or consultants for any wages, salaries, commissions,
bonuses, benefits or other compensation for any services or otherwise arising
under any policy, practice, agreement, plan, program or Law, which delinquency
would, in the aggregate, have a FelCor Material Adverse Effect. None of FelCor's
or any FelCor Subsidiary's employment policies or practices is currently being
audited or investigated by any Governmental Entity or court. There is no pending
or, to the Knowledge of FelCor, threatened litigation, unfair labor practice
charge, or other charge or inquiry against FelCor or any FelCor Subsidiary
brought by or on behalf of any employee, prospective employee, former employee,
retiree, labor organization or other representative of any of them with respect
to employment practices which could reasonably be expected to have a FelCor
Material Adverse Effect.

(c) Neither FelCor nor any FelCor Subsidiary is a party to, or otherwise
bound by, any consent decree with, or citation or other order by, any
Governmental Entity relating to employees or employment practices. FelCor and
each FelCor Subsidiary are in compliance in all material respects with all
applicable Laws, Contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including the
obligations of the WARN, and has not planned or implemented any early
retirement, separation or window program within the past five years.

5.11 TAXES.

(a) Each of FelCor and the FelCor Subsidiaries has timely filed or caused
to be timely filed all material Tax Returns required to be filed by it and for
any partnerships for which any of them is a general partner (after giving effect
to any filing extension properly granted by a Governmental Entity having
authority to do so) and has paid (or FelCor has paid on its behalf) all Taxes
required to be paid as shown on such returns and all such Tax Returns were, when
filed, complete and accurate in all material respects, except where the failure
to file such Tax Returns, the failure to pay such Taxes and the failure of such
Tax Returns to be complete and accurate in all material respects could not be
reasonably expected to have a FelCor Material Adverse Effect. No material
deficiencies for any Taxes have been or are currently being proposed, asserted
or assessed in writing, or to the Knowledge of FelCor, threatened in writing by
any taxing authority against FelCor or any FelCor Subsidiary. Neither FelCor nor
a FelCor Subsidiary has executed or filed with any taxing authority any
agreement now in effect extending the period for assessment of Taxes. No Tax
Returns of FelCor or any FelCor Subsidiary have been or are currently being
audited by any applicable taxing authority, and neither FelCor nor any FelCor
Subsidiary has received any written notice that such audit is contemplated.
There are no material Tax liens on any properties of FelCor or any FelCor
Subsidiary other than liens for current Taxes not yet due and payable. The most
recent audited financial statements contained in the FelCor SEC Documents
reflect an adequate accrual in accordance with GAAP for all Taxes and deferred
Taxes payable by FelCor and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Except as would
not have a FelCor Material Adverse Effect, FelCor and each FelCor Subsidiary
have complied with all applicable Laws relating to the payment, collection,
withholding and deposit, as the case may be, of Taxes and, to the extent
required, have paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes, unemployment insurance and other
amounts required by law to be withheld or collected.

(b) FelCor is not required to include in income any amount for an
adjustment pursuant to Section 481 of the Code, and except as set forth on
Schedule 5.11(b) to the FelCor Disclosure Letter, is

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neither a party to nor obligated under any agreement or other arrangement
providing for the payment of any amount that is not or would not be deductible
by FelCor by reason of Section 280G of the Code or Section 162(m) of the Code.

(c) Neither FelCor nor any FelCor Subsidiary has taken or will take any
action that would create a material risk that the Merger would not qualify as a
reorganization within the meaning of Section 368(a) of the Code.

(d) Neither FelCor nor any FelCor Subsidiary is a party to or has any
obligation under any Tax sharing agreements or similar contract or arrangement
that would have a FelCor Material Adverse Effect. No closing agreement pursuant
to Section 7121 of the Code (or any similar provision of state, local or foreign
law) has been entered into by FelCor or any FelCor Subsidiary that would have a
FelCor Material Adverse Effect.

(e) Except as set forth on Schedule 5.11(e) to the FelCor Disclosure
Letter, neither FelCor nor any FelCor Subsidiary has any material liability for
Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise, that would have a FelCor Material Adverse Effect.

(f) Since the FelCor Financial Statement Date, (i) FelCor has incurred no
material liability for Taxes under Section 857(b), 860(c) or 4981 of the Code,
including, without limitation, any Tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code, and (ii) neither FelCor nor a FelCor
Subsidiary has incurred any material liability for Taxes other than in the
ordinary course of business except where such liability for Taxes could not
reasonably be expected to have a FelCor Material Adverse Effect. No event has
occurred, and no condition or circumstance exists, which presents a material
risk that any material Tax described in this paragraph (f) will be imposed upon
FelCor.

(g) FelCor (i) for all taxable years commencing with its taxable year
beginning July 28, 1994, and ended December 31, 1994, and through December 31,
2000, has been subject to taxation as a REIT and has satisfied all requirements
to qualify as a REIT for such years, and (ii) has operated, and intends to
continue to operate, in such manner as to qualify as a REIT for the taxable year
ending December 31, 2001 and subsequent taxable years. To FelCor's Knowledge, no
action, proceeding or investigation that could reasonably be expected to result
in the termination of FelCor's status as a REIT has been taken or omitted or is
pending or threatened.

(h) Except as set forth on Schedule 5.11(h) to the FelCor Disclosure
Letter, each of FelCor OP and each other subsidiary of FelCor that is organized
as a partnership, limited liability company or trust (including entities in
which FelCor directly or indirectly owns less than 50% of the equity ownership
interests) has been at all times since the date of its formation, and will be
through the Closing Date, treated for federal income tax purposes as either (i)
a partnership that is not either an association taxable as a corporation or a
publicly traded partnership under Section 7704 of the Code, (ii) a publicly
traded partnership that is eligible for partnership status under Section 7704(c)
of the Code or (iii) a disregarded entity.

(i) Except as set forth on Schedule 5.11(i) to the FelCor Disclosure
Letter, each of the corporations in which FelCor owns a direct or indirect
equity ownership interest has been at all times since the date of its formation,
and through the Closing Date will be, treated for federal income tax purposes as
either (i) a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code or (ii) a "taxable REIT subsidiary" within the meaning of Section
856(l) of the Code.

(j) Schedule 5.11(j) to the FelCor Disclosure Letter sets forth a list of
the entities for which FelCor has made taxable REIT subsidiary elections under
Section 856(l) and the effective dates of such elections. FelCor has made a
taxable REIT subsidiary election for each entity that it intends to treat as a
taxable REIT subsidiary for its 2001 taxable year.

(k) Except as listed on Schedule 5.11(k) to the FelCor Disclosure Letter,
neither FelCor nor any FelCor Subsidiary has entered into or is subject,
directly or indirectly, to any "FelCor Tax Protection

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Agreements." As used herein, a FelCor Tax Protection Agreement is an agreement,
oral or written, (A) that has as one of its purposes to permit a Person to take
the position that such Person could defer federal taxable income that otherwise
might have been recognized upon a transfer of property to the FelCor OP or any
other FelCor Subsidiary that is treated as a partnership for federal income tax
purposes, and that (i) prohibits or restricts in any manner the disposition of
any assets of FelCor or any FelCor Subsidiary or requires FelCor or any FelCor
Subsidiary to indemnify or reimburse any Person for a loss of Tax deferral as a
result of any such asset disposition; (ii) requires that FelCor or any FelCor
Subsidiary maintain, put in place, or replace, indebtedness, whether or not
secured by one or more of the FelCor Properties, or (iii) requires that FelCor
or any FelCor Subsidiary offer to any Person at any time the opportunity to
guarantee or otherwise assume, directly or indirectly (including, without
limitation, through a "deficit restoration obligation," guarantee (including,
without limitation, a "bottom" guarantee), indemnification agreement,
reimbursement agreement or other similar arrangement), the risk of loss for
federal income tax purposes for indebtedness or other liabilities of FelCor or
any FelCor Subsidiary, (B) that specifies or relates to a method of taking into
account book-tax disparities under Section 704(c) of the Code or the Treasury
Regulations promulgated thereunder with respect to one or more assets of FelCor
or a FelCor Subsidiary, or (C) that requires a particular method for allocating
one or more liabilities of FelCor or any FelCor Subsidiary under Section 752 of
the Code or the Treasury Regulations promulgated thereunder. Except as would not
have a FelCor Material Adverse Effect, neither FelCor nor any FelCor Subsidiary
is in violation of or in default under any FelCor Tax Protection Agreement.

5.12 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Except as set forth
on Schedule 5.12 to the FelCor Disclosure Letter, there are no cash or non-cash
payments which will become payable to any employee, officer or director of
FelCor or any FelCor Subsidiary as a result of the Merger and the Transactions
and there is no employment or severance contract, or other agreement requiring
payments, cancellation of indebtedness or other obligation to be made upon a
change of control or otherwise as a result of the consummation of any of the
transactions contemplated by this Agreement, with respect to any employee,
officer or director of FelCor or any FelCor Subsidiary.

5.13 BROKERS, FEES AND EXPENSES. No broker, investment banker, financial
advisor or other person, other than Deutsche Banc Alex. Brown and J.P. Morgan
Securities Inc., the fees and expenses of which are as described in their
engagement letters between Deutsche Banc Alex. Brown and FelCor, and J.P. Morgan
Securities Inc. and FelCor, respectively, a true and correct copy of each of
which has previously been delivered to the MeriStar Parties, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby, based upon arrangements
made by or on behalf of FelCor or any FelCor Subsidiary.

5.14 CONTRACTS; DEBT INSTRUMENTS.

(a) Except as set forth in Schedule 5.14(a) to the FelCor Disclosure
Letter, and except as, individually or in the aggregate, would not have a FelCor
Material Adverse Effect, neither FelCor nor any FelCor Subsidiary has received a
written notice that FelCor or any FelCor Subsidiary is in violation of or in
default under (nor to the Knowledge of FelCor does there exist any condition,
which upon the passage of time or the giving of notice or both, would cause such
a violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, nor to the Knowledge of
FelCor does such a violation or default exist.

(b) Except for any of the following expressly identified in FelCor SEC
Documents, Schedule 5.14(b) to the FelCor Disclosure Letter sets forth a list of
each loan or credit agreement, note, bond, mortgage, indenture and any other
agreement and instrument pursuant to which any Indebtedness in excess of
$10,000,000 of FelCor or of any FelCor Subsidiary, other than such Indebtedness
payable to FelCor or a FelCor Subsidiary, is outstanding or may be incurred.

5.15 ENVIRONMENTAL MATTERS. Except as, individually or in the aggregate,
would not have a FelCor Material Adverse Effect and except as disclosed in the
FelCor SEC Documents filed prior to the date of this Agreement, none of FelCor,
any of the FelCor Subsidiaries or, to the Knowledge of FelCor,
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any other Person has caused or permitted (a) the unlawful presence of any
Hazardous Materials on any of the FelCor Properties or properties formerly owned
by FelCor or (b) any unlawful spills, releases, discharges or disposal of
Hazardous Materials to have occurred on FelCor Properties or properties formerly
owned by FelCor or be presently occurring on or from the FelCor Properties,
which presence or occurrence, individually or in the aggregate, could reasonably
be expected to have a FelCor Material Adverse Effect; and, in connection with
the construction on or operation and use of the FelCor Properties, neither
FelCor nor any FelCor Subsidiary has failed to comply in any material respect
with any applicable Environmental Laws, except to the extent such failure to
comply, individually or in the aggregate, could not be reasonably expected to
have a FelCor Material Adverse Effect. No notice, notification, demand, request
for information, citation, summons, complaint or order has been received by or
is pending, or to the Knowledge of FelCor, is threatened by, any Person against
FelCor or any FelCor Subsidiary, other than where such notice, notification,
demand, request for information, citation, summons, complaint or order has been
fully resolved, or, individually and in the aggregate, could not be reasonably
expected to result in a FelCor Material Adverse Effect. FelCor has previously
delivered or made available to MeriStar or its counsel true and complete copies
of all internally prepared or commissioned environmental studies, assessments
and reports in the possession or under the control of FelCor that relate to the
FelCor Properties and/or FelCor 's compliance with Environmental Laws.

5.16 COMPLIANCE WITH LAWS. Except as disclosed in the FelCor SEC
Documents, neither FelCor nor any FelCor Subsidiary has violated or failed to
comply with any Law, permit, judgment, decree or order of any Governmental
Entity applicable to its business, properties or operations, except to the
extent that such violation or failure could not reasonably be expected to have a
FelCor Material Adverse Effect.

5.17 OPINIONS OF FINANCIAL ADVISOR. The Board of Directors of FelCor has
received the opinions of Deutsche Banc Alex. Brown and J.P. Morgan Securities
Inc. dated the date of this Agreement, to the effect that, as of such date, the
Merger Consideration is fair, from a financial point of view, to FelCor.

5.18 MARYLAND TAKEOVER LAWS. The Maryland Business Combination Act and
the Maryland Control Share Acquisition Act will not apply to FelCor in
connection with this Agreement and the other transactions contemplated hereby.
The provisions of Article XIII of the FelCor Charter relating to the Maryland
Control Share Acquisition Act have not been rescinded or revoked.

5.19 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by FelCor specifically for inclusion or incorporation by reference in
(i) the Registration Statement, at the time the Registration Statement is filed
with the SEC or at the time it becomes effective under the Securities Act, or
(ii) the Proxy Statement, at the date it is first mailed to FelCor's
stockholders or at the time of the FelCor Stockholders Meeting, (as defined in
Section 7.1(e)) will contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement and Proxy Statement will comply
in all material respects with the requirements of the Securities Act and the
Exchange Act, respectively, and the rules and regulations thereunder, except
that no representation or warranty is made by FelCor with respect to statements
made or incorporated by reference therein based on information supplied by
MeriStar specifically for inclusion or incorporated by reference in the Proxy
Statement or contained in any MeriStar SEC Documents incorporated by reference
in the Registration Statement or the Proxy Statement.

5.20 INVESTMENT COMPANY ACT OF 1940. Neither FelCor nor any FelCor
Subsidiary is, or at the Effective Time will be, required to be registered under
the 1940 Act.

5.21 DEFINITION OF KNOWLEDGE OF FELCOR. As used in this Agreement, the
phrase "Knowledge of FelCor" (or words of similar import) means the knowledge of
those individuals identified in Schedule 5.21 to the FelCor Disclosure Letter.

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5.22 VOTING REQUIREMENTS. The FelCor Stockholder Approvals, which shall
consist of the affirmative vote of holders of shares entitled to cast a majority
of all votes entitled to be cast on the matter at the FelCor Stockholders
Meeting, which shall be a duly convened meeting at which a quorum is present and
acting throughout, to approve the Merger, and the affirmative vote of the
holders of a majority of the outstanding FelCor OP Units to approve the OP
Merger, are the only votes of the holders of any class or series of FelCor's
stock or FelCor OP's partnership interests necessary to approve the Merger and
the other transactions contemplated by this Agreement.

ARTICLE 6

COVENANTS

The parties agree as follows with respect to the period from and after the
date of this Agreement to the Effective Time.

6.1 NO SOLICITATION BY MERISTAR.

(a) MeriStar shall not, nor shall it permit any of the MeriStar
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of MeriStar or any MeriStar Subsidiary to, (i)
solicit, initiate or encourage the submission of, any MeriStar Acquisition
Proposal (as defined below), (ii) except to the extent permitted by paragraph
(b) enter into any agreement with respect to any MeriStar Acquisition Proposal,
or (iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any MeriStar Acquisition Proposal; provided,
however, that prior to the MeriStar Stockholder Meeting, to the extent required
by the duties of the Board of Directors of MeriStar under Maryland law, as
determined in good faith by a majority of the disinterested members thereof,
having received the advice of outside counsel, MeriStar may, in response to
unsolicited requests therefor, participate in discussions or negotiations with,
or furnish information pursuant to an appropriate confidentiality agreement to,
any Person that makes or expresses a bona fide intention to make an unsolicited
MeriStar Acquisition Proposal, if the Board of Directors of MeriStar first
determines in good faith, based on the vote of a majority of the disinterested
members thereof, that such Person has the ability to consummate a MeriStar
Superior Proposal (as defined below). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by an officer, director or employee of or any investment banker,
attorney, accountant, agent or other advisor or representative of MeriStar or
any MeriStar Subsidiary, whether or not such person is purporting to act on
behalf of MeriStar, a MeriStar Subsidiary or otherwise, shall be deemed to be a
breach of this paragraph by MeriStar. For all purposes of this Agreement,
"MeriStar Acquisition Proposal" means any proposal, other than a proposal by
FelCor or FelCor OP, for a merger, consolidation, share exchange, business
combination or other similar transaction involving MeriStar or any of its
Significant Subsidiaries (as defined below) or any proposal or offer (including,
without limitation, any proposal or offer to stockholders of MeriStar), other
than a proposal or offer by FelCor or FelCor OP, to acquire in any manner,
directly or indirectly, more than a 10% equity interest in any voting securities
of, or 10% or more of the consolidated assets of, MeriStar or any of its
Significant Subsidiaries. MeriStar immediately shall cease and cause to be
terminated all existing discussions or negotiations with any persons conducted
heretofore with respect to, or that could reasonably be expected to lead to, any
MeriStar Acquisition Proposal. For all purposes of this Agreement, a
"Significant Subsidiary" means any Subsidiary that would constitute a
"significant subsidiary" within the meaning of Article 1, Rule 1-02 of
Regulation S-X of the SEC.

(b) Neither the Board of Directors of MeriStar nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to FelCor or FelCor OP, the approval or recommendation by the
Board of Directors of MeriStar or any committee thereof of this Agreement or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
MeriStar Acquisition Proposal. Notwithstanding the foregoing, the Board of
Directors of MeriStar, to the extent required by its duties under Maryland law,
as determined in good faith by a majority of the
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disinterested members thereof, having received the advice of outside counsel,
may approve or recommend (and, in connection therewith, withdraw or modify its
approval or recommendation of this Agreement or the Merger) a MeriStar Superior
Proposal (as defined below). For purposes of this Agreement, a "MeriStar
Superior Proposal" means a bona fide written proposal made by a third party to
acquire MeriStar or any of its Significant Subsidiaries pursuant to a tender or
exchange offer, a merger, a share exchange, a sale of all or substantially all
of its assets or otherwise, in any such case, on terms which a majority of the
disinterested members of the Board of Directors of MeriStar determines in their
good faith judgment (after consultation with independent financial advisors) to
be more favorable to MeriStar and its stockholders than the Merger and for which
financing, to the extent required, is then fully committed or which, in the good
faith judgment of a majority of such disinterested members (after consultation
with independent financial advisors), is reasonably capable of being financed by
such third party.

(c) MeriStar shall promptly advise FelCor orally and in writing of any
MeriStar Acquisition Proposal or any inquiry with respect to, or which could
reasonably be expected to lead to, any MeriStar Acquisition Proposal, the
material terms and conditions of such MeriStar Acquisition Proposal or inquiry
and the identity of the Person making any such MeriStar Acquisition Proposal or
inquiry. MeriStar will keep FelCor fully informed of the status and details of
any such MeriStar Acquisition Proposal or inquiry. MeriStar shall give FelCor at
least one day's advance notice of any information to be supplied to, and at
least three days' advance notice of any agreement to be entered into with, any
Person making a MeriStar Acquisition Proposal.

(d) Nothing contained in this Section 6.1 will prohibit MeriStar from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
MeriStar's stockholders if the MeriStar Board of Directors determines that such
disclosure is necessary in order to comply with the MeriStar Board of Directors'
duties under Maryland law; provided, however, that neither MeriStar nor the
MeriStar Board of Directors nor any committee thereof may, except in accordance
with Section 6.1(b), withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a MeriStar Acquisition
Proposal.

6.2 NO SOLICITATION BY FELCOR.

(a) FelCor shall not, nor shall it permit any of the FelCor Subsidiaries
to, nor shall it authorize or permit any officer, director or employee of or any
investment banker, attorney, accountant, agent or other advisor or
representative of FelCor or any FelCor Subsidiary to, (i) solicit, initiate or
encourage the submission of, any FelCor Acquisition Proposal (as defined below),
(ii) except to the extent permitted by paragraph (b), enter into any agreement
with respect to any FelCor Acquisition Proposal, or (iii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any FelCor Acquisition Proposal; provided, however, that prior to the FelCor
Stockholder Meeting, to the extent required by the duties of the Board of
Directors of FelCor under Maryland law, as determined in good faith by a
majority of the disinterested members thereof, having received the advice of
outside counsel, FelCor may, in response to unsolicited requests therefor,
participate in discussions or negotiations with, or furnish information pursuant
to an appropriate confidentiality agreement to, any Person that makes or
expresses a bona fide intention to make an unsolicited FelCor Acquisition
Proposal, if the Board of Directors of FelCor first determines in good faith,
based on the vote of a majority of the disinterested members thereof, that such
Person has the ability to consummate a FelCor Superior Proposal (as defined
below). Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by an officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of FelCor or any FelCor Subsidiary, whether or not
such person is purporting to act on behalf of FelCor, a FelCor Subsidiary or
otherwise, shall be deemed to be a breach of this paragraph by FelCor. For all
purposes of this Agreement, "FelCor Acquisition Proposal" means any proposal
other than a proposal by MeriStar or MeriStar OP, for a merger, consolidation,
share exchange, business combination or other similar transaction involving
FelCor or any of its Significant Subsidiaries or any proposal or offer
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(including, without limitation, any proposal or offer to stockholders of
FelCor), other than a proposal or offer by MeriStar or MeriStar OP, to acquire
in any manner, directly or indirectly, more than a 10% equity interest in any
voting securities of, or 10% or more of the consolidated assets of, FelCor or
any of its Significant Subsidiaries. FelCor immediately shall cease and cause to
be terminated all existing discussions or negotiations with any persons
conducted heretofore with respect to, or that could reasonably be expected to
lead to, any FelCor Acquisition Proposal.

(b) Neither the Board of Directors of FelCor nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to MeriStar or MeriStar OP, the approval or recommendation by the
Board of Directors of FelCor or any committee thereof of this Agreement or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
FelCor Acquisition Proposal. Notwithstanding the foregoing, the Board of
Directors of FelCor, to the extent required by its duties under Maryland law, as
determined in good faith by a majority of the disinterested members thereof
having received the advice of outside counsel, may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement or the Merger) a FelCor Superior Proposal (as defined below). For
purposes of this Agreement, a "FelCor Superior Proposal" means a bona fide
written proposal made by a third party to acquire FelCor or any of its
Significant Subsidiaries pursuant to a tender or exchange offer, a merger, a
share exchange, a sale of all or substantially all of its assets or otherwise,
in any such case, on terms which a majority of the disinterested members of the
Board of Directors of FelCor determines in their good faith judgment (after
consultation with independent financial advisors) to be more favorable to FelCor
and its stockholders than the Merger and for which financing, to the extent
required, is then fully committed or which, in the good faith judgment of a
majority of such disinterested members (after consultation with independent
financial advisors), is reasonably capable of being financed by such third
party.

(c) FelCor shall promptly advise MeriStar orally and in writing of any
FelCor Acquisition Proposal or any inquiry with respect to, or which could
reasonably be expected to lead to, any FelCor Acquisition Proposal, the material
terms and conditions of such FelCor Acquisition Proposal or inquiry and the
identity of the Person making any such FelCor Acquisition Proposal or inquiry.
FelCor will keep MeriStar fully informed of the status and details of any such
FelCor Acquisition Proposal or inquiry. FelCor shall give MeriStar at least one
day's advance notice of any information to be supplied to, and at least three
days' advance notice of any agreement to be entered into with, any Person making
an FelCor Acquisition Proposal.

(d) Nothing contained in this Section 6.2 will prohibit FelCor from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to FelCor's
stockholders if the FelCor Board of Directors determines that such disclosure is
necessary in order to comply with the FelCor Board of Directors' duties under
Maryland law; provided, however, that neither FelCor nor the FelCor Board of
Directors nor any committee thereof may, except in accordance with Section
6.2(b), withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to this Agreement or the Merger or approve or recommend,
or propose publicly to approve or recommend, a FelCor Acquisition Proposal.

6.3 CONDUCT OF MERISTAR'S BUSINESS PENDING MERGER. Prior to the Effective
Time, (i) except as expressly provided for in this Agreement, (ii) except as
consented to in writing by FelCor or approved by the Interim Transactions
Committee (as hereinafter defined), or (iii) except as otherwise set forth in
Schedule 6.3 to the MeriStar Disclosure Letter, MeriStar shall, and shall cause
each MeriStar Subsidiary to:

(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;

(b) preserve intact its business organization and goodwill and use its
reasonable efforts to keep available the services of its officers and
employees;

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(c) not acquire, enter into any option to acquire, or exercise any
option or contract to acquire, additional real property (including, without
limitation, any hotel property), incur additional indebtedness, encumber
assets or commence construction of, or enter into any agreement or
commitment to develop or construct, other real estate or hotel projects,
except that MeriStar may incur additional indebtedness under its revolving
credit facility as in effect on the date hereof;

(d) not amend the MeriStar Charter or MeriStar Bylaws, the MeriStar OP
Partnership Agreement, or other comparable organizational documents of any
MeriStar Subsidiary;

(e) (x) make no change in the number of shares of capital stock,
membership interests or units (or their equivalent) of partnership interest
issued and outstanding with respect to MeriStar or any MeriStar Subsidiary,
other than pursuant to (i) the exercise of options disclosed in Schedule
4.3(b) to the MeriStar Disclosure Letter, or (ii) any exchange, redemption
or conversion of the MeriStar OP Units or MeriStar Convertible Notes into
shares of MeriStar Common Stock in accordance with the existing agreements
governing same, and (y) not grant any rights, warrants or options to
acquire any such shares, membership or partnership interests;

(f) not (i) authorize, declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of MeriStar
Common Stock or partnership interests in MeriStar OP except as contemplated
in Section 2.2(c) or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of capital stock, membership interests or
units of partnership interest or any option, warrant or right to acquire,
or security convertible into, shares of capital stock, membership
interests, or units of partnership interest in MeriStar or any MeriStar
Subsidiary except for the exchange of MeriStar OP Units for shares of
MeriStar Common Stock pursuant to an exchange agreement in existence on the
date of this Agreement;

(g) not sell, lease, mortgage, subject to Lien or otherwise dispose of
any of the MeriStar Properties except for leases or subleases of long-term
stay rental units, newsstands, gift shops, rooftop antenna spaces and other
facilities customarily leased to third parties, that are entered into in
the ordinary and normal course of business with unrelated third parties and
that, individually or in the aggregate, are not material to the business or
operations of the MeriStar Property to which they relate;

(h) not enter into any commitment, contractual obligation, capital
expenditure or transaction (each, a "MeriStar Commitment") which may result
in total payments or liability by or to it in excess of $500,000 or
aggregate MeriStar Commitments in excess of $1,000,000, except for the
capital expenditures disclosed in the MeriStar Budget and Schedule, and not
make any capital expenditures except in conformance in all material
respects with the MeriStar Budget and Schedule;

(i) not settle any stockholder derivative or class action claims
arising out of, relating to or connected with any of the transactions
contemplated by this Agreement;

(j) not enter into or amend any MeriStar Commitment or employment,
compensation or severance agreement with any of its officers, directors,
employees or Affiliates (as defined herein), other than waivers by
employees of benefits under such agreements;

(k) confer on a regular basis with one or more representatives of
FelCor to report operational matters of a material nature and, subject to
Sections 6.1 and 6.5, any proposals to engage in material transactions;

(l) promptly notify FelCor of any material emergency or other material
change in its business, financial condition, results of operations or
prospects;

(m) maintain its books and records in accordance with GAAP,
consistently applied, and not change in any material manner any of its
methods, principles or practices of accounting in effect at the applicable
MeriStar Financial Statement Date, except as may be required by applicable
Law or GAAP;

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(n) not make or rescind any express or deemed election relative to
Taxes which would have a MeriStar Material Adverse Effect (unless required
by Law or necessary to preserve MeriStar's status as a REIT or the status
of any MeriStar Subsidiary as a partnership for Tax purposes or as a
qualified REIT subsidiary or a taxable REIT subsidiary under Section 856(i)
of the Code and Section 856(l) of the Code, respectively);

(o) not adopt any new employee benefit plan or amend any existing
plans or rights, except for changes which are required by Law or changes
which are not more favorable to participants than provisions presently in
effect;

(p) not amend any contract to which MeriStar or any MeriStar
Subsidiary is a party that is listed or identified in the MeriStar
Disclosure Letter, or any schedule thereto, in a manner adverse to FelCor
without obtaining the prior written consent of FelCor or the approval of
the Interim Transactions Committee (as defined herein);

(q) not change the ownership of any MeriStar Subsidiary;

(r) promptly notify FelCor of any action, suit, proceeding, claim or
audit pending or threatened against or with respect to MeriStar or any
MeriStar Subsidiary where there is a reasonable possibility of a
determination or decision which could have a MeriStar Material Adverse
Effect;

(s) continue to maintain and repair all of the MeriStar Properties in
a manner consistent with past practices;

(t) maintain all licenses and permits material to the conduct of
business at any MeriStar Property or as may be required by any Governmental
Entity administering Laws regulating the MeriStar Properties, and take
whatever action is reasonably necessary to maintain such licenses and
permits; and

(u) not make any loans, advances or capital contributions to, or
investments in, any other Person, except loans, advances and capital
contributions to MeriStar Subsidiaries in existence as of the date hereof
and ordinary course expense advances to employees and except in connection
with a transaction permitted by Section 6.3(c).

6.4 CONDUCT OF FELCOR'S BUSINESS PENDING MERGER. Prior to the Effective
Time, (i) except as expressly provided for in this Agreement, (ii) except as
consented to in writing by MeriStar or approved by the Interim Transactions
Committee or (iii) except as otherwise set forth in Schedule 6.4 to the FelCor
Disclosure Letter, FelCor shall, and shall cause each FelCor Subsidiary to:

(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;

(b) preserve intact its business organization and goodwill and use its
reasonable efforts to keep available the services of its officers and
employees;

(c) not acquire, enter into any option to acquire, or exercise any
option or contract to acquire, additional real property (including, without
limitation, any hotel property), incur additional indebtedness, encumber
assets or commence construction of, or enter into any agreement or
commitment to develop or construct, other real estate or hotel projects,
except that FelCor may incur additional indebtedness (x) in connection with
this Agreement and the Transactions contemplated herein and (y) under its
revolving credit facility as in effect on the date hereof;

(d) not amend the FelCor Charter or FelCor Bylaws, the FelCor OP
Partnership Agreement, or other comparable organizational documents of any
FelCor Subsidiary;

(e) (x) make no increase in the number of shares of stock of FelCor,
membership interests or units (or their equivalent) of partnership interest
issued and outstanding with respect to FelCor or any FelCor Subsidiary,
other than pursuant to (i) the exercise of options disclosed in Schedule
5.3(c) to the FelCor Disclosure Letter, or (ii) any exchange or redemption
of FelCor OP Units for shares of
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FelCor Common Stock in accordance with the existing agreements governing
same, and (y) not grant any rights, warrants or options to acquire any such
shares, membership or partnership interests;

(f) not (i) authorize, declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of FelCor
Common Stock or partnership interests in FelCor OP except as contemplated
in Section 2.2(c) or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of capital stock, membership interests or
units of partnership interest or any option, warrant or right to acquire,
or security convertible into, shares of capital stock, membership
interests, or units of partnership interest except for the exchange of
FelCor OP Units for shares of FelCor Common Stock pursuant to the FelCor OP
Partnership Agreement;

(g) not sell, lease, mortgage, subject to Lien or otherwise dispose of
any of the FelCor Properties except for leases or subleases of long-term
stay rental units, newsstands, gift shops, rooftop antenna spaces and other
facilities customarily leased to third parties, that are entered into in
the ordinary and normal course of business with unrelated third parties and
that, individually or in the aggregate, are not material to the business or
operations of the FelCor Property to which they relate;

(h) not enter into any commitment, contractual obligation, capital
expenditure or transaction (each, a "FelCor Commitment") which may result
in total payments or liability by or to it in excess of $500,000 or
aggregate FelCor Commitments in excess of $1,000,000, except for the
capital expenditures disclosed in the FelCor Budget and Schedule;

(i) not settle any stockholder derivative or class action claims
arising out of, relating to or connected with any of the transactions
contemplated by this Agreement;

(j) not enter into or amend any FelCor Commitment or employment,
compensation or severance agreement with any of its officers, directors,
employees or Affiliates, other than waivers by employees of benefits under
such agreements;

(k) confer on a regular basis with one or more representatives of
MeriStar to report operational matters of a material nature and, subject to
Sections 6.2 and 6.5, any proposals to engage in material transactions;

(l) promptly notify MeriStar of any material emergency or other
material change in its business, financial condition, results of operations
or prospects;

(m) maintain its books and records in accordance with GAAP,
consistently applied, and not change in any material manner any of its
methods, principles or practices of accounting in effect at the applicable
FelCor Financial Statement Date, except as may be required by applicable
Law or GAAP;

(n) not make or rescind any express or deemed election relative to
Taxes which would have a FelCor Material Adverse Effect (unless required by
Law or necessary to preserve FelCor's status as a REIT or the status of any
FelCor Subsidiary as a partnership for Tax purposes or as a qualified REIT
subsidiary or a taxable REIT subsidiary under Section 856(i) of the Code
and Section 856(l) of the Code, respectively);

(o) not change the ownership of any FelCor Subsidiary; and

(p) promptly notify MeriStar of any action, suit, proceeding, claim or
audit pending or threatened against or with respect to FelCor or any FelCor
Subsidiary where there is a reasonable possibility of a determination or
decision which could have a FelCor Material Adverse Effect.

6.5 INTERIM TRANSACTIONS COMMITTEE. Promptly following the execution of
this Agreement, MeriStar and FelCor will constitute and establish a committee
(the "Interim Transactions Committee") which will evaluate and consider any
proposed commitment, contractual obligation, capital expenditure or transaction
of the type referred to in Sections 6.3 or 6.4 of this Agreement, or the
settlement of any stockholder derivative or class action claims arising out of
or in connection with any of the transactions

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contemplated by this Agreement between the date hereof and the Effective Time.
The Interim Transactions Committee will consist of the President and Chief
Executive Officer of FelCor, or such other individual selected by FelCor who is
reasonably acceptable to MeriStar, and the Chairman and Chief Executive Officer
of MeriStar, or such other individual selected by MeriStar who is reasonably
acceptable to FelCor. The Interim Transactions Committee will act only by the
affirmative vote of both members thereof. The Interim Transactions Committee
will be abolished at the Effective Time.

6.6 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Effective Time,
MeriStar shall cause to be prepared and delivered to FelCor a list (reasonably
satisfactory to counsel for FelCor) identifying all persons who, at the time of
the FelCor and MeriStar Stockholders Meetings, may be deemed to be "affiliates"
of MeriStar as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates"). MeriStar shall use its best efforts to cause
each person who is identified as an Affiliate in such list to deliver to FelCor
on or prior to the Effective Time a written agreement, in the form attached
hereto as Exhibit "C," that such Affiliate will not sell, pledge, transfer or
otherwise dispose of any FelCor Common Stock issued to such Affiliate pursuant
to the Merger, except pursuant to an effective registration statement under the
Securities Act, in compliance with paragraph (d) of Rule 145 or pursuant to an
exemption from the registration requirements of the Securities Act. FelCor shall
be entitled to place legends as specified in such written agreements on the
certificates representing any FelCor Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the FelCor Common Stock,
consistent with the terms of such agreements.

6.7 FILING OF CERTAIN REPORTS. The Surviving Corporation shall file the
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Affiliate of MeriStar or FelCor may reasonably request, all to the extent
required from time to time to enable such Affiliate to sell shares of stock of
the Surviving Corporation received by such Affiliate in the Merger without
registration under the Securities Act pursuant to (i) Rule 145(d)(1) under the
Securities Act, as such rule may be amended from to time, or (ii) any successor
rule or regulation hereafter adopted by the SEC.

6.8 OTHER ACTIONS. Each of MeriStar on the one hand and FelCor on the
other hand shall not, and shall use commercially reasonable efforts to cause
their respective Subsidiaries not to, take any action that would result in (i)
any of the representations and warranties of such party (without giving effect
to any "knowledge" qualification) set forth in this Agreement that are qualified
as to materiality becoming untrue, (ii) any of such representations and
warranties (without giving effect to any "knowledge" qualification) that are not
so qualified becoming untrue in any material respect or (iii) except as
contemplated by Section 6.1 or 6.2 (as the case may be), any of the conditions
to the Merger set forth in Article 8 not being satisfied.

ARTICLE 7

ADDITIONAL COVENANTS

The parties additionally agree as follows with respect to the period from
and after the date of this Agreement to the Effective Time.

7.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
MERISTAR STOCKHOLDERS MEETING AND FELCOR STOCKHOLDERS MEETING.

(a) The parties shall cooperate and promptly prepare and FelCor shall file
with the SEC as soon as practicable a Registration Statement on Form S-4 under
the Securities Act (the "Registration Statement") covering the FelCor Common
Stock issuable in the Merger, a portion of which registration statement shall
also serve as the joint proxy statement with respect to the meetings of the
stockholders of FelCor and MeriStar in connection with the Merger (the "Proxy
Statement"). FelCor shall use commercially reasonable efforts, and MeriStar
shall use commercially reasonable efforts to cooperate with FelCor, to (i)
respond to any comments of the SEC and (ii) have the Registration Statement
declared
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effective under the Securities Act and the rules and regulations promulgated
thereunder as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger and the transactions contemplated hereby. Each of MeriStar and FelCor
will use its reasonable best efforts to cause the Proxy Statement to be mailed
to its respective stockholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. Each party agrees to
date its Proxy Statement as of the same date, which shall be the approximate
date of mailing to the stockholders of the respective parties. FelCor will
notify MeriStar promptly of the receipt of any comments from the SEC and of any
request by the SEC for amendments or supplements to the Registration Statement
or the Proxy Statement or for additional information and will supply MeriStar
with copies of all correspondence between such party or any of its
representatives and the SEC, with respect to the Registration Statement or the
Proxy Statement. Whenever any event occurs which is required to be set forth in
an amendment or supplement to the Registration Statement or the Proxy Statement,
MeriStar or FelCor, as the case may be, shall promptly inform the other of such
occurrences and cooperate in filing with the SEC and/or mailing to the
stockholders of MeriStar or FelCor such amendment or supplement to the
Registration Statement or Proxy Statement. Each party hereto shall also take
such action as may be reasonably required to cause the shares of FelCor Common
Stock issuable in connection with the Merger to be registered or to obtain an
exemption from registration under applicable state "blue sky" or securities
laws; provided, however, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
general service of process in any jurisdiction where the Surviving Corporation
will not be, following the Merger, so subject. Each of the parties hereto shall
furnish all information concerning itself which is required or customary for
inclusion in the Proxy Statement and Registration Statement. The MeriStar
Parties and the FelCor Parties also shall use commercially reasonable efforts to
cause their respective legal counsel designated in Section 8.1(f), (g) and (h)
to deliver any opinions, which opinions shall be filed as exhibits to the
Registration Statement, addressing federal income tax matters and other matters
as are required to be addressed in the Registration Statement and the Proxy
Statement under the applicable rules of the SEC. MeriStar OP shall promptly
complete the accounting audit of its financial statements for the 1998, 1999 and
2000 fiscal years so that such financial statements are available for inclusion
in any filings, reports or registration statements (including the Registration
Statement) if and to the extent such inclusion is required under applicable
regulations of the SEC. The information provided by any party hereto for use in
the Proxy Statement and Registration Statement shall be true and correct in all
material respects without omission of any material fact which is required to
make such information not false or misleading. No representation, covenant or
agreement is made by any party hereto with respect to information supplied by
any other party for inclusion in the Proxy Statement and Registration Statement.

(b) MeriStar shall use commercially reasonable efforts to cause to be
delivered to FelCor letters of KPMG Peat Marwick LLP, dated a date within two
business days before the date of the Proxy Statement and Registration Statement,
and addressed to FelCor, in form and substance reasonably satisfactory to FelCor
and customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements on
Form S-4.

(c) FelCor shall use commercially reasonable efforts to cause to be
delivered to MeriStar a letter of PricewaterhouseCoopers L.L.P., dated a date
within two business days before the date of the Proxy Statement and Registration
Statement, and addressed to MeriStar, in form and substance reasonably
satisfactory to MeriStar and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements on Form S-4.

(d) MeriStar will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold (no sooner than 20
business days following the date the Proxy Statement is mailed to the
stockholders of MeriStar) a meeting of its stockholders (the "MeriStar
Stockholders Meeting") for the purpose of obtaining the MeriStar Stockholder
Approval. MeriStar will, through its Board of Directors, recommend to its
stockholders approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement, which recommendation shall also be stated in the
Proxy Statement. Prior

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to the MeriStar Stockholders Meeting, such recommendation may be withdrawn,
modified or amended only in accordance with Section 6.1 of this Agreement.

(e) FelCor will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold (no sooner than 20
business days following the date the Proxy Statement is mailed to the
stockholders of FelCor) a meeting of its stockholders (the "FelCor Stockholders
Meeting") for the purpose of obtaining the FelCor Stockholder Approval. FelCor
will, through its Board of Directors, recommend to its stockholders approval of
this Agreement, the Merger and the other transactions contemplated by this
Agreement, which recommendation shall also be stated in the Proxy Statement.
Prior to the FelCor Stockholders Meeting, such recommendation may be withdrawn,
modified or amended only in accordance with Section 6.2 of this Agreement.

(f) MeriStar and FelCor shall use commercially reasonable efforts to hold
their respective stockholder meetings on the same day, which day, subject to the
provisions of Section 7.1(d) and 7.1(e), shall be a day not later than 45 days
after the date the Proxy Statement is mailed.

(g) If on the date for the MeriStar Stockholders Meeting and the FelCor
Stockholders Meeting established pursuant to Section 7.1(d) and (e),
respectively, either MeriStar or FelCor has not received a sufficient number of
proxies to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement, then both parties will adjourn their respective
stockholders meetings until the first to occur of (i) the date ten calendar days
after the originally scheduled date of the stockholders meetings or (ii) the
date on which the requisite number of proxies approving this Agreement, the
Merger and the other transactions contemplated by this Agreement has been
obtained.

7.2 ACCESS TO INFORMATION: CONFIDENTIALITY. Subject to the requirements
of confidentiality agreements with third parties, each of MeriStar and FelCor
shall, and shall cause each of its Subsidiaries to, afford to the other party
and to the officers, employees, accountants, counsel, financial advisors and
other representatives of such other party, reasonable access during normal
business hours prior to the Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of MeriStar and FelCor shall, and shall cause each of its Subsidiaries to,
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Each of MeriStar and FelCor shall cause its
Subsidiaries to, and shall use commercially reasonable efforts to cause its
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to, hold any nonpublic information in confidence
to the extent required by, and in accordance with, and will comply with the
provisions of the letter agreement dated as of March 7, 2001 between MeriStar
and FelCor (the "Confidentiality Agreement"), the terms of which are
incorporated herein and made a part of this Agreement.

7.3 REGULATORY MATTERS. Each party hereto shall cooperate and use its
best efforts to promptly prepare and file all necessary documentation, to effect
all necessary applications, notices, petitions, filings and other documents, and
to use all commercially reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all governmental authorities,
including, without limitation, the NYSE, National Association of Securities
Dealers or the American Stock Exchange (as applicable), necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement.

7.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION.

(a) MeriStar Indemnification. From and after the Effective Time, the
Surviving Corporation will provide indemnification for each individual who is
now or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, an officer or director of MeriStar or any MeriStar
Subsidiary (the "Indemnified Parties") which is the same as the indemnification
provided to the Indemnified Parties by MeriStar and the MeriStar Subsidiaries in
the MeriStar Charter and Bylaws or the applicable charter or other
organizational document of such MeriStar Subsidiary, as in effect on the date
hereof; provided,

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that such indemnification covers actions on or prior to the Effective Time,
including without limitation all transactions contemplated by this Agreement,
whether asserted before, at or after the Effective Time.

(b) Insurance. The Surviving Corporation shall obtain, at its expense,
so-called "tail insurance" providing for the extension of the directors and
officers liability insurance maintained by MeriStar for six years after the
Closing Date.

(c) Continuing Indemnification. The Surviving Corporation will continue in
force and effect after the Effective Time each indemnification agreement between
MeriStar or any MeriStar Subsidiary, on the one hand, and any Person, on the
other hand, which was in force and effect immediately prior to the date of this
Agreement.

(d) Successors. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in either such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 7.4.

(e) Benefit. The provisions of this Section 7.4 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or her
heirs, representatives, administrators, successors and assigns.

7.5 PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure obligations
imposed by law, MeriStar and FelCor will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any public announcement or statement
with respect hereto or thereto without the consent of the other party (which
consent shall not be unreasonably withheld or delayed). In this regard, the
parties shall comply with the requirements of any applicable rules and
regulations of the SEC, including Regulation FD and Rule 165. To the extent
required by such rules and regulations, the parties shall cooperate to make any
required filings or to issue any required public disclosures thereunder. It is
understood and agreed that this Section 7.5 is intended to address matters with
respect to this Agreement and the transactions contemplated hereby (e.g.,
status, terms, etc.), and is not intended to address disclosure of confidential
non-public information of a party obtained by the other party in connection with
this Agreement and the transactions contemplated hereby, which information is
subject to the Confidentiality Agreement and Section 7.2 hereof.

7.6 EMPLOYMENT AGREEMENTS AND WORKFORCE MATTERS.

(a) Prior to the Closing Date, FelCor, on behalf of the Surviving
Corporation, shall tender employment agreements or make offers of employment (as
applicable) to the MeriStar employees set forth on Schedule 7.6(a) to the FelCor
Disclosure Letter, upon the terms and subject to the conditions set forth on
such schedule. FelCor shall have the right, but not the obligation, to tender
offers of employment to other MeriStar employees as determined by FelCor in its
sole discretion.

(b) After the Effective Time, FelCor agrees to comply with and pay the
severance and bonus arrangements of former MeriStar or MeriStar OP employees, as
described on Schedule 7.6(b) to the MeriStar Disclosure Letter, if (i) such
employees continue in good faith to perform their duties as employees through
the Closing Date and (ii) except for prorated bonuses paid for the 2001 year,
such employees are not employed with the Surviving Corporation or with MeriStar
Hotels & Resorts or their Subsidiaries with substantially the same compensation
and duties as applicable to such employees as of the date hereof.

7.7 EMPLOYEE BENEFIT PLANS.

(a) MeriStar Benefit Plans. After the Effective Time, each employee of
MeriStar or any MeriStar Subsidiary who is employed by the Surviving Corporation
or the Surviving Partnership ("Continuing Employee") shall be eligible to
participate in each FelCor Benefit Plan for which FelCor, in its sole
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discretion, determines that such Continuing Employee participated in a similar
MeriStar Benefit Plan, at the level of similarly situated employees of the
Surviving Corporation or the Surviving Partnership; provided, however, if the
Surviving Corporation or the Surviving Partnership, in its sole discretion,
determines it is not practicable for such Continuing Employees to participate in
one or more FelCor Benefit Plans as described above, the Surviving Corporation
or Surviving Partnership shall adopt and continue the corresponding MeriStar
Benefit Plan, and continue such Continuing Employee's participation therein,
until such time as the Surviving Corporation or the Surviving Partnership
determines it is practicable to include such Continuing Employee in its
corresponding FelCor Benefit Plan; and provided, further, that the Surviving
Corporation or the Surviving Partnership may make such adjustments and impose
such conditions on such Continuing Employee's participation in any FelCor
Benefit Plan, or continued MeriStar Benefit Plan, as, in their sole discretion,
they shall reasonably determine as necessary or appropriate to insure that a
Continuing Employee shall not receive a duplicate benefit, or any benefit to
which an employee of FelCor would not have been entitled, under comparable
circumstances. FelCor shall have the right, exercisable in its sole discretion,
to instruct MeriStar and any MeriStar Subsidiary (i) to terminate MeriStar's
employee stock purchase plan effective at the end of the current option exercise
period (however denominated in such plan), and (ii) to terminate any one or more
MeriStar Benefit Plans prior to the Closing Date effective immediately prior to
the Effective Time.

(b) Credit for Past Services. Without limitation of the foregoing
provisions of this Section 7.7, each Continuing Employee shall receive credit
for service with MeriStar or any MeriStar Subsidiary, or their predecessors for
purposes of (i) eligibility to participate (including waiting periods and
without being subject to any subsequent entry date requirement for which the
waiting period has already been satisfied), vesting and eligibility to receive
benefits (including without pre-existing conditions limitations) under any
FelCor Benefit Plan, or continued MeriStar Benefit Plan, in which they are
designated by the Surviving Corporation as eligible to participate, and (ii)
benefit accrual under only the severance or vacation pay plan of the Surviving
Corporation or Surviving Partnership in which such Continuing Employee is
designated by the Surviving Corporation or Surviving Partnership as eligible to
participate, if any; and provided, however, that FelCor, in its sole discretion,
may adjust the crediting of service so as to insure that a Continuing Employee
shall not receive a duplicate benefit, or any benefit to which an employee of
FelCor would not have been entitled based on a comparable period of service.
With respect to any FelCor Benefit Plan which is a medical plan or a cafeteria
plan, where a Continuing Employee is designated as eligible to participate in
the corresponding FelCor Benefit Plan(s), the Surviving Corporation and
Surviving Partnership shall cause to be waived any pre-existing condition
limitation to the same extent such pre-existing condition was waived under the
corresponding MeriStar Benefit Plan, and shall give effect, in determining any
deductible and maximum out-of-pocket limitations, the claims incurred and
amounts paid by, and amounts reimbursed to, such Continuing Employee with
respect to the similar plans maintained by MeriStar or a MeriStar Subsidiary
immediately prior to the Closing Date; provided, further, and without
limitation, that FelCor, in its sole discretion, may adjust the benefits under
such FelCor Benefit Plan(s) so as to insure that a Continuing Employee shall not
receive a duplicate benefit, or any benefit to which an employee of FelCor would
not have been entitled, under comparable circumstances.

7.8 STOCK OPTION AND OTHER STOCK PLANS.

(a) Exchange of Stock Options. As of the Effective Time, each option to
purchase shares of MeriStar Common Stock (a "MeriStar Stock Option") which is
outstanding as of the Effective Time shall be assumed (or a substitute option
granted) by the Surviving Corporation and shall continue as an option ("Assumed
Option") to purchase the number of shares of FelCor Common Stock (rounded up to
the nearest whole share) equal to the number of shares of MeriStar Common Stock
subject to such option multiplied by the Exchange Ratio, at an exercise price
per share of FelCor Common Stock (rounded down to the nearest penny) equal to
the former exercise price per share of MeriStar Common Stock under such MeriStar
Stock Option immediately prior to the Effective Time minus the Cash
Consideration. Each Assumed Option will be in the form determined by FelCor, and
furnished to MeriStar at least 10 days prior to the Closing Date; provided,
however, that the provisions of each such Assumed Option shall not differ from
the provisions of the corresponding MeriStar Stock Option except to the extent
such provisions

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could have been added, or changed, by amendment under the terms of the MeriStar
Incentive Plan and the MeriStar Stock Option without the consent of option
holders. Without limiting the generality of the forgoing, FelCor shall not be
required to offer employment to an employee of MeriStar, or MeriStar OP,
including, without limitation, a person set forth on Schedule 7.6(a), unless
such employee furnishes FelCor with a written waiver, in a form acceptable to
FelCor, of any acceleration in the vesting of his MeriStar Stock Option(s) which
otherwise would occur as a result of the Merger.

(b) Adoption of the MeriStar Incentive Plan. In its sole discretion, and
without limiting the generality of the forgoing provisions of this Section 7.8,
FelCor shall have the right to assume the MeriStar Incentive Plan.

(c) Other Actions. As soon as practicable after the Effective Time, the
Surviving Corporation shall deliver the Assumed Options to the holders of
MeriStar Stock Options upon surrender of the corresponding MeriStar Stock
Options. On, or as soon as practicable after, the Effective Time, the Surviving
Corporation will cause to be filed one or more registration statements on Form
S-3 or Form S-8 under the Securities Act (or any successor or other appropriate
forms), in order to register those shares of FelCor Common Stock subject to
Assumed Options ("Assumed Option Shares") not previously registered, or
post-effective amendments on Form S-3 or Form S-8 to the Registration Statement,
to the extent permitted by applicable law, to describe and cover the Assumed
Option Shares. The Surviving Corporation shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such Assumed
Options remain outstanding. FelCor shall use its best efforts to cause such
registration statements (or post-effective amendments) on Form S-3 to become
effective within 60 days after the date of filing. At or prior to the Effective
Time, the Surviving Corporation shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of FelCor Common Stock for
delivery in connection with (i) the Assumed Options, (ii) the exchange of
MeriStar OP Units and (iii) the conversion of the outstanding MeriStar
Convertible Notes. The Surviving Corporation shall take all corporate action
necessary or appropriate to obtain stockholder approval with respect to the
Assumed Options to the extent, if any, such approval is required for purposes of
the Code or other applicable law. With respect to the those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act with respect to equity securities of the
Surviving Corporation, the Surviving Corporation shall administer such Assumed
Options, where applicable, in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act.

7.9 REGISTRATION STATEMENTS.

(a) Shelf Registration. As soon as practicable after the date hereof, the
Surviving Corporation shall cause to be filed a registration statement (a "Shelf
Registration") on Form S-3 or any other appropriate form under the Securities
Act for an offering to be made on a delayed or continuous basis pursuant to Rule
415 thereunder or any similar rule that may be adopted by the SEC and permitting
sales in ordinary course brokerage or dealer transactions not involving an
underwritten public offering covering all shares of FelCor Common Stock issuable
after the Effective Time to former holders of MeriStar OP Units. The Surviving
Corporation shall use its reasonable best efforts to have such Shelf
Registration declared effective on or prior to the Closing Date and remain
effective until all shares registered thereunder are sold or are eligible to be
sold under Rule 144(k) promulgated under the Securities Act. The Surviving
Corporation shall pay all registration expenses (other than sales commission and
discounts) incurred in connection with the Shelf Registration. In lieu of the
Shelf Registration, if permitted under applicable SEC regulations, FelCor may
elect to include such offering by the former holders of MeriStar OP Units as
part of the Registration Statement.

(b) Exchange Registration. As soon as practicable after the date hereof,
each of MeriStar and FelCor shall cause to be filed a registration statement (an
"Exchange Registration") on Form S-4 or any other appropriate form under the
Securities Act, registering the offer to exchange (i) in the case of MeriStar,
$300 million in principal amount of new Series A and Series B 9% Senior Notes
Due 2008 and $200 million in principal amount of new Series C and Series D
9 1/8% Senior Notes Due 2011, for

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$300 million in principal amount of outstanding old Series A and Series B 9%
Senior Notes Due 2008 and $200 million in principal amount of outstanding old
Series C and Series D 9 1/8% Senior Notes Due 2011, in each case, which had been
issued without registration under the Securities Act, and (ii) in the case of
FelCor, $100 million in principal amount of new 9 1/2% Senior Notes Due 2008 for
$100 million in principal amount of outstanding old 9 1/2% Senior Notes Due 2008
which had been issued without registration under the Securities Act. In each
case, MeriStar or FelCor, as applicable, shall use commercially reasonable
efforts to have such Exchange Registration declared effective, and to have its
respective exchange offer completed, on or prior to the Closing Date. Each of
MeriStar and FelCor shall pay all registration expenses incurred in connection
with its respective Exchange Registration.

7.10 REORGANIZATION STATUS. Each party hereto agrees, as to itself and to
each of its Subsidiaries, that after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, except as expressly contemplated
or permitted in this Agreement, neither party hereto shall, nor shall either
party hereto permit any of its Subsidiaries or any employees, officers or
directors of such party or of any of its Subsidiaries to, take any actions which
would, or would be reasonably likely to, adversely affect the ability of the
Merger to qualify as a reorganization under Section 368(a)(1)(A) of the Code,
and each party hereto shall use all reasonable efforts to achieve such result
and to obtain the opinions of counsel described in Section 8.1(h).

7.11 NYSE LISTING. FelCor shall use commercially reasonable efforts to
cause the shares of FelCor Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Effective Time.

7.12 TRANSFER TAXES. MeriStar and FelCor shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.

7.13 PAYMENT OF MERISTAR DEBT. MeriStar and FelCor agree that immediately
prior to, or upon, the Effective Time, the Surviving Corporation shall pay to
the applicable MeriStar lenders the amount necessary to discharge and terminate
MeriStar's $1.0 billion Senior Secured Credit Facility.

7.14 RESIGNATIONS. On the Closing Date, MeriStar shall cause the
directors, managers and officers of each MeriStar Subsidiary to submit their
resignations from such positions, effective as of the Effective Time.

7.15 ASSUMPTION OF DEBT. With respect to the debt issued by MeriStar or
the MeriStar OP under indentures qualified under the Trust Indenture Act of 1939
(the "Indentures"), FelCor, as to debt issued by MeriStar, and FelCor OP, as to
debt issued by MeriStar OP, shall execute and deliver to the trustees under the
respective Indentures, Supplemental Indentures, in form satisfactory to the
respective trustees, expressly assuming the obligations of MeriStar or MeriStar
OP with respect to the due and punctual payment of the principal of and
interest, if any, on all debt securities issued by MeriStar or MeriStar OP under
the respective Indentures and the due and punctual performance of all the terms,
covenants and conditions of the respective Indentures to be kept or performed by
MeriStar or MeriStar OP, and shall deliver such Supplemental Indentures to the
respective trustees under the Indentures.

7.16 TAX PROVISION. Except as otherwise required under the agreements
listed in Schedule 4.13(l) to the MeriStar Disclosure Letter with respect to the
properties previously contributed to MeriStar OP, FelCor OP shall use the
traditional method contained in the Treasury Regulations promulgated under
Section 704(c) of the Code with respect to all properties contributed by
MeriStar OP to FelCor OP in the OP Merger.

7.17 FINANCING. The MeriStar Parties acknowledge that a portion of the
financing to be obtained by the FelCor Parties in order to consummate the
Transactions may be secured by assets of the MeriStar Parties. The MeriStar
Parties shall use all reasonable commercial efforts to provide such information
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regarding MeriStar, the MeriStar Subsidiaries and the MeriStar Properties as may
be reasonably requested by the Persons (or their representatives or agents)
providing such financing, to answer inquiries by such Persons and to otherwise
cooperate in any reasonable manner to assist the FelCor Parties in obtaining
such financing.

7.18 RELATIONSHIP WITH MERISTAR HOTELS & RESORTS.

(a) The MeriStar Parties shall deliver to the FelCor Parties, on or before
the Closing Date, a fully executed agreement with MeriStar Hotels & Resorts and
any of its Subsidiaries, in form reasonably satisfactory to the FelCor Parties,
that amends that certain Revolving Credit Agreement between MeriStar OP and
MeriStar H&R Operating Company, L.P., dated August 3, 1998, as amended February
29, 2000, to reflect the agreements set forth in the Term Sheet attached as
Schedule 7.18 hereto. The MeriStar Parties shall use best efforts to obtain on
or before May 21, 2001 any necessary consents or approvals of any lenders of
MeriStar Hotels & Resorts to such amendment agreement.

(b) The MeriStar Parties shall request and obtain, under the MeriStar
Management Agreements, an estoppel certificate, dated as of a date within ten
(10) days prior to the Closing Date, from MeriStar Hotels & Resorts or any
subsidiary of MeriStar Hotels & Resorts that is a party to any such agreement
with respect to the status of the MeriStar Management Agreements, (i) confirming
that such agreements are in full force and effect, (ii) confirming that there
are no defaults, and no facts or circumstances that could reasonably be expected
to give rise to a default, thereunder, and (iii) acknowledging the amount of the
Aggregate New Management Credits, as defined in the MeriStar Management
Agreements.

7.19 COMPLETION OF CAPITAL PROJECTS. Each of MeriStar and FelCor will
continue in the ordinary and normal course of business to pursue the completion
of existing capital expenditure projects in accordance with the MeriStar Budget
and Schedule and FelCor Budget and Schedule, respectively. Any significant
deviations from the MeriStar Budget and Schedule or the FelCor Budget and
Schedule for any particular project shall be reported in writing to the Interim
Transactions Committee as soon as practicable after such party becomes aware of
the possibility of such deviation.

7.20 COMMERCIALLY REASONABLE EFFORTS AND COOPERATION. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto will use
all commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to permit and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate or
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including without limitation,
(i) obtaining all consents, approvals and waivers from third parties prior to
the Effective Time, (ii) defending any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any adverse order entered by any court or other Governmental Entity vacated or
reversed and (iii) executing and delivering any additional instruments necessary
to consummate the transactions contemplated by, and to carry out fully, the
purposes of this Agreement. In addition, and without limiting the generality of
the foregoing, MeriStar will cooperate with FelCor to ensure that FelCor
continues to qualify as a REIT following the Effective Time.

7.21 FINANCING COMMITMENT. FelCor will deliver to MeriStar, within 30
days after the date of this Agreement, either (i) a commitment for financing
issued by Deutsche Bank Alex. Brown, J.P. Morgan Securities Inc., or another
comparable investment or commercial banking firm or firms, for an aggregate
amount of at least $500 million and for a term of not less than seven years, and
with such other terms and provisions as may be reasonably acceptable to FelCor
and MeriStar, or (ii) evidence reasonably satisfactory to MeriStar that the
holders of a majority of the aggregate outstanding principal amount of
MeriStar's Series A and Series B 9% Senior Notes Due 2008 and Series C and
Series D 9 1/8% Senior Notes Due 2011 (collectively, the "Senior Notes") have
waived their right to be offered the opportunity to tender their Senior Notes
following the Merger pursuant to a Change of Control Offer as defined in the
Indenture governing the Senior Notes.

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ARTICLE 8

CONDITIONS

8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:

(a) Stockholder Approvals. Each of the Stockholder Approvals will
have been obtained.

(b) Listing of Shares. The NYSE shall have approved for listing the
shares of FelCor Common Stock to be issued in the Merger, subject to
official notice of issuance.

(c) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings by the SEC seeking a stop order.

(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions
contemplated hereby shall be in effect.

(e) Blue Sky Laws. The Surviving Corporation shall have received all
state securities or "blue sky" permits and other authorizations necessary
to issue shares of FelCor Common Stock to the stockholders of MeriStar.

(f) Tax Opinions Relating to REIT Status of FelCor and Partnership
Status of FelCor OP. The FelCor Parties and the MeriStar Parties shall have
received an opinion of Hunton & Williams, reasonably satisfactory to the
FelCor Parties and the MeriStar Parties, that (i) commencing with its
taxable year ended December 31, 1994, FelCor was organized and has operated
in conformity with the requirements for qualification as a REIT under the
Code, (ii) FelCor OP has been since its formation in 1994, and continues to
be, treated for federal income tax purposes as a partnership and not as a
corporation or association taxable as a corporation, and (iii) the
Transactions will not prevent FelCor from continuing to operate in
conformity with the requirements for qualification as a REIT under the Code
(with customary exceptions, assumptions and qualifications and based upon
customary representations).

(g) Tax Opinions Relating to REIT Status of MeriStar and Partnership
Status of MeriStar OP. The FelCor Parties and the MeriStar Parties shall
have received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison,
reasonably satisfactory to the FelCor Parties and the MeriStar Parties,
that (i) commencing with its taxable year ended December 31, 1996, MeriStar
or its predecessor was organized and has operated in conformity with the
requirements for qualification, as a REIT under the Code, and (ii) MeriStar
OP has been since its formation in 1996, and continues to be, treated for
federal income tax purposes as a partnership and not as a corporation or
association taxable as a corporation (with customary exceptions,
assumptions and qualifications and based upon customary representations).

(h) Tax Opinion Relating to Merger. The FelCor Parties shall have
received an opinion dated the Closing Date from Jenkens & Gilchrist, P.C.
("J&G") reasonably satisfactory to the FelCor Parties, and the MeriStar
Parties shall have received an opinion dated the Closing Date from Paul,
Weiss, Rifkind, Wharton & Garrison ("Paul Weiss"), reasonably satisfactory
to the MeriStar Parties, based upon certificates and letters, which letters
and certificates are in the form agreed upon by the parties and dated the
Closing Date, to the effect that the Merger will qualify as a
reorganization under the provisions of Section 368(a)(1)(A) of the Code.

(i) Change in Tax Laws. There shall not have been any federal
legislative or regulatory change that would cause FelCor or MeriStar to
cease to qualify as a REIT for federal income tax purposes.

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8.2 CONDITIONS TO OBLIGATIONS OF THE MERISTAR PARTIES. The obligation of
the MeriStar Parties to effect the Merger and to consummate the other
transactions contemplated to occur on the Closing Date is further subject to the
following conditions, any one or more of which may be waived by the MeriStar
Parties:

(a) Representations and Warranties. The representations and
warranties of the FelCor Parties set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the
representations and warranties of the FelCor Parties that are not so
qualified shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date, except to the extent the representation or
warranty is expressly limited by its terms to another date, and the
MeriStar Parties shall have received a certificate (which certificate may
be qualified by Knowledge to the same extent as the representations and
warranties of the FelCor Parties contained herein are so qualified) signed
on behalf of the FelCor Parties by the chief executive officer and the
chief financial officer or principal accounting officer of FelCor, in such
capacity, to such effect.

(b) Performance of Obligations of the FelCor Parties. Each of the
FelCor Parties shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Effective Time, and the MeriStar Parties shall have received a
certificate of the FelCor Parties signed on behalf of the FelCor Parties by
the chief executive officer and the chief financial officer or principal
accounting officer of FelCor, in such capacity, to such effect.

(c) Material Adverse Change. Since the date of this Agreement, there
shall have been no FelCor Material Adverse Change, and the MeriStar Parties
shall have received a certificate of the chief executive officer and chief
financial officer or principal accounting officer of FelCor, in such
capacity, certifying to such effect.

(d) Consents. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties
necessary in connection with the consummation of the Transactions shall
have been obtained, other than such consents and waivers from third
parties, which, if not obtained, would not result, individually or in the
aggregate, in a FelCor Material Adverse Effect or a MeriStar Material
Adverse Effect, and all consents and waivers from franchisors and ground
lessors of the MeriStar Properties and lenders of MeriStar debt necessary
in connection with the consummation of the Transactions shall have been
obtained.

8.3 CONDITIONS TO OBLIGATIONS OF THE FELCOR PARTIES. The obligations of
the FelCor Parties to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date are further subject to the following
conditions, any one or more of which may be waived by the FelCor Parties:

(a) Representations and Warranties. The representations and
warranties of the MeriStar Parties set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the
representations and warranties of the MeriStar Parties that are not so
qualified shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date, except to the extent the representation or
warranty is expressly limited by its terms to another date, and the FelCor
Parties shall have received a certificate (which certificate may be
qualified by Knowledge to the same extent as the representations and
warranties of the MeriStar Parties contained herein are so qualified)
signed on behalf of the MeriStar Parties by the chief executive officer and
the chief financial officer or principal accounting officer of MeriStar, in
such capacity, to such effect. Notwithstanding the foregoing, MeriStar
shall not be deemed to be in breach of Section 4.13(f) regarding Sections
857(b) and 4981 of the Code with respect to the period ending on the
Closing Date so long as it complies with the provisions of Section
2.2(c)(i) and (ii).

(b) Performance of Obligations of the MeriStar Parties. Each of the
MeriStar Parties shall have performed in all material respects all
obligations required to be performed by it under this

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Agreement at or prior to the Effective Time, and the FelCor Parties shall
have received a certificate signed on behalf of the MeriStar Parties by the
chief executive officer and the chief financial officer or principal
accounting officer of MeriStar, in such capacity, to such effect.

(c) Material Adverse Change. Since the date of this Agreement, there
shall have been no MeriStar Material Adverse Change, and the FelCor Parties
shall have received a certificate of the chief executive officer and chief
financial officer or principal accounting officer of MeriStar, in such
capacity, certifying to such effect.

(e) Affiliates Letter. Each of the Affiliates referred to in Section
6.6 shall have delivered to FelCor the written agreement contemplated by
Section 6.6.

(f) Relationship with MeriStar Hotels & Resorts. The MeriStar Parties
shall have fully performed their obligations set forth in Section 7.18.

8.4 FRUSTRATION OF CLOSING CONDITIONS. Neither the MeriStar Parties nor
the FelCor Parties may rely on the failure of any condition set forth in Section
8.1, 8.2 or 8.3, as the case may be, to be satisfied if such failure was caused
by such party's failure to use commercially reasonable efforts to commence or
complete the Merger and the other transactions contemplated by this Agreement.

ARTICLE 9

TERMINATION, AMENDMENT AND WAIVER

9.1 TERMINATION. This Agreement may be terminated at any time prior to
the filing of the Articles of Merger with the Department, whether before or
after either of the Stockholder Approvals are obtained:

(a) by mutual written consent duly authorized by both the Board of
Directors of FelCor and the Board of Directors of MeriStar;

(b) by FelCor, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of the MeriStar Parties set
forth in this Agreement, in either case such that the conditions set forth
in Section 8.3(a) or Section 8.3(b), as the case may be, would be incapable
of being satisfied by October 31, 2001 (or as otherwise extended);

(c) by MeriStar, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of the FelCor Parties set
forth in this Agreement, in either case such that the conditions set forth
in Section 8.2(a) or Section 8.2(b), as the case may be, would be incapable
of being satisfied by October 31, 2001 (or as otherwise extended);

(d) by either FelCor or MeriStar, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable;

(e) by either FelCor or MeriStar, if the Merger shall not have been
consummated before October 31, 2001; provided, that a party may not
terminate pursuant to this clause (e) if the terminating party shall have
breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of the
failure referred to in this clause;
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(f) by either FelCor or MeriStar if, upon a vote at a duly held
MeriStar Stockholders Meeting or any adjournment thereof, the MeriStar
Stockholder Approval shall not have been obtained as contemplated by
Section 7.1;

(g) by either FelCor or MeriStar if, upon a vote at a duly held FelCor
Stockholders Meeting or any adjournment thereof, the FelCor Stockholder
Approval shall not have been obtained as contemplated by Section 7.1;

(h) by MeriStar, if prior to the MeriStar Stockholders Meeting, the
Board of Directors of MeriStar shall have withdrawn or modified, in
accordance with Section 6.1 hereof, in any manner adverse to FelCor, its
approval or recommendation of the Merger or this Agreement in connection
with, or approved or recommended, a MeriStar Superior Proposal; provided
that such termination pursuant to this clause (h) shall not be effective
until MeriStar has made payment of the Break-Up Fee (as defined below)
required by Section 9.2(c) hereof;

(i) by FelCor, if prior to the FelCor Stockholders Meeting, the Board
of Directors of FelCor shall have withdrawn or modified, in accordance with
Section 6.2 hereof, in any manner adverse to MeriStar, its approval or
recommendation of the Merger or this Agreement in connection with, or
approved or recommended, any FelCor Superior Proposal; provided that such
termination pursuant to this clause (i) shall not be effective until FelCor
has made payment of the Break-Up Fee required by Section 9.2(b) hereof;

(j) by FelCor if (i) prior to the MeriStar Stockholders Meeting, the
Board of Directors of MeriStar shall have withdrawn or modified, in any
manner adverse to FelCor, its approval or recommendation of the Merger or
this Agreement in connection with, or approved or recommended, any MeriStar
Acquisition Proposal, (ii) prior to the MeriStar Stockholders Meeting,
MeriStar shall have entered into any agreement with respect to a MeriStar
Acquisition Proposal (other than a confidentiality agreement as
contemplated and permitted by Section 6.1(a)) or (iii) the Board of
Directors of MeriStar shall have resolved to do any of the foregoing;

(k) by MeriStar if (i) prior to the FelCor Stockholders Meeting, the
Board of Directors of FelCor shall have withdrawn or modified, in any
manner adverse to MeriStar, its approval or recommendation of the Merger or
this Agreement in connection with, or approved or recommended, any FelCor
Acquisition Proposal, (ii) prior to the FelCor Stockholders Meeting, FelCor
shall have entered into any agreement with respect to a FelCor Acquisition
Proposal (other than a confidentiality agreement as contemplated and
permitted by Section 6.2(a)) or (iii) the Board of Directors of FelCor
shall have resolved to do any of the foregoing; and

(l) by either FelCor or MeriStar if, during any ten consecutive
trading days between the date hereof and the Closing Date, the average
Closing Price (as defined below) of the FelCor Common Stock is less than
$18.40, and the party desiring such termination provides notice to the
other party within three business days after the end of such ten
trading-day period. For purposes hereof, "Closing Price" shall mean the
last reported sale price per share of FelCor Common Stock as reported on
the NYSE consolidated tape on the trading day in question.

9.2 CERTAIN FEES AND EXPENSES.

(a) Except as otherwise specified in this Agreement or agreed in writing by
the parties, all out-of-pocket costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, all expenses relating to the transfer of any hotel franchises) shall
be paid by the party incurring such cost or expense.

(b) FelCor agrees that if this Agreement shall be terminated pursuant to
Section 9.1(c), (i) or (k), then FelCor will pay as directed by MeriStar a fee
in an amount equal to the Break-Up Fee (as defined below). In the event of a
termination pursuant to Section 9.1(g), FelCor shall pay as directed by MeriStar
an amount equal to the Break-Up Expenses (as defined below). Payment of any of
such amounts shall be made, as directed by MeriStar, by wire transfer of
immediately available funds immediately upon the
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occurrence of the event giving rise to the payment of such fee or expenses. The
payment of the Break-Up Fee shall be full compensation for the loss suffered by
MeriStar as a result of the failure of the Merger to be consummated under the
circumstances giving rise to the payment of such fee, and to avoid the
difficulty of determining damages under such circumstances, and neither party
shall have any other liability to the other, other than the payment of the
Break-Up Fee, under such circumstances. The payment of the Break-Up Expenses
shall be full compensation for the loss suffered by MeriStar as the result of
the failure of the Merger to be consummated under the circumstances giving rise
to the payment of such expenses, and to avoid the difficulty of determining
damages under such circumstances, and neither party shall have any other
liability to the other, other than the payment of the Break-Up Expenses, under
such circumstances.

(c) MeriStar agrees that if this Agreement shall be terminated pursuant to
Section 9.1(b), (h) or (j), then MeriStar will pay as directed by FelCor a fee
in an amount equal to the Break-Up Fee. In the event of a termination pursuant
to Section 9.1(f), then MeriStar will pay, as directed by FelCor, an amount
equal to the Break-Up Expenses. Payment of any of such amounts shall be made, as
directed by FelCor, by wire transfer of immediately available funds immediately
upon the occurrence of the event giving rise to payment of such fee or expenses.
The payment of the Break-Up Fee shall be full compensation for the loss suffered
by FelCor as a result of the failure of the Merger to be consummated under the
circumstances giving rise to the payment of such fee, and to avoid the
difficulty of determining damages under the circumstances, and neither party
shall have any other liability to the other, other than the payment of the
Break-Up Fee. The payment of the Break-Up Expenses shall be full compensation
for the loss suffered by FelCor as the result of the failure of the Merger to be
consummated under the circumstances giving rise to the payment of such expenses,
and to avoid the difficulty of determining damages under such circumstances, and
neither party shall have any other liability to the other, other than the
payment of the Break-Up Expenses, under such circumstances.

(d) As used in this Agreement, "Break-Up Fee" shall be an amount equal to
$35 million plus Break-Up Expenses (the "Base Amount"); provided, however, that
such fee shall not exceed the sum of (A) the maximum amount that can be paid to
FelCor or MeriStar, as the case may be (the "Recipient") without causing it to
fail to meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute income described
in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying
Income"), as determined by independent accountants to the Recipient, and (B) in
the event the Recipient receives an opinion from outside counsel (a "Break-Up
Fee Tax Opinion") or a ruling from the IRS (a "Break-Up Fee Ruling"), in either
case holding that the Recipient's receipt of the Base Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code (the "REIT Requirements") or
that the receipt by the Recipient of the remaining balance of the Base Amount
following the receipt of and pursuant to such ruling or opinion would not be
deemed constructively received prior thereto, the Base Amount less the amount
payable under clause (A) above; provided, however, that, if the Break-Up Fee Tax
Opinion or the Break-Up Fee Ruling is based on the absence of constructive
receipt, the amount that will be paid upon the receipt of the Break-Up Fee Tax
Opinion or the Break-Up Fee Ruling will be the maximum amount that can be paid
at that time without causing the Recipient to fail the REIT Requirements, as
determined by the Recipient's independent accountants based on the Break-Up Fee
Tax Opinion or Break-Up Fee Ruling, and any remaining amount payable to the
Recipient pursuant to clause (B) shall be paid as soon as it shall be possible
to do so without causing the Recipient to fail the REIT Requirements, as
determined by the Recipient's independent accountants based on the Break-Up Fee
Tax Opinion or Break-Up Fee Ruling. The other party's obligation to pay (the
"Payor") any unpaid portion of the Break-Up Fee shall terminate five years from
the date of this Agreement. In the event that the Recipient is not able to
receive the full Base Amount, the Payor shall place the unpaid amount in escrow
and shall not release any portion thereof to the Recipient unless and until the
Payor receives either a Break-Up Fee Tax Opinion or a Break-Up Fee Ruling, in
which event the Payor shall pay to the Recipient the unpaid Base Amount;
provided, however, that, if the Break-Up Fee Tax Opinion or the Break-Up Fee
Ruling is based on the absence of constructive receipt, the amount that will be
paid upon the receipt of the Break-Up Fee Tax Opinion or the Break-Up Fee Ruling
will be the
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maximum amount that can be paid at that time without causing the Recipient to
fail the REIT Requirements, as determined by the Recipient's independent
accountants based on the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and
any remaining amount payable to the Recipient shall be paid as soon as it shall
be possible to do so without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling.

(e) The "Break-Up Expenses" payable to the Recipient shall be an amount
equal to the lesser of (i) $5 million and (ii) the Recipient's out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, all attorneys',
accountants', commercial bankers' and investment bankers' fees and expenses);
provided, however, such expenses shall not exceed the sum of (A) the maximum
amount that can be paid to the Recipient without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income, as determined by
independent accountants to the Recipient, and (B) in the event the Recipient
receives a Break-Up Fee Tax Opinion or a Break-Up Fee Ruling holding that the
Recipient's receipt of the Break-Up Expenses would either constitute Qualifying
Income or would be excluded from gross income within the meaning of the REIT
Requirements or that receipt by the Recipient of the remaining balance of the
Break-Up Expenses following the receipt of and pursuant to such ruling or
opinion would not be deemed constructively received prior thereto, the Break-Up
Expenses less the amount payable under clause (A) above; provided, however,
that, if the Break-Up Fee Tax Opinion or Break-Up Fee Ruling is based on the
absence of constructive receipt, the amount that will be paid upon the receipt
of the Break-Up Fee Tax Opinion or the Break-Up Fee Ruling will be the maximum
amount that can be paid at that time without causing the Recipient to fail the
REIT Requirements, as determined by the Recipient's independent accountants
based on the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and any remaining
amount payable to the Recipient pursuant to clause (B) shall be paid as soon as
it shall be possible to do so without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling. The obligation of the Payor
to pay any unpaid portion of the Break-Up Expenses shall terminate five years
from the date of this Agreement. In the event that the Recipient is not able to
receive the full Break-Up Expenses, the Payor shall place the unpaid amount in
escrow and shall not release any portion thereof to the Recipient unless and
until the Payor receives either a Break-Up Fee Tax Opinion or a Break-Up Fee
Ruling with respect to the Break-Up Expenses, in which event the Payor shall pay
to the Recipient the unpaid Break-Up Expenses; provided, however, if the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling is based on the absence of
constructive receipt, the amount that will be paid upon the receipt of the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling will be the maximum amount
that can be paid at that time without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and any remaining amount
payable to the Recipient shall be paid as soon as it shall be possible to do so
without causing the Recipient to fail the REIT Requirements, as determined by
the Recipient's independent accountants based on the Break-Up Fee Tax Opinion or
Break-Up Fee Ruling.

9.3 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either MeriStar or FelCor as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of FelCor, or MeriStar, other than pursuant to the last sentence of
Section 7.2, Section 9.2, this Section 9.3 and Article 10.

9.4 AMENDMENT. This Agreement may be amended by the parties in writing by
action of their respective Board of Directors at any time before or after any
Stockholder Approvals are obtained and prior to the filing of the Articles of
Merger with the Department; provided, however, that, after the Stockholder
Approvals are obtained, no such amendment, modification or supplement shall be
made which by law requires the further approval of stockholders without
obtaining such further approval. The parties agree to amend this Agreement in
the manner provided in the immediately preceding sentence to the extent

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required to (a) continue the status of FelCor or MeriStar as a REIT or (b)
preserve the Merger as a reorganization under Section 368 of the Code.

9.5 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
9.4, waive compliance with any of the agreements or conditions of the other
party contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.

ARTICLE 10

GENERAL PROVISIONS

10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 10.1 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.

10.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):

(a) if to FelCor, to:

FelCor Lodging Trust Incorporated
545 E. John Carpenter Frwy., Ste. 1300
Irving, TX 75062-3933
Attention: President and CEO
Fax No. (972) 444-4949

with a copy to:

Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: Robert W. Dockery, Esq.
Fax No. (214) 855-4300

(b) if to MeriStar, to:

MeriStar Hospitality Corporation
1010 Wisconsin Ave., N.W.
Washington, D.C. 20007
Attention: Chairman of the Board and CEO
Fax No. (202) 295-2248

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with copies to:

Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Richard S. Borisoff, Esq.
Fax No. (212) 757-3990

and

DeCampo, Diamond & Ash
805 Third Avenue
New York, New York 10022
Attention: William H. Diamond, Esq.
Fax No. (212) 758-1728

All notices shall be deemed given only when actually received.

10.3 INTERPRETATION. When a reference is made in this Agreement to a
Section or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."

10.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.

10.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. Except as provided
in Section 7.4, this Agreement, the MeriStar Disclosure Letter, the FelCor
Disclosure Letter, the Confidentiality Agreement and the other agreements
entered into in connection with the Merger or OP Merger constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of this
Agreement and are not intended to confer upon any person other than the parties
hereto any rights or remedies.

10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF
(OTHER THAN SECTION 5-1401 OF NEW YORK'S GENERAL OBLIGATIONS LAWS), EXCEPT TO
THE EXTENT THAT THE LAWS OF THE STATE OF MARYLAND OR DELAWARE ARE MANDATORILY
APPLICABLE.

10.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned or delegated, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.

10.8 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
Southern District of New York or in any state court located in New York, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself
(without making such submission exclusive) to the personal jurisdiction of any
federal court located in the Southern District of
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New York or any state court located in New York in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement
and (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court.

10.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the FelCor Parties and the MeriStar Parties have caused
this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.

<Table>

ATTEST: FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation

By: /s/ LAWRENCE D. ROBINSON By: /s/ THOMAS J. CORCORAN, JR.
------------------------------------------------ ------------------------------------------------
Name: Thomas J. Corcoran, Jr.
Title: President and Chief Executive Officer

FELCOR LODGING LIMITED PARTNERSHIP
a Delaware limited partnership

By: FelCor Lodging Trust Incorporated,
its general partner

ATTEST: MERISTAR HOSPITALITY CORPORATION,
a Maryland corporation

By: /s/ CHRISTOPHER L. BENNETT By: /s/ PAUL W. WHETSELL
------------------------------------------------ ------------------------------------------------
Name: Paul W. Whetsell
Title: Chief Executive Officer

MERISTAR HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership

By: MeriStar Hospitality Corporation,
its general partner

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FIRST AMENDMENT
TO AGREEMENT AND PLAN OF MERGER

This First Amendment to Agreement and Plan of Merger (the "First
Amendment") is dated as of August 16, 2001, and entered into by and among FELCOR
LODGING TRUST INCORPORATED, a Maryland corporation ("FelCor"), FELCOR LODGING
LIMITED PARTNERSHIP, a Delaware limited partnership ("FelCor OP" and, together
with FelCor, the "FelCor Parties"), MERISTAR HOSPITALITY CORPORATION, a Maryland
corporation ("MeriStar"), MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership ("MeriStar OP" and, together with MeriStar, the
"MeriStar Parties"), and FELCOR MERGESUB, L.L.C., a Delaware limited liability
Company ("FelCor Mergesub").

RECITALS:

A. The FelCor Parties and the MeriStar Parties have previously entered into
that certain Agreement and Plan of Merger dated as of May 9, 2001 (the "Merger
Agreement").

B. The FelCor Parties and the MeriStar Parties desire to amend the Merger
Agreement in the manner set forth herein.

C. FelCor Mergesub desires to enter into the Merger Agreement by executing
this First Amendment in order to provide for the merger of FelCor Mergesub with
and into MeriStar OP in lieu of the OP Merger currently contemplated by the
Merger Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto hereby agree to amend the
Merger Agreement as follows:

1. The third sentence in Section 4.2(a) of the Merger Agreement shall
be amended to read in its entirety as follows:

"There are issued and outstanding (i) an aggregate of 47,349,101
MeriStar Common Units, (ii) an aggregate of 964,227 MeriStar Class C
Units, (iii) an aggregate of 392,157 MeriStar Class D Units, and (iv) an
aggregate of 802,292 MeriStar POP Units."

2. Section 5.22 of the Merger Agreement shall be amended to read in
its entirety as follows:

"5.22 VOTING REQUIREMENTS. The FelCor Stockholder Approvals, which
shall consist of the affirmative vote of holders of shares entitled to
cast a majority of all votes entitled to be cast on the matter at the
FelCor Stockholders Meeting, which shall be a duly convened meeting at
which a quorum is present and acting throughout, to approve the Merger,
are the only votes of the holders of any class or series of FelCor's
stock or FelCor OP's partnership interests necessary to approve the
Merger and the other transactions contemplated by this Agreement."

3. The first sentence of Section 7.8(a) of the Merger Agreement shall
be amended to read in its entirety as follows:

"As of the Effective Time, each option to purchase shares of MeriStar
Common Stock (a "MeriStar Stock Option") which is outstanding as of the
Effective Time shall be assumed (or a substitute option granted) by the
Surviving Corporation and shall continue as an option ("Assumed Option")
to purchase the number of shares of FelCor Common Stock (rounded up to
the nearest whole share) equal to the number of shares of MeriStar
Common Stock subject to such option multiplied by the Exchange Ratio, at
an exercise price per share of FelCor Common Stock (rounded down to the
nearest penny) equal to (A) the former exercise price per share of
MeriStar Common Stock under such MeriStar Stock Option immediately prior
to the Effective Time minus the Cash Consideration, divided by (B)
0.784."

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4. Section 7.16 of the Merger Agreement shall be amended to read in
its entirety of follows:

"7.16 TAX PROVISION. Except as otherwise required under existing
agreements with respect to the properties previously contributed to
MeriStar OP, MeriStar OP shall use the traditional method contained in
the Treasury Regulations promulgated under Section 704(c) of the Code
with respect to all of the properties that it owns immediately after the
OP Merger."

5. In Section 7.18(a) of the Merger Agreement, the date "May 21, 2001"
set forth in the last sentence shall be amended to read "July 12, 2001."

6. In Section 7.21 of the Merger Agreement, the phrase "within 30 days
after the date of this Agreement" shall be deleted, and the phrase "on or
before July 12, 2001" shall be substituted in lieu thereof.

7. Recital D on page 1 of the Merger Agreement shall be amended to
read in its entirety as follows:

"D. Immediately following the Merger, MeriStar OP and the FelCor Parties
will effect a merger of FelCor Mergesub with and into MeriStar OP, with
MeriStar OP as the survivor (the "OP Merger"), and FelCor will
contribute to FelCor OP its interests in MeriStar OP in several
transactions, as contemplated by Article 3 of this Agreement (the
Merger, together with the other transactions, including without
limitation the OP Merger, contemplated by this Agreement, being referred
to collectively herein as the "Transactions")."

8. Article 3 of the Merger Agreement shall be amended to read in its
entirety as follows:

ARTICLE 3

CERTAIN TRANSACTIONS RELATING TO THE MERISTAR OP

3.1 INITIAL CONTRIBUTION BY FELCOR OF COMMON UNITS. Immediately after the
Effective Time and prior to the OP Merger effectiveness, FelCor shall transfer,
as a capital contribution, to FelCor OP each of the units of partnership
interest in MeriStar OP known as "OP Units" (herein called "MeriStar Common
Units") that it owns as successor limited partner to MeriStar by virtue of the
Merger, other than the units of partnership interest owned by FelCor as
successor general partner in MeriStar OP (the "MeriStar GP Interest") by virtue
of succeeding MeriStar as general partner, in exchange for, in respect of each
such unit, (i) the number of units of partnership interest in FelCor OP known as
"Partnership Units" or "Common Units" (herein called "FelCor Common Units")
equal to the Exchange Ratio, and (ii) the right to receive from FelCor OP cash
in an amount equal to the Cash Consideration, without interest. The transaction
described in this Section 3.1 shall be herein called the "Initial Contribution."

3.2 MERGER OF MERISTAR OP AND FELCOR MERGESUB. Immediately following the
Initial Contribution, FelCor shall cause FelCor Mergesub to merge with and into
MeriStar OP in accordance with the Delaware Revised Uniform Limited Partnership
Act ("DRULPA"), the Delaware Limited Liability Company Act ("DLLCA"), the
partnership agreement of MeriStar OP and the limited liability company agreement
of FelCor Mergesub, with MeriStar OP as the surviving entity. The effects and
consequences of the OP Merger are set forth in this Article 3, the DRULPA and
the DLLCA. MeriStar OP, after the effectiveness of the OP Merger, is sometimes
referred to herein as the "Surviving Partnership."

3.3 SUBSEQUENT CONTRIBUTIONS BY FELCOR OF GENERAL PARTNER UNITS.

(a) FelCor will become the sole general partner of MeriStar OP by virtue of
the Merger as successor to MeriStar. Immediately following the effectiveness of
the OP Merger, FelCor shall transfer, as capital contributions, (i) 1% of the
MeriStar GP Interest to a newly formed taxable REIT subsidiary ("TRS") of FelCor
and (ii) 99% of the MeriStar GP Interest to a newly formed limited partnership
(the "Successor MeriStar OP General Partner"), the sole partners in which will
be TRS as the 1% general partner and
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FelCor as the 99% limited partner. In forming Successor MeriStar OP General
Partner, the FelCor Parties shall cause TRS to transfer, as a capital
contribution, its MeriStar GP Interest to the Successor MeriStar OP General
Partner. Successor MeriStar OP General Partner will be admitted as the successor
general partner of MeriStar OP, and FelCor shall withdraw as general partner of
MeriStar OP.

(b) Immediately following effectiveness of the contributions required by
(a) above, FelCor will transfer, as a capital contribution, all of the equity
interests in TRS and Successor MeriStar OP General Partner to FelCor OP in
exchange for (i) the number of FelCor Common Units equal to (x) the Exchange
Ratio times (y) the total number of units of partnership interest comprising the
MeriStar GP Interest, and (ii) the right to receive cash in an amount equal to
(s) the Cash Consideration, without interest, times (t) the total number of
units of partnership interest comprising the MeriStar GP Interest. The
transactions described in Section 3.3(a) and this Section 3.3(b) shall be herein
called the "Subsequent Contributions."

(c) Promptly following the effectiveness of the OP Merger and the
Subsequent Contributions, FelCor OP shall, or shall cause one of its
wholly-owned subsidiaries that is disregarded for federal income tax purposes
to, incur or increase a borrowing that is a recourse liability within the
meaning of Treasury Regulations section 1.752-1(a)(1) (the "Recourse Borrowing")
and shall use the proceeds of the Recourse Borrowing to pay (i) all of the Cash
Consideration due to holders of MeriStar OP Units other than FelCor or FelCor OP
(the "MeriStar LP Cash Amount") and (ii) the cash due to FelCor in connection
with the Initial Contribution and the Subsequent Contributions (the "FelCor Cash
Amount" and, together with the MeriStar LP Cash Amount, the "Cash Amounts").
Subject to and in accordance with Sections 3.3(b), 3.4, 3.7 and 3.8, FelCor OP
shall pay the Cash Amounts to the respective recipients within 90 days of
incurring the Recourse Borrowing and shall segregate the proceeds of the
Recourse Borrowing that are used to pay the Cash Amounts so that such proceeds
are allocable to the Cash Amounts under Treasury Regulations section 1.163-8T.

(d) In connection with the incurrence of the Recourse Borrowing, FelCor OP
shall provide to each MeriStar OP Unit Holder who is entitled to receive Cash
Consideration the opportunity to agree to reimburse FelCor with respect to a
portion of the Recourse Borrowing up to the amount of Cash Consideration to
which such MeriStar OP Unit Holder is entitled as a result of the OP Merger by
executing a reimbursement agreement in the form set forth as Exhibit A hereto (a
"Reimbursement Agreement"). A MeriStar OP Unit Holder must make its election to
agree to reimburse FelCor by delivering written notice of its election to FelCor
OP before the effective date of the OP Merger and by delivering an executed
signature page of the Reimbursement Agreement with such notice. Pursuant to the
Reimbursement Agreement, a MeriStar OP Unit Holder will agree to reimburse
FelCor for the amount that FelCor must pay with respect to the Recourse
Borrowing (or bear the economic risk of loss for); provided, however, that (i)
the amount that the MeriStar OP Unit Holder is required to pay shall in no event
exceed the Cash Consideration received by the MeriStar OP Unit Holder in the OP
Merger and (ii) the MeriStar OP Unit Holder shall be required to reimburse
FelCor only to the extent that FelCor does not otherwise recover (or is relieved
of paying as a result of recoveries by the lender or lenders with respect to the
Recourse Borrowing) an amount at least equal to the amount agreed to be
reimbursed by the MeriStar OP Unit Holder after (A) the lender or lenders of the
Recourse Borrowing have exhausted their remedies against FelCor OP's assets and
the assets of any other obligors or guarantors of the Recourse Borrowing other
than FelCor (excluding persons who previously have executed bottom dollar
guarantees with respect to the Recourse Borrowing) and (B) FelCor has demanded
payment from other persons who have agreed to reimburse FelCor with respect to
the Recourse Borrowing (excluding persons who previously have executed bottom
dollar reimbursement agreements with respect to the Recourse Borrowing). As soon
as practicable following the closing of the OP Merger, FelCor will notify The
Chase Manhattan Bank, as administrative agent for the lenders with respect to
the Recourse Borrowing (the "Administrative Agent"), of the lenders' rights
under the reimbursement agreement that is executed by FelCor and the electing
MeriStar OP Unit Holders (the "Reimbursement Agreement"), send a copy of the
Reimbursement Agreement to the Administrative Agent, and use its good faith
efforts to obtain the Administrative Agent's acknowledgement of its receipt of
the Reimbursement Agreement and acceptance,

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on behalf of the lenders, of the lenders' rights (but not obligations) under the
Reimbursement Agreement, provided that good faith efforts shall not be construed
to include payment of any fee or the granting of any monetary or other
concessions by FelCor to the Administrative Agent or the lenders.

If a MeriStar OP Unit Holder agrees to reimburse FelCor with respect to a
portion of the Recourse Borrowing (such MeriStar OP Unit Holder, a "Guaranteeing
MeriStar OP Unit Holder"), FelCor OP shall maintain outstanding at least such
portion of the Recourse Borrowing (above and beyond any amount of the Recourse
Borrowing that previously has been guaranteed or agreed to be reimbursed by
other parties), or such amount of any replacement or additional recourse
borrowing, until the earlier of (i) five years following the closing of the OP
Merger or (ii) the date on which the Guaranteeing MeriStar OP Unit Holder has,
cumulatively over time, redeemed or otherwise disposed of all of his FelCor OP
Units received in the OP Merger. The aggregate amount of indebtedness that
FelCor OP must maintain pursuant to this Section 3.3(d) (the "Required
Indebtedness") shall be equal to the aggregate amount of the Recourse Borrowing
that the Guaranteeing MeriStar OP Unit Holders agree to reimburse FelCor.

The Required Indebtedness shall be reduced to the extent that Guaranteeing
MeriStar OP Unit Holders redeem any of the FelCor OP Units that they received in
the OP Merger in exchange for FelCor Common Stock or for cash, or otherwise
dispose of any of such FelCor OP Units (the FelCor OP Units that are so redeemed
or disposed of are referred to herein as "Stepped-Up Basis Units"). In such a
case, the Required Indebtedness shall be reduced by an amount equal to the
original Required Indebtedness prior to any reduction multiplied by a fraction
equal to (i) the portion of the Cash Consideration received by the Guaranteeing
MeriStar OP Unit Holders that is allocable to the Stepped-Up Basis Units
redeemed or transferred immediately prior to the reduction of the Required
Indebtedness, divided by (ii) the Cash Consideration received by the
Guaranteeing MeriStar OP Unit Holders.

FelCor OP shall indemnify the Guaranteeing MeriStar OP Unit Holders against
any and all federal and state income tax liability (including interest and
penalties), plus reasonable attorney's fees (if any), of the Guaranteeing
MeriStar OP Unit Holders that are directly related to the recognition of gain by
such Guaranteeing MeriStar OP Unit Holders due to FelCor OP's breach of its
obligation to maintain debt pursuant to this Section 3.3(d); provided, however,
that FelCor OP shall not indemnify the Guaranteeing MeriStar OP Unit Holders
against any federal and state income tax liability associated with the receipt
of an indemnification payment pursuant to this Section 3.3(d).

(e) With respect to each Guaranteeing MeriStar OP Unit Holder, FelCor OP
covenants and agrees that, until the earlier of (i) five years after the closing
of the OP Merger and (ii) the date on such Guaranteeing MeriStar OP Unit Holder
no longer owns at least 50% of the FelCor OP Units issued to him in the OP
Merger, FelCor OP will not sell, assign, transfer, distribute, or otherwise
dispose of the MeriStar OP Units formerly owned by such Guaranteeing MeriStar OP
Unit Holder (the "Contributed Assets"), or any successor asset or assets
acquired by FelCor OP in exchange for such MeriStar OP Units in a non-taxable
transaction ("Successor Assets"), in a transaction that would result in the
allocation of taxable income or gain by FelCor OP to the Guaranteeing MeriStar
OP Unit Holder under Code section 704(c). Nothing in this Section 3.3(e) shall
prevent FelCor OP or one or more of its affiliates from (i) pledging or
encumbering any of the Contributed Assets or Successor Assets, as applicable,
(ii) assigning, transferring, or otherwise disposing of the Contributed Assets
or Successor Assets, as applicable, to a subsidiary, or (iii) engaging in a
merger, consolidation, other reorganization or liquidation, as long as such
action or transaction does not result in the allocation of taxable income or
gain to the Guaranteeing MeriStar OP Unit Holders under Code section 704(c).
FelCor OP shall indemnify the Guaranteeing MeriStar OP Unit Holders against any
and all federal and state income tax liability (including interest and
penalties), plus reasonable attorney's fees (if any), of the Guaranteeing
MeriStar OP Unit Holders that are directly related to the recognition of gain by
such Guaranteeing MeriStar OP Unit Holders due to FelCor OP's breach of its
obligation not to dispose of the Contributed Assets or Successor Assets, as
applicable, pursuant to this Section 3.3(e); provided, however, that FelCor OP
shall not indemnify the Guaranteeing MeriStar OP Unit Holders against any
federal and state income tax liability associated with the receipt of an
indemnification payment pursuant to this Section 3.3(e).
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3.4 CLOSING AND EFFECTIVENESS. The closing (the "OP Transactions
Closing") of the Initial Contribution, the OP Merger and the Subsequent
Contributions (collectively, the "OP Transactions") shall take place at the same
time and place as the Closing. All of the documents and transactions relating to
the OP Transactions Closing shall be deemed to be part of the Closing. The OP
Transactions shall be conditioned upon prior effectiveness of the Merger and
shall be effective immediately following the Effective Time of the Merger. At
the OP Transactions Closing, MeriStar OP and FelCor Mergesub shall execute the
Certificate of Merger (the "OP Merger Articles") in the form attached hereto as
Exhibit "B," which certificate shall then be filed with the Delaware Secretary
of State.

3.5 EFFECTS OF OP MERGER. The OP Merger shall have the effects set forth
in the DRULPA and DLLCA.

3.6 CERTIFICATE OF LIMITED PARTNERSHIP AND PARTNERSHIP AGREEMENT. The
certificate of limited partnership of MeriStar OP as in effect immediately prior
to the Effective Time (the "MeriStar OP Certificate") shall be the certificate
of limited partnership of the Surviving Partnership. The limited partnership
agreement of MeriStar OP as amended and restated in a form reasonably
satisfactory to the parties (the "Restated MeriStar OP Partnership Agreement")
shall be the limited partnership agreement of the Surviving Partnership after
completion of the transactions contemplated by this Article 3, until thereafter
amended as provided by applicable law or therein. The Restated MeriStar OP
Partnership Agreement and the MeriStar OP Certificate shall be amended in
connection with the Subsequent Contributions to reflect the change in general
partner from MeriStar to Successor MeriStar OP General Partner. The limited
partnership agreement of FelCor OP as amended and restated in a form reasonably
satisfactory to the parties (the "Restated Partnership Agreement") shall be the
limited partnership agreement of FelCor OP after completion of the transactions
contemplated by this Article 3, until thereafter amended as provided by
applicable law or therein.

3.7 EFFECT OF THE OP MERGER ON PARTNERSHIP INTERESTS.

(a) Common Units of MeriStar OP. As of the effectiveness of the OP Merger,
by virtue of the OP Merger and without any action on the part of any holder of
MeriStar Common Units, each outstanding MeriStar Common Unit, other than those
held by FelCor or FelCor OP, shall be converted into the right to receive (i)
the number of FelCor Common Units equal to the Exchange Ratio, and (ii) cash in
an amount equal to the Cash Consideration, without interest.

(c) Class C Units of MeriStar OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class C Units"
(herein called "MeriStar Class C Units"), each outstanding MeriStar Class C Unit
shall be converted into the right to receive (i) the number of units of
partnership interest in FelCor OP known as "Series C Preferred Units" (herein
called "FelCor Series C Units") equal to the Exchange Ratio, and (ii) cash in an
amount equal to the Cash Consideration, without interest.

(d) Class D Units of MeriStar OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class D Units"
(herein called "MeriStar Class D Units"), each outstanding MeriStar Class D Unit
shall be converted into the right to receive one unit of partnership interest in
FelCor OP known as "Series D Preferred Units" (herein called "FelCor Series D
Units").

vested and not subject to forfeiture as of the Effective Time, assuming the
Merger was completed, under the respective Restricted Unit Agreements (as
defined in the MeriStar Profits-Only Operating Partnership Units Plan (the "POP
Unit Plan")) dated effective as of March 29, 2000 and April 16, 2001 between
MeriStar, MeriStar OP and each of the respective holders of such MeriStar POP
Units. As of the effectiveness of the OP Merger, by virtue of the OP Merger and
without any action on the part of any holder of the POP Units, each outstanding
MeriStar POP Unit that is not Vested shall be cancelled and cease to exist, and
no consideration shall be issued or delivered in exchange therefor.

(f) Interests of FelCor in MeriStar OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of FelCor
and FelCor OP, all MeriStar Common Units and the MeriStar GP Interest owned by
FelCor or FelCor OP in MeriStar OP as a result of the Merger or the Initial
Contribution shall remain outstanding and shall not be otherwise cancelled or
converted.

(g) Effect on MeriStar OP Units. All MeriStar Common Units (other than
those held by FelCor or FelCor OP), MeriStar Class B Units, MeriStar Class C
Units, MeriStar Class D Units, and MeriStar POP Units (collectively, the
"MeriStar OP Units") shall automatically be canceled and reissued to FelCor OP.
The pre-OP Merger holders of record of each such MeriStar OP Unit shall
thereafter have only the right to receive, upon making the deliveries required
by Section 3.8(a), such number of whole FelCor Common Units, FelCor Series C
Units, and FelCor Series D Units (collectively the "New FelCor OP Units"), and
certificates representing such FelCor OP Units, into which such MeriStar OP
Units were converted in accordance with Section 3.7(a)-(e) plus any applicable
Cash Consideration, without interest. The holders of such MeriStar OP Units
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such MeriStar OP Units except as otherwise provided
herein or by law. No fractional New FelCor OP Units shall be issued, and, in
lieu thereof, a cash payment, without interest, shall be made pursuant to
Section 3.8(c).

3.8 ISSUANCE OF NEW CERTIFICATES FOR FELCOR OP UNITS.

(a) Delivery Procedures. As soon as practicable after the effectiveness of
the OP Merger, FelCor OP shall mail to each holder of record of a MeriStar OP
Unit (a "MeriStar OP Unit Holder"), other than FelCor or FelCor OP, a
ratification and joinder agreement (a "Ratification Agreement") by which the
MeriStar OP Unit Holder ratifies and agrees to be bound by the Restated
Partnership Agreement, waives any rights they have under their exchange rights
agreements with MeriStar and MeriStar OP, and is admitted as a limited partner
in FelCor OP as a holder of the respective New FelCor OP Units which the
MeriStar OP Unit Holder is entitled to receive by virtue of the OP Merger. The
Ratification Agreement to be executed by holders of MeriStar POP Units will also
contain a waiver of any rights they have under the agreements by which their POP
Units were granted or under the POP Unit Plan. Without limitation to the rights
under Section 3.8(b), upon delivery to FelCor OP of a duly executed Ratification
Agreement, together with such other customary documents as FelCor OP may
require, the MeriStar OP Unit Holder shall be entitled to receive, with respect
to such MeriStar OP Units (i) a certificate or certificates representing that
number of whole New FelCor OP Units which such MeriStar OP Unit Holder has the
right to receive pursuant to Section 3.7, (ii) a check in payment of the Cash
Consideration, if any, without interest, which such MeriStar OP Unit Holder has
the right to receive pursuant to Section 3.7, and (iii) a check in payment of
the cash in lieu of fractional New FelCor OP Units, without interest, which such
holder is entitled to receive pursuant to Section 3.8(c). FelCor OP shall cause
all FelCor OP Units issued pursuant to the OP Merger to be duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights.

(b) Distributions After Effective Time. No distributions declared or made
after the Effective Time with respect to New FelCor OP Units with a record date
after the Effective Time shall be paid to any MeriStar OP Unit Holder with
respect to New FelCor OP Units until such MeriStar OP Unit Holder executes and
delivers to FelCor OP a Ratification Agreement. Subject to the effect of
unclaimed property, escheat and other applicable laws, following delivery to
FelCor OP of any such Ratification Agreement, in addition to the consideration
required by Section 3.7, there shall be paid to the holder of the certificates
representing whole New FelCor OP Units issued in consideration therefor, without
interest, (i) at the time of such delivery, the amount of distributions with a
record date after the Effective Time theretofore paid

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with respect to such whole New FelCor OP Units and (ii) at the appropriate
payment date, the amount of distributions with a record date after the Effective
Time but prior to delivery and a payment date subsequent to delivery payable
with respect to such whole New FelCor OP Units.

(d) Withholding Rights. FelCor OP shall be entitled to deduct and withhold
from the consideration otherwise payable under Section 3.7 to any holder of
MeriStar OP Units, such amounts as FelCor OP is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
FelCor OP, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the MeriStar OP Units, in respect
of which such deduction and withholding was made by FelCor OP."

9. Section 7.6(b) of the Merger Agreement shall be amended to read in
its entirety as follows:

(b) Promptly after the Effective Time, FelCor shall comply with and
pay the severance and bonus arrangements of former MeriStar and MeriStar
OP employees, as described on Schedule 7.6(b) to the MeriStar Disclosure
Letter, except with respect to (i) employees who do not continue in good
faith to perform their duties as employees through the Closing Date and
(ii) employees who are employed with the Surviving Corporation or
MeriStar Hotels & Resorts or their Subsidiaries with substantially the
same compensation and duties applicable to such employees as of May 9,
2001; provided that FelCor shall pay prorated bonuses for the 2001 year
to employees described in clause (ii) above.

10. The parties agree to amend Section 9.5 of the Merger Agreement to
add at the end thereof the following sentence: "The parties agree that the
conditions set forth in Section 8.1 (f), (g) and (h) may not be waived."

11. Schedule 1.6(a) to the Merger Agreement is amended to read in its
entirety as set forth in the Schedule 1.6(a) attached hereto.

12. The FelCor Parties, jointly and severally, represent and warrant
to the MeriStar Parties with respect to FelCor Mergesub as follows:

(a) FelCor Mergesub is a limited liability company duly organized
and validly existing under the laws of the State of Delaware and has
conducted no business and will conduct no business prior to the Closing.
FelCor OP is the record and beneficial owner of all of the issued and
outstanding membership interests of FelCor Mergesub, free and clear of
all Liens. Copies of the organizational documents and operating
agreement for FelCor Mergesub have been previously delivered to the
MeriStar Parties.

(b) FelCor Mergesub is not a party to any other agreement, document
or contract.

(c) There are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind to which FelCor Mergesub is a party or by which it is bound
obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, any ownership interests in FelCor Mergesub or
obligating it to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There is no outstanding obligation of FelCor Mergesub to
repurchase, redeem or otherwise acquire any ownership interest in it.

(d) All membership interests in FelCor Mergesub have been duly
authorized, validly issued, fully paid and nonassessable and are not
subject to any preemptive rights.

(e) FelCor Mergesub has no debts or other obligations.

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(f) FelCor Mergesub has the requisite power to enter into this
First Amendment and to consummate the OP Merger. The execution and
delivery of this First Amendment and the consummation of the Merger have
been duly authorized by all necessary action on the part of FelCor
Mergesub. This First Amendment has been duly executed and delivered by
FelCor Mergesub and constitutes a valid and binding obligation of FelCor
Mergesub, enforceable against FelCor Mergesub in accordance with and
subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and
general principles of equity.

(g) FelCor Mergesub has not elected, and will not elect, to be
taxed as a corporation for federal income tax purposes under Treasury
Regulations Section 301.7701-3(c).

12. Any capitalized terms not defined in this First Amendment shall
have the meaning assigned to them in the Merger Agreement.

13. The Merger Agreement, as amended hereby, shall continue in full
force and effect.

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IN WITNESS WHEREOF, the FelCor Parties, the MeriStar Parties and FelCor
Mergesub have caused this First Amendment to be signed by their respective
officers thereunto duly authorized all as of the date first written above.

<Table>

ATTEST: FELCOR LODGING TRUST INCORPORATED, a Maryland
corporation

By: /s/ SCARLETT RAY By: /s/ LAWRENCE D. ROBINSON
- ------------------------------------------------- -------------------------------------------------
Name: Lawrence D. Robinson
Title: Executive Vice President and General Counsel

FELCOR LODGING LIMITED PARTNERSHIP, a Delaware
limited partnership

By: FelCor Lodging Trust Incorporated, its general
partner

ATTEST: MERISTAR HOSPITALITY CORPORATION, a Maryland
corporation

By: /s/ STEPHEN T. LAWRENCE By: /s/ CHRISTOPHER L. BENNETT
- ------------------------------------------------- -------------------------------------------------
Name: Christopher L. Bennett
Title: Vice President, Legal and Secretary
</Table>

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<Table>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership

By: MeriStar Hospitality Corporation , its general
partner

ATTEST: FELCOR MERGESUB, L.L.C.

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SCHEDULE 1.6(a)

DIRECTORS OF SURVIVING CORPORATION

CLASS I (TERMS EXPIRING IN 2004)

- Melinda J. Bush

- Charles A. Ledsinger, Jr.

- Robert H. Lutz, Jr.

- Michael D. Rose

- Paul W. Whetsell

CLASS II (TERMS EXPIRING IN 2002)

- Thomas J. Corcoran, Jr.

- Thomas A. McChristy

- Donald J. McNamara

- Richard C. North

CLASS III (TERMS EXPIRING IN 2003)

- Richard S. Ellwood

- Richard O. Jacobson

- Charles N. Mathewson

- Steven D. Jorns

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FORM OF REIMBURSEMENT AGREEMENT

EXHIBIT A TO FIRST AMENDMENT

REIMBURSEMENT AGREEMENT

THIS REIMBURSEMENT AGREEMENT (this "Agreement") is entered into as of
October , 2001, by and among those limited partners of MeriStar Hospitality
Operating Partnership, L.P., a Delaware limited partnership ("MeriStar OP"), who
execute this agreement as reimbursors (the "Reimbursors"), on the one hand, and
FELCOR LODGING TRUST INCORPORATED, a Maryland corporation ("FelCor" or the
"Reimbursee"), on the other hand.

RECITALS

A. Pursuant to an Agreement and Plan of Merger, dated as of May 9, 2001 (as
amended by the First Amendment to Agreement and Plan of Merger dated as of
August 16, 2001, the "Merger Agreement"), among FelCor and FelCor Lodging
Limited Partnership, a Delaware limited partnership ("FelCor OP"), on the one
hand, and MeriStar Hospitality Corporation, a Maryland corporation ("MeriStar"),
and MeriStar OP, on the other hand, MeriStar is merging with and into FelCor,
and a subsidiary of FelCor OP is merging with and into MeriStar OP (the "OP
Merger"). In the OP Merger, the limited partners of MeriStar OP ("MeriStar OP
Limited Partners"), other than FelCor and its subsidiaries, will exchange their
interests in MeriStar OP ("MeriStar OP Units") for interests in FelCor OP
("FelCor OP Units") and, where applicable, cash (the "Cash Consideration").

B. Promptly following the effectiveness of the OP Merger and the Subsequent
Contributions (as defined in the Merger Agreement), FelCor OP is incurring a
borrowing that is a recourse liability within the meaning of Treasury
Regulations section 1.752-1(a)(1) (the "Recourse Borrowing") and is using the
proceeds thereof to pay the Cash Consideration due to the MeriStar OP Limited
Partners in the OP Merger. Pursuant to the Merger Agreement, FelCor OP is
providing to each MeriStar OP Limited Partner who is entitled to receive Cash
Consideration in the OP Merger the opportunity to agree to reimburse FelCor, as
a co-obligor whose obligation is equivalent to a guaranty, with respect to a
portion of its repayment obligation with respect to the Recourse Borrowing up to
the amount of Cash Consideration to which such MeriStar OP Limited Partner is
entitled as a result of the OP Merger.

C. Pursuant to the Merger Agreement, to the extent that a MeriStar OP
Limited Partner agrees to reimburse FelCor with respect to a portion of its
repayment obligation with respect to the Recourse Borrowing, FelCor OP will
maintain outstanding at least the portion of the Recourse Borrowing (or the same
portion of any replacement or additional recourse indebtedness) that the
Reimbursor has agreed to reimburse (above and beyond any amount of FelCor OP's
indebtedness that previously has been guaranteed or agreed to be reimbursed by
parties other than the Reimbursor) until the earlier of (i) October , 2006 or
(ii) the date on which the Reimbursor has redeemed or otherwise disposed of all
of its FelCor OP Units received in the OP Merger.

D. The aggregate amount of indebtedness that FelCor OP must maintain (the
"Required Indebtedness") is equal to the aggregate amount of the Recourse
Borrowing that the Reimbursors agree to reimburse FelCor. Pursuant to the Merger
Agreement, the Required Indebtedness will be reduced to the extent that the
Reimbursors redeem any of the FelCor OP Units that they receive in the OP Merger
in exchange for FelCor common stock or cash, or otherwise dispose of any of such
FelCor OP Units (the FelCor OP Units that are so redeemed or disposed of are
referred to herein as "Stepped-Up Basis Units"). In such a case, the Required
Indebtedness will be reduced by an amount equal to the original Required
Indebtedness prior to any reduction multiplied by a fraction equal to (i) the
portion of the Cash Consideration received by the Reimbursors that is allocable
to the Stepped-Up Basis Units redeemed or transferred immediately prior to the
reduction of the Required Indebtedness, divided by (ii) the Cash Consideration
received by the Reimbursors.

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E. Pursuant to the Merger Agreement, to the extent that a MeriStar OP
Limited Partner agrees to reimburse FelCor with respect to a portion of its
repayment obligation with respect to the Recourse Borrowing, FelCor OP will not
sell, assign, transfer, distribute, or otherwise dispose of the MeriStar OP
Units formerly owned by such Reimbursor (the "Contributed Assets"), or any
successor asset or assets acquired by FelCor OP in exchange for such MeriStar OP
Units in a non-taxable transaction ("Successor Assets"), in a transaction that
would result in the allocation of taxable income or gain by FelCor OP to the
Reimbursor under section 704(c) of the Internal Revenue Code of 1986, as amended
(the "Code"), until the earlier of (i) October , 2006 or (ii) the date on
which such Reimbursor no longer owns at least 50% of the FelCor OP Units issued
to such Reimbursor in the OP Merger, provided that this restriction will not
prevent FelCor OP from (A) pledging or encumbering any of the Contributed Assets
or Successor Assets, as applicable, (B) assigning, transferring, or otherwise
disposing of the Contributed Assets or Successor Assets, as applicable, to a
subsidiary, or (C) engaging in a merger, consolidation, other reorganization, or
liquidation, as long as such action or transaction does not result in the
allocation of taxable income or gain to a Reimbursor under Code section 704(c).

F. Pursuant to that certain Seventh Amended and Restated Credit Agreement,
dated as of July 26, 2001 (the "Credit Agreement"), by and among FelCor, FelCor
OP, the financial institutions party thereto (the "Lenders"), and The Chase
Manhattan Bank, as administrative agent for the Lenders, the Lenders have
extended the Recourse Borrowing to FelCor OP. The Recourse Borrowing is
evidenced by Promissory Notes dated July 26, 2001, in the aggregate original
principal amount of $615 million (the "Notes"). The Notes are unsecured.

G. FelCor is the sole general partner of FelCor OP and is a co-obligor with
respect to the Recourse Borrowing, which is a recourse obligation of FelCor OP
and the Reimbursee.

H. The Reimbursors have agreed to reimburse the Reimbursee up to a certain
amount in the event (i) the Lenders have exhausted their remedies against FelCor
OP's assets and the assets of any person or entity that enters into a guaranty
with respect to the Recourse Borrowing (collectively, the "Future Guarantors"),
excluding (A) persons who previously have executed bottom dollar guarantees with
respect to the Recourse Borrowing (the "Prior Guarantors" and, together with the
Future Guarantors, the "Other Guarantors") and (B) the Reimbursee and its
subsidiaries, and (ii) the Reimbursee has demanded payment from any other person
or entity that enters into a reimbursement agreement with the Reimbursee
(collectively, the "Future Reimbursors"), excluding (A) the Reimbursors and (B)
persons who previously have executed bottom dollar reimbursement agreements with
respect to the Recourse Borrowing (the "Prior Reimbursors" and, together with
the Future Reimbursors, the "Other Reimbursors"), and the Reimbursee must pay,
directly or indirectly, to the Lenders (or bear the economic risk of loss for)
any portion of the Required Indebtedness. The amount for which each Reimbursor
has agreed to reimburse the Reimbursee is set forth on the signature page for
that Reimbursor. The aggregate amount for which the Reimbursee may be reimbursed
pursuant to this Agreement is referred to herein as the "Reimbursable Amount."

NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Reimbursors and the Reimbursee
hereby agree as follows:

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AGREEMENT

1. Term. This Agreement shall terminate on October , 2006; provided,
however, this Agreement shall terminate (a) as to any Reimbursor twelve months
after the taxable disposition by such Reimbursor of all of such Reimbursor's
FelCor OP Units received in the OP Merger, provided that no demand for payment
has been made by the Reimbursee on such Reimbursor before the expiration of such
twelve-month period and (b) as to a Reimbursor who is an individual, upon the
death of such Reimbursor, provided that no demand for payment has been made by
the Reimbursee on such Reimbursor before such Reimbursor's death.

2. Reimbursement Obligations. The Reimbursors, severally and in proportion
to each Reimbursor's respective share of the Reimbursable Amount (as described
in Section 3 hereof), but not jointly, hereby agree to reimburse the Reimbursee
for the amount that the Reimbursee must pay with respect to the Recourse
Borrowing (or bear the economic risk of loss for); provided, however, that (i)
the amount that each Reimbursor is required to pay pursuant to this Agreement
shall in no event exceed its respective share of the Reimbursable Amount and
(ii) the Reimbursors shall be required to pay the Reimbursable Amount only to
the extent that the Reimbursee does not otherwise recover (or is relieved of
paying as a result of recoveries by the Lenders) an amount at least equal to the
Reimbursable Amount (excluding, for this purpose, recoveries attributable to the
guarantee or reimbursement obligations of Prior Guarantors and Prior
Reimbursors) after (A) the Lenders have exhausted their remedies against FelCor
OP's assets and the assets of any Future Guarantors and (B) the Reimbursee has
demanded payment from any Future Reimbursors. The Reimbursors' obligations set
forth in this Section 2 shall be referred to herein as the "Reimbursement
Obligations."

3. Respective Shares of Reimbursable Amount. Each Reimbursor's respective
share of the Reimbursable Amount is set forth on the signature page hereto for
that Reimbursor.

4. Modification of Reimbursable Amount. (a) The Reimbursable Amount shall
not be reduced by any regularly scheduled amortization payments made under the
documents evidencing or securing the Recourse Borrowing (the "Loan Documents"),
or by any Extraordinary Payments (as defined in this Section 4). For purposes of
this Section 4, the term "Extraordinary Payment" shall mean any payment made to
the Lenders to reduce the principal amount of the Recourse Borrowing other than
regularly scheduled amortization payments, including, without limitation: (i)
any partial prepayment of the Recourse Borrowing; (ii) any award by a
governmental or quasi-governmental entity by reason of a taking of all or any
portion of FelCor OP's property, or any interest therein, in condemnation or by
exercise of the power of eminent domain or by an agreement in lieu thereof, to
the extent applied in reduction of the Recourse Borrowing; and (iii) any
insurance proceeds, or the amount thereof remaining after repair of damage to
FelCor OP's property caused by fire or other casualty, to the extent applied in
reduction of the Recourse Borrowing.

(b) FelCor will not permit any Future Guarantor or Future Reimbursor to
enter into a guaranty agreement or reimbursement agreement with FelCor with
respect to its repayment obligation on the Recourse Borrowing (or any
replacement or additional recourse indebtedness of FelCor OP) after the date of
this agreement unless the amount of the Recourse Borrowing (or any replacement
or additional recourse indebtedness of FelCor OP) is at least equal to the
Reimbursable Amount plus the amount guaranteed or agreed to be reimbursed by all
Other Guarantors and Other Reimbursors.

5. Reimbursement Procedures. Any reimbursement made under this Agreement
shall be made no later than 90 days after a Reimbursor's receipt of a written
request by the Reimbursee stating the amount of the Reimbursement Obligations
and setting forth a detailed calculation of the amount requested that lists the
efforts undertaken to recover the Reimbursable Amount from sources that must be
pursued prior to calling upon the Reimbursement Obligations of the Reimbursees
pursuant to Section 2 hereof and the amounts collected therefrom. If a claim
under this Agreement is not paid in full by a Reimbursor within 90 days after a
written request for payment has first been received by the Reimbursor, the
Reimbursee may at any time thereafter bring an action against the Reimbursor to
recover the Reimbursor's unpaid amount of the claim.
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6. Entire Agreement. This Agreement constitutes the entire agreement of
the parties and supersedes any and all previous agreements among the Reimbursors
and the Reimbursee, whether written or oral, respecting the subject matter
hereof and thereof. This Agreement may not be modified or amended except by an
instrument in writing signed by or on behalf of the parties hereto.

7. Amendments; Governing Law. This Agreement may not be waived, modified,
or amended except by an agreement in writing signed by the Reimbursors and the
Reimbursee. The respective rights and obligations of the Reimbursors and the
Reimbursee shall be governed by and construed in accordance with the laws of the
State of Texas.

8. Section Headings. The section headings in this Agreement are included
for convenience only and are not a part of, nor shall be used in construing,
this Agreement.

9. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Reimbursors and the Reimbursee, their respective
successors and assigns, and the Lenders, who are intended to be third-party
beneficiaries of this Agreement and will have a direct claim against the
Reimbursors with respect to the Reimbursors' obligations pursuant to this
Agreement. Except for the Reimbursors, the Reimbursee, their respective
successors and assigns, and the Lenders, no other person shall be entitled to
the benefits of this Agreement or to rely hereon. Upon the dissolution or
liquidation of a Reimbursor (the "Predecessor Reimbursor"), the successors,
assigns, and/or distributees of the Predecessor Reimbursor shall, without the
necessity of obtaining the consent or approval of the Reimbursee, assume or
otherwise undertake the Reimbursement Obligations of the Predecessor Reimbursor,
and shall enter into and deliver to the Reimbursee an agreement wherein such
successors, assigns, and/or distributees assume the Reimbursement Obligations of
the Predecessor Reimbursor under this Agreement, in order to satisfy all or any
portion of the Reimbursement Obligations of the Predecessor Reimbursor. If one
or more, but not all, of the successors, assigns, and/or distributees elect to
assume or otherwise undertake their respective shares of the Reimbursement
Obligations of the Predecessor Reimbursor, then all those making such election
shall be severally liable for their respective shares of the Predecessor
Reimbursor's respective share of the Reimbursable Amount, as determined pursuant
to Section 4 hereof. Upon the merger of any Reimbursor with another entity, the
surviving entity shall, without the necessity of obtaining the consent or
approval of the Reimbursee, assume or otherwise undertake the Reimbursement
Obligations of the target entity and shall enter into and deliver to the
Reimbursee an agreement wherein such surviving entity assumes the Reimbursement
Obligations of the target entity under this Agreement, in order to satisfy all
or any portion of the Reimbursement Obligations of the target entity.

10. Severability. If this Agreement would be held or determined to be
void, invalid, or unenforceable by reason of the amount of the Reimbursors'
liability under this Agreement, then, notwithstanding any other provision of
this Agreement to the contrary, the maximum amount of the liability of the
Reimbursors under this Agreement shall, without any further action by the
Reimbursors, the Reimbursee, or any other person, be automatically limited and
reduced to an amount that is valid and enforceable.

11. No Subrogation. The Reimbursors hereby waive all rights of subrogation
or contribution that they may have against the Reimbursee and FelCor OP, whether
arising by contract or operation of law by reason of any payment pursuant
hereto.

12. Notices. All notices or other communications hereunder shall be in
writing and shall be sent by: (a) overnight courier service or United States
Express Mail against receipt; or (b) Certified Mail, Return Receipt Requested,
postage prepaid. Notices shall be deemed given two business days after being
sent if sent by overnight courier service or United States Express Mail or five
business days after being sent if sent by Certified Mail. Notices to a party
shall be sent to its or his address set forth opposite its or his signature on
the signature page for such party or to such other address as shall be stated in
a notice similarly given.

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13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

14. Binding Agreement. This Agreement shall be binding between the
Reimbursee and each Reimbursor who executes a signature page to this Agreement.

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IN WITNESS WHEREOF, each party hereto, either directly or through its
officer thereunto duly authorized, has duly executed this Agreement as of the
day and year first above written.

REIMBURSORS:

[name]
[address]
[share of reimbursable amount]

[separate signature page for each Reimbursor]

REIMBURSEE:

FELCOR LODGING TRUST
INCORPORATED,
a Maryland corporation
545 E. John Carpenter Frwy., Suite
1300
Irving, Texas 75062
Attention: Lawrence D. Robinson,
Esq.
Fax No.: (972) 444-4949

By:
----------------------------------
Lawrence D. Robinson,
Executive Vice President

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APPENDIX B

(DEUTSCHE BANC ALEX. BROWN LETTERHEAD)
May 9, 2001

Board of Directors
FelCor Lodging Trust Incorporated
545 East John Carpenter Freeway
Suite 1300
Irving, TX 75062

Lady and Gentlemen:

Deutsche Banc Alex. Brown Inc. ("DBAB") has acted as financial advisor to
FelCor Lodging Trust Incorporated ("Client") in connection with the proposed
acquisition of MeriStar Hospitality Corporation (the "Company") pursuant to the
Agreement and Plan of Merger, dated as of May 9, 2001 (the "Merger Agreement"),
among Client, a Maryland corporation, and FelCor Lodging Limited Partnership, a
Delaware limited partnership ("FelCor OP" and together with Client, the "FelCor
Parties"), on the one hand, and the Company, a Maryland corporation, and
MeriStar Hospitality Operating Partnership L.P., a Delaware limited partnership
("MeriStar OP" and together with Company, the "MeriStar Parties"), on the other
hand, which provides, among other things, for the merger of the Company with and
into Client (the "Merger") and the merger of MeriStar OP with and into FelCor OP
(the "OP merger") and together with the Merger, (the "Transaction"). As set
forth more fully in the Merger Agreement, as a result of the Merger, each share
of the Common Stock, par value $0.01 per share, of the Company ("Company Common
Stock") not owned directly or indirectly by the Company or Client will be
converted into the right to receive (i) cash in the amount of $4.60 and (ii)
0.784 of one fully paid and nonassessable share of common stock par value $0.01
per share, of FelCor (together, the "Merger Consideration"). As a result of the
OP Merger, the partnership interests in MeriStar OP will be converted into
partnership interests in FelCor OP or a combination of partnership interests in
FelCor OP and cash, as provided in the Merger Agreement. The terms and
conditions of the Transaction are more fully set forth in the Merger Agreement.

You have requested DBAB's opinion, as investment bankers, as to the
fairness, from a financial point of view, to Client of the Merger Consideration
payable to the holders of Company common stock.

In connection with DBAB's role as financial advisor to Client, and in
arriving at its opinion, DBAB has reviewed certain publicly available financial
and other information concerning the Company and Client and certain internal
analyses and other information furnished to it by the Company and Client. DBAB
has also held discussions with members of the senior managements of the Company
and Client regarding the businesses and prospects of their respective companies
and the joint prospects of a combined company. In addition, DBAB has (i)
reviewed the reported prices and trading activity for Company Common Stock and
Client Common Stock, (ii) compared certain financial and stock market
information for the Company and Client with similar information for certain
other companies whose securities are publicly traded, (iii) reviewed the
financial terms of certain recent business combinations which it deemed
comparable in whole or in part, (iv) reviewed the terms of the Merger Agreement
and (v) performed such other studies and analyses and considered such other
factors as it deemed appropriate.

DBAB has not assumed responsibility for independent verification of, and
has not independently verified, any information, whether publicly available or
furnished to it, concerning the Company or Client, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, DBAB has assumed and relied upon the accuracy and completeness of all
such information and DBAB has not conducted a physical

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FelCor Lodging Trust Incorporated
May 9, 2001
Page 2

inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
the Company or Client. With respect to the financial forecasts and projections,
including the analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies expected by Client and the
Company to be achieved as a result of the Transaction (collectively, the
"Synergies"), made available to DBAB and used in its analyses, DBAB has assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company or Client, as
the case may be, as to the matters covered thereby. In rendering its opinion,
DBAB expresses no view as to the reasonableness of such forecasts and
projections, including the Synergies, or the assumptions on which they are
based. DBAB's opinion is necessarily based upon economic, market and other
conditions as in effect on, and the information made available to it as of, the
date hereof.

For purposes of rendering its opinion, DBAB has assumed that, in all
respects material to its analysis, the representations and warranties of the
FelCor Parties, and the MeriStar Parties contained in the Merger Agreement are
true and correct, the FelCor Parties and the MeriStar Parties will each perform
all of the covenants and agreements to be performed by them under the Merger
Agreement and all conditions to the obligations of each of the FelCor Parties
and the MeriStar Parties to consummate the Transaction will be satisfied without
any waiver thereof. DBAB has also assumed that all material governmental,
regulatory or other approvals and consents required in connection with the
consummation of the Transaction will be obtained and that in connection with
obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either FelCor or MeriStar is a party or is
subject or by which it is bound, no limitations, restrictions or conditions will
be imposed or amendments, modifications or waivers made that would have a
material adverse effect on FelCor or MeriStar or materially reduce the
contemplated benefits of the Transaction to FelCor.

This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Client and is not a recommendation to the stockholders of Client to
approve the Transaction. This opinion is limited to the fairness, from a
financial point of view, to Client of the Merger Consideration payable to the
holders of Company common stock, and DBAB expresses no opinion as to the merits
of the underlying decision by Client to engage in the Transaction.

DBAB will be paid a fee for its services as financial advisor to Client in
connection with the Transaction, a portion of which is contingent upon
consummation of the Transaction. We are an affiliate of Deutsche Bank AG
(together with its affiliates, the "DB Group"). One or more members of the DB
Group have, from time to time, provided investment banking, commercial banking
(including extension of credit) and other financial services to Client and the
Company or their affiliates. One or more members of the DB Group have agreed to
provide financing to Client in connection with the Merger. In the ordinary
course of business, members of the DB Group may actively trade in the securities
and other instruments and obligations of Client and the Company for their own
accounts and for the accounts of their customers. Accordingly, the DB Group may
at any time hold a long or short position in such securities, instruments and
obligations.

Based upon and subject to the foregoing, it is DBAB's opinion as investment
bankers that the Merger Consideration payable to the holders of Company Common
Stock is fair, from a financial point of view, to Client.

Very truly yours,

DEUTSCHE BANC ALEX. BROWN INC.

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APPENDIX C

[JPMORGAN LOGO]

May 9, 2001

The Board of Directors
FelCor Lodging Trust Incorporated
545 E. John Carpenter Freeway
Suite 1300
Irving, TX 75062-3933

Members of the Board of Directors:

You have requested our opinion as to the fairness, from a financial point
of view, to FelCor Lodging Trust Inc. (the "Company") of the consideration to be
paid by the Company in the proposed merger (the "Merger") of the Company with
MeriStar Hospitality Corporation (the "Merger Partner"). Pursuant to the
Agreement and Plan of Merger, dated as of May 9, 2001 (the "Agreement"), between
the Company and the Merger Partner, the Merger Partner will merge with and into
the Company, with the Company being the surviving corporation, and each
outstanding share of common stock, par value $0.01 per share, of the Merger
Partner (the "Merger Partner Common Stock"), other than shares of Merger Partner
Common Stock held in treasury or owned by the Company and its affiliates, will
be converted into the right to receive $4.60 per share in cash and 0.784 shares
of the Company's common stock, par value $0.01 per share (the "Company Common
Stock"). We understand that concurrent with the Merger, the Company and the
Merger Partner will effect a merger of MeriStar Hospitality Operating
Partnership (the "MeriStar OP") with and into FelCor Lodging Limited Partnership
(the "FelCor OP"), with the FelCor OP being the survivor, and each outstanding
partnership interest in MeriStar OP will be converted into the right to receive
$4.60 in cash and 0.784 partnership interests in FelCor OP. Class D units of the
MeriStar OP, however, will be convertible one-for-one into units of FelCor OP.

In arriving at our opinion, we have (i) reviewed a draft of the Agreement
dated May 9, 2001; (ii) reviewed certain publicly available business and
financial information concerning the Merger Partner and the Company and the
industries in which they operate; (iii) compared the proposed financial terms of
the Merger with the publicly available financial terms of certain transactions
involving companies we deemed relevant and the consideration received for such
companies; (iv) compared the financial and operating performance of the Merger
Partner and the Company with publicly available information concerning certain
other companies we deemed relevant and reviewed the current and historical
market prices of the Merger Partner Common Stock and the Company Common Stock
and certain publicly traded securities of such other companies; (v) reviewed
certain internal financial analyses and forecasts prepared by the managements of
the Merger Partner and the Company relating to their respective businesses, as
well as the estimated amount and timing of the cost savings and related expenses
and synergies expected to result from the Merger (the "Synergies"); and (vi)
performed such other financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this opinion.

In addition, we have held discussions with certain members of the
management of the Company with respect to certain aspects of the Merger, and the
past and current business operations of the Merger Partner and the Company, the
financial condition and future prospects and operations of the Merger Partner
and the Company, the effects of the Merger on the financial condition and future
prospects of the Company, and certain other matters we believed necessary or
appropriate to our inquiry.

In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Merger Partner and the Company or
otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or

C-1
432

liabilities, nor have any such valuations or appraisals been provided to us. In
relying on financial analyses and forecasts provided to us, including the
Synergies, we have assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of the Merger Partner and the Company to which such analyses or
forecasts relate. We have also assumed that the Merger will have the tax
consequences described in discussions with, and materials furnished to us by,
representatives of the Company, and that the other transactions contemplated by
the Agreement will be consummated as described in the Agreement. We have relied
as to all legal matters relevant to rendering our opinion upon the advice of
counsel. We have also assumed that the definitive Agreement will not differ in
any material respects from the draft thereof furnished to us. We have further
assumed that all material governmental, regulatory or other consents and
approvals necessary for the consummation of the Merger will be obtained without
any adverse effect on the Merger Partner or the Company or on the contemplated
benefits of the Merger.

Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. Our opinion is limited to the fairness, from a financial point of
view, to the Company of the consideration to be paid in the proposed Merger and
we express no opinion as to the underlying decision by the Company to engage in
the Merger. We are expressing no opinion herein as to the price at which the
Company Common Stock will trade at any future time.

We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. Please
be advised that we are administrative agent for the Company's revolving credit
facility, and have in the past acted as the Company's lead agent for various
corporate debt facilities, corporate bonds, and asset-level debt securities
(i.e. CMBS). In the ordinary course of our businesses, we and our affiliates may
actively trade the debt and equity securities of the Company or the Merger
Partner for our own account or for the accounts of customers and, accordingly,
we may at any time hold long or short positions in such securities.

On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid by the Company in the proposed
Merger is fair, from a financial point of view, to the Company.

This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any shareholder of the Company
as to how such shareholder should vote with respect to the Merger or any other
matter. This opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever except with our
prior written approval. This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written
approval.

Very truly yours,

J.P. MORGAN SECURITIES, INC.

/s/ J.P. MORGAN SECURITIES, INC.

J.P. Morgan Securities, Inc.

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APPENDIX D

(LETTERHEAD OF SALOMON SMITH BARNEY INC.)

May 9, 2001

The Board of Directors
MeriStar Hospitality Corporation
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007

Members of the Board:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of MeriStar Hospitality Corporation
("MeriStar") of the Merger Consideration (defined below) provided for in the
Agreement and Plan of Merger, dated as of May 9, 2001 (the "Merger Agreement"),
by and among FelCor Lodging Trust Incorporated ("FelCor"), FelCor Lodging
Limited Partnership ("FelCor OP"), MeriStar and MeriStar Hospitality Operating
Partnership, L.P. ("MeriStar OP"). As more fully described in the Merger
Agreement, (i) MeriStar will be merged with and into FelCor (the "Merger") and
(ii) each outstanding share of the common stock, par value $0.01 per share, of
MeriStar ("MeriStar Common Stock") will be converted into the right to receive
(x) $4.60 in cash without interest (the "Cash Consideration") and (y) 0.784 of a
share of the common stock, par value $0.01 per share, of FelCor ("FelCor Common
Stock" and, the number of shares of FelCor Common Stock into which shares of
MeriStar Common Stock will be so converted, together with the Cash
Consideration, the "Merger Consideration"). The Merger Agreement also provides
that, concurrently with the Merger, MeriStar OP will merge with and into FelCor
OP (the "OP Merger" and, together with the Merger, the "Transaction").

In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of MeriStar and certain senior officers and other representatives
and advisors of FelCor concerning the businesses, operations and prospects of
MeriStar and FelCor. We examined certain publicly available business and
financial information relating to MeriStar and FelCor as well as certain
financial forecasts and other information and data for MeriStar and FelCor which
were provided to or otherwise discussed with us by the managements of MeriStar
and FelCor, including certain information relating to the potential strategic
implications and operational benefits anticipated by the managements of MeriStar
and FelCor to result from the Transaction. We reviewed the financial terms of
the Transaction as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of MeriStar
Common Stock and FelCor Common Stock; the historical and projected operating
data of MeriStar and FelCor; and the financial condition and capitalization of
MeriStar and FelCor. We analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations we considered relevant in evaluating those of MeriStar and
FelCor. In addition to the foregoing, we conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we deemed appropriate in arriving at our opinion.

In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of MeriStar and FelCor that
434

(LETTERHEAD OF SALOMON SMITH BARNEY INC.)

The Board of Directors
MeriStar Hospitality Corporation
May 9, 2001
Page 2

such forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of MeriStar and FelCor as to the future financial performance of
MeriStar and FelCor and the potential strategic implications and operational
benefits anticipated to result from the Transaction. We have assumed, with your
consent, that the Transaction will be consummated in accordance with its terms,
without waiver, modification or amendment of any material term, condition or
agreement. We also have assumed, with your consent, that the Merger will be
treated as a reorganization for federal income tax purposes. We further have
assumed, with your consent, that MeriStar and FelCor were organized and have
operated in conformity with the requirements for qualification as a real estate
investment trust ("REIT") for federal income tax purposes and that the
Transaction will not adversely affect the REIT status or operations of MeriStar
or FelCor. We are not expressing any opinion as to what the value of the FelCor
Common Stock actually will be when issued in the Transaction or the prices at
which the FelCor Common Stock will trade or otherwise be transferable at any
time. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of MeriStar or
FelCor nor have we made any physical inspection of the properties or assets of
MeriStar or FelCor. In connection with our engagement, we were not requested to,
and we did not, solicit third party indications of interest in the possible
acquisition of all or a part of MeriStar. We express no view as to, and our
opinion does not address, the relative merits of the Transaction as compared to
any alternative business strategies that might exist for MeriStar or the effect
of any other transaction in which MeriStar might engage. Our opinion is
necessarily based upon information available to us, and financial, stock market
and other conditions and circumstances existing and disclosed to us, as of the
date hereof.

Salomon Smith Barney Inc. has acted as financial advisor to MeriStar in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon delivery of this opinion. We
and our affiliates in the past have provided, and are currently providing,
services to MeriStar and its affiliates unrelated to the proposed Transaction,
for which services we and our affiliates have received and will receive
compensation. We and our affiliates also in the past have provided services to
FelCor unrelated to the proposed Transaction, for which services we and our
affiliates have received compensation. In the ordinary course of our business,
we and our affiliates may actively trade or hold the securities of MeriStar and
FelCor for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. In addition,
we and our affiliates (including Citigroup Inc. and its affiliates) may maintain
relationships with MeriStar, FelCor and their respective affiliates.

Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of MeriStar in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Transaction or as to any other matters relating to the
Transaction.
435

(LETTERHEAD OF SALOMON SMITH BARNEY INC.)

The Board of Directors
MeriStar Hospitality Corporation
May 9, 2001
Page 3

Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the holders of MeriStar Common Stock.

Very truly yours,

/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.