Under the terms of the agreement, which was approved unanimously by the Boards of Directors of both companies, each share of RFS will be exchanged for 1.5 shares of Equity Inns. At closing, RFS board members Robert M. Solmson and Bruce E. Campbell, Jr. will join the Equity Inns Board of Directors, increasing its size to six persons. In addition, Mr. Solmson will become a member of a newly created executive committee of the Equity Inns board consisting of Messrs. Phillip H. McNeill, Sr., Robert M. Solmson and William W. Deupree, Jr. Mr. McNeill will continue as chairman and CEO of the combined company. The transaction is expected to close in thethird quarter, and is subject to the approval of both companies' shareholders and other customary conditions.

Based upon yesterday's closing stock price of Equity Inns, the transaction is valued at approximately $990 million, including the assumption of approximately $330 million in debt including the anticipated costs of terminating certain of the operating leases on RFS' hotels. Upon completion of the transaction and certain announced acquisitions, Equity Inns will have a total market capitalization in excess of $1.8 billion and will own 156 hotels with over 20,000 rooms and suites.

The acquisition is expected to be immediately accretive to Equity Inns' funds from operations (FFO) for 1998 and 1999, taking into account annual cost savings of approximately $3.5 million, fees relating to termination of the current RFS leases and new leases with an independent hotel lessee/manager. The acquisition will add 61 hotels plus six hotel development opportunities to Equity Inns' current portfolio of 95 hotels. In 1997, approximately 66% of RFS' hotel revenues were derived from full service and upscale extended stay properties.

In addition, approximately 27% of RFS' revenue was generated from hotels located in the state of California. Equity Inns' Chairman and CEO Phillip H. McNeill, Sr. said, "We believe this is an exceptional opportunity to acquire a high-quality portfolio of hotel properties and to expand our presence in the upscale extended stay and full service segments and in certain states, like California. This transaction provides compelling financial and strategic benefits to our shareholders and will more than double ENN's market capitalization and increase the number of rooms owned by 82%. RFS' hotels are successful and are located in some of the most attractive markets in the United States. Silicon Valley, for example, where RFS invested over $100 million for four hotels last year, has been cited as perhaps the best hotel market in the country.

This transaction complements our already strong mix of extended stay, all suite and premier limited-service hotels, enhances the quality and diversity of our assets and improves the internal growth prospects of our Company. Our focus on growing our portfolio on both coasts and the Midwest part of the United States is greatly accelerated with this merger. RFS also provides us with six excellent development opportunities."

Equity Inns' headquarters will remain in Memphis, and Mr. McNeill noted that he expects several RFS personnel to be offered positions with Equity Inns.

Upon closing of the acquisition, providing Equity Inns' average stock price is between $14 and $17 per share during an agreed upon 20 day measurement period, RFS shareholders will receive 1.5 Equity Inns shares for each RFS share. If Equity Inns' average stock price during the measurement period exceeds $17 per share, the exchange ratio will be adjusted to provide RFS shareholders with $25.50 worth of Equity Inns' stock for each share of RFS. The Board of Directors of Equity Inns was advised by Bear Stearns Co. Inc., and Morgan Keegan Company, Inc. The Board of Directors of RFS was advised by Salomon Smith Barney.

Strategic and Financial Benefits:
 
 
 

RFS Chairman Robert M. Solmson said of the merger with Equity Inns, "We expect that this transaction will add significant value to our shareholders' investment. We have been examining for a number of months the best direction in which to take the company, and we are confident that this merger, with a company and a management team we know well and respect, is a decision that benefits our shareholders and offers important synergies for the future."

Memphis-based Equity Inns, Inc. is a self-advised REIT that focuses on the upscale extended stay, all suite and premium limited-service segments of the hotel industry. With the settlement of previously announced acquisitions, the Company will own 95 hotels with a total of 11,676 rooms located in 32 states. RFS is a Memphis - based REIT that owns a diversified portfolio of 61 full service, extended stay and premium limited-service hotels comprising approximately 8,800 rooms in 24 states.
 
 
 
 

(a) Includes announced acquisitions.  Excludes hotels under development.
(b) Combined based on 1.5 fixed exchange ratio and Equity Inns current stock price of $15.38 per share.
(c) Combined debt includes anticipated costs of terminating certain of the operating leases on RFS' hotels and estimated transaction expenses.