<PAGE>   1


================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------


                                  FORM 10-K/A
                               (AMENDMENT NO. 2)



                      Annual Report Pursuant to Section 13
                     of the Securities Exchange Act of 1934
                      For the Year Ended December 31, 1997

                              BRISTOL HOTEL COMPANY
                                14295 Midway Road
                               Dallas, Texas 75244
                                  972-391-3910

                           Commission File No. 1-14062


Incorporated in Delaware                                      IRS No. 75-2584227

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


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

                                                       NAME OF EACH EXCHANGE
       TITLE OF EACH CLASS                              ON WHICH REGISTERED
       -------------------                             ---------------------
Common Stock, Par Value $.01 per share                New York Stock Exchange

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

     The Company (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
required and will not be contained in a definitive proxy statement incorporated
by reference in Part III of this Form 10-K.

     The aggregate market value of the voting stock held by non-affiliates of
the Company at March 6, 1998 was $309,762,521. Such computation excludes
12,267,783 shares held by the Company's two largest shareholders, directors and
executive officers. At March 6, 1998, there were 43,800,401 shares of Common
Stock outstanding.

     Document Incorporated by Reference:  None.



================================================================================



<PAGE>   2




This document replaces in its entirety Bristol Hotel Company Form 10-K for the
year ended December 31, 1997 and Form 10-K/A (Amendment No. 1) filed April 29,
1998.

                                     PART I.


FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of Bristol Hotel Company (the
"Company" or "Bristol") to be different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
statements include, among others, statements regarding the intent, belief or
expectations of the Company and its directors and officers with respect to (i)
the ownership, management, and operation of hotels, including the integration of
hotels acquired by the Company, (ii) potential acquisitions or dispositions of
hotel properties, (iii) the policies of the Company regarding investments,
acquisitions, dispositions, financings and other matters, (iv) the lodging
industry and real estate markets in general, (v) the availability of debt and
equity financing, (vi) general economic conditions, and (vii) trends affecting
the Company's financial condition and results of operations. Although the
Company believes the intent, belief or expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.


ITEMS 1 & 2.  BUSINESS AND PROPERTIES


GENERAL

The Company is one of the largest owner/operators of hotels in North America,
currently operating 101 hotels containing approximately 28,800 rooms, including
86 owned hotels. The Company's properties are predominantly full-service hotels
that operate in the upscale and mid-priced with food and beverage segments of
the lodging industry under franchise agreements primarily with Holiday
Hospitality Corporation (formerly Holiday Inn Worldwide). The Company is the
largest Holiday Inn franchisee in the world and also operates hotels under
franchise agreements with other national hotel chains, including Marriott
International, Inc. and Hampton Inn (a division of Promus Hotels, Inc.). The
Company's hotels are located in 22 states, the District of Columbia and Canada,
with hotels clustered in major metropolitan areas with concentrations in the
South, East, Southwest and Pacific regions of the United States.

On March 24, 1998, the Company announced a proposed merger with FelCor Suite
Hotels, Inc. (See Mergers.)

The Company was formed pursuant to the combination (the "Combination") of Harvey
Hotel Company, Ltd. and its affiliated businesses ("Harvey Hotel Companies" or
"Predecessor") and United Inns, Inc. ("United Inns"), which was completed on
January 31, 1995. The Company was incorporated in Delaware in November 1994 and
completed its initial public offering (the "IPO") of 4,887,500 shares of its
common stock ("Common Stock") in December 1995. Concurrent with the IPO, the
Company obtained a $120 million credit facility (the "1995 Senior Credit
Facility") and $70 million aggregate principal amount of Senior Notes Due 2000
(the "Senior Notes"). The Company used proceeds from the IPO, the 1995 Senior
Credit Facility and the Senior Notes to refinance certain of the Company's
then-existing indebtedness and for general corporate purposes.

                                        2

<PAGE>   3





The completion of the Combination resulted in the Company owning 34 hotels,
eight from Harvey Hotel Companies and 26 from United Inns (the "United Hotels").
In 1995, the Company purchased two additional hotels and by the end of 1996 the
Company had acquired one additional hotel and had substantially completed a
comprehensive redevelopment program that included extensive exterior and
interior reconstruction and renovations to 20 of the United Hotels, as well as
the strategic repositioning of the redeveloped hotels within their local
markets. Collectively, the 37 hotels owned by the Company at January 1, 1996,
which excludes the Holiday Inn Plano, are referred to as the "Original Bristol
Portfolio." In 1997, the Company added 63 hotels to its owned/operated portfolio
when it completed the acquisition of 60 hotels from Holiday Corporation (the
"Holiday Inn Acquisition") and three additional hotels comprising the 1997
Single Asset Purchases, as defined below. (See Acquisitions.)

The Company also completed several debt and equity transactions during 1997,
including the repayment of the 1995 Senior Credit Facility with proceeds
received from the $560 million credit facility entered into in connection with
the Holiday Inn Acquisition (the "New Credit Facility"). The New Credit Facility
was subsequently repaid, first with $108 million in net proceeds received in May
1997 when the Company completed the issuance of 3,162,500 (pre-Stock Split)
shares of its Common Stock (the "Offering") and then the remaining $452 million
was repaid with proceeds from the $600 million credit facility obtained by the
Company in October 1997 (the "Refinancing"). In December 1997, the Company
repaid $40 million of its $70 million Senior Notes. In July 1997, the Company
effected a three-for-two stock split in the form of a stock dividend (the "Stock
Split"). All per share data and the average common and common equivalent shares
outstanding have been adjusted to reflect the Stock Split for all periods
presented.

The Company's principal executive offices are located at 14295 Midway Road,
Dallas, Texas 75244, and its telephone number is (972) 391-3910.


ACQUISITIONS

On April 28, 1997, the Company acquired 45 full-service Holiday Inns and the
management of an additional 15 Holiday Inn properties, of which three are owned
by joint ventures in which the Company acquired a 50% interest (the owned,
managed and joint venture properties, collectively referred to as the "Holiday
Inn Assets") through the merger of Holiday Inns, Inc. with and into the Company.
As consideration for the Holiday Inn Acquisition, the Company paid $398 million
in cash and issued 9,381,308 shares (pre-Stock Split) of its Common Stock. The
acquisition has been accounted for as a purchase and the results of operations
of the Holiday Inn Assets have been included in the consolidated financial
statements since April 28, 1997. The purchase price was allocated to the assets
acquired based upon their estimated fair market values. The excess of the
purchase price over the estimated fair market value of the net assets acquired
was recorded as goodwill.

During 1997, in addition to the Holiday Inn Assets, the Company acquired three
hotels through single asset purchases. In January 1997, the Company acquired the
378 room Allerton Hotel in Chicago, Illinois for $35.0 million; in October 1997,
the Company acquired the 318 room Holiday Inn - Westport in St. Louis, Missouri
for $18.0 million; and in December 1997, the Company acquired the 364 room
Holiday Inn - Independence Mall in Philadelphia, Pennsylvania for $25.5 million.
Collectively, these hotels are referred to as the "1997 Single Asset Purchases."

In December 1997, the Company acquired the remaining 50% partnership interest in
the joint venture which owns the 305 room Holiday Inn - San Jose North ("HI -
San Jose") in San Jose, California, resulting in full ownership of the hotel.
The Company had acquired its original 50% partnership interest in connection
with the Holiday Inn Acquisition.

On February 2, 1998, the Company announced a definitive agreement to acquire 20
Midwestern hotels with a total of 3,456 rooms (the "Omaha Acquisition"). Under
the transaction, the Company will acquire by merger Omaha Hotel, Inc. and will
purchase an individual hotel. The total consideration for the Omaha Acquisition


                                        3

<PAGE>   4



is as follows: $19.1 million in cash, $40.9 million in assumed debt and 1.43
million shares of newly issued Common Stock. Consummation of the Omaha
Acquisition is subject to certain conditions, and there can be no assurance that
the Omaha Acquisition will be consummated if any such conditions are not
satisfied.

The hotels in the Omaha Acquisition consist of nine full-service Holiday Inns,
five Holiday Inn Express hotels, five Hampton Inns and one Homewood Suites, with
locations in Omaha, Nebraska; Moline, Illinois; Davenport, Iowa; central Kansas
and Midland/Odessa, Texas. Seven of the nine full-service hotels have undergone
major property improvement plans over the past 24 months. Of the five Holiday
Inn Express hotels, one is a new construction project set to open for business
in mid-1998 and two others are newly built hotels that opened in the past two
years.


MERGER

On March 24, 1998, the Company announced a proposed merger with FelCor Suite
Hotels, Inc.("FelCor"), which was unanimously approved by the boards of both
companies subject to final documentation. FelCor will acquire the Company's real
estate holdings and associated debt in return for 31.7 million shares of newly
issued FelCor stock. Prior to the merger, the Company will spin off, as a
taxable dividend, all of its non-real estate holdings into a newly formed public
company to be known as Bristol Hotels & Resorts, Inc. ("New Bristol"). New
Bristol will become one of FelCor's two major tenants, with long-term leases on
all of the Bristol hotels included in the merger. New Bristol will continue to
be Holiday Hospitality's largest franchisee. The existing Hotel Properties
Agreement will be terminated and New Bristol will commit to add 8,700 Holiday
branded rooms over the next five years. New Bristol will aggressively pursue
lease and management of larger, full-service hotels which can be redeveloped and
repositioned.

Bass PLC, which owned 32% of the Company's common stock at December 31, 1997,
will reduce its ownership in New Bristol to 9.9% in order to ensure compliance
with REIT requirements.

The proposed merger is subject to shareholder approval and other customary
conditions. FelCor and New Bristol will be completely independent public
companies with no overlap in management or boards of directors. Both companies
will maintain their existing headquarter facilities in Dallas and no layoffs are
expected at either company. FelCor will continue to operate as a REIT. New
Bristol will operate as a C-corporation and will apply for listing on the New
York Stock Exchange.

Subsequent to closing, FelCor will fund the Redevelopment and Rebranding Program
as defined below. This merger is expected to close by the end of July 1998.


REDEVELOPMENT AND REBRANDING PROGRAM

In November 1997, the Company initiated a comprehensive redevelopment and
rebranding program (the "Redevelopment and Rebranding Program") which entails
exterior and interior reconstruction of and renovations to a substantial number
of the Holiday Inn Assets (the "HI Renovations") and the three hotels comprising
the 1997 Single Asset Purchases as well as the rebranding of certain hotels
operated under the Company's own brand names. The Redevelopment and Rebranding
Program is expected to be substantially complete by the end of 1999.

The HI Renovations include 41 of the Holiday Inn Assets. In addition to the
renovations, the Company expects to rebrand 17 of the 41 hotels primarily to the
Crowne Plaza or Crowne Plaza Suites brand. The renovation and rebranding of the
1997 Single Asset Purchases is expected to be completed in 1999 and include the
rebranding of the Allerton Hotel and the Holiday Inn - Westport to the Crowne
Plaza brand. The Company believes the conversions to the Crowne Plaza brands
will enable the hotels to more effectively compete in the markets in which they
operate.

                                        4

<PAGE>   5





The Redevelopment and Rebranding Program also includes the renovation and
rebranding of seven hotels in the Original Bristol Portfolio that are or have
been operated as a Harvey Hotel brand, a Bristol Suites brand or a Harvey Suites
brand. Six of these hotels have been or will be converted to the Crowne Plaza or
Crowne Plaza Suites brand, and one hotel is being converted to a Holiday Inn and
Suites. The conversion of these seven Original Bristol Hotels is in accordance
with franchise agreements entered into in connection with the Holiday Inn
Acquisition as more fully discussed below. (See Franchise Agreements and
Trademarks.)


EMPLOYEES

As of December 1997, the Company employed approximately 13,000 persons,
including 370 employees at the Company's corporate headquarters. An estimated
86% of those employed were compensated on an hourly basis.

Approximately 1,400 employees at 13 of the Company's hotels are represented by a
labor union. Management believes that its ongoing labor relations are good.


PROPERTIES

The following table sets forth certain information with respect to each of the
Company's hotels as of December 31, 1997:

<TABLE>
<CAPTION>
                                                                                                          NO. OF
                           HOTEL                                             LOCATION                      ROOMS
<S>                                                                                                         <C>
     OWNED:
     Holiday Inn - Montgomery.....................................     Montgomery, AL...................    213
     Holiday Inn - Texarkana I-30 (1).............................     Texarkana, AR....................    210
     Days Inn - Flagstaff.........................................     Flagstaff, AZ....................    157
     Fairfield Inn - Downtown Scottsdale (1)......................     Scottsdale, AZ...................    218
     Holiday Inn - Santa Barbara..................................     Santa Barbara, CA................    160
     Holiday Inn Select - Irvine/Orange County Airport (3)........     Irvine, CA.......................    334
     Holiday Inn Select - Pleasanton (2)..........................     Pleasanton, CA...................    244
     Holiday Inn - San Diego on the Bay (1) (3) ..................     San Diego, CA....................    600
     Holiday Inn - San Jose North.................................     San Jose, CA.....................    305
     Holiday Inn - San Francisco Financial District (1) (3) ......     San Francisco, CA................    565
     Holiday Inn - San Francisco Fisherman's Wharf (1)............     San Francisco, CA................    584
     Holiday Inn Select - San Francisco Union Square (2)..........     San Francisco, CA................    400
     Holiday Inn Express - Colorado Springs Central...............     Colorado Springs, CO.............    207
     Ramada Inn - Colorado Springs North..........................     Colorado Springs, CO.............    220
     Holiday Inn - Hartford Downtown (2)..........................     Hartford, CT.....................    342
     Holiday Inn Select - Stamford (1)............................     Stamford, CT.....................    383
     Holiday Inn - Cocoa Beach Oceanfront Resort..................     Cocoa Beach, FL..................    500
     Holiday Inn - Nikki Bird (1).................................     Kissimmee, FL....................    529
     Holiday Inn Select - Miami International Airport (1) (2).....     Miami, FL........................    304
     Holiday Inn Select - Orlando International Airport...........     Orlando, FL......................    288
     Holiday Inn - Orlando International Drive Resort.............     Orlando, FL......................    652
     Holiday Inn - Orlando North/Winter Park......................     Orlando, FL......................    200
     Holiday Inn - Near Busch Gardens(R)Tampa.....................     Tampa, FL........................    395
     Courtyard by Marriott - Downtown Atlanta.....................     Atlanta, GA......................    211
     Fairfield Inn - Downtown Atlanta.............................     Atlanta, GA......................    242
     Holiday Inn - Atlanta Airport North..........................     Atlanta, GA......................    493
     Harvey Hotel - Atlanta Powers Ferry (2)......................     Atlanta, GA......................    296
     Crowne Plaza - Atlanta Airport...............................     Atlanta, GA......................    378
     Holiday Inn Select - Atlanta Perimeter Dunwoody..............     Atlanta, GA......................    250
</TABLE>









                                                         5

<PAGE>   6



<TABLE>

<S>                                                                                                         <C>
     Holiday Inn Express - Atlanta I-20 East......................     Atlanta, GA......................    167
     Holiday Inn Express - Atlanta Northeast......................     Atlanta, GA......................    199
     Holiday Inn - Atlanta South/Jonesboro........................     Atlanta, GA......................    180
     Holiday Inn - Columbus Airport North (1).....................     Columbus, GA.....................    223
     Hampton Inn - Marietta.......................................     Marietta, GA.....................    140
     Allerton Hotel - Chicago (3).................................     Chicago, IL......................    378
     Holiday Inn - New Orleans French Quarter (1).................     New Orleans, LA..................    276
     Holiday Inn Select - Boston Government Center (1)(3).........     Boston, MA.......................    303
     Holiday Inn - Kansas City Northeast..........................     Kansas City, MO..................    167
     Holiday Inn - Westport.......................................     St. Louis, MO....................    318
     Holiday Inn - Jackson Southwest..............................     Jackson, MS......................    289
     Crowne Plaza - Downtown Jackson..............................     Jackson, MS......................    354
     Hampton Inn - Jackson North..................................     Jackson, MS......................    119
     Harvey Hotel & Suites - Jackson North........................     Jackson, MS......................    224
     Whispering Woods Hotel and Conference Center.................     Olive Branch, MS.................    181
     Holiday Inn - Albuquerque Mountainview.......................     Albuquerque, NM..................    360
     Holiday Inn Select - Philadelphia Center City (2)............     Philadelphia, PA.................    445
     Holiday Inn - Independence Mall..............................     Philadelphia, PA.................    364
     The Mills House Hotel - Charleston Holiday Inn...............     Charleston, SC...................    214
     Holiday Inn - Columbia Airport...............................     Columbia, SC.....................    148
     Holiday Inn Select - Greenville (Roper) (2)..................     Greenville, SC...................    208
     Holiday Inn - Spartanburg West...............................     Spartanburg, SC..................    224
     Holiday Inn - Chattanooga Southeast I-75.....................     Chattanooga, TN..................    230
     Holiday Inn - Knoxville West (1).............................     Knoxville, TN....................    242
     Holiday Inn Select - Nashville Opryland/Airport (1) (3)......     Nashville, TN....................    384
     Holiday Inn - Amarillo I-40 (1)..............................     Amarillo, TX.....................    247
     Holiday Inn - Austin Town Lake...............................     Austin, TX.......................    320
     Holiday Inn - Beaumont Midtown I-10..........................     Beaumont, TX.....................    190
     Fairfield Inn - Dallas Regal Row.............................     Dallas, TX.......................    204
     Harvey Hotel - Dallas (1)....................................     Dallas, TX.......................    313
     Harvey Hotel - Addison (2)...................................     Dallas, TX.......................    429
     Bristol Suites - Dallas (1) (2)..............................     Dallas, TX.......................    295
     Hampton - Downtown Dallas/West End...........................     Dallas, TX.......................    311
     Harvey Hotel - Dallas Brookhollow (2)........................     Dallas, TX.......................    354
     Courtyard by Marriott - Houston Near The Galleria............     Houston, TX......................    209
     Fairfield Inn - Houston Near The Galleria....................     Houston, TX......................    107
     Holiday Inn Select - Houston Near Greenway Plaza.............     Houston, TX......................    355
     Holiday Inn - Medical Center (2).............................     Houston, TX......................    297
     Fairfield Inn - Houston I-10 East............................     Houston, TX......................    160
     Holiday Inn - Houston Intercontinental Airport...............     Houston, TX......................    413
     Hampton Inn - Houston I-10 East..............................     Houston, TX......................     90
     Holiday Inn Select - Houston I-10 West (3)...................     Houston, TX......................    349
     Harvey Suites - Houston Medical Center (1)(4) ...............     Houston, TX......................    285
     Harvey Suites - DFW Airport..................................     Irving, TX  .....................    164
     Harvey Hotel - DFW Airport (1)...............................     Irving, TX.......................    506
     Harvey Hotel - Plano.........................................     Plano, TX........................    279
     Holiday Inn - Plano..........................................     Plano, TX........................    161
     Holiday Inn - San Antonio Downtown (1).......................     San Antonio, TX..................    314
     Holiday Inn Select - San Antonio International Airport.......     San Antonio, TX..................    397
     Holiday Inn - Waco I-35......................................     Waco, TX.........................    171
     Holiday Inn - Salt Lake City Airport.........................     Salt Lake City, UT...............    190
     Holiday Inn - Cambridge......................................     Cambridge, Ontario...............    139
     Holiday Inn Select - Toronto Airport.........................     Toronto, Ontario ................    444
     Holiday Inn - Kitchener Waterloo.............................     Kitchener, Ontario...............    182
     Holiday Inn - Peterborough - Waterfront......................     Peterborough, Ontario............    154
     Holiday Inn - Sarnia.........................................     Sarnia, Ontario..................    151
</TABLE>

                                        6

<PAGE>   7



<TABLE>

<S>                                                                                                         <C>
     Holiday Inn - Toronto Yorkdale...............................     Toronto, Ontario.................    370

     MANAGED:
     Holiday Inn - Hollywood......................................     Hollywood, CA....................    470
     Holiday Inn - City Center....................................     Los Angeles, CA..................    195
     Holiday Inn - Woodland Hills.................................     Woodland Hills, CA...............    124
     Holiday Inn - San Francisco Civic Center.....................     San Francisco, CA................    393
     Holiday Inn - Torrance.......................................     Torrance, CA.....................    329
     Holiday Inn - South Bend University Area.....................     South Bend, IN...................    229
     Holiday Inn - Lexington North................................     Lexington, KY....................    303
     Holiday Inn - Cincinnati North...............................     Cincinnati, OH...................    407
     Holiday Inn Select - Pittsburgh University Center............     Pittsburgh, PA...................    251
     Holiday Inn - Memphis East...................................     Memphis, TN......................    243
     Holiday Inn - Nashville Vanderbilt...........................     Nashville, TN....................    300
     Bristol House................................................     Dallas, TX.......................    127
     Holiday Inn - San Antonio Riverwalk..........................     San Antonio, TX..................    313

     JOINT VENTURES:

     Holiday Inn - Washington D.C. Downtown.......................     Washington, DC...................    208
     Chateau LeMoyne - New Orleans Holiday Inn....................     New Orleans, LA..................    171
</TABLE>

      NOTES:

        (1)  The Company leases the land for these hotels.

        (2)  These hotels will be converted to Crowne Plaza hotels during 1998.

        (3)  These hotels will be converted to Crowne Plaza hotels during 1999.

        (4)  This hotel will be converted to a Holiday Inn and Suites during
             1998.

The following table sets forth certain operating and redevelopment and
rebranding information for the Company's properties (dollars in thousand, except
rate and revenue per available room or "RevPAR"):

<TABLE>
<CAPTION>

                          Average             1998
                         Number of           Planned          Average       Average
                        Guest Rooms        Renovations       Occupancy       Rate       RevPAR
                        -----------        -----------       ---------      -------     ------
<S>                         <C>              <C>               <C>          <C>         <C>   
Owned Properties            286              $164,500          71.9%        $75.18      $54.08
Managed Properties          296                 N/A            73.6%        $79.24      $57.97
Joint Ventures              190                 N/A            74.8%        $98.79      $73.91
Total Portfolio             285              $164,500          72.1%        $76.05      $54.86
</TABLE>

NOTE: Includes statistics for all properties for the entire year. 1997
acquisitions, including the Holiday Inn Acquisition, are treated as if owned for
the entire year.

FRANCHISE AGREEMENTS AND TRADEMARKS

As of December 31, 1997, the Company had franchise agreements (collectively, the
"Franchise Agreements") with Holiday Inns Franchising, Inc., Hampton Inn (a
division of Promus Hotels, Inc.), Days Inn of America Franchising, Inc.,
Marriott International, Inc., and Ramada Franchise Systems, Inc. Although the
terms of the Franchise Agreements differ, each requires the Company to pay a
monthly royalty fee based on gross revenues attributable to room rentals, plus
marketing and reservation contributions, which are also based on gross revenues.
The terms of the Franchise Agreements generally are between 10 and 20 years,
with a substantial penalty for early termination by the Company. The Company
anticipates no changes in the brands used for its hotels which would require the
payment of franchise termination fees.



                                        7

<PAGE>   8


Several of the franchise agreements with Holiday Inns Franchising, Inc. were
entered into in conjunction with the Holiday Inn Acquisition and the related
conversion of the majority of Bristol's own branded hotels to a Crowne Plaza or
other Holiday Inn brand. The franchise fees payable under these conversion
agreements will be a phased-in percentage of 0% of room revenue in 1997, 1% in
1998, 3% in 1999 and 5% in 2000 and thereafter. Seven of these hotels have been
or are expected to be converted by the end of 1998. (See Redevelopment and
Rebranding Program.)

The Company obtained registration of the "Bristol" and "Bristol Suites"
trademarks on June 25, 1996, and July 2, 1996, respectively, with the United
States Patent and Trademark Office. The Company knows of approximately 15
lodging establishments located in the United States that use "Bristol" in their
trade names, but which have no existing or historical relationship with the
Company. Some of these establishments are located in areas where the Company has
not previously used the Bristol name. Accordingly, others may be able to
restrict the Company's use of the name in those markets. The Company has not
registered or applied for any other trademarks in connection with any other
hotel brand names that the Company utilizes.

MANAGEMENT AGREEMENTS

The Company acquired 15 management agreements in the Holiday Inn Acquisition,
three of which were for joint ventures in which the Company purchased a 50%
interest. The Company entered into one additional management agreement in the
fall of 1997 unrelated to the Holiday Inn Acquisition. In December the Company
purchased the remaining 50% interest in one of the joint ventures resulting in
15 total management agreements.

In general, the management agreements have remaining terms that range from one
to 11 years (subject to extension or renewal), and are generally cancelable
under certain conditions. The management agreements specify base fees, which are
generally based on percentages of gross revenues and, in certain cases, also
provide for incentive fees. These management contracts may contain provisions
which allow the third party owner to terminate the contract for such reasons as
sale of the property, for cause or without cause. Therefore, the Company cannot
guarantee that it will continue to manage these properties to the contract
expiration date.

COMPETITION

The Company competes primarily in the upscale and mid-priced with food and
beverage full-service segment of the lodging industry, as defined by Smith
Travel Research, a noted industry resource. Hotel chains such as Marriott, Hyatt
and Embassy Suites are direct competitors of the Company; and in each geographic
market in which the Company's hotels are located, there are other limited and
full-service hotels that compete with the Company's hotels. In addition, the
Company's food and beverage operations compete with local free-standing
restaurants and bars. Some of the Company's competitors have larger networks of
locations and greater financial resources than the Company. Competition in the
United States lodging industry is generally based on convenience of location,
price, range of services and guest amenities offered, plus the quality of
customer service and overall product. Newer, recently constructed hotels compete
effectively against older hotels if the older hotels are not refurbished on a
regular basis. While newer limited-service hotels do not compete directly with
the Company's larger full-service hotels, they do provide alternatives for
guests who do not need the amenities of a full-service hotel.

ENVIRONMENTAL ISSUES

All of the owned hotels of the Company have undergone Phase I environmental
assessments which generally provide a physical inspection and data base search
but not soil or groundwater analysis. In addition, most of the Company's hotels
have been inspected to determine the presence of asbestos-containing materials
("ACM's"). While ACM's are present in certain of the Company's properties,
operations and maintenance programs for maintaining such ACM's have been
implemented, or the ACM's have been scheduled to be or have been abated, at such
hotels. None of the environmental assessments conducted to date have revealed


                                        8

<PAGE>   9

any environmental condition that management believes would have a material
adverse effect on the Company's business, assets or results of operations, nor
is management aware of any such condition. However, it is possible that these
assessments have not revealed all potential environmental liabilities or that
there are material environmental liabilities of which management is not aware.

AMERICANS WITH DISABILITIES ACT

Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements relating to
access and use by disabled persons. Bristol's management believes that its
hotels are substantially in compliance with the requirements of the ADA.
However, a determination that its hotels are not in compliance with the ADA
could result in liability for governmental fines and damages to private
litigants. If Bristol were required to make unanticipated major modifications to
its hotels to comply with the requirements of the ADA, it could affect its
ability to pay its obligations and make distributions to its shareholders.

ITEM 3.       LEGAL PROCEEDINGS.

The Company is involved in various legal proceedings arising in the normal
course of business. The Company believes that the ultimate outcome of such
proceedings will not have a material adverse effect on the results of operations
or financial condition of the Company; however, there can be no assurance that
this will be the case.

ITEM 4.       SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.

During the fourth quarter of 1997, no matter was submitted to a vote of the
Company's security holders.

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY
              RELATED SHAREHOLDER.

The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "BH." The range of the high and low sales price of the
Company's Common Stock as reported on the NYSE Composite Tape for each of the
quarters during the years ended December 31, 1997 and 1996, as adjusted for the
Stock Split, is set forth below:

<TABLE>
<CAPTION>

                                                                   1997                     1996
                                                          -----------------------  ------------------------
                                                            High          Low         High          Low

<S>                                                        <C>         <C>          <C>          <C>      
         First quarter...............................      $29.667     $  21.083    $  19.083    $  16.250
         Second quarter..............................       28.917        24.083       21.667       18.250
         Third quarter...............................       28.250        25.500       21.417       17.500
         Fourth quarter..............................       29.750        23.937       21.167       16.667
</TABLE>

On March 6, 1998, the last reported sale price of the Common Stock on the NYSE
was $25.25. On March 6, 1998, the Company had 66 stockholders of record. The
Company believes the number of beneficial owners of its Common Stock to be
approximately 2,200.


The Company has not paid any cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. Instruments governing
certain of the Company's indebtedness prohibit the payment of dividends on the
Common Stock.

                                        9

<PAGE>   10


                                    PART II.


ITEM 6.       SELECTED FINANCIAL DATA.

The following table sets forth selected historical financial data for the
Company for the years ended December 31, 1997 and 1996, and the 11 months ended
December 31, 1995, and unaudited pro forma financial data for the years ended
December 31, 1997, 1996 and 1995, respectively. The unaudited pro forma
financial data for the years ended December 31, 1997 and 1996 give effect to the
Holiday Inn Acquisition and the refinancing (the New Credit Facility) of the
indebtedness in connection with the Holiday Inn Acquisition (collectively the
"HI Pro Forma Transactions") as if these transactions had occurred on January 1
of each period presented. The unaudited pro forma financial data for the Company
for the year ended December 31, 1995, give effect to the Combination, the 1995
Senior Credit Facility, the Senior Notes and the IPO as if they had been
consummated at the beginning of the period but do not give effect to the Holiday
Inn Acquisition. The selected balance sheet data for the Company is presented as
of December 31, 1997, 1996 and 1995.

The pro forma financial information presented is not necessarily indicative of
what the actual financial position and results of operations of the Company
would have been as of and for the periods indicated, nor does it purport to
represent the Company's future financial position and results of operations. The
financial data set forth below are qualified in their entirety by, and should be
read in conjunction with, "Management's Discussion and Analysis of Financial
Information and Results of Operations" and the financial statements and notes
thereto included herein.



                                       10

<PAGE>   11




                              BRISTOL HOTEL COMPANY
          SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA
                        (IN THOUSANDS, EXCEPT SHARE DATA)



<TABLE>
<CAPTION>

                                                        HISTORICAL
                                         ----------------------------------------
                                                                   ELEVEN MONTHS
                                              YEAR ENDED               ENDED                PRO FORMA (UNAUDITED)
                                              DECEMBER 31,           DECEMBER 31,           YEAR ENDED DECEMBER 31,
                                         ------------------------    ------------   ----------------------------------------
                                           1997            1996          1995         1997          1996 (1)       1995 (2)
                                         --------        --------    ------------   ---------      ----------     ----------
<S>                                      <C>            <C>           <C>           <C>            <C>            <C>      
OPERATING DATA:

REVENUE:
   Rooms ...........................     $ 377,380      $ 149,794     $ 115,771     $ 469,885      $ 421,278      $ 127,670
   Food, beverage and other ........       127,138         62,046        49,424       156,162        150,598         54,012
                                         ---------      ---------     ---------     ---------      ---------      ---------
         Total revenue .............       504,518        211,840       165,195       626,047        571,876        181,682
                                         ---------      ---------     ---------     ---------      ---------      ---------

OPERATING COSTS AND EXPENSES:
   Departmental expenses:
      Rooms ........................       105,063         37,706        32,692       131,124        119,654         36,240
      Food, beverage and other .....        79,092         35,810        31,376        99,363         95,779         34,312
   Undistributed operating expenses:
      Administration and general,
         marketing .................        78,694         33,821        28,254        99,465         95,995         30,504
      Property operating costs .....        79,633         28,402        24,738       100,907         85,115         26,804
      Depreciation and amortization.        39,690         18,377        13,505        49,665         49,017         14,387
      Corporate expense ............        24,450         10,958         8,035        24,787         21,412          8,691
                                         ---------      ---------     ---------     ---------      ---------      ---------
         Operating income ..........        97,896         46,766        26,595       120,736        104,904         30,744
                                         ---------      ---------     ---------     ---------      ---------      ---------

   Other expenses:
      Interest expense (3) .........        44,591         18,616        18,374        55,694         54,248         16,133
      Other non-operating expenses .          --             --             430          --             --               93
      Equity in income of joint
          ventures .................        (1,916)          --            --          (2,440)        (1,483)          --
      Income taxes .................        22,007         10,401         2,822        26,317         20,158          5,226
                                         ---------      ---------     ---------     ---------      ---------      ---------

Income before extraordinary item ...        33,214         17,749         4,969        41,165         31,981          9,292

Extraordinary loss on early
    extinguishment of debt, net
    of income taxes ................        12,741           --           1,908        11,403           --             --
                                         ---------      ---------     ---------     ---------      ---------      ---------

Net income .........................     $  20,473      $  17,749     $   3,061     $  29,762      $  31,981      $   9,292
                                         =========      =========     =========     =========      =========      =========

Diluted earnings per common and
  common equivalent share:
   Income before extraordinary item      $    0.87      $    0.70     $    0.28     $    1.03      $    0.81      $    0.37
   Net income ......................     $    0.53      $    0.70     $    0.17     $    0.75      $    0.81      $    0.37

Weighted average number of
   common and common
   equivalent shares outstanding
   - diluted (in thousands) ........        38,332         25,526        17,909        39,865         39,568         24,892
</TABLE>



                                       11

<PAGE>   12





                              BRISTOL HOTEL COMPANY
    SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA (CONTINUED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)




<TABLE>
<CAPTION>
                                                                                        HISTORICAL
                                                                         -------------------------------------
                                                                                        DECEMBER 31,
                                                                         -------------------------------------
                                                                            1997           1996        1995
                                                                         ----------     ----------   ---------

BALANCE SHEET DATA:

<S>                                                                      <C>            <C>          <C>      
   Cash and cash equivalents......................................       $   86,167     $   4,666    $   7,906
   Property and equipment - net...................................        1,439,167       552,564      470,705
   Total assets...................................................        1,666,638       592,788      512,901
   Long-term debt including
      current portion.............................................          717,319       232,694      170,544
   Stockholders' equity...........................................          648,794       252,157      236,122
</TABLE>



      NOTES TO SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA


(1)      Pro forma operating results for 1996 include the operations of the
         Holiday Inn - Stamford, which was purchased by Holiday Inn in July
         1996.

(2)      Pro forma operating results for 1995 include the operations of the
         Sheraton - Atlanta, a 368 room hotel purchased by the Company in June
         1995 and exclude the operations of the Holiday Inn-West Loop, which was
         sold by the Company in July 1995.

(3)      Pro forma interest expense for 1997 and 1996 reflects an increase in
         interest primarily as a result of additional debt incurred in
         connection with the Holiday Inn Acquisition. Pro forma interest expense
         for 1995 has been reduced from actual interest expense by $3.2 million
         related primarily to the reduction of debt with proceeds from the IPO.





                                       12

<PAGE>   13




The following tables set forth selected historical combined financial data for
Harvey Hotel Companies as of and for the two years ended December 31, 1994 and
1993, and for the month ended January 31, 1995, which have been derived from
financial statements audited by Price Waterhouse LLP, independent accountants,
each of which financial statements is included or incorporated by reference
herein. The selected financial data set forth below are qualified in their
entirety by, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere herein.

                      HARVEY HOTEL COMPANIES (PREDECESSOR)
                   SELECTED HISTORICAL COMBINED FINANCIAL DATA
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                              MONTH ENDED       ------------------------     
                                                            JANUARY 31, 1995    1994               1993
                                                            ----------------    ------------------------
<S>                                                           <C>             <C>               <C>            
OPERATING DATA:
REVENUE:
   Rooms   ...............................................    $    4,006      $  44,972         $  39,968
   Food, beverage and other...............................         1,937         25,379            24,054
                                                              ----------      ---------         ---------
   Total revenue..........................................         5,943         70,351            64,022
                                                              ----------      ---------         ---------


OPERATING COSTS AND EXPENSES:
Departmental expenses:
   Rooms   ...............................................         1,124         10,344             9,469
   Food, beverage and other...............................         1,055         14,835            14,600
Undistributed operating expenses:
   Administrative and general,
      marketing...........................................           579         11,369            10,285
   Property operating costs...............................           629         10,563            10,086
   Depreciation...........................................           309          4,041             3,963
   Corporate expense......................................           315          3,761             2,827
                                                              ----------      ---------         ---------
       Operating income...................................         1,932         15,438            12,792
                                                              ----------      ---------         ---------
Other (income) expenses:
   Interest expense, net..................................           652          7,631             7,737
   Other non-operating income.............................            --           (337)             (241)
                                                              ----------      ---------         ---------

Income before extraordinary item..........................    $    1,280      $   8,144         $   5,296
                                                              ==========      =========         =========   
</TABLE>

<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,
                                                                             ----------------------------
                                                                                1994              1993
                                                                             ----------        ----------
<S>                                                                          <C>               <C>       
BALANCE SHEET DATA:
Cash and cash equivalents..............................................      $    4,118        $      395
Property and equipment, net............................................          80,635            72,387
Total assets...........................................................         109,874            99,635
Long-term debt, including current portion..............................         114,054           112,963
Equity.................................................................         (11,988)          (20,604)
</TABLE>


                                       13

<PAGE>   14




ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

Historical results for the year ended December 31, 1997, include the Original
Bristol Hotels and Holiday Inn -Plano, as well as the Holiday Inn Assets (except
for HI - San Jose) and the 1997 Single Asset Purchases from their respective
acquisition dates. Historical results for the year ended December 31, 1997, also
reflect the management and the 50% joint venture ownership of the HI - San Jose
from the Holiday Inn Acquisition date to November 1997 and the full ownership of
the hotel for the month of December 1997. Historical results for the year ended
December 31, 1996, include the Original Bristol Portfolio and Holiday Inn -
Plano (as of May 31, 1996). The 45 owned hotels included in the Holiday Inn
Assets are referred to below as the "Acquired Hotels."


RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1997, COMPARED WITH YEAR ENDED
DECEMBER 31, 1996

Actual Results

Total revenue increased 138.2% to $504.5 million for the year ended December 31,
1997, as compared to 1996 as a result of the inclusion of the Holiday Inn Assets
and the 1997 Single Asset Purchases from their respective acquisition dates and
the improved operating performance of the Original Bristol Portfolio. Revenue
per available room ("RevPAR") for the Original Bristol Portfolio was $47.53 for
the year ended December 31, 1997, compared to $43.92 for 1996, representing an
8.2% increase. The improvement in RevPAR is primarily attributable to the
successful repositioning and/or redevelopment of several hotels in the Original
Bristol Portfolio. Occupancy and average daily room rate ("ADR") for the
Original Bristol Portfolio was 70.0% and $67.91, respectively, for the year
ended December 31, 1997, compared to 64.4% and $68.21, respectively, for 1996.
The change from 1996 to 1997 was also impacted by nonrecurring items in 1996
including the Atlanta Olympics and the renovations of the United Hotels. The
Atlanta Olympics had a positive impact on results in 1996 due to the 100%
occupancy experienced by the ten Atlanta hotels in the Original Bristol
Portfolio during the 20 days of the Olympic games. Results for 1996 were also
impacted by the renovations of 13 United Hotels throughout the year.

Rooms revenue as a percent of total revenue was 74.8% for the year ended
December 31, 1997, as compared to 70.7% for the year ended December 31, 1996,
resulting from the Acquired Hotels having proportionally lower food and beverage
business than the Original Bristol Portfolio. This is also evidenced by the
151.9% increase in rooms revenue for the year ended December 31, 1997, compared
to the same period in 1996 as compared to a 108.8% increase in food and beverage
revenue.

Food and beverage revenue increased primarily due to the increase in the number
of hotels and also due to higher food and beverage revenues for the Original
Bristol Portfolio. Food and beverage revenue for the Original Bristol Portfolio
for the year ended December 31, 1997 was $51.6 million, representing a 12%
increase over 1996. This increase is primarily attributable to the effective
redevelopment of several hotels in the Original Bristol Portfolio.

The increase in management fees relates primarily to the addition of the 15
management contracts acquired in the Holiday Inn Acquisition offset by the loss
of two management agreements previously held by Bristol in 1996.

Gross operating margin (consisting of total revenue less department expenses,
administrative and general, marketing and property operating costs divided by
total revenue) was 32.1% for the year ended December 31, 1997, compared to 35.9%
for the year ended December 31, 1996. The 3.8 percentage point decrease in gross
operating margin is primarily attributable to declines in departmental operating
margins and higher



                                       14

<PAGE>   15




property operating costs related to property taxes and land rentals. Declines in
departmental margins relate primarily to the integration of the Acquired Hotels,
which have had historically lower margins. Property tax increases relate to
increased valuations as a result of the significant capital improvements for
several hotels in the Original Bristol Portfolio as well as an increase in tax
rates for certain hotels. Increased land rentals relate to the Acquired Hotels
having a proportionately higher number of ground leases than the Original
Bristol Portfolio.

Depreciation and amortization increased $21.3 million for the year ended
December 31, 1997, compared to 1996 as a result of the Holiday Inn Acquisition
and the 1997 Single Asset Purchases. Depreciation expense also increased as a
result of the substantial capital improvements at several hotels in the Original
Bristol Portfolio.

Corporate expenses for the year ended December 31, 1997, were $24.5 million
compared to $11.0 million for 1996. Approximately $3.1 million of the increase
relates to one-time costs incurred during the second quarter of 1997 for the
closing and integration of the Holiday Inn Acquisition. The remaining increase
relates primarily to the increase in the number of corporate employees and
related costs and increased travel expenses as a result of the acquisition.

Interest expense for the year ended December 31, 1997, increased $26.0 million
to $44.6 million primarily as a result of additional debt incurred to finance
the Holiday Inn Acquisition as well as borrowings increasing ratably in 1996 to
fund acquisitions and certain redevelopment costs.

Equity in income of joint ventures of $1.9 million for the year ended December
31, 1997, represents the Company's 50% interest in the earnings of the three
joint ventures acquired in the Holiday Inn Acquisition.

As a result of the factors described above, income before extraordinary items
increased 87.1% to $33.2 million for the year ended December 31, 1997, compared
to the year ended 1996 and diluted earnings per share increased 24.3% to $.87
for the year ended December 31, 1997, compared to $.70 for 1996. Recurring
earnings for the year ended December 31, 1997 of $35.1 million, which exclude
the extraordinary item of $12.7 million and the one-time costs related to the
Holiday Inn Acquisition ($1.8 million, net of tax), represents a 138.8% increase
over recurring earnings for the year ended December 31, 1996 of $14.7 million,
which excludes a one-time gain related to the sale of marketable securities ($.3
million, net of tax), the positive impact of the Atlanta Olympics ($2.2 million,
net of tax), and the litigation settlement gain ($.6 million, net of tax).
Recurring diluted earnings per share of $.92 for the year ended December 31,
1997, represents a 58.6% improvement over 1996.

Pro Forma Results

Pro forma revenues increased $54.2 million, or 9.5%, to $626.0 million for the
year ended December 31, 1997, compared to 1996, reflecting increases in rooms
revenue and food and beverage revenue. Revenue increases reflect the addition of
the 1997 Single Asset Purchases and improvements in RevPAR. RevPAR for the
Original Bristol Portfolio was $47.53 for the year ended December 31, 1997,
compared to $43.92 for the year ended December 31, 1996. This RevPAR increase is
primarily attributable to the successful repositioning and/or redevelopment of
several hotels in the Original Bristol Portfolio. The Acquired Hotels achieved a
7.5% improvement in RevPAR for the year ended December 31, 1997, compared to
1996 primarily as a result of favorable results in the mid-priced with food and
beverage sector as well as the strength of the Holiday Inn brand name and
reservation system. RevPAR, occupancy and ADR for the Acquired Hotels for the
year ended December 31, 1997, was $57.65, 73.2% and $78.74, respectively,
compared to $53.62, 73.5% and $72.95, respectively, for 1996.

Pro forma operating income margin remained relatively consistent on a
year-to-date basis. Pro forma operating income margin for the year ended
December 31, 1997 was 19.3% compared to 18.3% for the 1996.

Pro forma interest expense increased by $1.4 million to $55.7 million for the
year ended December 31, 1997,

                                       15


<PAGE>   16
compared to 1996. This increase was due primarily to borrowings increasing
ratably during 1996 to fund acquisitions and certain redevelopment costs.

Pro forma equity in income of joint ventures increased $1.0 million for the year
ended December 31, 1997, compared to 1996. The increase is due to improvements
in the operating results for the three hotels owned by the joint ventures.

As a result of the factors described above, pro forma income before
extraordinary items increased to $41.2 million for the year ended December 31,
1997, from $32.0 million for the year ended December 31, 1996, an increase of
28.7% and pro forma diluted earnings per share increased 27.2% to $1.03 for the
year ended December 31, 1997, compared to $.81 in 1996.

RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996, COMPARED WITH PRO FORMA
YEAR ENDED DECEMBER 31, 1995

Revenues increased from $181.7 million for the pro forma year ended December 31,
1995 to $211.8 million, an increase of $30.1 million, or 16.6%, for the year
ended December 31, 1996. The increase is primarily attributable to the addition
of the Holiday Inn Plano in May 1996, the completion of the renovation and
redevelopment of the United Hotels and the application of the Company's
operating strategies to the United Hotels. The hotels in the United Hotels
portfolio that had substantially completed renovations by the end of 1995 (the
"Phase I" hotels) posted gains in total hotel revenue in excess of 60%, with
only a 5.3% increase in available rooms from 1995 to 1996. The positive impact
of applying the Company's operating strategies to the United Hotels is also
evidenced by the 17% increase in occupancy for the Phase I hotels and a 16.1%
increase in hotel revenue for those hotels. (Although the Company took over
management of the United Hotels in February 1995, the operating strategy
integration was a several month process.) The Atlanta Olympics also had a
positive impact on 1996 results as compared to 1995. Increases in total hotel
revenues were partially offset by declines in total revenues for the United
Hotels undergoing renovations in 1996. The increase in total revenues reflects
increases in all revenue categories, as discussed below.

Hotel room revenues were $149.8 million for the year ended December 31, 1996, an
increase of $22.1 million, or 17.3%, from the pro forma year ended December 31,
1995, due primarily to improved occupancy and average daily room rates of 67.4%
and $68.24, respectively, for the year ended December 31, 1996, as compared to
64.1% and $62.67, respectively, for the pro forma year ended December 31, 1995.
Rooms department operating margins increased to 74.8% from 71.6%, benefiting
from a higher number of occupied rooms and the availability of rooms in 1996
which were undergoing renovation and unavailable during 1995.

Food and beverage revenues improved by $4.7 million to $44.3 million for the
year ended December 31, 1996, from $39.6 million for the pro forma year ended
December 31, 1995, due primarily to the higher occupancy levels in the Company's
hotels and increased focus on banquet and catering business for the United
Hotels. Food and beverage department margins increased to 29.5% from 24.8%,
primarily as a result of applying the Company's operating strategies to the
United Hotels.

Other revenues increased 23.1%, or by $3.3 million, to $17.7 million for the
year ended December 31, 1996. The Company sold marketable securities in the
third quarter of 1996, resulting in a gain of approximately $0.5 million. In
addition, the Company recognized gains of $0.9 million and $0.5 million as a
result of the settlement of certain litigation and the early termination of a
management agreement, respectively. Other revenues also increased as a result of
improved occupancy, and the increased emphasis on maximizing telephone revenue.

Gross operating income (consisting of total revenue less rooms, food, beverage
and other expense) was $138.3 million, a $27.2 million improvement for the year
ended December 31, 1996, as compared to the pro forma year ended December 31,
1995. Gross operating margin for the year ended December 31, 1996, was 65.3% as
compared to 61.2% for the pro forma period ended December 31, 1995, an
improvement of 6.7% as a result of the factors noted above.





                                       16

<PAGE>   17




Operating income increased to $46.8 million for the year ended December 31,
1996, from $30.7 million for the pro forma year ended December 31, 1995. This
$16.1 million, or 52.4%, increase was due primarily to increased revenues and
the improvements in departmental performance noted above. In addition,
administration and general and marketing expenses have stabilized. Combined
administrative and general and marketing expenses increased 10.9% for the year
ended December 31, 1996, compared to the pro forma year ended December 31, 1995,
in contrast to a 14.2% increase from the pro forma year ended December 31, 1994,
as compared to 1995.

Corporate expenses increased to $10.9 million for the year ended December 31,
1996, as compared to $8.7 million for the pro forma year ended December 31,
1995. The increase of $2.2 million is primarily related to additional costs
incurred during 1996 to establish the Company as a public entity as well as
costs incurred in connection with the establishment of an acquisition
department.

Depreciation expense was $18.4 million for the year ended December 31, 1996, a
$3.9 million increase from the pro forma year ended December 31, 1995. The
increase is a result of the renovation costs associated with certain United
Hotels being placed in service during 1996.

Interest expense increased by $2.5 million to $18.6 million for the year ended
December 31, 1996, compared to the pro forma year ended December 31, 1995. This
increase was due primarily to increased borrowings during 1996 for the costs of
the United Hotels renovations and the acquisition of the Holiday Inn Plano in
May 1996.

As a result of the factors described above, net income increased to $17.7
million for the year ended December 31, 1996, from $9.3 million for the pro
forma year ended December 31, 1995, an increase of 91.0%.

PERFORMANCE OF REDEVELOPED ASSETS

In February 1997, the Company completed the last phase of its renovation program
that had commenced in the spring of 1995. The total cost of the program was
approximately $130 million and included 20 hotels with approximately 5,400
rooms. The Company's overall return on redevelopment capital for all assets
substantially complete as of December 31, 1996 was approximately 13%. (Return on
redevelopment capital is defined as the improvement in EBITDA, defined below,
for the twelve months immediately preceding each hotel's start of renovation
compared to the year ended December 31, 1997.) Excluding the Company's hotels in
Jackson, Mississippi, the return on redevelopment capital for the full-service
assets substantially complete as of December 1996 was approximately 20%. The
Company's limited-service assets also substantially complete as of December 1996
achieved a return on redevelopment capital of approximately 12%. These
considerable returns are primarily attributable to substantial improvements in
RevPAR and food and beverage revenue as well as enhanced operating margins.

With respect to the Company's portfolio in Jackson, Mississippi, the Company's
redeveloped assets have not yet reached similar returns. Market occupancies in
Jackson have averaged around 60%, limiting the Company's opportunities to
greatly improve average daily rates. As a result, the performance of the assets
to date have not yet met the Company's expectations. However, the Company is
proactively defining alternative strategies including brand conversions in order
to enhance the performance of the Jackson portfolio. The Company remains
optimistic that adding stronger brand names to these hotels and revising the
operating cost structure will, over time, produce acceptable returns on the
redeveloped assets. Early results for the downtown Jackson hotel which converted
to the Crowne Plaza brand in late 1997 are extremely encouraging. A brand
conversion is likely for the other non-branded hotel in Jackson over time.

                                       17

<PAGE>   18

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of capital to fund its operational and capital
needs is cash flow from operations, which it typically measures in terms of
EBITDA (earnings before interest, taxes, depreciation and amortization). EBITDA
is considered to be principally available to pay income taxes, fund routine
capital maintenance and to pay debt service, both interest and principal.
Management believes that EBITDA is an effective measure of operating performance
because it is industry practice to evaluate hotel properties using multiples of
EBITDA. EBITDA is unaffected by the debt and equity structure of the property
owner. EBITDA does not represent cash flow from operations as defined by
generally accepted accounting principles ("GAAP"), and is not necessarily
indicative of cash available to fund all cash flow needs and should not be
considered an alternative to net income for purposes of evaluating the Company's
operating performance. Management believes that cash flow from operations will
be sufficient to cover the Company's reasonably foreseeable working capital,
capital expenditure and debt service requirements. EBITDA totaled $139.5 million
for the year ended December 31, 1997, compared to $65.1 million for the year
ended December 31, 1996, an increase of 114.3%. The Company filed a registration
statement relating to the issuance from time to time of up to $500 million of
equity or debt securities, which was partially utilized with the Offering, and
expects from time to time to consider the possible issuance of other debt or
equity securities thereunder.

The Company's net cash provided by operations totaled $75.0 million for the year
ended December 31, 1997, compared to $40.6 million for 1996. The Company's cash
and cash equivalent assets were $86.2 million and $4.7 million at December 31,
1997 and 1996, respectively. The $34.4 million increase in net cash provided by
operating activities from 1996 to 1997 relates primarily to the increase in
income before depreciation and amortization and an increase in working capital
offset by an increase in restricted cash. The increase in working capital
relates primarily to the Holiday Inn Acquisition and the resulting increases in
accounts receivable offset by the increases in accounts payable and accrued
expenses. The increase in restricted cash relates primarily to reserves for real
estate taxes and capital expenditures deposited in accordance with the terms of
the Refinancing.

The Company anticipates using cash on hand along with cash from operations to
fund the Redevelopment and Rebranding Program and planned capital projects
scheduled for completion up to the date of the proposed merger, at which time
FelCor will assume responsibility for funding capital expenditures.

The Redevelopment and Rebranding Program, which started in November 1997, is
expected to continue throughout 1998 and 1999 at a total cost of approximately
$327 million. This activity includes approximately $241 million for the HI
Renovations, $32 million to renovate and rebrand several of the hotels in the
Original Bristol Portfolio, and $54 million for the redevelopment and rebranding
of the 1997 Single Asset Purchases. In addition to the amounts funded in 1997,
the Company anticipates spending $165 million in 1998, approximately $130
million in 1999 and the remainder thereafter to fund this redevelopment. In
addition to the Redevelopment and Rebranding Program, the Company plans to spend
approximately $18 million on capital projects during 1998. As noted above, the
Company plans to fund these costs with cash from operations for costs scheduled
for completion up to the date of the proposed merger, at which time FelCor will
assume responsibility for funding capital expenditures.

YEAR 2000 ISSUE

The Year 2000 issue relates to computer programs that were written using two
digits rather than four to define the applicable year. In those programs, dates
after December 31, 1999 may be incorrectly identified and could cause system
failures or miscalculations causing a disruption of operations, including a
temporary inability to process transactions, prepare financial statements or
engage in other normal business operations. The Company has recently assessed
its information technology systems and believes that a majority of these systems
will properly utilize dates beyond the Year 2000.

The Company expects to cause its desktop systems to be compliant by continuing
its existing program of replacing all desktop computers every two to three
years. This desktop replacement program is expected to make all desktop
computers Year 2000 compliant. The Company is also evaluating whether to upgrade
or replace various automated time clock systems to make them Year 2000
compliant. The Company expects to spend approximately $4 million over the next
18 months on these programs.

The Company has begun to evaluate its non-information technology systems to
determine whether they are Year 2000 compliant, including embedded systems that
operate elevators, phone systems, energy management systems, security systems
and other systems. The Company is also surveying its major vendors to determine
whether they are Year 2000 compliant. The Company expects that these studies
will be completed by December 31, 1998. At that time, the Company will
determine the extent to which additional actions will be required by the
Company, including the extent to which the Company will replace non-compliant
vendors. Holiday Inns and Promus, franchisors for 106 of the Company's hotels,
have indicated to the Company that their reservation systems will be Year 2000
compliant by the end of 1998. Year 2000 compliance surveys have been sent to
the Company's other franchisors. The Company anticipates that all reprogramming
efforts and hardware replacement will be implemented and tested by June 30,
1999. This gives adequate time prior to January 1, 2000 for the Company to
correct any problems that did not surface during the implementation and testing.


                                       18

<PAGE>   19







SEASONALITY

The lodging industry is affected by seasonal patterns. At most of the Company's
hotels, demand is higher in the second and third quarters than during the
remainder of the year. The Company's results are also impacted during periods of
renovation when rooms are placed out of service. The Company expects to have
approximately 376,000 and 280,000 rooms out of service in 1998 and 1999,
respectively, in conjunction with the Redevelopment and Rebranding Program.

INFLATION

The Company is impacted by inflation in both the general price movement of
certain costs of the operations of its hotels and in the ability to increase the
rates charged to its guests for rooms, food and beverage and other services.

Many of the costs of operating the hotels can be fixed for certain periods of
time, reducing the short-term effects of changes in the rate of inflation. Room
rates, which are set on a daily basis, can be rapidly changed to meet changes in
inflation rates (as well as other changing market conditions). The Company
believes that given the favorable demand/supply balance in the hotel segments in
which it operates, increases in inflation from today's relatively low rates will
not have an adverse impact on profits generated by the Company's hotels.

Changes in the rate of inflation could impact the level of short-term interest
rates. The Company does not anticipate a significant increase or decrease in the
level of short-term interest rates, and, since the Company has no floating rate
debt currently outstanding, the Company does not believe that it has any
significant exposure should a rise in market interest rates occur.


                                       19
<PAGE>   20




ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial information is included on the pages indicated and is
incorporated into this item by reference:

<TABLE>
<CAPTION>

                                                                                                          Page
                                                                                                          ----

<S>                                                                                                        <C>
Reports of Independent Public Accountants...........................................                       F-1

Consolidated Balance Sheets.........................................................                       F-3

Consolidated and Combined Statements of Income......................................                       F-4

Consolidated Statements of Changes in Stockholders' Equity..........................                       F-5

Consolidated and Combined Statements of Cash Flows..................................                       F-6

Notes to Consolidated and Combined Financial Statements.............................                       F-8
</TABLE>








                                       20

<PAGE>   21




ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On June 17, 1996, the Company appointed Arthur Andersen LLP as independent
accountants for fiscal 1996 to replace Price Waterhouse LLP effective with such
appointment. The change in independent accountants was approved by the Audit
Committee of the Company's Board of Directors and the Company's stockholders.

Price Waterhouse LLP's report on the financial statements for the 11 months
ended December 31, 1995, did not contain an adverse opinion, disclaimer of
opinion, qualification, or modification as to uncertainty, audit scope, or
accounting principles. Furthermore, during the 11 months ended December 31,
1995, and the interim period subsequent to December 31, 1995, there have not
been any disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Price
Waterhouse LLP, would have caused that firm to make reference to the subject
matter of such disagreements in connection with its report.



                                       21

<PAGE>   22




                                    PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The management of the Company is under the direction of the Bristol Board of
Directors (the "Bristol Board"). Each director is elected to serve until his or
her successor is elected and qualified. Set forth below is certain information
regarding the directors and executive officers of Bristol.

<TABLE>
<CAPTION>

                                                                                           Year Elected
                      Name and Position                                                      Director
                      -----------------                                                      --------            
<S>                                                                                           <C>  
         J. Peter Kline
         Chief Executive Officer, President and Director.......................................1995
         John A. Beckert
         Chief Operating Officer, Executive Vice President and Director........................1995
         Reginald K. Brack, Jr.
         Director..............................................................................1997
         David A. Dittman
         Director..............................................................................1995
         Craig H. Hunt
         Director..............................................................................1997
         Robert H. Lutz, Jr.
         Director..............................................................................1995
         Donald J. McNamara
         Chairman of the Board and Director....................................................1994
         Richard C. North
         Director..............................................................................1997
         Kurt C. Read
         Director..............................................................................1997
</TABLE>

J. Peter Kline, 50, has been a director of the Company since February 1995.
Since 1981, Mr. Kline has been the President and Chief Executive Officer of the
Company (and its predecessor, Harvey Hotel Companies).

John A. Beckert, 44, has been a director of the Company since February 1995.
Since 1981, Mr. Beckert has been the Chief Operating Officer and Executive Vice
President of the Company (and its predecessor, Harvey Hotel Companies). Mr.
Beckert is the brother of Richard N. Beckert, the Senior Vice President,
Administration of the Company.

Reginald K. Brack, Jr., 60, has been a director of the Company since May 1997.
Since July 1997, Mr. Brack has been the Chairman Emeritus of Time, Inc. Prior to
such period, Mr. Brack was the Chairman and Chief Executive Officer of Time,
Inc. from December 1986 to July 1997.

David A. Dittman, 52, has been a director of the Company since December 1995.
Since 1990, Mr. Dittman has been the Dean of the Cornell University School of
Hotel Administration and an E.M. Statler Professor.

Craig H. Hunt, 45, has been a director of the Company since April 1997. Mr. Hunt
has been President of Holiday Inn Hotels and Suites since 1997, and a member of
the Holiday Hospitality Corporation Board of Directors since 1990. During 1996
and 1997, Mr. Hunt was the President of Americas Franchise Division of Holiday
Inns. Prior to 1996, he served as Senior Vice President and Chief Operating
Officer for Company Managed Hotels -- Americas, and Senior Vice President and
managing director for the United States, Caribbean and Latin American Region of
Holiday Inn International.

Robert H. Lutz, Jr., 48, has been a director of the Company since December 1995.
Since 1994, Mr. Lutz has
                                       22

<PAGE>   23




been the Chairman and Chief Executive Officer, and is 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 American Express Company engaged in real estate
ownership and management.

Donald J. McNamara, 45, has been Chairman of the Board since November 1994. Mr.
McNamara has been the Chairman and Co-Chief Executive Officer of The Hampstead
Group, L.L.C. ("Hampstead"), a privately held real estate investment company and
an affiliate of United/Harvey Holdings, L.P. ("Holdings") since the founding of
the firm in 1988. Mr. McNamara also is a director of Catellus Development
Corporation. Mr. McNamara also served on the FelCor Suite Hotels, Inc. board of
directors from July 1994 until November 1997.

Richard C. North, 48, has been a director of the Company since 1997. Mr. North
has been the Group Finance Director of Bass plc since 1994. Prior to 1994, Mr.
North served as the Group Finance Director of The Burton Group.

Kurt C. Read, 35, has been a director of the Company since April 1997. Mr. Read
has been a Senior Vice President of Hampstead since 1989.

Jeffrey P. Mayer, 41, has been Senior Vice President and Chief Financial Officer
of the Company since January, 1996. Prior to joining the Company, Mr. Mayer
served as Senior Vice President, Corporate Controller and Chief Accounting
Officer of Host Marriott Corporation (formerly Marriott Corporation)
("Marriott") from 1993 to 1996, as Vice President - Project Finance of Marriott
from 1991 to 1993 and in various positions with Marriott's finance department
from 1986 to 1991. Prior to joining Marriott, Mr. Mayer was Audit Manager with
Arthur Andersen & Company in Atlanta, GA.

Robert L. Miars, 48, has been Senior Vice President - Design, Construction &
Engineering of the Company since February 1995. Prior to joining the Company,
Mr. Miars was President of Huie Miars Custom Homes from 1989 to February 1995
and President of Huie Miars Construction Company from 1989 to 1995.

Edward J. Rohling, 43, was Senior Vice President - Corporate Development at his
departure from the Company on March 15, 1998. Mr. Rohling served in other senior
management positions with the Company (and its predecessor, Harvey Hotel
Companies) from 1988 to 1996.

Pursuant to a stockholders' agreement, each of Holiday Corporation and Bass
America, Inc., as a group (the "Bass Entities"), and Holdings has agreed to vote
its Bristol Common Shares and take all other necessary actions in order to
ensure that the Bristol Board is comprised of three persons designated by
Holdings, three persons designated by the Bass Entities, and Messrs. Kline and
Beckert and one person designated by Messrs. Kline and Beckert. By a separate
agreement, Messrs. Kline and Beckert have agreed to vote for the designees of
Holdings and the Bass Entities. One of the three directors to be designated by
each of Holdings and the Bass Entities, and the director designated by Messrs.
Kline and Beckert, must be an Outside Director. For this purpose, an "Outside
Director" is a Director who is not an employee, executive officer or affiliate
of Bristol, the Bass Entities or Holdings and who is not an associate of a
business primarily engaged in operating, managing or developing Mid-Scale
Lodging Facilities and who qualifies as an "independent director" within the
meaning of the NYSE Listed Company Manual. A "Mid-Scale Lodging Facility" is a
full-service lodging facility providing a degree of sophistication and
full-service amenities and facilities which (i) are of a type and standard
generally consistent with hotels operated as Holiday Inn hotels, (ii) do not
primarily offer suites, (iii) are not designed to accommodate extended stays,
and (iv) do not generally compete as upscale or economy hotels.

Holdings has designated Donald J. McNamara, Kurt C. Read and Robert H. Lutz, Jr.
(Outside Director) as its designees; Messrs. Kline and Beckert have designated
David A. Dittman as their Outside Director designee; and the Bass Entities have
designated Richard C. North, Reginald K. Brack, Jr. (Outside Director) and Craig
H. Hunt as their designees. Pursuant to a separate agreement, Bass plc has
agreed to cause the directors designated by the Bass Entities to vote for Donald
J. McNamara to serve as Chairman of the Board so long as he is a director of the
Company.

                                       23

<PAGE>   24




ITEM 11.      EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the compensation
paid to the Company's chief executive officer and each of the four other most
highly compensated executive officers of the Company (the "Named Executive
Officers") who earned at least $100,000 in total salary and bonus in 1997.

<TABLE>
<CAPTION>

                                                    SUMMARY COMPENSATION TABLE


                                                    Annual Compensation            Securities             All Other
     Name and Principle Position         Year      Salary       Bonus (1)          Options (2)        Compensation (3)
-------------------------------------   ------   ----------    -----------   ---------------------    -----------------
<S>                                      <C>      <C>           <C>           <C>                     <C>
J. Peter Kline.......................... 1997     $457,307      $ 91,461           30,000                    $4,750
President and Chief Executive Officer    1996     $250,502      $ 69,350                -                       -
                                         1995     $231,353      $ 87,183          225,000                    $2,073

John A. Beckert......................... 1997     $457,307      $ 91,461           30,000                    $4,750
Chief Operating Officer and              1996     $250,502      $ 69,350                -                       -
Executive Vice President                 1995     $231,353      $ 79,724          225,000                    $2,072

Jeffery P. Mayer  (4)................... 1997     $257,115      $ 51,423           25,000                    $44,723
Senior Vice President and                1996     $188,159      $ 56,448          195,000                    $46,633
Chief Financial Officer                  1995        -              -                   -                       -

Edward J. Rohling....................... 1997     $232,404      $ 46,481                -                    $3,567
Senior Vice President, Corporate         1996     $199,541      $ 55,480           30,000                       -
 Development                             1995     $163,576      $ 82,922          216,000                    $2,088

Robert L. Miars......................... 1997     $229,604      $ 68,881           20,000                    $4,750
Senior Vice President,                   1996     $144,503      $120,515           15,000                       -
Construction and Design                  1995     $126,422      $ 74,282           49,500                       -
</TABLE>


(1)      The bonus amounts for all years are based on amounts earned during the
         calendar year regardless of when paid.

(2)      Reflects options to acquire shares of Bristol Common Stock granted
         pursuant to the Company's 1995 Equity Incentive Plan, adjusted to
         reflect the 1997 three-for-two stock split (the "Stock Split").

(3)      Consists entirely of contributions by the Company to Bristol's 401(k)
         plan except for Mr. Mayer, whose 1997 other compensation consists of
         $3,462 of contributions to the Company's 401(k) plan and $41,261 for
         relocation expenses. Mr. Mayer's 1996 other compensation consists
         entirely of relocation expenses.

(4)      Mr. Mayer joined the Company in January 1996.



                                       24

<PAGE>   25




STOCK OPTION GRANTS

The following table sets forth certain information with respect to options
granted to the Named Executive Officers during 1997.

                        OPTION GRANTS IN FISCAL YEAR 1997

<TABLE>
<CAPTION>

                                                                                                 POTENTIAL REALIZED VALUE AT
                                      NUMBER OF     % OF TOTAL                                     ASSUMED ANNUAL RATES OF
                                      SECURITIES      OPTIONS                                     STOCK PRICE APPRECIATION
                                      UNDERLYING    GRANTED TO       EXERCISE                         FOR OPTION TERM (1)
                                       OPTIONS       EMPLOYEES         OR         EXPIRATION  --------------------------------------
                  NAME                 GRANTED        IN 1997       BASE PRICE      DATE            5%                10%
-----------------------------------    -------        -------       ----------      ----      --------------------------------------
<S>                                     <C>             <C>         <C>             <C>       <C>              <C>          
J. Peter Kline........................  30,000          6.09%       $  26.00        2007      $   490,538      $   1,243,119
John A. Beckert....................     30,000          6.09           26.00        2007          490,538          1,243,119
Jeffrey P. Mayer...................     25,000          5.07           26.00        2007          408,782          1,035,933
Edward J. Rohling................            -             -               -           -                -                  -
Robert L. Miars.....................    20,000          4.06           26.00        2007          327,025            828,746
</TABLE>

     (1) The potential realizable value portion of the foregoing table
         illustrates value that might be realized upon exercise of the options
         immediately prior to the expiration of their term, assuming the
         specified compounded rates of appreciation on Bristol Common Stock over
         the term of the options. These numbers do not take into account
         provisions of certain options providing termination of the option
         following termination of employment, nontransferability or vesting over
         periods. The use of the assumed 5% and 10% returns is established by
         the Securities and Exchange Commission (the "Commission") and is not
         intended by the Company to forecast possible future appreciation of the
         price of Bristol Common Stock.

Each of the aforementioned options becomes exercisable over a four year period,
with 25% of the total number of shares covered thereby becoming exercisable on
each of the first four anniversaries of the date of grant, and expires on the
tenth anniversary of the date of grant.

The following table sets forth certain information with respect to options held
at December 31, 1997 by the Named Executive Officers.

                       OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>

                                                  Securities Underlying              Value of Unexercised
                                                   Unexercised Options               in-the-Money Options
                                                at December 31, 1997 (1)           at December 31, 1997 (2)
                                             ---------------------------------  -------------------------------
              Name                            Unexercisable       Exercisable    Unexercisable     Exercisable
-----------------------------------------    ---------------     -------------  --------------    -------------
<S>                                                <C>              <C>          <C>              <C>
J. Peter Kline    ......................           255,000                -       $  4,756,013     $         -
John A. Beckert.........................           255,000                -          4,756,013               -
Jeffrey P. Mayer........................           181,000           39,000          2,331,885         563,831
Edward J. Rohling.......................           240,000            6,000          4,749,480          67,977
Robert L. Miars   ......................            81,500            3,000          1,223,314          33,989
</TABLE>

     (1) This represents the total number of shares subject to stock options
         held by the Named Executive Officers at December 31, 1997. These
         options were granted on various dates during the years 1995 through
         1997.

     (2) The closing price per share of Bristol Common Stock as reported in the
         New York Stock Exchange (the "NYSE") Composite Transactions Report on
         December 31, 1997 was $29.0625. Value is calculated on the basis of the
         difference between the option exercise price and $29.0625 multiplied by
         the number of shares of Bristol Common Stock covered by the option.


                                       25

<PAGE>   26




COMPENSATION PLANS AND ARRANGEMENTS

Director Compensation

Each director who is not a full-time employee of the Company or an employee of
an affiliate of Bristol is granted annually a non-qualified option to purchase
7,500 Bristol Common Shares at an exercise price equal to the market price of
the Bristol Common Shares at the close of business on the date of grant.
Directors are also reimbursed for their out-of-pocket expenses incurred in
connection with their attendance at meetings of the Bristol Board and committees
of the Bristol Board and other activities relating to their position as a
director.

Management Bonus Plan

The Company's Management Bonus Plan provides key management employees of the
Company with cash bonuses based upon the achievement of specified targets and
goals for the Company and for the particular employees. Each officer of the
Company is eligible to receive annual bonus awards based on the achievement of
performance criteria, as well as personal criteria, established by the
Compensation Committee.

401(k) Plan

Bristol maintains and offers to its employees and executive officers a profit
sharing plan with a 401(k) feature (the "Bristol 401(k) Plan"). Eligible
employees may contribute to the Bristol 401(k) Plan through salary deferral
elections of not less than 1% nor more than 16% of their salary. The Company
makes matching contributions of $.50 for each dollar contributed, up to 6% of a
participant's salary. The Bristol Board may in its sole discretion grant
additional matching contributions, subject to statutory limitations.
Contributions by participants are 100% vested and contributions by the Company
vest over a period of years, becoming fully vested after five years of
continuous employment. The Bristol 401(k) Plan is intended to qualify under
Section 401 of the Code so that contributions by participants or by the Company
to the Bristol 401(k) Plan, and income earned on such contributions, are not
taxable to the participants until withdrawn from the Bristol 401(k) Plan.

Incentive Plan

The Bristol Incentive Plan is designed to attract and retain qualified officers
and other key employees of the Company. The Bristol Incentive Plan authorizes
the grant of options to purchase Bristol Common Shares, stock appreciation
rights, restricted shares, deferred shares, performance shares and performance
units. The Compensation Committee administers the Bristol Incentive Plan and
determines to whom awards are to be granted, as well as the number of shares,
the exercise period and other terms and conditions of a particular grant.

As of December 31, 1997, there were outstanding options granted under the
Bristol Incentive Plan to purchase an aggregate of 2,069,441 Bristol Common
Shares. These options generally vest over four or five years from the date of
grant, with certain options becoming fully vested upon specified anniversary's
from the date of grant.

Employment Agreements

Messrs. Kline and Beckert have entered into employment agreements with Bristol
that expire in 2001 and provide for the payment of an annual base salary of at
least $450,000. Messrs. Kline and Beckert are also eligible to receive future
grants of stock-based incentive awards and other benefits provided to senior
executives of Bristol, including bonuses of up to 50% of base pay.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

Mr. North is a member of the Company's Compensation Committee of the Board of
Directors. The Company paid fees to subsidiaries of Bass plc, of which Mr. North
is Group Finance Director. In 1997, the Company paid $21.8 million pursuant to
franchise agreements and for related marketing, advertising and reservation
services, and $1.3 million pursuant to an Interim Services Agreement. These
agreements are more fully described in Item 13. Certain Relationships and
Related Transactions.


                                       26

<PAGE>   27




ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of Bristol Common Stock, as of the close of business on March 31, 1998
by (i) each person known to the Company to own beneficially more than 5% of the
Bristol Common Stock, (ii) each director and Named Executive Officer of the
Company, and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the address for each of the individuals
named in the table is 14295 Midway Road, Dallas, Texas 75244. For purposes of
the table, a person or group of persons is deemed to have "beneficial ownership"
of any shares as of a given date which such person has the right to acquire
within 60 days after such date.

<TABLE>
<CAPTION>
                                                                      Beneficial Ownership
                                                            -----------------------------------------
                                                              Number of            Percentage of
                                                            Shares Owned       Outstanding Shares(1)
                                                            --------------     ----------------------     
<S>                                                           <C>                    <C>   
United/Harvey Holdings, L.P.(2)........................       14,059,677             31.08%
4200 Texas Commerce Tower W
2200 Ross Avenue
Dallas, Texas 75201

Bass plc (3)...........................................       14,041,962             31.04%
20 North Audley Street
London, W1Y1WE

Baron Capital (4)......................................        5,384,200             11.90%
767 Fifth Avenue, 24th Floor
New York, New York 10153

Cohen & Steers Capital Management, Inc. (5)............        2,438,500              5.39%
757 Third Avenue
New York, New York 10017

J. Peter Kline (6).....................................        1,343,601              2.97%

Robert L. Miars (7)....................................          977,154              2.16%

John A. Beckert (6)....................................          848,604              1.88%

Edward J. Rohling (8)..................................          382,260              *

Jeffrey P. Mayer (9)...................................           69,000              *

David A. Dittman (10)..................................           22,500              *

Robert H. Lutz, Jr. (10)...............................           22,500              *

Reginald K. Brack, Jr. (11)............................            9,600              *

Donald J. McNamara (12)................................           -                   -

Craig H. Hunt..........................................           -                   -

Richard C. North.......................................           -                   -

Kurt C. Read...........................................           -                   -

All directors and executive officers
 as a group (14 persons)...............................        4,014,479              8.88%

</TABLE>


                                       27
<PAGE>   28





SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED)

Legend:
    *      Less than 1%

  (1)      Assumes issuance of 1,428,571 shares as partial consideration for the
           acquisition of 20 Midwestern hotels (the "Omaha Acquisition"). Total
           consideration for the Omaha Acquisition is $19.1 million in cash,
           $40.9 million of assumed debt and 1,428,571 shares of Bristol Common
           Stock. The Omaha Acquisition is expected to close April 30, 1998.

  (2)      Includes 1,342,791 shares which may be purchased from Mr. Huie upon
           exercise of Holdings' portion of a call option.

  (3)      Bass America, Inc. owns 10,455,033 Bristol shares, which represents
           23.11% of outstanding Bristol shares, and Holiday Corporation owns
           3,586,929 Bristol shares which represents 7.93% of outstanding
           Bristol shares. Both corporations are subsidiaries of Bass plc.

  (4)      As reported in a Schedule 13 G/A filed with the Commission February
           13, 1998.

  (5)      As reported in a Schedule 13 G/A filed with the Commission February
           12, 1998.

  (6)      Includes 150,000 shares which Messrs. Kline and Beckert each have the
           right to acquire through the exercise of options.

  (7)      Includes 3,000 shares which Mr. Miars has the right to acquire
           through the exercise of options.

  (8)      Mr. Rohling left the Company March 15, 1998.

  (9)      Includes 69,000 shares which Mr. Mayer has the right to acquire
           through the exercise of options.

  (10)     Includes 22,500 shares which Messrs. Dittman and Lutz each have the
           right to acquire through the exercise of options, including 7,500
           shares which Messrs. Dittman and Lutz will each have the right to
           acquire after the 1998 Annual Meeting.

  (11)     Includes 7,500 shares which Mr. Brack has the right to acquire after
           the 1998 Annual Meeting through the exercise of options.

  (12)     Mr. McNamara is the founder and Co-Chief Executive Officer of
           Hampstead. Holdings and its general partner were formed by Hampstead.
           The limited partners of Holdings include entities affiliated with
           Hampstead and certain unaffiliated institutional investors, none of
           which has the right to direct the management of the business of
           Holdings. However, by virtue of the foregoing relationships, Mr.
           McNamara may be deemed to beneficially own the shares of Bristol
           Common Stock owned by Holdings. Mr. McNamara disclaims beneficial
           ownership of all shares owned by Holdings and, accordingly, such
           shares are not shown in the table as being beneficially owned by him.


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

HOTEL PROPERTIES AGREEMENT

In April 1997, Bristol and Holiday Corporation and its affiliates (collectively,
the "Holiday Entities") entered into a hotel properties agreement (the "Hotel
Properties Agreement") pursuant to which Bristol agreed to offer to the Holiday
Entities the opportunity to enter into a standard Holiday franchise agreement
for each hotel that Bristol acquires, manages or develops that meets specified
criteria. The Hotel Properties Agreement requires that 85% of the rooms in
Bristol's owned, leased and managed hotel portfolio be operated under a Holiday
Inn brand, subject to certain limitations and approvals.

In April 1997, Bristol also agreed to enter into franchise agreements with
Holiday Hospitality pursuant to which certain Bristol properties will be
rebranded to Holiday Hospitality brands, subject to normal franchising
procedures. Franchise fees for these rebranded hotels will equal 1% of room
revenue in 1998, 3% in 1999 and 5% in 2000. Amounts paid to the Holiday Entities
pursuant to franchise agreements and related marketing, advertising and
reservation services were $21.8 million in 1997, including $13.1 million as
franchise royalty fees and $4.5 million as franchise marketing fees.

As of April 1, 1998, Bass plc, through its subsidiaries Bass America, Inc. and
Holiday Corporation, owned approximately 31% of the Bristol Common Shares.
Richard C. North, Craig H. Hunt and Reginald K. Brack, Jr. serve as designees of
the Bass Entities on the Bristol Board.

INTERIM SERVICES AGREEMENT

In April 1997, Bristol entered into an interim services agreement with Holiday
Hospitality pursuant to which Holiday Hospitality agreed to continue to provide
certain accounting, payroll, and employee benefit services to Bristol during the
transition period following the Holiday Inn Acquisition. Bristol reimbursed
Holiday Hospitality $1.3 million for the estimated costs incurred in providing
such services during 1997. This agreement terminated in October 1997.

                                       28

<PAGE>   29





                                    PART IV.

ITEM 14.      EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORT ON
              FORM 8-K.

   (a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

       1. The financial statements as set forth under Item 8 are filed as part
          of this report.

       2. All financial statement schedules are omitted as they are either not
          applicable or the required information is included in the financial
          statements or the notes thereto.

       3. The list of exhibits contained in the Index to Exhibits is
          incorporated herein by reference.

   (b) REPORTS ON FORM 8-K

          Current Report on Form 8-K dated November 14, 1997, containing the
          financial statements of Bristol Hotel Asset Company for the period
          ended September 30, 1997.


                                INDEX TO EXHIBITS

 Exhibit
   No.                               Description
----------                           ----------- 

      2.1     Agreement and Plan of Merger dated as of December 15, 1996 among
              Holiday Corporation, Holiday Inns, Inc. and the Company
              (incorporated by reference to Annex A of the Company's 1997 Proxy
              Statement).

      2.2     Amendment No. 1 to Agreement and Plan of Merger dated as of April
              1, 1997 among Holiday Corporation, Holiday Inns, Inc. and the
              Company (incorporated by reference to Exhibit 2.1.b of the
              Company's Current Report on Form 8-K dated April 28, 1997).

      2.3     Agreement and Plan of Merger dated as of January 30, 1998 among
              Bristol Hotel Company, Bristol Omaha Hotel Company, and Omaha
              Hotel Inc., et al. (incorporated by reference to Exhibit 2.3 of 
              the Company's Annual Report on Form 10-K for the year ended 
              December 31, 1997).


      2.4     Agreement and Plan of Merger dated as of March 23, 1998 among
              Bristol Hotel Company and FelCor Suites Hotel, Inc. 
              (incorporated by reference to Exhibit 2.4 of the Company's 
              Annual Report on Form 10-K for the year ended December 31, 1997).


      3.1     Amended and Restated Certificate of Incorporation of the Company
              (incorporated by reference to Exhibit 4.1 of the Company's Form
              S-8 Registration Statement [333-27633] dated May 22, 1997).

      3.2     Amended and Restated By laws of the Company as adopted and in
              effect as of April 28, 1997 (incorporated by reference to Exhibit
              4.2 of the Company's Form S-8, Registration Statement dated May
              22, 1997).

      4.1     Indenture, dated as of December 18, 1995, among the Company as
              issuer, Bristol Hotel Asset Company as guarantor, and The Bank of
              New York as trustee (incorporated by reference to Exhibit 4.1 of
              the Company's Annual Report on Form 10-K for the year ended
              December 31, 1995).

      4.2     Form of Old Notes (included in Exhibit 4.1).

      4.3     Form of New Notes (included in Exhibit 4.1).

      4.4     Exchange and Registration Rights Agreement, dated as of December
              18, 1995, among the Company, Bristol Hotel Asset Company, Bankers
              Trust Company and New England Cayman Corporation (incorporated by
              reference to Exhibit 4.4 to the Form S-4).


                                       29

<PAGE>   30





      10.1    Form of Indemnification Agreement among the Company and each of
              its directors (incorporated herein by reference to Exhibit 10.1 of
              the Company's Registration Statement on Form S-1 [File No.
              33-97916], as amended [the "Registration Statement"]).

      10.2    Registration Rights Agreement, dated as of February 27, 1995,
              among the Company, United/Harvey Holdings, L.P. and the other
              parties signatory thereto (incorporated by reference to Exhibit
              10.10 to the Registration Statement).

      10.3    Stockholders' Agreement, dated as of February 27, 1995, among the
              Company, United/Harvey Holdings, L.P. and the other parties
              signatory thereto (incorporated by reference to Exhibit 10.11 to
              the Registration Statement).

      10.4    Put/Call Option Agreement, dated as of February 27, 1995, between
              the Company and H. K. Huie, Jr. (incorporated by reference to
              Exhibit 10.12 to the Registration Statement).

      10.5    Management Bonus Plan (incorporated by reference to Exhibit 10.16
              to the Registration Statement).

      10.6    Amended and Restated 1995 Equity Incentive Plan (incorporated by
              reference to Exhibit 10.15 to the Form S-4).

      10.7    Stock Option Plan for Non-Employee Directors (incorporated herein
              by reference to Exhibit 10.16 to the Form S-4).

      10.8    Amended and Restated Put/Call Option Agreement, Amendment to
              Combination Agreement, Stockholders' Agreement, and Registration
              Rights Agreement and Termination of Consulting Agreement, dated as
              of November 16, 1995, among the Company, United/Harvey Holdings,
              L.P., J. Peter Kline, John A. Beckert, Richard N. Beckert, Edward
              J. Rohling, Robert L. Miars, Harvey Hotel Company, Ltd., Harvey
              HTS, Inc., Endlease, Inc. and Harvey Hotel DFW, Inc. (incorporated
              by reference to Exhibit 10.19 to the Registration Statement).

      10.9    Stockholders' Agreement dated as of April 28, 1997 by and among
              United/Harvey Holdings, L.P., Holiday Corporation, Bass America,
              Inc. Bass plc and the Company (incorporated by reference to
              Exhibit 2 of Schedule 13-D filed May 8, 1997).

      10.10   Loan Agreement dated as of October 10, 1997 among Bristol Lodging
              Company, Bristol Lodging Holding Company, Nomura Asset Capital
              Corporation as administrative agent and collateral agent for
              Lenders and Bankers Trust Company as co-agent for Lenders
              (incorporated by reference to Exhibit 10.10 of the Company's
              Annual Report on Form 10-K for the year ended December 31, 1997).

      10.11   Loan Agreement dated as of October 10, 1997 among Bristol Hotel
              Asset Company, BHAC Canada, Inc., Nomura Asset Capital Corporation
              as administrative agent and collateral agent for Lenders and
              Bankers Trust Company as co-agent for Lenders (incorporated by
              reference to Exhibit 10.11 of the Company's Annual Report on Form
              10-K for the year ended December 31, 1997).


      10.12   Employment Agreement between the Company and J. Peter Kline
              effective as of April 28, 1997 (incorporated by reference to
              Exhibit 10.12 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      10.13   Employment Agreement between the Company and John A. Beckert
              effective as of April 28, 1997 (incorporated by reference to
              Exhibit 10.13 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      10.14   Earnest Money Contract by and between Highland Manor, Inc. and
              Bristol Omaha Hotel Company dated as of January 30, 1998
              (incorporated by reference to Exhibit 10.14 of the Company's
              Annual Report on Form 10-K for the year ended December 31, 1997).


      11.1    Computation of Earnings per Common Share (incorporated by
              reference to Exhibit 11.1 of the Company's Annual Report on Form
              10-K for the year ended December 31, 1997).


      16.1    Letter of Price Waterhouse LLP dated June 20, 1996 regarding
              change in certifying accountant (incorporated by reference to
              Exhibit 16.1 of the Current Report on Form 8-K dated June 17,
              1996).

      21.1    List of Subsidiaries of the Company (incorporated by reference to
              Exhibit 21.1 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      27.1    Financial Data Schedule (incorporated by reference to Exhibit
              27.1 of the Company's Annual Report on Form 10-K for the year
              ended December 31, 1997).




                                       30

<PAGE>   31


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Company has duly caused this Form 10-K/A to be signed on its behalf by
the undersigned, thereunto duly authorized, on this 15th day of June, 1998.

                                            BRISTOL HOTEL COMPANY


                                            BY:  /s/ John D. Bailey
                                               --------------------------------
                                               John D. Bailey
                                               Vice President, Controller and
                                               Chief Accounting Officer




                                       31

<PAGE>   32




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
   of Bristol Hotel Company

We have audited the accompanying consolidated balance sheets of Bristol Hotel
Company (a Delaware corporation) as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Bristol Hotel Company as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.




ARTHUR ANDERSEN LLP

Dallas, Texas
     February 6, 1998 (except with respect to the
     matter discussed in Note 20 as to which the
     date is March 25, 1998)








                                       F-1

<PAGE>   33




                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
   of Bristol Hotel Company

In our opinion, the accompanying consolidated statements of income, of changes
in stockholders' equity and of cash flows for Bristol Hotel Company and its
subsidiaries ("Company") and the combined statements of income and cash flows
for Harvey Hotel Companies ("Predecessor") present fairly, in all material
respects, the results of operations and cash flows of the Company and its
Predecessor for the eleven months ended December 31, 1995 and for the one month
ended January 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company and
its Predecessor'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 generally accepted auditing standards 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 the opinion expressed above. We have not audited the
consolidated financial statements of Bristol Hotel Company and its subsidiaries
for any period subsequent to December 31, 1995.





PRICE WATERHOUSE LLP



Dallas, Texas
February 23, 1996








                                       F-2

<PAGE>   34




                              BRISTOL HOTEL COMPANY
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                  December 31,      December 31,
                                                                                      1997              1996
                                                                                 --------------    -------------
                                         ASSETS
<S>                                                                               <C>              <C>          

Current assets
    Cash and cash equivalents..............................................       $      86,167    $       4,666
    Trading securities.....................................................                 103              116
    Accounts receivable (net of allowance of $2,259 and $344)..............              31,305           10,501
    Inventory..............................................................               8,286            3,320
    Deposits   ............................................................               7,569            5,404
    Other current assets...................................................               1,626              950
                                                                                  -------------    -------------
               Total current assets........................................             135,056           24,957
                                                                                  -------------    -------------

Property and equipment (net of accumulated depreciation
    of $76,172 and $31,071)................................................           1,439,167          552,564

Other assets
    Restricted cash........................................................               9,283            3,069
    Investments in joint ventures, net.....................................              12,396           -
    Goodwill (net of accumulated amortization of $891).....................              52,773           -
    Deferred charges and other noncurrent assets (net of
        accumulated amortization of $1,965 and $2,144).....................              17,963           12,198
                                                                                  -------------    -------------

               Total assets................................................       $   1,666,638    $     592,788
                                                                                  =============    =============

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Current portion of long-term debt......................................       $       8,455    $      15,769
    Accounts payable and accrued expenses..................................              27,366           10,626
    Accrued construction costs.............................................               1,330            4,797
    Accrued property, sales and use taxes..................................              15,911            7,346
    Accrued insurance reserves.............................................               9,530            6,920
    Advance deposits     ..................................................               1,156              278
                                                                                  -------------    -------------
               Total current liabilities...................................              63,748           45,736
                                                                                  -------------    -------------

Long-term debt, excluding current portion..................................             708,864          216,925
Deferred income taxes......................................................             242,530           75,619
Other liabilities..........................................................               2,702            2,351
                                                                                  -------------    -------------
               Total liabilities...........................................           1,017,844          340,631
                                                                                  -------------    -------------

Common stock ($.01 par value; 150,000,000 shares authorized, 45,734,472 and
   24,848,760 shares issued at December 31, 1997 and 1996, respectively, and
   43,641,401 and 24,848,760 shares outstanding at
   December 31, 1997 and 1996, respectively)...............................                 436              166
Additional paid-in capital.................................................             606,935          231,181
Cumulative translation adjustment..........................................                 286              -
Retained earnings..........................................................              41,137           20,810
                                                                                  -------------    -------------
               Total stockholders' equity..................................             648,794          252,157
                                                                                  -------------    -------------

               Total liabilities and stockholders' equity..................       $   1,666,638    $     592,788
                                                                                  =============    =============
</TABLE>

              The accompanying notes are an integral part of these
                          consolidated balance sheets.


                                       F-3

<PAGE>   35

                              BRISTOL HOTEL COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
                          COMBINED STATEMENTS OF INCOME
                (Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION> 
                                                                                                                 HARVEY HOTEL
                                                                        BRISTOL HOTEL COMPANY                      COMPANIES
                                                      -------------------------------------------------------  ----------------- 
                                                                                                  Eleven
                                                           Year Ended        Year Ended        Months Ended       Month Ended
                                                       December 31, 1997  December 31, 1996  December 31, 1995  January 31, 1995
                                                       -----------------  -----------------  -----------------  ----------------
<S>                                                     <C>               <C>                  <C>                 <C>         
REVENUE:
   Rooms.............................................   $       377,380   $      149,794       $      115,771      $      4,006
   Food and beverage.................................            92,596           44,344               36,070             1,505
   Management fees...................................             4,948            2,513                1,382                34
   Other ............................................            29,594           15,189               11,972               398
                                                        ---------------   --------------       --------------      ------------
         Total revenue...............................           504,518          211,840              165,195             5,943
                                                        ---------------   --------------       --------------      ------------

OPERATING COSTS AND EXPENSES:
   Departmental expenses:
     Rooms...........................................           105,063           37,706               32,692             1,124
     Food and beverage...............................            69,766           31,282               27,118             1,006
     Other...........................................             9,326            4,528                4,258                49
   Undistributed operating expenses:
     Administrative and general......................            44,255           18,266               16,184               186
     Marketing.......................................            34,439           15,555               12,070               393
     Property operating costs........................            44,303           17,499               16,313               360
     Property taxes, rent and insurance..............            35,330           10,903                8,425               269
     Depreciation and amortization...................            39,690           18,377               13,505               309
     Corporate expense...............................            24,450           10,958                8,035               315
                                                        ---------------   --------------       --------------      ------------
Operating income.....................................            97,896           46,766               26,595             1,932
                                                        ---------------   --------------       --------------      ------------

Other (income) expense:
   Interest expense..................................            44,591           18,616               18,374               652
   Equity in income of joint ventures................            (1,916)              --                   --                --
   Other ............................................                --               --                  257                --
                                                        ---------------   --------------       --------------      ------------

Income before minority interest, income taxes, extra-
   ordinary items and pro forma income taxes.........            55,221           28,150                7,964            1,280
Minority interest....................................                --               --                  173               --
                                                        ---------------   --------------       --------------      -----------
Income before income taxes, extraordinary items
   and pro forma income taxes........................            55,221           28,150                7,791            1,280
Income taxes.........................................            22,007           10,401                2,822               --
                                                        ---------------   --------------       --------------      -----------
Income before extraordinary items and pro forma
   income taxes......................................            33,214           17,749                4,969            1,280
Extraordinary loss on early extinguishment
   of debt, net of tax...............................           (12,741)              --                (1,908)             --
                                                        ---------------   --------------       --------------      -----------
Net income before pro forma income taxes.............   $        20,473   $       17,749       $        3,061            1,280
                                                        ===============   ==============       ==============
Pro forma income taxes (Unaudited)...................                                                                      435
                                                                                                                  ------------
Net income after pro forma income tax expense
   (Unaudited).......................................                                                             $        845
                                                                                                                  ============

Earnings per common and common equivalent share: 
Income before extraordinary item:
     Basic...........................................   $          0.89   $         0.71       $         0.28            --
     Diluted.........................................   $          0.87   $         0.70       $         0.28            --
   Net income:
     Basic...........................................   $          0.55   $         0.71       $         0.17            --
     Diluted.........................................   $          0.53   $         0.70       $         0.17            --
Weighted average number of common and common 
equivalent shares outstanding:

   Basic ............................................        37,359,364       24,848,760           17,857,936            --
   Diluted...........................................        38,332,302       25,526,413           17,908,955            --
</TABLE>

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

                                       F-4

<PAGE>   36

                              BRISTOL HOTEL COMPANY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (Dollars in thousands)


<TABLE>
<CAPTION>

                                                                   ADDITIONAL    UNREALIZED   CUMULATIVE   RETAINED
                                                 COMMON STOCK        PAID-IN     GAIN (LOSS) TRANSLATION   EARNINGS
                                              SHARES       AMOUNT    CAPITAL  ON SECURITIES   ADJUSTMENT   (DEFICIT)      TOTAL
                                            ----------  ----------  ----------   ----------   ----------  ----------   ----------
<S>                                         <C>         <C>         <C>          <C>          <C>         <C>          <C>       
Balance at January 31, 1995 ...............  9,856,178  $       99  $  123,104   $       --   $       --  $       --   $  123,203
   Unrealized gain on securities, net .....         --          --          --          262           --          --          262
   Issuance of common stock ...............  6,709,662          67     109,529           --           --          --      109,596
   Net of income ..........................         --          --          --           --           --       3,061        3,061
                                            ----------  ----------  ----------   ----------   ----------  ----------   ----------

Balance at December 31, 1995 .............. 16,565,840         166     232,633          262           --       3,061      236,122
   Reclass securities to trading ..........         --          --          --         (262)          --          --         (262)
   Employee stock options .................         --          --         216           --           --          --          216
   Adjustment to offering costs for
      1995 common stock issuance ..........         --          --      (1,668)          --           --          --       (1,668)
   Net income .............................         --          --          --           --           --      17,749       17,749
                                            ----------  ----------  ----------   ----------   ----------  ----------   ----------

Balance at December 31, 1996 .............. 16,565,840         166     231,181           --           --      20,810      252,157
   Employee stock options .................         --          --         296           --           --          --          296
   Exercise of employee stock options .....      6,619          --         114           --           --          --          114
   Issuance of stock in Holiday Inn
      Acquisition .........................  9,361,308          93     267,874           --           --          --      267,967
   Issuance of common stock, net of costs..  3,162,500          31     107,470           --           --          --      107,501
   Stock split ............................ 14,545,134         146          --           --           --        (146)          --
   Foreign currency translation ...........         --          --          --           --          286          --          286
   Net income .............................         --          --          --           --           --      20,473       20,473
                                            ----------  ----------  ----------   ----------   ----------  ----------   ----------

Balance at December 31, 1997 .............. 43,641,401  $      436  $  606,935   $       --   $      286  $   41,137   $  648,794
                                            ==========  ==========  ==========   ==========   ==========  ==========   ==========
</TABLE>




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

                                       F-5

<PAGE>   37

                              BRISTOL HOTEL COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                                                  HARVEY HOTEL
                                                                        BRISTOL HOTEL COMPANY                       COMPANIES
                                                       ---------------------------------------------------------  -------------
                                                                                                    Eleven
                                                           Year Ended        Year Ended          Months Ended       Month Ended
                                                        December 31, 1997  December 31, 1996   December 31, 1995  January 31, 1995
                                                        -----------------  -----------------   ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                           <C>              <C>              <C>              <C>      
   Net income .........................................       $  20,473        $  17,749        $   3,061        $   1,280
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization ....................          39,690           18,377           13,505              309
     Amortization of deferred financing fees ..........           2,749            2,062               --               --
     Other ............................................              --               --              602               --
     Equity in earnings of joint ventures .............          (1,399)              --               --               --
     Compensation expense recognized for
       employee stock options .........................             410              216               --               --
     Unrealized gain on marketable securities .........              --             (378)              --               --
     Non-cash portion of extraordinary item, net of tax          11,009               --            1,908               --
   Changes in assets and liabilities:
     Changes in working capital .......................           1,645             (684)            (714)             641
     Decrease (increase) in restricted cash ...........          (6,214)          (2,449)           2,860              (84)
     Distributions from joint ventures ................             650               --               --               --
     Increase (decrease) in other liabilities .........             217             (460)          (4,260)             421
     Deferred tax provision ...........................           5,805            6,171             (326)              --
                                                              ---------        ---------        ---------        ---------

         Net cash provided by operating activities ....          75,035           40,604           16,636            2,567
                                                              ---------        ---------        ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Improvements to property and equipment .............         (54,071)         (93,936)         (60,941)            (721)
   Purchases of property and equipment, net of
     associated debt ..................................         (86,977)          (6,300)         (20,000)              --
   Sales of property and equipment ....................              --               --            4,711               --
   Holiday Inn Acquisition, net of costs ..............        (400,159)              --               --               --
   Sales of marketable securities .....................              --              726               --            1,928
                                                              ---------        ---------        ---------        ---------

         Net cash provided by (used in)
            investing activities ......................        (541,207)         (99,510)         (76,230)           1,207
                                                              ---------        ---------        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Refinancing ..........................         600,000               --               --               --
   Proceeds from New Credit Facility ..................         560,000               --               --               --
   Repayment of New Credit Facility ...................        (560,000)              --               --               --
   Paydown of Senior Notes ............................         (40,000)              --               --               --
   Proceeds from Offering, net of costs ...............         107,852               --               --               --
   Early extinguishment of long-term debt .............        (133,540)              --               --               --
   Distributions to predecessor equity holders ........              --               --           (4,140)          (8,009)
   Additions to notes receivable - partners ...........              --               --               --              488
   Principal payments and extinguishment of
     long-term debt ...................................          (7,058)          (4,826)        (156,612)            (121)
   Proceeds from issuance of long-term debt ...........          43,410           66,976          123,387               --
   Payment of offering costs ..........................              --           (1,342)              --               --
   Proceeds from affiliate ............................              --               --           19,900               --
   Proceeds from initial public offering,
     net of offering costs ............................              --               --           88,557               --
   Dividend paid to minority partner ..................              --               --             (335)              --
   Decrease in accounts receivable affiliate ..........              --               --              542               --
   Decrease (increase) in deferred charges and other
     non-current assets ...............................         (22,991)          (5,142)          (9,212)             316
                                                              ---------        ---------        ---------        ---------

         Net cash provided by (used in)
            financing activities ......................         547,673           55,666           62,087           (7,326)
                                                              ---------        ---------        ---------        ---------
</TABLE>

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

                                       F-6

<PAGE>   38




                              BRISTOL HOTEL COMPANY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
                  COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                                                      HARVEY HOTEL
                                                                        BRISTOL HOTEL COMPANY                           COMPANIES
                                                       ----------------------------------------------------------  -----------------
                                                                                                      Eleven
                                                           Year Ended         Year Ended            Months Ended      Month Ended
                                                       December 31, 1997   December 31, 1996     December 31, 1995  January 31, 1995
                                                       -----------------   -----------------     -----------------  ----------------
<S>                                                         <C>             <C>                        <C>             <C>      
Net increase (decrease) in cash and
  cash equivalents ..............................           $ 81,501        $         (3,240)          $  2,493        $ (3,552)

Cash and cash equivalents at beginning of period               4,666                   7,906              5,413           4,118
                                                            --------        ----------------           --------        --------

Cash and cash equivalents at end of period ......           $ 86,167        $          4,666           $  7,906        $    566
                                                            ========        ================           ========        ========


Supplemental cash flow information:
   Interest paid ................................           $ 39,706        $         17,696           $ 17,111        $    330
                                                            ========        ================           ========        ========
   Income taxes paid ............................           $ 10,942        $          3,543           $  2,685        $     --
                                                            ========        ================           ========        ========

Non-cash investing and financing activities:
   Debt assumed to acquire property
     and equipment ..............................           $ 21,813        $             --           $ 12,100        $     --
                                                            ========        ================           ========        ========
   Sale of non-hotel properties for assumption
     of liabilities .............................           $     --        $             --           $  4,723        $     --
                                                            ========        ================           ========        ========
   Purchase of minority interest for common stock           $     --        $             --           $  1,110        $     --
                                                            ========        ================           ========        ========

Common stock issued in Holiday Inn Acquisition ..           $267,967        $             --           $     --        $     --
                                                            ========        ================           ========        ========
</TABLE>





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

                                       F-7

<PAGE>   39

                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
             NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS


1.         ORGANIZATION

           Bristol Hotel Company (the "Company") is a Delaware corporation which
           was incorporated in November 1994 and began operations after the
           acquisitions of Harvey Hotel Company, Ltd. and its subsidiaries
           (together, "Harvey Hotel Companies" or "Predecessor") and United
           Inns, Inc. ("United Inns") (collectively, the "Combination"). The
           Company owns 86 hotels and manages 15 additional hotels, two of which
           are owned by joint ventures in which the Company owns a 50% interest.
           The properties, which contain approximately 28,800 rooms, are located
           in 22 states, the District of Columbia and Canada. The Company
           acquired the ownership and/or management of 60 of these properties on
           April 28, 1997 (the "Holiday Inn Acquisition"). The Combination and
           the Holiday Inn Acquisition are more fully described in Note 3.

2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           PRINCIPLES OF CONSOLIDATION

           The accompanying consolidated financial statements include the
           accounts of the Company and its subsidiaries. The combined financial
           statements of the Predecessor include the accounts of Harvey Hotel
           Company and related entities, all of which were under common control.
           The owners of these entities combined their interests for the purpose
           of forming a new entity which was acquired by the Company. The
           accounts of United Inns and its subsidiaries are included from
           February 1, 1995, the date of acquisition. The results of operations
           of the hotels acquired in the Holiday Inn Acquisition have been
           included in the Company's financial statements since April 28, 1997.
           All significant intercompany accounts and transactions have been
           eliminated.

           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.

           TRADING SECURITIES

           Marketable securities consist primarily of equity securities and
           mutual fund shares. Equity securities have been classified as either:
           (i) available-for-sale, which are reported at fair value, with net
           unrealized gains and losses excluded from earnings and reported as a
           separate component of changes in equity; or (ii) trading securities,
           which are reported at fair value, with unrealized holding gains and
           losses for trading securities included in earnings. At December 31,
           1997 and 1996, all marketable securities owned by the Company were
           classified as trading securities.

           ACCOUNTS RECEIVABLE

           Accounts receivable in the balance sheets are expected to be
           collected within one year and are net of estimated uncollectible
           amounts of $2,259,000 and $344,000, at December 31, 1997 and 1996,
           respectively.

           Valuation and qualifying accounts consist of allowance for doubtful
           accounts as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                             Write-Off of
                                                                    Balance at   Charged to    Amounts       Balance at
                                                                    Beginning    Costs and    Previously       End of
                                                                    of Period     Expenses     Reserved        Period
                                                                   -----------   ----------   -----------    -----------
           Company
<S>                                                                 <C>            <C>           <C>           <C>   
              Year ended December 31, 1997......................    $    344       $2,306        $(391)        $2,259
              Year ended December 31, 1996......................         620          251         (527)           344
              Eleven months ended December 31, 1995.............         221          796         (397)           620
</TABLE>



                                       F-8

<PAGE>   40





                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           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.

           DEFERRED CHARGES AND OTHER NONCURRENT ASSETS

           Deferred charges and other noncurrent assets consist primarily of
           financing costs which are amortized over the life of the related
           loan. The amounts reported in the balance sheets at December 31, 1997
           and 1996, are net of accumulated amortization of $1,965,000 and
           $2,144,000, respectively.

           PROPERTY AND EQUIPMENT

           The Company recorded the Combination and the Holiday Inn Acquisition
           on the basis of an allocation of the purchase price based on the fair
           market value of the assets acquired at the date of acquisition.
           Subsequent additions and improvements are capitalized at their cost,
           including interest costs associated with the renovation of certain
           hotels. Interest capitalized during the years ended December 31, 1997
           and 1996 was $1,628,000 and $2,100,000, respectively.

           The cost of normal repairs and maintenance that does not
           significantly extend the life of the property and equipment is
           expensed as incurred. Depreciation is computed on a straight-line
           method over the estimated useful lives of the assets, as follows:

<TABLE>
<CAPTION>
                                                                 BRISTOL HOTEL COMPANY         HARVEY HOTEL COMPANIES
                                                                 ---------------------        ------------------------
<S>                                                             <C>                            <C>        
                      Buildings                                       35-40 years                    31-35 years
                      Furniture, fixtures and equipment               3-15 years                       7 years
                      Automobiles and trucks                            3 years                        3 years
                      Leasehold improvements                     Lease term or useful           Lease term or useful
                                                                life, whichever is less        life, whichever is less
</TABLE>


           Depreciation and amortization expense recorded for the years ended
           December 31, 1997 and 1996, and the eleven months ended December 31,
           1995 was $39.7 million, $18.4 million, and $13.5 million,
           respectively.

           The Company has adopted Statement of Financial Accounting Standards
           No. 121, "Accounting for Impairment of Long-Lived Assets and for
           Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires
           that an entity review long-lived assets for impairment whenever
           events or changes in circumstances indicate that the carrying amount
           of an asset may not be recoverable. Should 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 property and determine if the investment in the hotel
           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 hotel based on discounted future cash flows. As
           of December 31, 1997 and 1996, no impairment losses have been
           incurred. The assets, which were classified as available for sale as
           of December 31, 1996, were reclassified to held and used in the
           second quarter of 1997.

           RESTRICTED CASH

           Restricted cash consists of (i) funds placed in reserve for the
           replacement of furniture, fixtures and equipment, and (ii) tax and
           insurance reserves. The Company is required to deposit monthly with
           various lenders amounts of three to four percent of hotel revenues
           for replacement reserves plus the tax and insurance escrow. As tax
           and insurance payments are made and improvements are completed, the
           Company is reimbursed from the reserves.

                                       F-9

<PAGE>   41

                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

           In February 1997, Statement of Financial Accounting Standards No.
           128, "Earnings Per Share" ("SFAS 128") was issued. Under SFAS 128,
           basic earnings per share ("EPS") is computed by dividing net earnings
           by the weighted average number of shares of common stock outstanding
           during the period. SFAS 128 replaces fully diluted EPS, which the
           Company was not previously required to report, with EPS, assuming
           dilution ("diluted EPS"). The Company calculates diluted EPS assuming
           all outstanding options to purchase common stock have been exercised
           at the beginning of the year (or the time of issuance, if later). The
           dilutive effect of the outstanding options is reflected by
           application of the treasury stock method, whereby the proceeds from
           the exercised options are assumed to be used to purchase common stock
           at the average market price during the period. The Company adopted
           SFAS 128 effective December 15, 1997. All prior period EPS data have
           been restated. The effect of this accounting change on previously
           reported EPS data is not significant. The following table reconciles
           the computation of basic EPS to diluted EPS:

<TABLE>
<CAPTION>
                                                                             PER SHARE
                                               NET EARNINGS      SHARES        AMOUNT
                                               --------------   ---------    ----------   
                                               ($ in thousands)
<S>                                             <C>             <C>             <C>  
For the year ended December 31, 1997:
  Income before extraordinary item
     per share ...........................      $   33,214      37,359,364      $0.89
  Effect of options ......................              --         972,938
                                                ----------      ----------
  Income before extraordinary item per
     share, assuming dilution ............      $   33,214      38,332,302      $0.87
                                                ==========      ==========

  Net income per share ...................      $   20,473      37,359,364      $0.55
  Effect of options ......................              --         972,938
                                                ----------      ----------
  Net income per share, assuming dilution       $   20,473      38,332,302      $0.53
                                                ==========      ==========

For the year ended December 31, 1996:
  Income before extraordinary item
     per share ...........................      $   17,749      24,848,760      $0.71
  Effect of options ......................              --         677,653
                                                ----------      ----------
  Income before extraordinary item per
     share, assuming dilution ............      $   17,749      25,526,413      $0.70
                                                ==========      ==========

  Net income per share ...................      $   17,749      24,848,760      $0.71
  Effect of options ......................              --         677,653
                                                ----------      ----------
  Net income per share, assuming dilution       $   17,749      25,526,413      $0.70
                                                ==========      ==========

For the 11 months ended December 31, 1995:
  Income before extraordinary item
     per share ...........................      $    4,969      17,857,936      $0.28
  Effect of options ......................              --          51,019
                                                ----------      ----------
  Income before extraordinary item per
     share, assuming dilution ............      $    4,969      17,908,955      $0.28
                                                ==========      ==========

  Net income per share ...................      $    3,061      17,857,936      $0.17
  Effect of options ......................              --          51,019
                                                ----------      ----------

  Net income per share, assuming dilution       $    3,061      17,908,955      $0.17
                                                ==========      ==========
</TABLE>

      Earnings per share have been retroactively adjusted for the effect of
                                 stock splits.

                                      F-10


<PAGE>   42





                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           FOREIGN CURRENCY TRANSACTIONS

           As part of the Holiday Inn Acquisition, the Company acquired six
           hotels in Canada. Results of operations for those hotels are
           maintained in Canadian dollars and translated using average exchange
           rates during the period. Currency transaction losses are included in
           net income and were $303,000 for the year ended December 31, 1997.
           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 stockholders' equity as a
           cumulative foreign currency translation adjustment. Cumulative
           currency translation gains included in stockholders' equity at
           December 31, 1997 were $286,000.

           INCOME TAXES

           Company
                The Company accounts for income taxes under the Statement of
                Financial Accounting Standards No. 109, "Accounting for Income
                Taxes" ("SFAS 109"). SFAS 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 of assets and
                liabilities using currently enacted tax rates in effect for the
                years in which the differences are expected to reverse.

           Predecessor
                Harvey Hotel Company and related entities are partnership or
                S-Corporation entities, and income or loss for federal income
                tax purposes is allocated to the individual partners or
                shareholders. Accordingly, no recognition has been given to
                income taxes in the combined financial statements. However, pro
                forma income tax expense, at an effective rate of 34%, has been
                included in the combined statements of income in order to
                reflect the impact on the income of Harvey Hotel Companies.

                Harvey Hotel Corporation accounted for the tax effect of net
                income or loss in accordance with SFAS 109. However, because of
                the changes in ownership (see Note 1), realization of the
                benefit of the accumulated losses is uncertain and, therefore,
                has not been recorded in the combined financial statements.

           EARNINGS PER SHARE

           Earnings per share is determined by dividing net income by the
           weighted average number of common and common equivalent shares
           outstanding during the year. The 1995 weighted average shares
           outstanding has been calculated using the treasury stock method and
           as if Holdings' shares of 1,768,000 (see Note 3) had been outstanding
           since February 1, 1995. The 1997 and 1996 weighted average shares is
           calculated using the treasury stock method, giving effect to the
           common equivalent shares outstanding as of December 31, 1997 and
           1996. The common equivalent shares include officer and director stock
           options which have been deemed exercised at the issue date using the
           treasury method for the purposes of computing earnings per share. The
           Company has no other potentially dilutive securities.

           All weighted average share and per share data presented are
           calculated in accordance with SFAS 128, which calls for both basic
           and diluted weighted average share presentation. All prior period
           amounts have been restated in accordance with SFAS 128. The Company
           believes that there has been no impact on its financial statements
           from the implementation of SFAS 128, as the weighted average shares
           previously used in calculating earnings per share are the same as the
           diluted weighted average shares calculated under SFAS 128.

                                      F-11

<PAGE>   43



                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           EARNINGS PER SHARE (continued)

           On June 23, 1997, the Company's Board of Directors declared a
           three-for-two stock split, effective in the form of a stock dividend
           for shareholders of record June 30, 1997, which was distributed July
           15, 1997 (the "Stock Split"). All per share data and the average
           common and common equivalent shares issued and outstanding have been
           adjusted to reflect the Stock Split for all periods presented.

           USE OF ESTIMATES

           The Company has made a number of estimates and assumptions relating
           to the reporting of assets and liabilities, the disclosure of
           contingent assets and liabilities and the reported amounts of
           revenues and expenses to prepare these financial statements in
           conformity with generally accepted accounting principles.
           Actual results could differ from those estimates.

           RECLASSIFICATIONS

           Certain financial statement items from the prior years for the
           Company and the Predecessor have been reclassified to conform with
           the current presentation.

3.         ACQUISITIONS

           UNITED INNS ACQUISITION

           On January 27, 1995, United/Harvey Holdings L.P. ("Holdings")
           acquired the common stock of United Inns for an aggregate purchase
           price of $67 million plus the assumption of United Inns' liabilities.
           The acquisition was accounted for as a purchase and the purchase
           price was allocated to the net assets acquired. Under the acquisition
           agreement, Holdings, Harvey Hotel Companies, H. K. Huie, Jr., the
           Harvey Management Equity Holders and the other parties thereto, the
           following occurred: (1) Holdings contributed to the Company all of
           the outstanding capital stock of United Inns, approximately $15.1
           million in cash and certain cash advances previously made for the
           benefit of Harvey Hotel Companies in exchange for an aggregate of
           68.1% of the Company's Common Stock; (2) the Harvey Management Equity
           Holders collectively contributed to the Company 46.4% of the
           outstanding partnership interests in Harvey Hotel Companies in
           exchange for an aggregate of 20.6% of the Company's Common Stock; and
           (3) Mr. Huie contributed 25.3% of his 50.6% outstanding partnership
           interest in Harvey Hotel Companies for 11.3% of the Company's Common
           Stock. In addition, Mr. Huie and two of his daughters sold to the
           Company approximately 27.3% of the outstanding partnership interests
           in Harvey Hotel Companies for approximately $15.1 million in cash
           plus interest.

           As a result of these transactions, Holdings, Mr. Huie and the Harvey
           Management Equity Holders became the stockholders of the Company, the
           Company became the sole stockholder of United Inns, the Company
           became the indirect owner of 99% of the outstanding partnership
           interests in Harvey Hotel Companies, and in connection therewith, a
           wholly owned subsidiary of the Company became the managing general
           partner of Harvey Hotel Companies. Subsequently, one of Mr. Huie's
           daughters, who did not participate in the Combination, sold her 1.0%
           limited partnership interest in Harvey Hotel Companies (See Note 15).

           The aggregate purchase price for Harvey Hotel Companies of $55
           million in stock and cash including the interests contributed by the
           Harvey Management Equity Holders and Mr. Huie has been allocated,
           along with acquisition costs of $1 million, to the net assets
           acquired. The net assets contributed were valued at their estimated
           fair value on the basis of an independent valuation performed by
           Holdings and as a result of the cash paid for the 27.3% owned by Mr.
           Huie and his two daughters. The excess of the purchase price over the
           net assets acquired of $71.5 million was principally allocated to
           land and buildings in accordance with the purchase method of
           accounting.



                                      F-12

<PAGE>   44



                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


3.         ACQUISITIONS (CONTINUED)

           UNITED INNS ACQUISITION (continued)

           The consolidated statements of income for the Company includes the
           results of operations for United Inns from February 1, 1995.

           The following unaudited pro forma summary presents the combined
           results of Harvey Hotel Companies as if United Inns had been acquired
           at the beginning of 1995. The pro forma results have been prepared
           for comparative purposes only and do not purport to be indicative of
           the results of operations that would actually have resulted had the
           acquisition been in effect on the date indicated (in thousands):

<TABLE>
<CAPTION>
                                                                  (Unaudited)
                                                                  Month Ended
                                                               January 31, 1995
                                                               ----------------  
<S>                                                                <C>      
               Total revenues...................................   $  13,142
               Net income after extraordinary gain and
                pro forma income tax expense....................   $   1,111
</TABLE>

           HOLIDAY INN ACQUISITION

           On April 28, 1997, the Company acquired the ownership of 45
           full-service Holiday Inns and the management of an additional 15
           Holiday Inn properties, three of which were owned by joint ventures
           in which the Company acquired a 50% interest (the owned hotels,
           management contracts and joint venture interests, collectively
           referred to as the "Holiday Inn Assets"). As consideration for the
           Holiday Inn Acquisition, the Company paid $398 million in cash and
           issued 9,381,308 shares (pre-Stock Split) of its common stock. The
           acquisition has been accounted for as a purchase and the results of
           operations of the Holiday Inn Assets have been included in the
           consolidated financial statements since April 28, 1997. The purchase
           price, including liabilities assumed in the acquisition (principally
           deferred tax liabilities) was allocated to the assets acquired, based
           upon their fair market values. The excess of the purchase price over
           the estimated fair market value of the net assets acquired was
           recorded as goodwill and is being amortized over 40 years.

           The following unaudited pro forma summary presents the results of the
           Company as if the Holiday Inn Acquisition and related refinancing
           pursuant to the New Credit Facility (see Note 6) had occurred at the
           beginning of the period presented. The pro forma results have been
           prepared for comparative purposes only and are not indicative of the
           results of operations that would have occurred had the Holiday Inn
           Acquisition occurred on the date indicated.
<TABLE>
<CAPTION>

                                                               (Unaudited)
                                                            1997         1996
                                                          ----------  ----------    
                                                               (in thousands)
<S>                                                       <C>         <C>       
               Total revenues............................ $  626,047  $  571,876
               Income before extraordinary item.......... $   41,165  $   31,981
               Net income................................ $   29,762  $   31,981

</TABLE>

                                      F-13

<PAGE>   45




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


3.         ACQUISITIONS (CONTINUED)

           OTHER ACQUISITIONS

           In addition to the Holiday Inn Acquisition, the Company completed the
           following single-asset acquisitions in 1997 and 1996:
<TABLE>
<CAPTION>
                                                                                                            Mortgage
                      Date                                           Number          Purchase                Debt
                    Acquired                Location                of Rooms           Price                Assumed
                  -----------               --------                --------           -----                -------                 

                  <S>                   <C>                             <C>       <C>                     <C>           
                  December 1997         Milpitas (San Jose), CA         305       $  4.25 million (1)     $      -
                  December 1997         Philadelphia, PA                364        $25.50 million         $ 13.4 million
                  October 1997          St. Louis, MO                   318        $18.00 million         $  8.4 million
                  January 1997          Chicago, IL                     378        $35.00 million         $      -
                  May 1996              Plano, TX                       161       $  6.30 million         $      -
</TABLE>

           (1)    The Holiday Inn - Milpitas was previously owned by a joint
                  venture in which the Company owned a 50% interest. The Company
                  purchased the remaining 50% interest in the venture for $4.25
                  million and, concurrently with the acquisition, repaid all
                  outstanding debt associated with the property of $25.7
                  million.

4.         PROPERTY AND EQUIPMENT

           Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                     December 31, 1997         December 31, 1996
                                                                     -----------------         -----------------
                  <S>                                                  <C>                       <C>          
                  Land............................................     $     169,611             $      50,528
                  Buildings.......................................         1,152,383                   406,682
                  Furniture, fixtures and equipment...............           162,045                    74,827
                                                                       -------------             -------------
                                                                           1,484,039                   532,037
                      Less accumulated depreciation...............           (76,172)                  (26,091)
                                                                       -------------             -------------
                                                                           1,407,867                   505,946
                  Assets held for sale (net of accumulated
                      depreciation of $0 and  $4,980).............            -                         38,279
                  Construction in progress........................            31,300                     8,339
                                                                       -------------             -------------
                                                                       $   1,439,167             $     552,564
                                                                       ============              =============
</TABLE>


           The Company's properties are predominantly full-service hotels that
           operate in the upscale and mid-price with food and beverage segments
           of the lodging industry under franchise agreements primarily with
           Holiday Inn. The Company seeks to maintain a geographically diverse
           portfolio of hotels to offset the effects of regional economic
           cycles. The Company operates properties in 22 states, the District of
           Columbia and Canada, including 13 hotels in California, 11 in
           Georgia, 27 in Texas, seven in Florida, and six in Canada.

           During fiscal year 1996, the Company classified certain
           limited-service hotels as assets held for sale pursuant to the
           provisions of SFAS 121. During 1997, the Company reclassified these
           assets as held and used, therefore recording depreciation expense on
           these assets. The results of operations for these limited-service
           properties included in the income statement for the years ended
           December 31, 1997, 1996 and 1995 were (in thousands):
<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                             ---------------------------------
                                                  1997       1996      1995
                                             -----------  ---------  ---------

          <S>                                <C>          <C>        <C>     
           Total revenues................... $   13,464   $  16,398  $ 14,552
           Operating income.................      2,186       5,580     4,020
</TABLE>


                                      F-14
<PAGE>   46


                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


5.         MARKETABLE SECURITIES

           In 1995, the Company classified certain equity securities as
           Available-for-Sale Securities (per Statement of Financial Accounting
           Standard No. 115, "Accounting for Certain Investments in Debt and
           Equity Securities"). Unrealized gains were reported as a separate
           component of stockholders' equity. In May 1996, management resolved
           to sell the equity securities, and accordingly, the securities were
           reclassified as Trading Securities and an unrealized gain of
           approximately $450,000 was recorded in earnings in 1996.
           These securities were sold in August 1996.

6.         LONG-TERM DEBT

           Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                  December 31, 1997    December 31, 1996
                                                                                 ------------------   --------------------
           <S>                                                                    <C>                   <C>          
           Senior Notes
               11.22% due December 18, 2000 (net of discount)................     $      29,469         $      68,340
           Mortgage loans
               Fixed rate:
                  7.66% due October 27, 2009.................................           455,000                  -
                  7.458% due November 11, 2007...............................           144,834                  -
                  8% due December 31, 2002...................................            40,263                42,126
                  8.55% due January 11, 2016.................................            14,324                14,626
                  9% due October 1, 2005.....................................            13,401                  -
                  9.5% due August 1, 2005....................................             8,366                  -
                  Non-interest bearing due December 31, 2002.................             7,950                 9,086
                  7.25% due September 30, 1997...............................               -                   8,110
               Variable rate:
                  7.75% Senior Term Facility due December 18, 1998...........               -                  66,976
                  10.26% due January 31, 2000................................               -                   9,300
                  10.25% due December 31, 1999...............................               -                   6,899
                  8.5% due September 30, 1997................................               -                   1,500
           Other long-term debt..............................................               345                 4,329
           Capital leases....................................................             3,367                 1,402
                                                                                  -------------         -------------
                                                                                        717,319               232,694
               Less current portion..........................................            (8,455)              (15,769)
                                                                                  -------------         -------------
                         Long-term debt, excluding current portion...........     $     708,864         $     216,925
                                                                                  =============         =============
</TABLE>

           The mortgages are amortized using varying methods as provided in the
           individual debt agreements. Substantially all of the Company's
           properties and equipment are pledged as collateral on mortgage
           obligations.

           The Company obtained the financing for the Holiday Inn Acquisition
           under a new senior term facility which provided for up to $560
           million aggregate amount of term loan borrowings (the "New Credit
           Facility"). The New Credit Facility was utilized to repay existing
           debt of approximately $134 million, to fund the cash portion of the
           Holiday Inn Acquisition and related closing costs. The Company repaid
           $108 million of borrowings from the New Credit Facility in May 1997
           with proceeds from the Offering (as defined in Note 10). The
           treatment of the extraordinary costs related to the repayment of debt
           is more fully described in Note 8.

           On October 28, 1997, the Company completed the refinancing of the
           existing $560 million New Credit Facility. The new financing (the
           "Refinancing") has two tranches: (a) $145 million at a fixed interest
           rate of 7.458%, a term of 10 years, and secured by 15 hotel
           properties; and, (b) $455 million at a fixed interest rate of 7.66%,
           a term of 12 years, and secured by 62 hotel properties.


                                      F-15

<PAGE>   47


                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


6.         LONG-TERM DEBT (CONTINUED)

           The Company prepaid $40 million of its 11.22% Senior Secured Notes
           (the "Senior Notes") in December 1997. In conjunction with the
           prepayment, the Company amended the Senior Note indenture to allow
           for a more flexible prepayment schedule. In connection with the
           Refinancing, Bristol Hotel Operating Company, a wholly owned
           subsidiary of the Company, became a joint and several guarantor of
           the Senior Notes along with Bristol Hotel Asset Company.

           As discussed in Note 15, portions of the mortgage loans associated
           with three of the Company's properties have been allocated to a third
           party.

           The aggregate maturities of long-term debt for the five years
           subsequent to December 31, 1997, are as follows (in thousands):
<TABLE>
<CAPTION>

                     Year ended December 31,
                                <S>                          <C> 
                               1998.......................   $       8,455
                               1999.......................           8,387
                               2000.......................          38,421
                               2001.......................           9,146
                               2002.......................          34,230
                               Thereafter.................         618,680
                                                             -------------
                                                             $     717,319
                                                             =============
</TABLE>
    
7.         INCOME TAXES

           Components of income tax expense from continuing operations for the
           years ended December 31, 1997 and 1996 and the eleven months ended
           December 31, 1995, consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                       1997              1996             1995
                                                                  --------------   ---------------   ---------------
                  <S>                                             <C>               <C>              <C>           

                  Federal:
                      Current.................................    $       12,683    $       4,486    $        3,245
                      Deferred................................             4,637            5,301              (579)
                  State:
                      Current.................................             1,837              282               190
                      Deferred................................               509              332               (34)
                  Canada:
                      Current.................................             1,618                -                 -
                      Deferred................................               723                -                 -
                                                                  --------------    -------------    --------------

                                                                  $       22,007    $      10,401    $        2,822
                                                                  ==============    =============    ==============
</TABLE>


           Components of income tax benefit from extraordinary items for the
           years ended December 31, 1997 and 1996, consist of the following (in
           thousands):
                             
<TABLE>
<CAPTION>
                                                                      1997               1996
                                                                  --------------    -------------
                  <S>                                             <C>               <C>     
                  Federal:
                      Current.................................    $        7,358    $      -
                      Deferred................................            -                -
                  State:
                      Current.................................             1,098           -
                      Deferred................................            -                -
                                                                  --------------    -------------

                                                                  $        8,456    $      -
                                                                  ==============    =============
</TABLE>


                                      F-16

<PAGE>   48







                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


7.         INCOME TAXES (CONTINUED)

           The Company estimates that its effective tax rate for 1997
           approximated 39.9%. The actual income tax expense for the year ended
           December 31, 1997, is computed by applying the U. S. federal
           statutory income tax rate, adjusted as follows:

<TABLE>
                  <S>                                                                                <C>  
                  Income tax expense at the U. S. federal statutory rate.........................     35.0%
                  State income taxes, net of federal benefit      ...............................      3.6%
                  Permanent differences and effect of higher Canadian tax rates..................      1.3%
                                                                                                     ------
                                                                                                      39.9%
                                                                                                     ======
</TABLE>

           The tax effects of temporary differences that give rise to
           significant portions of the deferred tax assets and liabilities at
           December 31, 1997 and December 31, 1996, are as follows (in
           thousands):
<TABLE>
<CAPTION>

                                                                                   1997            1996
                                                                                ----------     -----------
<S>                                                                             <C>            <C>        
                  Purchase accounting adjustments to
                     land and building.....................................     $  248,866     $    85,134
                  Other....................................................            994          -
                                                                                ----------     -----------
                      Gross deferred tax liabilities.......................        249,860          85,134
                                                                                ----------     -----------

                  Tax credit and NOL carryforwards.........................          4,011           5,502
                  Accrued reserves.........................................          1,823           2,192
                  Other....................................................          1,496           1,821
                                                                                ----------     -----------

                  Gross deferred tax asset.................................          7,330           9,515
                  Valuation allowance......................................         -               -
                                                                                ----------     -----------
                  Deferred tax asset.......................................          7,330           9,515
                                                                                ----------     -----------

                      Net deferred tax liability...........................     $  242,530     $    75,619
                                                                                ==========     ===========
</TABLE>


           The gross deferred tax liabilities relate principally to the
           temporary differences caused by the purchase accounting adjustments
           recorded as a result of the Combination and the Holiday Inn
           Acquisition. For financial reporting purposes, the transactions were
           recorded under the principles of purchase accounting and,
           accordingly, the basis of the assets have been adjusted to fair
           market value. For tax reporting purposes, the transactions resulted
           in the bases of the assets and liabilities being carried forward at
           their adjusted bases with some adjustment for certain gains
           recognized on the acquisition. This differing treatment has created
           book bases in excess of tax bases and, accordingly, the related
           deferred tax liabilities associated with these differences have been
           recorded. As the Company depreciates and amortizes the bases of its
           assets for book and tax purposes, it will record an expense for
           depreciation and amortization in excess of that claimed for tax
           purposes. This reversal of the temporary differences established
           through purchase accounting will result in the Company recording a
           credit to deferred tax expense for the tax effect of these
           differences.

           The remaining deferred tax assets are expected to be realized in
           future periods through use of existing tax NOL and tax credit
           carryforwards.


                                      F-17

<PAGE>   49




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


7.         INCOME TAXES (CONTINUED)

           For federal tax reporting purposes, net operating losses of
           $8,988,000 and tax credits of $657,000 generated by United Inns and
           Harvey Hotel Corporation in prior years are available to be carried
           forward to periods expiring as follows (in thousands):

<TABLE>
<CAPTION>
                               Year of Expiration                            Federal NOL         Tax Credits
                               ------------------                            -----------         -----------
                                      <S>                                   <C>                  <C> 
                                      2001.............................    $      -              $         142
                                      2002.............................           -                        154
                                      2003.............................           -                        158
                                      2004.............................           -                        103
                                      2005.............................            3,924                    58
                                  2006 to 2010.........................            5,064                    42
                                                                           -------------         -------------
                                                                           $       8,988         $         657
</TABLE>


           The losses and credits are subject to an annual loss limitation
           equivalent of approximately $4.8 million due to the changes in
           ownership of United Inns and Harvey Hotel Corporation which occurred
           in 1995. These carryforwards are further limited as they were
           incurred prior to the ownership of United Inns and Harvey Hotel
           Corporation by the Company. Accordingly, these carryforwards are
           available only to offset income and taxes associated with the
           operations of the hotels that generated them.

8.         EXTRAORDINARY ITEMS

           On April 28, 1997, the Company recognized an extraordinary loss of
           $2.2 million ($1.3 million, net of tax) related to the early
           extinguishment of debt with proceeds from the New Credit Facility.
           The Company incurred $479,000 of prepayment penalties and wrote off
           $1.7 million in deferred financing costs.

           The Company refinanced the New Credit Facility in October 1997 and
           recognized an extraordinary loss of $14.0 million ($8.4 million, net
           of tax) related to the early extinguishment of the New Credit
           Facility. The loss on extinguishment reflects the write-off of
           deferred financing fees related to the New Credit Facility.

           The Company prepaid a portion of its Senior Notes on December 16,
           1997. The Company prepaid $40 million of principal, and recognized an
           extraordinary loss of $5.0 million ($3.0 million, net of tax). The
           extraordinary loss reflects the $2.4 million in prepayment penalties
           paid by the Company for the Senior Notes, as well as the write-off of
           approximately $2.6 million of deferred financing fees and discount on
           the Senior Notes.

9.         ACCOUNTS PAYABLE AND ACCRUED EXPENSES

           Accounts payable and accrued expenses consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31, 1997     DECEMBER 31, 1996
                                                                                  -----------------     -----------------   
                      <S>                                                           <C>                   <C>          
                      Accounts payable..........................................    $       2,921         $       1,689
                      Accrued payroll, payroll taxes and benefits...............           15,480                 5,208
                      Accrued interest..........................................            3,738                   993
                      Accrued hotel operating expenses..........................            1,405                   858
                      Accrued Holiday Inn Acquisition
                          costs/conversion costs................................            1,104                    -
                      Other.....................................................            2,718                 1,878
                                                                                    -------------         -------------
                                                                                    $      27,366         $      10,626
                                                                                    =============         =============
</TABLE>



                                      F-18

<PAGE>   50




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


10.        STOCKHOLDERS' EQUITY

           On April 28, 1997, the Company's shareholders voted to amend the
           Company's certificate of incorporation to increase the number of
           authorized shares of common stock from 75,000,000 to 150,000,000. As
           part of the consideration for the Holiday Inn Acquisition, the
           Company issued 9,381,308 shares (pre-split) of its common stock.

           On May 16, 1997, the Company issued 2,750,000 (pre-Stock Split)
           shares of its common stock at a price of $36 per share (the
           "Offering"). The Company issued an additional 412,500 shares
           (pre-Stock Split) on May 28, 1997, pursuant to an over-allotment
           agreement with the underwriters of the Offering. Proceeds from the
           issuances were approximately $108 million (net of costs of $6.3
           million).

           NON-EMPLOYEE DIRECTOR OPTIONS

           The Company instituted a Stock Option Plan for Non-Employee Directors
           (the "Director Plan") in 1995. Only members of the board who are not
           employees of the Company or an employee of a 10% beneficial owner or
           an affiliate thereof will be eligible for option grants thereunder
           (an "Eligible Director"). An Eligible Director receives an option to
           purchase 7,500 shares of Common Stock at an exercise price equal to
           the market value on the date the individual becomes a director, and
           those options shall become exercisable 34% at the first next annual
           shareholders' meeting at which the individual is a director, and 33%
           at each of the next two consecutive years during which the individual
           is a director. In addition, the Eligible Director will receive
           options to purchase 7,500 shares at each annual meeting during which
           the individual is a director, exercisable on the date of the next
           annual shareholders' meeting at which the individual is a director.
           As of December 31, 1997, a total of 52,500 options had been granted
           to the three Eligible Directors on the board, 25,050 of which are
           currently exercisable.

           EMPLOYEE OPTIONS

           Under the Amended and Restated 1995 Equity Incentive Plan, the
           Company may award to participating officers and employees, options to
           purchase the Company's stock. Employee stock options may be granted
           to officers and employees with an exercise price generally not less
           than the fair market value of the common stock at the date of grant.
           Options expire at 10 years from date of grant. Options issued prior
           to December 31, 1995, have cliff vesting from 1998 - 2000 and options
           issued on or after January 1, 1996, vest ratably over a four- or
           five-year period from the date of the grant. There were 2,069,441
           employee options outstanding at December 31, 1997, of which 82,800
           were exercisable.

           SFAS 123 DISCLOSURE

           In October 1995, the Financial Accounting Standards Board issued
           Statement of Financial Accounting Standards No. 123, "Accounting for
           Stock-Based Compensation" ("SFAS 123"), effective for fiscal years
           beginning after December 15, 1995. SFAS 123 encourages, but does not
           require, companies to record compensation cost for stock-based
           employee compensation plans at fair value. The Company has chosen to
           continue to account for stock-based compensation using the intrinsic
           value method prescribed in Accounting Pronouncement Bulletin Opinion
           No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
           Accordingly, compensation cost for stock options is measured as the
           excess, if any, of the market price of the Company's stock at the
           date of the grant over the amount the employee must pay to acquire
           the stock. The Company, therefore, does not believe that the
           implementation of SFAS 123 has had a material adverse impact on the
           Company's financial position or results of operations.


                                      F-19

<PAGE>   51




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


10.        STOCKHOLDERS' EQUITY (CONTINUED)

           SFAS 123 DISCLOSURE (continued)

           However, had compensation cost for these plans been determined
           consistent with the method of SFAS No. 123, the Company's net income
           and earnings per share would have been reduced to the following pro
           forma amounts (dollars in thousands):

<TABLE>
<CAPTION>
                                                                    YEAR ENDED        YEAR ENDED          ELEVEN MONTHS ENDED
                                                                 DECEMBER 31, 1997    DECEMBER 31, 1996   DECEMBER 31, 1995
                                                                 -----------------    -----------------   -----------------
                  <S>                       <C>                  <C>                 <C>                  <C>
                  Net Income                As Reported          $       20,473       $      17,749       $     3,061
                                            Pro Forma                    19,060              16,865             2,621
                  Basic EPS                 As Reported                  0.55                0.71                0.17
                                            Pro Forma                    0.51                0.68                0.15
                  Diluted EPS               As Reported                  0.53                0.70                0.17
                                            Pro Forma                    0.50                0.67                0.15
</TABLE>

           A summary of the status of the Company's stock option plan at
           December 31, 1997, 1996 and 1995, (adjusted for Stock Split) and
           changes during the years then ended is presented in the table and
           narrative below:
<TABLE>
<CAPTION>
                                                        1997                    1996                      1995
                                            --------------------------  -----------------------  -------------
                                                      WEIGHTED AVERAGE          WEIGHTED AVERAGE           WEIGHTED AVERAGE
                                              SHARES   EXERCISE PRICE   SHARES   EXERCISE PRICE   SHARES    EXERCISE PRICE

<S>                                        <C>            <C>         <C>           <C>          <C>          <C>     
           Outstanding at January 1.....    1,613,363     $  10.57     1,190,766    $    8.41       -         $      -
           Options granted..............      520,400        25.06       435,000        16.39     1,190,766         8.41
           Options exercised............       (6,929)       16.47          -             -         -
           Options expired..............       (4,893)        9.78       (12,403)        8.33       -                -
                                            ---------     --------     ---------    ---------    ----------   ----------

           Options outstanding at
              December 31...............    2,121,941     $  14.10     1,613,363    $   10.57     1,190,766   $     8.41
                                            =========     ========     =========    =========    ===========  ==========

           Options exercisable at
              December 31...............      107,850     $  16.60         5,100    $   15.00       -                -
                                            =========     ========     =========    =========    ===========

           Weighted average fair value
               of options...............    $    7.82                  $    5.76                 $      4.11
                                            =========                  =========                 ===========
</TABLE>


           The 2,121,941 options outstanding at December 31, 1997, have exercise
           prices between $8.33 and $28.25 with a weighted average exercise
           price of $14.10 and a weighted average remaining contractual life of
           8.1 years. At December 31, 1997, 107,850 of these options (with a
           weighted average exercise price of $16.60) are exercisable.

           The fair value of each option grant is estimated on the date of grant
           using the Black-Scholes option pricing model with the following
           weighted-average assumptions used for grants in 1997, 1996 and 1995;
           risk-free interest rates from 5.30% to 7.04%; no expected dividend
           yields; expected lives of one to seven years; expected volatility of
           33.37%.


                                      F-20

<PAGE>   52




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


11.        OPERATING LEASES

           The Company leases certain land, office space and equipment under
           noncancellable operating lease commitments. Minimum rentals due under
           these agreements for the next five years and thereafter are as
           follows (in thousands):

<TABLE>
<CAPTION>
                      Year Ended December 31,
                      <S>                                  <C>      
                         1998........................      $  11,933
                         1999........................         11,976
                         2000........................         12,046
                         2001........................         12,029
                         2002........................         11,887
                      Thereafter.....................        216,075
                                                           ---------
                                                           $ 275,946
                                                           =========
</TABLE>
      

           Leases include long-term ground leases for certain hotels, generally
           with renewal options. Certain leases contain provisions for the
           payment of contingent rentals based on a percentage of sales.

           The Company leases certain hotel space to third-party vendors. Future
           minimum rentals to be received under noncancellable operating leases
           that have initial or remaining lease terms in excess of one year are
           as follows (in thousands):
<TABLE>
<CAPTION>

                      Year Ended December 31 ,
                               <S>                              <C>       
                               1998........................     $    3,582
                               1999........................          3,562
                               2000........................          3,289
                               2001........................          3,116
                               2002........................          2,720
                            Thereafter.....................         13,868
                                                                ----------
                                                                $   30,137
                                                                ========== 
</TABLE>

12.        MANAGEMENT CONTRACTS

           The Company acquired the management of 15 hotels in the Holiday Inn
           Acquisition, three of which were owned by joint ventures in which the
           Company owned a 50% interest. The purchase price allocated to these
           contracts at April 28, 1997 was $4.4 million and is being amortized
           on a straight-line basis over the remaining lives of the agreements,
           which range from one to 11 years. The amortization of the purchase
           price recorded in 1997 was $878,000. Management fee income was $4.9
           million in 1997, $2.5 million in 1996, and $1.4 million in 1995.
           These management contracts may contain provisions which allow the
           third-party owner to terminate the contract for such reasons as sale
           of the property, for cause or without cause. Therefore, the Company
           cannot guarantee that it will continue to manage these properties to
           the contract expiration date.

           The Company acquired the remaining 50% interest in one of the joint
           ventures in which it was a partner in December 1997. (See Note 13.)

13.        INVESTMENTS IN JOINT VENTURES

           The Company acquired 50% interests in three joint ventures in the
           Holiday Inn Acquisition. The purchase price allocated to these joint
           ventures was approximately $12 million and is being amortized on a
           straight-line basis over the estimated life of the assets acquired.
           Amortization expense of $308,000 was recorded in 1997.


                                      F-21

<PAGE>   53




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


13.        INVESTMENTS IN JOINT VENTURES (CONTINUED)

           On December 11, 1997, the Company acquired the remaining 50% interest
           in the Milpitas Joint Venture for $4.25 million. Concurrently with
           the acquisition, the Company paid off all outstanding debt related to
           the property of $25.7 million. None of the original $12 million
           purchase price allocated to the joint ventures in the Holiday Inn
           Acquisition was attributed to the Milpitas Joint Venture.

14.        BENEFITS

           Health (including fully insured term life and accidental death and
           dismemberment), dental and disability coverage is provided to the
           Company's employees through the Welfare Benefit Trust (the "Trust").
           The Company maintains varying levels of stop-loss and umbrella
           insurance policies to limit the Company's per occurrence and
           aggregate liability in any given year. Actual claims and premiums on
           stop-loss insurance, medical and disability policies are paid from
           the Trust. The Trust is funded through a combination of employer and
           employee contributions. The Trust also pays work-related injury
           claims which are funded by the employer for its employees in Texas.
           Since April 1, 1995, all employees have been eligible for
           participation in the benefits provided through the Trust. The Company
           provided $6.1 million and $2.9 million related to these benefits for
           the years ended December 31, 1997 and 1996, respectively.

           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(a) of the Internal Revenue Code. Under the
           401(k) Plan, eligible employees are allowed to defer up to 16% of
           their income on a pretax basis through contributions to the Plan;
           however, only the first 6% of pretax income is subject to matching by
           the Company. The Company may elect to make matching contributions of
           up to 50% of the employees' matchable contributions subject to
           certain performance measures of the Company. The Company provided for
           matching contributions for the years ended December 31, 1997 and 1996
           totaling $1.5 million and $135,000, respectively.

15.        COMMITMENTS AND CONTINGENCIES

           Substantially all of the Company's hotel properties are (or will be
           in the next year) operated pursuant to franchise or license
           agreements ("Franchise Agreements"), primarily with Holiday Inn
           Franchising, Inc. or its affiliates. The Company also operates hotels
           under franchise agreements with Marriott International, Inc., Hampton
           Inn (a division of Promus Hotels, Inc.), Ramada Franchise Systems,
           Inc. and Days Inn Inc. of America Franchising Inc. 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 2017, and
           generally may not be terminated without the payment of substantial
           fees. Franchise fees of $19.5 million and $4.1 million were paid
           during the years ending December 31, 1997 and 1996, respectively.

           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.

           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.

In connection with the administration of the Dallas County Probate Court of the
estate of the deceased wife of H.K. Huie, Jr., one of Mr. Huie's daughters (the
"Plaintiff"), alleged self dealing and breach of duty and


                                      F-22

<PAGE>   54


                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


15.        COMMITMENTS AND CONTINGENCIES (CONTINUED)

           trust by Mr. Huie as executor and testamentary trustee under his
           wife's will and in connection with his actions as the managing
           general partner of Harvey Hotel Company and related partnerships and
           ventures (the "Probate Proceeding"). Several of the Company's
           officers and certain subsidiaries were also named defendants in the
           Probate Proceeding. In November 1995, the Company and the Plaintiff
           entered into a settlement agreement and release (the "Settlement
           Agreement") pursuant to which Plaintiff agreed to release the
           Company, including its subsidiaries, from the lawsuit. Pursuant to
           the Settlement Agreement, the Company paid an aggregate of $2.4
           million for the Plaintiff's 1% interest in Harvey Hotel Company and a
           full release from all claims and causes of action. However, at that
           time, the named officers remained defendants in the Probate
           Proceeding. In the summer of 1996, during continuing mediation with
           the officers, the Plaintiff threatened the Company with further
           action, claiming fraud and misrepresentation in the negotiation of
           the November 1995 Settlement Agreement. In August 1996, there was a
           final resolution of the Probate Proceeding, a result of which the
           Company paid an additional $0.75 million for the full satisfaction of
           all claims and causes of action which could be asserted against the
           Company, its subsidiaries or its officers. The Company had reserved
           $1.65 million for this litigation. As a result, the Company
           recognized $0.9 million ($0.6 million after tax) as other income
           during the third quarter of 1996.

           On March 28, 1997, the Company paid approximately $663,000 to the
           State of Tennessee Department of Revenue in full settlement of all
           claims for franchise and excise tax related to United Inns, Inc.

           All of the owned hotels of the Company have undergone Phase I
           environmental assessments which generally provide a physical
           inspection and data base search but not soil or groundwater analysis.
           In addition, most of the Company's hotels have been inspected to
           determine the presence of asbestos-containing materials ("ACM's").
           While ACM's are present in certain of the Company's properties,
           operations and maintenance programs for maintaining such ACM's have
           been implemented, or the ACM's have been scheduled to be or have been
           abated, at such hotels. None of the environmental assessments
           conducted to date have revealed any environmental condition that
           management believes would have a material adverse effect on the
           Company's business, assets or results of operations, nor is
           management aware of any such condition. However, it is possible that
           these assessments have not revealed all potential environmental
           liabilities or that there are material environmental liabilities of
           which management is not aware.

           In September 1995, the Company disposed of certain of its non-hotel
           properties to HH Land Company, L.P. ("HH Land Company"). Upon
           acquisition of the non-hotel properties, HH Land Company assumed all
           liabilities associated with the non-hotel properties through a formal
           indemnification agreement, including environmental liabilities
           associated with the properties. The Company remains contingently
           liable for the environmental costs associated with the properties. At
           such time that the Company determines that it is not probable that HH
           Land Company will fully pay the remediation costs related to the
           disposed properties, the Company will recognize such liabilities.

           The Company leases the land underlying several of its hotels under
           various long-term leases through the year 2063. Lease payments under
           the agreements were $11.0 million and $2.6 million in 1997 and 1996,
           respectively.



                                      F-23

<PAGE>   55




                             BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
      NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


15.        COMMITMENTS AND CONTINGENCIES (CONTINUED)

           The Company and Mr. Huie, representing various land ventures, are
           co-borrowers of funds secured by Harvey Hotel - DFW Airport, Harvey
           Hotel - Dallas, Bristol Suites, and the various related land parcels.
           The Company and Mr. Huie agreed to an assignment of the debt to the
           various unrelated land ventures resulting in the assignment of
           23.73%, 24.24% and 22.18% of the debt associated with the borrowings
           for each property, respectively. The related land parcels underlying
           each hotel are owned by Mr. Huie through the land ventures. The total
           debt and the amount allocated to Mr. Huie are as follows (in
           thousands):

<TABLE>
<CAPTION>
                                                                          1997                    1996
                                                                -------------------------  -------------------
                                                                  Total      Allocated      Total    Allocated
                                                                   Debt       to Huie        Debt     to Huie
                                                                 --------    ---------     --------  ---------
                  <S>                                            <C>         <C>           <C>       <C>      
                  Harvey Hotel - DFW Airport..............       $ 24,275    $   5,762     $ 25,581  $   6,071
                  Harvey Hotel - Dallas...................          7,442        1,802        7,600      1,843
                  Bristol Suites..........................         19,378        4,298       20,756      4,604
</TABLE>

           The Company is jointly and severally liable in the event of
           nonpayment by Mr. Huie of the debt allocated. For December 31, 1997
           and 1996, the allocated amounts have not been reflected in the
           consolidated financial statements of the Company. However, the
           Company does not record interest expense on the allocated debt
           because payments made to Mr. Huie are appropriately recorded as
           rental expense under the related land leases. The land parcels at the
           respective hotels are security for the additional liability.

16.        RELATED PARTY TRANSACTIONS

           HOTEL PROPERTIES AGREEMENT

           Concurrently with the Holiday Inn Acquisition, the Company, and
           Holiday Corporation and its affiliates (collectively, "HC") entered
           into a hotel properties agreement (the "Hotel Properties Agreement").
           Pursuant to the Hotel Properties Agreement, the Company will offer to
           HC the opportunity to enter into a standard HC franchise agreement
           for each hotel that Bristol acquires, manages or develops that meets
           specified criteria. The Hotel Properties Agreement requires that 85%
           of the rooms in the Company's owned, leased and managed hotels be
           operated under a Holiday Inn brand, subject to certain limitations
           and approvals. The above provisions of the Hotel Properties Agreement
           will expire the earlier of (i) the date that HC terminates its
           obligation at any time following 24 months after the Holiday Inn
           Acquisition (the "Holiday Notice") or (ii) the date that HC no longer
           holds a controlling interest in the franchisor of the Holiday Inn
           brands.

           Additionally, the Company has a right of first refusal on any entity
           or other interest meeting certain criteria that HC wishes to acquire
           or develop, subject to certain limitations. HC can terminate its
           obligation under this provision in accordance with the Holiday
           Notice.

           The Company has agreed to enter into Franchise Agreements with HC
           pursuant to which certain Bristol properties will be rebranded to
           Holiday Inn brands, subject to normal franchising procedures.
           Franchise fees for these rebranded hotels will equal 0% of room
           revenue for 1997, 1% in 1998, 3% in 1999 and 5% in 2000. Amounts paid
           to HC pursuant to Franchise Agreements and related marketing,
           advertising and reservation services were $21.8 million in 1997,
           including $13.1 million for franchise royalty fees and $4.5 million
           of franchise marketing fees.


                                      F-24

<PAGE>   56




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


16.        RELATED PARTY TRANSACTIONS (CONTINUED)

           INTERIM SERVICES AGREEMENT

           The Company entered into an interim services agreement (the "ISA
           Agreement") with Holiday Hospitality Corporation ("HHC") for HHC to
           provide certain accounting, payroll, employee benefit, training,
           treasury, management information and construction and design services
           to Bristol for a transition period following the Holiday Inn
           Acquisition. In consideration for such services, the Company
           reimbursed HHC for the estimated cost incurred in connection with
           providing the services, totaling $1.3 million for the year ended
           December 31, 1997. The ISA Agreement expired in October 1997.

17.        FAIR VALUE

           The Company has estimated the fair value of its financial instruments
           at December 31, 1997 and 1996, 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 their fair values. Marketable
           securities are carried at fair value, which is determined based upon
           quoted market prices. The carrying values of variable and fixed rate
           debt are reasonable estimates of their fair values.

18.        QUARTERLY FINANCIAL DATA (UNAUDITED)

           The unaudited consolidated quarterly results of operations for the
           Company and the unaudited combined quarterly results of operations
           for the Predecessor are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                        1995
                                                       -----------------------------------------------------------------------
                                                        HARVEY HOTEL             BRISTOL HOTEL COMPANY
                                                         COMPANIES      FEBRUARY TO       SECOND        THIRD        FOURTH
                                                        JANUARY 1995       MARCH         QUARTER       QUARTER       QUARTER
                                                       --------------  -------------  -------------  -----------  ------------
<S>                                                       <C>          <C>             <C>           <C>           <C>       
               Revenues..............................     $ 5,943      $     29,910    $    43,040     $    46,205   $    46,040
               Operating income......................       1,932             6,221          8,016           5,484         6,874
               Income (loss) before extraordinary item      1,280             2,268          2,056            (290)          935
               Net income (loss).....................       1,280             2,268          2,056            (290)         (973)
               Earnings per common share: 
                  Income (loss) before extraordinary item:
                      Basic..........................         -        $       0.13    $      0.12     $  (   0.02)  $      0.05
                      Diluted........................         -        $       0.13    $      0.12     $  (   0.02)  $      0.05
                   Net income (loss):
                      Basic..........................         -        $       0.13    $      0.12     $  (   0.02)  $ (    0.05)
                      Diluted........................         -        $       0.13    $      0.12     $  (   0.02)  $ (    0.05)
               Weighted average number of common and 
                 common equivalent shares:
                      Basic..........................         -          17,436,267     17,436,267      17,436,267    18,967,108
                      Diluted........................         -          17,460,202     17,479,061      17,479,953    19,050,967
</TABLE>






                                      F-25

<PAGE>   57




                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


18.         QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       1996
                                           -----------------------------------------------------------------------            
                                                                BRISTOL HOTEL COMPANY
                                             
                                              FIRST           SECOND             THIRD               FOURTH
                                             QUARTER          QUARTER           QUARTER              QUARTER
                                           ------------     ------------    ----------------      -----------------       
<S>                                        <C>              <C>              <C>                  <C>            
Revenues ............................      $    49,677      $    51,237      $        58,571      $        52,355
Operating income ....................           10,318           11,282               16,073                9,093
Income before extraordinary item ....            3,863            4,375                6,835                2,676
Net income ..........................            3,863            4,375                6,835                2,676
Earnings per common share:
    Income before extraordinary item:
       Basic ........................      $      0.16      $      0.18      $          0.28      $          0.11
       Diluted ......................      $      0.15      $      0.17      $          0.27      $          0.10
    Net income:
       Basic ........................      $      0.16      $      0.18      $          0.28      $          0.11
       Diluted ......................      $      0.15      $      0.17      $          0.27      $          0.10
Weighted average number of common and
   common equivalent shares:
    Basic ...........................       24,848,760       24,848,760           24,848,760           24,848,760
    Diluted .........................       25,511,455       25,552,515           25,530,737           25,524,361
</TABLE>



<TABLE>
<CAPTION>
                                                                              1997
                                                -------------------------------------------------------------------  
                                                                        BRISTOL HOTEL COMPANY
                                                     FIRST              SECOND           THIRD             FOURTH
                                                    QUARTER            QUARTER          QUARTER            QUARTER
                                                 -------------    ---------------    -------------    -------------      
<S>                                              <C>               <C>               <C>               <C>         
Revenues ..................................      $     58,261      $    131,615      $    163,005      $    151,637
Operating income ..........................            13,301            26,909            32,252            25,434
Income before extraordinary item ..........             4,410             9,622            12,066             7,116
Net income (loss) .........................             4,410             8,284            12,066            (4,287)
Earnings per common share:
   Income (loss) before extraordinary item:
       Basic ..............................      $       0.18      $       0.26      $       0.28      $       0.16
       Diluted ............................      $       0.17      $       0.25      $       0.27      $       0.16
    Net income (loss):
       Basic ..............................      $       0.18      $       0.22      $       0.28      $      (0.10)
       Diluted ............................      $       0.17      $       0.22      $       0.27      $      (0.10)
Weighted average number of common and
   common equivalent shares:
    Basic .................................        24,848,760        37,041,425        43,635,401        43,636,444
    Diluted ...............................        25,796,808        37,997,744        44,643,133        44,629,022
</TABLE>

            Earnings per common share amounts and weighted average number of
            common and common equivalent shares have been retroactively adjusted
            to reflect the July 15, 1997 Stock Split and calculated in
            accordance with Statement of Financial Accounting Standards No. 128,
            "Earnings Per Share." The sum of the earnings (loss) per common
            share for the four quarters differs from the annual earnings per
            common share due to the required method of computing the weighted
            average number of shares in the respective periods.

19.         SUBSEQUENT EVENT - OMAHA ACQUISITION

            On February 2, 1998, the Company announced that it had entered into
            a definitive agreement to acquire 20 midwestern hotels. Under the
            transaction, the Company will acquire by merger Omaha Hotel, Inc.
            and will purchase an individual hotel. The total consideration for
            these assets is as follows: $19.1 million in cash, $40.9 million of
            assumed debt and 1.43 million shares of the Company's common stock.
            The portfolio consists of nine full-service Holiday Inns, five
            Holiday Inns Express hotels, five Hampton Inns and one Homewood
            Suites with locations in Omaha, Nebraska; Moline, Illinois;
            Davenport, Iowa; central Kansas and Midland/Odessa, Texas. The
            acquisition is anticipated to close in April 1998.


                                      F-26

<PAGE>   58


                              BRISTOL HOTEL COMPANY
                      HARVEY HOTEL COMPANIES (PREDECESSOR)
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)


20.         SUBSEQUENT EVENT - PROPOSED MERGER

            On March 24, 1998, the Company announced a proposed merger with
            FelCor Suite Hotels, Inc.("FelCor"), subject to approval by
            shareholders of both companies and final documentation. Under the
            terms of the proposed merger, FelCor will acquire the real estate
            holdings and associated debt of the Company in return for 31.7
            million shares of newly issued FelCor stock. Prior to the merger,
            the Company will spin off, as a taxable dividend, all of its
            non-real estate holdings into a newly formed public company to be
            known as Bristol Hotels & Resorts, Inc. ("New Bristol").

            Each of the Company's outstanding common shares will be exchanged
            for .685 shares of FelCor common stock. In addition, Bristol
            shareholders will receive a taxable distribution of one share of New
            Bristol common stock for each two shares of Bristol.

            The merger is expected to close by the end of July 1998.



                                      F-27

<PAGE>   59


                                INDEX TO EXHIBITS

 Exhibit
   No.                               Description
----------                           ----------- 

      2.1     Agreement and Plan of Merger dated as of December 15, 1996 among
              Holiday Corporation, Holiday Inns, Inc. and the Company
              (incorporated by reference to Annex A of the Company's 1997 Proxy
              Statement).

      2.2     Amendment No. 1 to Agreement and Plan of Merger dated as of April
              1, 1997 among Holiday Corporation, Holiday Inns, Inc. and the
              Company (incorporated by reference to Exhibit 2.1.b of the
              Company's Current Report on Form 8-K dated April 28, 1997).

      2.3     Agreement and Plan of Merger dated as of January 30, 1998 among
              Bristol Hotel Company, Bristol Omaha Hotel Company, and Omaha
              Hotel Inc., et al. (incorporated by reference to Exhibit 2.3 of 
              the Company's Annual Report on Form 10-K for the year ended 
              December 31, 1997).


      2.4     Agreement and Plan of Merger dated as of March 23, 1998 among
              Bristol Hotel Company and FelCor Suites Hotel, Inc. 
              (incorporated by reference to Exhibit 2.4 of the Company's 
              Annual Report on Form 10-K for the year ended December 31, 1997).


      3.1     Amended and Restated Certificate of Incorporation of the Company
              (incorporated by reference Exhibit 4.1 of the Company's Form S-8
              Registration Statement [333-27633] dated May 22, 1997).

      3.2     Amended and Restated By laws of the Company as adopted and in
              effect as of April 28, 1997 (incorporated by reference to Exhibit
              4.2 of the Company's Form S-8, Registration Statement dated May
              22, 1997).

      4.1     Indenture, dated as of December 18, 1995, among the Company as
              issuer, Bristol Hotel Asset Company as guarantor, and The Bank of
              New York as trustee (incorporated by reference to Exhibit 4.1 of
              the Company's Annual Report on Form 10-K for the year ended
              December 31, 1995).

      4.2     Form of Old Notes (included in Exhibit 4.1).

      4.3     Form of New Notes (included in Exhibit 4.1).

      4.4     Exchange and Registration Rights Agreement, dated as of December
              18, 1995, among the Company, Bristol Hotel Asset Company, Bankers
              Trust Company and New England Cayman Corporation (incorporated by
              reference to Exhibit 4.4 to the Form S-4).



<PAGE>   60





      10.1    Form of Indemnification Agreement among the Company and each of
              its directors (incorporated herein by reference to Exhibit 10.1 of
              the Company's Registration Statement on Form S-1 [File No.
              33-97916], as amended [the "Registration Statement"]).

      10.2    Registration Rights Agreement, dated as of February 27, 1995,
              among the Company, United/Harvey Holdings, L.P. and the other
              parties signatory thereto (incorporated by reference to Exhibit
              10.10 to the Registration Statement).

      10.3    Stockholders' Agreement, dated as of February 27, 1995, among the
              Company, United/Harvey Holdings, L.P. and the other parties
              signatory thereto (incorporated by reference to Exhibit 10.11 to
              the Registration Statement).

      10.4    Put/Call Option Agreement, dated as of February 27, 1995, between
              the Company and H. K. Huie, Jr. (incorporated by reference to
              Exhibit 10.12 to the Registration Statement).

      10.5    Management Bonus Plan (incorporated by reference to Exhibit 10.16
              to the Registration Statement).

      10.6    Amended and Restated 1995 Equity Incentive Plan (incorporated by
              reference to Exhibit 10.15 to the Form S-4).

      10.7    Stock Option Plan for Non-Employee Directors (incorporated herein
              by reference to Exhibit 10.16 to the Form S-4).

      10.8    Amended and Restated Put/Call Option Agreement, Amendment to
              Combination Agreement, Stockholders' Agreement, and Registration
              Rights Agreement and Termination of Consulting Agreement, dated as
              of November 16, 1995, among the Company, United/Harvey Holdings,
              L.P., J. Peter Kline, John A. Beckert, Richard N. Beckert, Edward
              J. Rohling, Robert L. Miars, Harvey Hotel Company, Ltd., Harvey
              HTS, Inc., Endlease, Inc. and Harvey Hotel DFW, Inc. (incorporated
              by reference to Exhibit 10.19 to the Registration Statement).

      10.9    Stockholders' Agreement dated as of April 28, 1997 by and among
              United/Harvey Holdings, L.P., Holiday Corporation, Bass America,
              Inc. Bass plc and the Company (incorporated by reference to
              Exhibit 2 of Schedule 13-D filed May 8, 1997).


      10.10   Loan Agreement dated as of October 10, 1997 among Bristol Lodging
              Company, Bristol Lodging Holding Company, Nomura Asset Capital
              Corporation as administrative agent and collateral agent for
              Lenders and Bankers Trust Company as co-agent for lenders.
              (incorporated by reference to Exhibit 10.10 of the Company's
              Annual Report on Form 10-K for the year ended December 31, 1997).

      10.11   Loan Agreement dated as of October 10, 1997 among Bristol Hotel
              Asset Company, BHAC Canada, Inc., Nomura Asset Capital Corporation
              as administrative agent and collateral agent for Lenders and
              Bankers Trust Company as co-agent for Lenders (incorporated by
              reference to Exhibit 10.11 of the Company's Annual Report on Form
              10-K for the year ended December 31, 1997).


      10.12   Employment Agreement between the Company and J. Peter Kline
              effective as of April 28, 1997 (incorporated by reference to
              Exhibit 10.12 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      10.13   Employment Agreement between the Company and John A. Beckert
              effective as of April 28, 1997 (incorporated by reference to
              Exhibit 10.13 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      10.14   Earnest Money Contract by and between Highland Manor, Inc. and
              Bristol Omaha Hotel Company dated as of January 30,
              1998 (incorporated by reference to Exhibit 10.14 of the Company's
              Annual Report on Form 10-K for the year ended December 31, 1997).


      11.1    Computation of Earnings per Common Share (incorporated by
              reference to Exhibit 11.1 of the Company's Annual Report on Form
              10-K for the year ended December 31, 1997).


      16.1    Letter of Price Waterhouse LLP dated June 20, 1996 regarding
              change in certifying accountant (incorporated by reference to
              Exhibit 16.1 of the Current Report on Form 8-K dated June 17,
              1996). 

      21.1    List of Subsidiaries of the Company (incorporated by reference to
              Exhibit 21.1 of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997).


      27.1    Financial Data Schedule (incorporated by reference to Exhibit
              27.1 of the Company's Annual Report on Form 10-K for the year
              ended December 31, 1997).