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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 20, 1998
Date of report (Date of Earliest Event Reported)
EQUITY INNS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Tennessee O-23290 62-1550848
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(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
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4735 Spottswood
Suite 102
Memphis, Tennessee 38117
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(Address of Principal Executive Offices) (Zip Code)
(901) 761-9651
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On January 20, 1998, Equity Inns, Inc. (the "Company"), through Equity
Inns Partnership, L.P. (the "Partnership"), in which a wholly-owned subsidiary
of the Company currently has an approximate 95.1% general partnership interest,
entered into a strategic alliance agreement (the "Alliance Agreement") with U.S.
Franchise Systems, Inc. ("U.S. Franchise Systems"), a publicly traded hotel
franchise company, which owns the franchise system right for the Hawthorn Suites
brand of upscale extended-stay hotels.
Under the terms of the Alliance Agreement, the Company will have a
right of first offer until December 31, 2000, to purchase any and all Hawthorn
Suites or Hawthorn Suites LTD hotels located in 19 eastern and mid-western
states and Washington, D.C. in which U.S. Franchise Systems has a 51% or more
ownership interest. U.S. Franchise Systems has agreed to offer to sell to the
Company not fewer than twelve hotels during each of 1998, 1999 and 2000. In the
event that a total of 30 hotels have not been offered to the Company by December
31, 2000, the Alliance Agreement shall survive until such time as a total of 36
hotels have been offered by U.S. Franchise Systems to the Company. The Company
may lease the hotels to a subsidiary of U.S. Franchise Systems. The areas in
which the Company has the right of first offer are New York, New Jersey,
Connecticut, Rhode Island, Massachusetts, Maine, New Hampshire, Vermont,
Pennsylvania, Maryland, Delaware, Illinois, Ohio, Michigan, Wisconsin,
Minnesota, Washington, D.C., Virginia, Georgia and Indiana.
U.S. Franchise Systems acquires, markets and expands hotel franchises
and hotel chains, including the upscale, extended-stay Hawthorn Suites hotel
brand. Hawthorn Suites hotels offer side-by-side separate living and sleeping
rooms and fully equipped kitchens, a complimentary hot breakfast buffet and
evening refreshments. U.S. Franchise Systems ended 1997 with 557 properties open
or planned systemwide, including 446 Microtel Inn & Suites hotels, the chain of
all newly-constructed interior corridor budget hotels, and 111 Hawthorn Suites
hotels.
The Company is a self-advised equity real estate investment trust that
focuses on the extended stay, all-suite and premium limited service segments of
the hotel industry. The Company currently owns 89 hotels with a total of 10,778
rooms located in 30 states, consisting of 57 Hampton Inns, ten AmeriSuites, nine
Residence Inns, five Homewood Suites, three Comfort Inns, four Holiday Inns and
one Holiday Inn Express.
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ITEM 7. EXHIBITS.
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10.1 Alliance Agreement dated as of January 20, 1998 between U.S.
Franchise Systems, Inc. and Equity Inns Partnership, L.P.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITY INNS, INC.
February 3, 1998
By: /s/ Howard A. Silver
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Howard A. Silver
Executive Vice President,
Secretary, Treasurer and
Chief Financial Officer
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EXHIBIT INDEX
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10.1 Alliance Agreement dated as of January 20, 1998 between U.S. Franchise
Systems, Inc. and Equity Inns Partnership, L.P.
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EXHIBIT 10.1
ALLIANCE AGREEMENT
THIS ALLIANCE AGREEMENT, dated as of January 20, 1998, between U.S.
FRANCHISE SYSTEMS, INC. ("USFS"), and EQUITY INNS PARTNERSHIP, L.P.
("Equity"), recites and provides as follows:
RECITALS
A. USFS franchises, and may own and operate hotels under the
trade name "Hawthorn Suites."
B. USFS occasionally contracts with unrelated third party
developers (a "Developer") to develop and construct a Hawthorn
Suites Hotel.
C. Equity owns hotels of various brand names.
D. USFS and Equity desire to enter into an alliance whereby USFS
would sell (or cause Developers to sell) to and, in some
sales, lease back from Equity various Hawthorn Suites hotels,
upon the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual provisions of
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Right of First Offer.
(a) During the period from the date hereof and through and
including December 31, 2000 (the "Alliance Period"), U.S.
Franchise Systems, for itself and any wholly owned
subsidiary (collectively, the "U.S. Franchise Group"),
hereby grants Equity a right of first offer (the "RFO")
to purchase any and all "Hawthorn Suites or Hawthorn
Suites LTD Hotels" located in New York, New Jersey,
Connecticut, Rhode Island, Massachusetts, Maine, New
Hampshire, Vermont, Pennsylvania, Maryland, Delaware,
Illinois, Ohio, Michigan, Wisconsin, Minnesota,
Washington D.C., Virginia, Georgia, and Indiana in which
the U.S. Franchise Group has at least 51% of the
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ownership interest (a "Hotel"). In addition, U.S.
Franchise Group will use its best efforts to cause
entities with which it has licensed the right to
build, own, and operate Hawthorn Suites, Hawthorn Suites
LTD, or any additional Hawthorn branded hotels in the
previously mentioned states, to offer to Equity a first
opportunity to purchase their hotels. However, Equity
recognizes the U.S. Franchise Group can not cause any
such sales to occur.
(b) If any member of the "U.S. Franchise Group" desires to
sell one or more Hotels, then before agreeing to sell or
offering for sale such Hotel to any third party, the U.S.
Franchise Group agrees to cause the Seller to deliver to
Equity a notice (an "Offer") setting forth the price and
all material terms and conditions upon which the Seller,
in its sole discretion, would be willing to sell the
Hotel, together with copies of all available due
diligence materials with respect to the Hotel in the U.S.
Franchise Group's possession or control (the "Due
Diligence Materials"), including, without limitation,
occupancy, ADR and REVPAR information, financial
statements, title policies, title documents, surveys,
environmental audits, zoning reports, incoming expense
statements, appraisals, operating agreements, PIPs, star
reports, budgets, litigation reports and similar
materials.
(c) Within 15 days following the receipt of the Offer,
Equity shall by notice to Seller either (i) accept the
Offer or (ii) reject the Offer.
(d) In the event Equity elects to reject the Offer, the
Seller shall be free to offer to sell the Hotel to any
and all third parties upon the same terms and conditions
as set forth in the Offer free and clear of the RFO
during a period of six months following the date Equity
received the Offer, including all of the available Due
Diligence materials (the "Sales Period"). Failure of the
Seller to sell the hotel during the Sales Period, or the
desire of the Seller to sell the hotel during the Sales
Period at terms materially differing from the terms of
the Offer shall require the Seller to comply with the
terms of the RFO.
(e) In the event Equity accepts the Offer in a timely
manner, then Seller and Equity shall, within 30 days
thereafter, execute and deliver a purchase agreement
with respect to the applicable Hotel, which purchase
agreement shall incorporate the provisions of the Offer
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in the form of purchase agreement previously agreed to
by U.S. Franchise and Equity reasonably in good faith
(the "Purchase Agreement").
2. Purchase Option. During the Alliance Period, USFS agrees
that the U.S. Franchise Group shall offer to sell to
Equity in accordance with the RFO not fewer than 12
hotels during each calendar year of 1998, 1999 and
2000 (the "Option"). In order for an Offer to be
counted towards the fulfillment of the
requirements of an Option, all of the available due
diligence materials in U.S. Franchise Group's control
or possession, price, deposit, rent (in the event of
leaseback) franchise payments and the like must be
provided to Equity and be reasonable in Equity's
reasonable discretion. In the event that a total of 30
hotels have not been Offered in accordance with the
Option by December 31, 2000, then this agreement
shall survive until such time as a total of 36 hotels
have been Offered under the Option.
3. Leaseback. In the event where any Offer includes, as a
term thereof, the right of a member of the U.S. Franchise
Group to lease back the applicable Hotel from Purchaser
as a condition to the sale, reference to the sale of such
Hotel shall be deemed also to include such agreement
to lease. Unless expressly required in the applicable
Offer, Equity shall not be obligated to lease back any
Hotel purchased by Equity to any member of the U.S.
Franchise Group.
4. Franchise. Where a Hotel purchased by Equity is not
leased back to a member of the U.S. Franchise Group,
or such leaseback expires or is terminated, then, so
long as Equity, an affiliate of Equity or their purchaser
is the owner of such Hotel, U.S. Franchise (or the
applicable member of the U.S. Franchise Group) shall not
unreasonably withhold, delay nor condition the issuance
of a "Hawthorn Suites" (or applicable brand) franchise
agreement from Equity, Equity's tenant or other operator
upon such franchise terms previously granted with respect
to such Hotel.
5. Notices. Any and all notices or other communications
required or permitted under this Agreement shall be
deemed given if and in writing and same delivered by
certified mail or reputable overnight commercial carrier
addressed to the recipient of the notice or other
communication, postage prepaid and received or certified
with return receipt required (if by mail), or with all
freight charges prepaid (if by overnight commercial
carrier), and shall be deemed received on the date after
appropriate mailing or on the subsequent business day.
All such notices shall be addressed,
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If to Equity, to:
Equity Inns Partnership, L.P.
4735 Spottswood Avenue, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr., CEO
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, Virginia 22102
Attention: Gerald R. Best, Esquire
and if to the U.S. Franchise Group, to:
U.S. Franchise Systems, Inc.
13 Corporate Square, Suite 250
Atlanta, Georgia 30329
Attention: Robert J. Leven
6. Governing Law. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the
laws of the State of Tennessee, without regard to choice
of law principles.
7. Amendments and Waivers. This Agreement may not be
amended, nor shall any waiver, change, modification,
consent or discharge be affected except by written
instrument executed by the party against whom enforcement
is sought.
8. Successors and Assigns. This Agreement shall inure to
the benefit of and bind the parties hereto and their
successors and assigns.
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[SIGNATURE PAGE]
ALLIANCE AGREEMENT
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust, as its general
partner
By: /s/ David L. Levine
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Name: David L. Levine
Title: President & COO
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[SIGNATURE PAGE]
ALLIANCE AGREEMENT
U.S. FRANCHISE SYSTEMS, INC.
By: /s/ Jim Darby
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Name: Jim Darby
Title: VP Franchise Ops
