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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT JUNE 23, 1998
EQUITY INNS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 0-23290 62-1550848
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4735 SPOTTSWOOD
SUITE 102
MEMPHIS, TENNESSEE 38117
(Address and zip code of
principal executive offices)
Registrant's telephone number, including area code: (901) 761-9651
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ITEM 5. OTHER EVENTS
This report contains certain exhibits filed in connection with the sale
of 2,750,000 shares of the Company's 9 1/2% Series A Cumulative Preferred Stock,
$.01 par value (Liquidation Preference $25 per share), pursuant to the Company's
Prospectus Supplement dated June 23, 1998, supplementing the Company's base
Prospectus dated April 21, 1998 which was included as part of a Registration
Statement on Form S-3 (No. 333-48169) declared effective by the Securities and
Exchange Commission (the "Commission") on April 21, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit Description
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<S> <C>
1.1 Underwriting Agreement between the Company, Equity
Inns Trust, Equity Inns Partnership, L.P. and Salomon
Smith Barney, J.C. Bradford & Co., CIBC Oppenheimer,
Morgan Keegan & Company, Inc., Prudential Securities
Incorporated and Roney Capital Markets.
4.1 Form of Preferred Stock Certificate for 9 1/2% Series
A Cumulative Preferred Stock, $.01 par value
(Liquidation Preference $25 per share), of the
Company (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form 8-A
filed with the Commission on June 19, 1998).
4.2 Articles of Amendment to the Second Amended and
Restated Charter of the Company.
8.1 Tax Opinion of Hunton & Williams.
99.1 Amendment No. 1 to the Third Amended and Restated
Agreement of Limited Partnership of Equity Inns
Partnership, L.P.
99.2 Consent of Robert M. Solmson.
99.3 Consent of Bruce E. Campbell, Jr.
</TABLE>
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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 thereunto duly authorized.
EQUITY INNS, INC.
(REGISTRANT)
Date: June 23, 1998 By: /s/ Howard A. Silver
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Howard A. Silver
President, Chief Operating Officer, Treasurer
and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
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<S> <C>
1.1 Underwriting Agreement between the Company, Equity
Inns Trust, Equity Inns Partnership, L.P. and Salomon
Smith Barney, J.C. Bradford & Co., CIBC Oppenheimer,
Morgan Keegan & Company, Inc., Prudential Securities
Incorporated and Roney Capital Markets.
4.1 Form of Preferred Stock Certificate for 9 1/2% Series
A Cumulative Preferred Stock, $.01 par value
(Liquidation Preference $25 per share), of the
Company (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form 8-A
filed with the Commission on June 19, 1998).
4.2 Articles of Amendment to the Second Amended and
Restated Charter of the Company.
8.1 Tax Opinion of Hunton & Williams.
99.1 Amendment No. 1 to the Third Amended and Restated
Agreement of Limited Partnership of Equity Inns
Partnership, L.P.
99.2 Consent of Robert M. Solmson.
99.3 Consent of Bruce E. Campbell, Jr.
</TABLE>
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EXHIBIT 1.1
2,750,000 SHARES
EQUITY INNS, INC.
9 1/2% SERIES A CUMULATIVE PREFERRED STOCK
UNDERWRITING AGREEMENT
June 23, 1998
SMITH BARNEY INC.
CIBC OPPENHEIMER
J.C. BRADFORD & CO.
MORGAN KEEGAN & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
RONEY CAPITAL MARKETS
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Equity Inns, Inc., a Tennessee corporation (the "Company"), proposes to
issue and sell an aggregate of 2,750,000 shares (the "Firm Shares") of its
9 1/2% Series A Cumulative Preferred Stock, $.01 par value per share (the
"Series A Preferred Stock"), to the several Underwriters named in Schedule I
hereto (the "Underwriters"). The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to
an additional 412,500 shares (the "Additional Shares") of Series A Preferred
Stock. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares."
Upon consummation of the transactions contemplated hereby and
application of the net proceeds from the sale of the Firm Shares, the Company,
through its wholly-owned subsidiary, Equity Inns Trust, a Maryland real estate
investment trust (the "Trust"), will own an approximate 94.9% general
partnership interest in Equity Inns Partnership, L.P. (the "Partnership"), a
Tennessee limited partnership and will own 100% of the Series A Preferred Units
(as defined herein) of the Partnership. The Partnership currently owns 95 hotels
as described in the Prospectus (the "Current Hotels"). The Partnership has
entered into agreements (the "Acquisition Agreements") as described in the
Prospectus to acquire nine additional hotels (the "Acquisition Hotels") and
pursuant to the Asset Sale Agreement and Plans of Merger dated as of April 21,
1998 (the "Merger Agreement") with RFS Hotel Investors, Inc. ("RFS") will
acquire 63 additional hotels (the RFS Hotels;" together with the Acquisition
Hotels and the Current Hotels, the "Hotels"). Other capitalized terms used
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herein and not otherwise defined herein shall have the respective meanings set
forth in the Registration Statement.
The Company wishes to confirm as follows its agreement with you (the
"Representatives") and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Shares by the
Underwriters.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 (Registration No. 333-48169) under
the Act, including a prospectus relating to the Company's common stock, $.01 par
value per share, and preferred stock, $.01 par value per share, and such
amendments to such registration statement as may have been required prior to the
date hereof have been filed with the Commission, and such amendments have been
similarly prepared. Such registration statement and any post-effective
amendments thereto have become effective under the Act. The Company also has
filed, or proposes to file, with the Commission pursuant to Rule 424(b) under
the Act, a prospectus supplement specifically relating to the Shares.
The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it became effective, as supplemented or amended prior to the
execution of this Agreement, including all information (if any) deemed to be a
part of such registration at the time it became effective pursuant to Rule 430A
under the Act. If it is contemplated, at the time this Agreement is executed,
that a post-effective amendment to the registration statement will be filed and
must be declared effective before the offering of the Shares may commence, the
term "Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. The term "Prospectus" as
used in this Agreement means the base prospectus in the form included in the
Registration Statement at the time it was declared effective (the "Base
Prospectus") together with the prospectus supplement relating to the offering of
the Shares dated the date hereof in the form first filed with the Commission on
or after June 15, 1998 pursuant to Rule 424(b) under the Act. Any reference in
this Agreement to the registration statement, the Registration Statement, the
Base Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of the Registration Statement or the Prospectus,
as the case may be, and any reference to any amendment or supplement to the
Registration Statement or the Prospectus shall be deemed to refer to and include
any documents filed after such date under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which, upon filing, are incorporated by
reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein, the term "Incorporated Documents" means the documents which are
incorporated by reference in the Registration Statement, the Prospectus, or any
amendment or supplement thereto during the period the Prospectus is required to
be delivered in connection with the sale of the Shares by the Underwriters or
any dealer.
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2. Agreements to Sell and Purchase. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Company, the Trust and the Partnership contained in this
Agreement and subject to all the terms and conditions set forth in this
Agreement, each Underwriter agrees, severally and not jointly, to purchase from
the Company, at a purchase price of $24.2125 per Share (the "Purchase Price Per
Share"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares increased as set
forth in Section 10 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company, the Trust and the
Partnership contained in this Agreement and subject to all the terms and
conditions set forth in this Agreement, the Underwriters shall have the right to
purchase from the Company, at the Purchase Price Per Share, pursuant to an
option (the "Over-allotment Option") which may be exercised at any time and from
time to time prior to 9:00 P.M., New York City time, on the 30th day after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange
(the "NYSE") is open for trading), up to an aggregate of 412,500 Additional
Shares. Additional Shares may be purchased only for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. Upon
any exercise of the Over-allotment Option, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments as you may determine in order to avoid fractional
shares) which bears the same proportion to the number of Additional Shares to be
purchased by the Underwriters as the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof) bears to the aggregate number of
Firm Shares.
3. Terms of Public Offering. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after this Agreement has become effective as in your
judgment is advisable and initially to offer the Shares upon the terms set forth
in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 333 West 34th Street, New York, New York 10001, at 10:00
A.M., New York City time, on June 25, 1998 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the office of Smith Barney
Inc. mentioned above at such time and on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on
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behalf of the Underwriters to the Company of the Underwriters' determination to
purchase a number, specified in such notice, of Additional Shares. The place of
closing for any Additional Shares and the Option Closing Date for such Shares
may be varied by agreement between you and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by wire transfer of immediately available funds to the Company.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for a post-effective amendment to the Registration Statement to
be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause such post-effective amendment to become effective
as soon as possible and will advise you promptly and, if requested by you, will
confirm such advice in writing, when such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: of any request by the Commission for
amendment of or a supplement to the Registration Statement or the Prospectus or
for additional information; of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and within the period of time
referred to in paragraph (f) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations, or of the happening of any event, which makes any statement of a
material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
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(c) The Company will furnish to you, without charge, (i) as
many signed copies of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits thereto as you may reasonably request, (ii) such number of conformed
copies of the Registration Statement as originally filed and of each amendment
thereto, but without exhibits, as you may reasonably request, (iii) such number
of copies of the Incorporated Documents, without exhibits, as you may reasonably
request, and (iv) five copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus or,
prior to the end of the period of time referred to in the first sentence in
subsection (e) below, file any document which upon filing, becomes an
Incorporated Document, of which you shall not previously have been advised or to
which, after you shall have received a copy of the document proposed to be
filed, you shall reasonably object.
(e) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer, the Company
will expeditiously deliver to each Underwriter and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. Subject to the provisions of subsection (g) below,
the Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Act and with the
securities or Blue Sky laws or real estate syndication laws of the jurisdictions
in the United States in which the Shares are offered by the several Underwriters
and by all dealers to whom Shares may be sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter as the
Prospectus is required by the Act to be delivered in connection with sales by
any Underwriter or dealer. If during such period of time any event shall occur
that in the judgment of the Company or in the opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus (or to
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that the Company and
you, as Representatives of the several Underwriters, agree that the Prospectus
should be amended or supplemented, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(f) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws or real estate syndication laws of
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such jurisdictions as you may designate and will file such consents to service
of process or other documents necessary or appropriate in order to effect such
registration or qualification; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject.
(g) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(h) The Company will furnish to its shareholders, as soon as
practicable after the end of each respective period, annual reports (including
financial statements audited by independent public accountants) and unaudited
quarterly reports of operations for each of the first three quarters of the
fiscal year, and during the period of three years hereafter, the Company will
furnish to you concurrently with mailing or filing, a copy of each report of the
Company mailed to shareholders or filed with the Commission, and from time to
time such other information concerning the Company as you may reasonably
request.
(i) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 10 hereof or by notice given by you terminating
this Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply with the terms or fulfill any of the conditions of
this Agreement to be complied with or fulfilled by the Company, the Company
agrees to reimburse the Representatives for all reasonable out-of-pocket
expenses (including fees and expenses of counsel for the Underwriters) incurred
by you in connection with this Agreement.
(j) The Company will apply the net proceeds from the sale of
the Shares substantially in accordance with the description set forth under the
caption "Use of Proceeds" in the Prospectus.
(k) The Company will timely file the Prospectus pursuant to
Rule 424(b) under the Act and will advise you of the time and manner of such
filing.
(l) Except as stated in this Agreement and in the Prospectus,
the Company has not taken, nor will it take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Series A Preferred Stock to
facilitate the sale or resale of the Shares.
(m) The Company will use its best efforts to list the Shares
on the NYSE.
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6. Representations and Warranties of the Company, The Trust and
the Partnership. The Company, the Trust and the Partnership, jointly and
severally, represent and warrant to each Underwriter that:
(a) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no proceeding for
that purpose has been instituted or threatened by the Commission or the
securities authority of any state or other jurisdiction.
(b) The Company and the transactions contemplated by this
Agreement meet the requirements and conditions for using a registration
statement on Form S-3 under the Act, set forth in the General Instructions to
Form S-3. When the Registration Statement or any amendment thereto was declared
effective, and on the Closing Date (or the Option Closing Date, as the case may
be) it (i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all material respects
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b) and at
the Closing Date (or the Option Closing Date, as the case may be), the
Prospectus, as amended or supplemented at any such time, (i) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The representation
and warranty in this paragraph (b) does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of any Underwriter through you expressly for use therein.
(c) The Incorporated Documents when they were filed (or, if
any amendment with respect to any such document was filed, when such amendment
was filed), conformed in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, any further Incorporated
Documents so filed will, when they are filed, conform in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder; no such document when it was filed (or, if an amendment with respect
to any such document was filed, when such amendment was filed) contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and no such further document, when it is filed, will contain an
untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
Tennessee with all requisite corporate power and authority to own and lease its
properties and to conduct its business as now conducted.
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The Company has been duly qualified to do business and is in good standing as a
foreign corporation in each other jurisdiction in which the ownership or leasing
of its properties or the nature or conduct of its business as now conducted
requires such qualification, except where the failure to do so would not have a
material adverse effect on the Company, the Trust, the Partnership, or any
Hotel. The Company will be duly qualified (at the time of the closing of the
acquisition of the Acquisition Hotels) in each jurisdiction in which the
ownership or leasing of its properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the Company, the Trust, the Partnership, or any
Hotel. Except for the Trust, the Partnership, Equity Inns Services, Inc., a
wholly-owned subsidiary of the Company ("EISI"), Equity Inns Partnership II,
L.P. ("ENN II,L.P."), Equity Inns/West Virginia Partnership, L.P. ("EIWV"), EQI
Financing Corporation ("EQIFC") and EQI Financing Partnership I, L.P. ("EQIFP),
the Company does not own or control, directly or indirectly, any corporation,
association or other entity.
(e) The Trust has been duly organized and is validly existing
as a real estate investment trust in good standing under the laws of the State
of Maryland with all requisite power and authority to own and lease its
properties and to conduct its business as now conducted. The Trust has been duly
qualified to do business and is in good standing in each other jurisdiction in
which the ownership or leasing of its properties or the nature or conduct of its
business as now conducted requires such qualification, except where the failure
to do so would not have a material adverse effect on the Company, the Trust, the
Partnership, or any Hotel. The Trust will be duly qualified (at the time of the
closing of the acquisition of the Acquisition Hotels) in each jurisdiction in
which the ownership or leasing of its properties or the nature or conduct of its
business requires such qualification, except where the failure to do so would
not have a material adverse effect on the Company, the Trust, the Partnership,
or any Hotel. Except for the Partnership, the Trust does not own or control,
directly or indirectly, any corporation, association or other entity. The Trust
is wholly owned by the Company.
(f) The Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the Tennessee Revised
Uniform Limited Partnership Act (the "Tennessee Act") with all requisite
partnership power and authority to own and lease its properties and to conduct
its business as now conducted. The Partnership has been duly qualified or
registered to do business and is in good standing as a foreign partnership in
each other jurisdiction in which the ownership or leasing of its properties or
the nature or conduct of its business as now conducted requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company, the Trust, the Partnership, or any Hotel. The
Partnership will be duly qualified (at the time of the closing of the
acquisition of the Acquisition Hotels) in each jurisdiction in which the
ownership or leasing of its properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the Company, the Trust, the Partnership, or any
Hotel. The Trust is the sole general partner of the Partnership and holds
approximately 94.9% of the outstanding Partnership Units. At the Closing Date,
following the contribution of the net proceeds of the Offering to the
Partnership, the Trust will be the sole general partner of the Partnership and
will be the holder of approximately 94.9% of the
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units of limited partnership interest in the Partnership ("Partnership Units")
and the holder of 2,750,000 9 1/2% Series A Cumulative Preferred Units (the
"Series A Preferred Units") or 100% of the outstanding Series A Preferred Units
(assuming no exercise of the option to purchase the Additional Shares).
(g) The Partnership and, to the knowledge of the Company, the
Trust and the Partnership, each of the other parties to the Acquisition
Agreements and the Merger Agreement has been duly formed and is validly existing
as a corporation or partnership, as applicable, under the laws of its state of
formation. The Partnership and, to the knowledge of the Company, the Trust and
the Partnership, each of the other parties to the Acquisition Agreements and the
Merger Agreement has all requisite corporate or partnership power and authority
to own, lease and operate its properties and to conduct its business as now
conducted.
(h) The Company has full corporate right, power and authority
to enter into this Agreement, to issue, sell and deliver the Shares as provided
herein and to consummate the transactions contemplated herein. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding agreement of the Company, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability relating to or
affecting creditors' rights, or by general equity principles and except to the
extent the indemnification and contribution provisions set forth in Section 7 of
this Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.
(i) The Trust has full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein. This Agreement has been duly authorized, executed and delivered by the
Trust and constitutes a valid and binding agreement of the Trust, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights, or by general equity
principles and except to the extent the indemnification and contribution
provisions set forth in Section 7 of this Agreement may be limited by federal or
state securities laws or the public policy underlying such laws.
(j) The Partnership has full partnership right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly authorized, executed and
delivered on behalf of the Partnership by the Trust, as the sole general partner
of the Partnership, and constitutes a valid and binding agreement of the
Partnership enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws of general applicability relating to or affecting creditors' rights, or by
general equity principles and except to the extent the indemnification and
contribution provisions set forth in Section 7 of this Agreement may be limited
by federal or state securities laws or the public policy underlying such laws.
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<PAGE> 10
(k) Each of the Third Amended and Restated Agreement of
Limited Partnership of the Partnership, as amended by Amendment No. 1 dated as
of the Closing Date (the "Partnership Agreement"), the Consolidated Lease
Amendment dated as of November 15, 1996 by and between the Partnership and
Crossroads/Memphis Partnership, L.P., First Amendment to Consolidated Lease
Amendment dated as of February 6, 1997 (together, the "Consolidated Lease
Amendment") and the Second Consolidated Lease Amendment dated as of February 6,
1997 (the "Second Consolidated Lease Amendment") between EQI Financing
Partnership I, L.P., and Crossroads/Memphis Financing Company, L.L.C. and each
of the operating leases between the Lessee and the Partnership pursuant to which
the Lessee leases Current Hotels from the Partnership (the "Percentage Leases")
executed since the date of the Consolidated Lease Agreement have been duly
authorized, executed and delivered by the parties thereto and constitute valid
and binding agreements, enforceable in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or affecting
creditors' rights or by general equity principles. The leases with respect to
the Acquisition Hotels (the "Proposed Leases"), when duly authorized, executed
and delivered by the parties thereto, will constitute valid and binding
agreements, enforceable in accordance with their terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws of general applicability relating to or affecting creditors' rights or by
general equity principles. (This Agreement, the Partnership Agreement, the
Consolidated Lease Amendment, the Percentage Leases, and the Proposed Leases
sometimes are hereinafter referred to as the "Operative Documents.")
(l) The Partnership and, to the knowledge of the Company, the
Trust and the Partnership, each of the other parties to the Acquisition
Agreements and the Merger Agreement has full legal right, power and authority to
enter into such agreements and to consummate the transactions contemplated
thereby subject to the terms thereof. The Acquisition Agreements and the Merger
Agreement have been duly authorized, executed and delivered on behalf of the
Partnership by the Trust, as general partner of the Partnership and, to the
Company's, the Trust's and the Partnership's knowledge, the other parties
thereto and constitute valid and binding agreements, enforceable in accordance
with their terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general applicability
relating to or affecting creditors' rights or by general equity principles.
(m) Each material consent, approval, authorization, order,
license, certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery of the Shares, the execution, delivery and performance of this
Agreement, the other Operative Documents, the Acquisition Agreements and the
consummation by the Company, the Trust and the Partnership and the other parties
to the Acquisition Agreements of the transactions contemplated hereby and
thereby has been made or obtained and is in full force and effect or will be
made or obtained prior to the closing of the purchase of the Acquisition Hotels
and the RFS Hotels and will be in full force and effect.
(n) Neither the issuance, sale and delivery by the Company of
the Shares, nor the execution, delivery and performance of this Agreement, the
other Operative Documents, the
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<PAGE> 11
Acquisition Agreements or the Merger Agreement nor the consummation of the
transactions contemplated hereby and thereby by the Company, the Trust or the
Partnership, as applicable, will conflict with or result in a breach or
violation of any of the terms and provisions of, or (with or without the giving
of notice or the passage of time or both) constitute a default under the
charter, by-laws, Declaration of Trust, certificate of limited partnership or
partnership agreement, as the case may be, of the Company, the Trust or the
Partnership; any indenture, mortgage, deed of trust, loan agreement, note, lease
or other agreement or instrument to which the Company, the Trust or the
Partnership is a party or to which they, any of them, any of their respective
properties or other assets or any Current Hotel or, to the Company's knowledge,
any Acquisition Hotel is subject; or any applicable statute, judgment, decree,
order, rule or regulation of any court or governmental agency or body applicable
to any of the foregoing or any of their respective properties; or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of any of the foregoing.
(o) The issuance of the Shares to be issued and sold to the
Underwriters hereunder has been validly authorized by the Company. When issued
and delivered against payment therefor as provided in this Agreement, the Shares
will be duly and validly issued, fully paid and nonassessable. No statutory or
other preemptive rights of shareholders exist with respect to any of the Shares.
No person or entity holds a right to require or participate in the registration
under the Act of the Shares pursuant to the Registration Statement. No person or
entity has a right of participation or first refusal with respect to the sale of
the Shares by the Company. The form of certificates evidencing the Shares
complies with all applicable requirements of Tennessee law.
(p) The Company's authorized, issued and outstanding capital
stock is as disclosed in the Prospectus. All of the issued shares of capital
stock of the Company have been duly authorized and are validly issued, fully
paid and nonassessable. None of the issued shares of capital stock of the
Company has been issued or is owned or held in violation of any statutory or
other preemptive rights of shareholders. Except as disclosed in the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any shares of capital stock
of the Company or any security convertible into or exchangeable for capital
stock of the Company.
(q) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times duly registered under the Act or
exempt from the registration requirements of the Act by reason of Sections 3(b),
4(2) or 4(6) thereof and were duly registered or were issued pursuant to an
available exemption from the registration requirements under the applicable
state securities or Blue Sky laws.
(r) All of the issued shares of beneficial interest of the
Trust have been duly authorized and validly issued, are fully paid and
nonassessable. None of the issued shares of beneficial interest of the Trust has
been issued or is owned or held in violation of any preemptive right. There is
no outstanding option, warrant or other right calling for the issuance of, and
no commitment, plan or arrangement to issue, any shares of beneficial interest
of the Trust or any
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<PAGE> 12
security convertible into or exchangeable for shares of beneficial interest of
the Trust. All of the outstanding shares of beneficial interest of the Trust
have been issued, offered and sold in compliance with all applicable laws
(including, without limitation, federal and state securities laws).
(s) All of the issued Partnership Units of the Partnership
have been duly and validly authorized and issued and are fully paid and
nonassessable. None of the issued Partnership Units has been issued or is owned
or held in violation of any preemptive right. At the Closing Date, such
Partnership Units will be validly issued, fully paid and nonassessable. All of
the outstanding Partnership Units have been issued, offered and sold in
compliance with all applicable laws (including, without limitation, federal and
state securities laws).
(t) The financial statements of the Company incorporated by
reference in the Registration Statement and Prospectus present fairly the
financial position of the Company as of the dates indicated and the results of
operations and cash flows for the Company for the periods specified, all in
conformity with generally accepted accounting principles applied on a consistent
basis. To the knowledge of the Company, the Partnership and the Trust, the
various financial statements of RFS incorporated by reference in the
Registration Statement and the Prospectus present fairly the financial position
for such hotels as of the dates indicated and the results of operations and cash
flows for such hotels for the periods specified, all in conformity with
generally accepted accounting principles applied on a consistent basis. The
financial statement schedules included in the Registration Statement fairly
present the information shown therein and have been compiled on a basis
consistent with the financial statements incorporated by reference in the
Registration Statement and the Prospectus. No other financial statements or
schedules are required by Form S-3 or otherwise to be included in the
Registration Statement or the Prospectus. The unaudited pro forma financial
information (including the related notes) incorporated by reference in the
Prospectus complies as to form in all material respects to the applicable
accounting requirements of the Act and the Act Regulations, and management of
the Company believes that the assumptions underlying the pro forma adjustments
are reasonable. Such pro forma adjustments have been properly applied to the
historical amounts in the compilation of the information and such information
fairly presents with respect to the Company, the financial position, results of
operations and other information purported to be shown therein at the respective
dates and for the respective periods specified.
(u) Coopers & Lybrand L.L.P., who have examined and are
reporting upon the audited financial statements and schedules of the Company and
RFS incorporated by reference in the Registration Statement, are, and were
during the periods covered by their reports incorporated by reference in the
Registration Statement and the Prospectus, independent public accountants within
the meaning of the Act, the Exchange Act and the respective rules and
regulations of the Commission thereunder.
(v) None of the Company, the Trust, the Partnership or, to the
knowledge of the Company, RFS has sustained, since December 31, 1997, any
material loss or interference with its business from fire, explosion, flood,
hurricane, accident or other calamity, whether or not covered
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<PAGE> 13
by insurance, or from any labor dispute or arbitrators' or court or governmental
action, order or decree; and, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except as
otherwise stated in the Registration Statement and Prospectus, there has not
been (i) any material change in the capital stock, shares of beneficial
interests or partnership interests, as applicable, long-term debt, obligations
under capital leases or short-term borrowings of the Company, the Trust, the
Partnership or, to the knowledge of the Company, RFS, (ii) any material adverse
change, or any development which could reasonably be seen as involving a
prospective material adverse change, in or affecting the business, prospects,
properties, assets, results of operations or condition (financial or other) of
the Company, the Trust, the Partnership or, to the knowledge of the Company,
RFS, (iii) any liability or obligation, direct or contingent, incurred or
undertaken by the Company, the Trust, the Partnership or, to the knowledge of
the Company, RFS which is material to the business or condition (financial or
other) of such entity, except for liabilities or obligations incurred in the
ordinary course of business, (iv) any declaration or payment of any dividend or
distribution of any kind on or with respect to the capital stock, shares of
beneficial interest or partnership interests, as applicable, of the Company, the
Trust, or the Partnership except as set forth in the Registration Statement; or
(v) any transaction that is material to the Company, the Trust, the Partnership
or, to the knowledge of the Company, RFS except transactions in the ordinary
course of business or as otherwise disclosed in the Registration Statement and
the Prospectus.
(w) The Partnership or its subsidiaries has good and
marketable title in fee simple to all real property and the improvements located
thereon owned by it, including the Current Hotels, free and clear of all liens,
encumbrances, claims, security interests, restrictions and defects except such
as are described in the Prospectus or in connection with the Company's $250
million unsecured line of credit (the "Line of Credit"), the collateralized
mortgage bonds issued by EQI Financing Partnership I, L.P. or the title
insurance policies relating to such properties. Upon consummation of the
transactions contemplated by the Acquisition Agreements and the Merger
Agreement, the Partnership or its subsidiaries will have good and marketable
title in fee simple to the Acquisition Hotels and the RFS Hotels and all related
real property, free and clear of all liens, encumbrances, claims, security
interests, restrictions and defects except such as are described in the proposed
title commitments for the Acquisition Hotels and the RFS Hotels or in connection
with the financing of a portion of the purchase price for the Acquisition Hotels
and the RFS Hotels or which do not materially adversely affect the value of the
property or the use proposed to be made of the property by the Partnership or
its subsidiaries. Neither the Company nor the Trust owns or leases any real
property as lessee. Except for the ground leases relating to the Traverse City,
Michigan Hotel, the Tinton Falls, New Jersey Hotel, the Glen Burnie (Baltimore),
Maryland Hotel, the Mountain Brook (Birmingham), Alabama Hotel, the Atlanta
(Northlake), Georgia Hotel, the Memphis (Sycamore), Tennessee Hotel and the
Nashville, Tennessee Hotel (collectively, the "Leases"), the Partnership does or
will not lease any real property as lessee. The Leases are valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made, and proposed to be made, of such property, by the
Partnership. The Leases conform in all material respects to the description
thereof, if any, set forth in the Registration Statement; and no notice has been
given or material claim asserted by anyone adverse to the rights of the
Partnership under any of the Leases or affecting the right to the continued
possession of the leased property. Except with respect to the
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<PAGE> 14
Line of Credit and the EQI Financing Partnership I, L.P. agreements, the
Company, the Trust and the Partnership have good title to all personal property
owned by them, free and clear of all liens, security interests, pledges,
charges, encumbrances, mortgages and defects, except such as are disclosed in
the Prospectus or do not materially and adversely affect the value of such
property and do not interfere with the use made or proposed to be made of such
property by the Company, the Trust or the Partnership. Except as disclosed in
the Registration Statement, no person has an option or right of first refusal to
purchase all or part of any Current Hotel, any Acquisition Hotel, any RFS Hotel
or any interest therein. Each of the Current Hotels and, to the Company's
knowledge, the RFS Hotels, complies with all applicable codes, laws and
regulations (including, without limitation, building and zoning codes, laws and
regulations and laws relating to access to the Hotels) and except for such
failures to comply that would not individually or in the aggregate have a
material adverse impact on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of the Partnership, the
Trust, the Company or, to the knowledge of the Company, RFS. Neither the
Company, the Trust nor the Partnership has knowledge of any pending or
threatened condemnation proceedings, zoning change, or other proceeding or
action that will in any manner affect the size of, use of, improvements on,
construction on or access to the Hotels, except such proceedings or actions that
would not have a material adverse effect on the condition, financial or
otherwise, or on the earnings, assets, business affairs or business prospects of
or with respect to a Hotel, the Partnership, the Trust or the Company.
(x) Neither the Company, the Trust or the Partnership is in
violation of its respective charter, bylaws, declaration of trust, certificate
of limited partnership or partnership agreement, as the case may be, and no
default exists, and no event has occurred, nor state of facts exists, which,
with notice or after the lapse of time to cure or both, would constitute a
default in the due performance and observance of any obligation, agreement,
term, covenant, consideration or condition contained in any indenture, mortgage,
deed of trust, loan agreement, note, lease or other agreement or instrument to
which any such entity is a party or to which any such entity or any of its
properties is subject, except as may be properly described in the Prospectus or
such as in the aggregate do not now have or will not in the future have a
material adverse effect on the financial position, results of operations or
business of each such entity, respectively. None of the Company, the Trust or
the Partnership is in violation of, or in default with respect to, any statute,
rule, regulation, order, judgment or decree, except as may be properly described
in the Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect on the financial position, results of
operations or business of each such entity, respectively.
(y) There is not pending or, to the knowledge of the Company,
the Trust, or the Partnership, threatened, any action, suit, proceeding, inquiry
or investigation against the Company, the Trust, the Partnership or any of their
respective officers and directors or, to the knowledge of the Company, RFS or to
which the properties, assets or rights of any such entity are subject, before or
brought by any court or governmental agency or body or board of arbitrators,
which could result in any material adverse change in the business, prospects,
properties, assets, results of operations or condition (financial or otherwise)
of any such entity or which could adversely affect the
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<PAGE> 15
consummation of the transactions contemplated by this Agreement, the Acquisition
Agreements and the Merger Agreement.
(z) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein described
present fairly the information required to be shown, and there are no contracts,
leases, or other documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required. To the best
knowledge of the Company, the Trust and the Partnership, there are no statutes
or regulations applicable to the Company, the Trust or the Partnership or
certificates, permits or other authorizations from governmental regulatory
officials or bodies required to be obtained or maintained by the Company, the
Trust or the Partnership of a character required to be disclosed in the
Registration Statement or the Prospectus which have not been so disclosed and
properly described therein. All agreements, if any, between the Company, the
Trust and the Partnership, respectively, and third parties expressly referenced
in the Prospectus are legal, valid and binding obligations of the Company, the
Trust and the Partnership, respectively, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general applicability
relating to or affecting creditors' rights and by general equitable principles.
(aa) The Company, the Trust, the Partnership or the Lessee
owns, possesses or has obtained all material permits, licenses, franchises
(including, with respect to the Partnership, the franchises relating to the
Hotels), certificates, consents, orders, approvals and other authorizations of
governmental or regulatory authorities or other entities as are necessary to own
or lease, as the case may be, its respective properties and to carry on its
business as presently conducted, or as contemplated in the Prospectus to be
conducted, and none of the Company, the Trust or the Partnership has received
any notice of proceedings relating to revocation or modification of any such
licenses, permits, franchises, certificates, consents, orders, approvals or
authorizations.
(bb) Each of the Company, the Trust, the Partnership or, to
the knowledge of the Company, RFS owns or possesses adequate license or other
rights to use all trademarks, service marks, trade names, copyrights, software
and design licenses, trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively "Intangibles") necessary to entitle
the Company, the Trust and the Partnership to conduct its respective business
now, and as proposed to be conducted or operated as described in the Prospectus,
and neither the Company, the Trust or the Partnership has received notice of
infringement or of conflict with (and knows of no such infringement of or
conflict with) asserted rights of others with respect to any Intangibles which
could materially and adversely affect the business, prospects, properties,
assets, results of operation or condition (financial or otherwise) of the
Company, the Trust or the Partnership.
(cc) To the best of the Company's, the Trust's and the
Partnership's knowledge, the Company's, the Trust's and the Partnership's system
of internal accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain to
the prevention or detection of errors or irregularities in amounts that would be
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<PAGE> 16
material in relation to the Company's, the Trust's or the Partnership's
financial statements; and, to the best of the Company's, the Trust's, and the
Partnership's knowledge, none of the Company, the Trust, the Partnership or any
employee or agent thereof, has made any payment of funds of the Company, the
Trust or the Partnership, as the case may be, or received or retained any funds
and no funds of the Company, the Trust or the Partnership, as the case may be,
have been set aside to be used for any payment, in each case in violation of any
law, rule or regulation.
(dd) Each of the Company, the Trust (to the extent not
consolidated with the Company) and the Partnership (to the extent not
consolidated with the Company) has filed on a timely basis all necessary
federal, state, local and foreign income and franchise tax returns required to
be filed through the date hereof and has paid all taxes shown as due thereon;
and no tax deficiency has been asserted against any such entity, nor does any
such entity know of any tax deficiency which is likely to be asserted against
any such entity which if determined adversely to any such entity, could
materially adversely affect the business, prospects, properties, assets, results
of operations or condition (financial or otherwise) of any such entity. All tax
liabilities are adequately provided for on the respective books of such
entities.
(ee) Each of the Company, the Trust, the Partnership, and
their officers, directors or affiliates has not taken and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in or constitute the stabilization or manipulation
of any security of the Company or to facilitate the sale or resale of the
Shares.
(ff) The Series A Preferred Stock is registered pursuant to
Section 12(b) of the Exchange Act and an application for listing the Series A
Preferred Stock on the NYSE has been filed.
(gg) The Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by this Agreement other
than as contemplated hereby or as described in the Registration Statement.
(hh) Except as otherwise disclosed in the Prospectus, neither
the Company, the Trust, the Partnership nor, to the knowledge of the Company,
the Trust, or the Partnership, any entity ("Selling Entity") from which the
Partnership acquired a Current Hotel or from which the Partnership proposes to
acquire the Acquisition Hotels or the RFS Hotels has authorized or conducted or
has knowledge of the generation, transportation, storage, presence, use,
treatment, disposal, release, or other handling of any hazardous substance,
hazardous waste, hazardous material, hazardous constituent, toxic substance,
pollutant, contaminant, asbestos, radon, polychlorinated biphenyls ("PCBs"),
petroleum product or waste (including crude oil or any fraction thereof),
natural gas, liquefied gas, synthetic gas or other material defined, regulated,
controlled or potentially subject to any remediation requirement under any
environmental law (collectively, "Hazardous Materials"), on, in, under or
affecting any real property currently leased or owned (or proposed to be leased
or owned) or by any means controlled by the Company, the Trust, and the
Partnership, including the
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<PAGE> 17
Current Hotels, the Acquisition Hotels and the RFS Hotels (the "Real Property")
except as in material compliance with applicable laws; except as otherwise
disclosed in the Prospectus, to the knowledge of the Company, the Trust and the
Partnership, the Real Property and the Company's, the Trust's and the
Partnership's and the Selling Entities' operations with respect to the Real
Property are in compliance with all federal, state and local laws, ordinances,
rules, regulations and other governmental requirements relating to pollution,
control of chemicals, management of waste, discharges of materials into the
environment, health, safety, natural resources, and the environment
(collectively, "Environmental Laws"), and the Company, the Trust, the
Partnership and the Selling Entities have, and are in compliance with, all
licenses, permits, registrations and government authorizations necessary to
operate under all applicable Environmental Laws. Except as otherwise disclosed
in the Prospectus, none of the Company, the Trust, the Partnership, or, to the
knowledge of the Company, the Trust and the Partnership, any Selling Entity has
received any written or oral notice from any governmental entity or any other
person and there is no pending or threatened claim, litigation or any
administrative agency proceeding that: (i) alleges a violation of any
Environmental Laws by the Company, the Trust, the Partnership or any Selling
Entity; (ii) alleges that the Company, the Trust, the Partnership or any Selling
Entity is a liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601, et seq., or any state superfund law; (iii) has resulted in or could
result in the attachment of an environmental lien on any of the Real Property;
or (iv) alleges that the Company, the Trust, the Partnership or any Selling
Entity is liable for any contamination of the environment, contamination of the
Real Property, damage to natural resources, property damage, or personal injury
based on their activities or the activities of their predecessors or third
parties (whether at the Real Property or elsewhere) involving Hazardous
Materials, whether arising under the Environmental Laws, common law principles,
or other legal standards.
(ii) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"), and the Company's method
of operation enables it to meet the requirements for taxation as a real estate
investment trust under the Code. The Partnership is treated as a partnership for
federal income purposes and not as a corporation or an association taxable as a
corporation.
(jj) None of the Company, the Trust or the Partnership is,
will become as a result of the transactions contemplated hereby, or will conduct
their respective businesses in a manner in which any such entity would become,
"an investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(kk) None of the appraisers which prepared appraisals of any
of the Current Hotels or the Acquisition Hotels, nor any environmental
engineering firm which prepared Phase I environmental assessment reports with
respect to the Current Hotels or the Acquisition Hotels was employed for such
purpose on a contingent basis or has any substantial interest in the Company,
the Trust or the Partnership.
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<PAGE> 18
(ll) The Partnership is not currently prohibited, directly or
indirectly, from making distributions to the Trust, from repaying to the Trust
any loans or advances to the Partnership or from transferring any of the
Partnership's property or assets to the Trust, except as disclosed in the
Prospectus and under the Line of Credit and the EQI Financing Partnership I,
L.P. agreements.
(mm) The Trust is not currently prohibited, directly or
indirectly, from making distributions to the Company, from repaying to the
Company any loans or advances to the Trust or from transferring any of the
Trust's property or assets to the Company, except as disclosed in the Prospectus
and under the Line of Credit and the EQI Financing Partnership I, L.P.
agreements.
(nn) The statements set forth in the Prospectus under the
caption "Federal Income Tax Considerations," insofar as they purport to describe
the provisions of the laws and documents referred to therein, are accurate and
complete.
Any certificate signed by any officer of the Company on behalf
of the Company, or by an officer of the Trust on behalf of the Trust or the
Partnership and delivered to you or to counsel for the Underwriters shall be
deemed a representation and warranty by such entity to each Underwriter as to
the matters covered thereby.
7. Indemnification and Contribution. (a) The Company, the Trust and the
Partnership, jointly and severally, agree to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to such Underwriter furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for use in
connection therewith. The foregoing indemnity agreement shall be in addition to
any liability which the Company, the Trust or the Partnership may otherwise
have.
(b) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, the Trust or the Partnership, such
Underwriter or such controlling person shall promptly notify the Company, the
Trust or the Partnership, and the Company, the Trust or the Partnership shall
assume the defense thereof, including the employment of counsel and payment of
all reasonable fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling
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<PAGE> 19
person unless the Company, the Trust or the Partnership have agreed in writing
to pay such fees and expenses, the Company, the Trust or the Partnership, have
failed to assume the defense and employ counsel, or the named parties to any
such action, suit or proceeding (including any impleaded parties) include both
such Underwriter or such controlling person and the Company, the Trust or the
Partnership and such Underwriter or such controlling person shall have been
advised by its counsel that representation of such indemnified party and the
Company, the Trust or the Partnership by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company, the Trust or the
Partnership shall not have the right to assume the defense of such action, suit
or proceeding on behalf of such Underwriter or such controlling person). It is
understood, however, that the Company, the Trust or the Partnership shall, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel), at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The Company, the Trust or the Partnership shall
not be liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company, the Trust or the Partnership agree to indemnify and
hold harmless any Underwriter, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Trust, the Partnership, their
respective directors and officers who sign the Registration Statement, and any
person who controls the Company, the Trust or the Partnership within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company, the Trust and the Partnership to
each Underwriter, but only with respect to information furnished in writing by
or on behalf of such Underwriter through you expressly for use in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the Company,
the Trust, the Partnership or any of their respective directors, any such
officer, or any such controlling person based on the Registration Statement or
the Prospectus, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against any Underwriter pursuant to this paragraph (c),
such Underwriter shall have the rights and duties given to the Company, the
Trust and the Partnership by paragraph (b) above (except that if the Company,
the Trust and the Partnership shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, the
Trust, the Partnership or their respective directors, any such officer, and any
such controlling person shall have the rights
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and duties given to the Underwriters by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Underwriters
may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Trust and the Partnership on the one hand and the Underwriters on
the other hand from the offering of the Shares, or if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Trust and the Partnership
on the one hand and the Underwriters on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, the Trust and the Partnership on
the one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters bear to the price to public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company, the Trust and the Partnership on
the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Trust or the Partnership on
the one hand or by the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The Company, the Trust, the Partnership and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by a pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in paragraph (d) above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities and expenses
referred to in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating any claim or defending
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7 are several in proportion to the respective numbers
of Firm Shares set forth opposite
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<PAGE> 21
their names in Schedule I hereto (or such numbers of Firm Shares increased as
set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company, the Trust, the Partnership and
the Underwriters set forth in this Agreement shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, the Trust,
the Partnership, their respective directors or officers, or any person
controlling the Company or the Trust or the Partnership, acceptance of any
Shares and payment therefor hereunder, and any termination of this Agreement. A
successor to any Underwriter or any person controlling any Underwriter, or to
the Company, the Trust or the Partnership, their respective directors or
officers, or any person controlling the Company or the Trust or the Partnership,
shall be entitled to the benefits of the indemnity, contribution, and
reimbursement agreements contained in this Section 7.
8. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for a post-effective amendment to the Registration Statement to
be declared effective before the offering of the Shares may commence, such
post-effective amendment shall have become effective not later than 5:30 P.M.,
New York City time, on the date hereof, or at such later date and time as shall
be consented to in writing by you, and all filings, if any, required by Rule 424
under the Act shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company, the Trust and
the Partnership taken as a whole not contemplated by the Prospectus, which
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in your reasonable opinion, as Representatives of the several Underwriters,
would materially, adversely affect the market for the Shares, or any event or
development relating to or involving the Company, the Trust or the Partnership
or any officer or director of the Company which makes any statement made in the
Prospectus untrue or which, in the reasonable opinion of the Company and its
counsel or the Underwriters and their counsel, requires the making of any
addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your reasonable
opinion, as Representatives of the several Underwriters, materially adversely
affect the market for the Shares.
(c) You shall have received on the Closing Date, an
Opinion of Hunton & Williams, counsel for the Company, the Trust and the
Partnership, dated the Closing Date and addressed to you, as Representatives of
the several Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Tennessee with the corporate power and authority to own and lease its
properties and to conduct its business as described in the Prospectus. To such
counsel's knowledge, except for the Trust, EISI, ENN II, L.P., EIWV, EQIFC,
EQIFP and the Partnership, the Company does not own or control, directly or
indirectly, any corporation, association or other entity.
(ii) The Trust has been duly organized and is validly
existing as a real estate investment trust in good standing under the laws of
the State of Maryland with all requisite power and authority to own and lease
its properties and to conduct its business as described in the Prospectus. The
Trust is wholly owned by the Company.
(iii) The Partnership is a limited partnership duly
formed and validly existing under the Tennessee Act with the partnership power
and authority to own and lease its properties and to conduct its business as
described in the Prospectus.
(iv) The Company has the corporate power and
authority to enter into this Agreement, to issue, sell and deliver the Shares as
provided herein and to consummate the transactions contemplated herein. This
Agreement has been duly authorized by all necessary corporate action and has
been executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Underwriters, constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws affecting the rights of creditors generally and by
principles of equity, whether considered at law or in equity, and except to the
extent that enforcement of the indemnification and contribution provisions set
forth in Section 7 of this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
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<PAGE> 23
(v) The Trust has the legal power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein. This Agreement has been duly authorized by all necessary trust action
and has been executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the Underwriters, constitutes a valid
and binding agreement of the Trust, enforceable in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other laws affecting the rights of
creditors generally and by principles of equity, whether considered at law or in
equity, and except to the extent that enforcement of the indemnification and
contribution provisions set forth in Section 7 of this Agreement may be limited
by federal or state securities laws or the public policy underlying such laws.
(vi) The Partnership has the partnership power and
authority to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly authorized by all necessary
partnership action and has been executed and delivered on behalf of the
Partnership and, assuming due authorization, execution and delivery by the
Underwriters, constitutes a valid and binding agreement of the Partnership
enforceable in accordance with its terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, moratorium, reorganization or other
laws affecting the rights of creditors generally and by principles of equity,
whether considered at law or in equity, and except to the extent that
enforcement of the indemnification and contribution provisions set forth in
Section 7 of this Agreement may be limited by federal or state securities laws
or the public policy underlying such laws.
(vii) The Partnership Agreement has been duly
authorized by all necessary corporate, trust or partnership action on behalf of
the Company, the Trust and the Partnership, respectively, and has been executed
and delivered by the parties thereto and constitutes a valid and binding
agreement, enforceable in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws affecting the rights of creditors generally and by
principles of equity, whether considered at law or in equity.
(viii) The Partnership has the partnership power and
authority to enter into the Acquisition Agreements and the Merger Agreement and
to consummate the transactions contemplated therein. The Acquisition Agreements
and the Merger Agreement have been duly authorized, executed and delivered on
behalf of the Partnership.
(ix) Each consent, approval, authorization, order,
license, certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery of the Shares, the execution, delivery and performance of this
Agreement and the consummation by the Company, the Trust and the Partnership of
the transactions contemplated hereby, has been made or obtained and is in full
force and effect, except such as may be necessary under state securities or real
estate syndication laws or required by the National Association of Securities
Dealers, Inc. (the "NASD") in connection with the purchase and distribution of
the Shares by the Underwriters, as to which such counsel need express no
opinion.
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<PAGE> 24
(x) Neither the issuance, sale and delivery by the
Company of the Shares, nor the execution, delivery and performance of this
Agreement will (a) violate the charter, bylaws, declaration of trust,
certificate of limited partnership or partnership agreement, as the case may be,
of the Company, the Trust or the Partnership; (b) constitute a default under any
of the Operative Documents or any contract or agreement filed or incorporated by
reference as an exhibit to the Registration Statement; (c) to such counsel's
knowledge, violate any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body; or (d) to such counsel's
knowledge, result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of any of the Company, the Trust or the
Partnership.
(xi) The issuance of the Shares to the Underwriters
hereunder has been validly authorized by the Company. When issued and delivered
against payment therefor as provided in this Agreement, the Shares will be
validly issued, fully paid and nonassessable. No statutory or, to such counsel's
knowledge, other preemptive rights of shareholders exist with respect to any of
the Shares. To such counsel's knowledge, no person or entity holds a right to
require or participate in the registration under the Act of the Shares pursuant
to the Registration Statement. To such counsel's knowledge, no person or entity
has a right of participation or first refusal with respect to the sale of the
Shares by the Company. The form of certificates evidencing the Shares complies
with all applicable requirements of Tennessee law.
(xii) The Company has authorized capital stock as
set forth in the Prospectus under the caption "Capitalization." All of the
issued shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable. None of the issued shares of
capital stock of the Company has been issued in violation of any preemptive
rights of shareholders. All sales of the Company's capital stock prior to the
date hereof were at all relevant times duly registered under the Act or were
exempt from the registration requirements of the Act by reason of Sections 3(b),
4(2) or 4(6) thereof and were duly registered or were issued pursuant to an
available exemption from the registration requirements of the applicable state
securities or blue sky laws, provided, however, that such counsel need not
express any opinion with respect to the registration or availability of an
exemption under applicable state securities or blue sky laws for shares of
preferred stock issued pursuant to an underwritten public offering. To the
knowledge of such counsel, except as disclosed in the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any shares of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company.
(xiii) All of the issued shares of beneficial
interest of the Trust have been duly authorized and validly issued and are fully
paid and nonassessable. None of the issued shares of beneficial interest of the
Trust has been issued or is owned or held in violation of any statutory or, to
such counsel's knowledge, other preemptive right. The issuance of all of the
outstanding shares of beneficial interest of the Trust was exempt from the
registration requirements of the Act and any applicable state securities laws.
To such counsel's knowledge, there is no outstanding option, warrant or other
right calling for the issuance of, and no commitment, plan or arrangement
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<PAGE> 25
to issue, any shares of beneficial interest of the Trust or any security
convertible into or exchangeable for shares of beneficial interest of the Trust.
(xiv) All of the issued Partnership Units of the
Partnership have been duly authorized and validly issued and are fully paid and
nonassessable. To such counsel's knowledge, none of the issued Partnership Units
has been issued or is owned or held in violation of any preemptive rights. The
issuance of Series A Preferred Partnership Units to be issued to the Trust at
the Closing Date has been duly and validly authorized by the Partnership. When
issued and delivered against payment therefor as provided in the Partnership
Agreement, such Partnership Units will be duly and validly issued and fully
paid. The issuances of the outstanding Partnership Units were exempt from the
registration requirements of the Act and any applicable state securities laws.
(xv) To such counsel's knowledge and except as
described in the Prospectus, there is not pending or threatened, any action,
suit, proceeding, inquiry or investigation against the Company, the Trust or the
Partnership or any of their respective officers and directors or to which the
properties, assets or rights of any such entity are subject, which, if
determined adversely to any such entity, would in the aggregate have a material
adverse effect on the financial position, results of operations or business of
the Company.
(xvi) The descriptions in the Registration
Statement and the Prospectus of the contracts, leases and other legal documents
therein described present fairly the information required to be shown and there
are no contracts, leases or other documents known to such counsel of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not described or
filed as required. There are no statutes or regulations applicable to the
Company, the Trust or the Partnership or certificates, permits or other
authorizations from governmental regulatory officials or bodies required to be
obtained or maintained by any such entity, known to such counsel, of a character
required to be disclosed in the Registration Statement or the Prospectus which
have not been so disclosed and properly described therein.
(xvii) The Company is organized in conformity with
the requirements for qualification as a real estate investment trust ("REIT")
pursuant to Sections 856 through 860 of the Code, and the Company's method of
operation enables it to meet the requirements for qualification and taxation as
a REIT under the Code. The Partnership is treated as a partnership for federal
income purposes and not as a corporation or an association taxable as a
corporation.
(xviii) The Registration Statement has become
effective under the Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or is pending or contemplated
under the Act. Other than financial statements and other financial and operating
data and schedules contained therein, as to which counsel need express no
opinion, the Registration Statement, the Prospectus and any amendment or
supplement thereto, appear on their face to conform as to form in all material
respects with the requirements of the Act and the Act Regulations.
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<PAGE> 26
(xix) Such counsel has no reason to believe that
the Registration Statement, or any further amendment thereto made prior to the
Closing Date, on its effective date and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, or any amendment or
supplement thereto made prior to the Closing Date, as of its issue date and as
of the Closing Date, contained or contains any untrue statement of a material
fact or omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that such
counsel need express no belief regarding the financial statements and related
schedules and other statistical and financial data contained in the Registration
Statement, any amendment thereto, or the Prospectus, or any amendment or
supplement thereto).
(xx) The Incorporated Documents (other than the
financial statements and related schedules therein, as to which such counsel
need express no opinion) when they were filed with the Commission complied on
their face as to form in all material respects with the requirements of the
Exchange Act, and the rules and regulations of the Commission thereunder; and
nothing has come to such counsel's attention which causes them to believe that
any of such Incorporated Documents (other than the statistical and financial
statements and related schedules therein, as to which such counsel need express
no belief), when such Incorporated Documents were so filed, contained an untrue
statement of material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made when such documents were so filed, not misleading.
(xxi) Neither the Company, the Trust nor the
Partnership is, or solely as a result of the consummation of the transactions
contemplated hereby will become, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
(xxii) The information in the Prospectus under the
caption "Federal Income Tax Considerations," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel, is
correct and presents fairly the information required to be disclosed therein
under the Act and the Act Regulations.
(xxiii) To such counsel's knowledge, the conditions
for use of a Registration Statement on Form S-3 set forth in the General
Instructions to Form S-3 have been satisfied with respect to the Company and the
transactions contemplated by this Agreement and the Registration Statement.
(xxiv) Such counsel has been advised that the Shares
have been approved for listing on the NYSE, subject to official notice of
issuance.
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(d) You shall have received on the Closing Date an opinion of
King & Spalding, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in clauses (iv), (xi) and (xix) of the foregoing
paragraph (c) and such other related matters as you may request.
(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Coopers & Lybrand L.L.P., independent certified public
accountants, substantially in the forms heretofore approved by you.
(f) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the consolidated short-term or long-term debt of the Company (other
than in the ordinary course of business) from that set forth or contemplated in
the Registration Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company, the
Trust or the Partnership taken as a whole; (iv) the Company, the Trust, and the
Partnership, shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to the
Company, the Trust, and the Partnership, taken as a whole, other than those
reflected in the Registration Statement or the Prospectus (or any amendment or
supplement thereto); and (v) all the representations and warranties of the
Company, the Trust, and the Partnership contained in this Agreement shall be
true and correct on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company and similar officers of the Trust
as general partner of the Partnership (or such other officers as are acceptable
to you), to the effect set forth in this Section 8(f) and in Section 8(g)
hereof.
(g) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(h) The Shares shall have been listed or approved for listing
upon notice of issuance on the NYSE.
(i) The NASD shall not have objected to such offering, such
terms or the Underwriters' participation in the same.
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(j) The Company shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you and your counsel in your reasonable discretion.
Any certificate or document signed by any officer of the
Company, the Trust or the general partner of the Partnership and delivered to
you, as Representatives of the Underwriters, or to counsel for the Underwriters,
shall be deemed a representation and warranty by the Company, the Trust or the
Partnership, as applicable, to each Underwriter as to the statements made
therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 8, except that,
if any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (f) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c) and (d) shall be revised to reflect the sale of Additional Shares.
9. Expenses. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: the preparation, printing or reproduction, and filing
with the Commission of the Registration Statement (including financial
statements and exhibits thereto), the Prospectus, and each amendment or
supplement to any of them; the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Registration Statement, the Prospectus, and all amendments
or supplements to any of them as may be reasonably requested for use in
connection with the offering and sale of the Shares; the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the Shares;
the reproduction and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents reproduced
and delivered in connection with the offering of the Shares; the listing of the
Shares on the NYSE; the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws or real estate syndication laws
of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); the
filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the NASD; the
transportation and other expenses incurred by or on behalf of the Company's
representatives in connection with presentations to prospective purchasers of
the Shares; the fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company.
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10. Effective Date of Agreement. This Agreement shall become effective:
upon the execution and delivery hereof by the parties hereto; or if, at the time
this Agreement is executed and delivered, it is necessary for a post-effective
amendment to the Registration Statement to be declared effective before the
offering of the Shares may commence, when notification of the effectiveness of
or such post-effective amendment has been released by the Commission. Until such
time as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters in
Schedule I or in such other proportion as you may specify in accordance with
Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to
purchase the shares which such defaulting Underwriter or Underwriters are
obligated, but fail or refuse, to purchase. If any one or more of the
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you and the Company for the
purchase of such Shares by one or more non-defaulting Underwriters or other
party or parties approved by you and the Company are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed within 24 hours by
letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, trading in securities
generally on the NYSE, the American Stock Exchange or The Nasdaq Stock Market
shall have been suspended or
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materially limited, a general moratorium on commercial banking activities in New
York or Tennessee shall have been declared by either federal or state
authorities, or there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your reasonable
judgment, impracticable or inadvisable to commence or continue the offering of
the Shares at the offering price to the public set forth on the cover page of
the Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed within 24
hours by letter.
12. Information Furnished by the Underwriters. The statements set forth
in the penultimate sentence of the third paragraph of the cover page and the
last paragraph on the cover page, the stabilization legend on the inside cover
page, the list of Underwriters and their respective allotments appearing under
the caption "Underwriting" in the Prospectus and the statements in the first,
third, fifth and last paragraphs under the caption "Underwriting" in the
Prospectus, constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 6(b) and
7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10 and
11 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered if to the Company, the Trust or the Partnership,
at the office of the Company at Equity Inns, Inc., 4735 Spottswood, Suite 102,
Memphis, Tennessee, 38117, Attention: Mr. Phillip H. McNeill, Sr. or if to you,
as Representatives of the several Underwriters, care of Smith Barney Inc., 388
Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
This Agreement has been and is made solely for the benefit of
the several Underwriters, the Company, the Trust and the Partnership, their
respective directors and officers, and the other controlling persons referred to
in Section 7 hereof and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any right under or by
virtue of this Agreement. Neither the term "successor" nor the term "successors
and assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Shares in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
-30-
<PAGE> 31
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Partnership, the Trust and the several Underwriters.
Very truly yours,
EQUITY INNS, INC.
By: /s/ Howard A. Silver
--------------------------------------
Howard A. Silver
President, Chief Operating Officer,
Treasurer and Chief Financial Officer
EQUITY INNS TRUST
By: /s/ Howard A. Silver
--------------------------------------
Howard A. Silver
Secretary and Treasurer
EQUITY INNS PARTNERSHIP, L.P.
By: EQUITY INNS TRUST
General Partner
By: /s/ Howard A. Silver
--------------------------------------
Howard A. Silver
Secretary and Treasurer
-31-
<PAGE> 32
Confirmed as of the date first above
mentioned on behalf of themselves and the
other several Underwriters named in Schedule
I hereto.
SMITH BARNEY INC.
CIBC OPPENHEIMER
J. C. BRADFORD & CO.
MORGAN KEEGAN & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
RONEY CAPITAL MARKETS
As Representatives of the Several Underwriters
By: SMITH BARNEY INC.
By: /s/ Jeffrey Horowitz
-----------------------
Jeffrey Horowitz
Managing Director
-32-
<PAGE> 33
SCHEDULE I
EQUITY INNS, INC.
<TABLE>
<CAPTION>
Number of
Underwriter Firm Shares
- ----------- -----------
<S> <C>
Smith Barney Inc................................................................ 500,000
CIBC Oppenheimer................................................................ 450,000
J.C. Bradford & Co.............................................................. 450,000
Morgan Keegan & Company, Inc.................................................... 450,000
Prudential Securities Incorporated.............................................. 450,000
Roney Capital Markets........................................................... 450,000
----------
Total....................................... 2,750,000
==========
</TABLE>
<PAGE> 1
EXHIBIT 4.2
EQUITY INNS, INC.
ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED
CHARTER DESIGNATING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK
To the Secretary of State of the State of Tennessee:
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporation Act, the undersigned Tennessee corporation adopts the
following amendments to its Second Amended and Restated Charter (the "Charter").
1. The name of the corporation is Equity Inns, Inc. (the
"Corporation").
2. The text of the amendments adopted to the Charter are as
follows:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article 5 of the Charter and by Section
48-16-102 of the Tennessee Business Corporation Act, as amended, the Board of
Directors has, by resolution, duly divided and classified 3,162,000 shares of
the preferred stock of the Corporation into a series designated 9 1/2 Series A
Cumulative Preferred Stock (the "Series A Preferred Stock") and has provided for
the issuance of the Series A Preferred Stock.
SECOND: Article 5 of the Charter is hereby amended by adding the
following as a new subsection (a) to such Article 5:
1. DESIGNATION AND NUMBER. A series of Preferred Stock, designated the
"9 1/2% Series A Cumulative Preferred Stock" (the "Series A Preferred
Stock"), is hereby established. The maximum number of authorized shares
of the Series A Preferred Stock shall be 3,162,000.
2. RANK. The Series A Preferred Stock will, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of the
Corporation, rank (a) prior or senior to any class or series of Common
Stock of the Corporation and any other class or series of equity
securities of the Corporation, if the holders of Series A Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of shares of such class or series ("Junior
Stock"); (b) on a parity with any class or series of equity securities
of the Corporation if, pursuant to the specific terms of such class or
series of equity securities, the holders of such class or series of
equity securities and the Series A Preferred Stock shall be entitled to
the receipt of dividends and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation preferences,
without preference or priority one over the other ("Parity Stock"); (c)
junior to any class or series of equity securities of the Corporation
if, pursuant to the specific terms of such class or series, the holders
of such class or series shall be entitled to the receipt of dividends
or amounts distributable upon liquidation, dissolution or winding up in
preference or priority to the holders of the Series A Preferred Stock
("Senior Stock"); and (d) junior to all existing and future
indebtedness
<PAGE> 2
of the Corporation. The term "equity securities" does not include
convertible debt securities, which will rank senior to the Series A
Preferred Stock prior to conversion.
3. DIVIDENDS.
(a) Holders of Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds
of the Corporation legally available for payment, cash dividends at the
rate of 9 1/2% per annum of the $25 liquidation preference (equivalent
to $2.375 per annum per share). Such dividends shall be cumulative from
the date of original issue, whether or not in any dividend period or
periods (i) such dividends shall be declared, (ii) there shall be funds
of the Corporation legally available for the payment of such dividends
or (iii) any agreement of the Corporation prohibits payment of such
dividends, and shall be payable quarterly on or before the last day of
January, April, July and October of each year (or, if not a business
day, the next succeeding business day, each a "Dividend Payment Date
"), commencing October 31, 1998. The first dividend will be prorated
for more than a full quarter. Any dividend payable on the Series A
Preferred Stock for any partial dividend period will be computed on the
basis of twelve 30-day months and a 360 day year. Dividends will be
payable in arrears to holders of record as they appear on the stock
records of the Corporation at the close of business on the last
business day of March, June, September and December immediately
preceding such Dividend Payment Date. Holders of Series A Preferred
Stock shall not be entitled to receive any dividends in excess of
cumulative dividends on the Series A Preferred Stock. No interest shall
be paid in respect of any dividend payment or payments on the Series A
Preferred Stock that may be in arrears.
(b) When dividends are not paid in full upon the Series A
Preferred Stock or any other class or series of Parity Stock, or a sum
sufficient for such payment is not set apart, all dividends declared
upon the Series A Preferred Stock and any other class or series of
Parity Stock shall be declared ratably in proportion to the respective
amounts of dividends accumulated, accrued and unpaid on the Series A
Preferred Stock and accumulated, accrued and unpaid on such Parity
Stock. Except as set forth in the preceding sentence, unless dividends
on the Series A Preferred Stock equal to the full amount of
accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid, or declared and a sum
sufficient for the payment thereof set apart for such payment for all
past dividend periods, no dividends shall be declared or paid or set
aside for payment by the Corporation with respect to any class or
series of Parity Stock. Unless full cumulative dividends on the Series
A Preferred Stock have been paid or declared and set apart for payment
for all past dividend periods, no dividends (other than dividends paid
in shares of Junior Stock or options, warrants or rights to subscribe
for or purchase shares of Junior Stock) shall be declared or paid or
set apart for payment by the Corporation with respect to any shares of
Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (except for purposes of an employee
benefit plan) for any consideration (except by conversion or exchange
for shares of Junior Stock, or options, warrants or rights to subscribe
for or purchase shares of Junior Stock), nor shall any other cash or
other property be paid or distributed to or for the benefit of holders
of shares of Junior Stock. Notwithstanding the above, the Corporation
shall not be prohibited from (i) declaring or paying or setting apart
for payment any dividend or distribution on any shares of Parity Stock
or (ii) or redeeming, purchasing or otherwise acquiring any Parity
Stock, in each case, if such declaration,
2
<PAGE> 3
payment, redemption, purchase or other acquisition is necessary to
maintain the Corporation's qualification as a REIT.
(c) No dividends on shares of Series A Preferred Stock shall
be declared by the Board of Directors or paid or set apart for payment
by the Corporation at such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to its
indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or
if such declaration or payment shall be restricted or prohibited by
law.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the
Internal Revenue Code of 1986, as amended (the "Code")) any portion
(the "Capital Gains Amount") of the dividends (as determined for
federal income tax purposes) paid or made available for the year to
holders of all classes of stock (the "Total Dividends"), then the
portion of the Capital Gains Amount that shall be allocable to the
holders of Series A Preferred Stock shall be the amount that the total
dividends (as determined for federal income tax purposes) paid or made
available to the holders of the Series A Preferred Stock for the year
bears to the Total Dividends. The Corporation may elect to retain and
pay income tax on its net long-term capital gains. In such a case, the
holders of Series A Preferred Stock would include in income their
proportionate share of the Corporation's undistributed long-term
capital gains, as designated by the Corporation.
4. LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, before any payment or distribution by
the Corporation shall be made to or set apart for the holders of any
shares of Junior Stock, the holders of shares of Series A Preferred
Stock shall be entitled to receive a liquidation preference of $25 per
share (the "Liquidation Preference"), plus an amount equal to all
accumulated, accrued and unpaid dividends (whether or not earned or
declared) to the date of final distribution to such holders, but such
holders shall not be entitled to any further payment. Until the holders
of the Series A Preferred Stock have been paid the Liquidation
Preference in full, plus an amount equal to all accumulated, accrued
and unpaid dividends (whether or not earned or declared) to the date of
final distribution to such holders, no payment shall be made to any
holder of Junior Stock upon the liquidation, dissolution or winding up
of the Corporation.
(b) If upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of Series A Preferred Stock shall be
insufficient to pay in full the above described preferential amount and
liquidating payments on any other shares of any class or series of
Parity Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of Series A Preferred Stock and any such
other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Series A Preferred Stock and any
such other Parity Stock if all amounts payable thereon were paid in
full.
(c) A voluntary or involuntary liquidation, dissolution or
winding up of the
3
<PAGE> 4
Corporation shall not include a consolidation or merger of the
Corporation with one or more corporations, a sale or transfer of all or
substantially all of the Corporation's assets, or a statutory share
exchange.
(d) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders
of Series A Preferred Stock and any Parity Stock, any other series or
class or classes of Junior Stock shall be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the
Series A Preferred Stock and any Parity Stock shall not be entitled to
share therein.
5. REDEMPTION.
(a) Shares of Series A Preferred Stock shall not be redeemable
prior to June 25, 2003. However, in order to ensure that the
Corporation will continue to meet the requirement for qualification as
a REIT, the Series A Preferred Stock will be subject to the provisions
of Article 14 of the Corporation's Charter (the "Charter") pursuant to
which shares of Preferred Stock and the Cumulative Stock of the
Corporation owned by a shareholder in excess of 9.9% in value of the
outstanding shares of capital stock of the Corporation (the "Ownership
Limit") will be deemed "Shares-in-Trust" (as defined in such Article
14). On and after June 25, 2003, the Corporation may redeem shares of
Series A Preferred Stock, in whole or from time to time in part, at a
cash redemption price equal to 100% of the Liquidation Preference plus
all accrued and unpaid dividends to the date fixed for redemption (the
"Redemption Date"). The Redemption Date shall be selected by the
Corporation and shall not be less than 30 days nor more than 60 days
after the date notice of redemption is sent by the Corporation. If full
cumulative dividends on all outstanding shares of Series A Preferred
Stock have not been paid or declared and set apart for payment, no
shares of Series A Preferred Stock may be redeemed unless all
outstanding shares of Series A Preferred Stock are simultaneously
redeemed. The redemption price for the Series A Preferred Stock (other
than any portion thereof consisting of accrued and unpaid dividends)
shall be payable solely with the proceeds from the sale by the
Corporation or the Partnership of other capital shares of the
Corporation or the Partnership (whether or not such sale occurs
concurrently with such redemption). For purposes of the preceding
sentence, "capital shares" means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or
other ownership interests (however designated) and any rights (other
than debt securities convertible into or exchangeable at the option of
the holder for equity securities (unless and to the extent such debt
securities are subsequently converted into capital shares)) or options
to purchase any of the foregoing of or in the Corporation or the
Partnership.
(b) Notice of redemption of the Series A Preferred Stock shall
be mailed by the Corporation to each holder of record of the shares to
be redeemed by first class mail, postage prepaid at such holder's
address as the same appears on the stock records of the Corporation.
Any notice which was mailed as described above shall be conclusively
presumed to have been duly given on the date mailed whether or not the
holder receives the notice. Each notice shall state: (i) the Redemption
Date; (ii) the number of shares of Series A Preferred Stock to be
redeemed; and (iii) the place or places where certificates for such
shares of Series A Preferred Stock are to be surrendered for cash. From
and after
4
<PAGE> 5
the Redemption Date, dividends on the shares of Series A Preferred
Stock to be redeemed will cease to accrue, such shares shall no longer
be deemed to be outstanding and all rights of the holders thereof shall
cease (except the right to receive the cash payable upon such
redemption).
(c) The Series A Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption
provisions except as provided under Article 14 of the Charter.
(d) Subject to applicable law and the limitation on purchases
when dividends on the Series A Preferred Stock are in arrears, the
Corporation may, at any time and from time to time, purchase any shares
of Series A Preferred Stock in the open market, by tender or by private
agreement.
6. VOTING RIGHTS.
(a) Holders of the Series A Preferred Stock will not have any
voting rights, except as set forth below or as otherwise from time to
time required by law.
(b) If and whenever distributions on any shares of Series A
Preferred Stock or any series or class of Parity Stock shall be in
arrears for six or more quarterly periods (whether or not consecutive),
the number of directors then constituting the Board of Directors shall
be increased by two and the holders of such shares of Series A
Preferred Stock (voting together as a single class with all other
shares of Parity Stock of any other class or series which is entitled
to similar voting rights (the "Voting Preferred Stock")) will be
entitled to vote for the election of the two additional directors of
the Corporation at any annual meeting of stockholders or at a special
meeting of the holders of the Series A Preferred Stock and of the
Voting Preferred Stock called for that purpose. The Corporation must
call such special meeting upon the request of any holder of record of
shares of Series A Preferred Stock. Whenever dividends in arrears on
outstanding shares of the Series A Preferred Stock and the Voting
Preferred Stock shall have been paid and dividends thereon for the
current quarterly dividend period shall have been paid or declared and
set apart for payment, then the right of the holders of the Series A
Preferred Stock to elect such additional two directors shall cease and
the terms of office of such directors shall terminate and the number of
directors constituting the Board of Directors shall be reduced
accordingly.
(c) The affirmative vote or consent of at least 66 2/3% of the
votes entitled to be cast by the holders of the outstanding shares of
Series A Preferred Stock and the holders of all other classes or series
of Preferred Stock entitled to vote on such matters, voting as a single
class, will be required to (i) authorize the creation of, the increase
in the authorized amount of, or issuance of any shares of any class of
Senior Stock or any security convertible into shares of any class of
Senior Stock or (ii) amend, alter or repeal any provision of, or add
any provision to, the Charter, including the Articles of Amendment, or
the Corporation's bylaws, if such action would materially adversely
affect the voting powers, rights or preferences of the holders of the
Series A Preferred Stock. The amendment of the Charter to authorize,
create, or to increase the authorized amount of Junior Stock or any
shares of any class of Parity Stock, shall not be deemed to
5
<PAGE> 6
materially adversely affect the voting powers, rights or preferences of
the holders of Series A Preferred Stock. No such vote of the holders
Series A Preferred Stock as described above shall be required if
provision is made to redeem all shares of Series A Preferred Stock at
or prior to the time such amendment, alteration or repeal is to take
effect, or when the issuance of any such shares or convertible security
is to be made, as the case may be.
(d) With respect to the exercise of the above described voting
rights, each share of Series A Preferred Stock shall have one (1) vote
per share, except that when any other class or series of Preferred
Stock shall have the right to vote with the Series A Preferred Stock as
a single class, then the Series A Preferred Stock and such other class
or series shall have one quarter of one (0.25) vote per $25 of stated
Liquidation Preference.
(e) The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of
Series A Preferred Stock shall have been redeemed or called for
redemption upon proper notice and sufficient funds shall have been
deposited in trust to effect such redemption.
7. CONVERSION. The Series A Preferred Stock is not convertible into
or exchangeable for any other property or securities of the
Corporation.
THIRD: The above-listed amendments are to become effective when these
articles of amendment are accepted for filing by the Secretary of State of the
State of Tennessee.
FOURTH: The above-listed amendments do not provide for the exchange,
reclassification or cancellation of existing shares.
FIFTH: The above-listed amendments were duly adopted by the Board of
Directors of the Corporation as of June 9, 1998 and were not required to be
adopted by the shareholders of the Corporation.
Dated this the 25th day of June, 1998.
EQUITY INNS, INC.
By: /s/ Howard A. Silver
--------------------------------------------
Howard A. Silver
Title: President, Chief Operating Officer,
Treasurer and Chief Financial Officer
6
<PAGE> 1
EXHIBIT 8.1
June 23, 1998
Equity Inns, Inc.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Equity Inns, Inc.
Qualification as
Real Estate Investment Trust
Ladies and Gentlemen:
We have acted as counsel to Equity Inns, Inc., a Tennessee
corporation (the "Company"), in connection with (i) the preparation of a
Registration Statement on Form S-3 (No. 333-48169) declared effective by the
Securities and Exchange Commission ("SEC") on April 21, 1998 (the "Registration
Statement"), (ii) the offering and sale (the "Offering") of 2,750,000 shares of
9 1/2% Series A Cumulative Preferred Stock (Liquidation Preference $25 per
Share) of the Company (the "Series A Preferred Stock") pursuant to a prospectus
dated April 21, 1998 (the "Prospectus") and a related prospectus supplement
dated June 23, 1998 (the "Prospectus Supplement") related to the Registration
Statement, and (iii) the Company's contribution of the net proceeds of the
Offering to its wholly-owned subsidiary, Equity Inns Trust, a Maryland real
estate investment trust (the "Trust"), and the Trust's contribution of such net
proceeds to Equity Inns Partnership, L.P., a Tennessee limited partnership (the
"Operating Partnership"), in exchange for an additional general partnership
interest in the Operating Partnership. You have requested our opinion regarding
certain U.S. federal income tax matters in connection with the Offering.
<PAGE> 2
The Company, through the Operating Partnership, EQI Financing
Partnership I, L.P. (the "First Subsidiary Partnership"), and Equity Inns/West
Virginia Partnership, L.P. (the "Second Subsidiary Partnership" and, together
with the Operating Partnership and the First Subsidiary Partnership, the
"Partnerships"), currently owns 95 hotels and associated personal property (the
"Current Hotels"). EQI Financing Corporation, a wholly-owned subsidiary of the
Company ("Financing"), owns a 1% general partnership interest, and the Operating
Partnership owns a 99% limited partnership interest, in the First Subsidiary
Partnership. Equity Inns Services, Inc., a wholly-owned subsidiary of the
Company ("Services"), owns a 1% general partnership interest, and the Operating
Partnership owns a 99% limited partnership interest, in the Second Subsidiary
Partnership.
Prior to November 15, 1996, the Partnerships leased the
Current Hotels to Trust Leasing, Inc. (formerly named McNeill Hotel Co., Inc.)
pursuant to substantially similar operating leases. As of the date hereof, the
Partnerships lease 82 of the Current Hotels to subsidiaries of Interstate Hotels
Company ("Interstate") pursuant to substantially similar operating leases (the
"Interstate Leases"), and lease ten of the Current Hotels to a subsidiary of
Prime Hospitality Corporation ("Prime" and, together with Interstate, the
"Lessee") pursuant to substantially similar operating leases (the "Prime Leases"
and, together with the Interstate Leases, the "Leases"). Two of the remaining
three Current Hotels are operated by Interstate pursuant to management
agreements with the Operating Partnership, and the final Current Hotel is
operated by CapStar Hotel Co. pursuant to a management agreement with the
Operating Partnership. Interstate operates certain of the 82 Current Hotels that
it leases from the Partnerships, and Promus Hotels, Inc. operates certain of
those Current Hotels pursuant to substantially similar management agreements
with Interstate (the "Management Agreements"). Prime operates the ten Current
Hotels that it leases from the Partnerships.
The Operating Partnership has contracted to acquire nine
additional hotels and associated personal property (the "Acquisition Hotels").
Upon the Operating Partnership's acquisition of the Acquisition Hotels, the
Operating Partnership plans to enter into lease agreements with Prime that are
substantially similar to the Prime Leases (the "Acquisition Leases"). Prime
plans to operate the Acquisition Hotels.
In connection with the opinions rendered below, we have
examined the following:
1. the Company's Charter, as amended;
2. the Company's Bylaws;
3. the minutes of meetings of the Company's board of directors held from
April 6, 1998 through May 14, 1998;
4. the Prospectus and the Prospectus Supplement;
-2-
<PAGE> 3
5. the Third Amended and Restated Agreement of Limited Partnership of the
Operating Partnership, dated June 25, 1997, among the Trust, as general partner,
and several limited partners (the "Operating Partnership Agreement"), as amended
by Amendment no. 1 to the Operating Partnership Agreement;
6. the Limited Partnership Agreement of the First Subsidiary Partnership,
dated December 24, 1996, between Financing and the Operating Partnership;
7. the Limited Partnership Agreement of the Second Subsidiary Partnership,
dated November 25, 1996, between Services and the Operating Partnership, as
amended on December 31, 1996;
8. the Leases and the Acquisition Leases;
9. the Management Agreements; and
10. such other documents as we have deemed necessary or appropriate for
purposes of this opinion.
In connection with the opinions rendered below, we have
assumed generally that:
1. each of the documents referred to above has been duly authorized,
executed, and delivered; is authentic, if an original, or is accurate, if a
copy; and has not been amended;
2. during its taxable year ending December 31, 1998 and subsequent taxable
years, the Company has operated and will continue to operate in such a manner
that makes and will continue to make the representations contained in a
certificate, dated June 22, 1998 and executed by a duly appointed officer of the
Company (the "Officer's Certificate"), true for such years;
3. the Company will not make any amendments to its organizational
documents, the Trust's organizational documents, Financing's organizational
documents, Services' organizational documents, the Operating Partnership
Agreement, or the partnership agreements of the First or Second Subsidiary
Partnership (together with the Operating Partnership Agreement, the "Partnership
Agreements") after the date of this opinion that would affect its qualification
as a real estate investment trust (a "REIT") for any taxable year;
4. each partner of the Partnerships (a "Partner") that is a corporation or
other entity has a valid legal existence;
5. each Partner has full power, authority, and legal right to enter into
and to perform the terms of the applicable Partnership Agreement and the
transactions contemplated thereby; and
-3-
<PAGE> 4
6. no action will be taken by the Company, the Trust, Financing, Services,
the Partnerships, or the Partners after the date hereof that would have the
effect of altering the facts upon which the opinions set forth below are based.
In connection with the opinions rendered below, we also have
relied upon the correctness of the factual representations contained in the
Officer's Certificate. After reasonable inquiry, we are not aware of any facts
inconsistent with the representations set forth in the Officer's Certificate.
Furthermore, where such factual representations involve terms defined in the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
thereunder (the "Regulations"), published rulings of the Internal Revenue
Service (the "Service"), or other relevant authority, we have explained such
terms to the Company's representatives and are satisfied that the such
representatives understand such terms and are capable of making such factual
representations.
Based on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, and the discussions in
the Prospectus and the Prospectus Supplement under the captions "Federal Income
Tax Considerations" and "Certain Federal Income Tax Considerations,"
respectively (which are incorporated herein by reference), we are of the opinion
that:
(a) the Company qualified to be taxed as a REIT pursuant
to sections 856 through 860 of the Code for its taxable years ended
December 31, 1994 through December 31, 1997, and the Company's
organization and current and proposed method of operation will enable
it to continue to qualify as a REIT for its taxable year ending
December 31, 1998, and in the future;
(b) the descriptions of the law and the legal conclusions
contained in the Prospectus and the Prospectus Supplement under the
captions "Federal Income Tax Considerations" and "Certain Federal
Income Tax Considerations," respectively, are correct in all material
respects, and the discussions thereunder fairly summarize the federal
income tax considerations that are likely to be material to a holder of
the Series A Preferred Stock;
(c) the Leases and the Acquisition Leases will be treated
as true leases for federal income tax purposes; and
(d) each Partnership will be treated for federal income
tax purposes as a partnership and not as a corporation or an
association taxable as a corporation or as a publicly traded
partnership, and each other subsidiary of the Company that is not a
partnership constitutes a "qualified REIT subsidiary" within the
meaning of Code section 856(i).
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<PAGE> 5
We will not review on a continuing basis the Company's compliance with the
documents or assumptions set forth above, or the representations set forth in
the Officer's Certificate. Accordingly, no assurance can be given that the
actual results of the Company's operations for its 1998 and subsequent taxable
years will satisfy the requirements for qualification and taxation as a REIT.
The foregoing opinions are based on current provisions of the
Code and the Regulations, published administrative interpretations thereof, and
published court decisions. The Service has not issued Regulations or
administrative interpretations with respect to various provisions of the Code
relating to REIT qualification. No assurance can be given that the law will not
change in a way that will prevent the Company from qualifying as a REIT.
We hereby consent to the filing of this opinion as an exhibit
to the Company's Form 8-K, dated June 23, 1998. We also consent to the
references to Hunton & Williams under the caption "Federal Income Tax
Considerations" in the Prospectus and the captions "Certain Federal Income Tax
Considerations" and "Legal Matters" in the Prospectus Supplement. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required by Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder by the SEC.
The foregoing opinions are limited to the U.S. federal income
tax matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country or any state or locality. We undertake no obligation to update the
opinions expressed herein after the date of this letter. This opinion letter is
solely for the information and use of the addressee, and it may not be
distributed, relied upon for any purpose by any other person, quoted in whole or
in part or otherwise reproduced in any document, or filed with any governmental
agency without our express written consent.
Very truly yours,
/s/ Hunton & Williams
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EXHIBIT 99.1
AMENDMENT NO. 1 TO THE THIRD AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
EQUITY INNS PARTNERSHIP, L.P.
This Amendment No. 1 (this "Amendment") to the Third Amended and
Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P. dated
June 25, 1997 (the "Partnership Agreement") is entered into as of June 25, 1998,
by and among Equity Inns, Inc., a Tennessee corporation (the "Corporation"),
Equity Inns Trust, a Maryland real estate investment trust (the "General
Partner"), and the limited partners (the "Limited Partners") of Equity Inns
Partnership, L.P. (the "Partnership"). All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Partnership
Agreement.
WHEREAS, the Corporation, which is the sole shareholder of the General
Partner, on even date herewith, has issued 2,750,000 shares of its 9 1/2% Series
A Cumulative Preferred Stock, $.01, par value per share, having a liquidation
preference equivalent to $25.00 per share (the "Series A Preferred Stock"), and
has sold such Series A Preferred Stock in a public offering and may issue and
sell up to an aggregate of 412,500 additional shares of Series A Preferred
Stock;
WHEREAS, the Corporation desires to contribute the net proceeds of the
sale of the Series A Preferred Stock through the General Partner to the
Partnership in exchange for preferred partnership interests in the Partnership
as set forth herein;
WHEREAS, the General Partner is authorized to cause the Partnership to
issue interests in the Partnership to the General Partner in exchange for such
contribution of such net proceeds made by the Corporation through the General
Partner;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Partnership Agreement as follows:
Section 1. Contribution.
The Corporation hereby contributes through the General Partner to the
Partnership the entire net proceeds received by the Corporation from the
issuance of the Series A Preferred Stock. As provided in Section 4.02(g) of the
Partnership Agreement, the Corporation shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the gross proceeds raised
in connection with the issuance of such shares of Series A Preferred Stock,
which is $68,750,000 and the Partnership shall be deemed
<PAGE> 2
simultaneously to have paid, pursuant to Section 6.05(b) of the Partnership
Agreement, for the costs and expenses relating to the offer, registration and
sale of the Series A Preferred Stock.
Section 2. Issuance of Series A Preferred Units.
In consideration of the contribution to the Partnership made by the
Corporation through the General Partner pursuant to Section 1 hereof, the
Partnership hereby issues to the General Partner 2,750,000 Series A Preferred
Units (as defined below) and may issue to the General Partner an additional
412,500 Series A Preferred Units.
Section 3. Definitions.
Article I of the Partnership Agreement is hereby amended by inserting
in the logical alphabetical locations the following definitions of Common Units,
Preferred Units, Series A Preferred Return, Series A Preferred Stock and Series
A Preferred Units, as follows:
"Common Units" means all Partnership Units that are not specifically
designated as Preferred Units pursuant to Section 4.02(c).
"Preferred Units" means all Partnership Units designated as units of
preferred partnership interest and issued by the Partnership from time to time.
"Series A Preferred Return" means an annualized amount equal to $2.375
per Series A Preferred Unit.
"Series A Preferred Stock" means the 9 1/2% Series A Cumulative
Preferred Stock, $.01 par value, of the Corporation.
"Series A Preferred Units" means the Preferred Units issued to the
General Partner in exchange for the net proceeds of the issuance by the
Corporation of its Series A Preferred Stock, which Series A Preferred Units
shall have the designations, preferences, privileges, limitations and relative
rights set forth in Section 4.02(c)(i) hereof.
Section 4. Creation of Series A Preferred Units.
Article IV of the Partnership Agreement is hereby amended by adding
Section 4.02(c)(i) as follows:
"(i) 9 1/2% SERIES A CUMULATIVE PREFERRED UNITS.
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1. DESIGNATION AND NUMBER. A series of Preferred Units,
designated the "9 1/2% Series A Cumulative Preferred Units"
(the "Series A Preferred Units"), is hereby established. The
number of Series A Preferred Units shall be as set forth on
Exhibit A hereto.
2. RANK. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution
or winding up of the Partnership, rank (i) senior to all
classes or series of Common Units of the Partnership, and to
all Partnership Units ranking junior to the Series A Preferred
Units with respect to distribution rights or rights upon
liquidation, dissolution or winding up of the Partnership;
(ii) on a parity with all Partnership Units issued by the
Partnership the terms of which specifically provide that such
Partnership Units rank on a parity with the Series A Preferred
Units with respect to distribution rights or rights upon
liquidation, dissolution or winding up of the Partnership; and
(iii) junior to all existing and future indebtedness of the
Partnership. The term "Partnership Units" does not include
convertible debt securities, which will rank senior to the
Series A Preferred Units prior to conversion.
3. DISTRIBUTIONS.
(a) Holders of the Series A Preferred Units are entitled
to receive, when and as distributed by the General Partner out of
available cash flow, preferential cumulative cash distributions in an
amount equal to the excess, if any, of (i) the cumulative Series A
Preferred Return for the current and all prior years over (ii) the sum
of all prior Series A Preferred Return distributions pursuant to this
Section 4.02(c)(i)(3). Distributions on the Series A Preferred Units
shall be cumulative from the date of original issue and shall be
payable quarterly in arrears on or before the last day of January,
April, July and October of each year, or, if not a Business Day (as
defined below), the next succeeding business day (each, a "Distribution
Payment Date"). The first distribution will be paid on or before
October 31, 1998. The first distribution will be prorated for more than
a full quarter. Any distribution payable on the Series A Preferred
Units for any partial distribution period will be computed on the basis
of a 360-day year consisting of twelve 30 day months. Distributions
will be payable to holders of record as they appear in the ownership
records of the Partnership at the close of business on the applicable
record date, which shall be the last Business Day of March, June,
September and December immediately preceding such Distribution Payment
Date, or on such other date designated by the General Partner of the
Partnership for the payment of distributions that is not more than 30
nor less than 10 days prior to such Distribution Payment Date (each, a
"Distribution Record Date"). "Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a legal
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<PAGE> 4
holiday nor a day on which banking institutions in New York City are
authorized or required by law, regulation or executive order to close.
(b) The amount of any distributions accrued on any Series
A Preferred Units at any Distribution Payment Date shall be the amount
of any unpaid distributions accumulated thereon, to and including such
Distribution Payment Date, whether or not earned or declared, and the
amount of distributions accrued on any Series A Preferred Units at any
date other than a Distribution Payment Date shall be equal to the sum
of the amount of any unpaid distributions accumulated thereon, to and
including the last preceding Distribution Payment Date, whether or not
earned or declared, plus an amount calculated on the basis of the
Series A Preferred Return for the period after such last preceding
Distribution Payment Date to and including the date as of which the
calculation is made based on a 360-day year of twelve 30-day months.
(c) Except as provided in subsection (a) hereof, the
holder of the Series A Preferred Units will not be entitled to any
distributions in excess of full cumulative distributions as described
above and shall not be entitled to participate in the earnings or
assets of the Partnership, and no interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or
payments on the Series A Preferred Units which may be in arrears.
(d) No distributions on Series A Preferred Units shall be
declared by the General Partner or paid or set apart for payment by the
Partnership if the terms and provisions of any agreement of the
Partnership, including any agreement relating to its indebtedness,
prohibit such declaration, payment or setting apart for payment or
provide that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration or payment shall be restricted or prohibited by law.
Notwithstanding the foregoing, distributions on the Series A Preferred
Units will accrue whether or not the Partnership has earnings, whether
or not there is available cash flow for the payment of such
distributions and whether or not such distributions are declared.
Accrued but unpaid distributions on the Series A Preferred Units will
not bear interest and holders of the Series A Preferred Units will not
be entitled to any distributions in excess of full cumulative
distributions described above.
(e) Except as set forth in the next sentence, no
distributions will be declared or paid or set apart for payment on any
Partnership Units or any other
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<PAGE> 5
series of Preferred Units ranking, as to distributions, on a parity
with or junior to the Series A Preferred Units (other than a
distribution of the Partnership's Common Units or any other class of
Partnership Units ranking junior to the Series A Preferred Units as to
distributions and upon liquidation) for any period unless full
cumulative distributions have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series A Preferred Units for all past
distribution periods and the then current distribution period. When
distributions are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series A Preferred Units and any
other series of Preferred Units ranking on a parity as to distributions
with the Series A Preferred Units, all distributions declared upon the
Series A Preferred Units and any other series of Preferred Units
ranking on a parity as to distributions with the Series A Preferred
Units shall be declared pro rata so that the amount of distributions
declared per Series A Preferred Unit and such other series of Preferred
Units shall in all cases bear to each other the same ratio that accrued
distributions per Series A Preferred Unit and such other series of
Preferred Units (which shall not include any accrual in respect of
unpaid distributions for prior distribution periods if such Preferred
Units do not have a cumulative distribution) bear to each other.
(f) Except as provided in the immediately preceding
paragraph, unless full cumulative distributions on the Series A
Preferred Units have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for
payment for all past distribution periods and the then current
distribution period, no distributions (other than a distribution of
Common Units or other Partnership Units ranking junior to the Series A
Preferred Units as to distributions and upon liquidation) shall be
declared or paid or set aside for payment nor shall any other
distribution be declared or made upon the Common Units, or any other
Partnership Units ranking junior to or on a parity with the Series A
Preferred Units as to distributions or upon liquidation, nor shall any
Common Units, or any other Partnership Units in the Partnership ranking
junior to or on a parity with the Series A Preferred Units as to
distributions or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any such units) by
the Partnership. Holders of Series A Preferred Units shall not be
entitled to any distribution, whether payable in cash, property or
securities in excess of full cumulative distributions on the Series A
Preferred Units as provided above.
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<PAGE> 6
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Partnership, the holders of Series A Preferred Units are entitled to be
paid out of the assets of the Partnership legally available for
distribution to its partners a liquidation preference of $25.00 per
Series A Preferred Unit (the "Liquidation Preference"), plus an amount
equal to any accrued and unpaid distributions with respect to the
Series A Preferred Units to the date of payment, but without interest,
before any distribution of assets is made to holders of Common Units or
any other class or series of Partnership Units in the Partnership that
ranks junior to the Series A Preferred Units as to liquidation rights.
The Partnership will promptly provide to the holders of Series A
Preferred Units written notice of any event triggering the right to
receive such Liquidation Preference. After payment of the full amount
of the Liquidation Preference, the holders of Series A Preferred Units
will have no right or claim to any of the remaining assets of the
Partnership. If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Partnership, the amounts payable with
respect to the Liquidation Preference, plus an amount equal to any
accrued and unpaid distributions to the date of payment, of the Series
A Preferred Units and any other units of the Partnership ranking as to
any such distribution on a parity with the Series A Preferred Units are
not paid in full, the holders of the Series A Preferred Units and of
such other units will share ratably in any such distribution of assets
of the Partnership in proportion to the full respective preference
amounts to which they are entitled. The consolidation or merger of the
Partnership with or into any other partnership, corporation, trust or
entity or of any other partnership or corporation with or into the
Partnership, or the sale, lease or conveyance of all or substantially
all of the property or business of the Partnership, shall not be deemed
to constitute a liquidation, dissolution or winding up of the
Partnership.
5. OPTIONAL REDEMPTION.
(a) Except as provided in Section 4.02(c)(i)(6) hereof,
the Series A Preferred Units are not redeemable by the Partnership
prior to June 25, 2003. On and after June 25, 2003, the Partnership, at
its option upon not less than 30 nor more than 60 days' written notice,
may redeem the Series A Preferred Units, in whole or in part, at any
time or from time to time, for cash at a redemption price of $25.00 per
Series A Preferred Unit, plus all accrued and unpaid distributions
thereon to the date fixed for redemption, without interest. A holder
shall surrender its Series A Preferred Units at the place designated in
such notice and shall be entitled to the redemption price and any
accrued and unpaid distributions payable upon such redemption following
such surrender. If notice of redemption of any Series A Preferred Units
has been given and if the funds necessary for such redemption have been
set aside by the Partnership in trust for
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<PAGE> 7
the benefit of the holders of any Series A Preferred Units so called
for redemption, then from and after the redemption date distributions
will cease to accrue on such Series A Preferred Units, such Series A
Preferred Units shall no longer be deemed outstanding and all rights of
the holders of such Series A Preferred Units will terminate, except the
right to receive the redemption price. If less than all of the
outstanding Series A Preferred Units are to be redeemed, the Series A
Preferred Units to be redeemed shall be selected pro rata (as nearly as
may be practicable without creating fractional Series A Preferred
Units) or by any other equitable method determined by the General
Partner.
(b) Notice of redemption will be mailed to holders of
Series A Preferred Units not less than 30 nor more than 60 days prior
to the redemption date. In addition to any information required by law,
each notice shall state: (i) the Redemption Date; (ii) the Redemption
Price; (iii) the number of Series A Preferred Units to be redeemed;
(iv) the place or places where the Series A Preferred Units are to be
surrendered for payment of the redemption price; and (v) that
distributions on the Series A Preferred Units to be redeemed will cease
to accrue on such redemption date. If less than all of the Series A
Preferred Units held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series A
Preferred Units held by such holder to be redeemed.
(c) Immediately prior to any redemption of Series A
Preferred Units, the Partnership shall pay, in cash, any accumulated
and unpaid distributions through the redemption date, unless a
redemption date falls after a Distribution Record Date and prior to the
corresponding Distribution Payment Date, in which case each holder of
Series A Preferred Units at the close of business on such Distribution
Record Date shall be entitled to the distribution payable on such
shares on the corresponding Distribution Payment Date notwithstanding
the redemption of such shares before such Distribution Payment Date.
(d) If the Partnership exercises its optional redemption
right with respect to the Series A Preferred Units pursuant to this
Section 4.02(c)(i)(5), then the Corporation must redeem a corresponding
number of shares of Series A Preferred Stock. Similarly, if the
Corporation exercises its optional redemption right with respect to
shares of Series A Preferred Stock, then the Partnership must redeem a
corresponding number of Series A Preferred Units.
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<PAGE> 8
6. CONVERSION. The Series A Preferred Units are not redeemable
for, convertible into or exchangeable for any other property or
securities of the Partnership or the General Partner."
Section 5. Allocation of Profit and Loss.
Article V, Section 5.01 is hereby deleted in its entirety and the
following new Section 5.01 is inserted in its place:
"(a) Allocation of Profit and Loss. After giving effect to the
special allocations set forth in Sections 5.01(c), (d) and (e) hereof,
and subject to Section 5.01(b) hereof, the Partnership's Profit and
Loss shall be allocated among the Partners for each fiscal year (or
portion thereof) in proportion to their respective Percentage Interests
(determined solely on the basis of the Partners' respective Common
Units).
(b) Capital Account Deficit. Loss shall not be allocated to a
Partner to the extent that such allocation would cause a deficit in
such Partner's Capital Account (after reduction to reflect the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6))
in excess of the sum of such Partner's shares of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in excess of
that limitation shall be allocated first to other Partners with
positive Capital Accounts (adjusted as described in the preceding
sentence) in proportion to such positive Capital Accounts and then to
the General Partner. After the occurrence of an allocation of Loss to a
Partner in accordance with this Section 5.01(b), to the extent
permitted by Regulations Section 1.704-1(b), Profit shall be specially
allocated to such Partner in an amount necessary to offset the Loss
previously allocated to such Partner under this Section 5.01(b).
(c) Minimum Gain Chargeback. Notwithstanding any provision
herein to the contrary, (i) any expense of the Partnership that is a
"nonrecourse deduction" within the meaning of Regulations Section
1.704-2(b)(1) shall be allocated in accordance with the Partners'
respective Percentage Interests (determined solely on the basis of
their respective Common Units), (ii) any expense of the Partnership
that is a "Partner nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
Partnership
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<PAGE> 9
Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership fiscal year, items of gain and income shall be
allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section
1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain within the meaning of Regulations Section
1.704-2(i)(4) for any Partnership fiscal year, items of gain and income
shall be allocated among the Partners in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Regulations
Section 1.704-2(j). A Partner's "interest in Partnership profits" for
purposes of determining its share of the nonrecourse liabilities of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3)
shall be such Partner's Percentage Interest (determined solely on the
basis of the Partners' respective Common Units).
(d) Qualified Income Offset. If a Limited Partner receives in
any fiscal year an adjustment, allocation, or distribution described in
subparagraph (4), (5), or (6) of Regulations Section
1.704-1(b)(2)(ii)(d) that causes or increases a negative balance in
such Partner's Capital Account that exceeds the sum of such Partner's
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
Gain, as determined in accordance with Regulations Sections 1.704-2(g)
and 1.704-2(i), such Partner shall be allocated specially for such
fiscal year (and, if necessary, later fiscal years) items of income and
gain in an amount and manner sufficient to eliminate such negative
Capital Account balance as quickly as possible as provided in
Regulations Section 1.704-1 (b)(2)(ii)(d). After the occurrence of an
allocation of income or gain to a Limited Partner in accordance with
this Section 5.01(d), to the extent permitted by Regulations Section
1.704-1(b) and Section 5.01(b), items of expense or loss shall be
allocated to such Partner in an amount necessary to offset the income
or gain previously allocated to such Partner under this Section
5.01(d).
(e) Priority Allocations With Respect To Series A Preferred
Units. After giving effect to the allocations set forth in Sections
5.01(b), (c), and (d) hereof, but before giving effect to the
allocations set forth in Section 5.01(a), Net Operating Income shall be
allocated to the General Partner until the aggregate amount of Net
Operating Income allocated to the General Partner under this Section
5.01(e) for the current and all prior years equals the aggregate amount
of the Series A Preferred Return paid to the General Partner pursuant
to Sections 4.02(c)(i)(3) and 4.02(c)(i)(4) hereof for the current and
all prior years. To the extent that an allocation of Loss to the
General Partner with respect to its Series A Preferred Units would
cause the balance of the General Partner's Capital Account in excess of
the sum of the General Partner's shares of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain (the "Adjusted Capital Account
Balance") to be reduced by an amount greater than the Liquidation
Preference
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<PAGE> 10
associated with the Series A Preferred Units, Net Operating Income will
be allocated to the General Partner in an amount necessary to cause its
Adjusted Capital Account Balance to equal the Liquidation Preference
associated with the Series A Preferred Units. For purposes of this
Section 5.01(e), "Net Operating Income" means the excess, if any, of
the Partnership's gross income over its expenses (but not taking into
account depreciation, amortization, or any other noncash expenses of
the Partnership), calculated in accordance with the principles of
Section 5.01(g) hereof.
(f) Allocations Between Transferor and Transferee. If a
Partner transfers any part or all of its Partnership Interest, the
distributive shares of the various items of Profit and Loss allocable
among the Partners during such taxable year of the Partnership shall be
allocated between the transferor and the transferee either (i) as if
the Partnership's fiscal year had ended on the date of the transfer, or
(ii) based on the number of days of such fiscal year that each was a
Partner without regard to the results of Partnership activities in the
respective portions of such fiscal year in which the transferor and the
transferee were Partners. The General Partner, in its sole discretion,
shall determine which method shall be used to allocate the distributive
shares of the various items of Profit and Loss between the transferor
and transferee.
(g) Definition of Profit and Loss. "Profit" and "Loss" and
items of income, gain, expense, or loss referred to in this Agreement
shall be determined in accordance with federal income tax accounting
principles, as modified by Regulations Section 1.704-1 (b)(2)(iv),
except that Profit and Loss shall not include items of income, gain and
expense that are specially allocated pursuant to Sections 5.01 (b),
(c), (d) and (e). All allocations of income, Profit, gain, Loss, and
expense (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth
in this Section 5.01, except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-1(b)(4). The General Partner
shall have the authority to elect the method to be used by the
Partnership for allocating items of income, gain and expense required
by Section 704(c) of the Code, and such election shall be binding on
all Partners."
Section 6. Distribution of Cash.
Article V, Section 5.02 is hereby amended by adding the following new
subsection:
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<PAGE> 11
"(d) Notwithstanding the discretion given to the General
Partner in subsection (a) above, the General Partner shall, prior to
any distributions to the holders of Common Units, make any
distributions required to be made to the holders of the Preferred
Units, to the extent of the Partnership's available cash flow."
Section 7. Redemption Right.
The Partnership Agreement is hereby amended by adding the following new
Section 8.05(f) to the Partnership Agreement, immediately following Section
8.05(e):
"(f) Preferred Units shall be redeemed, if at all, only in
accordance with such redemption rights or options as are set forth with
respect to such Preferred Units (or class or series thereof) in the
instruments designating such Preferred Units (or class or series
thereof)."
Section 8. General Amendments to Partnership Agreement.
Notwithstanding anything contained herein, all references to
Partnership Units in Section 7.01 of the Partnership Agreement shall be deemed
to refer solely to Common Units, and not to Preferred Units. In addition,
references in Article XI of the Partnership Agreement to Percentage Interests of
the Limited Partners shall be deemed to refer solely to Percentage Interests of
Limited Partners with respect to Common Units.
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<PAGE> 12
IN WITNESS WHEREOF, the foregoing Amendment No. 1 to the Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.
has been signed and delivered as of this 25th day of June, 1998, by the
undersigned sole general partner of the Partnership and non-Partner party to the
Partnership Agreement.
EQUITY INNS TRUST, a Maryland real estate
investment trust, as sole General Partner
By: /s/ Howard A. Silver
------------------------------------------
Name: Howard A. Silver
----------------------------------------
Title: Secretary and Treasurer
---------------------------------------
EQUITY INNS TRUST, a Maryland real estate
investment trust, as General Partner, on
behalf of the Limited Partners pursuant to
Section 8.02 and Article XI of the
Partnership Agreement
By: /s/ Howard A. Silver
------------------------------------------
Name: Howard A. Silver
----------------------------------------
Title: Secretary and Treasurer
---------------------------------------
EQUITY INNS, INC., a Tennessee corporation,
as a non-Partner party to the Third
Amendment and Restated Agreement of Limited
Partnership
By: /s/ Howard A. Silver
------------------------------------------
Name: Howard A. Silver
----------------------------------------
Title: President, Chief Operating Officer,
Treasurer and Chief Financial Officer
-------------------------------------
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<PAGE> 1
EXHIBIT 99.2
Consent of Person About to Become a Director
(pursuant to Rule 438 under the Securities Act of 1933, as amended
In connection with the filing of a prospectus supplement to a base
prospectus contained in a Registration Statement on Form S-3 (File No.
333-48169) filed by Equity Inns, Inc. with the Securities and Exchange
Commission pursuant to Rule 424(b)(5) of the Securities Act of 1933 (the
"Prospectus Supplement") relating to the offering and sale of ___% Series A
Cumulative Preferred Stock by Equity Inns, Inc., I, Robert M. Solmson, expect to
be elected to the Board of Directors of Equity Inns, Inc., as described therein.
As of the effective time of the Prospectus Supplement, I will not be a member of
the Board of Directors of Equity Inns, Inc.
I hereby consent to being named in the Prospectus Supplement as a
future member of Equity Inns, Inc.'s Board of Directors, and to the filing of
the Prospectus Supplement as contemplated by Equity Inns, Inc.
June 17, 1998 /s/ Robert M. Solmson
- ----------------------------- ----------------------------------------
Date Robert M. Solmson
<PAGE> 1
EXHIBIT 99.3
Consent of Person About to Become a Director
(pursuant to Rule 438 under the Securities Act of 1933, as amended)
In connection with the filing of a prospectus supplement to a base
prospectus contained in a Registration Statement on Form S-3 (File No.
333-48169) filed by Equity Inns, Inc. with the Securities and Exchange
Commission pursuant to Rule 424(b)(5) of the Securities Act of 1933 (the
"Prospectus Supplement") relating to the offering and sale of ___% Series A
Cumulative Preferred Stock by Equity Inns, Inc., I, Bruce E. Campbell, Jr.,
expect to be elected to the Board of Directors of Equity Inns, Inc., as
described therein. As of the effective time of the Prospectus Supplement, I will
not be a member of the Board of Directors of Equity Inns, Inc.
I hereby consent to being named in the Prospectus Supplement as a
future member of Equity Inns, Inc.'s Board of Directors, and to the filing of
the Prospectus Supplement as contemplated by Equity Inns, Inc.
June 17, 1998 /s/ Bruce E. Campbell, Jr.
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Date Bruce E. Campbell, Jr.
