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SCHEDULE 14A
(RULE 14A - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material under Rule 14a-12.
EQUITY INNS, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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EQUITY INNS, INC.
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 2000
------------------------
We cordially invite you to attend our annual meeting of shareholders
to be held at the Homewood Suites Hotel, 7855 Wolf River Parkway, Germantown,
Tennessee, on Thursday, May 11, 2000 at 10:00 a.m., Central Time. At this
meeting, you and our other shareholders will be able to vote on the following
proposal, together with any other business that may properly come before the
meeting:
1. Elect one Class II director to serve on our Board of
Directors until our annual meeting of shareholders in 2002,
or until his successor has been duly elected and qualified,
and two Class III directors to serve on our Board of
Directors until our annual meeting of shareholders in 2003,
or until their successors have been duly elected and
qualified; and
2. Transact any other business that may properly come before our
annual meeting and any adjournments of our annual meeting.
You may vote in person or by proxy. Please see the attached proxy
statement for more details on how you can vote by proxy. If you cannot attend
our annual meeting, we urge you to complete and return the enclosed proxy card
promptly in the enclosed self-addressed, envelope so that your shares will be
represented and voted at our annual meeting in accordance with your
instructions. Of course, if you attend our annual meeting in person, you may
withdraw your proxy and vote your shares. Only shareholders of record at the
close of business on March 15, 2000 will be entitled to vote at our annual
meeting or any adjournment of our annual meeting.
As a part of this Notice of Annual Meeting, we enclose a proxy
statement, which contains further information regarding our annual meeting and
the proposal described above.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Donald H. Dempsey
DONALD H. DEMPSEY, SECRETARY
Memphis, Tennessee
March 29, 2000
<PAGE> 3
EQUITY INNS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 2000
GENERAL INFORMATION
Our Board of Directors is soliciting your proxy for use at our annual meeting
of shareholders to be held at the Homewood Suites Hotel, 7855 Wolf River
Parkway, Germantown, Tennessee, on Thursday, May 11, 2000 at 10:00 a.m.,
Central Time and at any adjournments of our annual meeting. You are invited to
attend our annual meeting and vote your shares directly. However, even if you
do not attend, you may vote by proxy, which allows you to direct another person
to vote your shares at our annual meeting on your behalf.
The mailing address of our principal executive offices is 7700 Wolf River
Boulevard, Germantown, Tennessee 38138.
This proxy statement and the accompanying proxy card and Notice of Annual
Meeting are being mailed to our shareholders on or about March 29, 2000.
PURPOSES OF OUR ANNUAL MEETING
The purposes of our annual meeting are: (1) to elect three directors (one Class
II director and two Class III directors) to serve on our Board; and (2) to
transact any other business that may properly come before our annual meeting
and any adjournments of our annual meeting. Our Board knows of no matters,
other than the election of directors, to be brought before our annual meeting.
THIS PROXY SOLICITATION
There are two parts to this solicitation: the proxy card and this proxy
statement. The proxy card is the means by which you actually authorize another
person to vote your shares in accordance with your instructions.
This proxy statement provides you with various items of information that you
may find useful in determining how to vote.
Proxies are being solicited by and on behalf of our Board, and the solicitation
of proxies is being made primarily by the use of the mails. We will bear the
cost of preparing and mailing this proxy statement and the accompanying
material, and the cost of any supplementary solicitations which may be made by
mail, telephone, telegraph or personally by our officers and employees who will
not be additionally compensated for their activities. We have retained
Corporate Communications, Inc. to aid in the solicitation of proxies and to
verify records related to the solicitation of proxies at a fee of approximately
$5,000, plus reimbursement of reasonable out-of-pocket expenses.
No person is authorized to give any information or to make any representation
not contained in this proxy statement and, if given or made, you should not
rely upon that information or representation as having been authorized by us.
This proxy statement does not constitute the solicitation of a proxy, in any
jurisdiction, from any person to whom it is unlawful to make such proxy
solicitation in that jurisdiction. The delivery of this proxy statement shall
not, under any circumstances, imply that there has been no change in the
information set forth since the date of the proxy statement.
VOTING
RECORD DATE FOR OUR ANNUAL MEETING AND WHO IS ENTITLED TO VOTE AT OUR
ANNUAL MEETING
Our Board has fixed the close of business on March 15, 2000 as the record date
for the determination of our shareholders entitled to receive notice of, and to
vote at, our annual meeting. You will be entitled to notice of, and to vote at,
our annual meeting and any adjournments of our annual meeting, only if you are
a shareholder of record at the close of business on the record date. At the
close of business on March 15, 2000, we had issued and outstanding 36,666,252
shares of common stock and 2,750,000 shares of 9 1/2% Series A Cumulative
Preferred Stock.
HOW TO VOTE YOUR SHARES AND HOW TO REVOKE YOUR PROXY
You may vote your shares at our annual meeting in person or if you are unable
to attend our annual meeting in person or you wish to have your shares voted by
proxy even if you do attend our annual meeting, you may vote by duly authorized
proxy. To
<PAGE> 4
vote in person, you must attend the annual meeting, and obtain and submit a
ballot, which will be provided at the meeting. To vote by proxy, you must
complete and return the enclosed proxy card.
By completing and submitting the proxy card for our annual meeting, following
the specific instructions on the card, you will direct the designated persons
(known as "proxies") to vote your shares at our annual meeting in accordance
with your instructions. Our Board has appointed Phillip H. McNeill, Sr. and
Donald H. Dempsey to serve as the proxies for our annual meeting.
Your proxy will be valid only if you sign, date and return it before our annual
meeting. If you complete all of the proxy card except the voting instructions,
then the designated proxies will vote your shares for the election of the three
nominees for directors. If any nominee for election to our Board is unable to
serve, which is not anticipated, or if any other matters properly come before
the meeting, then the designated proxies will vote your shares in accordance
with their best judgment.
You may revoke your proxy at any time before it is exercised at our annual
meeting by any of the following means:
- notifying our Secretary in writing that you would like to revoke your
proxy;
- completing and submitting a later dated proxy; or
- attending our annual meeting and voting in person. However, your
attendance at our annual meeting will not, by itself, revoke a proxy;
you must vote your shares at our annual meeting to revoke an earlier
proxy.
If you choose either of the first two means, you must submit your notice of
revocation or your new proxy to our office address listed on page 1.
In voting by proxy with respect to the election of the three nominees for
directors, you may either vote in favor of one or more of the nominees or
withhold your votes as to one or more of the nominees. You may not abstain with
respect to the election of directors.
If you cannot attend our annual meeting, we request that you promptly vote,
sign, date and return the enclosed proxy card as soon as possible. If your
shares of our common stock are held in the name of a broker or other
intermediary, you may vote and revoke a previously submitted vote only through,
and in accordance with, procedures established by the record holder(s) or their
agent(s).
REQUIRED VOTES
Voting Rights. You will be entitled to one vote for each share of our common
stock that you hold. Shares of our Series A Preferred Stock do not have voting
rights with respect to the election of directors. Therefore, if you hold shares
of our Series A Preferred Stock, you are not entitled to vote those shares on
the election of nominees for directors. Cumulative voting of shares is not
permitted.
Quorum Requirements. Under Tennessee law and our charter and bylaws, a majority
of votes entitled to be cast at the annual meeting, represented in person at
the annual meeting or by proxy, constitutes a quorum for the consideration of
the election of the three nominees for directors and for each matter that
properly comes before our annual meeting.
Vote Required. A plurality of all the votes cast voting in favor of the nominee
will elect each nominee for director.
Abstentions and Broker Non-Votes. No specific provisions of the Tennessee
Business Corporation Act or our charter or bylaws address the issue of
abstentions or broker non-votes. Abstentions will not be counted "for" or
"against" proposals, but will be counted for the purpose of determining the
existence of a quorum. Under applicable New York Stock Exchange rules (the
exchange on which shares of our common stock are traded), brokers holding
shares for beneficial owners in nominee or "street name" must vote those shares
according to the specific instructions they receive from the beneficial owners.
However, brokers or nominees holding shares for a beneficial owner may not
receive voting instructions from beneficial owners and under the NYSE's rules
may not have discretionary voting power on non-routine matters. In these cases,
without the receipt of specific voting instructions from the beneficial owner,
the broker may not vote on non-routine proposals. This results in what is known
as a "broker non-vote." "Broker non-votes" will not be counted as votes cast
but will be counted for the purpose of determining the existence of a quorum.
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Because the election of directors is a routine matter for which specific
instructions from beneficial owners are not required under the NYSE's rules, no
"broker non-votes" will arise in the context of voting for the three nominees
for directors.
If you do not vote your shares, your brokerage firm may either (1) vote your
shares on routine matters, including this year's election of directors, or (2)
leave your shares unvoted.
To ensure that your shares are voted at our annual meeting, we encourage you to
provide instructions to your brokerage firm by voting your proxy.
THE ELECTION OF DIRECTORS
ELECTION OF NOMINEES FOR CLASS II AND CLASS III DIRECTORS
At our annual meeting, our shareholders will vote on the election of one Class
II director and two Class III director. For a description of our three classes
of directors, see "Our Board of Directors" beginning on page 5.
Our Board has nominated Harry S. Hays for election as a Class II director for a
two-year term expiring at our annual meeting of shareholders in 2002. Our Board
also has nominated each of Donald H. Dempsey and Joseph W. McLeary for election
to serve as a Class III director for a three-year term expiring at our annual
meeting of shareholders in 2003. You will find below a brief biography of each
nominee. See "Ownership of Our Common Stock--Security Ownership of Management"
on page 8 for information on their holdings of our common stock.
If any nominee becomes unavailable or unwilling to serve as a director for any
reason, the persons named as proxies in the accompanying proxy card are
expected to consult with our management in voting the shares represented by
them and will vote in favor of any substitute nominee or nominees approved by
our Board. Our Board has no reason to doubt the availability of the nominees
for Class II and Class III directors, and each of the three nominees has
expressed his willingness to serve as a director if elected by our shareholders
at our annual meeting.
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES FOR
DIRECTOR.
NOMINEE FOR ELECTION AS CLASS II DIRECTOR
(TERM EXPIRING 2002)
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HARRY S. HAYS, age 64 Mr. Hays served as the President and Chief Executive
Officer of Allen & O'Hara Inc., a national commercial
real estate firm with particular expertise in the
construction and development of major hotel brands
including Holiday Inns, Residence Inns, Spring Hill
Suites and Marriott Courtyards, and Allen & O'Hara
Construction Co., L.L.C. from 1980 until his retirement
in 1998. He joined the legal department of Allen &
O'Hara Inc. in 1964 and served from 1970 to 1972 as
Secretary and Assistant General Counsel and from 1972
to 1980 as a Director and Vice President and General
Counsel. From February 1995 to February 1999, Mr. Hays
was a member of the Board of Directors of The Residence
Inn Association and served on its Technology
Committee. Mr. Hays was appointed to our Board in
September 1999 to fill the position created by the
death of James A. Thomas, III in June 1999.
COMMITTEES: AUDIT
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NOMINEES FOR ELECTION AS CLASS III DIRECTORS
(TERMS EXPIRING 2003)
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DONALD H. DEMPSEY, age 55 Mr. Dempsey is our company's Executive Vice
President, Secretary, Treasurer and Chief
Financial Officer. Before joining our company
in July 1998, Mr. Dempsey served as Executive
Vice President and Chief Financial Officer of
Choice Hotels International, Inc. from January
1998 to July 1998. From April 1995 to December
1997, Mr. Dempsey served as Senior Vice
President and Chief Financial Officer of
Promus Hotel Corporation, from October 1993 to
April 1995 as Senior Vice President of Finance
and Administration of the Hotel Division of
The Promus Companies Incorporated, and from
December 1991 to October 1993 as Vice
President, Finance of the Hampton Inn/Homewood
Suites Hotel Division of The Promus Companies
Incorporated. Mr. Dempsey served in various
other senior financial and development officer
positions within the Hotel Division of The
Promus Companies Incorporated and its
predecessor companies from 1983 to 1991. From
1969 to 1983, Mr. Dempsey held various
corporate and division financial management
and administrative positions with Holiday
Inns, Inc. Mr. Dempsey is a member of the
Board of Directors of John Q. Hammons Hotels,
Inc. Mr. Dempsey was first appointed to our
Board in December 1998.
COMMITTEES: NONE
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JOSEPH W. MCLEARY, age 60 Mr. McLeary is a private investor. From 1997
to 1999, he served as Chairman of Executive
Financial Services, Inc., a private financial
consulting and benefits administration firm.
From 1987 to 1997, he was Chairman and Chief
Executive Officer of Midland Financial Group,
Inc., a publicly owned automobile insurance
company. From 1984 to 1987, he was president
of McLeary & Co., a company organized to
manage a privately held investment fund
engaged in the acquisition of small businesses
in the Memphis, Tennessee area. From 1969 to
1983, he was President and Chief Financial
Officer and a Director of Cook International,
Inc., a publicly owned agricultural
commodities firm. Before 1969, he was employed
by the Federal Reserve Bank of Atlanta. Mr.
McLeary has been a director of our company
since February 1994.
COMMITTEES: AUDIT (CHAIRMAN)
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OUR BOARD OF DIRECTORS
Our charter divides our Board into three classes as nearly equal in number as
possible, with each class serving a term of three years. One class of directors
is elected by our shareholders at each annual meeting. Our Board has set at
seven the number of directors constituting the current Board. At our annual
meeting, shareholders will vote on two nominees for Class III directors and one
nominee for Class II director to fill the remaining term of a Class II director
who died in June 1999. The remaining members of our Board will continue as
members of our Board until their respective terms expire, as indicated below,
or until their successors are elected and qualified.
You will find below a brief biography of each incumbent director. See
"Ownership of Our Common Stock--Security Ownership of Management" on page 9 for
information on our directors' and officers' holdings of our common stock.
INCUMBENT DIRECTORS -- CLASS I
(TERMS EXPIRING 2001)
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PHILLIP H. MCNEILL, SR., age 61 Mr. McNeill is our company's Chairman of the
Board of Directors and Chief Executive Officer
and has been Chairman and President of McNeill
Investment Company, Inc. since 1977. From 1963
to 1977, he served in various capacities,
including President and Chief Executive
Officer, with Schumacher Mortgage Company,
Inc., a mortgage banking firm and subsidiary
of Time, Inc. Mr. McNeill has served as
President and Director of the Memphis Mortgage
Bankers Association and the Tennessee State
Mortgage Bankers Association. He has been a
director of National Bank of Commerce since
January 1997, a director of Interstate Hotels
Corporation since June 1999, a member of the
Board of Trustees of Rhodes College, and a
board member of the Society of Entrepreneurs
and the Memphis Museum System. He has been
Chairman of the Board, Chief Executive Officer
and Director of our company since its founding
in 1993. Mr. McNeill is the father of Phillip
H. McNeill, Jr., the Executive Vice President
--Development of our company.
COMMITTEES: NONE
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RAYMOND E. SCHULTZ, age 66 Mr. Schultz served as Chairman of the Board
and Chief Executive Officer of Promus Hotel
Corporation from August 1997 to December 1998
and of Promus Hotel Corporation and as
Chairman of Promus Hotel Corporation's
Executive Committee from December 1997 to
December 1998. Mr. Schultz served as
President, Chief Executive Officer and a
director of Promus Hotel Corporation from
April 1995 through December 1997. From 1993 to
1995 he served as President and Chief
Executive Officer of the Hotel Division of The
Promus Companies Incorporated. Mr. Schultz was
the President and Chief Executive Officer of
Hampton Inn/Homewood Suites Hotel Division
from
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1991 to 1993. Mr. Schultz is a director of
TBC Corporation and Choice Hotels
International, Inc. Mr. Schultz was first
appointed to our Board in December 1998.
`COMMITTEES: COMPENSATION (CHAIRMAN)
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HOWARD A. SILVER, age 45 Mr. Silver is President and Chief Operating
Officer of our company and has been a
certified public accountant since 1980. Mr.
Silver joined our company in May 1994 and has
served in various capacities, including as
Executive Vice President of Finance,
Secretary, Treasurer and Chief Financial
Officer of our company until June 1998. From
1992 until joining our company, Mr. Silver
served as Chief Financial Officer of Alabaster
Originals, L.P., Memphis, Tennessee, a fashion
jewelry wholesaler. From 1978 to 1985, Mr.
Silver was a certified public accountant with
the national accounting firm of Coopers &
Lybrand L.L.P., and from 1987 to 1992 Mr.
Silver was employed as a certified public
accountant with the national accounting firm
of Ernst & Young. Mr. Silver was first
appointed to our Board in December 1998.
COMMITTEES: NONE
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INCUMBENT DIRECTOR -- CLASS II
(TERM EXPIRING 2002)
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WILLIAM W. DEUPREE, JR., age 57, Mr. Deupree is a Managing Director of Morgan
Keegan & Company, Inc. and its parent company
Morgan Keegan, Inc., a New York Stock Exchange
listed company, positions he has held since
1985. Mr. Deupree joined Morgan Keegan &
Company, Inc. in 1972 and served as its
President from 1985 to 1996. Mr. Deupree has
been a director of our company since February
1994.
COMMITTEES: COMPENSATION
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COMMITTEES AND MEETINGS OF OUR BOARD OF DIRECTORS
Board Meetings. We operate under the general management of our Board as
required by our bylaws and the laws of Tennessee, our state of incorporation.
Our charter requires that a majority of our directors must be independent
directors. We consider a director to be independent if he or she is not an
officer or employee of our company or an affiliate of any advisor to our
company under an advisory agreement, any lessee of our property, any subsidiary
of our company or any partnership which is an affiliate of our company. We
presently have seven directors, including four independent directors, Messrs.
Deupree, Hays, McLeary and Schultz. Our Board held five meetings during 1999,
and all of our directors who were members of our Board at the time of those
meetings attended those meetings.
Audit Committee. Our Board has established an audit committee. From January
1999 to November 15, 1999, this committee consisted of the independent
directors, Messrs. Deupree, McLeary, Schultz and, before his
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death in June 1999, Mr. Thomas. Mr. Hays replaced Mr. Thomas in September 1999.
Since November 15, 1999, Messrs. McLeary and Hays have comprised the audit
committee, with Mr. McLeary being its chairman. The audit committee
- makes recommendations concerning the engagement of independent public
accountants,
- reviews with the independent public accountants the plans and results
of the audit engagement,
- approves professional services provided by the independent public
accountants,
- reviews the independence of the independent public accountants,
- considers the range of audit and non-audit fees, and
- reviews the adequacy of our internal accounting controls.
The audit committee met once in 1999, and all of its members attended that
meeting.
Compensation Committee. Our Board has also established a compensation
committee. From January 1999 to November 15, 1999, this committee consisted of
the independent directors, Messrs. Deupree, McLeary, Schultz and, before his
death in June 1999, Mr. Thomas. Mr. Hays replaced Mr. Thomas in September 1999.
Since November 15, 1999, Messrs. Deupree and Schultz have comprised this
committee, with Mr. Schultz being its chairman. The compensation committee
- determines compensation for our executive officers,
- establishes salaries of and awards of performance-based bonuses to
our executive officers, and
- determines awards of restricted stock and grants of stock options to
officers and employees under our stock plans.
The compensation committee met once in 1999, and all of its members attended
that meeting.
Other Committees. Our Board does not have a standing nominating committee;
instead, our entire Board acts in this capacity. Our Board may, from time to
time, form other committees as circumstances warrant. Those committees will
have authority and responsibility as delegated to them by our Board.
COMPENSATION OF DIRECTORS
Each independent director receives $12,000 annually, payable $3,000 each
quarter. In addition, each independent director receives $1,000 for each Board
meeting personally attended, payable either in cash or, at each director's
option, in shares of our common stock. We issued an aggregate of 9,235 shares
of our common stock to the independent directors as payment for a portion of
their compensation during 1999. Upon becoming a director, each non-employee
director received 5,000 shares of our common stock, which are restricted as to
transfer prior to vesting. The restricted shares vest at the rate of 1,000
shares per year. In August 1998, Messrs. Deupree and McLeary each received an
additional 5,000 restricted shares, which vest at the rate of 1,000 shares per
year of service from the date of grant. Each independent director is entitled
to vote and receive dividends paid with respect to these restricted shares
prior to vesting. Any independent director who ceases to be a director will
forfeit any restricted shares not previously vested.
In addition, in April 1995, Messrs. Deupree and McLeary each received an option
under the Directors' Plan to purchase up to 5,000 shares of our common stock,
with these options becoming exercisable at the rate of 1,000 shares beginning
on the date of the first meeting of our Board following each annual meeting of
our shareholders. Also, in August 1998, Messrs. Deupree and McLeary each
received an option under the Directors' Plan to purchase up to 5,000 shares of
our common stock, with these options becoming exercisable at the rate of 1,000
shares per year beginning on the anniversary of the date of grant. Messrs.
Schultz and Hays each received an option under the Directors' Plan to purchase
up to 5,000 shares of our common stock, with these options becoming exercisable
at the rate of 1,000 shares effective December 10 of each year commencing in
1998, for Mr. Schultz, and effective September 2 of each year commencing in
1999 for Mr. Hays. The exercise price for each of these options is the fair
market value of our common stock on the effective date of grant. We reimburse
directors for their out-of-pocket expenses incurred in
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connection with their service on our Board of Directors.
Directors are also permitted to defer receipt of all or a portion of their
compensation under our Executive Deferred Compensation Plan. Deferred
compensation is payable at the time or times specified by the independent
director in a deferral election form. Amounts may be payable, for example, upon
termination of service as an independent director or attaining a certain age.
Deferred cash compensation is credited with earnings and losses using
investment measures offered under our Executive Deferred Compensation Plan and
selected by the independent director.
Deferred director fees otherwise payable in shares of our common stock will be
credited with earnings equal to the dividends that would have been paid if the
director had held, on the dividend distribution date, a number of shares with a
fair market value on that date equal to the current value of the independent
director's deferred stock compensation. Deferral elections for unvested
restricted shares of our common stock are accomplished through a forfeiture of
deferred shares in exchange for the right to receive that number of shares at
the end of the deferral period. Earnings are calculated in the same way as they
are calculated for deferred director fees otherwise payable in stock.
An independent director may not vote any shares of our common stock that have
been deferred but will receive a payment equal to the dividends that would have
been paid on that stock if it had not been deferred, unless an election is make
to defer those earnings as well. We have set aside assets in trust that we may
use to pay deferred compensation to independent directors at the end of the
deferral period. No independent director has any claim on or right to those
assets, however, and the assets are subject to the claims of our general
creditors.
REPORTS OF BENEFICIAL OWNERSHIP
Under the federal securities laws, our directors, executive officers and any
persons beneficially owning more than ten percent (10%) of a registered class
of our equity securities are required to report their ownership and any changes
in that ownership to the Securities and Exchange Commission and to the NYSE.
These persons are also required by SEC rules and regulations to furnish us with
copies of these reports. Precise due dates for these reports have been
established, and we are required to report in this proxy statement any failure
to timely file these reports by those due dates by our directors and executive
officers during 1999.
Based solely upon our review of the reports and amendments to those reports
furnished to us or written representations from our directors and executive
officers that these reports were not required from those persons, we believe
that all of these filing requirements were satisfied by our directors and
executive officers during 1999, except for Mr. Schultz, who inadvertently
failed to file a timely Form 4 report with respect to the grant of stock
options for 5,000 shares of our common stock.
OWNERSHIP OF OUR COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
We summarize below the beneficial ownership of our common stock, as of February
18, 2000, by (1) each of our directors, (2) each of our executive officers and
(3) all of our directors and executive officers as a group.
To our knowledge, as of December 31, 1999, except for Phillip H. McNeill, Sr.,
no persons beneficially owned more than five percent of our common stock. A
person generally "beneficially owns" shares if he or she, directly or
indirectly, has or shares either the right to vote those shares or dispose of
them. Unless otherwise indicated in the accompanying footnotes, all of the
shares of our common stock listed below are owned directly, and the indicated
person has sole voting and investment power.
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<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------- --------- --------
<S> <C> <C>
Phillip H. McNeill, Sr.(1) 1,938,993(2)(3)(4) 5.2%(2)
William W. Deupree, Jr. 45,589(3)(5) *
Joseph W. McLeary 28,546(3)(5) *
Raymond E. Schultz 15,443(3)(6) *
Howard A. Silver 199,943(3)(7) *
Donald H. Dempsey 136,436(3)(8) *
Harry S. Hays 96,497(3)(9) *
Phillip H. McNeill, Jr. 69,218(3)(10) *
J. Ronald Cooper 40,397(3)(11) *
Richard Mitchell 22,281(3)(12) *
Michael K. Goforth 4,509(13) *
All directors and 2,622,700(2)(3)(4)(5) 7.0% (2)
executive officers as a (6)(7)(8)(9)(10(11)(12)(13)
group (eleven persons)
</TABLE>
- -----------------------
* Represents less than 1% of the outstanding shares of our common stock.
(1) Mr. McNeill's principal address is 7700 Wolf River Boulevard,
Germantown, Tennessee 38138.
(2) Includes 833,698 shares issuable upon redemption of units of limited
partnership interest in Equity Inns Partnership, L.P. held by Mr.
McNeill or his affiliates. These units may be tendered for redemption
the option of the holder at any time pursuant to redemption rights. The
units are redeemable for cash, or, at our sole option, shares of our
common stock on a one-for-one basis. The total number of shares
outstanding used in calculating the percentage of class assumes that
none of the units held by other persons are redeemed for shares of our
common stock.
(3) Includes shares of restricted stock. Each recipient of shares of
restricted stock is entitled to vote and receive dividends with
respect to unvested shares of restricted stock prior to their vesting
but cannot dispose of the restricted stock before its vesting. Any
shares of restricted stock that have not vested at the time the
recipient ceases to be an officer or director will be forfeited.
(4) Includes (a) 14,705 shares owned by Mr. McNeill's wife; (b) 7,029
shares owned by Mr. McNeill's adult children; (c) 554,906 shares
issuable to Mr. McNeill, and 275,678 shares issuable to Mr. McNeill
through his ownership interests in McNeill Investment Co., Inc., upon
the redemption of units of limited partnership interest in Equity Inns
Partnership, L.P.; and (d) 15,218 shares owned by McNeill Investment
Company, Inc. Mr. McNeill owns approximately 99%, and his son, Phillip
H. McNeill, Jr., owns less than 1%, of the capital stock of McNeill
Investment Company, Inc. Also includes (a) 390,000 shares issuable upon
the exercise of vested options granted under the 1994 Stock Incentive
Plan; (b) 10,000 shares of restricted stock issued in December 1996
under the 1994 Stock Incentive Plan, which shares are subject to
certain vesting requirements over a five-year period from their date of
grant; (c) 42,000 shares of restricted stock issued in July 1998, with
14,000 shares of such restricted stock subject to certain vesting
requirements on each of the first through third anniversaries of the
date of grant; and (d) 9,000 shares and 38,400 shares of restricted
stock issued in January 2000 and January 1999, respectively, under the
1994 Stock Incentive Plan, which shares are subject to certain
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<PAGE> 12
vesting requirements over a three-year period from the date of grant.
Mr. McNeill is our company's Chairman of the Board and Chief Executive
Officer.
(5) Includes 5,000 shares issuable upon the exercise of vested options
granted to each director under the Directors' Plan. Excludes 4,000
shares of our common stock subject to options granted to such
independent director under the Directors' Plan, which options vest at
the rate of 1,000 shares in each August 2000 through 2003. Excludes,
with respect to Mr. McLeary, 555 shares and, with respect to Mr.
Schultz, 4,555 shares of our common stock for which a deferral election
was made under the Executive Deferred Compensation Plan, described
above under "Compensation of Directors." Messrs. McLeary and Schultz
may not vote the deferred shares but will receive payments equal to the
dividends they would have received if they had not deferred the shares,
unless an election is made to defer the dividend equivalent payments as
well.
(6) Includes (a) an aggregate of 5,000 shares of restricted stock issued to
Mr. Schultz in December 1998 which began vesting with Mr. Schultz at
the rate of 1,000 shares per year beginning in December 1999 and (b)
2,000 shares issuable upon the exercise of vested options granted under
the Directors' Plan in December 1998. Excludes 3,000 shares of our
common stock subject to options granted under the Directors' Plan,
which options vest at the rate of 1,000 shares in each December 2000
through 2002.
(7) Includes (a) 17,000, 32,000, 40,000 and 7,500 shares of restricted
stock issued to Mr. Silver in January 2000, January 1999, July 1998 and
December 1996, respectively, under the 1994 Stock Incentive Plan, all
of which vest over a five-year period from their respective dates of
grant; (b) 1,640 shares owned by Mr. Silver's wife; and (c) 45,000
shares issuable upon the exercise of vested options granted under the
1994 Stock Incentive Plan. Mr. Silver is our company's President and
Chief Operating Officer.
(8) Includes (a) 15,000 and 25,600 shares of restricted stock issued to Mr.
Dempsey in January 2000 and January 1999, respectively, under the 1994
Stock Incentive Plan, which shares vest over a five-year period from
the date of grant; (b) 20,000 shares of restricted stock issued in July
1998 to Mr. Dempsey under the 1994 Stock Incentive Plan, 4,000 of which
were immediately vested and 16,000 of which vest over a four-year
period from the date of grant; and (c) 40,000 shares issuable upon the
exercise of vested options granted under the 1994 Stock Incentive Plan.
Excludes 60,000 shares of our common stock subject to options granted
to Mr. Dempsey under the 1994 Stock Incentive Plan, which options vest
in increments of 20,000 shares in each July of 1999 through 2002. Mr.
Dempsey is our company's Executive Vice President, Secretary, Treasurer
and Chief Financial Officer.
(9) Includes an aggregate of 5,000 shares of restricted stock issued to
Mr. Hays in September 1999 which began vesting at the rate of 1,000
shares per year in September 1999. Excludes an aggregate of 5,000
shares subject to options granted under the Directors' Plan in
September 1999, which options vest at the rate of 1,000 shares in each
September 2000 through 2004.
(10) Includes (a) 6,701 shares issuable upon redemption of units of limited
partnership interests in Equity Inns Partnership, L.P. held by Mr.
McNeill, Jr.; (b) 1,557 shares issuable upon redemption of units held
by PHM Family, L.L.C. in which Mr. McNeill, Jr. owns a 1/3 interest;
and (c) 7,400, 12,800 and 15,000 shares of restricted stock issued in
January 2000, January 1999 and July 1998, respectively, to Mr. McNeill,
Jr., all of which vest over a five-year period from their respective
dates of grant. Excludes 18,949 shares issuable on redemption of units
in Equity Inns Partnership, L.P. and 15,218 shares held by McNeill
Investment Co., Inc., in which Mr. McNeill, Jr. owns less than 1% of
the capital stock. Mr. McNeill, Jr. is our company's Executive Vice
President--Development and is the son of Phillip H. McNeill, Sr.
(11) Includes (a) 1,500 shares owned by Mr. Cooper's wife and (b) 3,600,
6,400 and 10,000 shares of restricted stock issued in January 2000,
January 1999 and July 1998, respectively, to Mr. Cooper, all of which
vest over a five-year period from their respective dates of grant.
Excludes 3,070 shares owned by Mr. Cooper's adult children, as to which
shares Mr. Cooper disclaims beneficial ownership. Mr. Cooper is our
company's Vice President, Controller, Assistant Secretary and Assistant
Treasurer.
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<PAGE> 13
(12) Includes 3,600, 6,400 and 10,000 shares of restricted stock issued in
January 2000, January 1999 and July 1998, respectively, to Mr.
Mitchell, all of which vest over a five-year period from their
respective dates of grant. Mr. Mitchell is our company's Vice
President--Asset Management.
(13) Includes 3,600 restricted shares issued to Mr. Goforth in January 2000
under our 1994 Stock Incentive Plan, which shares vest over a
five-year period from the date of grant. Mr. Goforth is our company's
Vice President--Construction and Capital Projects.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BUSINESS RELATIONSHIPS BETWEEN OUR COMPANY AND OUR DIRECTORS
National Bank of Commerce. Our company and several of our subsidiaries have
entered into an unsecured $10 million revolving credit agreement with National
Bank of Commerce, Memphis, Tennessee (the "NBC Credit Line"). The NBC Credit
Line bears interest at an annual rate equal to the prime rate (8.5% at December
31, 1999), and a commitment fee is payable equal to two-tenths of one percent
per annum on the unused portion of the commitment, calculated and payable on a
quarterly basis. National Bank of Commerce is also a participating lender in
the syndication of our company's three-year, $219.5 million unsecured line of
credit administered by Bank One, with National Bank of Commerce having a $17.5
million participation in the syndication of the unsecured line of credit.
Phillip H. McNeill, Sr., our company's Chairman of the Board and Chief
Executive Officer, is and has been a member of the board of directors of
National Bank of Commerce since January 1997.
TRANSACTIONS WITH OUR MANAGEMENT
Our company and Equity Inns Partnership, L.P. have entered into several
transactions with affiliates of Phillip H. McNeill, Sr. and several of our
executive officers.
Office Space Lease. Effective December 17, 1998, Equity Inns Services, Inc., a
wholly owned subsidiary of our company, entered into a commercial lease
agreement with 64 LTD, LLC, a limited liability company that is 25% owned by
Mr. McNeill, Sr., under which we lease our office space at 7700 Wolf River
Boulevard, Germantown, Tennessee. This office space is leased for an initial
120-month term, for $13,238.40 per month.
Loans to Our Officers. During our fiscal years ended December 31, 1999 and
1998, our company loaned funds to several executive officers for the payment of
income taxes incurred in connection with grants of performance shares and
restricted shares of our common stock in each fiscal year. These loans were
made under a promissory note and pledge agreement entered into between each of
these executive officers and our company. The face amounts of these loans at
December 31, 1999 and 1998, respectively, to our executive officers were as
follows: Mr. McNeill, Sr. ($84,177 and $139,402); Howard A. Silver ($82,857 and
$36,956); Donald H. Dempsey ($82,857, for 1999 only); Phillip H. McNeill, Jr.
($35,966 and $30,887); and J. Ronald Cooper ($22,054 and $21,831). Interest is
imputed at the rate of 5.7% per annum. Balances due under the promissory notes
are due and payable on the earlier of January 2001 (provided, however, that we
can extend the maturity date for an additional one-year period) or 30 days
after the date of termination of the borrowing executive officer as an employee
or officer of our company.
Transactions with the Interstate Lessee. Before November 15, 1996, Mr. McNeill
was the sole shareholder of Trust Leasing, Inc., which was the lessee of all of
the hotel properties owned at that date by Equity Inns Partnership. Effective
November 15, 1996, Trust Leasing transferred and assigned its rights under each
of our then-existing Percentage Leases with respect to Equity Inns
Partnership's hotels to affiliates (collectively, the "Interstate Lessee") of
Interstate Hotels Corporation ("Interstate"), and Equity Inns Partnership and
the Interstate Lessee amended and restated the Percentage Leases in a
consolidated lease amendment. This transfer was made in exchange for units of
limited partnership interest in the Interstate Lessee. Effective December 1997,
Trust Leasing and Trust Management were merged into McNeill Investment Company,
Inc., which is wholly owned by Mr. McNeill. In June 1998, Interstate Hotel
Company was merged with and into Patriot American Hospitality, Inc., and the
Interstate Lessee became a subsidiary of Patriot American (now known as Wyndham
International, Inc.). Effective June 30, 1999, Interstate was divested from
Wyndham International. Further, since June 1999, Mr. McNeill, Sr. has served as
a member of the Board of Directors of Interstate, the
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<PAGE> 14
parent company of the Interstate Lessee, which leased 78 of our hotels at
December 31, 1999. In 1999, the Interstate Lessee paid our company
approximately $86.6 million in rent under the Percentage Leases for those
hotels. Mr. McNeill currently owns 35,230 shares of Interstate's common stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
We summarize below the compensation paid or accrued for the last three fiscal
years to those persons who (1) served as our chief executive officer and (2)
were our four other most highly paid executive officers during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ -----------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(1)(2) SATION(3)
- ------------------- ---- --------- -------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Phillip H. McNeill, Sr. 1999 275,000 67,375(4) 374,400(7) 390,000 $15,641
Chairman of the Board 1998 275,000 275,000(5) 567,000(8)(9) 390,000 $ 7,946
and Chief Executive 1997 225,000 466,249(6) --- 390,000 ---
Officer
Howard A. Silver 1999 270,000 66,150(4) 312,000(7) 45,000 $33,558
President and Chief 1998 234,231 270,000(5) 540,000(8)(9) 45,000 $25,529
Operating Officer 1997 145,000 323,063(6) --- 45,000 $14,500
Donald H. Dempsey 1999 270,000 66,150(4) 249,600(7) 100,000 $16,393
Executive Vice 1998 119,423 270,000(5) 271,250(8)(10) 100,000 $27,000
President, Secretary, 1997 --- --- --- --- ---
Treasurer and
Chief Financial Officer
Phillip H. McNeill, Jr. 1999 138,600 40,748(4) 124,800(7) --- $17,540
Executive Vice 1998 132,000 108,876(5) 202,500(8) --- $14,961
President--Development 1997 110,000 93,748(6) --- --- $10,915
J. Ronald Cooper 1999 115,500 42,262(4) 62,400(7) --- $13,968
Vice President, 1998 110,000 61,874(5) 135,000(8) --- $12,244
Controller, Assistant 1997 88,577 62,500(6) --- --- $ 8,858
Secretary and Assistant
Treasurer
- ---------------
</TABLE>
(1) Messrs. McNeill's and Silver's stock options were awarded pursuant to the
1994 Stock Incentive Plan and vest at the rate of 20% per year over a
five-year period commencing on July 6, 1995. The exercise price per share
is $12.50.
(2) Mr. Dempsey's stock options were awarded pursuant to the 1994 Stock
Incentive Plan and vest at the rate of 20,000 shares per year over a
four-year period beginning July 20, 1998, with the first 20,000 shares
immediately vesting on the date of grant. The exercise price per share is
$13 9/16.
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<PAGE> 15
(3) The amounts listed under "All Other Compensation" include (a) imputed
interest, calculated at the rate of 5.7% per annum, for loans entered into
between our company and the named executive officers during the fiscal
year listed for the payment of income taxes incurred in connection with
grants of performance shares and restricted shares under a promissory note
and pledge agreement between our company and each officer, and (b)
matching contributions under our Executive Deferred Compensation Plan. The
amount of imputed interest are as follows for December 31, 1999 and 1998,
respectively: Mr. McNeill, Sr. ($12,468 and $7,946); Mr. Silver ($6,558
and $2,106); Mr. Dempsey ($4,451 for 1999 only); Mr. McNeill, Jr. ($3,693
and $1,761); and Mr. Cooper ($2,429 and $1,244). The balance of the
amounts listed for each of the five named officers under "All Other
Compensation" represent matching contributions accrued under our Executive
Deferred Compensation Plan. Under the Executive Deferred Compensation
Plan, participants may defer up to 25% of their base salary, bonus or
both. We pay a matching contribution equal to the lesser of the amount
deferred or 10% of base salary that is credited to each participant's
account. Participants may also elect to defer unvested restricted shares
of our common stock under our Executive Deferred Compensation Plan,
although no matching contribution is made for these deferrals. To date, no
executive officer has elected to defer any non-cash compensation.
(4) The 1999 bonuses were paid in discretionary performance shares of our
common stock as follows: (a) Mr. McNeill, Sr., 9,000 shares which had an
aggregate fair market value of $61,875 on January 24, 2000 (the date of
valuation for all 1999 bonus performance shares); (b) in the case of both
Messrs. Silver and Dempsey, 8,836 shares which had an aggregate fair
market value of $60,750; (c) Mr. McNeill, Jr., 5,443 shares which had an
aggregate fair market value of $37,422; and (d) Mr. Cooper, 5,645 shares
of our common stock which had an aggregate fair market value of $38,813.
(5) The 1998 bonuses were paid in performance shares of our common stock as
follows: (a) Mr. McNeill, Sr., 27,500 shares which had an aggregate fair
market value of $275,000 on January 22, 1999 (the date of valuation for
all 1998 bonus performance shares); (b) in the case of both Messrs. Silver
and Dempsey, 27,000 shares which had an aggregate fair market value of
$270,000; (c) Mr. McNeill, Jr., 10,887 shares which had an aggregate fair
market value of $108,870; and (d) Mr. Cooper, 6,187 shares which had an
aggregate fair market value of $61,870.
(6) A portion of the 1997 bonuses were paid in performance shares of our
common stock as follows: (a) Mr. McNeill, Sr., 30,325 shares of our common
stock which had an aggregate fair market value of $466,249 on January 23,
1998, the date of valuation; (b) Mr. Silver, 7,500 shares of our common
stock which had an aggregate fair market value of $115,313 on January 23,
1998 (the balance of Mr. Silver's 1997 bonus, $207,750, was paid in cash);
(c) Mr. McNeill, Jr., 6,097 shares of our common stock which had an
aggregate fair market value of $93,748 on January 23, 1998; and (d) Mr.
Cooper, 4,065 shares of our common stock which had an aggregate fair
market value of $62,500 on January 23, 1998.
(7) As of January 4, 1999, 38,400, 32,000, 25,600, 12,800 and 6,400 restricted
shares of our common stock were awarded to Messrs. McNeill, Sr., Silver,
Dempsey, McNeill, Jr., and Cooper, respectively, subject to vesting. With
exception of Mr. McNeill, Sr.'s awards, which vest at the rate of
one-third per year over three years from the date of grant, the restricted
stock awards vest with respect to the shares at the rate of 20% per year
on each of the first through fifth anniversaries of the date of grant. At
the date of grant, the value of the restricted shares owned by the
above-listed officers (based upon the closing market price of our common
stock on January 4, 1999 of $9.75) was $374,400, $312,000, $249,600,
$124,800 and $62,400, respectively. At December 31, 1999, an aggregate of
259,700 shares of restricted stock, with an aggregate value at such date
(based upon the closing market price of our common stock at such date of
$6.75) of $1,752,975, were held as follows: Mr. McNeill, Sr. (90,400
shares, valued at $610,200); Mr. Silver (79,500 shares, valued at
$536,625); Mr. Dempsey (45,600 shares, valued at $307,800); Mr. McNeill,
Jr. (27,800 shares, valued at $187,650); and Mr. Cooper (16,400 shares,
valued at $110,700). Prior to vesting, the recipients have the right to
vote and receive dividends with respect to all unvested shares of
restricted stock.
(8) As of July 22, 1998, 42,000, 40,000, 15,000 and 10,000 restricted shares
of our common stock were awarded to Messrs. McNeill, Sr., Silver, McNeill,
Jr. and Cooper, respectively, subject to vesting. With the exception of
Mr. McNeill, Sr.'s awards, which vest at the rate of 1/3 per year over
three years from the date of grant, the awards vest with respect to the
shares at the rate of 20% per year on each of the first through fifth
anniversaries of the date of grant. At the date of grant, the value of the
restricted shares owned by the above-listed officers (based upon the
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<PAGE> 16
closing market price of our common stock on July 22, 1998 of $13.50) was
$567,000, $540,000, $202,500 and $135,000, respectively. Before vesting,
the recipients have the right to vote and receive dividends with respect
to all unvested shares of restricted stock.
(9) As of December 11, 1996, 10,000 and 7,500 restricted shares of our common
stock were awarded to Messrs. McNeill and Silver, respectively, subject to
vesting. At the date of grant, the value of the restricted shares (based
on the closing market price of our common stock on December 11, 1996 of
$12.25) was $122,500 and $91,875, respectively. The awards vest with
respect to the shares at the rate of 20% per year on each of the first
through fifth anniversaries of the date of grant. Before vesting, the
recipients have the right to vote and receive dividends with respect to
all unvested shares of restricted stock.
(10) As of July 20, 1998, 20,000 restricted shares of our common stock were
awarded to Mr. Dempsey, subject to vesting. At the date of grant, the
value of the restricted shares (based on the closing market price of our
common stock on July 20, 1998 of $13.5625) was $271,250. The awards (a)
vested immediately with respect to 4,000 of such shares and (b) for the
balance of the shares, vest at the rate of 4,000 shares per year on each
of the second through fourth anniversaries of the date of grant. Before
vesting, the recipients have the right to vote and receive dividends with
respect to all unvested shares of restricted stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
We provide below information regarding unexercised options at December 31,
1999. No options were either exercised or granted during our 1999 fiscal year,
nor were any separate stock appreciation rights granted during our 1999 fiscal
year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL YEAR-END OPTIONS AT
FISCAL YEAR-END
---------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/UN-
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE EXERCISABLE(1)
---- --------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
Phillip H. McNeill, Sr. --- --- 390,000 $---/$---
Howard A. Silver --- --- 45,000 $---/$---
Donald H. Dempsey --- --- 40,000/60,000 $---/$---
</TABLE>
- ---------------
(1) No stock options were in-the-money, which is the positive spread, if any,
between the exercise price of the stock options and the fair market value
of the underlying common stock at December 31, 1999, the end of our
fiscal year. No stock options were exercised during our 1999 fiscal year.
Except for the stock options granted to Mr. Dempsey, which were granted
on July 20, 1998, all such stock options were granted on July 6, 1994.
EMPLOYMENT CONTRACTS
Our company and a wholly owned subsidiary have entered into change in control
agreements with several of our officers, including Messrs. McNeill, Sr.,
Silver, Dempsey, McNeill, Jr., and Cooper, which provide benefits upon
termination of employment following a change in control or a potential change
in control, as defined in the agreements, of our company. An executive receives
severance payments and other benefits if his employment terminates within 18
months of a change in control, or during the period beginning with a potential
change in control and ending on the earlier
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<PAGE> 17
of (1) a reversal of the events constituting the potential change in control or
(2) 18 months following the change in control to which the potential change in
control relates. Benefits are paid only if
- the executive's employment is terminated by our company without cause,
- the executive voluntarily resigns his employment because of a
diminution in duties, responsibilities, functions or compensation, or
- certain other changes occur in the conditions of the executive's
employment.
The severance payments are based on (a) a multiple of the average of the rates
of base salary in effect for the executive (1) immediately preceding
termination, (2) twelve months preceding termination, and (3) twenty-four
months preceding termination plus (b) the average of the bonuses paid or earned
for the three fiscal years preceding the year in which employment terminates.
If an executive has not been employed by us for three full fiscal years before
the year of termination, the calculation described in the preceding sentence is
appropriately adjusted. The multiple of average compensation used for Messrs.
McNeill, Sr., Silver and Dempsey is three; for Mr. McNeill, Jr., two; and for
Mr. Cooper, one and one-half.
The agreements also call for payment of
- unpaid base salary and prorated bonus for the year of termination,
- unpaid bonus for the immediately preceding fiscal year,
- forgiveness of loans made by our company to the executive,
- accelerated vesting of awards under the 1994 Stock Incentive Plan and
other non-tax-qualified benefits,
- a payment equal to any portion of a benefit under a tax-qualified
defined contribution plan forfeited as a result of the executive's
termination,
- continued insurance benefits for eighteen months, and
- payment of any other benefits accrued through the termination date.
To the extent the executive incurs an excise tax under Section 4999 of the
federal income tax laws as a result of a payment under the agreement or any
other payment owed the executive by our company or any affiliate, our company
will indemnify the executive for that liability, including additional excise,
income and employment taxes attributable to the initial excise tax
indemnification payment. The agreements place restrictions on each executive's
ability to use or disclose confidential information, solicit employees to
terminate their employment with our company, or interfere with our company's
hotel development opportunities.
In addition to the change in control agreements, our company and a subsidiary
entered into an employment agreement with Mr. Dempsey in July 1998. Under this
agreement, Mr. Dempsey serves as Executive Vice President, Secretary, Treasurer
and Chief Financial Officer for a term of two years, expiring in July 2000. The
agreement provides for
- an annual base compensation of $270,000 (subject to any increases in
base compensation approved by the Compensation Committee),
- a guaranteed annual bonus of at least $50,000 for the 1998 fiscal
year,
- 20,000 restricted shares of common stock, 8,000 of which have vested
and 4,000 of which will vest on each of the second through fourth
anniversaries of the date of grant,
- stock options for an aggregate of 100,000 shares, 40,000 of which have
vested and an additional 20,000 shares of which will vest on each of
the second through fourth anniversaries of the date of grant,
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<PAGE> 18
- stock options for up to 200,000 shares for attainment of maximum
performance goals for our 1998 fiscal year, to be paid in early 1999
(payable in the alternative as up to 40,000 restricted shares), and
- annual bonuses for all subsequent fiscal years as may be established
by the Compensation Committee.
This agreement also provides for continued payments of Mr. Dempsey's base
salary and bonuses during the term in the event of his death or disability or
upon termination of his employment by our company without cause. Mr. Dempsey is
eligible to participate in our Executive Deferred Compensation Plan, under
which we pay a matching contribution in an amount equal to 10% of Mr. Dempsey's
base salary, and our medical plans, and such other fringe benefits as we may
establish from time to time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION ON COMPENSATION DECISIONS
Mr. Deupree, an independent director and a member of the Compensation Committee
of our board of directors, is a Managing Director of Morgan Keegan and was
President of Morgan Keegan from 1985 to 1996. Morgan Keegan was a managing
underwriter of our initial public offering and certain follow-on public equity
offerings and received investment banking fees and other compensation in
connection with those public offerings. Morgan Keegan has also received fees in
connection with providing us financial advisory services.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for
- establishing and administering compensation policies,
- establishing salaries of and awarding performance-based bonuses to our
executive officers, and
- determining awards of restricted stock and grants of stock options
under our stock plans.
The Compensation Committee's policy is to devise and implement compensation for
our officers and employees commensurate with their position and determined with
reference to compensation paid to similarly situated employees and officers of
companies which the Compensation Committee deems to be comparable to our
company. No members of the Compensation Committee are employees or officers of
our company or any of our subsidiaries.
COMPONENTS OF EXECUTIVE COMPENSATION
The Compensation Committee's executive compensation methodology consists of
three components: (1) base salary, (2) annual incentive and (3) long-term
incentive compensation. These components provide elements of fixed income and
variable compensation that is linked to the achievement of individual and
corporate goals and the enhancement of shareholder value.
Base Salary. Base salary represents the fixed component of our executive
compensation system. Executives receive salaries that are within a range
established by the Compensation Committee for their respective positions based
on the comparative analysis described above. The determination of where each
executive's salary falls within the salary range is based on a determination of
the level of experience that the executive brings to the position and how
successful the executive has been in achieving set goals. Adjustments to
salaries are based on a similar evaluation and a comparison of adjustments made
by competitors and any necessary inflationary adjustments.
Annual Incentives. Annual incentives exist in the form of bonuses, which are
provided for each executive officer as a means of linking compensation to
objective performance criteria that are within the control of the executive
officer. At the beginning of each year the Compensation Committee establishes a
target bonus for each executive and identifies performance measures for each
executive to meet to receive the full bonus. The actual amount of incentive
bonus received by each of our executive officers is determined by the
Compensation Committee after the end of the applicable year and may be paid in
cash or performance shares. To motivate executives to increase their ownership,
we have agreed to fund bonuses, at the executive's option, with shares of our
common stock.
Long-Term Incentives. The third component of executive compensation is targeted
toward providing
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<PAGE> 19
rewards for long-term performance. The Compensation Committee believes that
long-term incentives are important to motivate and reward our executives and
employees for maximizing stockholder value. Long-term incentives are provided
primarily under the 1994 Stock Incentive Plan, which is administered by the
Compensation Committee. The purpose of the 1994 Stock Incentive Plan is to
assist our company and our affiliates in recruiting and retaining key employees,
by enabling such persons to participate in the future success of our company and
our affiliates and to associate their interests with those of our company and
our shareholders.
BASE COMPENSATION AND BONUSES
The Compensation Committee approved the payment of annual base salaries to our
executive officers, through our subsidiary Equity Inns Services, effective
January 1, 1999. These base salaries were as follows:
<TABLE>
<CAPTION>
Executive Officer Annual Base Salary
----------------- ------------------
<S> <C>
Phillip H. McNeill, Sr. $275,000
Chairman of the Board and
Chief Executive Officer
Howard A. Silver $270,000
President and Chief
Operating Officer
Donald H. Dempsey $270,000
Executive Vice President,
Secretary, Treasurer and
Chief Financial Officer
Phillip H. McNeill, Jr. $138,600
Executive Vice President--
Development
J. Ronald Cooper $115,500
Vice President, Controller,
Assistant Secretary and
Assistant Treasurer
</TABLE>
In addition to these 1999 annual base salaries, the Compensation Committee
approved and implemented a bonus award procedure for 1999 to grant performance
shares under our 1994 Stock Incentive Plan, subject to the meeting of certain
performance goals, to our company's executive officers. We commissioned FPL
Associates Consulting in 1998 to perform a comprehensive review of executive
compensation. FPL Associates' study compared the base salaries and other
elements of composition of our company's top executive officers against those
of 11 other hotel REITs and, to a lesser extent, similarly sized non-hotel
REITs and REITs operating on a net lease basis.
Based on the recommendations of this study, the Compensation Committee
established that performance shares were to be earned for our 1999 fiscal year,
if at all, based on:
- the achievement of certain levels of percentage increase in our
company's funds from operations per share ("FFO"); and
- a discretionary component for each individual officer's performance.
The National Association of Real Estate Investment Trusts, Inc. defines FFO as
being net income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructurings and sales of
property, plus depreciation of real property (including furniture and
17
<PAGE> 20
equipment) and after adjustments for unconsolidated partnerships, joint
ventures and minority interests. Because 1999's FFO did not exceed FFO for
1998, no performance shares for FFO achievement were earned by the above-named
executive officers as bonuses in our 1999 fiscal year. Total bonuses earned by
our company's above-named executive officers for our 1999 fiscal year for
achievement of individual performance goals under the Compensation Committee's
discretionary component, including a total of 37,760 bonus shares and including
cash awards, were $282,685.
In addition, restricted stock awards were made to our company's officers in
January 1999, consisting of a total of 115,200 shares. These awards were
recommended as part of the FPL Associates' executive compensation study as an
ongoing long-term incentive mechanism based on overall corporate performance.
Each recipient was provided with the choice of accepting his January 1999 award
either as stock options or, in lieu of options, as restricted stock at the
ratio of one share of restricted stock for every five shares subject to a stock
option. All recipients chose to accept the award in shares of restricted stock.
The Compensation Committee will determine annually a similar bonus plan for our
company's officers, with any future stock bonus awards to be issued to the
executive officers through the 1994 Stock Incentive Plan. When the stated
annual performance goals are met, the Compensation Committee's policy is to
award performance shares in recognition of year-end bonuses under the 1994
Stock Incentive Plan, in addition to shares of restricted stock, as a way of
maintaining a direct link between the achievement of annual corporate goals and
our executive officers' individual performance.
Although none of our company's executive officers receives annual compensation
in excess of $1 million, we continue to study the cap on tax deductibility of
compensation in excess of that amount established under the Omnibus Budget
Reconciliation Act of 1993. We have taken steps to allow for the grant of stock
options and certain other stock incentive awards that qualify as
performance-based compensation exempt from the cap.
1999 CEO COMPENSATION
In determining the appropriate compensation for Phillip H. McNeill, Sr., our
company's CEO, the Compensation Committee is guided by our performance,
competitive practices, and the Compensation Committee's policy, as discussed
above, of determining compensation with reference to the compensation paid to
similarly situated executives of comparable companies. Appropriate adjustments
in the compensation of our chief executive officer are considered concurrently
with similar adjustments made for our other executive officers.
In devising Mr. McNeill's total cash compensation package for our 1999 fiscal
year, the Compensation Committee was guided by FPL Associates' executive
compensation report. This 1998 report specifically compared Mr. McNeill's
compensation as our company's CEO to that of the CEOs of 11 other hotel REITs
and, to a lesser extent, to the compensation packages of similarly sized
non-hotel REITs as well as REITs operating on a net lease basis. Based upon
such considerations and whether certain targeted goals, particularly an annual
increase in FFO per share, were achieved, in May 1999 the Compensation
Committee adopted and approved $275,000 as the appropriate base salary to be
paid to Mr. McNeill during the 1999 fiscal year. This level of base salary was
identical to that approved for Mr. McNeill for our 1998 fiscal year.
The Compensation Committee intends to continue to apply the bonus award
procedure discussed above under "Base Compensation and Bonuses" to Mr. McNeill
and our other executive officers during our 2000 fiscal year.
This report has been submitted by the members of the Compensation Committee for
our 1999 fiscal year.
William W. Deupree
Raymond E. Schultz
Joseph W. McLeary (to November 15, 1999)
PERFORMANCE GRAPH
We provide below a graph, which compares the change in our shareholder return
on our common stock for the period December 31, 1994, which was the end of the
first calendar year during which our common stock was publicly traded, through
December 31, 1999, with the changes in the Standard & Poor's 500 Stock Index,
the Russell 2000 Index and the SNL Securities Hotel REIT Index for the same
period. The SNL Securities Hotel REIT Index is comprised of 15 publicly traded
REITs that focus on investments in hotel properties. The common stock of 9 of
these companies became publicly traded after our initial public offering in
March 1994.
18
<PAGE> 21
Applicable SEC rules require the inclusion of a broad equity market index, such
as the S&P 500, in our performance graphs. In prior years, we used the S&P 500.
The S&P 500 contains no REITS and we believe it is more suitable for measuring
the performance of larger capitalization U.S. companies. As a result, we have
elected to change our broad equity market index to the Russell 2000 index. The
Russell 2000 contains a broader base of 2,000 companies, with a mean market
value of $428.0 million, and the Russell 2000 includes REITs. Our management
believes that the Russell 2000 reflects a broader U.S. market, including the
REIT market sector (which is excluded from the S&P 500), than does the S&P 500.
The graph assumes a base index value of 100 for our common stock and each index
for comparative purposes. Total return equals appreciation in stock price plus
dividends paid, and assumes that all dividends are reinvested.
(TOTAL RETURN PERFORMANCE GRAPH)
<TABLE>
<CAPTION>
Period Ending
-----------------------------------------------------------
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Inns, Inc. 100.00 114.15 141.02 173.25 124.90 101.25
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
Russell 2000 100.00 128.45 149.64 183.10 178.44 216.37
SNL Hotel REITs 100.00 131.64 201.14 263.71 130.39 101.27
</TABLE>
Source: SNL Securities, L.C.
We cannot assure you that our share performance will continue into the future
with the same or similar trends depicted in the graph above. We will not make
or endorse any predictions as to its future share performance.
19
<PAGE> 22
The performance comparisons noted in the graph above shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this graph by reference, and shall not otherwise be deemed filed
under such acts.
SHAREHOLDER PROPOSALS FOR OUR 2001 ANNUAL MEETING
Our Board will provide for presentation of proposals by our shareholders at the
annual meeting of shareholders for 2001, provided that these proposals are
submitted by eligible shareholders who have complied with the relevant
regulations of the SEC regarding shareholder proposals and our bylaws, a copy
of which is available upon written request from our Secretary.
Shareholders intending to submit proposals for presentation at our annual
meeting of shareholders must submit their proposals in writing and we must
receive these proposals at our executive offices on or before December 3, 2000
for inclusion in our proxy statement and the form of proxy relating to our 2001
annual meeting. We will determine whether we will oppose inclusion of any
proposal in our proxy statement and form of proxy on a case-by-case basis in
accordance with our judgment, our bylaws and the relevant regulations of the
SEC. We will not consider proposals received after December 3, 2000 for
inclusion in our proxy materials for our 2001 annual meeting of shareholders.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers L.L.P. has served as independent public accountants and
auditors for our company and our subsidiaries for the year ended December 31,
1999 and will continue to serve as our auditors for the year ending December
31, 2000, unless this is changed by action of our Board.
We expect that a PricewaterhouseCoopers L.L.P. representative will be present
at our annual meeting to make a statement if so desired and is expected to be
available to respond to appropriate questions.
OTHER MATTERS
Our Board currently does not intend to bring before our annual meeting any
matter other than the election of directors as specified in the notice to
shareholders, and our Board has no knowledge of any other matters to be brought
before our annual meeting. If any other matters requiring a vote of our
shareholders are properly brought before our annual meeting, the enclosed
proxies will be voted on such matters in accordance with the judgment of the
persons named as proxies in those proxies, or their substitutes, present and
acting at the meeting.
We will provide to each beneficial owner of our common stock entitled to vote
at our annual meeting, upon written request to Donald H. Dempsey, our Executive
Vice President, Secretary, Treasurer and Chief Financial Officer, at 7700 Wolf
River Boulevard, Germantown, Tennessee 38138, telephone (901) 754-7774, a copy
of our Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
including the financial statements and financial statement schedules filed by
us with the SEC.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Donald H. Dempsey
DONALD H. DEMPSEY, SECRETARY
March 29, 2000
<PAGE> 23
PROXY
EQUITY INNS, INC.
7700 WOLF RIVER BOULEVARD, GERMANTOWN, TENNESSEE 38138
ANNUAL MEETING OF SHAREHOLDERS -- MAY 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Phillip H. McNeill, Sr. and Donald H.
Dempsey, or either of them, with full power of substitution in each, proxies
(and if the undersigned is a proxy, substitute proxies) to vote all Common Stock
of the undersigned in Equity Inns, Inc. at the Annual Meeting of Shareholders to
be held at the Homewood Suites Hotel, 7855 Wolf River Parkway, Germantown,
Tennessee, on Thursday, May 11, 2000 at 10:00 a.m. Central Time, and at any
adjournments thereof, as specified below. Please indicate your vote by checking
the appropriate box next to each matter below.
ELECTION OF DIRECTORS
[ ]CLASS II -- TERM EXPIRING 2002 -- [ ] WITHHOLD AUTHORITY TO VOTE FOR THE
NOMINEE
FOR THE NOMINEE LISTED BELOW LISTED TO THE LEFT
Harry S. Hays
[ ]CLASS III -- TERMS EXPIRING 2003 -- [ ] WITHHOLD
AUTHORITY TO VOTE FOR BOTH
FOR BOTH NOMINEES LISTED BELOW NOMINEES LISTED
BELOW
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ON THE LIST BELOW)
Donald H. Dempsey Joseph W. McLeary
[Please sign and date on reverse side of this proxy.]
In their discretion, the proxies (and if the undersigned is a proxy, any
substitute proxies) are authorized to vote upon such other business as may
properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF NOMINEES FOR DIRECTORS.
DATED:
--------------------------------,
2000
PLEASE SIGN NAME EXACTLY AS IT
APPEARS ON THE LEFT. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
--------------------------------
SIGNATURE
--------------------------------
TITLE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
