<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
--
X Annual Report Pursuant to Section 13 or 15(d) of
---
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission File Number 01-12073
EQUITY INNS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-1550848
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
7700 Wolf River Boulevard, Germantown, Tennessee 38138
---------------------------------------------------------------
(Address of Registrant's Principal Executive Office) (Zip Code)
( 901) 754-7774
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
9 1/2% Series A Cumulative Preferred Stock, $.01 par value
----------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of voting stock and non-voting stock held by
nonaffiliates of the Registrant as of March 3, 2000: $224,575,458.
Number of shares of Common Stock, $.01 par value, outstanding as of March 3,
2000: 36,666,252
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
Shareholders to be held May 11, 2000 (the "Proxy Statement") are incorporated by
reference into Part III of this Report.
Exhibit Index beginning on Page 59.
Page 1 of 63
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EQUITY INNS, INC
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1999
TABLE OF CONTENTS
PART I
Page
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 18
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 51
Part III
Item 10. Directors and Executive Officers of the Registrant 51
Item 11. Executive Compensation 51
Item 12. Security Ownership of Certain Beneficial Owners and
Management 51
Item 13. Certain Relationships and Related Transactions 51
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K 52
2
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THIS REPORT CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD- LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES,"
"ANTICIPATES," "ESTIMATES," "PROJECTS," "EXPECTS" AND SIMILAR WORDS. SUCH
FORWARD-LOOKING STATEMENTS RELATE TO FUTURE EVENTS AND THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY, AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM THE RESULTS OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. ATTENTION
SHOULD BE PAID TO THE VARIOUS FACTORS IDENTIFIED OR INCORPORATED BY REFERENCE IN
THIS REPORT WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER, INCLUDING BUT NOT
LIMITED TO THOSE DISCUSSED IN THE SECTIONS ENTITLED "INTERNAL GROWTH STRATEGY,"
"ACQUISITION STRATEGY," "COMPETITION," "LEVERAGE," "ENVIRONMENTAL MATTERS," "TAX
STATUS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS." THE COMPANY IS NOT OBLIGATED TO UPDATE ANY SUCH FACTORS
OR TO REFLECT THE IMPACT OF ACTUAL FUTURE EVENTS OR DEVELOPMENTS ON SUCH
FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Equity Inns, Inc. (the "Company") is in the business of acquiring equity
interests in hotel properties. The Company commenced operations in March 1994
and is a real estate investment trust ("REIT") for federal income tax purposes.
The Company, through its wholly-owned subsidiary, Equity Inns Trust (the
"Trust"), is the sole general partner of Equity Inns Partnership, L.P. (the
"Partnership") and, at December 31, 1999, owned an approximate 96.6% interest in
the Partnership. The Company conducts its business through the Partnership and
its subsidiaries.
(b) Financial Information About Industry Segment
The Company is in the business of acquiring equity interests in hotel
properties. See the Consolidated Financial Statements and notes thereto included
in Item 8 of this Annual Report on Form 10-K for certain financial information
required in Item 1.
(c) Narrative Description of Business
In order to qualify as a REIT, neither the Company nor the Partnership can
operate hotels. The Company has implemented a strategy of utilizing multiple
lessees and hotel management companies for its hotel properties. At December 31,
1999, the Partnership or its affiliates leased 78 of the Company's hotels to
affiliates of Interstate Hotels Corporation (formerly named Interstate Hotels
Management, Inc.) ("IHC"), which was recently divested from Wyndham
International, Inc., formerly known as Patriot American Hospitality, Inc.
("Wyndham"). Affiliates of IHC are collectively referred to herein as the
"Interstate Lessee." All payments due under these Percentage Leases are
guaranteed by Interstate Hotels, L.L.C., a subsidiary of IHC, and by IHC
(except for three hotels where Wyndham rather than IHC is the guarantor). The
Partnership leased 19 hotels to wholly-owned subsidiaries of Prime Hospitality
Corporation (collectively, the "Prime Lessee"). All payments due under these
Percentage Leases are guaranteed by Prime Hospitality Corporation. The
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Interstate Lessee and the Prime Lessee are referred to herein collectively
as the "Lessees," and individually as a "Lessee." The Lessees operate and lease
hotels owned by the Partnership and its affiliates pursuant to percentage leases
(the "Percentage Leases"), which provide for annual rent payments equal to
the greater of (i) a fixed base rent ("Base Rent") or (ii) percentage rent based
on the revenues of the hotels ("Percentage Rent"). The Company's remaining
two hotels are operated pursuant to management agreements with a subsidiary of
IHC and with a wholly-owned subsidiary of MeriStar Hotels & Resorts, Inc.
At December 31, 1999, the Partnership owned 99 hotel properties with a total of
12,618 rooms in 35 states (the "Hotels"). The diversity of the portfolio is such
that, at December 31, 1999, no individual hotel exceeded 2% of the total rooms
in the portfolio. The Company's geographical distribution and franchise
diversity is illustrated by the following charts.
Franchise Diversity
# of Hotel # of Rooms/
Franchise Affiliation Properties Suites
--------------------- ---------- -----------
Premium Limited Service Hotels:
Hampton Inn 50 6,284
Hampton Inn & Suites 1 125
Holiday Express 1 101
Comfort Inn 2 245
-- ------
Sub-total 54 6,755
-- ------
All-Suite Hotels:
AmeriSuites 19 2,403
Premium Extended Stay Hotels:
Residence Inn 12 1,431
Homewood Suites 9 1,295
-- -------
Sub-total 21 2,726
-- -------
Full Service Hotels:
Holiday Inn 4 557
Comfort Inn 1 177
-- ------
Sub-total 5 734
-- ------
Total 99 12,618
== ======
4
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Geographical Diversity
Number of Number of Percentage of
State Hotels Suites/Rooms Suites/Rooms
- ----- ---------- ------------ -------------
Alabama 3 382 3.0%
Arizona 4 495 3.9%
Arkansas 1 123 1.0%
Colorado 3 356 2.8%
Connecticut 3 405 3.2%
Florida 8 1,079 8.6%
Georgia 4 443 3.5%
Idaho 1 104 0.8%
Illinois 3 499 4.0%
Indiana 2 255 2.0%
Kansas 2 260 2.1%
Kentucky 1 119 0.9%
Louisiana 1 128 1.0%
Maryland 2 244 1.9%
Michigan 3 399 3.2%
Minnesota 2 248 2.0%
Missouri 2 242 1.9%
Nebraska 1 80 0.6%
Nevada 1 202 1.6%
New Jersey 3 424 3.4%
New Mexico 1 128 1.0%
New York 1 154 1.2%
North Carolina 5 614 4.9%
Ohio 6 736 5.8%
Oklahoma 1 135 1.1%
Oregon 1 168 1.3%
Pennsylvania 2 249 2.0%
South Carolina 3 404 3.2%
Tennessee 10 1,172 9.3%
Texas 9 1,230 9.7%
Vermont 2 200 1.6%
Virginia 2 245 1.9%
Washington 1 161 1.3%
West Virginia 4 455 3.6%
Wisconsin 1 80 0.6%
-- ------ -----
99 12,618 100.0%
== ====== =====
BUSINESS STRATEGY
The Company's primary long-term objective is to increase funds from operations
and enhance shareholder value by participating in increased revenues from the
Hotels through the Percentage Leases, by acquiring equity interests in
additional hotels that meet the Company's investment criteria and by disposition
of certain hotels where the Company believes it can enhance its returns through
redeployment of capital.
5
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ACQUISITION STRATEGY
The Company intends to acquire additional existing hotel properties that meet
its investment criteria, primarily premier upscale limited service,
extended-stay, all-suite and underperforming hotels that can be renovated and/or
converted to premium franchise brands. In particular, the Company has
increasingly emphasized the acquisition of hotel portfolios in order to
capitalize on the Company's efficiency and experience in acquisition analysis
and transaction structuring and to enable the Company to more rapidly expand its
hotel portfolio. Based upon current conditions in the REIT and hotel sectors of
the capital markets, the Company intends to focus, in the near term, on
improving the performance of its existing portfolio, as opposed to acquiring or
developing additional hotels.
The Company has entered into an alliance with a major franchisor of all-suite
hotels, Prime Hospitality Corporation. This alliance allows the Company the
right of first offer through the year 2000 to purchase up to 20 hotels per year.
This alliance provides the Company with a distinct advantage by avoiding the
necessity to bid against competition for new acquisitions.
The Company considers investment in hotel properties which meet some or all of
the following criteria:
Particular emphasis is given to premium extended stay and all-suite
properties in the upscale and mid-price segment, such as AmeriSuites(R),
Homewood Suites(R), Residence Inn(R), Hampton Inn & Suites(R), and Embassy
Suites(R) and premium limited service hotels, such as Hampton Inn(R) and
Marriott Courtyard(R), with major franchisors such as Hilton Hotels
Corporation, Marriott Corporation, and Prime Hospitality Corporation;
Properties in attractive locations that the Company believes could benefit
significantly by changing franchise affiliations to a brand the Company
believes will strengthen the acquired hotel's competitive position. In
general, the Company focuses on acquisitions in markets with the following
characteristics:
o high barriers to entry, such as the scarcity or high cost of land
for additional development, restrictive zoning, stringent local
development laws, extended permit-approval processes, and a
relatively low supply of competing hotels;
o historically stable demand generators, such as major corporate
office or retail complexes, airports, major universities and
medical centers with convenient access to major thoroughfares and
airports;
Properties with relatively stable operating histories; and
Properties with purchase prices which, coupled with the elimination or
significant reduction of debt, may allow the Company to realize a favorable
return on its investment.
The Company continually evaluates its hotel portfolio with respect to the
potential sale of certain of its hotel properties that no longer meet its
investment criteria. Proceeds from the sale of its hotels will be used to repay
indebtedness, buy back outstanding shares of the Company's stock or re-invest in
hotels meeting the Company's investment criteria.
DEVELOPMENT STRATEGY
The Company may consider selective internal development of hotel properties,
principally in the premium extended stay, all-suite and limited service segment
of the market. At December 31, 1999, the Company held land in Salt Lake City,
Utah for possible construction of an Embassy Suites hotel. However, the Company
is continuing to evaluate this project.
6
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INTERNAL GROWTH STRATEGY
The Percentage Leases are designed to allow the Company to participate in any
growth in room revenues at the Hotels and to a lesser extent, food and beverage
revenue, if any. The Percentage Leases provide for rent equal to the greater of
(i) a fixed Base Rent or (ii) Percentage Rent. The Percentage Leases provide
that the Base Rent and the thresholds for the payment of Percentage Rent will be
adjusted annually (subject to an annual cap of 7%) based on changes in the
United States Consumer Price Index ("CPI").
EMPLOYEES
At March 1, 2000, the Company employed, through a wholly-owned subsidiary, 16
employees.
COMPETITION
The hotel industry is highly competitive with various participants competing on
the basis of price, level of service and geographic location. Each of the Hotels
is located in a developed area that includes other hotel properties. The number
of competitive hotel properties in a particular area could have a material
adverse effect on occupancy, Average Daily Rate ("ADR") and Revenue Per
Available Room ("REVPAR") of the Hotels or at hotel properties acquired in the
future. The Company believes that brand recognition, location, the quality of
the hotel, consistency of services provided, and price are the principal
competitive factors affecting the Company's hotels.
The Company may be competing for investment opportunities with entities which
have substantially greater financial resources than the Company. These entities
generally may be able to accept more risk than the Company prudently can manage.
Competition generally may reduce the number of suitable investment opportunities
available to the Company and increase the bargaining power of property owners
seeking to sell.
FRANCHISE AGREEMENTS
All of the Hotels operate under franchise licenses. The Company anticipates that
most of the additional hotel properties in which it invests will be operated
under franchise licenses. The Company believes that the public's perception of
quality associated with a franchisor is an important feature in the operation of
a hotel. Franchisors provide a variety of benefits for franchisees which include
national advertising, publicity and other marketing programs designed to
increase brand awareness, training of personnel, continuous review of quality
standards and centralized reservation systems.
The Lessees hold the franchise licenses for the leased hotels. The franchise
licenses generally specify certain management, operational, recordkeeping,
accounting, reporting and marketing standards and procedures with which the
applicable Lessee must comply. The franchise licenses obligate each Lessee to
comply with the franchisors' standards and requirements with respect to training
of operation personnel, safety, maintaining specified insurance, the types of
services and products ancillary to guest room services that may be provided by
the Lessee, display of signage, and the type, quality and age of furniture,
fixtures and equipment included in guest rooms, lobbies and other common areas.
Each franchise license generally gives the Lessee the right to operate the
particular Hotel under a franchise license for periods ranging up to 20 years.
The franchise agreements provide for termination at the franchisor's option upon
the occurrence of certain events, including the Lessee's failure to pay
royalties and fees or perform its other covenants under the license agreement,
bankruptcy, assignment of the license without the consent of the franchisor, or
failure to comply with applicable law in the operation of the relevant Hotel.
The Lessee may terminate the franchise
7
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license only by giving at least 12 months' notice and paying a specific amount
of liquidated damages. The Percentage Leases require the Company's consent to
any change or termination in the franchise brand. The license agreements will
not renew automatically upon expiration. The Partnership made franchise transfer
payments to franchisors aggregating approximately $200,000 in 1999. The
Partnership is also committed to franchisors to make certain capital
improvements to hotel properties, which will be funded from borrowings or
working capital. The Partnership made capital improvements of approximately
$32.8 million to its hotel properties in 1999, including approximately $10.4
million in renovations required by franchisors. In 2000, the Partnership expects
to fund approximately $11.5 million of capital improvements for the Hotels. The
Lessees are responsible for making royalty payments under the franchise
agreements to the franchisors. Under the franchise agreements, the Lessees pay
franchise fees ranging from 6.5% to 8.05% of room revenue. A portion of these
fees may be designated for a marketing and reservation fund for the benefit of
franchised hotels systemwide.
SEASONALITY
The Hotels' operations historically have been seasonal in nature, generally
reflecting higher occupancy rates during the second and third quarters. This
seasonality can be expected to cause fluctuations in the Company's quarterly
lease revenue to the extent that it receives Percentage Rent.
TAX STATUS
The Company intends to operate so as to be taxed as a REIT under Sections
856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). As long
as the Company qualifies for taxation as a REIT, with certain exceptions, the
Company will not be taxed at the corporate level on its taxable income that is
distributed to its shareholders. A REIT is subject to a number of organizational
and operational requirements, including a requirement that it distribute
annually at least 95% of its taxable income. Failure to qualify as a REIT will
render the Company subject to tax (including any applicable minimum tax) on its
taxable income at regular corporate rates and distributions to the shareholders
in any such year will not be deductible by the Company. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain state
and local taxes on its income and property. In connection with the Company's
election to be taxed as a REIT, the Company's Charter imposes certain
restrictions on the transfer of shares of Common Stock. The Company has adopted
the calendar year as its taxable year.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances on such property. Such laws often impose
such liability without regard to whether the owner knew of, or was responsible
for, the presence of hazardous or toxic substances. Furthermore, a person that
arranges for the disposal or transports for disposal or treatment a hazardous
substance at a property owned by another may be liable for the costs of removal
or remediation of hazardous substances released into the environment at that
property. The costs of remediation or removal of such substances may be
substantial and the presence of such substances, or the failure to promptly
remediate such substances, may adversely affect the owner's ability to sell such
real estate or to use such real estate as collateral for borrowings. In
connection with the ownership and operation of the Hotels, the Company, the
Partnership or the Lessee, as the case may be, may be potentially liable for any
such costs.
In connection with the Partnership's acquisition of the Hotels, Phase I
environmental site assessments ("ESAs") were obtained on all of the Hotels from
various independent environmental engineers. The Phase I ESAs were intended to
identify potential environmental contamination for
8
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which the Hotels may be responsible and the potential for environmental
regulatory compliance liabilities. The Phase I ESAs included historical review
of the Hotels, reviews of certain public records, preliminary investigations of
the sites and surrounding properties, screening for the presence of hazardous
substances, toxic substances and underground storage tanks, and the preparation
and issuance of a written report. The Phase I ESAs did not include invasive
procedures, such as soil sampling or ground water analysis to detect
contaminants from former operations on the Current Hotels or migrating from
neighbors or caused by third parties.
The Phase I ESAs have not revealed any environmental liability that the Company
believes would have a material adverse effect on the Company's business, assets,
results of operations or liquidity, nor is the Company aware of any such
liability or that there are material environmental liabilities of which the
Company is unaware. Nevertheless, no assurances can be given that (i) future
laws, ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Hotels will not be
affected by the condition of the properties in the vicinity of Hotels (such as
the presence of leaking underground storage tanks) or by third parties unrelated
to the Partnership or the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, listed below, serve in their respective
capacities for approximate one year terms and are subject to re-election
annually by the Board of Directors, normally in May of each year.
NAME POSITION
---- --------
Phillip H. McNeill, Sr. Chairman of the Board, Chief Executive Officer
and Director
Howard A. Silver President, Chief Operating Officer and Director
Donald H. Dempsey Executive Vice President, Chief Financial
Officer, Secretary, Treasurer and Director
Phillip H. McNeill, Jr. Executive Vice President of Development
J. Ronald Cooper Vice President, Assistant Secretary, Assistant
Treasurer and Controller
Phillip H. McNeill, Sr. (age 61) is Chairman and Chief Executive Officer of the
Company and has been Chairman of McNeill Hospitality Corporation since 1984.
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 served as a member of the Board of Trustees
of the University of Memphis Foundation and as a Director of First Commercial
Bank of Memphis. He is currently serving as a member of the Boards of Directors
of National Commerce Bancorporation and Interstate Hotels Corporation. Mr.
McNeill holds both a B.S. and a J.D. degree from the University of Memphis and
is a graduate of the Northwestern School of Mortgage Banking.
Howard A. Silver (age 45) is President and Chief Operating Officer of the
Company and has been a certified public accountant since 1980. Mr. Silver
joined the Company in May 1994 and has previously served as Executive Vice
President of Finance, Secretary, Treasurer and Chief Financial Officer of the
Company. From 1992 until joining the Company, Mr. Silver served as Chief
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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 holds a B.S. in
Accounting from the University of Memphis.
Donald H. Dempsey (age 55) is Executive Vice President, Secretary, Treasurer and
Chief Financial Officer of the Company. Prior to joining the 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 was
first appointed to the Board of Directors in December 1998. Mr. Dempsey is
currently serving on the Board of Directors of John Q. Hammons Hotels, Inc. Mr.
Dempsey holds a B.S. in Accounting from Mississippi State University.
Phillip H. McNeill, Jr. (age 38) is Executive Vice President of Development of
the Company. From 1994 to 1996, he served as President of Trust Leasing, Inc.,
formerly McNeill Hotel Co., Inc., the Company's former lessee (the "Former
Lessee"), and from 1984 to 1996 served as Vice President of Trust Management,
Inc., formerly McNeill Hospitality Corporation, which was an affiliate of the
Former Lessee. Mr. McNeill is the son of Phillip H. McNeill, Sr. and holds a
B.B.A. from the University of Memphis and is a graduate of the Northwestern
School of Mortgage Banking.
J. Ronald Cooper (age 51) is Vice President, Assistant Secretary, Assistant
Treasurer and Controller of the Company. From 1994 to 1996, he was Controller
and Director of Financial Reporting for the Former Lessee and joined the Former
Lessee in October 1994. Mr. Cooper has been a certified public accountant since
1972. From 1978 until joining the Former Lessee, Mr. Cooper was employed as
Secretary, Treasurer and Controller of Wall Street Deli, Inc., a publicly-owned
delicatessen company. Prior to that, Mr. Cooper was a certified public
accountant with the national accounting firm of Coopers & Lybrand L.L.P. from
1970 to 1976. Mr. Cooper holds a B.S. degree in accounting from Murray State
University.
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ITEM 2. PROPERTIES
The following table sets forth certain information for the year ended December
31, 1999 with respect to the Hotels on a pro forma basis:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(3) Payment (1)(3) Occupancy Rate Room (2)
------ ------- ---------- -------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampton Inn:
Albany, New York 1986 154 $3,312 $1,585 68.0% $86.88 $58.93
Ann Arbor, Michigan 1986 150 2,775 1,273 67.4% $75.15 $50.68
Atlanta (Northlake),
Georgia 1988 130 1,754 791 57.7% $64.08 $36.96
Austin, Texas 1987 122 2,078 957 66.2% $71.10 $47.05
Baltimore (Glen Burnie),
Maryland 1989 116 2,520 1,169 80.2% $74.87 $60.04
Beckley, West Virginia 1992 108 1,885 962 73.5% $65.04 $47.83
Birmingham (Mountain
Brook), Alabama 1987 131 2,266 1,185 65.2% $72.67 $47.38
Birmingham (Vestavia),
Alabama 1986 123 1,778 719 62.0% $63.90 $39.60
Chapel Hill, North Carolina 1986 122 2,132 1,066 64.1% $74.68 $47.88
Charleston, South Carolina 1985 125 2,053 933 66.4% $67.72 $44.99
Chattanooga, Tennessee 1988 168 2,574 1,138 71.7% $58.70 $42.10
Chicago (Gurnee), Illinois 1988 134 1,985 796 51.6% $78.68 $40.58
Chicago (Naperville), Illinois 1987 130 2,449 1,121 72.4% $71.89 $52.02
Cleveland, Ohio 1987 123 1,812 854 58.1% $69.46 $40.35
College Station, Texas 1986 135 2,008 888 62.1% $65.61 $40.76
Colorado Springs, Colorado 1985 128 1,840 789 57.8% $68.09 $39.37
Columbia, South Carolina 1985 121 1,686 754 59.3% $64.31 $38.17
Columbus, Georgia 1986 119 2,067 997 76.8% $61.96 $47.59
Columbus (Dublin), Ohio 1988 123 2,118 1,009 65.5% $72.03 $47.17
Dallas (Addison), Texas 1985 160 2,287 1,097 55.1% $71.20 $39.20
Dallas (Garland), Texas 1987 125 908 429 39.7% $50.07 $19.90
Dallas (Richardson), Texas 1987 130 1,959 912 62.9% $65.64 $41.28
Denver (Aurora), Colorado 1985 132 1,731 680 56.6% $63.62 $36.03
Detroit (Madison Heights),
Michigan 1987 124 2,429 1,182 74.6% $71.90 $53.66
Detroit (Northfield), Michigan 1989 125 2,587 1,296 75.3% $75.31 $56.71
Fayetteville, North Carolina 1986 122 1,226 439 50.6% $54.39 $27.54
Ft. Worth, Texas 1987 125 1,313 397 48.1% $59.88 $28.75
Gastonia, North Carolina 1989 109 1,977 1,031 73.8% $67.37 $49.69
Indianapolis, Indiana 1987 129 2,311 1,066 64.6% $76.02 $49.08
Jacksonville, Florida 1986 122 1,796 697 65.2% $61.86 $40.33
Kansas City (Overland Park),
Kansas 1991 134 2,387 1,132 66.3% $73.60 $48.81
Kansas City, Missouri 1987 120 2,002 897 62.3% $73.33 $45.70
Knoxville, Tennessee 1991 118 1,966 838 73.6% $62.05 $45.65
Little Rock (North),
Arkansas 1985 123 1,565 644 59.3% $58.83 $34.86
Louisville, Kentucky 1986 119 1,895 852 59.5% $73.36 $43.63
Memphis (Poplar),
Tennessee 1985 126 2,628 1,341 74.2% $77.35 $57.41
Memphis (Sycamore View),
Tennessee 1984 117 1,437 500 57.2% $59.13 $33.81
Meriden, Connecticut 1988 125 2,261 1,111 67.5% $73.40 $49.56
Milford, Connecticut 1986 148 3,059 1,499 75.6% $74.95 $56.64
Morgantown, West Virginia 1991 108 2,119 1,078 72.8% $73.88 $53.76
Nashville (Briley Parkway),
Tennessee 1987 120 2,213 981 66.0% $76.53 $50.53
Norfolk, Virginia 1990 119 2,097 1,019 68.9% $70.04 $48.27
Pickwick, Tennessee 1994 50 771 258 62.2% $67.96 $42.26
San Antonio (Bowie), Texas 1995 169 3,579 1,964 69.1% $84.03 $58.02
Sarasota, Florida 1987 97 1,360 467 61.5% $62.51 $38.41
Savannah, Georgia 1986 129 2,055 988 70.2% $62.68 $44.00
Scottsdale, Arizona 1996 126 1,746 814 43.4% $87.38 $37.96
Scranton, Pennsylvania 1994 129 2,382 1,048 70.3% $71.98 $50.59
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(3) Payment (1)(3) Occupancy Rate Room (2)
------ ------- ---------- -------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampton Inn (Continued):
St. Louis (Westport),
Missouri 1987 122 1,717 673 57.2% $67.35 $38.50
State College,
Pennsylvania 1987 120 2,412 1,196 70.4% $78.23 $55.08
Hampton Inn & Suites:
Memphis (Bartlett),
Tennessee 1998 125 2,060 940 59.3% $76.12 $45.14
Comfort Inn:
Dallas (Arlington), Texas 1985 141 1,260 610 41.3% $59.28 $24.50
Jacksonville Beach, Florida 1973 177 3,739 1,710 66.6% $87.40 $58.20
Rutland, Vermont 1985 104 1,816 785 76.3% $62.69 $47.84
Residence Inn:
Boise, Idaho (5) 1986 104 2,662 1,155 84.1% $83.62 $70.31
Burlington, Vermont 1988 96 2,563 1,241 85.0% $86.11 $73.15
Colorado Springs, Colorado 1984 96 2,541 1,341 80.6% $89.98 $72.50
Madison, Wisconsin 1988 80 1,383 456 59.7% $79.31 $47.36
Minneapolis (Eagan),
Minnesota 1988 120 3,159 1,569 81.0% $89.05 $72.12
Oklahoma City, Oklahoma 1982 135 3,002 1,419 78.5% $77.64 $60.92
Omaha, Nebraska 1981 80 2,033 824 78.3% $88.90 $69.61
Portland, Oregon (1) 1990 168 5,279 2,835 77.8% $110.67 $86.09
Princeton, New Jersey 1988 208 6,198 3,269 72.2% $113.02 $81.63
Somers Point,
New Jersey (5) 1988 120 3,355 1,340 76.5% $100.25 $76.71
Tinton Falls, New Jersey 1988 96 3,193 1,549 84.7% $107.55 $91.12
Tucson, Arizona 1985 128 3,253 1,592 86.0% $80.99 $69.63
Holiday Inn:
Bluefield, West Virginia 1980 120 1,953 867 64.8% $68.82 $44.60
Charleston (Mt. Pleasant),
South Carolina 1988 158 3,018 1,483 69.0% $76.53 $52.77
Oak Hill, West Virginia 1983 119 1,155 530 43.0% $61.89 $26.59
Wilkesboro, North Carolina 1985 101 1,217 596 52.7% $62.63 $33.00
Winston-Salem, North
Carolina 1969 160 795 494 22.8% $59.89 $13.63
Homewood Suites:
Augusta, Georgia 1997 65 1,405 661 65.6% $90.37 $59.24
Chicago, Illinois (4) 1999 235 4,159
Cincinnati (Sharonville),
Ohio 1990 111 2,292 1,062 70.2% $80.57 $56.57
Hartford, Connecticut 1990 132 4,119 2,103 79.2% $107.95 $85.50
Memphis (Germantown),
Tennessee 1996 92 1,946 908 65.3% $88.80 $57.96
Orlando, Florida (4) 1999 252 2,740
Phoenix, Arizona 1996 124 3,525 1,604 72.0% $108.19 $77.88
San Antonio, Texas 1996 123 2,732 1,166 72.5% $84.00 $60.86
Seattle, Washington 1998 161 4,295 2,575 65.2% $112.16 $73.09
AmeriSuites:
Albuquerque, New Mexico 1997 128 2,460 1,248 76.8% $68.54 $52.65
Baltimore, Maryland 1996 128 2,957 1,528 75.6% $83.96 $63.46
Baton Rouge, Louisiana 1997 128 2,649 1,412 73.9% $76.77 $56.70
Birmingham, Alabama 1997 128 1,998 909 60.8% $70.30 $42.76
Cincinnati (Blue Ash), Ohio 1990 127 1,969 876 56.3% $75.41 $42.47
Cincinnati (Forest Park),
Ohio 1992 126 2,375 1,130 68.5% $75.44 $51.65
Columbus, Ohio 1994 126 2,553 1,233 70.8% $78.40 $55.51
Flagstaff, Arizona 1993 117 1,902 839 70.6% $63.12 $44.54
Indianapolis, Indiana 1992 126 2,466 1,253 64.7% $82.84 $53.61
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(3) Payment (1)(3) Occupancy Rate Room (2)
------ ------ ---------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
AmeriSuites (Continued):
Jacksonville, Florida 1996 112 1,745 770 64.8% $65.84 $42.69
Las Vegas, Nevada 1998 202 4,610 2,380 80.4% $77.81 $62.53
Kansas City (Overland
Park), Kansas 1994 126 2,517 1,225 69.4% $78.89 $54.74
Memphis (Wolfchase),
Tennessee 1996 128 2,276 1,030 61.9% $78.76 $48.71
Miami, Florida 1996 126 3,220 1,852 86.8% $80.66 $70.02
Miami (Kendall), Florida 1996 67 2,209 1,357 89.0% $101.48 $90.33
Minneapolis, Minnesota 1997 128 2,541 1,274 68.6% $79.27 $54.39
Nashville, Tennessee 1997 128 2,432 1,244 68.7% $75.76 $52.05
Richmond, Virginia 1992 126 2,555 1,295 70.0% $79.42 $55.56
Tampa, Florida 1994 126 3,160 1,803 73.9% $93.02 $68.72
------ -------- -------- ---- ------ ------
Consolidated Totals/Weighted
Average for all Hotels 12,618 $227,809 $115,753 67.0% $75.80 $51.51
====== ======== ======== ==== ====== ======
</TABLE>
- --------------------
(1) Represents lease payments calculated on a pro forma basis by applying
the rent provisions in the Percentage Leases using historical room
revenues of the hotels as if January 1, 1999 was the beginning of the
lease year.
(2) Determined by multiplying occupancy and the average daily rate.
(3) Amounts in thousands.
(4) Hotel was not open for the entire period; therefore, pro forma results
are not available, minimum rent has been assumed.
(5) Hotel operated under a management contract; lease payment amount
represents operating income after payment of management fees and other
hotel operating expenses.
THE PERCENTAGE LEASES
All but two of the Hotels owned by the Partnership are separately leased to the
Lessees under a Percentage Lease. All Percentage Leases with the Lessees have a
non-cancelable initial term of ten to fifteen years, subject to earlier
termination upon the occurrence of certain contingencies described in the
Percentage Leases. During the term of each Percentage Lease, the Lessees are
obligated to pay (i) the greater of Base Rent or Percentage Rent and (ii)
certain other amounts, including interest accrued on any late payments or
charges. Base Rent accrues and is required to be paid monthly. Percentage Rent
is based on percentages of room revenues and to a lesser extent, food and
beverage revenues, if any, for each of the Hotels. Both the Base Rent and the
threshold room revenue amount in each Percentage Rent formula will be adjusted
annually for changes in the CPI. The adjustment is calculated at the beginning
of each lease year after a holding period of the first full calendar year of the
lease, based upon the average change in the CPI during the prior 24 months. The
adjustment in any lease year may not exceed 7% of the Base Rent and threshold
room revenue amounts for the prior fiscal year. Percentage Rent is payable
quarterly, on or before the 30th day following the end of each of the calendar
quarters in each fiscal year.
13
<PAGE>
The following table summarizes the percentages of room revenues in excess of
certain levels payable as Percentage Rent under the Percentage Leases as of
January 1, 2000.
Range of Percentages of Room Revenue
First Tier Top Tier
-------------- -----------
Full Service (1) 28% to 38% 65% to 77%
Extended Stay 27% to 49.4% 65% to 75%
All-Suite 35.7% to 59.7% 69% to 76.1%
Limited Service 22% to 37% 62% to 74%
(1) Percentage Rent formula also includes 15%-30% of beverage revenue and 5%-15%
of food revenue.
Two of the Hotels are operated pursuant to management agreements between a
subsidiary of the Company and third party management companies, with management
fees ranging from 3% to 5% of total hotel revenues.
Other than real estate and personal property taxes and maintenance of
underground utilities and structural elements, which are obligations of the
Partnership, the Percentage Leases require the Lessees to pay insurance,
utilities and all other costs and expenses incurred in the operation of the
Hotels. The Percentage Leases also provide for rent reductions and abatements in
the event of damage or destruction or a partial taking of any Hotel.
Maintenance and Modifications. Under the Percentage Leases, the Partnership is
required to maintain the underground utilities and the structural elements of
the improvements, including exterior and interior load bearing walls (excluding
plate glass) and the roof of each Hotel. In addition, the Percentage Leases
obligate the Partnership to fund certain capital expenditures at the Hotels
pursuant to the capital budgets approved by the Partnership, when and as deemed
necessary by the Lessees, up to an amount equal to 4% of annual room revenue,
net of amounts actually expended for capital expenditures for each Hotel during
any fiscal year. The Partnership's obligation will be carried forward to the
extent that the Lessees have not expended such amount, and any unexpended
amounts will remain the property of the Partnership upon termination of the
Percentage Leases. Otherwise, the Lessees are required, at their expense, to
maintain the Hotels in good order and repair, except for ordinary wear and tear,
and to make non-structural, foreseen and unforeseen, and ordinary and
extraordinary, repairs which may be necessary and appropriate to keep the Hotels
in good order and repair.
Insurance and Property Taxes. The Partnership is responsible for paying real
estate and personal property taxes on the Hotels (except to the extent that
personal property associated with the Hotels is owned by the Lessee). The
Lessees are required to keep in force and pay or reimburse the Partnership for
all insurance on the Hotels, with extended coverage, including casualty,
comprehensive general public liability, workers' compensation, earthquake, flood
and other insurance appropriate and customary for properties similar to the
Hotels and is required to name the Partnership as an additional named insured.
Indemnification. Under each of the Percentage Leases, the Lessees are obligated
to indemnify, and are obligated to hold harmless, the Partnership from and
against liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) incurred by, imposed upon or asserted against the Partnership on
account of, among other things, (i) any accident or injury to person or property
on or about the Hotels, (ii) any misuse by the Lessees or any of their agents of
the leased property, (iii) any environmental liability resulting from any action
or negligence of the Lessees, (iv) taxes and
14
<PAGE>
assessments in respect of the Hotels (other than real estate and personal
property taxes and income taxes of the Partnership on income attributable to the
Hotels), (v) the sale or consumption of alcoholic beverages on or in the real
property or improvements thereon, or (vi) any breach of the Percentage Leases by
Lessees; provided, however, that such indemnification will not be construed to
require the Lessees to indemnify the Partnership against the Partnership's own
grossly negligent acts or omissions or willful misconduct or third-party
contractual liabilities arising from termination of the Percentage Leases due to
an event of default by the Partnership thereunder.
Damage to Hotels. In the event of damage to or destruction of any Hotel covered
by insurance which renders the Hotel unsuitable for the Lessee's use and
occupancy, the Lessee, at its option, will be obligated to (i) repair, rebuild,
or restore the Hotel or (ii) offer to acquire the Hotel on the terms set forth
in the applicable Percentage Lease. If a Lessee rebuilds the Hotel, the
Partnership is obligated to disburse to the Lessee, from time to time and upon
satisfaction of certain conditions, any insurance proceeds actually received by
the Partnership as a result of such damage or destruction, and any excess costs
of repair or restoration will be paid by the Lessee. If the Lessee decides not
to rebuild and the Partnership exercises its right to reject the Lessee's
mandatory offer to purchase the Hotel on the terms set forth in the Percentage
Lease, the Percentage Lease will terminate and the insurance proceeds will be
retained by the Partnership. If the Partnership accepts the Lessee's offer to
purchase the Hotel, the Percentage Lease will terminate and the Lessee will be
entitled to the insurance proceeds. In the event that damage to or destruction
of a Hotel which is covered by insurance does not render the Hotel wholly
unsuitable for the Lessee's use and occupancy, the Lessee generally will be
obligated to repair or restore the Hotel. In the event of damage to or
destruction of any Hotel which is not covered by insurance, the Lessee will be
obligated to either repair, rebuild, or restore the Hotel or offer to purchase
the Hotel on the terms and conditions set forth in the Percentage Lease. The
Percentage Lease shall remain in full force and effect during the period
required for repair or restoration of any damaged or destroyed Hotel, with the
Lessee to receive a credit against rental payments and other charges in an
amount equal to any loss-of-income insurance proceeds actually received by the
Partnership.
Condemnation of Hotel. In the event of a total condemnation of a Hotel, the
relevant Percentage Lease will terminate with respect to such Hotel as of the
date of taking, and the Partnership and the Lessee will be entitled to their
shares of the condemnation award in accordance with the provisions of the
Percentage Lease. In the event of a partial taking which does not render the
Hotel unsuitable for the Lessee's use, the Lessee shall restore the untaken
portion of the Hotel to a complete architectural unit and the Partnership shall
contribute to the cost of such restoration that part of the condemnation award
specified for restoration, provided that if the condemnation awards are
inadequate to restore the affected Hotel to a complete architectural unit,
either the Partnership or the Lessee shall have the right to terminate the
applicable Percentage Lease.
Events of Default. Events of Default under the existing Percentage Leases
include the following:
(i) the occurrence of an Event of Default under any other lease
between the Partnership and a Lessee or any Affiliate of a Lessee;
(ii) the failure by a Lessee to pay Base Rent, Percentage Rent or
any additional charges within 10 days after written notice from the Partnership
that such has become due and payable;
(iii) the failure by a Lessee to observe or perform any other term
of a Percentage Lease and the continuation of such failure for a period of 30
days after receipt by the Lessee of notice from the Partnership thereof, unless
such failure cannot be cured within such period and the Lessee commences
appropriate action to cure such failure within said 30 days and thereafter acts,
with diligence, to correct such failure within such time as is necessary;
15
<PAGE>
(iv) if a Lessee or a guarantor of the Percentage Leases shall file
a petition in bankruptcy or reorganization pursuant to any federal or state
bankruptcy law or any similar federal or state law, or shall be adjudicated a
bankrupt or shall make an assignment for the benefit of creditors or shall admit
in writing its inability to pay its debts generally as they become due, or if a
petition or answer proposing the adjudication of the Lessee or a guarantor of
the Percentage Leases as bankrupt or its reorganization pursuant to any federal
or state bankruptcy law or any similar federal or state law shall be filed in
any court and the Lessee or a guarantor of the Percentage Leases shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within 60 days after the entry of an order in respect thereof, or if a
receiver of the Lessee or a guarantor of the Percentage Leases or of the whole
or substantially all of the assets of the Lessee shall be appointed in any
proceeding brought by the Lessee or a guarantor of the Percentage Leases or if
any such receiver, trustee or liquidator shall be appointed in any proceeding
brought against the Lessee or any guarantor of the Percentage Leases and shall
not be vacated or set aside or stayed within 60 days after such appointment;
(v) if the Lessee voluntarily discontinues operations of a Hotel
for more than 30 days, except as a result of damage, destruction, or
condemnation;
(vi) if the franchise agreement with respect to a Hotel is
terminated as a result of any action or failure to act by the Lessee or its
agents (other than a failure to complete a capital improvement required by the
franchisor resulting from the Partnership's failure to fund such capital
improvements); or
(vii) the occurrence of an event of default under the Lease
Guaranties with respect to the hotels leased to the Interstate Lessee or IHC's
inability to maintain a liquid net worth of not less than 15% of the rent paid
under all Percentage Leases between the Partnership and the Interstate Lessee
(the "Minimum Liquid Net Worth"), if uncured for 30 days, or if IHC makes a
distribution and after giving effect to such distribution, IHC's liquid net
worth shall be less than the Minimum Net Worth.
Performance Standards in Interstate Percentage Leases. In 1999 each Percentage
Lease with the Interstate Lessee was amended to include the following new
performance standards:
(i) In the event that a leased hotel does not produce REVPAR in an
amount of at least 93% of the estimated amount under the applicable operating
budget for any two consecutive quarters, the Partnership shall give the lessee
notice of potential termination. If, in each of the two following quarters, such
hotel continues to achieve negative REVPAR variance to the estimated amount of
at least 7%, the Partnership has the option at any time thereafter to terminate
the relevant Percentage Lease upon at least 30 days notice, unless the
Interstate Lessee pays the Partnership during such 30-day period an amount equal
to the sum the Partnership would have received as rent had the hotel maintained
REVPAR equal to 93% of the budgeted amount minus the amount of rent previously
received by the Partnership for such period. If such hotel does not meet or
exceed the REVPAR budgeted for it for any fiscal year, then the hotel's
threshold room revenue amount in the hotel's Percentage Rent formula will not be
adjusted for changes in CPI, but the hotel's Base Rent shall be adjusted for
changes in CPI;
(ii) In the event the REVPAR yield index, as reported by Smith
Travel Research, declines by five or more percentage points for any calendar
year compared with the previous calendar year, or in the event a leased hotel
performs at below 100% of such REVPAR yield index for any four consecutive
calendar quarters, the Partnership shall have the option at any time thereafter
to terminate the applicable Percentage Lease upon 30 days notice, unless during
such 30-day period the Interstate Lessee pays to the Partnership rent equal to
the amount of rent the Partnership would have received for such period had the
performance of such hotel met such criteria minus the amount of rent the
Partnership actually received for such period;
16
<PAGE>
(iii) In the event the Interstate Lessee fails either of the above
performance standards, then the Interstate Lessee may elect to terminate the
relevant Percentage Lease within 30 days after such failure, effective 90 days
after the Interstate Lessee gives notice of its election to terminate, all
provided the Interstate Lessee timely pays to the Partnership a termination fee.
The amount of such termination fee is on a declining scale, equal to the total
estimated rent for the affected Percentage Lease under the relevant operating
budget if terminated during the first fiscal year declining to a minimum of 20%
of the total rent accrued during the fiscal year prior to the date of
termination if terminated during any fiscal year after the eighth fiscal year;
(iv) The Partnership shall have the right to terminate any
Percentage Lease on 30 days notice if during any fiscal year the Interstate
Lessee does not expend or incur in accordance with generally accepted accounting
principles at least 95% of the dollar amounts contained in the operating budget
for sale and marketing expenses (excluding certain franchisor-related
advertising and marketing expenses) and property maintenance; and
(v) The Partnership shall have the right to terminate any Percentage
Lease on 30 days notice if any general manager or director of sales of a hotel
is transferred to another hotel or similar property owned, leased, or managed by
IHC, the Interstate Lessee or an affiliate in the same market without the
Partnership's consent and such person is not transferred back to such hotel
within 15 days notice from Equity Inns.
The Partnership's sole remedy in the event of any failure to meet any of the
above performance standards shall be the termination of the relevant Percentage
Lease; provided, however, that neither the failure to meet any performance
standard under any Percentage Lease with the Interstate Lessee nor the
termination of a Percentage Lease based sole upon the failure to meet a
performance standard shall result in a cross-default under any other Percentage
Leases, nor shall the Partnership incur any termination payment as a result of a
termination of a Percentage Lease for failure to meet the performance standards.
If an Event of Default occurs and continues beyond any curative period, the
Partnership will have the option of terminating the Percentage Lease and any
other Percentage Leases between the Partnership and the Lessee.
Performance Standard in Prime Percentage Leases. With respect to the Percentage
Leases between the Partnership and the Prime Lessee, unless caused by
unavoidable delays (due to, among other things, acts of God, strikes and
lock-outs), upon a "REVPAR Market Decline" (as defined in the Percentage Leases
with the Prime Lessee), the Partnership may terminate the applicable Percentage
Lease upon 30 days prior written notice to the Prime Lessee, unless during such
30-day period the Prime Lessee pays the Partnership as additional Base Rent an
amount reasonably calculated by the Partnership and specified in such notice
that is equal to the sum the Partnership would have received as rent had the
Percentage Lease met the minimum criteria to avoid such a REVPAR Market Decline.
Right of First Offer. In the event that the Partnership desires to sell its
interest in a Hotel, the Partnership shall first offer to the Lessee by written
notice the opportunity to acquire the Hotel at the price at which the
Partnership intends to offer the Hotel (the "Offer Price"). In the event that
the Lessee elects within 15 days after receipt of such notice to acquire the
Hotel at the Offer Price, the Partnership will be obligated to sell the Hotel to
the Lessee or its nominee at the Offer Price, and upon such sale, the applicable
Percentage Lease shall terminate with respect to the Hotel. Such provisions
shall not apply to any sale, transfer or conveyance by the Partnership of any
interest in the Hotels to any affiliate of the Partnership.
Termination of Percentage Leases on Disposition of the Hotels. In the event the
Partnership enters into an agreement to sell or otherwise transfer a Hotel and
the Lessee does not elect to acquire the Hotel in accordance with the right of
first offer described above, the Partnership shall be permitted
17
<PAGE>
to sell the Hotel to a third party at a price equal to or greater than 95% of
the Offer Price. As compensation for the early termination of the Lessee's
leasehold estate, the Partnership will have the right to terminate the
Percentage Lease with respect to such Hotel upon either (i) paying the Lessee
the net present value of the Lessee's leasehold interest in the remaining term
of the Percentage Lease to be terminated as set forth in the lease agreement or
(ii) offering to lease to the Lessee one or more substitute hotels on terms that
would create a leasehold interest in such hotels with a fair market value equal
to or exceeding the fair market value of the Lessee's remaining leasehold
interest under the Percentage Lease to be terminated.
Termination of Percentage Leases on Company's Termination of REIT Status. In the
event that the Company terminates its REIT status or the Code provisions are
amended so that REITs are permitted to operate hotels, the Partnership may elect
to terminate the Percentage Leases. In such event, the Partnership shall be
obligated to pay to the Lessees the termination payment described in the
preceding paragraph.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Partnership currently is involved in any material
litigation nor, to the Company's knowledge, is any material litigation currently
threatened against the Company or the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 1999, through the solicitation of proxies or otherwise.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's common stock, $.01 par value (the "Common Stock") is traded on the
New York Stock Exchange (the "NYSE") under the symbol "ENN." The following table
sets forth for the indicated periods the high and low closing prices for the
Common Stock as traded through the facilities of the NYSE and the cash
distributions declared per share:
<TABLE>
<CAPTION>
Price Range Distributions
-------------------- Declared Record
High Low Per Share Date
--------- -------- ------------- ------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998:
First Quarter $16 $14-1/4 $0.31 March 27, 1998
Second Quarter $16-1/16 $13-3/16 $0.31 June 30, 1998
Third Quarter $14-1/8 $9-7/8 $0.31 September 30, 1998
Fourth Quarter $11-13/16 $8-3/4 $0.31 December 31, 1998
Year Ended December 31, 1999:
First Quarter $10-1/8 $8-1/2 $0.31 March 31, 1999
Second Quarter $10-1/8 $9-1/4 $0.31 June 30, 1999
Third Quarter $9-5/16 $8-1/2 $0.31 September 30, 1999
Fourth Quarter $8-9/16 $6-1/4 $0.31 December 30, 1999
</TABLE>
18
<PAGE>
(b) Stockholder Information
On March 3, 2000, there were 1,135 record holders of the Company's Common Stock,
including shares held in "street name" by nominees who are record holders, and
approximately 27,000 beneficial owners.
(c) Distributions
In order to qualify as a REIT for federal income tax purposes, the Company must
distribute to shareholders annually at least 95% of its taxable income. The
Company's ability to make distributions is dependent on the receipt of
distributions from the Partnership. The Partnership's primary source of revenue
consists of rent payments from the Lessees under the Percentage Leases. The
Company, as general partner of the Partnership through the Trust, intends to
cause the Partnership to distribute to its partners sufficient amounts to permit
the Company to make regular quarterly distributions to its shareholders in an
annual amount necessary to maintain the Company's REIT status.
A portion of the distribution to shareholders is expected to represent a return
of capital for federal income tax purposes which generally will not be subject
to federal income tax under current law. The Company's distributions made in
1999 and 1998 are considered to be approximately 33% and 26% return of capital,
respectively, for federal income tax purposes.
Future distributions paid by the Company will be at the discretion of the Board
of Directors of the Company and will depend on the actual cash flow of the
Company, its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and such other factors as the
directors of the Company deem relevant.
(d) Recent Sales of Unregistered Securities
In the year ended December 31, 1999, the Company issued no securities which were
not registered pursuant to the Securities Act of 1933, as amended under either a
registration statement on Form S-3 or Form S-8.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth (i) selected historical operating and other
financial information for the years ended December 31, 1999, 1998, 1997, 1996
and 1995 and (ii) selected historical balance sheet data as of December 31,
1999, 1998, 1997, 1996 and 1995. The selected historical financial information
has been derived from the historical financial statements of the Company audited
by PricewaterhouseCoopers LLP, independent accountants.
The following selected financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and all of the financial statements and notes thereto included
elsewhere in this report.
19
<PAGE>
EQUITY INNS, INC
SELECTED FINANCIAL DATA
(in thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenue $118,424 $106,731 $ 71,761 $ 38,430 $ 24,145
Net income 29,316 31,595 23,543 14,473 8,511
Preferred stock dividends 6,531 3,374
Net income applicable to common
shareholders 22,785 28,221 23,543 14,473 8,511
Income before extraordinary
item per common share .61 .78 .88 .69 .70
Net income per common share,
basic and diluted .61 .78 .82 .69 .70
Distributions declared per
common share and Unit 1.24 1.24 1.14 1.12 1.00
Weighted average number of
common shares and Units
outstanding-diluted 38,570 38,001 29,963 21,681 12,920
Balance Sheet Data:
Investments in hotel properties,
net $814,537 $790,132 $617,072 $309,202 $218,429
Total assets 832,119 807,023 635,525 317,880 225,067
Debt 381,175 331,394 233,206 77,399 74,939
Minority interest in Partnership 12,008 19,070 19,035 7,728 6,073
Shareholders' Equity 412,252 431,264 360,172 222,951 137,493
Other Data:
Funds from operations (1) $ 61,180 $ 64,985 $ 45,748 $ 26,397 $ 15,804
Funds from operations per
common share and Unit 1.59 1.71 1.53 1.22 1.22
</TABLE>
(1) Represents Funds from Operations ("FFO") of the Company on a
consolidated basis. Industry analysts generally consider FFO to be an
appropriate measure of the performance of an equity REIT. In accordance
with the resolution adopted by the Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT"), FFO represents
net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from sales of
property, plus depreciation, and after adjustment for unconsolidated
partnerships and joint ventures. For the periods presented,
depreciation, minority interest, the write-off of non-recurring merger
expenses and the charge from write-off of deferred organizational
costs were the Company's only adjustments to net income for the
determination of FFO. The Company's computation of FFO may not be
comparable to FFO reported by other REITs that do not define the term
in accordance with the current NAREIT definition or that interpret
the current NAREIT definition differently than the Company. FFO should
not be considered an alternative to net income or other measurements
under generally accepted accounting principles as an indicator of
operating performance or to cash flows from operating, investing or
financing activities as a measure of liquidity. FFO does not reflect
working capital changes, cash expenditures for capital improvements
or principal payments with respect to indebtedness on the hotels.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company
Equity Inns, Inc. (the "Company") is a self-advised real estate investment trust
("REIT") which commenced operations on March 1, 1994. The Company, through its
wholly-owned subsidiary, Equity Inns Trust (the "Trust"), is the sole general
partner of Equity Inns Partnership, L.P. (the "Partnership") and at December 31,
1999 owned an approximate 96.6% interest in the Partnership.
In order to qualify as a REIT, neither the Company nor the Partnership can
operate hotels. Therefore, the Partnership leases 78 of the Company's hotels to
affiliates of Interstate Hotels Corporation ("IHC"), formerly named Interstate
Hotels Management, Inc., which was recently divested from Wyndham International,
Inc. ("Wyndham"), formerly known as Patriot American Hospitality, Inc. IHC is
referred to herein as the "Interstate Lessee." All payments due under these
Percentage Leases are guaranteed by Interstate Hotels, L.L.C., a subsidiary of
IHC, and IHC (except for three hotels where Wyndham rather than IHC is the
guarantor). The Partnership leased 19 hotels to wholly-owned subsidiaries of
Prime Hospitality Corporation (collectively, the "Prime Lessee"). All payments
due under these Percentage Leases are guaranteed by Prime Hospitality
Corporation. The IHC Lessee and the Prime Lessee are referred to herein
collectively as the "Lessees," and individually as a "Lessee." The Lessees
operate and lease hotels owned by the Partnership and its affiliates pursuant to
the Percentage Leases, which provide for rent payments equal to the greater of
(i) a fixed base rent ("Base Rent") or (ii) percentage rent based on the
revenues of the hotels ("Percentage Rent"). The remaining two hotels are
operated pursuant to management agreements, one of which is operated by a
subsidiary of IHC and one of which is operated by a wholly-owned subsidiary of
MeriStar Hotels & Resorts, Inc. The Partnership's, and therefore the Company's,
principal sources of revenue are lease payments made by the Lessees under the
Percentage Leases. Percentage Rent is based primarily upon the hotels' room
revenues and, to a lesser extent, food and beverage revenues.
Recent Highlights
Since its inception, the Company has taken steps to position itself for growth
and stability. Several changes have occurred since December 31, 1998 which add
significantly to these efforts. These events are as follows:
Acquisitions and Disposition of Hotels
Since the IPO, the Company has actively implemented its acquisition
strategy. During 1999, 1998 and 1997, the Company acquired the
following types of hotels for the approximate amounts indicated:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
No. of Purchase No. of Purchase No. of Purchase
Hotels Price Hotels Price Hotels Price
------ -------- ------ -------- ------ --------
(in thousands) (in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Premium Limited Service 2 $ 20,100 34 $198,574
Premium Extended Stay 2 $56,676 5 68,350 6 61,650
All-Suite 9 96,996 10 86,966
- ------- -- -------- -- --------
2 $56,676 16 $185,446 50 $347,190
= ======= == ======== == ========
</TABLE>
21
<PAGE>
During 1999, the Partnership sold five hotels (Hampton Inn,
Nashville (Brentwood), Tennessee; Comfort Inn, Enterprise, Alabama;
Hampton Inn, Southaven, Mississippi; Hampton Inn, Destin, Florida;
Hampton Inn, Traverse City, Michigan) to third parties for aggregate
sales prices of approximately $29 million. The Company realized a
gain of approximately $1,130,000 as a result of these sales. The
sales prices were paid in cash.
Lessee Relationship
As a result of certain restructuring changes at Wyndham, including a
spin-off of the hotel management business Wyndham acquired from
Interstate Hotels Company (which includes the Percentage Leases with
the Interstate Lessee) into a separate public company, the Company
entered into a consolidated lease amendment with its Interstate
Lessee on March 31, 1999 (the "Consolidated Amendment") for 78 of
the Company's hotels. The consolidated lease amendment became
effective as of April 15, 1999.
Under the terms of the Consolidated Amendment, the Interstate Lessee
relinquished the right of first refusal to lease the Company's
hotels. The Company relinquished the right of first refusal to
purchase Interstate assets in the future. In the event the
Interstate Lessee desires to sell its current Percentage Leases with
the Company, the Company has a right of first offer to purchase the
leases.
In addition, performance standards have been included in all
existing Percentage Leases based on revenues of the hotels and
expenditures for marketing and maintenance of the hotels, and the
Company, in April 1999, received $2 million of additional 1999
incentive rent.
Debt Restructuring
In March 1999, the Company obtained a $25 million unsecured line of
credit (the "Bank of America Line") from Bank of America. The Bank
of America Line bears interest at a variable rate of LIBOR plus
1.775%, 1.875%, 2.00%, 2.25% or 2.50% as determined by the Company's
percentage of total debt to total value of the Company's investment
in hotel properties, as defined in the loan agreement. The
percentage is reviewed quarterly, and the interest rate is adjusted
as necessary. At December 31, 1999, the interest rate on the Bank of
America Line was LIBOR (5.82% at December 31, 1999) plus 2.50%. The
Bank of America Line expires in October 2000.
On June 21, 1999, the Company financed $97,020,000 with GMAC
Commercial Mortgage Company at an interest rate of 8.37%. The
principal amount of the loan is amortized over 25 years, with the
unpaid balance due and payable in July 2009. Proceeds from the
completion of this loan were used to repay existing debt under the
Bank One Line (as defined below). In connection with the GMAC
financing, 19 of the Company's hotel properties with a carrying
value of approximately $181 million collateralize the loan.
On June 23, 1999, the Company amended its $250 million unsecured
line of credit (the "Bank One Line") primarily to allow for the
measurement of certain ratios and covenants against a trailing
twelve month period, which is consistent with industry practice. At
that time, certain participant banks elected to reduce their
exposure to lodging REITs, resulting in the Bank One Line being
reduced to $219.5 million. The Bank One Line bears interest at a
variable rate of LIBOR plus 1.5%, 1.75%, 2.00%, 2.25% or 2.50% as
determined by the Company's percentage of total debt to the total
value of the Company's investment in hotel properties, as defined in
the loan agreement which is reviewed quarterly, and the interest
rate is adjusted as necessary. At December 31, 1999, the interest
rate on the Bank One Line was LIBOR (5.82% at December 31, 1999)
plus 2.50%. The Bank One Line expires in October 2000.
22
<PAGE>
In October 1999, the Company's Board of Directors approved a stock
repurchase program authorizing the Company to buy back up to $25
million of its Common Stock over the next eighteen months, subject
to certain market conditions and other factors in the Company's
discretion. The stock repurchase is to be funded primarily by
proceeds from the sale of hotels not currently meeting the Company's
investment criteria. At December 31, 1999, a total of 557,300 shares
had been repurchased at a cost of $3.9 million.
Results of Operations
Comparison of the Company's operating results for the year ended December 31,
1999 with the year ended December 31, 1998.
For the year ended December 31, 1999, the Company had total revenues of $118.4
million, consisting substantially of Percentage Lease revenue. This compares
with total revenue of $106.7 million for the year ended December 31, 1998.
Increases in revenue from hotel operations for the year ended December 31, 1999
as compared to 1998 are due to (i) an increased number of hotels being owned and
leased by the Partnership throughout 1999, (ii) a full year of operation in 1999
of hotels acquired in 1998 and (iii) the recognition of the $2 million in
special percentage lease revenue applicable to the amendment of the Company's
leases with the Interstate Lessee. Assuming all hotels which were in operation a
full year in both 1999 and 1998 had been owned and leased as of January 1, 1998,
revenue per available room ("REVPAR") on a pro forma basis would have decreased
2.0% compared to 1998.
Real estate and personal property taxes and general and administration expenses
in the aggregate remained fairly constant in 1999 as compared to 1998 as a
percentage of total revenue. Interest expense increased to $27.9 million from
$21.6 in 1998 due primarily to borrowings incurred to finance the Company's
acquisitions and slightly higher interest rates on the Company's variable rate
borrowings. The Company's weighted average interest rates on outstanding
borrowings during the years ended December 31, 1999 and 1998, were 7.74% and
7.46%, respectively. Net income applicable to common shareholders for 1999 was
$22.8 million or $0.61 per share, compared to $28.2 million or $0.78 per share
for 1998.
Comparison of the Company's operating results for the year ended December 31,
1998 with the year ended December 31, 1997.
For the year ended December 31, 1998, the Company had total revenues of $106.7
million, consisting substantially of Percentage Lease revenue. This compares
with total revenues of $71.8 million for the year ended December 31, 1997.
Increases in revenue from hotel operations for the year ended December 31, 1998
as compared to 1997 are due to (i) an increased number of hotels being owned and
leased by the Partnership throughout 1998, (ii) increases in ADR and/or
occupancy at many of the hotels leased during both years, and (iii) a full year
of operation in 1998 of hotels acquired in 1997. Assuming all hotels which were
in operation a full year in both 1998 and 1997 had been owned and leased as of
January 1, 1997, REVPAR on a pro forma basis would have increased .7% over 1997.
Real estate and personal property taxes and general and administrative expenses
in the aggregate remained fairly constant in 1998 as compared to 1997 as a
percentage of total revenue. Interest expense increased to $21.6 million from
$12.6 million in 1997 due primarily to borrowings incurred to finance the
Company's acquisitions. The Company's weighted average interest rate on
outstanding borrowings during the years ended December 31, 1998 and 1997, was
7.46% and 7.53%, respectively. Net income applicable to common shareholders for
1998 was $28.2 million or $0.78 per share, compared to $23.5 million or $0.82
per share for 1997.
23
<PAGE>
Funds from Operations
Industry analysts generally consider Funds from Operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. In accordance with the
resolution adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"), FFO represents net income (loss) (computed
in accordance with generally accepted accounting principles), excluding gains
(or losses) from sales of property, plus depreciation, and after adjustments for
unconsolidated partnerships and joint ventures. For the periods presented,
depreciation, minority interest, the write- off of non-recurring merger expenses
and the charge from write-off of deferred organization costs were the Company's
only adjustments to net income for the definition of FFO. The Company's
computation of FFO may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. FFO should
not be considered an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance or to cash flows from operating, investing or financing activities
as a measure of liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements or principal payments with respect to
indebtedness on the hotels.
The following reconciliation of net income to FFO illustrates the difference in
the two measures of operating performance:
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998
------- -------
(in thousands, except per share and Unit data)
<S> <C> <C> <C> <C> <C> <C>
Net income $29,316 $31,595
Less:
Gain on sale of hotel properties (1,130)
Preferred stock dividends (6,531) (3,374)
Add:
Minority interest 819 1,492
Depreciation of buildings,
furniture and fixtures 38,573 32,370
Loss on sale of hotel properties 705
Change in accounting for corporate
organization costs 133
Non-recurring merger expenses 2,197
------- -------
Funds from Operations $61,180 $64,985
======= =======
Weighted average number of
common shares and Units
outstanding 38,570 38,001
======= =======
Funds from Operations per common share
and Unit $ 1.59 $ 1.71
======= =======
</TABLE>
Liquidity and Capital Resources
The Company's principal source of cash to meet its cash requirements, including
distributions to its shareholders, is its cash distributions from the
Partnership. The Partnership receives cash payments from the Lessees pursuant to
the Percentage Leases. The Company's liquidity, including its ability to make
distributions to shareholders, is dependent upon the Lessees' ability to make
24
<PAGE>
payments under the Percentage Leases.
Cash and cash equivalents were $361,000 at December 31, 1999, compared to
$400,000 at December 31, 1998. Excess cash balances are used to reduce the
Company's outstanding debt. For the year ended December 31, 1999, cash flow
provided by operating activities, consisting primarily of Percentage Lease
revenue, was $71.5 million.
The Company intends to make additional investments in hotel properties and may
incur, or cause the Partnership to incur, indebtedness to make such investments
or to meet distribution requirements imposed on a REIT under the Code to the
extent that working capital and cash flow from the Company's investments are
insufficient to make such distributions. The Company's Board of Directors has
adopted a policy limiting aggregate indebtedness to 45% of the Company's
investment in hotel properties, at cost, after giving effect to the Company's
use of proceeds from any indebtedness. This policy may be amended at any time
by the Board of Directors without shareholder vote.
At December 31, 1999, the Company had outstanding debt of approximately $381.2
million, including $174.5 million under the $219.5 million unsecured line of
credit with Bank One (the "Bank One Line"), $18.0 million under the $25 million
unsecured line of credit with Bank of America (the "Bank of America Line"),
$81.7 million under the Commercial Mortgage Bonds (the "Bonds"), and $96.6
million under the GMAC term loan, leaving $39.5 million available under the Bank
One Line after consideration of outstanding letters of credit, $7 million under
the $25 million unsecured line of credit from Bank of America and $10.0 million
available under the NBC Credit Line. Additionally, the Company had $10.4 million
of mortgage notes payable assumed in connection with the purchase of two hotels
in 1998. The Company's consolidated indebtedness was 42.2% of its investments in
hotels, at cost, at December 31, 1999.
In December 1997, the Company entered into an interest rate swap agreement with
a financial institution on a notional principal amount of $75 million. The
agreement effectively fixes the interest rate on floating rate debt at a rate of
5.90% plus 1.50%, 1.75%, 2.00%, 2.25%, or 2.50% as determined by the Company's
percentage of total debt to the total value of the Company's investments in
hotel properties, as defined in the Company's Bank One Line and Bank of America
Line loan agreements (the "Percentage"). In May 1999, the Company entered into a
second interest rate swap on a notional principal amount of $40 million, which
effectively fixes the interest rate on floating rate debt at a rate of 5.24%
plus the Percentage. These swap agreements will expire in October 2000.
During 1999, the Company invested $32.8 million, including $10.4 million for
renovations required by franchisors, to fund capital improvements to its hotels,
including replacement of carpets, drapes, renovation of common areas and
improvements of hotel exteriors. In addition, the Company expects to fund
approximately $11.5 million in 2000 for capital improvements.
The Company intends to fund such improvements out of future cash from
operations, present cash balances and borrowings under its Bank One Line, Bank
of America Line and the NBC Credit Line. Under the Bank One Line and the Bonds,
the Partnership is obligated to fund 4% of room revenues per quarter on a
cumulative basis, to a separate room renovation account for the ongoing
replacement or refurbishment of furniture, fixtures and equipment at the Hotels.
During 1999 and 1998, non-recurring enhancements for capital expenditures
exceeded this threshold, which based upon 4% of room revenue, were $9.3 million
and $8.6 million, respectively.
The Company elected to be taxed as a REIT commencing with its taxable year ended
December 31, 1994, and expects to continue to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986. Accordingly, no provision
for federal income taxes has been reflected in the financial statements.
25
<PAGE>
REITs are subject to a number of organizational and operational requirements.
For example, for federal income tax purposes, a REIT, and therefore the Company,
is required to pay distributions of at least 95% of its taxable income to its
shareholders. The Company intends to pay these distributions from operating cash
flows. During 1999, the Partnership distributed an aggregate of $47.7 million to
its partners, or $1.24 per Unit (including $46.1 million of distributions to the
Company to fund distributions to shareholders of $1.24 per share in 1999).
During 1998, the Partnership distributed an aggregate of $47.2 million to its
partners, or $1.24 per Unit (including $44.9 million of distributions to the
Company to fund distributions to shareholders of $1.24 per share in 1998). For
federal income tax purposes, approximately 33% of 1999 distributions represented
a return of capital, compared with approximately 26% for 1998.
The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations, existing cash balances and, if
necessary, short-term borrowings under the Bank One Line, Bank of America Line
and the NBC Credit Line. The Company believes that its net cash provided by
operations will be adequate to fund both operating requirements and payment of
distributions by the Company in accordance with REIT requirements.
The Company expects to meet its long-term liquidity requirements, such as
scheduled debt maturities and property acquisitions, through long-term secured
and unsecured borrowings, the issuance of additional equity securities of the
Company or, in connection with acquisitions of hotel properties, the issuance of
Partnership Units. Pursuant to the Partnership Agreement for the Partnership,
subject to certain holding period requirements, holders of Units in the
Partnership have the right to require the Partnership to redeem their Units.
During the year ended December 31, 1999, 632,129 Units were tendered for
redemption. Pursuant to the Partnership Agreement, the Company has the option to
redeem Units tendered for redemption on a one-for-one basis for shares of Common
Stock or for an equivalent amount of cash. The Company anticipates that it will
acquire any Units tendered for redemption in the foreseeable future in exchange
for shares of Common Stock and has agreed to register such shares so as to be
freely tradeable by the recipient.
Inflation
Operators of hotels in general have the ability to adjust room rates quickly.
However, competitive pressures may limit the Lessees' ability to raise room
rates in the face of inflation.
Seasonality
Hotel operations historically are seasonal in nature, generally reflecting
higher occupancy rates during the second and third quarters. This seasonality
can be expected to cause fluctuations in the Company's quarterly lease revenues
to the extent that it receives Percentage Rent.
Revenue Recognition and Impact of Recently Issued Accounting Standards to be
Adopted in 2000
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101") which provides guidance on revenue recognition. SAB
101 is effective for fiscal years beginning after December 15, 1999. SAB 101
requires that a lessor not recognize contingent rental income until annual
specified hurdles have been achieved by the Lessees. During 1999 and prior
years, the Company has recognized contingent rentals throughout the year since
it was considered probable that the Lessees would exceed the annual specified
hurdles. The Company has reviewed the terms of its Percentage Leases and has
determined that the provisions of SAB 101 materially impact the Company's
revenue recognition on an interim basis, effectively deferring the recognition
of revenue from its Percentage Leases from the first and second quarters of the
calendar year to the third and fourth quarters. SAB 101 will not impact the
Company's revenue recognition on an annual basis nor will it impact the
Company's interim or annual cash flow or its Funds from
26
<PAGE>
Operations from its third party Lessees, and therefore will not effect its
ability to pay dividends. The Company will account for SAB 101 as a change in
accounting principle effective January 1, 2000.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Act
of 1934, as amended, including, without limitation, statements containing the
words "believes," "estimates," "projects," "anticipates," "expects" and words of
similar import. Such forward-looking statements relate to future events and the
future financial performance of the Company, and involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from the
results or achievement expressed or implied by such forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain financial market risks, the most predominant
of which is the fluctuation in interest rates. At December 31, 1999, the
Company's exposure to market risk for a change in interest rates is related
solely to its debt outstanding under its $219.5 million Bank One Line, its $25
million Bank of America Line and its $10 million NBC Credit Line (collectively
referred to as the "Facilities"). Total debt outstanding under the Facilities
totaled $192.5 million at December 31, 1999. In December 1997, the Company
entered into an interest rate swap agreement, expiring in October 2000, with a
financial institution on a notional principal amount of $75 million. The
agreement effectively fixes the interest rate on floating rate debt at a rate
of 5.90% plus 1.50%, 1.75%, 2.00%, 2.25%, or 2.50% as determined by the
Company's percentage of total debt to the total value of the Company's
investments in hotel properties, as defined in the Company's Bank One Line and
Bank of America Line loan agreements (the "Percentage"). In May 1999, the
Company entered into a second interest rate swap agreement, expiring in October
2000, on a notional principal amount of $40 million, which effectively fixes the
interest rate on floating rate debt at a rate of 5.24% plus the Percentage.
Thus, at December 31, 1999, the Company had $77.5 million of variable rate debt
outstanding under the Facilities that was exposed to fluctuations in the market
rate of interest.
The Company's operating results are affected by changes in interest rates,
primarily as a result of borrowing under the Facilities. If interest rates
increased by 25 basis points, the Company's annual interest expense would have
increased by approximately $275,000, based on balances outstanding during the
year ended December 31, 1999.
27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements:
The following financial statements are located in this report on the pages
indicated.
Equity Inns, Inc. Page
Report of Independent Accountants 29
Consolidated Balance Sheets as of December 31, 1999 and
1998 30
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 31
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 34
Notes to Consolidated Financial Statements 35
Schedule III -- Real Estate and Accumulated Depreciation
as of December 31, 1999 49
(b) Supplementary Data:
Quarterly Financial Information
Unaudited quarterly results for 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter (1) Quarter (1) Quarter (1) Quarter (1)
----------- ----------- ------------ -----------
1999 (in thousands, except per share data)
----
<S> <C> <C> <C> <C>
Revenue $26,076 $31,944 $34,185 $26,219
Net income applicable to
common shareholders 3,259 8,976 9,788 762
Income before extraordinary
item per common share .09 .24 .26 .02
Net income per common share,
basic and diluted .09 .24 .26 .02
1998
----
Revenue $21,577 $28,237 $32,481 $24,436
Net income applicable to
common shareholders 6,004 10,491 8,590 3,136
Net income per common
share, basic and diluted .17 .29 .24 .09
</TABLE>
- ------------------------
(1) Acquisitions of hotel properties throughout both years, coupled with the
seasonality of the hotels, have impacted the trend of quarterly results for the
periods shown.
28
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Shareholders of Equity Inns, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Equity Inns, Inc. at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. In addition,
in our opinion, the financial statement schedule listed in Item 14(a) of this
Form 10-K, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information required
to be included therein. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Memphis, Tennessee January 21, 2000,
except as to Note 4, for which the
date is January 25, 2000
29
<PAGE>
EQUITY INNS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Assets:
Investment in hotel properties, net $814,537 $790,132
Cash and cash equivalents 361 400
Due from Lessees 5,124 6,288
Notes receivable 3,314 3,215
Deferred expenses, net 7,019 6,313
Deposits and other assets 1,764 675
-------- --------
Total Assets $832,119 $807,023
======== ========
Liabilities and Shareholders' Equity:
Debt $381,175 $331,394
Accounts payable and accrued expenses 13,755 12,316
Distributions payable 12,929 12,979
Minority interest in Partnership 12,008 19,070
-------- --------
Total Liabilities 419,867 375,759
-------- --------
Commitments and contingencies (Note 6)
Shareholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
2,750,000 issued and outstanding
at December 31, 1999 and 1998 68,750 68,750
Common stock, $.01 par value,
50,000,000 shares authorized,
37,308,523 and 36,438,535 shares
issued and outstanding at December 31,
1999 and 1998, respectively 373 364
Additional paid-in capital 416,354 407,833
Treasury stock, at cost, 557,300 shares (3,883)
Unearned directors' and officers'
compensation (2,375) (2,006)
Predecessor basis assumed (1,264) (1,264)
Distributions in excess of net earnings (65,703) (42,413)
-------- --------
Total Shareholders' Equity 412,252 431,264
-------- --------
Total Liabilities and Shareholders' Equity $832,119 $807,023
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
30
<PAGE>
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Revenue:
Percentage lease revenues $116,459 $106,661 $70,478
Gain (loss) on sale of hotel properties 1,130 (705) 666
Other income 835 775 617
-------- -------- -------
Total Revenue 118,424 106,731 71,761
-------- -------- -------
Expenses:
Real estate and personal property taxes 12,756 10,411 6,688
Depreciation and amortization 38,856 32,665 20,214
Interest 27,947 21,587 12,601
Amortization of loan costs 1,210 834 1,013
General and administrative 5,150 4,650 4,142
Amortization of unearned directors' and
officers' compensation 891 331 92
Rental expense 1,346 969 566
Merger expense 2,197
-------- -------- -------
Total Expenses 88,156 73,644 45,316
-------- -------- -------
Income before extraordinary charges
and minority interest 30,268 33,087 26,445
Extraordinary charges
Change in accounting for corporate
organizational costs 133
Write-off of deferred financing fees 1,984
-------- -------- -------
Income before minority interest 30,135 33,087 24,461
Minority interest 819 1,492 918
-------- -------- -------
Net income 29,316 31,595 23,543
Preferred stock dividends 6,531 3,374
-------- -------- -------
Net income applicable to common
shareholders $ 22,785 $ 28,221 $23,543
======== ======== =======
Net income per common share, basic and diluted:
Income before extraordinary item $ .61 $ .78 $ .88
Extraordinary charge .06
-------- -------- -------
Net income $ .61 $ .78 $ .82
======== ======== =======
Weighted average number of common
shares and units outstanding - diluted 38,570 38,001 29,963
======== ======== =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
31
<PAGE>
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Treasury Stock
------------------- --------------------- Paid-In -----------------
Shares Dollars Shares Dollars Capital Shares Dollars
--------- ------- ----------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 23,693,278 $237 $238,748
Issuance of common shares, net of
offering expenses 11,082,300 111 144,428
Issuance of common shares to officers
and directors through exercise of
of stock options 90,000 1 1,124
Amortization of unearned officers'
and directors' compensation
Net income applicable to common
shareholders
Distributions ($1.14 per share)
Adjustments to minority interest from
issuance of common shares and
partnership units 2,834
--------- ------- ----------- ------- ----------- ------- --------
Balance at December 31, 1997 34,865,578 349 387,134
Issuance of common shares, net of
offering expenses 1,286,718 13 18,795
Issuance of preferred shares, net of
offering expenses 2,750,000 $68,750 (2,408)
Issuance of common shares to officers
in lieu of cash bonus 69,123 1 1,062
Issuance of common shares to
directors in lieu of cash
compensation 4,042 55
Issuance of restricted common
shares to officers and directors 161,000 1 2,135
Issuance of common shares to
officers through exercise of stock
options 9,000 112
Forfeitures of unvested shares by an
officer, upon resignation (6,000) (73)
Amortization of unearned officers' and
directors' compensation
<CAPTION>
Unearned
Directors' Predecessor Disbributions
and Officers' Basis In Excess of
Compensation Assumed Net Earnings Total
------------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ (366) $(1,264) $(14,404) $222,951
Issuance of common shares, net of
offering expenses 144,539
Issuance of common shares to officers
and directors through exercise of
of stock options 1,125
Amortization of unearned officers'
and directors' compensation 92 92
Net income applicable to common
shareholders 23,543 23,543
Distributions ($1.14 per share) (34,912) (34,912)
Adjustments to minority interest from
issuance of common shares and
partnership units
------------- ----------- ------------- --------
Balance at December 31, 1997 (274) (1,264) (25,773) 360,172
Issuance of common shares, net of
offering expenses 18,808
Issuance of preferred shares, net of
offering expenses 66,342
Issuance of common shares to officers
in lieu of cash bonus 1,063
Issuance of common shares to
directors in lieu of cash
compensation 55
Issuance of restricted common
shares to officers and directors (2,136) 0
Issuance of common shares to
officers through exercise of stock
options 112
Forfeitures of unvested shares by an
officer, upon resignation 73 0
Amortization of unearned officers' and
directors' compensation 331 331
</TABLE>
32
<PAGE>
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Treasury Stock
------------------- --------------------- Paid-In -----------------
Shares Dollars Shares Dollars Capital Shares Dollars
--------- ------- ----------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common shares upon
redemption of Units 49,074 525
Net income applicable to common
shareholders
Distributions ($1.24 per share)
Adjustments to minority interest from
issuance of common shares and
partnership units 496
--------- ------- ----------- ------- ----------- ------- --------
Balance at December 31, 1998 2,750,000 68,750 36,438,535 364 407,833
Issuance of common shares to
officers in lieu of cash bonus 98,820 1 987
Issuance of common shares to
directors in lieu of cash
compensation 9,235 80
Issuance of restricted common
stock to officers and directors 129,800 1 1,259
Repurchase of Treasury Stock 557,300 $(3,883)
Offering expenses (30)
Amortization of unearned officers'
and directors' compensation
Issuance of common shares upon
redemption of Units 632,129 7 6,266
Net income applicable to common
shareholders
Distributions ($1.24 per share)
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (41)
---------- ------- ---------- ---- -------- ------- -------
Balance at December 31, 1999 2,750,000 $68,750 37,308,523 $373 $416,354 557,300 $(3,883)
========== ======= ========== ==== ======== ======= =======
<CAPTION>
Unearned
Directors' Predecessor Disbributions
and Officers' Basis In Excess of
Compensation Assumed Net Earnings Total
------------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Issuance of common shares upon
redemption of Units 555
Net income applicable to common
shareholders 28,221 28,221
Distributions ($1.24 per share) (44,861) (44,861)
Adjustments to minority interest from
issuance of common shares and
partnership units 496
------- ------- -------- --------
Balance at December 31, 1998 (2,006) (1,264) (42,413) 431,264
Issuance of common shares to
officers in lieu of cash bonus 988
Issuance of common shares to
directors in lieu of cash
compensation 80
Issuance of restricted common
stock to officers and directors (1,260) 0
Repurchase of Treasury Stock (3,883)
Offering expenses (30)
Amortization of unearned officers'
and directors' compensation 891 891
Issuance of common shares upon
redemption of Units 6,273
Net income applicable to common
shareholders 22,785 22,785
Distributions ($1.24 per share) (46,075) (46,075)
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (41)
------- ------- -------- --------
Balance at December 31, 1999 $(2,375) $(1,264) $(65,703) $412,252
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
33
<PAGE>
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $29,316 $31,595 $23,543
Adjustment to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of hotel properties (1,130) 705 (666)
Depreciation and amortization 38,856 32,665 20,214
Amortization of loan costs 1,210 834 1,013
Write-off of debt costs 1,984
Change in accounting for corporate
organizational costs 133
Amortization of unearned directors' and
officers' compensation 891 331 92
Directors' compensation 80 55
Minority interest 819 1,492 918
Changes in assets and liabilities:
Due from Lessees 1,164 (363) (2,548)
Note receivable (99) 669 (3,884)
Deferred expenses 5 (11) (8)
Deposits and other assets (1,089) 503 215
Accounts payable and accrued expenses 1,359 911 9,529
------- ------- -------
Net cash flow provided by operating
activities 71,515 69,386 50,402
------- ------- -------
Cash flows from investing activities:
Acquisitions of hotel properties (57,188) (175,576) (337,069)
Improvements and additions to hotel properties (32,800) (25,998) (18,083)
Cash paid for franchise applications (234) (215) (2,144)
Proceeds from sale of hotel properties 28,323 8,250 43,207
------- ------- -------
Net cash flow used in investing activities (61,899) (193,539) (314,089)
------- ------- -------
Cash flows from financing activities:
Gross proceeds from public offering of common stock 20,145 153,388
Gross proceeds from public offering of preferred stock 68,750
Purchase of Treasury stock (2,815)
Payment of offering expenses (30) (3,745) (8,849)
Proceeds from exercise of stock options 112 1,125
Distributions paid (54,305) (48,262) (32,656)
Borrowings under revolving credit facility 166,150 179,475 326,411
Payments on revolving credit facility (210,250) (89,725) (256,885)
Borrowings under CMBS credit facility 88,000
Payments under CMBS credit facility (2,351) (2,195) (1,717)
Borrowings under GMAC Term Loan 97,020
Payments on GMAC Term Loan (459)
Payments on debt assumed (260) (160)
Cash paid for loan costs (2,286) (28) (5,067)
Payments on capital lease obligations (69) (4) (2)
------- ------- -------
Net cash flow provided by (used in)
financing activities (9,655) 124,363 263,748
------- ------- -------
Net increase (decrease) in cash and cash
equivalents (39) 210 61
Cash and cash equivalents at beginning of year 400 190 129
------- ------- -------
Cash and cash equivalents at end of year $ 361 $ 400 $ 190
======= ======= =======
Supplemental disclosure of cash flow information --
Interest paid $27,537 $20,947 $12,226
======= ======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
34
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Equity Inns, Inc. (the "Company") is in the business of acquiring equity
interests in hotel properties. The Company is a real estate investment trust
("REIT") for federal income tax purposes. The Company, through its wholly owned
subsidiary, Equity Inns Trust (the "Trust"), is the sole general partner of
Equity Inns Partnership, L.P. (the "Partnership") and at December 31, 1999 owned
an approximate 96.6% interest in the Partnership.
As of December 31, 1999, the Partnership or its affiliates owned 99 hotel
properties, with a total of 12,618 rooms in 35 states. The Partnership or its
affiliates, under operating leases providing for the payment of percentage rent
(the "Percentage Leases"), leased 78 of the Company's hotels to affiliates of
Interstate Hotels Corporation (formerly named Interstate Hotels Management,
Inc.) ("IHC"), which was recently divested from Wyndham International, Inc.,
formerly known as Patriot American Hospitality, Inc. ("Wyndham"). IHC is
referred to herein as the "Interstate Lessee." All payments due under these
Percentage Leases are guaranteed by Interstate Hotels, L.L.C., a subsidiary of
IHC, and IHC (except for three hotels where Wyndham rather than IHC is the
guarantor). The Partnership leased 19 hotels to wholly-owned subsidiaries of
Prime Hospitality Corporation (collectively, the "Prime Lessee"). All payments
due under these Percentage Leases are guaranteed by Prime Hospitality
Corporation. The IHC Lessee and the Prime Lessee are referred to herein
collectively as the "Lessees", and individually as a "Lessee." The Lessees
operate and lease hotels owned by the Partnership and its affiliates pursuant to
the Percentage Leases, which provide for rent payments equal to the greater of
(i) a fixed base rent ("Base Rent") or (ii) percentage rent based on the
revenues of the hotels ("Percentage Rent"). The remaining two hotels are
operated pursuant to management agreements, one of which is operated by a
subsidiary of IHC and one of which is operated by a wholly-owned subsidiary of
MeriStar Hotels & Resorts, Inc.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the
Trust and the Partnership. All significant intercompany balances and
transactions have been eliminated.
Investment in Hotel Properties
The hotel properties are recorded at cost. Depreciation is computed using the
straight-line method over estimated useful lives of the assets which range from
5 to 40 years for buildings and components and 5 to 7 years for furniture and
equipment.
Maintenance and repairs are the responsibility of the Lessees; major renewals
and improvements are capitalized. Upon disposition, both the asset and
accumulated depreciation accounts are relieved, and the related gain or loss is
credited or charged to the income statement.
The Company reviews the carrying value of each hotel property to determine if
circumstances exist indicating an impairment in the carrying value of the
investment in the hotel property or that depreciation periods should be
modified. If impairment is indicated, the carrying value of the hotel
35
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
property is adjusted based on the discounted future cash flows. The Company does
not believe that there are any current facts or circumstances indicating
impairment of any of its investment in hotel properties.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less when
purchased are considered to be cash equivalents.
Deferred Expenses
Deferred expenses are recorded at cost and consist of the following at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------ ------
(in thousands)
<S> <C> <C>
Initial franchise fees $3,712 $3,712
Loan costs 6,694 4,413
Other 260
------ ------
10,406 8,385
Accumulated amortization (3,387) (2,072)
------- ------
$7,019 $6,313
====== ======
</TABLE>
Amortization of franchise fees is computed using the straight-line method over
the remaining lives of the franchise agreements which range up to 20 years and
is included in depreciation and amortization expense. Amortization of loan costs
is computed using the straight-line method over the term of the related debt. In
1997, the Company expensed approximately $2.0 million of unamortized loan costs
relating to debt that was replaced in 1997.
Deposits and Other Assets
Deposits include escrow deposits and other prepayments relating to the potential
acquisition of hotel properties.
Interest Rate Swap Agreements
The Company has entered into interest rate swap agreements to reduce the impact
of changes in interest rates on its floating rate debt. The agreements are
contracts to exchange floating rate interest payments for fixed rate interest
payments periodically over the life of the agreements without the exchange of
the underlying notional amounts. The notional amounts of interest rate
agreements are used to measure the interest to be received or paid and do not
represent the amount of exposure to credit loss. The differential paid or
received on interest rate agreements is recognized as an adjustment to interest
expense.
36
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
Revenue Recognition
Percentage Lease revenue is recognized when earned from the Lessees under the
Percentage Leases from the date of acquisition of each hotel property (Note 5).
Net Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128), which
changed the computation and presentation of earnings per share. SFAS 128
requires the presentation of basic and diluted earnings per share, replacing
primary and fully diluted earnings per share previously required.
A reconciliation of the numerator and denominator used in the basic earnings per
share computation to the numerator and denominator used in the diluted earnings
per share computation is presented below for the years ended December 31, 1999,
1998 and 1997, respectively.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------------- ----------------------------------- -----------------------------------
Income Shares Per Share Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- --------- ----------- ------------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income applicable to
common shareholders-
basic $22,785 37,225 $.61 $28,221 36,073 $.78 $23,543 28,773 $.82
Dilutive effect of
potential conversion
of partnership units
and elimination of
minority interest 819 1,345 1,492 1,907 918 1,129
Dilutive effect of stock
options outstanding
using the treasury
stock method 21 61
------- ------ ---- ------- ------ ---- ------- ------ ---
Net income applicable to
common shareholders-
diluted $23,604 38,570 $.61 $29,713 38,001 $.78 $24,461 29,963 $.82
======= ====== ==== ======= ====== ==== ======= ====== ====
</TABLE>
Distributions
The Company pays regular quarterly cash distributions to shareholders which are
dependent upon receipt of distributions from the Partnership.
Minority Interest
Minority interest in the Partnership represents the limited partners'
proportionate share of the equity of the Partnership. Income is allocated to
minority interest based on weighted average percentage ownership throughout the
year.
Stock-Based Compensation Plans
The Company applies APB Opinion No. 25 and related interpretations in its
accounting for Stock Based Compensation Plans. Accordingly, the Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation."
37
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
Income Taxes
The Company has qualified as a REIT under Sections 856 through 860 of the
Internal Revenue Code, as amended. Accordingly, no provision for federal income
taxes has been reflected in the financial statements.
Earnings and profits, which will determine the taxability of distributions to
shareholders, will differ from net income reported for financial reporting
purposes primarily due to the differences for federal tax purposes in the
estimated useful lives and methods used to compute depreciation. Distributions
made to shareholders in 1999 and 1998 are considered to be approximately 33% and
26% return of capital, respectively, for federal income tax purposes.
Concentration of Credit Risk
The Company maintains cash balances with financial institutions with high
ratings. The Company has not experienced any losses with respect to bank
balances in excess of government-provided insurance.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications of the prior year amounts have been made to conform
with the current year presentation.
3. Investment in Hotel Properties
Hotel properties consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Land $103,315 $102,897
Buildings and improvements 695,923 655,300
Furniture and equipment 112,817 97,556
Construction in progress 3,366 2,854
-------- --------
915,421 858,607
Less accumulated depreciation (100,884) (68,475)
-------- --------
$814,537 $790,132
======== ========
</TABLE>
38
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Investment in Hotel Properties, Continued
Fifty-four of the hotel properties are premium limited service hotels, five are
full service hotels, twenty-one are premium extended stay hotels, and nineteen
are all-suite hotels.
During 1999 and 1998, the Company acquired the following types of hotels for the
approximate amounts indicated:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
No. of Hotels Purchase Price No. of Hotels Purchase Price
------------- -------------- ------------- --------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Mid-scale Limited Service 2 $ 20,100
Upscale Extended Stay 2 $56,676 5 68,350
Upscale All-Suite 9 96,996
- ------- -- --------
2 $56,676 16 $185,446
= ======= == ========
</TABLE>
The above acquisitions were accounted for as purchases, and the results of such
acquisitions are included in the Company's consolidated statements of operations
from the dates of acquisition.
During 1999, the Partnership sold five hotels (Hampton Inn, Nashville
(Brentwood), Tennessee; Comfort Inn, Enterprise, Alabama; Hampton Inn,
Southaven, Mississippi; Hampton Inn, Destin, Florida; Hampton Inn, Traverse
City, Michigan) to third parties for an aggregate sales price of approximately
$29 million. The Company realized a gain of approximately $1,130,000 as a result
of these sales. The sales price was paid in cash.
During January 2000, the Partnership sold a Residence Inn hotel in Madison,
Wisconsin to a third party for an aggregate sales price of approximately $4.2
million. The Company realized a loss of approximately $280,000 as a result of
the sale. The sales price was paid in cash.
4. Notes Receivable
Notes receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------ ------
(in thousands)
<S> <C> <C>
Hudson Hotels Properties Corporation, a
subsidiary of Hudson Hotels Corporation $2,634 $2,884
Rosemont Hospitality Group, L.L.C. 141
Officers of the Company 539 331
------ ------
$3,314 $3,215
====== ======
</TABLE>
39
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Notes Receivable, Continued
On August 13, 1997, the Company sold nine Hampton Inn hotels to a subsidiary of
Hudson Hotels Corporation ("Hudson") for a purchase price of approximately
$46.25 million, $3.9 million of which was in the form of a two-year note bearing
interest at an annual rate of 10%, and secured by two million shares of Hudson
Hotels Corporation common stock. In 1998, the Company modified the repayment
terms of the note and extended the term of the note by one year. In 1999, Hudson
defaulted on its obligation to make three of the four scheduled principal
payments on the outstanding balance of the note, although Hudson continues to
make regular interest payments in accordance with the terms of the promissory
note. The Company has accelerated the full loan amount of the note due upon such
default in accordance with the terms of the note, but has agreed not to exercise
any remedies with respect to such default until at such time the Company gives
Hudson one day written notice thereof. The Company is currently discussing the
restructuring of the note with Hudson, in connection with Hudson's overall
financial restructuring. The Company's management does not believe that a
write-off or reduction in principal is appropriate at this time.
In December 1999, the Company assigned its obligation to purchase a Hawthorn
Suites hotel in Chicago to Rosemont Hospitality Group, L.L.C. As a result, the
Company received a note receivable in the amount of $140,878 as reimbursement
for expenses incurred in regard to the proposed acquisition of the hotel. The
note bears interest at 10% and is due on December 31, 2000.
In January 1998 and 1999, the Company advanced loans to its officers in the
amount of $330,508 and $308,803, respectively, for taxes relating to 1997 and
1998 bonuses taken in shares of the Company's common stock, $.01 par value
("Common Stock"), in lieu of cash, of which $100,764 was repaid in February
1998. At December 31, 1999, the aggregate amount of notes receivable from
officers of the Company is $538,547. In January 2000, the Company advanced loans
to its officers in the amount of $94,413 for taxes relating to 1999 bonuses
taken in Common Stock in lieu of cash. All loans are non-interest bearing and
have an original term of one year, but have historically been extended an
additional year for each year that they are not repaid. However, all loans are
due in full upon termination of employment or upon retirement.
5. Debt
Debt is comprised of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Revolving credit facilities $192,500 $236,600
Commercial Mortgage Bonds 81,738 84,088
GMAC Term Loan 96,561
Mortgage notes payable 10,376 10,637
Other 69
-------- --------
$381,175 $331,394
======== ========
</TABLE>
40
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Debt, Continued
In February 1997, the Company, through a subsidiary, issued $88 million of rated
Commercial Mortgage Bonds (the "Bonds") in a private placement transaction as
follows:
<TABLE>
<CAPTION>
Initial
Principal Interest Stated
Class Amount Rate Maturity Rating
----- ------------- -------- ----------------- ------
<S> <C> <C> <C> <C>
A $27.4 million 6.825% November 20, 2006 AA
B $50.6 million 7.370% December 20, 2015 A
C $10.0 million 7.580% February 20, 2017 BBB
</TABLE>
The initial combined interest rate for all three issues of Bonds was fixed at
7.22%. The combined interest rate on the outstanding balances on all three
issues of Bonds at December 31, 1999 is 7.25%. Principal payments are to be
applied to each class of Bonds in order of their respective maturities with no
principal payment on any Bond until all Bonds in a bond class with an earlier
stated maturity have been paid in full. The Company expects to repay these Bonds
in full within 10 years with no prepayment penalty. Twenty-three hotel
properties with a carrying value of approximately $135.5 million at December 31,
1999 and their respective Percentage Leases collateralize the Bonds.
Aggregate annual principal payments for the next five years at December 31, 1999
for the Bonds are as follows (in thousands):
Year Amount
---- ------
2000 $2,518
2001 2,698
2002 2,890
2003 3,096
2004 3,317
The Company's $219.5 million unsecured line of credit with Bank One (the "Bank
One Line") bears interest at a variable rate of LIBOR plus 1.5%, 1.75%, 2.00%,
2.25% or 2.50% as determined by the Company's percentage of total debt to the
total value of the Company's investment in hotel properties, as defined in the
loan agreement (the "Percentage"). The Percentage is reviewed quarterly, and the
interest rate is adjusted as necessary. At December 31, 1999, the interest rate
on the Bank One Line was LIBOR (5.82% at December 31, 1999) plus 2.50%. The Bank
One Line expires in October 2000.
The Company's $10,000,000 line of credit with the National Bank of Commerce (the
"NBC Credit Line") bears interest at the bank's prime rate (8.50% at December
31, 1999) and is unsecured. The NBC Credit Line has a three-year term, expiring
in September 2000.
In March 1999, the Company obtained a $25 million unsecured line of credit from
Bank of America, formerly NationsBank (the "Bank of America Line"). The Bank of
America Line bears interest at a variable rate of LIBOR plus 1.5%, 1.75%, 2.00%,
2.25% or 2.50% as determined by the Company's percentage of total debt to total
value of the Company's investment in hotel properties, as defined in the loan
agreement. The percentage is reviewed quarterly, and the interest rate is
adjusted as
41
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Debt, Continued
necessary. At December 31, 1999, the interest rate on the Bank of America Line
was LIBOR (5.82% at December 31, 1999) plus 2.50%. The Bank of America Line
expires in October 2000.
In December 1997, the Company entered into an interest rate swap agreement with
a financial institution on a notional principal amount of $75 million. The
agreement effectively fixes the interest rate on floating rate debt at a rate of
5.90% plus the Percentage. In May 1999, the Company entered into a second
interest rate swap on a notional principal amount of $40 million, which
effectively fixes the interest rate on floating rate debt at a rate of 5.24%
plus the Percentage. These swap agreements will expire in October 2000.
In June 1999, the Company financed $97,020,000 with GMAC Commercial Mortgage
Company (the "GMAC Term Loan") at an interest rate of 8.37%. The principal
amount of the loan is amortized over 25 years, with the unpaid balance due and
payable in July 2009. The proceeds from this loan were used to repay existing
debt under the Bank One Line. In connection with this transaction, 19 of the
Company's hotel properties with a carrying value of approximately $181 million
collateralize the loan. The agreement requires a quarterly deposit into a
separate room renovation account for the amount by which 4% of room revenues at
the Company's hotels exceeds the amount expended by the Company during the year
for replacement of furniture, fixtures and equipment and capital improvements
for the hotels. For the year ended December 31, 1999, actual expenditures
exceeded the amounts required.
In connection with the purchase of a Hampton Inn hotel in San Antonio, Texas in
April 1998, the Partnership assumed a mortgage note payable with a principal
balance of approximately $6.5 million. The note bears interest at 10% and is due
in monthly principal and interest installments of approximately $66,000. The
note is due September 1, 2015. The hotel securing this note has a carrying value
of $12.5 million at December 31, 1999.
In connection with the purchase of a Residence Inn hotel in Boise, Idaho in
April 1998, the Partnership assumed a mortgage note payable with a principal
balance of approximately $4.3 million. The note bears interest at a variable
rate which, as of December 31, 1999, was approximately 8.6% and is due in
monthly principal and interest installments of approximately $39,000. The note
is due December 1, 2016 and contains a prepayment penalty. The hotel securing
this note has a carrying value of approximately $7.5 million at December 31,
1999.
Aggregate principal payments at December 31, 1999 for the next five years for
the mortgage notes payable described above are as follows (in thousands):
Year Amount
---- ------
2000 $286
2001 314
2002 345
2003 379
2004 416
42
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Debt, Continued
The weighted average interest rate on the Company's outstanding borrowings
during 1999 and 1998 was 7.74% and 7.46%, respectively. Fees of .50% are paid
quarterly on the unused portion of the Bank One Line and the Bank of America
Line and .20% on the NBC Credit Line. The carrying amount of the Company's
borrowings on its revolving credit facilities approximates fair value due to the
Company's ability to obtain such borrowings at comparable interest rates.
Prior to its 1998 annual shareholders meeting, the Company's Charter limited
aggregate indebtedness to 45% of the Company's investment in hotel properties,
at cost, after giving effect to the Company's use of proceeds from any
indebtedness. This limitation was deleted by shareholder vote on May 14, 1998.
The Company's Board of Directors has subsequently adopted a policy currently
imposing the same limitations previously imposed by the Charter.
The Bank One Line and the Bank of America Line agreements require the Company to
maintain certain debt coverage ratios and certain levels of cash flow, with
which the Company was in compliance at December 31, 1999. Additionally, the
agreements require a quarterly deposit into a separate room renovation account
for the amount by which 4% of room revenues at the Company's hotels exceeds the
amount expended by the Company during the year for replacement of furniture,
fixtures and equipment and capital improvements for the hotels. For the years
ended December 31, 1999 and 1998, actual expenditures exceeded the amounts
required.
6. Commitments and Related Party Transactions
All of the hotels are operated under franchise agreements and are licensed as
Hampton Inn hotels (50), AmeriSuites hotels (19), Residence Inn hotels (12),
Homewood Suites hotels (9), Holiday Inn hotels (5), Comfort Inn hotels (3), and
Hampton Inn & Suites hotels (1). The franchisors approve the transfer of the
franchise licenses to the Lessee when the Partnership acquires each hotel
property. The franchise agreements require the payment of fees based on a
percentage of hotel room revenue which are paid by the Lessee.
The Lessees have future lease commitments to the Company under the Percentage
Leases for various terms extending through 2014. Minimum future rental income
(Base Rents) under these non-cancelable operating leases is as follows (in
thousands):
Year Amount
2000 $ 78,042
2001 77,263
2002 77,263
2003 77,263
2004 77,263
2005 and thereafter 509,757
--------
$896,851
========
The Company earned Base Rents of $77.0 million, $65.9 million and $38.3 million
and Percentage Rents in excess of Base Rents of $39.5 million, $40.8 million and
$32.2 million, respectively, for the
43
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Commitments and Related Party Transactions, Continued
years ended December 31, 1999, 1998 and 1997. The Percentage Lease revenue is
based on a percentage of gross room revenue, and, if applicable, food and
beverage revenue of the hotels. The Percentage Leases range in terms from ten to
fifteen years. Rental rates on all fifteen-year leases are required to be
re-negotiated after ten years. Both the Base Rent and the threshold room revenue
amount in each Percentage Rent formula are adjusted annually for changes in the
U.S. Consumer Price Index ("CPI"). The adjustment is calculated on January 1 of
each year, provided the lease has been in effect for a complete calendar year
and is based upon the average change in the CPI during the prior 24 months. The
adjustment in any lease year may not exceed 7%. Effective January 1, 2000,
ninety-three of the Percentage Leases were adjusted, resulting in a 1.92%
increase in both Base Rent and threshold room revenue.
At December 31, 1999, the Lessees owed the Company $5,124,000 representing
fourth quarter Percentage Rent. All of the amounts due were collected prior to
January 31, 2000.
Under the Percentage Leases, the Partnership is obligated to pay the costs of
real estate and personal property taxes and to maintain underground utilities
and structural elements of the Hotels. In addition, the Percentage Leases
obligate the Partnership to fund the cost of periodic repair, replacement and
refurbishment of furniture, fixtures and equipment in the Hotels.
The Company also may be required by franchisors to fund certain capital
improvements to hotel properties, which are funded from borrowings, working
capital, or the room renovation account (Note 5). Capital improvements of $32.8
million, $26.0 million, and $18.1 million in 1999, 1998, and 1997, respectively,
were made to the hotel properties, including those required by the franchisors
at the acquisition of the property. In 2000, the Company expects to fund
approximately $11.5 million of capital improvements for the hotel properties
owned at December 31, 1999.
The Company has commitments under operating land leases through December 31,
2062, at eight hotel properties for payments as follows: 2000 -- $757,738; 2001
- -- $769,461; 2002 -- $795,888; 2003 -- $798,388; 2004 -- $801,138; thereafter --
$11.1 million.
The Company has commitments under a lease with an affiliate of Phillip H.
McNeill, Sr., the Company's Chairman of the Board, for the Company's office
space through December 2008 at monthly payments of $13,238.
As discussed in Note 4, the Company has $538,547 of non-interest bearing notes
receivable from its officers for taxes relating to 1997 and 1998 bonuses taken
in Common Stock in lieu of cash.
7. Supplemental Disclosure of Noncash Investing and Financing Activities
In 1999, the Company issued 98,824 shares of Common Stock valued at $10.00 per
share to its officers in lieu of cash to satisfy bonus compensation accrued at
December 31, 1998; 632,129 units of limited partnership interest in the
partnership ("Units") were exchanged for shares of Common Stock by certain
limited partners; 124,800 restricted shares of Common Stock valued at $9.75 per
share were issued to the Company's officers; 5,000 restricted shares of Common
Stock valued at $8.69 per share were issued to the Company's independent
directors; 9,235 shares of Common Stock at prices ranging from $6.31 to $9.63
were issued to independent directors of the Company in lieu of cash as
directors' compensation; 157,300 treasury shares valued at $6.79 per share were
traded in December 1999, but not settled at December 31, 1999; and $11.8 million
in distributions to common shareholders and limited partners had been declared
but not paid at December 31, 1999.
44
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Supplemental Disclosure of Noncash Investing and
Financing Activities, Continued
In 1998, the Company issued 69,123 shares of Common Stock valued at $15.38 per
share to its officers in lieu of cash to satisfy bonus compensation accrued at
December 31, 1997; 49,074 Units were exchanged for shares of Common Stock by
certain limited partners; 123,457 Units valued at $1.9 million and an assumption
of a $6.5 million note payable were issued as part of the total acquisition cost
of a hotel property; a $4.3 million note payable was assumed as part of the
acquisition cost of a hotel property; 141,000 restricted shares of Common Stock
valued from $13.50 to $13.56 per share were issued to the Company's officers;
20,000 restricted shares of Common Stock valued from $9.63 to $12.31 per share
were issued to the Company's independent directors; 4,042 shares of Common Stock
at prices ranging from $9.63 to $15.50 were issued to independent directors of
the Company in lieu of cash as directors compensation; 9,000 shares of Common
Stock were issued to an officer upon exercise of options; and $11.9 million in
distributions to common shareholders and limited partners had been declared but
not paid at December 31, 1998.
In 1997, the Company issued 90,000 shares of Common Stock to an officer upon
exercise of options; 1,021,062 Units valued at $14.7 million were issued as part
of the total acquisition cost of six hotel properties; and $10.6 million in
distributions to common shareholders and limited partners had been declared but
not paid at December 31, 1997.
8. Capital Stock
The Board of Directors is authorized to provide for the issuance of ten million
shares of preferred stock in one or more series, to establish the number of
shares in each series and to fix the designation, powers, preferences, and
rights of each such series and the qualifications, limitations or restriction
thereof. On June 25, 1998, the Company issued 2,750,000 shares of its 9 1/2%
Series A Cumulative Preferred Stock, $.01 par value ("Series A Preferred
Stock"). The offering price was $25 per share, resulting in gross proceeds of
$68.8 million. The Company received approximately $66.3 million after
underwriters' discounts and offering expenses.
The outstanding Units in the Partnership are redeemable at the option of the
holder for a like number of shares of Common Stock, or at the option of the
Company, the cash equivalent thereof. Total Units outstanding at December 31,
1999 and 1998 were 1,284,774 and 1,916,903, respectively. The total market value
of these Units at December 31, 1999, based on the last reported sales price of
the common stock on the NYSE of $6.75, was approximately $8.7 million.
In October 1999, the Company's Board of Directors approved a stock repurchase
program authorizing the Company to buy back up to $25 million of Common Stock on
the open market over the next eighteen months, subject to certain market
conditions and other factors. The Company expects to fund any stock repurchases
primarily with proceeds from the sale of hotels which do not currently meet the
Company's investment criteria. The Company believes that these repurchases, at
current market prices, will enhance shareholder value. At December 31, 1999,
557,300 shares had been repurchased at a cost of $3.9 million.
45
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Stock Based Compensation Plans
The Company is authorized, under the 1994 Stock Incentive Plan (the "1994 Plan")
and the Company's Non-Employee Directors Stock Option Plan (the "Directors
Plan"), referred to collectively as (the "Plans"), to issue a total of 4,050,000
shares of common stock to directors, officers and key employees of the Company
in the form of stock options, restricted stock, or performance stock. Under the
1994 Plan, the total shares available for grant is 4,000,000, of which not more
than 1,100,000 shares may be grants of restricted stock or performance stock.
Under the Directors Plan, the total shares available for grant is 50,000, which
may only be awarded in the form of stock options.
Stock Options
All options have 8 to 10 year contractual terms and vest ratably over 5 years,
with the exception of 100,000 stock options granted in 1998, of which 20,000
vested immediately with the remainder to vest ratably over 4 years. A summary of
the Company's stock options as of December 31, 1999, 1998 and 1997 and the
changes during the years are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
# of shares average # of shares average # of shares average
of underlying exercise of underlying exercise of underlying exercise
options price options price options price
------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 568,000 $12.68 519,000 $12.49 606,000 $12.49
Granted 14,000 $ 9.24 118,000 $13.40 3,000 $13.50
Exercised (9,000) $12.50 (90,000) $12.50
Forfeited (60,000) $12.50
------- ------ ------- ------ ------- ------
Outstanding at end of year 582,000 $12.60 568,000 $12.68 519,000 $12.49
Exercisable at end of year 505,000 $12.55 383,000 $12.56 279,000 $12.49
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ ------------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
# Outstanding Remaining Exercise # Exercisable Remaining Exercise
Range of Exercise Prices at 12/31/99 Life Price at 12/31/99 Life Price
- ------------------------ ------------- -------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
$8.69 -- $13.69 582,000 3.25 $12.60 505,000 2.67 $12.55
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in accounting
for the Plans. FASB Statement No. 23, "Accounting for Stock-Based Compensation"
("SFAS 123"), was issued by the FASB in 1995 and, if fully adopted, changes the
methods for recognition of cost on plans similar to the Plan. Adoption of the
expense recognition provisions of SFAS 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS 123 in 1995 are presented below.
46
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Stock Based Compensation Plans, Continued
The fair value of each option granted during 1999, 1998 and 1997 is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (1) dividend of $1.24 for 1999 and 1998, and $1.14 for
1997; (2) expected volatility of .19 for 1999 and 1998, and .11 for 1997; (3) a
risk-free interest rate of 6.0% for 1999, 5.2% for 1998, and 6.5% for 1997; and
(4) expected life of ten years for 1999, eight years for 1998, and ten years for
1997.
Had compensation cost for the Company's 1999, 1998 and 1997 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's pro forma net income, and net income per common share for 1999, 1998
and 1997 would have decreased less than 1%.
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
Restricted Stock
A summary of the status of the Company's restricted stock grants to officers and
directors as of December 31, 1999, 1998 and 1997 and the changes during the
years are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Fair Market Fair Market Fair Market
Value at Value at Value at
# of Shares Grant # of Shares Grant # of Shares Grant
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 193,500 $12.92 40,000 $11.41 40,000 $11.41
Granted:
With 5 year pro rata vesting 91,400 $ 9.69 99,000 $13.12
With 4 year pro rata vesting 16,000 $13.56
With 3 year pro rata vesting 38,400 $ 9.75 42,000 $13.50
Vest 100% at grant date 4,000 $13.56
------- ------ ------- ------ ------
Total granted 129,800 $ 9.71 161,000 $13.27
Vested to former employee (1,500)
Forfeited (6,000) $12.25
------- ------ ------- ------ ------ ------
Outstanding at end of year 323,300 $11.64 193,500 $12.92 40,000 $11.41
Vested at end of year 71,300 $12.42 29,000 $11.27 17,000 $10.67
</TABLE>
In January 2000, 71,450 shares of restricted stock were issued to officers of
the Company at a price of $6.75 per share, to vest ratably over 3 to 5 years.
47
<PAGE>
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Significant Lessee Information
As discussed in Note 1, the Company's Lessees each guarantee Percentage Rent
Leases relating to hotels accounting for more than 20% of the Company's assets.
The following financial information as of December 31, 1999 is presented for
each Lessee:
<TABLE>
<CAPTION>
IHC Prime
------ ----------
<S> <C> <C>
Miscellaneous Data:
Number of hotels owned, managed or leased 158 209
Number of rooms owned, managed or leased 29,379 27,839
Balance Sheet Data (in thousands):
Investment in hotel real estate $12,623 $1,227,497
Cash and short-term investments 22,440 15,502
Total assets 142,459 1,320,939
Total debt 549,032
Shareholders' equity 60,006 630,849
Income Statement Data (in thousands):
Total revenue $240,354 $552,732
Net income (loss) (7,617) 34,882
</TABLE>
48
<PAGE>
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Cost Capitalized Subsequent Gross Amount at Which
Initial Cost to Acquisition Carried at Close of Period
------------------------------- ---------------------------- --------------------------------
Furniture Buildings Furniture Buildings Furniture
and and and and and
Description of Property Land Improvements Fixtures Land Improvements Fixtures Land Improvements Fixtures
- ----------------------- -------- ------------ --------- ---- ------------ ---------- -------- ------------ ----------
Hampton Inn- Albany, New York $ 953 $ 9,897 $ 802 $ 262 $ 459 $ 953 $10,159 $ 1,261
Hampton Inn-Cleveland, Ohio 820 4,428 217 544 520 820 4,972 737
Hampton Inn-College Station, Texas 656 4,655 671 754 594 656 5,409 1,265
Hampton Inn-Columbus, Georgia 603 2,591 1,073 646 247 603 3,237 1,320
Hampton Inn-Ft. Worth, Texas 385 1,754 896 462 424 385 2,216 1,320
Hampton Inn-Louisville, Kentucky 395 2,406 919 712 445 395 3,118 1,364
Hampton Inn-Sarasota, Florida 553 3,389 753 508 412 553 3,897 1,165
Hampton Inn-Ann Arbor, Michigan 565 4,499 506 500 680 565 4,999 1,186
Hampton Inn-Gurnee, Illinois 630 3,397 277 989 1,094 630 4,386 1,371
Comfort Inn-Arlington, Texas 425 6,387 582 580 625 425 6,967 1,207
Residence Inn-Eagan, Minnesota 540 8,130 652 1,124 861 540 9,254 1,513
Residence Inn-Tinton Falls,
New Jersey 7,711 419 905 622 8,616 1,041
Hampton Inn-Milford, Connecticut 759 5,689 467 781 1,099 759 6,470 1,566
Hampton Inn-Meriden, Connecticut 648 3,226 435 724 758 648 3,950 1,193
Hampton Inn-Beckley, West
Virginia 1,876 5,557 402 252 384 1,876 5,809 786
Holiday Inn-Bluefield, West
Virginia 1,661 6,141 342 967 1,202 1,661 7,108 1,544
Hampton Inn-Gastonia, North
Carolina 1,651 4,741 358 264 696 1,651 5,005 1,054
Hampton Inn-Morgantown, West
Virginia 1,573 4,311 324 $ 4 141 479 1,577 4,452 803
Holiday Inn-Oak Hill, West
Virginia 269 3,727 85 1,628 1,153 269 5,355 1,238
Holiday Inn Express-Wilkesboro,
North Carolina 269 2,778 177 374 446 269 3,152 623
Hampton Inn-Naperville, Illinois 678 6,455 396 666 942 678 7,121 1,338
Hampton Inn-State College,
Pennsylvania 718 7,310 525 405 659 718 7,715 1,184
Comfort Inn-Rutland, Vermont 359 3,683 354 355 292 359 4,038 646
Hampton Inn-Scranton, Pennsylvania 403 7,017 720 188 281 403 7,205 1,001
Residence Inn-Omaha, Nebraska 953 2,650 162 6 1,174 756 959 3,824 918
Hampton Inn-Fayetteville, North
Carolina 403 5,043 148 17 611 812 420 5,654 960
Hampton Inn-Indianapolis, Indiana 1,207 6,513 126 597 1,117 1,207 7,110 1,243
Hampton Inn-Jacksonville Florida 403 4,793 126 444 1,217 403 5,237 1,343
Holiday Inn-Mt. Pleasant, South
Carolina 1,205 7,874 247 510 816 1,205 8,384 1,063
Comfort Inn-Jacksonville Beach,
Florida 849 7,307 371 2 1,879 1,248 851 9,186 1,619
Hampton Inn-Austin, Texas 500 6,659 375 6 545 767 506 7,204 1,142
Hampton Inn-Garland, Texas 375 4,959 450 3 336 704 378 5,295 1,154
Hampton Inn-Knoxville, Tennessee 617 3,871 232 299 853 617 4,170 1,085
Hampton Inn-Glen Burnie, Maryland 5,075 322 526 772 5,601 1,094
Hampton Inn-Detroit, Michigan 1,207 5,785 526 476 382 1,207 6,261 908
Homewood Suites-Hartford,
Connecticut 2,866 7,660 915 680 678 2,866 8,340 1,593
Residence Inn-Madison, Wisconsin 700 2,879 356 507 514 700 3,386 870
Holiday Inn-Winston-Salem, North
Carolina 1,350 3,124 639 3,300 1,031 1,350 6,424 1,670
Hampton Inn-Scottsdale, Arizona 2,227 6,566 723 206 17 2,227 6,772 740
Hampton Inn-Chattanooga, Tennessee 1,475 6,824 752 430 380 1,475 7,254 1,132
Homewood Suites-San Antonio, Texas 907 6,661 1,029 44 35 907 6,705 1,064
Residence Inn-Burlington, Vermont 678 6,677 342 896 658 678 7,573 1,000
Homewood Suites-Phoenix, Arizona 7,086 902 1,633 0 8,719 902
Residence Inn-Colorado Springs,
Colorado 1,350 7,638 740 457 578 1,350 8,095 1,318
Residence Inn-Oklahoma City,
Oklahoma 1,450 8,921 850 872 809 1,450 9,793 1,659
Residence Inn-Tucson, Arizona 832 7,078 705 619 376 832 7,697 1,081
Hampton Inn-Savannah, Georgia 705 4,186 334 401 742 705 4,587 1,076
Hampton Inn-Norfolk, Virginia 5,092 520 224 517 5,316 1,037
Hampton Inn-Pickwick, Tennessee 370 1,484 263 82 131 370 1,566 394
Hampton Inn-Overland Park, Kansas 906 5,931 330 591 710 906 6,522 1,040
Hampton Inn-Addison, Texas 2,981 6,336 810 692 710 2,981 7,028 1,520
Hampton Inn-Atlanta-Northlake,
Georgia 6,905 600 295 706 7,200 1,306
Hampton Inn-Birmingham (Mountain
Brook), Alabama 7,988 687 661 626 8,649 1,313
Hampton Inn-Birmingham (Vestavia),
Alabama 1,057 5,162 541 307 641 1,057 5,469 1,182
Hampton Inn-Chapel Hill, North
Carolina 1,834 6,504 725 398 681 1,834 6,902 1,406
Hampton Inn-Charleston, South
Carolina 712 5,219 516 278 483 712 5,497 999
<CAPTION>
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Total Fixtures Fixtures Construction Is Computed
-------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Hampton Inn-Albany, New York $ 12,373 $ 2,716 $ 9,657 1986 5-40 Yrs.
Hampton Inn-Cleveland, Ohio 6,529 1,339 5,190 1987 5-40 Yrs.
Hampton Inn-College Station, Texas 7,330 1,604 5,726 1986 5-40 Yrs.
Hampton Inn-Columbus, Georgia 5,160 1,515 3,645 1986 5-40 Yrs.
Hampton Inn-Ft. Worth, Texas 3,921 1,080 2,841 1987 5-40 Yrs.
Hampton Inn-Louisville, Kentucky 4,877 1,833 3,044 1986 5-40 Yrs.
Hampton Inn-Sarasota, Florida 5,615 1,351 4,264 1987 5-40 Yrs.
Hampton Inn-Ann Arbor, Michigan 6,750 1,559 5,191 1986 5-31 Yrs.
Hampton Inn-Gurnee, Illinois 6,387 1,379 5,008 1988 5-31 Yrs.
Comfort Inn-Arlington, Texas 8,599 1,881 6,718 1985 5-31 Yrs.
Residence Inn-Eagan, Minnesota 11,307 2,259 9,048 1988 5-31 Yrs.
Residence Inn-Tinton Falls,
New Jersey 9,657 1,639 8,018 1988 5-31 Yrs.
Hampton Inn-Milford, Connecticut 8,795 1,730 7,065 1986 5-31 Yrs.
Hampton Inn-Meriden, Connecticut 5,791 1,139 4,652 1988 5-31 Yrs.
Hampton Inn-Beckley, West
Virginia 8,471 1,321 7,150 1992 5-31 Yrs.
Holiday Inn-Bluefield, West
Virginia 10,313 1,628 8,685 1980 5-31 Yrs.
Hampton Inn-Gastonia, North
Carolina 7,710 1,275 6,435 1989 5-31 Yrs.
Hampton Inn-Morgantown, West
Virginia 6,832 1,110 5,722 1991 5-31 Yrs.
Holiday Inn-Oak Hill, West
Virginia 6,862 1,172 5,690 1983 5-31 Yrs.
Holiday Inn Express-Wilkesboro,
North Carolina 4,044 827 3,217 1985 5-31 Yrs.
Hampton Inn-Naperville, Illinois 9,137 1,707 7,430 1987 5-31 Yrs.
Hampton Inn-State College,
Pennsylvania 9,617 1,678 7,939 1987 5-31 Yrs.
Comfort Inn-Rutland, Vermont 5,043 941 4,102 1985 5-31 Yrs.
Hampton Inn-Scranton, Pennsylvania 8,609 1,487 7,122 1994 5-31 Yrs.
Residence Inn-Omaha, Nebraska 5,701 682 5,019 1985 5-31 Yrs.
Hampton Inn-Fayetteville, North
Carolina 7,034 1,234 5,800 1986 5-31 Yrs.
Hampton Inn-Indianapolis, Indiana 9,560 1,551 8,009 1987 5-31 Yrs.
Hampton Inn-Jacksonville Florida 6,983 1,205 5,778 1986 5-31 Yrs.
Holiday Inn-Mt. Pleasant, South
Carolina 10,652 1,625 9,027 1988 5-31 Yrs.
Comfort Inn-Jacksonville Beach,
Florida 11,656 1,668 9,988 1990 5-31 Yrs.
Hampton Inn-Austin, Texas 8,852 1,295 7,557 1987 5-31 Yrs.
Hampton Inn-Garland, Texas 6,827 1,185 5,642 1986 5-31 Yrs.
Hampton Inn-Knoxville, Tennessee 5,872 880 4,992 1988 5-31 Yrs.
Hampton Inn-Glen Burnie, Maryland 6,695 1,036 5,659 1989 5-31 Yrs.
Hampton Inn-Detroit, Michigan 8,376 1,047 7,329 1989 5-31 Yrs.
Homewood Suites-Hartford,
Connecticut 12,799 1,502 11,297 1990 5-31 Yrs.
Residence Inn-Madison, Wisconsin 4,956 651 4,305 1988 5-31 Yrs.
Holiday Inn-Winston-Salem, North
Carolina 9,444 585 8,859 1969 5-31 Yrs.
Hampton Inn-Scottsdale, Arizona 9,739 1,109 8,630 1996 5-31 Yrs.
Hampton Inn-Chattanooga, Tennessee 9,861 1,285 8,576 1988 5-31 Yrs.
Homewood Suites-San Antonio, Texas 8,676 1,190 7,486 1996 5-31 Yrs.
Residence Inn-Burlington, Vermont 9,251 1,073 8,178 1988 5-31 Yrs.
Homewood Suites-Phoenix, Arizona 9,621 1,296 8,325 1996 5-31 Yrs.
Residence Inn-Colorado Springs,
Colorado 10,763 1,182 9,581 1984 5-31 Yrs.
Residence Inn-Oklahoma City,
Oklahoma 12,902 1,388 11,514 1982 5-31 Yrs.
Residence Inn-Tucson, Arizona 9,610 1,050 8,560 1985 5-31 Yrs.
Hampton Inn-Savannah, Georgia 6,368 750 5,618 1968 5-31 Yrs.
Hampton Inn-Norfolk, Virginia 6,353 844 5,509 1990 5-31 Yrs.
Hampton Inn-Pickwick, Tennessee 2,330 268 2,062 1994 5-31 Yrs.
Hampton Inn-Overland Park, Kansas 8,468 803 7,665 1991 5-31 Yrs.
Hampton Inn-Addison, Texas 11,529 949 10,580 1985 5-31 Yrs.
Hampton Inn-Atlanta-Northlake,
Georgia 8,506 933 7,573 1988 5-31 Yrs.
Hampton Inn-Birmingham (Mountain
Brook), Alabama 9,962 1,032 8,930 1987 5-31 Yrs.
Hampton Inn-Birmingham (Vestavia),
Alabama 7,708 772 6,936 1986 5-31 Yrs.
Hampton Inn-Chapel Hill, North
Carolina 10,142 985 9,157 1986 5-31 Yrs.
Hampton Inn-Charleston, South
Carolina 7,208 704 6,504 1985 5-31 Yrs.
</TABLE>
49
<PAGE>
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
AS OF DECEMBER 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Cost Capitalized Subsequent Gross Amount at Which
Initial Cost to Acquisition Carried at Close of Period
------------------------------- ---------------------------- --------------------------------
Furniture Buildings Furniture Buildings Furniture
and and and and and
Description of Property Land Improvements Fixtures Land Improvements Fixtures Land Improvements Fixtures
- ----------------------- -------- ------------ --------- ---- ------------ ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hampton Inn-Colorado Springs,
Colorado 803 3,925 411 355 256 803 4,280 667
Hampton Inn-Columbia, South
Carolina 650 6,572 628 365 287 650 6,937 915
Hampton Inn-Aurora, Colorado 784 3,344 359 436 260 784 3,780 619
Hampton Inn-Detroit (Madison
Heights), Michigan 881 4,304 451 521 223 881 4,825 674
Hampton Inn-Dublin, Ohio 944 3,612 483 573 518 944 4,185 1,001
Hampton Inn-Kansas City, Kansas 585 4,294 425 305 260 585 4,599 685
Hampton Inn-Little Rock, Arkansas 898 5,520 558 273 492 898 5,793 1,050
Hampton Inn-Memphis (Poplar),
Tennessee 1,955 6,547 739 676 654 1,955 7,223 1,393
Hampton Inn-Memphis (Sycamore),
Tennessee 2,751 239 471 423 3,222 662
Hampton Inn-Nashville (Briley),
Tennessee 6,550 569 270 372 6,820 941
Hampton Inn-Richardson, Texas 1,750 5,252 609 423 579 1,750 5,675 1,188
Hampton Inn-St. Louis, Missouri 665 3,775 386 698 728 665 4,473 1,114
Homewood Suites-Germantown,
Tennessee 1,011 5,760 1,011 143 74 1,011 5,903 1,085
Homewood Suites-Augusta, Georgia 330 4,164 516 102 24 330 4,266 540
Residence Inn-Princeton, New
Jersey 1,920 15,875 1,500 1,162 1,444 1,920 17,037 2,944
AmeriSuites-Cincinnati (Blue Ash),
Ohio 900 6,241 466 264 207 900 6,505 673
AmeriSuites-Cincinnati (Forest
Park), Ohio 800 5,616 569 318 332 800 5,934 901
AmeriSuites-Columbus, Ohio 903 6,774 856 196 335 903 6,970 1,191
AmeriSuites-Flagstaff, Arizona 600 3,832 737 138 91 600 3,970 828
AmeriSuites-Jacksonville, Florida 1,168 5,734 436 371 414 1,168 6,105 850
AmeriSuites-Indianapolis, Indiana 700 4,775 800 148 174 700 4,923 974
AmeriSuites-Miami, Florida 1,500 9,387 900 143 37 1,500 9,530 937
AmeriSuites-Overland Park, Kansas 1,300 7,030 900 304 276 1,300 7,334 1,176
AmeriSuites-Richmond, Virginia 1,772 9,640 921 161 141 1,772 9,801 1,062
AmeriSuites-Tampa, Florida 1,400 9,786 523 144 68 1,400 9,930 591
Hampton Inn-San Antonio, Texas 3,749 7,539 1,317 592 126 3,749 8,131 1,443
Homewood Suites-Sharonville, Ohio 863 6,194 746 632 452 863 6,826 1,198
Residence Inn-Boise, Idaho 950 5,758 350 368 509 950 6,126 859
Residence Inn-Portland, Oregon 2,400 20,735 500 269 420 2,400 21,004 920
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 860 5,721 1,052 11 22 860 5,732 1,074
Residence Inn-Somers Point, New
Jersey 1,094 6,372 729 637 574 1,094 7,009 1,303
AmeriSuites-Albuquerque, New
Mexico 1,776 6,871 918 36 14 1,776 6,907 932
AmeriSuites-Baltimore, Maryland 659 8,514 898 43 22 659 8,557 920
AmeriSuites-Baton Rouge, Louisiana 649 9,085 1,157 46 15 649 9,131 1,172
AmeriSuites-Birmingham, Alabama 1,066 5,871 758 42 11 1,066 5,913 769
AmeriSuites-Las Vegas, Nevada 4,126 13,056 1,965 33 34 4,126 13,089 1,999
AmeriSuites-Memphis (Wolfchase),
Tennessee 1,108 6,433 900 41 16 1,108 6,474 916
AmeriSuites-Miami (Kendall),
Florida 2,426 7,394 802 38 66 2,426 7,432 868
AmeriSuites-Minneapolis, Minnesota 1,312 7,421 873 38 14 1,312 7,459 887
AmeriSuites-Nashville, Tennessee 1,622 8,452 1,198 40 9 1,622 8,492 1,207
Homewood Suites-Seattle, Washington 2,640 17,769 1,760 199 224 2,640 17,968 1,984
Homewood Suites-Chicago, Illinois 29,052 3,568 29,052 3,568
Homewood Suites-Orlando, Florida 4,250 17,015 2,792 4,250 17,015 2,792
Construction in Progress 3,366 3,366
Corporate Office--Memphis, TN 344 344
-------- -------- ------- --- ------- ------- -------- -------- --------
$106,643 $646,641 $60,631 $38 $47,726 $53,742 $106,681 $694,367 $114,373
======== ======== ======= === ======= ======= ======== ======== ========
<CAPTION>
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Total Fixtures Fixtures Construction Is Computed
-------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Hampton Inn-Colorado Springs,
Colorado 5,750 529 5,221 1985 5-31 Yrs.
Hampton Inn-Columbia, South
Carolina 8,502 848 7,654 1985 5-31 Yrs.
Hampton Inn-Aurora, Colorado 5,183 495 4,688 1985 5-31 Yrs.
Hampton Inn-Detroit (Madison
Heights), Michigan 6,380 581 5,799 1987 5-31 Yrs.
Hampton Inn-Dublin, Ohio 6,130 638 5,492 1988 5-31 Yrs.
Hampton Inn-Kansas City, Kansas 5,869 587 5,282 1987 5-31 Yrs.
Hampton Inn-Little Rock, Arkansas 7,741 804 6,937 1985 5-31 Yrs.
Hampton Inn-Memphis (Poplar),
Tennessee 10,571 974 9,597 1985 5-31 Yrs.
Hampton Inn-Memphis (Sycamore),
Tennessee 3,884 430 3,454 1984 5-31 Yrs.
Hampton Inn-Nashville (Briley),
Tennessee 7,761 821 6,940 1987 5-31 Yrs.
Hampton Inn-Richardson, Texas 8,613 782 7,831 1987 5-31 Yrs.
Hampton Inn-St. Louis, Missouri 6,252 638 5,614 1987 5-31 Yrs.
Homewood Suites-Germantown,
Tennessee 7,999 852 7,147 1986 5-31 Yrs.
Homewood Suites-Augusta, Georgia 5,136 524 4,612 1997 5-31 Yrs.
Residence Inn-Princeton, New
Jersey 21,901 1,923 19,978 1988 5-31 Yrs.
AmeriSuites-Cincinnati (Blue Ash),
Ohio 8,078 598 7,480 1990 5-31 Yrs.
AmeriSuites-Cincinnati (Forest
Park), Ohio 7,635 598 7,037 1992 5-31 Yrs.
AmeriSuites-Columbus, Ohio 9,064 744 8,320 1994 5-31 Yrs.
AmeriSuites-Flagstaff, Arizona 5,398 450 4,948 1993 5-31 Yrs.
AmeriSuites-Jacksonville, Florida 8,123 578 7,545 1996 5-31 Yrs.
AmeriSuites-Indianapolis, Indiana 6,597 580 6,017 1992 5-31 Yrs.
AmeriSuites-Miami, Florida 11,967 904 11,063 1996 5-31 Yrs.
AmeriSuites-Overland Park, Kansas 9,810 780 9,030 1994 5-31 Yrs.
AmeriSuites-Richmond, Virginia 12,635 944 11,691 1992 5-31 Yrs.
AmeriSuites-Tampa, Florida 11,921 829 11,092 1994 5-31 Yrs.
Hampton Inn-San Antonio, Texas 13,323 784 12,539 1995 5-31 Yrs.
Homewood Suites-Sharonville, Ohio 8,887 582 8,305 1990 5-31 Yrs.
Residence Inn-Boise, Idaho 7,935 481 7,454 1986 5-31 Yrs.
Residence Inn-Portland, Oregon 24,324 1,311 23,013 1990 5-31 Yrs.
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 7,666 562 7,104 1998 5-31 Yrs.
Residence Inn-Somers Point, New
Jersey 9,406 569 8,837 1998 5-31 Yrs.
AmeriSuites-Albuquerque, New
Mexico 9,615 531 9,084 1997 5-31 Yrs.
AmeriSuites-Baltimore, Maryland 10,136 607 9,529 1996 5-31 Yrs.
AmeriSuites-Baton Rouge, Louisiana 10,952 690 10,262 1997 5-31 Yrs.
AmeriSuites-Birmingham, Alabama 7,748 449 7,299 1997 5-31 Yrs.
AmeriSuites-Las Vegas, Nevada 19,214 1,056 18,158 1998 5-31 Yrs.
AmeriSuites-Memphis (Wolfchase),
Tennessee 8,498 506 7,992 1996 5-31 Yrs.
AmeriSuites-Miami (Kendall),
Florida 10,726 535 10,191 1996 5-31 Yrs.
AmeriSuites-Minneapolis, Minnesota 9,658 548 9,110 1997 5-31 Yrs.
AmeriSuites-Nashville, Tennessee 11,321 667 10,654 1997 5-31 Yrs.
Homewood Suites-Seattle, Washington 22,592 1,196 21,396 1998 5-31 Yrs.
Homewood Suites-Chicago, Illinois 32,620 886 31,734 1999 5-31 Yrs.
Homewood Suites-Orlando, Florida 24,057 498 23,559 1999 5-31 Yrs.
Construction in Progress 3,366 3,366 5-31 Yrs.
Corporate Office--Memphis, TN 344 66 278 7 Yrs.
-------- -------- --------
$915,421 $100,884 $814,537
======== ======== ========
</TABLE>
<TABLE>
<S> <C>
(a) Reconciliation of Real Estate:
Balance at December 31, 1997 $660,891
Additions during the period 208,374
Sales during the period (10,658)
--------
Balance at December 31, 1998 858,607
Additions during the period 87,769
Sales during the period (30,955)
--------
Balance at December 31, 1999 $915,421
========
(b) Reconciliation of Accumulated Depreciation:
Balance At December 31, 1997 $ 43,819
Depreciation expense during the period 26,447
Depreciation on sales during the period (1,791)
--------
Balance at December 31, 1998 68,475
Depreciation expense during the period 36,290
Depreciation on sales during the period (3,881)
--------
Balance at December 31, 1999 $100,884
========
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 1999 and through the date of this
report, there has been no change in the Company's independent accountants, nor
have any disagreements with such accountants or reportable events occurred.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated by reference from the section
entitled "Proposal One - Election of Directors" in the Proxy Statement as to the
Company's directors. See also Item 1 -- "Business-Executive Officers of the
Company."
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the sections
entitled "Ownership of the Company's Common Stock" and "Proposal One - Election
of Directors" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the section
entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
51
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements:
The following financial statements and financial statement schedules are located
in this report on the pages indicated:
Equity Inns, Inc. Page
Report of Independent Accountants 29
Consolidated Balance Sheets at December 31, 1999 and 1998 30
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 31
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 34
Notes to Consolidated Financial Statements 35
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 1999 49
All other schedules to the consolidated financial statements required by Article
7 of Regulation S-X are not required under the related instructions or are
inapplicable and therefore have been omitted.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report on Form 10-K.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1(a) -- Charter of the Registrant (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-11 (Registration
No. 33-73304)
3.1(b) -- Articles of Amendment to the Charter of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 0-23290) filed with the Securities and Exchange
Commission on April 27, 1995)
3.1(c) -- Articles of Amendment to the Charter of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 0-23290) filed with the Securities and Exchange
Commission on May 31, 1996)
3.1(d) -- Second Amended and Restated Charter of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on October 23, 1997)
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
3.1(e) -- Articles of Amendment to the Second Amended and Restated Charter of
the Registrant (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 28, 1998)
3.1(f) -- Articles of Amendment to the Second Amended and Restated Charter of
the Registrant (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on June 24, 1998)
3.2 -- By-Laws of the Registrant (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-11 (Registration
No. 33-73304)
4.1(a) -- Form of Share Certificate for the Company's Common Stock, $.01 par
value (incorporated by reference to Exhibit 4.1 to the Companny's
Registration Statement on Form S-11 (Registration No. 33-73304))
4.1(b) -- Form of Share Certificate for the Company's 9 1/2% Series A
Cumulative Preferred Stock, $.01 par value (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304))
4.2(a) -- Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated June 24, 1997
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on July 10, 1997)
4.2(b) -- Amendment No. 1 to Third Amended and Restated Agreement of Limited
Partnership of Equity Inns Partnership, L.P. (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on June 24, 1998)
4.3, -- Indenture dated as of February 6, 1997 among EQI Financing
10.1 Partnership I, L.P., as Issuer, LaSalle National Bank, as Trustee,
and ABN AMBRO Bank N.V., as Fiscal Agent (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
(Registration No. 01-12073) for the quarter ended March 31, 1997
and filed with the Securities and Exchange Commission on April 30,
1997)
10.2(a)-- Form of Percentage Lease Agreement (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304))
10.2(b)-- Consolidated Lease Amendment dated as of November 15, 1996 between
Equity Inns Partnership, L.P. and Crossroads/Memphis Partnership,
L.P. (incorporated by reference to Exhibit 10.1(a) to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.2(c)-- Form of Percentage Lease Amendment between Equity Inns Partnership,
L.P. and Crossroads/Future Company, L.L.C. (incorporated by reference
to Exhibit 10.1(b) to the Company's Amended Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on July 22, 1997)
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
10.2(d)-- Form of Percentage Lease Amendment between Equity Inns Partnership,
L.P. and Caldwell Holding Corp. (incorporated by reference to Exhibit
10.5 to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
December 24, 1997)
10.3(a)-- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.29(a) to the Company's Registration Statement
on Form S-11 (Registration No. 33-80318))
10.3(b)-- Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29(b) to the Company's
Registration Statement on Form S-11 (Registration No. 33-80318))
10.4 -- Right of First Refusal Agreement between Wolf River Hotel, L.P. and
Equity Inns Partnership, L.P. (incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-3
(Registration No. 33-93158))
10.5 -- Right of First Refusal Agreement between SAHI I L.P. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-3 (Registration No.
33-93158))
10.6 -- Credit Agreement between Equity Inns, Inc., Equity Inns Trust, Equity
Inns Partnership, L.P., Smith Barney Mortgage Capital Group, Inc.,
National Bank of Commerce, First National Bank of Chicago, Leader
Federal Bank for Savings, AmSouth Bank, First National Bank of
Commerce, Bank of Mississippi, Mercantile Bank of St. Louis, First
National Bank of Chicago and Smith Barney Mortgage Capital Group,
Inc. as collateral agent (incorporated by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1995 (Registration No. 0-23290) filed with the
Securities and Exchange Commission on March 20, 1996)
10.6(a)-- 1st Amendment to Revolving Credit Agreement, dated August 10, 1998,
between Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
10.6(b)-- 2nd Amendment to Revolving Credit Agreement, dated December 18, 1998,
between Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
10.7 -- Unsecured Revolving Credit Agreement dated as of October 10, 1997, by
and among Equity Inns Partnership, L.P. and Equity Inns/West Virginia
Partnership, L.P. as Borrower and The First National Bank of Chicago,
Credit Lyonnais New York Branch, and AmSouth Bank as Lenders, Credit
Lyonnais New York Branch, as Syndication Agent and The First National
Bank of Chicago as Administrative Agent (incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on November 24, 1997)
10.7(a)-- First Amendment to Unsecured Revolving Credit Agreement dated as of
November 24, 1997, by and among Equity Inns Partnership, L.P., Equity
Inns/West Virginia Partnership, L.P., The First National Bank of
Chicago and Credit Lyonnais New York Branch
10.7(b)-- Second Amendment to Unsecured Revolving Credit Agreement dated as of
September 28, 1998, by and among Equity Inns Partnership, L.P.,
Equity Inns/West Virginia Partnership, L.P., The First National Bank
of Chicago and Credit Lyonnais New York Branch
</TABLE>
54
<PAGE>
<TABLE>
<S> <C>
10.7(c)-- Amended and Restated Unsecured Revolving Credit Agreement dated as of
June 23, 1999, by and among Equity Inns Partnership, L.P., Equity
Inns/West Virginia Partnership, L.P. and Equity Inns Partnership II,
L.P. as Borrowers and The First National Bank of Chicago, Credit
Lyonnais New York Branch, NationsBank, N.A., AmSouth Bank, PNC Bank,
National Association, National Bank of Commerce, Chang Hwa Commercial
Bank, Ltd., New York Branch, Union Planters Bank, National
Association, and First Tennessee Bank as Lenders (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on August 13, 1999)
10.8 -- Unsecured Revolving Credit Agreement dated as of March 29, 1999, by
and among Equity Inns Partnership, L.P. and Equity Inns/West Virginia
Partnership, L.P. as Borrowers, NationsBank, N.A. and Credit Lyonnais
New York Branch as Lenders, NationsBank, N.A. as Administrative and
Documentation Agent, Credit Lyonnais New York Branch as Syndication
Agent, Joint Agent and Book Arranger and NationsBanc Montgomery
Securities, LLC (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 7, 1999)
10.9 -- Consolidated Amendment to Lease Agreements and Master Agreement dated
as of March 31, 1999, by and among Equity Inns, Inc., Equity Inns
Partnership, L.P., Equity Inns/West Virginia Partnership, L.P., EQI
Financing Partnership I, L.P., Equity Inns Partnership II, L.P.,
Crossroads/Memphis Partnership, L.P., State College BBQ/Concord Joint
Venture, Crossroads/Memphis Financing Company, L.L.C., Crossroads
Future Company, L.L.C., Patriot American Hospitality, Inc.,
Interstate Hotels, LLC, Crossroads Hospitality Company, L.L.C. and
Interstate Hotels Management, Inc. (incorporated by reference to
Exhibit 10.7 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on May 7, 1999)
10.10 -- Guaranty of Leases dated November 15, 1996 by Interstate Hotels
Company (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.11 -- Guaranty of Leases dated November 15, 1996 by Interstate Hotels
Corporation (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on December 13,
1996)
10.12 -- Master Agreement dated as of November 4, 1996 among Equity Inns,
Inc., Equity Inns Partnership, L.P., Interstate Hotels Corporation,
Crossroads/Memphis Partnership, L.P. and Crossroads Future Company,
L.L.C. (incorporated by reference to Exhibit 10.4 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.13 -- First Amendment to Master Agreement dated as of November 15, 1996
among Equity Inns, Inc., Equity Inns Partnership, L.P., Interstate
Hotels Corporation, Crossroads/Memphis Partnership, L.P. and
Crossroads Future Company, L.L.C. (incorporated by reference to
Exhibit 10.5 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on December 13, 1996)
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
10.14 -- Second Amendment to Master Agreement dated as of February 6, 1997 by
Equity Inns, Inc., Equity Inns Partnership, L.P., EQI Financing
Partnership 1, L.P., Interstate Hotels Corporation, Crossroads/
Memphis Partnership, L.P., Crossroads/Memphis Financing Company,
L.L.C., and Crossroads Future Company, L.L.C. (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q (Registration No. 01-12073) for the quarter ended March 31, 1997
and filed with the Securities and Exchange Commission on April 30,
1997)
10.15 -- Form of Deed of Trust dated as of February 6, 1997 by EQI Financing
Partnership 1, L.P. in favor of LaSalle National Bank, as Trustee
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q (Registration No. 01-12073) for the quarter ended
March 31, 1997 and filed with the Securities and Exchange Commission
on April 30, 1997)
10.16 -- Credit Agreement dated June 25, 1997, by and among Equity Inns
Partnership, L.P. and Equity Inns Trust, The First National Bank of
Chicago, Credit Lyonnais, New York Branch and AmSouth Bank of
Alabama, as Lenders, Credit Lyonnais, New York Branch, as
Documentation Agent and The First National Bank of Chicago, as
Administrative Agent and Syndication Agent (incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on July 10, 1997)
10.17 -- Revolving Credit Loan Agreement dated as of November 14, 1997 by and
among Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
10.18 -- Alliance Agreement dated as of January 20, 1998 between U. S.
Franchise Systems, Inc. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on February 6, 1998)
10.19 -- Commercial Lease dated as of December 17, 1998 between 64 LTD. LLC
and Equity Inns Services, Inc.
10.20 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Sr.
10.21 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Howard A. Silver
10.22 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
10.23 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Jr.
10.24 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
10.25 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
10.26* -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Michael K. Goforth
10.27 -- Equity Inns, Inc. Executive Deferred Compensation Plan
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers L.L.P.
27.1* -- Financial Data Schedule (filed electronically with the Securities and
Exchange Commission)
</TABLE>
- --------------
* Filed herewith.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Annual Report on Form 10-K. See Item 14 (a).
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 on the 15th day of March,
2000.
EQUITY INNS, INC.
By: /s/Phillip H. McNeill, Sr.
--------------------------
Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 15th day of March, 2000.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Phillip H. McNeill, Sr. Chairman of the Board and March 15, 2000
- --------------------------- Chief Executive Officer
Phillip H. McNeill, Sr. (Principal Executive Officer)
and Director
/s/ Howard A. Silver President, Chief Operating March 15, 2000
- -------------------- Officer and Director
Howard A. Silver
/s/ Donald H. Dempsey Executive Vice President, March 15, 2000
- --------------------- Secretary, Treasurer, Chief
Donald H. Dempsey Financial Officer (Principal
Financial and Accounting
Officer) and Director
/s/ William A. Deupree, Jr. Director March 15, 2000
- ---------------------------
William A. Deupree, Jr.
/s/ Harry S. Hays Director March 15, 2000
- -----------------
Harry S. Hays
/s/ Joseph W. McLeary Director March 15, 2000
- ---------------------
Joseph W. McLeary
/s/ Raymond E. Schultz Director March 15, 2000
- ----------------------
Raymond E. Schultz
</TABLE>
58
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1(a) -- Charter of the Registrant (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-11 (Registration
No. 33-73304)
3.1(b) -- Articles of Amendment to the Charter of the Registrant ( incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 0-23290) filed with the Securities and Exchange
Commission on April 27, 1995)
3.1(c) -- Articles of Amendment to the Charter of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 0-23290) filed with the Securities and Exchange
Commission on May 31, 1996)
3.1(d) -- Second Amended and Restated Charter of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on October 23, 1997)
3.1(e) -- Articles of Amendment to the Second Amended and Restated Charter of
the Registrant (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 28, 1998)
3.1(f) -- Articles of Amendment to the Second Amended and Restated Charter of
the Registrant (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on June 24, 1998)
3.2 -- By-Laws of the Registrant (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-11 (Registration
No. 33-73304)
4.1(a) -- Form of Share Certificate for the Company's Common Stock, $.01 par
value (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-11 (Registration No. 33-73304))
4.1(b) -- Form of Share Certificate for the Company's 9 1/2% Series A
Cumulative Preferred Stock, $.01 par value (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304))
4.2(a) -- Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated June 24, 1997
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on July 10, 1997)
4.2(b) -- Amendment No. 1 to Third Amended and Restated Agreement of Limited
Partnership of Equity Inns Partnership, L.P. (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on June 24, 1998)
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
4.3, -- Indenture dated as of February 6, 1997 among EQI Financing
10.1 Partnership I, L.P., as Issuer, LaSalle National Bank, as Trustee,
and ABN AMBRO Bank N.V., as Fiscal Agent (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
(Registration No. 01-12073) for the quarter ended March 31, 1997
and filed with the Securities and Exchange Commission on April 30,
1997)
10.2(a)-- Form of Percentage Lease Agreement (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304))
10.2(b)-- Consolidated Lease Amendment dated as of November 15, 1996 between
Equity Inns Partnership, L.P. and Crossroads/Memphis Partnership,
L.P. (incorporated by reference to Exhibit 10.1(a) to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.2(c)-- Form of Percentage Lease Amendment between Equity Inns Partnership,
L.P. and Crossroads/Future Company, L.L.C. (incorporated by reference
to Exhibit 10.1(b) to the Company's Amended Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on July 22, 1997)
10.2(d)-- Form of Percentage Lease Amendment between Equity Inns Partnership,
L.P. and Caldwell Holding Corp. (incorporated by reference to Exhibit
10.5 to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
December 24, 1997)
10.3(a)-- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.29(a) to the Company's Registration Statement
on Form S-11 (Registration No. 33-80318))
10.3(b)-- Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29(b) to the Company's
Registration Statement on Form S-11 (Registration No. 33-80318))
10.4 -- Right of First Refusal Agreement between Wolf River Hotel, L.P. and
Equity Inns Partnership, L.P. (incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-3
(Registration No. 33-93158))
10.5 -- Right of First Refusal Agreement between SAHI I L.P. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-3 (Registration No. 33-
93158))
10.6 -- Credit Agreement between Equity Inns, Inc., Equity Inns Trust, Equity
Inns Partnership, L.P., Smith Barney Mortgage Capital Group, Inc.,
National Bank of Commerce, First National Bank of Chicago, Leader
Federal Bank for Savings, AmSouth Bank, First National Bank of
Commerce, Bank of Mississippi, Mercantile Bank of St. Louis, First
National Bank of Chicago and Smith Barney Mortgage Capital Group,
Inc. as collateral agent (incorporated by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1995 (Registration No. 0-23290) filed with the
Securities and Exchange Commission on March 20, 1996)
10.6(a)-- 1st Amendment to Revolving Credit Agreement, dated August 10, 1998,
between Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
10.6(b)-- 2nd Amendment to Revolving Credit Agreement, dated December 18, 1998,
between Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
10.7 -- Unsecured Revolving Credit Agreement dated as of October 10, 1997, by
and among Equity Inns Partnership, L.P. and Equity Inns/West Virginia
Partnership, L.P. as Borrower and The First National Bank of Chicago,
Credit Lyonnais New York Branch, and AmSouth Bank as Lenders, Credit
Lyonnais New York Branch, as Syndication Agent and The First National
Bank of Chicago as Administrative Agent (incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on November 24, 1997)
10.7(a)-- First Amendment to Unsecured Revolving Credit Agreement dated as of
November 24, 1997, by and among Equity Inns Partnership, L.P., Equity
Inns/West Virginia Partnership, L.P., The First National Bank of
Chicago and Credit Lyonnais New York Branch
10.7(b)-- Second Amendment to Unsecured Revolving Credit Agreement dated as of
September 28, 1998, by and among Equity Inns Partnership, L.P.,
Equity Inns/West Virginia Partnership, L.P., The First National Bank
of Chicago and Credit Lyonnais New York Branch
10.7(c)-- Amended and Restated Unsecured Revolving Credit Agreement dated as of
June 23, 1999, by and among Equity Inns Partnership, L.P., Equity
Inns/West Virginia Partnership, L.P. and Equity Inns Partnership II,
L.P. as Borrowers and The First National Bank of Chicago, Credit
Lyonnais New York Branch, NationsBank, N.A., AmSouth Bank, PNC Bank,
National Association, National Bank of Commerce, Chang Hwa Commercial
Bank, Ltd., New York Branch, Union Planters Bank, National
Association, and First Tennessee Bank as Lenders (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on August 13, 1999)
10.8 -- Unsecured Revolving Credit Agreement dated as of March 29, 1999, by
and among Equity Inns Partnership, L.P. and Equity Inns/West Virginia
Partnership, L.P. as Borrowers, NationsBank, N.A. and Credit Lyonnais
New York Branch as Lenders, NationsBank, N.A. as Administrative and
Documentation Agent, Credit Lyonnais New York Branch as Syndication
Agent, Joint Agent and Book Arranger and NationsBanc Montgomery
Securities, LLC (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 7, 1999)
10.9 -- Consolidated Amendment to Lease Agreements and Master Agreement dated
as of March 31, 1999, by and among Equity Inns, Inc., Equity Inns
Partnership, L.P., Equity Inns/West Virginia Partnership, L.P., EQI
Financing Partnership I, L.P., Equity Inns Partnership II, L.P.,
Crossroads/Memphis Partnership, L.P., State College BBQ/Concord Joint
Venture, Crossroads/Memphis Financing Company, L.L.C., Crossroads
Future Company, L.L.C., Patriot American Hospitality, Inc.,
Interstate Hotels, LLC, Crossroads Hospitality Company, L.L.C. and
Interstate Hotels Management, Inc. (incorporated by reference to
Exhibit 10.7 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on May 7, 1999)
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
10.10 -- Guaranty of Leases dated November 15, 1996 by Interstate Hotels
Company (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.11 -- Guaranty of Leases dated November 15, 1996 by Interstate Hotels
Corporation (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on December 13,
1996)
10.12 -- Master Agreement dated as of November 4, 1996 among Equity Inns,
Inc., Equity Inns Partnership, L.P., Interstate Hotels Corporation,
Crossroads/Memphis Partnership, L.P. and Crossroads Future Company,
L.L.C. (incorporated by reference to Exhibit 10.4 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on December 13, 1996)
10.13 -- First Amendment to Master Agreement dated as of November 15, 1996
among Equity Inns, Inc., Equity Inns Partnership, L.P., Interstate
Hotels Corporation, Crossroads/Memphis Partnership, L.P. and
Crossroads Future Company, L.L.C. (incorporated by reference to
Exhibit 10.5 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on December 13, 1996)
10.14 -- Second Amendment to Master Agreement dated as of February 6, 1997 by
Equity Inns, Inc., Equity Inns Partnership, L.P., EQI Financing
Partnership 1, L.P., Interstate Hotels Corporation, Crossroads/
Memphis Partnership, L.P., Crossroads/Memphis Financing Company,
L.L.C., and Crossroads Future Company, L.L.C. (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q (Registration No. 01-12073) for the quarter ended March 31, 1997
and filed with the Securities and Exchange Commission on April 30,
1997)
10.15 -- Form of Deed of Trust dated as of February 6, 1997 by EQI Financing
Partnership 1, L.P. in favor of LaSalle National Bank, as Trustee
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q (Registration No. 01-12073) for the quarter ended
March 31, 1997 and filed with the Securities and Exchange Commission
on April 30, 1997)
10.16 -- Credit Agreement dated June 25, 1997, by and among Equity Inns
Partnership, L.P. and Equity Inns Trust, The First National Bank of
Chicago, Credit Lyonnais, New York Branch and AmSouth Bank of
Alabama, as Lenders, Credit Lyonnais, New York Branch, as
Documentation Agent and The First National Bank of Chicago, as
Administrative Agent and Syndication Agent (incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on July 10, 1997)
10.17 -- Revolving Credit Loan Agreement dated as of November 14, 1997 by and
among Equity Inns Partnership, L.P., Equity Inns/West Virginia
Partnership, L.P., Equity Inns, Inc., Equity Inns Trust and National
Bank of Commerce
</TABLE>
62
<PAGE>
<TABLE>
<S> <C>
10.18 -- Alliance Agreement dated as of January 20, 1998 between U. S.
Franchise Systems, Inc. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on February 6, 1998)
10.19 -- Commercial Lease dated as of December 17, 1998 between 64 LTD. LLC
and Equity Inns Services, Inc.
10.20 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Sr.
10.21 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Howard A. Silver
10.22 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
10.23 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Jr.
10.24 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
10.25 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
10.26* -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Michael K. Goforth
10.27 -- Equity Inns, Inc. Executive Deferred Compensation Plan
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers L.L.P.
27.1* -- Financial Data Schedule (filed electronically with the Securities and
Exchange Commission)
</TABLE>
- --------------
* Filed herewith.
63
EXHIBIT 10.26
CHANGE IN CONTROL AND TERMINATION AGREEMENT
THIS CHANGE IN CONTROL AND TERMINATION AGREEMENT (the
"Agreement"), to be effective as of the 18th day of June, 1999, is made and
entered into by and between EQUITY INNS SERVICES, INC. (the "Company"), a
corporation organized and existing under the laws of the State of Tennessee,
EQUITY INNS, INC. (the "Parent"), a corporation organized and existing under the
laws of the State of Tennessee, and MICHAEL K. GOFORTH (the "Executive").
R E C I T A L S:
The Company provides management services to the Parent
pursuant to a management services agreement dated as of December 30, 1994.
The Company and the Parent acknowledge that Executive's
contributions to the past and future growth and success of the Company and the
Parent have been and will continue to be substantial. As a wholly-owned
subsidiary of a publicly held corporation, the Company recognizes that there
exists a possibility of a Change in Control (as defined herein) of the Company
or its Parent. The Company and the Parent also recognize that the possibility of
such a Change in Control may contribute to uncertainty on the part of senior
management and may result in the departure or distraction of senior management
from their operating responsibilities.
Outstanding management of the Company is always essential to
advancing the best interests of the Company's and the Parent's shareholders. In
the event of a threat or occurrence of a bid to acquire or change control of the
Parent or to effect a business combination, it is particularly important that
the Company's and the Parent's businesses be continued with a minimum of
disruption. The Company and the Parent believe that the objective of securing
and retaining outstanding management will be achieved if the Company's key
management employees are given assurances of employment security so they will
not be distracted by personal uncertainties and risks created by such
circumstances.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Parent and the Company, jointly and
severally, agree herein to pay to the Executive, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parent, the Company and the Executive agree as follows:
ARTICLE 1. TERM; CERTAIN DEFINITIONS.
1.1 Term. This Agreement is effective from the date of its
execution by the Company ("Effective Date") for a term of three years (the
"Initial Term"). This Agreement automatically continues in effect from year to
year after expiration of the Initial Term unless the Company notifies the
Executive in writing ninety (90) days before any anniversary of the Effective
Date following the Initial Term that the Agreement will terminate as of that
anniversary date. Notwithstanding the foregoing, no notice of termination of
this Agreement under the preceding sentence shall be effective during an
Employment Period as defined in section 2.1 below.
1.2 Certain Definitions. As used in this Agreement:
(a) Acquiring Person means that a Person,
considered alone or together with all Control Affiliates and
Associates of that Person, is or becomes directly or
<PAGE>
indirectly the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of securities representing at least
twenty percent (20%) of (i) the Parent's then outstanding
securities entitled to vote generally in the election of the
Parent's Board; or (ii) the Company's then outstanding
securities entitled to vote generally in the election of the
Company's Board.
(b) Annual Base Salary means the Executive's gross
annual salary before any taxes, deductions, exclusions or any
deferrals or contributions under any plan or program of the
Company or the Parent, but excluding bonuses, incentive
compensation, employee benefits or any non-salary form of
compensation (determined without regard to any reduction in
Annual Base Salary that results in Executive's voluntary
termination with Good Reason, under sections 1.2(n) and 2.3).
(c) Associate, with respect to any Person, is defined
in Rule 12b-2 under the Exchange Act; provided, however, that
an Associate shall not include the Parent or a majority-owned
subsidiary of the Parent.
(d) Bonus means the Executive's bonus or other
similar payment from the Company or the Parent, whether paid
in cash or shares of the Parent's common stock or otherwise,
that is based on the performance of the Company, the Parent,
or the Executive during a fiscal year or years, even if paid
after the close of the fiscal year. The term "Bonus" shall
include, without limitation, for 1996, restricted stock awards
granted in 1996 in lieu of amounts paid under the bonus pool
(which awards shall be deemed to have a value, solely for this
purpose, equal to the Fair Market Value on the date of grant
of all shares subject to the award, whether or not such shares
were vested on the date of grant); and for 1997, amounts paid
under the Company's annual bonus pool. Notwithstanding the
foregoing, for purposes of calculating Base Period Income
under section 2.5, the figure used as a Bonus (or projected
Bonus, for purposes of section 2.5(b)(ii)) for any fiscal year
shall be the greater of (i) the actual Bonus paid (or
projected, for purposes of section 2.5(b)(ii)) for that year,
or (ii) the Bonus that would have been paid if (A) reductions
that would permit a termination with Good Reason had not
occurred, and (B) the discretionary portion of the Bonus was
paid at the higher of "target" or actual levels.
(e) "Cause," means (i) willful, deliberate and
continued failure by the Executive (other than for reason of
mental or physical illness or Disability) to perform his
duties as established by the Company's Board, or fraud or
dishonesty in connection with such duties, in either case, if
such conduct has a materially detrimental effect on the
business operations of the Company; (ii) a material breach by
the Executive of his fiduciary duties of loyalty or care to
the Company or the Parent; (iii) conviction of any crime (or
upon entering a plea of guilty or nolo contendere to a charge
of any crime) constituting a felony; (iv) misappropriation of
funds or property; or (v) willful, flagrant, deliberate and
repeated infractions of material published policies and
regulations of the Company of which the Executive has actual
knowledge.
(f) Change in Control means (i) a Person is or
becomes an Acquiring Person; (ii) holders of the securities of
the Parent entitled to vote thereon approve any agreement with
a Person (or, if such approval is not required by applicable
law
<PAGE>
and is not solicited by the Parent, the closing of such an
agreement) that involves the transfer of at least fifty
percent (50%) of the Parent's and its subsidiaries' total
assets on a consolidated basis, as reported in the Parent's
consolidated financial statements filed with the Securities
and Exchange Commission; (iii) holders of the securities of
the Parent entitled to vote thereon approve a transaction (or,
if such approval is not required by applicable law and is not
solicited by the Parent, the closing of such a transaction)
pursuant to which the Parent will undergo a merger,
consolidation, or statutory share exchange with a Person,
regardless of whether the Parent is intended to be the
surviving or resulting entity after the merger, consolidation,
or statutory share exchange, other than a transaction that
results in the voting securities of the Parent carrying the
right to vote in elections of persons to the Parent's Board
outstanding immediately prior to the closing of the
transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least 66 2/3% (sixty-six and
two-thirds percent) of the Parent's voting securities carrying
the right to vote in elections of persons to the Parent's
Board, or such securities of such surviving entity,
outstanding immediately after the closing of such transaction;
(iv) the Continuing Directors cease for any reason to
constitute a majority of the Parent's Board; (v) holders of
the securities of the Parent entitled to vote thereon approve
a plan of complete liquidation of the Parent or an agreement
for the sale or liquidation by the Parent or its subsidiaries
of substantially all of the assets of the Parent and its
subsidiaries (or, if such approval is not required by
applicable law and is not solicited by the Parent, the
commencement of actions constituting such a plan or the
closing of such an agreement); or (vi) the Parent's Board
adopts a resolution to the effect that, in its judgment, as a
consequence of any one or more transactions or events or
series of transactions or events, a Change in Control of the
Company or the Parent has effectively occurred. The Parent's
Board shall be entitled to exercise its sole and absolute
discretion in adopting any such resolution pursuant to
subparagraph (vi) above and in determining whether or not any
such transaction(s) or event(s) might be deemed, individually
or collectively, to constitute a Change in Control of the
Company or the Parent.
(g) Company's Board means the Board of Directors of
the Company.
(h) Continuing Director means any member of the
Parent's Board, while a member of the Parent's Board and (i)
who was a member of the Parent's Board on the date hereof or
(ii) whose nomination for or election to the Parent's Board
was recommended or approved by a majority of the Continuing
Directors.
(i) Control Affiliate, with respect to any Person,
means an affiliate as defined in Rule 12b-2 under the Exchange
Act.
(j) Control Change Date means the date on which a
Change in Control occurs. If a Change in Control occurs on
account of a series of transactions, the "Control Change Date"
is the date of the last of such transactions.
(k) Disability means a complete physical or mental
inability, confirmed by an independent licensed physician, to
perform substantially all of the services required of an
employee in Executive's position with the Company immediately
before
<PAGE>
Executive first became unable to perform those services, that
continues for a period of two hundred forty (240) consecutive
days, provided that the Company has given advance written
notice to Executive of its determination of such Disability,
and Executive has not resumed performance of such services
within thirty (30) days of such notice.
(l) Exchange Act means the Securities Exchange Act of
1934, as amended.
(m) Fair Market Value has the same meaning given that
term in the Parent's 1994 Stock Incentive Plan, as amended and
in effect from time to time.
(n) Good Reason means the Executive's resignation
from the Company's employment on account of one or more of the
following events:
(i) the failure by the Parent's Board or the
Company's Board (as applicable) to reelect the Executive to
Executive's current position with the Company and the Parent
(as of the Control Change Date), provided the Executive elects
to leave the Company's or Parent's employment within six (6)
months of such failure to so reelect or reappoint the
Executive;
(ii) a material diminution by the Parent's
Board or the Company's Board (as applicable) of the duties,
functions and responsibilities of the Executive as the Vice
President-Asset Management of the Company/Vice President-Asset
Management of the Parent without his consent within six (6)
months of such diminution of duties, responsibilities or
functions; or
(iii) the failure of the Company or the
Parent to permit the Executive to exercise such
responsibilities as are consistent with the Executive's
position and are of such a nature as are usually associated
with such offices of a corporation engaged in substantially
the same business as the Company or the Parent;
(iv) the Company's or the Parent's causing
the Executive to relocate his employment more than fifty (50)
miles from Memphis, Tennessee, without the consent of the
Executive;
(v) the Parent's or the Company's failure to
make (or the Parent's failure to cause the Company to make) a
payment when due to the Executive;
(vi) the Company's reduction, during the
Employment Period, of the Executive's (A) Annual Base Salary,
as such may be increased from time to time after the date of
this Agreement; (B) Bonus, such that the aggregate threshold,
target, or maximum Bonus projected for Executive for a fiscal
year are lower than the greater of (1) the aggregate
threshold, target, or maximum Bonus, respectively, projected
for the Executive for the immediately preceding fiscal year or
(2) the aggregate threshold, target, or maximum Bonus,
respectively, projected most recently prior to the Employment
Period for the Executive; or (C) employee welfare, fringe or
pension benefits, other than reductions determined to be
necessary to
<PAGE>
comply with the Employee Retirement Income Security Act of
1974, as amended, or to retain the tax-qualified or
tax-favored status of the benefit under the Code, which
determination shall be made by the Parent's Board in good
faith. For purposes of section 1.2(vi)(C), awards under the
1994 Plan, and other compensatory awards granted with respect
to the Parent's capital stock under any other plan or outside
of a plan, shall not be considered "employee benefits" and
shall be subject to reduction except to the extent those
awards are otherwise subject to restrictions on reductions in
Bonus levels under section 1.2(vi)(B); or
(vii) the Company, the Company's Board, the
Parent or the Parent's Board directs Executive to engage in
unlawful or unethical conduct or conduct contrary to the
Company's or the Parent's good business practices.
(o) Parent's Board means the Board of Directors of
the Parent.
(p) Person means any human being, firm, corporation,
partnership, or other entity. "Person" also includes any human
being, firm, corporation, partnership, or other entity as
defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act.
The term "Person" does not include the Company, the Parent or
any Related Entity, and the term Person does not include any
employee-benefit plan maintained by the Parent, the Company or
any Related Entity, and any person or entity organized,
appointed, or established by the Parent, the Company or any
Related Entity for or pursuant to the terms of any such
employee-benefit plan, unless the Parent's Board or the
Company's Board determines that such an employee-benefit plan
or such person or entity is a "Person".
(q) Potential Change in Control means that (i) the
Parent's Board approves a transaction or series of
transactions that, if consummated, would result in a Change in
Control; (ii) any Person, the Company, or the Parent makes a
public announcement of its intention to take or consider
taking actions that would result in a Change in Control; (iii)
any Person initiates a tender offer which, if consummated,
would result in a Change in Control; or (iv) the Parent's
Board adopts a resolution to the effect that, in its judgment,
as a consequence of any one or more transactions or events or
series of transactions or events, a Potential Change in
Control of the Company or the Parent has effectively occurred.
The Parent's Board shall be entitled to exercise its sole and
absolute discretion in adopting any such resolution pursuant
to subparagraph (iv) above and in determining whether or not
any such transaction(s) or event(s) might be deemed,
individually or collectively, to constitute a Potential Change
in Control of the Company or the Parent.
(r) Related Entity means any entity that is part of a
controlled group of corporations or is under common control
with the Parent within the meaning of section 1563(a), 414(b)
or 414(c) of the Internal Revenue Code of 1986, as amended
(the "Code").
ARTICLE 2. TERMINATION OF EMPLOYMENT.
2.1 General. Executive is entitled to receive a Termination
Payment according
<PAGE>
to the remaining provisions of this Article 2 if Executive's employment with the
Company terminates during the term of this Agreement and during an Employment
Period (as defined below) because of an event described in either section 2.2 or
2.3. An Employment Period begins on the occurrence of any Potential Change in
Control. An Employment Period also begins on the occurrence of a Control Change
Date if, with respect to the Change in Control to which such Control Change Date
relates, no Potential Change in Control occurred (or a Potential Change in
Control did occur, but it was determined by the Parent's Board to have been
unwound, reversed or concluded (as provided in the following sentence)). If an
Employment Period begins on the occurrence of a Potential Change in Control, it
will end on the earlier of (i) the date (if any) that the events constituting
the Potential Change in Control have been unwound, reversed or concluded such
that the events are no longer expected to result in a Change in Control, as
determined by the Parent's Board in good faith, or (ii) eighteen (18) months
following the Control Change Date to which the Potential Change of Control
relates. If an Employment Period begins on a Control Change Date, it will end
eighteen (18) months following the Control Change Date. If Executive's
employment terminates during an Employment Period and an event described in
section 2.2 or 2.3 has not occurred, or Executive's employment terminates as a
result of his death or Disability, this Agreement terminates.
2.2 Termination by the Company. Executive is entitled to
receive a Termination Payment if Executive's employment is terminated by the
Company during an Employment Period without Cause. If the Company desires to
discharge the Executive for Cause (the "Cause Exception"), it shall give notice
to the Executive as provided in section 2.7 and the Executive shall have thirty
(30) days after notice has been given to him in which to cure the reason for the
Company's exercise of the Cause Exception. If the reason for the Company's
exercise of the Cause Exception is timely cured by the Executive (as determined
by a majority of the members of the Company's Board following a hearing), the
Company's notice of discharge shall become null and void.
2.3 Voluntary Termination. Executive is entitled to receive
a Termination Payment if Executive voluntarily terminates employment during an
Employment Period with Good Reason.
2.4 Termination Payment. The Parent shall pay or shall cause
the Company to pay a Termination Payment equal to one and one half (1 1/2) times
Executive's Base Period Income (as determined under section 2.5) in a single sum
payment, net of any required tax withholding, in cash. The Termination Payment
to Executive shall be made not later than the thirtieth (30th) business day
after Executive's employment termination in accordance with section 2.2 or 2.3
(the "Payment Date"). Notwithstanding the foregoing, if the amount of the
Termination Payment cannot be finally determined on or before the Payment Date,
the Parent shall pay or shall cause the Company to pay on the Payment Date an
estimate, as determined in good faith by the Company, of the minimum amount of
the Termination Payment. Any portion of the Termination Payment that is not made
on the Payment Date shall bear interest at a rate equal to one-hundred twenty
(120) percent of the monthly compounded applicable federal rate, as in effect
under section 1274(d) of the Code for the month in which the Payment Date
occurs. In the event that the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the payor, payable on the fifth day after demand by the Parent or the Company,
as applicable, with interest at the rate provided under section 1274(d) of the
Code until paid.
2.5 Base Period Income. Base Period Income for the Executive
equals the sum of (a) and (b), as determined below:
<PAGE>
(a) Average Annual Base Salary, determined as follows:
(i) twelve times: (A) the monthly rate of Annual Base
Salary to which the Executive is entitled on the day
prior to his termination (the "Salary Measurement
Date"); plus (B) the monthly rate of Annual Base
Salary to which the Executive was entitled twelve
months prior to the Salary Measurement Date, if
Executive was employed by the Company or the Parent
on that date; plus (C) the monthly rate of Annual
Base Salary to which the Executive was entitled
twenty-four months prior to the Salary Measurement
Date, if Executive was employed by the Company or the
Parent on that date (with Annual Base Salary
determined in each case in accordance with section
1.2(b));
(ii) divided by: (A) one, if Executive was not
employed by the Company or the Parent twelve months
prior to the Salary Measurement Date; (B) two, if
Executive was employed by the Company or the Parent
twelve months (but not twenty-four months) prior to
the Salary Measurement Date; or (C) three, if
Executive was employed by the Company twenty-four
months prior to the Salary Measurement Date;
plus
(b) Average Bonus, determined as either:
(i) the sum of the Bonuses paid to or earned by the
Executive for the three fiscal years immediately
preceding the year in which the Executive's
employment with the Company terminates, divided by
the number of such fiscal years for which a Bonus was
paid to or earned by the Executive; provided that if
the Executive was paid or earned a Bonus for any
fiscal year that was pro rated based on partial
year's employment, such Bonus shall be annualized for
purposes of calculating Base Period Income; or
(ii) if Executive earned no Bonus for any fiscal year
prior to the year in which his employment with the
Company terminates, his "target" Bonus for the fiscal
year in which his employment with the Company
terminates shall be his Average Bonus for purposes of
calculating Base Period Income.
All Bonuses shall be determined in accordance with
section 1.2(d), including provisions that specify an
amount to be used in lieu of the Bonus actually paid
or projected for a fiscal year. The provisions of
this section 2.5(b) and section 1.2(d) are
illustrated by the following examples:
Example. Assume a Potential Change in Control occurs
(and thus an Employment Period begins) in December,
1998, and Executive's employment is terminated
without Cause in January, 1999. For purposes of
calculating Executive's Base Period Income,
Executive's Bonuses for the years 1996,
<PAGE>
1997 and 1998 would be averaged. Assume that
Executive received 7,500 shares of restricted stock
in December, 1996 in lieu of a payment under the
bonus pool, and that the Fair Market Value of the
shares on date the shares were issued was $13.50.
Further assume that Executive received a payment
under the bonus pool for 1997, taken part in cash
($150,000) and part in shares of Common Stock (7,500
shares, with a Fair Market Value on the date the
shares were issued of $14.00 per share). Finally,
assume that (i) Executive's 1998 Bonus performance
measures, as established by the Compensation
Committee of the Parent's Board, had a "corporate"
and an "individual" component, (ii) Executive's Bonus
would be $275,000, if the "target" Bonus was paid for
both the corporate and individual components of the
award, and (iii) the target Bonus was earned for both
components of the award.
Executive's average Bonus, for purposes of
calculating his Base Period Income would be
$210,416.67 ([$101,250 for 1996 + $255,000 ($150,000
+ $105,000) for 1997 + $275,000 for 1998] / 3).
Example. Assume the same "target" Bonus levels for
1998 as set forth above. Further assume that (i) a
Potential Change in Control occurs (and, thus, the
Employment Period begins) in January, 1999; (ii) each
of the Bonus projections subsequently established by
the Compensation Committee for the 1999 fiscal year
are set at a level lower than the corresponding Bonus
level projections for 1998; and (iii) Executive's
employment is terminated without Cause in January,
1999. Finally, assume that (i) corporate performance
for fiscal 1999 met "target" levels of achievement;
and (ii) the Compensation Committee determined that
the individual component of the Bonus for 1999 would
be paid at "target" levels. Executive's average
Bonus, for purposes of calculating his Base Period
Income would be $268,333.34 ([$255,000 for 1997 +
$275,000 for 1998 + $275,000 for 1999]). Note that
"target" levels for both the corporate and individual
component as established for 1998 are used to
calculate the average Bonus, because the "target"
levels established for 1999 were lower than "target"
levels established for 1998 - and would have
permitted a termination for Good Reason.
2.6 Other Severance Benefits. In the event Executive is
entitled to a Termination Payment under section 2.4, he shall also be entitled
to the following benefits and other rights:
(a) Accrued but unpaid Annual Base Salary through the
date that Executive's employment terminates, which the Parent
shall pay or cause the Company to pay no later than the
Payment Date (as defined in section 2.4);
(b) Payment of a Bonus for the fiscal year in which
Executive's employment terminates, pro rated based on the
number of days of such year prior to the date of Executive's
termination, with such Bonus being calculated as a pro rated
portion of the "target" Bonus projected for Executive for that
year (determined without regard to any reduction that results
in Executive's termination with Good Reason), which the Parent
shall pay or cause the Company to pay no later than the
Payment Date;
<PAGE>
(c) Payment of any unpaid Bonus for any fiscal year
prior to the year in which Executive's employment terminates
with any discretionary portion of the Bonus being paid at
"target" levels or higher for such year and any
non-discretionary portion of the Bonus being paid based on
actual levels of corporate achievement (each determined
without regard to any reduction that results in Executive's
termination with Good Reason), which the Parent shall pay or
cause the Company to pay no later than the Payment Date;
(d) Forgiveness of all loans made to Executive by the
Company or the Parent and outstanding as of the date of
Executive's termination of employment with the Company (other
than the loan deemed made by the Company to Executive in
accordance with the last sentence of section 2.4 or section
3.3);
(e) Accelerated vesting, settlement, or
exercisability of (i) awards outstanding under the Parent's
1994 Stock Incentive Plan; (ii) compensatory awards granted
with respect to the Parent's capital stock under any other
plan or outside of a plan (in each case, including without
limitation restricted stock awards, performance shares and
stock options); (iii) Executive's balance under the Parent's
Deferred Compensation Plan; and (iv) benefits under any other
non-tax-qualified plan of the Company or the Parent in which a
portion of an award or benefit would be lost through
termination of employment; provided that, in each case, such
acceleration shall occur as of the date of Executive's
termination of employment (if such acceleration has not
previously occurred);
(f) A payment equal to the portion of Executive's
account balance under any defined contribution tax-qualified
pension plan of the Company or the Parent forfeited as a
result of failure to satisfy vesting requirements due to
Executive's termination of employment, which the Parent shall
pay or cause the Company to pay no later than the Payment
Date;
(g) Continuation, for the longer of eighteen (18)
months following the date of termination of employment, or the
period mandated, in the case of group health plan coverage, by
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, of all of Executive's insurance benefits (including
without limitation medical, dental, and vision insurance
benefits) and any other medical, dental or vision benefits (if
not insured) on the same terms as in effect immediately prior
to Executive's termination (determined without regard to any
reduction that results in Executive's termination with Good
Reason); provided that any such benefits in effect immediately
prior to Executive's termination shall be made available to
the Executive for the period stated above even if they must be
secured by the Company or the Parent outside of any plan or
group insurance policy; and
(h) Any other benefits accrued by the Executive as of
the date of his termination of employment, including without
limitation accrued vacation, in accordance with the terms of
the plan, agreement or other arrangement under which the
benefit was established, which the Parent shall pay or cause
the Company to pay no later than the Payment Date.
<PAGE>
2.7 Notice of Termination. Any termination by the Company
under the Cause Exception or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto. For purposes of
sections 2.2, 2.3 and 2.4, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the termination date is other than the date
of receipt of such notice, specifies the effective date of termination.
ARTICLE 3. TAX MATTERS.
3.1 Indemnification. If the excise tax on "excess parachute
payments," as defined in section 280G of the Code, will be imposed on the
Executive under Code section 4999 as a result of the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (without
regard to the "Additional Amount" described below) which the Executive receives
or has the right to receive from the Company or the Parent or any of their
affiliates (the "Change in Control Benefits"), the Company and the Parent shall
indemnify the Executive and hold him harmless against all claims, losses,
damages, penalties, expenses, and excise taxes. To effect this indemnification,
the Parent shall pay or cause the Company to pay to the Executive the
"Additional Amount" described in this section 3.1. The Additional Amount shall
be the amount that is sufficient to indemnify and hold the Executive harmless
from the application of Code sections 280G and 4999, including the amount of (i)
the excise tax that will be imposed on the Executive under section 4999 of the
Code with respect to the Change in Control Benefits; (ii) the additional (A)
excise tax under section 4999 of the Code, (B) hospital insurance tax under
section 3111(b) of the Code and (C) federal, state and local income taxes for
which the Executive is or will be liable on account of the payment of the amount
described in item (i); and (iii) the further excise, hospital insurance and
income taxes for which the Executive is or will be liable on account of the
payment of the amount described in item (ii) and this item (iii) and any other
indemnification payment under this section 3.1. The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the Executive. In calculating the Additional Amount, the highest
marginal rates of federal and applicable state and local income taxes applicable
to individuals and in effect for the year in which the Change in Control occurs
shall be used. Nothing in this paragraph shall give the Executive the right to
receive indemnification from the Company or the Parent for federal, state or
local income taxes or hospital insurance taxes payable solely as a result of the
Executive's receipt of (a) the Termination Payment, or (b) any additional
payment, benefit or compensation other than additional compensation in the form
of the excise tax payment specified in item (i), above. As specified in items
(ii) and (iii), above, all income, hospital insurance and additional excise
taxes resulting from additional compensation in the form of the excise tax
payment specified in item (i), above, shall be paid to the Executive.
3.2 Example. The provisions of section 3.1 are illustrated by
the following example:
<PAGE>
Assume that the Termination Payment and all other Change in
Control Benefits result in a total federal, state and local income tax and
hospital insurance tax liability of $180,000; and an excise tax liability under
Code section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Parent must pay or cause the Company to pay to the Executive $70,000, plus
an amount necessary to indemnify the Executive for all federal, state and local
income taxes, hospital insurance taxes, and excise taxes that will result from
the $70,000 payment to the Executive and from all further indemnification to the
Executive of taxes attributable to the initial $70,000 payment.
3.3 Estimated Payment. Notwithstanding the foregoing, if the
Additional Amount cannot be finally determined on or before the Payment Date (as
defined in section 2.4), the Parent shall pay or cause the Company to pay on the
Payment Date an estimate, as determined in good faith by the Company, of the
minimum amount of the Additional Amount. Any portion of the Additional Amount
that is not made on the Payment Date shall bear interest at a rate equal to one-
hundred twenty (120) percent of the monthly compounded applicable federal rate,
as in effect under section 1274(d) of the Code for the month in which the
Payment Date occurs. In the event that the amount of the estimated payment
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the payor, payable on the fifth day after demand by the
Parent or the Company, as applicable, with interest at the rate provided under
section 1274(d) of the Code until paid.
ARTICLE 4. MITIGATION. The Executive shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking or accepting other employment or otherwise, and compensation earned
from such employment or otherwise shall not reduce the amounts otherwise payable
under this Agreement.
ARTICLE 5. RESTRICTION ON CONDUCT OF EXECUTIVE.
5.1 General. The Executive and the Company understand and
agree that the purpose of the provisions of this Article 5 is to protect
legitimate business interests of the Company and Parent, as more fully described
below, and is not intended to impair or infringe upon the Executive's right to
work, earn a living, or acquire and possess property from the fruits of his
labor. The Executive hereby acknowledges that the post-employment restrictions
set forth in this Article 5 are reasonable and that they do not, and will not,
unduly impair his ability to earn a living after the termination of his
employment with the Company. Therefore, subject to the limitations of
reasonableness imposed by law upon restrictions set forth herein, Executive
shall be subject to the restrictions set forth in this Article 5.
5.2 Definitions. The following capitalized terms used in this
Article 5 shall have the meanings assigned to them below, which definitions
shall apply to both the singular and the plural forms of such terms:
(a) Confidential Information means any confidential
or proprietary information possessed by the Company, the
Parent or a Related Entity, including without limitation, any
confidential "know-how", customer lists, details of client or
consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies,
business plans, operational methods, marketing plans or
strategies, product development techniques or plans, computer
software programs (including object code and source code),
<PAGE>
data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past,
current and planned research and development, acquisition
plans, new personnel acquisition plans and any other
information that would constitute a trade secret under
common law or the laws of the State of Tennessee.
(b) Determination Date means the date of termination
of Executive's employment with the Company for any reason
whatsoever or any earlier date (during the Restricted Period)
of an alleged breach of the Restrictive Covenants by the
Executive.
(c) Principal or Representative means a principal,
owner, partner, shareholder, joint venturer, member, trustee,
director, officer, manager, employee, agent, representative or
consultant.
(d) Protected Employees means employees of the
Company, the Parent, or a Related Entity who were employed by
the Company, the Parent or a Related Entity at any time within
six (6) months prior to the Determination Date.
(e) Restricted Period means the period of Executive's
employment with the Company plus a period extending two (2)
years from the date of termination of employment.
(f) Restrictive Covenants means the restrictive
covenants contained in sections 5.3, 5.4, and 5.5 hereof.
5.3 Restriction on Disclosure and Use of Confidential
Information. Executive understands and agrees that the Confidential Information
constitutes a valuable asset of the Company and the Parent, and may not be
converted to Executive's own use. Accordingly, Executive hereby agrees that
Executive shall not, directly or indirectly, at any time during the Restricted
Period reveal, divulge or disclose to any Person not expressly authorized by the
Company or the Parent any Confidential Information, and Executive shall not,
directly or indirectly, at any time during the Restricted Period use or make use
of any Confidential Information in connection with any business activity other
than that of the Company, the Parent or a Related Entity and, upon request by
the Company or the Parent, shall return all copies of any Confidential
Information then in the Executive's possession as of the date of termination of
his employment. The parties acknowledge and agree that this Agreement is not
intended to be, and does not, alter either the Company's rights or the
Executive's obligations under any state or federal statutory or common law
regarding trade secrets and unfair trade practices.
5.4 Nonsolicitation of Protected Employees. Executive
understands and agrees that the relationship between the Company, the Parent, or
a Related Entity and each of the Protected Employees constitutes a valuable
asset of the Company or the Parent and may not be converted for Executive's own
use. Accordingly, Executive hereby agrees that during the Restricted Period,
Executive shall not directly or indirectly on Executive's own behalf or as a
Principal or Representative of any Person solicit any Protected Employee to
terminate his or her employment with the Company, the Parent, or a Related
Entity.
<PAGE>
5.5 Noninterference with Company and Parent Opportunities.
Executive understands and agrees that all hotel development opportunities with
which he is involved during his employment with the Company constitute valuable
assets of the Company and the Parent and may not be converted to Executive's own
use. Accordingly, Executive hereby agrees that during the Restricted Period,
Executive shall not directly or indirectly on Executive's own behalf or as a
Principal or Representative of any Person, interfere with, solicit, pursue, or
in any way make use of the Company's or the Parent's hotel development
opportunities.
5.6 Exceptions from Disclosure Restrictions. Anything herein
to the contrary notwithstanding, Executive shall not be restricted from
disclosing or using Confidential Information that: (i) is or becomes generally
available to the public other than as a result of an unauthorized disclosure by
Executive or his agent; (ii) becomes available to Executive other than through
his employment by the Company and the Parent and in a manner that is not in
contravention of applicable law from a source (other than the Company, the
Parent, or a Related Entity or one of their officers, employees, agents or
representatives) that is not bound by a confidential relationship with the
Company, the Parent or a Related Entity or by a confidentiality or similar
agreement; (iii) was known to the Executive on a non-confidential basis and not
in contravention of applicable law or a confidentiality or other similar
agreement before its disclosure to Executive by the Company, the Parent, or a
Related Entity or one of their officers, employees, agents or representatives;
or (iv) is required to be disclosed by law, court order or other legal process;
provided, however, that in the event disclosure is required by law, Executive
shall provide the Company with prompt notice of such requirement so that the
Company or the Parent may seek an appropriate protective order prior to such
required disclosure by Executive.
5.7 Enforcement of Covenants.
------------------------
(a) Rights and Remedies upon Breach. In the event
Executive breaches, or threatens to commit a breach of, any of
the provisions of the Restrictive Covenants, the Company and
the Parent shall each have the right and remedy to enjoin,
preliminarily and permanently, Executive from violating or
threatening to violate the Restrictive Covenants and to have
the Restrictive Covenants specifically enforced by any court
of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and the Parent and that
money damages would not provide an adequate remedy to the
Company or the Parent. The rights referred to in the preceding
sentence shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of,
any other rights and remedies available to the Company or the
Parent at law or in equity.
(b) Acknowledgment. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid
in time and space and in all other respects, and that they
will be interpreted in accordance with Article 10.
ARTICLE 6. ATTORNEYS' FEES. In the event that the Executive
incurs any attorneys' fees in protecting or enforcing his rights under this
Agreement, the Parent shall reimburse or cause the Company to reimburse the
Executive for such reasonable attorneys' fees and for any other reasonable
expenses related thereto. Such reimbursement shall be made within thirty (30)
days following final resolution of the dispute or occurrence giving rise to such
fees and expenses.
<PAGE>
ARTICLE 7. DECISIONS BY COMPANY OR PARENT; FACILITY OF
PAYMENT. Any powers granted to the Company's Board or the Parent's Board (as
applicable) hereunder may be exercised by a committee, appointed by either such
Board, and such committee, if appointed, shall have general responsibility for
the administration and interpretation of this Agreement. If such Board or
committee shall find that any person to whom any amount is or was payable
hereunder is unable to care for his affairs because of illness or accident, or
has died, then such Board or committee, if it so elects, may direct that any
payment due him or his estate (unless a prior claim therefore has been made by a
duly appointed legal representative) or any part thereof be paid or applied for
the benefit of such person or to or for the benefit of his spouse, children or
other dependents, an institution maintaining or having custody of such person,
any other person deemed by such Board or committee to be a proper recipient on
behalf of such person otherwise entitled to payment, or any of them, in such
manner and proportion as such Board or committee may deem proper. Any such
payment shall be in complete discharge of the liability of the Company and the
Parent therefor.
ARTICLE 8. INDEMNIFICATION. The Company shall indemnify the
Executive during his employment and thereafter to the maximum extent permitted
by applicable law for any and all liability of the Executive arising out of, or
in connection with, his employment by the Company or the Parent or membership on
the Company's Board or the Parent's Board (as applicable); provided, that in no
event shall such indemnity of the Executive at any time during the period of his
employment by the Company be less than the maximum indemnity provided by the
Company or the Parent at any time during such period to any other officer or
director under an indemnification insurance policy or the bylaws or charter of
the Company or the Parent or by agreement.
ARTICLE 9. SOURCE OF PAYMENTS; NO TRUST. The obligations of
the Parent and the Company to make payments hereunder shall constitute a joint
and several liability of the Parent and the Company to the Executive. Such
payments shall be made from the general funds of the Parent or the Company or
both, and neither the Parent nor the Company shall be required to establish or
maintain any special or separate fund, or otherwise to segregate assets to
assure that such payments shall be made, and neither the Executive nor his
designated beneficiary shall have any interest in any particular asset of the
Parent or the Company by reason of either entity's obligations hereunder.
Nothing contained in this Agreement shall create or be construed as creating a
trust of any kind or any other fiduciary relationship between the Parent or the
Company and the Executive or any other person. To the extent that any person
acquires a right to receive payments from the Parent and the Company hereunder,
such right shall be no greater than the right of an unsecured creditor of the
Parent and the Company.
ARTICLE 10. SEVERABILITY. All agreements and covenants
contained herein, including the Restrictive Covenants, as defined in Article
V, are severable, and in the event any of them (or any portion thereof) shall
be held to be invalid or unenforceable by any competent court, the remainder
of this Agreement (including the remainder of the Restrictive Covenants is only
a portion thereof is held invalid or unenforceable) shall not thereby be
affected, shall be given full effect, and shall be interpreted as if such
invalid agreements, Restrictive Covenants or other covenants (or portion or
portions thereof) were not contained herein.
ARTICLE 11. ASSIGNMENT PROHIBITED. This Agreement is personal
to each of the parties hereto, and none of the parties may assign nor delegate
any of his or its rights or obligations hereunder.
<PAGE>
ARTICLE 12. NO ATTACHMENT. Except as otherwise provided in
this Agreement or required by applicable law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
ARTICLE 13. HEADINGS. The headings of articles, paragraphs
and sections herein are included solely for convenience of reference and shall
not control the meaning or interpretation of any of the provisions of this
Agreement.
ARTICLE 14. GOVERNING LAW. The parties intend that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder shall be construed in accordance with and under and pursuant to the
laws of the State of Tennessee and that in any action, special proceeding or
other proceeding that may be brought arising out of, in connection with, or by
reason of this Agreement, the laws of the State of Tennessee shall be applicable
and shall govern to the exclusion of the law of any other forum, without regard
to the jurisdiction in which any action or special proceeding may be instituted.
ARTICLE 15. SUCCESSORS; BINDING AGREEMENT.
15.1 Successors. The Company and the Parent will require any
successor of all or substantially all of the business and/or assets of either of
them (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company or Parent would be required to
perform it if no such succession had taken place. Failure of the Company or
Parent to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company or the Parent in the same amount and
on the same terms as the Executive would be entitled to hereunder if he
terminated his employment for Good Reason following a Change in Control, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of Executive's
termination. As used in this Agreement, "Company" and "Parent" shall mean the
Company and the Parent as herein before defined and any successor to the
respective entity's business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
15.2 Binding Agreement. This agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representative, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount remains
payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there is none, to the Executive's
estate.
ARTICLE 16. NO RESTRICTION ON EMPLOYMENT RIGHTS. Nothing in
this Agreement shall confer on the Executive any right to continue in the employ
of the Company or the Parent or shall interfere with or restrict in any way the
rights of the Company or the Parent, which are hereby expressly reserved, to
discharge the Executive at any time for any reason whatsoever, with or without
Cause, subject to the requirements of this Agreement. Nothing in this Agreement
<PAGE>
shall restrict the right of the Executive to terminate his employment with the
Company or the Parent at any time for any reason whatsoever, with or without
Good Reason.
ARTICLE 17. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
ARTICLE 18. ENTIRE AGREEMENT. This Agreement expresses the
whole and entire agreement between the parties with reference to the employment
of the Executive and, as of the effective date hereof, supersedes and replaces
any prior employment agreement, understanding or arrangement (whether written or
oral) between the Company or the Parent and the Executive. Each of the parties
hereto has relied on his or its own judgment in entering into this Agreement.
ARTICLE 19. NOTICES. All notices, requests and other
communications to any party under this Agreement shall be in writing and shall
be given to such party at its address set forth below or such other address as
such party may hereafter specify for the purpose by notice to the other party:
(a) If to the Executive:
Michael K. Goforth
7700 Wolf River Boulevard
Germantown, TN 38138
(b) If to the Company
Equity Inns Services, Inc.
7700 Wolf River Boulevard
Germantown, TN 38138
(c) If to the Parent:
Equity Inns, Inc.
7700 Wolf River Boulevard
Germantown, TN 38138
Each such notice, request or other communication shall be effective (i) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address specified in this Article 19.
ARTICLE 20. MODIFICATION OF AGREEMENT. No waiver or
modification of this Agreement or of any covenant, condition, or limitation
herein contained shall be valid unless in writing and duly executed by the party
to be charged therewith. No evidence of any waiver or modification shall be
offered or received in evidence at any proceeding, arbitration, or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid.
<PAGE>
The parties further agree that the provisions of this Article 20 may not be
waived except as herein set forth.
ARTICLE 21. TAXES. To the extent required by applicable law,
the Company or the Parent shall deduct and withhold all necessary Social
Security and Hospital Insurance taxes and all necessary federal and state
withholding taxes and any other similar sums required by law to be withheld from
any payments made pursuant to the terms of this Agreement.
ARTICLE 22. RECITALS. The Recitals to this Agreement are
incorporated herein and shall constitute an integral part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
EXECUTIVE:
---------
By: /s/ Michael K. Goforth
------------------------
MICHAEL K. GOFORTH
EQUITY INNS SERVICES, INC.:
--------------------------
By: /s/ Howard A. Silver
------------------------
Title: President
------------------------
EQUITY INNS, INC.:
-----------------
By: /s/ Howard A. Silver
------------------------
Title: President
------------------------
Exhibit 10.27
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective June 1, 1996 and
Amended and Restated Effective December 1, 1999
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
Section Page
PURPOSE.......................................................................1
DEFINITIONS...................................................................1
PARTICIPATION.................................................................7
DEFERRAL ELECTION.............................................................8
EFFECT OF NO ELECTION.........................................................9
DEFERRED CASH BENEFITS........................................................9
DEFERRED STOCK BENEFITS......................................................10
MATCHING BENEFITS............................................................11
INVESTMENT OPTIONS...........................................................12
DISTRIBUTIONS................................................................13
HARDSHIP DISTRIBUTIONS.......................................................15
COMPANY'S OBLIGATION.........................................................16
CONTROL BY PARTICIPANT.......................................................16
CLAIMS AGAINST PARTICIPANT'S BENEFITS........................................16
AMENDMENT OR TERMINATION.....................................................16
ADMINISTRATION...............................................................17
NOTICES......................................................................18
WAIVER.......................................................................18
BINDING NATURE...............................................................18
CONSTRUCTION.................................................................18
EXHIBIT I INVESTMENT OPTIONS.................................................19
(i)
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
1. PURPOSE. The Equity Inns, Inc. Executive Deferred Compensation Plan
(the "Plan") is intended to constitute a deferred compensation plan for
a select group of management and highly compensated employees of the
Company and its Affiliates and directors of the Company.
2. DEFINITIONS. The following definitions apply to this Plan and to the
Deferral Election Forms and Beneficiary Designation Forms.
(a) Acquiring Person means that a Person, considered alone or
together with all Control Affiliates and Associates of that
Person, is or becomes directly or indirectly the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of
securities representing at least twenty percent (20%) of (i)
the Company's then outstanding securities entitled to vote
generally in the election of the Board; or (ii) Services' then
outstanding securities entitled to vote generally in the
election of the Board of Directors of Services.
(b) Affiliate means (i) any entity that is a member of a
controlled group of corporations as defined in Code section
1563(a), determined without regard to Code sections 1563(a)(4)
and 1563(e)(3)(c), of which the Company is a member according
to Code section 414(b); or (ii) an unincorporated trade or
business that is under common control with the Company as
determined according to Code section 414(c).
(c) Associate, with respect to any Person, is defined in Rule
12b-2 of the General Rules and Regulations under the Exchange
Act. An Associate does not include the Company or a
majority-owned subsidiary of the Company.
(d) Beneficiary or Beneficiaries means a person or persons or
other entity designated on a Beneficiary Designation Form by a
Participant as allowed in subsection 9(c) of this Plan to
receive a Deferred Benefit or Matching Benefit payment. If
there is no valid designation by the Participant, or if the
designated Beneficiary or Beneficiaries fail to survive the
Participant or otherwise fail to take the Deferred Benefit or
Matching Benefit, the Participant's Beneficiary is the first
of the following who survives the Participant: a Participant's
spouse (the person legally married to the Participant when the
Participant dies); the Participant's children in equal shares;
and the Participant's estate.
(e) Beneficiary Designation Form means a form acceptable to the
Committee used by a Participant according to this Plan to name
his Beneficiary or Beneficiaries who will receive all Deferred
Benefit and Matching Benefit payments under this Plan if he
dies.
(f) Board means the board of directors of the Company.
(g) Cash Bonus, with respect to a Deferral Year, means any bonus
or other similar payment from the Company or an Affiliate that
is (i) paid to an Eligible Employee in
- 1 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
cash, and (ii) is based on the performance of the Company, an
Affiliate, the Eligible Employee, or any of them, during the
Deferral Year, even if paid after the close of the Deferral
Year.
(h) Change of Control means (i) a Person is or becomes an
Acquiring Person; (ii) holders of the securities of the
Company entitled to vote thereon approve any agreement with a
Person (or, if such approval is not required by applicable law
and is not solicited by the Company, the closing of such an
agreement) that involves the transfer of at least fifty
percent (50%) of the Company's total assets on a consolidated
basis, as reported in the Company's consolidated financial
statements filed with the Securities and Exchange Commission;
(iii) holders of the securities of the Company entitled to
vote thereon approve a transaction (or, if such approval is
not required by applicable law and is not solicited by the
Company, the closing of such a transaction) pursuant to which
the Company will undergo a merger, consolidation, or statutory
share exchange with a Person, regardless of whether the
Company is intended to be the surviving or resulting entity
after the merger, consolidation, or statutory share exchange,
other than a transaction that results in the voting securities
of the Company carrying the right to vote in elections of
persons to the Board outstanding immediately prior to the
closing of the transaction continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66 2/3% (sixty-
six and two-thirds percent) of the Company's voting securities
carrying the right to vote in elections of persons to the
Company's Board, or such securities of such surviving entity,
outstanding immediately after the closing of such transaction;
(iv) the Continuing Directors cease for any reason to
constitute a majority of the Board; (v) holders of the
securities of the Company entitled to vote thereon approve a
plan of complete liquidation of the Company or an agreement
for the sale or liquidation by the Company of substantially
all of the Company's assets (or, if such approval is not
required by applicable law and is not solicited by the
Company, the commencement of actions constituting such a plan
or the closing of such an agreement); or (vi) the Board adopts
a resolution to the effect that, in its judgment, as a
consequence of any one or more transactions or events or
series of transactions or events, a Change of Control of
Services or of the Company has effectively occurred. The Board
shall be entitled to exercise its sole and absolute discretion
in exercising its judgment and in the adoption of such
resolution, whether or not any such transaction(s) or event(s)
might be deemed, individually or collectively, to satisfy
any of the criteria set forth in subparagraphs (i) through (v)
above.
(i) Code means the Internal Revenue Code of 1986, as amended.
(j) Committee means the Compensation Committee of the Board.
(k) Common Stock means the common stock of the Company.
- 2 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(l) Company means Equity Inns, Inc. and any successor business by
merger, purchase, or otherwise that maintains the Plan.
(m) Compensation, as to an Eligible Employee, means the Eligible
Employee's aggregate combined Salary, Cash Bonus, and Stock
Bonus for a Deferral Year; and, as to an Eligible Director,
means the Eligible Director's Director Fees for a Deferral
Year.
(n) Continuing Director means any member of the Board, while a
member of the Board and (i) who was a member of the Board on
March 1, 1999 or (ii) whose nomination for or election to the
Board was recommended or approved by a majority of the
Continuing Directors.
(o) Control Affiliate with respect to any Person, means an
affiliate as defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(p) Control Change Date means the date on which a Change of
Control occurs. If a Change of Control occurs on account of a
series of transactions, the "Control Change Date" is the date
of the last of such transactions.
(q) Deferral Election Form means a document governed by the
provisions of sections 4, 9 and 10 of this Plan, including (i)
the portion that is the Distribution Election Form and (ii)
the related Beneficiary Designation Form that applies to all
of that Participant's Deferred Benefits and Matching Benefits
under the Plan.
(r) Deferral Year means a calendar year for which a Participant
has an operative Deferral Election Form.
(s) Deferred Account means a Participant's Deferred Cash Account
and Deferred Stock Account, in the aggregate.
(t) Deferred Benefit means a Deferred Cash Benefit, a Deferred
Stock Benefit, or both, as applicable.
(u) Deferred Cash Account means that bookkeeping record
established for each Participant solely for purposes of
measuring a Deferred Cash Benefit and not to segregate assets
or to identify assets that may or must be used to satisfy a
Deferred Cash Benefit. A Deferred Cash Account will be
credited with the Participant's Compensation otherwise payable
in cash and deferred according to a Deferral Election Form and
section 6 of this Plan. A Deferred Cash Account will be
credited and debited periodically to reflect earnings and
losses as provided in sections 6, 8 and 9 of this Plan.
- 3 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(v) Deferred Cash Benefit means the Deferred Benefit elected by a
Participant under section 4 (b) that results in payments
governed by sections 6, 9 and 10.
(w) Deferred Stock Account means that bookkeeping record
established for each Participant solely for the purpose of
measuring a Deferred Stock Benefit and not to segregate assets
as to identify assets that may or must be used to satisfy a
Deferred Stock Benefit. A Deferred Stock Account will be
credited with (i) the Participant's Compensation otherwise
payable in Common Stock, (ii) Nonqualified Option Gain, and
(iii) any portion of a Stock Award, deferred or (in the case
of a Stock Award) forfeited according to a Deferral Election
Form and according to section 7 of this Plan. A Deferred Stock
Account will be credited periodically to reflect earnings as
provided in sections 7 and 9 of this Plan.
(x) Deferred Stock Benefit means the Deferred Benefit elected by a
Participant under section 4(b) that results in payments
governed by sections 7, 9 and 10.
(y) Director Fees means fees payable to an Eligible Director for
service on the Board, whether payable in cash or stock and
whether denominated as meeting fees, retainer fees or
otherwise, but not including awards made under the Company's
Non- Employee Director Compensation Plan (except for awards
made in lieu of cash Director Fees).
(z) Disability or Disabled means that a Participant is unable to
perform the material duties of his position with the Company
or an Affiliate on account of a mental or physical condition
or impairment as determined by the Committee in its sole and
absolute discretion.
(aa) Distribution Election Form means that part of a Deferral
Election Form used by a Participant according to this Plan to
establish the duration of deferral and the frequency of
payments of a Deferred Benefit and a Matching Benefit. If a
Deferred Benefit or Matching Benefit has no Distribution
Election Form that is operative according to section 4,
distribution of that Deferred Benefit or Matching Benefit is
governed by section 9.
(bb) Dividend Equivalents means amounts equal to the dividends that
would have been payable to the Participant during a Deferral
Year on the number of shares of Common Stock credited to the
Participant's Deferred Stock Account had those shares been
held by the Participant.
(cc) Election Date means the date established by this Plan as the
date before which an Eligible Employee or Eligible Director
must submit a valid Deferral Election Form to the Committee.
For each Deferral Year, (i) the Election Date for Salary
deferral is December 31 of the preceding calendar year; (ii)
the Election Date for Cash Bonus or Stock Bonus deferral is
fifteen days before the end of the period for which
- 4 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
performance is measured in determining the amount of a Cash
Bonus or Stock Bonus, or, if earlier, fifteen days before the
amount of Cash Bonus or Stock Bonus is determined; (iii) the
Election Date for Director Fees deferral is December 31 of the
calendar year preceding the year in which the Director Fees
are earned; (iv) the Election Date for any portion of a Stock
Award is December 31 of the year prior to the year in which
such portion is scheduled to become vested; (v) the Election
Date for Nonqualified Option Gain is the day prior to the date
of exercise of the Option; and (vi) the Election Date for
Dividend Equivalents is December 31 of the calendar year prior
to the year in which they will otherwise be paid pursuant to
section 7(b). However, for an individual who becomes an
Eligible Employee or Eligible Director during a Deferral Year,
the Election Date for Salary or Director Fee deferral is the
thirtieth day following the date that he becomes an Eligible
Employee or Eligible Director. Despite the three preceding
sentences, the Committee may set an earlier date as the
Election Date for any Deferral Year with respect to
Compensation, Stock Awards, Nonqualified Option Gain, and/or
Dividend Equivalents.
(dd) Eligible Director means a member of the Board who is not an
employee of the Company or an Affiliate.
(ee) Eligible Employee means an employee of the Company or an
Affiliate who is a member of a select group of management or a
highly compensated employee (as such terms are used in Section
201(2) of the Employee Retirement Income Security Act of
1974), and who is designated by the Committee to elect a
Deferred Benefit under section 4. Once an individual is
designated by the Committee to elect a Deferred Benefit under
section 4, such employee shall continue to be an Eligible
Employee until the date he is no longer a member of management
or a highly compensated employee or the date the Committee
declares he is no longer entitled to elect a Deferred Benefit.
(ff) Exchange Act means the Securities Exchange Act of 1934, as
amended as of January 1, 1990.
(gg) Indebtedness, at any date, means (a) all indebtedness of the
Company for borrowed money, (b) all obligations of the Company
for the deferred purchase price of property or services (other
than current trade liabilities and other accounts payable, and
accrued expenses incurred in the ordinary course of business
and payable in accordance with customary practices), to the
extent such obligations constitute indebtedness for purposes
of GAAP, (c) any other indebtedness of the Company which is
evidenced by a note, bond, debenture or similar instrument,
(d) all obligations of the Company under financing leases and
capital leases, (e) all obligations of the Company in respect
of acceptances issued or created for the Company's account,
(f) all guarantee obligations of the Company, (g) all
reimbursement obligations of the Company for letters of credit
and other contingent liabilities, (h) all liabilities secured
by any lien, mortgage, pledge, security interest, encumbrance
or charge of any kind (collectively, "Liens"), other than
- 5 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Liens for taxes not yet due and payable, on any property owned
by the Company even though the Company has not assumed or
otherwise become liable for the payment thereof, (i) any
repurchase obligation or liability of the Company with respect
to accounts or notes receivable sold by the Company, and (j)
the Company's pro rata share of debt in any loans where the
Company is liable as general partner.
(hh) Investment Options shall mean the investment options shown on
Exhibit I, or otherwise announced by the Committee from time
to time.
(ii) Matching Account means that bookkeeping record established for
each Participant eligible for a Matching Benefit solely for
the purpose of measuring the Matching Benefit and not to
segregate assets or to identify assets that may or must be
used to satisfy a Matching Benefit. A Matching Account will be
credited with the Participant's Matching Benefit accrued
according to section 8 of this Plan. A Matching Account will
be credited and debited periodically to reflect earnings and
losses as provided in sections 8 and 9 of the Plan.
(jj) Matching Benefit means the amounts credited to a Participant's
Matching Account in accordance with section 8 of the Plan that
result in payments governed by sections 8, 9 and 10.
(kk) Nonqualified Option Gain means gain attributable to the
exercise of options not intended to qualify under section 422
of the Internal Revenue Code of 1986, as amended, and granted
under the Company's 1994 Stock Incentive Plan or Non-Employee
Director Compensation Plan, stated as a number of whole shares
of Common Stock, where the option price is paid by the
surrender of shares of Common Stock that have been held by the
Participant for at least six months.
(ll) Participant, with respect to any Deferral Year, means an
Eligible Employee or Eligible Director whose Deferral Election
Form is operative for that Deferral Year according to section
4 of this Plan.
(mm) Person means any human being, firm, corporation, partnership,
or other entity. "Person" also includes any human being, firm,
corporation, partnership, or other entity as defined in
sections 13(d)(3) and 14(d)(2) of the Exchange Act. The term
"Person" does not include the Company, Services or any Related
Entity, and the term Person does not include any employee-
benefit plan maintained by the Company, Services, or any
Related Entity, and any person or entity organized, appointed,
or established by the Company, Services or any Related Entity
for or pursuant to the terms of any such employee-benefit
plan, unless the Board or Services' Board determines that such
an employee-benefit plan or such perso or entity is a
"Person".
(nn) Plan means the Equity Inns, Inc. Executive Deferred
Compensation Plan.
- 6 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(oo) Related Entity means any entity that is part of a controlled
group of corporations or is under common control with the
Company within the meaning of Sections 1563(a), 414(b) or
414(c) of the Code.
(pp) Salary means an Eligible Employee's base salary and does not
include bonuses or other payments from the Company or an
Affiliate that are not made on a regular basis.
(qq) Services means Equity Inns Services, Inc.
(rr) Stock Award means an award of Common Stock granted under the
Company's 1994 Stock Incentive Plan or the Company's
Non-Employee Director Compensation Plan (other than an award
made in lieu of cash director fees).
(ss) Stock Bonus with respect to a Deferral Year, means any bonus
or other similar payment from the Company or an Affiliate that
is (i) paid to an Eligible Employee in Common Stock, and (ii)
is based on the performance of the Company, an Affiliate, the
Eligible Employee, or any of them, during the Deferral Year,
even if paid after the close of the Deferral Year.
(tt) Terminate, Terminating, or Termination, with respect to a
Participant, mean cessation of an employment relationship with
the Company or an Affiliate or of service on the Board whether
by death, Disability, retirement or severance for any other
reason. Unless the Committee determines otherwise in it sole
discretion, Terminate, Terminating, or Termination do not
include situations where the Participant becomes employed by
the Company or one of its Affiliates.
(uu) Total Cost shall mean, as of any date, (i) the sum of the book
value under GAAP of all properties then owned by the Company
plus (ii) all depreciation on such properties previously
reflected on the Corporation's financial statements in
accordance with GAAP.
(vv) Year of Service means a period of twelve months' continuous
employment with the Company or an Affiliate, including periods
of employment prior to the effective date of the Plan. A
single period of simultaneous service with the Company and one
or more Affiliates shall be treated as a single period of
service.
3. PARTICIPATION. An Eligible Employee or Eligible Director becomes a
Participant for any Deferral Year by filing a valid Deferral Election
Form according to section 4 on or before the applicable Election Date
for that Deferral Year, but only if his Deferral Election Form is
operative according to section 4.
4. DEFERRAL ELECTION. A deferral election is valid when a Deferral
Election Form is completed, signed by the electing Eligible Employee,
and received by the Committee. Deferral elections are governed by the
provisions of this section.
- 7 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(a) A Participant may elect a Deferred Benefit for any Deferral
Year if he is an Eligible Employee or Eligible Director at the
beginning of that Deferral Year or becomes an Eligible
Employee or Eligible Director during that Deferral Year.
(b) Before each Election Date for a Deferral Year, each Eligible
Employee and Eligible Director will be provided with a
Deferral Election Form and a Beneficiary Designation Form.
Under the Deferral Election Form or Forms for a single
Deferral Year, an Eligible Employee may elect on or before the
applicable Election Date to defer a portion of his
Compensation for the Deferral Year as provided in the
following sentence. At the time a Salary deferral is elected,
a Participant may defer up to 25 percent of Salary for the
Deferral Year, and at the time a Cash Bonus or Stock Bonus
deferral is elected, a Participant may defer up to 25 percent
of Compensation for the Deferral Year, less the amount of
Salary deferred for that Deferral Year. Under the Deferral
Election Form or Forms for a single Deferral Year, an Eligible
Director may elect on or before the application Election Date
to defer receipt of all or part of his Director Fees. In
addition, under the Deferral Election Form or Forms for a
single Deferral Year, an Eligible Employee or an Eligible
Director my elect on or before the applicable Election Date to
forfeit or defer receipt of all or part of his (i) Stock
Awards that may vest during the Deferral Year (specifying the
Stock Award, and one or more whole shares subject to the
election); (ii) Nonqualified Option Gain (specifying the
Option, and one or more whole shares of Common stock subject
to the election); or (iii) Dividend Equivalents that will be
payable during the Deferral Year, as provided in section 7(b),
absent the deferral election.
(c) Each Distribution Election Form is part of the Deferral
Election Form on which it appears or to which it states that
it is related. The Committee may allow a Participant to file
one Distribution Election Form for all of his Deferred
Benefits and Matching Benefits. In its sole discretion, the
Committee may allow a Participant to change his Distribution
Election Form or file a Distribution Election Form after the
time he files his initial Deferral Election Form in accordance
with section 10(b) and any other procedures established by the
Committee, but subject to the approval of the Board, if
required by section 16(a). The provisions of section 9 apply
to any Deferred Benefit or Matching Benefit under this Plan if
there is no operative Distribution Election Form for that
Deferred Benefit or Matching Benefit.
(d) If it does so before the last business day of the Deferral
Year, the Committee may reject any Deferral Election Form or
Distribution Election Form or either form, and the Committee
is not required to state a reason for any rejection. The
Committee may modify any Distribution Election Form at any
time to the extent necessary to comply with any federal
securities laws or regulations. The Committee's rejections
must be made on a uniform basis with respect to similarly
situated Participants. If the Committee rejects a Deferral
Election Form, the Participant must be paid the amounts he
would then have been entitled to receive if he had not
submitted the rejected Deferral Election Form.
- 8 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(e) An Eligible Employee or Eligible Director may not revoke a
Deferral Election Form or a Distribution Election Form after
the applicable Election Date. Any revocation before the
applicable Election Date is the same as a failure to submit a
Deferral Election Form or a Distribution Election Form. Any
writing signed by an Eligible Employee or Eligible Director
expressing an intention to revoke his Deferral Election Form
and delivered to the Committee before the close of business on
the applicable Election Date is a revocation.
5. EFFECT OF NO ELECTION. An Eligible Employee or Eligible Director who
has not submitted a valid Deferral Election Form to the Committee on or
before the applicable Election Date may not defer any amounts for the
Deferral Year under this Plan. The Deferred Benefit and Matching
Benefit of an Eligible Employee who submits a valid Deferral Election
Form but fails to submit a valid Distribution Election Form for that
Deferred Benefit or Matching Benefit before the applicable Election
Date or who otherwise has no valid Distribution Election Form for that
Deferred Benefit and Matching Benefit is governed by section 10.
6. DEFERRED CASH BENEFITS.
(a) Deferred Cash Benefits will be credited to a Deferred Cash
Account for each Participant as follows: (i) Salary deferrals
shall be credited to a Participant's Deferred Cash Account as
of the last day of the payroll period in which the deferred
Salary would have been paid; (ii) deferrals of Director Fees
otherwise payable in cash shall be credited to a Participant's
Deferred Cash Account as of the day that the Director Fees
would have been paid; (iii) Cash Bonus deferrals shall be
credited to a Participant's Deferred Account as of the date
such award would have been paid; and (iv) deferrals of
Dividend Equivalents shall be credited to a Participant's
Deferred Cash Account as of the day that the dividends on
which the amount of the Dividend Equivalent is based are
payable to shareholders.
(b) Earnings and losses, in amounts determined under section 9,
will be credited or debited on the last day of each month
based on the Deferred Cash Account balance on the last day of
the preceding month. Earnings and losses are accrued through
the last day of the month preceding the month of distribution
of a Deferred Cash Benefit.
(c) A Participant's Deferred Cash Benefits for all Deferral Years
shall be immediately and fully vested.
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<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
7. DEFERRED STOCK BENEFITS.
(a) Deferred Benefits attributable to deferred Stock Awards, Stock
Bonus, Director Fees otherwise payable in Common Stock and
Nonqualified Option Gain shall be Deferred Stock Benefits.
Deferred Stock Benefits will be credited to a Deferred Stock
Account as follows: (i) Stock Award deferrals will be
credited on the day following the Election Date; (ii)
Nonqualified Option Gain deferrals will be credited on the day
following the date of exercise of the related Option; (iii)
Director Fees otherwise payable as Common Stock and deferred
Stock Bonus will be credited to a Participant's Deferred Stock
Account as of the day that the Director Fees or Stock Bonus
would have been paid.
(b) A Deferred Stock Account shall not be credited with earnings.
A cash payment (referred to herein as "Dividend Equivalents")
equal to the dividends that would have been paid to
Participant on the whole shares of Common Stock credited to
the Deferred Stock Account as of any Common Stock dividend
distribution date, had the Participant actually owned the
credited shares, shall be distributed to Participant on each
such distribution date. Notwithstanding the preceding
sentence, if a deferral election with respect to Dividend
Equivalents for a Deferral Year has been made in accordance
with Section 6(a), no distribution of Dividend Equivalents
shall be made for the Deferral Year, and the provisions of the
Plan governing Deferred Cash Benefits shall apply.
(c) The portion of a Participant's Deferred Stock Benefit
attributable to Nonqualified Option Gain, and deferred Stock
Bonus and Director Fees are immediately and fully vested. The
portion of a Deferred Stock Benefit attributable to deferred
Stock Awards (or a portion thereof) shall become vested as of
the date the related (i) Stock Award (or portion thereof)
would otherwise have become nonforfeitable and transferable,
provided any conditions for vesting set forth in the Agreement
relating to the stock Award are satisfied. To the extent a
Participant Terminates under circumstances that do not allow
for continued vesting or to the extent the Stock Award would
otherwise be forfeited if then held by the Participant, the
unvested portion of Participant's Deferred Stock Account shall
be immediately forfeited, and Participant shall have no
further rights with respect to that portion of his Deferred
Stock Account regardless of whether Participant is
subsequently reemployed by the Company or an Affiliate or
recommences service on the Board. Notwithstanding any other
provision of this section 7(c), a Participant's entire
Deferred Stock Benefit shall become fully vested upon a
Control Change Date except to the extent forfeited under the
preceding sentence prior to the Control Change Date.
- 10 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
8. MATCHING BENEFITS.
(a) Matching Benefits will be credited only with respect to
deferrals of Salary and Cash Bonus. Matching Benefits will be
credited to a Matching Account for a Participant on the same
day as the Deferred Benefits to which the Matching Benefits
relate. Matching Benefits with respect to Salary deferrals
will be credited in an amount equal to such Salary deferrals;
provided, however, that (i) Matching Benefits (without regard
to earnings and losses attributable thereto) with respect to
Salary deferrals shall not exceed ten percent of the
Participant's Salary for the Deferral Year (the "ten percent
of Salary limit"), and (ii) no further Matching Benefits with
respect to Salary deferrals for the Deferral Year shall be
made after the ten percent of Salary limit is reached
(although earnings and losses attributable to Matching
Benefits will continue to be credited and debited from the
Participant's Matching Account). Notwithstanding the
foregoing, if Participant's Salary for the Deferral Year is
increased during the Deferral Year, Matching Contributions
will recommence on the date next scheduled for crediting
Salary deferrals to the Participant's Deferred Cash Account
under subsection 6(a) and shall be made in the same manner as
set forth in the preceding sentence. If Participant
Terminates or if his Salary is reduced during the Deferral
Year, the Committee shall determine within 30 days of such
Termination or reduction in Salary whether, as a result of
such event, previously credited Matching Benefits (without
regard to earnings and losses attributable thereto) with
respect to Salary deferred for the Deferral Year exceed the
ten percent of Salary limit. On the date of such
determination, Matching Benefits for the Deferral Year, as
adjusted by earnings and losses attributable thereto, will be
forfeited to the extent necessary to satisfy the ten percent
of Salary limit. Matching Benefits with respect to Cash Bonus
deferrals will be credited in an amount equal to ten percent
of such Cash Bonus deferrals; provided, however, that the
total Matching Benefit for the Deferral Year (without regard
to earnings and losses attributable thereto) shall not exceed
ten percent of a Participant's Salary and Cash Bonus.
(b) Earnings and losses, in amounts determined under section 9,
will be credited and debited on the last day of each month
based on the Matching Account balance on the last day of the
preceding month. Earnings and losses are accrued through the
end of the month preceding the month of distribution of a
Matching Benefit.
(c) A Participant who has completed one Year of Service shall be
immediately and fully vested in twenty percent of the
Participant's Matching Benefits for all Deferral Years. For
each additional Year of Service completed by the Participant,
the Participant shall be immediately and fully vested in an
additional twenty percent of the Participant's Matching
Benefits for all Deferral Years, so that a Participant who has
completed five Years of Service shall be immediately and fully
vested in one hundred percent of the Participant's Matching
Benefits for all Deferral Years.
(d) If a Participant Terminates employment with the Company or an
Affiliate by reason of death, Disability or retirement,
Participant's entire Matching Benefit shall be fully
- 11 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
vested upon such Termination; provided, however, that this
sentence shall not apply to a Participant who is not an
Eligible Employee at the time of such death, Disability or
retirement. If a Participant Terminates employment with the
Company or an Affiliate for any reason other than death,
Disability or retirement, any portion of his Matching Account
that is not then vested in accordance with this subsection
8(d) shall be immediately forfeited, and Participant shall
have no further rights with respect to that portion of his
Matching Account, regardless of whether Participant is
subsequently reemployed by the Company or an Affiliate.
(e) Notwithstanding the foregoing, a Participant shall be
immediately and fully vested in his Matching Account upon a
Control Change Date provided the Participant is employed by
the Company or an Affiliate on the Control Change Date.
9. INVESTMENT OPTIONS.
(a) The Company has selected the Investment Options shown on in
Exhibit I, any of which may be changed, modified or deleted,
and to which additional Investment Options may be added, from
time to time by the Committee.
(b) At the time an Eligible Employee or Eligible Director first
becomes a Participant for any Deferral Year, the Participant
shall choose one of the Investment Options, as permitted on
the Participant's Deferral Election Form. Such Investment
Options will be used as a measure of the investment
performance of the Participant's Deferred Cash Account and
Matching Account. To the extent a Participant fails to select
an Investment Option for his Deferred Cash Benefit and
Matching Benefit on his Deferral Election Form, he shall be
deemed to have elected an Investment Option yielding interest
based on average three-month Treasury Bill rates (equivalent
yield, not discount yield) as published by the Federal Reserve
Board, or such other default Investment Option announced by
the Committee for this purpose from time to time. The
applicable Treasury Bill rate for each month will be
determined on the last business day of the previous month.
(c) A Participant may change the Investment Options for his
Deferred Cash Account and his Matching Account in accordance
with procedures established and at the time or times permitted
by the Committee, but Participant may not make a change more
often than once per calendar quarter. An election to change
an Investment Option shall be made on forms designated for
this purpose by the Committee and shall specify whether the
change is to apply to Participant's entire Deferred Cash
Account and Matching Account, or only to future deferrals and
Matching Benefits attributable thereto. Until a Participant
delivers a new election form to the Committee, his prior
Investment Option selection shall control the measure of
investment performance of his Deferred Cash Account and
Matching Account.
- 12 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(d) Earnings and losses will be credited to or debited from a
Participant's Deferred Cash Account and his Matching Account
as if such account balances were invested in the Investment
Options selected by the Participant (or if no Investment
Options were selected for a portion of the Participant's
accounts, as if such account balances were invested according
to the last two sentences of subsection 9(b)) in the manner
set forth in the following sentence: as of the last business
day of each month in which any amount remains credited to the
Deferred Cash Account or Matching Account of a Participant,
each portion of such accounts deemed invested in a particular
Investment Option shall either be credited or debited with an
amount equal to that determined by multiplying the balance of
such portion of such account as of the last day of the
preceding month by the return rate for that month for the
applicable Investment Option. As to the applicable amount
distributed, the Company shall cease crediting and debiting
the Participant's Deferred Cash Account or Matching Account
with earnings and losses on the last day of the month
preceding the date of distribution.
10. DISTRIBUTIONS.
(a) According to a Participant's Distribution Election Form, but
subject to Plan section 4(d), a Deferred Cash Benefit and a
vested Matching Benefit must be distributed in cash. According
to a Participant's Distribution Election Form but subject to
the Company's 1994 Stock Incentive Plan and Non-Employee
Director Stock Compensation Plan, a vested Deferred Stock
Benefit must be distributed in shares of Common Stock equal to
the number of whole shares of Common Stock credited to the
vested portion of Participant's Deferred Stock Account on the
last day of the month preceding the month of distribution.
Cash will be paid in lieu of a fractional share of Common
Stock credited to the Participant's Deferred Stock Account on
the last day of the month preceding the month of distribution.
(b) Except for distributions triggered by a Participant's
Disability, vested Deferred Benefits and vested Matching
Benefits will be paid in a lump sum unless the Participant's
Distribution Election Form specifies installment payments over
a period of up to 15 years. If permitted on a Distribution
Election Form, a Participant may elect one form of
distribution if the payment of Deferred Benefits and Matching
Benefits begins on particular dates or events, and another
form of distribution if the payment of Deferred Benefits and
Matching Benefits begins on other dates or events. With the
consent of the Committee, a Participant may amend his
Distribution Election Form to change the form of benefit
payments previously elected, including, without limitation, a
change in the period over which installments payments will be
made, if (i) the amendment is approved by the Committee before
the calendar year in which benefit payments are scheduled to
begin (or, with respect to one or more unpaid installments,
before the calendar year in which such installment or
installments are scheduled to be paid) and (ii) the change in
payment form conforms to the requirements of the Plan.
Earnings and losses will continue to be credited to and
- 13 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
debited from a Deferred Cash Benefit or vested Matching
Benefit payable in installments under section 9(d) on the
unpaid balance of a Deferred Cash Account or Matching Account.
If a Participant Terminates as a result of his Disability,
Deferred Benefits and vested Matching Benefits will be paid to
such Participant in installment payments over a period of 10
years commencing on the date his Disability is certified by
the Committee unless the Committee, in its sole discretion,
approves a longer or shorter payment period. If, after his
Termination as a result of Disability, such Participant
recovers before the balance of his Deferred Account and vested
Matching Account under the Plan is exhausted, his
distributions will be discontinued and any remaining Deferred
Benefits or Matching Benefits under the Plan will be governed
by the provisions of this section and his Distribution
Election Form.
Unless otherwise specified in a Participant's Distribution
Election Form, any lump sum payment will be paid or
installment payments will begin to be paid on the earlier of
(i) the last day of the month in which the Participant's
sixty-fifth birthday occurs, or (ii) the last day of the month
in which the Participant's Termination occurs. For
distributions that would automatically be caused under the
preceding sentence by a Participant's Termination (other than
by death or Disability) or for distributions that would
otherwise automatically begin because a Participant reaches
age sixty-five, the Participant may elect on his Distribution
Election Form that payments are to begin on the earliest of
one or more of the following dates or events:
(i) on the last day of the month in which his
Termination occurs, without regard to his age;
(ii) on the last day of the month in which the
later of his Termination occurs or he attains a specified age;
(iii) even if Participant does not Terminate, on
the last day of the month in which Participant attains a
specified age;
(iv) even if Participant does not Terminate, on
the last day of a specified month in a specified year;
(v) on a Control Change Date; or
(vi) on the occurrence of any other event or date
selected by the Committee for this purpose and listed on a
Distribution Election Form.
For purposes of these distribution election alternatives, any
age specified in accordance with section 10(b)(iii) must be
not less than the Participant's age one year from the Election
Date, and any date specified in accordance with section
10(b)(iv)
- 14 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
must be at least one year after the Election Date for to the
applicable Deferral Year and type of payment being deferred.
With the consent of the Committee, a Participant may amend his
Distribution Election Form to change the commencement of
benefit payments if (i) the amendment is approved by the
Committee before the calendar year in which benefit payments
are scheduled to begin (or, with respect to one or more unpaid
installments, before the calendar year in which such
installment or installments are scheduled to be paid) and (ii)
the amended payment date conforms to the requirements of the
Plan.
(c) Deferred Benefits may not be assigned by a Participant or
Beneficiary. A Participant may use only one Beneficiary
Designation Form to designate one or more Beneficiaries for
all of his Deferred Benefits and Matching Benefits under the
Plan; such designations are revocable. Each Beneficiary will
receive his portion of the Participant's Deferred Account and
Matching Account on the last day of the month in which
Participant's death occurs unless the Beneficiary's request
for an accelerated payment is approved at the Committee's
discretion under section 11 or unless the Beneficiary's
request for a different distribution schedule or form of
payment is received before distributions begin and is approved
at the Committee's discretion. The Committee may insist that
multiple Beneficiaries agree upon a single distribution
method.
(d) Notwithstanding the foregoing, the balance of a Participant's
Deferred Account and Matching Account shall be paid to the
Participant or a Beneficiary in a lump sum within thirty days
of a Control Change Date. The preceding sentence shall apply
(i) only if no Distribution Election Form is in effect for
that Participant, and (ii) if that Participant dies before the
lump sum payment is scheduled to be paid under the preceding
sentence, only if no request for a distribution schedule or
form of payment that is inconsistent with such lump sum
payment has been submitted by the Beneficiary of that
Participant and approved by the Committee in accordance with
section 10(c).
11. HARDSHIP DISTRIBUTIONS.
(a) At its sole discretion and at the request of a Participant
before or after the Participant's Termination, or at the
request of any of the Participant's Beneficiaries after the
Participant's death, the Committee may accelerate and pay all
or part of any amount attributable to a P articipant's vested
Deferred Benefits or his vested Matching Benefits under this
Plan. Accelerated distributions may be allowed only in the
event of a financial emergency beyond the Participant's or
Beneficiary's control and only if disallowance of a
distribution would create a severe hardship for the
Participant or Beneficiary. An accelerated distribution must
be limited to the amount determined by the Committee to be
necessary to satisfy the financial emergency, with such
distribution first being made from Participant's Deferred
Cash Account then from
- 15 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Participant's vested Matching Account, and, if an additional
distribution is necessary to satisfy the emergency after
Participant's Deferred Cash Account and vested Matching
Account have been exhausted, then being made from
Participant's vested Deferred Stock Account.
(b) A distribution under this section must be paid in cash or
shares of Common Stock and is in lieu of that portion of the
Deferred Benefit or Matching Benefit that would have been paid
otherwise. A Deferred Benefit or Matching Benefit is adjusted
for a distribution under this section by reducing the
Participant's Deferred Account balance or Matching Account
balance by the amount of the distribution.
12. COMPANY'S OBLIGATION. The Plan is unfunded. A Deferred Benefit and
Matching Benefit is at all times a mere contractual obligation of the
Company. A Participant and his Beneficiaries have no right, title, or
interest in the Deferred Benefits or Matching Benefits or any claim
against them. All Deferred Benefits and Matching Benefits will be
satisfied solely out of the general corporate assets of the Company,
which shall remain subject to the claims of its creditors and the
creditors of any Affiliate that is an employer of a Participant. The
Company may establish one or more trusts under which payments may be
made that will satisfy the Company's obligations under this Plan to the
extent of such payments. The assets of any such trusts will remain
subject to the claims of the creditors of the Company and any Affiliate
that is an employer of a Participant.
13. CONTROL BY PARTICIPANT. A Participant has no control over Deferred
Benefits or Matching Benefits except according to his Deferral Election
Forms, his Distribution Election Forms, his Beneficiary Designation
Form, and any Investment Options elected on the form specified by the
Committee.
14. CLAIMS AGAINST PARTICIPANT'S BENEFITS. A Deferred Account or Matching
Account relating to a Participant under this Plan is not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so is void. A Deferred
Benefit or Matching Benefit is not subject to attachment or legal
process for a Participant's debts or other obligations. Nothing
contained in this Plan gives any Participant any interest, lien, or
claim against any specific asset of the Company. A Participant or his
Beneficiary has no rights other than as a general creditor of the
Company.
15. AMENDMENT OR TERMINATION. Except as otherwise provided in this section,
this Plan may be altered, amended, suspended, or terminated at any time
by the Board. Except for a termination of the Plan caused by the
determination of the Board that the laws upon which the Plan is based
have changed in a manner that negates the Plan's objectives, the Board
may not alter, amend, suspend, or terminate this Plan without the
majority consent of all Eligible Employees if that action would result
either in a distribution of all Deferred Benefits or Matching Benefits
in any manner other than as provided in this Plan or that would result
in immediate taxation of Deferred Benefits or Matching Benefits to
Participants.
- 16 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Notwithstanding the preceding sentence, if any amendment to the Plan,
subsequent to the date the Plan becomes effective, adversely affects
the deferred taxation of Deferred Benefits or Matching Benefits elected
hereunder, after the effective date of any such amendment, and the
Internal Revenue Service declines to rule favorably on any such
amendment or to rule favorably only if the Board makes amendments to
the Plan not acceptable to the Board, the Board, in its sole
discretion, may accelerate the distribution of part or all of the
amounts attributable to affected Deferred Benefits and Matching
Benefits due Participants and Beneficiaries hereunder.
16. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, subject to
the approval of the Board on any matters relating to Deferred
Benefits of Eligible Directors that may affect the taxation
of those Deferred Benefits, including, without limitation, the
Committee's selection of potential distribution events under
section 10(b)(vi), and its acceptance of an Eligible
Director's Deferral Election Form or Distribution Election
Form or its approval of changes to those Forms. Any references
in this Plan to actions to be taken by the Committee must be
interpreted and implemented in accordance with the preceding
sentence. Subject to the provisions of the Plan, the Committee
may adopt such rules and regulations as may be necessary to
carry out the purposes hereof. The Committee's interpretation
and construction of any provision of the Plan shall be final
and conclusive.
(b) The Company shall indemnify and save harmless each member of
the Committee and the Board against any and all expenses and
liabilities arising out of membership on the Committee and the
Board and relating to administration of the Plan, excepting
only expenses and liabilities arising out of a member's own
willful misconduct. Expenses against which a member of the
Committee or the Board shall be indemnified hereunder shall
include without limitation, the amount of any settlement or
judgment, costs, counsel fees, and related charges reasonably
incurred in connection with a claim asserted, or a proceeding
brought or settlement thereof. The foregoing right of
indemnification shall be in addition to any other rights to
which any such member may be entitled.
(c) In addition to the powers hereinabove specified, the Committee
shall have the power to select which employees of the Company
and its Affiliates will be eligible to elect a Deferred
Benefit under the Plan, to compute and certify the amount and
kind of benefits from time to time payable to Participants and
their Beneficiaries under the Plan, to authorize all
disbursements for such purposes, and to determine whether a
Participant is entitled to a benefit under the Plan.
(d) To enable the Committee to perform its functions, the Company
shall supply full and timely information to the Committee on
all matters relating to the compensation of all Participants,
- 17 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
their retirement, death or other cause for termination of
employment, and such other pertinent facts as the Committee
may require.
17. NOTICES. Notices and elections under this Plan must be in writing. A
notice or election is deemed delivered if it is delivered personally or
if it is mailed by registered or certified mail to the person or
business at its last known business address.
18. WAIVER. The waiver of a breach of any provision in this Plan does not
operate as and may not be construed as a waiver of any later breach.
19. BINDING NATURE. The Plan shall be binding upon the Company, its
Affiliates and the successors and assigns of the Company and its
Affiliates, subject to the provisions set forth in section 14, and upon
a Participant, his or her Beneficiary, and either of their assigns,
heirs, executors or Committees.
20. CONSTRUCTION. This Plan is created, adopted, and maintained according
to the laws of the State of Tennessee (except its choice-of-law rules).
It is governed by those laws in all respects. Headings and captions are
only for convenience; they do not have substantive meaning. If a
provision of this Plan is not valid or not enforceable, that fact in no
way affects the validity or enforceability of any other provision. Use
of one gender includes all, and the singular and plural include each
other.
- 18 -
<PAGE>
EQUITY INNS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
EXHIBIT I
INVESTMENT OPTIONS
Institutional Growth & Income (60/40 Global)
Institutional Capital Growth (80/20 Global)
Institutional Equity Portfolio (100% Global Equity)
Growth & Income Portfolio (60/40 US)
Capital Growth Portfolio (80/20 US)
Domestic Equity Portfolio (100 % US Equity)
- 19 -
Exhibit 21.1
SUBSIDIARIES OF EQUITY INNS, INC.
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation/Organization
- ---- --------------------------
<S> <C>
Equity Inns Trust Maryland
Equity Inns Services, Inc. Tennessee
Equity Inns Partnership, L.P. Tennessee
Equity Inns Partnership II, L.P. Tennessee
Equity Inns/West Virginia Partnership, L.P. Tennessee
EQI Financing Corporation Tennessee
EQI Financing Partnership I, L.P. Tennessee
EQI Financing Corporation II Tennessee
EQI Financing Partnership II, L.P. Tennessee
EQI/WV Financing Partnership, L.P. Tennessee
ENN Company, Inc. Tennessee
E. Inns Orlando, Inc. Tennessee
E.I.P. Orlando, L.P. Tennessee
</TABLE>
Exhibit 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Equity Inns, Inc. on Form S-3 (Files Nos. 333-26559, 33-99480, 33-90364,
333-48169, 333-47761 and 333-63253) of our report dated January 21, 2000,
except as to Note 4, for which the date is January 25, 2000, on our audits of
the consolidated financial statements and financial statement schedule of
Equity Inns, Inc. as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999, which report is included in this
Annual Report on Form 10-K.
PricewaterhouseCoopers, LLP
Memphis, Tennessee
March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EQUITY INNS, INC. FOR THE YEAR ENDED DECEMBER 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<CASH> 361
<SECURITIES> 0
<RECEIVABLES> 8,438
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 814,537
<DEPRECIATION> 0
<TOTAL-ASSETS> 832,119
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
68,750
<COMMON> 373
<OTHER-SE> 343,129
<TOTAL-LIABILITY-AND-EQUITY> 832,119
<SALES> 118,424
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 88,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,947
<INCOME-PRETAX> 30,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 133
<CHANGES> 0
<NET-INCOME> 22,785
<EPS-BASIC> .61
<EPS-DILUTED> .61
</TABLE>
