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EXHIBIT 99.1
AMENDMENT NO. 1 TO THE THIRD AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
EQUITY INNS PARTNERSHIP, L.P.
This Amendment No. 1 (this "Amendment") to the Third Amended and
Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P. dated
June 25, 1997 (the "Partnership Agreement") is entered into as of June 25, 1998,
by and among Equity Inns, Inc., a Tennessee corporation (the "Corporation"),
Equity Inns Trust, a Maryland real estate investment trust (the "General
Partner"), and the limited partners (the "Limited Partners") of Equity Inns
Partnership, L.P. (the "Partnership"). All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Partnership
Agreement.
WHEREAS, the Corporation, which is the sole shareholder of the General
Partner, on even date herewith, has issued 2,750,000 shares of its 9 1/2% Series
A Cumulative Preferred Stock, $.01, par value per share, having a liquidation
preference equivalent to $25.00 per share (the "Series A Preferred Stock"), and
has sold such Series A Preferred Stock in a public offering and may issue and
sell up to an aggregate of 412,500 additional shares of Series A Preferred
Stock;
WHEREAS, the Corporation desires to contribute the net proceeds of the
sale of the Series A Preferred Stock through the General Partner to the
Partnership in exchange for preferred partnership interests in the Partnership
as set forth herein;
WHEREAS, the General Partner is authorized to cause the Partnership to
issue interests in the Partnership to the General Partner in exchange for such
contribution of such net proceeds made by the Corporation through the General
Partner;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Partnership Agreement as follows:
Section 1. Contribution.
The Corporation hereby contributes through the General Partner to the
Partnership the entire net proceeds received by the Corporation from the
issuance of the Series A Preferred Stock. As provided in Section 4.02(g) of the
Partnership Agreement, the Corporation shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the gross proceeds raised
in connection with the issuance of such shares of Series A Preferred Stock,
which is $68,750,000 and the Partnership shall be deemed
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simultaneously to have paid, pursuant to Section 6.05(b) of the Partnership
Agreement, for the costs and expenses relating to the offer, registration and
sale of the Series A Preferred Stock.
Section 2. Issuance of Series A Preferred Units.
In consideration of the contribution to the Partnership made by the
Corporation through the General Partner pursuant to Section 1 hereof, the
Partnership hereby issues to the General Partner 2,750,000 Series A Preferred
Units (as defined below) and may issue to the General Partner an additional
412,500 Series A Preferred Units.
Section 3. Definitions.
Article I of the Partnership Agreement is hereby amended by inserting
in the logical alphabetical locations the following definitions of Common Units,
Preferred Units, Series A Preferred Return, Series A Preferred Stock and Series
A Preferred Units, as follows:
"Common Units" means all Partnership Units that are not specifically
designated as Preferred Units pursuant to Section 4.02(c).
"Preferred Units" means all Partnership Units designated as units of
preferred partnership interest and issued by the Partnership from time to time.
"Series A Preferred Return" means an annualized amount equal to $2.375
per Series A Preferred Unit.
"Series A Preferred Stock" means the 9 1/2% Series A Cumulative
Preferred Stock, $.01 par value, of the Corporation.
"Series A Preferred Units" means the Preferred Units issued to the
General Partner in exchange for the net proceeds of the issuance by the
Corporation of its Series A Preferred Stock, which Series A Preferred Units
shall have the designations, preferences, privileges, limitations and relative
rights set forth in Section 4.02(c)(i) hereof.
Section 4. Creation of Series A Preferred Units.
Article IV of the Partnership Agreement is hereby amended by adding
Section 4.02(c)(i) as follows:
"(i) 9 1/2% SERIES A CUMULATIVE PREFERRED UNITS.
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1. DESIGNATION AND NUMBER. A series of Preferred Units,
designated the "9 1/2% Series A Cumulative Preferred Units"
(the "Series A Preferred Units"), is hereby established. The
number of Series A Preferred Units shall be as set forth on
Exhibit A hereto.
2. RANK. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution
or winding up of the Partnership, rank (i) senior to all
classes or series of Common Units of the Partnership, and to
all Partnership Units ranking junior to the Series A Preferred
Units with respect to distribution rights or rights upon
liquidation, dissolution or winding up of the Partnership;
(ii) on a parity with all Partnership Units issued by the
Partnership the terms of which specifically provide that such
Partnership Units rank on a parity with the Series A Preferred
Units with respect to distribution rights or rights upon
liquidation, dissolution or winding up of the Partnership; and
(iii) junior to all existing and future indebtedness of the
Partnership. The term "Partnership Units" does not include
convertible debt securities, which will rank senior to the
Series A Preferred Units prior to conversion.
3. DISTRIBUTIONS.
(a) Holders of the Series A Preferred Units are entitled
to receive, when and as distributed by the General Partner out of
available cash flow, preferential cumulative cash distributions in an
amount equal to the excess, if any, of (i) the cumulative Series A
Preferred Return for the current and all prior years over (ii) the sum
of all prior Series A Preferred Return distributions pursuant to this
Section 4.02(c)(i)(3). Distributions on the Series A Preferred Units
shall be cumulative from the date of original issue and shall be
payable quarterly in arrears on or before the last day of January,
April, July and October of each year, or, if not a Business Day (as
defined below), the next succeeding business day (each, a "Distribution
Payment Date"). The first distribution will be paid on or before
October 31, 1998. The first distribution will be prorated for more than
a full quarter. Any distribution payable on the Series A Preferred
Units for any partial distribution period will be computed on the basis
of a 360-day year consisting of twelve 30 day months. Distributions
will be payable to holders of record as they appear in the ownership
records of the Partnership at the close of business on the applicable
record date, which shall be the last Business Day of March, June,
September and December immediately preceding such Distribution Payment
Date, or on such other date designated by the General Partner of the
Partnership for the payment of distributions that is not more than 30
nor less than 10 days prior to such Distribution Payment Date (each, a
"Distribution Record Date"). "Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a legal
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holiday nor a day on which banking institutions in New York City are
authorized or required by law, regulation or executive order to close.
(b) The amount of any distributions accrued on any Series
A Preferred Units at any Distribution Payment Date shall be the amount
of any unpaid distributions accumulated thereon, to and including such
Distribution Payment Date, whether or not earned or declared, and the
amount of distributions accrued on any Series A Preferred Units at any
date other than a Distribution Payment Date shall be equal to the sum
of the amount of any unpaid distributions accumulated thereon, to and
including the last preceding Distribution Payment Date, whether or not
earned or declared, plus an amount calculated on the basis of the
Series A Preferred Return for the period after such last preceding
Distribution Payment Date to and including the date as of which the
calculation is made based on a 360-day year of twelve 30-day months.
(c) Except as provided in subsection (a) hereof, the
holder of the Series A Preferred Units will not be entitled to any
distributions in excess of full cumulative distributions as described
above and shall not be entitled to participate in the earnings or
assets of the Partnership, and no interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or
payments on the Series A Preferred Units which may be in arrears.
(d) No distributions on Series A Preferred Units shall be
declared by the General Partner or paid or set apart for payment by the
Partnership if the terms and provisions of any agreement of the
Partnership, including any agreement relating to its indebtedness,
prohibit such declaration, payment or setting apart for payment or
provide that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration or payment shall be restricted or prohibited by law.
Notwithstanding the foregoing, distributions on the Series A Preferred
Units will accrue whether or not the Partnership has earnings, whether
or not there is available cash flow for the payment of such
distributions and whether or not such distributions are declared.
Accrued but unpaid distributions on the Series A Preferred Units will
not bear interest and holders of the Series A Preferred Units will not
be entitled to any distributions in excess of full cumulative
distributions described above.
(e) Except as set forth in the next sentence, no
distributions will be declared or paid or set apart for payment on any
Partnership Units or any other
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series of Preferred Units ranking, as to distributions, on a parity
with or junior to the Series A Preferred Units (other than a
distribution of the Partnership's Common Units or any other class of
Partnership Units ranking junior to the Series A Preferred Units as to
distributions and upon liquidation) for any period unless full
cumulative distributions have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series A Preferred Units for all past
distribution periods and the then current distribution period. When
distributions are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series A Preferred Units and any
other series of Preferred Units ranking on a parity as to distributions
with the Series A Preferred Units, all distributions declared upon the
Series A Preferred Units and any other series of Preferred Units
ranking on a parity as to distributions with the Series A Preferred
Units shall be declared pro rata so that the amount of distributions
declared per Series A Preferred Unit and such other series of Preferred
Units shall in all cases bear to each other the same ratio that accrued
distributions per Series A Preferred Unit and such other series of
Preferred Units (which shall not include any accrual in respect of
unpaid distributions for prior distribution periods if such Preferred
Units do not have a cumulative distribution) bear to each other.
(f) Except as provided in the immediately preceding
paragraph, unless full cumulative distributions on the Series A
Preferred Units have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for
payment for all past distribution periods and the then current
distribution period, no distributions (other than a distribution of
Common Units or other Partnership Units ranking junior to the Series A
Preferred Units as to distributions and upon liquidation) shall be
declared or paid or set aside for payment nor shall any other
distribution be declared or made upon the Common Units, or any other
Partnership Units ranking junior to or on a parity with the Series A
Preferred Units as to distributions or upon liquidation, nor shall any
Common Units, or any other Partnership Units in the Partnership ranking
junior to or on a parity with the Series A Preferred Units as to
distributions or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any such units) by
the Partnership. Holders of Series A Preferred Units shall not be
entitled to any distribution, whether payable in cash, property or
securities in excess of full cumulative distributions on the Series A
Preferred Units as provided above.
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4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Partnership, the holders of Series A Preferred Units are entitled to be
paid out of the assets of the Partnership legally available for
distribution to its partners a liquidation preference of $25.00 per
Series A Preferred Unit (the "Liquidation Preference"), plus an amount
equal to any accrued and unpaid distributions with respect to the
Series A Preferred Units to the date of payment, but without interest,
before any distribution of assets is made to holders of Common Units or
any other class or series of Partnership Units in the Partnership that
ranks junior to the Series A Preferred Units as to liquidation rights.
The Partnership will promptly provide to the holders of Series A
Preferred Units written notice of any event triggering the right to
receive such Liquidation Preference. After payment of the full amount
of the Liquidation Preference, the holders of Series A Preferred Units
will have no right or claim to any of the remaining assets of the
Partnership. If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Partnership, the amounts payable with
respect to the Liquidation Preference, plus an amount equal to any
accrued and unpaid distributions to the date of payment, of the Series
A Preferred Units and any other units of the Partnership ranking as to
any such distribution on a parity with the Series A Preferred Units are
not paid in full, the holders of the Series A Preferred Units and of
such other units will share ratably in any such distribution of assets
of the Partnership in proportion to the full respective preference
amounts to which they are entitled. The consolidation or merger of the
Partnership with or into any other partnership, corporation, trust or
entity or of any other partnership or corporation with or into the
Partnership, or the sale, lease or conveyance of all or substantially
all of the property or business of the Partnership, shall not be deemed
to constitute a liquidation, dissolution or winding up of the
Partnership.
5. OPTIONAL REDEMPTION.
(a) Except as provided in Section 4.02(c)(i)(6) hereof,
the Series A Preferred Units are not redeemable by the Partnership
prior to June 25, 2003. On and after June 25, 2003, the Partnership, at
its option upon not less than 30 nor more than 60 days' written notice,
may redeem the Series A Preferred Units, in whole or in part, at any
time or from time to time, for cash at a redemption price of $25.00 per
Series A Preferred Unit, plus all accrued and unpaid distributions
thereon to the date fixed for redemption, without interest. A holder
shall surrender its Series A Preferred Units at the place designated in
such notice and shall be entitled to the redemption price and any
accrued and unpaid distributions payable upon such redemption following
such surrender. If notice of redemption of any Series A Preferred Units
has been given and if the funds necessary for such redemption have been
set aside by the Partnership in trust for
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the benefit of the holders of any Series A Preferred Units so called
for redemption, then from and after the redemption date distributions
will cease to accrue on such Series A Preferred Units, such Series A
Preferred Units shall no longer be deemed outstanding and all rights of
the holders of such Series A Preferred Units will terminate, except the
right to receive the redemption price. If less than all of the
outstanding Series A Preferred Units are to be redeemed, the Series A
Preferred Units to be redeemed shall be selected pro rata (as nearly as
may be practicable without creating fractional Series A Preferred
Units) or by any other equitable method determined by the General
Partner.
(b) Notice of redemption will be mailed to holders of
Series A Preferred Units not less than 30 nor more than 60 days prior
to the redemption date. In addition to any information required by law,
each notice shall state: (i) the Redemption Date; (ii) the Redemption
Price; (iii) the number of Series A Preferred Units to be redeemed;
(iv) the place or places where the Series A Preferred Units are to be
surrendered for payment of the redemption price; and (v) that
distributions on the Series A Preferred Units to be redeemed will cease
to accrue on such redemption date. If less than all of the Series A
Preferred Units held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series A
Preferred Units held by such holder to be redeemed.
(c) Immediately prior to any redemption of Series A
Preferred Units, the Partnership shall pay, in cash, any accumulated
and unpaid distributions through the redemption date, unless a
redemption date falls after a Distribution Record Date and prior to the
corresponding Distribution Payment Date, in which case each holder of
Series A Preferred Units at the close of business on such Distribution
Record Date shall be entitled to the distribution payable on such
shares on the corresponding Distribution Payment Date notwithstanding
the redemption of such shares before such Distribution Payment Date.
(d) If the Partnership exercises its optional redemption
right with respect to the Series A Preferred Units pursuant to this
Section 4.02(c)(i)(5), then the Corporation must redeem a corresponding
number of shares of Series A Preferred Stock. Similarly, if the
Corporation exercises its optional redemption right with respect to
shares of Series A Preferred Stock, then the Partnership must redeem a
corresponding number of Series A Preferred Units.
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6. CONVERSION. The Series A Preferred Units are not redeemable
for, convertible into or exchangeable for any other property or
securities of the Partnership or the General Partner."
Section 5. Allocation of Profit and Loss.
Article V, Section 5.01 is hereby deleted in its entirety and the
following new Section 5.01 is inserted in its place:
"(a) Allocation of Profit and Loss. After giving effect to the
special allocations set forth in Sections 5.01(c), (d) and (e) hereof,
and subject to Section 5.01(b) hereof, the Partnership's Profit and
Loss shall be allocated among the Partners for each fiscal year (or
portion thereof) in proportion to their respective Percentage Interests
(determined solely on the basis of the Partners' respective Common
Units).
(b) Capital Account Deficit. Loss shall not be allocated to a
Partner to the extent that such allocation would cause a deficit in
such Partner's Capital Account (after reduction to reflect the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6))
in excess of the sum of such Partner's shares of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in excess of
that limitation shall be allocated first to other Partners with
positive Capital Accounts (adjusted as described in the preceding
sentence) in proportion to such positive Capital Accounts and then to
the General Partner. After the occurrence of an allocation of Loss to a
Partner in accordance with this Section 5.01(b), to the extent
permitted by Regulations Section 1.704-1(b), Profit shall be specially
allocated to such Partner in an amount necessary to offset the Loss
previously allocated to such Partner under this Section 5.01(b).
(c) Minimum Gain Chargeback. Notwithstanding any provision
herein to the contrary, (i) any expense of the Partnership that is a
"nonrecourse deduction" within the meaning of Regulations Section
1.704-2(b)(1) shall be allocated in accordance with the Partners'
respective Percentage Interests (determined solely on the basis of
their respective Common Units), (ii) any expense of the Partnership
that is a "Partner nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
Partnership
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Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership fiscal year, items of gain and income shall be
allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section
1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain within the meaning of Regulations Section
1.704-2(i)(4) for any Partnership fiscal year, items of gain and income
shall be allocated among the Partners in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Regulations
Section 1.704-2(j). A Partner's "interest in Partnership profits" for
purposes of determining its share of the nonrecourse liabilities of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3)
shall be such Partner's Percentage Interest (determined solely on the
basis of the Partners' respective Common Units).
(d) Qualified Income Offset. If a Limited Partner receives in
any fiscal year an adjustment, allocation, or distribution described in
subparagraph (4), (5), or (6) of Regulations Section
1.704-1(b)(2)(ii)(d) that causes or increases a negative balance in
such Partner's Capital Account that exceeds the sum of such Partner's
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
Gain, as determined in accordance with Regulations Sections 1.704-2(g)
and 1.704-2(i), such Partner shall be allocated specially for such
fiscal year (and, if necessary, later fiscal years) items of income and
gain in an amount and manner sufficient to eliminate such negative
Capital Account balance as quickly as possible as provided in
Regulations Section 1.704-1 (b)(2)(ii)(d). After the occurrence of an
allocation of income or gain to a Limited Partner in accordance with
this Section 5.01(d), to the extent permitted by Regulations Section
1.704-1(b) and Section 5.01(b), items of expense or loss shall be
allocated to such Partner in an amount necessary to offset the income
or gain previously allocated to such Partner under this Section
5.01(d).
(e) Priority Allocations With Respect To Series A Preferred
Units. After giving effect to the allocations set forth in Sections
5.01(b), (c), and (d) hereof, but before giving effect to the
allocations set forth in Section 5.01(a), Net Operating Income shall be
allocated to the General Partner until the aggregate amount of Net
Operating Income allocated to the General Partner under this Section
5.01(e) for the current and all prior years equals the aggregate amount
of the Series A Preferred Return paid to the General Partner pursuant
to Sections 4.02(c)(i)(3) and 4.02(c)(i)(4) hereof for the current and
all prior years. To the extent that an allocation of Loss to the
General Partner with respect to its Series A Preferred Units would
cause the balance of the General Partner's Capital Account in excess of
the sum of the General Partner's shares of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain (the "Adjusted Capital Account
Balance") to be reduced by an amount greater than the Liquidation
Preference
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associated with the Series A Preferred Units, Net Operating Income will
be allocated to the General Partner in an amount necessary to cause its
Adjusted Capital Account Balance to equal the Liquidation Preference
associated with the Series A Preferred Units. For purposes of this
Section 5.01(e), "Net Operating Income" means the excess, if any, of
the Partnership's gross income over its expenses (but not taking into
account depreciation, amortization, or any other noncash expenses of
the Partnership), calculated in accordance with the principles of
Section 5.01(g) hereof.
(f) Allocations Between Transferor and Transferee. If a
Partner transfers any part or all of its Partnership Interest, the
distributive shares of the various items of Profit and Loss allocable
among the Partners during such taxable year of the Partnership shall be
allocated between the transferor and the transferee either (i) as if
the Partnership's fiscal year had ended on the date of the transfer, or
(ii) based on the number of days of such fiscal year that each was a
Partner without regard to the results of Partnership activities in the
respective portions of such fiscal year in which the transferor and the
transferee were Partners. The General Partner, in its sole discretion,
shall determine which method shall be used to allocate the distributive
shares of the various items of Profit and Loss between the transferor
and transferee.
(g) Definition of Profit and Loss. "Profit" and "Loss" and
items of income, gain, expense, or loss referred to in this Agreement
shall be determined in accordance with federal income tax accounting
principles, as modified by Regulations Section 1.704-1 (b)(2)(iv),
except that Profit and Loss shall not include items of income, gain and
expense that are specially allocated pursuant to Sections 5.01 (b),
(c), (d) and (e). All allocations of income, Profit, gain, Loss, and
expense (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth
in this Section 5.01, except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-1(b)(4). The General Partner
shall have the authority to elect the method to be used by the
Partnership for allocating items of income, gain and expense required
by Section 704(c) of the Code, and such election shall be binding on
all Partners."
Section 6. Distribution of Cash.
Article V, Section 5.02 is hereby amended by adding the following new
subsection:
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"(d) Notwithstanding the discretion given to the General
Partner in subsection (a) above, the General Partner shall, prior to
any distributions to the holders of Common Units, make any
distributions required to be made to the holders of the Preferred
Units, to the extent of the Partnership's available cash flow."
Section 7. Redemption Right.
The Partnership Agreement is hereby amended by adding the following new
Section 8.05(f) to the Partnership Agreement, immediately following Section
8.05(e):
"(f) Preferred Units shall be redeemed, if at all, only in
accordance with such redemption rights or options as are set forth with
respect to such Preferred Units (or class or series thereof) in the
instruments designating such Preferred Units (or class or series
thereof)."
Section 8. General Amendments to Partnership Agreement.
Notwithstanding anything contained herein, all references to
Partnership Units in Section 7.01 of the Partnership Agreement shall be deemed
to refer solely to Common Units, and not to Preferred Units. In addition,
references in Article XI of the Partnership Agreement to Percentage Interests of
the Limited Partners shall be deemed to refer solely to Percentage Interests of
Limited Partners with respect to Common Units.
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IN WITNESS WHEREOF, the foregoing Amendment No. 1 to the Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.
has been signed and delivered as of this 25th day of June, 1998, by the
undersigned sole general partner of the Partnership and non-Partner party to the
Partnership Agreement.
EQUITY INNS TRUST, a Maryland real estate
investment trust, as sole General Partner
By: /s/ ▇▇▇▇▇▇ ▇. Silver
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Name: ▇▇▇▇▇▇ ▇. Silver
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Title: Secretary and Treasurer
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EQUITY INNS TRUST, a Maryland real estate
investment trust, as General Partner, on
behalf of the Limited Partners pursuant to
Section 8.02 and Article XI of the
Partnership Agreement
By: /s/ ▇▇▇▇▇▇ ▇. Silver
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Name: ▇▇▇▇▇▇ ▇. Silver
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Title: Secretary and Treasurer
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EQUITY INNS, INC., a Tennessee corporation,
as a non-Partner party to the Third
Amendment and Restated Agreement of Limited
Partnership
By: /s/ ▇▇▇▇▇▇ ▇. Silver
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. Silver
----------------------------------------
Title: President, Chief Operating Officer,
Treasurer and Chief Financial Officer
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