EQUITY INNS, INC.
Exhibit
10.5
EQUITY
INNS, INC.
THIS
AGREEMENT, dated as of the 3rd
day of
January, 2007, between EQUITY INNS, INC., a Tennessee corporation (the
“Company”) and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (the “Participant”), is made pursuant and
subject to the provisions of the Equity Inns, Inc. 1994 Stock Incentive Plan
(the “Plan”), a copy of which has been made available to the Participant. All
terms used herein that are defined in the Plan have the same meaning given
them
in the Plan.
1. Award.
Pursuant to the Plan, the Company, effective as of January
3, 2007, (the “Date of Grant”) granted to Participant, subject to the terms and
conditions of the Plan and subject further to the terms and conditions of this
Agreement a Stock Award covering 18,136 shares of Common Stock.
2. Performance
Objectives.
Subject
to the terms of this Agreement, the Participant’s interest in the Stock Award
shall vest and become transferable in accordance with paragraphs 3, 4 and 5
and
Exhibit I based on the Company’s Compounded Annual Growth Rate TSR for the
applicable measurement period relative to the Compounded Annual Growth Rate
TSR
for the applicable measurement period for the companies (other than the Company)
listed in the NAREIT Hotel Index.
3. Vesting.
The
Participant’s interest in the Stock Award shall vest and become transferable in
three equal installments by applying Exhibit I to one-third of the shares of
the
Stock Award (the “Target Shares”), for each of the First, Second and Third
Measurement Periods as described below.
a. The
First
Measurement Period, for 6,046 shares, is the period of three consecutive fiscal
years (of the Company and the other companies listed in the NAREIT Hotel Index)
ending in 2007. If the Participant remains in the continuous employ of the
Company or an affiliate from the Date of Grant until January 5, 2008, the number
of shares of Common Stock that will vest and become transferable is equal to
the
product of (x)
the
number of Target Shares times (y)
the
Applicable Percentage determined under Exhibit I. If the Applicable Percentage
is greater than 100%, then the Participant shall receive, as soon as practicable
after January 5, 2008, an additional Stock Award (which shall be immediately
vested and transferable), for the number of shares of Common Stock equal to
(x)
the
number of shares determined under the preceding sentence minus (y)
the
number of Target Shares. If the Applicable Percentage is less than 100%, then
the Participant shall forfeit the number of Target Shares equal to (x)
the
number of Target Shares minus (y)
the
number of shares determined under the second preceding sentence.
b. The
Second Measurement Period, for 6,045 shares, is the period of three consecutive
fiscal years (of the Company and the other companies listed in the NAREIT Hotel
Index) ending in 2008. If the Participant remains in the continuous employ
of
the Company or an affiliate from the Date of Grant until January 5, 2009, the
number of shares of Common Stock that will vest and become transferable is
equal
to the product of (x)
the
number of Target Shares
times
(y)
the
Applicable Percentage determined under Exhibit I. If the Applicable Percentage
is greater than 100%, then the Participant shall receive, as soon as practicable
after January 5, 2009, an additional Stock Award (which shall be immediately
vested and transferable), for the number of shares of Common Stock equal to
(x)
the
number of shares determined under the preceding sentence minus (y)
the
number of Target Shares. If the Applicable Percentage is less than 100%, then
the Participant shall forfeit the number of Target Shares equal to (x)
the
number of Target Shares minus (y)
the
number of shares determined under the second preceding sentence.
c. The
Third
Measurement Period, for 6,045 shares, is the period of three consecutive fiscal
years (of the Company and the other companies listed in the NAREIT Hotel Index)
ending in 2009. If the Participant remains in the continuous employ of the
Company or an affiliate from the Date of Grant until January 5, 2010, the number
of shares of Common Stock that will vest and become transferable is equal to
the
product of (x)
the
number of Target Shares times (y)
the
Applicable Percentage determined under Exhibit I. If the Applicable Percentage
is greater than 100%, then the Participant shall receive, as soon as practicable
after January 5, 2010, an additional Stock Award (which shall be immediately
vested and transferable), for the number of shares of Common Stock equal to
(x)
the
number of shares determined under the preceding sentence minus (y)
the
number of Target Shares. If the Applicable Percentage is less than 100%, then
the Participant shall forfeit the number of Target Shares equal to (x)
the
number of Target Shares minus (y)
the
number of shares determined under the second preceding sentence.
4. Retirement.
This
paragraph applies if the Participant remains in the continuous employ of the
Company or an affiliate from the Date of Grant until the date that the
Participant’s employment ends on account of Retirement after 2007. In that
event, the provisions of paragraph 3 shall be applied as if the Participant
continued employment with the Company and the Stock Award shall vest and become
transferable or shall be forfeited in accordance with paragraph 3.
5. Death,
Disability, Termination Without Cause.
This
paragraph applies if the Participant remains in the continuous employ of the
Company or an affiliate from the Date of Grant until the date that the
Participant’s employment ends, before January 5, 2010, on account of the
Participant’s death or Disability or the termination of the Participant by the
Company or an affiliate for reasons other than Cause.
a. If
the
Participant’s employment ends before January 1, 2008, all of the shares subject
to the Stock Award shall be forfeited and the Participant shall have no further
rights under this Agreement.
b. If
the
Participant’s employment ends on or after January 1, 2008, and the Participant
completed at least seven Years of Service with the Company or an affiliate,
the
provisions of paragraph 3 shall be applied as if the Participant continued
employment with the Company and the Stock Award shall vest and become
transferable or shall be forfeited in accordance with paragraph 3.
c. If
the
Participant’s employment ends on or after January 1, 2008, and the Participant
completed less than seven Years of Service with the Company or an affiliate,
the
provisions of paragraph 3 shall be applied as if the Participant continued
employment with the Company and the Stock Award and the appropriate number
of
unvested shares determined in accordance with paragraph 3 shall be multiplied
by
a fraction, the numerator of which is the number of whole months the Participant
was employed by the Company or an affiliate on and after January 1, 2007,
and the denominator of which is thirty-six. The number of shares determined
in
accordance with the preceding sentence shall vest and become transferable and
any Target Shares in excess of that number, if any, shall be
forfeited.
6. Change
in Control.
This
paragraph applies if the Participant remains in the continuous employ of the
Company or an affiliate from the Date of Grant until the date that is six months
before a Change in Control. In that event, (x)
Target
Shares for a measurement period that ended on or before the date of the Change
in Control shall vest and become transferable or shall be forfeited as provided
in paragraph 3 and (y)
Target
Shares for a measurement period that ends after the date of the Change in
Control shall vest and become transferable as of the date of the Change in
Control with an assumed Applicable Percentage of 100%.
7. Forfeiture.
Except
as
provided in paragraphs 4, 5 and 6, shares of Common Stock subject to this Stock
Award that have not previously become vested and transferable shall be forfeited
(and the Participant shall have no further rights under this Agreement) if
the
Participant’s employment with the Company and its affiliates ends before January
5, 2010.
8. Definitions.
For
purposes of this Agreement, the following terms shall have the definitions
set
forth below.
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
Company’s Board; or (ii) the Company’s then outstanding securities entitled to
vote generally in the election of the Company’s Board.
b. “Compounded
Annual Growth Rate” means the constant growth rate of TSR that yields the same
compounded TSR for a given period as calculated by the Committee or a consultant
engaged by the Committee or Company to make such calculation.
c. “Cause”
means the Participant’s (i) willful and continued failure to perform the
Participant’s duties as established by the 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) material
breach of the fiduciary duties of loyalty or care to the Company or an
Affiliate; (iii) conviction of any crime (or upon entering a plea of guilty
or
nolo contendere to a charge of any crime) constituting a felony; or (iv)
willful, flagrant, deliberate and repeated infractions of material published
policies and regulations of the Company of which the Participant has actual
knowledge.
d. “Change
in 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 and its subsidiaries’
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 Company’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
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 Company’s 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 or its subsidiaries of substantially all of the
assets of the Company and its subsidiaries (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 Company’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 has effectively
occurred. The Company’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.
e. “Disability”
means a permanent and total disability as defined in Section 22(e)(3) of the
Code.
f. “Retirement”
means a voluntary termination of employment with the Company and its affiliates
on or after attaining age sixty.
g. “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 and the term Person does not include any
employee-benefit plan maintained by the Company or any related entity, and
any
person or entity organized, appointed, or established by the Company or any
related entity for or pursuant to the terms of any such employee-benefit plan,
unless the Company’s Board determines that such an employee-benefit plan or such
person or entity is a “Person”.
h. “TSR”
means the percentage increase or decrease in the fair market value of the Common
Stock or the common stock of another company listed on the NAREIT Hotel Index,
taking into account the value of dividends paid on each share and assuming
that
the dividends are invested in Common Stock or common stock of such other
company, as applicable, on the dividend payment date. For each vesting period,
the calculation shall be based on the returns for the last three fiscal years,
including the most recently completed fiscal year. For example, the 2007
measurement period will include the returns for 2005, 2006 and 2007; the 2008
measurement period will include the returns for 2006, 2007 and 2008, etc. The
fair market value of the Common Stock and the common stock of each other company
listed on the NAREIT Hotel Index shall be determined on the basis of the 30-day
average closing price of the Common Stock or other company’s common stock, as
applicable, prior to the beginning and ending measurement dates for each vesting
period.
i. “Year
of
Service” means the Participant’s most recent period of continuous employment
with the Company or its affiliates/the Participant’s total period of employment
with the Company or its affiliates. A period of employment of twelve months
shall equal one Year of Service. A fractional Year of Service shall be
disregarded for purposes of this Agreement.
9. Custody
of Certificates.
The
Company shall retain custody of the certificates evidencing this Stock Award
until the Committee certifies that the shares have become vested and
transferable. The Company shall deliver the certificates evidencing the shares
subject to this Stock Award promptly after the Committee certifies that the
requirements of this Agreement have been satisfied.
10. Stock
Power.With
respect to any shares that are forfeited in accordance with this Agreement,
the
Participant hereby appoints the Company’s Chief Executive Officer and the
Company’s Chief Operating Officer as his attorney to transfer any such forfeited
shares on the books of the Company with full power of substitution in the
premises. Such persons shall use the authority granted under this paragraph
10
to cancel any shares that are forfeited under this Agreement.
11. Shareholder
Rights.
Subject
to the provisions of the Plan and this Agreement, the Participant shall have
all
the rights of a shareholder of the Company with respect to the shares subject
to
this Stock Award, including the right to vote such shares and receive dividends
thereon, from the Date of Grant until a forfeiture of the shares under this
Agreement.
12. Change
in Capital Structure.
The
terms of this Agreement, including the number of shares subject to this Stock
Award, shall be adjusted as the Board determines is equitably required in the
event the Company effects one or more stock dividends, stock split-sups,
subdivisions or consolidations of shares or other similar changes in
capitalization.
13. No
Right to Continued Employment.
This
Stock Award does not confer upon the Participant any right with respect to
continuance of employment with the Company or an Affiliate and does not
interfere with the right of the Company or an Affiliate to terminate the
Participant’s employment.
14. Conflicts.
In the
event of any conflict between the provisions of the Plan as in effect on the
Date of Grant and the provisions of this Agreement, the provisions of the Plan
shall govern. All references herein to the Plan mean the Plan as in effect
on
the date hereof.
15. Participant
Bound by Plan.
The
Participant hereby acknowledges that a copy of the Plan has been made available
to him and agrees to be bound by all the terms and provisions
thereof.
16. Binding
Effect.
Subject
to the limitations stated above and in the Plan, this Agreement shall be binding
upon and inure to the benefit of the legatees, distributees and personal
representatives of the Participant and the successors of the
Company.
17. Governing
Law.
This
Agreement shall be governed by the laws of the Commonwealth of
Virginia.
IN
WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly
authorized officer, and the Participant has affixed his signature
hereto.
|
EQUITY
INNS, INC.
|
[PARTICIPANT]
|
||
|
By:
|
/s/
▇▇▇▇▇▇ ▇. Silver
|
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
|
|
Exhibit
I
|
Performance
Percentile Ranking
|
|||
|
Performance
Percentile Achieved1
|
|
Applicable
Percentage
(Percentage
of Target
Shares
That Vest and
Become
Transferable)
|
|
|
75th
& Above
|
|
150%
|
|
|
74th
|
148%
|
|
|
|
73th
|
146%
|
|
|
|
72th
|
144%
|
|
|
|
71th
|
142%
|
|
|
|
70th
|
|
140%
|
|
|
69th
|
138%
|
|
|
|
68th
|
136%
|
|
|
|
67th
|
134%
|
|
|
|
66th
|
132%
|
|
|
|
65th
|
|
130%
|
|
|
64th
|
128%
|
|
|
|
63th
|
126%
|
|
|
|
62th
|
124%
|
|
|
|
61th
|
122%
|
|
|
|
60th
|
|
120%
|
|
|
59th
|
118%
|
|
|
|
58th
|
116%
|
|
|
|
57th
|
114%
|
|
|
|
56th
|
112%
|
|
|
|
55th
|
|
110%
|
|
|
54th
|
108%
|
|
|
|
53th
|
106%
|
|
|
|
52th
|
104%
|
|
|
|
51th
|
102%
|
|
|
|
50th
(Median)
|
|
100%
|
|
|
49th
|
95%
|
|
|
|
48th
|
90%
|
|
|
|
47th
|
85%
|
|
|
|
46th
|
80%
|
|
|
|
45th
|
|
75%
|
|
|
44th
|
70%
|
|
|
|
43th
|
65%
|
|
|
|
42th
|
60%
|
|
|
|
41th
|
55%
|
|
|
|
40th
|
|
50%
|
|
|
Below
40th
|
|
0%
|
|
1The
“Performance Percentile Achieved” shall be determined by the Company’s
Compounded Annual Growth Rate TSR relative to the Compounded Annual Growth
Rate
TSR for the other companies listed on the NAREIT Hotel Index for the applicable
measurement period described in paragraph 3 of the Agreement. Fractional
percentile rankings shall be rounded down to the next whole percentile,e.g.,
a
ranking in the 60.65 percentile shall be rounded to the 60th
percentile (with the result that 120% of the shares subject to the Stock
Award
will become vested and
transferable).