Amendment No. 3 to the Third Amended and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.

Summary

This amendment involves Equity Inns, Inc., Equity Inns Trust (the General Partner), and the limited partners of Equity Inns Partnership, L.P. It updates the partnership agreement to reflect the Corporation’s contribution of $60 million in net proceeds from the sale of Series C Preferred Stock to the Partnership, in exchange for the issuance of 2,400,000 Series C Preferred Units to the General Partner. The amendment defines key terms, sets the rights and preferences of the new Series C Preferred Units, and clarifies their ranking and distribution entitlements within the Partnership.

EX-4.2(D) 3 exh42d-3q06.txt AMENDMENT NO. 3 TO THE PARTNERSHIP AGREEMENT Exhibit 4.2(d) AMENDMENT NO. 3 TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EQUITY INNS PARTNERSHIP, L.P. This Amendment No. 3 (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 February 15, 2006, 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 2,400,000 shares of its 8.00% Series C Cumulative Preferred Stock, $.01 par value per share, having a liquidation preference equivalent to $25.00 per share (the "Series C Preferred Stock"), and has sold such Series C Preferred Stock in two public offerings; WHEREAS, the Corporation desires to contribute the net proceeds of the sale of the Series C Preferred Stock through the General Partner to the Partnership in exchange for the issuance to the General Partner of preferred partnership interests in the Partnership as set forth herein; and 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 C 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 C Preferred Stock, which is $60,000,000, and the Partnership shall be deemed 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 C Preferred Stock. Section 2. Issuance of Series C 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 2,400,000 Series C Preferred Units (as defined below). Section 3. Definitions. Article I of the Partnership Agreement is hereby amended by inserting in the appropriate alphabetical locations the following definitions of Change of Control, Series C Preferred Return, Series C Preferred Stock, Series C Preferred Units and Voting Stock, as follows: "Change of Control" shall be deemed to have occurred at such time as (i) the date a "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the ultimate "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have beneficial ownership of all shares of Voting Stock that such person or group has the right to acquire regardless of when such right is first exercisable), directly or indirectly, of Voting Stock representing more than 50% of the total voting power of the total Voting Stock of the Corporation; (ii) the date the Corporation sells, transfers or otherwise disposes of all or substantially all of its assets; or (iii) the date of the consummation of a merger or share exchange of the Corporation with another entity where the Corporation's shareholders immediately prior to the merger or share exchange would not beneficially own immediately after the merger or share exchange, shares representing 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate group vote) to which all shareholders of the corporation issuing cash or securities in the merger or share exchange would be entitled in the election of directors, or where members of the Corporation's Board of Directors immediately prior to the merger or share exchange would not immediately after the merger or share exchange constitute a majority of the Board of Directors of the corporation issuing cash or securities in the merger or share exchange. "Series C Preferred Return" means an annualized amount equal to $2.00 per Series C Preferred Unit; provided, however, if following a Change of Control the Series C Preferred Stock is not listed on the New York Stock Exchange, Inc. (the "NYSE") or the American Stock Exchange ("Amex") or quoted on the Nasdaq Stock Market, Inc. ("Nasdaq"), Series C Preferred Return shall mean, from (but excluding) the first date on which both the Change of Control has occurred and the Series C Preferred Stock is not so listed or quoted, $2.25 per Series C Preferred Unit for as long as the Series C Preferred Stock is not so listed or quoted. "Series C Preferred Stock" means the 8.00% Series C Cumulative Preferred Stock, $.01 par value, of the Corporation. "Series C 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 C Preferred Stock, which Series C Preferred Units shall have the designations, preferences, privileges, limitations and relative rights set forth in Section 4.02(c)(iii) hereof. "Voting Stock" means stock of any class or kind having the power to vote generally for the election of directors. Section 4. Creation of Series C Preferred Units. ------------------------------------- Article IV of the Partnership Agreement is hereby amended by adding Section 4.02(c)(iii) as follows: "(iii) 8.00% Series C Cumulative Preferred Units. (1) Designation and Number. A series of Preferred Units, designated the "8.00% Series C Cumulative Preferred Units" (the "Series C Preferred Units"), is hereby established. The number of Series C Preferred Units shall be as set forth on Exhibit B hereto. (2) Rank. The Series C 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 C 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 C 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 C Preferred Units prior to conversion. (3) Distributions. (a) Holders of the Series C 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 C Preferred Return for the current and all prior years over (ii) the sum of all prior Series C Preferred Return distributions pursuant to this Section 4.02(c)(iii)(3). Distributions on the Series C 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 "Series C Distribution Payment Date"). The first distribution will be paid on or before April 30, 2006. The first distribution will be prorated for less than a full quarter. Any distribution payable on the Series C 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 each of March, June, September and December immediately preceding such Series C 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 Series C Distribution Payment Date (each, a "Series C Distribution Record Date"). "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal 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 C Preferred Units at any Series C Distribution Payment Date shall be the amount of any unpaid distributions accumulated thereon, to and including such Series C Distribution Payment Date, whether or not earned or declared, and the amount of distributions accrued on any Series C Preferred Units at any date other than a Series C Distribution Payment Date shall be equal to the sum of the amount of any unpaid distributions accumulated thereon, to and including the last preceding Series C Distribution Payment Date, whether or not earned or declared, plus an amount calculated on the basis of the Series C Preferred Return for the period after such last preceding Series C 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) The holder of the Series C 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 C Preferred Units which may be in arrears. (d) No distributions on Series C 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 C 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 C Preferred Units will not bear interest and holders of the Series C 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 series of Preferred Units ranking, as to distributions, on a parity with or junior to the Series C Preferred Units (other than a distribution of the Partnership's Common Units or any other class of Partnership Units ranking junior to the Series C 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 C 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 C Preferred Units and any other series of Preferred Units ranking on a parity as to distributions with the Series C Preferred Units, all distributions declared upon the Series C Preferred Units and any other series of Preferred Units ranking on a parity as to distributions with the Series C Preferred Units shall be declared pro rata so that the amount of distributions declared per Series C 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 C 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 C 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 C 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 C 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 C 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 C 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 C Preferred Units as provided above. (4) Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, the holders of Series C 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 C Preferred Unit (the "Series C Liquidation Preference"), plus an amount equal to any accrued and unpaid distributions with respect to the Series C 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 C Preferred Units as to liquidation rights. The Partnership will promptly provide to the holders of Series C Preferred Units written notice of any event triggering the right to receive such Series C Liquidation Preference. After payment of the full amount of the Series C Liquidation Preference, the holders of Series C 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 Series C Liquidation Preference, plus an amount equal to any accrued and unpaid distributions to the date of payment, of the Series C Preferred Units and any other units of the Partnership ranking as to any such distribution on a parity with the Series C Preferred Units are not paid in full, the holders of the Series C 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) Redemption. (a) Except as set forth in Section 4.02(c)(iii)(6) below, the Series C Preferred Units are not redeemable by the Partnership prior to February 15, 2011. On and after February 15, 2011, the Partnership, at its option upon not less than 30 nor more than 60 days' written notice, may redeem the Series C 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 C Preferred Unit, plus all accrued and unpaid distributions thereon to the date fixed for redemption, without interest. A holder shall surrender its Series C 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 C Preferred Units has been given and if the funds necessary for such redemption have been set aside by the Partnership in trust for the benefit of the holders of any Series C Preferred Units so called for redemption, then from and after the redemption date distributions will cease to accrue on such Series C Preferred Units, such Series C Preferred Units shall no longer be deemed outstanding and all rights of the holders of such Series C Preferred Units will terminate, except the right to receive the redemption price. If less than all of the outstanding Series C Preferred Units are to be redeemed, the Series C Preferred Units to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional Series C Preferred Units) or by any other equitable method determined by the General Partner. (b) Notice of redemption will be mailed or delivered to holders of Series C 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 Specified Redemption Date; (ii) the Redemption Amount; (iii) the number of Series C Preferred Units to be redeemed; (iv) the place or places where the Series C Preferred Units are to be surrendered for payment of the redemption price; and (v) that distributions on the Series C Preferred Units to be redeemed will cease to accrue on the Specified Redemption Date. If less than all of the Series C Preferred Units held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of Series C Preferred Units held by such holder to be redeemed. (c) Immediately prior to any redemption of Series C Preferred Units, the Partnership shall pay, in cash, any accumulated and unpaid distributions through the redemption date, unless a redemption date falls after a Series C Distribution Record Date and prior to the corresponding Series C Distribution Payment Date, in which case each holder of Series C Preferred Units at the close of business on such Series C Distribution Record Date shall be entitled to the distribution payable on such Series C Preferred Units on the corresponding Series C Distribution Payment Date notwithstanding the redemption of such shares before such Series C Distribution Payment Date. (d) If the Partnership exercises its optional redemption right with respect to the Series C Preferred Units pursuant to this Section 4.02(c)(iii)(5), then the Corporation must redeem a corresponding number of shares of Series C Preferred Stock. Similarly, if the Corporation exercises its optional redemption right with respect to shares of Series C Preferred Stock, then the Partnership must redeem a corresponding number of Series C Preferred Units. (6) Special Optional Redemption by the Partnership. (a) If at any time following a Change of Control the Series C Preferred Stock is not listed on the NYSE or the Amex or quoted on Nasdaq, the Partnership will have the option upon written notice to the holders of record of the Series C Preferred Units in accordance with Section 4.02(c)(iii)(5)(b) to redeem the Series C Preferred Units, in whole but not in part, within 90 days after the first date on which both the Change of Control has occurred and the Series C Preferred Stock is not so listed or quoted, for a cash redemption price equal to 100% of the Series C Liquidation Preference plus all accrued and unpaid distributions to the Specified Redemption Date. (b) Upon any redemption of the Series C Preferred Units pursuant to this Section 4.02(c)(iii)(6), the Partnership will pay, in cash, any accrued and unpaid distributions to the Specified Redemption Date, whether or not authorized, unless the Specified Redemption Date falls after a distribution payment record date and prior to the corresponding Series C Distribution Payment Date, in which case each holder of the Series C Preferred Units at the close of business on such distribution payment record date will be entitled to the distribution payable on such units on the corresponding Series C Distribution Payment Date notwithstanding the redemption of such units before the Series C Distribution Payment Date. Except as provided in the previous sentence, the Partnership will make no payment or allowance for unpaid distributions, whether or not in arrears, on the Series C Preferred Units. (c) At its election, the Partnership, prior to the Specified Redemption Date, may irrevocably deposit the redemption price described in Section 4.02(c)(iii)(6)(a) above for the Series C Preferred Units so called for redemption in trust for the holders thereof with a bank or trust company. (7) Conversion. The Series C 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 of the Partnership Agreement is hereby amended by adding the following new Section 5.01(f) immediately following Section 5.01(e), and the sections previously designated as Section 5.01(f) and Section 5.01(g) are hereby redesignated as Section 5.01(g) and Section 5.01(h), respectively: "(f) Priority Allocations With Respect To Series C Preferred Units. After giving effect to the allocations set forth in Sections 5.01(b), (c), (d) and (e) 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(f) for the current and all prior years equals the aggregate amount of the Series B Preferred Return and the Series C Preferred Return paid to the General Partner pursuant to Sections 4.02(c)(ii)(3), 4.02(c)(ii)(4), 4.02(c)(iii)(3) and 4.02(c)(iii)(4) hereof for the current and all prior years. For purposes of this Section 5.01(f), "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(h) hereof." [Signature page follows.] IN WITNESS WHEREOF, the foregoing Amendment No. 3 to the Third Amended and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P. has been signed and delivered as of this 15th day of February, 2006, by the undersigned sole general partner of the Partnership, as general partner and on behalf of the Limited Partners, and by the Corporation as non-Partner party to the Partnership Agreement. EQUITY INNS TRUST, a Maryland real estate investment trust, as sole General Partner By: /s/ Howard A. Silver -------------------- Name: Howard A. Silver Title: President and Chief Executive Officer EQUITY INNS TRUST, a Maryland real estate investment trust, as General Partner, on behalf of the Limited Partners pursuant to Section 8.02 and Article XI of the Partnership Agreement By: /s/ Howard A. Silver -------------------- Name: Howard A. Silver Title: President and Chief Executive Officer EQUITY INNS, INC., a Tennessee corporation, as a non-Partner party to the Partnership Agreement By: /s/ Howard A. Silver -------------------- Name: Howard A. Silver Title: President and Chief Executive Officer Exhibit B SERIES C PREFERRED UNITS (Effective as of February 15, 2006)