EXHIBIT 10.27
CHANGE IN CONTROL AND TERMINATION AGREEMENT
THIS CHANGE IN CONTROL AND TERMINATION AGREEMENT (the
"Agreement"), to be effective as of the
20th day of January, 2004, 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 J.
MITCHELL COLLINS (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.
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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 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.
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(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 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.
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(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 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
Executive Vice President, Chief Financial Officer, Secretary
and Treasurer 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;
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(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 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,
<PAGE>
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 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.
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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 three (3) 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:
(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;
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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
