1
EXHIBIT 3.1
RFS HOTEL INVESTORS, INC.
ARTICLES OF AMENDMENT TO THE [SECOND] AMENDED AND RESTATED
CHARTER DESIGNATING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK
To the Secretary of State of the State of Tennessee:
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporation Act, the undersigned Tennessee corporation adopts the
following amendments to its [Second] Restated Charter (the "Charter").
1. The name of the corporation is RFS Hotel Investors, Inc. (the
"Corporation").
2. The text of the amendments adopted to the Charter are as
follows:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article 5 of the Charter and by Section
48-16-102 of the Tennessee Business Corporation Act, as amended, the Board of
Directors has, by resolution, duly divided and classified 250,000 shares of the
preferred stock of the Corporation into a series designated Series B Cumulative
Preferred Stock (the "Series B Preferred Stock") and has provided for the
issuance of the Series B Preferred Stock.
SECOND: Article 5 of the Charter is hereby amended by adding the
following [as a new subsection (a)] to such Article 5:
1. DESIGNATION AND NUMBER. A series of Preferred Stock,
designated the Series B Cumulative Preferred Stock (the "Series B
Preferred Stock"), is hereby established. The maximum number of
authorized shares of the Series B Preferred Stock shall be 250,000.
2. RANK. The Series B Preferred Stock will, with respect to
dividend rights and rights upon liquidation, dissolution or winding up
of the Corporation, rank (a) prior or senior to any class or series of
Common Stock of the Corporation and any other class or series of equity
securities of the Corporation, if the holders of Series B Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of shares of such class or series ("Junior
Stock"); (b) on a parity with the Series A Preferred Stock and any
other class or series of equity securities of the Corporation if,
pursuant to the specific terms of such class or series of equity
securities, the holders of such class or series of equity securities
and the Series B Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation preferences, without
preference or priority one over the other ("Parity Stock"); (c) junior
to any class or series of equity securities of the Corporation if,
pursuant to the specific terms of such class or series, the holders of
such class or series shall be entitled to the receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up in
preference or priority to the holders of the Series B Preferred Stock
("Senior Stock"); and (d) junior to all existing and future
indebtedness of the Corporation. The term "equity securities" does not
include convertible debt securities, which will rank senior to the
Series B Preferred Stock prior to conversion.
2
3. DIVIDENDS.
(a) Holders of Series B Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of
funds of the Corporation legally available for payment, cash dividends
payable quarterly on or before the last day of March, June, September,
December of each year (or, if not a business day, the next succeeding
business day, each a "Dividend Payment Date"), commencing March 31,
2001 as follows:
(i) For the period prior to December 31, 2005 at
the annual rate of 12.5% of the Liquidation Preference (as defined in
Section 4(a) below) or 3.125% of the Liquidation Preference per quarter
per share;
(ii) Beginning on January 1, 2006, the dividend
rate shall increase each quarter at the rate of 2.0% of the Liquidation
Preference per annum per share (at a quarterly rate of increase of 0.5%
of the Liquidation Preference per quarter per share) up to a maximum
rate per annum per share of 20.5% of the Liquidation Preference as
follows:
Quarterly Dividend Rate
-----------------------
Quarter ending March 31, 2006 3.625% of the Liquidation Preference
Quarter ending June 30, 2006 4.125% of the Liquidation Preference
Quarter ending September 30, 2006 4.625% of the Liquidation Preference
Quarter ending December 31, 2006
and thereafter 5.125% of the Liquidation Preference
(iii) For so long as any shares of Series B
Preferred Stock are outstanding, in the event the Consolidated Total
Indebtedness (as defined below) of the Corporation exceeds 60% of Total
Asset Value (as defined below) of the Corporation, and for so long as
Consolidated Total Indebtedness exceeds 60% of Total Asset Value, the
then existing annual dividend rate shall be increased by 2.5% of the
Liquidation Preference (equivalent to 0.625% of the Liquidation
Preference per quarter per share).
(iv) For purposes of subsection (iii) above, the
following terms shall have the following definitions.
"Adjusted Cash Flow" means Property Operating Income (as
defined herein, but before deducting real estate taxes, insurance, any
capital expenditures and any management fee) for the trailing twelve
(12) months less real estate taxes for the latest available year,
property insurance, the Capital Expenditure Reserve Amount and the
greater of (a) actual management fees paid over the prior twelve (12)
months or (b) two and one half percent (2.5%) of gross room revenue for
the trailing twelve (12) months. For a Hotel Property leased to a third
party which is not a Subsidiary of the Corporation "Adjusted Cash Flow"
means the lesser of (i) lease payments for the trailing twelve (12)
months less real estate taxes for the latest available year, property
insurance and the Capital Expenditure Reserve Amount or (ii) Property
Operating Income (as defined herein, but before deducting real estate
taxes, insurance, any capital expenditures and any management fee) for
the trailing twelve (12) months less real estate taxes for the latest
available year, property insurance, the Capital Expenditure Reserve
Amount and a management fee equal to four percent (4%) of trailing
twelve (12) month gross room revenues.
"Applicable Cap Rate" means 11.5%.
2
3
"Capital Expenditure Reserve Amount" means, for any period, 4%
of the trailing twelve (12) month gross revenues.
"Capitalized Lease" of a Person means any lease of property
imposing obligations on such Person, as lessee thereunder, which are
required in accordance with GAAP to be capitalized on a balance sheet
of such Person.
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with GAAP.
"Cash Equivalents" means, as of any date, (i) securities
issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality thereof having maturities
of not more than one year from such date, (ii) time deposits and
certificates of deposit having maturities of not more than one year
from such date and issued by any domestic commercial bank having (A)
senior long-term unsecured debt rated at least A or the equivalent
thereof by Standard & Poor's or A2 or the equivalent thereof by Moody's
Investor Service and (B) capital and surplus in excess of $100,000,000,
(iii) commercial paper rated at least A-1 or the equivalent thereof by
S&P or P-1 or the equivalent thereof by Moody's and in either case
maturing within 120 days from such date; and (iv) shares of any money
market fund rated at least AAA or the equivalent thereof by S&P or at
least AAA or the equivalent thereof by Moody's.
"Consolidated Total Indebtedness" means, as of any date of
determination, all Indebtedness of the Corporation and any Subsidiary,
determined on a consolidated basis, such consolidation to be in
accordance with GAAP, after eliminating intercompany items, plus the
amount of the aggregate Liquidation Preference with respect to all
outstanding shares of Series B Preferred Stock plus the liquidation
preference with respect to any other outstanding shares of preferred
stock of the Corporation.
"Cost" means for any Hotel Property the purchase price of such
Hotel Property plus the cost of any capital improvements which exceed
4% of the Hotel Property's revenues for the four quarter period
following the purchase date of the Hotel Property.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, applied in a
manner consistent with that used in preparing the financial statements
of the Corporation.
"Guarantee Obligation" means, as to any Person (the
"guaranteeing person"), any obligation (determined without duplication)
of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any Letter of Credit) to induce the
creation of which the guaranteeing person has issued a reimbursement,
counter-indemnity or similar obligation, in either case guaranteeing or
in effect guaranteeing any Indebtedness, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase any property, securities or services primarily for
3
4
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the maximum stated amount of
the primary obligation relating to such Guarantee Obligation (or, if
less, the maximum stated liability set forth in the instrument
embodying such Guarantee Obligation), provided, that in the absence of
any such stated amount or stated liability, the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by
the Corporation in good faith.
"Hotel Property" means any parcel of real property owned by
the Corporation, or any Subsidiary, Investment Affiliate, or Joint
Venture, on which parcel is either located a hotel, or on which
construction of a hotel has commenced.
"Implied Value" means for any Hotel Property an amount arrived
at based upon that Hotel Property's Adjusted Cash Flow, divided by the
Applicable Cap Rate.
"Indebtedness" of any Person at any date means without
duplication, (a) all indebtedness of such Person for borrowed money
which is outstanding according to GAAP, (b) all obligations of such
Person for the deferred purchase price of property or services, (c) any
other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (d) all Capitalized Lease Obligations,
(e) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (f) all Guarantee Obligations
of such Person (excluding in any calculation of consolidated
indebtedness of the Corporation, Guarantee Obligations of the
Corporation or any Subsidiary in respect of primary obligations of any
Subsidiary), (g) all reimbursement obligations of such Person for
Letters of Credit and other contingent liabilities, (h) all liabilities
secured by any lien (other than liens for taxes not yet due and
payable) on any property owned by such Person even though such Person
has not assumed for otherwise become liable for the payment thereof,
(i) any repurchase obligation or liability of such Person or any of its
Subsidiaries with respect to accounts or notes receivable sold by such
Person or any of its Subsidiaries, (j) the Corporation's (or
Subsidiary's) pro rata share of debt in Investment Affiliates and 100%
any loans where the Corporation is liable as a general partner, (k) the
greater of (i) the Corporation's and all Subsidiaries' recourse
interest in an Investment Affiliate's debt that is not consolidated
with the Corporation's financial statements, or (ii) pro rata interest
in all debt owed by an Investment Affiliate which is either recourse or
non-recourse to the Corporation or any Subsidiary, as applicable, that
is not consolidated with the Corporation's or any Subsidiaries'
financial statements, (l) any pre-sale obligations of such Person
relating to the purchase of any real or personal property, (m) Total
Liabilities, (n) any amounts payable under any interest rate protection
product, (o) any other amounts considered debt by rating agencies and
(p) any forward equity commitments. Notwithstanding the foregoing, 100%
of all Indebtedness of RFS Partnership, L.P. or any successor thereto
shall be deemed to be Indebtedness of the Company.
"Investment Affiliate" means any Person in which the
Corporation or any Subsidiary, directly or indirectly, has an ownership
interest, including, without limitation, any Joint Venture, whose
financial results are not consolidated under GAAP with the financial
results of the Person having the ownership interest in its consolidated
financial statements.
4
5
"Joint Venture" means any joint venture partnership in which
the Corporation or any Subsidiary is a joint venture partner.
"Letter of Credit" means a letter of credit of a Person which
is issued upon the application of such Person or upon which such Person
is an account party or for which such Person is in any way liable.
"Person" means any corporation, joint venture, partnership,
association, enterprise, trust, limited liability company or other
entity or organization.
"Property Operating Income" means, with respect to any Hotel
Property owned by the Corporation, any Subsidiary or any Investment
Affiliate, for any period, earnings from rental operations (computed in
accordance with GAAP but without deduction for reserves) attributable
to such Hotel Property plus depreciation, amortization and interest
expense for such period, and, if such period is less than a year,
adjusted by straight lining various ordinary operating expenses which
are payable less frequently than once during every such period (e.g.
real estate taxes and insurance).
"SAB 101" means Staff Accounting Bulletin No. 101 of the
Securities and Exchange Commission issued December 3, 1999.
"Subsidiary" means a corporation, partnership or other entity
of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by the Corporation, and
provided such corporation, partnership or other entity is consolidated
with the Corporation for financial reporting purposes under GAAP.
"Total Asset Value" means the sum of (a) for each open Hotel
Property owned or open for less than four (4) fiscal quarters, 100% of
the Cost of the Hotel Property plus (b) for each open Hotel Property
owned or open for four (4) fiscal quarters or more, the Implied Value
of the Hotel Property, plus (c) 100% of cash and Cash Equivalents in
accordance with GAAP; provided, however, that with respect to a Hotel
Property owned by an Investment Affiliate or Joint Venture, the Cost or
Implied Value of the Hotel Property shall be multiplied by a percentage
equal to the percentage of ownership of the Corporation or a Subsidiary
in the Investment Affiliate or Joint Venture. Notwithstanding the
foregoing, the Cost or Implied Value of any Hotel Property owned by RFS
Partnership, L.P. or any successor thereto shall be 100% of the Cost or
Implied Value of such Hotel Property.
"Total Liabilities" means all GAAP liabilities (not inclusive
of GAAP minority interest or GAAP deferred/unearned revenue liability
arising solely from the application of the policies and procedures
prescribed by SAB 101) of the Corporation and its Subsidiaries.
Such dividends shall be cumulative from the date of original issue,
whether or not in any dividend period or periods (i) such dividends
shall be declared, (ii) there shall be funds of the Corporation legally
available for the payment of such dividends or (iii) any agreement of
the Corporation
5
6
prohibits payment of such dividends. Dividends not paid when due as
described in Section 3(a) above shall bear interest at a per annum rate
equal to the dividend rate in effect from time to time.
Any dividend payable on the Series B Preferred Stock for any partial
dividend period will be computed on the basis of twelve 30-day months
and a 360 day year. Dividends will be payable in arrears to holders of
record as they appear on the stock records of the Corporation at the
close of business on the 15th day of March, June, September and
December immediately preceding such Dividend Payment Date. Holders of
Series B Preferred Stock shall not be entitled to receive any dividends
in excess of cumulative dividends on the Series B Preferred Stock.
(b) When dividends are not paid in full upon the Series
B Preferred Stock or any other class or series of Parity Stock, or a
sum sufficient for such payment is not set apart, all dividends
declared upon the Series B Preferred Stock and any other class or
series of Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid,
together with interest thereon (if any), on the Series B Preferred
Stock and dividends accumulated, accrued and unpaid on such Parity
Stock, together with interest thereon (if any). Except as set forth in
the preceding sentence, unless dividends on the Series B Preferred
Stock equal to the full amount of accumulated, accrued and unpaid
dividends, together with interest thereon (if any), have been or
contemporaneously are declared and paid, or declared and a sum
sufficient for the payment thereof set apart for such payment for all
past dividend periods, no dividends shall be declared or paid or set
aside for payment by the Corporation with respect to any class or
series of Parity Stock. Unless full cumulative dividends on the Series
B Preferred Stock, together with interest thereon (if any), have been
paid or declared and set apart for payment for all past dividend
periods, no dividends (other than dividends paid in shares of Junior
Stock or options, warrants or rights to subscribe for or purchase
shares of Junior Stock) shall be declared or paid or set apart for
payment by the Corporation with respect to any shares of Junior Stock,
nor shall any shares of Junior Stock be redeemed, purchased or
otherwise acquired (except for purposes of an employee benefit plan)
for any consideration (except by conversion or exchange for shares of
Junior Stock, or options, warrants or rights to subscribe for or
purchase shares of Junior Stock), nor shall any other cash or other
property be paid or distributed to or for the benefit of holders of
shares of Junior Stock. Notwithstanding the above, the Corporation
shall not be prohibited from (i) declaring or paying or setting apart
for payment any dividend or distribution on any shares of Parity Stock
or (ii) or redeeming, purchasing or otherwise acquiring any Parity
Stock, in each case, if such declaration, payment, redemption, purchase
or other acquisition is necessary to maintain the Corporation's
qualification as a real estate investment trust under the Internal
Revenue Code of 1986, as amended (the "Code").
(c) No dividends on shares of Series B Preferred Stock
shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation at such time as the terms and provisions of
any agreement of the Corporation, including any agreement relating to
its indebtedness, prohibits such declaration, payment or setting apart
for payment or provides 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.
(d) If, for any taxable year, the Corporation elects
to designate as "capital gain dividends" (as defined in Section 857 of
the Code) any portion (the "Capital Gains Amount") of the dividends (as
determined for federal income tax purposes) paid or made available for
the year to holders of all classes of stock (the "Total Dividends"),
then the portion of the Capital Gains Amount that shall be allocable to
the holders of Series B Preferred Stock shall be the amount that
6
7
the total dividends (as determined for federal income tax purposes)
paid or made available to the holders of the Series B Preferred Stock
for the year bears to the Total Dividends. The Corporation may elect to
retain and pay income tax on its net long-term capital gains. In such a
case, the holders of Series B Preferred Stock would include in income
their proportionate share of the Corporation's undistributed long-term
capital gains, as designated by the Corporation.
4. LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, before any payment or
distribution by the Corporation shall be made to or set apart for the
holders of any shares of Junior Stock, the holders of shares of Series
B Preferred Stock shall be entitled to receive a liquidation preference
of $100 per share (the "Liquidation Preference"), plus an amount equal
to all accumulated, accrued and unpaid dividends (whether or not
declared), together with interest thereon (if any), to the date of
final distribution to such holders, but such holders shall not be
entitled to any further payment. Until the holders of the Series B
Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all accumulated, accrued and unpaid dividends
(whether or not declared) to the date of final distribution to such
holders, no payment shall be made to any holder of Junior Stock upon
the liquidation, dissolution or winding up of the Corporation.
(b) If upon any liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of Series B Preferred Stock shall be
insufficient to pay in full the above described preferential amount and
liquidating payments on any other shares of any class or series of
Parity Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of Series B Preferred Stock and any such
other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Series B Preferred Stock and any
such other Parity Stock if all amounts payable thereon were paid in
full.
(c) A voluntary or involuntary liquidation, dissolution
or winding up of the Corporation shall not include any Redemption Event
described in Section 5(c) below.
(d) Upon any liquidation, dissolution or winding up of
the Corporation, after payment shall have been made in full to the
holders of Series B Preferred Stock and any Parity Stock, any series or
class or classes of Junior Stock shall be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the
Series B Preferred Stock and any Parity Stock shall not be entitled to
share therein.
5. REDEMPTION.
(a) Shares of Series B Preferred Stock shall not be
redeemable by the Corporation prior to December 31, 2003. However, in
order to ensure that the Corporation will continue to meet the
requirement for qualification as a real estate investment trust under
the Code, the Series B Preferred Stock will be subject to the
provisions of Article 14 of the Corporation's Charter (the "Charter")
pursuant to which shares of Preferred Stock and Common Stock of the
Corporation owned by a shareholder in excess of 9.9% in value of the
outstanding shares of capital stock of the Corporation (the "Ownership
Limit") will be deemed "Shares-in-Trust" (as defined in such Article
14). The Corporation may redeem shares of Series B Preferred Stock, in
whole but not in part (a "Voluntary Redemption"), (i) on and after
December 31, 2003 at a cash redemption price
7
8
equal to 100% of the Liquidation Preference plus all accrued and unpaid
dividends, together with interest thereon (if any), to the date fixed
for redemption (the "Redemption Date"), (ii) at any time during which
the Consolidated Total Indebtedness of the Corporation exceeds 60% of
Total Asset Value of the Corporation as determined in accordance with
Sections 3(a)(iii) and 3(a)(iv) above at a cash redemption price
determined in accordance with Section 5(b) below or (iii) immediately
prior to consummation of a Change of Control (as defined in Section
5(c)(ii)) at a cash redemption price determined in accordance with
Section 5(b) below.
(b) Upon the occurrence of a Redemption Event (as defined
below), the Corporation shall offer, in accordance with subsections (d)
and (e) below, to redeem all of the outstanding Series B Preferred
Stock at the applicable redemption price reflected below, plus accrued
and unpaid dividends, together with interest thereon (if any), to the
date of redemption:
Redemption Price
Date of Redemption Per Share
------------------ ----------------
Prior to December 31, 2001 $103.00
January 1, 2002 through December 31, 2002 $102.00
January 1, 2003 through December 31, 2003 $101.00
After January 1, 2004 $100.00
(c) As used in this Section 5:
(i) A "Redemption Event" shall mean (1) the
execution by the Corporation or any of its subsidiaries or affiliates
of any agreement with respect to any proposed transaction or event or
series of transactions or events which, individually or in the
aggregate, may reasonably be expected to result in a Change of Control
(as defined below); (2) the failure of the Corporation and its
subsidiaries to complete on or before April 15, 2001 (A) the
termination or assignment of certain lease agreements between
subsidiaries of the Corporation, as lessor, and subsidiaries of Hilton
Hotels Corporation, as lessee, and (B) the purchase from RFS, Inc. of
973,684 shares of the Corporation's convertible Preferred Stock, Series
A, all as set forth in the Termination Agreement dated as of January
26, 2000, among the Corporation and certain of its subsidiaries and
Hilton Hotels Corporation and certain of its subsidiaries; or (3) the
Corporation fails to satisfy the requirements for qualification as a
real estate investment trust under the Code.
(ii) A "Change of Control" shall be deemed to
have occurred at such time as (1) 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 20% of the total voting power of the total voting stock of the
Corporation on a fully diluted basis; (2) the date the Corporation
sells, transfers or otherwise disposes of all or substantially all of
the assets of the Corporation or the Operating Partnership, other than
to a subsidiary of the Corporation; and (3) the date of the
consummation of a merger or share exchange of the Corporation with
another corporation where
8
9
the shareholders of the Corporation immediately prior to the merger or
share exchange would not beneficially own immediately after the merger
or share exchange, shares entitling such shareholders to 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 Board of Directors of the Corporation 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.
(iii) "Voting Stock" shall mean capital stock of
any class or kind having the power to vote generally for the election
of directors of the Corporation.
(d) In the event of a Voluntary Redemption by the
Corporation pursuant to subsection (a) above or upon the occurrence of
a Redemption Event as defined in subsection (c) above, the Corporation
shall select a Redemption Date which shall not be less than 30 days nor
more than 60 days after the date notice of redemption is sent by the
Corporation (in accordance with subsection (e) below), in the case of a
Voluntary Redemption, or the offer to redeem is sent, in the case of an
occurrence of a Redemption Event. If full cumulative dividends on all
outstanding shares of Series B Preferred Stock have not been paid or
declared and set apart for payment, no shares of Series B Preferred
Stock may be redeemed unless all outstanding shares of Series B
Preferred Stock are simultaneously redeemed.
(e) Notice of redemption of the Series B Preferred Stock,
in the case of a Voluntary Redemption, or an offer of redemption, in
the case of an occurrence of a Redemption Event, shall be mailed by the
Corporation to each holder of record of the shares to be redeemed or
offered to be redeemed by first class mail, postage prepaid at such
holder's address as the same appears on the stock records of the
Corporation no later than ten (10) business days following the
occurrence of a Redemption Event. Any notice which was mailed as
described above shall be conclusively presumed to have been duly given
on the date mailed whether or not the holder receives the notice. Each
notice shall state: (i) the Redemption Date; (ii) the redemption price;
and (iii) the place or places where certificates for such shares of
Series B Preferred Stock are to be surrendered for cash. From and after
the Redemption Date, dividends on the shares of Series B Preferred
Stock to be redeemed will cease to accrue, such shares shall no longer
be deemed to be outstanding and all rights of the holders thereof shall
cease (except the right to receive the cash payable upon such
redemption); provided, however, that if the Company does not fund the
redemption of the Series B Preferred Stock on the Redemption Date,
dividends shall continue to accrue from the Redemption Date until the
funding date.
(f) The Series B Preferred Stock has no stated maturity
and will not be subject to any sinking fund or mandatory redemption
provisions except as provided under Article 14 of the Charter.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series B Preferred Stock are in
arrears, the Corporation may, at any time and from time to time,
purchase any shares of Series B Preferred Stock in the open market, by
tender or by private agreement.
6. VOTING RIGHTS.
9
10
(a) Holders of the Series B Preferred Stock will not have
any voting rights, except as set forth below or as otherwise from time
to time required by law.
(b) If and whenever dividends on any shares of Series B
Preferred Stock shall be in arrears for two or more quarterly periods
(whether or not consecutive), the holders of such shares of Series B
Preferred Stock (voting together as a single class) will be entitled to
vote for the election of two additional directors of the Corporation at
any annual meeting of stockholders or at a special meeting of the
holders of the Series B Preferred Stock called for that purpose and the
number of directors then constituting the Board of Directors shall be
increased by two. The Corporation must call such special meeting upon
the request of holders of record of at least 66 2/3% of the outstanding
shares of Series B Preferred Stock. Whenever dividends in arrears on
outstanding shares of the Series B Preferred Stock shall have been paid
and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of
the holders of the Series B Preferred Stock to elect such additional
two directors shall cease and the terms of office of such directors
shall terminate and the number of directors constituting the Board of
Directors shall be reduced accordingly; provided however, that if,
thereafter, dividends on any shares of Series B Preferred Stock shall
be in arrears for any quarterly period, the voting rights of the
holders of such shares of Series B Preferred Stock shall again become
exercisable with respect to the election of two additional directors of
the Corporation in accordance with the provisions of this subsection
(b) and any additional directors so elected shall serve for a term
described above.
(c) The affirmative vote or consent of at least 66 2/3%
of the votes entitled to be cast by the holders of the outstanding
shares of Series B Preferred Stock, voting as a single class, will be
required to (i) authorize the issuance of any shares of any class of
Senior Stock or any security convertible into shares of any class of
Senior Stock or (ii) amend, alter or repeal any provision of, or add
any provision to, the Charter (including any amendment, alteration,
repeal or addition resulting from a merger or consolidation), including
the Articles of Amendment, or the Corporation's bylaws, if such action
would materially adversely affect the voting powers, rights or
preferences of the holders of the Series B Preferred Stock, including
any amendment which adversely affects the voting rights of the Series B
Preferred Stock described in Section 6(b) above or any amendment to the
Charter which alters the requirement that the Independent Directors
approve the issuance of Parity Stock or which reduces the percentage of
Independent Directors (as defined in the Charter). Notwithstanding the
foregoing, the amendment of the Charter to authorize, create, or to
increase the authorized amount of capital stock, shall not be deemed to
materially adversely affect the voting powers, rights or preferences of
the holders of Series B Preferred Stock. No such vote of the holders of
Series B Preferred Stock as described above shall be required if
provision is made to redeem all shares of Series B Preferred Stock at
or prior to the time such amendment, alteration or repeal is to take
effect, or when the issuance of any such shares or convertible security
is to be made, as the case may be.
(d) The foregoing voting provisions will not apply if, at
or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of
Series B Preferred Stock shall have been redeemed or called for
redemption upon proper notice and sufficient funds shall have been
deposited in trust to effect such redemption.
7. CONVERSION. The Series B Preferred Stock is not convertible
into or exchangeable for any other property or securities of the
Corporation.
10
11
8. PARITY STOCK. Any issuance of Parity Stock shall be approved
by a majority of the Independent Directors (as defined in the Charter)
for fair market value as determined by such directors in their sole
discretion.
THIRD: The above-listed amendments are to become effective when these
articles of amendment are accepted for filing by the Secretary of State of the
State of Tennessee.
FOURTH: The above-listed amendments do not provide for the exchange,
reclassification or cancellation of existing shares.
FIFTH: The above-listed amendments were duly adopted by the Board of
Directors of the Corporation as of December 22, 2000, and were not required to
be adopted by the shareholders of the Corporation.
Dated this the 27th day of December, 2000.
RFS HOTEL INVESTORS, INC.
By: /s/Kevin M. Luebbers
--------------------------------------------
Name: Kevin M. Luebbers
Title: Vice President, Secretary and Treasurer
11