<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 1999
(January 27, 1999)
SIGNATURE INNS, INC.
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(Exact name of registrant as specified in its charter)
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Indiana 0-9659 35-1426996
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 581-1111
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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Signature Inns, Inc., an Indiana corporation (the "Company") has
entered into an Agreement and Plan of Merger, dated as of January 27, 1999 (the
"Merger Agreement"), with Jameson Inns, Inc., a Georgia corporation ("Jameson").
Pursuant to and subject to the terms and conditions of the Merger Agreement, the
Company will be merged with and into Jameson (the "Merger"), with Jameson being
the surviving corporation. At the Effective Time (as defined in the Merger
Agreement) of the Merger, the holders of Company common stock (the "Company
Common Stock") will receive one-half share of Jameson common stock (the "Jameson
Common Stock") and a cash payment of $1.50 in exchange for each share of Company
Common Stock owned. The amount of the cash payment will be reduced if a dividend
is declared and paid to the holders of the Company Common Stock prior to the
consummation of the merger. Such a dividend distribution may be required to
distribute all earnings and profits, as defined under federal tax law, of the
Company prior to the merger to protect the REIT status of Jameson. Holders of
the outstanding shares of the Company $1.70 Cumulative Convertible Preferred
Stock, Series A (the "Company Series A Preferred Stock"), will receive an equal
number of shares of a new series of Jameson cumulative convertible preferred
stock (the "Jameson Series S Preferred Stock") having substantially the same
terms as the Company Series A Preferred Stock, including an annual preferred
dividend right of $1.70 per share and a liquidation preference of $20.00 per
share. Upon conversion of each share of the new Jameson Series S Preferred Stock
(at any time in the future), holders will be entitled to receive 1.04 shares of
Jameson Common Stock and a cash payment of $3.125.
The Merger is subject to approval by the Company's common and preferred
shareholders, each voting separately as a single class, approval by the Jameson
common shareholders and certain other conditions.
On January 28, 1999, the Company and Jameson issued a press release
(the "Press Release") concerning the Merger and the execution of the Merger
Agreement.
The foregoing description of the Merger and related transactions does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, the Articles of Amendment to the Amended and Restated Articles
of Incorporation of Jameson Inns, Inc. and the Press Release, which are attached
hereto as Exhibits 2.1, 2.2 and 99.1 and are incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits: See Exhibit Index following signature page.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIGNATURE INNS, INC.
Date: February 1, 1999 By: /s/ John D. Bontreger
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John D. Bontreger
President and Chief Executive Officer
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EXHIBIT INDEX
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No. Document
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2.1 Agreement and Plan of Merger, dated as of January 27, 1999,
among Signature Inns, Inc. and Jameson Inns, Inc. (Schedules
and other exhibits are omitted from this filing but the
Company will furnish supplemental copies of the omitted
materials to the Securities and Exchange Commission upon
request.)
2.2 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Jameson Inns, Inc.
99.1 Joint Press Release dated January 28, 1999.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
between
JAMESON INNS, INC.
and
SIGNATURE INNS, INC.
Dated as of January 27, 1999
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TABLE OF CONTENTS
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ARTICLE I
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THE MERGER.............................................................................................-1-
1.01. The Merger....................................................................................-1-
1.02. Effective Time of the Merger..................................................................-2-
1.03. Articles of Incorporation, By-laws, Directors and Officers....................................-2-
1.04. Conversion of Shares..........................................................................-2-
1.05. Employee Stock Options........................................................................-3-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SIGNATURE............................................................-4-
2.01. Organization; Good Standing; Power, Etc.......................................................-4-
2.02. Authorization of Agreement, Etc...............................................................-4-
2.03. Capitalization................................................................................-7-
2.04. Absence of Certain Changes or Events..........................................................-8-
2.05. Signature SEC Reports.........................................................................-9-
2.06. Defaults.....................................................................................-10-
2.07. Tax Matters..................................................................................-10-
2.08. Trademarks, Copyrights, Etc..................................................................-11-
2.09. Title to Properties: Absence of Liens and Encumbrances: Leases, etc..........................-12-
2.10. Employee Benefit Plans.......................................................................-13-
2.11. Litigation...................................................................................-17-
2.12. Insurance....................................................................................-17-
2.13. Brokers and Finders..........................................................................-17-
2.14. Compliance with Laws.........................................................................-18-
2.15. Information Supplied.........................................................................-19-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF JAMESON.............................................................-20-
3.01. Organization, Good Standing, Power, Etc......................................................-20-
3.02. Authorization of Agreement. Etc..............................................................-20-
3.03. Tax Matters..................................................................................-22-
3.04. Capitalization...............................................................................-23-
3.05. Issuance of Jameson Common Stock and Jameson Series S Preferred Stock........................-23-
3.06. No Material Adverse Change...................................................................-23-
3.07. Brokers and Finders..........................................................................-23-
3.08. Jameson SEC Reports..........................................................................-24-
3.09. Litigation...................................................................................-24-
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3.10. Compliance with Laws.........................................................................-25-
3.11. Information Supplied.........................................................................-26-
ARTICLE IV
COVENANTS OF SIGNATURE................................................................................-26-
4.01. Approvals....................................................................................-26-
4.02. Investigation by Jameson.....................................................................-27-
4.03. No Solicitation..............................................................................-27-
4.04. Conduct of Business..........................................................................-30-
4.05. No Charter Amendments........................................................................-32-
4.06. No Issuance or Disposition of Securities.....................................................-32-
4.07. No Dividends.................................................................................-32-
4.08. No Disposal of Property......................................................................-33-
4.09. No Acquisitions..............................................................................-33-
4.10. No Breach or Default.........................................................................-33-
4.11. No Indebtedness..............................................................................-33-
4.12. Payment of Liabilities.......................................................................-33-
4.13. Employee Matters.............................................................................-33-
4.14. Stockholders Meeting.........................................................................-34-
4.15. Notice and Cure..............................................................................-35-
4.16. Cooperation of Management Pending Merger.....................................................-35-
4.17. Furnish Information for Jameson Statements...................................................-35-
4.18. Affiliates Undertakings......................................................................-35-
4.19. Filings; Other Actions.......................................................................-36-
4.20. Comfort Letter...............................................................................-36-
4.21. REIT-Related Transactions....................................................................-36-
4.22 Signature Property Restructuring.............................................................-37-
ARTICLE V
COVENANTS OF JAMESON..................................................................................-37-
5.01. Approvals....................................................................................-37-
5.02. Investigation by Signature...................................................................-37-
5.03. Conduct of Business..........................................................................-38-
5.04. Stockholders' Meeting........................................................................-38-
5.05. Blue Sky Permits.............................................................................-38-
5.06. Registration Statement.......................................................................-38-
5.07. Issuance of Jameson Common Stock and Jameson Series S Preferred Stock........................-38-
5.08. Notice and Cure..............................................................................-39-
5.09. Nasdaq National Market Listing...............................................................-39-
5.10. Tax Covenants................................................................................-39-
5.11. No Breach or Default.........................................................................-39-
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5.12. Notice and Cure..............................................................................-39-
5.13. Cooperation of Management Pending Merger.....................................................-40-
5.14. Furnish Information for Signature Proxy Statements...........................................-40-
5.15. Comfort Letters..............................................................................-40-
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF JAMESON AND SIGNATURE..............................................................................-40-
6.01. Consents and Approvals.......................................................................-40-
6.02. Registration Statement.......................................................................-41-
6.03. Stockholder Approval.........................................................................-41-
6.04. Nasdaq National Market Listings..............................................................-41-
6.05. Certain Actions, etc.........................................................................-41-
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF JAMESON........................................................-41-
7.01. Accuracy of Representations and Warranties...................................................-41-
7.02. Performance of Covenants, Agreements and Conditions..........................................-42-
7.03. Officers' Certificate, Etc...................................................................-42-
7.04. Employment Agreements........................................................................-42-
7.05. Opinion of Signature Counsel.................................................................-42-
7.06. Undertakings by Signature Affiliates.........................................................-45-
7.07. Rights Agreement.............................................................................-46-
7.08. Opinions of Professionals....................................................................-46-
7.09. Auditors' letters............................................................................-46-
7.10. Resignations.................................................................................-46-
7.11. Fairness Opinion.............................................................................-46-
7.12. No Material Adverse Change...................................................................-47-
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SIGNATURE......................................................-47-
8.01. Accuracy of Representations and Warranties...................................................-47-
8.02. Performance of Covenants, Agreements and Conditions..........................................-47-
8.03. Officers' Certificates Etc...................................................................-47-
8.04. Opinion of Counsel for Jameson...............................................................-48-
8.05. Authorization of Jameson Stock...............................................................-50-
8.06. Fairness Opinion.............................................................................-50-
8.07. Tax Opinion..................................................................................-51-
8.08. No Material Adverse Change...................................................................-51-
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8.09. Auditors' Letters............................................................................-51-
ARTICLE IX
TERMINATION, AMENDMENTS AND WAIVER....................................................................-51-
9.01. Termination..................................................................................-52-
9.02. Effect of Termination........................................................................-53-
9.03. Amendment....................................................................................-53-
9.04. Waiver.......................................................................................-53-
ARTICLE X
OTHER AGREEMENTS; NONSURVIVAL
OF REPRESENTATIONS AND WARRANTIES ....................................................................-54-
10.01. Confidentiality..............................................................................-54-
10.02. Public Announcements.........................................................................-54-
10.03. Indemnification..............................................................................-54-
10.04. Additional Agreements........................................................................-55-
10.05. Break-up Fee.................................................................................-55-
10.06. Available Remedies...........................................................................-55-
10.07. Nonsurvival of Representations and Warranties................................................-55-
ARTICLE XI
MISCELLANEOUS.........................................................................................-56-
11.01. Closing......................................................................................-56-
11.02. Expenses.....................................................................................-56-
11.03. Notices......................................................................................-56-
11.04. Entire Agreement.............................................................................-57-
11.05. Binding Effect: Benefits.....................................................................-57-
11.06. Assignment...................................................................................-57-
11.07. Applicable Law...............................................................................-57-
11.08. Article and Section Headings.................................................................-57-
11.09. Construction.................................................................................-58-
11.10 Severability.................................................................................-58-
11.11. Incorporation of Exhibits and Schedules......................................................-58-
11.12. Counterparts.................................................................................-58-
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LIST OF EXHIBITS AND SCHEDULES
Exhibits
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Exhibit A - Agreement of Merger.
Exhibit A-1 - Form of Certificate of Designation for Jameson Series S Preferred
Stock Exhibit B - Amendment of Signature Rights Agreement.
Exhibit C - Form of Employment Agreements.
Exhibit D - Assignment and Assumption Agreement - Signature Operating Assets and Liabilities
Schedules
Schedule 1.05 - Options to purchase Common Stock of Signature.
Schedule 2.01 - Subsidiaries of Signature.
Schedule 2.02(c) - Consents
Schedule 2.04 - Changes since the September 30, 1998.
Schedule 2.07 - Signature Tax Matters.
Schedule 2.08 - Intellectual Property Rights.
Schedule 2.09 - Real Property.
Schedule 2.10 - Employee Benefit Plans.
Schedule 2.11 - Signature Litigation
Schedule 2.12 - Insurance.
Schedule 2.14 - Compliance with Laws.
Schedule 3.03 - Jameson Tax Matters
Schedule 3.09 - Jameson Litigation
Schedule 3.10 - Jameson Compliance with Laws
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<PAGE> 7
DEFINITIONS
Capitalized terms used herein shall have the meanings ascribed to them in the
sections set forth below.
Affiliate: as defined in Section 2.10(a).
Agreement: as defined in the first sentence of this document.
Average Price: as defined in Section 1.04.
Closing: as defined in Section 1.01.
Code: as defined in Section 2.10.
Commission: as defined in Section 2.05.
Dissolved Partnerships: as defined in Section 2.02(h)
Earnings and Profits: as defined in Section 7.08(a).
Effective Time of the Merger: as defined in Section 1.02.
Employee Pension Benefit Plans: as defined in Section 2.10.
Employee Welfare Benefit Plans: as defined in Section 2.10.
Encumbrance: as defined in Section 2.09.
Environmental Laws: as defined in Section 2.14.
ERISA: as defined in Section 2.10.
Georgia Law: as defined in Section 1.01.
Governmental Entity: as defined in Section 2.02.
Indiana Law: as defined in Section 1.01.
IRS: as defined in Section 2.10(c).
Intellectual Property: as defined in Section 2.08
Jameson Common Stock: as defined in Section 3.04.
Jameson SEC Reports: as defined in Section 3.08.
Jameson Series A Preferred Stock: as defined in Section 3.04.
Jameson Series S Preferred Stock: as defined in Section 3.05.
Jameson Stockholder Meeting: as defined in Section 5.04
Knowledge: as defined in Section 11.09.
Legal Requirements: as defined in Section 2.14.
Material Adverse Effect: as defined in Section 2.02.
Merger: as defined in the recitals.
Merger Agreement: as defined in Section 1.01.
PBGC: as defined in Section 4.13(c).
Person: as defined in Section 2.02.
Property Restriction: as defined in Section 2.10.
Proxy Statement: as defined in Section 2.15.
Registration Statement: as defined in Section 2.15.
REIT: as defined in Section 3.03.
Rights: as defined in Section 2.03.
Rights Agreement: as defined in Section 2.03.
1933 Act: as defined in Section 2.02.
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1934 Act: as defined in Section 2.02.
Significant Subsidiary: as defined in Section 4.03.
Subsidiary: as defined in Section 2.01.
Superior Proposal: as defined in Section 4.03.
Surviving Corporation: as defined in Section 1.01.
Signature Common Stock: as defined in Section 2.03.
Signature Partnerships: as defined in Section 2.02.
Signature Preferred Stock: as defined in Section 2.03.
Signature Properties: as defined in Section 2.09.
Signature SEC Reports: as defined in Section 2.05.
Signature Series One Preferred Stock: as defined in Section 2.03.
Signature Stockholder Meeting: as defined in Section 4.14.
Takeover Proposal: as defined in Section 4.03.
Tax Returns: as defined in Section 2.07.
Tax: as defined in Section 2.07.
Worker Safety Laws: as defined in Section 2.14.
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<PAGE> 9
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is dated as of January 27,
1999 (this "Agreement"), by and among Jameson Inns, Inc., a Georgia corporation
("Jameson"), and Signature Inns, Inc., an Indiana corporation ("Signature").
WHEREAS, the Boards of Directors of Jameson and Signature deem
it advisable and in the best interests of their respective corporations that
Signature be merged with and into Jameson; and
WHEREAS, the Boards of Directors of Jameson and Signature, by
resolutions duly adopted, have approved this Agreement providing for the merger
of Signature with and into Jameson (the "Merger"), with Jameson surviving such
Merger, and the respective Boards of Directors of Jameson and Signature have
recommended the Merger Agreement for approval by their respective stockholders
in accordance with the terms of this Agreement, Georgia and Indiana Law and the
Nasdaq Stock Market; and
WHEREAS, Jameson and Signature desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement and to prescribe various conditions
precedent to such transactions;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements herein set forth,
the parties to this Agreement have agreed, and hereby agree subject to the terms
and conditions hereinafter set forth, as follows:
ARTICLE I
THE MERGER
1.01. The Merger. (a) At the Effective Time of the Merger, in
accordance with the provisions of the Georgia Business Corporation Code and
other applicable Georgia law ("Georgia Law"), the Indiana Business Corporation
Law and other applicable Indiana law ("Indiana Law"), and the terms of this
Agreement, Signature shall be merged with and into Jameson, with Jameson
surviving the merger ("Surviving Corporation"), all as more fully provided for
in the form of Agreement of Merger, which is attached hereto as Exhibit A and
incorporated herein by reference (the "Merger Agreement").
(b) The consummation of the transactions contemplated by
Section 1.01(a) hereof and by this Agreement is herein called the "Closing."
1.02. Effective Time of the Merger. The Merger shall not
become effective until, and, subject to the terms and conditions of this
Agreement, shall become effective when, appropriate Articles of Merger shall
have been filed, in accordance with the requirements of Georgia Law and
<PAGE> 10
Indiana Law, in the offices of the Secretary of State of the State of Georgia
and the offices of the Secretary of State of Indiana. The date and time when the
Merger shall become effective as aforesaid is herein referred to as the
"Effective Time of the Merger."
1.03. Articles of Incorporation, By-laws, Directors and
Officers. (a) The Amended and Restated Articles of Incorporation of Jameson as
in effect immediately prior to the Effective Time of the Merger shall be the
Amended and Restated Articles of Incorporation of the Surviving Corporation from
and after the Effective Time of the Merger until amended in accordance with
Georgia Law.
(b) The By-laws of Jameson, as in effect immediately prior
to the Effective Time of the Merger, shall be the By-laws of the Surviving
Corporation from and after the Effective Time of the Merger until amended in
accordance with Georgia Law and the Restated Articles of Incorporation and the
By-laws of the Surviving Corporation.
(c) The officers of Jameson in office immediately prior to
the Effective Time of the Merger shall be the officers of the Surviving
Corporation from and after the Effective Time of the Merger, each to hold office
in accordance with the Restated Articles of Incorporation and Bylaws of the
Surviving Corporation.
(d) The directors of Jameson in office immediately prior to
the Effective Time of the Merger shall be the directors of the Surviving
Corporation from and after the Effective Time of the Merger, and each shall hold
such office until his successor shall have been elected or qualified or as
otherwise provided in the By-laws or Restated Articles of Incorporation of the
Surviving Corporation.
1.04. Conversion of Shares. At the Effective Time of the
Merger:
(a) Each share of Signature Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one-half of one fully paid and nonassessable share of Jameson
Common Stock and the right to receive cash in the amount of $1.50 less the
amount of the per share extraordinary dividend paid for the purpose of
distributing any current and anticipated undistributed Earnings and Profits of
Signature as contemplated by Section 4.21. No fractional shares of Jameson
Common Stock shall be issued. Any holder of Signature Common Stock who, at the
Effective Time of the Merger, otherwise becomes entitled to receive a fractional
share of Jameson Common Stock shall, in lieu thereof, be entitled to receive
cash equal to such fraction multiplied by the average of the per share closing
prices for the Jameson Common Stock (the "Average Price") on the Nasdaq National
Market for the five (5) consecutive trading days ending on the last trading day
of the calendar week preceding the calendar week of the Effective Time of the
Merger.
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<PAGE> 11
(b) Each share of Signature Preferred Stock shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into one share of Jameson Series S Preferred Stock which shall have
the rights, preferences and terms set forth in the Designation of Preferences,
Rights, Privileges and Restrictions of $1.70 Series S Cumulative Preferred Stock
set forth in the Articles of Amendment of the Jameson Articles of Incorporation
to be filed with the Secretary of State of Georgia and attached hereto as
Exhibit A-1.
(c) Each share of Signature Common Stock held in the
treasury of Signature immediately prior to the Effective Time of the Merger
shall be canceled, without any payment or other distribution in respect thereof.
(d) At the Effective Time of the Merger, each outstanding
certificate which theretofore represented shares of the Signature Common Stock
(and associated Rights) shall be deemed for all purposes to evidence ownership
of and to represent that number of shares of Jameson Common Stock and the right
to receive the cash payment into which the shares of the Signature Common Stock
represented thereby shall have been converted and all Rights associated with
such shares of Signature Common Stock shall be thereby canceled and shall cease
to exist. Also, at the Effective Time of the Merger, each outstanding
certificate which theretofore represented shares of the Signature Preferred
Stock shall be deemed for all purposes to evidence ownership of and to represent
that number of shares of Jameson Preferred Stock into which the shares of the
Signature Preferred Stock represented thereby shall have been converted.
1.05. Employee Stock Options. At the Effective Time of the
Merger, the outstanding options to purchase shares of the Common Stock of
Signature reflected on Schedule 1.05 hereto which are then unexercised will be
canceled. Each of the Signature employees who held canceled options to purchase
shares of Signature Common Stock shall be granted options under the Jameson 1993
Stock Incentive Plan providing for the purchase of that number of shares of
Jameson Common Stock (the "Jameson Replacement Options") equal to the number of
shares of Signature Common Stock covered by the canceled options. The exercise
price of the Jameson Replacement Options will be equal to the closing sales
price for Jameson Common Stock as reported on the Nasdaq National Market on the
Effective Date of the Merger. Such options shall become exercisable with respect
to one-third of the shares covered thereby on each of the first three
anniversary dates of the Effective Date of the Merger. Subject to the foregoing,
the exercise, termination and other provisions of the Jameson Replacement
Options shall be as comparable to the provisions of the canceled options prior
to the Effective Time of the Merger (and without regard to any acceleration of
the vesting of the options due to the Merger) as practicable in light of the
terms, provisions and requirements of the Jameson 1993 Stock Incentive Plan and
the rules and regulations of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SIGNATURE
Signature hereby represents and warrants to Jameson as
follows:
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<PAGE> 12
2.01. Organization; Good Standing; Power, Etc. Signature is a
corporation duly incorporated and validly existing under the laws of the State
of Indiana and has all requisite power and authority to own, operate and lease
its properties and assets and to carry on its business as now being conducted.
Signature has no Subsidiaries, as defined below, other than those listed on
Schedule 2.01 hereto. Each Signature Subsidiary is a corporation duly organized
and validly existing under the laws of the State of Indiana and has all
requisite power and authority to own, operate and lease its properties and
assets and to carry on its business as now being conducted. Signature and each
Signature Subsidiary, as hereafter defined, is duly qualified to do business and
is in good standing as a foreign corporation or other entity in each other
jurisdiction in which the ownership, operation or leasing of its properties or
assets or the nature of its business requires such qualification except where
the failure so to qualify would not have a Material Averse Effect on the
business, financial condition or properties of Signature and its Subsidiaries
taken as a whole. As used in this Agreement, the term "Subsidiary" shall mean
any corporation 50% or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company, limited partnership or
other entity 50% or more of the total equity interest of which, is directly or
indirectly owned by another entity.
2.02. Authorization of Agreement, Etc. (a) Signature has all
requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
by Signature and the consummation by Signature of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Signature, subject only, with respect to the Merger, to the approval of
holders of a majority of the outstanding shares of Signature Common Stock
entitled to vote and the holders of a majority of the outstanding shares of
Signature Preferred Stock entitled to vote, voting separately as a class. This
Agreement has been duly executed and delivered by Signature and constitutes the
legal, valid and binding obligation of Signature, enforceable against Signature
in accordance with its terms except as enforceability may be subject to (i) any
applicable bankruptcy, insolvency, reorganization or other law relating to or
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(b) Assuming the approval of the holders of at least a
majority of the outstanding shares of Signature Common Stock and the holders of
at least a majority of the outstanding shares of Signature Preferred Stock,
voting separately as a class, is obtained, neither the execution and delivery of
this Agreement by Signature nor the consummation of the transactions
contemplated hereby to be performed by Signature will (i) violate or conflict
with any provision of the Articles of Incorporation, as amended, or Bylaws, as
currently in effect, of Signature or (ii) violate or conflict with any provision
of any law, rule, regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of any foreign,
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality ("Governmental Entity"), other regulatory or
self-regulatory body or association or arbitrator binding upon Signature or any
of its properties, except where such violations or conflicts would not in the
aggregate have a Material Adverse Effect on the business, properties, financial
condition or results of operations of Signature or on the ability of Signature
to consummate the transactions contemplated hereby, and
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<PAGE> 13
except for violations that will be cured, waived or terminated prior to the
Effective Time of the Merger. The term "Material Adverse Effect," with respect
to any entity, shall mean a material adverse effect on or change in the
financial condition, assets or results of operations of such entity and its
subsidiaries (including any subsidiary partnership) taken as a whole (without
regard, however, to changes in conditions generally applicable to the hotel
industry or general economic conditions globally, in the United States or in the
geographical regions thereof in which such entity conducts business, and any
changes in the financial condition or results of operations or assets of such
entity and its subsidiaries, taken as a whole, that are caused primarily or
substantially by such changes or events or as a result of the announcement of
this Agreement and the transactions contemplated hereby, including the payment
of any costs, expenses, fees or similar charges incurred by such entity's
contemplation, negotiation, execution or consummation of this Agreement or the
transactions contemplated hereby). The term "entity" shall mean and include a
company, a partnership, a limited partnership, a joint venture, a limited
liability company, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(c) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby to be performed by
Signature will result in a breach of or constitute a default (or with notice or
lapse of time or both result in a breach of or constitute a default) under, or
give rise to a right of termination, cancellation, acceleration or repurchase of
any obligation or a right of first refusal with respect to any material property
or asset or a loss of a material benefit or the imposition of a material penalty
under, any of the terms, conditions or provisions of (i) any mortgage,
indenture, loan or credit agreement or any other agreement or instrument
evidencing indebtedness for money borrowed to which Signature or any Signature
Subsidiary is a party or by which it or any of its properties is bound or
affected, or pursuant to which Signature or any Signature Subsidiary has
guaranteed the indebtedness or preferred stock of any natural person, firm,
partnership, association, corporation, limited liability company, company,
trust, entity, public body or government. or entity ("Person"), or (ii) any
lease, license, tariff, contract or other agreement or instrument to which
Signature is a party or by which it or any of its properties is bound or
affected, except for any such breaches, defaults, rights, losses or penalties
that do not have a Material Adverse Effect on the business, properties,
financial condition or results of operations of Signature or such Signature
Subsidiary or on the ability of Signature to consummate the transactions
contemplated hereby, or with respect to which the consents, waivers or releases
listed on Schedule 2.02(c) attached hereto will be obtained prior to the
Effective Time of the Merger.
(d) Neither the execution and delivery by Signature of this
Agreement nor the consummation of the transactions contemplated hereby to be
performed by Signature will result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties or other
assets now or hereafter owned by Signature or any Signature Subsidiary, except
where such would not in the aggregate have a Material Adverse Effect on the
business, properties, financial condition or results of operations of Signature
or any Signature Subsidiary or on the ability of Signature to consummate the
transactions contemplated hereby.
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(e) No consent, approval, order, certificate or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Signature in connection with the
execution and delivery of this Agreement by Signature or the consummation by
Signature of the transactions contemplated hereby, other than (i) in connection
or compliance with any applicable provisions of Georgia Law, Indiana Law, the
Securities Act of 1933, as amended ("1933 Act"), the Securities Exchange Act of
1934, as amended ("1934 Act"), and any applicable state securities laws or
regulations, and (ii) such filings or registrations that, if not made, and such
authorizations, consents or approvals, that, if not received, would not in the
aggregate have a Material Adverse Effect on the business, properties, financial
condition or results of operations of Signature or any Signature Subsidiary or
on the ability of Signature to consummate the transactions contemplated hereby.
(f) Signature and each Signature Subsidiary has made or
obtained each registration, filing, submission, license, permit, certificate,
determination or governmental approval necessary to enable it to carry on its
business, except for those which the failure to have does not have a Material
Adverse Effect on the business, properties, financial condition or results of
operations of Signature or such Signature Subsidiary. All such registrations,
filings and submissions with any Governmental Entity relating to the operations
of Signature or any Signature Subsidiary were in material compliance with
applicable law when filed, and no material deficiencies have been asserted by
any such authority with respect to such registrations, filing or submissions.
(g) SM Limited Partnership (the "Signature Partnership") is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Indiana and is duly qualified to do business and
is in good standing in each jurisdiction in which the nature of its business
activities or its ownership or leasing of property makes such qualification
necessary, except where the failure to qualify would not or could not reasonably
be expected to have a Material Adverse Effect on such Signature Partnership. The
Signature Partnership has full power and authority to own or lease and to
operate and use its properties and to carry on its business as now conducted.
True and correct copies of the partnership agreement of the Signature
Partnership, as amended to date, has been delivered to Jameson. The general
partner of the Signature Partnership is P&N Corporation and the sole limited
partner of the Signature Partnership is GPI Hotel Properties, L.P.
(h) Each of the limited partnerships listed on Schedule 2.02
(h) hereto (the "Dissolved Signature Partnerships") was a limited partnership
duly organized under Indiana law and prior to the date hereof has been dissolved
in accordance with Indiana Law and the requirements of the agreement of limited
partnership applicable thereto. Prior to or in connection with the liquidation
and dissolution of each Dissolved Signature Partnership, good and marketable
title to the hotel property or properties owned and operated thereby were sold
or otherwise transferred to Signature or the Signature Subsidiary indicated on
Schedule 2.02 (h) free of liens, charges, mortgages, encumbrances, security
interests or other adverse claims except those that were expressly specified in
the title insurance policies covering such properties, copies of which have been
provided to Jameson. The transfers of such properties and the dissolution of the
Dissolved Signature
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<PAGE> 15
Partnerships were effected in material compliance with all requirements of
Indiana Law, the terms of the respective agreements and certificates of limited
partnership, and the terms of any loan agreements, mortgages, deeds of trust,
security agreements, management agreements, leases, franchise agreements or
other documents applicable thereto. Without limiting the generality of the
foregoing, it is represented that all required notices were given, all required
consents, waivers or approvals of partners, lenders, Government Entities and
other third Persons required in connection therewith were obtained, true,
accurate and complete final accountings were prepared and provided to each
partner of each Dissolved Signature Partnership and no claims have been asserted
against Signature, the general partner of any Dissolved Signature Partnership or
any other Subsidiary or Affiliate of Signature with respect to either the
transfers of the properties to Signature or its Subsidiaries or the dissolution
of the Dissolved Signature Partnerships and the distribution of the partnership
assets to the partners thereof in connection therewith, and Signature is not
aware of any facts or circumstances which could reasonably be a basis for any
such claim. None of the limited partners or other investors in the Dissolved
Partnerships has any dissenters' appraisal rights or other claims or rights
regarding either the act of liquidating and dissolving the Dissolved
Partnerships or the value, fairness, propriety or legality of the transfers of
the hotel properties or other acts involved in the liquidation and dissolution
of the Dissolved Partnerships.
2.03. Capitalization. (a) The authorized capital stock of
Signature consists of 5,000,000 shares of preferred stock, no par value and
25,000,000 shares of common stock, no par value ("Signature Common Stock"). As
of the date of this Agreement, 2,105,703 shares of Signature Common Stock
(including the corresponding number of Rights (as defined below) to purchase
Signature Series One Preferred Stock (as defined below) pursuant to the Rights
Agreement (as defined below)) and 2,256,000 shares of Signature $1.70 Cumulative
Convertible Preferred Stock, Series A ("Signature Preferred Stock") are issued
and outstanding. The only outstanding options, warrants, or other rights to
purchase shares of Signature Common Stock are the employee stock options
covering a total of 80,168 shares of Signature Common Stock referred to in
Section 1.05 above and which are listed in Schedule 1.05 thereto. All shares of
capital stock of Signature have been duly authorized, validly issued, fully paid
and nonassessable, and are not subject to, or issued in violation of, any
preemptive rights. Except as set forth above, there are no shares of capital
stock of Signature authorized or outstanding, and there are no subscriptions,
options to purchase shares of the capital stock of Signature, conversion or
exchange rights, warrants, preemptive rights or other agreements, claims or
commitments of any nature whatsoever (whether firm or conditional) obligating
Signature to issue, transfer, deliver or sell, or cause to be issued,
transferred, delivered or sold, additional shares of the capital stock or other
securities or interests of Signature or obligating Signature to grant, extend or
enter into any such agreement or commitment.
(b) Signature has approved the Amendment of the Rights
Agreement as set forth on Exhibit B. The term "Rights" means a stock purchase
right entitling the holder thereof the right to purchase one hundredth of one
share of Signature Non-cumulative Preferred Stock, Series One, without par value
("Signature Series One Preferred Stock") at an initial exercise price of $40 per
one-hundredth of one share, subject to adjustment. The "Rights Agreement" is the
agreement that provides said stock purchase rights to the holders of Signature
Common Stock. The Company has
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executed the Amendment to the Rights Agreement and has taken all other action,
if any, necessary (so long as this Agreement has not been terminated) to (i)
render the Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement and (ii) ensure that (y) neither Jameson nor any
of its affiliates is an Acquiring Person (as defined in the Rights Agreement)and
(z) a Stock Acquisition Date or an Exercisability Date (as defined in the Rights
Agreement) does not occur by reason of the announcement or consummation of the
Merger or the consummation of any of the other transactions contemplated by this
Agreement. Upon consummation of the Merger, the Rights will be canceled and
shall cease to exist and none of the Persons who owned Signature Common Stock,
Signature Preferred Stock or any associated Rights will have any rights, claims
or interests thereunder or with respect thereto.
2.04. Absence of Certain Changes or Events. Except as has
occurred in the ordinary course of business consistent with prior practices and
custom or as disclosed in Schedule 2.04, since September 30, 1998, neither
Signature nor any Signature Subsidiary has (i) borrowed, or agreed to borrow,
funds, (ii) incurred or become subject to, or agreed to incur or become subject
to, any material obligation or liability, contingent or otherwise, except
current liabilities incurred, and obligations under contracts entered into, in
the ordinary course of its business, (iii) discharged or satisfied any material
lien, charge or encumbrance or paid any material obligation or liability,
contingent or otherwise, other than current liabilities shown in the Interim
Balance Sheet, current liabilities incurred since September 30, 1998 in the
ordinary course of its business and prepayments of obligations in accordance
with normal and customary past practices, (iv) declared, set aside or paid any
dividend or other distribution (whether in cash, stock or property) in respect
of its capital stock, except for the cumulative dividends which accrued and
became payable under the terms of the Signature Preferred Stock, (v) mortgaged,
pledged or subjected to lien, charge or other encumbrance, or agreed so to do,
any of the assets material to the operation of its business, tangible or
intangible, (vi) sold, assigned, transferred, conveyed, leased or otherwise
disposed of or agreed to sell, assign, transfer, convey, lease or otherwise
dispose of any of its assets or properties, (vii) canceled or compromised any
debt or claim, except for immaterial adjustments made in the ordinary course of
business, or waived or released any rights, regardless of whether in the
ordinary course of business, which, in the aggregate, are material, (viii)
entered into any material transaction, contract or commitment, (ix) declared,
set aside, or made any payment to its executives, board members, employees or
any other person either in contemplation of this Agreement or otherwise in the
form of a bonus or other form of incentive or other nonrecurring compensation,
(x) increased, or agreed to increase, the monthly rate of compensation payable
or to become payable by it to any of its officers, directors or other key
management employees over the rate being paid to them or accrued for at
September 30, 1998, (xi) increased, or agreed to increase, the rate of
compensation payable or to become payable by it to any of its employees (other
than officers, directors and other key management employees) over the rate being
paid to them or accrued for at September 30, 1998, or other than in accordance
with its established procedures for annual or other periodic reviews and
increments, (xii) made or permitted, or agreed to make or permit, any amendment
or termination of any material contract, mortgage, lease, license, agreement or
other instrument to which it is a party or by which any of its properties or
assets are bound, (xiii) made, or agreed to make, any accrual or arrangement for
or payment of bonuses or special compensation in excess of $25,000 of any kind
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to any employee (or $100,000 in the aggregate for all employees), (xiv) directly
or indirectly paid, or agreed to pay, any severance or termination pay to any
employee in excess of $10,000 (or $50,000 in the aggregate for all employees)
which was not accrued for at September 30, 1998, (xv) made, or agreed to make,
any changes in its accounting methods or practices, (xvi) made capital
expenditures which, in the aggregate, exceed $100,000, or, entered into any
commitment therefor, or (xvii) experienced any material adverse change in its
financial condition, assets, liabilities, earnings or business.
2.05. Signature SEC Reports. Signature has delivered or made
available to Jameson (i) each registration statement, report on Form 8-K, proxy
statement or information statement prepared by it since January 1, 1996, (ii)
Annual Reports on Form 10-KSB for the years ended December 31, 1997, December
31, 1996, and December 31, 1995 and (iii) the Company's Quarterly Reports on
Form 10-QSB for the quarterly periods ended March 31, June 30, and September 30,
of 1996, 1997 and 1998, each in the form (including exhibits) filed with the
Securities and Exchange Commission ("Commission") (collectively, the "Signature
SEC Reports"). As of their respective dates, the Signature SEC Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. Each of
the balance sheets included in or incorporated by reference into the Signature
SEC Reports (including the related notes and schedules) fairly presents the
financial position of Signature as of its date and each of the statements of
income, of stockholders' equity and of cash flows included in or incorporated by
reference into the Signature SEC Reports (including the related notes and
schedules) fairly presents the results of operations, stockholders' equity and
cash flows, as the case may be, of Signature for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material to Signature in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved except as noted therein. Other
than the Signature SEC Reports, Signature has not filed any other definitive
reports or statements with the Commission since January 1, 1996.
2.06. Defaults. There exists no event of default by Signature
or any Signature Subsidiary under the terms of its Articles of Incorporation, as
amended, or Bylaws, as amended. In addition, there exists no event of default or
breach by Signature or any Signature Subsidiary, to the Knowledge of Signature,
or SEC by any other party which has occurred under the terms of any contract,
agreement, document, lease, commitment, mortgage, loan, note, license,
franchise, permit, authorization, concession, order, law, rule or regulation,
which violation could reasonably be expected to have a Material Adverse Effect
on Signature or any such Subsidiary or its properties or operations, and no
event has occurred that is, or which with notice or lapse of time or both would
constitute, such a default or breach.
2.07. Tax Matters. (a) Except as provided in Schedule 2.07,
(a) all (i) returns and reports ("Tax Returns") of or with respect to any Tax
which is required to be filed on or before the Closing Date by or with respect
to Signature or the business operations of Signature have been or will be duly
and timely filed, (ii) items of income, gain, loss, deduction and credit or
other items
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required to be included in each such Tax Return have been or will be so included
and all information provided in each such Tax Return is true, correct and
complete, (iii) Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely paid in full,
and (iv) withholding Tax requirements imposed on or with respect to Signature
have been or will be satisfied in full in all respects. In addition, no penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax. For purposes of this
Agreement, the term "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean any federal, state, local or foreign income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value added, occupancy,
hospitality, transfer or excise Tax, or any other Tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Entity.
Signature's Tax Returns have included all of the corporate Signature
Subsidiaries on a consolidated basis.
(b) To the extent related to federal or state income taxes,
all Tax Returns of or with respect to Signature have been examined by the
applicable Governmental Entity, or the applicable statute of limitations has
expired, for all periods up to and including the periods set forth in Schedule
2.07.
(c) There is no claim against Signature for any Taxes, and
no assessment, deficiency or adjustment has been asserted or proposed with
respect to any Tax Return of or with respect to Signature.
(d) Except as set forth in Schedule 2.07, there is not in
force any extension of time with respect to the due date for the filing of any
Tax Return of or with respect to Signature or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect to
Signature.
(e) The total amounts set up as a reserve for current and
prior tax liabilities, excluding any amounts recorded as deferred tax
liabilities, in the Interim Balance Sheet are sufficient to cover the payment of
all Taxes, whether or not assessed or disputed, which are, or are hereafter
found to be, or to have been, due by or with respect to Signature and its
business and properties up to and through taxable periods ending on or before
the Closing Date.
(f) Signature is not a party to any Tax allocation or
sharing agreement and no payments are due or will become due by Signature
pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 2.07, none of the
property of Signature is held in an arrangement that could be classified as a
partnership for Tax purposes.
(h) The final Tax Returns for all of the Dissolved Signature
Partnerships have been filed with the appropriate Governmental Entities and all
reports and notices required to be provided to the partners thereof have been so
provided. There have been no claims, notices or other
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correspondence or communication received from any Governmental Entity regarding
audits, assessments, or other actions that might be taken in respect of such Tax
Returns or the information and data contained therein.
(i) As of December 31, 1998, Signature has (and at the
Effective Time of the Merger it will have) no consolidated deferred intercompany
income or gains as defined under Internal Revenue Code Section 1502 and
Regulations Section 1.1502-13 ( "Deferred Intercompany Gains").
2.08. Trademarks, Copyrights, Etc. (a) Signature and its
Subsidiaries own or have the right to use all patents, patent rights,
trademarks, trade names, service marks, trade secrets, copyrights and other
proprietary intellectual property rights ("Intellectual Property"), as set forth
in Schedule 2.08, as are necessary in connection with the business of Signature
and its Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on Signature.
(b) There have not been asserted against Signature any
claims that any product, activity, name, mark, design or operation of Signature
infringes upon or involves, or had resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened which challenge
the rights of Signature with respect thereto, in each case, which would have a
Material Adverse Effect on the business, properties, financial condition or
results of operations of Signature.
2.09. Title to Properties: Absence of Liens and Encumbrances:
Leases, etc. Signature and its Subsidiaries own, and have good, valid and
marketable title to, the assets purported to be owned by them and which are
material to the conduct of the business of Signature and for such purpose each
hotel property owned by Signature or its Affiliates (a "Signature Property")
shall be deemed to be material. Except as set forth in Schedule 2.09 hereto,
such assets are owned by Signature free and clear of any charge, claim,
community property interest, condition, equitable interest, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership ("Encumbrance"), except for (i) any
lien for current taxes not yet due and payable and (ii) liens that have arisen
in the ordinary course of business and that do not materially detract from the
value of the assets subject thereto or materially impair the use or operation of
such assets or the business, operations or affairs of of Signature or any of its
Subsidiaries. The material items of equipment and tangible assets owned by or
leased to Signature and its Subsidiaries are adequate for the uses to which they
are being put and are in good condition and repair (ordinary wear and tear
excepted). Except as set forth in Schedule 2.09 hereto, all of the real property
owned or leased by Signature and its Subsidiaries was disclosed in Signature's
annual report on Form 10-KSB for the year ended December 31, 1997, which was
filed with the SEC. Valid policies of title insurance have been issued insuring
Signature's or any of its Subsidiaries' title to the Signature Properties owned
in fee in amounts at least equal to the purchase price or construction cost
thereof (whichever is
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applicable), subject only to the matters set forth therein or disclosed above,
and such policies are, at the date hereof, in full force and effect and there
are no pending claims against any such policy. Any material certificate, permit
or license from any governmental authority having jurisdiction over any
Signature Property and any agreement, easement or other right which is necessary
to permit the material lawful use and operation of the buildings and
improvements on any of the Signature Properties or which is necessary to permit
the lawful use and operation in all material respects of all driveways, roads
and other means of egress and ingress, which Signature has rights to, to and
from any of the Signature Properties which are currently occupied and are
material to the operation of the property has been obtained and is in full force
and effect. Signature is not in receipt of any written notice of any violation
of any material federal, state or municipal law, ordinance, order, regulation or
requirement affecting any portion of any of the Signature Properties issued by
any governmental authority other than such violations which would not reasonably
be expected to have a Material Adverse Effect on Signature or any of its
Subsidiaries. To the Knowledge of Signature, (A) there are no material
structural defects relating to Signature Properties, (B) there are no Signature
Properties whose building systems are not in working order in any material
respect (except for normal maintenance and operating systems failures which in
any event are the subject of adequate pending repair procedures), (C) there is
no physical damage to any Signature Property in excess of $50,000 for which
there is no insurance in effect covering the cost of the restoration as of the
date hereof, or (D) no current renovation or restoration to any Signature
Property is underway or for which contracts have been entered into the cost of
which exceeds $50,000, except in each case, as set forth in Schedule 2.09.
Neither Signature nor any of its Subsidiaries has received any written notice to
the effect that (x) any condemnations or material rezoning proceedings are
pending or threatened with respect to any of the Signature Properties where the
fair market value of the object of such proceedings exceeds $100,000 or (y) any
zoning, building or similar law, code, ordinance or regulation is or will be
violated in any material respect by Signature or its Subsidiaries by the
continued maintenance, operation, or use of any buildings or other improvements
on any of the Signature Properties as currently maintained, used or operated by
Signature or its Subsidiaries which is not insured over and where the remedying
of such violations would materially and adversely affect the relevant Signature
Property. All work to be performed, payments to be made and actions to be taken
by Signature or any of its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to the
Signature Properties has been performed, paid or taken, as the case may be, in
all material respects, and Signature is not aware of any planned or proposed
work, payments or actions that may be required after the date hereof pursuant to
such agreements.
2.10. Employee Benefit Plans.
(a) Employee Welfare Benefit Plans. Schedule 2.10 lists each
and every "employee welfare benefit plan" (as defined in Section 3(1) of
Employee Retirement Income Security Act ("ERISA")) maintained at any time since
January 1, 1990 by Signature or any corporation or other trade or business
aggregated with Signature for treatment as a single employer under Section
414(t) of the Internal Revenue Code of 1986, as amended ("Code") or
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Section 3(40)(B), 4001(a)(14) or 4001(b) of ERISA), either currently or at any
time since January 1, 1990 with Signature (hereafter "Affiliate"), or to which
Signature or any affiliate contributes, is required to contribute or has
contributed, including any such type of plan established, maintained or
contributed to under the laws of any foreign country (such plans being
hereinafter collectively referred to as the "Employee Welfare Benefit Plans")
for employees or former employees of Signature, and Signature has prior to the
date of this Agreement delivered to Jameson true and complete copies of each and
every Employee Welfare Benefit Plan together with all documents or instruments
establishing or constituting any related trust or other funding instrument.
(b) Employee Pension Benefit Plans.
(i) Schedule 2.10 lists each and every "employee
pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained at any time since January 1, 1990 by Signature or
any Affiliate, or to which Signature or any Affiliate
contributes, is required to contribute or has contributed,
including any multiemployer pension plans (as defined in
either Section 3(37) or Section 4001(a) (3) of ERISA) and
including any such type of plan established, maintained or
contributed to under the laws of any foreign country (such
employee benefit plans being hereinafter collectively referred
to as the "Employee Pension Benefit Plans") for employees or
former employees of Signature, and Signature has prior to the
date of this Agreement delivered to Jameson true and complete
copies of each and every such Employee Pension Benefit Plan
together with such copies of all documents or instruments
establishing or constituting any related trust or other
funding instruments.
(ii) Concerning each Employee Pension Benefit Plan
that is in whole or in part an "individual account plan" (as
defined in Section 3(34) of ERISA), there is set forth in
Schedule 2.10, (A) the amount of any Signature unpaid
liability for contributions due with respect to each such
Employee Pension Benefit Plan for periods up to the date
hereof and (B) the amount of any contribution expected to be
accrued or paid with respect to such Employee Pension Benefit
Plan for the current plan year; with respect to any such
Employee Pension Benefit Plan, no such plan has been
terminated or partially terminated and no assets of any such
plan have been used or employed in a manner so as to subject
them to an excise Tax imposed under Section 4980 of the Code;
and each such Employee Pension Benefit Plan permits
termination thereof.
(iii) From and after July 1, 1974, neither Signature
nor any Affiliate (including entities that were, but are no
longer, Affiliates) has contributed to, been required to
contribute to or maintained any Employee Pension Benefit Plan
subject to Title IV of ERISA.
(c) ERISA, Code and Other Laws Compliance. Signature has
established and maintained all Employee Pension Benefit Plans and Employee
Welfare Benefit Plans and any related
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trust agreements or any other documents relating to the administration or
funding of such plans in all material respects in compliance with the provisions
of ERISA, the Code, and any other applicable laws; and favorable determinations
as to the qualification under the Code of each of the Employee Pension Benefit
Plans (and each amendment thereto) have been made by the Internal Revenue
Service ("IRS"), except as to amendments with respect to legislation enacted
after the Tax Reform Act of 1986 and other recent changes in applicable statutes
and regulations or as set forth on Schedule 2.10 hereof. Each voluntary
employees' beneficiary association (or so-called "VEBA Trust") maintained by
Signature or any Affiliate is intended to satisfy the requirements of Section
501(c) (9) of the Code and satisfies such provisions in all matreial respects.
Each Employee Pension Benefit Plan is intended to satisfy the requirements of
Section 401(a) and 501(a) of the Code and satisfies such provisions in all
material respects. No benefits provided or to be provided under an Employee
Welfare Benefit Plan will result in the imposition of excise Taxes under Section
4976 of the Code. No Employee Welfare Benefit Plan has or will have been deemed
unrelated business income under Section 512(a)(3) of the Code.
(d) Administration of Plans. Except as set forth in Schedule
2.10, the administration of all Employee Pension Benefit Plans and all Employee
Welfare Benefit Plans and any trusts relating to such plans has been consistent
with and in compliance in all material respects with applicable requirements of
the Code, ERISA and any other applicable law, including, without limitation,
compliance on a timely basis with all requirements for reporting and disclosure
concerning each Employee Welfare Benefit Plan and Employee Pension Benefit Plan,
and all notices and coverages required under Parts 6 and 7 of Title I of ERISA.
None of the exceptions set forth in Schedule 2.10 will adversely affect the
deductibility of the contributions made by Signature for Tax purposes.
(e) Prohibited Transactions and Fiduciary Matters. To the
Knowledge of Signature, neither Signature, any Affiliate nor any plan fiduciary
of any Employee Pension Benefit Plan or Employee Welfare Benefit Plan has (i)
since January 1, 1990, engaged in any transaction or acted or failed to act in a
manner which violates Section 404 or 406 of ERISA nor engaged in any "prohibited
transaction" (as defined in Section 4975(c) (1) of the Code or Section 406 of
ERISA) for which there exists neither a statutory nor regulatory exemption and
which results in material liability, or (ii) acted or failed to act in any
manner which violates Section 404 of ERISA and results in material liability to
Signature, any Affiliate or any such plan.
(f) Other Employee Benefit Arrangements. Signature has
delivered to Jameson copies of each and every other personnel policy, stock
option plan, nonqualified deferred compensation plan, collective bargaining
agreement, bonus, incentive award, fringe benefit, disability or sick pay,
vacation pay, severance pay, consulting agreement or any other employee benefit
plan, agreement, arrangement or understanding which Signature or any Affiliate
maintains or has maintained at any time since January 1, 1990, or to which
Signature or any Affiliate contributes, is required to contribute or has
contributed and which is not required under Section 3.12 (a) or (b) above to be
listed in Schedule 2.10 (including with respect to any plans that are unwritten,
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a written description of eligibility, participation, benefits, funding
arrangements, assets and any other matters which relate to the obligations of
Signature).
(g) Other Plan Documents: Reports. True and complete copies
of each plan, agreement, arrangement or understanding referred to in Section
2.10(f), the most recent determination letter issued by the IRS with respect to
each Employee Pension Benefit Plan, annual reports on Form 5500 required to be
filed with any governmental agency for each Employee Welfare Benefit Plan and
each Employee Pension Benefit Plan for the six most recent plan years for which
such filings are due prior to the date of this Agreement have been delivered by
Signature to Jameson.
(h) Validity of Plans. All Employee Welfare Benefit Plans,
Employee Pension Benefit Plans, related trust agreements and any other related
documents, and all plans, agreements, arrangements and understandings referred
to in Section 2.10(f) are legally valid and binding and in full force and effect
and Signature is not in default under any of the provisions of any such plans or
arrangements.
(i) Claims and Litigation. (i) Signature has no Knowledge of
any threatened or pending claims, suits or other proceedings by any of
Signature's or its Affiliates' employees, former employees, plan participants,
beneficiaries or spouses of any of the above involving any employee benefit plan
described in Section 2.10 or any rights or benefits under any employee benefit
plan described in Section 2.10 other than ordinary and usual claims for benefits
by participants or beneficiaries, (ii) to Signature's Knowledge, neither
Signature nor any of its Affiliates nor any of their directors, officers,
employees or any other "fiduciary," as such term is defined in Section 3(21) of
ERISA, has any liability for an act or for a failure to act in connection with
either the administration or investment of assets of such plans or the
transactions contemplated by this Agreement, and (iii) there is no pending or,
to Signature's Knowledge, threatened audit, legal action or proceeding or
investigation against or involving any employee benefit plan described in
Section 2.11 and Signature has no Knowledge of facts or circumstances which
could reasonably constitute the basis for any such audit, legal action,
proceeding or investigation.
(j) No Union Contracts. Neither Signature nor any Affiliate
is now nor has it ever been a party to any agreement with, and no employees are
or have been represented by, any union or collective bargaining unit.
(k) Certain Severance Arrangements. Signature is not a party
to or obligated under any agreement, plan, contract or other arrangement
pursuant to which Signature or any Affiliate or Jameson is or might be required
to make payments that would not be deductible or capitalizable for federal
income Tax purposes by reason of the application of Section 280G of the Code.
(l) Certain Liabilities. The aggregate amount of liabilities
of Signature in connection with any written or oral plans, contracts, agreements
or other arrangements described in this Section 2.10 is set forth on Schedule
2.10, and Schedule 2.10 sets forth the calculation of such
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aggregate liability including a statement of the specific liabilities of
Signature and its Affiliates with respect to each of such plans, contracts,
agreements or other arrangements.
(m) Plans May Be Terminated. Each and every employee benefit
plan, practice, arrangement or understanding and each and every Signature
personnel or payroll practice described in this Section 2.10 may be terminated
by Jameson in its sole discretion at any time after the Effective Time of the
Merger without any liability to any of Jameson, Signature or its Affiliates to
any person, entity or government agency for any conduct or practice of Signature
which occurred prior to the Effective Time of the Merger except for liabilities
to and the rights of employees thereunder accrued prior to the Effective Time of
the Merger.
2.11. Litigation. Except as described in the Signature SEC
Reports or set forth on Schedule 2.11,
(a) there is no claim, action, suit, proceeding,
arbitration, investigation or inquiry before any Governmental Entity, other
regulatory or self-regulatory body or association or arbitrator, now pending or,
to the Knowledge of Signature, threatened against, relating to or affecting
Signature or any Signature Subsidiary or its assets, properties or business
which questions the validity of this Agreement or affects the transactions
contemplated herein; nor is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry; and
(b) neither Signature nor any of its officers, directors or
employees has been permanently or temporarily enjoined or prohibited by order,
judgment or decree of any Governmental Entity, other regulatory or
self-regulatory body or association, or arbitrator from engaging in or
continuing any conduct or practice in connection with the business engaged in by
Signature; and
(c) there is not in existence any order, judgment or decree
of any Governmental Entity, other regulatory or self-regulatory body or
association or arbitrator enjoining or prohibiting Signature from taking, or
requiring Signature to take, any action of any kind or to which Signature or any
of its business, or any of the properties or assets material to the operations
of such business, are subject or bound; and
(d) Signature is not in default in any respect under any
order, writ, injunction or decree of any Governmental Entity, other regulatory
or self-regulatory body or association or arbitrator.
2.12. Insurance. The insurance coverage maintained by
Signature at the date of this Agreement is in the judgment of Signature adequate
in scope and amount in view of the properties owned and operations carried on by
it. Signature has complied in all material respects with the provisions of all
such policies. Schedule 2.12 lists each of the insurance policies issued to
Signature or any Signature Subsidiary providing coverage for Signature, its
Subsidiaries or any of their respective directors, officers, employees, agents
or other representatives, for property damage,
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<PAGE> 25
liability, workers' compensation, employers' liability, casualty, auto,
executive or key man life, officer and director liability, fiduciary liability,
business interruption, and any other coverage deemed by Signature to be material
to its operations, assets or personnel. Such Schedule 2.12 sets forth the
coverage of each of such policies and the limits of such coverage.
2.13. Brokers and Finders. No person other than McDonald &
Company has acted on behalf of Signature in connection with any negotiations
relative to this Agreement and the transactions contemplated hereby, and such
negotiations have been carried on by it without the intervention of any other
person acting on behalf of Signature in such a manner as to give rise to any
valid claim for a brokerage commission, finder's fee or other like payment
against Jameson or Signature.
2.14. Compliance with Laws. Except as described in the
Signature SEC Reports or Schedule 2.14 hereto;
(a) Signature is in compliance in all material respects with
all orders, judgments, writs, injunctions, determinations, awards, decrees,
laws, statutes, rules or regulations ("Legal Requirements") applicable to any of
its properties or assets and/or the ownership, operation and use thereof, and
Signature has not received notice of any noncompliance or alleged noncompliance
with any Legal Requirement relating or applicable to any of its properties or
assets or to the operation of its business, the existence or enforcement of
which would have a Material Adverse Effect on Jameson's ability to operate them
on the same basis as currently conducted and operated or which would require the
payment of material refunds, fines, penalties or restitution in respect of
matters occurring prior to the Effective Time of the Merger, including, without
limitation, any Legal Requirement relating to (i) wages, hours, hiring,
non-discrimination, promotion, retirement, benefits, pensions or working
conditions, (ii) air, water, noise, odor or solid or liquid waste (including the
generation, treatment, storage, disposal or transportation thereof), (iii)
health and safety, (iv) zoning, (v) the production, processing, advertising,
sales or warranty of products or services of its business or (vi) trade or
antitrust regulations.
(b) Without limiting the generality of the foregoing, except
as otherwise set forth in Schedule 2.14 hereto, (i) the properties, assets and
operations of Signature and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local, regional and foreign laws,
rules and regulations, orders, decrees, common law, judgments, permits and
licenses relating to public and worker health and safety(collectively, "Worker
Safety Laws") and the protection, regulation and clean-up of the indoor and
outdoor environment and activities or conditions related thereto, including,
without limitation, those relating to the generation, handling, disposal,
transportation or release of hazardous or toxic materials, substances, wastes,
pollutants and contaminants including, without limitation, asbestos, petroleum,
radon and polychlorinated biphenyls (collectively,"Environmental Laws"), except
for any violation that, individually or in the aggregate, has not had, or would
not reasonably be expected to have, a Material Adverse Effect on Signature; and
(ii) with respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, as of the
date hereof and at the Effective
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Time, there are no past, present or, to the Knowledge of Signature, reasonably
anticipated future events, conditions, circumstances, activities, practices,
incidents, actions or plans of Signature or any of its Subsidiaries that may
interfere with or prevent compliance or continued compliance with applicable
Worker Safety Laws and Environmental Laws, other than any such interference or
prevention that, individually or in the aggregate, has not had, or would not
reasonably be expected to have, a Material Adverse Effect on Signature.
(c)(i)Signature and its Subsidiaries have not caused or
permitted any property, asset, operation, including any previously owned
property, asset or operation, to use generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such activity
that, individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Signature or any Signature
Subsidiary; (ii) Signature and its Subsidiaries have not reported to any
Governmental Entity any material violation of an Environmental Law or any
release, discharge or emission of any hazardous or toxic materials, substances,
wastes, pollutants or contaminants, other than any such violation, release,
discharge or emission that, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on
Signature, and (iii) as of the date hereof and at the Effective Time of the
Merger, Signature has no Knowledge of any pending, threatened or reasonably
anticipated claims or liabilities under CERCLA, 42 U.S.C. sec. 9601 et seq.,
RCRA, 42 U.S.C. sec.6901 et seq., or equivalent state law provisions and no
Knowledge that any current or former property, asset or operation is identified
or currently proposed for the National Priorities List at 40 CFR sec. 300,
Appendix B, or the CERCLIS or equivalent state lists or hazardous substances
release sites.
(d) All sales by Signature of securities of Signature were
at all relevant times duly registered under or effected in a manner which was
exempt from the registration requirements of the 1933 Act and all applicable
state securities or blue sky laws.
(e) All sales by any of the Dissolved Signature Partnerships
and the Signature Partnership of limited partnership interests and any other
securities of such Partnerships were at all relevant times duly registered under
or effected in a manner which was exempt from the registration requirements of
the 1933 Act and all applicable state securities or blue sky laws.
2.15. Information Supplied. None of the information supplied
or to be supplied by the Signature for inclusion or incorporation by reference
in (a) the registration statement on Form S-4 to be filed with the SEC by
Jameson in connection with the Merger (such registration statement, together
with any amendments or supplements thereto, the "Registration Statement") and
(b) the Proxy Statement (as defined below) to be filed with the SEC by Signature
and Jameson (such proxy statement, together with any amendments or supplements
thereto, the "Proxy Statement") will, at the time their filing with the SEC, or
at any time of their amending or supplementation, or at the time they become
effective under the Securities Act or at the time the Proxy Statement is mailed
to the Signature stockholders and the Jameson stockholders, as the case may be,
contain any untrue
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statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF JAMESON
Jameson hereby represents and warrants to Signature as follows:
3.01. Organization, Good Standing, Power, Etc. Jameson and
each Jameson Subsidiary is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its state of incorporation or
organization and has all requisite power and authority and all licenses,
permits, certificates, determinations, authorizations and franchises to own,
operate and lease its respective properties and assets and to carry on its
respective businesses as now being conducted. Jameson and each Jameson
Subsidiary, is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each other jurisdiction in which the
ownership, operation or leasing of its properties or assets or the nature of its
business require such qualification, except where the failure so to qualify
would not have a Material Adverse Effect on the business, financial condition or
properties of Jameson and the Jameson Subsidiaries taken as a whole. Jameson has
furnished to Signature true, correct and complete copies of its Articles of
Incorporation and Bylaws, in each case as amended and supplemented to the date
hereof.
3.02. Authorization of Agreement. Etc.
(a) Jameson has all requisite corporate power and authority
to enter into and perform all of its obligations under this Agreement. The
execution and delivery of this Agreement by Jameson and the consummation by
Jameson of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Jameson, subject only, with respect to
the Merger, to the approval of holders of a simple majority of the issued and
outstanding shares of the Jameson Common Stock present and entitled to vote
Jameson Stockholder Meeting. This Agreement has been duly executed and delivered
by Jameson and constitutes the legal, valid and binding obligation of Jameson,
enforceable against Jameson in accordance with its terms except as
enforceability may be subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by
Jameson, nor, assuming the approval of holders of at least a majority of the
issued and outstanding shares of Jameson Common Stock, the consummation of the
transactions contemplated hereby to be performed by Jameson, will (i) violate or
conflict with any provision of the Articles of Incorporation, as amended, or
By-laws, as currently in effect, of Jameson or (ii) violate or conflict with any
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provision of any law, rule, regulation, order, permit, certificate, writ,
judgment, injunction, decree, determination, award or other decision of any
Governmental Entity, other regulatory or self-regulatory body or association or
arbitrator binding upon Jameson or any Jameson Subsidiary or any of their
respective properties, except where such violations or conflicts would not in
the aggregate have a Material Adverse Effect on the business, financial
condition or properties of Jameson or any Jameson Subsidiary taken as a whole or
on the ability of Jameson to consummate the transactions contemplated hereby and
except for violations that will be cured, waived or terminated prior to the
Effective Time of the Merger.
(c) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby to be performed by
Jameson will result in a breach of or constitute a default (or with notice or
lapse of time or both result in a breach of or constitute a default) under, or
give rise to a right of termination, cancellation, acceleration or repurchase of
any obligation or a right of first refusal with respect to any material property
or asset or a loss of a material benefit or the imposition of a material penalty
under, any of the terms, conditions or provisions of (i) any mortgage,
indenture, loan or credit agreement or any other agreement or instrument
evidencing indebtedness for money borrowed to which Jameson is a party or by
which it or any of its respective properties is bound or affected, or pursuant
to which Jameson has guaranteed the indebtedness or preferred stock of any
person or entity or (ii) any lease, license, tariff, contract or other agreement
or instrument to which Jameson is a party or by which it or any of its
properties is bound or affected, except for any such breaches, defaults, rights,
losses or penalties that in the aggregate do not have any Material Adverse
Effect on the business, financial condition, or properties of Jameson or any
Jameson Subsidiary or on the ability of Jameson to consummate the transactions
contemplated hereby or for which Jameson will have obtained required consents,
waivers or releases prior to the Effective Time of the Merger.
(d) Neither the execution and delivery by Jameson of this
Agreement nor the consummation of the transactions contemplated hereby to be
performed by Jameson will result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned by Jameson or any Jameson Subsidiary, except where such would not in the
aggregate have a Material Adverse Effect on the business, financial condition,
or properties of Jameson or any Subsidiary or on the ability of Jameson to
consummate the transactions contemplated hereby.
(e) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Jameson or any Jameson Subsidiary in connection with the
execution and delivery of this Agreement by Jameson or the consummation by
Jameson of the transactions contemplated hereby, other than (i) in connection or
compliance with any applicable provisions of Georgia Law, Indiana Law, the 1933
Act and the 1934 Act and any applicable state securities laws or regulations,
and (ii) such filings or registrations which, if not made, and such
authorizations, consents or approvals which, if not received, would not have any
Material Adverse Effect on the business, financial condition, or properties of
Jameson or
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any Jameson subsidiary or on the ability of Jameson to consummate the
transactions contemplated hereby.
(f) Jameson and each Jameson Subsidiary has made or obtained
each registration, filing, submission, license, permit, certificate,
determination or governmental approval necessary to enable it to carry on its
business, except for those which the failure to have does not have a Material
Adverse Effect on the business, properties, financial condition or results of
operations of Jameson and its Subsidiaries, taken as a whole. All such
registrations, filings and submissions with any Governmental Entity relating to
the operations of Jameson or any Jameson Subsidiary were in material compliance
with applicable law when filed, and no material deficiencies have been asserted
by any such authority with respect to such registrations, filing or submissions.
3.03. Tax Matters. Except as provided in Schedule 3.03, (a)
all (i) Tax Returns of or with respect to any Tax which is required to be filed
on or before the Closing Date by or with respect to Jameson or the business
operations of Jameson have been or will be duly and timely filed, (ii) items of
income, gain, loss, deduction and credit or other items required to be included
in each such Tax Return have been or will be so included and all information
provided in each such Tax Return is true, correct and complete, (iii) Taxes
which have become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, and (iv) withholding
Tax requirements imposed on or with respect to Jameson have been or will be
satisfied in full in all respects. In addition, no penalty, interest or other
charge is or will become due with respect to the late filing of any such Tax
Return or late payment of any such Tax. Jameson's Tax Returns have included all
of the Jameson Subsidiaries on a consolidated basis.
(b) There is no claim against Jameson for any Taxes, and no
assessment, deficiency or adjustment has been asserted or proposed with respect
to any Tax Return of or with respect to Jameson.
(c) Except as set forth in Schedule 3.03 there is not in
force any extension of time with respect to the due date for the filing of any
Tax Return of or with respect to Jameson or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect to
Jameson.
(d) Jameson is not a party to any Tax allocation or sharing
agreement and no payments are due or will become due by Jameson pursuant to any
such agreement or arrangement.
(e) Jameson is organized in conformity with the
requirements for qualification as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Code, has duly elected to be taxed as a REIT
commencing with the taxable year ending December 31, 1994, and such election has
not been terminated or revoked.
(f) Jameson is operated in such a manner that it continues
to qualify as a REIT and is taxed as a REIT.
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(g) Each Jameson Subsidiary constitutes a "qualified REIT
subsidiary" within the meaning of Section 856(i) of the Code.
(h) Jameson has not received any net income from prohibited
transactions within the meaning of Section 852(b)(6)(B) of the Code.
3.04. Capitalization. The authorized capital stock of Jameson
consists of 40,000,000 shares of common stock, par value $.10 per share
("Jameson Common Stock"), and 10,000,000 shares of preferred stock, par value
$1.00 per share. On the date of this Agreement, there were 9,857,731 shares of
Jameson Common Stock and 1,200,000 shares of its 9.25% Series A Cumulative
Preferred Stock ("Jameson Series A Preferred Stock") issued and outstanding. All
the outstanding shares of Jameson Common Stock and Jameson Series A Preferred
Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and are not subject to, or issued in violation of, any preemptive
rights. Except for (i) outstanding employee and director stock options (which at
the date of this Agreement covered 848,114 shares of Jameson Common Stock), (ii)
72,727 shares of Jameson Series A Preferred Stock to be issued to Thomas K.
Kitchin and Judith Kitchin in connection with the acquisition by Jameson of the
outdoor advertising assets of Jameson Hospitalility LLC, and (iii) rights under
the Jameson dividend reinvestment plan, there are no shares of capital stock of
Jameson authorized or outstanding, and there are no subscriptions, options to
purchase shares of the capital stock of Jameson, conversion or exchange rights,
warrants, preemptive rights or other agreements, claims or commitments of any
nature whatsoever (whether firm or conditional) obligating Jameson to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered or
sold, additional shares of the capital stock or other securities or interests of
Jameson or obligating Jameson to grant, extend or enter into any such agreement
or commitment.
3.05. Issuance of Jameson Common Stock and Jameson Series S
Preferred Stock. As and when required by the terms of this Agreement and the
Merger Agreement and subject to the terms and conditions hereof, Jameson shall
issue and deliver the shares of Jameson Common Stock and Jameson $1.70
Cumulative Convertible Preferred Stock; Series S (the "Jameson Series S
Preferred Stock") to be issued and delivered in accordance with this Agreement
and the Merger Agreement. Such shares have been duly authorized and, when issued
in accordance with this Agreement and the Merger Agreement, will be validly
issued, fully paid and nonassessable.
3.06. No Material Adverse Change. Since September 30, 1998,
there has been no material adverse change in the business, properties, financial
condition or results of operations of Jameson and the consolidated Jameson
Subsidiaries taken as a whole.
3.07. Brokers and Finders. No person other than
Robinson-Humphrey Company, L.L.C. has acted on behalf of Jameson or any Jameson
subsidiary in connection with any negotiations relative to this Agreement and
the transactions contemplated hereby, and such negotiations have been carried on
by such parties without intervention of any person acting on behalf of either
Jameson or any Jameson subsidiary, in such a manner as to give rise to any valid
claim for
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a brokerage commission, finder's fee or any other like payment against Jameson,
any Jameson Subsidiary, or the stockholders of Jameson.
3.08. Jameson SEC Reports. Jameson has delivered to Signature
(i) each registration statement, report on Form 8-K, proxy statement or
information statement prepared by it since January 1, 1996, (ii) Jameson's
Annual Reports on Form 10-K for the years ended December 31, 1997, 1996, and
1995 and (iii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, June 30, and September 30, 1996, 1997 and 1998, each in
the form (including exhibits) filed with the Commission (collectively, the
"Jameson SEC Reports"). As of their respective dates, the Jameson SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. Each of the consolidated balance sheets included in or incorporated
by reference into the Jameson SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of Jameson and
its subsidiaries as of its date and each of the consolidated statements of
income, of stockholders' equity and of cash flows included in or incorporated by
reference into the Jameson SEC Reports (including any related notes and
schedules) fairly presents the results of operations, stockholders' equity and
cash flows, of Jameson and its subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material to Jameson and its subsidiaries taken as
a whole in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Other than the Jameson SEC Reports, Jameson has not
filed any other definitive reports or statements with the SEC since January 1,
1996.
3.09. Litigation. Except as described in the Jameson SEC
Reports or Schedule 3.09,
(a) there is no claim, action, suit, proceeding,
arbitration, investigation or inquiry before any Governmental Entity, other
regulatory or self-regulatory body or association or arbitrator, now pending or,
to the Knowledge of Jameson, threatened against, relating to or affecting
Jameson or any Jameson Subsidiary or its assets, properties or business which
questions the validity of this Agreement or affects the transactions
contemplated herein; nor is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry; and
(b) neither Jameson nor any of its officers, directors or
employees has been permanently or temporarily enjoined or prohibited by order,
judgment or decree of any Governmental Entity, other regulatory or
self-regulatory body or association, or arbitrator from engaging in or
continuing any conduct or practice in connection with the business engaged in by
Jameson; and
(c) there is not in existence any order, judgment or decree
of any Governmental Entity, other regulatory or self-regulatory body or
association or arbitrator enjoining or prohibiting Jameson from taking, or
requiring Jameson to take, any action of any kind or to which Jameson or
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any of its business, or any of the properties or assets material to the
operations of such business, are subject or bound; and
(d) Jameson is not in default in any respect under any
order, writ, injunction or decree of any Governmental Entity, other regulatory
or self-regulatory body or association or arbitrator.
3.10. Compliance with Laws. Except as described in the
Jameson SEC Reports or Schedule 3.10 hereto;
(a) Jameson is in compliance in all material respects with
Legal Requirements applicable to any of its properties or assets and/or the
ownership, operation and use thereof, and Jameson has not received notice of any
noncompliance or alleged noncompliance with any Legal Requirement relating or
applicable to any of its properties or assets or to the operation of its
business, the existence or enforcement of which would have a Material Adverse
Effect on Jameson's ability to operate them on the same basis as currently
conducted and operated or which would require the payment of refunds, fines,
penalties or restitution in respect of matters occurring prior to the Effective
Time of the Merger, including, without limitation, any Legal Requirement
relating to (i) wages, hours, hiring, non-discrimination, promotion, retirement,
benefits, pensions or working conditions, (ii) air, water, noise, odor or solid
or liquid waste (including the generation, treatment, storage, disposal or
transportation thereof), (iii) health and safety, (iv) zoning, (v) the
production, processing, advertising, sales or warranty of products or services
of its business or (vi) trade or antitrust regulations.
(b) Without limiting the generality of the foregoing,
except as otherwise set forth in Schedule 3.10 hereto, (i) the properties,
assets and operations of Jameson and its Subsidiaries are in compliance with all
applicable Worker Safety Laws and Environmental Laws, except for any violation
that, individually or in the aggregate, has not had, or would not reasonably be
expected to have, a Material Adverse Effect on Jameson; and (ii) with respect to
such properties, assets and operations, including any previously owned, leased
or operated properties, assets or operations, as of the date hereof and at the
Effective Time, there are no past, present or, to the Knowledge of Jameson,
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of Jameson or any of its Subsidiaries
that may interfere with or prevent compliance or continued compliance with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention that, individually or in the aggregate, has not had,
or would not reasonably be expected to have, a Material Adverse Effect on
Jameson.
(c)(i) Jameson and its Subsidiaries have not caused or
permitted any property, asset, operation, including any previously owned
property, asset or operation, to use generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such activity
that, individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Jameson
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or any Jameson Subsidiary; (ii) Jameson and its Subsidiaries have not reported
to any Governmental Entity any material violation of an Environmental Law or any
release, discharge or emission of any hazardous or toxic materials, substances,
wastes, pollutants or contaminants, other than any such violation, release,
discharge or emission that, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on Jameson,
and (iii) as of the date hereof and at the Effective Time of the Merger, Jameson
has no Knowledge of any pending, threatened or anticipated claims or liabilities
under CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C. sec.6901 et seq., or
equivalent state law provisions and no Knowledge that any current or former
property, asset or operation is identified or currently proposed for the
National Priorities List at 40 CFR sec. 300, Appendix B, or the CERCLIS or
equivalent state lists or hazardous substances release sites.
3.11. Information Supplied. None of the information supplied
or to be supplied by the Jameson for inclusion or incorporation by reference in
(a) the Registration Statement and (b) the Proxy Statement will, at the time
their filing with the SEC, or at any time of their amending or supplementation,
or at the time they become effective under the Securities Act or at the time the
Proxy Statement is mailed to the Jameson stockholders and the Signature
stockholders, as the case may be, contain any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE IV
COVENANTS OF SIGNATURE
Signature covenants and agrees with Jameson that, at all times
prior to the Effective Time of the Merger, Signature at its expense will comply
with all covenants and provisions of this Article IV, except to the extent
Jameson may otherwise consent in writing or to the extent otherwise expressly
required or permitted by this Agreement.
4.01. Approvals. Signature will (i) take all reasonable steps
and use all reasonable efforts necessary or desirable to recommend the granting
of and to obtain, as promptly as practicable, all approvals, authorizations,
certificates, franchises, licenses, consents and clearances of Governmental
Entities and of third parties, required of Signature to consummate the
transactions contemplated hereby, (ii) provide such other information and
communications to such Governmental Entities as Jameson or such authorities may
reasonably request, and (iii) cooperate with Jameson in obtaining, as promptly
as practicable, all approvals, authorizations, certificates, franchises,
licenses, consents and clearances of Governmental Entities required of Jameson
to consummate the transactions contemplated hereby.
4.02. Investigation by Jameson. Signature will provide
Jameson, its counsel, accountants, actuaries and other representatives with
reasonable access, upon prior notice and during normal business hours, to all
facilities, officers, directors, employees, agents, accountants, actuaries,
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assets, properties, books and records of Signature, and will furnish Jameson and
such other persons during such period with all such other information and data
concerning the business, operations and affairs of Signature or the transactions
contemplated hereby as Jameson or any of such other persons reasonably may
request.
4.03. No Solicitation. (a) Except as may be required pursuant
to this Agreement, Signature shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of Signature or any of its Subsidiaries to, (i)
solicit, initiate, or encourage the submission of, any Takeover Proposal, (ii)
except to the extent permitted by paragraph (b), enter into any agreement with
respect to any Takeover Proposal or (iii) participate in any discussions or
negotiations regarding or furnish to any person any information with respect to
Signature's business, properties or assets, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that if prior to the Signature Stockholder Meeting (as defined in Section 4.14),
Signature shall have received an unsolicited written Takeover Proposal, which
offer appears in the good faith determination of the Signature Board of
Directors, based on the advice of Signature's outside counsel and financial
advisors, to be a "Superior Proposal" (as defined below) and which Signature's
Board of Directors is legally obligated to consider by principles of fiduciary
duty to stockholders under applicable law, the foregoing restrictions shall not
apply to such proposal. For all purposes of this Agreement, "Takeover Proposal"
means any proposal, other than a proposal by Jameson or an affiliate of Jameson,
for a merger, consolidation, share exchange, business combination or other
similar transaction involving Signature or any of its Significant Subsidiaries
or any proposal or offer (including, without limitation, any proposal or offer
to stockholders of Signature), other than a proposal or offer by Jameson or an
affiliate of Jameson (i) to acquire in any manner, directly or indirectly, an
equity interest in or any voting securities of, Signature or any of its
Significant Subsidiaries or (ii) to acquire or lease in any manner, directly or
indirectly, any property, business or other assets that, individually or in the
aggregate, would satisfy any of the tests for a "significant subsidiary" within
the meaning of Rule 1-02 of Regulation S-X of the SEC. Signature immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any persons conducted heretofore with respect to, or that could reasonably
be expected to lead to, any Takeover Proposal. As used herein, a "Significant
Subsidiary" means any Subsidiary that would constitute a "significant
subsidiary" within the meaning of Rule 1-02 of Regulation S-X of the SEC.
(b) Neither the Board of Directors of Signature nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Jameson, the approval or recommendation by the
Board of Directors of Signature or any such committee of this Agreement, any of
the transactions contemplated by this Agreement, or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal, or (iii)
take action to render the Rights inapplicable to any Takeover Proposal.
Notwithstanding the foregoing, the Board of Directors of Signature, to the
extent required by the fiduciary obligations thereof, as determined by the
advice of Henderson, Daily, Withrow & DeVoe or Bass, Berry & Sims, PLC, or other
legal counsel to Signature reasonably acceptable to Jameson, may approve or
recommend (and, in
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connection therewith, withdraw or modify its approval or recommendation of this
Agreement or the Merger) a Superior Proposal. If, prior to the approval of this
Agreement and the transactions contemplated hereby by the stockholders of
Signature, Signature's Board of Directors determines in good faith, after it has
received a Superior Proposal (as defined below) and after it has received advice
from such outside counsel that the failure to do so would result in a reasonable
possibility that Signature's Board of Directors would breach its fiduciary duty
under applicable law, Signature shall (i) notify Jameson in writing that it
intends to accept a Superior Proposal and enter into such a binding, written
agreement with respect to the transaction contemplated thereby, and (ii) attach
the most current version of such agreement or a full and complete summary of the
terms thereof to such notice. Jameson shall have the opportunity, within five
calendar days of receipt of Signature's written notice, to make an offer that
the Board of Directors of Signature determines, in good faith after consultation
with its financial advisors and outside counsel, is at least as favorable, from
a financial point of view, to the stockholders of Signature as the Superior
Proposal. Signature agrees that it will not enter into a binding agreement
referred to in clause (i) above until at least the sixth calendar day after it
has provided the notice to Jameson required thereby and to notify Jameson
promptly if its intention to enter into a written agreement referred to in its
notification shall change at any time after giving such notification. For all
purposes of this Agreement, "Superior Proposal" means a bona fide written
proposal made by a third party to acquire Signature pursuant to a tender or
exchange offer, a merger, a share exchange, a sale of all or substantially all
its assets or otherwise on terms which, the Board of Directors of Signature
determines, based on the advice of McDonald & Company and in light of all
relevant circumstances (including the apparent likelihood of such third party
being able to obtain any financing that it may require to consummate the
proposed transaction), are financially superior to those provided for in the
Merger. If, to the extent permitted by this Section 4.3(b), the Board of
Directors of Signature approves or recommends a Superior Proposal, Signature may
take appropriate action to render the Rights inapplicable to such Superior
Proposal.
(c) Each of John D. Bontreger, Mark D. Carney, Bo L. Hagood,
David R. Miller, Stephen M. Huse, George A. Morton, Richard L. Russell and
William S. Watson, by such individual's execution of this Agreement, agrees,
solely in his capacity as a stockholder of Signature, to vote all of the shares
of capital stock of Signature owned by such individual at the date of this
Agreement that have the power to vote in favor of the Merger; provided, however,
that such individuals shall be free to vote their shares in their sole
discretion if the Board of Directors of Signature terminates this Agreement in
accordance with Section 9.01(f) hereof. Each of such stockholders represents,
covenants and agrees for the benefit of Jameson that, until the earlier of the
Effective Time of the Merger or the termination of this Agreement pursuant to
Article IX hereof and subject to the foregoing provisions, he:
(1) has the power, authority and legal capacity to execute
and deliver this Agreement (only as applicable to this Section 4.03(c))
and perform his obligations under this Agreement;
(2) is the sole beneficial owner of at least that number of
shares of Signature Common Stock and/or Signature Preferred Stock
indicated as owned by him in the Signature
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Proxy Statement used in connection with the solicitation of proxies for
the Signature Annual Meeting of Stockholders held in 1998 and has the
full and exclusive authority to enter into this Agreement and to vote
his shares as contemplated hereby;
(3) will not sell, transfer, pledge, hypothecate, encumber,
assign, tender or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, encumbrance, assignment, tender or
other disposition of any of the Signature Common Stock or Signature
Preferred Stock owned by him;
(4) will not, other than as expressly contemplated by this
Agreement, grant any powers of attorney or proxies or consents in
respect of any of the Signature Common Stock or Signature Preferred
Stock owned by him, deposit any of the Signature Common Stock or
Signature Preferred Stock owned by him into a voting trust, enter into
a voting agreement with respect to any of the Signature Common Stock or
Signature Preferred Stock owned by him or otherwise restrict his
ability to freely exercise all voting rights with respect to any of the
Signature Common Stock or Signature Preferred Stock owned by him;
(5) will not (i) cause Signature to take any action or (ii)
consent to Signature taking any action prohibited by the Agreement;
(6) will use his reasonable efforts to take, or cause to be
taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement; and
(7) acknowledges that his agreement and commitment contained
in this Section 4.03(c) are an integral part of the transactions
contemplated by this Agreement, that damages may be an inadequate
remedy for any breach by it of the provisions of this Agreement and
that the obligations of the parties hereunder shall be specifically
enforceable.
(d) Signature shall promptly (but in any event within one day)
advise Jameson orally and in writing of any Takeover Proposal or any inquiry
regarding the making of a Takeover Proposal, including any request for
information, the material terms and conditions of such request, Takeover
Proposal or inquiry, and the identity of the Person making such request,
Takeover Proposal or inquiry. Signature will, to the extent reasonably
practicable, keep Jameson fully informed of the status and details (including
amendments or proposed amendments) of any such request, Takeover Proposal or
inquiry.
(e) Except to the extent reasonably required in connection
with Signature's obligations under this Agreement, during the period from the
date of this Agreement through the Effective Time of the Merger, Signature shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill or similar agreement to which Signature or any of its Subsidiaries is
a party (other than any involving Jameson) unless, in the written opinion of
counsel to Signature,
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failure to take such action would violate the fiduciary obligations of the Board
of Directors of Signature, under applicable law. During such period, Signature
agrees to enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreements, including, but not limited to, obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state thereof having jurisdiction.
(f) Nothing contained in this Section 4.03 shall prohibit
Signature from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2 promulgated under the 1934 Act or from making any disclosure to
Signature's stockholders which, in the good faith judgment of the Board of
Directors of Signature based on the written opinion of outside counsel, is
required under applicable law.
4.04. Conduct of Business. Signature will conduct its business
only in the ordinary course and consistent with past practice and custom.
Without limiting the generality of the foregoing:
(a) Signature will use all reasonable efforts to (i)
preserve intact Signature's present business organization, reputation and
customer relations, (ii) preserve its relationships with customers, suppliers,
licensors, lessors and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired to any material extent
at the Effective Time of the Merger, (iii) keep available the services of
Signature's present officers, employees, agents, consultants and other similar
representatives, (iv) maintain all licenses, qualifications and authorizations
of Signature to do business in each jurisdiction in which it is so licensed,
qualified or authorized, (v) maintain all assets and properties of Signature in
good working order and condition, ordinary wear and tear excepted and (vi)
continue all current marketing activities relating to the business, operations
or affairs of Signature.
(b) Signature will cause the books and records of Signature
to be maintained in the usual manner and consistent with past practice and
custom and will not permit a material change in any operational, financial
reporting or accounting practice or policy of Signature or in any assumption
underlying such a practice or policy, or in any method of calculating any bad
debt, contingency or other reserve for financial reporting purposes or for other
accounting purposes.
(c) Signature will (i) prepare properly and file duly,
validly and timely all reports and all Tax Returns required to be filed with any
governmental or regulatory authorities with respect to the business, operations
or affairs of such corporation, and (ii) pay duly and fully all Taxes indicated
by such Tax Returns or otherwise levied or assessed upon such corporation or any
of its assets and properties, and withhold or collect and pay to the proper
Taxing authorities or hold in separate bank accounts for such payment all Taxes
that such corporation is required to so withhold or collect and pay, unless such
Taxes are being contested in good faith and, if appropriate, reasonable reserves
therefor have been established and reflected in the books and records of such
corporation and in accordance with generally accepted accounting principles
consistently applied.
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(d) Signature will use all reasonable efforts to maintain in
full force and effect until the Effective Time of the Merger substantially the
same levels of coverage as the insurance afforded under the contracts in force
as of the date of this Agreement.
(e) Signature will comply, in all material respects, with
all Legal Requirements applicable to its business, operations or affairs.
(f) Except in the ordinary course of business consistent
with past practice and custom, Signature will not, without the prior written
consent of Jameson, (i) enter into or execute any contract, agreement, lease,
indenture, note or other commitment; (ii) hire, terminate, promote, transfer,
change the salary or other form of compensation of, grant any leave of absence
to or change any policies of Signature or employment arrangements or agreements
Signature may have with respect to any officers, directors or employees of
Signature whose compensation from Signature in the last preceding year (12
months) exceeded $50,000 or increase the annual level of compensation of any
other officer, director or employee of Signature; (iii) not create or establish
any employee plans, policies or programs, except as required by law; (iv) amend,
cancel, modify, alter or otherwise change the terms of any of its leases or
other material agreements, arrangements, commitments, or other rights or
obligations to which it may be entitled or subject; or (v) waive or relinquish
any of its rights, claims or authority, or give any material consents to action
or inaction, under any of the agreements, arrangements, commitments, leases or
other bases of its rights or obligations.
Notwithstanding anything herein to the contrary, without the
prior written consent of Jameson or except as otherwise required hereby,
Signature will not (i) enter into any real property lease or, directly or
indirectly, terminate, modify, assign, release, relinquish or waive any material
right of Signature under any existing real property lease or increase its
obligations under real property leases, (ii) enter into any long-term (in excess
of one year) material contract or other commitment involving an expenditure,
commitment or obligation of Signature in excess of $50,000, (iii) make or agree
to make any new capital expenditure or expenditures which, individually, is in
excess of $50,000 or which, in the aggregate, are in excess of $250,000 other
than refurbishment expenses contemplated by Schedule 2.04; (iv) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business (a) consistent with past
practice, of liabilities reflected or reserved against in, or contemplated by
the most recent consolidated financial statements (or the notes thereto) of
Signature included in the Signature SEC Documents, or (b) incurred in the
ordinary course of business consistent with past practice; (v) settle or
compromise any material federal, state, local or foreign Tax liability; or (vi)
authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
4.05. No Charter Amendments. Signature will not amend or
propose to amend its Articles of Incorporation, as amended, Bylaws or other
charter or organizational documents or take any action with respect to any such
amendment.
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4.06. No Issuance or Disposition of Securities. Signature will
not (i) authorize or issue any shares of such corporation's capital stock or
other equity securities or enter into any contract granting any option, warrant
or right calling for the authorization or issuance of any such shares or other
equity securities except pursuant to the exercise of options, warrants or other
rights which are outstanding on the date of the Agreement and disclosed herein
or the Schedules hereto, (ii) create or issue any securities directly or
indirectly convertible into or exchangeable for any such shares or other equity
securities, (iii) create or issue any options, warrants or rights to purchase
any such convertible securities, (iv) pledge, assign, transfer or otherwise
dispose of or encumber any shares of, or any options, warrants or rights to
purchase any shares of, any equity securities of Signature, or (v) split,
combine or reclassify any equity securities of Signature.
4.07. No Dividends. Signature will not declare, set aside or
pay any dividend or other distribution in respect of its capital stock or other
equity securities, or directly or indirectly redeem, purchase or otherwise
acquire any shares of Signature's capital stock or other equity securities, or
any interest in or right to acquire any such shares or other equity securities
(other than (i) dividends declared and paid on the Signature Preferred Stock in
the ordinary course of business and customary with past practice, and dividends
and other distributions by direct or indirect wholly owned Subsidiaries, and
(ii) extraordinary dividends declared and paid such that, in the opinion of
Signature's independent accountants, the distribution is necessary to eliminate
all current and anticipated earnings and profits of Signature prior to the
Effective Time of the Merger so that Jameson may continue to qualify as a real
estate investment trust under the Code from and after the Effective Time of the
Merger).
4.08. No Disposal of Property. Except as expressly provided in
this Agreement and in a manner consistent with Section 4.03 hereof, Signature
will not (i) dispose of or assign any of its assets or properties or permit any
of its assets and properties to be subjected to any liens, easements,
rights-of-way or other encumbrances except to the extent any such disposition or
any such lien, easement, right-of-way or other encumbrance is made or incurred
in the ordinary course of the business consistent with past practice and custom
and is not material to the business, operations or assets of Signature or any of
its Subsidiaries, or (ii) sell any material part of its operations or business
to any third party.
4.09. No Acquisitions. Signature will not (i) merge,
consolidate or otherwise combine or agree to merge, consolidate or otherwise
combine with any other person, (ii) acquire all or substantially all, or a
material portion of all, the assets, capital stock or other equity securities of
any other person, or any business division of any other person or (iii)
otherwise acquire control or ownership of any other person.
4.10. No Breach or Default. Signature will not violate, breach
or default, or take or fail to take any action that (with or without notice or
lapse of time or both) would constitute a violation, breach or default under,
any term or provision of any contract to which Signature is a party or by which
any of its assets are or may be bound and as to which such violation, breach or
default, individually or in the aggregate, has or reasonably may be expected to
have a Material Adverse
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Effect on the validity or enforceability against Signature of this Agreement or
on the business, properties, financial condition or results of operations of
Signature.
4.11. No Indebtedness. Except in the ordinary course of
business consistent with past practice and custom, Signature will not create,
incur, assume, guarantee or otherwise become liable for (i) any debt, obligation
or other liability for money borrowed, or (ii) any other debt, obligation or
other liability. Signature will not cancel, pay, agree to cancel or pay, or
otherwise provide for a complete or partial discharge in advance of a scheduled
payment date with respect to, any debt, obligation or other liability, or waive,
cancel or compromise any right to receive any direct or indirect payment or
other benefit under any debt, obligation or other liability owing to such
corporation, except in the ordinary course of business consistent with past
practice and custom.
4.12. Payment of Liabilities. Signature will not delay or
postpone beyond normal past practice and custom the payment of any material
account payable or other debt, obligation or other liability.
4.13. Employee Matters.
(a) Continued Administration. Between the date of this
Agreement and the Effective Time of the Merger, Signature agrees to employ its
reasonable efforts to administer each and every employee benefit plan described
in Section 2.10 in all material respects, or cause them to be so administered,
in accordance with the provisions of the Code, ERISA, and any other applicable
law.
(b) No Changes to Plans: Funding. Except as specifically
provided in this Agreement, between the date of this Agreement and the Effective
Time of the Merger, Signature agrees not to amend or terminate, partially or
completely, any employee benefit plan described in Section 2.10 without the
prior written consent of Jameson.
(c) Claims or Litigation. Signature agrees to notify
Jameson in writing of receipt of any notice of audit, investigation or
administrative proceeding by the IRS, Department of Labor, Pension Benefit
Guaranty Corporation ("PBGC") or other Governmental Entity, involving any
employee benefit plan described in Section 2.10, or of any action or claim by
any person under any employee benefit plan described in Section 2.10 other than
ordinary and usual claims for benefits by participants or beneficiaries, and
promptly furnish to Jameson a copy of any such written notice.
(d) Other Employee Benefit Plans or Arrangements. Signature
agrees that the coverage of any employee of Signature who remains an employee of
Signature from and after the Effective Time of the Merger under any Employee
Welfare Benefit Plan or any other employee benefit plan described in Section
2.10 may be terminated or continued for the benefit of such employees on or
after the Effective Time of the Merger at the sole discretion of Jameson. No
such employee of Signature shall be entitled to benefits under any such employee
benefit plan from and after the Effective Time of the Merger except to the
extent that either (i) such benefits are expressly
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provided under the terms of said plan such as the continuation of benefits or
payment of earned but unpaid benefits in the event of termination of coverage or
(ii) Jameson and/or Signature elects to continue coverage from and after the
Effective Time of the Merger under a particular plan.
(e) Employee Benefit Plans. Prior to the Closing, Signature
shall cause each of the plans listed on Schedule 2.10, if and to the extent that
Jameson and Signature have mutually agreed, to be terminated (i) in a manner
such that Signature has no further obligation with respect thereto, (ii) except
as otherwise mtually agreed, at no cost to Signature except for benefits earned
but unpaid prior to the termination and (iii) without any payments made
thereunder subject to the golden parachute provisions of Section 280G or Section
4999 of the Code.
4.14. Stockholders Meeting. Signature will promptly duly call
a meeting of all of the holders of Signature Common Stock and Signature
Preferred Stock (the "Signature Stockholder Meeting") entitled to vote on the
Merger Agreement to be held as soon as practicable following the effectiveness
under the 1933 Act of the Registration Statement, as hereinafter defined, but in
any event not more than forty days after such effectiveness, for the purpose of
voting upon and approving the Merger Agreement and the transactions contemplated
thereby. Signature will, through its Board of Directors, recommend to its
stockholders approval of such matters and shall not withdraw such
recommendation, except to the extent that the Board of Directors of Signature
shall have withdrawn or modified its approval or recommendation of this
Agreement of the Merger as permitted by Section 4.03(b). Without limiting the
generality of the foregoing, Signature agrees that its obligations pursuant to
the first sentence of this Section 4.14 shall not be affected by the
commencement, public proposal, public disclosure or communication to Signature
of any Takeover Proposal. Signature and Jameson shall coordinate and cooperate
with respect to the timing of such meeting.
4.15. Notice and Cure. Signature will notify Jameson promptly
in writing of, and contemporaneously will provide Jameson with true, complete
and correct copies of any and all information or documents relating to, and will
use all reasonable efforts to cure before the Effective Time of the Merger, any
event, transaction or circumstance occurring after the date of this Agreement
that results in or will result in any covenant or agreement of Signature under
this Agreement to be breached, or that renders or will render untrue any
representation or warranty of Signature contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
Signature also will use all reasonable efforts to cure, at the earliest
practicable date and before the Effective Time of the Merger, any violation or
breach of any representation, warranty, covenant or agreement made by Signature
in this Agreement, whether occurring or arising before or after the date of this
Agreement.
4.16. Cooperation of Management Pending Merger. Signature
covenants and agrees that between the date hereof and the Effective Time of the
Merger, Signature's management will cooperate with Jameson and endeavor to help
persons designated by Jameson to become familiar with Signature's business, its
operations, properties, business prospects, needs, employees and any other
matters pertaining to Signature's business and operations and to begin
implementation of the transitional plan to be developed by Jameson and
Signature.
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4.17. Furnish Information for Jameson Statements. Signature
will furnish Jameson all the information concerning Signature required for
inclusion in the Registration Statement, in applications required under the Blue
Sky laws of various states, and in listing applications to be filed with the
Nasdaq Stock Market respecting the shares of Jameson Common Stock and Jameson
Series S Preferred Stock to be delivered pursuant to this Agreement, or in any
statement or application made by Jameson to any governmental body in connection
with the transactions contemplated in this Agreement. Signature will promptly
notify Jameson in writing upon the occurrence of any material event which
warrants the preparation and filing of any amendment of or supplement to any
such registration statement, application or statement.
4.18. Affiliates Undertakings. Signature shall use its best
efforts to obtain written undertakings, in form and substance satisfactory to
Jameson, signed by each person who in the opinion of counsel for Jameson is at
the Effective Time of the Merger, or was at the time of the Signature
Stockholder Meeting, an "affiliate" of Signature within the meaning of Rule 145
of the Commission under the 1933 Act, to the effect that such person will not
offer or sell or otherwise distribute the shares of Jameson Common Stock to be
received by him or her upon consummation of the Merger, provided that such
undertaking shall not extend to such shares as may be sold (i) in the manner and
to the extent permitted by paragraph (d) of said Rule 145, as it may be amended
form time to time, (ii) pursuant to an offering which has been registered under
the 1933 Act and any applicable state securities laws, or (iii) in a manner
which is exempt from the registration requirements of the 1933 Act and any
applicable state securities laws. In addition, each of the persons named in
Section 7.04 will agree to not sell any of the shares of Jameson Common Stock or
Jameson Series S Preferred Stock received by him in connection with the
consummation of the Merger for a period of one year from the Effective Time of
the Merger without the prior consent of Jameson.
4.19. Filings; Other Actions. Signature and Jameson shall
promptly prepare and file with the SEC the Proxy Statement and Signature will
cooperate with Jameson in the preparation and filing with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Signature shall furnish all information concerning Signature and the
holders of Signature Common Stock and Signature Preferred Stock as may be
reasonably requested in connection with the actions of Jameson required to be
taken under any applicable state securities laws in connection with the issuance
of the Jameson Common stock and Jameson Series S Preferred Stock in the Merger,
including information relating to the number of shares of Jameson Common Stock
and Jameson Series S Preferred Stock required to be registered.
4.20. Comfort Letter. Signature shall use all reasonable
efforts to cause to be delivered to Jameson "comfort" letters of KPMG Peat
Marwick, Signature's independent public accountants, as contemplated by Section
7.09 of this Agreement.
4.21. REIT-Related Transactions. Signature shall take such
further action and engage in such further transactions as determined by Jameson,
based on the advice of its attorneys and/or independent accountants, to be
reasonably necessary to preserve Jameson's status as a "real
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estate investment trust" under the Code, so long as such actions have no
material adverse economic effect on Signature and its stockholders in the event
that the Merger is not consummated (for these purposes, the tax consequences to
any Signature stockholders resulting from a dividend or distribution by
Signature to them shall not be considered a material economic effect on them).
Without limiting the generality or breadth of the foregoing, it is agreed that
not later than immediately prior to the Effective Time of the Merger, (i) each
Signature Subsidiary will be liquidated and dissolved; (ii) Signature will enter
into that certain Assignment and Assumption Agreement substantially in the form
of Exhibit D hereto with Jameson Hospitality, LLC whereby not later than
immediately prior to the Effective Date of the Merger, Signature will sell,
assign and transfer to Jameson Hospitality, LLC those operating assets and
operations more specifically described in Exhibit E hereto and all of
Signature's rights and interests in and to the trade name or trademark
"Signature Inns"; and (iii) prior to the Effective Time of the Merger, Signature
will declare and pay an extraordinary dividend to the holders of the outstanding
Signature Common Stock in an aggregate amount not less than the amount of the
undistributed Earnings and Profits, if any, that the independent accountants of
Signature estimate that Signature would have at the Effective Time of the Merger
if such dividend were not declared and paid, it being understood and agreed that
the amount of any such dividend per share of Signature Common Stock will reduce
the amount of the cash payment per share due to the holders of the Signature
Common Stock by virtue of the consummation of the Merger as provided in Section
1.04(a) hereof. In addition, Signature and the Signature Partnership will enter
into amendments of the management and franchise agreements between such parties
which will result in the cancellation and termination of those agreements in
conjunction with the consummation of the Merger and will provide for the
execution of a lease with Jameson Hospitality LLC covering the Signature
Property owned by the Signature Partnership immediately following the Effective
Time of the Merger. Also in connection with the execution of the lease between
the Signature Partnership and Jameson Hospitality, LLC, the dissolution of the
general partner of the Signature Partnership and the substitution of Signature
as the general partner in connection therewith and the amendments of the said
management and franchise agreements Signature will use its best efforts to
obtain any limited partner approval of such actions that may be required under
the terms of the certificate or agreement of limited partnership and Indiana
Law.
4.22 Signature Property Restructuring. At the request of
Jameson, shortly before the Effective Time of the Merger, Signature will create
one or more limited liability companies and/or limited partnerships, as Jameson
may specify, which, at such time will be wholly owned by Signature, and transfer
the Signature Properties thereto.
ARTICLE V
COVENANTS OF JAMESON
Jameson covenants and agrees with Signature that, at all times
prior to the Effective Time of the Merger, Jameson at its expense will comply
with all covenants and provisions of this Article V, except to the extent
Signature may otherwise consent in writing or to the extent otherwise expressly
required or permitted by this Agreement.
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5.01. Approvals. Jameson will (i) take all reasonable steps
and use all reasonable efforts necessary or desirable to recommend the granting
of and to obtain, as promptly as practicable, all approvals, authorizations and
clearances of Governmental Entities and of third parties, required of Jameson to
consummate the transactions contemplated hereby, (ii) provide such other
information and communications to such Governmental Entities as Signature or
such authorities may reasonably request, and (iii) cooperate with Signature in
obtaining, as promptly as practicable, all approvals, authorizations and
clearances of Governmental Entities required of Signature to consummate the
transactions contemplated hereby.
5.02. Investigation by Signature. Jameson will provide
Signature, its counsel, accountants, actuaries and other representatives with
reasonable access, upon prior notice and during normal business hours, to all
facilities, officers, directors, employees, agents, accountants, actuaries,
assets, properties, books and records of Jameson, and will furnish Signature and
such other persons during such period with all such other information and data
concerning the business, operations and affairs of Jameson for the transactions
contemplated hereby as Signature or any of such other persons reasonably may
request.
5.03. Conduct of Business. Jameson agrees that during the
period from the date of this Agreement to the Effective Time of the Merger,
except as expressly contemplated by this Agreement or to the extent that
Signature may otherwise consent in writing, Jameson will not engage in any
activity or suffer any event, which, if engaged in or suffered prior to the date
of this Agreement, would have resulted in a misrepresentation under Article III.
5.04. Stockholders' Meeting. Jameson will promptly call a
meeting of all of the holders of Jameson Common Stock of Jameson (the "Jameson
Stockholder Meeting") entitled to vote on the Merger Agreement to be held as
soon as practicable following the effectiveness under the 1933 Act of the
Registration Statement, as hereinafter defined, but in any event not more than
forty days after such effectiveness, for the purpose of voting upon and
approving the Merger Agreement and the transactions contemplated thereby and
hereby. Jameson will, through its Board of Directors, recommend to its
stockholders approval of such matters. Signature and Jameson shall coordinate
and cooperate with respect to the timing of such meeting.
5.05. Blue Sky Permits. Jameson will use its reasonable
efforts to obtain all necessary Blue Sky permits and approvals required to carry
out the transactions contemplated by this Agreement; provided, however, that
notwithstanding anything herein to the contrary, Jameson shall not be required
to qualify to do business as a foreign corporation in any jurisdiction in which
it is not otherwise required to be so qualified.
5.06. Registration Statement. Jameson will file with the
Commission the Registration Statement with respect to the shares of Jameson
Common Stock and Jameson Series S Preferred Stock to be issued pursuant to this
Agreement, provided that it shall have received from Signature all information
with respect to Signature required to be included therein, and will use its best
efforts to effect the registration of such shares under the 1933 Act. If at any
time after the
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effectiveness of the Registration Statement and before the Effective Time of the
Merger, an event occurs which, in the opinion of counsel to Jameson,
necessitates the resolicitation of proxies for the Jameson Stockholder Meeting
or the Signature Stockholder Meeting, Jameson will promptly prepare and file a
post-effective amendment to the Registration Statement as necessary to effect
such resolicitation.
5.07. Issuance of Jameson Common Stock and Jameson Series S
Preferred Stock. Prior to the Effective Time of the Merger, Jameson will take
all such reasonable actions as may be required or appropriate to approve the
Articles of Amendment of its Articles of Incorporation in the form of Exhibit
A-1 hereto, thereby creating, designating and authorizing the issuance of the
Jameson Series S Preferred Stock to be issued in connection with the
consummation of the Merger. Jameson will issue as of the Effective Time of the
Merger the shares of Jameson Common Stock and Jameson Series S Preferred Stock
required to be paid and delivered to the stockholders of Signature upon
conversion of the Signature Common Stock and Signature Preferred Stock pursuant
to the terms of the Merger Agreement.
5.08. Notice and Cure. Jameson will notify Signature promptly
in writing of, and contemporaneously will provide Signature with true, complete
and correct copies of any and all information or documents relating to, and will
use all reasonable efforts to cure prior to the Effective Time of the Merger,
any event, transaction or circumstance occurring after the date of this
Agreement that results in or will result in any covenant or agreement of Jameson
under this Agreement to be breached, or that renders or will render untrue any
representation or warranty of Jameson contained in this Agreement as if the same
were made on or as of the date of such event, transaction or circumstance.
Jameson also will use all reasonable efforts to cure, at the earliest
practicable date and before the Effective Time of the Merger, any violation or
breach of any representation, warranty, covenant or agreement made by it in this
Agreement, whether occurring or arising before or after the date of this
Agreement.
5.09. Nasdaq National Market Listing. Jameson will use its
best efforts to have the shares of Jameson Common Stock and Jameson Series S
Preferred Stock to be issued in connection with the transactions contemplated by
this Agreement duly listed, subject to official notice of issuance, on the
Nasdaq National Market.
5.10. Tax Covenants. For one year following the Effective Time
of the Merger, Jameson will not take or fail to take, nor will it permit the
Surviving Corporation to take or fail to take, any action that would cause the
Merger not to constitute a "reorganization" within the meaning of Sections 368
of the Code.
5.11. No Breach or Default. Jameson will not violate, breach
or default, or take or fail to take any action that (with or without notice or
lapse of time or both) would constitute a violation, breach or default under,
any term or provision of any contract to which Jameson is a party or by which
any of its assets are or may be bound and as to which such violation, breach or
default, individually or in the aggregate, has or reasonably may be expected to
have a Material Adverse
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Effect on the validity or enforceability against Jameson of this Agreement or on
the business, properties, financial condition or results of operations of
Jameson and its Subsidiaries taken as a whole.
5.12. Notice and Cure. Jameson will notify Signature promptly
in writing of, and contemporaneously will provide Signature with true, complete
and correct copies of any and all information or documents relating to, and will
use all reasonable efforts to cure before the Effective Time of the Merger, any
event, transaction or circumstance that results in or will result in any
covenant or agreement of Jameson under this Agreement to be breached, or that
renders or will render untrue any representation or warranty of Jameson
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. Jameson will use all reasonable efforts
to cure, at the earliest practicable date and prior to the Effective Time of the
Merger, any violation or breach of any representation, warranty, covenant or
agreement made by Jameson in this Agreement, whether occurring or arising before
or after the date of this Agreement.
5.13. Cooperation of Management Pending Merger. Jameson
covenants and agrees that between the date hereof and the Effective Time of the
Merger, Jameson's management will cooperate with Signature and endeavor to help
persons designated by Signature to become familiar with Jameson's business, its
operations, properties, business prospects, needs, employees and any other
matters pertaining to Jameson's business and operations and to begin
implementation of the transitional plan to be developed by Jameson and
Signature.
5.14. Furnish Information for Signature Proxy Statements.
Jameson will furnish Signature all the information concerning Jameson required
for inclusion in the Signature Proxy Statement to be prepared and delivered to
the Signature stockholders in connection with the Signature Stockholders
Meeting, or in any statement or application made by Signature to any
Governmental Entity in connection with the transactions contemplated in this
Agreement.
5.15. Comfort Letters. Jameson shall use all reasonable
efforts to cause to be delivered to Signature "comfort" letters of Ernst &
Young, LLP, Jameson's independent public accountants, as contemplated by Section
8.09 of this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF JAMESON AND SIGNATURE
Notwithstanding any other provision of this Agreement, the
obligation of each of Jameson and Signature to consummate the transactions
contemplated hereby shall be subject to the fulfillment, prior to or at the
Effective Time of the Merger, of each of the following conditions precedent, any
one of which may be waived by such entity:
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6.01. Consents and Approvals. All approvals of, and consents
by, all Governmental Entities and other persons, and all permits by and all
filings with and submissions to all such Governmental Entities and other persons
as may be required for the consummation of the transactions contemplated by this
Agreement, shall have been obtained or made and reasonably satisfactory evidence
thereof shall have been received.
6.02. Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the 1933 Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purposes shall have been initiated
or, to the Knowledge of Jameson or Signature, threatened by the SEC. All
necessary state securities or blue sky authorizations shall have been received.
6.03. Stockholder Approval. At or prior to the Effective Time
of the Merger, the Merger Agreement shall have been duly approved by the
requisite vote of holders of the Signature Common Stock, Signature Preferred
Stock and Jameson Common Stock in accordance with applicable law and the
Restated Articles of Incorporation, as amended, and Bylaws of Signature and
Jameson, respectively.
6.04. Nasdaq National Market Listings. The shares of Jameson
Common Stock and the Jameson Series S Preferred Stock issuable in the Merger
shall have been approved for listing on the Nasdaq National Market.
6.05. Certain Actions, etc. There shall not have been
instituted and be continuing or threatened against Jameson and Signature or any
of their respective directors or officers any action, suit or proceeding by or
before any Governmental Entity that would (i) restrain, prohibit or invalidate,
or result in the payment of substantial damages in respect of, the Merger or any
other transaction contemplated by this Agreement, (ii) impose or confirm
material limitations on the ability of Jameson effectively to exercise full
rights of ownership of the shares of capital stock of Signature or (iii)
prohibit Jameson's or Signature's ownership or operation of all or a material
portion of Jameson's or Signature's business, properties or assets, or compel
Jameson to dispose of or hold separate all or a material portion of Jameson's or
Signature's business, properties or assets.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF JAMESON
Notwithstanding any other provision of this Agreement, the
obligation of Jameson to consummate the transactions contemplated hereby shall
be subject to the fulfillment, prior to or at the Effective Time of the Merger,
of each of the following conditions precedent, any one of which may be waived by
Jameson:
7.01. Accuracy of Representations and Warranties. The
representations and warranties of Signature set forth in Article II shall be
true and correct in all material respects as of
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the date of this Agreement and as of the Effective Time of the Merger with the
same effect as though such representations and warranties had been made at and
as of the Effective Time of the Merger except for such changes with respect
thereto which are contemplated by this Agreement or the passage of time.
7.02. Performance of Covenants, Agreements and Conditions.
Signature shall have duly performed, complied with and satisfied in all material
respects all covenants, agreements and conditions required by this Agreement to
be performed, complied with or satisfied by it at or prior to the Effective Time
of the Merger.
7.03. Officers' Certificate, Etc. Jameson shall have received
(i) a certificate, dated the date of the Effective Time of the Merger and signed
by the President and the Treasurer of Signature, to the effect set forth in
Sections 7.01, 7.02 and 7.12 and (ii) such other certificates, instruments and
documents as shall be reasonably requested by Jameson for the purpose of
verifying the accuracy of such representations and warranties and the
performance and satisfaction of such covenants and conditions.
7.04. Employment Agreements. Jameson Hospitality LLC shall
have entered into employment agreements in the forms of Exhibit C to this
Agreement with the following officers and key employees of Signature: John D.
Bontreger. Mark D. Carney, Bo L. Hagood, David R. Miller and Martin D. Brew.
7.05. Opinion of Signature Counsel. Jameson shall have
received an opinion, dated the date of the Effective Time of the Merger, of
Henderson, Daily, Withrow & Devoe, counsel for Signature, in form and substance
satisfactory to Jameson, to the effect that:
(a) Signature is a corporation duly organized and validly
existing under Indiana Law and has all requisite corporate power and authority
to own, operate and lease its properties and assets and to carry on its business
as now being conducted;
(b) Signature is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction set forth in
Schedule 2.01 to this Agreement;
(c) Each of the Signature Subsidiaries has been dissolved
and liquidated in accordance with Indiana Law, its articles of incorporation and
bylaws and Signature has obtained all material consents, waivers, approvals and
authority as may be reasonable required or necessary in connection therewith;
(d) The Signature Partnership is a limited partnership
validly existing and in good standing under the laws of the State of Indiana and
is duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business activities or its ownership or leasing of
property makes such qualification necessary and in which the failure to qualify
would not or could not reasonably be expected to have a Material Adverse Effect.
The Signature Partnership has full
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power and authority to own or lease and to operate and use its properties and to
carry on its business as now conducted;
(e) Signature has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement; the execution
and delivery of this Agreement by Signature and the consummation by Signature of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Signature; this Agreement has been duly executed
and delivered by Signature and constitutes the legal, valid and binding
obligation of Signature, enforceable against Signature in accordance with its
terms except as enforceability may be subject to (i) any applicable bankruptcy,
insolvency, reorganization or other law relating to or affecting creditors'
rights and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(f) Neither the execution and delivery of this Agreement by
Signature, nor the consummation of the transactions contemplated hereby to be
preformed by Signature, will (i) violate or conflict with any provision of the
Articles of Incorporation, as amended, or Bylaws, as currently in effect, of
Signature or any Signature Subsidiary, or (ii) violate or conflict with any
provision of any Indiana or federal law, rule or regulation, or of any order,
permit, certificate, writ, judgment, injunction, decree, determination, award or
other decision known to such counsel of any Governmental Entity, other
regulatory or self-regulatory body or association or arbitrator binding upon
Signature or any of its Subsidiaries or any of the properties of Signature or
any Signature Subsidiary, except where such violations or conflicts would not
individually or in the aggregate have a Material Adverse Effect on the business,
financial condition or properties of Signature or any Signature Subsidiary or on
the ability of Signature to consummate the transactions contemplated hereby;
(g) To such counsel's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby to be performed by Signature will result in a breach of or constitute a
default (or with notice or lapse of time or both result in a breach of or
constitute a default) under, or give rise to a right of termination,
cancellation, acceleration or repurchase of any obligation or a right of first
refusal with respect to any material property or asset or a loss of a material
benefit or the imposition of a material penalty under, any of the terms,
conditions or provisions of (i) any mortgage, indenture, loan or credit
agreement or any other agreement or instrument evidencing indebtedness for money
borrowed to which Signature or any Signature Subsidiary is a party or by which
Signature or any Signature Subsidiary or the properties of Signature or any
Signature Subsidiary is bound or affected, or pursuant to which Signature or any
Signature Subsidiary has guaranteed the indebtedness or preferred stock of any
person or entity, or (ii) any lease, contract or other agreement or instrument
to which Signature or any Signature Subsidiary is a party or by which Signature
or any Signature Subsidiary or any of the properties of Signature or any
Signature Subsidiary is bound or affected, except in the case of each of clauses
(i) and (ii) above, for any such breaches, defaults, rights, losses or penalties
that in the aggregate would not have any Material Adverse Effect on the
business, financial condition or
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properties of Signature or any Signature Subsidiary or on the ability of
Signature to consummate the transactions contemplated hereby;
(h) Each Dissolved Signature Partnership has been liquidated
and dissolved in compliance with the requirements of its certificate or
agreement of limited partnership and Indiana Law and neither Signature nor any
of its Subsidiaries has assumed, either contractually or by operation of law,
any liabilities, obligations or duties of the Dissolved Signature Partnership or
any of the partners thereof except for any responsibility or liability it may
have solely by reason of its position as the general partner of the Dissolved
Signature Partnership. Such counsel has no knowledge of any outstanding
indebtedness, claims, liabilities or obligations of any Dissolved Signature
Partnership to which Signature or any Signature Subsidiary may be subject and
which has not been disclosed in this Agreement or in any of the Schedules to
this Agreement.
(i) To such counsel's knowledge, except as contemplated in
this Agreement, neither the execution and delivery by Signature of this
Agreement nor the consummation of the transactions contemplated hereby to be
performed by Signature will result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned by Signature or any Signature Subsidiary, except where such would not in
the aggregate have a Material Adverse Effect on the business, financial
condition or properties of Signature or any Signature Subsidiary or on the
ability of Signature to consummate the transactions contemplated hereby;
(j) No consent, approval, order, certificate or authorization
of, or registration, declaration or filing with, any federal or Indiana
Governmental Entity is required by or with respect to Signature or any Signature
Subsidiary in connection with the execution and delivery of this Agreement by
Signature or the consummation by Signature of the transactions contemplated
hereby, other than in connection or compliance with any applicable provisions of
Indiana Law, Georgia Law and applicable state and Federal securities laws.
(k) The authorized capital stock of Signature consists of
25,000,000 shares of Signature Common Stock and 5,000,000 shares of Signature
Preferred Stock; to the knowledge of such counsel, there are no options to
purchase any shares of capital stock of Signature outstanding other than the
employee stock options described in Schedule 1.05 hereto; and all shares of
capital stock of Signature are duly authorized, validly issued, fully paid and
nonassessable, and are not subject to or issued in violation of, any preemptive
rights.
(l) All such shares of Signature Common Stock (and the
associated Rights), when converted into the right to receive shares of Jameson
Common Stock and cash pursuant to the terms of the Merger Agreement, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist and each holder of a certificate representing any such shares
(and the associated Rights) shall cease to have any rights with respect thereto
other than the right to receive the shares of Jameson Common Stock and cash
payment described in Section 1.04(a) hereof. By virtue of the Amendment to the
Rights Agreement and at the Effective Time of the Merger, the
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Rights shall be canceled and shall cease to exist by reason of the Merger and
the holders of the Signature Common Stock shall have no rights with respect
thereto upon consummation of the Merger.
(m) Such matters relating to the formation of one or more
limited liability companies or limited partnerships to hold title to the
properties in certain of the states pursuant to Section 4.22 and the
effectiveness of the transfer of title to such properties thereto as Jameson may
reasonably request.
In addition, such counsel shall state that no facts have come
to such counsel's attention which lead such counsel to believe that either the
Registration Statement or the Proxy Statement, or any amendment or supplement
thereto (other than the financial statements and other financial and statistical
information contained therein as well as expertized portions thereof, as to
which such counsel need not comment), both as of their respective issue or
effective dates and as of the Effective Time of the Merger, contained an untrue
statement of a material fact with respect to Signature or omitted to state a
material fact with respect to Signature required to be stated therein or
necessary to make the statements therein with respect to Signature not
misleading.
In rendering the above opinions, such counsel may rely on such
local or other counsel to which Jameson has reasonably agreed with respect to
matters particularly within the expertise of such counsel and/or not normally
opined on by outside counsel.
7.06. Undertakings by Signature Affiliates. Jameson shall have
received written undertakings, in form and substance satisfactory to Jameson,
signed by each person who in the opinion of counsel for Jameson is at the
Effective Time of the Merger, or was at the time of the Signature Stockholder
Meeting, an "affiliate" of Signature within the meaning of Rule 145 of the
Commission under the 1933 Act, to the effect that such person will not offer or
sell or otherwise distribute the shares of Jameson Common Stock or Jameson
Series S Preferred Stock to be received by him upon consummation of the Merger,
provided that such undertaking shall not extend to such shares as may be sold
(i) in the manner and to the extent permitted by paragraph (d) of said Rule 145,
as it may be amended from time to time, (ii) pursuant to an offering which has
been registered under the 1933 Act and any applicable state securities laws, or
(iii) in a manner which is exempt from the registration requirements of the 1933
Act and any applicable state securities laws. In addition, each of the persons
named in Section 7.04 will have agreed to not sell any of the shares of Jameson
Common Stock or Jameson Series S Preferred Stock received by him in connection
with the consummation of the Merger for a period of one year from the Effective
Time of the Merger without the prior consent of Jameson.
7.07. Rights Agreement. The Rights shall not have become
nonredeemable, exercisable, distributed or triggered pursuant to the terms of
the Rights Agreement.
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7.08. Opinions of Professionals.
(a) Jameson will have received an opinion from the
independent accountants of Signature, in form and substance reasonably
satisfactory to Jameson and its counsel, to the effect that at the Closing Date
Signature does not then have any undistributed earnings and profits as defined
under Internal Revenue Code Section 312 and the Regulations thereunder
("Earnings and Profits").
(b) On the Closing Date, the opinion of Conner & Winters, A
Professional Corporation, counsel to Jameson, shall have been delivered to
Jameson in form and substance reasonably satisfactory to Jameson stating (i)
that Jameson is a "real estate investment trust" for federal income Tax
purposes, (ii) that consummation of the transactions contemplated by this
Agreement will not cause Jameson to cease to qualify as a "real estate
investment trust" for federal income Tax purposes, and (iii) that the Merger
will be treated for federal income Tax purposes as a reorganization within the
meaning of section 368(a) of the Code, and that each of Jameson and Signature
will be a party to that reorganization within the meaning of section 368(b) of
the Code. In rendering such opinion, such counsel shall be entitled to rely upon
the opinion rendered pursuant to paragraph (a) above as well as certificates of
officers of Signature and Jameson as to such factual matters as such counsel may
reasonably request.
7.09. Auditors' letters. Jameson shall have received from KPMG
Peat Marwick a letter dated the effective date of the Registration Statement and
a letter dated the Effective Time of the Merger, each such letter to be in form
and substance satisfactory to Jameson and to the effect that:
(a) in their opinion, the financial statements of Signature
examined by them and included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act and the published rules and regulations thereunder; and
(b) based upon limited procedures described in such letter,
certain data and information appearing in said Registration Statement and
specified in said letter has been obtained from the accounting records of
Signature is in agreement with such records or computations made therefrom.
7.10. Resignations. If requested, Jameson shall have received
the resignations of each officer and director of each of the Signature
Subsidiaries.
7.11. Fairness Opinion. Jameson shall have received a letter
from The Robinson-Humphrey Company, L.L.C. for inclusion in the Registration
Statement in form and substance satisfactory to Signature to the effect that in
the opinion of The Robinson-Humphrey Company, L.L.C., the terms of the Merger
contemplated by this Agreement are fair to the stockholders of Jameson from a
financial point of view.
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7.12. No Material Adverse Change. Since the date of this
Agreement, there shall have been no event or occurrence which has had or
reasonably could be expected to have a Material Adverse Effect on the business,
properties, financial condition or results of operations of Signature or on the
ability of Signature to consummate the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SIGNATURE
Notwithstanding any other provision of this Agreement, the
obligations of Signature to consummate the transactions contemplated hereunder
(other than the obligations of Signature set forth in Section 10.05) shall be
subject to the fulfillment, prior to or at the Effective Time of the Merger, of
each of the following conditions precedent, any one of which may be waived by
Signature.
8.01. Accuracy of Representations and Warranties. The
representations and warranties of Jameson set forth in Article III shall be true
and correct in all material respects as of the date of this Agreement and as of
the Effective Time of the Merger with the same effect as though such
representations and warranties had been made at and as of the Effective Time of
the Merger except for such changes with respect thereto which are contemplated
by this Agreement or the passage of time.
8.02. Performance of Covenants, Agreements and Conditions.
Jameson shall have duly performed, complied with and satisfied all covenants,
agreements and conditions required by this Agreement to be performed, complied
with or satisfied by them, at or prior to the Effective Time of the Merger.
8.03. Officers' Certificates Etc. Signature shall have
received (i) certificates, dated the date of the Effective Time of the Merger
and signed by the President or any Vice President of Jameson, to the effect set
forth in Sections 8.01, 8.02 and 8.08, insofar as such Sections relate to
Jameson and (ii) such other certificates, instruments and documents as shall be
reasonably requested by Signature for the purpose of verifying the accuracy of
such representations and warranties and the performance and satisfaction of such
covenants and conditions.
8.04. Opinion of Counsel for Jameson. Signature shall have
received an opinion, dated the date of the Effective Time of the Merger, of
Conner & Winters, A Professional Corporation, counsel for Jameson, in form and
substance satisfactory to Signature, to the effect that:
(a) Jameson is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and Jameson has all requisite corporate power and authority to own, operate and
lease its respective properties and assets and to carry on its respective
businesses as now being conducted;
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(b) Jameson and each Jameson Subsidiary is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction specified in such opinion;
(c) Jameson has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement; the execution
and delivery of this Agreement by Jameson and the consummation by Jameson of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Jameson; this agreement has been duly executed
and delivered by Jameson and constitutes the legal, valid and binding obligation
of Jameson, enforceable against Jameson in accordance with its terms except as
enforceability may be subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(d) Neither the execution and delivery of this Agreement by
Jameson, nor the consummation of the transactions contemplated hereby to be
performed by Jameson, will (i) violate or conflict with any provision of the
Articles of Incorporation, as amended, or By-laws, as currently in effect, of
Jameson or (ii) violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any Governmental Entity, other
regulatory or self-regulatory body or association or arbitrator binding upon
Jameson or any Jameson Subsidiary or any of their respective properties, except
where such violations or conflicts would not in the aggregate have a Material
Adverse Effect on the business, financial condition or properties of Jameson and
its Subsidiaries taken as a whole or on the ability of Jameson to consummate the
transactions contemplated hereby;
(e) To the knowledge of counsel, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby to be performed by Jameson will result in a breach of or constitute a
default (or with notice or lapse of time or both result in a breach of or
constitute a default) under, or give rise to a right of termination,
cancellation, acceleration or repurchase of any obligation or a right of first
refusal with respect to any material property or asset or a loss of a material
benefit or the imposition of a material penalty under, any of the terms,
conditions or provisions of (i) any mortgage, indenture, loan or credit
agreement or any other agreement or instrument evidencing indebtedness for money
borrowed to which Jameson is a party or by which it or any of its respective
properties is bound or affected, or pursuant to which Jameson has guaranteed the
indebtedness or preferred stock of any person or entity or (ii) any lease,
license, tariff, contract or other agreement or instrument to which Jameson is a
party or by which it or any of its properties is bound or affected, except in
the case of each of clauses (i) and (ii) above, for any such breaches, defaults,
rights, losses or penalties that in the aggregate do not have any Material
Adverse Effect on the business, financial condition, or properties of Jameson
and its subsidiaries taken as a whole or on the ability of Jameson to consummate
the transactions contemplated hereby;
(f) To the knowledge of counsel, except as contemplated in
this Agreement, neither the execution and delivery of Jameson of this Agreement
nor the consummation of the transactions
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contemplated hereby to be performed by Jameson will result in, or require, the
creation or imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature upon or with respect to
any of the properties now or hereafter owned by Jameson or its Subsidiaries,
except where such would not in the aggregate have a Material Adverse Effect on
the business, financial condition, or properties of Jameson or any Jameson
Subsidiary or on the ability of Jameson to consummate the transactions
contemplated hereby;
(g) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Jameson or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Jameson or the consummation by
Jameson of the transactions contemplated hereby, other than in connection or
compliance with any applicable provisions of Georgia Law, Indiana Law or
applicable state and Federal securities laws.
(h) The authorized capital stock of Jameson consists of
40,000,000 shares of Jameson Common Stock and 10,000,000 shares of preferred
stock, par value $1.00 per share. On the date of this Agreement, there were
9,857,731 shares of Jameson Common Stock and 1,200,000 shares of Jameson Series
A Preferred Stock issued and outstanding. All the outstanding shares of Jameson
Common Stock and Jameson Series A Preferred Stock have been duly authorized and
validly issued and are fully paid and nonassessable. To the knowledge of such
counsel, there are no options to purchase any shares of capital stock of Jameson
except as set forth in Section 3.04 of this Agreement. The shares of Jameson
Series S Preferred Stock have been validly designated and authorized by the
filing of the Articles of Amendment substantially in the form of Exhibit A-1 to
this Agreement. The shares of Jameson Common Stock and Jameson Series S
Preferred Stock to be issued pursuant to this Agreement have been duly
authorized and, when issued in accordance with the provisions hereof, will be
validly issued, fully paid and nonassessable; and the Jameson stockholders have
no preemptive rights to acquire such shares.
(i) The Registration Statement has become effective under
the 1933 Act and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act; and the resale of the shares of Jameson Common
Stock and Jameson Series S Preferred Stock issued pursuant to this Agreement and
the Merger Agreement will not require registration under the 1933 Act except as
such registration may be required by law, if any, with respect to certain
distributions by those "affiliates" of Signature who deliver the undertakings to
Jameson contemplated by Section 7.06 herein.
(j) The issuance of the shares of Jameson Common Stock and
Jameson Series S Preferred Stock in connection with the transactions
contemplated by this Agreement has been registered or is subject to applicable
exemptions from the registration requirements under the state securities or Blue
Sky laws of the various states in which the stockholders of Signature reside.
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In addition, such counsel shall state that no facts have come
to such counsel's attention which lead such counsel to believe that either the
Registration Statement or the Proxy Statement or any amendment or supplement
thereto (other than the financial statements and other financial and statistical
information contained therein as well as expertized portions thereof, as to
which such counsel need not comment), both as of their respective issue or
effective dates and as of the Effective Time of the Merger, contained an untrue
statement of a material fact with respect to Jameson and the Jameson
Subsidiaries or omitted to state a material fact with respect to Jameson and the
Jameson Subsidiaries required to be stated therein or necessary to make the
statements therein with respect to Jameson and the Jameson Subsidiaries not
misleading.
In rendering the above opinions, such counsel may rely upon
such local or other counsel to which Signature has reasonably agreed with
respect to matters particularly within the expertise of such counsel and/or not
normally opined on by outside counsel. It is agreed that such counsel may rely
on the opinion of Steven A. Curlee, Esq. regarding matters of Georgia Law.
8.05. Authorization of Jameson Stock. The Board of Directors
of Jameson shall have taken all necessary corporate action to provide for the
issuance and reservation of such number of shares of Jameson Common Stock and
Jameson Series S Preferred Stock as may be required to carry out the terms of
this Agreement.
8.06. Fairness Opinion. Signature shall have received a letter
from McDonald Investments, Inc. no earlier than three business days prior to the
effective date of the Registration Statement for inclusion in the Registration
Statement in form and substance satisfactory to Signature to the effect that in
the opinion of McDonald Investments, Inc., the consideration to be received in
the Merger by the holders of the Signature Common Stock and Signature Preferred
Stock contemplated by this Agreement is fair to the stockholders of Signature
from a financial point of view.
8.07. Tax Opinion. Signature shall have received a written
opinion of Conner & Winters, A Professional Corporation, to the effect that (i)
Jameson is a "real estate investment trust" for federal income Tax purposes,
(ii) consummation of the transactions contemplated by this Agreement will not
cause Jameson to cease to qualify as a "real estate investment trust" for
federal income Tax purposes, and (iii) the Merger will be treated for federal
income Tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of Jameson and Signature will be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (iv) that
Signature and the Signature stockholders exchanging Signature Common Stock and
Preferred Stock will recognize no gain or loss for federal income tax purposes
as a result of the consummation of the Merger (except as to the cash
consideration received by Signature stockholders and except for any gain that
Signature may realize in connection with the sale of its operating assets to
Hospitality, LLC as contemplated by Section 4.21). In connection with the Tax
opinion, such counsel shall be entitled to assume the accuracy of the
representations and warranties of Signature and Jameson and shall be entitled to
make such other factual assumptions as are reasonable or
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customary in similar Tax opinions. In rendering such opinion, such counsel shall
be entitled to rely upon the opinion rendered pursuant to Section 7.08(a) above.
8.08. No Material Adverse Change. Since the date of this
Agreement, there shall have been no event or occurrence which has had or
reasonably could be expected to have a Material Adverse Effect on the business,
properties, financial condition or results of operations of Jameson or on the
ability of Jameson to consummate the transactions contemplated hereby.
8.09. Auditors' Letters. Signature shall have received from
Ernst & Young, LLP, a letter dated the effective date of the Registration
Statement and a letter dated the Effective Time of the Merger, each such letter
to be in form and substance satisfactory to Signature and to the effect that:
(a) in their opinion, the financial statements of Jameson
examined by them and included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act and the published rules and regulations thereunder; and
(b) based upon limited procedures described in such letter,
certain data and information appearing in said Registration Statement and
specified in said letter has been obtained from the accounting records of
Jameson is in agreement with such records or computations made therefrom.
ARTICLE IX
TERMINATION, AMENDMENTS AND WAIVER
9.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time of the Merger, whether before or after approval
by the stockholders of Jameson and Signature:
(a) by mutual written consent of Jameson and Signature; or
(b) by either Jameson or Signature if the Merger shall not
have been consummated on or before July 31, 1999 (other than due to the failure
of the party seeking to terminate this Agreement to perform its obligations
under this Agreement required to be performed at or prior to the Effective
Time); or
(c) by either Jameson or Signature, if any United States
federal or state court of competent jurisdiction or other governmental entity
shall have issued a final order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable,
provided that the party seeking to terminate shall have used its best efforts to
appeal such order, decree, ruling or other action; or
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(d) by either Jameson or Signature, if any required approval
of the stockholders of Jameson or Signature that is a condition to the
obligations of Jameson or Signature under Section 6.03 shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of stockholders or at any adjournment thereof; or
(e) by Jameson if the Board of Directors of Signature shall
or shall resolve to (i) not recommend, or withdraw its approval or
recommendation of, the Merger, this Agreement or any of the transactions
contemplated hereby, (ii) modify such approval or recommendation in a manner
adverse to Jameson or (iii) approve or recommend a Superior Proposal pursuant to
Section 4.03(b); or
(f) by the Board of Directors of Signature if (i) to the
extent permitted by Section 4.03(b), the Board of Directors of Signature
authorizes Signature to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and Signature provides
notification to Jameson in accordance with Section 4.03(b), and (ii) Jameson
does not make, within five calendar days of receipt of Signature's written
notification of its intention to enter into a binding agreement for a Superior
Proposal, an offer that the Board of Directors of Signature determines, in good
faith after consultation with its financial advisors and outside counsel, is at
least as favorable, from a financial point of view, to the stockholders of
Signature as the Superior Proposal, and (iii) Signature, prior to such
termination has paid to Jameson in cash the full amounts required to be paid by
Section 10.05; or
(g) by Jameson, if Signature has failed to perform in any
respect any of its obligations required to be performed by it under this
Agreement and such failure continues for more than 30 days after notice unless
failure to so perform has been caused by or results from a breach of this
Agreement by Jameson, except where such failure or failures would not in the
aggregate have a Material Adverse Effect on the business, properties, financial
condition or results of operations of Signature or Jameson on the ability of
Signature or Jameson to consummate the transactions contemplated hereby; or
(h) by Signature, if Jameson shall have failed to perform in
any respect any of its obligations required to be performed by it under this
Agreement and such failure continues for more than 30 days after notice unless
failure to so perform has been caused by or results from a breach of this
Agreement by Signature, except where such failure or failures would not in the
aggregate have a Material Adverse Effect on the business, properties, financial
condition or results of operations of Signature or on the ability of Signature
to consummate the transactions contemplated hereby; or
(i) by Signature, if the average of the closing sales prices
for Jameson Common Stock as reported on the Nasdaq National Market for the
period of ten consecutive trading days ending five business days prior to the
date of the Signature Stockholder Meeting is less than $7.00 per share.
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9.02. Effect of Termination. If either Jameson or Signature
terminates this Agreement as provided in the foregoing Section, this Agreement
will forthwith become void, and there will be no liability or obligation on the
part of Jameson or Signature or their officers or directors except as set forth
in Sections 10.05 and 11.02 (relating to noncompletion expenses and fees), 2.13
and 3.07 (relating to brokers or finders), and 10.01 (relating to
confidentiality), and except to the extent that such termination results from
the willful breach by a party of any of its representations, warranties or
agreements in this Agreement.
9.03. Amendment. This Agreement may be amended by the parties
hereto, by action taken (in the case of Signature or Jameson) by their
respective Boards of Directors at any time before or after approval hereof by
the stockholders of Signature and Jameson. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
9.04. Waiver. Any term or provision of this Agreement may be
waived in writing at any time by Jameson, if it is entitled to the benefits
thereof, or by Signature, if it is entitled to the benefits thereof.
ARTICLE X
OTHER AGREEMENTS; NONSURVIVAL
OF REPRESENTATIONS AND WARRANTIES
10.01. Confidentiality. The parties agree that the
commitments, covenants, terms and obligations under Sections 1 through 5 and
Section 9 of that certain Mutual Confidential Disclosure Agreement dated as of
December 16, 1998 shall continue in full force and effect; provided, however,
that nothing in the last paragraph of Section 2 thereof shall affect, limit or
restrict the representations and warranties of the parties under Articles II and
III hereof.
10.02. Public Announcements. None of the parties hereto will
make any public announcement without prior approval of the other, except as may
otherwise be required by law.
10.03. Indemnification. (a) Jameson agrees that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
prior to the Effective Time of the Merger now existing in favor of any current
or former employees, agents, directors or officers of Signature and its
Subsidiaries as provided in their respective Articles of Incorporation or
By-laws (or comparable organizational documents) and any indemnification
agreements of Signature disclosed in a schedule hereto shall survive the Merger
and shall continue in full force and effect in accordance with their terms for a
period of not less than five years from the Effective Time of the Merger and the
obligations of Signature in connection therewith shall be assumed by Jameson;
provided that in the event any claim or claims are asserted or made within such
five year period, all rights to indemnification in respect of any such claim
shall continue until final disposition of such claim.
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(b) Jameson agrees that from and after the Effective Time
of the Merger, Jameson shall cause the policies or director and officer
liability insurance maintained by Signature on the date hereof to be maintained
in effect for the period of time directors and officers are entitled to
indemnification under Section 10.03(a) above; provided that Jameson may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the Indemnified Parties, provided
that such substitution shall not result in any gaps or lapses in coverage with
respect to matters occurring prior to the Effective Time of the Merger.
(c) In the event Jameson merges or is acquired in a
transaction in which it is not the surviving corporation, or if Jameson sells
substantially all of its assets, Jameson will use its reasonable efforts to
cause proper provision to be made in such transaction so that Jameson's
successor or acquiror will assume the obligations set forth in Section 10.03(a)
above. The parties agree that Signature's directors and officers are the third
party beneficiaries of, and entitled to enforce, the provisions of this Section
10.03.
(d) The provisions of this Section 10.03 are intended to be
for the benefit of, and shall be enforceable by, each person who is or has been
a director or officer of Signature or a Subsidiary of Signature, and such
director's or officer's heirs and personal representatives and shall be binding
on all successors and assigns of Jameson.
10.04. Additional Agreements. Subject to this Agreement, each
of the parties agrees to use its best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate approval
of stockholders of Signature or Jameson required so to approve. If at any time
after the Effective Time of the Merger any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each corporation that is a party to this Agreement will take all
such necessary action.
10.05. Break-up Fee. If
(a) this Agreement is terminated pursuant to Section
9.01(e), (g) or (f) without the Closing having occurred, or
(b) the stockholders of Signature do not approve the Merger
Agreement and either (i) the Signature Board of Directors does not
recommend approval of the Merger Agreement or at any time prior to the
Signature Stockholder Meeting changes its recommendation for approval,
or (ii) any tender or exchange offer for the shares of Signature Common
Stock or Signature Preferred Stock or solicitation of proxies voting
against approval of the Merger Agreement is commenced by any third
party (including any affiliate of Signature) at any time prior to the
date on which the Signature Stockholder Meeting is scheduled and the
Signature Board of Directors fails to take a position recommending that
such offer not be accepted or that such proxies not be granted,
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then Signature agrees to pay Jameson $2,000,000 in cash plus an amount equal to
all of the out-of pocket fees and expenses reasonably incurred by Jameson in
connection with this Agreement and the transactions contemplated hereby, not to
exceed $500,000 in the aggregate.
10.06. Available Remedies. Each party expressly agrees that,
consistent with its intention and agreement to be bound by the terms of this
Agreement and to consummate the transactions contemplated hereby, subject only
to the performance or satisfaction of conditions precedent, the remedy of
specific performance shall be available to a non-breaching and non-defaulting
party to enforce performance of this Agreement by a breaching or defaulting
party, including, without limitation, to require the consummation of the Closing
pursuant to Section 1.01.
10.07. Nonsurvival of Representations and Warranties. The
representations and warranties of the parties hereto contained in Articles II
and III shall expire at the Closing and be of no further force or effect.
ARTICLE XI
MISCELLANEOUS
11.01. Closing. Subject to the terms and conditions hereof,
the closing of the transactions contemplated hereby shall take place at the
offices of Henderson, Daily, Withrow & Devoe, 2600 One Indiana Square,
Indianapolis, Indiana 46204-2071 at 10:00 am., Eastern Time, on the day after
the meeting of the stockholders of Signature referred to in Section 4.14 or at
such other place and time as the parties hereto shall agree.
11.02. Expenses. Except as otherwise provided herein, each of
Jameson and Signature will pay its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including the fees
and expenses of its counsel, irrespective of when incurred and regardless of
whether the Merger is consummated; provided, however, that in the event that
this Agreement is terminated without the Merger being consummated pursuant to
any subparagraph of Section 9.01 other than Subparagraph 9.01(f) or 9.01(g),
Jameson shall reimburse Signature for one-half of the fees and expenses paid or
payable to the independent accountants of Signature for the analysis and review
undertaken by that firm to determine the Earnings and Profits of Signature for
purposes of Sections 4.21.
11.03. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered
personally or sent by telex, facsimile transmis sion, a nationally recognized
overnight delivery service or registered or certified mail (return receipt
requested), postage prepaid, to the parties to this Agreement at the following
addresses or at such other address for a party as shall be specified by like
notice:
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If to Jameson: Jameson Inns, Inc.
8 Perimeter Center East, Suite 8050
Atlanta, Georgia 30346-1603
Fax No.: (770) 901-9203
Attention: Thomas W. Kitchin
with a copy to: Conner & Winters, A Professional Corporation
3700 First Place Tower
15 East 5th Street
Tulsa, Oklahoma 74103
Fax No.: (918) 586-8548
Attention: Lynnwood R. Moore, Jr.
If to Signature: Signature Inns, Inc.
One Parkwood Crossing
250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
Fax No.: (317) 574-7397
Attention: John D Bontreger
with a copy to: Henderson, Daily, Withrow & Devoe
2600 One Indiana Square
Indianapolis, Indiana 46204-2071
Fax No.: (317) 639-0191
Attention: Thomas N. Eckerle
and to: Bass, Berry & Sims, PLC
2700 First American Center
Nashville, Tennessee 37238-2700
Fax No.: (615) 742-2709
Attention: Howard H. Lamar, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof.
11.04. Entire Agreement. This Agreement (including the
documents and instruments referred to herein) constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, written and oral.
11.05. Binding Effect: Benefits. This Agreement shall be
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Except for parties referred to in
Section 10.03, nothing expressed or implied in this Agreement is
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intended to or shall be construed to give any person other than the parties to
this Agreement or their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of this Agreement, it being
the intention of the parties to this Agreement that this Agreement shall be for
the sole and exclusive benefit of such parties or such successors or assigns and
for the benefit of no other person.
11.06. Assignment. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by any party to this Agreement without the prior written consent of
the other parties.
11.07. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed within that State.
11.08. Article and Section Headings. The article, section and
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
11.09. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. As used in Articles II
and III, "Knowledge" shall mean and a Person will be deemed to have "Knowledge"
of a particular fact or other matter if such Person is actually aware of such
fact or other matter or has been presented information or evidence which lead a
reasonable and prudent individual to determine the existence of such fact or
other matter without the necessity of conducting a further comprehensive
investigation concerning the existence of such fact or other matter. A Person
(other than an individual) will be deemed to have "Knowledge" of a particular
fact or other matter if any individual who is serving, or who has at any time
served, as a director, executive officer, partner, executor or trustee of, or
partner in, such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
11.10 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad or excessive as to be unenforceable,
such provision shall be interpreted (or deemed to be revised) to be only so
broad, or to provide for the maximum amount, as in enforceable.
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11.11. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
11.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be a single agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first written above.
Jameson Inns, Inc.
By /s/ Thomas W. Kitchin
-------------------------------------
Thomas W. Kitchin, Chief Executive
Officer
Signature Inns, Inc.
By /s/ John D. Bontreger
------------------------------------
John D. Bontreger, President and
Chief Executive Officer
The undersigned are executing this Agreement solely for the purpose of
agreeing to and confirming irrevocably the provisions of Section 4.03(c) of this
Agreement provided, however, that none of the undersigned makes any agreement or
understanding by executing below in his capacity as such director or officer,
rather such person signs this Agreement solely in his capacity as the beneficial
owner and registered owner of Signature Common Stock or Signature Preferred
Stock, and nothing herein shall limit or affect any actions taken by any of the
undersigned in his capacity as an officer or director of Signature, including,
without limitation, any action taken in such person's capacity as a director or
officer of Signature consistent with the provisions of Section 4.03(a) or (b) of
the Agreement.
/s/ John D. Bontreger
- ------------------------------
John D. Bontreger
/s/ Mark D. Carney
- ------------------------------
Mark D. Carney
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/s/ Bo L. Hagood
------------------------------
Bo L. Hagood
/s/ David R. Miller
------------------------------
David R. Miller
/s/ Stephen M. Huse
------------------------------
Stephen M. Huse
/s/ George A Morton
------------------------------
George A Morton
/s/ Richard L. Russell
------------------------------
Richard L. Russell
/s/ William S. Watson
------------------------------
William S. Watson
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<PAGE> 1
EXHIBIT 2.2
FORM OF
ARTICLES OF AMENDMENT
OF
JAMESON INNS, INC.
In accordance with Section 14-2-602 of the Georgia Business Corporation
Code (O.C.G.A. ss. 14-2-602), Jameson Inns, Inc. (the "Corporation") hereby
delivers these Articles of Amendment to the Secretary of State for filing.
I
The name of the Corporation is Jameson Inns, Inc.
II
The Amended and Restated Articles of Incorporation of the Corporation
(the "Articles") shall be amended by adding the following:
DESIGNATION OF PREFERENCES, RIGHTS, PRIVILEGES
AND RESTRICTIONS OF $1.70 SERIES S
CUMULATIVE PREFERRED STOCK
1. Designation and Initial Number. Two million two hundred fifty-six
thousand (2,256,000) shares of the preferred stock of the Corporation, par value
$1.00 per share (the "Preferred Stock"), are hereby classified into one series
which shall be designated the $1.70 Cumulative Convertible Preferred Stock,
Series S (the "Series S Preferred Stock"). In the event any shares of Series S
Preferred Stock have not been issued to third parties on or before June 30,
1999, such shares shall automatically without further action by the Board of
Directors of the Corporation cease to be shares of Series S Preferred Stock and
shall revert to the status of authorized unclassified shares of Preferred Stock.
The foregoing sentence shall not be interpreted or construed to constitute a
forfeiture provision and shall not affect any existing rights to convert into,
acquire, and/or purchase Series S Preferred Stock pursuant to any Agreement and
Plan of Merger or other agreement executed prior to the date set forth herein.
With respect to matters of dividends and distribution on liquidation, the shares
of Series S Preferred Stock authorized hereby:
(a) shall be senior to (i) all shares of the Corporation's common
stock, par value $.10 per share ("Common Stock") and (ii) all shares of the
Corporation's non-cumulative preferred stock, if any, and all shares of any
other class of the Corporation's stock ranking junior to the Series S Preferred
Stock; and
<PAGE> 2
(b) shall be on a parity with the Corporation's 9.25% Series A
Cumulative Preferred Stock and any other series of shares of cumulative
preferred stock ranking on a parity with the Series S Preferred Stock ("Parity
Preferred").
In no event shall any preferred stock senior to the Series S Preferred
Stock be authorized or issued without the affirmative vote of two-thirds of the
outstanding shares of Series S Preferred Stock.
2. Dividends. Holders of shares of the Series S Preferred Stock are
entitled to the payment of dividends only in accordance with the following:
(a) The holders of Series S Preferred Stock, in preference to the
holders of Common Stock and of any other class of shares ranking junior to the
Series S Preferred Stock, shall be entitled to receive out of any funds legally
available for Series S Preferred Stock, when and as declared by the Board of
Directors, dividends in cash at the annual rate of $1.70 and no more, payable
quarterly in arrears on or before the 20th day of January, April, July and
October of each year, or if not a business day, the next succeeding business day
(each, a "Dividend Payment Date"). Such dividends shall accrue and be cumulative
from and after ________, 1999 and the initial Dividend Payment Date shall be
________, 1999. No dividends shall be paid upon or declared or set apart for any
Parity Preferred for any dividend period unless at the same time a like
proportionate dividend for the dividend periods terminating on the same or any
earlier date, ratably in proportion to the respective dividend rates fixed
therefor, shall have been paid upon or declared or set apart for the Series S
Preferred Stock then issued and outstanding and entitled to receive such
dividend.
(b) So long as the Series S Preferred Stock shall be outstanding, no
dividend, except a dividend payable in Common Stock or other shares ranking
junior to the Series S Preferred Stock, shall be paid or declared or any
distribution made, except as aforesaid, in respect of the shares of the
Corporation's Common Stock or any other shares ranking junior to the Series S
Preferred Stock, nor shall any Common Stock or any other shares ranking junior
to or on a parity with the Series S Preferred Stock be purchased, redeemed,
retired or otherwise acquired by the Corporation, except (i) out of the proceeds
of the sale of Common Stock or other shares of the Corporation ranking junior to
the Series S Preferred Stock received by the Corporation subsequent to the date
of first issuance of the Series S Preferred Stock or (ii) by conversion into or
exchange for other capital stock of the Corporation ranking junior to the Series
S Preferred Stock as to dividends and upon liquidation or redemption for the
purpose of preserving the Corporation's qualification as a real estate
investment trust under sections 856 through 860 of the Internal Revenue Code of
1986, as amended ("REIT"), unless: (x) all accrued and unpaid dividends on all
outstanding Series S Preferred Stock, including the full dividends for all
current dividend periods, shall have been declared and paid or a sum sufficient
for payment thereof set apart, and (y) there shall be no arrearages with respect
to the redemption of the Series S Preferred Stock.
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<PAGE> 3
(c) No dividends on shares of Series S 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 the Corporation's 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) Notwithstanding subparagraph (c) above, dividends on the Series S
Preferred Stock shall accrue whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared. Accrued but unpaid
dividends on the Series S Preferred Stock will not bear interest and holders of
the Series S Preferred Stock will not be entitled to any distributions in excess
of full cumulative distributions described above. Any dividend payment made on
shares of the Series S Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to such shares which
remains payable.
3. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Series S Preferred Stock shall be entitled to receive in full out of the assets
of the Corporation, before any amount shall be paid or distributed among the
holders of Common Stock or any other shares ranking junior to the Series S
Preferred Stock, the sum of (i) $20.00 per share plus (ii) an amount equal to
all dividends accrued and unpaid thereon, whether or not declared, to the date
of payment of the amount due pursuant to such liquidation, dissolution or
winding up of the affairs of the Corporation. In the event the net assets of the
Corporation legally available therefor are insufficient to permit the payment
upon all outstanding Series S Preferred Stock and all Parity Preferred of the
full preferential amount to which they are respectively entitled, then such net
assets shall be distributed ratably upon all outstanding Series S Preferred
Stock and Parity Preferred in proportion to the full preferential amount to
which each such share is entitled.
(b) After payment to the holders of Series S Preferred Stock of the
full preferential amounts as aforesaid, the holders of Series S Preferred Stock,
as such, shall have no right or claim to any of the remaining assets of the
Corporation.
(c) The merger or consolidation of the Corporation into or with any
other corporation, the merger of any other corporation into it, or the sale,
lease or conveyance of all or substantially all the assets of the Corporation,
shall not be deemed to be a dissolution, liquidation or winding up for the
purposes of this Section.
4. Redemption. Shares of Series S Preferred Stock shall be redeemable
only in accordance with the following:
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<PAGE> 4
(a) All or any part of the Series S Preferred Stock shall be redeemable
by the Corporation, at any time on or after February 1, 2000, at the option of
the Board of Directors, at the redemption prices set forth below, plus accrued
and unpaid dividends:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PREMIUM PRICE
------ ------- ------
<S> <C> <C>
February 1, 2000 to January 31, 2001 104.8572% $20.97
February 1, 2001 to January 31, 2002 103.6429% $20.73
February 1, 2002 to January 31, 2003 102.4286% $20.49
February 1, 2003 to January 31, 2004 101.2143% $20.24
February 1, 2004 and thereafter 100.0000% $20.00
</TABLE>
(b) Notice of any proposed redemption of Series S Preferred Stock shall
be given by the Corporation by mailing a copy of such notice, at least thirty
(30) days, and not more than sixty (60) days, prior to the date fixed for such
redemption, to the holders of record of the Series S Preferred Stock to be
redeemed, at their respective addresses then appearing upon the books of the
Corporation. In case of the redemption of a part only of the Series S Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected by
lot or pro rata, as the Board of Directors may determine. The Board of Directors
shall have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which, and the terms and conditions
upon which, the shares of the Series S Preferred Stock shall be redeemed from
time to time. On or at any time before the redemption date specified in such
notice, the Corporation shall deposit in trust, for the account of the holders
of the shares to be redeemed, funds necessary for such redemption with a
national bank or trust company, organized under the laws of the United States of
America, in good standing and designated in such notice of redemption. Upon
mailing of the notice of redemption as above provided, or upon the making of
such deposit, whichever is later, all shares with respect to the redemption of
which such notice and deposit shall have been given and made shall be deemed to
be no longer outstanding for any purpose, and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the holders
of the certificates for such shares to receive, out of the funds so deposited in
trust, from and after the date of such deposit, the amount payable upon the
redemption thereof, without interest; provided, however, that no right of
conversion shall be impaired by the mailing of such notice or the making of such
deposit. The Corporation shall not purchase any shares of Common Stock, any
shares ranking junior to the Series S Preferred Stock, or any Parity Preferred
unless and except as provided in Paragraph 2.
5. Voting Rights. Holders of the Series S Preferred Stock will not
have any voting rights, except as set forth below or as otherwise from time to
time required by law.
(a) If, and so often as, the Corporation shall fail to declare and pay
dividends on the Series S Preferred Stock at the time outstanding at the rate
specified for such shares for six (6) Dividend Payment Dates (whether or not
consecutive) the holders of the Series S Preferred Stock (voting separately as a
voting group with all Parity Preferred upon which like voting rights have been
conferred and are exercisable ("Voting Parity Preferred") will be entitled to
vote separately as a
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<PAGE> 5
voting group for the election, as herein provided, of two additional members of
the Board of Directors of the Corporation and the holders of Common Stock,
voting separately as a class, and all other series of Parity Preferred upon
which different voting rights have been conferred and are exercisable, voting
separately as a class, and all other classes or series upon which voting rights
have been conferred and are exercisable, shall elect the remaining directors;
provided, however, that the holders of the Series S Preferred Stock and the
holders of any Voting Parity Preferred shall exercise such special voting rights
only at the next annual meeting of shareholders or any special meeting of
shareholders held in lieu thereof after the sixth such payment date at which
directors are elected and at which the holders of not less than one-third of the
shares of Series S Preferred Stock and any Voting Parity Preferred, then
outstanding, are present in person or by proxy; and provided further that the
special class voting rights provided for in this subparagraph (a) shall remain
vested in the holders of Series S Preferred Stock and any Voting Parity
Preferred until all accrued and unpaid dividends on the Series S Preferred Stock
and any Voting Parity Preferred then outstanding shall have been declared and
paid, whereupon the holders of Series S Preferred Stock and any Voting Parity
Preferred shall be divested of their special voting rights in respect of
subsequent elections of directors, subject to the revesting of such special
class voting rights in the event above specified in this subparagraph (a). The
directors elected by the holders of the Series S Preferred Stock and any Voting
Parity Preferred shall not be removable by vote of directors, but shall be
removable by vote of the holders of the Series S Preferred Stock and any Voting
Parity Preferred, voting separately as a combined class, with or without cause.
In no event shall any voting or consent rights be created with respect to any
class or series of preferred stock of the Corporation which would be senior to
the voting or consent rights of the Series S Preferred Stock, or those rights as
set forth in this paragraph 5 and in paragraph 9 of this Designation.
(b) At any meeting at which the holders of shares of Series S Preferred
Stock and any Voting Parity Preferred shall be entitled to elect directors, the
holders of one-third of the Series S Preferred Stock and any Voting Parity
Preferred, present in person or by proxy, shall be sufficient to constitute a
quorum, and the vote of holders of a plurality of such shares so present at any
such meeting at which there shall be such a quorum shall be sufficient to elect
the two members of the Board of Directors which such holders are entitled to
elect as herein provided. Nothing in this subparagraph (b) shall prevent any
change otherwise permitted in the total number of or classifications of
directors of the Corporation nor require the resignation of any director elected
other than pursuant to this subparagraph (b). Notwithstanding any classification
of the other directors of the Corporation, any directors elected by the holders
of Series S Preferred Stock and any Voting Parity Preferred shall be elected
annually for terms expiring at the next succeeding annual meeting of
shareholders, subject to earlier termination pursuant to the provisions of
subparagraph (c) below.
(c) Upon any divesting of the special class of voting rights of the
holders of the Series S Preferred Stock and any Voting Parity Preferred in
respect of elections of directors as provided in this Paragraph 5, the terms of
office of all directors then in office elected by such holders shall terminate
immediately. If the office of any director elected by such holders, voting as a
class, becomes vacant by reason of death, resignation, removal from office or
otherwise, the remaining
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<PAGE> 6
director elected by such holders may elect a successor who shall hold office for
the unexpired term in respect of which such vacancy occurred.
6. Conversion Rights. The holders of the Series S Preferred Stock
shall have the following conversion rights:
(a) Right to Convert. Each share of Series S Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such Series S Preferred Stock and before any redemption date in
respect thereof, at the office of the Corporation or any transfer agent for the
Series S Preferred Stock or Common Stock, into fully paid and nonassessable
shares of Common Stock, at the Conversion Price (as hereafter defined) therefor
in effect at the time of conversion determined as provided herein.
(b) Conversion Price. Each share of Series S Preferred Stock shall be
convertible into (i) the number of shares of Common Stock that results from
dividing $20.00 by the Conversion Price, as hereinafter defined, plus (ii) the
right to receive cash payment from the Corporation of $3.125 (the "Conversion
Cash Payment"). The Conversion Price as of the original date of issuance of the
Series S Preferred Stock shall be $19.20 per Share of Common Stock subject to
adjustment from time to time as provided herein. Holders of shares of Series S
Preferred Stock surrendered for conversion or redemption after the record date
for a dividend payment and prior to the next succeeding dividend payment date
shall be entitled to the dividend falling due on that next succeeding dividend
payment date notwithstanding such conversion or redemption.
(c) Mechanics of Conversion. Any holder of Series S Preferred Stock
shall be entitled to convert the same into Common Stock by surrendering the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series S Preferred Stock or Common
Stock on a date prior to the close of business on the day before the the date
fixed for redemption of such shares of Series S Preferred Stock called for
redemption (the "Conversion Date"), and shall give prior written notice by mail,
postage prepaid, to the Corporation at such office, that such holder elects to
convert the same and shall state therein the number of shares of Series S
Preferred Stock being converted and the name or names in which the certificate
or certificates for Common Stock are to be issued. Upon the Corporations's
receipt of notice of conversion and the holder's surrender of the certificate or
certificates on the Conversion Date, the Corporation shall promptly issue and
deliver at such office to such holder of Series S Preferred Stock or to the
nominee or nominees of such holder a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled together with
the Corporation's check in the amount of the aggregate Conversion Cash Payment
due. Such Conversion shall be deemed to have been made immediately prior to the
close of business on the Conversion Date of the Series S Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock on such date.
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<PAGE> 7
(d) Adjustments for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the original issue date
of the Series S Preferred Stock effect a subdivision or combination of any
outstanding Common Stock, including a dividend payable in Common Stock, the
Conversion Price then in effect immediately before such subdivision or
combination shall be proportionately adjusted by multiplying the then effective
Conversion Price by a fraction, (i) the numerator of which shall be the number
of shares of Common Stock issued and outstanding immediately prior to such
subdivision or combination, and (ii) the denominator of which shall be the
number of shares of Common Stock issued and outstanding immediately after such
subdivision or combination. The number of shares of Common Stock outstanding at
any time shall, for the purposes of this Designation, include the number of
shares of Common Stock into which any convertible securities of the Company,
including the Series S Preferred Stock, may be converted, or for which any
warrant, option or rights of the Corporation may be exercised or exchanged. Any
adjustment under this Designation shall become effective at the close of
business on the date the subdivision or combination becomes effective. Advance
notice of events which would give rise to an adjustment in the conversion rate
shall be given to holders of the Series S Preferred Stock, but failure to give
such notice shall not affect the validity or effectiveness of such event. No
adjustment of the conversion price shall be made for the issuance of shares of
Common Stock to employees pursuant to the Company's or any subsidiary's stock
ownership, stock option or other benefit plan. No adjustment of the conversion
rate will be required to be made in any case until cumulative adjustments amount
to one percent or more of the conversion price. The Corporation reserves the
right to make such changes in the conversion rate in addition to those required
in the foregoing provisions as the Corporation in its discretion shall determine
to be advisable in order that certain stock-related distributions hereafter made
by the Corporation to its shareholders shall not be taxable. There shall be no
adjustment in the amount of the Conversion Cash Payment except in connection
with a split-up, combination, reverse split or other event involving the
outstanding shares of Series S Preferred Stock which would result in a change in
the amount of the liquidation preference per share of Series S Preferred Stock
set forth in Section 3(a)(i) above, in which event the amount of the per share
Conversion Cash Payment would be adjusted proportionately to the adjustment in
such liquidation preference amount.
(e) Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time after the original issue date
of the Series S Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in (i) evidences of indebtedness of the Corporation,
(ii) assets of the Corporation (other than cash dividends or distributions paid
out of retained earnings), or (iii) securities of the Corporation other than
Common Stock, then and in each such event provision shall be made so that the
holders of Series S Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of such evidences, assets or securities that they would have received had
they held, on such record date, the maximum number of shares of Common Stock
into which their Series S Preferred Stock could then have been converted. The
Corporation reserves the right to make such changes in the conversion rate in
addition to those required in the foregoing provisions as the Corporation in its
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<PAGE> 8
discretion shall determine to be advisable in order that certain stock-related
distributions hereafter made by the Corporation to its shareholders shall not be
taxable.
(f) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Series S Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Paragraph 6), then and in each such event the holders of
Series S Preferred Stock shall have the right thereafter to convert each such
share into the kind and amounts of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the maximum number of shares of Common Stock into which such
Series S Preferred Stock could have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(g) Reorganization, Mergers, Consolidations or Sales of Assets or
Capital Stock. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for in this Paragraph 6) or a
merger or consolidation of the Corporation with or into another corporation, or
the sale of all or substantially all the Corporation's properties and assets or
capital stock to any other person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that each holder of
the Series S Preferred Stock shall thereafter be entitled to receive, upon
conversion of the Series S Preferred Stock, the number of shares of stock or
other securities or property of the Corporation, or of the successor corporation
resulting from such merger of consolidation or sale as though conversion of the
Series S Preferred Stock had occurred immediately prior to such event, provided
such holder (x) is not the entity with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be, or an affiliate of such an entity and
(y) failed to exercise its rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Paragraph 6 with respect to the
rights of the holders of the Series S Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions of this Paragraph 6
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series S Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(h) Issue of Rights or Warrants to Subscribe for Common Stock at Less
Than Market Value. In the event the Corporation at any time or from time to time
after the original issue date of the Series S Preferred Stock shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, rights or warrants to subscribe for shares of Common Stock
at a price less than the then current market price for the Common Stock (the
"Subscription Price"), then, and in each such instance, the Conversion Price
shall be reduced as of the opening of business on the date of such issue of
rights or warrants to a price equal to the Subscription Price.
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<PAGE> 9
(i) No Sinking Fund. The Series S Preferred Stock shall not be subject
to any sinking fund for the purchase or redemption of shares.
(j) Accountant's Certificate of Adjustment. In each case of an
adjustment or readjustment of a conversion price for Common Stock issuable upon
conversion of Series S Preferred Stock, the Corporation, at its expense, shall
cause independent certified public accountants of recognized standing selected
by the Corporation (who shall be the independent certified public accountants
then reviewing or auditing the books of the Corporation) to compute such
adjustment or readjustment in accordance herewith and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first-class mail, postage prepaid, to each registered holder of that Series S
Preferred Stock, at the holder's address as shown in the Corporation's books.
The certificate shall set forth such adjustment or readjustment and show in
detail the facts upon which such adjustment or readjustment is based.
(k) Fractional Shares. No fractional share of Common Stock shall be
issued upon conversion of Series S Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to the product of such fraction multiplied by the fair market
value of one share of Common Stock on the date of conversion, as reasonably
determined in good faith by the Board of Directors.
(l) Reservation of Shares Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series S Preferred Stock.
As a condition precedent to the taking of any action which would cause an
adjustment to the conversion price for Series S Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to authorize such number of shares of Common Stock as shall be
issuable pursuant to such adjusted conversion price.
(m) Payment of Taxes. The Corporation will pay all transfer taxes and
other similar governmental charges (but not taxes measured by the revenue or
income of the holders of the Series S Preferred Stock) that may be imposed in
respect of the issue or delivery of Common Stock upon conversion of Series S
Preferred Stock.
7. Restrictions on Ownership and Transfer; Redemption of Excess Stock.
(a) Definitions. For the purposes of Sections 7 and 8 of this
Designation, the following terms shall have the following meanings:
(i) "Beneficial Ownership" shall mean ownership of Series S
Preferred Stock by a Person who is or would be treated as an owner of such
Series S Preferred Stock either directly or constructively through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially
Owned" shall have the correlative meanings.
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<PAGE> 10
(ii) "Beneficiary" shall mean the beneficiary of the Trust as
determined pursuant to Paragraph 8 of this Designation.
(iii) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(iv) "Constructive Ownership" shall mean ownership of Series
S Preferred Stock by a Person who is or would be treated as an owner of such
Series S Preferred Stock either directly or constructively through the
application of Section 318 of the Code, as modified by Section 856(d)(5) of the
Code. The terms "Constructive Owner," "Constructively Owns" and "Constructively
Owned" shall have the correlative meanings.
(v) "Excess Stock" shall mean those shares of Series S
Preferred Stock Constructively Owned by a Person in excess of the Ownership
Limit.
(vi) "Initial Offering" shall mean the issuance of Series S
Preferred Stock pursuant to the merger of Signature Inns, Inc. with and into the
Corporation pursuant to that certain Agreement and Plan of Merger dated as of
January 27, 1999, as more fully described in that certain joint proxy
statement/prospectus of the Corporation and Signature Inns dated as of
___________, 1999 and which is Part I of the effective registration statement on
Form S-4 covering such Series S Preferred Stock filed under the Securities Act
of 1933, as amended.
(vii) "Market Price" shall mean the value per share equal to
the average of the closing price of a share of Series S Preferred Stock as
reported by Nasdaq (or, if the Series S Preferred Stock is then reported on a
stock exchange, the closing price as reported on such exchange) for the 10
calendar days preceding the relevant date, or if the Series S Preferred Stock is
not then traded over any exchange or quotation system, then the market price of
the Series S Preferred Stock on the relevant date as determined in good faith by
the Board of Directors of the Corporation.
(viii) "Ownership Limit" shall mean the lesser of: (i) with
respect to Thomas W. Kitchin, not more than 20.75%, with respect to American
Real Estate Investment Company, Ltd., not more than 9.0%, and with respect to
any other Person, not more than 6.75%, of the outstanding Series S Preferred
Stock (in value or in number of shares, whichever is more restrictive), or (ii)
with respect to any Person (including those named in (i) above) who owns,
directly or constructively (through the application of Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code), 9.9% or more of a Person
(in the case of a corporation, of the total combined total combined voting power
of all classes of stock entitled to vote or the total number of shares of all
classes of stock of such corporation and, in the case of any Person which is not
a corporation, of the assets or net profits of such person), from which the
Corporation derives gross income, not more than 9.9% of the total combined
voting power of all classes of stock entitled to vote or of the number of shares
of all classes of stock of the Corporation (the "Related Party Limit").
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<PAGE> 11
(ix) "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock corporation or other entity, and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Exchange Act; but does not
include an underwriter which participates in a public offering of the Series S
Preferred Stock, provided that the ownership of Series S Preferred Stock by such
underwriter would not result in the Corporation's being "closely held" within
the meaning of Section 856(h) of the Code, or would otherwise result in the
Corporation's failing to qualify as a REIT.
(x) "Purported Beneficial Transferee" shall mean, with
respect to any purported Transfer which results in Excess Stock, the purported
beneficial transferee or owner for whom the Purported Record Transferee would
have acquired or owned shares of Series S Preferred Stock, if such Transfer had
been valid under subparagraph (b) of this Paragraph 7.
(xi) "Purported Record Transferee" shall mean, with respect
to any purported Transfer which results in Excess Stock, the record holder of
the Series S Preferred Stock if such Transfer had been valid under subparagraph
(b) of this Paragraph 7.
(xii) "REIT" shall mean a Real Estate Investment Trust under
Section 856 of the Code.
(xiii) "Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Series S Preferred Stock, including
(i) the granting of any option or entering into any agreement for the sale,
transfer or other disposition of Series S Preferred Stock, or (ii) the sale,
transfer, assignment or other disposition of any securities (or rights
convertible into or exchangeable for Series S Preferred Stock), whether
voluntary or involuntary, whether of record or beneficially or Beneficially or
Constructively (including but not limited to transfers of interests in other
entities which results in changes in Beneficial or Constructive Ownership of
Series S Preferred Stock), and whether by operation of law or otherwise.
(xiv) "Trust" shall mean the trust created pursuant to
subparagraph (a) of Paragraph 8 of this Designation.
(xv) "Trustee" shall mean the Corporation as Trustee for the
Trust, and any successor trustee appointed by the Corporation.
(b) Restriction on Ownership and Transfer.
(i) Except as provided in subparagraph (i) of this
Paragraph 7, from and after the date of the Initial Offering, no Person shall
Beneficially Own or Constructively Own Series S Preferred Stock in excess of the
Ownership Limit.
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<PAGE> 12
(ii) Except as provided in subparagraph (i) of this Paragraph
7, from the date of the Initial Offering, any Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq), that, if
effective, would result in any Person Beneficially Owning Series S Preferred
Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of such Series S Preferred Stock which would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such Series S Preferred Stock.
(iii) Except as provided in subparagraph (i) of this Paragraph
7, from and after the date of the Initial Offering, any Transfer (whether or not
such Transfer is the result of a transaction entered into through Nasdaq) that,
if effective, would result in any Person Constructively Owning Series S
Preferred Stock in excess of the Ownership Limit shall be void ab initio as to
the Transfer of such Series S Preferred Stock which would be otherwise
Constructively Owned by such Person in excess of the Ownership Limit; and the
intended transferee shall acquire no rights in such Series S Preferred Stock.
(iv) Except as provided in subparagraph (i) of this Paragraph
7, from and after the date of the Initial Offering, any Transfer (whether or not
such Transfer is the result of a transaction entered into through Nasdaq) that,
if effective, would result in the Series S Preferred Stock being beneficially
owned by less than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of such Series S
Preferred Stock which would be otherwise beneficially owned by the transferee;
and the intended transferee shall acquire no rights in such Series S Preferred
Stock.
(v) Notwithstanding any other provisions contained in this
Designation, from and after the date of the Initial Offering, any Transfer
(whether or not such Transfer is the result of a transaction entered into
through Nasdaq) or other event that, if effective, would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation failing to qualify as a REIT
(including, but not limited to, a Transfer or other event that would result in
the Corporation owning (directly or Constructively) an interest in a tenant that
is described in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation from such tenant would cause the Corporation to fail to satisfy any
of the gross income requirements of Section 856(c) of the Code), shall be void
ab initio as to the Transfer of the Series S Preferred Stock or other event
which would cause the Corporation to be "closely held" within the meaning of
Section 856(h) of the Code or would otherwise result in the Corporation failing
to qualify as a REIT; and the intended transferee or owner or Constructive or
Beneficial Owner shall acquire or retain no rights in such Series S Preferred
Stock.
(c) Series S Preferred Stock Deemed Excess Stock. If,
notwithstanding the other provisions contained in this Designation, at any time
after the date of the Initial Offering, there is a purported Transfer (whether
or not such Transfer is the result of a transaction entered into through
Nasdaq), change in the capital structure of the Corporation or other event such
that one or more of the restrictions on ownership and transfers described in
subparagraph (b) of this Paragraph 7 has
12
<PAGE> 13
been violated, then the Series S Preferred Stock being Transferred (or in the
case of an event other than a Transfer, the Series S Preferred Stock owned or
Constructively Owned or Beneficially Owned) which would cause one or more of the
restrictions on ownership or transfer to be violated (rounded up to the nearest
whole share) shall be deemed Excess Stock effective as of the closed of business
on the business day prior to the date of such Transfer or other event.
(d) Remedies For Breach. If the Board of Directors or its designees
shall at any time determine in good faith that a Transfer or other event has
taken place in violation of subparagraph (b) of this Paragraph 7 or that a
Person intends to acquire, has attempted to acquire or may acquire direct
ownership, beneficial ownership (determined without reference to any rules of
attribution), Beneficial Ownership or Constructive Ownership of any shares of
the Corporation in violation of subparagraph (b) of this Paragraph 7, the Board
of Directors or its designees shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer or other event, including,
but not limited to, refusing to give effect to such Transfer or other event on
the books of the Corporation or instituting proceedings to enjoin such Transfer
or other event.
(e) Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire Series S Preferred Stock or other securities in violation of
subparagraph (b) of this Paragraph 7, shall immediately give written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer or other event on the Corporation's
status as a REIT.
(f) Owners Required To Provide Information. From and after the date of
the Initial Offering, each Person who is a Beneficial Owner or Constructive
Owner of more than 5% of Series S Preferred Stock must file an affidavit with
the Corporation within 30 days after January 1st of each year containing
information that the Corporation may require, in order to determine the
Corporation's status as a REIT. From and after the date of the Initial Offering,
each Person who is a beneficial owner or Beneficial Owner or Constructive Owner
of any Series S Preferred Stock and each Person (including the stockholder of
record) who is holding Series S Preferred Stock for a Beneficial Owner or
Constructive Owner shall provide to the Corporation such information that the
Corporation may request, in good faith, in order to determine the Corporation's
status as a REIT.
(g) Remedies Not Limited. Nothing contained in this Designation (but
subject to subparagraph (f) of Paragraph 8 hereof) shall limit the authority of
the Board of Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of Paragraph 7, including any definition contained in
subparagraph (a) of this Paragraph 7, the Board of Directors shall have the
power to determine the application of the provisions of this Paragraph 7 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of subparagraph (f) of Paragraph 8 of this Designation).
13
<PAGE> 14
(i) Exceptions.
(i) Subject to subparagraph (b)(v) of this Paragraph 7, the
Board of Directors, in its sole and absolute discretion, may exempt a Person
from the Ownership Limit if such Person is not an individual for purposes of
Section 542(a)(2) of the Code and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial Ownership of such Series S Preferred
Stock will violate the Ownership Limit and such Person agrees that any violation
of such representations or undertaking (or other action which is contrary to the
restrictions contained in this Paragraph 7) or attempted violation will result
in Excess Stock in accordance with subparagraph (c) of this Paragraph 7.
(ii) Subject to subparagraph (b)(v) of this Paragraph 7, the
Board of Directors, in its sole and absolute discretion, may exempt a Person
from the limitation on a Person Constructively Owning Series S Preferred Stock
in excess of the Ownership Limit, if such Person does not and represents that it
will not own, directly or constructively (through the application of Section
318(a) of the Code, as modified by Section 856(d)(5) of the Code), more than a
9.9% interest (within the meaning of Section 856(d)(2)(B)) in a Person from whom
the Corporation derives gross income and the Board of Directors obtains such
representations and undertakings from such Person as reasonably necessary to
ascertain this fact and such Person agrees that any violation or attempted
violation will result in such Series S Preferred Stock in excess of the
Ownership Limit being deemed Excess Stock in accordance with subparagraph (c) of
this Paragraph 7.
(iii) Prior to granting any exception pursuant to subparagraph
(i)(A) or (i)(B) of this Paragraph 7, the Board of Directors may require a
ruling from the Internal Revenue Service, or an opinion of counsel, in either
case in form and substance satisfactory to the Board of Directors in its sole
discretion as it may deem necessary or advisable in order to determine or ensure
the Corporation's status as a REIT; provided, however, that obtaining a
favorable ruling or opinion shall not be required for the Board of Directors to
grant an exception hereunder.
(j) Legend. Each certificate representing one or more shares of
Series S Preferred Stock shall bear the following legend:
"The Corporation is authorized to issue two classes of capital
stock which are designated as Common Stock and Preferred Stock. The Board of
Directors is authorized, without action by the Corporation's stockholders, to
determine the preferences, limitations and relative rights of the Preferred
Stock before the issuance of any Preferred Stock. The Corporation will furnish,
without charge, to any stockholder making a written request therefor, a copy of
the Corporation's articles of incorporation and a written statement of the
designations, relative rights, preferences and limitations applicable to each
class of stock. Requests for such written statement may be directed to Jameson
Inns, Inc., 8 Perimeter Center East, Suite 8050, Atlanta, Georgia 30346-1603.
The shares of $1.70 Cumulative Convertible Preferred Stock,
Series S ("Series S Preferred Stock") represented by this certificate are
subject to restrictions on ownership and transfer
14
<PAGE> 15
for the purpose of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended. No Person
(other than Thomas W. Kitchin, his heirs, legatees and the personal
representative of his estate, as such, and American Real Estate Investment
Company, Ltd.) may own, Beneficially Own or Constructively Own Series S
Preferred Stock in excess of 6.75% (in value or in number of shares, whichever
is more restrictive) of the outstanding Series S Preferred Stock of the
Corporation, with certain further restrictions and exceptions set forth in the
Corporation's articles of incorporation. Any Person who attempts to own,
Beneficially Own or Constructively Own Series S Preferred Stock in excess of the
above limitations must immediately notify the Corporation. All capitalized terms
in this legend have the meanings defined in the Corporation's articles of
incorporation. Transfers in violation of the restrictions described above may be
void ab initio.
In addition, upon the occurrence of certain events, if the
restrictions on ownership are violated, the Series S Preferred Stock represented
hereby may be redeemed or held in trust by the Corporation. The Corporation has
an option to acquire Excess Stock under certain circumstances. The Corporation
will furnish to the holder hereof upon request and without charge a complete
written statement of the terms and conditions of the Excess Stock. Requests for
such statement may be directed to Jameson Inns, Inc., 8 Perimeter Center East,
Suite 8050, Atlanta, Georgia 30346-1603.
Capitalized terms used herein shall, where the context
permits, have the same meaning assigned to such terms as are assigned in the
Corporation's articles of incorporation."
(k) Separability. If any provision of Paragraph 7 or 8 of this
Designation or any application of any such provision is determined to be invalid
by any federal or state court having jurisdiction, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
8. Excess Stock.
(a) Ownership In Trust. Upon any purported Transfer (whether or
not such Transfer is the result of a transaction entered into through Nasdaq)
that results in Excess Stock pursuant to subparagraph (c) of Paragraph 7 of this
Designation, such Excess Stock shall be deemed to have been transferred to the
Corporation, as Trustee of a Trust for the exclusive benefit of such Beneficiary
or Beneficiaries to whom an interest in such Excess Stock may later be
transferred pursuant to subparagraph (d) of this Paragraph 8. The Purported
Record Transferee shall have no rights in such Excess Stock except the right to
designate a transferee of such Excess Stock upon the terms specified in
subparagraph (d) of this Paragraph 8. The Purported Beneficial Transferee shall
have no rights in such Excess Stock except as provided in subparagraph (d) of
this Paragraph 8.
(b) Dividend Rights. Excess Stock shall not be entitled to any
dividends. Any dividend or distribution paid prior to the discovery by the
Corporation that shares of Series S Preferred Stock have been converted into
Excess Stock shall be repaid to the Corporation upon demand.
15
<PAGE> 16
(c) Rights Upon Liquidation. Subject to the preferential rights of
the Preferred Stock, if any, as may be determined by the Board of Directors of
the Corporation in accordance with the articles of incorporation of the
Corporation, as amended, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, each holder of Excess Stock shall be entitled to receive,
ratably with each other holder of Series S Preferred Stock, that portion of the
assets of the Corporation available for distribution to its stockholders as the
number shares of Excess Stock held by such holder bears to the total number of
shares of Series S Preferred Stock then outstanding. The Corporation, as holder
of the Excess Stock in trust, or if the Corporation shall have been dissolved,
any trustee appointed by the Corporation prior to its dissolution, shall
distribute ratably to the Beneficiaries of the Trust, when and if determined in
accordance with subparagraph (d) of this Paragraph 8, any such assets received
in respect of the Excess Stock in any liquidation, dissolution or winding up of,
or any distribution of the assets of the Corporation.
(d) Restrictions On Transfer; Designation of Beneficiary.
(i) Excess Stock shall not be transferable. Subject to the
last sentence of this clause (a), the Purported Record Transferee may freely
designate a Beneficiary of an interest in the Trust (representing the number of
shares of Excess Stock held by the Trust attributable to a purported Transfer
that resulted in Excess Stock), if (i) the Excess Stock held in the Trust would
not be Excess Stock in the hands of such Beneficiary and (ii) the Purported
Beneficial Transferee does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Stock that exceeds (x) the price
per share such Purported Beneficial Transferee paid for the Series S Preferred
Stock in the purported Transfer that resulted in Excess Stock, or (y) if the
Transfer or other event that resulted in Excess Stock was not a transaction in
which the Purported Beneficial Transferee gave full value for such Excess Stock,
a price per share equal to the Market Price on the date of the purported
Transfer or other event that resulted in the issuance of Excess Stock. Upon such
transfer of an interest in the Trust, the corresponding shares of Excess Stock
in the Trust shall automatically cease to be Excess Stock and such Series S
Preferred Stock shall be transferred of record to the transferee of the interest
in the Trust if such Series S Preferred Stock would not be Excess Stock in the
hands of such transferee. Prior to any transfer of any interest in the Trust,
the Purported Record Transferee must give advance notice to the Corporation of
the intended transfer and the Corporation must have waived in writing its
purchase rights under subparagraph (e) of this Paragraph 8.
(ii) Notwithstanding the foregoing, if a Purported Beneficial
Transferee receives a price for designating a Beneficiary of an interest in the
Trust that exceeds the amounts allowable under subparagraph (d)(i) of this
Paragraph 8, such Purported Beneficial Transferee shall pay, or cause such
Beneficiary to pay, such excess to the Corporation.
(e) Purchase Right in Excess Stock. Notwithstanding the provisions
of subparagraph (d) of this Paragraph 8, Excess Stock shall be deemed to have
been offered for sale to the Corporation, or its designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that resulted
in such Excess Stock (or, if the Transfer or other event that resulted in such
Excess Stock
16
<PAGE> 17
was not a transaction in which the Purported Beneficial Transferee gave full
value for such Excess Stock, a price per share equal to the Market Price on the
date of the purported Transfer or other event that resulted in Excess Stock) and
(ii) the Market Price on the date the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to accept such offer for a period of
ninety days after the later of (i) the date of the Transfer or other event which
resulted in such Excess Stock and (ii) the date the Board of Directors
determines in good faith that a Transfer or other event resulting in such Excess
Stock has occurred, if the Corporation does not receive a notice of such
Transfer or other event pursuant to subparagraph (e) of Paragraph 7 of this
Designation. The Corporation may appoint a special trustee of the trust
established under subparagraph (a) of this Paragraph 8 for the purpose of
consummating the purchase of Excess Stock by the Corporation.
(f) Settlement. Nothing in this Paragraph 7 or Paragraph 8 of
this Designation shall preclude the settlement of any transaction entered into
through Nasdaq.
9. Required Consent. The affirmative vote or consent of the
holders of two-thirds of the shares of Series S Preferred Stock and all other
series of Parity Preferred and having similar consent rights as the Series S
Preferred Stock ("Consent Parity Preferred"), at the time outstanding, voting or
consenting separately as a class, given in person or by proxy either in writing
or at a meeting called for the purpose, shall be necessary to effect any one or
more of the following:
(a) Any amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Amended and Restated
Articles of Incorporation or of the By-Laws of the Corporation which affects
adversely the preferences or voting or other rights of the holders of Series S
Preferred Stock; provided, however, that the amendment of the Amended and
Restated Articles of Incorporation or the By-Laws, as amended, so as to: (i)
authorize, create or change the authorized or outstanding number of shares of
Series S Preferred Stock, Parity Preferred, or of any shares ranking junior to
the Series S Preferred Stock, or (ii) change the number or classification of
directors shall not be deemed to affect adversely the preferences or voting or
other rights of the holders of Series S Preferred Stock;
(b) The authorization, creation or the increase in the authorized
number of any shares, or of any security convertible into shares, in either case
ranking senior to the Series S Preferred Stock; or
(c) The purchase or redemption of less than all of the Series S
Preferred Stock and all other shares ranking on a parity with the Series S
Preferred Stock upon purchase or redemption then outstanding except in
accordance with a stock purchase offer made to all holders of record of the
Series S Preferred Stock and all other shares ranking on a parity with the
Series S Preferred Stock upon purchase or redemption, unless all dividends on
the Series S Preferred Stock then outstanding for all previous Dividend Payment
Dates and for the dividend period ending on the next Dividend Payment Date shall
have been declared and paid or provision made for payments thereof.
10. General Provisions.
17
<PAGE> 18
(a) Notices. Any notice required by the provisions of this
Designation to be given to holders of record of Series S Preferred Stock shall
be deemed given when personally delivered to such holder or five business days
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
that holder of record at its address appearing on the books of the Corporation.
(b) No Impairment. The Corporation shall not amend the Amended and
Restated Articles of Incorporation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation.
(c) Status of Series S Preferred Stock Upon Redemption or
Conversion. Any share of Series S Preferred Stock which is (1) redeemed by the
Corporation, (2) converted in accordance with the express terms thereof, or (3)
otherwise acquired by the Corporation, shall resume the status of authorized but
unissued Preferred Stock without designation.
III
The amendment set forth in Section II of these Articles of Amendment
was duly adopted by the affirmative vote of a majority of the members of the
Board of Directors of the Corporation on _____________, 1999. Pursuant to
Section 14-2-602 of the Georgia Business Corporation Code, the shareholders of
the Corporation were not required to take any action in connection herewith.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its duly authorized officer on the _____ day of
___________, 1999.
JAMESON INNS, INC.
By:
---------------------------------
Steven A. Curlee, Secretary and
Vice President - Legal
18
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
For Immediate Release
Contact: Craig R. Kitchin
Jameson Inns, Inc.
(770) 901-9020
John D. Bontreger
Signature Inns, Inc.
(317) 581-1111
JAMESON INNS, INC. AND SIGNATURE INNS, INC. ANNOUNCE MERGER
ATLANTA, GA & INDIANAPOLIS, IN (January 27,1999) - Jameson Inns, Inc.
(NASDAQ/NNM-JAMS and JAMSP) and Signature Inns, Inc. (NASDAQ/NNM-SGNS and
SGNSP) jointly announced today that they have entered into a definitive
agreement to merge the companies in a stock transaction which will create a
hotel real estate investment trust (REIT) with approximately $250 million in
assets and two hotel brands representing 107 operating hotels and 19 hotel sites
under development in 14 states in the southeastern and midwestern United States.
Under the terms of the agreement which was approved unanimously by the Boards of
Directors of both companies, Jameson will be the surviving company. The holders
of the outstanding Signature common stock will receive one-half share of Jameson
common stock and a cash payment of $1.50 in exchange for each share of Signature
common stock. The amount of the cash payment will be reduced if a dividend is
declared and paid to the holders of the Signature common stock prior to the
consummation of the merger. Such a dividend distribution may be required to
distribute all earnings and profits, as defined under federal tax law, of
Signature prior to the merger to protect the REIT status of Jameson. Holders of
the outstanding shares of Signature $1.70 Cumulative Convertible Preferred
Stock, Series A, will receive an equal number of shares of a new series of
Jameson cumulative convertible preferred stock having substantially the same
terms as the Signature Series A preferred, including an annual preferred
dividend right of $1.70 per share and a liquidation preference of $20.00 per
share. Upon conversion of each share of the new Jameson preferred stock (at any
time in the future), holders will be entitled to receive 1.04 shares of Jameson
common stock and a cash payment of $3.125.
The acquisition is expected to be accretive to Jameson Inns' funds
from operations for 1999. At closing, Mr. John D. Bontreger will be named
President of the Signature Inns division; Craig Kitchin will remain president
and CFO, and Thomas W. Kitchin will continue as chairman and CEO of the combined
company.
-MORE-
<PAGE> 2
PAGE 2 - MERGER
Consummation of the merger is subject to a number of conditions,
including the continued accuracy of the representations and warranties of the
parties in the merger agreement, no withdrawal of the fairness opinions rendered
to the respective boards of directors and approval by the holders of the
outstanding Signature common stock and preferred stock and the holders of the
outstanding Jameson common stock.
It is anticipated that special meetings of the stockholders of the
companies will be held in April or May of this year, and the closing will occur
promptly afterwards if the transaction receives the requisite stockholder
approval. Complete details of the terms of the merger will be contained in a
joint definitive proxy statement/prospectus which will be provided to the
stockholders of both companies and which will be part of a registration
statement filed with the Securities and Exchange Commission.
Both companies own limited service hotels which cater primarily to the
business traveler. Jameson Inns are located in the southeast while Signature
Inns are in six midwestern states. Thomas W. Kitchin, Chairman of the Board of
Jameson Inns, Inc., stated, "We believe this is an exceptional opportunity to
acquire a high-quality portfolio of hotel properties in excellent locations and
to expand our presence into the midwest. We further believe this transaction
provides compelling financial and strategic benefits to our shareholders
increasing our capitalization by over $100 million and the number of rooms owned
by 80%. The combination of the two companies blends management teams that have
the same philosophy toward building hotel brands. Our plan is to grow both
brands which operate at different price points. Jameson and Signature have
employed the same strategy of not franchising their brands in order to bring
consistency and predictability to the traveling public. The geographic spread of
properties for the company provides diversification beyond the southeast for
Jameson into the midwest. The merger increases the eight states where Jameson
currently has locations to 14 states after the merger. The combined company
expects to have approximately 8,000 hotel rooms in operation by the end of
1999." Kitchin went on to say, "The combined talent of both companies will
result in a very strong management team."
"The combination of the two organizations represents the culmination
of our efforts to explore strategic alternatives with a goal of maximizing
shareholder value. We believe this merger transaction with Jameson best
accomplishes this objective," stated John D. Bontreger, president and chairman
of the board of Signature Inns, Inc. "We believe the REIT structure will be more
efficient for the ownership of our hotels and provide our shareholders an
increase in stock value along with ongoing dividends. The Signature Inn chain
has gained significant public acceptance in the midwest through our commitment
to high quality service to our guests. This transaction will provide greater
opportunity to grow the Signature brand. The Signature divisional office will
remain in Indianapolis and our employees will remain intact. The similar
cultures and philosophies make this a great fit for us and our employees and the
management team looks forward to being a part of the Jameson organization,"
Bontreger continued.
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<PAGE> 3
Page 3 - MERGER
Jameson, based in Atlanta, Georgia, is a real estate investment trust
which owns 82 operating Jameson Inns located in the states of Georgia, Alabama,
Mississippi, North Carolina, South Carolina and Tennessee (representing
approximately 3,800 available rooms) and has 20 additional Inns currently under
development, including sites in Florida and Virginia. All of its Inns are leased
to and operated by Jameson Hospitality, LLC which has approximately 1,900
employees.
Signature owns 25 Signature Inns located in the states of Indiana,
Illinois, Iowa, Ohio, Kentucky and Tennessee (representing approximately 3,000
available rooms) and has a total of 750 employees. It is anticipated that these
properties will continue to be operated under the Signature Inns name as a
separate division of Jameson.
Statements in this press release which are not strictly historical are
"forward-looking" and are subject to the many risks and uncertainties which
affect the Company's business. These uncertainties, which include competition
within the lodging industry, the balance between supply and demand for hotel
rooms, the Company's ability to execute new hotel construction or acquisition
programs, the effect of economic conditions, and the availability of capital to
finance planned growth, are detailed from time to time in the Company's filings
with the Securities and Exchange Commission.
The Company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
-MORE-
<PAGE> 4
Combined Number of Jameson and Signature Inn Locations Operating and Under
Development:
<TABLE>
<CAPTION>
State Locations Open Locations Under Dev. Rooms Under Dev.
- ----- -------------- -------------------- ----------------
<S> <C> <C> <C>
Alabama 18
Georgia 32 3 192
Mississippi 1 5 336
North Carolina 13
South Carolina 13
Tennessee 6 5 308
Florida 0 4 260
Virginia 0 2 124
Illinois 3
Indiana 13
Kentucky 3
Ohio 4
Iowa 1
TOTALS 107 19 1,220
- ------ --- -- -----
</TABLE>
TOTAL NUMBER OF ROOMS CURRENTLY AVAILABLE: 6,929
TOTAL ROOMS AVAILABLE AFTER DEVELOPMENT COMPLETION: 8,149
<TABLE>
<CAPTION>
Jameson Inns Signature Inns Combined
------------ -------------- --------
<S> <C> <C> <C>
Owned Hotels
In operation 82 25 107
Under development 19 -- 19
Guestrooms in operation 3870 3059 6929
YTD through Sept. 30, 1998:
Occupancy 64.5% 64.2%
ADR $ 49.94 $ 60.39
REVPAR $ 32.28 $ 38.75
As of Sept. 30, 1998:
Book Equity Capitalization: $101,000,000 $ 51,000,000 $152,000,000
Net Debt $ 36,000,000 $ 61,000,000 $ 97,000,000
Total Capitalization $137,000,000 $112,000,000 249,000,000
Net Debt to Capital Ratio 26% 55% 39%
</TABLE>
###
