JAMESON INNS, INC.
8 Perimeter Center East, Suite 8050
Atlanta, Georgia 30346-1603
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 27, 1998
To the Stockholders of
JAMESON INNS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Jameson Inns, Inc., a Georgia corporation (the Company), will
be held at Corporate Sports Unlimited Farm, on Hurricane Shoals
Road, Lawrenceville, Georgia 30243, on Saturday, June 27, 1998, at
11:00 a.m., local time, for the following purposes:
1. To elect one director to Class II for a three year term;
2. To consider and act upon a proposal to ratify the
appointment of Ernst & Young LLP as independent auditors
of the Company for 1998; and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
April 30, 1998, as the record date for the meeting, and only
holders of record of Common Stock at such time will be entitled to
vote at the meeting or any adjournment thereof. A complete list of
the stockholders entitled to vote at the meeting will be open to
the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours for a period of ten days
prior to the date of the meeting at the offices of the Company and
at the time and place of the meeting.
Order of the Board of
Directors,
Steven A. Curlee
Secretary
Atlanta, Georgia
May 12, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE
IN PERSON.
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Jameson Inns, Inc.
8 Perimeter Center East, Suite 8050
Atlanta, Georgia 30346-1603
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 27, 1998
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Jameson Inns, Inc., a
Georgia corporation (the Company), of proxies to be voted at the
Annual Meeting of Stockholders of the Company to be held on June
27, 1998, or at any adjournment thereof (the Annual Meeting), for
the purposes set forth in the accompanying Notice of Annual
Meeting. This Proxy Statement and accompanying proxy were first
forwarded on or about May 12, 1998, to stockholders of record on
April 30, 1998.
If the accompanying proxy is properly executed and returned,
the shares represented by the proxy will be voted at the Annual
Meeting. If a stockholder indicates in his or her proxy a choice
with respect to any matter to be acted upon, that stockholder's
shares will be voted in accordance with such choice. If no choice
is indicated, such shares will be voted FOR (1) the election of
one nominee for director named below and (2) ratification of the
appointment of the independent auditor. A stockholder giving a
proxy may revoke it by giving written notice of revocation to the
Secretary of the Company at any time before it is voted, by
executing another valid proxy bearing a later date and delivering
such proxy to the Secretary of the Company prior to or at the
Annual Meeting, or by attending the Annual Meeting and voting in
person.
The expenses of this proxy solicitation, including the cost of
preparing and mailing this Proxy Statement and accompanying proxy
will be borne by the Company. Such expenses will also include the
charges and expenses of banks, brokerage firms, and other
custodians, nominees or fiduciaries for forwarding solicitation
material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. Solicitation of proxies may be made by
mail, telephone, personal interviews or by other means by the Board
of Directors or employees of the Company who will not be
additionally compensated therefor, but who may be reimbursed for
their out-of-pocket expenses in connection therewith.
STOCKHOLDERS ENTITLED TO VOTE
Holders of record of the Common Stock, par value $.10 per
share (the Common Stock) of the Company, at the close of business
on April 30, 1998 (the Record Date), will be entitled to vote at
the Annual Meeting. As of the Record Date, there were issued and
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outstanding 9,831,672 shares of Common Stock. Each share of Common
Stock is entitled to one vote. There is no cumulative voting with
respect to the election of directors. The presence in person or by
proxy of the holders of issued and outstanding shares having a
majority of the votes entitled to vote at the Annual Meeting will
constitute a quorum for the transaction of business. Votes
withheld from the nominee for director, abstentions and broker non-
votes will be counted for purposes of determining whether a quorum
has been reached. Under the law of Georgia, the Company's state of
incorporation, directors are elected by a plurality of votes cast.
As provided in the Company's bylaws, each of the other proposals
before the stockholders will be approved if the number of votes
cast at the Annual Meeting for the action exceeds the number of
votes cast opposing the action. With regard to the election of a
director, votes may be cast in favor of or withheld from the
nominee; votes that are withheld will be excluded entirely from the
vote and will have no effect. Based on the Company's understanding
of Georgia state law requirements, abstentions, broker non-votes
and withheld votes will not be considered votes cast. Broker non-
votes will have no effect on the outcome of the election of a
director or other proposals. Votes will be tabulated by an
inspector of elections appointed by the Board of Directors of the
Company.
PROPOSAL ONE
ELECTION OF DIRECTOR
The Amended and Restated Articles of Incorporation (the
Articles) of the Company provide that the Board of Directors of
the Company (the Board of Directors) shall consist of not less
than two nor more than 15 directors, as determined from time to
time by resolution of the Board of Directors. The number of
directors is currently fixed at four. The Board of Directors is
divided into three classes. The terms of such classes are
staggered so that, except with respect to directors appointed to
fill vacancies created by an increase in the number of directors,
only one class is elected at the annual meeting of stockholders
each year for a three-year term. The term of the Class II
directors, currently consisting of Mr. Michael E. Lawrence, will
expire at the Annual Meeting. The accompanying proxy solicits your
vote for one Class II director. The term of the Class II director
elected at the 1998 annual meeting will expire at the annual
meeting of stockholders to be held in 2001.
The Board of Directors has nominated Mr. Michael E. Lawrence
for re-election as a Class II director. The persons named as
proxies in the accompanying proxy, who have been designated by the
Board of Directors, intend to vote, unless otherwise instructed in
such proxy, for the election of Mr. Lawrence. Should Mr. Lawrence
become unable for any reason to stand for election as a director of
the Company, it is intended that the persons named in such proxy
will vote for the election of such other person as the Board of
Directors may recommend. The Company knows of no reason why Mr.
Lawrence will be unavailable or unable to serve.
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The Board of Directors recommends a vote FOR the following
nominee for director.
Nominees for Director
Class II
(Term to Expire 2001)
Michael E. Lawrence, 52, became a director in April 1994.
Since March 1994, he has been a director of Sea Pines Associates,
Inc., a publicly held corporation with approximately $35 million in
annual revenues which owns and operates real estate and
recreational properties on Hilton Head Island, South Carolina. Mr.
Lawrence is president of Sea Pines Company, a subsidiary of Sea
Pines Associates, Inc., where he has served as the chief financial
officer since February 1990. Since that date he has also been vice
president and chief financial officer of Sea Pines Real Estate
Company and a director, vice president and chief financial officer
of Sea Pines Country Club, Inc., both companies being subsidiaries
of Sea Pines Associates, Inc. Prior to joining Sea Pines
Associates, Inc., Mr. Lawrence was a management consultant with
Ernst & Young from 1969 through 1989 and was a partner in that firm
from 1982 through 1989. Mr. Lawrence is a certified public
accountant with a B.S. degree from Washington & Lee University and
an M.B.A. degree from Emory University.
Directors Continuing in Office
Class I
(Term Expires 2000)
Robert D. Hisrich, Ph. D., 53, became a director in October
1993. Dr. Hisrich has held the A. Malachi Mixon III Chair in
Entrepreneurial Studies and has been a professor at the Weatherford
School of Management, Case Western Reserve University, Cleveland,
Ohio, since September 1993. From 1985 until his appointment at
Case Western Reserve University, Dr. Hisrich held the Bovaird Chair
of Entrepreneurial Studies and Private Enterprise and was a
Professor of marketing and a Director of the Enterprise Development
Center at The University of Tulsa, Tulsa, Oklahoma. In the spring
of 1992, Dr. Hisrich was a Visiting Professor of Entrepreneurship
Studies at the University of Limerick, Limerick, Ireland, and from
1990 through 1991, he was a Fulbright Professor and holder of the
Alexander Hamilton Chair in Entrepreneurship at the Foundation for
Small Enterprise Economic Development, Budapest, Hungary. In the
spring of 1989, Dr. Hisrich was a Fulbright Professor at the
International Management Center, Budapest, Hungary. In addition,
since 1974 Dr. Hisrich has been Director of H & B Associates, a
marketing and management consulting firm. He has also held a
number of other academic positions and is widely published in the
areas of marketing, management and entrepreneurship. Dr. Hisrich
has a B.A. degree in English and science from DePauw University, an
M.B.A. degree in marketing from the University of Cincinnati and a
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Ph.D. degree in business administration from the University of
Cincinnati.
Thomas J. O'Haren, 64, became a director in June 1997. Mr.
O Haren has been employed for the past 27 years in sales and
marketing for Cigna Financial Advisors, Inc., a company engaged in
the insurance business. Mr. O Haren serves that company both as a
regional vice president and as a consultant. He is active in the
insurance industry, including serving as an adjunct professor of
leadership at The American College, the degree-granting college of
the insurance industry, as a member of The American College
Leadership Institute and as chairman of the board of trustees of
the GAMA Foundation, a research foundation for the insurance
industry. Mr. O Haren has a B.S. degree in finance from
Pennsylvania State University, received his Chartered Life
Underwriter designation in 1966 and his designation as a Chartered
Financial Consultant in 1983.
Class III
(Term Expires 1999)
Thomas W. Kitchin, 55, is President, Chief Executive Officer,
a director and Chairman of the Board of Directors of the Company.
He has been an officer and director of the Company since its
incorporation in 1988. He served from 1977 until December 1986 as
the President and Chairman of the Board of a public oil and gas
company. Prior thereto, Mr. Kitchin was involved in the banking
business for 16 years. Mr. Kitchin is a Director of the American
Hotel and Motel Association, the Georgia Hospitality and Travel
Association, the Georgia State University Cecil B. Day School of
Hospitality Administration and the Association for Publicly Traded
Companies. Mr. Kitchin is the father of Craig R. Kitchin, Vice
President Finance, Chief Financial Officer and Treasurer of the
Company.
Compensation of Directors
Each director other than Mr. Kitchin receives from the Company
an annual fee of $10,000, $500 for each Board of Directors or Board
Committee meeting attended and reimbursement of expenses incurred
in attending Board or Committee meetings. Payment of the annual
fee is not contingent upon attendance at Board or Committee
meetings.
Under the Jameson Inns, Inc. Director Stock Option Plan (the
"Director Plan"), each director of the Company who is not otherwise
an employee of the Company or any of its subsidiaries or affiliates
is granted an option to purchase (Director Option) 25,000 shares
of Common Stock upon his initial election as a director of the
Company. Dr. Hisrich and Mr. Lawrence, who were elected or
appointed as directors prior to the adoption in 1995 of the
Director Plan, each received a Director Option to purchase 25,000
shares of Common Stock upon the adoption of the Director Plan in
1995 in exchange for their surrender and the cancellation of stock
-4-
options previously granted to each of them under the 1993 Jameson
Stock Incentive Plan. Director Options vest immediately at the time
of grant and have a per share exercise price equal to the fair
market value of a share of Common Stock at the close of business on
the last business day preceding the day of grant. The Director
Options granted to Dr. Hisrich and Mr. Lawrence have an exercise
price of $7.25 per share. Mr. O'Haren received a Director Option
to purchase 25,000 shares of Common Stock on June 20, 1997, at an
exercise price of $11.375.
Under the Jameson Inns, Inc. 1997 Director Stock Option Plan
(the "1997 Director Plan"), each director of the Company who is
serving as a director on the first business day following the
annual meeting of the Companys stockholders and at such annual
meeting was considered as a director of the Company who was
continuing in office or was reelected as a director and is not
otherwise an employee of the Company or any of its subsidiaries or
affiliates is granted an option to purchase (Annual Director
Option) 5,000 shares of Common Stock as of the first business day
following the annual meeting of the Companys stockholders. Dr.
Hisrich, Mr. Lawrence and Mr. O Haren, who were elected or
appointed as directors prior to the adoption in November 1997 of
the 1997 Director Plan, each received an Annual Director Option to
purchase 5,000 shares of Common Stock upon the adoption of the 1997
Director Plan. The Annual Director Options vest immediately at the
time of grant and have a per share exercise price equal to the fair
market value of a share of Common Stock at the close of business on
the last business day preceding the day of grant. The Annual
Director Options granted to Dr. Hisrich, Mr. Lawrence and Mr.
O Haren in November 1997 have an exercise price of $11.625 per
share.
Meetings and Committees of the Board of Directors
During 1997, the Board of Directors held five meetings. In
addition, the Board of Directors took action 12 times during 1997
by unanimous written consent. No director attended fewer than 75
percent of the aggregate of: (1) the total number of meetings of
the Board of Directors held during the period in which the
respective director was a director during 1997, or (2) the total
number of meetings held by all committees of the Board of Directors
on which the respective director served. The Company has a
standing Audit Committee and a Compensation Committee of the Board
of Directors.
The Audit Committee is composed of Dr. Hisrich and Mr.
Lawrence. The Audit Committee, which met one time in 1997, annually
considers the qualifications of the independent auditor of the
Company and makes recommendations to the Board of Directors on the
engagement of the independent auditor. The Audit Committee also
reviews (a) any transactions between the Company and its officers,
directors and principal stockholders, (b) the plans for and results
of audits of the Company, and (c) the results of any internal
audits, compliance with any of the Company's written policies and
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procedures and the adequacy of the Company's system of internal
accounting controls.
In 1997, the Compensation Committee was composed of Dr.
Hisrich, Mr. Lawrence and Mr. O Haren. During 1997, the
Compensation Committee met one time. The Compensation Committee
administers the Jameson 1993 Stock Incentive Plan and the Jameson
1996 Stock Incentive Plan and also reviews the determinations by
Kitchin Investments, Inc. under the Cost Reimbursement Agreement
(see "Certain Transactions Cost Reimbursement Agreement," below)
as to the percentage of time each executive officer of the Company
devoted to the Company's business during the relevant period.
The Company does not have a standing Nominating Committee.
The Company's Bylaws provide that nominations of candidates for
election as directors of the Company may be made by or at the
direction of the Board of Directors or by any stockholder entitled
to vote at the meeting at which directors are to be elected who
complies with the advance notice procedures set forth therein.
These procedures require any stockholder who intends to make a
nomination for director to deliver notice of such nomination to the
Secretary of the Company not later than the date on which
stockholder proposals must be received by the Secretary of the
Company for inclusion in the Company's proxy statement under the
rules of the Securities and Exchange Commission. The notice must
contain all information specified by the Board of Directors. If the
chairman of the meeting determines that a person is not nominated
in accordance with the nomination procedure, such nomination will
be disregarded.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
Upon the recommendation of the Audit Committee, the Board of
Directors has appointed Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998. Ernst
& Young LLP have been independent auditors of the Company since the
Companys inception in 1988. A proposal will be presented at the
Annual Meeting asking the stockholders to ratify the appointment of
Ernst & Young LLP as the Company s independent auditor. If the
stockholders do not ratify the appointment of Ernst & Young LLP,
the Board of Directors will reconsider the appointment.
This proposal will be approved if the number of votes cast for
the proposal at the Annual Meeting exceeds the number of votes cast
against the proposal. The Board of Directors recommends a vote
FOR the ratification of Ernst & Young LLP as independent auditors
for 1998.
A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting and therefore is expected to be
available to respond to appropriate questions. If a representative
of Ernst & Young LLP is present at the meeting, he or she will be
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given the opportunity to make a statement, if he or she desires to
do so, and respond to appropriate questions.
PRINCIPAL STOCKHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of April
15, 1998, regarding (a) the ownership of the Company's Common Stock
by all persons known by the Company to be beneficial owners of more
than five percent of such stock, and (b )the ownership of the
Company's Common Stock and 9.25% Series A Cumulative Preferred
Stock, par value $1.00 per share (Series A Preferred Stock), by
(i) each director and nominee for director of the Company, (ii)
each of the executive officers of the Company named in the Summary
Compensation Table below, and (iii) all executive officers and
directors of the Company as a group. Unless otherwise noted, the
persons named below have sole voting and investment power with
respect to such shares.
<TABLE>
<CAPTION>
Shares
of
Shares of Series A
Common Preferred
Name of Owner or Stock Percentage Stock Percentge
Identity of Group Beneficially of Beneficially
Class of
Owned1 Owned1 Class
<S> <C> <C>
Thomas W. Kitchin 6.5%
8 Perimeter 647,1702
Center East,
Suite 8050
Atlanta,
Georgia 30346-1603
Robert D. Hisrich 30,9003 *
Michael E. 30,5003 *
Lawrence
Thomas J. O'Haren 50,4103 *
All directors and 866,3924 8.6%
executive
officers as a
group
(7 persons)
_______
* Less than one percent (1%)
</TABLE>
1 The total number includes shares issued and outstanding as of
April 15, 1998, plus shares which the owner shown above has the
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right to acquire within 60 days after April 15, 1998. For purposes
of calculating the percent of the class outstanding held by each
owner shown above with a right to acquire additional shares, the
total number of shares excludes the shares which all other persons
have the right to acquire within 60 days after April 15, 1998,
pursuant to the exercise of outstanding stock options.
2 Includes 46,938 shares owned by Kitchin Children's Trust, the
beneficiaries of which are members of the family of Mr. Kitchin and
of which Mr. Kitchin serves as trustee, 75,000 shares issuable upon
the exercise of currently vested stock options, 37,500 shares of
restricted Common Stock and 30,000 shares owned jointly with Mr.
Kitchin's spouse.
3 Includes 30,000 shares issuable upon the exercise of currently
vested stock options.
4 Includes 239,067 shares issuable upon the exercise of currently
vested stock options and 50,625 shares of restricted Common Stock.
EXECUTIVE OFFICERS
The executive officers of the Company are:
Name Position
Thomas W. Kitchin President, Chief Executive Officer,
Director, Chairman of the Board of Directors
William D. Walker Vice President - Development
Craig R. Kitchin Vice President - Finance, Chief
Financial Officer, Treasurer
Steven A. Curlee Vice President - Legal, General
Counsel, Secretary
Set forth below is certain information concerning the
Company's executive officers except for Mr. Thomas W. Kitchin.
Information concerning Mr. Kitchin is set forth above under the
heading Proposal One, Election of Director Nominee for
Director.
William D. Walker, 45, is Vice President-Development of the
Company. He has been an officer of the Company since its inception
in 1988 and served as a director from 1988 through October 29,
1993. Prior to joining the Company, he worked in various financial
management positions for twelve years. Mr. Walker received a
B.B.A. degree in finance from Texas Tech University in 1975.
-8-
Craig R. Kitchin, 30, became Chief Financial Officer of the
Company in February 1994 and Vice President-Finance in September
1997. He joined the Company as its Controller and Treasurer on
June 15, 1992, upon receiving his M.B.A degree from the University
of Chicago with concentrations in accounting and finance. Before
attending the University of Chicago, he was a financial analyst
with FMC Corporation in Santa Clara, California, from 1989 to 1990,
where his primary responsibilities included budgeting and
forecasting overhead expenses. Mr. Kitchin graduated from Santa
Clara University with a degree in finance in 1989. Craig Kitchin
is the son of Thomas W. Kitchin, the President of the Company.
Steven A. Curlee, 46, became General Counsel and Secretary of
the Company in January 1993 and Vice President-Legal in September
1997. From April 1985 to July 1992, he was general counsel for a
public oil and gas company in Tulsa, Oklahoma primarily involved in
the formation of large public limited partnerships for the
acquisition of producing oil and gas properties for investors.
Prior thereto, he was engaged in the private practice of law in
Tulsa, Oklahoma for five years. From 1976 to 1980, Mr. Curlee
served on active duty in the U.S. Navy as a Judge Advocate. He
continues to serve in the Navy Reserves, having attained the rank
of Commander. Mr. Curlee received a B.A. degree in political
science and his J.D. from the University of Arkansas. He received
a Masters of Law in Taxation degree from Georgetown University.
Mr. Curlee is admitted to practice law in Arkansas, the District of
Columbia, Oklahoma, Texas and Georgia.
EXECUTIVE COMPENSATION
The following table sets forth certain information with
respect to the compensation of Thomas W. Kitchin, the Company's
President and Chief Executive Officer, for services in all
capacities to the Company during the fiscal years ended December
31, 1995, 1996 and 1997. No other executive officer of the Company
had an annual salary and bonus in excess of $100,000 during any
such year. No information is given as to any person for any fiscal
year during which such person was not an executive officer of the
Company.
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<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term Compensation
Annual Awards
------------
Restricted Securities
Name and Salary Stock Awards Underlying
Principal Position Year ($)1 ($) Options
<S> <C> <C> <C> <C>
Thomas W. Kitchin, Chairman 1997 80,451 75,0002
President and Chief 1996 62,598 367,9693 -
Executive Officer 1995 43,363 25,0004
- ----------
<FN>
1 Mr. Kitchin holds positions with Jameson Development Company, LLC
and Kitchin Investments, Inc. ("KI"), as well as with the Company,
and receives compensation from each such entity. The amount set
forth in the table represents an allocation to the Company by KI of
Mr. Kitchin's total compensation from all such entities (and their
predecessors) based on records of actual time spent by Mr. Kitchin
related to the Company. Compensation which Mr. Kitchin receives
from other entities is not reported in the table. See "Certain
Transactions - Cost Reimbursement Agreement."
2 Consists of options to purchase 75,000 shares of Common Stock at
$11.625 per share granted under the Jameson 1993 Stock Incentive
Plan. Options vest equally over the five year period following the
date of grant.
3 Represents the closing price of the Common Stock on Nasdaq on the
date of grant for 37,500 shares of restricted Common Stock granted
under the Jameson 1996 Stock Incentive Plan. Such shares vest
10 years after the date of grant, assuming continuous employment
with the Company through the date of vesting.
4 Consists of options to purchase 25,000 shares of Common Stock at
$7.25 per share granted under the Jameson 1993 Stock Incentive
Plan.
</FN>
</TABLE>
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Option Grants in Last Fiscal Year
The following table sets forth certain information with
respect to stock options granted to the named executive officer of
the Company during fiscal 1997.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------
Number of % of Total Potential Realizable Value
Underlying Granted to of Stock Price
Options Employees Appreciation
Granted In Fiscal Base Price for Option Term
---------------
Name (#) Year ($/sh) Expiration Date 5% 10%
- ----- ------- ---------- -------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas W. 75,0002 17%3 $11.625 November 1 8,2007 $548,625 $1,389,375
Kitchin
<FN>
1 Potential realizable value illustrates the value that might be
realized upon exercise of the options immediately prior to
expiration of their term (ten years from the date of grant),
assuming that the Common Stock appreciates in value from the date
of grant to the end of the option term at the rates of 5% and 10%,
respectively, compounded annually. Assuming a 5% appreciation
rate, the price of the Common Stock would be $18.94 at the end of
the ten-year period. Assuming a 10% appreciation rate, the price
of the Common Stock would be $30.15 at the end of the ten-year
period.
2 All options granted to Mr. Kitchin were granted under the 1993
Jameson Stock Incentive Plan. Such options vest equally over the
five-year period following the date of grant.
3 Based on the total number of shares underlying options which were
granted during 1997 and remained outstanding at December 31, 1997.
Options which were forfeited upon the termination during 1997 of
the employment of the respective grantees are not included as
options granted during 1997 for purposes of calculating this
percentage.
</FN>
</TABLE>
Option Exercises in Last Fiscal Year;
Aggregate Fiscal Year-End Values of Options
The named executive officer did not exercise any options
during 1997. The following table sets forth the values as of
December 31, 1997, of all options held by the named executive
officer during 1997.
-11-
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year in-the-money Options
-----------------------
------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ------------ -------------
<S>
<C> <C> <C> <C>
Thomas W. 75,000 112,500 $332,813 $442,969
Kitchin
</TABLE>
Employment Agreement
In connection with consummation in early 1994 of the Company's
initial public offering of 2,600,000 shares of Common Stock (the
"IPO"), the Company entered into an employment agreement with
Thomas W. Kitchin as Chief Executive Officer and President of the
Company. Under the agreement, the Board of Directors sets the
maximum amount of annual salary for which the Company reimburses
Kitchin Investments, Inc. ("KI") under the Cost Reimbursement
Agreement between the Company and KI based on the amount of time
Mr. Kitchin devotes to the Company's business. See "Certain
Transactions - Cost Reimbursement Agreement."
Subject to certain penalties for early termination set forth
below, the employment agreement can be terminated by Mr. Kitchin
upon giving 60 days' notice. The Company may terminate the
agreement at any time. If the Company terminates Mr. Kitchin's
employment without cause, however, and elects to continue the non-
compete provisions of the agreement described below, the Company
must pay Mr. Kitchin an amount equal to 300% of his annual
compensation by the Company in equal monthly installments over the
24-month term of the non-compete provisions. Pursuant to such
provisions, Mr. Kitchin is prohibited from owning, operating or
managing, directly or indirectly, any hotel property during the
term of his employment, or, for two years following such
employment, any hotel property within a 20-mile radius of any hotel
property owned by the Company.
Report on Executive Compensation
The Compensation Committee met once during 1997. At that
meeting the Compensation committee approved the recommendations of
Thomas W. Kitchin regarding stock option awards to executive
officers and other key employees under the Jameson 1993 Stock
Incentive Plan (the "1993 Plan") and recommended such awards to the
Stock Plan Committee of the 1993 Plan. All other decisions
regarding the compensation of executive officers were in practice
made by Mr. Kitchin, the Company's President, Chief Executive
Officer, Chairman of the Board and a director. Compensation for
Mr. Kitchin was based on the provisions of his employment agreement
which is discussed above.
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This report is made by Dr. Robert D. Hisrich, Michael E.
Lawrence and Thomas J. O'Haren constituting the Compensation
Committee during 1997.
Insider Participation in Compensation Decisions
As noted above under "- Report on Executive Compensation,"
Thomas W. Kitchin, the Company's President, Chief Executive
Officer, Chairman of the Board and a director made recommendations
to the directors constituting the Compensation Committee regarding
stock option awards to executives and other key employees under the
1993 Plan. All other decisions regarding the compensation of
executive officers was determined in practice during 1997 by
Mr. Kitchin.
-13-
Shareholder Return Performance Graph
The Company's Common Stock was first registered under the
Securities Exchange Act of 1934 and was listed for trading on the
Nasdaq National Market on January 27, 1994. The following graph
compares the percentage change in the cumulative total stockholder
return on the Company's Common Stock during the period which
commenced January 27, 1994, and ended December 31, 1997, with the
cumulative total return on the Nasdaq Market - U.S. Index and the
Standard & Poors Hotel-Motel Index.
COMPARISON OF 47 MONTH CUMALATIVE TOTAL RETURN AMONG JAMESON
INNS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE S&P
LODGING-HOTELS INDEX
Cumulative Total Return
<TABLE>
<CAPTION>
1/27/94 12/94 12/95 12/96 12/97
<S> <C> <C> <C> <C> <C>
Jameson Inns, Inc. JAMS 100 84 114 185 176
NASDAQ STOCK MARKET INAS 100 98 138 170 209
(U.S.)
S&P LODGING-HOTELS IHOT 100 89 105 125 175
</TABLE>
The above performance graph shall not be deemed incorporated
by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
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CERTAIN TRANSACTIONS
The Leases
All of the Company's operating hotel properties (Inns) are
leased, and future Inns are expected to be leased, to Jameson
Development Company, LLC ("JDC"), pursuant to several master leases
(the "Leases") from the various Jameson entities that hold legal
title to the Inns. Thomas W. Kitchin, President, Chief Executive
Officer and Chairman of the Company, and his spouse are the sole
owners of JDC. JDC became the lessee under the Leases on March 31,
1998, pursuant to a merger of Jameson Operating Company, LLC and
certain other entities with and into JDC. Prior to such merger,
Jameson Operating Company, LLC ("JOCLLC"), a company wholly owned
by Thomas W. Kitchin, was the lessee under the Leases. JOCLLC
succeeded Jameson Operating Company, a Georgia corporation ("JOC"),
as lessee when it acquired all of the assets of JOC in December
1997. Until October 1997, JOC was owned 9.9% by Thomas W. Kitchin
and 90.1% by a grantor trust of which Steve A. Curlee, Vice
President - Legal, General Counsel and Secretary of the Company,
was trustee. In October 1997, Thomas W. Kitchin acquired all of
the stock of JOC.
The Leases, which terminate December 31, 2007, provide for
payment of Base Rent and, if required under the formula set forth
under the Leases, Percentage Rent. Under the Leases, the Company is
required to pay real and personal property taxes, general liability
and casualty insurance premiums, the cost of maintaining structural
elements, including underground utilities and the cost of
refurbishment of the Inns, including replacement and repair of
furniture, fixtures and equipment used in connection with the
operation of the Inns. JDC is required to pay liability insurance
premiums, utility costs and all other costs and expenses incurred
in the operation of the Inns. In 1997, Base Rent charged to JDC by
the Company totaled $7,532,712 and Percentage Rent totaled
$5,433,473.
Turnkey Construction Contracts
All new Inns and expansions of existing Inns were constructed
by JDC or by its predecessor Jameson Construction Company. It is
anticipated that JDC will act as general contractor for new Inns
built by the Company as well as expansions of existing Inns. All
Inns and Inn expansions are constructed by JDC on a turnkey basis
pursuant to construction agreements with the Company. JDC also
performs all of the construction work for renovations of existing
Inns and constructed fitness centers for Inns constructed prior to
their becoming a standard feature of new Inns. The Company paid
JDC an aggregate of approximately $29.6 million for turnkey
construction of new Inns, expansions and renovations during the
year ended December 31, 1997. Under the construction agreements,
if the contract price for a new Inn or group of Inns or an Inn
expansion exceeds JDC's costs plus 10%, JDC is required to refund
the excess amount to the Company. The contract price as well as
the other terms of each construction agreement submitted by JDC are
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subject to approval by the Company's independent directors.
Cost Reimbursement Agreement
The officers and employees of the Company are also employees
of KI, a corporation owned 100% by Thomas W. Kitchin. Rather than
duplicate payroll functions, the Company entered into the Cost
Reimbursement Agreement with KI providing that the Company will
reimburse KI, on an actual cost basis, for the employee
compensation and overhead costs attributable to the Company. The
officers and employees of the Company receive their salaries,
hourly wages and fringe benefits entirely from KI, which also pays
the Company's office overhead and other general and administrative
costs. Under the Cost Reimbursement Agreement, the Company
determines for each officer and employee the amount the Company
would pay in salary and benefits if such person devoted 100% of his
or her time to Company business. KI then determines, subject to
review by the Company, the actual percentage of the person's time
devoted to the Company's business and applies that percentage to
the Company-established compensation amount. The resulting amount
is the amount the Company reimburses KI with respect to the
officer's or employee's compensation. Office overhead and other
general and administrative costs are also allocated to and borne by
the Company based primarily on the amount of time spent by these
officers and employees on Company business. In 1997, such
allocations of salary, office overhead and other general and
administrative costs to the Company totaled approximately $220,000.
OTHER MATTERS
Matters Which May Come Before the Annual Meeting
The Board of Directors knows of no matters other than those
described in this Proxy Statement which will be brought before the
Annual Meeting for a vote of the stockholders. If any other matter
properly comes before the Annual Meeting for a stockholder's vote,
the persons named in the accompanying proxy will vote thereon in
accordance with their best judgment. The Company's Bylaws require
that for business to be properly brought before a meeting of
stockholders by a stockholder, notice must be received by the
Secretary of the Company not later than the date on which
stockholder proposals must be received by the Company for inclusion
in the Company's proxy statement under the rules of the Securities
and Exchange Commission (see below). The notice must contain a
brief description of the business proposed to be brought before the
meeting.
Inclusion in Proxy Statement of Stockholder Proposals
To be considered for inclusion in the Company's proxy
statement and accompanying proxy for the Company's 1999 Annual
Meeting of Stockholders, proposals of stockholders intended to be
presented at such meeting must be received at the principal
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executive offices of the Company, 8 Perimeter Center East, Suite
8050, Atlanta, Georgia 30346-1603, not later than January 12, 1999,
and must otherwise conform to the rules of the Securities and
Exchange Commission.
Annual Report
A copy of the Company's Annual Report on Form 10-K, excluding
exhibits, for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission, will be furnished without
charge to stockholders upon written request to: Steven A. Curlee,
Secretary, Jameson Inns, Inc., 8 Perimeter Center East, Suite 8050,
Atlanta Georgia 30346-1603.
Steven A. Curlee,
Secretary of
Jameson Inns, Inc.
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