<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
---------
this 27th day of July, 2000, by and between Jameson Inns, Inc., a real estate
investment trust incorporated under the laws of the State of Georgia (the
"Company"), and Thomas W. Kitchin, an individual resident of the State of
-------
Georgia (the "Executive").
---------
BACKGROUND
Executive and Company are parties to that certain Employment Agreement,
dated February 3, 1994 (the "Prior Agreement"), pursuant to which Executive
---------------
agreed to serve as Chairman of the Board of Directors (the "Board") and
-----
President of Company. Executive currently serves as Chairman of the Board and
Chief Executive Officer of Company. Company recognizes Executive's past and
potential contributions to the growth and success of Company. Company desires
to provide for the continued employment of Executive and to make certain changes
in the Prior Agreement which Company has determined will reinforce and encourage
the continued dedication of Executive to Company and will promote the best
interests of Company and its stockholders. Executive is willing to continue to
serve Company on the terms and conditions herein provided.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective date of this Agreement (the "Effective
-------------- ---------
Date") shall be May 1, 2000.
----
2. Employment. Company shall continue to employ Executive and Executive
----------
hereby accepts such continued employment subject to the terms and conditions set
forth herein for the Employment Period.
3. Employment Period. This Agreement will begin on the Effective Date and,
-----------------
unless earlier terminated in accordance with Section 6 hereof, will be for a
term of two years, which term shall be extended automatically (without further
action of Executive or Company) for an additional one year period from and after
the then scheduled expiration date unless at least twelve (12) months prior to
the then applicable expiration date Company notifies Executive in writing of its
intent to terminate or change the Agreement. The period ending at the then
scheduled expiration date of this Agreement is referred to herein as the
"Employment Period."
-----------------
<PAGE>
4. Duties and Responsibilities; Authority; Devotion of Time to Company.
-------------------------------------------------------------------
(a) Executive will continue to serve in his capacity as Chairman of the
Board and Chief Executive Officer of Company. Subject to clause (c) below,
Executive shall faithfully and diligently perform the services and functions
relating to such positions or otherwise incident thereto, as may be reasonably
designated by the Board from time to time; provided, however, that all such
services shall be within Executive's area of competence and expertise.
(b) Executive shall enjoy the authority consistent with the positions
described above and shall report directly and solely to the Board.
(c) During the Employment Period, excluding any period of vacation or
sick leave to which Executive is entitled, Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
Company and, to the extent necessary to discharge the responsibilities assigned
to Executive hereunder, to use Executive's reasonable best efforts to perform
faithfully and diligently such responsibilities. During the Employment Period,
Executive shall be entitled to (i) serve on corporate, civic or charitable
boards or committees other than those of Company and (ii) manage personal
investments, provided that such activities do not materially interfere with the
performance of Executive's responsibilities under this Agreement.
5. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Employment Period, Company will pay to
Executive a base salary ("Base Salary"), less normal withholdings, payable in
-----------
equal monthly or more frequent installments as are customary under Company's
payroll practices from time to time. Executive's Base Salary for the first 12
months of the Employment Period shall be $338,632.00; provided, however, that
the amount actually paid to Executive each year as Base Salary shall be (i) the
Base Salary multiplied by (ii) the percentage (as reasonably determined by
Executive) that the time of Executive devoted to the business and affairs of
Company bears to the total of Executive's time devoted to the business and
affairs of (A) Company, (B) the various Jameson Inns owned by Company (the
"Inns"), (C) the operating company that manages the Inns and (D) the development
----
company or companies that develop new Inns.
(b) Incentive, Profit Sharing, Savings and Retirement Plans. During the
Employment Period, Executive will be entitled to participate in all executive
incentive compensation and bonus programs (including, without limitation, stock
option, performance share and restricted stock grants as may from time to time
be authorized by the Board), profit sharing, savings and retirement plans,
practices, policies and programs applicable generally to actively employed
senior executive officers of Company ("Peer Executives"), on terms and
---------------
conditions no less favorable than those applicable to Peer Executives.
2
<PAGE>
(c) Welfare Benefit Plans. During the Employment Period, Executive
and/or Executive's family, as the case may be, will be eligible for
participation in and will receive all benefits under welfare benefit plans,
practices, policies and programs provided by Company (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs)
(collectively, the "Company Welfare Plans") to the extent applicable generally
---------------------
to Peer Executives. Without limiting the foregoing, Company shall:
(i) obtain and maintain a term life policy on Executive with a face
value of five times his Base Salary, payable to Executive's spouse or
designated beneficiary;
(ii) in the event that Executive is unable to substantially perform
his duties due to any physical or mental infirmity, pay 100% of Executive's
Base Salary until the Disability Effective Date (as defined in Section
6(b));
(iii) obtain and maintain a long-term disability insurance policy
which shall pay to Executive, upon his Disability, not less than $6,000 per
month from the Disability Effective Date until the date that Executive
reaches age 65 or is no longer subject to such Disability; and
(iv) obtain and maintain a "your own occupation" disability insurance
policy which shall pay not less than $6,000 per month, payable to
Executive's spouse or designated beneficiary.
(d) Expenses. During the Employment Period, Company will promptly
reimburse Executive for all reasonable expenses incurred by Executive and
related to Executive's duties (including, without limitation, travel, seminar
and continuing education expenses), in accordance with the policies, practices
and procedures of Company to the extent applicable generally to Peer Executives.
(e) Fringe Benefits. During the Employment Period, Executive will be
entitled to fringe benefits in accordance with the plans, practices, programs
and policies of Company in effect for Peer Executives. Without limiting the
foregoing, Company shall:
(i) provide to Executive an automobile owned or leased by Company of
a make and model appropriate to Executive's status (in the reasonable
opinion of Executive) or, at Executive's request, shall provide Executive
with a monthly allowance of not less than $800.00 to cover the cost of the
business use of an automobile owned or leased by Executive; and
(ii) reimburse Executive's reasonable expenses for dues and capital
assessments for the Ravinia Club, Dunwoody Country Club, Sea Island Club
3
<PAGE>
and Atlanta Athletic Club memberships currently held by Executive. With
respect to such memberships not currently held by Executive, Company shall
in addition pay the initiation fees for such memberships if approved in
advance by the Board of Directors.
(f) Vacation. During the Employment Period, Executive will be entitled
to not less than six weeks of paid annual vacation in accordance with the plans,
policies, programs and practices of Company as in effect generally with respect
to Peer Executives.
(g) Past Service Credit. Executive shall be given full credit for
Executive's prior years of service with Company for all purposes under the
plans, programs, policies, agreements and practices covering Executive pursuant
to this Section.
6. Termination of Employment.
-------------------------
(a) Death. Executive's employment will terminate automatically upon
Executive's death during the Employment Period.
(b) Disability. If the Disability of Executive has occurred during the
Employment Period, Company may give to Executive written notice in accordance
with Section 16(d) of this Agreement of its intention to terminate Executive's
employment. In such event, Executive's employment will terminate effective on
the 30th day after receipt by Executive of such written notice (the "Disability
----------
Effective Date"), provided that, within the 30 days after such receipt,
--------------
Executive shall not have returned to full-time performance of Executive's
duties. For purposes of this Agreement, "Disability" means a physical or mental
----------
infirmity that impairs Executive's ability to substantially perform his duties
with Company for a period of 180 consecutive days, as determined by Company in
good faith subject to review by a three-physician panel.
(c) Termination for Cause. Company may terminate Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
-----
means:
(i) the failure of Executive to substantially perform Executive's
duties with duties with Company (other than any such failure resulting from
incapacity due to physical or mental infirmity), which failure continues
for a period of 30 days after a written demand for substantial performance
is delivered to Executive by the Board that specifically identifies the
manner in which the Board believes that Executive has not substantially
performed Executive's duties;
(ii) the engaging by Executive in illegal conduct that is materially
and demonstrably injurious to Company;
4
<PAGE>
(iii) breach of fiduciary duty to Company that results in material
personal profit to Executive at the expense of Company; or
(iv) the failure by Executive to honor all the terms and provisions of
this Agreement, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by
Executive promptly after receipt of notice given by Company.
The cessation of employment of Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to Executive, as part of
the Notice of Termination, a copy of a resolution duly adopted by the
affirmative vote of not less than a two-thirds majority of the independent, non-
employee Directors then serving at a meeting of the Board called and held for
the purpose of considering such termination (after reasonable notice is provided
to Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board) reasonably finding that, in the good faith opinion of
such Directors, Executive is guilty of the conduct described in clause (i),
(ii), (iii) or (iv) above, and specifying the particulars thereof in detail.
(d) Termination for Good Reason. Executive's employment may be
terminated by Executive for Good Reason. For purposes of this Agreement, "Good
----
Reason" means the occurrence during the Employment Period of any of the
------
following events:
(i) the assignment to Executive, without his written consent, of any
duties inconsistent in any material respect with Executive's position,
authority, duties or responsibilities on the Effective Date or any other
action by Company that results in a diminution in any material respect in
such position, authority, duties or responsibilities, excluding for this
purpose an isolated and inadvertent action not taken in bad faith that is
remedied by Company promptly after receipt of notice thereof given by
Executive;
(ii) a reduction by Company in Executive's annual Base Salary at the
rate in effect on the Effective Date or as the same may be increased from
time to time;
(iii) the failure by Company (A) to continue in effect any
compensation plan in which Executive participates during the Employment
Period that is material to Executive's total compensation, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan or (B) to continue
Executive's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of Executive's participation relative to
Peer Executives;
5
<PAGE>
(iv) the failure by Company to continue to provide Executive with
benefits substantially similar to those enjoyed by Executive under any of
Company's pension, life insurance, medical, health and accident, disability
or other welfare plans in which Executive was participating during the
Employment Period;
(v) the failure by Company to pay to Executive any deferred
compensation when due under any deferred compensation plan or agreement
applicable to Executive; or
(vi) the failure by Company to honor all the terms and provisions of
this Agreement, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by Company
promptly after receipt of notice thereof given by Executive.
(e) Notice of Termination. Any termination of Executive's employment by
Company other than by reason of death or Disability, or by Executive for Good
Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 16(d) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice that (i) indicates
---------------------
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated and (iii) specifies the termination date (which date
shall be not less than 60 days after the giving of such notice). If a dispute
exists concerning the provisions of this Agreement that apply to Executive's
termination of employment, the parties shall pursue the resolution of such
dispute with reasonable diligence. Within ten business days of such a
resolution, any party owing any payments pursuant to the provisions of this
Agreement shall make all such payments together with interest accrued thereon at
the rate provided in Section 1274(b)(2)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"). Termination of Executive's employment shall occur on
----
the specified Date of Termination even if there is a dispute between the parties
relating to the provisions of this Agreement that apply to such termination. The
failure by Executive or Company to set forth in the Notice of Termination any
fact or circumstance that contributes to a showing of Good Reason or Cause will
not waive any right of Executive or Company, respectively, hereunder or preclude
Executive or Company, respectively, from asserting such fact or circumstance in
enforcing Executive's or Company's rights hereunder.
(f) Date of Termination. For purposes of this Agreement, "Date of
-------
Termination" means (i) if Executive's employment is terminated by Company other
-----------
than by reason of death or Disability, or by Executive for Good Reason, the date
specified in the Notice of Termination, (ii) if Executive's employment is
terminated by reason of death or Disability, the Date of Termination will be the
date of death or the
6
<PAGE>
Disability Effective Date, as the case may be or (iii) if Executive's
employment is terminated by Executive other than for Good Reason (i.e., if
Executive voluntarily resigns from his employment with Company), the date
Executive announces his voluntary resignation.
7. Obligations of Company upon Termination.
---------------------------------------
(a) Good Reason; Other than for Cause. If Executive's employment is
terminated by Company without Cause or by Executive for Good Reason (and in
either case, other than by reason of Executive's death or Disability), then in
consideration of Executive's services rendered prior to such termination:
(i) Lump-Sum Severance Payment. In lieu of any further salary payments
to Executive for periods subsequent to the Date of Termination, Company
shall pay to Executive a lump sum severance payment, in cash, without
discount, equal to two (2) times the sum of (A) Executive's annual Base
Salary at the rate in effect immediately prior to the Date of Termination
(not taking into account any reduction in Base Salary that would constitute
Good Reason) and (B) Executive's Average Bonus. For purposes of this
Agreement, (a) Executive's "Average Bonus" means the average of Executive's
-------------
annual bonuses paid prior to the Effective Date and/or hereunder for the
two fiscal years during which Executive has been employed by Company
immediately preceding the fiscal year in which the Date of Termination
occurs, and (b) the portion of the then applicable Base Salary to be used
to determine the payments due to Executive upon the termination of his
employment hereunder shall be that percentage of the stated Base Salary
paid by Company pursuant to the proviso in the second sentence of Section
5(a) hereof for the twelve full months preceding the date of the notice of
termination;
(ii) Vesting of Options. Any and all options to purchase Company common
stock then held by Executive will, to the extent not already vested, become
vested and exercisable in full as of the Date of Termination, and any
provision contained in the agreement(s) under which such options were
granted that is inconsistent with such acceleration is hereby modified to
the extent necessary to provide for such acceleration;
(iii) Vesting of Restricted Stock. Any and all restrictions applicable
to awards of restricted stock of Company then held by Executive shall lapse
upon the Date of Termination, and any provision contained in the
agreement(s) under which such restricted stock awards were granted that is
inconsistent with such acceleration is hereby modified to the extent
necessary to provide for such acceleration of vesting;
(iv) Continued Benefits. For a period of two (2) years from the Date of
Termination (the "Benefits Period"), Company shall provide Executive with
---------------
7
<PAGE>
group term life insurance, health insurance, accident and long-term
disability insurance benefits (collectively, "Welfare Benefits")
----------------
substantially similar in all respects to those that Executive was receiving
immediately prior to the Date of Termination (not taking into account any
reduction in such Welfare Benefits that would constitute Good Reason).
During the Benefits Period, Executive will be entitled to elect to change
his level of coverage and/or his choice of coverage options (such as
Executive only or family medical coverage) with respect to the Welfare
Benefits to be provided by Company to Executive to the same extent that
actively employed senior executives of Company are permitted to make such
changes; provided, however, that in the event of any such changes Executive
shall pay the amount of any cost increase that would actually be paid by an
actively employed senior executive of Company by reason of making the same
changes in his level of coverage or coverage options; and
(v) Other Benefits. To the extent not theretofore paid or provided,
Company shall timely pay or provide to Executive any other amounts or
benefits required to be paid or provided or that Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of Company (including, without limitation, payment or provision
of amounts and benefits pursuant to the terms of the Incentive Plan and/or
Retirement Plan) (such other amounts and benefits, collectively, the "Other
-----
Benefits").
--------
(b) Voluntary Resignation other than for Good Reason. If Executive's
employment is terminated by Executive other than for Good Reason, then in
consideration of Executive's services rendered prior to such termination,
Company shall pay to Executive in cash, without discount, an amount equal to
Executive's Base Salary to the Date of Termination;
(c) Death. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement will terminate
without further obligations to Executive's legal representatives under this
Agreement, other than for payment of Accrued Compensation, the vesting of stock
options and restricted stock and the timely payment or provision of Other
Benefits, including without limitation any death benefits to which Executive is
then entitled. For purposes of this Agreement, "Accrued Compensation" means all
--------------------
amounts of compensation for services rendered by Executive to Company or any
affiliate that have been earned or accrued through the Date of Termination but
that have not been paid as of the Date of Termination, including (i) Base
Salary, (ii) reimbursement (in accordance with Company's expense reimbursement
policy) for reasonable and necessary business expenses incurred by Executive on
behalf of Company during the period ending on the Date of Termination, (iii)
vacation pay and (iv) bonuses and incentive compensation. Accrued Compensation
shall be paid to Executive in a lump sum in cash within 30 days of the Date of
Termination or in accordance with any deferral election theretofore elected by
Executive.
8
<PAGE>
(d) Disability. If Executive's employment is terminated by reason of
Executive's Disability during the Employment Period, this Agreement will
terminate without further obligations to Executive, other than for payment of
the sum of Accrued Compensation, the vesting of stock options and restricted
stock and the timely payment or provision of Welfare Benefits (during the
Benefits Period) and Other Benefits (including without limitation any disability
benefits to which Executive is then entitled). Accrued Compensation shall be
paid to Executive in a lump sum in cash within 30 days of the Date of
Termination or in accordance with any deferral election theretofore elected by
Executive.
(e) Cause. If Executive's employment is terminated for Cause during the
Employment Period, this Agreement will terminate without further obligations to
Executive, other than for payment of Accrued Compensation and the timely payment
or provision of Other Benefits. In such case, all Accrued Compensation shall be
paid to Executive in a lump sum in cash within 30 days of the Date of
Termination or in accordance with any deferral election theretofore elected by
Executive.
Company's obligations under this Section shall survive the termination of
this Agreement.
8. Certain Additional Payments by Company. The parties intend that the
--------------------------------------
severance payments and other compensation provided for herein are reasonable
compensation for Executive's services to Company and shall not constitute
"excess parachute payments" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended ("Code"). In the event that the
----
severance benefits or any other benefits or payments to which Executive is
entitled pursuant to this Agreement or otherwise (collectively, the "Total
-----
Benefits"), will be subject to the excise tax imposed pursuant to Section 4999
--------
of the Code ("Excise Tax"), Company shall pay to Executive an additional amount
----------
(the "Gross-Up Payment") such that the net amount retained by Executive, after
----------------
deduction of any Excise Tax on the Total Benefits and any federal, state and
local income taxes, Excise Tax, and FICA and Medicare withholding taxes upon the
payment provided for by this Section, will be equal to the Total Benefits.
For purposes of this Section, Executive will be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Excise Tax is (or would be) payable and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Executive's residence on the Date of Termination, net of the
reduction in federal income taxes that could be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under Section
68 of the Internal Revenue Code in the amount of itemized deductions allowable
to Executive applies first to reduce the amount of such state and local income
taxes that would otherwise be deductible by Executive).
In the event that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of
Executive's employment, Executive shall repay to Company, at the time the amount
of such reduction in Excise Tax is fully
9
<PAGE>
determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax,
federal, state and local income taxes and FICA and Medicare withholding taxes
imposed on the Gross-Up Payment being repaid by Executive to the extent that
such repayment results in a reduction in Excise Tax, FICA and Medicare
withholding taxes and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Internal Revenue Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of Executive's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), Company shall make an additional Gross-Up Payment to Executive in
respect of such excess (plus any interest, penalties or additions payable by
Executive with respect to such excess) at the time that the amount of such
excess is finally determined.
The parties' obligations under this Section shall survive termination
of this Agreement.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit Executive's continuing or future participation in any plan, program,
policy or practice provided by Company and for which Executive may qualify, nor,
subject to Section 16(j), shall anything herein limit or otherwise affect such
rights as Executive may have under any contract or agreement with Company.
Amounts that are vested benefits or that Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with Company at or subsequent to the Date of Termination will be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
10. Full Settlement; Certain Legal Expenses.
---------------------------------------
(a) In no event shall Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
(b) Company shall pay to Executive all reasonable legal fees and
expenses incurred by Executive as a result of a termination that entitles
Executive to any payments under this Agreement, including all such fees and
expenses, if any, incurred in successfully contesting or disputing any Notice of
Termination given hereunder or in successfully seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Section 4999 of
the Internal Revenue Code to any payment or benefit provided hereunder. Such
payments shall be made within ten (10) business days after delivery of
Executive's respective written requests for payment accompanied with such
evidence of fees and expenses incurred as Company reasonably may require.
10
<PAGE>
11. Assignment and Successors.
-------------------------
(a) Executive. This Agreement is personal to Executive and without the
prior written consent of Company shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive's legal representatives.
(b) Company. This Agreement shall inure to the benefit of and be
binding upon Company and its successors and assigns.
(c) Assumption by Successors. Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" means Company as herein before
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.
12. Indemnification of Executive. Company shall indemnify Executive in the
----------------------------
event that Executive was or is a party or is threatened to be made a party to
any threatened, pending, or completed Proceeding:
(a) other than an action by or in the right of Company, arising out of
the performance of Executive's duties with Company or by reason of the fact that
he is or was an officer, director, employee or agent of Company, or is or was
serving at the request of Company as a manager, director, trustee, officer,
employee, or agent of any other company, nonprofit or for-profit corporation,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by Executive in connection with such Proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of Company and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any Proceeding by judgment, order, or settlement, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that Executive did not act in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of Company and, with respect to
any criminal Proceeding, he had reasonable cause to believe that his conduct was
unlawful.
(b) by or in the right of Company to procure a judgment in its favor,
arising out of the performance of Executive's duties with Company or by reason
of the fact that he is or was an officer, director, employee, or agent of
Company, or is or was serving at the request of Company as a manager, director,
trustee, officer, employee, or agent of any other company, nonprofit or for-
profit corporation, partnership, joint venture, trust, or other enterprise,
against expenses, including attorney's fees, actually and
11
<PAGE>
reasonably incurred by Executive in connection with the defense or settlement of
such Proceeding if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of Company, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which Executive is adjudged to have engaged in conduct which would otherwise
allow Company to terminate Executive for Cause, unless and only to the extent
that the court in which such Proceeding was brought determines upon application
that, despite the adjudication of such conduct, but in view of all the
circumstances of the case, Executive is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
(c) Without limiting the generality of the foregoing, to the extent
that Executive has been successful on the merits or otherwise in defense of any
Proceeding referred to in clause (a) or clause (b) of this Section, or in
defense of any claim, issue or matter therein, Company shall indemnify him
against expenses, including, without limitation, attorneys' fees actually and
reasonably incurred by him in connection with the Proceeding.
(d) Indemnifiable expenses incurred by Executive shall be paid by
Company in advance of the final disposition of the Proceeding upon receipt of an
undertaking by or on behalf of Executive to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by Company as
authorized in this Section 12.
For purposes of this Agreement, "Proceeding" means any judicial or
----------
administrative trial, hearing, or other activity, civil, criminal or
investigative, the result of which may be that a court, arbitrator, or
governmental agency may enter a judgment, order, decree, or other determination
which, if not appealed and reversed, would be binding upon Company, its officers
or directors or other person subject to the jurisdiction of such court,
arbitrator, or governmental agency.
13. Non-Compete Agreement. Executive covenants and agrees that during the
---------------------
Employment Period, neither he nor any corporation, firm, partnership, joint
venture or other entity of which he is an officer, employee, consultant or
holder of ten percent or more of the issued and outstanding Voting Securities or
equity interests (any such entity, an "Affiliated Entity"), will own, operate or
-----------------
manage any limited-service motel or hotel other than the Inns owned by Company.
For a period of one year after the Termination Date, neither Executive nor any
Affiliated Entity will own, operate or manage any limited-service motel or hotel
which is located within a ten-mile radius of any Inn owned by Company.
Executive's obligations under this Section shall survive the termination of this
Agreement for a period of one year after the Termination Date.
14. Confidentiality. During the Employment Period and for a period of one
---------------
year after the Termination Date, Executive will not divulge or appropriate for
his own use or the use of others any Confidential Information. Executive
acknowledges that the provisions of the prior sentence are expressly for the
benefit of Company, that Company would be irrevocably injured by a violation
thereof and that Company would have no adequate remedy at law in the event of
such violation. Therefore, Executive acknowledges and agrees that injunctive
relief,
12
<PAGE>
specific performance or any other appropriate equitable remedy are appropriate
remedies to enforce compliance with such provisions. Executive's obligations
under this Section shall survive the termination of this Agreement for a period
of one year after the Termination Date.
For purposes of this Agreement, "Confidential Information" means any
------------------------
valuable, non-public, competitively sensitive information concerning Company's
financial position and results of operations, annual and long-range business
plans, product or service plans, marketing plans and methods, training,
educational and administrative manuals, supplier information and purchase
histories and employee lists obtained by Executive during his employment with
Company; provided, however, that Confidential Information shall not include
information to the extent that it (i) is or becomes publicly known or generally
utilized by others engaged in the same business or activities in which Company
utilized, developed, or otherwise acquired such information; (ii) is known to
Executive prior to employment, having been lawfully received from parties other
than Company; or (iii) is furnished to others by Company with no restriction on
disclosure.
15. Arbitration. Any controversy or claim arising from, out of or relating
-----------
to this Agreement (other than controversies or claims arising from, out of or
relating to the provisions in Sections 13 and 14, with respect to which either
party may upon 24 hours notice to the other seek injunctive and/or other
equitable relief in a court of competent jurisdiction) which would give rise to
a claim under federal, state or local law (including but not limited to claims
based in tort or contract, claims for discrimination under state or federal law,
and/or claims for violation of any federal, state or local law, statute or
regulation) (each a "Claim", which shall also include any dispute as to whether
-----
a matter constitutes a Claim), which cannot be resolved within 30 days by
amicable negotiation between the parties, shall be resolved by final and binding
arbitration in Atlanta, Georgia in accordance with the Model Employment Dispute
Resolution Rules ("Rules") of the American Arbitration Association (the
-----
"Association"), by an experienced employment arbitrator licensed to practice law
-----------
in the State of Georgia.
A demand for arbitration shall be made within a reasonable time after the
Claim has arisen. In no event shall the demand for arbitration be made after
the date when institution of legal and/or equitable proceedings based on such
Claim would be barred by the applicable statute of limitations. Each party to
the arbitration will be entitled to be represented by counsel and will have the
opportunity to take one deposition of an opposing party or witness before the
arbitration hearing. By mutual agreement of the parties, additional depositions
may be taken. The arbitrator shall have the authority to hear and grant a
motion to dismiss and/or for summary judgment, applying the standards governing
such motions under the Federal Rules of Civil procedure. Each party shall have
the right to subpoena witnesses and documents for the arbitration hearing. A
court reporter shall record all arbitration proceedings.
With respect to any Claim brought to arbitration hereunder, either party
may be entitled to recover whatever damages would otherwise be available to that
party in any legal proceeding based upon the federal and/or state law applicable
to the matter. The decision of the arbitrator may be entered and enforced in any
court of competent jurisdiction by either party. Each party shall pay the fees
of their respective attorneys (except as otherwise awarded by the arbitrator),
the
13
<PAGE>
expenses of their witnesses and any other expenses connected with presenting
their Claim or defense. Other costs of the arbitration, including the fees of
the arbitrator, the cost of any record or transcript of the arbitration,
administrative fees, and other fees and costs, shall be borne equally by the
parties, one-half by Executive and one-half by the Company. Should Executive or
Company pursue any dispute or matter covered by this Section by any method other
than said arbitration, the responding party shall be entitled to recover from
the other party all damages, costs, expenses, and reasonable attorneys' fees
incurred as a result of such action. The provisions contained in this Section
shall survive the termination of this Agreement.
The parties indicate their acceptance of the foregoing arbitration
requirement by initialing below:
--------------------------------- ---------------------------------
For the Company Executive
16. Miscellaneous.
-------------
(a) Governing Law. Except to the extent preempted by federal law and
without reference to principles of conflict of laws, the laws of the State of
Georgia will govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
(b) Captions. The captions in this Agreement are not part of the
provisions hereof and shall have no force or effect.
(c) Amendments and Modifications. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives, which writing makes
specific reference to this Agreement.
(d) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Company: Jameson Inns, Inc.
8 Perimeter Center East
Suite 350
Atlanta, Georgia 30346
Attention: General Counsel
If to Executive: Thomas W. Kitchin
1515 Masters Club Drive
Atlanta, GA 30350
14
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
(e) Other Agents. Nothing in this Agreement is to be interpreted as
limiting Company from employing other personnel on such terms and conditions as
may be satisfactory to it.
(f) Severability. If any provision or covenant, or any part thereof, of
this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which will remain in full force and effect.
(g) Withholding. Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(h) Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(i) Reduction of Benefits By Legally Required Benefits. Notwithstanding
any other provision of this Agreement to the contrary, if Company is obligated
by law to pay severance pay, a termination indemnity, notice pay, or the like,
or if Company is obligated by law to provide advance notice of separation
("Notice Period"), then any severance benefits hereunder shall be reduced by the
-------------
amount of any such severance pay, termination indemnity, notice pay or the like,
as applicable, and by the amount of any pay received with respect to any Notice
Period .
(j) Timing of Payments.
(i) The payments provided for in Sections 7 and 8 shall be made within
30 days after the Date of Termination, provided, however, that if the
amounts of such payments cannot be finally determined on or before such
date, Company shall pay to Executive on such day an estimate, as determined
in good faith by Company, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B)of the Code from the Date of Termination
to the payment of such remainder) as soon as the amount thereof can be
determined but in no event later than the 45th day after the Date of
Termination. In the event that the
15
<PAGE>
amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by Company to
Executive, payable on the tenth business day after demand by Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code from the Date of Termination to the repayment of such excess).
(ii) If any payment to Executive (other than those described in the
preceding subclause) is not made within 30 days of the date such payment is
required to be made, Executive shall be entitled to receive interest on
such payment from the due date until paid in full at an annual rate which
is the greater of (A) the "prime rate" (as promulgated by Wachovia Bank,
Georgia, N.A. from time to time) plus three percent or (B) the legal rate
of interest on judgments in the State of Georgia.
(k) Entire Agreement; Termination of Prior Agreement. Except as
provided herein, this Agreement contains the entire agreement between Company
and Executive with respect to the subject matter hereof and it supersedes and
invalidates any previous employment or severance agreements or contracts between
them, including, without limitation, the Prior Agreement. No representations,
inducements, promises or agreements, oral or otherwise, that are not embodied
herein shall be of any force or effect. In the event that this Agreement does
not take effect, the Prior Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment Agreement as of the date first above written.
JAMESON INNS, INC.
By: Steven A. Curlee
----------------
Title: Steven A. Curlee, Vice President-Legal
EXECUTIVE:
Thomas W. Kitchin
-----------------
Thomas W. Kitchin
16
