Exhibit 10.1

 

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JAMESON INNS, INC.,

 

as the Company

 

and

 

BUYERS,

 

as defined herein

 

SECURITIES PURCHASE AGREEMENT

 

Dated as of September 29, 2005

 

7.0 % Convertible Senior Subordinated Notes due 2010

 

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SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 29,
2005, by and among Jameson Inns, Inc., a Georgia corporation (the “Company”),
and the Buyers listed on the Schedule of Buyers attached hereto as Schedule 1
(individually, a “Buyer” and, collectively, the “Buyers”).

 

THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of the
following facts, intentions and understandings:

 

A. In accordance with the terms and conditions of this Agreement, the Company
has agreed to issue and sell, and the Buyers have severally agreed to purchase
in the aggregate, Thirty-Five Million United States Dollars ($35,000,000)
principal amount of the Company’s 7.0% Convertible Senior Subordinated Notes due
2010 (such Convertible Senior Subordinated Notes, substantially in the form
attached as Exhibit A hereto, as such form of Note may be amended, modified or
supplemented from time to time in accordance with the terms thereof, the
“Notes”), which shall be convertible into shares of the common stock, $0.10 par
value per share (the “Common Stock”), of the Company (as converted, the
“Conversion Shares”).

 

B. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (as the same may be
amended, modified or supplemented from time to time in accordance with the terms
thereof, the “Registration Rights Agreement”) pursuant to which the Company has
agreed to provide the Buyers with the benefit of certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities Act”) and applicable state securities
laws, on the terms and subject to the conditions set forth therein.

 

NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:

 

SECTION 1. Purchase and Sale of Notes.

 

(a) Purchase of Notes. Subject to the satisfaction (or waiver, to the extent
permitted by applicable law) of the conditions set forth in Sections 5 and 6 of
this Agreement, the Company shall issue and sell to each Buyer, and each Buyer
severally and not jointly agrees to purchase from the Company, the respective
principal amount of Notes set forth opposite such Buyer’s name on the Schedule
of Buyers attached hereto as Schedule 1 (the “Closing”). The Company shall issue
to each Buyer One Thousand United States Dollars ($1,000) principal amount of
the Notes for each One Thousand United States Dollars ($1,000) tendered by each
such Buyer.

 

(b) The Closing. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., Eastern Standard Time, on September 30, 2005, subject to the
satisfaction (or waiver, to the extent permitted by applicable law) of the
conditions set forth in Sections 5 and 6 of this Agreement. The Closing shall
occur on the Closing Date at the offices of Conner & Winters, LLP, 3700 First
Place Tower, 15 East Fifth Street, Tulsa, OK 74103-4344.

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(c) Form of Payment. On the Closing Date, (i) each Buyer shall pay the Company
for the Notes to be issued and sold to such Buyer on the Closing Date, by wire
transfer of immediately available funds in accordance with the Company’s written
wire instructions attached hereto on Schedule A, and (ii) the Company shall
issue to each Buyer properly authenticated Notes (in the denominations of not
less than One Thousand United States Dollars ($1,000) as such Buyer shall
reasonably request) representing the principal amount of Notes which such Buyer
is then purchasing hereunder, duly executed on behalf of the Company and
registered in the name of such Buyer.

 

SECTION 2. Buyer’s Representations and Warranties. Each Buyer represents and
warrants to the Company with respect to only itself that as of the date hereof:

 

(a) Investment Purpose. Such Buyer is acquiring the Notes for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the Securities Act; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Notes and the Conversion Shares (collectively, the “Securities”)
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time; provided, further, that such disposition shall be in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

 

(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D under the Securities Act as of
the date of this Agreement and was not organized for the specific purpose of
acquiring the Securities.

 

(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and such Buyer’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein and in the applicable Note in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.

 

(d) Information. Such Buyer believes it (i) has been furnished with or believes
it has had full access to all of the information that it considers necessary or
appropriate for deciding whether to purchase the Securities, including a copy of
the Confidential Private Placement Memorandum (as defined below) and all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer, (ii) has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
Offering, (iii) can bear the economic risk of a total loss of its investment in
the Securities and (iv) has such knowledge and experience in business and
financial matters so as to enable it to understand the risks of and form an
investment decision with respect to its investment in the Securities. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall limit, modify, amend
or affect the Company’s representations and warranties contained in this
Agreement or any other Transaction Document and the Buyer’s right to rely
thereon.

 

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(e) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

 

(f) Transfer or Resale. Such Buyer understands that, except as provided in the
Registration Rights Agreement, the Securities have not been registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred without registration under the Securities Act or
an exemption therefrom and that, in the absence of an effective registration
statement under the Securities Act, such Securities may only be sold under
certain circumstances as set forth in the Securities Act. In that connection,
such Buyer is aware of Rule 144 under the Securities Act and the restrictions
imposed thereby.

 

(g) Legends.

 

(1) Such Buyer understands that, until the expiration of the holding period
applicable to sales thereof under Rule 144(k) (or any successor provision), any
certificate evidencing such Notes (and all securities issued in exchange
therefor or in substitution thereof, other than Common Stock, if any, issued
upon conversion thereof, which shall bear the legend set forth in
Section 2(g)(2) of this Agreement, if applicable) shall bear a legend (a
“Securities Act Legend”) in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

The Company may place the following legend (an “Affiliate Legend”) on any Note,
as appropriate, held by or transferred to an “affiliate” (as defined in Rule
501(b) of Regulation D under the Securities Act) of the Company:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE
SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT.

 

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The legends set forth above shall be removed and the Company shall issue a new
Note, as appropriate, of like tenor and aggregate principal amount or number of
shares, as appropriate, and which shall not bear the restrictive legends
required by this Section 2(g)(1), (i) if such Notes are registered for resale
under the Securities Act and are transferred or sold pursuant to such
registration, (ii) if, in connection with a sale transaction, such holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that such sale, assignment or transfer of the Notes may be
made without registration under the Securities Act, or (iii) upon expiration of
the two-year period under Rule 144(k) of the Securities Act (or any successor
rule) if the holder of the Securities has not been an “affiliate” (as defined in
Rule 501(b) of Regulation D under the Securities Act) during the preceding three
(3) months.

 

(2) Such Buyer understands that any stock certificate representing Conversion
Shares shall bear a legend in substantially the following form (unless (i) the
resale of such Conversion Shares has been registered pursuant to an effective
registration statement, (ii) such Conversion Shares have been transferred or
sold pursuant to the exemption from registration provided by Rule 144 under the
Securities Act, (iii) such Conversion Shares may be transferred pursuant to Rule
144(k) under the Securities Act, or (iv) unless otherwise agreed by the Company
in writing with written notice to the transfer agent):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

The Company may instruct the transfer agent to place the following legend on any
certificate evidencing shares of Common Stock held by or transferred to an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act)
of the Company:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE
SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.

 

The legends set forth above shall be removed and the Company shall issue the
relevant Securities without such legends to the holder of the Securities upon
which it is stamped, (i) if such Securities are registered for resale under the
Securities Act, (ii) if, in connection with a sale transaction, such holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that such sale, assignment or transfer of the Securities
may be made without registration under the Securities Act, or (iii) upon
expiration of the two-year

 

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period under Rule 144(k) of the Securities Act (or any successor rule) if the
holder of the Securities has not been an “affiliate” (as defined in Rule 501(b)
of Regulation D under the Securities Act) during the preceding three (3) months.

 

(3) Such Buyer understands that, in the event Rule 144(k) as promulgated under
the Securities Act (or any successor rule) is amended to change the two-year or
three-month periods under Rule 144(k) (or the corresponding periods under any
successor rule), (i) each reference in Sections 2(g)(1) and 2(g)(2) of this
Agreement to “two (2) years” or the “two-year period” and to “three (3) months”
shall be deemed for all purposes of this Agreement to be references to such
changed period or periods, and (ii) all corresponding references in the Notes
shall be deemed for all purposes to be references to the changed period or
periods, provided that such changes shall not become effective if they are
otherwise prohibited by, or would otherwise cause a violation of, the
then-applicable federal securities laws.

 

(h) Authorization; Enforcement; Validity. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and are valid and binding agreements of such Buyer
enforceable against such Buyer in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

 

(i) Residency. Such Buyer is a resident of that country or state specified in
its address on the Schedule of Buyers attached hereto as Schedule 1.

 

(j) No Conflicts. The execution and performance of this Agreement and the
Registration Rights Agreement do not conflict with any agreement to which such
Buyer is a party or is bound thereby, any court order or judgment addressed to
such Buyer, or the constituent documents of such Buyer, except for those
conflicts that would not, individually or in the aggregate, have a material
adverse effect on the Buyer’s authority or ability to perform its obligations
under this Agreement or the Registration Rights Agreement.

 

(k) Conversion/ Limitation. (A) Subject to such Buyer’s election on the
signature pages hereto to be governed by this Section 2(k)(A), such Buyer hereby
agrees that in no event will it convert, and the Company will not honor any
conversion request presented to it that requests the conversion of, any of the
Notes in excess of the number of such Notes upon the conversion of which (x) the
number of shares of Common Stock beneficially owned by such Buyer (other than
the shares which would otherwise be deemed beneficially owned except for being
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section 2(k)(A)) plus (y) the number of shares of Common Stock
issuable upon the conversion of such Notes would be equal to or exceed 9.99% of
the number of shares of Common Stock then issued and outstanding (after giving
effect to such conversion or exercise), it being the intent of the Company and
such Buyer that a Buyer electing to be governed by this Section 2(k)(A) not be
deemed at any time to have the power to vote or dispose of greater than 9.99% of
the number of shares of Common Stock issued and outstanding. As used herein,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the “Exchange Act”). To the

 

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extent that the limitation contained in this Section 2(k)(A) applies (and
without limiting any rights the Company may otherwise have), the Company may
rely on such Buyer’s determination of whether the Notes are convertible pursuant
to the terms hereof, the Company having no obligation whatsoever to verify or
confirm the accuracy of such determination, and the submission of the Conversion
Notice (as that term is defined in the Note) by such Buyer shall be deemed to be
such Buyer’s representation that the Notes specified therein are convertible or
exercisable pursuant to the terms hereof. Nothing contained herein shall be
deemed to restrict the right of such Buyer to convert the Notes at such time as
the conversion or exercise thereof will not violate the provisions of this
Section 2(k)(A). By written notice to the Company, such Buyer may increase or
decrease the maximum percentage stated in this paragraph to any other percentage
specified in such notice; provided, that any such increase will not be effective
until the sixty-first (61st) day after such notice is delivered to the Company
and provided further that in no event shall the percentage stated in this
paragraph exceed 9.99%. Notwithstanding anything herein to the contrary, this
Section 2(k)(A) shall not apply to a Buyer unless the Buyer has elected to be
governed by this Section by so indicating on the signature page.

 

(B) Subject to such Buyer’s election on the signature pages hereto to be
governed by this Section 2(k)(B), such Buyer hereby agrees that in no event will
it convert, and the Company will not honor any conversion request presented to
it that requests the conversion of, any of the Notes in excess of the number of
such Notes, upon the conversion of which (x) the number of shares of Common
Stock beneficially owned by such Buyer (other than the shares which would
otherwise be deemed beneficially owned except for being subject to a limitation
on conversion analogous to the limitation contained in this Section 2(k)(B))
plus (y) the number of shares of Common Stock issuable upon the conversion of
such Notes would be equal to or exceed 4.99% of the number of shares of Common
Stock then issued and outstanding (after giving effect to such conversion), it
being the intent of the Company and such Buyer that a Buyer electing to be
governed by this Section 2(k)(B) not be deemed at any time to have the power to
vote or dispose of greater than 4.99% of the number of shares of Common Stock
issued and outstanding. As used herein, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this Section 2(k)(B) applies (and without limiting any
rights the Company may otherwise have), the Company may rely on such Buyer’s
determination of whether the Notes are convertible pursuant to the terms hereof,
the Company having no obligation whatsoever to verify or confirm the accuracy of
such determination, and the submission of the Conversion Notice (as that term is
defined in the Note) by such Buyer shall be deemed to be such Buyer’s
representation that the Notes specified therein are convertible or exercisable
pursuant to the terms hereof. Nothing contained herein shall be deemed to
restrict the right of such Buyer to convert the Notes at such time as the
conversion or exercise thereof will not violate the provisions of this
Section 2(k)(B). By written notice to the Company, such Buyer may increase or
decrease the maximum percentage stated in this paragraph to any other percentage
specified in such notice; provided, that any such increase will not be effective
until the sixty-first (61st) day after such notice is delivered to the Company
and provided further that in no event shall the percentage stated in this
paragraph exceed 4.99%. Notwithstanding anything herein to the contrary, this
Section 2(k)(B) shall not apply to a Buyer unless the Buyer has elected to be
governed by this Section by so indicating on the signature page.

 

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(l) Additional Acknowledgement. Each Buyer acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, the Notes and the Registration Rights Agreement, that it has
independently determined to enter into the transactions contemplated hereby and
thereby, that it is not relying on any advice from or evaluation by any other
Buyer, and that it is not acting in concert with any other Buyer in purchasing
the Securities offered hereunder.

 

The representations and warranties of a Buyer made in this Section 2 are made
solely for the purpose of permitting the Company to make a determination that
the offer and sale of the Notes pursuant to this Agreement complies with
applicable U.S. federal and state securities laws and not for any other purpose.
Accordingly, the Company shall not rely on such representations and warranties
for any other purpose.

 

SECTION 3. Representations and Warranties of the Company. The Company represents
and warrants to JMP Securities LLC (“JMP”) and each of the Buyers that as of the
date hereof:

 

(a) Organization and Qualification. The Company and its Subsidiaries (as defined
below) are corporations, statutory business trusts, partnerships or limited
liability companies, as applicable, duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated or
organized, and have the requisite corporate, trust, partnership or limited
liability company power and authorization to own their properties and to carry
on their business as now being conducted. Copies of the Company’s Articles of
Incorporation and Bylaws, and all amendments thereto, have been filed as
exhibits to the Company’s SEC Documents (as defined in Section 3(f) of this
Agreement), are in full effect and have not been modified. Each of the Company
and its Subsidiaries is duly qualified as a foreign corporation, statutory
business trust, partnership or limited liability company to do business and is
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted and proposed to be conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, “Material Adverse Effect” means any material adverse
effect on (i) the business, properties, assets, operations, results of
operations or condition (financial or otherwise) or prospects of the Company and
its Subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or
by the agreements and instruments to be entered into in connection herewith, or
(iii) the authority or ability of the Company to perform its obligations under
the Transaction Documents (as defined below). “Subsidiary” means any entity in
which the Company, directly or indirectly, owns or controls a majority of the
ordinary voting power, capital stock or other equity or similar interests. The
Company’s “Subsidiaries” are set forth on Schedule 3(a).

 

(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, and the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 4(q) of this
Agreement) and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”), and to issue and sell the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company

 

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and the consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance and repayment of the Notes, the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion thereof and the registration for resale of the Registrable Securities
(as such term is defined in the Registration Rights Agreement), have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization is required of the Company’s Board of Directors or shareholders.
The Transaction Documents have been duly executed and delivered by the Company.
The Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
(i) as rights to indemnification and contribution may be limited by federal or
state securities laws and policies underlying such laws and (ii) as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors’ rights and remedies.

 

(c) Capitalization. Except for any shares issuable upon exercise of options
issued pursuant to employee benefit plans disclosed in the Company’s SEC
Documents, the capitalization of the Company is as described in the Company’s
SEC Documents. All of the Company’s outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable and were
issued in accordance with applicable federal and state securities laws. The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act and is listed for trading on The Nasdaq National Market. Except for rights
created pursuant to the Transaction Documents and as set forth in the SEC
Documents, (i) no shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
created by the Company; (ii) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries (other than any such options, warrants,
scrip, rights, calls, commitments, securities, understandings and arrangement
outstanding under plans disclosed in the SEC Documents); (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound, except for the debt securities, notes
credit agreement and credit facilities disclosed in SEC Documents (the “Debt
Agreements”); (iv) there are no financing statements securing obligations in any
amounts greater than Fifty Thousand United States Dollars ($50,000), singly, or
Two Hundred Fifty Thousand United States Dollars ($250,000) in the aggregate,
filed in connection with the Company or any of its Subsidiaries except for those
filed in respect of the Debt Agreements; (v) other than rights under the
Registration Rights Agreement, dated as of January 2, 2004, by and among the
Company and each of the persons listed on Exhibit A thereto, all of which rights
have been waived by the holders thereof, there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of its securities under the Securities Act; (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments,

 

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understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; (viii) the Company does not have
any stock appreciation rights or “phantom” stock plans or agreements or any
similar plan or agreement; (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents but not
so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or would not reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole; and (x) the Company does not have outstanding stockholder purchase rights
or “poison pill” or any similar arrangement in effect giving any person or
entity the right to purchase any equity interest in the Company upon the
occurrence of certain events.

 

(d) Issuance of Securities. The Securities are duly authorized and, upon
issuance in accordance with the terms of the applicable Transaction Documents,
shall be (i) validly issued, fully paid and non-assessable and (ii) free from
all taxes, liens and charges with respect to the issuance thereof, other than
any liens or encumbrances created by or imposed by the Buyers, and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company. As of the Closing, at least 13,898,918 shares of Common Stock (subject
to adjustment pursuant to the Company’s covenant set forth in Section 4(e) of
this Agreement) will have been duly authorized and reserved for issuance upon
conversion of the Notes. Upon conversion or issuance in accordance with the
terms of the Notes, the Conversion Shares will be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, other than any liens or encumbrances created by or imposed by the
Buyers, with the holders being entitled to all rights accorded to a holder of
Common Stock. Subject to the accuracy of the representations and warranties of
each of the Buyers in this Agreement, the issuance by the Company of the
Securities is exempt from registration under the Securities Act and applicable
state securities laws.

 

(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Notes and the reservation for issuance and issuance of the Conversion
Shares) will not (i) result in a violation of the Company’s Articles of
Incorporation or Bylaws; (ii) other than as set forth on Schedule 3(e), conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, except
for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have or reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected. Neither the Company nor any of its
Subsidiaries is in violation of any material term of or in default under its
Articles of Incorporation, Bylaws or their organizational charter or bylaws,
respectively. Neither the Company nor any of its

 

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Subsidiaries is in violation of any term of or in default under any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except where such violations and defaults would not have or
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except where such violations would not have or reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Except as
specifically contemplated by this Agreement, as required under the Securities
Act or as required by Blue Sky filings (but only to the extent that such filings
may be made after the Closing), the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency or
other person or entity in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof and copies of such consents, authorizations, orders,
filings and registrations have been delivered to the Buyers. The Company is not
in violation of the listing requirements of the Principal Market, and has no
actual knowledge of any facts which could reasonably be expected to lead to
delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. The Company and its Subsidiaries are not in violation of any
covenants or other terms of its outstanding indebtedness for borrowed money
which have a Material Adverse Effect. The Company and its Subsidiaries are
currently unaware of any facts or circumstances which might give rise to any of
the foregoing events set forth in this paragraph.

 

(f) SEC Documents; Financial Statements. Since January 1, 2002, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the “Commission”)
pursuant to the reporting requirements of the Exchange Act, (all of the
foregoing filed prior to or on the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC Documents”). As of
the date of filing of such SEC Documents, each such SEC Document, as it may have
been subsequently amended by filings made by the Company with the Commission
prior to the date hereof, complied in all material respects with the
requirements of the Exchange Act applicable to such SEC Document and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they are or were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and published rules and regulations of the Commission
with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied in the
United States (“GAAP”), during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), correspond to the books
and records of the Company and fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the dates thereof
and the results of operations and cash flows for the periods then ended. Ernst &
Young LLP are independent accountants as required by the Exchange Act. The
Company is not aware of any issues raised by the

 

10

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Commission with respect to any of the SEC Documents. No other written
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
or were made, not misleading. The Company satisfies the requirements for
registration of the resale of the Registrable Securities on Form S-3 and does
not have any knowledge or reason to believe that it does not satisfy such
requirements or have any knowledge of any fact which would reasonably result in
its not satisfying such requirements. The Company is not required to file and
will not be required to file any agreement, note, lease, mortgage, deed or other
instrument entered into prior to the date hereof and to which the Company is a
party or by which the Company is bound which has not been previously filed as an
exhibit to its reports filed with the Commission under the Exchange Act, except
for those Transaction Documents required to be filed upon execution and
delivery. Except for the issuance of the Notes contemplated by this Agreement,
no event, liability, development or circumstance has occurred or exists, or is
currently contemplated to occur, with respect to the Company or its Subsidiaries
or their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws and which has not been publicly disclosed. The
Company has no reason to believe that its independent auditors will withhold
their consent to the inclusion of their audit opinion concerning the Company’s
financial statements which shall be included in the Registration Statement (as
such term is defined in the Registration Rights Agreement).

 

(g) Absence of Litigation. Except as disclosed in the section titled “Legal
Proceedings” in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2004, there is no action, suit, proceeding, inquiry or
investigation (“Material Litigation”) before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened in writing
against the Company or any of its Subsidiaries or any of the Company’s or the
Subsidiaries’ officers or directors in their capacities as such that has or
would reasonably be expected to have a Material Adverse Effect. The Company
believes it has set aside on its books provisions reasonably adequate for the
payment of all judgments, damages, costs, and expenses arising out of its
pending Material Litigation and has appropriately accounted for such reserves
under GAAP.

 

(h) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.

 

(i) Intellectual Property Rights. The Company and its Subsidiaries own, possess,
license or can acquire or make use of on reasonable terms, adequate rights or
licenses to use all trademarks, trade names, trade dress, service marks, service
mark registrations, service names,

 

11

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patents, patent rights, copyrights, inventions, technology licenses, approvals,
governmental authorizations, trade secrets, and other intellectual property
rights (collectively, “Intellectual Property”) necessary to conduct their
respective businesses as now conducted and as currently contemplated to be
conducted by them as described in the SEC Documents, except where the failure to
currently own or possess Intellectual Property does not and would not reasonably
be expected to have a Material Adverse Effect. The Company and its Subsidiaries
do not have any knowledge of any infringement by the Company or its Subsidiaries
of Intellectual Property rights of others, or of any development of similar or
identical trade secrets or technical information by others. There is no claim,
action or proceeding being made by the Company or its Subsidiaries regarding the
Intellectual Property rights of the Company or its Subsidiaries or to the
Company’s knowledge, brought or currently threatened against the Company or its
Subsidiaries regarding the Intellectual Property rights of or the use of any
Intellectual Property by the Company or its Subsidiaries of any third party
that, if the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to have a Material Adverse Effect.

 

(j) Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are commensurate with similarly situated companies engaged in similar
businesses as the Company and its Subsidiaries.

 

(k) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as currently conducted (the “Permits”), except where the
failure to possess such Permits does not and would not reasonably be expected to
have a Material Adverse Effect and neither the Company nor any of its
Subsidiaries has received any written notice of proceedings relating to the
revocation or material modification of any such Permit.

 

(l) Tax Status. The Company and each of its Subsidiaries (i) has made or filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and all such tax returns are
accurate and complete in all material respects, (ii) has paid all taxes and
other governmental assessments and charges due with respect to the periods
covered by such returns, reports and declarations, except those being contested
in good faith and for which the Company has made appropriate reserves on its
books in accordance with GAAP, and (iii) has paid or set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
(referred to in clause (i) above) apply. Except as disclosed in the SEC
Documents, there are no unpaid taxes or assessments for tax deficiencies that
are individually or in the aggregate material in amount claimed to be due by the
taxing authority of any jurisdiction, and the Company knows of no basis for any
such claim, and there are no audits in progress with respect to any tax returns,
no extension of time is in force with respect to any date on which any tax
return was or is to be filed, and no waiver or agreement is in force for the
extension of time for the assessment or payment of any tax. Except as disclosed
in the SEC Documents, all provisions for tax liabilities of the Company and each
of its Subsidiaries have been disclosed in the Company’s financial statements
and made in accordance with GAAP consistently applied, and all liabilities for
taxes of the Company and each of its Subsidiaries attributable to periods prior
to or ending on the Closing Date have been adequately disclosed in the Company’s
financial statements.

 

12

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(m) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Articles of Incorporation, the laws of the state of its incorporation
or the laws of any other state which is applicable to the Buyers as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company’s issuance of the Securities and the Buyers’ ownership, voting (to
the extent applicable) or disposition of the Securities.

 

(n) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries,
nor, to the Company’s knowledge, any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in the course of
his actions for, or on behalf of, the Company or any Subsidiary used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

 

(o) Confidential Private Placement Memorandum. The information supplied by the
Company for inclusion or incorporation by reference in the Confidential Private
Placement Memorandum dated as of September 28, 2005 (the “Confidential Private
Placement Memorandum”) in connection with the Offering does not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading. If, at any time
prior to the Closing Date, any event with respect to the Company shall occur
which is required to be described in the Confidential Private Placement
Memorandum, such event shall be so described, and an appropriate amendment or
supplement shall be prepared by the Company.

 

(p) Transactions With Affiliates. Other than the grant of stock options granted
pursuant to the Company’s employee benefit plans and other than as disclosed in
the SEC Documents, none of the officers, directors or employees of the Company
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than in connection with the provision of services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner, such that the transaction would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the
Securities Act.

 

13

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(q) Brokers and Finders. Except for fees payable to JMP as placement agent, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company with respect to the transactions contemplated by this Agreement.

 

(r) Absence of Certain Changes. Except as disclosed in the SEC Documents
available on the EDGAR system, since December 31, 2004, there has been no change
or development that has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

 

(s) No Material Non-Public Information. Except for the issuance of the
Securities and the transactions contemplated by this Agreement and the Company’s
intended use of the net proceeds from the sale of the Notes (which such
information shall be fully disclosed in the Current Report on Form 8-K filed
pursuant to Section 4(g)(1) hereof), the Company has not provided the Buyers
with, and the Confidential Private Placement Memorandum does not contain,
material non-public information.

 

(t) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an “affiliate” of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more
than 10% of the Common Stock (as defined for purposes of Rule 13d-3 of the
Exchange Act). The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase of
the Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives. The Company
acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 2.

 

(u) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion of the Notes will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and the Notes is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders of
the Company.

 

(v) Insolvency. The Company has not taken any steps to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at each Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(v), “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay the

 

14

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Company’s total debt, (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

 

(w) Employee Relations.

 

(1) Except as disclosed in the SEC Documents, neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company (as defined
in Rule 501(f) of the Securities Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment
with the Company, except that Martin D. Brew, Treasurer and Chief Accounting
Officer, and the Company have agreed that Mr. Brew will terminate his employment
with the Company effective April 1, 2006. No executive officer of the Company,
to the knowledge of the Company, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.

 

(2) The Company and its Subsidiaries are in compliance with all federal, state,
local and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

 

(x) Title. The Company and its Subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except for such (i) as set forth in the SEC Documents or (ii) as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.

 

(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply has or could be reasonably expected to have, individually or in the
aggregate, a

 

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Material Adverse Effect. The term “Environmental Laws” means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

 

(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

 

(aa) Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference.

 

(bb) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
with respect to the Company as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are effective with
respect to the Company as of the date hereof, except where such noncompliance
does not have and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

 

SECTION 4. Covenants.

 

(a) Obligations. Each party shall use commercially reasonable efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 5
and 6 of this Agreement.

 

(b) Form D and Blue Sky. The Company agrees to file timely a Form D with the
Commission with respect to the Securities as required under Regulation D and to
provide, upon request, a copy thereof to each Buyer. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification) and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all timely filings and reports relating to the
offer and sale of the Securities required under applicable securities or

 

16

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“Blue Sky” laws of the states of the United States following the Closing Date.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(b).

 

(c) Reporting Status. With a view to making available to the Investors (as that
term is defined in the Registration Rights Agreement) the benefits of Rule 144
promulgated under the Securities Act or any similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration (“Rule 144”), the Company shall:
(1) make and keep public information available, as those terms are understood
and defined in Rule 144; (2) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and (3) furnish to each Investor, so long as such Investor
owns Registrable Securities (the “Reporting Period”), promptly upon request,
(A) a written statement by the Company, if true, that it has complied with the
applicable reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company and copies of such other reports and documents so filed by the Company,
(C) the information required by Rule 144A(d)(4) (or any successor rule) under
the Securities Act, and (D) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

 

(d) Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Notes as described in the Confidential Private Placement Memorandum.

 

(e) Reservation of Shares. The Company shall take all actions necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than one hundred ten percent (110%) of the number of shares of Common Stock (the
“Reservation Amount”) needed to provide for the issuance of the Conversion
Shares upon conversion of all of the Notes without regard to any limitations on
conversions.

 

(f) Listing. The Company shall promptly use its best efforts to secure the
listing of all of the Conversion Shares upon each national securities exchange
and automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, shall maintain, so
long as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of the Transaction
Documents. So long as any Securities are outstanding, the Company shall maintain
the Common Stock’s authorization for quotation or listing on The New York Stock
Exchange, Inc., the American Stock Exchange, Inc. or The Nasdaq National Market
or SmallCap Market (the principal market on which the Common Stock is then
traded, the “Principal Market”). The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).

 

(g) Filing of Form 8-K. Prior to 8:30 a.m. New York time on the Business Day
following the date hereof, the Company shall issue a press release announcing
the transactions contemplated hereby and use reasonable best efforts to file,
within one Business Day after the date hereof, a Current Report on Form 8-K with
the Commission describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K (i) such press release, (ii) this Agreement and the Exhibits hereto,

 

17

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(iii) the form of Note and (iv) the Registration Rights Agreement, each in the
form required by the Exchange Act; provided, however, that all references to the
names of the Buyers shall be redacted from any press release filed in connection
with the transactions contemplated hereby. “Business Day” means any day other
than Saturday, Sunday or other day on which commercial banks in the City of New
York are required by law to remain closed.

 

(h) Tax Matters. If the Company shall be required to withhold or deduct any tax
or other governmental charge from any payment made hereunder or under any Note
to any Buyer, then, subject to the last sentence of this Section 4(h), the
Company shall pay to such Buyer such additional amounts as are necessary such
that such Buyer actually receives the amount such Buyer would have received if
no such withholding or deduction had been required. If any Buyer is organized
under the laws of a jurisdiction other than the United States, any State thereof
or the District of Columbia (a “Non-United States Buyer”), such Buyer shall
deliver to the Company either (a) two (2) copies of either United States
Internal Revenue Service Form W-8BEN or Form W-8ECI, or (b) in the case of a
Non-United States Buyer claiming exemption from United States Federal
withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder (the
“Code”) with respect to payments of “portfolio interest”, a certificate in form
and substance reasonably acceptable to the Company representing that such
Non-United States Buyer is not a bank for purposes of Section 881(c) of the
Code, is not a ten percent (10%) shareholder (within the meaning of
Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign
corporation related to the Company (within the meaning of Section 864(d)(4) of
the Code), together with Internal Revenue Service Form W-8 or W-9, as
applicable, in all cases such forms and other documents being properly completed
and duly executed by such Non-United States Buyer claiming complete exemption
from United States Federal withholding tax on payments of interest by the
Company (or accruals of original issue discount) under the Notes. In addition,
each Buyer that is not otherwise exempt from “back-up withholding” shall deliver
to the Company properly completed and duly executed Internal Revenue Service
Form W-8 or W-9 indicating that such Buyer is subject to “back-up withholding”
for United States Federal income tax purposes. The forms and other documents
required to be delivered pursuant to the two preceding sentences shall be
delivered within ten (10) days after the Closing Date. The Company shall not be
required to pay any additional amounts (x) to any Non-United States Buyer in
respect of United States Federal withholding tax or (y) to any Buyer in respect
of United States Federal “back-up withholding” tax to the extent that the
obligation to pay such additional amounts would not have arisen but for a
failure by such Non-United States Buyer or Buyer, as the case may be, to comply
with the provisions of this Section 4(h).

 

(i) Violation of Laws. The business of the Company and its Subsidiaries shall
not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations do not and would not
reasonably be expected not to, either individually or in the aggregate, have a
Material Adverse Effect.

 

(j) Limits on Additional Issuances. The Company shall not, in any manner, until
the later of (i) 90 days after the Closing or (ii) the date on which the
Registration Statement required to be filed pursuant to Section 2(a) of the
Registration Rights Agreement is declared effective by the Commission (the
“Effective Date”), issue or sell any Common Stock or rights, warrants or options
to subscribe for or purchase Common Stock or any security directly or indirectly

 

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convertible into or exchangeable or exercisable for Common Stock (the “Equity
Limitation”). The Equity Limitation shall not apply (i) to the issuance of
Conversion Shares pursuant to the Notes, (ii) to the issuance of securities
pursuant to the conversion or exchange of convertible or exchangeable securities
or the exercise of warrants or options, in each case outstanding on the date
hereof, provided such securities, warrants and options are not amended after the
date hereof, (iii) if holders representing a majority of the outstanding
principal amount of the Notes give their prior written consent to such issuance
or sale, (iv) if the issuance is pursuant to employee benefits plans approved by
the Company’s Board of Directors, (v) to the filing of a Registration Statement
on Form S-8, (vi) if the securities are issued for consideration other than cash
in connection with a bona fide business acquisition by the Company whether by
merger, consolidation, purchase of assets, sale or exchange of stock or
otherwise, (vii) to the issuance of securities in connection with the Jameson
Stock Awards Program or (viii) if the issuance is in connection with a
(A) commercial banking arrangement, (B) equipment financing, (C) sponsored
research, (D) collaboration, (E) technology licensing, (F) development agreement
or (G) other strategic partnership; provided, however, that with respect to
(C) through (G) hereof, the primary purpose of such transaction is not to raise
equity capital.

 

(k) CUSIP Numbers. The Company in issuing the Securities shall use “CUSIP”
numbers (if then generally in use), and shall use such “CUSIP” numbers in
notices to holders as a convenience to holders thereof; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice to
such holders and that reliance may be placed only on other identification
numbers printed on such Securities, and any such Company action referenced in
such notice (including, without limitation, redemption or automatic conversion
of Notes) shall not be affected by any defect in or omission of such numbers.

 

(l) Accounting Matters. The Company shall use its reasonable best efforts to
cause to be delivered to the Buyers a letter in form and substance reasonably
acceptable to the Buyers and reasonably customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
offerings similar to the Offering.

 

(m) Nonpublic Information. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide a Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the Forms 8-K with the SEC pursuant to Section 4(g) hereof without the express
written consent of such Buyer; provided, however that the foregoing shall not
restrict in any way the distribution of any information to any Buyer by the
Company or its Subsidiaries and its and each of their respective officers,
directors, employees and agents (i) as reasonably required by the terms of the
Transaction Documents or (ii) in connection with any request made to any Buyer
by or on behalf of the Company to waive, amend or modify any provision of the
Transaction Documents.

 

(n) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be

 

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deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents, and the Company has
no knowledge of any facts that would establish that the Buyers are acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Buyer confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each Buyer shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

 

(o) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates registered in the name of each Buyer or their respective
nominee(s), for the Conversion Shares in such amounts as specified from time to
time by a Buyer to the Company upon conversion of the Notes and in accordance
with their respective terms (the “Irrevocable Transfer Agent Instructions”),
substantially in the form attached hereto as Exhibit C. Prior to transfer or
sale pursuant to a registration statement or Rule 144 under the Securities Act
of the Conversion Shares, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company represents and
warrants that no instruction inconsistent with the Irrevocable Transfer Agent
Instructions referred to in this Section 4 will be given by the Company to its
transfer agent and that the Securities shall be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement, the
Notes and the Registration Rights Agreement. Subject to the terms of the Notes,
if a Buyer provides the Company with an opinion of counsel, in form reasonably
acceptable to the Company, to the effect that a sale, assignment or transfer of
the Securities has been made without registration under the Securities Act or
that the Securities can be sold pursuant to Rule 144(k) without any restriction
as to the number of securities acquired as of a particular date that can then be
immediately sold, and provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates, in such
name and in such denominations as specified by such Buyer and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby.

 

(p) If the Company is obligated pursuant to Section 2(g) to issue and deliver to
a Buyer a Note or certificate representing shares of Common Stock without a
Securities Act Legend and/or an Affiliate Legend and the Company shall not have
delivered such unlegended Note or certificate within ten (10) Business Days
after the date of the request by Buyer for such unlegended Note or certificate,
the Company shall pay liquidated damages to such Buyer, (i) in the case of a
Note, in the amount of one-half percent (0.5%) per month of the outstanding
principal amount of such Note or (ii) in the case of a certificate representing
shares of Common Stock, in the amount of one-half percent (0.5%) per month of
the sum of (A) the number of shares of Common Stock represented by such
certificate multiplied by (B) the “Closing Sale Price” (as such term is defined
in the Note) on the date of the request by Buyer for such unlegended
certificate.

 

20

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(q) If a Buyer has elected to be governed by Section 2(k)(A) or Section 2(k)(B),
the Company shall, within two Business Days of receipt of a written request from
such Buyer, inform such Buyer of the number of shares of Common Stock
outstanding as of the most recent practicable date. The Company acknowledges
that any Buyer may, in accordance with Rule 13d-1(j) of the Exchange Act, in
determining the number of shares of Common Stock outstanding, rely upon
information in the Company’s most recent quarterly, annual or current report
filed with the Commission.

 

SECTION 5. Conditions to the Company’s Obligation to Close. The obligation of
the Company to issue and sell the Notes to each respective Buyer at the Closing
is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing such Buyer with prior written notice thereof:

 

(a) Transaction Documents. Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.

 

(b) Payment of Purchase Price. Such Buyer shall have delivered to the Company
the purchase price for the Notes being purchased by such Buyer at the Closing,
by wire transfer of immediately available funds pursuant to the wire
instructions attached hereto as Schedule A.

 

(c) Representations and Warranties; Covenants. The representations and
warranties of such Buyer shall be true, correct and complete in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Section 2 above, in which case such
representations and warranties shall be true, correct and complete without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date (which shall be true, correct and complete as of such
date)), and such Buyer shall have performed, satisfied and complied with in all
material respects the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by such Buyer
at or prior to the Closing Date.

 

SECTION 6. Conditions to Each Buyer’s Obligation to Purchase. The several
obligations of each Buyer hereunder to purchase its Notes from the Company at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:

 

(a) Transaction Documents. The Company shall have executed each of the
Transaction Documents and delivered the same to such Buyer.

 

(b) No Delisting of Common Stock. The Common Stock (i) shall be designated for
quotation or listed on the Principal Market and (ii) shall not have been
suspended by the Commission or the Principal Market from trading on the
Principal Market nor shall suspension

 

21

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by the Commission or the Principal Market have been threatened either (A) in
writing by the Commission or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.

 

(c) Representations and Warranties; Covenants. The representations and
warranties of the Company shall be true, correct and complete in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Section 3 of this Agreement, in which
case such representations and warranties shall be true, correct and complete
without further qualification) as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date (which shall be true, correct and complete as of
such date)) and the Company shall have performed, satisfied and complied with in
all material respects the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer or Chief Financial Officer of the
Company, dated as of the Closing Date, to the foregoing effect.

 

(d) Opinion of Counsel. The Company shall have delivered to such Buyer the
opinion of Conner & Winters, LLP, dated as of the Closing Date, in the form of
Exhibit D attached hereto.

 

(e) Delivery of Notes. The Company shall have executed and delivered to such
Buyer the Notes (in such denominations of not less than One Thousand United
States Dollars ($1,000) as such Buyer shall reasonably request) for the Notes
being purchased by such Buyer at the Closing.

 

(f) Reservation of Common Stock. As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Notes, the number of shares of Common Stock
equal to the Reservation Amount (as defined in Section 4(e) of this Agreement).

 

(g) Irrevocable Transfer Agent Instructions. The Company shall have delivered
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C attached
hereto, to the Company’s transfer agent.

 

(h) Good Standing Certificates. The Company shall have delivered to JMP (i) a
certificate evidencing the incorporation and good standing of the Company in
Georgia issued by the Secretary of State of the State of Georgia as of a recent
date; and (ii) a certificate of good standing (or appropriate counterpart) from
the appropriate governmental authority in each domestic jurisdiction in which
Subsidiaries are incorporated or organized as of a recent date.

 

(i) Secretary’s Certificate. The Company shall have delivered to such Buyer a
secretary’s certificate, dated as of the Closing Date, certifying as to
(i) adoption of the form of resolutions of the Board of Directors of the Company
consistent with Section 3(b) of this Agreement and in a form reasonably
acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.

 

(j) Filings; Authorizations. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant

 

22

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to this Agreement in compliance with such laws, and shall have obtained all
authorizations, approvals and permits necessary to consummate the transactions
contemplated by the Transaction Documents and such authorizations, approvals and
permits shall be effective as of the Closing Date.

 

(k) No Injunctions. No temporary restraining order, preliminary or permanent
injunction or other order or decree, and no other legal restraint or prohibition
shall exist which prevents or arguably prevents the consummation of the
transactions contemplated by the Transaction Documents, nor shall any proceeding
have been commenced or threatened with respect to the foregoing.

 

(l) No Material Adverse Effect. Between the time of execution of this Agreement
and the Closing Date, (i) no Material Adverse Effect shall occur or become known
(whether or not arising in the ordinary course of business) and (ii) no
transaction which is material and unfavorable to the Company shall have been
entered into by the Company.

 

(m) Minimum Offering. The Company shall have confirmed in writing to JMP that it
will be issuing at least an aggregate of $20,000,000 principal amount of Notes
to the Buyers on the Closing Date.

 

(n) Comfort Letter. The Company’s independent public accountants shall have
delivered to the Buyers a letter in form and substance reasonably acceptable to
the Buyers and reasonably customary in scope and substance for comfort letters
delivered by independent public accountants in connection with offerings similar
to the Offering.

 

(o) No Stop Orders. No stop order or suspension of trading shall have been
imposed by the Principal Trading Market, the Commission or any other
governmental or regulatory body with respect to public trading in the Common
Stock.

 

(p) Consents. The Company shall have obtained any consents listed on Schedule
3(e).

 

SECTION 7. Indemnification.

 

(a) Indemnification by the Company. In consideration of each Buyer’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and JMP’s agreement to act as exclusive placement agent and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless JMP
and each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (collectively, “Claims”), incurred
by any Indemnitee as a result of, or arising out of, or relating to (i) an
untrue statement or alleged untrue statement of a material fact contained in the
Confidential Private Placement Memorandum, or in any amendment or supplement
thereto, or in any Blue Sky filings executed

 

23

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by the Company or based on any information furnished in writing by the Company
and filed in any jurisdiction in order to qualify any or all of the Securities
under (or obtain exemption from) the securities laws thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or
(ii) any breach of any representation, warranty, covenant or agreement made by
the Company in the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Claims which is permissible under applicable law. Subject to Section 7(b) of
this Agreement, the Company shall reimburse the Indemnitees, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with the investigating or
defending any such Claim.

 

(b) Procedures for Indemnification. Promptly after an Indemnitee has knowledge
of any Claim as to which such Indemnitee reasonably believes indemnity may be
sought or promptly after such Indemnitee receives notice of the commencement of
any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnitee shall, if a Claim in respect thereof is to be
made against the Company under this Section 7, deliver to the Company a written
notice of such Claim, and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnitee;
provided, however, that an Indemnitee shall have the right to retain its own
counsel if, in the reasonable opinion of counsel retained by the Company, the
representation by such counsel of the Indemnitee and the Company would be
inappropriate due to actual or potential differing interests between such
Indemnitee and the Company; provided, further, that the Company shall not be
responsible for the reasonable fees and expense of more than one (1) separate
legal counsel for such Indemnitee. In the case of an Indemnitee, the legal
counsel referred to in the immediately preceding sentence shall be selected by
the Buyers holding at least a majority in interest of the Securities to which
the Claim relates. The Indemnitee shall cooperate fully with the Company in
connection with any negotiation or defense of any such action or Claim by the
Company and shall furnish to the Company all information reasonably available to
the Indemnitee which relates to such action or Claim. The Company shall keep the
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any Claim effected without its prior written consent;
provided, however, that the Company shall not unreasonably withhold, delay or
condition its consent. The Company shall not, without the prior written consent
of the Indemnitee, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a full release from
all liability in respect to such Claim, action and proceeding. The failure to
deliver written notice to the Company as provided in this Agreement shall not
relieve the Company of any liability to the Indemnitee under this Section 7,
except to the extent that the Company is materially prejudiced in its ability to
defend such action.

 

(c) Survival of Representations and Warranties; Indemnification Obligations. The
representations and warranties of the Buyers and the Company set forth herein
and the obligations of the Company under this Section 7 shall survive the
transfer of the Securities by the Indemnitees.

 

24

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SECTION 8. Miscellaneous.

 

(a) Governing Law; Jurisdiction; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(b) Counterparts. This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other parties hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

 

(c) Headings. The headings of this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

 

(d) Entire Agreement. This Agreement, the Registration Rights Agreement, the
Notes and the documents referenced herein and therein constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Registration Rights Agreement and the Notes supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

 

25

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(e) Consents. All consents and other determinations required to be made by
Buyers pursuant to this Agreement shall be made, unless otherwise specified in
this Agreement, by Buyers holding at least a majority of the Conversion Shares,
determined as if all of the Notes held by Buyers then outstanding have been
converted into Conversion Shares without regard to any limitations on conversion
of the Notes; provided, that for these purposes any Securities owned directly or
indirectly by the Company or any of its affiliates shall be deemed not to be
outstanding.

 

(f) Waivers. No provision of this Agreement may be amended or waived other than
by an instrument in writing signed by the Company and Buyers holding at least a
majority of the Conversion Shares, determined as if all of the Notes held by
Buyers then outstanding have been converted into Conversion Shares without
regard to any limitations on the conversion of the Notes; provided, that for
theses purposes any Securities owned directly or indirectly by the Company or
any of its affiliates shall be deemed not to be outstanding. Notwithstanding the
preceding sentence to the contrary: (i) no amendment or waiver of the provisions
of Section 1, Section 8(e) or Section 8(f) of this Agreement shall be effective
without the approval of the holders of all outstanding Securities, (ii) no
amendment or waiver of the provisions of Section 2, Section 6, Section 7,
Section 8(k), Section 8(l) or Section 8(m) of this Agreement shall be effective
with respect to any holder of Securities unless it is approved by such holder,
and (iii) no amendment shall be effective to the extent that it applies to less
than all of the holders of the Notes then outstanding. No consideration shall be
offered or paid to any holder of any Securities to amend or consent to a waiver
or modification of any provision of any of the Transaction Documents unless the
same consideration is offered on identical terms to all of the holders of such
Securities. Notwithstanding anything herein to the contrary, no amendment shall
(i) extend the maturity of the Notes, reduce the interest rate, extend the time
for payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on redemption or
repurchase thereof or affect any amounts due to any holder or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such amendment, without the consent of the holders of all Notes then
outstanding.

 

(g) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile; or (iii) one (1) Business
Day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

 

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If to the Company:

 

Jameson Inns, Inc.

8 Perimeter Center East, Suite 8050

Atlanta, Georgia 30346

Telephone:  (770) 481-0305

Facsimile:    (770) 901-9203

Attention:    Craig R. Kitchin

 

with a copy to:

 

Conner & Winters, LLP

3700 First Place Tower

15 East Fifth Street

Tulsa, Oklahoma 74103

Telephone:  (918) 586-5711

Facsimile:    (918) 586-8548

Attention:    Lynnwood R. Moore, Jr., Esq.

 

If to JMP Securities LLC:

 

JMP Securities LLC

600 Montgomery Street, Suite 1100

San Francisco, California 94111

Telephone:  (415) 835-8900

Facsimile:    (415) 835-8920

Attention:    David J. Fullerton

 

with a copy to:

 

Gibson, Dunn & Crutcher LLP

1050 Connecticut Avenue NW

Washington, DC 20036

Telephone:  (202) 955-8500

Facsimile:    (202) 467-0539

Attention:    Brian Lane, Esq.

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto as Schedule 1, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers,

 

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or

 

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(C) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

 

(h) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

(i) Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and, to
the limited extent provided in Section 7, the Indemnitees, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person other
than JMP.

 

(j) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

(k) Successors and Assigns. This Agreement shall be binding upon the parties and
their respective successors and assigns, including any subsequent holders of the
Securities, and shall inure to the benefit of those persons and to the extent
provided in Section 8(i), JMP and the Indemnitees. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least a majority of the outstanding principal
amount of the Notes including by merger or consolidation, except pursuant to a
Change of Control (as defined in the Notes) with respect to which the Company is
in compliance with the terms of the Notes. Other than in connection with a sale
pursuant to the Registration Rights Agreement, a Buyer may assign some or all of
its rights and obligations hereunder without the consent of the Company;
provided, however, that the transferee has agreed in writing to be bound by the
applicable provisions of this Agreement and provided, further, that such
assignment shall be in connection with a transfer of all or a portion of the
Notes held by such Buyer and subject to the terms and conditions of the Notes,
as applicable.

 

(l) Publicity. The Company and JMP shall have the right to approve before
issuance any press releases or any other public statements with respect to the
transactions contemplated by the Transaction Documents; provided, however, that
neither the Company nor JMP shall have the right to issue a press release or
other public statement referring to a Buyer or its affiliates without such
Buyer’s prior written consent. JMP has the right to describe its services to the
Company in connection with the Offering and to reproduce the Company’s name and
logo in JMP’s advertisements, marketing materials and equity research reports.

 

(m) Termination. In the event that the Closing shall not have occurred with
respect to a Buyer on or before five (5) Business Days from the date hereof due
to the Company’s or such Buyer’s failure to satisfy the conditions set forth in
Sections 5 and 6 of this Agreement (and the nonbreaching party’s failure to
waive such unsatisfied conditions), the nonbreaching party shall have the option
to terminate this Agreement with respect to such breaching party at the close of

 

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business on such date without liability of any party to any other party, and the
Company or JMP, as the case may be, shall return any and all funds paid
hereunder to the applicable Buyer no later than the close of business on the
Business Day following such termination.

 

(n) Placement Agent. The Company acknowledges that it has engaged JMP as sole
placement agent in connection with the sale of the Notes. The Company
acknowledges that JMP’s fees shall be paid by wire transfer of immediately
available funds at Closing. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or brokers’ commissions
(other than for persons engaged by any Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim.

 

(o) Remedies. Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights to recover damages by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law.

 

(p) Payment Set Aside. To the extent that the Company makes a payment or
payments to any Buyer hereunder or pursuant to any of the other Transaction
Documents, or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

 

29

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IN WITNESS WHEREOF, the parties have caused this Securities Purchase Agreement
to be duly executed as of the date first written above.

 

“COMPANY” JAMESON INNS, INC.

By:

 

/s/ Thomas W. Kitchin

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[Signatures of Buyers on Following Page]

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[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

“BUYER”

--------------------------------------------------------------------------------

(print full legal name of Buyer) By:  

 

--------------------------------------------------------------------------------

    (signature of authorized representative) Name:  

 

--------------------------------------------------------------------------------

Its:  

 

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¨       Buyer hereby elects to be subject to the 9.99% conversion limitation set
forth in Section 2(k)(A)

¨       Buyer hereby elects to be subject to the 4.99% conversion limitation set
forth in Section 2(k)(B)

--------------------------------------------------------------------------------

SCHEDULE 1

 

SCHEDULE OF BUYERS

 

    

Name of Buyer

Contact Information for Buyer

--------------------------------------------------------------------------------

  

Principal Amount of

Notes

--------------------------------------------------------------------------------

1.

         

2.

         

3.

         

--------------------------------------------------------------------------------

EXHIBIT A

 

FORM OF NOTE

 

Filed as Exhibit 4.2 hereto

--------------------------------------------------------------------------------

EXHIBIT B

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

Filed as Exhibit 4.1 hereto.

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EXHIBIT C

 

FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

September 30, 2005

 

VIA FEDERAL EXPRESS

 

Registrar and Transfer Company

P.O. Box 664

Cranford, New Jersey 07016

 

  Re: Reservation of Shares of Common Stock Pursuant to Sale by Jameson Inns,
Inc., of up to $35,000,000 in Aggregate Principal Amount of 7.0% Convertible
Senior Subordinated Notes due 2010

 

Ladies and Gentlemen:

 

Jameson Inns, Inc., a Georgia corporation (the “Company”), has agreed to sell to
the buyers listed on Schedule A hereto (the “Buyers”), on the date hereof,
Thirty-Five Million United States Dollars ($35,000,000) in aggregate principal
amount of 7.0% Convertible Senior Subordinated Notes due 2010 (the “Notes”),
convertible into shares of the common stock, $0.10 par value per share (the
“Common Stock”) of the Company pursuant to that certain Securities Purchase
Agreement dated as of September 29, 2005, by and among the Company and each
Buyer (the “Securities Purchase Agreement”). Capitalized terms used herein
without definition have the meanings assigned to them in the Securities Purchase
Agreement.

 

You are hereby instructed to:

 

Establish as of the date of this letter a reserve of 13,898,918 shares of Common
Stock for issuance to holders of Notes upon conversion of their Notes (the
“Conversion Share Reserve”). The Conversion Share Reserve shall be adjusted to
appropriately reflect the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Common Stock), reorganization, recapitalization, reclassification, exchange or
other like change with respect to Common Stock occurring on or after the date
hereof.

 

A registration statement on Form S-3 to register the Common Stock issuable out
of the Conversion Share Reserve (the “Registration Statement”) will be filed
with the Securities and Exchange Commission (the “Commission”) on or before
October 10, 2005. We will forward to you copies of the filing promptly after it
is declared or deemed effective by the Commission.

--------------------------------------------------------------------------------

The certificates evidencing the shares of Common Stock issued out of the
Conversion Share Reserve will bear the restrictive legend set forth below:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

Certificates evidencing shares of Common Stock held by or transferred to an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act)
of the Company will bear the restrictive legend set forth below:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE
SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.

 

So long as you have previously received an opinion of the Company’s outside
counsel (which the Company shall direct be delivered to you by such outside
counsel upon the effectiveness of the Registration Statement covering the
resales of the Common Stock) stating that a Registration Statement covering the
resales of the Common Stock has been declared effective by the Commission under
the Securities Act, the form of which is attached hereto as Exhibit I (the
“Opinion”), the certificates representing the Common Stock sold pursuant to the
Registration Statement shall not bear any legend restricting transfer of the
Common Stock thereby and should not be subject to any stop-transfer restriction.

 

We enclose the following additional documents:

 

  1. A copy of the Securities Purchase Agreement; and

 

  2. A capitalization table listing the Buyers and their respective beneficial
ownership interests in the shares of Common Stock.

 

Please be advised that the Buyers have relied upon this instruction letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
each of the Buyers is a third party beneficiary to these instructions.

 

Please sign in the space provided below to evidence your acceptance and
acknowledgment of your responsibilities under this letter. Please call me at
770-481-0305 if you require any further information. Thank you for your
assistance.

--------------------------------------------------------------------------------

Very truly yours, JAMESON INNS, INC. By:  

 

--------------------------------------------------------------------------------

Its:  

 

--------------------------------------------------------------------------------

 

Acknowledged and Agreed:

 

REGISTRAR AND TRANSFER COMPANY

 

By:  

 

--------------------------------------------------------------------------------

Its:    

 

cc: Mr. David J. Fullerton (w/o encl.)

 

Enclosures

--------------------------------------------------------------------------------

EXHIBIT I

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

Registrar and Transfer Company

P. O. Box 664

Cranford, NJ 07016

 

  Re: Jameson Inns, Inc.

 

Ladies and Gentlemen:

 

I am counsel to Jameson Inns, Inc., a Georgia corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of September 29, 2005 (the “Securities Purchase Agreement”),
entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the
Holders 7.0% Convertible Senior Subordinated Notes due 2010 convertible into
shares of the Company’s Common Stock, par value $0.10 per share (the “Common
Stock”). Pursuant to the Securities Purchase Agreement, the Company has agreed,
among other things, to register the resale of the Conversion Shares (as defined
in the Securities Purchase Agreement) under the Securities Act of 1933, as
amended (the “1933 Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on                          , 2005, the Company
filed a Registration Statement on Form S-3 (File No. 333-                    )
(the “Registration Statement”) with the Securities and Exchange Commission (the
“SEC”) relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

 

In connection with the foregoing, I advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and I have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

--------------------------------------------------------------------------------

This letter shall serve as my standing notice to you that the Common Stock may
be freely transferred by the Holders pursuant to the Registration Statement so
long as the Holders certify they have caused a prospectus to be delivered to the
transferee. You need not require further letters from me to effect any future
legend-free issuance or reissuance of shares of Common Stock to the transferees
of the Holders as contemplated by the Company’s Irrevocable Transfer Agent
Instructions dated September 30, 2005. This letter shall serve as my standing
instructions with regard to this matter.

 

Very truly yours, [COUNSEL] By:  

 

--------------------------------------------------------------------------------

 

CC:    [LIST NAMES OF HOLDERS]

--------------------------------------------------------------------------------

EXHIBIT D

 

FORM OF COMPANY COUNSEL OPINION

 

1. The Company is a corporation validly existing in good standing under the laws
of the State of Georgia, with all requisite corporate power and authority to
own, lease and operate its properties and assets, to conduct its business as
described in the Confidential Private Placement Memorandum, and to enter into
and perform its obligations under the Transaction Documents.

 

2. The Subsidiaries are corporations, statutory business trusts, partnerships or
limited liability companies validly existing in good standing under the laws of
their respective jurisdictions of incorporation, with all requisite corporate
power and authority to own, lease and operate its properties and assets, to
conduct their businesses as described in the Confidential Private Placement
Memorandum.

 

3. The execution, delivery and performance of the Transaction Documents have
been duly authorized by all necessary corporate action on the part of the
Company and the Transaction Documents have been duly executed and delivered by
the Company.

 

4. The Transaction Documents constitute the legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.

 

5. The execution and delivery by the Company of the Transaction Documents do
not, and the Company’s performance of its obligations under the Transaction
Documents will not, (i) violate the Company’s Articles of Incorporation or
By-Laws, (ii) violate, breach or result in a default under, any existing
obligation of or restrictions on the Company under any other agreement listed in
an exhibit to the Company’s most recent annual report on Form 10-K or any
quarterly report on Form 10-Q filed since such annual report, (iii) breach or
otherwise violate any existing obligation of or restriction on the Company under
any order, judgment or decree of any state or federal court or governmental
authority binding on the Company, and known to us, or (iv) to our knowledge,
violate any current Georgia or New York federal statute, rule or regulation that
we have recognized as applicable to the Company or to transactions of the type
contemplated by the Transaction Documents.

 

6. The Notes have been duly authorized by all necessary corporate action on the
part of the Company and, upon payment for and delivery of the Notes in
accordance with the Purchase Agreement, to our knowledge will be made and issued
free of preemptive or similar rights.

 

7. The Conversion Shares have been duly authorized and reserved for issuance
upon conversion of the Notes by all necessary corporate action on the part of
the Company and, upon conversion of the Notes and delivery of the Conversion
Shares in accordance with the Notes, the Conversion Shares will be validly
issued, fully paid and nonassessable and, to our knowledge, free of preemptive
or similar rights.

 

8. The offer and sale of the Securities by the Company will not be integrated
with

--------------------------------------------------------------------------------

any prior or contemporaneous offers or sales by the Company for purposes of the
Securities Act. The Company is currently offering shares under the Jameson Stock
Awards Program pursuant to a registration statement (file no. 333-119016) which
was declared effective by the Commission on June 7, 2005. In this regard, we
have reviewed the five criteria of integration set forth in Rule 502(a) of
Regulation D promulgated by the Commission under the Securities Act and
considered their application to the Jameson Stock Awards Program and the
offering of the Notes. We believe that notwithstanding that the two offerings
are being made at or about the same time and could be considered (under
positions taken by Commission in certain of its no-action letters and other
pronouncements) to involve the same class of securities, the offerings will not
be integrated because they have different purposes, involve different plans of
financing and, with respect to the shares issued to participants in the Jameson
Stock Awards Program in respect of hotel stay credits (which, we understand,
represent all of the shares issued under that Program as of this date involve
different types of consideration. We believe that this conclusion is reasonable
under the applicable facts and regulations, but our opinion is not binding upon
the Commission or upon any courts or tribunals where any action or proceeding
may be initiated in which it is claimed that these offerings should be
integrated.

 

9. No order, consent, permit or approval of any Georgia, New York or federal
governmental authority that we have recognized as applicable and material to the
Company or to the transactions of the type contemplated by the Transaction
Documents is required on the part of the Company for the execution and delivery
of, and performance of its obligations under, the Transaction Documents except
as may be required under applicable state and federal securities laws and
regulations applicable to the offer and sale of the Securities and by federal
and state securities laws with respect to the Company’s obligations under the
Registration Rights Agreement.

 

10. Assuming the accuracy of your representations in Section 2 of the Securities
Purchase Agreement and assuming that no general solicitation or advertising has
been engaged in by JMP Securities LLC, the sales agent engaged by the Company to
assist in the offering of the Notes, no registration under the Securities Act is
required for the purchase and sale of the Notes in the manner contemplated by
the Purchase Agreement and the Confidential Private Placement Memorandum.
Assuming that the exemption provided by Section 3(a)(9) of the Securities Act
would be available, no registration under the Securities Act will be required
for the issuance of the Conversion Shares in the manner contemplated by the
Notes.

 

11. We do not know of any contract or other document of a character required to
be filed as an SEC Document which is not filed as required.

 

12. The SEC Documents incorporated by reference in the Confidential Private
Placement Memorandum, on the respective dates they were filed, appeared on their
face to comply in all material respects with the requirements as to form for
reports on Form 10-K, Form 10-Q, Form 8-K and Schedule 14-A, except that we
express no opinion concerning the financial statements and other financial or
statistical information contained or incorporated by reference therein or the
exhibits thereto.

 

In the course of acting as counsel for the Company in connection with the
preparation by the Company of the Confidential Private Placement Memorandum, we
have participated in

--------------------------------------------------------------------------------

conferences with officers and representatives of the Company, the independent
accountants of the Company, and representatives of JMP and their counsel, at
which time the contents of the Confidential Private Placement Memorandum and
related matters were discussed. Although we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Confidential Private Placement Memorandum, based on
such participation, no facts have come to our attention that would lead us to
believe that the Confidential Private Placement Memorandum (except that we
express no view with respect to the financial statements, including the notes
thereto, and schedules or other financial data included therein or the exhibits
contained in the SEC Documents) as of the date thereof contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.

--------------------------------------------------------------------------------

SCHEDULE 3(a)

 

Subsidiaries

 

Jameson Alabama, Inc., an Alabama corporation

Jameson Properties, LLC, a Georgia limited liability company

Jameson Properties of Tennessee, L.P., a Tennessee limited partnership

Jameson Lodging, LLC, a Georgia limited liability company

SIE Corporation, an Indiana corporation

Jameson Outdoor Advertising Company, a Georgia corporation

Kitchin Hospitality, LLC, a Georgia limited liability company

Jameson Franchising Company, LLC, a Georgia limited liability company

Jameson Inns Financing 01, LP, a Georgia limited partnership

Jameson Inns Financing 02, LP, a Georgia limited partnership

Jameson Management Company, a Georgia corporation

Jameson Inns Financing Trust I, a Georgia statutory business trust

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SCHEDULE A

 

Company Wire Instructions

--------------------------------------------------------------------------------

SECTION 1.    Purchase and Sale of Notes    1 SECTION 2.    Buyer’s
Representations and Warranties    2 SECTION 3.    Representations and Warranties
of the Company    7 SECTION 4.    Covenants    16 SECTION 5.    Conditions to
the Company’s Obligation to Close    21 SECTION 6.    Conditions to Each Buyer’s
Obligation to Purchase    21 SECTION 7.    Indemnification    23 SECTION 8.   
Miscellaneous    25

 

SCHEDULES

 

Schedule 3(a)    Subsidiaries Schedule A    Company Wire Instructions Schedule
3(e)    Consents

 

EXHIBITS

 

Schedule 1    Schedule of Buyers Exhibit A    Form of Note Exhibit B    Form
Registration Rights Agreement Exhibit C    Irrevocable Transfer Agent
Instructions Exhibit D    Form of Opinion of Company Counsel Exhibit E   
Schedule of Fees