Exhibit 4.1
Execution Copy
REGISTRATION RIGHTS AGREEMENT
between
U.S. FRANCHISE SYSTEMS, INC.
and
ALPINE HOSPITALITY EQUITIES LLC
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Dated as of April 28, 1998
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TABLE OF CONTENTS
1. Definitions.....................................................................................1
2. Registration Rights.............................................................................3
2.1 (a) Incidental Registration.......................................................3
(b) Demand Registrations..........................................................5
(c) Expenses......................................................................6
(d) Holdback Agreements...........................................................6
(e) Seller Information............................................................6
(f) Notice to Discontinue.........................................................6
(g) Registration Procedures.......................................................7
2.2 Underwritten Offerings................................................................10
2.3 Reports Under the Exchange Act........................................................10
3. Tag-Along Rights...............................................................................10
4. Indemnification; Contribution..................................................................12
4.1 Indemnification by the Company.......................................................12
4.2 Indemnification by Purchaser..........................................................12
4.3 Conduct of Indemnification Proceedings................................................13
4.4 Contribution..........................................................................13
5. Miscellaneous..................................................................................14
5.1 Recapitalizations, Exchanges, etc.....................................................14
5.2 No Inconsistent Agreements............................................................14
5.3 Successors and Assigns; Third Party Beneficiaries.....................................14
5.4 Specific Performance..................................................................14
5.5 Survival of Representations and Warranties............................................15
5.6 Entire Agreement......................................................................15
5.7 Severability..........................................................................15
5.8 Notices...............................................................................15
5.9 Governing Law.........................................................................16
5.10 Counterparts..........................................................................16
REGISTRATION RIGHTS AGREEMENT, dated as of April 28, 1998,
among U.S. FRANCHISE SYSTEMS, INC., a Delaware corporation (the "Company"),
ALPINE HOSPITALITY EQUITIES LLC, a Delaware limited liability company (the
"Purchaser"), Michael A. Leven ("Leven") and Neal K. Aronson ("Aronson").
Pursuant to a Securities Purchase Agreement, dated as of the
date hereof, between the Company and the Purchaser (the "Purchase Agreement"),
the Purchaser has agreed to purchase from the Company, and the Company has
agreed to issue and sell to the Purchaser, 350,000 shares (the "Shares") of
Class A Common Stock, par value $.01 per share (the "Class A Stock"), of the
Company.
The parties hereby agree as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with the Person in question. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act and the
Exchange Act.
"Common Stock" means shares of Class A Common Stock, par value
$.01 each, of the Company and shares of Class B Common Stock, par value $.01
each, of the Company.
"Effective Period" means a period commencing on the date of
this Agreement and ending on the earliest of (i) the first date as of which all
Registrable Securities cease to be Registrable Securities and (ii) the third
anniversary of the date of the Closing Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any superseding Federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such superseding Federal statute.
"Indemnified Party" has the meaning set forth in Section 4.3.
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"NationsBank Loan" means that certain loan in the principal
amount of $10,000,000 to be made concurrent herewith by NationsBank, N.A., as
lender, to the Company, as borrower.
"Person" means an individual or a corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Principal Stockholder" means each of Leven and Aronson.
"Registrable Securities" means each of the following: (a) any
and all Shares owned by the Purchaser and (b) any shares of Common Stock issued
or issuable to the Purchaser with respect to the Shares by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise and shares of Common
Stock issuable upon conversion, exercise or exchange thereof. Registrable
Securities will cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective under
the Securities Act by the Commission and such Registrable Securities have been
disposed of pursuant to such effective Registration Statement or (ii) such
securities shall have been sold pursuant to Rule 144 (or any successor
provision) under the Securities Act.
"Registration Expenses" means all expenses arising from or
incident to the Company's performance of, or compliance with, this Agreement,
including, without limitation, all registration, filing and listing fees; all
fees and expenses of complying with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue sky"
qualifications of Registrable Securities); all printing, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and its
independent public accountants; the fees, disbursements and expenses of one firm
of counsel (other than in-house counsel) retained by the holders of Registrable
Securities being registered; the expenses of any special audits required by or
incident to such performance and compliance; and any liability insurance or
other premiums for insurance obtained in connection with any registration
pursuant to the terms of this Agreement.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any superseding Federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
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2. Registration Rights.
2.1 (a) Incidental Registration.
(i) If the Company, at any time or from
time to time, proposes to register any of its shares of Common Stock
under the Securities Act (other than (i) a registration of an employee
stock ownership, stock option, stock purchase or other employee
compensation plan or arrangement adopted in the ordinary course of
business on Form S-8 (or any successor form), or any dividend
reinvestment plan or (ii) a registration of securities on Form S-4 (or
any successor form), including, without limitation, in connection with
a proposed issuance in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation)
then the Company will at each such time give written notice (given at
least 30 days prior to the proposed filing date) describing the
proposed registration and distribution to the Purchaser of the
Company's intention to do so and, upon the written request of the
Purchaser, made within 30 days after the receipt of any such notice
(which request shall specify the amount of Registrable Securities
proposed to be sold by the Purchaser and the intended method of
disposition thereof), the Company will, as provided in this Section 2,
use its reasonable best efforts to effect the registration under the
Securities Act of all of the Registrable Securities that the Company
has been so requested to register by the Purchaser, to the extent
required to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities to be
registered (each, an "Incidental Registration"); provided, however,
that if, at any time after giving written notice of its intention to
register any of its shares of Common Stock and prior to the effective
date of the Registration Statement filed in connection with such
Incidental Registration, the Company shall determine for any reason not
to register such shares of Common Stock, the Company may, at its
election, give written notice of such determination to the Purchaser
and, thereupon, shall be relieved from its obligation to register any
Registrable Securities in connection with such Incidental Registration.
In connection with any Incidental Registration under this Section 2.1
involving an underwriter, or a distribution with the assistance of a
selling agent, the right of the Purchaser to participate in such
Incidental Registration shall be conditioned upon the Purchaser's
participation in such underwriting or distribution.
(ii) Priority on Primary Registrations.
If an Incidental Registration is an underwritten primary registration
on behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the amount of securities
requested to be included in such registration exceeds the amount which
can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in
such registration along with securities requested to be included in
such registration by other holders exercising similar piggyback rights,
pro rata among the
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holders of such Registrable Securities and such other holders on the
basis of the number of shares requested to be included therein by each
such holder, and (iii) third, other securities requested to be included
in such registration.
(iii) Priority on Secondary Registrations.
If an Incidental Registration is an underwritten secondary registration
on behalf of holders of the Company's securities exercising demand
registration rights, and the managing underwriters advise the Company
in writing that in their opinion the amount of securities requested to
be included in such registration exceeds the amount which can be sold
in such offering without adversely affecting the marketability of the
offering, the Company will include in such registration (i) first, the
securities requested to be included therein by the holders exercising
demand registration rights, (ii) second, the Registrable Securities
requested to be included in such registration along with securities
requested to be included in such registration by other holders
exercising similar piggyback rights, pro rata among the holders of such
Registrable Securities and such other holders on the basis of the
number of shares requested to be included therein by each such holder,
and (iii) third, other securities requested to be included in such
registration.
(iv) Waiver of Incidental Rights.
Purchaser acknowledges that in connection with the acquisition by the
Company of the Best Inns brand of hotels from America's Best Inns,
Inc., the Company intends to enter into the NationsBank Loan and that
Leven, Andrea Leven and Aronson intend to pledge as collateral under
the NationsBank Loan (the "Pledge") an aggregate of at least
$14,300,000 worth of their shares (the "Collateral Shares") pursuant to
separate Stock Pledge Agreements to be entered into with NationsBank
(the "Pledge Agreements"). In addition, Purchaser acknowledges that
NationsBank and the Company intend, concurrently with the Loan, to
enter into a Registration Rights Agreement (the "NationsBank
Agreement") with respect to such Collateral Shares, the provisions of
which are only to have effect at such time, if at all, when the
Collateral Shares are foreclosed upon in accordance with the terms of
the Pledge Agreements. Notwithstanding the above, Purchaser hereby
waives any right it may have to notice of the Company's filing of a
Registration Statement pursuant to the terms and provisions of the
NationsBank Agreement, and waives any registration rights it has or may
have under this Agreement and any other agreement with the Company or
otherwise to include in such Registration Statement(s) any shares of
Common Stock beneficially owned by Purchaser, without regard as to
whether any other holder of capital stock (or stock equivalents) of the
Company exercises any registration rights in respect of, or
participates in, an offering of securities of the Company related to
such Registration Statement.
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(b) Demand Registrations.
(i) The Purchaser may request
registration under the Securities Act of all or any portion of its
Registrable Securities in accordance with the provisions of this
Section 2(b). All registrations requested pursuant to this Section 2(b)
are referred to herein as "Demand Registrations." Each request for a
Demand Registration shall specify the number of Registrable Securities
requested to be registered. Within ten (10) days after receipt of any
such request, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and shall
include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein
within fifteen (15) days after the receipt of the Company's notice.
(ii) The Purchaser shall be entitled to
request no more than one Demand Registration in accordance with this
Section 2(b). A registration shall not count as the permitted Demand
Registration until it has become effective.
(iii) If the Demand Registration is an
underwritten offering and the managing underwriters advise the Company
in writing that in their opinion the number of Registrable Securities
and other securities requested to be included in such offering exceeds
the number of Registrable Securities and other securities, if any, that
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities
included in such registration, the Company shall include in such
registration prior to the inclusion of any securities that are not
Registrable Securities the number of Registrable Securities requested
to be included which in the opinion of such underwriters can be sold in
an orderly manner within the price range of such offering.
(iv) The Company shall not be obligated to
effect any Demand Registration within 60 days after the effective date
of a previous offering of Common Stock registered under the Securities
Act. The Company may postpone for up to 90 days the filing or the
effectiveness of a registration statement for a Demand Registration if
the Company's board of directors determines in its reasonable good
faith judgment that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by
the Company or any of its subsidiaries to engage in any acquisition
(other than in the ordinary course of business) or any merger,
consolidation, tender offer, reorganization or similar transaction;
provided that (a) the Company may exercise its right to delay the
Demand Registration only once in any twelve-month period and (b) if the
Demand Registration is delayed hereunder, the Purchaser shall be
entitled to withdraw such request and, if such request is withdrawn,
such Demand Registration shall not count as the permitted Demand
Registration hereunder and the Company shall pay all Registration
Expenses in connection with such terminated registration.
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Notwithstanding anything to the contrary in this Section 2(b)(iv), (x)
the Company may not prevent, delay or postpone any Demand Registration
and (y) the Purchaser shall not be subject to any lockup or similar
agreements following the Demand Registration, in either case for more
than 180 days during any 360-day period.
(v) The Company shall have the right to
select the investment banker(s) and manager(s) to administer the
offering, subject to the consent of Purchaser, such consent not to be
unreasonably withheld.
(c) Expenses. The Company shall pay all
Registration Expenses in connection with any registration pursuant to this
Section 2, whether or not such registration becomes effective; provided, that
all underwriting discount and selling commissions applicable to the Registrable
Securities shall be borne by the holders selling such Registrable Securities, in
proportion to the number of Registrable Securities sold by each such holder;
provided further that, if the Purchaser has requested to include Registrable
Securities that may, in the reasonable opinion of counsel to the Company
delivered to such Purchaser, be distributed to the public without limitation as
to volume pursuant to Rule 144 (or any successor provision of the Securities
Act) the Purchaser shall pay its pro rata portion of all Registration Expenses
incurred in connection with such offering.
(d) Holdback Agreements. The Purchaser agrees
not to effect any public sale or distribution of any Registrable Securities
being registered or of any securities convertible into or exchangeable or
exercisable for such Registrable Securities, including a sale pursuant to Rule
144 under the Securities Act (i) during the 90 day period beginning on the
effective date of such Registration Statement (except as part of such
registration), in the case of a non-underwritten public offering, or (ii) during
the reasonable period, if any, requested by the underwriters, in the case of an
underwritten public offering, provided, in each case, that all directors of the
Company, Principal Stockholders and other 5% or greater beneficial owners of
shares of the Common Stock of the Company seeking to include shares of Common
Stock in such Registration Statement are similarly restricted.
(e) Seller Information. The Company may require
each seller of Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such securities as the Company may from time to time reasonably request in
writing and as shall be required by law in connection therewith.
(f) Notice to Discontinue. The Purchaser agrees
that, upon receipt of any notice from the Company of the happening of any event
that causes the Registration Statement to include an untrue statement of a
material fact or to omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, Purchaser shall forthwith discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Purchaser's receipt of the
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copies of a supplemented or amended prospectus and, if so directed by the
Company, Purchaser shall deliver to the Company all copies, of the prospectus
covering such Registrable Securities that is current at the time of receipt of
such notice.
(g) Registration Procedures. Whenever the
Purchaser has requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its reasonable best efforts to effect
the registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company
shall as expeditiously as reasonably practicable:
(i) prepare and file with
the Commission within 90 days after the request or demand therefor
a Registration Statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such
Registration Statement to become effective (provided that before
filing a Registration Statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to one firm of
counsel selected by the Purchaser, and contemplated by the
definition of "Registration Expenses" contained herein, copies of
all such documents proposed to be filed);
(ii) notify the Purchaser of
the effectiveness of each Registration Statement filed hereunder
and prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such
Registration Statement effective for a period of not less than 180
days and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such Registration Statement; provided, that, in determining the
180- day period of this Section 2.1(g)(ii), such 180-day period
shall be extended for one day for every day which a stop order is
in effect or has been initiated or every day on which any fact
contemplated by Section 2.1(g)(v) exists.
(iii) furnish to the Purchaser
such number of copies of such Registration Statement, each
amendment and supplement thereto, the prospectus included in such
Registration Statement (including each preliminary prospectus) and
such other documents as the Purchaser may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by Purchaser;
(iv) use its reasonable best
efforts to register or qualify such Registrable Securities under
such other securities or blue sky laws of such jurisdictions as the
Purchaser reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable the
Purchaser to consummate the disposition in such jurisdictions of
the Registrable Securities owned by Purchaser (provided that the
Company shall
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not be required to (a) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (b) subject itself to taxation in any
such jurisdiction or (c) consent to general service of process in
any such jurisdiction);
(v) notify the Purchaser at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company shall prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein
not misleading;
(vi) cause all such Registrable
Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed and, if
not so listed, to be listed on the NASD automated quotation system
and, if listed on the NASD automated quotation system, use its
reasonable best efforts to secure designation of all such
Registrable Securities covered by such Registration Statement as a
NASDAQ "national market system security" within the meaning of Rule
llAa2-1 of the Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities;
(vii) provide a transfer agent
and registrar for all such Registrable Securities not later than
the effective date of such Registration Statement;
(viii) enter into such
customary agreements (including underwriting agreements in
customary form) and take all such other actions as the Purchaser or
the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities,
whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration:
(1) make such representations
and warranties to the Purchaser and the underwriters, if any,
in form, scope and substance as are customarily made by
issuers to underwriters in firm commitment underwritten
offerings;
(2) obtain opinions of counsel
to the Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the
Purchaser) addressed to Purchaser and the underwriters
covering the matters customarily covered in opinions
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requested in firm commitment underwritten offerings and such
other matters as may be reasonably requested by the Purchaser
and the managing underwriter, if any;
(3) obtain "cold comfort"
letters and updates thereof from the Company's independent
certified public accountants addressed to the Purchaser and
the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold
comfort" letters by independent accountants in connection with
firm commitment underwritten offerings on such date or dates
as may be reasonably requested by Purchaser and the managing
underwriter, if any;
(4) if requested, provide
indemnification in accordance with the provisions and
procedures of Section 4 hereof to all parties to be
indemnified pursuant to said Section; and
(5) deliver such documents and
certificates as may be reasonably requested by the Purchaser
and the managing underwriters, if any, to evidence compliance
with clause (v) above and with any customary conditions
contained in the underwriting agreement or other agreement
entered into by the Company (the matters set forth in this
Section 2(g)(viii) to be effected at each closing under any
underwriting or similar agreement as and to the extent
required thereunder);
(ix) make available for inspection by
Purchaser and any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney,
accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by
Purchaser, underwriter, each attorney, accountant or other
agent in connection with such Registration Statement;
(x) cause its employees to participate
in "road shows" and other presentations as reasonably
requested by the underwriters in connection with any
registered offering; and
(xi) otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first
day of the Company's first full calendar quarter after the
effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
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2.2 Underwritten Offerings. If the registration of Registrable
Shares is to be accomplished through an underwritten offering, the Purchaser
shall be party to the underwriting agreement between the Company and such
underwriters and the representations and warranties by, and the other agreements
on the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of the Purchaser. The underwriting agreement
shall not include conditions that are not customary in underwriting agreements
with respect to combined primary and secondary distributions and shall be
otherwise reasonably satisfactory to such holders. The Purchaser shall not be
required by the Company to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Purchaser, such Purchaser's Registrable
Shares and such Purchaser's intended method of distribution or any other
representations required by applicable law.
2.3 Reports Under the Exchange Act. The Company agrees
to:
(a) file with the Commission in a timely manner
all reports and other documents required of the Company under the Exchange Act,
and
(b) furnish to the Purchaser, during the
Effective Period, forthwith upon request (A) a written statement by the Company
that it has complied with the current public information and reporting
requirements of Rule 144 under the Securities Act and the Exchange Act and (B) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company.
3. Tag-Along Rights. (a) In the event that any Principal Stockholder
proposes to transfer, in a single transaction or series of related transactions,
shares of Common Stock representing 25% or more of the shares of Common Stock
held by such Principal Stockholder on the date hereof, which transfer either (i)
occurs prior to the date on which all Registrable Securities are freely
transferable pursuant to Rule 144(k) under the Securities Act, or (ii) involves
a change in control of the Company (defined as the acquisition of Common Stock
representing more than 33% of the total combined voting power of the Common
Stock taken as a whole, by any person or group of persons acting in concert),
the transferring Principal Stockholder shall give written notice of such
proposed transfer to Purchaser specifying the terms and conditions of such
transfer and the identity of the proposed transferee (a "Sale Notice").
Purchaser shall have the right to participate in the proposed transfer by
delivering to the transferring Principal Stockholder a written notice of such
election within five business days following delivery of the Sale Notice. If
Purchaser elects to participate in such transfer, the transferring Principal
Stockholder and Purchaser will be entitled to sell in such proposed transfer, at
the same price and on the same terms, a number of shares of Common Stock equal
to the product of (i) the quotient determined by dividing the number of shares
of Common Stock then held by the transferring Principal Stockholder or
Purchaser, as the case may be, by the aggregate number of shares of Common Stock
then held by the transferring Principal Stockholder and all participating
holders (including the Purchaser) exercising
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contractual tag-along rights, multiplied by (ii) the number of shares of Common
Stock to be sold in such proposed transfer. The transferring Principal
Stockholder shall not effect such proposed transfer unless the proposed
transferee consents to the participation of the Purchaser pursuant to this
Section 3. In the event that Purchaser does not elect to participate in a
proposed transfer, the transferring Principal Stockholder shall have a period of
time ending 90 days after the date of delivery of the Sale Notice (or, if later,
five days following the expiration or early termination of all waiting periods
applicable to such transfer under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended) within which to effect the transfer on the terms set
forth in the Sale Notice. If such transfer is not completed within such period
or in the event of a material change in the terms set forth in the Sale Notice,
the transferring Principal Stockholder shall be required to once again comply
with the provisions of this Section 3 prior to effecting any transfer of such
shares. This Section 3 shall not apply to transfers between the Principal
Stockholder or by a Principal Stockholder to members of such Principal
Stockholder's immediate family or a trust for the benefit of members of such
Principal Stockholder's immediate family so long as such transferee agrees to be
bound by the provisions of this Section 3 in connection with any subsequent
transfer of such shares. For purposes of this Section 3, "Common Stock" shall
include the Company's Class A Common Stock and Class B Common Stock.
(b) Notwithstanding the provisions of Section
3(a) above, the Purchaser acknowledges that (i) notice is not required with
respect to the Pledge of the Collateral Shares by the Principal Stockholders and
Andrea Leven as collateral under the NationsBank Loan and pursuant to the
respective Pledge Agreements and (ii) there shall not exist any "tag-along"
rights as contemplated by Section 3(a) with respect to the transfer of the
Collateral Shares pursuant to (y) the Pledge and/or (z) the foreclosure and/or
sale of the Collateral Shares by NationsBank upon the occurrence of an Event of
Default (as defined in the Pledge Agreement).
4. Indemnification; Contribution.
4.1 Indemnification by the Company. In the event of any
registration of any Registrable Securities pursuant to the terms of Section 2,
the Company will indemnify and hold harmless, to the fullest extent permitted by
law, Purchaser and its respective directors, officers, partners, trustees,
employees, legal counsel, accountants, financial advisors and agents, and each
other Person, if any, who controls (within the meaning of the Securities Act and
the Exchange Act) Purchaser or any such directors, officers, partners, trustees,
employees, legal counsel, accountants, financial advisors and agents (each of
the foregoing, a "Purchaser indemnified party") against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation), joint or several, to which such Purchaser indemnified party may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of or are based upon (x) any untrue statement or alleged
untrue statement of any material fact or (y) any omission or alleged omission to
state therein a material fact required to be stated therein or
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necessary to make the statements therein not misleading contained in any
Registration Statement under which such Registrable Securities were registered
under the Securities Act, provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or actions or proceedings in respect thereof) arises out of or is
based upon (x) any untrue statement or alleged untrue statement of any material
fact or (y) any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in such Registration Statement, or amendment or supplement thereto, in reliance
upon and in conformity with written information concerning Purchaser and
furnished to the Company for use in the preparation thereof.
4.2 Indemnification by Purchaser. The Company may require, as
a condition to including any Registrable Securities in any Registration
Statement filed pursuant to Section 2, that the Company shall have received an
undertaking from Purchaser to indemnify and hold harmless the Company, its
directors, officers, legal counsel, accountants and financial advisors and each
other Person, if any, who controls (within the meaning of the Securities Act and
the Exchange Act) the Company or any such directors, officers, legal counsel,
accountants and financial advisors (each of the foregoing, a "Company
Indemnified Party") against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Company Indemnified Party may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (x) any untrue statement or alleged untrue
statement of a material fact or (y) any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act or any amendment
or supplement thereto, if such statement or omission was made in reliance upon
and in conformity with written information concerning Purchaser and furnished to
the Company.
4.3 Conduct of Indemnification Proceedings. Promptly after
receipt by any Purchaser Indemnified Party or Company Indemnified Party (each,
an "Indemnified Party") of notice of the commencement of any action, suit,
proceeding or investigation or threatened thereof in writing for which the
Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement, such Indemnified Party will give written notice thereof to the
Indemnifying Party; provided, however, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent that the Indemnifying
Party is actually prejudiced by such failure to give notice. If notice of
commencement of any such action is brought against an Indemnified Party, the
Indemnifying Party may, at its expense, participate in and assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party
agrees to pay the same, (ii) the Indemnifying Party fails to assume
13
the defense of such action with counsel satisfactory to the Indemnified Party in
its reasonable judgment or (iii) the named parties to any such action (including
any impleaded parties) have been advised by such counsel in writing that either
(x) representation of such Indemnified Party and the Indemnifying Party by the
same counsel would be inappropriate under applicable standards of professional
conduct or (y) there may be one or more legal defenses available to the
Indemnified Party which are different from or additional to those available to
the Indemnifying Party. In no event shall the Indemnifying Party be responsible
for the fees of more than one counsel (in addition to local counsel) for all
Indemnified Parties. No Indemnifying Party or Indemnified Party shall consent to
entry of any judgment or enter into any settlement without the written consent
of the other, which consent shall not be unreasonably withheld.
4.4 Contribution. If the indemnification provided for in this
Section 4 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees, charges or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person.
5. Miscellaneous.
5.1 Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply, to the full extent set forth herein, with respect to (i)
the Shares and (ii) any and all equity securities of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise), which may be issued in respect of, in conversion of, in
exchange for or in
14
substitution of, the Shares, and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof.
5.2 No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
registration rights granted in this Agreement.
5.3 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto. Except as specifically provided
herein, this Agreement is not assignable by any of the parties. The rights
granted to Purchaser hereunder are transferable to any other subsequent holder
of the Shares, provided that the Shares received by such subsequent holder have
not been distributed pursuant to a Registration Statement or sold in a broker
transaction pursuant to the terms of Rule 144.
5.4 Specific Performance. Each of the parties hereto
acknowledges that the other party would not have an adequate remedy at law for
money damages if any of the covenants or agreements of the other party in this
Agreement were not performed in accordance with its terms and therefore agrees
that the other party shall be entitled to specific enforcement of such covenants
or agreements and to injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
5.5 Survival of Representations and Warranties. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution of this Agreement and any investigation at
any time by the Purchaser, the Company, or on behalf of either thereof.
5.6 Entire Agreement. This Agreement, together with the
Securities Purchase Agreement, contains the entire understandings of the parties
with respect to the subject matter of such agreements. This Agreement may not be
amended except by a writing signed by all of the parties.
5.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect, unless such action would substantially impair the benefits to either
party of the remaining provisions of this Agreement.
5.8 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by registered or certified or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally, telecopied
or sent by certified, registered or express mail, as follows:
15
If to the Company, Leven or Aronson:
U.S. Franchise Systems, Inc.
13 Corporate Square, Suite 250
Atlanta, Georgia 30329
Attention: Stephen D. Aronson, Esq.
Telecopier: (404) 235-7448
With copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Judith R. Thoyer, Esq.
Telecopier: (212) 757-3990
If to the Purchaser:
Alpine Equity Partners L.P.
1285 Avenue of the Americas
21st Floor
New York, New York 10019-6064
Attention: Lorraine E. Jackson, Esq.
Telecopier: (212) 641-5125
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert B. Schumer, Esq.
Telecopier: (212) 757-3990
5.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflict of laws provisions, except to the extent the General Corporation Law of
the State of Delaware applies.
5.10 Counterparts. This Agreement may be executed in one or
more counterparts, which together will constitute a single agreement.
16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
ALPINE HOSPITALITY EQUITIES LLC
By Alpine Hospitality Holdings LLC
its Managing Member
By Alpine Equity Partners L.P.,
its Managing Member
By Alpine Equity Partners L.L.C.
its General Partner
By: /s/ Richard D. Goldstein
-------------------------------
Name: Richard D. Goldstein
Title: Executive Vice President
U.S. FRANCHISE SYSTEMS, INC.
By: /s/ Neal K. Aronson
-------------------------------
Name: Neal K. Aronson
Title: Executive Vice President
/s/ Neal K. Aronson
-------------------------------
Neal K. Aronson
/s/ Michael A. Leven
-------------------------------
Michael A. Leven