Exhibit 4.2
SHAREHOLDERS AGREEMENT
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THIS SHAREHOLDERS AGREEMENT, dated as of March 12, 1998 (the
"AGREEMENT") by and among Hawthorn Suites Associates, an Illinois joint venture
("HSA"), HSA Properties, Inc., a Delaware corporation ("HPI", and together with
HSA, the "SECURITYHOLDERS"), Michael A. Leven ("LEVEN"), Neal K. Aronson
("ARONSON"), and U.S. Franchise Systems, Inc. (formerly known as USFS Hawthorn,
Inc.), a Delaware corporation (the "COMPANY").
WHEREAS, concurrently herewith, pursuant to a Contribution Agreement,
by and among the Securityholders, the Company and Old USFS (as defined below),
dated as of December 9, 1997 (the "CONTRIBUTION AGREEMENT"), HSA shall acquire
2,199,775 shares of Class A Common Stock, $.01 par value per share, of the
Company ("CLASS A STOCK"), and HPI shall acquire 22,447 shares of Class A Stock
(such shares hereinafter referred to as the "SHARES"), and the Securityholders
shall contribute, assign, transfer and convey (the "TRANSFER") all of their
respective interests in HSA Properties, L.L.C., a Delaware limited liability
company ("HSA LLC"), on the terms, and subject to the conditions, contained in
the Contribution Agreement;
WHEREAS, on the date hereof, immediately upon the consummation of the
Transfer, U.S. Franchise Systems, Inc., a Delaware corporation ("OLD USFS"),
shall merge with and into the Company with the Company as the surviving
corporation (the "MERGER"), pursuant to the Agreement and Plan of Merger, dated
as of December 9, 1997 (the "MERGER AGREEMENT"), between the Company and Old
USFS. In the Merger, each outstanding share of Class A Common Stock, par value
$.01 per share, and Class B Common Stock, par value $.01 per share, of Old USFS
shall be converted into the right to receive a share of Class A Stock or Class B
Common Stock, par value $.01 per share ("CLASS B STOCK" and together with the
Class A Stock, collectively, the "COMMON STOCK"), of the Company, respectively,
and the Shares will remain outstanding; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by each of the Merger Agreement and the Contribution Agreement that
the parties hereto execute and deliver this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows.
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Section 1. DEFINITIONS. As used in this Agreement, 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. In addition to the foregoing, with respect to the
Securityholders, "Affiliate" shall mean the lineal descendants of Nicholas
J. Pritzker, deceased, and their immediate family members, trusts primarily for
the benefit of such individuals and Persons controlled, directly or indirectly,
by such individuals and/or trusts.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce 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.
"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.
"DESIGNATED HOLDER" means each of the Securityholders and their
permitted transferees under Section 2(b)(i).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"INCLUDED TRANSFEREE" means, with respect to a Principal
Stockholder, an immediate family member (which shall mean, with respect to such
person, such person's spouse, parents, children and grandchildren and the spouse
of such person's children and grandchildren) of such Principal Stockholder, and
any trust or partnership of which all the beneficiaries or partners, as the case
may be, are Principal Stockholders and/or an immediate family member of such
Principal Stockholder.
"LOCKUP PERIOD" means the period commencing on the date hereof
and ending on the second anniversary of the date hereof.
"PERSON" means an individual or a corporation, partnership,
limited liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
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"PRINCIPAL STOCKHOLDER" means each of Michael A. Leven and
Neal K. Aronson.
"REGISTRABLE SECURITIES" means each of the following: (a) any
and all Shares owned by the Designated Holders and (b) any shares of Class A
Stock issued or issuable to any of the Designated Holders 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 or other equity
securities of the Company 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, (ii) such securities shall have been sold pursuant to
Rule 144 (or any successor provision) under the Securities Act and in compliance
with the requirements of paragraphs (c) (e), (f) and (g) of Rule 144
(notwithstanding the provisions of paragraph (k) of such Rule), or (iii) the
Registrable Securities are sold or distributed by a Person not entitled to the
registration rights granted by this Agreement.
"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 state 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 and disbursements 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" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"VOTING SECURITIES" shall mean the shares of Common Stock and any
other securities of the Company entitled to vote generally in the election of
directors.
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Section 2. TRANSFER OF SHARES.
(a) RESTRICTIONS ON TRANSFER. Each Designated Holder agrees
that such Designated Holder will not, directly or indirectly, offer, sell,
exchange, pledge, hypothecate, encumber, transfer, assign or otherwise dispose
of (collectively, a "transfer") any of its Shares, except as provided in Section
2(b).
(b) EXCEPTIONS TO RESTRICTIONS. Subject to Section 4(e), the
provisions of Section 2(a) shall not apply to any of the following transfers:
(i) from any Designated Holder to the Company or to any
Affiliate of such Designated Holder, PROVIDED THAT, each such Affiliate
shall execute an agreement in form and substance reasonably satisfactory to
the Company pursuant to which such Affiliate shall agree to comply with,
and shall be bound by, the terms of this Agreement;
(ii) pursuant to Section 3;
(iii) pursuant to a registered offering in which either of
the Principal Stockholders or an Included Transferee is participating;
provided that the Designated Holder's shares of Common Stock included in
such offering do not represent a greater percentage of the total shares of
Common Stock owned by such Designated Holder then the shares of Common
Stock being sold by such Principal Stockholder or Included Transferee
represents of his total shares of Common Stock owned;
(iv) pursuant to a tender offer, exchange offer, merger,
consolidation or other business combination involving the Company, or a
sale of all or substantially all of the outstanding shares of Common Stock
of the Company with a third party not an Affiliate of the Company (x) which
the Board of Directors of the Company does not oppose or (y) which the
Board of Directors of the Company opposes (an "OPPOSED TENDER"); PROVIDED
THAT, no indication or arrangement to tender the Shares may be made in the
case of an Opposed Tender until twenty-four hours prior to the expiration
of any time after which securities tendered may be treated less favorably
than securities tendered prior to such time;
(v) after the expiration the Lockup Period;
(vi) to the extent necessary to obtain or maintain,
without suspension or threatened revocation, any gaming license, permit or
approval of any Affiliate of any Securityholder; PROVIDED THAT, in the
event of any such proposed transfer the transferor shall have complied with
the right of first refusal contained in Section 2(c); PROVIDED FURTHER
THAT, the transferee shall execute an agreement in form and substance
reasonably satisfactory to the
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Company pursuant to which such transferee shall agree to comply with, and
be bound by, the terms of this Agreement; or
(vii) as contemplated by Section VI of the Contribution
Agreement; PROVIDED THAT, prior to the expiration of the Lockup Period each
transferee (other than the Company ) shall execute an agreement in form and
substance reasonably satisfactory to the Company pursuant to which such
transferee shall agree to comply with, and be bound by, the terms of this
Agreement.
Notwithstanding the foregoing, no transfer shall be permitted under
Section 2(b),(i), (ii), (iii), (iv) or (vi) prior to the first anniversary of
the date of this Agreement unless HSA and/or HPI, as the case may be, shall have
agreed, in a written instrument reasonably acceptable to the Company not to
transfer any of the net (pre-tax) proceeds received in such transfer prior to
the first anniversary of the date of this Agreement.
(c) RIGHT OF FIRST REFUSAL.
(i) If during the Lockup Period any Designated Holder (a
"SELLING STOCKHOLDER") desires to transfer all or any portion to its Shares
to any Person (a "THIRD PARTY OFFEROR") pursuant to Section 2(b)(vi) and
has received a bona fide offer from such Third Party Offeror to buy all of
such Shares (a "THIRD PARTY OFFER"), such Selling Stockholder shall send
written notice (a "NOTICE") to the Company, which shall state (a) the
number of Shares proposed to be transferred (the "OFFERED SECURITIES"),
(b) the proposed purchase price per Share to be paid by the Third Party
Offeror (the "OFFER PRICE"), which shall be payable solely in cash, (c) the
name of the Third Party Offeror, (d) that the proposed purchase of the
Offered Securities shall be consummated after the expiration or termination
of the Option Period (as defined below) but on or prior to the first
business day which occurs after the later of sixty (60) days after delivery
of the Notice and the date which is five (5) days after the expiration or
waiver of any applicable waiting period under the HSR Act (as defined
below), and (e) that the Third Party Offer has been accepted by the Selling
Stockholder subject to the rights of the Company contained in this
Section 2(c). The Offering Notice shall also state any other material
terms and conditions of the Third Party Offer and shall include a copy of
all writings between the Third Party Offeror and the Selling Stockholder
necessary to establish the terms of the Third Party Offer.
(ii) For a period of ten (10) days after the delivery of
the Notice (the "OPTION PERIOD"), the Company or its designee shall have
the right to elect to purchase all (but not less than all) of the Offered
Securities at a purchase price equal to the Offer Price and upon the terms
and conditions of the Third Party Offer. The election of the Company or
its designee under this
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Section 2(c) shall be exercisable by delivering written notice of the
exercise thereof, prior to the expiration of the Option Period, to the
Selling Stockholder. The failure of the Company or its designee to respond
within the Option Period to the Selling Stockholder shall be deemed to be a
waiver of its rights under this Section 2(c).
(iii) The closing of the purchase of Offered Securities to
be purchased by the Company or its designee under this Section 2(c) shall
be held at the principal office of the Company at 11:00 a.m., local time,
on the date that is the later of sixty (60) days after delivery of the
Notice and the date which is five (5) days after the expiration or waiver
of any applicable waiting period under the HSR Act or at such other time
and place as the parties to the transaction may agree. At such closing,
the Selling Stockholder shall deliver to the Company or its designee
certificates representing the Offered Securities, duly endorsed for
transfer and accompanied by all requisite transfer taxes, if any, and such
Offered Securities shall be free and clear of any liens, claims, options,
charges, encumbrances or rights (other than those arising hereunder), and
the Selling Stockholder shall so represent and warrant, and shall further
represent and warrant that it is the beneficial and record owner of such
Offered Securities. The Company or its designee shall, at the closing,
deliver to the Selling Stockholder payment in full in immediately available
funds for the Offered Securities purchased by it. At such closing, all of
the parties to the transaction shall execute such additional documents as
are otherwise necessary or appropriate.
(iv) Unless the Company or its designee elects to
purchase all of the Offered Securities pursuant to Section 2(c), the
Selling Stockholder may sell all (but not less than all) the Offered
Securities to the Third Party Offeror on the terms and conditions of the
Third Party Offer; PROVIDED, HOWEVER, that such sale is bona fide and made
prior to or the date that is the later of ninety (90) days after delivery
of the Notice and five (5) days after the expiration or waiver of any
applicable waiting period under the HSR Act. If such sale is not completed
prior to such date, for any reason, then the restrictions provided for
herein shall again become effective, and no transfer of such Offered
Securities may be made thereafter under Section 2(b)(vi) without again
offering the same to the Company in accordance with this Section 2(c).
(d) ENDORSEMENT ON CERTIFICATES, ETC.
(i) Upon the execution of this Agreement, in addition to
any other legend which the Company may deem advisable under the Securities
Act and certain state securities laws, all certificates representing issued
and outstanding Shares and shares of Common Stock owned by the Principal
Stockholders shall be endorsed as follows:
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THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY
UPON COMPLIANCE WITH, THE PROVISIONS OF A SHAREHOLDERS
AGREEMENT DATED AS OF MARCH 12, 1998, AMONG THE COMPANY
AND CERTAIN OF ITS SHAREHOLDERS. A COPY OF THE
ABOVE-REFERENCED AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AS
EVIDENCED BY AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED.
(ii) Except as otherwise expressly provided in this
Agreement, all certificates or other instruments representing shares of
Common Stock hereafter issued to or acquired by any of the Designated
Holders or their successors, assigns or transferees shall bear the legends
set forth above, and the shares of Common Stock represented by such
certificates or instruments shall be subject to the applicable provisions
of this Agreement.
(iii) Notwithstanding any other provision of this
Agreement, no transfer of the Shares may be made unless (a) the transfer
complies in all material respects with the applicable provisions of this
Agreement and applicable federal and state securities laws, including
without limitation, the Securities Act and (b) if requested by the Company,
an opinion of counsel to such transferring Securityholder shall be supplied
to the Company, at such transferring Securityholder's expense, to the
effect that such transfer complies in all material respects with, or is
otherwise exempt from the provisions of, all applicable federal and state
securities laws. The second paragraph of the legend set forth in clause
(i) of this Section 2(d) shall be removed from a particular certificate
representing shares of Common Stock when an opinion of counsel has been
delivered to the Company to the effect that any such security may be freely
sold to the public without compliance with the registration provisions of
the Securities Act. Counsel referred to in this Section 2(d)(iii) shall be
reasonably acceptable to the Company and may include an attorney who is an
employee of a Securityholder.
(iv) Whenever the restrictions imposed by this Agreement
shall terminate as to any particular shares of Common Stock, the
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holder thereof shall be entitled to receive from the Company, without
expense, upon delivery to the Company of the existing certificate
representing such shares of Common Stock, a new certificate not bearing the
restrictive legends otherwise required pursuant to this Section 2(d).
(e) IMPROPER TRANSFER. Any attempt to transfer or encumber any
shares of Common Stock other than in accordance with the terms of this Agreement
shall be null and void and neither the Company nor any transfer agent of such
securities shall give any effect to such attempted transfer or encumbrance in
its stock records.
Section 3. TAG-ALONG RIGHTS.
(a) If a Principal Stockholder or his Included Transferees
desires to transfer (such transferring stockholder(s) being referred to as the
"TRANSFEROR(S)") to any Person, (i) at any time during the Lockup Period, any
shares of Common Stock, or (ii) at any time after the Lockup Period, shares of
Common Stock that, together with any shares of Common Stock sold by the
Principal Stockholders and their Included Transferees in such transaction or
series of related transactions, that would result in a transfer of "control" of
the Company, the Transferors shall, in the case of clauses (i) and (ii), prior
to making any such transfer, first notify each of the Securityholders of such
transfer. Such notice (the "TRANSFERORS' NOTICE") shall specify the proposed
transferee thereof, the number of shares of Common Stock to be transferred, and
the amount and type of consideration to be received therefor, and shall contain
the Participation Offer set forth in Section 3(c).
(b) Notwithstanding Section 3(a), a Transferor shall not be
obligated to deliver a Transferors' Notice in respect of, and the provisions of
this Section 3 shall not apply to, (i) any transfers made to a Principal
Stockholder or an Included Transferee, (ii) any transfers made pursuant to a
registered public offering for which the Securityholders have been provided
registration rights under Section 6 and (iii) any transfers made by a Transferor
to a Person not a Principal Stockholder or an Included Transferee of shares of
Common Stock that, together with each other transfer of such type since the date
of this Agreement, constitute less than 5% of the number of shares owned as of
the date of this Agreement by the Principal Stockholders and the Included
Transferees.
(c) The Transferors shall offer (the "PARTICIPATION OFFER") to
include in the proposed transfer: a number of shares of Common Stock designated
by each Designated Holder, not to exceed, in respect of any such Designated
Holder the number of shares of Common Stock equal to the product of (x) the
aggregate number of shares of Common Stock proposed to be transferred pursuant
to the Transferors' Notice and (y) a fraction, the numerator of which is equal
to the number of shares of Common Stock owned by such Designated Holder and the
denominator of which is
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the total number of shares of Common Stock held by the Transferors and all
holders (including the Designated Holder) of Common Stock who are exercising
tag-along rights in connection with such transfer, in each case, as of the date
of the Transferors' Notice. The Participation Offer shall be conditioned upon
the Transferors consummating a transfer on the terms described in the
Transferors' Notice (which they shall not be obligated to do) to the transferee
named in the Transferors' Notice.
(d) Any Designated Holder which does not accept the
Participation Offer by written notice to the Transferors within 5 business days
after such Designated Holder has received notice thereof shall be deemed to
have waived its rights under this Section 3 (for purposes only of the particular
transfer described in the Transferors' Notice), and the Transferors and, if any
Designated Holder accepts the Participation Offer, such Designated Holder (the
Transferors and each such accepting Securityholder being hereinafter sometimes
called "SELLERS") may transfer the shares described in the Transferors' Notice
and the shares included by such Designated Holder pursuant to the Participation
Offer to the proposed transferee, in accordance with the terms of such transfer
set forth in the Transferors' Notice, so long as such transfer occurs on or
before the later of 90 days after the date the Transferors' Notice was received
by the other Designated Holder and the date which is five days after the
expiration or waiver of any applicable waiting period to such proposed transfer
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"). The price per share, form of consideration and other terms and
conditions for sales of Common Stock made pursuant to this Section 3 shall be
the same for the Transferors and each Designated Holder accepting the
Participation Offer; PROVIDED, HOWEVER, that any indemnification obligations of
any Designated Holder which accepts the Participation Offer shall be made
severally, and not jointly, and shall, in any event, be limited to a maximum
amount equal to the net (pre-tax) proceeds actually received by such Designated
Holder in connection with the transfer subject to the Participation Offer.
Section 4. STANDSTILL.
(a) During such period as (x) Leven is Chairman, Chief Executive
Officer or President of the Company and (y) the Principal Stockholders and their
Included Transferees, in the aggregate, own at least one-half of the shares of
Common Stock owned by such Persons, in the aggregate, on the date hereof, the
Designated Holders each agree, without the prior written consent of the Board of
Directors of the Company specifically expressed in a resolution adopted by a
majority of the directors of the Company who are not Affiliates of the
Designated Holders, that the Designated Holders, acting either individually or
together, will not, and the Designated Holders will use their reasonable best
efforts to cause each of its Affiliates not to, directly or indirectly:
(i) acquire, announce an intention to acquire, offer or
propose to acquire, or agree to acquire (except, in any case, by way of
stock
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dividends or other distributions or offerings made available to holders of
any Common Stock generally, provided, that any such securities shall be
subject to the provisions hereof), directly or indirectly, whether by
purchase, tender or exchange offer, through the acquisition of control of
another Person (as hereinafter defined), by joining a partnership, limited
partnership, syndicate or other "group" (within the meaning of Section
13(d)(3) of the Exchange Act) or otherwise, any equity securities of the
Company that would result in such Designated Holder and its Affiliates, in
the aggregate, owning Voting Securities representing a greater amount of
the voting power of the Company than would be held by any Nonexcluded
Person following such transaction. "Nonexcluded Person" means any Person
or "group" (within the meaning of Section 13(d)(3) of the Exchange Act),
other than the Principal Stockholders, the Included Transferees or a
"group" which includes any of the Principal Stockholders or Included
Transferees;
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" (as such term is used in the proxy rules
of the Commission as in effect on the date hereof) of proxies or consents
(whether or not relating to the election or removal of directors), seek to
advise, encourage or influence any Person with respect to the voting of any
Voting Securities, initiate, propose or otherwise "solicit" (as such term
is used in the proxy rules of the Commission as in effect on the date
hereof) stockholders of the Company for the approval of stockholder
proposals made pursuant to Rule 14a-8 of the Exchange Act, or induce or
attempt to induce any other Person to initiate any such stockholder
proposal;
(iii) seek, propose, or make any statement (whether
written or oral) with respect to, any merger, consolidation, business
combination, tender or exchange offer, sale or purchase of assets, sale or
purchase of securities (except as and to the extent specifically permitted
hereby), dissolution, liquidation, restructuring, recapitalization or
similar transactions of or involving the Company or any of its Affiliates
or solicit or encourage any other person to make any such statement or
proposal;
(iv) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect
to any Voting Securities, other than groups consisting solely of one or
more of the Securityholders, directors of the Company, other parties hereto
and their respective Affiliates;
(v) deposit any Voting Securities in any voting trust or
subject any Voting Securities to any arrangement or agreement with respect
to the voting of any Voting Securities except a set forth in Section 5
hereof;
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(vi) execute any written consent with respect to the
Company or its Voting Securities, except as set forth in Section 5 hereof;
(vii) otherwise act, alone or in concert with others, to
control or seek to control or influence or seek to influence the
management, Board of Directors or policies of the Company;
(viii) seek, alone or in concert with others,
representation on the Board of Directors of the Company or seek the removal
of any member of the Board of Directors;
(ix) make any publicly disclosed proposal or enter into
any discussion regarding any of the foregoing;
(x) make any proposal, statement or inquiry, or disclose
any intention, plan or arrangement (whether written or oral) inconsistent
with the foregoing, or make or disclose any request to amend, waive or
terminate any provision of this Agreement or the Certificate of
Incorporation or By-laws of the Company;
(xi) have any discussions or communications or enter into
any arrangements, understandings or agreements (whether written or oral)
with, or advise, finance, assist or encourage, any other Person in
connection with any of the foregoing, or make any investment in or enter
into any arrangement with, any other Person that engages, or offers or
proposes to engage, in any of the foregoing; or
(xii) request the Company (or its directors, officers,
employees or agents), directly or indirectly, to amend or waive any
provisions of this Agreement or take any action which might require the
other party to make a public announcement regarding the possibility of a
merger, consolidation, tender or exchange offer or other business
combination or extraordinary transaction.
(b) The Securityholders and their Affiliates may acquire Voting
Securities and other securities of the Company without regard to the foregoing
limitation if any of the following events shall occur: (A) a tender or exchange
offer is made by any Person or 13D Group (as hereinafter defined) (other than an
Affiliate of, or any Person acting in concert with, a Securityholder or any of
its Affiliates and other than a Principal Stockholder, any Affiliate thereof or
13D Group including a Principal Stockholder), which Person or 13D Group has the
financial wherewithal to consummate such a transaction, to acquire Voting
Securities in an amount which, together with Voting Securities (if any) already
owned by such person or 13D Group, would represent more than 50% of the total
combined voting power of all Voting Securities then outstanding or (B) it is
publicly disclosed that Voting Securities
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representing more than 50% of the total combined voting power of all Voting
Securities then outstanding have been acquired subsequent to the Closing Date by
an Person or 13D Group (other than the Securityholders or any of their
respective Affiliates and other than a Principal Stockholder, any Affiliate
thereof or 13D Group including a Principal Stockholder). As used herein, the
term "13D Group" shall mean any group of Persons formed for the purpose of
acquiring, holding, voting or disposing of Voting Securities which would be
required under Section 13(d) of the Exchange Act and the rules and regulations
thereunder (as now in effect) to file a statement on Schedule 13D with the
Securities and Exchange Commission as a "person" within the meaning of Section
13(d)(3) of the Exchange Act if such group beneficially owned Voting Securities
representing more than 5% of the total combined voting power of all Voting
Securities then outstanding.
(c) Nothing in this Section 4 shall prohibit any Person who is
serving as a director of the Company as contemplated by Section 7 of this
Agreement from, solely in his or her capacity as director, (a) taking any action
or making any statement at any meeting of the Board of Directors of the Company
or any committee thereof or (b) making any statement to any director, officer or
agent of the Company. In addition, nothing in this Section 4 shall restrict any
private communications between the Securityholders and any Person designated by
the Securityholders as a director, provided that all such communications by such
Person remain subject to the fiduciary duties of such Person as a director.
(d) Notwithstanding anything contained in this Section 4, the
Securityholders shall have the right in their sole discretion to vote any Voting
Securities owned by them as they shall determine in connection with any
Significant Event. "Significant Event" shall mean any event other than the
election of directors or appointment of auditors or approval of any stockholder
proposal made pursuant to Rule 14a-8 of the Exchange Act.
(e) Except in connection with a transfer made pursuant to
Section 3, the Securityholders each agree that they shall not effect any
transfer of any of the Shares to any Person who such Securityholder believes,
after due inquiry, would, after giving effect to such transfer beneficially own,
together with its Affiliates, more than 5% of the total combined voting power of
all Voting Securities then outstanding unless it shall have obtained prior to
such transfer a written instrument from such transferee agreeing to be bound by
this Section 4, in form and substance satisfactory to the Company.
Section 5. VOTING. The Designated Holders each agree that so long as
they or any of their respective Affiliates beneficially own any Voting
Securities, it will, and will cause its Affiliates to, (a) be present, in person
or represented by proxy, at all properly noticed annual and special meetings of
stockholders of the Company so that all Voting Securities beneficially owned by
such Securityholder and its Affiliates then entitled to vote may be counted for
the purpose of determining the
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presence of a quorum at such meetings, (b) support each nominee on the slate of
nominees proposed by the Board of Directors of the Company and vote all Voting
Securities which it is then entitled to vote in favor of the election of each
such nominee, and (c) vote in accordance with the Board of Directors'
recommendation on all stockholder proposals made pursuant to Rule 14a-8 under
the Exchange Act.
Section 6. REGISTRATION RIGHTS.
(a) INCIDENTAL REGISTRATION.
(i) If the Company, at any time or from time to time,
(1) after the Lockup Period proposes to register any of its shares of
Common Stock for its own account 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 or (2) during the
Lockup Period so proposes to register any of its shares of Common Stock and
such Registration Statement also includes the registration of shares of
Common Stock owned by either or both of the Principal Stockholders or their
Included Transferees, then it 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 each of the Designated Holders of
its intention to do so and, upon the written request of each of the
Designated Holders, 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 such Designated Holder and the intended method of
disposition thereof), the Company will, as provided in this Section 6, 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 Designated Holders, 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
each of the Designated Holders 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 6(a) involving an underwriter, or a distribution with
the assistance of a selling agent, the right of any Designated
14
Holder to participate in such Incidental Registration shall be conditioned
upon such Designated Holder's participation in such underwriting or
distribution on terms not less favorable than those available to other
stockholders participating therein.
(ii) Notwithstanding anything to the contrary set forth
in Section 6(a), if a proposed Incidental Registration is for a registered
public offering involving an underwriting and the representative of the
underwriters advises the Company in writing that the registration of all or
part of the shares of Common Stock to be underwritten in such Incidental
Registration would adversely effect such offering, then the Company shall
so advise the Designated Holders and any other holders of shares of Common
Stock requesting registration in such Incidental Registration, and the
number of shares of Common Stock that are entitled to be included in the
Incidental Registration shall be allocated (i) first, to the Company for
shares of Common Stock being sold for its own account, (ii) second, among
the Principal Stockholders, the Designated Holders and any other holders of
shares of Common Stock entitled to "incidental" registration rights and
requesting inclusion of shares of Common Stock in such Incidental
Registration, pro rata on the basis of the number of shares of Common Stock
requested to be included in such Incidental Registration, and (iii) third,
any other shares of Common Stock requested to be included in such
Incidental Registration.
(b) DEMAND REGISTRATIONS.
(i) At any time after the expiration of the Lockup
Period, the Designated Holders holding a majority of the then Registrable
Securities may request registration under the Securities Act of all or any
portion of their Registrable Securities in accordance with the provisions
of this Section 6(b). All registrations requested pursuant to this
Section 6(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 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 Designated Holders of Registrable Securities
shall be entitled to request no more than three Demand Registrations in
accordance with this Section 6(b). The aggregate offering value of the
Registrable Securities requested to be registered in any Demand
Registration must, in the good faith judgment of the holders thereof, equal
at least $5,000,000. A registration shall not count as one of the
permitted Demand
15
Registrations until it has become effective (unless the holders of a
majority of the Registrable Securities included in such registration have
agreed to abandon such registration after a registration statement has been
filed with the Commission).
(iii) If a 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, which 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 which 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, pro rata among the respective holders thereof on the basis
of the amount of securities requested to be included therein by each such
holder.
(iv) The Company shall not be obligated to effect more
than one Demand Registration in any twelve-month period, and 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 180 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 a Demand
Registration only once in any twelve-month period and (b) if a Demand
Registration is delayed hereunder, the holders of Registrable Securities
initially requesting such Demand Registration shall be entitled to withdraw
such request and, if such request is withdrawn, such Demand Registration
shall not count as one of the permitted Demand Registrations hereunder and
the Company shall pay all Registration Expenses in connection with such
registration. Notwithstanding anything to the contrary in this
Section 6(b)(iv), (x) the Company may not prevent, delay or postpone any
Demand Registration and (y) the Securityholders shall not be subject to any
lockup or similar agreements following any Demand Registration for more
than 270 days during any 360-day period.
16
(v) The Designated Holders shall have the right to
select the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the Company in its sole discretion.
(c) EXPENSES. The Company shall pay all Registration Expenses
in connection with any registration pursuant to this Section 6, 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, the
Designated Holders that have requested to include Registrable Securities that
may, in the reasonable opinion of counsel to the Company delivered to such
Designated Holders, be distributed to the public without limitation as to volume
pursuant to Rule 144 (or any successor provision of the Securities Act), in any
Registration Statement that does not also cover shares of Common Stock owned by
any of the Principal Stockholders or any of their Included Transferees, shall
pay their pro rata portion of all Registration Expenses incurred in connection
with such offering.
(d) HOLDBACK AGREEMENTS. Each of the Designated Holders 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 (other than institutional shareholders
in respect of shares of Common Stock not acquired directly from 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. Each Designated Holder of
Registrable Securities 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, such Designated Holder
shall forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement covering
17
such Registrable Securities until such Designated Holder's receipt of the copies
of a supplemented or amended prospectus and, if so directed by the Company, such
Designated Holder 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 Designated Holders of
Registrable Securities have 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 the counsel selected by
the holders of a majority of the Registrable Securities covered by such
Registration Statement copies of all such documents proposed to be filed);
(ii) notify each holder of Registrable Securities of the
effectiveness of each Registration Statement filed hereunder and prepare
and file with the Securities and Exchange 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;
(iii) furnish to each seller of Registrable Securities
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 such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(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 any seller reasonably requests and do any and
all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller (provided that the Company
shall not be
18
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 each seller of such Registrable Securities,
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 holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(ix) make available for inspection by any seller of
Registrable Securities, 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 any such
seller, underwriter, attorney, accountant or other agent in connection with
such Registration Statement;
19
(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 Securities and Exchange
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.
(h) INDEMNIFICATION; CONTRIBUTION.
(i) In the event of any registration of any Registrable
Securities pursuant to the terms of Section 6, the Company will indemnify
and hold harmless, to the fullest extent permitted by law, each of the
Designated Holders and their respective Affiliates, 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) such Designated
Holder or any such directors, officers, partners, trustees, employees,
legal counsel, accountants, financial advisors and agents (each of the
foregoing, a "designated indemnified party") against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation), joint or several, to which such designated 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 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 of any material fact or (y) any 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 such Designated Holder and furnished to the
Company for use in the preparation thereof.
(ii) The Company may require, as a condition to including
any Registrable Securities in any Registration Statement filed
20
pursuant to Section 6, that the Company shall have received an undertaking
from each Designated Holder selling such Registrable Securities, severally
and not jointly, 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 such
Designated Holder and furnished to the Company; PROVIDED, in each instance,
that any Designated Holder's maximum liability in respect of such
indemnification obligations shall be limited to the amount of net (pre-tax)
proceeds actually received by such Designated Holder pursuant to the sale
of such Registrable Securities.
(iii) Promptly after receipt by any designated 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 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
21
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.
(i) If the indemnification provided for in this Section 6 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 6 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.
Section 7. BOARD REPRESENTATION.
(a) On the Closing Date, Mr. Doug Geoga shall be elected as a
director of the Company by the Company's Board of Directors. Subject to its
fiduciary duties, the Company's Board of Directors will nominate Mr. Geoga (or,
if Mr. Geoga is unable or unwilling to serve, a successor as contemplated by
this Section 7) for election at each meeting (or in each action by written
consent in lieu of a meeting) of stockholders of the Company for the election of
directors during the term of this Agreement so long as the Securityholders
and/or their Affiliates beneficially own (as such term is defined in Rule 13d-3
of the Exchange Act) more
22
than 1.1 million shares of Common Stock (as such number of shares of Common
Stock shall be adjusted to take into account any stock splits, reverse stock
splits, reclassifications and other similar transactions or adjustments).
(b) If Mr. Doug Geoga (or such a successor) is no longer a
director of the Company as contemplated by paragraph (a) of this Section 7, the
Securityholders may propose to the Company as a nominee for election as a
director of the Company a person who (i) has recognized standing in the business
community, (ii) is not a former director, officer or employee of the Company,
(iii) does not have a conflict of interest with the Company and (iv) is at such
time either the President of Hyatt Hotels Corp. or a person who is otherwise
reasonably acceptable to USFS.
(c) The Company will use its best efforts to cause Mr. Doug
Geoga or any successor nominated as provided in this Section 7 to be elected by
the stockholders of the Company and will solicit proxies in favor of Mr. Geoga
or any such successor at each meeting (or in each action by written consent in
lieu of a meeting) of stockholders of the Company.
(d) If the Company does not accept a Securityholders' designee
as provided in paragraph (b) of this Section 7, the process set forth therein
shall be repeated so long as reasonably appropriate to find a successor
candidate acceptable to both Securityholders and the Company.
Section 8. NOTIFICATION AS TO CERTAIN MATTERS. Each Designated
Holder shall notify the Company of any change in such Designated Holder's
beneficial ownership of shares of Voting Securities not later than two business
days after such change and from time to time, upon request, shall notify the
Company of the number of shares of Voting Securities beneficially owned by such
Designated Holder and of the names and addresses of all Affiliates to whom such
Designated Holder shall have transferred shares in accordance with
Section 2(b)(i).
Section 9. REPRESENTATIONS AND WARRANTIES.
(a) Each Securityholder, severally and not jointly, represents
and warrants to the other parties hereto as follows:
(i) Such Securityholder has full right, power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by such Securityholder and constitutes the legal, valid and
binding obligation of such Securityholder, enforceable against such
Securityholder in accordance with its terms, except that such enforcement
may be limited by bankruptcy, fraudulent conveyance, fraudulent transfer,
insolvency, reorganization, liquidation, conservatorship, moratorium and
other similar laws relating to or affecting creditors' rights or the
collection of debtors' obligations
23
generally and any general equitable principles (regardless of whether
enforcement is considered in a proceeding in equity or at law) and the
discretion of any court before which any proceedings therefor may be
brought.
(ii) The execution, delivery and performance by such
Securityholder of this Agreement and the consummation of the transactions
contemplated hereby do not and will not conflict with or result in any
breach or violation of any material agreement to which such Securityholder
is a party or is otherwise bound or subject and do not and will not result
in any material violation of the organizational documents of such
Securityholder or any statute, order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Securityholder or
any of its properties.
(b) The Company represents and warrants to the other parties as
follows:
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against it in accordance with its
terms, except that such enforcement may be limited by bankruptcy,
fraudulent conveyance, fraudulent transfer, insolvency, reorganization,
liquidation, conservatorship, moratorium and other similar laws relating to
or affecting creditors' rights or the collection of debtors' obligations
generally and any general equitable principles (regardless of whether an
enforcement is considered in a proceeding in equity or at law) and the
discretion of any court before which any proceedings therefor may be
brought.
(ii) The execution, delivery and performance by the
Company of this Agreement do not and will not conflict with or result in a
breach or violation of any agreement to which the Company is bound or
subject and do not and will not result in any violation of the Certificate
of Incorporation or Bylaws of the Company or any statute, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its properties.
(c) Leven and Aronson, severally and not jointly, each
represents and warrants to the other parties as follows:
(i) He has the full right, capacity and authority to
enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by such Person and constitutes the legal, valid and
binding obligation of such Person enforceable against him in accordance
with
24
its terms, except that such enforcement may be limited by bankruptcy,
fraudulent conveyance, fraudulent transfer, insolvency, reorganization,
liquidation, conservatorship, moratorium and other similar laws relating to
or affecting creditors' rights or the collection of debtors' obligations
generally and any general equitable principles (regardless of whether
enforcement is considered in a proceeding in equity or at law) and the
discretion of any court before which any proceedings therefor may be
brought.
(ii) The execution, delivery and performance by such
Persons do not and will not conflict with or result in a breach or
violation of any agreement to which such Person is bound or subject and do
not and will not result in any violation of any statute, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over such Person.
Section 10. MISCELLANEOUS.
(a) RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein, with respect to
(i) the shares of Common Stock 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 substitution of, the shares of Common
Stock, and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof.
(b) 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.
(c) 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.
(d) SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the other parties would not have an adequate remedy at law for
money damages if any of the covenants or agreements of the parties in this
Agreement were not performed in accordance with its terms and therefore agrees
that the other party(ies) 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.
(e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements contained in this
Agreement
25
shall survive the execution of this Agreement and any investigation at any time
by the Securityholders, the Company, or on behalf of either thereof.
(f) ENTIRE AGREEMENT. This Agreement, together with the Merger
Agreement and the Contribution 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 Company,
Leven, Aronson and record holders of a majority of the Shares.
(g) SEVERABILITY. If any terms, 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 restriction 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.
(h) NOTICES. Any notices and other communications required to
be given pursuant to this Agreement shall be delivered by hand, by registered or
certified mail, postage prepaid, return receipt requested, by private courier,
by facsimile or by telex, as follows:
If to the Company, Leven or Aronson:
U.S. Franchise Systems, Inc.
13 Corporate Square, Suite 250
Atlanta, Georgia 30329
Attention: Neal K. Aronson
Telecopier: (404) 235-7448
With copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Paul D. Ginsberg, Esq.
Telecopier: (212) 757-3990
26
If to the Securityholders:
c/o HSA Properties, Inc.
200 West Madison Street
Suite 3800
Chicago, Illinois 60606
Attention: Harold S. Handelsman, Esq.
Telecopier: (312) 750-8545
with copies to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: Michael A. Pucker, Esq.
Telecopier: (312) 269-1747
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, which together will constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
HAWTHORN SUITES ASSOCIATES
By: Meridian Associates, L.P., its managing
venturer
By: Meridian Investments, Inc., its general
partner
By: /s/ GLEN MILLER
-------------------------------------
Name: GLEN MILLER
Title: Vice President
HSA PROPERTIES, INC.
By: /s/ GLEN MILLER
-------------------------------------
Name: GLEN MILLER
Title: Vice President
U.S. FRANCHISE SYSTEMS, INC.
By: /s/ NEAL ARONSON
-------------------------------------
Name: NEAL ARONSON
Title: Executive Vice President & CFO