U.S. FRANCHISE SYSTEMS, INC.,
a Delaware corporation
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE AGREEMENT
---------------------------------
Xxxx X. Xxxxxxx
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TABLE OF CONTENTS
Page
1. Definitions.......................................................... 3
2. Management Equity Participation...................................... 9
3. Representations of Employee.......................................... 14
4. Representations and Warranties of the Corporation.................... 15
5. Limitations on Restricted Shares..................................... 16
6. Earned Shares........................................................ 17
7. Redemption of Restricted Shares Not Earned........................... 17
8. Termination Forfeiture............................................... 18
9. Termination of Employment Without Cause or by Employee for Good
Reason............................................................... 19
10. Death or Total Disability of Employee................................ 19
11. Reissue of Forfeit Shares............................................ 20
12. Performance Criteria................................................. 20
13. Successors and Assigns............................................... 23
14. Sale of All or Substantially All Stock or Assets, or Merger.......... 23
15. Legends.............................................................. 24
16. Additional Covenants................................................. 24
17. Withholding Taxes; Section 83(b) Election............................ 25
18. Notices.............................................................. 26
19. Miscellaneous........................................................ 27
20. Multiple Counterparts................................................ 29
21. Record Owner......................................................... 29
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THIS AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE AGREEMENT AND THE SECURITIES
ISSUED UPON THE TERMS HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND NEITHER THIS
AGREEMENT NOR THE UNDERLYING SECURITIES MAY BE ASSIGNED, HYPOTHECATED,
ENCUMBERED, PLEDGED, SOLD OR OTHERWISE TRANSFERRED EXCEPT AS PROVIDED BY THE
TERMS HEREOF, IN ACCORDANCE WITH THE TERMS OF A SEPARATE STOCKHOLDERS' AGREEMENT
DATED ON OR ABOUT THE DATE HEREOF, AS THE SAME MAY BE AMENDED FROM TIME TO TIME,
AND PURSUANT TO EITHER AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
STATE OF GEORGIA
COUNTY OF XXXXXX
U.S. FRANCHISE SYSTEMS, INC.,
a Delaware corporation
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE AGREEMENT
This Amended and Restated Employee Stock Purchase Agreement
(as amended, the "Agreement") is entered into as of the ___ day of _____________
1996, by and between U.S. FRANCHISE SYSTEMS, INC., a Delaware corporation (the
"Corporation"), and XXXX X. XXXXXXX, an individual resident of the State of
Georgia (the "Employee").
WHEREAS, on September 29, 1995, the Employee and the
Corporation executed an Employee Stock Purchase Agreement (the "Old Agreement"),
pursuant to which the Corporation issued to the Employee and to Xxxxxxx X. Xxxxx
(together, the "Initial Management") a total of 567,245 shares of common stock,
par value $.10 per share (the "Old Common Stock"), of the Corporation,
constituting 51% of the then issued and outstanding common shares of the
Corporation;
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WHEREAS, as set forth in greater detail on Exhibit A hereto,
278,061 of such shares, or 25% of the then outstanding common shares of the
Corporation, were acquired outright by Initial Management as Unrestricted Shares
(as defined in the Old Agreement) and 289,184 of such shares, or 26% of the then
outstanding common shares, were acquired by Initial Management as Restricted
Shares (as defined in the Old Agreement), subject to the terms and conditions
and provisions as set forth in the Old Agreement;
WHEREAS, with respect to the 26% of the then outstanding
common shares that were held by Initial Management as Restricted Shares (as
defined in the Old Agreement), the Old Agreement (i) limited the rights of
Initial Management to vote and to receive dividends with respect to such shares,
(ii) imposed substantial restrictions on the transferability of such shares
until such shares were "earned" by Initial Management by reason of the
Corporation's satisfaction of certain performance criteria set forth therein and
(iii) provided that such shares were subject to forfeiture in the event the
employment of the Management holder thereof was terminated in certain
circumstances;
WHEREAS, the Corporation is considering an IPO (as defined
below) with respect to its common shares, as adjusted for the Reclassification
(as defined below);
WHEREAS, in connection with the IPO, the Corporation and the
Employee have agreed to eliminate some of the restrictions that were imposed on
Restricted Shares pursuant to the Old Agreement and to deem that certain shares
designated as Restricted Shares pursuant to the Old Agreement be redesignated as
Unrestricted Shares;
NOW THEREFORE, FOR AND IN CONSIDERATION of the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt,
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adequacy and sufficiency of which is hereby acknowledged, the parties do hereby
agree to amend and restate the Old Agreement, as so amended, as follows:
1. Definitions. For purposes hereof, the following terms shall be
defined as follows:
(a) "Adjusted EBITDA" for any fiscal year of the Corporation
means (i) consolidated earnings of the Corporation and its subsidiaries before
consolidated interest, taxes, depreciation, amortization, and other non-cash
charges, adjusted to exclude one-time or non-recurring expenses or credits (such
exclusions to include but not be limited to the payments to Xxxxxx Hotels
Corporation (formerly known as Microtel Franchising and Development Corporation)
in the total amount of $4 million dollars pursuant to the terms of that certain
Joint Venture Agreement dated September 7, 1995) for such fiscal year, as
determined by the Corporation in good faith in accordance with generally
accepted accounting principles consistently applied, minus (ii) 10% of the
Transaction Consideration (as defined below) actually paid by the Corporation
and/or its subsidiaries in connection with a Transaction (as defined below)
closed after the closing of the IPO (provided that such consideration has not
been deducted in determining the amount referred to in clause (i) above). In the
event of any dispute or disagreement regarding the determination of the amount
of Adjusted EBITDA, then such dispute or disagreement shall be resolved by the
accounting firm regularly engaged to and providing auditing services to the
Corporation.
(b) "Earned Shares" means those Shares that are designated
herein as Restricted Shares and are subsequently redesignated as Earned Shares
in accordance with
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the terms hereof due to the attainment by the Corporation of certain performance
standards as provided for herein.
(c) "Employee Shares" means the Restricted Shares and Unrestricted
Shares held by Employee under this Agreement.
(d) "Employment Agreement" means that certain agreement
relating to the employment of Employee with the Corporation dated October 1,
1995, as the same may be amended from time to time.
(e) "Initial Management" means Employee and Xxxxxxx X. Xxxxx.
(f) "IPO" shall mean the initial public offering of Shares
pursuant to the Securities Act of 1933, as amended.
(g) "Management" means the group of individuals (including
Initial Management) who are employees of the Corporation and who have been
issued shares of Class A Common Stock pursuant to the terms of the Old Agreement
or a stock purchase agreement substantially similar to the Old Agreement, as the
same may be amended from time to time (with such changes thereto as are
authorized by the Stock Reallocation Committee).
(h) "Management Shares" means Shares issued to and acquired by
Management (or their permitted designees and successors), including Unrestricted
Shares, Restricted Shares, Earned Shares, Reallocable Shares, shares acquired
through preemptive (or similar) rights or otherwise from or through the
Corporation and such shares that are transferred to other Management.
(i) "Original Stockholders" or "Original Investors" means
those persons who are not employees of the Corporation and who were issued
shares of Old Common
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Stock pursuant to the offering described in the Confidential Investment
Memorandum of the Corporation, dated August 19, 1995, and their Permitted
Transferees (as such term is used in that certain Stockholders' Agreement among
the Corporation and the Original Investors, dated as of September 29, 1995).
(j) "Reallocable Shares" means those Restricted Shares and/or
Unrestricted Shares owned or held by Initial Management that were specifically
designated at the time of their original issue as Reallocable Shares and that,
prior to the date hereof, have been reallocated to other Management pursuant to
the Old Agreement. Such shares shall retain such designation regardless of
whether they are converted from Restricted Shares to Earned Shares (in the case
of Reallocable Restricted Shares), unless and until such shares become Forfeit
Shares and are redeemed or otherwise repurchased by the Corporation from the
Management holder (other than Initial Management) thereof.
(k) "Reclassification" means the conversion of each share of
Old Common Stock into 9.67 shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), of the Corporation pursuant to the Corporation's
Amended and Restated Certification of Incorporation, which is to be filed with
the State of Delaware prior to the consummation of the IPO.
(l) "Restricted Shares" means 144,592 Shares (prior to the
Reclassification), constituting 13% of the outstanding common stock of the
Corporation as of October 2, 1995), that were issued to Initial Management
pursuant to the Old Agreement and that were specifically designated at the time
of issue as Restricted Shares, as the same are reclassified pursuant to the
Reclassification. Restricted Shares are subject to repurchase (even if they have
been converted to Earned Shares) pursuant to a
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Termination Forfeiture. Restricted Shares are eligible for conversion to Earned
Shares upon attainment by the Corporation of certain performance criteria as set
forth herein. Restricted Shares that have not been converted to Earned Shares by
September 29, 2005 are subject to redemption by the Corporation (and reissue to
the Original Investors). If such shares are then reissued to Original Investors,
such shares shall automatically be converted to and shall thereafter be deemed
to be Unrestricted Shares.
(m) "Shares" means the shares of the Old Common Stock that
were authorized immediately prior to the Reclassification, as reclassified by
the Reclassification into Class A Common Stock and, to the extent set forth in
Section 2(b)(iv) hereof, exchanged for Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), of the Corporation, all as the same may be
further reclassified from time to time.
(n) "Stock Reallocation Committee" means the committee
appointed by the Board of Directors of the Corporation from among its members to
administer the reallocation of Reallocable Shares hereunder.
(o) "Stockholders' Agreement" means that certain Stockholders'
Agreement dated as of September 29, 1995 by and between the Corporation and the
Stockholders named therein, as such agreement may be amended from time to time.
Employee acknowledges that all of the Shares held by Employee hereunder shall be
issued and held in accordance with the terms of the Stockholders' Agreement, in
addition to the terms and conditions hereof.
(p) "Termination Forfeiture" means the redemption by the
Corporation from the Employee of Restricted Shares (whether or not converted to
Earned Shares) upon the occurrence of a Termination Forfeiture Event.
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(q) "Termination Forfeiture Event" means the occurrence or
happening of one of the following during the period ending on September 29,
2005: (i) voluntary resignation for other than Good Reason (as defined in the
Employment Agreement) of Employee; or (ii) termination of Employee by the
Corporation for Cause (as defined in the Employment Agreement).
(r) "Transaction Consideration" means the total consideration
paid or to be paid in connection with a Transaction, including, without
limitation: (i) cash; (ii) notes, securities and other property; (iii)
indebtedness for borrowed money assumed, refinanced or extinguished; (iv)
amounts payable under consulting agreements, agreements not to compete or
similar arrangements; and (v) contingent payments (whether or not related to
future earnings or operations); provided, that in the event debt financing is
utilized to effect a Transaction, proceeds from such debt financing shall no
longer be considered as Transaction Consideration as and to the extent such
proceeds have been repaid to the lender thereof. For purposes of determining the
amount of consideration paid, non-cash consideration shall be valued as follows:
(x) publicly traded securities, including capital stock of the Corporation,
shall be valued at the average of their closing prices (as reported in The Wall
Street Journal) for the five trading days prior to the closing of the
Transaction and (y) any other non-cash consideration shall be valued at the fair
market value thereof as determined in good faith by the Board of Directors of
the Corporation.
(s) "Transaction" means an acquisition by the Corporation
and/or its subsidiaries of another corporation or other entity, a business or a
brand, including, but not limited to, through a merger, consolidation, tender or
exchange offer, acquisition of
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securities or assets, or through a licensing agreement, but excluding any
investment in another corporation, joint venture or other entity (an "entity")
that represents less than 25% of the equity of such entity.
(t) "Unrestricted Shares" means all Shares owned or held by
the Initial Management (or by other Management, in the case of Reallocable
Shares, or by the Permitted Transferees of Initial Management (as such term is
defined in the Stockholders' Agreement, prior to any amendment thereof)) that
have not been specifically designated herein as Restricted Shares, including but
not limited to Shares acquired for value from the Corporation pursuant to a
voluntary exchange (including the exchange referred to in Section 2(b)(iv)
hereof) or through preemptive (or similar) rights, stock splits or dividends
with respect to Unrestricted Shares and the like or other subsequently acquired
shares. Unrestricted Shares are held outright and subject to the terms and
conditions set forth in the Amended and Restated Certificate of Incorporation of
the Corporation, as the same may be amended from time to time, and in the
Stockholders' Agreement.
(u) Capitalized terms not defined in this Agreement shall have
the meaning and intent ascribed to them in the Stockholders' Agreement.
2. Management Equity Participation.
(a) Stock Reallocation Committee.
-----------------------------
(i) Pursuant to the Old Agreement, the Management
Shares were initially issued, allocated, offered and divided among Employee and
Xxxxxxx X. Xxxxx in the amounts and designations set forth in Exhibit "A"
attached hereto. Following the Reclassification, the IPO and effectiveness of
this amendment in accordance with Section 19 hereof, Management (including
Initial Management) will own Shares in the amounts and designations set forth in
Exhibit "B"
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attached hereto. Thereafter, subsequent offers, call options, redemptions, and
the like, in each case to the extent permitted hereunder, shall be subject to
the exclusive control and authority of the Stock Reallocation Committee of the
Corporation. The Stock Reallocation Committee shall also have the authority to
cause the Corporation to act with respect to Management Shares that are
forfeited by Management to the Corporation, subject to the rights of Initial
Management to have Forfeit Shares reoffered to them under this Agreement.
(b) Unrestricted Shares.
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(i) Thirty-eight percent (38%) of the total 51% of
Shares acquired by Initial Management pursuant to the Old Agreement are hereby
designated as Unrestricted Shares. 62,911 of such shares, or approximately
5.656% of the 38% constituting Unrestricted Shares were designated as
Reallocable Shares pursuant to the Old Agreement and have heretofore been called
and repurchased from time to time at the direction of the Stock Reallocation
Committee from Initial Management (or their Permitted Transferees) and sold to
other members of Management. The Stock Reallocation Committee has had and shall
continue to have the authority to impose such terms, conditions, limitations and
otherwise as it deems reasonable, desirable or necessary with respect to
Reallocable Shares held by Management other than Initial Management; provided,
however, that following the effectiveness of this Agreement, no other Shares
(including Shares that have been forfeited to the Corporation and reissued to
Initial Management, as contemplated by Section 2(a)(ii) hereof) shall be subject
to call and repurchase from Initial Management (or their Permitted Transferees)
for offer, sale and/or transfer to other Management; and provided further, the
Stock Reallocation Committee
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may not permit such Reallocable Shares to be held by other Management under
terms, conditions, limitations and otherwise which are more favorable, desirable
or beneficial than as imposed on Initial Management, other than the provisions
with respect to the duration of service after which the risk of Termination
Forfeiture may lapse. The remaining approximately 32.34% of the 38% constituting
Unrestricted Shares shall be held outright, free and clear by Initial Management
(or their Permitted Transferees), are not subject to call, purchase or
reallocation by the Stock Reallocation Committee or otherwise, shall not be
subject to the risk of Termination Forfeiture, and the holders thereof shall
enjoy all incidents of ownership to such shares (subject to any restrictions or
limitations set forth in the Stockholders' Agreement).
(ii) Notwithstanding anything to the contrary in this
Agreement, while the Employee is still employed by the Corporation, the Stock
Reallocation Committee shall offer to Employee the opportunity to repurchase any
Reallocable Shares (Restricted, Earned and/or Unrestricted) that have heretofore
been called, repurchased, reallocated from the Employee and sold by the
Corporation at the direction of the Stock Reallocation Committee to other
Management, where, thereafter, such Reallocable Shares are forfeited to the
Corporation or repurchased or held by the Corporation for any reason ("Forfeit
Shares"). Such Forfeit Shares shall be reoffered to the Employee at the original
purchase price of $1.00 per share, as such price is adjusted for the
Reclassification (the "Adjusted Original Price"), and the right to purchase such
shares may be exercisable by Employee at any time. Forfeit Shares reacquired by
Employee shall not regain their status as Reallocable Shares and therefore shall
not be subject to call and redemption by the Stock Reallocation Committee for
purpose of reallocation to other Management.
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(iii) Unless otherwise specifically set forth in this
Agreement or in a separate written agreement between the Corporation and the
Employee, any and all shares acquired by the Employee from the Corporation for
value (other than Restricted Shares), including through a voluntary exchange
(including the exchange referred to in Section 2(b)(iv) hereof (the "Exchange"))
or pursuant to the exercise of preemptive (or similar) rights, or from stock
splits or stock dividends as to Unrestricted Shares (but not acquired shares
which are attributable to Restricted Shares), shall be deemed Unrestricted
Shares.
(iv) Immediately following the effectiveness of this
Amendment, the Corporation shall issue to Initial Management and Initial
Management shall purchase from the Corporation 2,706,557 shares of the
Corporation's Class B Common Stock (which shares shall be Unrestricted Shares)
in exchange for the same number of shares of the Corporation's Class A Common
Stock.
(c) Restricted Shares.
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(i) Shares designated herein as Restricted Shares are
limited as to their incidents of ownership and other rights as herein
specifically set forth (but shall retain all other rights including, without
limitation, the right to vote and to receive dividends with respect to such
shares) until such time as the Restricted Shares are deemed "Earned" and
converted to Earned Shares in accordance with the terms hereof.
(ii) Thirteen percent (13%), or 144,592
(pre-Reclassification), of the 51% of Shares acquired by Initial Management
pursuant to the Old Agreement are hereby designated as Restricted Shares.
Restricted Shares are subject to the substantial restrictions on transferability
and the substantial risks of forfeiture as set forth under this
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Agreement. 22,593 shares (pre-Reclassification) or 2.0315% of the 13%
constituting Restricted Shares were designated as Reallocable Shares pursuant to
the Old Agreement and have heretofore called and repurchased from Initial
Management (or their Permitted Transferees) and sold by the Corporation to other
Management in the same manner as the Reallocable Shares referred to in Section
2(b) hereof. While such Reallocable Shares are held by Management other than
Initial Management, such Shares shall cease to be Reallocable (but shall remain
Restricted (subject to being "Earned")). The Stock Reallocation Committee has
had and shall continue to have the authority to impose such terms, conditions,
limitations and otherwise as it deems reasonable, desirable or necessary with
respect to such Reallocable Shares held by Management other than Initial
Management; provided, however, that following the effectiveness of this
Agreement, no other Shares (including Forfeit Shares) shall be subject to call
and repurchase from Initial Management (or their Permitted Transferees) for
offer, sale and/or transfer to other Management; and provided further, the Stock
Reallocation Committee may not permit such Reallocable Shares to be held by
other Management under terms, conditions, limitations and otherwise which are
more favorable, desirable or beneficial than as imposed on Initial Management,
other than the provisions with respect to the duration of service after which
the risk of Termination Forfeiture may lapse.
(iii) Where certain performance criteria are attained
by the Corporation, Restricted Shares shall become Earned Shares such that the
substantial limitations on the holder's enjoyment of incidents of ownership in
the Restricted Shares will lapse and be suspended and the holder thereof will
become entitled to all incidents of ownership in the Earned Shares, subject only
to Termination Forfeiture and the restrictions
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on transfer hereinafter set forth. The specific performance criteria and the
related terms and conditions whereby Restricted Shares may become Earned Shares
are set forth in Sections 7 and 13 of this Agreement.
(d) Interpretation of "Percentage." Whenever this Agreement
refers to a "percentage" as to Shares, the percentage shall refer to a
percentage based on 100%, and not based on the percentage of the stated
percentage of such Shares. By way of example and not limitation, a "percentage"
of the 51%, 38% and/or 25%, respectively, refers to said 51%, 38% and/or 25%
being viewed as a total of 51, 38 and/or 25 increments of 1% each (and not to
100 increments of .51%, .38% and/or .25%), respectively. By way of further
example and not limitation, if the total of 51% of issued and outstanding
Management Shares (including all Unrestricted, Restricted and Earned Shares) is
represented by 510,000 Shares, then 38% of the 51% shall refer to 380,000
Shares, 5% of the 38% shall refer to 50,000 Shares, and so forth.
3. Representations of Employee. Employee hereby represents and warrants
to the Corporation that:
(a) Investment Intent. The Employee Shares (including those to
be acquired pursuant to the Exchange) were or will be acquired for Employee's
own account and not with a view to, or intention of, distribution thereof in
violation of the Securities Act of 1933, as amended (the "Securities Act"), or
any applicable state securities laws, and the Employee Shares shall not be
disposed of in contravention of the Securities Act or any applicable state
securities laws.
(b) Accredited Investor. Employee is an executive officer of
the Corporation and (i) is an "accredited investor" as defined in Rule 501(a)
under the
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Securities Act or (ii) by reason of Employee's business and financial
experience, and the business and financial experience of those retained by
Employee to advise Employee with respect to Employee's investment in the
Employee Shares purchased pursuant to the Old Agreement or the Exchange,
Employee, together with such advisors, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the risks and benefits of the investment in the Employee Shares.
(c) Risk of Investment. Employee is able to bear the economic
risk of the investment in the Employee Shares, including the complete loss of
such investment in the Employee Shares, for an indefinite period of time because
the Employee Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(d) Adequate Information. Employee has had an opportunity to
ask questions and receive answers concerning the terms and conditions of the
offering of Employee Shares and has had full access to such other information
concerning the Corporation as Employee has requested.
(e) Binding Agreement. This Agreement constitutes the legal,
valid and binding obligation of Employee, enforceable against Employee in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and fair
dealing. The execution, delivery and performance of this Agreement does not
conflict with, violate
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or cause a breach of any agreement, contract or instrument to which Employee is
a party or any judgment, order or decree to which Employee is subject.
4. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to Employee that:
(a) Corporate Entity. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
(b) Binding Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by the Corporation. This Agreement
constitutes a valid and binding obligation of the Corporation enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and fair
dealing.
(c) Fully Paid and Non-Assessable Shares. All Shares acquired
by the Employee pursuant to the Old Agreement have been validly issued, and
Shares acquired upon the Reclassification and the Exchange will be validly
issued, and all such Shares are or will be, as the case may be, fully paid and
nonassessable when issued.
5. Limitations on Restricted Shares. Employee will be entitled to enjoy
all incidents of ownership of the Restricted Shares, except that (i) such shares
shall be subject to the risk of Termination Forfeiture and (ii) may not be sold,
transferred, pledged or otherwise disposed of until September 29, 2005 other
than to an immediate family member of such holder or any trust or partnership of
which all of the beneficiaries or partners, as
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the case may be, are such holder and/or immediate family members of such holder,
so long as the transferee agrees in writing to be bound by the restrictions set
forth in this Agreement. All Restricted Shares that have become Earned Shares
subsequent to the date hereof (i.e., not including the 13% deemed Unrestricted
Shares by virtue of amendments to the Old Agreement) shall become permanently
vested with Employee or his Permitted Transferees as Unrestricted Shares and
shall no longer be subject to any Termination Forfeiture on September 29, 2005.
Restricted Shares not yet earned and redesignated as Earned Shares by September
29, 2005 shall be called and repurchased by the Corporation as set forth in
Section 7 hereof.
6. Earned Shares.
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(a) Repurchase Upon Termination Forfeiture Event. Restricted
Shares will be deemed and become Earned Shares upon the Corporation's attaining
the Performance Criteria set forth in Section 13 hereof.
(b) Incidents of Ownership. Subject to the restrictions on
transfer contained herein and the risk of Termination Forfeiture, the holder of
Earned Shares will enjoy all incidents of ownership to such shares, including
the right to receive all dividends and to vote such shares.
7. Redemption of Restricted Shares Not Earned.
-------------------------------------------
(a) Call and Repurchase by Corporation. Shares that remain
Restricted Shares on September 29, 2005 (i.e., which have not previously been
converted to Earned Shares) (the "Unearned Restricted Shares") shall be called
and redeemed by the Corporation at the Adjusted Original Price. The Board of
Directors of the Corporation may establish reasonable notice provisions, time
frames, procedures and otherwise as it
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deems reasonable or necessary to facilitate and effect the transaction
contemplated by this Section 7(a). Subject to Section 8(b), the Corporation must
call and purchase such shares from Employee within sixty (60) days of September
29, 2005.
(b) Reoffer of Restricted Shares Not Earned. Subject to
applicable federal and state securities laws, Unearned Restricted Shares so
acquired by the Corporation shall be offered by the Corporation at the Adjusted
Original Price to the Original Investors pro rata with their holdings of shares
of common stock, par value $.10 per share, prior to the IPO.
8. Termination Forfeiture.
-----------------------
(a) Termination for Cause; Resignation. If a Termination
Forfeiture Event occurs, then all Restricted Shares issued to Employee (whether
or not then converted to the status of Earned Shares) shall be called and
repurchased by the Corporation at the Adjusted Original Price, subject to
Section 8(b) hereof.
(b) Deferral of Purchase by Corporation. In the event that any
payment by the Corporation under Section 7(a) or 8(a) for such shares would
constitute a default or an event of default or result in a mandatory prepayment
requirement under the terms of any agreement for indebtedness or other agreement
to which the Corporation or any of its subsidiaries is a party as of the date
for such purchase, the Corporation shall have the right, by delivery of written
notice to the Employee, to defer exercise of its call and purchase right until
such payment by the Corporation would no longer have such an effect; provided
that the Corporation's exercise of its purchase right may not be deferred for
more than six (6) months. The Corporation shall give Employee prompt written
notice of when it is no longer restricted from making such purchase, and the
procedures set forth
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in Section 7(a) or 8(a) hereof, as the case may be, shall apply as though the
date giving rise to the purchase right occurred on the date such notice is
given.
(c) Procedures. The Board of Directors of the Corporation may
establish reasonable notice provisions, time frames, procedures and otherwise as
it deems reasonable or necessary to facilitate and effect the transaction
contemplated by this Section; provided, the Corporation may not exercise its
option and call the Shares subject to the Termination Forfeiture later than
ninety (90) days after the Corporation receives written notice of the
Termination Forfeiture Event.
9. Termination of Employment Without Cause or by Employee for Good
Reason. Upon termination of employment of Employee under the Employment
Agreement by the Corporation without Cause (as defined in the Employment
Agreement) or by the Employee for Good Reason (as defined in the Employment
Agreement), all limitations, restrictions, risks of forfeiture and conditions
which relate to Restricted Shares (as unearned Restricted Shares or Earned
Restricted Shares) held by Employee, including but not limited to risk of
Termination Forfeiture, limitations on transfer or risk of call by the Board for
non-conversion to Earned Shares, will automatically and permanently lapse and
all Restricted Shares and Earned Shares will permanently become Unrestricted
Shares held by Employee. The restrictions, terms and conditions of the
Stockholders' Agreement (or any other applicable agreement) then in effect shall
remain in full force and effect.
10. Death or Total Disability of Employee. Where termination of
Employee is due to Disability (as that term is defined in the Employee's
Employment Agreement) or death, (i) all risks of Termination Forfeiture shall
immediately lapse and terminate and (ii) as to any Restricted Shares held by
Employee as of the date of such event, the Disabled
19
or deceased Employee (or his duly authorized successors) will receive the
benefit of the Corporation's performance over the two (2) fiscal year ends
immediately following such termination as to the Corporation attaining the
Performance Criteria such that Restricted Shares may become Earned Shares and
Unrestricted Shares. By way of clarification, restrictions and risks of
forfeiture as to Restricted Shares held by the Disabled or deceased Employee (or
his successors) shall permanently lapse and Restricted Shares shall become
Earned (and therefore Unrestricted Shares) to the extent that the Corporation
attains the Adjusted EBITDA Performance Criteria set forth herein at such two
(2) fiscal year ends.
11. Reissue of Forfeit Shares. Forfeit Shares shall be reoffered by the
Corporation to Initial Management, pro rata based on their relative percentage
ownership of shares of common stock, par value $.10 per share, immediately
following the initial capitalization of the Company, at the Adjusted Original
Price per share, as the same may be further readjusted from time to time.
12. Performance Criteria. Restricted Shares may be earned and become
Earned Shares upon attainment by the Corporation of the following performance
criteria (the "Performance Criteria"):
(a) Adjusted EBITDA Threshold. One thirteenth (1/13) of the
Restricted Shares (allocated pro rata among Restricted Shares also designated
Reallocable and other Restricted Shares) will be redesignated as (and deemed to
be earned as) "Earned Shares" for every one million dollars ($1,000,000) of
annual Adjusted EBITDA earned by the Corporation, subject to the limitations set
forth in Section 12(b) hereof. Any incremental portion of Adjusted EBITDA less
than $1,000,000 will be disregarded for such calculation.
20
(b) Determination of Attained Thresholds and Earned Shares.
The number of Restricted Shares with respect to which restrictions and risk of
forfeiture will lapse shall be based on the highest annual Adjusted EBITDA of
the Corporation attained at any time and from time to time; provided, however,
Restricted Shares shall not be redesignated as Earned Shares until the
Corporation's annual Adjusted EBITDA for a fiscal year reaches or exceeds
fourteen million dollars ($14,000,000). By way of example and not limitation,
where Adjusted EBITDA in a given year is $13,300,000, then no restrictions or
risk of forfeiture shall lapse and no Restricted Shares shall become Earned
Shares. If Adjusted EBITDA in a given year is $14,000,000 (to $14,999,999.99),
then Management shall be deemed to have earned rights to 1/13 of the Restricted
Shares, and such Restricted Shares automatically shall become Earned Shares.
Thereafter, if Adjusted EBITDA in a given year is $20,000,000, then Management
shall be deemed to have earned rights to a total of 7/13 (i.e., an additional
6/13) of the Restricted Shares, and so forth. Accordingly, Management's rights
to have all Restricted Shares become Earned Shares will not occur until such
time as the Corporation realizes Adjusted EBITDA of twenty-six million dollars
($26,000,000) or more in a given fiscal year.
(c) Reduction in Adjusted EBITDA; Averaging. Once Restricted
Shares are earned, based upon the Corporation's annual Adjusted EBITDA for a
given fiscal year, and such Shares are redesignated as Earned Shares, such
Earned Shares shall not be affected by the fact that the Corporation's annual
Adjusted EBITDA may decline for any subsequent fiscal year. However, once
Adjusted EBITDA of $14,000,000 or more has been attained, if the Corporation's
annual Adjusted EBITDA declines in a subsequent fiscal year from the highest
level at which additional Restricted Shares become Earned Shares,
21
additional Restricted Shares will not become Earned Shares until the
Corporation's average annual Adjusted EBITDA for the fiscal years including and
following the year of such decline in annual Adjusted EBITDA is greater than the
level of annual Adjusted EBITDA at which Restricted Shares were last earned. For
example, no additional Restricted Shares would be earned if annual Adjusted
EBITDA in the most recent year in which Restricted Shares were earned had been
$16,000,000, such annual Adjusted EBITDA declined to $14,000,000 in the
following year and thereafter increased to $17,000,000 in the subsequent year
(the average of $14,000,000 and $17,000,000 is $15,500,000, which does not
exceed $16,000,000, the level of annual Adjusted EBITDA for the most recent year
in which Restricted Shares were earned). Additional Restricted Shares would not
be earned in this example until such average annual Adjusted EBITDA was at least
$17,000,000. As is always the case, additional Restricted Shares are not earned
as Earned Shares until annual Adjusted EBITDA increases from the prior year to
the next $1,000,000 threshold of Adjusted EBITDA (and thereafter additional
Restricted Shares are earned for each $1,000,000 threshold).
(d) Resumption of Thresholds. After the average Adjusted
EBITDA has exceeded the Adjusted EBITDA for the year of Adjusted EBITDA at which
Restricted Shares were last earned, then no averaging shall be applicable for so
long as Adjusted EBITDA does not decrease from a prior year's.
(e) Pro Rata Conversion. Upon the Corporation's attaining the
Performance Criteria from time to time, Restricted Shares held by all Management
(and their Permitted Transferees) shall be converted pro rata into Earned
Shares, based on the number of all Restricted Shares then held by all Management
(and their Permitted
22
Transferees). Provided, nothing herein shall be construed to limit the authority
or ability of the Stock Reallocation Committee to require or impose additional,
more strict or other conditions, restrictions, requirements or limitations as to
Restricted Shares held by other than Initial Management, such that vesting of
and/or lapse of restrictions on such Restricted Shares may be delayed,
prohibited, limited or otherwise with respect to Management other than Initial
Management.
13. Successors and Assigns. The duly authorized Permitted Transferees
(as such term is defined in the Stockholders' Agreement prior to any amendment
thereof) and holders of Restricted Shares and Reallocable Shares originally held
from or through Management, including any transferee obtaining Restricted Shares
in accordance with Section 5 hereof, shall be subject to the same restrictions,
obligations, call rights, purchase options, benefits, put options, terms and
otherwise as would be applicable if such shares were held directly by
Management. All restrictions, forfeiture and repurchase provisions and other
terms and conditions relating to Restricted Shares and Reallocable Shares shall
be binding on and inure to the benefit of the transferees, successors and
assignees of those shares.
14. Sale of All or Substantially All Stock or Assets, or Merger. In the
event that all or substantially all of the Corporation's stock or all or
substantially all assets of the Corporation are transferred or sold, or upon a
merger or other business combination, then all Restricted Shares will become
Unrestricted Shares to the extent that value for the entire Corporation
indicated by the gross sale price as determined in good faith by the Board of
Directors in such transaction results in an internal rate of return to those
Original Investors who, at the time of such transaction, continue to be
stockholders of the Corporation, of at
23
least 40% on a compounded annual basis based upon such persons' original
holdings in the Corporation (after taking into account the amount and timing of
all distributions and payments received by those Original Investors from the
Corporation, after considering Unrestricted and Earned Shares then held by
Management, and after giving effect to Restricted Shares that become
Unrestricted Shares as result of such sale, transfer or merger). Restricted
Shares that do not become Unrestricted Shares as a result of such sale, transfer
or merger shall retain their characteristics and potential benefits as
Restricted Shares under this Agreement, unless such issue is expressly addressed
in the documentation with respect to such sale, transfer or merger. The
Corporation may, without the consent of Employee, modify or eliminate the
Restricted Share rights and designation as to Restricted Shares not converted to
Unrestricted Shares in the documentation with respect to such sale, transfer or
merger where the Corporation agrees in writing to such matters as part of such
sale, transfer or merger.
15. Legends. Employees agrees that all share certificates representing
Shares issued to Employee under the Agreement shall have the legend required by
the Stockholders' Agreement or as otherwise may be reasonably be imposed by the
Corporation.
16. Additional Covenants.
---------------------
(a) Stockholders' Agreement. Employee hereby acknowledges that
the Shares shall be subject to the terms and conditions of the Stockholders'
Agreement. Employee has received a copy of such Stockholders' Agreement and
Employee further acknowledges that such Stockholders' Agreement contains
provisions restricting the transferability of the Shares in addition to those
set forth herein.
24
(b) Dilution. All Shares held by Management (including
Restricted Shares) will be diluted under the same circumstances as and pro rata
with any Shares held by an Original Investor and all other stockholders of the
Corporation.
(c) Not an Employment Agreement. This Agreement is not an
employment contract, the terms and conditions of which shall exclusively be
controlled by the provisions of the Employment Agreement.
(d) Stock Dividends, Stock Splits and Recapitalizations. If
dividends are declared and payable in kind, and in the event of a stock split,
recapitalization or other transaction which causes shares to be issued or
exchanged, the additional, issued, successor, substituted, and/or replacement
shares shall bear the same characteristics, restrictions, rights, obligations,
options and otherwise as the shares with respect to which such additional
issued, successor, substituted and/or replacement shares arose, for all purposes
and the Adjusted Original Price shall be further adjusted on a proportional
basis to reflect such change.
(e) Preemptive Shares. If shares are acquired pursuant to
pre-emptive (or substantially similar) rights by Employee, said acquired shares
shall possess and be subject to the same characteristics, restrictions, rights
obligations, options and otherwise as the shares giving rise to the acquisition
of such additional shares.
17. Withholding Taxes; Section 83(b) Election.
------------------------------------------
(a) Withholding Taxes. Employee shall be solely responsible
for paying the Corporation an amount necessary to satisfy the withholding and
payment of all applicable federal and state income tax withholdings, if any,
including but not limited to social security (FICA) and Medicare tax, at the
applicable rates in existence as of
25
September 29, 1995. Employee hereby authorizes the Corporation to withhold from
any amounts otherwise payable to Employee such taxes as may be required by law
in connection with the issue to Employee of the Shares. Employee agrees that if
such amounts are insufficient Employee will pay or make arrangements
satisfactory to the Corporation for payment of such taxes.
(b) Section 83(b) Election. Employee has filed an election
under I.R.C. Section 83(b) and the parties hereto acknowledge and agree that
withholding taxes shall be computed as an amount equal to (1) the fair market
value of the Shares issued to the Employee pursuant to the Old Agreement as of
September 29, 1995 less (2) any amount paid therefor. The Corporation shall
assist Employee at his request in the filing and perfecting of such I.R.C.
Section 83(b) election.
18. Notices. All notices permitted or required hereunder shall be in
writing and shall be deemed to have been duly and properly given as of the
earlier of the date and time of actual delivery or three (3) days following the
date the same are deposited with the United States Postal Service, postage
prepaid, to be sent certified mail with return receipt requested, and addressed
to the Corporation, as follows:
U.S. Franchise Systems, Inc.
Attention: Xxxxxxx X. Xxxxx
00 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
and addressed to Employee, as follows:
Xx. Xxxx X. Xxxxxxx
c/o U.S. Franchise Systems, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
26
or at such other address as the Corporation or Employee may at any time and from
time to time specify to the other by notice as herein provided.
19. Miscellaneous.
--------------
(a) This Amended and Restated Employee Stock Purchase
Agreement shall not be effective unless and until the closing of the IPO.
(b) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective agents,
representatives, successors and
permitted assigns.
(c) Cooperation. The parties shall cooperate fully with each
other and their respective counsel and representatives in connection with all
steps to be taken as part of their obligations under this Agreement.
(d) Governing Law. This Agreement and the rights and duties of
the parties attendant hereto shall be construed and governed in accordance with
the internal laws (and not the conflict of laws) of the State of Georgia.
(e) No Waiver. The failure of either party to insist, in one
or more instances, on the performance by the other in strict compliance with the
terms and conditions of this Agreement, shall not be deemed a waiver or
relinquishment of any right granted hereunder or of any terms and conditions of
this Agreement unless such waiver is contained in a writing signed by the
parties.
(f) Entire Agreement. This Agreement and any amendments or
exhibits attached hereto or related documents referenced herein comprise all the
agreement, understandings, representations, conditions and warranties by and
between the parties.
27
This Agreement may not be modified or amended except in a writing signed by the
parties to this Agreement.
(g) Survival. All representations, warranties and covenants
contained in this Agreement shall survive the execution and delivery of this
Agreement and all documents executed in performance of this Agreement.
(h) Interpretation. Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include the other gender, as the meaning in the context of this Agreement
shall require. Should any provision of this Agreement require judicial
interpretation, it is agreed that the court interpreting or construing the same
shall not imply a presumption that the terms hereof shall be more strictly
construed against one party by reason of the rule of construction that a
document is to be construed more strictly against the party who itself or
through its agent prepared this Agreement, it being agreed that all parties have
had the opportunity to review and understand this Agreement.
(i) Injunctive Relief. In the event of a breach or threatened
breach by a party of any of his obligations hereunder, the parties hereby
acknowledge and agree that the parties will not have an adequate remedy at law
and shall be entitled to such equitable and injunctive relief as may be
available to restrain a threatened or actual violation. Nothing herein shall be
construed as prohibiting a party from pursuing any other remedies available for
such breach or threatened breach, including without limitation the recovery of
damages. All remedies shall be cumulative. No party shall be required to post a
bond or other surety as a condition to obtaining such injunctive relief.
28
20. Multiple Counterparts. This Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
21. Record Owner. The Corporation shall not be required (i) to transfer
on its books any shares that shall have been sold or otherwise transferred in
violation of any of the provisions set forth in this Agreement or the
Stockholders' Agreement or (ii) to treat the improper transferee as owner of
such shares or to accord to such improper transferee the right to vote, if any,
as such owner.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Stock Purchase Agreement on the date first above written.
CORPORATION:
U.S. FRANCHISE SYSTEMS, INC.
By:______________________________
Xxxxxxx X. Xxxxx
Chairman, President and
Chief Executive Officer
ATTEST:
By:_____________________________
____________ Secretary
EMPLOYEE:
---------------------------
XXXX X. XXXXXXX
EXHIBIT "A"
EMPLOYEE SHARES
(as of September 29, 1995)
Xxxxxxx X. Xxxx K.
---------- -------
TOTAL Leven Xxxxxxx
----- ----- -------
(a) Restricted Shares
-----------------
(i) Reallocable 66,735 33,367 33,368
(ii) Non-Reallocable 222,449 111,225 111,224
Total Restricted Shares: 289,184 144,592 144,592
(b) Unrestricted Shares
-------------------
(i) Reallocable 55,612 33,367 22,245
(ii) Non-Reallocable 222,449 133,470 88,979
Total Unrestricted Shares: 278,061 166,837 111,224
Total Shares Issued Hereunder: 567,245 311,429 255,816
