<PAGE>

                                                                    EXHIBIT 2.1


                              ACQUISITION AGREEMENT

                                  BY AND AMONG

                          U.S. FRANCHISE SYSTEMS, INC.

                                   SDI, INC.,

                              USFS ACQUISITION CO.,

                            MERIDIAN ASSOCIATES, L.P.

                                       AND

                              HSA PROPERTIES, INC.


                            DATED SEPTEMBER 18, 2000


<PAGE>



                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                              <C>
RECITALS .........................................................................................................1

AGREEMENT.........................................................................................................2

ARTICLE 1
         DEFINED TERMS............................................................................................2

ARTICLE 2
         TENDER OFFER.............................................................................................2
                  Section 2.1       Tender Offer. ................................................................2
                  Section 2.2       Actions by SDI and Newco......................................................3
                  Section 2.3       Company Actions...............................................................4
                  Section 2.4       Board Representation..........................................................4
                  Section 2.5       Restricted Stock; Options.....................................................5

ARTICLE 3
         MERGER...................................................................................................5
                  Section 3.1       The Merger....................................................................5
                  Section 3.2       Effective Time; Filing of Certificate of Merger...............................6
                  Section 3.3       Certificate of Incorporation..................................................6
                  Section 3.4       Bylaws........................................................................6
                  Section 3.5       Directors and Officers........................................................6
                  Section 3.6       Additional Actions............................................................6
                  Section 3.7       Time and Place of Closing.....................................................6

ARTICLE 4         CONVERSION OF SECURITIES........................................................................7
                  Section 4.1       Merger Consideration..........................................................7
                  Section 4.2       Exchange of Certificates. ....................................................7
                  Section 4.3       Stock Transfer Books..........................................................9
                  Section 4.4       Dissenters' Rights............................................................9

ARTICLE 5
         CONDITIONS..............................................................................................10
                  Section 5.1       Conditions to the Offer......................................................10
                  Section 5.2       Conditions to the Merger.....................................................12

ARTICLE 6
         COVENANTS PENDING THE CLOSING...........................................................................12
                  Section 6.1       Interim Operations of the Company............................................12
                  Section 6.2       Negative Covenants...........................................................13
                  Section 6.3       Approval by the Company's Stockholders.......................................15
                  Section 6.4       Filings; Other Action........................................................16
                  Section 6.5       Access.......................................................................16
</TABLE>


                                        i

<PAGE>

<TABLE>
<S>                                                                                                              <C>
                  Section 6.6       Notification of Certain Matters.  ...........................................16
                  Section 6.7       Publicity....................................................................17
                  Section 6.8       Reasonable Efforts...........................................................17
                  Section 6.9       Vesting of Restricted Stock and Stock Options................................17

ARTICLE 7
         REPRESENTATIONS AND WARRANTIES..........................................................................17
                  Section 7.1       Representations and Warranties of Investors. ................................17
                  Section 7.2       Representations and Warranties of the Company................................19

ARTICLE 8
         INDEMNIFICATION AND INSURANCE...........................................................................25
                  Section 8.1       Charter and Bylaws...........................................................25
                  Section 8.2       Indemnity....................................................................25
                  Section 8.3       Insurance....................................................................26
                  Section 8.4       Survival.....................................................................26

ARTICLE 9
         TERMINATION.............................................................................................27
                  Section 9.1       Termination by Mutual Consent................................................27
                  Section 9.2       Termination by Either Party..................................................27
                  Section 9.3       Termination by Investors.....................................................27
                  Section 9.4       Termination by the Company...................................................27
                  Section 9.5       Effect of Termination and Abandonment........................................27
                  Section 9.6       Liquidated Damages...........................................................27

ARTICLE 10
         RELEASE.................................................................................................28
                  Section 10.1      Company Release..............................................................28
                  Section 10.2      Investor Release.............................................................28

ARTICLE 11
         Miscellaneous Provisions................................................................................29
                  Section 11.1      Payment of Expenses..........................................................29
                  Section 11.2      Modification or Amendment....................................................29
                  Section 11.3      Waiver of Conditions; Non-Survival...........................................29
                  Section 11.4      Captions.....................................................................29
                  Section 11.5      Governing Law................................................................29
                  Section 11.6      Notices......................................................................29
                  Section 11.7      Entire Agreement.............................................................29
                  Section 11.8      Assignment; Binding Effect...................................................30
                  Section 11.9      Third Party Beneficiaries....................................................30
                  Section 11.10     Counterparts.................................................................30
</TABLE>


                                       ii

<PAGE>



                                                                            Page
Glossary
Exhibit A         Exchange Agreement
Exhibit B         Hawthorn Termination
Exhibit C         Aronson Agreement
Exhibit D         Separation Agreement




                                       iii

<PAGE>




                              ACQUISITION AGREEMENT


         THIS ACQUISITION AGREEMENT (the "AGREEMENT") is made as of
September 18, 2000, by and among U.S. Franchise Systems, Inc., a Delaware
corporation (the "COMPANY"), SDI, Inc., a Nevada corporation ("SDI"), USFS
Acquisition Co., a Delaware corporation ("NEWCO"), HSA Properties, Inc.,
a Delaware corporation ("HSA PROPERTIES"), and Meridian Associates, L.P.,
an Illinois limited partnership ("MERIDIAN").

                                    RECITALS

         A.   The Company, SDI, Meridian, and HSA Properties are parties to the
Recapitalization Agreement dated as of June 2, 2000 (the "RECAPITALIZATON
AGREEMENT"), pursuant to which the Company would engage in a recapitalization
transaction involving an offer by the Company to purchase a portion of its
outstanding common stock.

         B.   The Company, SDI, Meridian, and HSA Properties have decided to
terminate the Recapitalization Agreement by their mutual agreement.

         C.   Newco and the Company desire to engage in a transaction involving
the merger of Newco with the Company following the completion of an offer by
Newco to purchase outstanding common stock of the Company.

         D.   Simultaneously with the execution and delivery of this Agreement:
(i) Newco, Meridian, HSA Properties, Michael A. Leven and Andrea Leven are
entering into an agreement in the form of EXHIBIT A attached hereto (the
"EXCHANGE AGREEMENT"); (ii) the Company, Michael A. Leven, Neal Aronson,
Meridian, and HSA Properties are entering into an agreement in the form of
EXHIBIT B attached hereto (the "HAWTHORN TERMINATION"); (iii) Neal Aronson and
Newco are entering into an agreement in the form of EXHIBIT C attached hereto
(the "ARONSON AGREEMENT"); and (iv) Neal Aronson and the Company are entering
into the Separation Agreement in the form of EXHIBIT D attached hereto (the
"SEPARATION AGREEMENT").

         E.   The board of directors of the Company (the "BOARD OF DIRECTORS")
has duly approved this Agreement and the various other agreements and
arrangements to which the Company is a party or which are otherwise contemplated
by this Agreement.

         F.   Banc of America Securities LLC ("BAS") has delivered a letter to
the Board of Directors, in form and content reasonably acceptable to the
Investors, expressing its opinion that the consideration to be received by the
Company's stockholders (other than specified Persons as to which BAS has
expressed no opinion) is fair from a financial point of view.

<PAGE>

                                    AGREEMENT

         For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                                  DEFINED TERMS

         Capitalized terms and acronyms used herein as defined terms but not
defined herein shall have the meanings given to them in the Glossary attached
hereto.


                                    ARTICLE 2
                                  TENDER OFFER

         Section 2.1         TENDER OFFER. Pursuant to an Offer to Purchase
                        conforming to the requirements of applicable law,
                        including the rules and regulations of the SEC, this
                        Agreement and otherwise in customary form (the "OFFER TO
                        PURCHASE"), and subject to the terms and conditions set
                        forth in this Agreement, Newco will commence (within the
                        meaning of Rule 14d-2 of the Exchange Act), and SDI will
                        cause Newco to commence, as soon as practicable but not
                        more than 10 Business Days after the execution hereof,
                        an offer to purchase (the "OFFER") any and all of the
                        outstanding shares of Class A Common Stock, $0.01 par
                        value, of the Company (the "CLASS A COMMON STOCK"), and
                        Class B Common Stock, $0.01 par value, of the Company
                        (the "CLASS B COMMON STOCK" together with the Class A
                        Common Stock collectively, the "SHARES") at a price of
                        $5.00 per Share, net to the seller in cash, subject only
                        to the condition (which may not be waived without the
                        written consent of the Company) that there be tendered
                        and not withdrawn the number of Shares that, together
                        with the Shares owned by the Investors and their
                        Affiliates, represents a majority of the outstanding
                        Shares of the Company (the "MINIMUM CONDITION"), the
                        conditions set forth in this Agreement, and applicable
                        provisions of the Exchange Act. Newco will, and SDI will
                        cause Newco to, accept for purchase and pay for all
                        Shares duly tendered, commencing at the later of (such
                        later date, as extended as permitted in this Agreement,
                        being referred to herein as the "EXPIRATION DATE") (a)
                        20 Business Days following commencement of the Offer and
                        (b) 12:00 noon New York time on the first Business Day
                        following the satisfaction or waiver of all conditions
                        to Newco's obligation to purchase Shares.
                        Notwithstanding the foregoing, SDI and Newco shall have
                        the right to extend the Offer (i) from time to time, if,
                        at the scheduled Expiration Date or any extended
                        expiration date of the Offer, any of the conditions to
                        the Offer shall not have been satisfied or waived, until
                        such conditions are satisfied or waived; provided that
                        if any of the conditions to the Offer is not satisfied
                        or waived on the scheduled Expiration Date of the Offer,
                        SDI and Newco shall extend the Offer unless such
                        condition or


                                       2

<PAGE>


                        conditions could not reasonably be expected to be
                        satisfied on or prior to the Termination Date, (ii) for
                        any period required by any rule, regulation,
                        interpretation or position of the SEC or the staff
                        thereof applicable to the Offer or any period required
                        by applicable law and (iii) for one or more subsequent
                        offering periods of up to an additional 20 Business Days
                        in the aggregate (collectively, the "SUBSEQUENT PERIOD")
                        pursuant to Rule 14d-11 under the Exchange Act. Subject
                        to the terms and conditions of the Offer in this
                        Agreement, Newco shall, and SDI shall cause Newco to,
                        accept for payment and pay for Shares validly tendered
                        and not withdrawn pursuant to the Offer as soon as
                        possible after the expiration of the Offer; provided
                        that Newco shall, and SDI shall cause Newco to,
                        immediately accept and promptly pay for all Shares as
                        they are tendered during the Subsequent Period, if the
                        Minimum Condition is met. The Offer to Purchase and
                        related documents distributed in connection with the
                        Offer (the "OFFER DOCUMENTS") shall be consistent with
                        the terms and conditions contained or referred to in
                        this SECTION 2.1. The Company and its counsel shall be
                        given a reasonable opportunity to review and comment
                        upon the Offer Documents prior to their being first
                        published, sent or given to holders of Shares.

         Section 2.2       ACTIONS BY SDI AND NEWCO.

                  (a)   As soon as reasonably practicable following the
         execution of this Agreement, SDI and Newco shall, and shall cause each
         other Person that is required to, file with the SEC a Tender Offer
         Statement and a Rule 13e-3 Transaction Statement on Schedule TO,
         including all exhibits thereto (together with all amendments and
         supplements thereto, the "SCHEDULE TO") with respect to the Offer,
         Merger and the other transactions contemplated hereby. The Schedule TO
         shall contain or incorporate by reference the Offer to Purchase and
         forms of the related letter of transmittal and any related documents
         (the Schedule TO, the Offer to Purchase and such other documents,
         together with all supplements or amendments thereto, collectively, the
         "OFFER DOCUMENTS"). The Offer Documents shall comply in all material
         respects with the requirements of the Exchange Act. The Company and its
         counsel shall be given a reasonable opportunity to review and comment
         upon the Offer Documents prior to their being first published, sent or
         given to holders of Shares. On the date filed with the SEC and on the
         date first published, sent or given to the Company's stockholders, the
         Offer Documents shall not contain any untrue statement of a material
         fact or omit to state any material fact required to be stated therein
         or necessary in order to make the statements therein, in light of the
         circumstances under which they were made, not misleading, except that
         no representation is made by SDI or Newco with respect to information
         supplied by the Company for inclusion in the Offer Documents. Each of
         SDI and Newco agrees to correct promptly, and the Company agrees to
         notify SDI promptly as to, any information provided by it for use in
         the Offer Documents, if and to the extent such information shall have
         become false or misleading in any material respect, and each


                                       3
<PAGE>

         of SDI and Newco further agrees to take all steps necessary to cause
         the Offer Documents as so corrected to be filed with the SEC and to be
         disseminated to all of the holders of Shares, in each case as and to
         the extent required by applicable federal securities laws. SDI and
         Newco agree to provide the Company and its counsel in writing any
         comments SDI, Newco or their counsel may receive from the SEC or its
         staff with respect to the Offer Documents promptly after the receipt of
         such comments. SDI and Newco shall use their respective reasonable best
         efforts to respond to such comments promptly and shall provide the
         Company copies of any written responses and telephonic notification of
         any verbal responses by SDI, Newco or their counsel.

                  (b)   SDI shall provide or cause to be provided to Newco on a
         timely basis all the funds necessary to purchase any Shares that Newco
         becomes obligated to purchase pursuant to the Offer.

         Section 2.3         COMPANY ACTIONS. The Company consents to the Offer
                        and represents that (a) its Board of Directors (at a
                        meeting duly called and held) consents to the Offer and
                        has resolved to recommend acceptance of the Offer and
                        approval and adoption of this Agreement and the Merger
                        by its stockholders and (b) BAS has delivered to the
                        Board of Directors of the Company its opinion dated as
                        of September 18, 2000, to the effect that the
                        consideration to be paid in the Offer and the Merger is
                        fair from a financial point of view to the holders of
                        Shares (other than specific persons as to whom BAS has
                        expressed no opinion). The Company agrees to file with
                        the SEC immediately following the filing of the Schedule
                        TO on the date of the commencement of the Offer a
                        Solicitation/Recommendation Statement on Schedule 14D-9
                        (together with all amendments and supplements thereto,
                        the "SCHEDULE 14D-9") in the form reviewed by Newco and
                        its counsel, containing such recommendations, unless the
                        Board of Directors shall have recommended to
                        stockholders or authorized or approved an Alternative
                        Proposal or a Superior Proposal. Newco and its counsel
                        shall be given a reasonable opportunity to review and
                        comment upon the Schedule 14D-9 prior to its being first
                        published, sent or given to holders of Shares and the
                        Schedule 14D-9 shall be in a form and substance
                        reasonably satisfactory to Newco and its counsel. In
                        connection with the Offer, the Company will promptly
                        furnish, or request its transfer agent to furnish, Newco
                        with mailing labels, security position listings and any
                        available listing or computer file containing the names
                        and addresses of the record holders of Shares as of a
                        recent date and shall furnish Newco with such
                        information and assistance as Newco or its agents may
                        reasonably request in communicating the Offer to the
                        stockholders of the Company.


                                       4
<PAGE>

         Section 2.4         BOARD REPRESENTATION.

                        (a)  Promptly upon the purchase of Shares pursuant to
                  the Offer, Newco shall be entitled to designate such number of
                  directors, rounded up to the next whole number, as will give
                  Newco representation on the Board of Directors of the Company
                  equal to the product of (i) the total number of directors on
                  the Board of Directors (giving effect to the election of any
                  additional directors pursuant to this Section) and (ii) the
                  percentage that the number of Shares beneficially owned by the
                  Investors (including Shares accepted for payment) bears to the
                  number of Shares outstanding. The Company shall take all
                  reasonable actions to permit Newco's designees to be elected
                  or appointed to the Company's Board of Directors, including
                  without limitation, increasing the size of the Board of
                  Directors and/or securing the resignations of incumbent
                  directors. The Company shall take at its expense all action
                  necessary pursuant to Section 14(f) of the Exchange Act and
                  then Rule 14f-1 under the Exchange Act in order to fulfill its
                  obligations under this Section and shall include in the
                  Schedule 14d-9 or otherwise timely mail to its stockholders
                  all necessary information to comply therewith.

                        (b)  Following the election or appointment of Newco's
                  designees pursuant to this Section and until the Effective
                  Time, the approval of a majority of the directors of the
                  Company then in office who are not designated by or otherwise
                  affiliated with SDI shall be required to authorize, and such
                  authorization shall constitute the authorization of the Board
                  of Directors and no other action on the part of the Company,
                  including any action by any other director of the Company,
                  shall be required to authorize, any termination of this
                  Agreement by the Company, any amendment of this Agreement, any
                  extension of time for performance of any obligation or action
                  hereunder by SDI or Newco and any enforcement of or any waiver
                  of compliance with any of the agreements or conditions
                  contained herein for the benefit of the Company, unless any
                  such amendment or waiver will not have an adverse effect on
                  (i) the rights of stockholders to receive the Merger
                  Consideration on the terms of this Agreement (including the
                  timing of such payment) or (ii) the rights of holders of
                  Restricted Stock or holders of stock options under SECTION 2.5
                  (including the timing of any payment to be made to such
                  holders pursuant to this Agreement).

         Section 2.5         RESTRICTED STOCK; OPTIONS. Immediately following
                        the consummation of the Offer, all shares of Restricted
                        Stock will be deemed irrevocably vested and no longer
                        subject to forfeiture and the holders of such shares of
                        Restricted Stock shall be entitled to receive the Merger
                        Consideration in accordance with Section 4.1(c) of this
                        Agreement. The parties acknowledge that the purchase of
                        Shares pursuant to the Offer shall constitute a "Change
                        of Control," as described in the Stock Option Plan and
                        that, as a result, upon the purchase of Shares pursuant
                        to the Offer all stock options outstanding under the
                        Stock Option Plan shall automatically be deemed
                        exercisable and otherwise vested. At the Effective Time,
                        all unexercised options to purchase shares of Common
                        Stock of the Company outstanding pursuant to the Stock
                        Option Plan and the Directors' Option Plan (whether or
                        not then exercisable) shall cease


                                       5
<PAGE>

                        to represent a right to acquire Shares and shall convert
                        automatically into an amount of cash equal to the
                        greater of (a) $.01 or (b) the amount, if any, by which
                        the Merger Consideration exceeds the exercise price per
                        share of such option, in either case multiplied by the
                        number of Shares subject to such option.


                                    ARTICLE 3
                                     MERGER

         Section 3.1         THE MERGER. Upon the terms and subject to the
                        conditions set forth in this Agreement and in accordance
                        with DGCL, at the Effective Time, Newco shall be merged
                        with and into the Company (the "MERGER"), the separate
                        corporate existence of Newco shall cease and the Company
                        shall (a) be the surviving corporation in the Merger (in
                        such capacity, the "SURVIVING CORPORATION"), (b) succeed
                        to and assume all the rights and obligations of Newco in
                        accordance with DGCL, and (c) continue its corporate
                        existence under the laws of the State of Delaware. The
                        Merger shall be pursuant to the provisions of, and shall
                        be with the effect provided in DGCL. In accordance with
                        DGCL, all of the rights, privileges, property, powers
                        and franchises of the Company and Newco shall vest in
                        the Surviving Corporation, and all of the debts,
                        liabilities and duties of the Company and Newco shall
                        become the debts, liabilities and duties of the
                        Surviving Corporation.

         Section 3.2         EFFECTIVE TIME; FILING OF CERTIFICATE OF MERGER.
                        Subject to the terms of this Agreement, the parties
                        shall cause the Merger to be consummated by filing a
                        properly executed Certificate of Merger or other
                        appropriate documents with the Secretary of State of the
                        State of Delaware in accordance with the provisions of
                        DGCL. The Merger shall become effective at the time of
                        such filing of the Certificate of Merger with the
                        Secretary of State of the State of Delaware or at such
                        later date or time as Newco and the Company shall agree
                        and specify in the Certificate of Merger (the "EFFECTIVE
                        TIME").

         Section 3.3         CERTIFICATE OF INCORPORATION. At the Effective
                        Time, the Certificate of Incorporation of the Surviving
                        Corporation shall be the Certificate of Incorporation of
                        Newco as in effect immediately prior to the Effective
                        Time, until thereafter amended in accordance with its
                        terms and DGCL, except that Article 1 thereof shall be
                        amended to read as follows:

         FIRST.         The name of the corporation is U.S. Franchise Systems
         Inc. (the "CORPORATION").


                                       6
<PAGE>

         Section 3.4         BYLAWS. At the Effective Time, the Bylaws of the
                        Surviving Corporation shall be the Bylaws of Newco as in
                        effect immediately prior to the Effective Time, until
                        thereafter amended in accordance with their terms and
                        DGCL.

         Section 3.5         DIRECTORS AND OFFICERS. At the Effective Time, the
                        directors of Newco and the officers of the Company
                        immediately prior to the Effective Time shall be the
                        initial directors and officers of the Surviving
                        Corporation. Each director and officer of the Surviving
                        Corporation shall hold office in accordance with the
                        Certificate of Incorporation and Bylaws of the Surviving
                        Corporation until his or her death, resignation or
                        removal or a successor is duly elected or appointed and
                        qualified.

         Section 3.6         ADDITIONAL ACTIONS. If, at any time after the
                        Effective Time, the Surviving Corporation shall consider
                        or be advised that consistent with the terms of this
                        Agreement any further assignments or assurances in law
                        or any other acts are necessary or desirable (a) to
                        vest, perfect or confirm, of record or otherwise, in the
                        Surviving Corporation, title to and possession of any
                        property or right of either constituent corporation
                        acquired or to be acquired by reason of, or as a result
                        of, the Merger, or (b) otherwise to carry out the
                        purposes of this Agreement, then, subject to the terms
                        and conditions of this Agreement, each such constituent
                        corporation and its officers and directors shall be
                        deemed to have granted to the Surviving Corporation an
                        irrevocable power of attorney to execute and deliver all
                        such deeds, assignments and assurances in law and to do
                        all acts necessary or proper to vest, perfect or confirm
                        title to and possession of such property or rights in
                        the Surviving Corporation and otherwise to carry out the
                        purposes of this Agreement; and the officers and
                        directors of the Surviving Corporation are fully
                        authorized in the name of either constituent corporation
                        to take any and all such action.

         Section 3.7         TIME AND PLACE OF CLOSING. The closing of the
                        Merger (the "CLOSING") shall take place at such place,
                        at such time and not later than one business day
                        following the satisfaction of all conditions to the
                        Merger, or on such other date as the parties may
                        mutually agree (the date of the Closing is hereinafter
                        sometimes referred to as the "CLOSING DATE").


                                    ARTICLE 4
                            CONVERSION OF SECURITIES

         Section 4.1    MERGER CONSIDERATION.  At the Effective Time, by virtue
of the Merger and without any action on the part of Newco, the Company or the
holders of any of the following securities:

                  (a)   Each share of common stock, par value $0.01 per share,
         of Newco issued and outstanding immediately prior to the Effective Time
         shall be converted into one validly issued, fully paid and
         non-assessable share of common stock, par value $0.01 per share, of the
         Surviving Corporation. Each stock certificate of Newco evidencing
         ownership of any


                                       7
<PAGE>

         such shares of common stock of Newco shall, following the Merger,
         evidence ownership of the same number of shares of common stock of the
         Surviving Corporation.

                  (b)   Each share of Company Class A Common Stock and Class B
         Common Stock owned by Newco immediately prior to the Effective Time
         shall be canceled and extinguished without any conversion thereof and
         no payment shall be made with respect thereto.

                  (c)   Each share of Company Class A Common Stock and Class B
         Common Stock that is issued and outstanding immediately prior to the
         Effective Time (excluding any shares of Company Common Stock canceled
         pursuant to SECTION 4.1(b)), shall by virtue of the Merger and without
         any action on the part of the holder thereof become and be converted
         into the right to receive cash in the amount of $5.00 for each whole
         Share (the "MERGER CONSIDERATION").

                  (d)   At the Effective Time, holders of Shares shall cease to
         be, and shall have no rights as, stockholders of the Company, other
         than to receive any dividend or other distribution with respect to such
         Shares with a record date occurring prior to the Effective Time and the
         Merger Consideration.

         Section 4.2    EXCHANGE OF CERTIFICATES.

                  (a)   At or prior to the Effective Time, SDI shall deposit, or
         shall cause to be deposited, with a bank or trust company organized
         under the laws of the United States or any state thereof with capital
         surplus and undivided profits of at least $500 million and which is
         reasonably satisfactory to the Company (the "EXCHANGE AGENT") for the
         benefit of the holders of certificates representing the Shares
         ("COMPANY STOCK CERTIFICATES") for payment in accordance with this
         ARTICLE 4, through the Exchange Agent, an amount of cash equal to the
         Merger Consideration to be paid for Shares pursuant to this ARTICLE 4
         (without any interest thereon), such cash being hereinafter referred to
         as the "EXCHANGE FUND"). The Exchange Fund shall not be used for any
         other purpose. The Exchange Agent shall invest cash in the Exchange
         Fund, as directed by SDI, on a daily basis; provided that all such
         investments shall be in (1) obligations of, or guaranteed by, the
         United States of America, (2) commercial paper obligations receiving
         the highest rating from either Moody's Investors Services, Inc. or
         Standard and Poor's Corporation, or (3) certificates of deposit of
         commercial banks with capital exceeding $1.0 billion. Any interest and
         other income resulting from such investments shall be paid to SDI.

                  (b)   As soon as reasonably practicable after the Effective
         Time, the Surviving Corporation will instruct the Exchange Agent to
         mail to each holder of record of Company Stock Certificates who has not
         previously surrendered his or her Company Stock Certificates (other
         than holders of any shares of Company Common Stock canceled pursuant to
         SECTION 4.1(b)) (1) a letter of transmittal (which shall specify that
         delivery shall be effected, and risk of loss and title to such holder's
         Company Stock Certificates shall pass, only upon proper delivery of the
         Company Stock Certificates to the Exchange Agent and shall be in such
         form and have such other provisions as the Surviving Corporation may
         reasonably specify) and (2) instructions for use in effecting the
         surrender of the Company Stock Certificates in exchange for cash in
         accordance with SECTION 4.1 (collectively, the "LETTER OF


                                       8
<PAGE>

         TRANSMITTAL").

                  (c)   Upon the later of the Effective Time and the surrender
         of a Company Stock Certificate for cancellation (or the affidavits and
         indemnification regarding the loss or destruction of such certificates
         reasonably acceptable to the Surviving Corporation) to the Exchange
         Agent together with the Letter of Transmittal, duly executed, and such
         other customary documents as may be required pursuant thereto, the
         holder of such Company Stock Certificate shall be entitled to receive
         in exchange therefor, and the Exchange Agent shall deliver in
         accordance with the Letter of Transmittal, the Merger Consideration for
         each Share formerly evidenced by such Company Stock Certificate in
         accordance with SECTION 4.1, and the Company Stock Certificate so
         surrendered shall forthwith be canceled. In the event of a transfer of
         ownership of Shares which is not registered in the transfer records of
         the Company, cash may be paid in accordance with this ARTICLE 4 to a
         transferee if the Company Stock Certificate evidencing such Shares is
         presented to the Exchange Agent, accompanied by all documents required
         to evidence and effect such transfer and by evidence that any
         applicable stock transfer taxes have been paid. Until surrendered as
         contemplated by this SECTION 4.2, each Company Stock Certificate (other
         than Dissenting Shares and Shares held in treasury, if any) shall be
         deemed at any time after the Effective Time to evidence only the right
         to receive upon such surrender the Merger Consideration multiplied by
         the number of shares evidenced by such certificates.

                  (d)   All cash paid upon the surrender of Company Stock
         Certificates in accordance with the terms of this ARTICLE 4 shall be
         deemed to have been paid in full satisfaction of all rights pertaining
         to the Shares theretofore represented by such Company Stock
         Certificates.

                  (e)   Any portion of the Exchange Fund which remains
         undistributed to the holders of the Company Stock Certificates for 12
         months after the Effective Time shall be delivered by the Exchange
         Agent to SDI, upon demand, and any holders of Company Stock
         Certificates who have not theretofore complied with this ARTICLE 4
         shall thereafter look only to SDI for payment of their claim for the
         Merger Consideration.

                  (f)   None of SDI, the Company, Newco or the Exchange Agent
         shall be liable to any Person in respect of any cash from the Exchange
         Fund in each case delivered to a public official pursuant to any
         applicable abandoned property, escheat or similar law. If any Company
         Stock Certificate shall not have been surrendered prior to seven years
         after the Effective Time (or immediately prior to such earlier date on
         which any Merger Consideration and any cash payable to the holder of
         such Company Stock Certificate pursuant to SECTION 4.2(e) would
         otherwise escheat to, or become the property of, any governmental body
         or authority), any such Merger Consideration shall, to the extent
         permitted by applicable law, become the property of the Surviving
         Corporation, free and clear of all claims or interest of any person
         previously entitled thereto.

                  (g)   SDI, Newco and the Surviving Corporation shall be
         entitled to deduct and withhold from the consideration otherwise
         payable pursuant to this Agreement to any holder of Shares such amounts
         as it is required to deduct and withhold with respect to the making of
         such payment under the Code or any provision of state, local or foreign
         tax law. To the


                                       9
<PAGE>

         extent that amounts are so withheld, such withheld amounts shall be
         treated for all purposes of this Agreement as having been paid to the
         holder of the Shares in respect of which such deduction and withholding
         was made.

                  (h)   If any Company Stock Certificate shall have been lost,
         stolen or destroyed, upon the making of an affidavit of that fact by
         the Person claiming such Company Stock Certificate to be lost, stolen
         or destroyed and, if required by the Surviving Corporation, the posting
         by such Person of a bond in such reasonable amount as the Surviving
         Corporation may direct as indemnity against any claim that may be made
         against it with respect to such Company Stock Certificate, the Exchange
         Agent will issue in exchange for such lost, stolen or destroyed Company
         Stock Certificate the Merger Consideration, pursuant to this ARTICLE 4.

                  (i)   In the event this Agreement is terminated without the
         occurrence of the Effective Time, SDI shall, or shall cause the
         Exchange Agent to, return promptly any Company Stock Certificates
         theretofore submitted or delivered to the Exchange Agent, without
         charge to the Person who submitted such Company Stock Certificates.

         Section 4.3    STOCK TRANSFER BOOKS. After the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Company Stock Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be canceled and exchanged as provided in this ARTICLE 4, except as
otherwise provided by law.

         Section 4.4    DISSENTERS' RIGHTS. Dissenting Shares, if required by
DGCL, but only to the extent required thereby, shall not be converted into the
right to receive the Merger Consideration, but the holders of Dissenting Shares
shall be entitled to receive such consideration as shall be determined pursuant
to Section 262 of DGCL; provided that if any such holder shall have failed to
perfect or shall withdraw or lose his or her right to appraisal and payment
under DGCL, such holder's Shares shall thereupon be deemed to have been
converted as of the Effective Time into the right to receive such Merger
Consideration as if such holder had made a non-election, without any interest
thereon, and such shares shall no longer be Dissenting Shares. The Company shall
give SDI, Newco and the Exchange Agent prompt notice of any claim by a
stockholder for payment of fair value for Dissenting Shares as provided in
Section 262 of DGCL. Prior to the Effective Time, the Company will not, except
with the prior written consent of SDI and Newco, make any payments with respect
to, or settle or offer to settle, any such demands. Notwithstanding anything to
the contrary contained in this Section, if the Merger is rescinded or abandoned,
then the right of any stockholder to be paid the fair value of such
stockholder's Dissenting Shares shall cease. The Surviving Corporation shall
comply with all its obligations under the DGCL with respect to holders of
Dissenting Shares.

         Section 4.5    MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding
the foregoing, in the event that Newco, or any other direct or indirect
subsidiary of SDI, shall acquire at least 90% of the outstanding Shares, the
parties hereto shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of the
Offer


                                       10
<PAGE>

without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.

                                    ARTICLE 5
                                   CONDITIONS

         Section 5.1         CONDITIONS TO THE OFFER. The obligation of Newco to
                        consummate the purchase of Shares pursuant to the Offer
                        is subject to the fulfillment, at or before the
                        Expiration Date, of the following conditions:

                  (a)        REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
                        representations and warranties of the Company contained
                        in SECTION 7.2(b) shall be true and correct in all
                        material respects on and as of the Expiration Date with
                        the same effect as though made at and as of such date.
                        The other representations and warranties of the Company
                        contained in SECTION 7.2 shall be true in all respects
                        on and as of the Expiration Date (without regard to any
                        "materiality" qualifications that may be contained in
                        those representations and warranties or any exceptions
                        for matters that would not reasonably be expected to
                        have a Material Adverse Effect on the Company) with the
                        same effect as though made at and as of such date,
                        except (i) as affected by transactions permitted or
                        contemplated by this Agreement; or (ii) where the event
                        or condition that caused such representation and
                        warranty to be untrue or the fact that it is untrue
                        could not reasonably be expected to have a Material
                        Adverse Effect on the Company. The Company shall have
                        duly performed and complied in all respects with all
                        agreements and covenants required by Section 6.1 and
                        Section 6.2 of this Agreement to be performed or
                        complied with by it prior to or on the Expiration Date
                        (without regard to materiality qualifications that may
                        be contained in any such agreement or covenant or any
                        exceptions for matters that would not reasonably be
                        expected to have a Material Adverse Effect on the
                        Company) except where the failure to so comply results
                        from or results in an event or condition that could not
                        reasonably be expected to have a Material Adverse Effect
                        on the Company. The Company shall have duly performed
                        and complied in all material respects with all other
                        material agreements and covenants required by this
                        Agreement to be performed or complied with by it prior
                        to or on the Expiration Date.

                  (b)   NO MATERIAL ADVERSE CHANGE. Since the date of this
         Agreement, no change shall have occurred in the assets, financial
         condition or results of operations of the Company or its Subsidiaries,
         that could reasonably be expected to have a Material Adverse Effect on
         the Company, excepting changes attributable to the expected effects of
         matters known to the Investors as of the date hereof.

                  (c)   JOINT DEFENSE AGREEMENT. The Joint Defense Agreement
         shall be in full force and effect, enforceable in accordance with its
         terms.


                                       11
<PAGE>

                  (d)   LITIGATION. No preliminary or permanent injunction or
         other order issued by any United States federal or state court of
         competent jurisdiction in the United States prohibiting the
         consummation of the Offer shall be in effect.

                  (e)   HSR ACT WAITING PERIOD. All applicable waiting periods
         under the HSR Act shall have expired or been terminated.

                  (f)   MINIMUM CONDITION. The Minimum Condition shall have been
         satisfied.

                  (g)   FAIRNESS OPINION. BAS shall not have withdrawn its
         fairness opinion relating to the transactions contemplated by this
         Agreement, as delivered to the Board of Directors prior to the
         execution of this Agreement, nor shall BAS have modified such opinion
         so as to make the form and content of such opinion no longer reasonably
         satisfactory to the Investors.

                  (h)   OTHER CONDITIONS.

                        (i)  There shall not have occurred (a) any general
                  suspension of trading in securities and, or limitation of
                  prices for, securities on the New York Stock Exchange, Inc. or
                  the Nasdaq Stock Market, (b) a declaration of a general
                  banking moratorium or any suspension of payments in respect of
                  banks in the United States; or (c) a declaration of war by the
                  Congress of the United States; or in the case of any of the
                  foregoing existing at the time of commencement of the Offer, a
                  material acceleration or worsening thereof.

                        (ii) The Company shall not have publicly withdrawn,
                  modified or amended in any material respect its recommendation
                  of acceptance of the Offer.

                        (iii) There shall not have been any statute, rule,
                  regulation, judgment, order, decree or injunction,
                  promulgated, entered, enforced, enacted, issued or deemed
                  applicable to the Offer or related transactions by or before
                  any government or governmental authority or agency, domestic
                  or foreign, that directly or indirectly (a) prohibits, or
                  imposes any material limitations on, Newco's ownership or
                  operation of all or a material portion of the Company's
                  business or assets or (b) prohibits or makes illegal the
                  acceptance for purchase of or payment for the Shares or the
                  consummation of the Offer or related transactions.

                        (iv) This Agreement shall not have been terminated in
                  accordance with its terms.

         Section 5.2         CONDITIONS TO THE MERGER. The respective
                        obligations of each party to consummate the Merger are
                        subject to the fulfillment of the following conditions:

                  (a)   LITIGATION. No preliminary or permanent injunction or
         other order issued by any United States federal or state court of
         competent jurisdiction


                                       12
<PAGE>

         in the United States prohibiting the consummation of the Merger shall
         be in effect.

                  (b)   VIOLATION OF LAW. Consummation of the Merger shall not
         result in violation of any applicable law, order or regulation of the
         United States or any of the several states or any foreign jurisdiction.

                  (c)   STOCKHOLDER APPROVAL. If necessary to effect the Merger,
         the Merger shall have been approved by the requisite vote of
         stockholders of the Company.

                                    ARTICLE 6
                          COVENANTS PENDING THE CLOSING

         Section 6.1         INTERIM OPERATIONS OF THE COMPANY. Except as
                        contemplated hereby, during the period from the date of
                        this Agreement to the Expiration Date, the Company
                        shall, and shall cause each of its Subsidiaries to:

                  (a)        conduct its business only in the usual, regular and
                        ordinary course;

                  (b)        maintain all of its properties in normal repair,
                        order and condition, except for depreciation, ordinary
                        wear and tear and damage by unavoidable casualty, except
                        where the failure could not reasonably be expected to
                        have a Material Adverse Effect on the Company;

                  (c)        maintain its books of account and records in the
                        usual, regular and ordinary manner;

                  (d)        use commercially reasonable efforts (without the
                        payment of or commitment to pay money (or other
                        consideration that would be reportable at any time as
                        taxable income to the recipient) for stay bonuses or
                        similar inducements unless approved by Michael A. Leven
                        and Steven Romaniello and, if the amount exceeds $1
                        million in the aggregate, Newco) to cause the key
                        employees of the Company and its Subsidiaries to remain
                        employed by the Company and its Subsidiaries as of the
                        Expiration Date.

                  (e)        at all times cause to be done all things reasonably
                        necessary to maintain, preserve and renew its corporate
                        existence and use commercially reasonable efforts to
                        maintain all licenses, authorizations and permits
                        necessary to the conduct of its businesses, except where
                        the failure could not reasonably be expected to have a
                        Material Adverse Effect on the Company;

                  (f)        comply with all material obligations which it
                        incurs pursuant to any contract or agreement, whether
                        oral or written, express or implied, as such obligations
                        become due to the extent to which the failure to so
                        comply would reasonably be expected to have a Material
                        Adverse Effect upon the Company, unless and except to
                        the extent that the same are being contested in good
                        faith and by appropriate proceedings and adequate
                        reserves (as


                                       13
<PAGE>

                        determined in accordance with GAAP) have been
                        established on its books with respect thereto;

                  (g)        comply with all applicable laws, rules and
                        regulations of all governmental authorities, the
                        violation of which would reasonably be expected to have
                        a Material Adverse Effect on the Company;

                  (h)        use its best efforts to continue in force existing
                        insurance coverage or comparable insurance coverage, to
                        the extent available on commercially reasonable terms;
                        and

                  (i)        file when due all reports required to be filed by
                        it under the Exchange Act and the rules and regulations
                        adopted by the SEC thereunder.

         Section 6.2         NEGATIVE COVENANTS. Except as contemplated hereby,
                        during the period from the date of this Agreement to the
                        Expiration Date, neither the Company nor any of its
                        Subsidiaries will, unless SDI gives its prior written
                        approval (which shall not be unreasonably withheld,
                        delayed or conditioned):

                  (a)        except as disclosed in the Company Disclosure
                        Letter, amend or otherwise change its certificate of
                        incorporation or by-laws, as each such document is in
                        effect on the date hereof;

                  (b)        except as disclosed in the Company Disclosure
                        Letter, incur any indebtedness for borrowed money or
                        enter into any guaranty or other similar obligation with
                        respect to the debts or other obligations of any other
                        Person (other than the endorsement of instruments for
                        collection in the ordinary course of business) or make
                        any loan to or investment in any Person excepting (i)
                        loans from the Company to its wholly-owned Subsidiaries,
                        (ii) guarantees by the Company of the obligations of its
                        wholly-owned Subsidiaries, (iii) investments by the
                        Company in its wholly owned Subsidiaries, and (iv) loans
                        to, or guarantees on behalf of, the reservation and
                        marketing funds or loans to franchisees in the ordinary
                        course of business; provided that loans and guarantees
                        pursuant to this clause (iv) shall be either committed
                        as of the date hereof and disclosed in the Company
                        Disclosure Letter or otherwise disclosed in writing to
                        the Investors prior to the date hereof or, if not so
                        committed and disclosed, shall not exceed $100,000 in
                        any single transaction or $400,000 in the aggregate
                        (less any development subsidies made after the date
                        hereof pursuant to SECTION 6.2(j)) and shall have been
                        approved by Michael A. Leven and Steven Romaniello;

                  (c)        except as disclosed in the Company Disclosure
                        Letter, directly or indirectly issue or sell, or
                        authorize for issuance or sale or enter into any
                        agreement providing for the issuance (contingent or
                        otherwise) of, (i) any notes or debt securities
                        containing equity features (including, without
                        limitation, any notes or debt securities convertible
                        into or exchangeable for


                                       14
<PAGE>

                        equity securities, issued in connection with the
                        issuance of equity securities or containing profit
                        participation features), (ii) any equity securities (or
                        any securities convertible into or exchangeable for any
                        equity securities) other than the issuance of Shares
                        pursuant to exercise of options existing as of the date
                        hereof, and other than the issuance of shares of capital
                        stock under existing agreements described in the Company
                        Disclosure Letter, or (iii) any option or rights to
                        acquire any equity securities, other than grants of
                        options under existing commitments described on the
                        Company Disclosure Letter and other options approved by
                        Michael A. Leven and Steven Romaniello for grants to
                        newly hired or newly promoted employees;

                  (d)        in the case of the Company and any wholly-owned
                        Subsidiary, declare, set aside, make or pay any dividend
                        or other distribution with respect to its capital stock
                        or directly or indirectly redeem, purchase or otherwise
                        acquire, or permit any Subsidiary to redeem, purchase or
                        otherwise acquire, any of the Company's or such
                        wholly-owned Subsidiary's equity securities (including,
                        without limitation, warrants, options and other rights
                        to acquire equity securities) other than purchases of
                        Shares pursuant to the Offer and repurchases of Shares
                        from employees of the Company and its Subsidiaries upon
                        termination of employment pursuant to arrangements
                        heretofore entered into by the Company;

                  (e)        acquire (by merger, consolidation, or acquisition
                        of stock or assets) any significant corporation, limited
                        liability company, partnership or other business
                        organization or division thereof, merge or consolidate
                        with any corporation, limited liability company,
                        partnership, or other business organization, or enter
                        into or modify any contract, agreement, commitment or
                        arrangement with respect to any of the foregoing;

                  (f)        except as disclosed in the Company Disclosure
                        Letter, pay or take any action with respect to any new
                        grants of any severance, change of control, or
                        termination pay other than in connection with the
                        termination of the hotel management business pursuant to
                        policies or agreements of the Company or any of its
                        Subsidiaries in effect on the date hereof and other
                        arrangements approved by Michael A. Leven and Steven
                        Romaniello, and if the amount exceeds $1,000,000, the
                        Investors;

                  (g)        except for salary increases or other employee
                        benefit arrangements consistent with the usual, regular
                        and ordinary course of the Company's business prior to
                        or on the date hereof, or heretofore described in
                        writing to the Investors, adopt or amend any bonus,
                        profit sharing, compensation, stock option, restricted
                        stock, pension, retirement, deferred compensation,
                        employment or other employee benefit plan, agreement,
                        trust, fund or arrangement for the benefit or welfare of
                        any employee;


                                       15
<PAGE>

                  (h)        make any material and substantive changes in the
                        fundamental business of the Company or its Subsidiaries
                        as conducted on the date hereof, other than with respect
                        to the Company's hotel management business;

                  (i)        except as disclosed in the Company Disclosure
                        Letter, incur or enter into any commitment to make any
                        capital expenditure having a value to the Company or its
                        Subsidiaries or cost of $25,000 or more in the
                        aggregate;

                  (j)        except as disclosed in the Company Disclosure
                        Letter, enter into any development subsidy agreement or
                        arrangement or any franchise or license agreement with
                        "key man" provisions or terms and conditions at variance
                        in any material respect from the Company's standard
                        franchise/licensing agreements; provided that the
                        Company may grant development subsidies not to exceed
                        $100,000 in any single transaction or $400,000 in the
                        aggregate (less any loans to franchisees after the date
                        hereof pursuant to SECTION 6.2(b)) if such development
                        subsidies are approved by Michael A. Leven or Steven
                        Romaniello.

                  (k)        except as disclosed in the Company Disclosure
                        Letter, enter into any other agreement having a value to
                        the Company or its Subsidiaries or cost of $50,000 or
                        more in the aggregate except in the usual, regular and
                        ordinary course of business;

                  (l)        except as disclosed in the Company Disclosure
                        Letter, sell, lease or otherwise dispose of, or permit
                        any Subsidiary to sell, lease or otherwise dispose of,
                        any material assets of the Company or its Subsidiaries
                        in any transaction or series of related transactions or
                        sell or permanently dispose of any of its or any
                        Subsidiary's material Proprietary Rights, excepting
                        settlements of claims for money due on terms and
                        conditions that are approved by Michael A. Leven and
                        Steven Romaniello; or

                  (m)        except as disclosed in the Company Disclosure
                        Letter, take any action, or fail to take any action, or
                        cause or permit any Subsidiary to take or fail to take
                        any action, which would result in the invalidity, abuse,
                        misuse or unenforceability of its Proprietary Rights or
                        which would infringe upon any rights of other Persons,
                        which in any case, could reasonably be expected to have
                        a Material Adverse Effect on the Company.

         Section 6.3         APPROVAL BY THE COMPANY'S STOCKHOLDERS. If
                        necessary to effect the Merger, the Company will take
                        all reasonable action necessary in accordance with
                        applicable law and its certificate of incorporation and
                        by-laws to convene a meeting of stockholders (which may
                        be the Company's annual meeting of stockholders) to
                        consider and vote upon: (a) the approval and
                        authorization of the Merger, and (b) such other matters
                        as may be necessary or advisable to consummate the
                        transactions contemplated by this Agreement. The
                        approval by stockholders of all such matters is herein
                        referred to as the "STOCKHOLDER APPROVAL". Unless the
                        Board of Directors


                                       16
<PAGE>

                        shall have recommended to stockholders or authorized or
                        approved an Alternative Proposal, and subject to
                        requirements of applicable law, the Board of Directors
                        of the Company shall recommend Stockholder Approval and
                        the Company shall take all reasonable lawful action to
                        solicit such Stockholder Approval. The Company's proxy
                        statement with respect to such meeting of stockholders,
                        at the date thereof and at the date of such meeting,
                        will not include any untrue statement of a material fact
                        or omit to state a material fact required to be stated
                        therein or necessary to make the statements made
                        therein, in light of the circumstances under which they
                        were made, not misleading; provided that the foregoing
                        shall not apply to the extent that any such untrue
                        statement of a material fact or omission to state a
                        material fact was made by the Company in reliance upon
                        and in conformity with information concerning furnished
                        to the Company by any of the Investors specifically for
                        use in the Company's proxy statement. At any such
                        meeting of stockholders, SDI agrees to cause any and all
                        of the Shares then owned by Newco, the Investors or
                        their Affiliates to be voted in favor of the Merger.

         Section 6.4         FILINGS; OTHER ACTION. Subject to the terms and
                        conditions herein provided, the Company and the
                        Investors shall: (a) promptly make their respective
                        filings and thereafter make any other required
                        submissions under the HSR Act with respect to the
                        transactions contemplated by this Agreement; and (b) use
                        their reasonable best efforts promptly to take, or cause
                        to be taken, all other action and do, or cause to be
                        done, all other things necessary, proper or appropriate
                        under applicable laws and regulations to consummate and
                        make effective the transactions contemplated by this
                        Agreement. The Company shall, as promptly as reasonably
                        practicable, take such actions as may be necessary or
                        advisable in connection herewith under applicable state
                        and federal laws relating to the regulation of
                        franchising to amend or supplement its Uniform Franchise
                        Offering Circulars (the "UFOCS"), PROVIDED that any and
                        all amendments to the UFOCs shall be approved by the
                        Investors before being filed.

         Section 6.5         ACCESS. Upon reasonable notice, the Company shall
                        (and shall cause each of its Subsidiaries to) afford the
                        Investors' officers, employees, counsel, accountants and
                        other authorized representatives access, during normal
                        business hours throughout the period prior to the
                        Closing Date, to all of its properties, books,
                        contracts, commitments and records, and, during such
                        period, the Company shall (and shall cause each of its
                        Subsidiaries to) furnish promptly to the Investors (a) a
                        copy of each report, schedule and other document filed
                        or received by it pursuant to the requirements of
                        federal or state securities laws and (b) all other
                        information concerning its business, properties and
                        personnel as any of the Investors may reasonably
                        request; provided that no investigation pursuant to this
                        Section 6.5 shall affect or be deemed to modify any
                        representation or warranty made by the parties to this
                        Agreement. All such information that may be made
                        available to the Investors shall be subject to the
                        existing confidentiality agreement by which the
                        Investors are bound.


                                       17
<PAGE>

         Section 6.6         NOTIFICATION OF CERTAIN MATTERS.

                  (a)        The Company shall give prompt notice to the
                        Investors upon becoming aware of any breach or default
                        of this Agreement by or on the part of the Company and
                        any notice of, or other communication known to an
                        executive officer of the Company relating to, a default
                        or event which, with notice or lapse of time or both,
                        would become a default under this Agreement subsequent
                        to the date of this Agreement and prior to the Effective
                        Time. The Company shall give prompt notice to the
                        Investors of any notice or other communication from any
                        Person alleging that the consent of any Person is or may
                        be required in connection with the transactions
                        contemplated by this Agreement.

                  (b)        The Investors shall give prompt notice to the
                        Company of any breach or default of this Agreement by or
                        on the part of the Investors and any notice of, or other
                        communication known to an executive officer of any
                        member of the Investors relating to, a default or event
                        which, with notice or lapse of time or both, would
                        become a default under this Agreement subsequent to the
                        date of this Agreement and prior to the Effective Time.
                        The Investors shall give prompt notice to the Company of
                        any notice or other communication from any Person
                        alleging that the consent of any Person is or may be
                        required in connection with the transactions
                        contemplated by this Agreement.

         Section 6.7         PUBLICITY. The initial press release with respect
                        to the execution of this Agreement shall be a joint
                        press release, and thereafter the Company and the
                        Investors shall consult with each other in issuing any
                        press releases or otherwise making public statements
                        with respect to the transactions contemplated hereby and
                        in making any filings with any federal or state
                        governmental or regulatory agency or with any national
                        market system or securities exchange with respect
                        thereto.

         Section 6.8         REASONABLE EFFORTS. Each of the Investors and the
                        Company shall use all commercially reasonable efforts to
                        cause to be satisfied all conditions to Newco's
                        obligation to make the Offer and otherwise to consummate
                        the transactions contemplated by this Agreement as
                        expeditiously as reasonably possible.

         Section 6.9         OPTIONS; RESTRICTED STOCK. The Company will take
                        such actions as are necessary to cause to be vested (and
                        no longer subject to forfeiture) immediately following
                        the Expiration Date (but subject to the purchase of
                        Shares in the Offer) all options outstanding under the
                        Stock Option Plan and all Restricted Stock.


                                       18
<PAGE>

                                    ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

         Section 7.1         REPRESENTATIONS AND WARRANTIES OF INVESTORS. The
                        Investors jointly and severally represent and warrant to
                        the Company that:

         (a)            CORPORATE ORGANIZATION. SDI is a corporation duly
                  organized, validly existing and in good standing under the
                  laws of its jurisdiction of organization and is in good
                  standing as a foreign corporation in each jurisdiction where
                  the properties owned, leased or operated, or the business
                  conducted, by it require such qualification and where failure
                  to so qualify or be in good standing either singly or in the
                  aggregate would have a Material Adverse Effect on SDI. Newco
                  is a corporation duly organized, validly existing and in good
                  standing under the laws of its jurisdiction of organization
                  and is in good standing as a foreign corporation in each
                  jurisdiction where the properties owned, leased or operated,
                  or the business conducted, by it require such qualification
                  and where failure to so qualify or be in good standing either
                  singly or in the aggregate would have a Material Adverse
                  Effect on Newco. HSA Properties is a corporation duly
                  organized, validly existing and in good standing under the
                  laws of its jurisdiction of organization and is in good
                  standing as a foreign corporation in each jurisdiction where
                  the properties owned, leased or operated, or the business
                  conducted, by it require such qualification and where failure
                  to so qualify or be in good standing either singly or in the
                  aggregate would have a Material Adverse Effect on HSA
                  Properties. Each Investor has the corporate or other
                  applicable power to carry on its respective businesses as it
                  is now being conducted. Meridian is a limited partnership duly
                  organized, validly existing and in good standing under the
                  laws of its jurisdiction of organization and is in good
                  standing as a foreign entity in each jurisdiction where the
                  properties owned, leased or operated, or the business
                  conducted, by it require such qualification and where failure
                  to so qualify or be in good standing either singly or in the
                  aggregate would have a Material Adverse Effect on Meridian.

         (b)            CORPORATE AUTHORIZATION. Each of the Investors has taken
                  all required corporate or partnership action, as applicable,
                  to approve and adopt this Agreement and consummate the
                  transactions hereunder, and this Agreement is a valid and
                  binding agreement of each of the Investors, enforceable
                  against them in accordance with its terms.

         (c)            NO CONFLICTS. The execution and delivery of this
                  Agreement by each of the Investors does not, and the
                  consummation of the transactions contemplated hereby by each
                  of the Investors will not, (i) violate or conflict with the
                  certificate of incorporation or by-laws of SDI, Newco, or HSA
                  Properties, or the certificate of limited partnership or
                  limited partnership agreement of Meridian, or (ii) assuming
                  compliance with the HSR Act, the Exchange Act and the rules
                  and regulations thereunder, State Laws, and


                                       19
<PAGE>

                  Foreign Laws, constitute a breach or violation of, or a
                  default under, any law, rule or regulation or any judgment,
                  decree, order, governmental permit or license, or agreement,
                  indenture or instrument of any of the Investors or to which
                  any of the Investors is subject, which breach, violation or
                  default would have a Material Adverse Effect on any of the
                  Investors, or would prevent or materially and adversely affect
                  the consummation of the transactions contemplated hereby.

         (d)            COMPLIANCE WITH LAWS. Other than the filings pursuant to
                  the HSR Act, the Exchange Act, State Laws, and Foreign Laws,
                  there are no filings required to be made by the Investors, and
                  there are no consents, approvals, permits or authorizations
                  required to be obtained by the Investors, from governmental
                  and regulatory authorities of the United States and the
                  several states in connection with the execution and delivery
                  of this Agreement by the Investors and the consummation of the
                  transactions contemplated hereby by the Investors, other than
                  such as may be required solely because the Company is a party
                  to this Agreement and other than such which the failure to
                  make or obtain would not, in the aggregate, have a Material
                  Adverse Effect on the Investors, or would prevent or
                  materially and adversely affect the consummation of the
                  transactions contemplated hereby.

         (e)            FINANCING. SDI has, and at the consummation of the
                  Offer, Newco will have, the funds necessary to purchase the
                  Shares pursuant to the Offer. Upon consummation of the Merger,
                  SDI will, or will cause Newco, to provide the Surviving
                  Corporation with the funds necessary to cancel the options
                  under the Stock Option Plan and the Directors' Option Plan as
                  provided in SECTION 2.5. SDI has, and at the Effective Time,
                  Newco will have, the funds necessary to pay for Shares
                  pursuant to the Merger.

         (f)            SHAREHOLDER ARRANGEMENTS. The Investors have disclosed
                  to the Company the terms of all arrangements entered into
                  between any of the Investors or any of their Affiliates and
                  Michael A. Leven, Neal K. Aronson and Steven Romaniello and
                  have provided the Company with true and correct copies of all
                  documents pertaining thereto.

         (g)            ADVISORY FEE. None of the Investors nor any of their
                  Affiliates nor any of their officers, directors, or employees,
                  has employed any broker or finder or incurred any liability
                  for any advisory fees, brokerage fees, commissions, or
                  finder's fees in connection with this Agreement or the
                  transactions contemplated hereby that could result in any
                  liability to the Company or any of its Subsidiaries.

         (h)            INTERIM OPERATIONS OF NEWCO. Newco was formed solely for
                  the purpose of engaging in the transactions contemplated
                  hereby, has engaged in no other business activities and has
                  conducted its operations as contemplated hereby.


                                       20
<PAGE>

                  (i)   INFORMATION SUPPLIED. None of the Offer Documents or any
         amendment or supplement thereto, at the respective time such documents
         are filed with the SEC or first published, sent or given to the
         Company's stockholders, will contain any untrue statement of a material
         fact or will omit to state any material fact required to be stated
         therein or necessary in order to make the statements therein, in light
         of the circumstances under which they were made, not misleading except
         that no representations made by SDI or Newco with respect to
         information supplied by the Company specifically for inclusion in the
         Offer Documents. None of the information supplied or to be supplied by
         SDI or Newco for inclusion or incorporation by reference in the
         Schedule 14D-9 will, at the time such documents are filed with the SEC
         or distributed to the Company's stockholders, contain any untrue
         statement of a material fact or omit to state a material fact required
         to be stated therein or necessary to make the statements therein, in
         light of the circumstances under which they were made, not misleading.
         If at any time prior to the Expiration Date either of SDI or Newco
         shall obtain knowledge of any facts with respect to itself, any of its
         officers and directors or any of its Subsidiaries that will require the
         supplement or amendment to the Offer Documents or the information
         supplied by SDI or Newco for inclusion or incorporation by reference in
         the Schedule 14D-9 in order to make the statements therein, in light of
         the circumstances under which they were made, not misleading, or to
         comply with applicable laws, such amendment or supplement shall be
         promptly filed with the SEC and, as required by law, disseminated to
         the stockholders of the Company, and in the event the Company shall
         advise SDI or Newco as to its obtaining knowledge of any facts that
         would make it necessary to supplement or amend any of the foregoing
         documents, SDI or Newco shall promptly amend or supplement such
         document as required and distribute the same to the Company's
         stockholders.

         Section 7.2         REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
                        Company represents and warrants to the Investors that:

                  (a)        CORPORATE ORGANIZATION. Each of the Company and its
                        Significant Subsidiaries is a corporation, partnership
                        or limited liability company duly organized, validly
                        existing and in good standing under the laws of its
                        respective jurisdiction of organization and is in good
                        standing as a foreign corporation, partnership or
                        limited liability company in each jurisdiction where the
                        properties owned, leased or operated, or the business
                        conducted by it require such qualification and where
                        failure to so qualify or be in good standing would,
                        either singly or in the aggregate, have a Material
                        Adverse Effect on the Company. Each of the Company and
                        its Significant Subsidiaries has the corporate,
                        partnership or limited liability company power to carry
                        on its respective businesses as they are now being
                        conducted. Except as disclosed in the Company Disclosure
                        Letter, each of the Company's Subsidiaries is
                        wholly-owned by the Company. All issued and outstanding
                        shares of capital stock of the Company's Significant
                        Subsidiaries have been validly issued and are fully paid
                        and nonassessable.

                  (b)        CAPITALIZATION. The authorized capital stock of the
                        Company consists of 36,000,000 shares of capital stock,
                        of which (i) 35,000,000 shares are Common Stock, par
                        value $0.01 per share (and which are herein referred to


                                       21
<PAGE>

                        as the Shares), of which 30,000,000 are designated as
                        Class A Common Stock and 5,000,000 are designated as
                        Class B Common Stock and (ii) 1,000,000 shares are
                        preferred stock, par value $0.01 per share. As of the
                        close of business on June 30, 2000, there were
                        19,953,753 Shares issued and outstanding of which
                        17,245,834 are designated as Class A Common Stock and
                        2,707,919 are designated as Class B Common Stock. As of
                        the same date, there were no shares of preferred stock
                        issued and outstanding. All of the outstanding Shares
                        have been validly issued and are fully paid and
                        nonassessable. As of the date hereof, except as
                        disclosed in the Company Disclosure Letter, the Company
                        has no Shares reserved for issuance, except that, as of
                        the close of business on June 30, 2000, there were
                        885,207 shares of Class A Common Stock reserved for
                        issuance pursuant to unexercised options granted and
                        currently outstanding under the Stock Option Plan and
                        the Directors Option Plan and 2,707,919 shares of Class
                        A Common Stock reserved for issuance upon conversion of
                        the shares of Class B Common Stock. Except as set forth
                        above or as disclosed in the Company Disclosure Letter
                        and except for issuances permitted by SECTION 6.2(c)
                        after the date hereof, there are no shares of capital
                        stock of the Company authorized or outstanding, and
                        there are no outstanding subscriptions, options,
                        warrants, rights, convertible securities or other
                        agreements or commitments of any character relating to
                        the issued or unissued capital stock or other securities
                        of the Company or any Subsidiary obligating the Company
                        or any Subsidiary to issue any securities. Except as
                        disclosed in the Company Disclosure Letter or the
                        Company Reports and except for issuances permitted under
                        SECTION 6.2(c), since June 30, 2000, no Shares have been
                        issued by the Company except pursuant to exercise of
                        options under the Stock Option Plan.

                  (c)        CORPORATE AUTHORIZATION. Subject only to
                        Stockholder Approval, the Company has taken all required
                        corporate action to authorize and adopt this Agreement
                        and approve the transactions contemplated hereby
                        including the Offer, and this Agreement is a valid and
                        binding agreement of the Company enforceable against the
                        Company in accordance with its terms. The Board of
                        Directors has (i) determined that the Offer is fair to
                        holders of Shares (other than the Investors named
                        herein), (ii) approved the making of the Offer and the
                        Merger and (iii) resolved to recommend acceptance of the
                        Offer by the holders of Shares.

                  (d)        SEC FILINGS. As of their respective dates, the
                        Company's press releases made after the date hereof and
                        Quarterly Reports on Form 10-Q filed after the date
                        hereof will not when made or filed, as applicable,
                        contain, any untrue statement of a material fact or omit
                        to state a material fact required to be stated therein
                        or necessary to make the statements made therein, in
                        light of the circumstances in which they are made, not
                        misleading. The Company Reports on Form 10-Q filed after
                        the date of this Agreement, when filed, will comply in
                        all material respects with all applicable requirements
                        of the Exchange Act.


                                       22
<PAGE>

                  (e)        NO CONFLICTS. Except as disclosed in the Company
                        Disclosure Letter, the execution and delivery of this
                        Agreement by the Company do not, and the consummation of
                        the transactions contemplated hereby by the Company will
                        not, (i) subject to Stockholder Approval, violate or
                        conflict with the certificate of incorporation or
                        by-laws of the Company, or (ii) assuming compliance with
                        the HSR Act, the Exchange Act, State Laws and Foreign
                        Laws, constitute a breach or violation of, or a default
                        under, any law, rule or regulation or any judgment,
                        decree, order, governmental permit or license, to which
                        the Company or any of its Subsidiaries is subject, or
                        (iii) constitute a breach or violation of, a default (or
                        an event or condition which, with notice or lapse of
                        time, or both, would constitute a default) under, permit
                        the termination or change of, or cause or permit the
                        acceleration of the maturity of, any agreement,
                        indenture, mortgage, bond, note or instrument to which
                        the Company or any of its Subsidiaries is a party or by
                        which the Company or any of its Subsidiaries is bound,
                        which conflict, breach, violation, default, termination,
                        change or acceleration would have a Material Adverse
                        Effect on the Company. Except as disclosed in the
                        Company Disclosure Letter, the execution and delivery of
                        this Agreement and the consummation of the transactions
                        contemplated hereby will not require the consent or
                        approval of any other party to any agreement, indenture,
                        mortgage, bond, note or instrument to which the Company
                        or any of its Subsidiaries is a party or by which the
                        Company or any of its Subsidiaries is bound where the
                        failure to obtain any such consent or approval would
                        have a Material Adverse Effect on the Company, or would
                        prevent or materially and adversely affect the
                        consummation of the transactions contemplated hereby.

                  (f)        COMPLIANCE WITH LAWS. Except as disclosed in the
                        Company Disclosure Letter, other than the filings
                        pursuant to the HSR Act, the Exchange Act, State Laws
                        and Foreign Laws, there are no filings required to be
                        made by the Company with, and there are no consents,
                        approvals, permits or authorizations required to be
                        obtained by the Company from, governmental and
                        regulatory authorities of the United States and the
                        several states in connection with the execution and
                        delivery of this Agreement by the Company and the
                        consummation of the transactions contemplated hereby by
                        the Company, other than such as may be required solely
                        because any Investor is a party to this Agreement and
                        other than such which the failure to make or obtain
                        would not, in the aggregate, have a Material Adverse
                        Effect on the Company, or would prevent or materially
                        and adversely affect the consummation of the
                        transactions contemplated hereby.

                  (g)        PROPERTIES. The Company and its Subsidiaries own
                        all of their material assets reflected as owned by them
                        on its balance sheet as of June 30, 2000 (except for
                        assets consumed, sold or otherwise disposed of in the
                        usual, regular and ordinary course of business),
                        subject, in each case, to no Encumbrance, except as set
                        forth in any report filed by the Company with the SEC on
                        or prior to the date hereto (the "COMPANY SEC REPORTS")
                        and excepting any Encumbrance the existence or
                        enforcement of which could not


                                       23
<PAGE>

                        reasonably be expected to have a Material Adverse Effect
                        on the Company. Except as disclosed in the Company
                        Disclosure Letter, the Company and its Subsidiaries own
                        all of their material Proprietary Rights relating to the
                        Microtel, Hawthorn and Best brands subject to no
                        Encumbrance arising by express consent or agreement of
                        the Company or its Affiliates. The Company and its
                        Subsidiaries own all other material Proprietary Rights
                        they purport to own, subject in each case to no
                        Encumbrance excepting any Encumbrance that could not
                        reasonably be expected to have a Material Adverse Effect
                        on the Company. The material Proprietary Rights owned by
                        the Company or its Subsidiaries include all Proprietary
                        Rights the use of which is reasonably necessary for the
                        continued conduct of the business of the Company and its
                        Subsidiaries as now conducted. To the knowledge of the
                        Company and its Subsidiaries, the use by the Company and
                        its Subsidiaries of all Proprietary Rights in the
                        operation of the business of the Company and its
                        Subsidiaries does not cause any infringement of the
                        Proprietary Rights of others, and there are no claims
                        against the Company or its Subsidiaries for such
                        infringement except as disclosed in the Company Reports
                        or the Company Disclosure Letter or except where such
                        infringement could not reasonably be expected to have a
                        Material Adverse Effect on the Company. Neither the
                        Company nor any of its Affiliates is in breach or
                        default of any agreement relating to the acquisition or
                        license by the Company or its Affiliates of any material
                        Proprietary Rights, nor has any event occurred nor does
                        any condition exist that, but for the giving of notice
                        or passage of time, or both, would constitute a breach
                        or default thereunder except for any breach or default
                        that could not reasonably be expected to have a Material
                        Adverse Effect on the Company.

                  (h)        TAXES. Except as disclosed in the Company
                        Disclosure Letter, the Company and its Subsidiaries have
                        duly filed, when due or within proper extensions of
                        time, all federal, state, local and foreign income,
                        sales, use, employment, excise, premium, value added and
                        other tax returns and reports which are required to be
                        filed by or on behalf of the Company and/or its
                        Subsidiaries or with respect to the income, deductions
                        and credits of the Company and its Subsidiaries, and
                        have paid all taxes (including estimated payments
                        thereof), interest and penalties, if any, shown on such
                        returns, reports or notices. Neither the Company nor any
                        of its Subsidiaries has entered into agreements with the
                        Internal Revenue Service or other taxing authority to
                        extend the period for the assessment and collection of
                        federal income taxes payable with respect to the income,
                        deductions and credits of the Company or its
                        Subsidiaries for any period. Neither the Company nor any
                        of its Subsidiaries has received any notice of
                        deficiency or assessment with respect to any taxable
                        year of the Company or its Subsidiaries that has not
                        been paid or otherwise discharged or adequately reserved
                        against. Except as disclosed in the Company Disclosure
                        Letter, all federal, state, local and foreign income,
                        sales, use, employment, excise, premium, value added and
                        other taxes attributable to the income, business
                        operations, or properties of the Company or its
                        Subsidiaries for periods ending on or before December


                                       24
<PAGE>

                        31, 1999, have been paid or adequate provision therefor
                        has been made on the Company Reports.

                  (i)        LITIGATION. Except as disclosed in the Company
                        Disclosure Letter, there are no judicial or
                        administrative actions, suits or proceedings pending or,
                        to the knowledge of the Company or its Subsidiaries,
                        threatened that might reasonably be expected to result
                        in a Material Adverse Effect on the Company. It is
                        understood that the commencement of any legal proceeding
                        or other action arising out or relating to this
                        Agreement or the transactions contemplated hereby or the
                        termination of the Recapitalization Agreement (including
                        the disposition of any such proceeding or action other
                        than a disposition that has resulted in an injunction
                        that remains in effect) shall not constitute the breach
                        of this or any other representation and warranty of the
                        Company contained in this Agreement or result in the
                        failure of any condition to the Offer or the Merger to
                        be satisfied.

                  (j)        WELFARE AND BENEFIT PLANS. Each of the severance
                        pay, vacation, sick leave, fringe benefit, medical,
                        dental, life insurance, disability or other welfare
                        plans, savings, profit sharing or other retirement plans
                        and all bonus or other incentive plans, contracts,
                        arrangements or practices (collectively, excluding
                        ordinary commissions and compensation paid to employees
                        for their services, the "Plans") maintained or
                        contributed to by the Company or its Affiliates and in
                        which any one or more of the current or former employees
                        of the Company or its Affiliates (including
                        beneficiaries of employees or former employees)
                        participates or is eligible to participate which is
                        intended to be "qualified" within the meaning of section
                        401(a) of the Code and any trust maintained in
                        connection with any of the Plans which trust is intended
                        to be so exempt under section 501(a) of the Code has
                        been determined by the IRS to be so qualified and
                        exempt, as the case may be, and such determinations have
                        not been modified, revoked or limited and nothing has
                        occurred (or failed to occur) since the receipt of such
                        determination letters that would adversely affect any
                        such Plan's qualification or any such trust's exempt
                        status. The Company neither maintains nor is obligated
                        to provide benefits under any life, medical or health
                        plan that provides benefits to retirees or other
                        terminated employees other than (i) benefit continuation
                        rights under COBRA, (ii) benefits under insured plans
                        maintained by the Company provided in the event an
                        employee is disabled at the time of termination of the
                        employee's employment with the Company, and (iii) the
                        conversion privileges provided under such insured plans.
                        The Company does not maintain any unfunded deferred
                        compensation arrangement with respect to any employee or
                        former employee, which has not been properly accrued on
                        the financial statements included in the Company SEC
                        Reports. There are no current or former Plan Affiliates.
                        Except as set forth on the Company Disclosure Letter or
                        as otherwise contemplated by SECTION 6.9, the
                        consummation of the transactions contemplated by this
                        Agreement will not (i) entitle any current or former
                        employee of the Company to severance pay, unemployment
                        compensation or any other payment, (ii) accelerate the
                        time


                                       25
<PAGE>

                        of payment or vesting of any payment, forgive any
                        indebtedness, or increase the amount of any compensation
                        due to any such employee or former employee, or (iii)
                        give rise to the payment of any amount that would not be
                        deductible pursuant to the terms of section 280G of the
                        Code.

                  (k)        FRANCHISING MATTERS. Except as disclosed in the
                        Company Reports or the Company Disclosure Letter:

                        (i)  There is no action, proceeding or investigation
                  pending or, to the knowledge of the Company and its
                  Subsidiaries (after reasonable investigation), threatened
                  against or involving the Company or any of its Subsidiaries
                  with any of its domestic or international franchisees and to
                  the Company's and its Subsidiaries' knowledge (after
                  reasonable investigation) there is no basis for any such
                  action, proceeding or investigation except for actions,
                  proceedings or investigations that could not reasonably be
                  expected to have a Material Adverse Effect on the Company.

                        (ii) There are no pending or to the Company's and its
                  Subsidiaries' knowledge threatened causes of action by a
                  franchisee or group of franchisees against the Company, its
                  Affiliates, or their officers or directors except for actions,
                  proceedings or investigations that could not reasonably be
                  expected to have a Material Adverse Effect on the Company.

                        (iii) Neither the Company nor any of its Subsidiaries
                  is subject to any judgment, order or decree entered in any
                  lawsuit or proceeding which has or may have an adverse effect
                  on its rights and interest in its franchise agreements or its
                  ability to assign those rights and interest.

                        (iv) There are not currently, nor have there ever
                  been any administrative actions, cease and desist orders or
                  other administrative actions by any federal or state agency
                  which regulates franchising that would have a Material Adverse
                  Effect on the Company or which could materially and adversely
                  affect the transactions contemplated by this Agreement.

                  (l)        EXISTING PERMITS AND VIOLATIONS OF LAW. No action
                        or proceeding is pending or, to the knowledge of the
                        Company, threatened that is reasonably likely to result
                        in a revocation, non-renewal, termination, suspension or
                        other material impairment of any material permits of the
                        Company or its Subsidiaries. No governmental entity has
                        indicated in writing to any executive officer of the
                        Company or any Subsidiary an intention to conduct an
                        investigation or review with respect to the Company or
                        any Subsidiary other than, in each case, those which
                        would not have a Material Adverse Effect on the Company.

                  (m)        CHANGE OF CONTROL AGREEMENTS. Except as disclosed
                        in the Company Disclosure Letter, neither the Company
                        nor any of its Subsidiaries is a party to any agreement
                        or plan, including any stock option plan, stock
                        appreciation


                                       26
<PAGE>

                        rights plan, restricted stock plan or stock purchase
                        plan, any of the benefits of which will be increased, or
                        the vesting of the benefits of which will be
                        accelerated, by the consummation of the transactions
                        contemplated by this Agreement except as contemplated by
                        SECTION 6.9. Except as disclosed in the Company
                        Disclosure Letter or as contemplated by SECTION 6.9, the
                        transactions contemplated by this Agreement will not
                        constitute a "change in control" under, require the
                        consent from or the giving of notice to any third party
                        pursuant to, or accelerate the vesting or lapse of
                        repurchase rights under, any material contract to which
                        the Company or any of its Subsidiaries is a party.
                        Except as disclosed in the Company Disclosure Letter or
                        as contemplated by SECTION 6.9, there are no amounts
                        that will be payable by the Company to any officers of
                        the Company (in their capacity as officers) as a result
                        of the transactions contemplated by this Agreement other
                        than in connection with the purchase of Shares pursuant
                        to the Offer.

                  (n)        ADVISORY FEES. With the exception of a fee payable
                        to BAS in its capacity as financial advisor to the
                        Company pursuant to a letter agreement that has been
                        delivered to Investors, neither the Company nor any of
                        its Subsidiaries nor any of their officers, directors,
                        or employees, has employed any broker or finder or
                        incurred any liability for any advisory fees, brokerage
                        fees, commissions or finder's fees in connection with
                        this Agreement or the transactions contemplated hereby

                  (o)        QUALIFICATIONS OF REPRESENTATIONS AND WARRANTIES.
                        Except for representations and warranties contained in
                        Sections 7.2(m), 7.2(n), and the last sentence in
                        7.2(j), all representations and warranties of the
                        Company contained in this Agreement shall be deemed
                        qualified in all respects by all of the information
                        provided prior to the date hereof to the Investors and
                        their representatives as part of their due diligence
                        examination of the Company. Any matter, fact or
                        circumstance that has been so disclosed to Investors or
                        their representatives shall be deemed to be incorporated
                        into all appropriate sections of the Company Disclosure
                        Letter.

                                    ARTICLE 8
                         INDEMNIFICATION AND INSURANCE.

         Section 8.1    CHARTER AND BYLAWS. After the Closing Date, the
Investors will cause the certificate of incorporation and bylaws of the
Surviving Corporation and each of its Subsidiaries to contain provisions with
respect to indemnification no less favorable than those set forth in the
certificate of incorporation and the bylaws of the Company and each of its
Subsidiaries on the date hereof, which provisions shall not be amended, modified
or otherwise repealed for a period of six years after the Closing Date in any
manner that would adversely affect the rights thereunder as of the Closing Date
of individuals who at the Closing Date were directors, officers, employees or
agents of the Company or such Subsidiary, unless such modification is required
after the Closing Date by law.

         Section 8.2    INDEMNITY. The Company shall, and the Investors, to the
extent of the liability limit hereinafter provided, shall cause the Company (and
the Surviving Corporation following the


                                       27
<PAGE>

Merger), to the fullest extent permitted under applicable law or under the
Company's (or the Surviving Corporation's) or such Subsidiary's certificate of
incorporation or bylaws or any indemnification agreement in effect as of the
date hereof, to indemnify and hold harmless, each present and former director,
officer or employee of the Company or any of its Subsidiaries (collectively, the
"INDEMNIFIED PARTIES") against any costs or expenses (including attorneys' fees
and disbursements), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, or otherwise (a) arising out of or pertaining to the transactions
contemplated by this Agreement (but excluding any matter to the extent involving
an Indemnified Party in a capacity other than as a director, officer, employee
or agent of the Company) including without limitation, the termination of the
Recapitalization Agreement or (b) with respect to any acts or omissions
occurring at or prior to the Effective Time, to the same extent as provided in
the Company's or such Subsidiary's certificate of incorporation or bylaws or any
applicable contract or agreement as currently in effect, in each case for a
period of six years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time) and subject to the specific terms of any indemnification
contract (except as provided in the Joint Defense Agreement insofar as it may
affect the procedure for the determination of entitlement to indemnification),
(a) the Company (and after the Effective Time, the Surviving Corporation) shall
pay the reasonable fees and expenses of any counsel retained by the Indemnified
Parties, promptly after statements therefor are received and (b) the Company
(and after the Effective Tie, the Surviving Corporation) shall cooperate in the
defense of any such matter, provided that in the event that any claim or claims
for indemnification are asserted or made within the foregoing six year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. Notwithstanding any
contrary provision of this SECTION 8.2, the liability of the Investors to cause
the Company (and after the Effective Time, the Surviving Corporation) and its
Subsidiaries to indemnify and hold harmless their present and former directors,
officers and employees shall be limited to the aggregate amount of cash and fair
market value of property received by the Investors and their successors in
interest as dividends or distributions from the Company (or the Surviving
Corporation).

         Section 8.3    INSURANCE. In addition, the Company (and after the
Effective Time, the Surviving Corporation), shall provide, for a period of not
less than six years after the Effective Time, the Company's current directors
and officers an insurance and indemnification policy that provides coverage for
events occurring at or prior to the Effective Time (the "D&O INSURANCE") that is
no less favorable than the existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided that
the Company shall not be required to pay an annual premium for the D&O Insurance
in excess of 200% of the annual premium currently paid by the Company for such
insurance, but in such case shall purchase as much of such coverage as possible
for such amount.

         Section 8.4    SURVIVAL. This ARTICLE 8 shall survive the consummation
of the transactions contemplated by this Agreement at the Effective Time, is
intended to benefit the Indemnified Parties, their heirs and representatives
shall be binding on all successors and assigns of the Company (and after the
Effective Time, the Surviving Corporation) and shall be enforceable by and may
not be amended or modified without the written approval of the Indemnified
Parties. If the Surviving Corporation or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or other entity and
shall not be the continuing or surviving corporation or entity of the


                                       28
<PAGE>

consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then and
in each such case, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation shall assume all of the obligations set
forth in this Article 8.

                                    ARTICLE 9
                                   TERMINATION

         Section 9.1    TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Offer or the Merger may be abandoned at any time prior to the
Effective Time, before or after any Stockholder Approval, by the mutual consent
of SDI and the Company.

         Section 9.2    TERMINATION BY EITHER PARTY. This Agreement may be
terminated and the Offer or the Merger may be terminated and abandoned by either
SDI or the Company at any time prior to the Effective Time, before or after any
Stockholder Approval, if (a) the purchase of Shares pursuant to the Offer shall
not have become effective in accordance with the terms of the Offer to Purchase
by December 31, 2000 (the "Termination Date"), or (b) the Offer shall have
expired or shall have been terminated without the acceptance for purchase of any
Shares pursuant thereto; provided that SDI shall not have the right to terminate
this Agreement or the Offer pursuant to this clause if the termination or
expiration of the Offer without the purchase of Shares shall have resulted from
the failure of SDI or Newco to set forth any obligation of either of them
contained in this Agreement.

         Section 9.3    TERMINATION BY INVESTORS. This Agreement may be
terminated and the Offer or the Merger may be abandoned at any time (a) prior to
the Expiration Date, by SDI if the Company shall have failed to comply in all
respects with any of the covenants or agreements required by SECTION 6.1 and
SECTION 6.2 of this Agreement prior to the Expiration Date (without regard to
materiality qualifications that may be contained in any such agreement or
covenant or any exceptions for matters that would not reasonably be expected to
have a Material Adverse Effect on the Company) except where the failure to so
comply results from or results in an event or condition that could not
reasonably be expected to have a Material Adverse Effect on the Company, (b)
without limiting SDI's rights under clause (d) below, prior to the Expiration
Date, by SDI if the Company shall have failed to comply in all material respects
with all other material agreements and covenants required by this Agreement to
be performed or complied with by it prior to or on the Expiration Date, (c)
prior to the Closing Date, by SDI if the Board of Directors shall have
recommended to stockholders or authorized or approved an Alternative Proposal or
Superior Proposal, or (d) prior to the Closing Date, by SDI if the Company shall
have failed to comply in all material respects with its covenants and agreements
in SECTION 2.4(a).

         Section 9.4    TERMINATION BY THE COMPANY. This Agreement may be
terminated at any time prior to the Closing Date, by the Company (a) if the
Investors shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by the Investors prior to the Closing Date or (b) if the Board of
Directors shall concurrently approve and the Company shall concurrently enter
into a definitive agreement providing for the implementation of a Superior
Proposal.


                                       29
<PAGE>

         Section 9.5    EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and abandonment of the Offer or the Merger
pursuant to SECTION 9.1, 9.2, 9.3 or 9.4, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party hereto, except as provided in SECTIONS 9.6, 10.1, 10.2 and 10.3 and
except that nothing herein will relieve any party from liability for any breach
of this Agreement.

         Section 9.6    LIQUIDATED DAMAGES.

                  (a)   In the event that prior to consummation of the Offer SDI
         exercises any right to terminate this Agreement under SECTION 9.3 and
         abandon the Offer, the Company shall (without duplication of any
         amounts paid under Section 9.6(b)): (i) reimburse the Investors for
         their out-of-pocket expenses reasonably incurred in connection with the
         preparation and negotiation of the Recapitalization Agreement and the
         other agreements, documents, and instruments contemplated by the
         Recapitalization Agreement (including but not limited to the proxy
         statement and the offer to purchase) and their out-of-pocket expenses
         reasonably incurred in connection with investigating the Company and
         preparation and negotiation of this Agreement and the other agreements,
         documents, and instruments contemplated by this Agreement, not to
         exceed $1,500,000 in the aggregate; (ii) reimburse the Investors for
         legal expenses reasonably incurred in any litigation or proceeding
         seeking enforcement of this SECTION 9.6(A); and (iii) pay to the
         Investors interest accruing, from the second Business Day after any
         such demand for payment to the date such sum is paid, at the Applicable
         Rate.

                  (b)   In the event the Board of Directors recommends to
         stockholders or authorizes or approves an Alternative Proposal or a
         Superior Proposal or the Company enters into a definitive agreement
         providing for the implementation of an Alternative Proposal or Superior
         Proposal, the Company shall (without duplication of any amounts paid
         under SECTION 9.6(a)): (i) pay to the Investors on demand, the sum of
         $3,000,000 to reimburse the Investors for the efforts they have made
         and will make, the risks they have undertaken and will undertake, and
         the expenses they have incurred and will incur in investigating the
         Company, negotiating the transaction, arranging financing, and
         otherwise preparing and making the Offer; (ii) reimburse the Investors
         for their out-of-pocket expenses reasonably incurred in connection with
         the preparation and negotiation of the Recapitalization Agreement and
         the other agreements, documents, and instruments contemplated by the
         Recapitalization Agreement (including but not limited to the proxy
         statement and the offer to purchase) and their out-of-pocket expenses
         reasonably incurred in connection with investigating the Company and
         preparation and negotiation of this Agreement and the other agreements,
         documents, and instruments contemplated by this Agreement, not to
         exceed $1,500,000 in the aggregate; (iii) reimburse the Investors for
         legal expenses reasonably incurred in any litigation or proceeding
         seeking enforcement of this SECTION 9.6(b); and (iv) pay to the
         Investors interest accruing, from the second Business Day after any
         such demand for payment to the date such sum is paid, at the Applicable
         Rate.


                                       30
<PAGE>

                                   ARTICLE 10
                                     RELEASE

         Section 10.1   TERMINATION OF THE RECAPITALIZATION AGREEMENT. SDI,
Meridian, HSA and the Company, by mutual agreement hereby terminate the
Recapitalization Agreement in accordance with SECTION 8.1 thereof.

         Section 10.2   COMPANY RELEASE. Effective upon the execution and
delivery of this Agreement by each of the parties hereto, the Company for itself
and its successors and assigns, irrevocably releases and discharges SDI,
Meridian and HSA Properties and their respective directors, officers,
stockholders, and partners, and their respective successors and assigns, from
all agreements, liabilities, obligations, claims, and causes of action of any
nature, whether known or unknown, under or in connection with the
Recapitalization Agreement.

         Section 10.3   INVESTOR RELEASE. Effective upon the execution and
delivery of this Agreement by each of the parties hereto, SDI, Meridian and HSA
Properties, each for itself and its successors, assigns, stockholders, and
partners, irrevocably releases and discharges the Company and its directors,
officers, and stockholders, and their respective successors and assigns, from
all agreements, liabilities, obligations, claims, and causes of action of any
nature, whether known or unknown, arising under or in connection with the
Recapitalization Agreement.

                                   ARTICLE 11
                            MISCELLANEOUS PROVISIONS

         Section 11.1        PAYMENT OF EXPENSES. Except as otherwise provided
                        by SECTION 9.6, whether or not the Offer shall be
                        consummated, each party hereto shall pay its own
                        expenses incident to preparing for, entering into and
                        carrying out this Agreement and the consummation of the
                        Offer.

         Section 11.2        MODIFICATION OR AMENDMENT. At any time prior to the
                        Effective Time, the parties hereto may, by written
                        agreement, make any modification or amendment of this
                        Agreement approved by their respective boards of
                        directors. This Agreement and the Exhibits hereto shall
                        not be modified or amended except pursuant to an
                        instrument in writing executed and delivered on behalf
                        of each of the parties hereto.

         Section 11.3        WAIVER OF CONDITIONS; NON-SURVIVAL.

                  (a)   The conditions to each of the parties' obligations to
         consummate the Offer and the Merger are for the sole benefit of such
         party and may be waived by such party by a written instrument, in whole
         or in part, to the extent permitted by applicable law (except for the
         Minimum Condition which may not be waived without the written consent
         of the Company).

                  (b)   None of the representations or warranties in this
         Agreement, or in any instrument delivered pursuant to this Agreement,
         shall survive the Effective Time.

         Section 11.4        CAPTIONS. The Article, Section and paragraph
                        captions herein are for convenience of reference only,
                        do not constitute part of this Agreement and


                                       31
<PAGE>

                        shall not be deemed to modify or otherwise affect any of
                        the provisions hereof.

         Section 11.5        GOVERNING LAW. This Agreement shall be governed by
                        and construed in accordance with the laws of the State
                        of Delaware.

         Section 11.6        NOTICES. Any notice, request, instruction or other
                        document to be given hereunder by any party to the
                        others shall be in writing and delivered personally or
                        sent by registered or certified mail, postage prepaid,
                        IF TO THE INVESTORS, addressed to SDI, Inc., at 200 West
                        Madison Street, Suite 3800, Chicago, Illinois 60606,
                        Attention: Harold S. Handelsman (with a copy to Katten
                        Muchin Zavis, 525 West Monroe Street, Chicago, Illinois
                        60661, Attention: David R. Shevitz and Bruce G. Wilson)
                        AND IF TO THE COMPANY, addressed to the Company at 13
                        Corporate Square, Suite 250, Atlanta, Georgia 30329,
                        Attention: Stephen Aronson (with a copy to Paul, Weiss,
                        Rifkind, Wharton & Garrison, 1285 Avenue of America, New
                        York, New York, 10019, Attention: Robert B. Schumer and
                        Paul D. Ginsberg), or to such other persons or addresses
                        as may be designated in writing by the party to receive
                        such notice.

         Section 11.7        ENTIRE AGREEMENT. This Agreement, its Exhibits and
                        the Company Disclosure Letter constitute the entire
                        agreement, and supersedes all other prior agreements and
                        understandings, both written and oral, among the
                        parties, with respect to the subject matter hereof.

         Section 11.8        ASSIGNMENT; BINDING EFFECT. Neither this Agreement,
                        nor any rights, obligations or interests hereunder, may
                        be assigned by any party hereto, except with the prior
                        written consent of the other parties hereto. Subject to
                        the preceding sentence, this Agreement shall be binding
                        upon, and shall inure to the benefit of, the parties
                        hereto and their respective successors and assigns.

         Section 11.9        THIRD PARTY BENEFICIARIES. This Agreement is
                        intended for the benefit of the parties hereto and their
                        respective successors and assigns and is not for the
                        benefit of, nor may any provision hereof be enforced by,
                        any other Person, unless specifically provided for
                        herein. Notwithstanding the foregoing, holders of
                        Restricted Stock and holders of the Company's stock
                        options are express beneficiaries of SECTION 2.5,
                        SECTION 6.9 and the second sentence of SECTION 7.1(e)
                        hereof.

         Section 11.10       COUNTERPARTS. For the convenience of the parties
                        hereto, this Agreement may be executed in any number of
                        counterparts, each such counterpart being deemed to be
                        an original instrument, and all such counterparts shall
                        together constitute the same agreement.

                           [SIGNATURE PAGE TO FOLLOW]


                                       32
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first written
above.


                                      U.S. FRANCHISE SYSTEMS, INC.


                                      By:    /s/ Stephen D. Aronson
                                             ----------------------
                                      Name:  Stephen D. Aronson
                                             ----------------------
                                      Title: VP/General Counsel
                                             ----------------------


                                      SDI, INC.

                                      By:    /s/ H.S. Handelsman
                                             ----------------------
                                      Name:  H.S. Handelsman
                                             ----------------------
                                      Title:
                                             -------------------------


                                      USFS ACQUISITION CO.

                                      By:    /s/ H.S. Handelsman
                                             -------------------------
                                      Name:  H.S. Handelsman
                                             -------------------------
                                      Title:
                                             -------------------------


                                      MERIDIAN ASSOCIATES, L.P.

                                      By: Meridian Investments, Inc.
                                            Its General Partner

                                      By:    /s/ H.S. Handelsman
                                             -------------------------
                                      Name:  H.S. Handelsman
                                             -------------------------
                                      Title:
                                             -------------------------

                                      HSA PROPERTIES, INC.

                                      By:    /s/ H.S. Handelsman
                                             -------------------------
                                      Name:  H.S. Handelsman
                                             -------------------------
                                      Title:
                                             -------------------------

<PAGE>

                            GLOSSARY OF DEFINED TERMS

         "Affiliate" of any particular Person means any other Person, entity or
investment fund controlling, controlled by or under common control with such
particular Person and any partner of such Person which is a partnership.
"Affiliate" with respect to the Investors, HSA Properties, and Meridian, means,
in addition to the foregoing, any and all of the lineal descendants of Nicholas
J. Pritzker, deceased, any and all trusts for their benefit or for the benefit
of any of their spouses, and any Person owned or controlled by such lineal
descendants or trusts.

         "Applicable Rate" means a fluctuating rate of interest corresponding to
a rate per annum equal to 3.0 percent in excess of the prime rate reported from
time to time in the WALL STREET JOURNAL.

         "Acquisition Proposal" means any proposal relating to a possible (i)
merger, consolidation, tender or exchange offer, or similar transaction
involving the Company or any of its Subsidiaries, (ii) sale, lease or other
disposition, directly or indirectly, by merger, consolidation, share exchange or
otherwise, of any material Proprietary Rights or any other assets of the Company
or its Subsidiaries (other than the hotel management business) representing, in
the aggregate, 75% or more of the assets of the Company or its Subsidiaries on a
consolidated basis, (iii) acquisition of or issuance, sale or other disposition
of (including by way of merger, consolidation, share exchange or any similar
transaction) to any Person or group of Persons (as defined and as interpreted by
the SEC for purposes of Section 13(d) of the Exchange Act and the rules
thereunder) securities (or options, rights or warrants to purchase or securities
convertible into, such securities) representing 75% or more of the votes
attached to the outstanding securities of the Company, (iv) liquidation,
dissolution, or other similar type of transaction with respect to the Company,
(v) recapitalization of the Company whether or not similar, in whole or in part,
to the transactions contemplated by this Agreement, or (vi) transaction which is
substantially similar, in whole or in part, in form, substance or purpose to any
of the foregoing transactions; provided, however, that the term "Acquisition
Proposal" shall not include the Offer or the Merger.

         "Alternative Proposal" means any Acquisition Proposal, other than a
Superior Proposal, that, if consummated, would result in (i) a transaction that
would give all stockholders of the Company the opportunity to receive cash
and/or property for their Shares, which in the good faith judgment of the Board
of Directors, taking into account all considerations materially relevant to such
Acquisition Proposal such as conditions to closing and other contingencies, and
based upon the written opinion of BAS or another nationally recognized financial
advisor to the Board of Directors, would result in a transaction having a value
to stockholders of the Company, from a financial point of view, in an amount per
share greater than the Merger Consideration and (ii) written confirmation to the
Investors, by the Company and the proponent of such transaction, of the
Company's obligations under Section 9.6 of the Acquisition Agreement.

         "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.

         "Code" means the Internal Revenue Code of 1986, as amended.


<PAGE>

         "DGCL" means the General Corporation Law of the State of Delaware.

         "Directors' Option Plan" means the U.S. Franchise Systems, Inc. 1996
Stock Option Plan for Non-Employee Directors.

         "Dissenting Shares" means shares with respect to which the holders
thereof have perfected their dissenters' rights in accordance with Section 262
of the DCGL.

         "Encumbrance" with respect to any property means any mortgage, pledge,
lien, security interest, charge, encumbrance, conditional sale or title
retention agreement, option or other claim affecting such property or its use or
marketability.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Exchange Act" mean the Securities Exchange Act of 1934, as amended.

         "Foreign Laws" means the applicable laws and regulations of any foreign
country.

         "GAAP" mean generally accepted accounting principles consistently
applied from period to period.

         "HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended, and the federal regulation promulgated thereunder.

         "Investors" means, collectively, SDI, Meridian, HSA Properties, and
Newco.

         "Joint Defense Agreement" means the Joint Defense Agreement dated June
___, 2000, as amended by the Amendment to Joint Defense Agreement dated
September ___, 2000, among the Company and directors of the Company.

         "Material Adverse Effect" with respect to any Person means a material
adverse effect on the assets, financial condition, results of operations or cash
flows, of such Person and its Subsidiaries, taken as a whole; provided, however,
that a Material Adverse Effect shall not include (i) changes in general economic
or financial or market conditions, including changes in the trading price of the
Shares, (ii) changes in conditions or circumstances generally affecting the
lodging or franchising industry, (iii) changes resulting from this Agreement or
from the announcement of the transactions contemplated hereby, (iv) changes in
reserves in connection with any receivables, (v) the writeoff or writedown of
any of loans in the Company's loan portfolios, or (vi) the granting of royalty
rebates or the reducing or forgiving of application fees, in the ordinary course
of business consistent in nature and amount with past practice.

         "Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

         "Proprietary Rights" means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and


                                      -2-
<PAGE>

registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data and documentation, (vi) trade secrets and other confidential information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vii) other intellectual property rights,
and (viii) copies and tangible embodiments thereof (in whatever form or medium).

         "Restricted Stock" means (i) the 123,805 shares of Class A Common Stock
held by Michael Leven, and designated as Restricted Shares under the Amended and
Restated Employee Stock Purchase Agreement between the Company and Michael
Leven, entered into as of September 29, 1995, as amended effective October 24,
1996 (the "Leven Stock Purchase Agreement"), (ii) the 233,032 Restricted Shares
held by Andrea Leven originally acquired under the Leven Employee Stock Purchase
Agreement, (iii) 589,865 Restricted Shares held by Neal Aronson acquired under
the Amended and Restated Employee Stock Purchase Agreement between the Company
and Neal K. Aronson entered into as of September 29, 1995, as amended effective
October 24, 1996 (the "Aronson Employee Stock Purchase Agreement"), and (iv)
424,615 Shares that have been reallocated to other members of management or
transferred to members of Michael A. Leven's family, as set forth on the
attached Schedule.

         "SEC" means the United States Securities and Exchange Commission.

         "Significant Subsidiary" means any significant subsidiary of the
Company within the meaning of Regulation S-X under the Securities Exchange Act
of 1934, as amended.

         "State Laws" mean the applicable laws and regulations of the several
states of the United States of America or any political subdivision thereof.

         "Stockholder Litigation" means the complaint filed May 17, 2000 in the
United States District Court for the Northern District of Georgia, Atlanta
Division, Case No. 00-CV-1244, captioned FORREST P. GUNTER ON BEHALF OF HIMSELF
AND ALL OTHERS SIMILARLY SITUATED VS. U.S. FRANCHISE SYSTEMS, INC., MICHAEL A.
LEVEN, NEAL K. ARONSON, AND RICHARD GOLDSTEIN.

         "Stock Option Plan" means the Company's Amended and Restated 1996 Stock
Option Plan.

         "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustee thereof is at the time owned or
controlled, directly or indirectly,


                                      -3-
<PAGE>

by that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the membership, partnership
or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person
or combination thereof. For purposes hereof, a Person or Persons shall be deemed
to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of partnership, association or other business
entity gains or losses or shall be or control the managing director or general
partner of such partnership, association or other business entity. For purposes
of this Agreement, Best Reservation Corporation, an Illinois not-for-profit
corporation, Microtel Reservations and Advertising Fund, Inc., a Georgia
not-for-profit corporation and Hawthorn Reservations and Advertising Fund, Inc.,
a Georgia not-for-profit corporation, shall not be deemed to be Subsidiaries of
the Company or any of its Subsidiaries.

         "Superior Proposal" means an Acquisition Proposal that, if consummated,
would result in (i) a transaction that would give all stockholders of the
Company the opportunity to receive cash for their Shares in an amount per share
greater than the Merger Consideration and (ii) written confirmation to the
Investors, by the Company and the proponent of such transaction, of the
Company's obligations under Section 9.6 of the Acquisition Agreement.


                                      -4-
<PAGE>


                            RESTRICTED STOCK SCHEDULE



 Restricted                                            Number
   Stock                                             of Shares
   Holder                                               Held
------------                                         ---------
Steven Romaniello                                     40,333
David E Shaw, Sr.                                     26,887
Jonathan Leven                                        91,123
Robert Leven                                          91,123
Adam Leven                                            77,677
Debbie Campbell                                       20,166
Brad LeBlanc                                           3,360
Timothy Muir                                          33,613
Michael Muir                                          33,613
Eugene Welch                                           6,720
                                   Total:            424,615


                                      -5-