UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
U.S. Franchise Systems, Inc.
(Name of Issuer)
Class A Common Stock, par value $0.01 per share
(Title of Class Of Securities)
902 956 30 9
(CUSIP Number)
Stephen D. Aronson, Esq.
c/o U.S. Franchise Systems, Inc.
13 Corporate Square
Atlanta, GA 30329
Tel. No.: (404) 235-7463
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 18, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d-l(b)(3) or (4), check the following box. / /
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SCHEDULE 13D
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1. Name of Reporting Person:
Neal K. Aronson
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2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [X]
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3. SEC Use Only
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4. Source of Funds:
00
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5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f):
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6. Citizenship or Place of Organization:
U.S.A.
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Number of 7. Sole Voting Power: 781,424 (See Exhibit A set
Shares forth in Amendment No. 1)
Beneficially ------------------------------------------------------
Owned By 8. Shared Voting Power:
Each 111,347
Reporting ------------------------------------------------------
Person With 9. Sole Dispositive Power:
589,865
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10. Shared Dispositive Power:
0
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11. Aggregate Amount Beneficially Owned by Each Reporting Person:
892,771 (See Exhibit A set forth in Amendment No. 1)
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
[ ]
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13. Percent of Class Represented by Amount in Row (11):
5.2%
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14 Type of Reporting Person:
IN
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ITEM 1. SECURITY AND ISSUER.
The undersigned hereby amends the statement on Schedule 13D, dated
March 25, 1998, as amended by amendment no. 1 thereto dated June 27, 2000,
relating to the Class A Common Stock par value $.01 per share (the "Class A
Common Stock") of U.S. Franchise Systems, Inc., a Delaware corporation (the
"Company"), whose principal executive office is located at 13 Corporate Square,
Suite 250, Atlanta, Georgia 30329.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Statement is hereby amended and restated to read in its
entirety as follows:
Prior to the merger referred to in the next paragraph (the "Merger"),
Mr. Aronson was the Executive Vice President, Chief Financial Officer and a
director of the predecessor to the Company ("USFS"), and he assumed identical
positions with the Company following the Merger.
The Merger was effected in connection with the series of transactions
(the "Merger Transactions") designed to enable USFS to acquire the entire
interest in the Hawthorn Suites brand of hotels currently owned by Hawthorn
Suites Associates, an Illinois joint venture ("HSA"), and HSA Properties, Inc.,
a Delaware corporation ("HPI"), through their ownership collectively of a 99%
membership interest in HSA Properties, L.L.C., a Delaware limited liability
company ("HSA LLC"). Prior to the Merger, USFS owned the remaining 1% membership
interest in HSA LLC. Immediately prior to the Merger, pursuant to a Contribution
Agreement (the "Contribution Agreement"), dated as of December 9, 1997, by and
among HSA, HPI, the Company and USFS, HSA and HPI assigned, transferred and
conveyed to the Company (the "Transfer") all of their respective ownership
interests in HSA LLC. Pursuant to the Transfer, HPI acquired 22,447 shares of
Company Class A Common Stock, and HSA acquired 2,199,775 shares of Company Class
A Common Stock.
By virtue of the Merger and the Contribution Agreement, the Company
acquired the remaining 99% interest in HSA LLC which USFS had not already owned.
Prior to the Merger, USFS and HSA LLC were parties to the Master Franchise
Agreement, dated as of March 27, 1996 (the "Hawthorn Acquisition Agreement"),
pursuant to which USFS acquired the exclusive, worldwide rights to franchise and
to control the development and operation of the Hawthorn Suites brand of hotels.
The Hawthorn Acquisition Agreement required that a percentage of royalties
received by USFS from the franchising of Hawthorn Suites hotels be remitted to
HSA LLC and also contained certain restrictions on USFS's operations and imposed
certain standards relating to the development of the Hawthorn Suites brand of
hotels. Accordingly, USFS acquired HSA LLC, through the Merger and the
Contribution Agreement, in order to eliminate these restrictions.
On June 2, 2000, the Company, SDI, Inc.("SDI"), Meridian Associates,
L.P. ("Meridian") and HPI (together with SDI, Meridian and USFS Acquisition Co.
("Newco"), the "Pritzker Entities") entered into a Recapitalization Agreement
(the "Recapitalization Agreement") pursuant to which the Company was to commence
a tender offer to purchase (the "Offer") up to an aggregate of 8,666,666 (but
not less than 3,000,000) shares of Common Stock of the Company, and SDI was to
purchase 75,000 shares of preferred stock of the Company for an aggregate of
$75,000,000. In connection with the Recapitalization Agreement, Mr. Aronson
entered into an agreement with Meridian pursuant to which, among other things,
Mr. Aronson agreed (i) to tender all his shares in the Offer and (ii) to vote
his shares as provided in the
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agreement at the upcoming annual meeting of stockholders. By mutual agreement,
the Recapitalization Agreement and Mr. Aronson's agreement with Meridian have
been terminated.
On September 18, 2000, SDI, HPI, Newco and Meridian entered into an
Acquisition Agreement with the Company (the "Acquisition Agreement") pursuant to
which Newco has agreed to commence a tender offer to purchase all of the
outstanding Common Stock of the Company for $5.00 per share (the "Offer"),
subject to the condition that there be tendered and not withdrawn the number of
shares of Common Stock that, together with the shares of Common Stock owned by
Meridian, HPI and their affiliates, represents a majority of the outstanding
shares of Common Stock (the "Minimum Condition"). Upon satisfaction of the
Minimum Condition, and subject to receipt of any required stockholder approval,
it is expected that Newco will merge into the Company. Upon consummation of the
merger, the shareholders who elected not to accept the Offer will receive $5.00
for their shares of Common Stock, subject to dissenter's rights properly
exercised under Delaware law, and the Company will become a privately held
company.
In connection with the Acquisition Agreement, Mr. Aronson entered into
an agreement with Meridian and Newco (the "Aronson Agreement") pursuant to which
he agreed to tender and not withdraw all of his shares of Common Stock, other
than 589,865 restricted shares of Class A Common Stock, to Newco prior to
expiration of the Offer. By virtue of the Aronson Agreement, the Pritzker
Entities may be deemed to share investment power with respect to 1,509,453
shares of Class B Common Stock held by Mr. Aronson. Pursuant to the Acquisition
Agreement, Mr. Aronson's restricted shares will vest upon consummation of the
Offer and he will be entitled to receive the merger consideration with respect
to such shares upon consummation of the merger. The complete text of the
Acquisition Agreement and the documents executed in connection therewith,
including the Aronson Agreement, have been attached as an exhibit to the Current
Report on Form 8-K filed by the Company on September 20, 2000 and are hereby
incorporated herein by reference.
Except as set forth in this Item 4, Mr. Aronson, in his individual
capacity, does not have any plans or proposals that relate to or would result in
any of the actions specified in clauses (a) through (j) of Item 4 of Schedule
13D.
Notwithstanding the above, Mr. Aronson may, in his capacity as an
executive officer and/or director of the Company, have plans or proposals
relating to items (a) through (j) of Item 4 of Schedule 13D and to such extent
Mr. Aronson declines to indicate such plans or proposals, and disclaims any
obligation to update such disclosure, except to the extent they derive from his
status as a shareholder instead of an executive officer and/or director. In
addition, subject to compliance with applicable law, Mr. Aronson may, at any
time and from time to time, and reserves the right to, acquire additional
securities of the Company, dispose of any such securities of the Company or
formulate plans or proposals regarding the Company or its securities, to the
extent deemed advisable by Mr. Aronson in light of his general investment
policy, market conditions or other factors.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended and restated to read in
its entirety as follows:
(a) Mr. Aronson beneficially owns 892,771 shares of the issued and
outstanding Company Class A Common Stock and 1,509,453 shares of the issued and
outstanding Company Class B Common Stock. Mr. Aronson may be deemed to share
investment power with respect to his shares of Class B Common Stock. See item 4
above.
Mr. Aronson's shares of Company Class A Common Stock constitute 5.2% of
the issued and outstanding Company Class A Common Stock. Each share of Company
Class A Common Stock is entitled to one vote.
Mr. Aronson's 1,509,453 shares of Company Class B Common Stock
constitute 55.7% of the issued and outstanding shares of Company Class B Common
Stock. Each share of Company Class B Common Stock is entitled to 10 votes per
share.
(b) Mr. Aronson has sole voting power over 781,724 shares of Company
Class A Common Stock. Pursuant to a voting agreement, Mr. Aronson has
transferred voting power to Mr. Leven with respect to 111,347 shares of Company
Class A Common Stock, to which Mr. Aronson has shared voting power with Mr.
Leven.
Mr. Leven is Chief Executive Officer of the Company. His address is 13
Corporate Square, Suite 250, Atlanta, GA 30329.
Mr. Leven is a citizen of the United States. During the last five
years, Mr. Leven has not been convicted in a criminal proceeding(excluding
traffic violations or similar misdemeanors) nor has Mr. Leven been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
with the result of such proceeding being that Mr. Leven is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws or finding
any violation with respect to such laws.
(c) Mr. Aronson has not effected any transactions in any shares of
Company Class A Common Stock during the past sixty (60) days.
(d) Members of management of the Company who own an aggregate of
302,906 shares of Company Class A Common Stock, and who are required to vote
them in the same manner as Mr. Aronson votes his shares, have the right to
receive dividends from or direct the proceeds from a sale of such securities.
(e) Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Item 6 of the Schedule 13D is hereby amended by deleting the last two
paragraphs thereof and inserting the following paragraph at the end of Item 6.
The Acquisition Agreement provides that all shares of Restricted Stock
of the Company, including the shares owned by Mr. Aronson, will be deemed
irrevocably vested and no longer subject to forfeiture immediately following
consummation of the tender offer contemplated by the Acquisition Agreement;
subject to such consummation, Mr. Aronson currently holds 589,865 Restricted
Shares.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following are added at the end of item 7 of the Schedule 13D.
Exhibit 1 Aronson Agreement incorporated by reference from Exhibit 99.2
to the Current Report on Form 8-K of the Company filed
September 20, 2000.
Exhibit 2 Acquisition Agreement incorporated by reference from Exhibit
2.1 to the Current Report on Form 8-K of the Company filed
September 20, 2000.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 26, 2000
/s/ Neal K. Aronson
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Neal K. Aronson
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