<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
[X] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Additional Materials RULE 14A-6(E)(2))
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Extended Stay America, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF EXTENDED STAY AMERICA]
April 14, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders of
Extended Stay America, Inc., which will be held on Monday, May 12th, 1997 at the
Broward Center for the Performing Arts, 201 Southwest Fifth Avenue, Fort
Lauderdale, FL 33301, commencing at 11:00 a.m.
Your Board of Directors and Management look forward to personally greeting those
Shareholders able to attend.
At the Meeting, in addition to electing seven directors, your Board is asking
Shareholders to ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors. These proposals are fully set forth in the accompanying
Proxy Statement, which you are urged to read thoroughly. For the reasons set
forth in the Proxy Statement, your Board of Directors recommends a vote "FOR"
each of the proposals.
It is important that your shares are represented and voted at the Meeting
whether or not you plan to attend. Accordingly, you are requested to mark, sign,
date, and mail the enclosed Proxy in the envelope provided at your earliest
convenience.
Thank you for your cooperation and continued support.
Sincerely,
/s/ H. Wayne Huizenga
-------------------------
H. Wayne Huizenga
Chairman of the Board
<PAGE>
[LOGO OF EXTENDED STAY AMERICA]
450 East Las Olas Boulevard, Suite 1100, Fort Lauderdale, Florida 33301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 12, 1997
You are cordially invited to attend the annual meeting of stockholders of
Extended Stay America, Inc. (the "Company") which will be held at the Broward
Center for the Performing Arts, 201 Southwest Fifth Avenue, Fort Lauderdale,
Florida on Monday, May 12, 1997, at 11:00 a.m., Eastern time, for the following
purposes:
1. To elect directors.
2. To consider and act upon a resolution to ratify the action of the Board of
Directors in appointing Coopers & Lybrand L.L.P. as independent auditors
for the Company for 1997.
3. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 21, 1997 are
entitled to vote at the meeting. A list of such stockholders will be available
for examination by any stockholder for any purpose germane to the meeting,
during normal business hours, at the Company's offices at 450 East Las Olas
Boulevard, Suite 1100, Fort Lauderdale, Florida, for a period of 10 days prior
to the meeting.
A proxy statement and a proxy card solicited by the Board of Directors are
enclosed herewith. It is important that your shares be represented at the
meeting regardless of the size of your holdings. Whether or not you intend to be
present at the meeting in person, we urge you to mark, date, and sign the
enclosed proxy card and return it in the envelope provided for that purpose,
which does not require postage if mailed in the United States. If you attend the
meeting, you may, if you wish, withdraw your proxy and vote in person.
/S/ Robert A. Brannon
---------------------------------
Robert A. Brannon
Senior Vice President, Chief
Financial Officer, Secretary,
and Treasurer
Fort Lauderdale, Florida
April 14, 1997
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YOU ARE URGED TO MARK, DATE, AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE
--------------------------------------------------
<PAGE>
EXTENDED STAY AMERICA, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 12, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Extended Stay America, Inc. (the "Company") of proxies for
use at the annual meeting of stockholders of the Company to be held at the
Broward Center for the Performing Arts, 201 Southwest Fifth Avenue, Fort
Lauderdale, Florida at 11:00 a.m., Eastern time, on May 12, 1997, and at any
postponement or adjournment thereof. Proxies properly executed and returned in a
timely manner will be voted at the meeting in accordance with the directions
noted thereon. If no direction is indicated, they will be voted for the election
of the nominees named herein as directors, for the proposal to ratify the
selection of Coopers & Lybrand L.L.P. as independent auditors for 1997, and on
other matters presented for a vote in accordance with the judgment of the
persons acting under the proxies. Any stockholder giving a proxy has the power
to revoke it at any time before it is voted, either in person at the meeting, by
written notice to the Secretary of the Company, or by delivery of a later-dated
proxy.
The Company's principal executive offices are located at 450 East Las Olas
Boulevard, Suite 1100, Fort Lauderdale, Florida 33301 (telephone 954/713-1600).
This Proxy Statement is dated April 14, 1997 and it is expected that proxy
materials will be mailed to stockholders beginning on or about such date.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 21, 1997 are
entitled to vote at the annual meeting of stockholders. The only voting stock of
the Company outstanding is its common stock, par value $.01 per share (the
"Common Stock"), of which 79,886,333 shares were outstanding as of the close of
business on March 21, 1997. Each share of Common Stock is entitled to one vote.
Election of each director requires the affirmative vote of the holders of a
plurality of the shares of the Company's Common Stock present in person or
represented by proxy and entitled to vote at the meeting. In general, approval
of any other matter submitted to the stockholders for their consideration
requires the affirmative vote of the holders of a majority of the shares of the
Common Stock present in person or represented by proxy and entitled to vote at
the meeting. Abstentions, directions to withhold authority, and broker non-votes
are counted as shares present in the determination of whether the shares of
stock represented at the meeting constitute a quorum. Abstentions are counted in
tabulations of the votes cast on proposals presented to stockholders. Thus, an
abstention from voting on a matter has the same legal effect as a vote against
the matter. Broker non-votes and directions to withhold authority are counted as
present, but are deemed not entitled to vote on proposals for which brokers do
not have discretionary authority and, therefore, have no effect. An automated
system administered by the Company's transfer agent will be used to tabulate the
votes.
<PAGE>
1. ELECTION OF DIRECTORS
Seven directors are to be elected at the meeting. The persons named below have
been designated by the Board of Directors as nominees for election as directors
for a term expiring at the annual meeting of stockholders in 1998. All of the
nominees are serving as directors as of the date of this Proxy Statement.
Unless otherwise instructed, properly executed proxies that are returned in a
timely manner will be voted for election of the seven nominees. If, however, any
of such nominees should be unable or should fail to act as a nominee by virtue
of an unexpected occurrence, the proxies will be voted for such other person as
will be determined by the holders of the proxies in their discretion, or the
Board of Directors may make an appropriate reduction in the number of directors
to be elected.
Biographical information concerning the seven nominees is presented below.
H. Wayne Huizenga, age 59, became a director of the Company in August 1995 and
serves as Chairman of its Board of Directors. Mr. Huizenga also currently serves
as Chairman of the Board of Directors and Co-Chief Executive Officer of Republic
Industries, Inc. ("Republic"), a diversified company operating in the
automotive, solid waste, electronic security, and out-of-home media industries.
Since September 1996, Mr. Huizenga has been Chairman of the Board of Florida
Panthers Holdings, Inc. ("FPHI"), a sports, entertainment and leisure company
which owns and operates the Florida Panthers professional sports franchise and
certain resort and other facilities. Mr. Huizenga served as the Vice Chairman of
Viacom Inc. ("Viacom"), a diversified entertainment and communications company,
from September 1994 until October 1995. Mr. Huizenga also served as the Chairman
of the Board of Blockbuster Entertainment Group, a division of Viacom, from
September 1994 until October 1995. From April 1987 through September 1994, Mr.
Huizenga served as the Chairman of the Board and Chief Executive Officer of
Blockbuster Entertainment Corporation ("Blockbuster"), during which time he
helped build Blockbuster from a 19-store chain into the world's largest video
and music retailer. In September 1994, Blockbuster merged into Viacom. In 1971,
Mr. Huizenga co-founded Waste Management, Inc., now known as WMX Technologies,
Inc. ("WMX"), which he helped build into the world's largest integrated
environmental services company, and he served in various capacities, including
the President, the Chief Operating Officer and a director from its inception
until 1984. Mr. Huizenga also owns or controls the Miami Dolphins and Florida
Marlins professional sports franchises, as well as Pro Player Stadium, in South
Florida.
George D. Johnson, Jr., age 54, has been President, Chief Executive Officer,
and a director of the Company since January 1995. He is responsible for all
aspects of development, operation, marketing, and personnel of the Company. Mr.
Johnson is the former President of the Consumer Products Division of Blockbuster
Entertainment Group, a division of Viacom. In this position he was responsible
for all U. S. video and music stores. Mr. Johnson has over 30 years of
experience developing and managing various businesses. He was formerly the
managing general partner of WJB Video, the largest Blockbuster franchisee which
developed over 200 video stores prior to a merger with Blockbuster in 1993 and
is the managing general partner of American Storage Limited Partnership, a chain
of 23 self-storage facilities located in the Carolinas and Georgia. He formerly
served as a director of Viacom and currently serves on the board of directors of
Republic, FPHI and Duke Power Company. He has been the Chairman of the Board of
Directors of Johnson Development Associates, Inc. since its founding in 1986.
Johnson Development Associates, Inc. is a real estate management, leasing, and
development company controlling approximately two million square feet of
commercial, retail, and industrial property located in the Carolinas and Georgia
which are owned by various partnerships controlled by Mr. Johnson and his
brother, Stewart H. Johnson. Mr. Johnson practiced law in Spartanburg, South
Carolina from 1967 until 1986 and served three terms in the South Carolina House
of Representatives.
Donald F. Flynn, age 57, became a director of the Company in August 1995. Mr.
Flynn is Chairman and Chief Executive Officer of Flynn Enterprises, Inc., a
business consulting and venture capital company, and from July 1992 until March
1996 was Chairman of Discovery Zone, Inc. ("Discovery Zone"). From July 1992
until May 1995, Mr. Flynn also served as Chief Executive Officer of Discovery
Zone. Discovery Zone is an owner and franchisor of family indoor entertainment
and fitness facilities. On March 25, 1996, Discovery Zone announced that it had
filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. Mr.
Flynn also currently serves as a director of WMX, Waste Management International
plc, Wheelabrator Technologies, Inc., and Psychemedics,
2
<PAGE>
Inc. ("Psychemedics"). Mr. Flynn is a former director of Blockbuster. From 1972
to 1990, Mr. Flynn served in various positions with WMX, including Senior Vice
President and Chief Financial Officer.
Stewart H. Johnson, age 53, became a director of the Company in August 1995.
Mr. Johnson is currently the Chairman of the Board of Directors, Chief Executive
Officer, and President of Morgan Corporation, a construction company
specializing in grading, site preparation, and sewer and utility installation.
Mr. Johnson has been directing the operations of Morgan Corporation since 1971.
Mr. Johnson also serves as Secretary for Johnson Development Associates, Inc.
Mr. Johnson is the brother of George D. Johnson, Jr.
John J. Melk, age 60, became a director of the Company in August 1995. Mr.
Melk has been Chairman and Chief Executive Officer of H/2/0 Plus, Inc., a bath
and skin care product manufacturer and retail distributor, since 1988. Mr. Melk
has been a private investor in various businesses since March 1984 and prior to
March 1984, he held various positions with WMX and its subsidiaries, including
President of Waste Management International, plc., a subsidiary of WMX. Mr. Melk
also serves as a director of Psychemedics Corporation and of Republic. From
February 1987 until March 1989 and from May 1993 until September 1994, Mr. Melk
served as a director of Blockbuster. He also served as the Vice Chairman of
Blockbuster from February 1987 until March 1989.
Peer Pedersen, age 72, became a director of the Company in August 1995. He is
the founder and has been Chairman of the law firm of Pedersen & Houpt, P.C., in
Chicago, Illinois for more than five years. He serves on the board of directors
of Aon Corporation, Boston Chicken, Inc., and WMX.
Norwood Cowgill, Jr., age 53, became a director of the Company in April 1997
in connection with the Company's merger with Studio Plus Hotels, Inc. ("Studio
Plus"). Mr. Cowgill is currently the President of Studio Plus, which is now a
wholly-owned subsidiary of the Company. Prior to its merger with the Company,
Mr. Cowgill was the Chairman of the Board of Directors and Chief Executive
Officer of Studio Plus, and founded the predecessor to Studio Plus in 1985.
Prior to 1985, Mr. Cowgill was a real estate developer in Lexington, Kentucky,
who was active in various aspects of real estate, including subdivision of land,
construction of single family housing, conversion of apartments to condominiums,
and construction, ownership, management and renovation of multi-family housing
communities.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" the election of each of the nominees for director.
Meetings and Committees of the Board
The three standing committees of the Board of Directors of the Company are the
Executive Committee, the Audit Committee, and the Compensation Committee, the
functions and membership of each of which are described below. The Board of
Directors does not have a standing nominating committee. During 1996, the Board
of Directors held five meetings, at which all of the directors were present, and
acted four times by unanimous written consent.
The Executive Committee, which is composed of H. Wayne Huizenga and George D.
Johnson, Jr., has the same powers and authority as the Board of Directors and
may act when the Board is not in session, subject to the limitations of the
Delaware General Corporation Law and the Company's certificate of incorporation
and bylaws. The Audit Committee's functions include making recommendations to
the Board of Directors on the selection of the Company's auditors, reviewing the
arrangements for, and scope of, the independent auditors' examination, meeting
with the independent auditors, the Board of Directors, and certain officers of
the Company to review the adequacy of internal controls and reporting, and
performing any other duties or functions deemed appropriate by the Board of
Directors. Messrs. Flynn, Pedersen, and Stewart H. Johnson are currently members
of the Audit Committee. The Compensation Committee is responsible for
establishing and making recommendations to the Board of Directors regarding
salaries to be paid to officers of the Company and is responsible for the
administration and interpretation of, and the granting of options under, the
Company's Amended and Restated 1995 Employee Stock Option Plan (the "1995
Plan"), Amended and Restated 1996 Employee Stock Option Plan (the "1996 Plan"),
and 1997 Employee Stock Option Plan (the "1997 Plan") (the 1995 Plan, the 1996
Plan, and the 1997 Plan are collectively
3
<PAGE>
referred to as the "Employee Plans"). Messrs. Flynn and Melk are currently
members of the Compensation Committee.
Nominations for election of directors are made by the Board of Directors and,
pursuant to the Company's bylaws, may be made by a committee appointed by the
Board or by any stockholder entitled to vote in the election of directors. See
"Submission of Stockholder Proposals for the 1998 Annual Meeting" for procedures
with respect to nominations by stockholders.
During 1996, the Audit Committee held one meeting and the Compensation
Committee acted forty-five times by unanimous written consent. During 1996, the
Executive Committee held one meeting and acted twice by unanimous written
consent. In 1996, during the time each director served in such capacity, no
director attended less than 75% of the aggregate of all meetings of the Board
and all meetings held by committees of the Board on which such director served.
2. APPOINTMENT OF AUDITORS
Subject to stockholder ratification, the Board of Directors has selected the
accounting firm of Coopers & Lybrand L.L.P. to serve as the independent auditors
of the Company for 1997. Coopers & Lybrand L.L.P. has served as the Company's
independent auditors since its inception in January 1995. Representatives of
Coopers & Lybrand L.L.P. will be available at the annual meeting to respond to
appropriate questions from stockholders. They have advised the Company that they
do not presently intend to make a statement at the annual meeting, although they
will have the opportunity to do so.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" ratification of the appointment of Coopers & Lybrand L.L.P. as auditors
for 1997.
OTHER MATTERS
Management knows of no other matters to be brought before the annual meeting
other than those described above. If any other business should come before the
meeting, it is intended that the persons named in the enclosed proxy will vote
the shares in accordance with their best judgment on any such matter.
4
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 21, 1997, certain information
regarding the beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of 5% or more of the outstanding
Common Stock, by each director, nominee for director, and Named Executive
Officer (as defined below), and by all directors and executive officers as a
group. As of such date, there were approximately 385 record holders and
approximately 8,000 beneficial holders of Common Stock and 79,886,333 shares of
Common Stock outstanding.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
-----------------------
Name(1) Number(2) Percent
------- ------------- --------
<S> <C> <C>
George D. Johnson, Jr. (3)......................... 11,179,824 14.0%
H. Wayne Huizenga (4).............................. 9,254,910 11.6
Putnam Investments, Inc. (5)....................... 7,752,315 9.7
One Post Office Square
Boston, Massachusetts 02109
Soros Fund Management LLC (6)...................... 4,200,000 5.3
888 Seventh Avenue, 33rd Floor
New York, New York 10106
State Street Research & Management Company (7)..... 4,180,600 5.2
One Financial Center, 30th Floor
Boston, Massachusetts 02111
Stewart H. Johnson (8)............................. 1,489,458 1.9
Robert A. Brannon (9).............................. 653,718 *
Richard A. Fadel, Jr............................... 30,000 *
Corry W. Oakes..................................... 67,369 *
Harold E. Wright................................... 325,434 *
Donald F. Flynn (10)............................... 523,154 *
John J. Melk (11)................................... 1,929,460 2.4
Peer Pedersen...................................... 1,489,460 1.9
Norwood Cowgill, Jr. (12).......................... 0 --
All directors and executive officers
as a group (15 persons)(3)(4)(8)(9)(10)(11)(12).. 27,133,865 33.5%
</TABLE>
- -----------
* Represents less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated, the address of such person is c/o Extended Stay
America, Inc., 450 E. Las Olas Boulevard, Suite 1100, Fort Lauderdale,
Florida 33301.
(2) The numbers and percentages of shares owned by the directors, the Named
Executive Officers and by all officers and directors as a group assume in
each case that currently outstanding stock options covering shares of
Common Stock which were exercisable within 60 days of March 21, 1997, had
been exercised by that person or group as follows: (i) George D. Johnson,
Jr. - 100,000; (ii) H. Wayne Huizenga - 75,000;, (iii) Stewart H. Johnson -
40,000; (iv) Robert A. Brannon - 170,564; (v) Richard A. Fadel, Jr. -
30,000; (vi) Corry W. Oakes - 34,519; (vii) Harold E. Wright - 319,626;
(viii) Donald F. Flynn - 40,000; (ix) John J. Melk - 40,000; (x) Peer
Pedersen - 40,000; and (xi) all directors and executive officers as a group
(including such individuals) - 1,014,327.
(3) Includes 3,832,524 shares of Common Stock beneficially owned by GDJ, Jr.
Investments Limited Partnership, a limited partnership controlled by George
D. Johnson, Jr., and includes 7,247,300 shares of Common Stock held in
various trusts for the benefit of members of George D. Johnson, Jr.'s
immediate family, of which George D. Johnson, Jr.'s brother, Stewart H.
Johnson, is a trustee, but does not include 241,576 shares of Common Stock
held in various trusts for the benefit of members of Stewart H. Johnson's
immediate family and with respect to which George D. Johnson, Jr. is
trustee, all of which shares George D. Johnson, Jr. may be deemed to
beneficially own.
(4) Includes 9,179,910 shares of Common Stock beneficially owned by Huizenga
Investments Limited Partnership, a limited partnership controlled by Mr.
Huizenga.
(5) The number of shares of Common Stock shown as beneficially owned is derived
from an Amendment to Schedule 13G dated March 7, 1997 filed with the
Securities and Exchange Commission (the "Commission") by the listed
stockholder.
(6) The number of shares of Common Stock shown as beneficially owned is derived
from a Schedule 13D, dated February 6, 1997, filed with the Commission by
the listed stockholder.
(7) The number of shares of Common Stock shown as beneficially owned is derived
from an Amendment to Schedule 13G dated February 13, 1997 filed with the
Commission by the listed stockholder.
(8) Includes 241,576 shares of Common Stock held in various trusts for the
benefit of members of Stewart H. Johnson's immediate family, of which
George D. Johnson, Jr. is trustee, but does not include 7,247,300 shares of
Common Stock held
5
<PAGE>
in various trusts for the benefit of members of George D. Johnson, Jr.'s
immediate family, of which Stewart H. Johnson is a trustee, all of which
shares Stewart H. Johnson may be deemed to beneficially own.
(9) Includes 483,154 shares of Common Stock beneficially owned by Brannon
Investments, L.P., a limited partnership controlled by Mr. Brannon.
(10) Includes 483,154 shares of Common Stock held in a trust of which Mr. Flynn
is a trustee and beneficiary.
(11) Includes 1,449,460 shares of Common Stock beneficially owned by M
Group Investments IV, L.P., of which Mr. Melk is a general partner.
(12) Upon consummation of the merger with Studio Plus, Mr. Cowgill was issued
1,209,929 shares of Common Stock and immediately exercisable options to
purchase 368,160 shares of Common Stock in exchange for shares, and options
to purchase shares, of Studio Plus common stock. In addition, upon
consummation of the merger, Cowgill Partners, L.P., a limited partnership
controlled by Mr. Cowgill, was issued 576,784 shares of Common Stock in
exchange for shares of Studio Plus common stock. None of these shares were
considered to be beneficially owned as of March 21, 1997 and they have been
excluded from the table above
EXECUTIVE COMPENSATION
The Company was incorporated in January 1995 and did not conduct any
operations prior to that time. The Company's executive officers commenced their
service with the Company at various times during 1995 and 1996 and none was
employed by the Company during all of 1995. Accordingly, the following table
sets forth, on an annualized basis with respect to salary information,
information regarding the compensation paid by the Company to its Chief
Executive Officer and each of the other four most highly compensated officers of
the Company (hereinafter, the "Named Executive Officers") for all services
rendered to the Company during 1995 and 1996. The Company does not have a
restricted stock award program or a long-term incentive plan. Directors of the
Company are not paid any cash compensation for their services but are reimbursed
for their out-of-pocket expenses.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------- -------------
Other Securities
Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options/SARs Compensation
Position Year ($) ($) ($) (#) ($)
- --------------------------------- ---- -------- ---------------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
George D. Johnson, Jr............ 1996 200,000 -- -- -- --
President and Chief 1995 200,000 -- -- 400,000 --
Executive Officer
Robert A. Brannon................ 1996 175,000 -- -- 78,504 --
Senior Vice President, 1995 175,000 -- -- 603,750 --
Chief Financial Officer,
Secretary, and Treasurer
Richard A. Fadel, Jr. 1996 175,000 -- -- 120,000 56,602(1)
Vice President--Operations 1995 -- -- -- -- --
of ESA Management, Inc.
Corry W. Oakes................... 1996 125,000 -- -- 96,074 67,156(1)
Vice President--Construction 1995 100,000 -- -- 42,000 22,837(1)
of ESA Management, Inc.
Harold E. Wright 1996 175,000 600,000(2) -- 1,278,504 45,517(1)
Senior Vice President--Real 1995 175,000 -- -- -- 51,179(1)
Estate of ESA Management, Inc.
</TABLE>
___________
(1) Represents the taxable portion of reimbursed relocation expenses.
(2) Pursuant to an employment agreement dated March 18, 1996.
6
<PAGE>
The following table sets forth individual grants of stock options made to the
Named Executive Officers during 1996.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Percent of Total Price Appreciation
Options Granted Exercise for Option Term(4)
Date of Options to Employees or Base Expiration ------------------------
Name Grant(1) Granted(2) in Fiscal Year Price(2)(3) Date 5% 10%
---- ------- --------- -------------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
George D. Johnson, Jr... -- -- -- % $ -- -- $ -- $ --
Robert A. Brannon....... 1/2/96 78,504 2.23 13.375 1/2/06 660,334 1,673,415
Richard A. Fadel, Jr.... 5/6/96 120,000 3.41 13.0625 5/6/06 985,792 2,498,191
Corry W. Oakes.......... 1/2/96 56,074 1.59 13.375 1/2/06 471,665 1,195,291
5/9/96 40,000 1.14 13.25 5/9/06 333,314 844,684
Harold E. Wright........ 1/2/96 78,504 2.23 13.375 1/2/06 660,334 1,673,415
3/18/96 1,200,000 34.08 10.50 3/18/06 7,924,072 20,081,155
- -----------
</TABLE>
(1) Except for specific situations, the options granted become exercisable as
to one-fourth of the grant on each of the first, second, third, and fourth
anniversary of the date of grant.
(2) Reflects a 2-for-1 stock split effected on July 19, 1996.
(3) Under the Employee Plans, the exercise price must be the fair market value
of the Common Stock on the date of grant.
(4) These amounts represent certain assumed annual rates of appreciation
calculated from the exercise price, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock. There can be no assurance that the amounts reflected
in this table will be achieved.
The following table provides certain information concerning the value of
unexercised options to purchase Common Stock at December 31, 1996 for the Named
Executive Officers. No options to purchase Common Stock were exercised during
1996.
Aggregate 1996 Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at 12/31/96 SARs at 12/31/96*
--------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) ($) ($)
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
George D. Johnson, Jr... 100,000 300,000 1,362,500 4,087,500
Robert A. Brannon....... 150,938 531,316 2,678,395 8,565,051
Richard A. Fadel, Jr.... 0 120,000 0 847,500
Corry W. Oakes.......... 10,500 127,574 186,323 1,212,467
Harold E. Wright........ 300,000 978,504 2,887,500 9,192,402
- -----------
</TABLE>
* This column indicates the aggregate amount, if any, by which the market
value of the Common Stock on December 31, 1996 exceeded the options'
exercise price, based on the closing per share sale price of the Common
Stock on such date of $20.125 as quoted on the Nasdaq National Market as
reported by The Wall Street Journal.
Compensation Committee Interlocks and Insider Participation
Until August 1995, George D. Johnson, Jr., the Company's Chief Executive
Officer, approved the terms of the compensation of the Company's executive
officers. In August 1995, the Company's Board of Directors formed a Compensation
Committee, which is currently composed of Messrs. Flynn and Melk, which
determines the compensation of the Company's executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of the Common Stock, to file
reports of ownership with the Securities and Exchange Commission. Such persons
also are required to furnish the Company with copies of all Section 16(a) forms
they
7
<PAGE>
file. Based solely on its review of copies of such forms received by it, the
Company notes that during 1996 Mr. Beck, Vice President--Real Estate of ESA
Management, Inc., filed one untimely report. The Company believes that all other
filing requirements applicable to its executive officers, directors, and greater
than 10% stockholders were complied with.
Employment and Stock Option Agreements
In June 1995, Mr. Wright entered into an employment agreement, which was
terminated in March 1996, with a wholly-owned subsidiary of the Company at that
time known as ESA Development, Inc. ("ESA Development"). Pursuant to his
employment agreement, Mr. Wright was entitled to receive a minimum annual base
salary of $175,000. The agreement had an initial term of two years and was to
have been automatically renewed for one-year periods thereafter unless notice of
termination was given by either party. The agreement provided that in the event
Mr. Wright's employment with ESA Development was terminated for any reason other
than for cause, Mr. Wright was entitled to receive an amount equal to his then
base salary for the remainder of the then current term. In addition, in the
event ESA Development did not grant to Mr. Wright, during each twelve-month
period from June 1 through May 31 of the term of the agreement, options to
purchase shares of common stock of ESA Development in an amount equal to 2 1/2
times his then base salary at the fair market value per share on the date of
grant, Mr. Wright could declare his employment terminated other than for cause.
In June 1995, Mr. Wright also entered into a stock option agreement with ESA
Development which was also terminated in March 1996 and all options granted
thereunder terminated. Pursuant to the stock option agreement, ESA Development
granted to Mr. Wright non-qualified options to purchase a total of 1,437.5
shares of the common stock of ESA Development. The options were to vest ratably
on each of the next four anniversaries of the date of the option grant. With
respect to options underlying 437.5 shares, the exercise price per share was
$1,000 and the term of the options was ten years. With respect to options
underlying the remaining 1,000 shares, the exercise price per share was $1,000
plus interest accrued at 10% per year, compounded annually, from the date of the
option grant through the date of exercise of the option, and the term of the
options was five years.
In March 1996, Mr. Wright and ESA Development entered into a new employment
agreement for the period commencing on March 18, 1996 and ending on June 30,
1999. Pursuant to this employment agreement, Mr. Wright is to act as the
President of ESA Development and is entitled to receive a minimum annual base
salary of $175,000. ESA Development also agreed to pay Mr. Wright additional
compensation equal to $15,000 for each site upon which ESA Development or its
subsidiaries has commenced construction of an extended stay lodging facility
during the term of the agreement. This additional compensation shall apply only
to the first 40 sites for 1996, 1997, and 1998 and the first 20 sites for 1999
and may be paid by delivering shares of the Company's Common Stock with a fair
market value equal to the amount due. In addition, pursuant to this employment
agreement, the Company granted to Mr. Wright, under the 1996 Plan, ten-year
options to purchase 1,200,000 shares of the Company's Common Stock at an
exercise price per share equal to $10.50, which options vest as to one-fourth of
the grant on September 19, 1996 and June 1 of each of 1997, 1998, and 1999,
respectively. Effective on January 1, 1997, ESA Development was merged into ESA
Management, Inc., another wholly-owned subsidiary of the Company, his employment
agreement was assumed by ESA Management, Inc., and Mr. Wright became Senior Vice
President--Real Estate of ESA Management, Inc.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Report of the
Compensation Committee" and "Performance Graph" will not be deemed to be filed
or to be proxy soliciting material or incorporated by reference in any prior or
future filings by the Company under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
REPORT OF THE COMPENSATION COMMITTEE
The compensation of the Company's executive officers is generally determined
by the Compensation Committee of the Board of Directors. The Compensation
Committee, which consists of two directors who are not officers or employees of
the Company, also grants stock options to key employees and consultants of the
Company
8
<PAGE>
and its subsidiaries. The following report with respect to certain compensation
paid or awarded to the Company's executive officers during 1996 is furnished by
the directors who then comprised the Compensation Committee.
General Policies
The Company's compensation program is intended to enable the Company to
attract, motivate, reward, and retain the management talent required to achieve
corporate objectives in a highly competitive industry, and thereby increase
stockholder value. It is the Company's policy to provide incentives to its
senior management to achieve both short-term and long-term objectives. To attain
these objectives, the Company's policy is to provide a significant portion of
executive compensation in the form of at-risk, incentive-based compensation,
such as stock options. The Compensation Committee believes that such a policy,
which directly aligns the financial interests of management with the financial
interests of stockholders, provides the proper incentives to attract, reward,
and retain high quality management. In determining the nature and amounts of
compensation for the Company's executive officers, the Compensation Committee
takes into account all factors that it considers relevant, including business
conditions in the lodging industry and generally, the Company's performance in
light of those conditions, the market rates of compensation for executives of
similar backgrounds and experience, and the performance of the specific
executive officer.
Section 162(m) of the Code limits the deduction for federal income tax
purposes of certain compensation paid by any publicly held corporation to its
chief executive officer and its four other highest compensated officers to $1
million per each such executive (the "$1 million cap"). The $1 million cap does
not apply to "performance-based" compensation plans as defined under Section
162(m) of the Code. The Company believes that its Employee Plans qualify as
"performance-based" plans that are not subject to the $1 million cap. The other
compensation currently paid to the Company's executive officers is not expected
to exceed the $1 million cap. See "--Base Salary".
Cash Compensation
Cash compensation for executive officers consists of salary and, in the case
of Mr. Wright, a cash bonus for 1996 pursuant to his employment agreement with
the Company. In 1996 and 1995, bonuses generally have not been part of the
Company's general executive compensation structure.
The Compensation Committee is aware that most executive officers, upon joining
the Company, experienced a significant reduction in annual cash compensation
from their prior employment. In addition, the Committee believes, based on the
general knowledge and experience of the Committee members, that base salaries
for executive officers are generally low relative to (i) cash salaries of
similarly sized or otherwise comparable companies, (ii) the contributions of the
executive officers to the Company's development and growth, and (iii) their
experience, responsibilities, and achievements. Base salaries for executive
officers are determined by a subjective assessment of responsibilities and
position within the Company, individual performance, and the Company's overall
performance. No specific corporate performance measures are considered.
Stock Options
The Compensation Committee considers incentive compensation in the form of
stock options to be an integral, important, and relatively large part of
executive compensation in particular and employee compensation generally. All
options granted have an exercise price equal to the fair market value of the
Common Stock on the grant date.
Options are granted generally to executive officers and other corporate level
employees upon commencement of employment and annually near the beginning of
each year at the discretion of the Compensation Committee. In exercising such
discretion, the Compensation Committee considers factors specific to that
employee such as salary, position, and responsibilities and the Company's
performance with respect to factors such as the rate of the Company's
development and growth, revenue growth, and increases in the market value of the
Company's Common Stock. Option grants relating to recruiting and employment
offers and special circumstances are recommended by management.
9
<PAGE>
Chief Executive Officer Compensation
George D. Johnson, Jr. founded the Company in January 1995 and has been its
President and Chief Executive Officer since that time. Mr. Johnson's annual
compensation was determined by the Compensation Committee using the same
criteria that were used to determine compensation levels for other corporate
officers and was based on the Compensation Committee's assessment of Mr.
Johnson's overall performance and on information regarding awards made by
similar companies. The Compensation Committee believes that Mr. Johnson's
experience, dedication, and knowledge have been of vital importance to the
successful and ongoing growth of the administration and operations of the
Company. No specific weighting was assigned to these factors. In the
Compensation Committee's view, Mr. Johnson's 1996 compensation package reflects
an appropriate balance of (i) the Company's performance in 1996, (ii) Mr.
Johnson's own performance level, and (iii) competitive standards. Mr. Johnson's
compensation consists of base salary and stock options. Beginning in 1997, the
Company will no longer pay Mr. Johnson any cash salary or bonus but rather will
compensate him primarily through stock option grants. The Compensation Committee
believes that tying Mr. Johnson's remuneration to the performance of the
Company's Common Stock will incent Mr. Johnson to maximize stockholder value and
is consistent with the Company's policy of compensating its senior executives,
like Mr. Johnson and Mr. Huizenga, primarily through annual stock option grants.
For 1997, the Compensation Committee has granted Mr. Johnson, Mr. Huizenga, and
Robert A Brannon, the Company's Senior Vice President, Chief Financial Officer,
Secretary, and Treasurer, options to purchase 900,000, 450,000, and 225,000
shares of Common Stock, respectively, under its 1996 Plan at an exercise price
of $18.50 per share.
Compensation Committee Members
Donald F. Flynn
John J. Melk
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
returns on the Company's Common Stock, the Dow Jones Lodging Index, and the
Standard & Poor's 500 Index (assuming dividend reinvestment, except in the case
of the Company, which has never paid cash dividends on the Common Stock) for the
period beginning on December 13, 1995, the effective date of the registration of
the Common Stock under Section 12 of the Exchange Act, and ending on December
31, 1996, the last day of the Company's 1996 fiscal year.
Comparison of Cumulative Return
vs. Dow Jones Lodging and S&P 500 Indices *
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1995 1996
---------------- ----------------------------------
Company/Index Name 12/13 12/29 3/29 6/30 9/30 12/31
------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Extended Stay America, Inc... $100.00 $211.54 $171.15 $242.31 $315.38 $309.62
Dow Jones Lodging Index...... 100.00 101.46 125.49 142.77 128.78 122.05
S&P 500 Index................ 100.00 99.07 103.83 107.87 110.56 119.15
- -----------
</TABLE>
* Assumes $100 invested on December 13, 1995 in the Company's Common Stock, the
Dow Jones Lodging Index, and the S&P 500 Index. Historical results are not
necessarily indicative of future performance.
CERTAIN TRANSACTIONS
The Company has airplane leasing arrangements with companies owned by George
D. Johnson, Jr., Stewart H. Johnson, and certain of their family members. In
connection therewith, the Company incurred aggregate charges of approximately
$983,000 during the year ended December 31, 1996. The Company believes that the
terms of its use of the planes are at least as favorable to the Company as those
it could have obtained from an unaffiliated party.
In 1996 the Company entered into (i) a 10-year lease for a suite at Pro Player
Stadium for a base rental of $115,000 per year, subject to certain additional
charges and periodic escalation, and (ii) a 3-year lease for a suite at
Homestead Motor Sports Complex for a base rental of $53,250 per year, subject to
certain additional charges. Mr. Huizenga owns Pro Player Stadium and has an
approximately 50% ownership interest in Homestead Motor Sports Complex. The
Company believes that the terms of these leases are comparable to those charged
to other persons.
11
<PAGE>
SOLICITATION OF PROXIES
Proxies will be solicited by the Board of Directors through the use of the
mail. Proxies may also be solicited by directors, officers, and a small number
of other employees of the Company personally or by mail, telephone, facsimile,
or otherwise, but such persons will not be compensated for such services.
Brokerage firms, banks, fiduciaries, voting trustees, or other nominees will be
requested to forward the soliciting material to the beneficial owners of stock
held of record by them, and the Company has hired Proxy Services Corporation to
coordinate the solicitation of proxies by and through such holders for a fee of
approximately $1,500 plus expenses. The entire cost of the Board of Directors'
solicitation will be borne by the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in the
proxy material to be distributed by the Company in connection with the 1998
Annual Meeting must do so no later than December 15, 1997. Any such proposal
should be submitted in writing to the Secretary of the Company at its principal
executive offices. In addition, the Company's bylaws require that in order for
any business to be properly brought before any meeting of stockholders,
including nominations for the election of directors, a stockholder must provide
written notice delivered to the Secretary of the Company at the principal
executive offices of the Company not less than 60 nor more than 120 days prior
to the meeting date; provided, however, that in the event that less than 65 days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, the stockholder notice, in order to be timely, must be received by
the corporate secretary not later than the close of business on the seventh day
following the day on which notice of the meeting was mailed or disclosure of the
meeting date has been made. The stockholder notice must include the
stockholder's name and address as it appears on the Company's records and the
class and number of shares of the Company's capital stock beneficially owned by
such stockholder on the record date for the meeting. In addition, (i) for
proposals other than nominations for the election of directors, such notice must
include a description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting, and any material
interest of the stockholder in such business, and (ii) for proposals relating to
stockholder nominations for the election of directors, such notice must also
include, with respect to each person nominated, the information required by
Regulation 14A under the Exchange Act.
GENERAL
It is important that proxies be returned promptly. If you are unable to attend
the meeting, you are urged, regardless of the number of shares owned, to mark,
date, sign, and return without delay your proxy card in the enclosed addressed
envelope.
By Order of the Board of Directors
Robert A. Brannon
Senior Vice President, Chief Financial Officer,
Secretary, and Treasurer
12
<PAGE>
REVOCABLE EXTENDED STAY AMERICA, INC. REVOCABLE
PROXY PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
for the Annual Meeting of Stockholders on May 12, 1997--11:00 a.m.
The undersigned hereby appoints George D. Johnson, Jr. or Robert A.
Brannon, or either one of them, each with full power of substitution, to act as
proxies for the undersigned, and to vote all shares of Common Stock of Extended
Stay America, Inc. (the "Company") which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders of the Company
to be held on May 12, 1997, at 11:00 a.m., at the Broward Center for the
Performing Arts, 201 Southwest Fifth Avenue, Ft. Lauderdale, Florida, and at
any and all postponements and adjournments thereof, as follows:
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED (i) FOR EACH OF THE
NOMINEES LISTED AND (ii) FOR A PROPOSAL TO RATIFY THE ACTION OF THE BOARD OF
DIRECTORS IN APPOINTING COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR THE
COMPANY IN 1997. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE ANNUAL MEETING.
[_] CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING.
PLEASE MARK, SIGN, DATE, AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
This Proxy will be voted in accordance with specifications made.
If no choices are indicated, this Proxy will be voted FOR the election of all
of the Nominees and for Item 2
1. ELECTION OF DIRECTORS--Nominees: H. Wayne Huizenga, George D. Johnson, Jr.,
Donald F. Flynn, Stewart H. Johnson, John J. Melk, Peer Pedersen, and
Norwood Cowgill, Jr.
----------------------------------------
Nominee Exception
For Withhold For All
Except
( ) ( ) ( )
2. To ratify the action of the Board of Directors of the Company in appointing
Coopers & Lybrand L.L.P. as independent auditors for the Company in 1997.
For Against Abstain
( ) ( ) ( )
3. In their discretion, on such other business as may properly come before the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED AND FOR THE
PROPOSAL TO RATIFY THE ACTION OF THE BOARD OF DIRECTORS IN APPOINTING COOPERS &
LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR THE COMPANY IN 1997.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of a Notice of Annual Meeting of Stockholders, Proxy Statement dated
April 14, 1997, and the Annual Report to Stockholders.
Dated:__________________________________, 1997
Signature(s)__________________________________
- ----------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign.
Where applicable, indicate official position or representative capacity.
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
