<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] 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:
---------------------------------------------------------------------
(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):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(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.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE>
[LOGO OF EXTENDED STAY AMERICA]
450 East Las Olas Boulevard, Suite 1100, Fort Lauderdale, Florida 33301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 19, 1999
You are cordially invited to attend the annual meeting of stockholders of
Extended Stay America, Inc., which will be held at the Broward Center for the
Performing Arts, 201 Southwest Fifth Avenue, Fort Lauderdale, Florida on
Wednesday, May 19, 1999, at 11:00 a.m., Eastern time, for the following
purposes:
1. To elect directors.
2. To ratify the action of the Board of Directors in appointing
PricewaterhouseCoopers LLP as your Company's independent
auditors for 1999.
3. To transact any other business that may be presented at the
meeting.
Only stockholders of record at the close of business on March 22, 1999 are
entitled to vote at the meeting. A list of those stockholders will be available
during normal business hours for a period of 10 days prior to the meeting. The
list may be examined by any stockholder, for any purpose relevant to the
meeting, at our offices at 450 East Las Olas Boulevard, Suite 1100, Fort
Lauderdale, Florida.
A proxy statement and a proxy card solicited by our Board of Directors are
enclosed with this notice. 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.
Robert A. Brannon
Senior Vice President, Chief Financial
Officer, Secretary, and Treasurer
Fort Lauderdale, Florida
March 30, 1999
--------------------------------------------------
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 19, 1999
We sent you this Proxy Statement because our Board of Directors is
soliciting your proxy to vote your shares of Extended Stay America at our
upcoming Annual Meeting of Stockholders for 1999, and at any postponement or
adjournment of that meeting. The meeting is 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 19, 1999. If your proxy is properly executed
and returned in a timely manner, it will be voted at the meeting according to
the directions you provide. If you do not provide any direction, your proxy will
be voted for the election as directors of the nominees named in this Proxy
Statement and to ratify the selection of PricewaterhouseCoopers LLP as
independent auditors for 1999. They will also be voted on any other matters
presented for a vote in accordance with the judgment of the persons acting under
the proxies. You have the power to revoke your proxy 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.
Our 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 March 30, 1999 and we expect to mail proxy materials to you
beginning on or about that date. In this Proxy Statement, the words "Extended
Stay America," "Company," "we," "our," "ours," and "us" refer to Extended Stay
America, Inc. and its subsidiaries.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 22, 1999 are
entitled to vote at the annual meeting of stockholders. The only voting stock of
the Company outstanding is our common stock (the "Common Stock"), of which
95,974,679 shares were outstanding as of the close of business on March 22,
1999. Each share of Common Stock is entitled to one vote.
The six nominees who receive the highest number of affirmative votes will
be elected as directors. For this purpose, only the affirmative votes from the
holders of the shares of the Common Stock that are present in person or
represented by proxy and entitled to vote at the meeting will be counted. In
general, approval of any other matter by stockholders requires the affirmative
vote of the holders of a majority of the shares of the Common Stock that are
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 Common 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 other than to
reduce the number of affirmative votes needed to approve a proposal. An
automated system administered by our transfer agent will be used to tabulate the
votes .
1. ELECTION OF OUR BOARD OF DIRECTORS
Six directors are to be elected at the meeting. We have designated the
persons named below as nominees for election as directors. If elected, they will
serve for a term expiring at the annual meeting of stockholders in 2000. All of
the nominees are serving as directors as of the date of this Proxy Statement.
Unless you otherwise instruct us, your properly executed proxy, that is
returned in a timely manner, will be voted for election of these six nominees.
If, however, any of these nominees should be unable or should fail to act as a
nominee because of an unexpected occurrence, your proxy will be voted for such
other person as the holders of your proxy, acting in their discretion, may
determine. In the alternative, the Board of Directors may make a reduction in
the number of directors to be elected.
<PAGE>
Biographical information concerning our six nominees is presented below.
H. Wayne Huizenga, age 61, became one of our director's in August 1995 and
serves as the Chairman of our Board of Directors. Mr. Huizenga has also served
as Chairman of the Board of Republic Industries, Inc. ("Republic"), which owns
the nation's largest chain of franchised automotive dealerships, is building a
chain of used vehicle megastores, and owns National Car Rental and Alamo
Rent-A-Car, since August 1995. Since October 1996, Mr. Huizenga has served as
Co-Chief Executive Officer of Republic and from August 1995 until October 1996,
Mr. Huizenga served as Chief Executive Officer of Republic. Since June 1998, Mr.
Huizenga has served as a director of NationsRent, Inc. ("NationsRent"), a
developing national equipment rental company which markets products and services
primarily to a broad range of construction and industrial customers. Since May
1998, Mr. Huizenga has served as Chairman of the Board and Chief Executive
Officer of Republic Services, Inc. ("Republic Services"), a leading provider of
non-hazardous solid waste collection and disposal services. Since September
1996, Mr. Huizenga has been Chairman of the Board of Florida Panthers Holdings,
Inc. ("FPHI"), a leisure-time, recreation, sports, and entertainment company
which owns and operates the Florida Panthers professional sports franchise and
certain resort and other facilities. From September 1994 until October 1995, Mr.
Huizenga served as the Vice-Chairman of Viacom Inc. ("Viacom"), a diversified
entertainment and communications company. During the same period, Mr. Huizenga
also served as the Chairman of the Board of Blockbuster Entertainment Group, a
division of Viacom. From April 1987 through September 1995, 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 rental company.
In September 1994, Blockbuster merged into Viacom. In 1971, Mr. Huizenga
co-founded Waste Management, Inc. ("Waste Management"), which he helped build
into the world's largest integrated solid waste services company, and he served
in various capacities, including President, Chief Operating Officer and a
director from its inception until 1984. Mr. Huizenga also currently owns or
controls the Miami Dolphins, a professional sports franchise, as well as Pro
Player Stadium, in South Florida and is a director of theglobe.com, an internet
on-line community.
George D. Johnson, Jr., age 56, has been our President, Chief Executive
Officer, and a director since January 1995. He is responsible for all aspects
of our development, operation, marketing, and personnel. 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. Mr. Johnson also is the
managing member of American Storage, LLC, a chain of 25 self-storage facilities
located in the Carolinas and Georgia. He formerly served as a director of
Viacom and Chairman of the Board of Home Choice Holdings, Inc. and currently
serves on the board of directors of Republic, FPHI, and Duke Energy Corporation.
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 four 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 59, became one of our directors in August 1995. Mr.
Flynn is Chairman and Chief Executive Officer of Flynn Enterprises, Inc., a
venture capital, hedging, and consulting firm based in Chicago, Illinois. Since
February 1997, Mr. Flynn has been the Vice Chairman of Blue Chip Casino, Inc.,
an owner and operator of a riverboat gaming vessel located in Michigan City,
Indiana. Since February 1998, Mr. Flynn also has been the Chairman of LKQ
Corporation, a company engaged in the automobile recycling business. Mr. Flynn
was Chairman of the Board from July 1992 until February 1996 and Chief Executive
Officer from July 1992 to May 1995 of Discovery Zone, Inc. ("Discovery Zone"),
which is an operator and franchisor of family entertainment centers. In March
1996, Discovery Zone filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy Code, and in July 1997 emerged from bankruptcy with a court-approved
plan of reorganization. From 1972 through 1990, Mr. Flynn held various positions
with Waste Management, including Senior Vice President and Chief Financial
Officer. Mr. Flynn was one of the original investors in, and a director of,
Blockbuster from February 1987 until September 1994 when Blockbuster was sold to
Viacom. Mr. Flynn also serves as a director of Psychemedics Corporation
("Psychemedics"), a provider of drug testing services.
2
<PAGE>
Stewart H. Johnson, age 55, became one of our directors in August 1995.
Mr. Johnson is currently the Chairman of the Board of Directors and Chief
Executive Officer of Morgan Corporation, a privately-held construction company
specializing in site preparation. 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., our Chief Executive Officer.
John J. Melk, age 62, became one of our directors in August 1995. Mr. Melk
has been Chairman and Chief Executive Officer of H2O 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 Waste Management and its subsidiaries,
including President of Waste Management International plc, a subsidiary of Waste
Management. Mr. Melk also serves as a director of Psychemedics 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 74, became one of our directors 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 also serves on the board of
directors of Boston Chicken, Inc.
We recommend that you vote "FOR" the election
of each of the nominees for director.
Meetings and Committees of the Board
Our Board of Directors has three standing committees. They are the
Executive Committee, the Audit Committee, and the Compensation Committee. The
functions and membership of each Committee are described below. The Board does
not have a standing nominating committee. During 1998, the Board of Directors
held four meetings, at which all of the directors were present, and acted once
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 our certificate of incorporation and
bylaws. The Audit Committee's functions include making recommendations to the
Board of Directors on the selection of our independent auditors, reviewing the
arrangements for, and scope of, the independent auditors' examination, meeting
with the independent auditors, the Board of Directors, and certain of our
officers 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 and Pedersen are currently the 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 our
officers and is responsible for the administration and interpretation of, and
the granting of options under, our various stock option plans. Messrs. Flynn and
Melk are currently the members of the Compensation Committee.
Nominations for election of directors are made by the Board of Directors.
Nominations also 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 2000 Annual Meeting" at the end of this Proxy
Statement for a description of the procedures you need to follow if you want to
nominate someone as a director.
During 1998, the Audit Committee held one meeting and the Compensation
Committee acted 94 times by unanimous written consent. During 1998, the
Executive Committee acted once by unanimous written consent. In 1998, 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.
3
<PAGE>
2. APPOINTMENT OF OUR INDEPENDENT AUDITORS
Subject to your ratification, the Board of Directors has selected the
accounting firm of PricewaterhouseCoopers LLP to serve as our independent
auditors for 2000. PricewaterhouseCoopers LLP has served as our independent
auditors since the formation of our Company in January 1995. Representatives of
PricewaterhouseCoopers LLP will be available at the annual meeting to respond to
your questions. They have advised us that they do not presently intend to make a
statement at the annual meeting, although they will have the opportunity to do
so.
We recommend that you vote "FOR" ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for 1999.
OTHER MATTERS
We know of no matters to be brought before the annual meeting other than
those described above. If any other business should come before the meeting, we
expect that the persons named in the enclosed proxy will vote your shares in
accordance with their best judgment on that matter.
4
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 22, 1999, certain information
regarding the beneficial ownership of the Common Stock by:
o each person known by us to be the beneficial owner of 5% or more of the
outstanding Common Stock;
o each of our directors and executive officers; and
o all of our directors and executive officers as a group.
There were approximately 450 record holders and approximately 8,200
beneficial holders of Common Stock and 95,974,679 shares of Common Stock
outstanding on that date.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
--------------------
Name(1) Number(2) Percent
------- --------- -------
<S> <C> <C>
The Equitable Companies, Incorporated (3).............. 14,181,208 14.8%
Putnam Investments, Inc. (4)........................... 11,195,978 11.7
FMR Corp. (5).......................................... 5,859,603 6.1
T. Rowe Price (6)...................................... 5,791,400 6.0
H. Wayne Huizenga (7).................................. 9,708,035 10.1
George D. Johnson, Jr. (8)............................. 4,796,354 5.0
Robert A. Brannon (9).................................. 1,157,344 1.2
Jay S. Witzel.......................................... 100,000 *
Donald F. Flynn (10)................................... 543,154 *
Stewart H. Johnson (11)................................ 1,316,970 1.4
John J. Melk(12)....................................... 79,460 *
Peer Pedersen.......................................... 1,372,460 1.4
All directors and executive officers
as a group (8 persons) (7)(8)(9)(10)(11)(12)......... 19,078,537 19.4%
</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 22, 1999 had
been exercised by that person or group as follows: (i) H. Wayne
Huizenga-528,125; (ii) George D. Johnson, Jr.--906,250; (iii) Robert A.
Brannon-674,190; (iv) Jay S. Witzel-100,000; (v) Donald F. Flynn-60,000;
(vi) Stewart H. Johnson--60,000; (vii) John J. Melk--60,000; (viii) Peer
Pedersen--60,000; and (ix) all directors and executive officers as a
group--2,448,565.
(3) The number of shares of Common Stock shown as beneficially owned was
derived from an Amendment to Schedule 13G dated February 10, 1999 filed
with the Securities and Exchange Commission by the listed stockholder. The
Equitable Companies Incorporated is located at 1290 Avenue of the Americas,
New York, New York 10104.
(4) The number of shares of Common Stock shown as beneficially owned was
derived from an Amendment to Schedule 13G dated January 26, 1999 filed with
the Securities and Exchange Commission by the listed stockholder. Putnam
Investments, Inc. is located at One Post Office Square, Boston,
Massachusetts 02109.
(5) The number of shares of Common Stock shown as beneficially owned was
derived from a Schedule 13G dated February 1, 1999 filed with the
Securities and Exchange Commission by the listed stockholder. FMR Corp. is
located at 82 Devonshire Street, Boston, Massachusetts 02109.
(6) The number of shares of Common Stock shown as beneficially owned was
derived from a Schedule 13G dated February 12, 1999 filed with the
Securities and Exchange Commission by the listed stockholder. T. Rowe Price
Associates, Inc. is located at 100 E. Pratt Street, Baltimore, Maryland
21202.
(7) Includes 9,179,910 shares of Common Stock beneficially owned by Huizenga
Investments Limited Partnership, a limited partnership controlled by Mr.
Huizenga.
(8) Includes 3,890,104 shares of Common Stock beneficially owned by GDJ, Jr.
Investments Limited Partnership, a limited partnership controlled by George
D. Johnson, Jr.
(9) Includes 483,154 shares of Common Stock beneficially owned by Brannon
Investments, L.P., a limited partnership controlled by Mr. Brannon.
(10) Includes 420,000 shares of Common Stock beneficially owned by DNB, L.P., a
limited partnership controlled by Mr. Flynn and 63,154 shares of Common
Stock held in a trust of which Mr. Flynn is a trustee and beneficiary.
(11) Includes 49,088 shares of Common Stock held in a trust for the benefit of
George D. Johnson, Jr., of which Stewart H. Johnson is the trustee.
(12) Includes 19,460 shares of Common Stock beneficially owned by M Group
Investments IV, L.P., a limited partnership controlled by Mr. Melk.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, on an annualized basis with respect to
salary information, information regarding the compensation we paid to our Chief
Executive Officer and each of our other executive officers (hereinafter, the
"Named Executive Officers") for all services they rendered to us during 1996,
1997, and 1998. We do not have a restricted stock award program or a long-term
incentive plan. Our directors were not paid any cash compensation for their
services during 1998, but were reimbursed for their out-of-pocket expenses.
Beginning in 1999, our non-employee directors will be paid $5,000 per quarter
and will be reimbursed for their out-of-pocket expenses.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options/SARs Compensation
Position Year ($) ($) ($) (#) ($)
- -------------------------- ---- ------- ------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
George D. Johnson, Jr............ 1998 -- -- -- 1,250,000 --
President and Chief 1997 -- -- -- 900,000 --
Executive Officer 1996 200,000 -- -- -- --
Robert A. Brannon................ 1998 275,000 -- -- 350,000 --
Senior Vice President, 1997 225,000 -- -- 225,000 --
Chief Financial Officer, 1996 175,000 -- -- 78,504 --
Secretary, and Treasurer
Jay S. Witzel.................... 1998 300,000 -- -- 300,000 37,997(1)
President and Chief 1997 250,000 250,000 16,690(1)
Operating Officer of
ESA Management, Inc.
- -----------
</TABLE>
(1) Represents the taxable portion of reimbursed relocation expenses.
The following table sets forth individual grants of stock options made to
the Named Executive Officers during 1998. The regular option grant for 1999 was
made in November 1998 and is reflected in the table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Total Options Annual Rates of Stock
Granted to Exercise Price Appreciation
Date of Options Employees in or Base Expiration for Option Term(3)
Name Grant(1) Granted Fiscal Year Price(2) Date 5% 10%
---- -------- ------- ------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George D. Johnson, Jr........ 1/8/98 625,000 9.02% $11.38 1/8/08 $ 4,471,048 $11,330,513
11/2/98 625,000 9.02 9.50 11/2/08 3,734,062 9,462,846
---------- ------ ----------- ------------
1,250,000 18.04 8,205,110 20,793,359
Robert A. Brannon............ 1/8/98 200,000 2.89 11.38 1/8/08 1,430,735 3,625,764
11/2/98 150,000 2.16 9.50 11/2/08 896,175 2,271,083
---------- ------ ----------- ------------
350,000 5.05 2,326,910 5,896,847
Jay S. Witzel................ 1/8/98 150,000 2.16 11.38 1/8/08 1,073,051 2,719,323
11/2/98 150,000 2.16 9.50 11/2/08 896,175 2,271,083
---------- ------ ----------- ------------
300,000 4.33 1,969,226 4,990,406
- -----------
</TABLE>
(1) Except for specific situations, the options granted become exercisable as
to one-fourth of the grant on each of the first, second, third, and fourth
anniversary of the date of grant.
(2) Under the Employee Plans, the exercise price must be the fair market value
of the Common Stock on the date of grant.
(3) These amounts represent certain assumed annual rates of appreciation
calculated from the exercise price, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings depend on the future performance of the
Common Stock. We cannot assure you that the amounts reflected in this table
will be achieved.
6
<PAGE>
The following table provides certain information concerning the value of
unexercised options to purchase Common Stock at December 31, 1998 for the Named
Executive Officers. No options to purchase Common Stock were exercised by the
Named Executive Officers during 1998.
AGGREGATE 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at 12/31/98 SARs at 12/31/98*
Exercisable Unexercisable Exercisable Unexercisable
---------------------------- ----------------------------
Name (#) (#) ($) ($)
---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
George D. Johnson, Jr............................. 525,000 2,025,000 1,200,000 1,025,000
Robert A. Brannon................................. 548,315 708,939 3,676,842 1,375,608
Jay S. Witzel..................................... 62,500 487,500 -- 150,000
- -----------
</TABLE>
* This column indicates the aggregate amount, if any, by which the market
value of the Common Stock on December 31, 1998 exceeded the options'
exercise price, based on the closing per share sale price of the Common
Stock on that date of $10.50 on the New York Stock Exchange.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is currently composed of Messrs. Flynn and Melk.
It determines the compensation of our executive officers. Neither Mr. Flynn nor
Mr. Melk is an employee of the Company nor are they officers of any entity for
which one of our executive officers makes compensation decisions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and
directors, and any other person who owns more than 10% of the Common Stock, to
file reports of ownership with the Securities and Exchange Commission. They also
are required to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of copies of the forms we received, we note that that
Mr. Peer Pedersen and Mr. Gregory R. Moxley, our Vice President-Finance, each
filed one untimely report. We believe that during 1998 all other filing
requirements were complied with.
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 us 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 our executive officers is generally determined by the
Compensation Committee of our Board of Directors. The Compensation Committee,
which consists of two of our directors who are not officers or employees, also
grants stock options to our key employees and consultants. The following report
is about compensation paid or awarded to our executive officers during 1998 and
is furnished by our directors who then comprised the Compensation Committee.
General Policies
Our compensation program is intended to enable the Company to attract,
motivate, reward, and retain the management talent it needs to achieve its
corporate objectives in a highly competitive industry, and thereby increase
stockholder value. It is our policy to provide incentives to the Company's
senior management to achieve both short-term and long-term goals. To attain
these goals, our policy is to provide a significant portion of executive
compensation in the form of at-risk, incentive-based compensation, like stock
options. We believe that such a policy, which directly aligns the financial
interests of management with your financial interests, 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, we take into account all factors that we consider relevant,
7
<PAGE>
including overall business conditions and those in the lodging industry, 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 Internal Revenue 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 executive (the "$1 million cap"). The $1
million cap does not apply to "performance-based" compensation plans as defined
under Section 162(m). We believe that the Company's stock option 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.
Cash Compensation
Cash compensation paid to the Company's executive officers consists
primarily of salary. In 1998, 1997, and 1996, bonuses generally have not been
part of our general executive compensation structure.
We are aware that most executive officers, upon joining the Company,
experienced a significant reduction in annual cash compensation from their prior
employment. In addition, we believe, based on the general knowledge and
experience of our members, that base salaries for the Company's 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. We determine base salaries for executive
officers through 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
We consider 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. We have granted all stock
options with an exercise price equal to the fair market value of the Common
Stock on the grant date.
We grant stock options generally to executive officers and other corporate
level employees upon their commencement of employment and annually near the
beginning of each year. When making grants, we consider factors specific to each
employee such as salary, position, and responsibilities. We also consider
factors such as the rate of the Company's development and growth, revenue
growth, and increases in the market value of the Common Stock. Option grants
relating to recruiting and employment offers and special circumstances are
recommended by management.
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 using the same criteria that we used to determine
compensation levels for other corporate officers and was based on our assessment
of Mr. Johnson's overall performance and on information regarding awards made by
similar companies. We believe 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. We did not assign any specific
weighting to these factors. In our view, Mr. Johnson's 1998 compensation package
reflected an appropriate balance of (i) the Company's performance in 1998, (ii)
Mr. Johnson's own performance level, and (iii) competitive standards. The
Company does not pay Mr. Johnson any cash salary or bonus but rather compensates
him exclusively through stock option grants. We believe that tying Mr. Johnson's
remuneration to the performance of the Company's Common Stock will motivate Mr.
Johnson to maximize stockholder value and is consistent with our policy of
compensating the Company's senior executives, like Messrs. Huizenga and Johnson,
primarily through annual stock option grants. For 1998, we granted Messrs.
Huizenga, Johnson, Mr. Robert A. Brannon, the Company's Senior Vice President,
Chief Financial Officer, Secretary, and Treasurer, and Mr. Jay S. Witzel, the
President and Chief Operating Officer of ESA Management, Inc., options to
purchase 312,500, 625,000, 200,000, and 150,000 shares of Common Stock,
8
<PAGE>
respectively, at an exercise price of $11.375 per share. For the 1999 regular
grant, which we made in November 1998, we granted Messrs. Huizenga, Johnson,
Brannon, and Witzel options to purchase 312,500, 625,000, 150,000, and 150,000
shares of Common Stock, respectively, at an exercise price of $9.50 per share.
Compensation Committee Members
Donald F. Flynn
John J. Melk
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
returns on the Common Stock, the Dow Jones Lodging Index, and the Standard &
Poor's 500 Index (assuming dividend reinvestment, except in our case because we
have never paid cash dividends on the Common Stock) for the period beginning on
December 13, 1995 (which was the date the Common Stock began trading publicly)
and ending on December 31, 1998 (which was the last day of our 1998 fiscal
year).
Comparison of Cumulative Return
vs. Dow Jones Lodging and S&P 500 Indices *
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1995 1996 1997 1998
-------------- ------------- ------------- -------------
Company/Index Name 12/13 12/29 6/28 12/31 6/30 12/31 6/30 12/31
------------------ ----- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Extended Stay America, Inc................ $100.00 $211.54 $242.31 $309.62 $242.31 $191.35 $173.08 $161.54
Dow Jones Lodging Index................... 100.00 101.46 142.77 122.05 134.29 169.05 159.99 128.03
S&P 500 Index............................. 100.00 99.07 107.87 119.15 142.38 156.10 182.38 197.72
</TABLE>
- -----------
* Assumes $100 invested on December 13, 1995 in the Common Stock, the Dow
Jones Lodging Index, and the S&P 500 Index. Historical results are not
necessarily indicative of future performance.
CERTAIN TRANSACTIONS
In connection with the operation of our business, we have leased airplanes
from companies owned by George D. Johnson, Jr., our President and Chief
Executive Officer, Stewart Johnson, one of our directors, and members of their
families. We paid an aggregate of $983,000, $1,682,000, and $1,726,000 under
those leases for 1996, 1997, and 1998, respectively. We believe, however, that
the terms of our use of these aircraft were at least as favorable to us as we
could have obtained from an unaffiliated third party.
We also lease space for our regional office in Spartanburg, South Carolina
from Johnson Development Associates, Inc., which is a company controlled by
George D. Johnson, Jr. and Stewart Johnson. We entered into
9
<PAGE>
this leasing arrangement in February 1997 and moved into different space under a
different lease in November 1998. The current lease agreement expires in
December 2001. The lease calls for monthly rent of approximately $4,600 plus
certain additional charges. We made total payments of $91,000 and $75,000 under
these leases during 1997 and 1998, respectively.
In 1996, we entered into a 10-year lease for a suite at Pro Player Stadium
and a 3-year lease for a suite at Homestead Motorsports Complex. The Pro Player
Stadium lease has a base rent of $115,000 per year and the Homestead Motorsports
Complex lease has a base rent of $53,250 per year. In 1998, we entered into a
3-year lease for an additional suite at Pro Player Stadium and a 7-year lease
for a suite of the Broward County Arena. The additional Pro Player Stadium lease
has a base rent of $83,000 per year and the Broward County Arena lease has a
base rent of $120,000 per year. All of the leases are subject to additional
charges and periodic escalation. H. Wayne Huizenga, the Chairman of our Board of
Directors, owns Pro Player Stadium and had an approximately 50% ownership
interest in Homestead Motorsports Complex (which was later reduced to
approximately 10%). He also is Chairman of the Board of Directors of the company
that operates the Broward County Arena. We believe that the terms of these
leases are comparable to those charged to other persons.
We use the services of Psychemedics Corporation to perform certain
employment related services, including drug screening, with respect to our
employees. We paid Psychemedics $23,000, $126,000, and $251,000 for these
services in 1996, 1997, and 1998, respectively. Donald F. Flynn and John J.
Melk, each of whom are directors of the Company, are directors of Psychemedics,
which is a publicly-traded company. Messrs. Flynn and Melk beneficially own
approximately 9.4% and 9.9%, respectively, of Psychemedics' common stock. In
addition, Mr. Huizenga beneficially owns approximately 10.6% of Psychemedics'
common stock.
SOLICITATION OF PROXIES
The Board of Directors will solicit your proxy by mail. Your proxy may also
be solicited by directors, officers, and a small number by our employees
personally or by mail, telephone, facsimile, or otherwise. These persons will
not be compensated for their services. Brokerage firms, banks, fiduciaries,
voting trustees, or other nominees will be requested to forward the proxy
soliciting material to the beneficial owners of stock held of record by them,
and we have hired Proxy Services Corporation to coordinate that solicitation for
a fee of approximately $1,500 plus expenses. The entire cost of the Board of
Directors' solicitation will be borne by us.
SUBMITTING YOUR PROPOSALS FOR THE 2000 ANNUAL MEETING
According to the rules of the Securities and Exchange Commission, if you
want to submit a proposal for inclusion in the proxy material to be distributed
by us in connection with our 2000 annual meeting of stockholders, you must do so
no later than November 30, 1999. Your proposal should be submitted in writing to
the Secretary of the Company at our principal executive offices. In addition,
our bylaws require that in order for you properly to bring any business before
any meeting of stockholders, including nominations for the election of
directors, you must provide written notice, delivered to the Secretary of the
Company at our principal executive offices, not less than 60 nor more than 120
days prior to the meeting date. In the event that we provide less than 65 days
notice or prior public disclosure of the date of the meeting, your notice, in
order to be timely, must be received by us not later than the close of business
on the seventh day following the day on which we mailed our notice or gave other
disclosure of the meeting date. Your notice must include your name and address
as it appears on our records and the class and number of shares of our capital
stock you beneficially owned on the record date for the meeting. In addition,
(1) for proposals other than nominations for the election of directors, your
notice must include a description of the business you want brought before the
meeting, your reasons for conducting that business at the meeting, and any
material interest you have in that business, and (2) for proposals relating to
your nominations of directors, your notice must also include, with respect to
each person nominated, the information required by Regulation 14A under the
Securities Exchange Act of 1934, as amended.
10
<PAGE>
GENERAL
It is important that your proxy 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
11
<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 19, 1999 -- 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 19, 1999, 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 the proposal to ratify the action of the Board of Directors in
appointing PricewaterhouseCoopers, LLP as independent auditors for the Company
in 1999. 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.)
<PAGE>
EXTENDED STAY AMERICA, INC.
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, and
Peer Pedersen
---------------------------------------------------
Nominee Exception
2. To ratify the action of the Board of Directors of
the Company in appointing PricewaterhouseCoopers,
LLP as independent auditors for the Company
in 1999.
For [_] Withhold [_] For All Except [_]
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
PricewaterhouseCoopers.
The undersigned acknowledges receipt from the Company prior to
the execution of this proxy of a Notice of Annual Meeting of
Stockholders, a Proxy Statement dated March 30, 1999, and the
Annual Report to Stockholders.
Dated:_____________________________ ______, 1999
Signature(s)____________________________________
- ------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each
sign. Where applicable, indicate official position or representative
capacity.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
