<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Studio Plus Hotels, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
864003108
(CUSIP Number)
Robert A. Brannon
Senior Vice President, Chief Financial
Officer, Secretary, and Treasurer
Extended Stay America, Inc.
450 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
954-713-1600
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 16, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with this statement [x].
The information required in the remainder of this cover page (the pages numbered
2 through 14 herein) shall not be deemed to be "filed" for the purpose of
Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject
to the liabilities of that section of the Act but shall be subject to all other
provisions of the Act.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 864003108 PAGE 2 OF 9 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Extended Stay America, Inc.
I.R.S. Identification No.: 36-3996573
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
1,455,927*
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,455,927*
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
11.6%*
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE ITEM 5 OF TEXT BELOW
<PAGE>
This Schedule 13D relates to the proposed acquisition by Extended Stay
America, Inc., a Delaware corporation, ("ESA"), of all of the outstanding stock
of Studio Plus Hotels, Inc., a Virginia corporation ("Studio Plus"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), dated January 16,
1997, among ESA, Studio Plus and ESA Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of ESA ("Merger Sub"), whereby Studio Plus is to
be merged with and into Merger Sub (the "Merger") and each outstanding share of
common stock of Studio Plus would be converted into the right to receive 1.2272
shares of common stock of ESA. A copy of the Merger Agreement is listed herein
as Exhibit 1 and incorporated herein by reference.
ITEM 1. SECURITY AND ISSUER
This Statement relates is the common stock, par value $.01 per share, of
Studio Plus (the "Shares"). The principal executive offices of Studio Plus are
located at 1999 Richmond Road, Suite Four, Lexington, Kentucky 40502.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(c), and (f). This statement is being filed by ESA, the principal
executive offices of which are located at 450 E. Las Olas Boulevard, Ft.
Lauderdale, Florida 33301. The names, business addresses and present principal
occupations of the directors and executive officers of ESA are set forth in
Appendix A which is attached hereto and incorporated herein by reference. All of
the directors and executive officers of ESA are citizens of the United States.
(d). During the last five years, neither ESA nor, to the best of ESA's
knowledge, any of its directors or executive officers listed on Appendix A has
been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors).
(e). During the last five years, nor, to the best of ESA's knowledge, any
of its directors or executive officers listed on Appendix A has been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order (i) enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or (ii) finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Stockholder Agreement described in Item 4 hereof was entered into by
Mr. Cowgill as an inducement to ESA to enter into the Merger Agreement. If ESA
exercises the Option (as defined below), it will pay cash from its working
capital for the shares purchased under such Option.
ITEM 4. PURPOSE OF TRANSACTION
As a condition to the execution of the Merger Agreement, ESA and Norwood
Cowgill, Jr., Chairman of the Board and President of Studio Plus ("Mr. Cowgill")
and Cowgill Partners, L.P., a limited partnership controlled by Mr. Cowgill
("Cowgill Partners"), entered into a Stockholder Agreement dated January 16,
1997 (the "Stockholder Agreement"), pursuant to which Mr. Cowgill and Cowgill
Partners granted to ESA (i) a proxy (the "Proxy") to represent and vote the
985,927 Shares beneficially owned by Mr. Cowgill and the 470,000 Shares
beneficially owned by Cowgill Partners (the "Cowgill Shares") with respect to
the Merger or any other business combination of Studio Plus with
3
<PAGE>
any other party or on any other business presented to the stockholders of Studio
Plus that has been the subject of preliminary proxy materials filed by Studio
Plus with the Securities and Exchange Commission (the "Commission") (subject to
a requirement to vote in favor of the Merger), and (ii) an option (the "Option")
to purchase the Cowgill Shares at a cash price of $25.00 per share. A copy of
the Stockholder Agreement is listed herein as Exhibit 2 and is incorporated
herein by reference. If ESA were to exercise the Option in full, it would own
approximately 11.6% of the shares outstanding as of the date hereof.
The Option is exercisable in the event that the Merger Agreement is
terminated by: (i) Studio Plus, upon receipt of a proposal with respect to a
merger, consolidation, reorganization, exchange, plan of liquidation, or similar
transaction other than with ESA ("Alternative Proposal"), or (ii) ESA, in the
event that the Board of Directors of Studio Plus shall have (a) withdrawn or
modified its approval or recommendation of the Merger or the Merger Agreement,
or (b) adopted resolutions to accept or implement an Alternative Proposal.
During the term of the Stockholder Agreement, each of Mr. Cowgill and Cowgill
Partners agreed (i) not to sell, transfer, pledge, encumber or otherwise dispose
of the Cowgill Shares, (ii) not to solicit or encourage inquiries or proposals
for the acquisition of all or any part of the securities, assets or business of
Studio Plus except as required by Mr. Cowgill's fiduciary duties as a director
of Studio Plus, and (iii) not to engage in any negotiations with potential
acquirers of Studio Plus other than ESA except as required by Mr. Cowgill's
fiduciary duties as a director of Studio Plus. The Stockholder Agreement expires
on the first to occur of (i) the closing of the Merger, or (ii) the date 180
days after the termination of the Merger Agreement.
The purpose of the Stockholder Agreement is to facilitate ESA's acquisition
of Studio Plus. To the extent the Option is exercised, a party other than ESA
seeking to acquire Studio Plus would have to pay for ESA's holdings of Studio
Plus Shares as well as the holdings of all other then current Studio Plus
stockholders and, if such a transaction were effected at a price over $25.00 per
share, ESA would receive the benefit of such premium. In addition, the Proxy
assures that the Cowgill Shares covered thereby will be voted in favor of the
Merger with ESA.
Upon effectiveness of the Merger, the Certificate of Incorporation of Merger
Sub will become the Certificate of Incorporation of the surviving corporation,
which Certificate will be amended to change the name of Merger Sub to Studio
Plus (the "Surviving Corporation"). The Certificate of Incorporation of Merger
Sub provides for an authorized capitalization of 1,000 shares of common stock,
par value $.01 per share, 100 of which would be issued and owned by ESA.
If the Merger is completed as planned, the current board of directors of
Studio Plus will resign and the sole director of Merger Sub shall be the initial
director of the Surviving Corporation. ESA anticipates that Studio Plus's
current management will be retained.
If the Merger is completed as planned, ESA expects to cause Studio Plus to
seek to have its shares deregistered under the Securities Exchange Act of 1934,
and to cease to be authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System.
Other than as described above, ESA has no plans or proposals which relate to,
or may result in, any of the matters listed in Items 4(a)-(j) of Schedule 13D
(although it reserves the right to develop such plans).
4
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) ESA may be deemed to be the beneficial owner of the 1,455,927 Cowgill
Shares which it has a right to vote and acquire pursuant to the Stockholder
Agreement. Based on the number of shares outstanding as of January 15, 1997 (as
represented by Studio Plus in the Merger Agreement), the aggregate of 1,455,927
Cowgill Shares would constitute 11.6% of the outstanding Studio Plus Shares (if
ESA exercised the Option in full). ESA disclaims beneficial ownership of all
Cowgill Shares, subject to the Stockholder Agreement.
Except as set forth above, neither ESA nor, to the best of ESA's knowledge,
any director or executive officer of ESA listed on Appendix I hereto
beneficially owns any Shares.
(b) ESA has sole power to vote (subject to a requirement to vote in favor of
the Merger Agreement and limited to matters presented to the stockholders of
Studio Plus that have been the subject of preliminary proxy materials filed by
Studio Plus with the Commission) the Cowgill Shares pursuant to the Stockholder
Agreement. ESA will have sole power to dispose of any Cowgill Shares it acquires
pursuant to the Option. Unless and until ESA acquires any Cowgill Shares, ESA
has no power to dispose of any Cowgill Shares.
(c) The Stockholder Agreement was executed on January 16, 1997.
(d) ESA will have the exclusive right to receive dividends from, or the
proceeds from the sale of, all Cowgill Shares it acquires pursuant to the
Option. Until such Option is exercised, ESA has no right to receive dividends
from, or the proceeds from the sale of, such Cowgill Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
See Item 4 for a description of the Stockholder Agreement which is
incorporated herein by reference.
ESA has agreed to pay Donaldson, Lufkin & Jenrette Securities Corporation an
investment banking fee which is customary for the type of transaction
contemplated by the Merger Agreement.
Except as set forth above, to the best of ESA's knowledge, no contracts,
arrangements, understandings or relationships (legal or otherwise) exist among
the persons named in Item 2 or between such persons and any other person with
respect to any securities of Studio Plus, including but not limited to, transfer
or voting of any such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
5
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1. Agreement and Plan of Merger, dated January 16,
1997, among Extended Stay America, Inc., ESA Merger
Sub, Inc., and Studio Plus Hotels, Inc. (filed as
Exhibit 2.1 to ESA's Current Report on Form 8-K
dated January 16, 1997 and incorporated herein by
reference).
2. Stockholder Agreement, dated January 16, 1997, among
Norwood Cowgill, Jr., Cowgill Partners, L.P., and
Extended Stay America, Inc.
3. Engagement Letter, dated January 14, 1997, between
Extended Stay America, Inc., and Donaldson, Lufkin &
Jenrette
</TABLE>
6
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
EXTENDED STAY AMERICA, INC.
By: /s/ Robert A. Brannon
---------------------
Robert A. Brannon
Senior Vice President, Chief Financial
Officer, Secretary, and Treasurer
7
<PAGE>
APPENDIX A
----------
The following individuals are executive officers or directors of ESA. Each
individual is a citizen of the United States, and unless otherwise noted, the
business address of each executive officer of the Reporting Person is 450 E. Las
Olas Boulevard, Ft. Lauderdale, Florida 33301.
<TABLE>
<CAPTION>
TITLE OF
NAME REPORTING PERSON
- ---- ----------------
<S> <C>
H. Wayne Huizenga Chairman of the Board of Directors
- -----------------
George D. Johnson, Jr. President, Chief Executive Officer,
- ---------------------- and Director
Robert A. Brannon Senior Vice President,
- ----------------- Chief Financial Officer, Treasurer,
and Secretary
Michael R. Beck Vice President--Real Estate of ESA
- --------------- Management, Inc., a wholly-owned subsidiary
of ESA
Corry W. Oakes Vice President--Construction of ESA
- -------------- Management, Inc.
Gregory R. Moxley Vice President--Finance and Controller
- -----------------
Michael M. Wilson Vice President--Marketing of ESA
- ----------------- Management, Inc.
Shawn R. Ruben Vice President--Development of ESA
- -------------- Management, Inc.
Robert W. Levis Vice President--Corporate Development of
- --------------- ESA Management, Inc.
Harold E. Wright Senior Vice President--Real Estate of ESA
- ---------------- Management Inc.
Donald F. Flynn Director and Chairman and Chief Executive
- --------------- Officer of Flynn Enterprises, Inc.
Flynn Enterprises, Inc.
676 N. Michigan Avenue, Suite 4000
Chicago, Illinois 60611
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Stewart H. Johnson Director and Chairman of the Board of
- ------------------ Directors, Chief Executive Officer, and
President of Morgan Corporation
John J. Melk Director and Chairman and Chief Executive
- ------------ Officer of H\\2\\0 Plus, Inc.
676 North Michigan Avenue
39th Floor
Chicago, Illinois 60611
Peer Pedersen Director and Chairman of the Board of
- ------------- Pedersen & Houpt, P.C.
161 N. Clark Street
Suite 3100
Chicago, Illinois 60601-3224
</TABLE>
<PAGE>
STOCKHOLDER AGREEMENT
---------------------
THIS STOCKHOLDER AGREEMENT (the "Agreement") is entered into as of January
16, 1997, by and between Extended Stay America, Inc., a Delaware corporation
("ESA"), and Norwood Cowgill, Jr. ("Cowgill") and Cowgill Partners, L.P. (the
"Partnership"), stockholders (Cowgill and the Partnership each individually
referred to as a "Stockholder" and collectively as the "Stockholders") of Studio
Plus Hotels, Inc., a Virginia corporation (the "Company").
W I T N E S S E T H:
-------------------
Each Stockholder is the owner of shares (with respect to each Stockholder
the "Shares") of common stock, par value $.01 per share, of the Company
("Company Common Stock"). As used herein, the term "Shares" shall also include
any shares of Company Common Stock that the respective Stockholder shall obtain
beneficial ownership of (including sole investment and voting power) during the
term of this Agreement. ESA, ESA Merger Sub, Inc., a Delaware corporation
("Merger Sub"), and the Company have entered into an Agreement and Plan of
Merger dated January 16, 1997 (the "Merger Agreement") providing for the merger
of the Company into Merger Sub (the "Merger"). In order to induce ESA and Merger
Sub to enter into the Merger Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the Stockholders desire to grant ESA an option to purchase, and proxy to vote,
the Shares.
ACCORDINGLY, the parties hereto agree as follows:
1. Option and Proxy. Subject to the terms and conditions of this
Agreement, each Stockholder hereby:
(a) Grants to ESA an option, exercisable from time to time and in
whole or in part under the conditions set forth below in this Paragraph 1(a) and
during the term of this Agreement, to purchase up to all of the Shares (the
"Option") at a price per Share equal to $25.00 (the "Purchase Price"). ESA may
exercise this Option, at any time after the occurrence of a Topping Event (as
defined in the Merger Agreement), upon three business days' notice to the
Stockholder indicating the Topping Event and the number of Shares to be acquired
together with the Purchase Price and the date, time and place of the closing of
such purchase (the "Closing"); provided that at the time of any exercise of the
Option there exists an Alternative Proposal (as defined in the Merger
Agreement).
(b) Appoints George D. Johnson, Jr. and Robert A. Brannon, or either
of them, with full power of substitution, as proxy holders (the "Proxy
Committee") to represent and to vote the Shares with respect to the Merger, or
any other merger or other business combination of the Company with any party
other than ESA or any Alternative Proposal (as defined in the Merger Agreement),
including with respect to any procedural matters related thereto, at any meeting
(whether special or annual, and whether or not adjourned) or by written action
of
<PAGE>
stockholders of the Company and, in the discretion of the Proxy Committee, upon
any other business as may properly come before such meeting or for written
action (provided that such business shall have been the subject of preliminary
proxy materials filed by the Company under the Securities Exchange Act of 1934,
as amended), such votes to be cast in any manner that the Proxy Committee in its
sole discretion shall deem proper except if the vote is on the Merger Agreement,
the Shares shall be voted in favor of the Merger Agreement; the authority
granted hereunder ("Proxy") shall be irrevocable during the term of this
Agreement and deemed to be coupled with an interest; and
(c) In the case of Cowgill, agrees to recommend the Merger to other
stockholders of the Company and to use his best efforts to bring about the
Merger, subject to applicable fiduciary duties as determined in good faith after
consultation with, and based upon the advice of, outside counsel.
2. Changes in Shares. For all purposes of this Agreement, the Shares
shall include any securities or cash or other property issued or exchanged with
respect to such Shares upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, dividend in cash or
stock or other property, split-up or combination of the securities of the
Company, or any other change in its capital structure.
3. Closing.
3.1 Delivery of Shares. At the Closing, Stockholder shall deliver to
Purchaser certificates representing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, with signatures guaranteed,
or otherwise in form acceptable for transfer on the books of the Company.
3.2 Payment for Shares. All payments by the Purchaser of the Purchase
Price shall be made on the date of the Closing by wire transfer of immediately
available funds to an account designated by Stockholder by written notice to
Purchaser.
4. Representations and Warranties of the Stockholders. Each Stockholder
represents and warrants to ESA as follows:
4.1 Power to Transfer the Shares. The Stockholder now has, and upon
delivery of the Shares at the Closing, the Stockholder will sell, assign,
transfer and deliver to ESA, valid and marketable title to the Shares, free and
clear of all security interests, liens, claims, pledges, assessments, options,
equities, charges and encumbrances whatsoever, and with no proxies or
restrictions on the voting rights or other incidents of record or beneficial
ownership pertaining thereto (except for the Proxy being granted pursuant to
this Agreement) and there are no outstanding options, warrants or rights to
purchase or acquire or agreements relating to any of the Shares. The Shares are
validly issued and outstanding, fully paid and non-assessable with no personal
liability attaching to the ownership thereof.
2
<PAGE>
4.2 Valid and Binding Agreement; No Violation. This Agreement constitutes
a valid and binding agreement of the Stockholder, enforceable in accordance with
its terms. Neither the execution of this Agreement, the exercise of the Option,
the Proxy, nor the voting of the Shares by the Proxy Committee, will constitute
a violation of, or conflict with, or result in a default under, any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which the Stockholder is a party or by which the Stockholder is bound or to
which the Shares are subject.
5. Representations and Warranties of ESA. ESA represents and warrants to
the Stockholder as follows:
5.1 Authorization. The execution and delivery of this Agreement by ESA has
been duly authorized by all requisite corporate action.
5.2 Valid and Binding Agreement. This Agreement constitutes a valid and
binding agreement of ESA, enforceable in accordance with its terms.
6. Covenants of the Stockholder. Each Stockholder hereby covenants and
agrees as follows:
6.1 Inquires or Proposals. From the date of execution of this Agreement to
termination hereof, the Stockholder shall not solicit or encourage any inquiries
or proposals for the acquisition of all or any part of the securities, assets or
business of the Company; the Stockholder shall not engage in any negotiations
with potential acquirers (other than ESA) or persons acting on their behalf;
provided, however, that nothing contained in this Section 6.1 shall prohibit
Cowgill from (i) furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Alternative
Proposal, if, and only to the extent that, the Board of Directors of the
Company, based upon the advice of outside counsel, determines in good faith that
such action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law.
6.2 Sale of Shares. The Stockholder agrees that Stockholder will not sell,
transfer, further pledge, encumber or otherwise dispose of the Shares except
pursuant to the Merger or this Agreement, between the date hereof and the
termination of this Agreement.
7. Miscellaneous.
7.1 Commissions. Each of the parties hereto represents and warrants that
to the best of such party's knowledge there are no agreements or claims for
brokerage commissions or finders' fees in connection with the transactions
contemplated by this Agreement, and the Stockholders and ESA will respectively
pay or discharge and will indemnify the other, for brokerage commissions or
finders' fees incurred by reason of any action taken by such indemnifying party.
3
<PAGE>
7.2 Expenses. All costs and expenses (including legal fees) incurred in
connection with this Agreement, and the sale and purchase of the Shares
contemplated hereby, shall be paid by the party incurring such expense.
7.3 Survival of Representations. Notwithstanding any provision of this
Agreement, all representations, warranties and agreements made by the
Stockholders and ESA in this Agreement shall survive until the earlier of (a)
the closing of the Merger or (b) the first anniversary of the date of exercise
of the Option.
7.4 Further Assurance and Cooperation. From time to time, and without
further consideration, each party will execute and deliver to the other such
documents and take such action as the other may reasonably request in order to
consummate more effectively the terms of this Agreement.
7.5 Parties in Interest. All authority herein conferred or agreed to be
conferred by a Stockholder shall survive such Stockholder's death or incapacity.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the Purchaser (if
such assigning party is a Stockholder) or Cowgill (if such assigning party is
the Purchaser), which consent will not be unreasonably withheld, and except that
ESA may assign to any wholly-owned subsidiary of ESA the right to purchase all
of any part of the Shares.
7.6 Specific Performance. Each party acknowledges that its obligations
hereunder are unique, and agrees that the other shall have the right, in
addition to any other rights it may have, to specific performance or equitable
relief by way of injunction if it shall fail to perform any of its obligations
hereunder.
7.7 Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law doctrine thereof.
7.8 Term of the Agreement. The term of this Agreement shall be until the
first to occur of (i) the date 180 days after the termination of the Merger
Agreement, or (ii) the closing of the Merger.
4
<PAGE>
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 . (212) 892-3000
January 14, 1997
PRIVATE AND CONFIDENTIAL
Extended Stay America, Inc.
450 East Las Olas Boulevard
Suite 1100
Ft. Lauderdale, Florida 33301
Attention: Robert A. Brannon
Senior Vice President and Chief Financial Officer
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding that
Extended Stay America, Inc. (which together with its subsidiaries and affiliates
is hereinafter referred to as the "Company") has engaged Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") to act as its exclusive financial
advisor for a period of six months commencing upon your acceptance of this
Agreement, with respect to the possible acquisition of Studio Plus Hotels, Inc.
("Target"), in one or a series of transactions, by merger, consolidation or any
other business combination, by purchase involving all or a substantial amount of
the business, securities or assets of the Target, or otherwise (each a
"Transaction").
As discussed, we propose to undertake certain services on your behalf
including, to the extent requested by you: (i) assisting you in evaluating the
Target, its operations, its historical performance and its future prospects;
(ii) advising on a proposed purchase price and form of consideration; (iii)
assisting you in structuring the Transaction; and (iv) negotiating the
financial aspects of any Transaction under your guidance. If requested, we will
deliver our opinion to the Board of Directors of the Company as to the fairness
to the Company from a financial point of view of the consideration to be paid by
the Company in a Transaction. The scope, form and substance of the opinion shall
be such as DLJ considers appropriate and, in the case of a stock-for-stock
merger, may be an opinion as to the fairness from a financial point of view of
the ratio to be applied for the exchange of common shares in the merger.
As compensation for the services to be provided by DLJ hereunder, the
Company agrees (i) to pay to DLJ (a) a fee of $500,000 at the time DLJ notifies
the Board of Directors of the Company that it is prepared to deliver the opinion
referred to in the preceding paragraph, and (b) additional cash compensation as
set forth below, and (ii) upon request by DLJ from time to time, to reimburse
DLJ
<PAGE>
Extended Stay America, Inc.
Page 2 January 14, 1997
promptly for all out-of-pocket expenses (including the reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
hereunder, whether or not a Transaction is consummated. It is understood that
such expenses will not exceed $25,000 without the prior approval of the Company.
As DLJ will be acting on your behalf, the Company agrees to the indemnification
and other obligations set forth in Schedule I hereto, which Schedule is an
integral part hereof.
The additional cash compensation referred to in clause (i)(b) of the
preceding paragraph shall be in an amount equal to $1,500,000, less the amount
paid by the Company pursuant to clause (i)(a) of such paragraph. Such additional
compensation shall be payable in cash promptly upon consummation of the
Transaction. For purposes of this Agreement, a Transaction shall be deemed to
have been consummated upon the earliest of any of the following events to occur:
(a) the acquisition of a majority of the outstanding common stock equity
securities of the Target calculated on a fully-diluted basis; (b) a merger or
consolidation of the Target with the Company or an affiliate of the Company; (c)
the acquisition by the Company or any of its affiliate of assets of the Target
representing a majority of the Target's total value based upon each outstanding
share of the Target's common stock (on a fully-diluted basis) being valued at
$15.00 per share, or (d) in the case of any other Transaction, the consummation
thereof.
The Company shall make available to DLJ all financial and other
information concerning its business and operations which DLJ reasonably requests
as well as any other information relating to any Transaction prepared by the
Company or any of its other advisors. In performing its services hereunder
(including, without limitation, giving an opinion of the type referred to in the
second paragraph hereof), DLJ shall be entitled to rely without investigation
upon all information that is available from public sources as well as all other
information supplied to it by or on behalf of the Company or its advisors and
shall not in any respect be responsible for the accuracy or completeness of, or
have any obligation to verify, the same or to conduct any appraisal of any of
the Company's or the Target's assets. To the extent consistent with legal
requirements, all information given to DLJ by the Company, unless publicly
available or otherwise available to DLJ without restriction or breach of any
confidentiality agreement, will be held by DLJ in confidence and will not be
disclosed to anyone other than DLJ's agents and advisors without the Company's
prior approval or used for any purpose other than those referred to in this
Agreement.
Any opinion requested by the Company and any advice, written or oral,
provided by DLJ pursuant to this Agreement will be treated by the Company as
confidential, will be solely for the information and assistance of the Company
in connection with its consideration of the Transaction and will not be
reproduced, summarized, described or referred to, or furnished to any other
party or used for any other purpose, except in each case with our prior written
consent. It is further understood and agreed that, in the event that any opinion
of DLJ delivered pursuant to this Agreement is to be included in any proxy
statement mailed in connection with the Transaction, the opinion will be
reproduced therein in full and any description of or reference to DLJ or any
summary of the opinion or presentation of DLJ included in such document shall be
in form and substance acceptable to DLJ and its legal counsel.
<PAGE>
Extended Stay America, Inc.
Page 3 January 14, 1997
Please note that DLJ is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our trading
and brokerage activities, DLJ or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions, for our own
account or on the accounts of customers, in debt or equity securities of the
Company or other entities that may be involved in the Transaction. We recognize
our responsibility for compliance with Federal laws in connection with any such
activities.
The Company acknowledges and agrees that DLJ has been retained solely to
provide the advice or services set forth in this Agreement. DLJ shall act as an
independent contractor, and any duties of DLJ arising out of its engagement
hereunder shall be owed solely to the Company.
This Agreement may be terminated by either the Company or DLJ upon receipt
of written notice to that effect by the other party. Upon any termination or
expiration of this Agreement, DLJ will be entitled to prompt payment of all fees
accrued prior to such termination or expiration and reimbursement of all out-of-
pocket expenses as described above. The indemnity and other provisions contained
in Schedule I will remain operative and in full force and effect regardless of
any termination or expiration of this Agreement.
In addition, if at any time prior to twelve months after termination or
expiration of this Agreement a Transaction is consummated, DLJ will be entitled
to payment in full of the compensation described in the fourth paragraph of this
Agreement.
It is understood that if the Company completes an acquisition transaction
involving the Target in lieu of any Transaction for which DLJ is entitled to
compensation pursuant to this Agreement, DLJ and the Company will in good faith
mutually agree upon acceptable compensation for DLJ taking into account, among
other things, the results obtained and the custom and practice among investment
bankers acting in similar transactions.
The Company further agrees that it will not enter into any transaction
unless, prior to or simultaneously with such transaction referred to in either
of the two preceding paragraphs, adequate provision is made with respect to the
payment of compensation to DLJ as contemplated by such paragraphs.
This Agreement shall be binding upon and inure to the benefit of the
Company, DLJ, each Indemnified Person (as defined in Schedule I hereto) and
their respective successors and assigns.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
<PAGE>
Extended Stay America, Inc.
Page 4 January 14, 1997
After reviewing this Agreement, please confirm that the foregoing is in
accordance with your understanding by signing and returning to me the duplicate
of this Agreement attached hereto, whereupon it shall be our binding Agreement.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/ Jeffrey A. Klein
---------------------------
Jeffrey A. Klein
Managing Director
Accepted and Agreed
this 14th day of January, 1997
EXTENDED STAY AMERICA, INC.
BY:/s/ Robert A. Brannon
----------------------------
Robert A. Brannon
Senior Vice President and Chief Financial Officer
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stockholder Agreement as
of the date first above written.
EXTENDED STAY AMERICA, INC.
By:/s/ George Dean Johnson, Jr.
-------------------------------
Authorized Representative
STOCKHOLDERS:
/s/ Norwood Cowgill, Jr.
-------------------------------
Norwood Cowgill, Jr.
COWGILL PARTNERS, L.P.
By: Cowgill Management Company, LLC
General Partner
/s/ Norwood Cowgill, Jr.
-------------------------------
Authorized Representative
