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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Under Rule 14a-12
Extended Stay America, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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.
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2) Aggregate number of securities to which transaction applies:
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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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[ ] 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:
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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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[Logo of Extended Stay]
March 29, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Extended Stay America, Inc., which will be held on Wednesday, May 22, 2002 at
the Twitchell Auditorium at Converse College, 580 East Main Street, Spartanburg,
South Carolina, commencing at 11:00 a.m.
Your Board of Directors and Management look forward to personally greeting
those Stockholders able to attend.
At the meeting, in addition to electing six directors, your Board is asking
Stockholders to ratify the appointment of PricewaterhouseCoopers LLP 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
[Logo of Extended Stay America]
101 North Pine Street, Suite 200, Spartanburg, South Carolina 29302
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 22, 2002
You are cordially invited to attend the annual meeting of stockholders of
Extended Stay America, Inc., which will be held at the Twitchell Auditorium at
Converse College, 580 East Main Street, Spartanburg, South Carolina on
Wednesday, May 22, 2002, 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
2002.
3. To transact any other business that may be presented at the meeting.
Only stockholders of record at the close of business on March 25, 2002 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 101 North Pine Street, Suite 200, Spartanburg, South
Carolina.
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
President, Chief Operating Officer,
Secretary, and Treasurer
Spartanburg, South Carolina
March 29, 2002
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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
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EXTENDED STAY AMERICA, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 22, 2002
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 2002, and at any postponement or
adjournment of that meeting. The meeting is to be held at the Twitchell
Auditorium at Converse College, 580 East Main Street, Spartanburg, South
Carolina at 11:00 a.m., Eastern time, on May 22, 2002. 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 2002. 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
Extended Stay America, or by delivery of a later-dated proxy.
Our principal executive offices are located at 101 North Pine Street, Suite
200, Spartanburg, South Carolina 29302 (telephone 864/573-1600). This Proxy
Statement is dated March 29, 2002 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 25, 2002 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
93,579,492 shares were outstanding as of the close of business on March 25,
2002. 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 2003. 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.
Biographical information concerning our six nominees is presented below.
H. Wayne Huizenga, age 64, became one of our directors in August 1995 and
serves as the Chairman of our Board of Directors. Mr. Huizenga has also served
as Chairman of the Board of AutoNation, Inc., which owns the nation's largest
chain of franchised automotive dealerships, since August 1995. From August 1995
to September 1999, Mr. Huizenga served as Chief Executive Officer or Co-Chief
Executive Officer of AutoNation, Inc. Since May 1998, Mr. Huizenga has served as
Chairman of the Board of Republic Services, Inc., a leading provider of
non-hazardous solid waste collection and disposal services and served as its
Chief Executive Officer from May 1998 until December 1998. Since September 1996,
Mr. Huizenga has been Chairman of the Board of Boca Resorts, Inc., which owns
and operates luxury resort properties. Since June 1998, Mr. Huizenga has served
as a director of NationsRent, Inc., a national chain providing rental equipment
primarily to a broad range of construction and industrial customers. Since May
2000, Mr. Huizenga has been Vice-Chairman of the Board of ZixIt Corporation,
which develops and markets products and services that enhance privacy, security,
and convenience over the internet. Mr. Huizenga is not standing for re-election
to ZixIt's board in 2002. Since June 2000, Mr. Huizenga has served as a director
of ANC Rental Corporation, which owns and operates Alamo Rent-A-Car, National
Car Rental, and CarTemps USA. 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., 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 the Miami Dolphins
and Pro Player Stadium in South Florida.
George D. Johnson, Jr., age 59, has been our Chief Executive Officer and a
director since January 1995. 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 26 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 AutoNation, Inc., Boca Resorts, Inc., 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 62, 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 1998, Mr. Flynn has been the sole director or Chairman of LKQ
Corporation, a company engaged in the automobile recycling business. Mr. Flynn
was the Vice Chairman of Blue Chip Casino, Inc., an owner and operator of a
riverboat gaming vessel located in Michigan City, Indiana, from February 1997 to
November 1999, when it was sold to Boyd Gaming Corporation. From 1972 through
1990, Mr. Flynn held various positions with Waste Management, Inc., 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, a provider of drug testing services.
2
Stewart H. Johnson, age 58, 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. Mr. Johnson is the brother of George D. Johnson,
Jr., our Chief Executive Officer.
John J. Melk, age 65, 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 also has
served as Chief Executive Officer of Fisher Island Holdings, Inc., a real estate
development company, since 1998. Since August 1995, Mr. Melk has been a director
of AutoNation, Inc. 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, Inc. and its subsidiaries, including President of Waste Management
International plc, a subsidiary of Waste Management, Inc. From 1991 through
1999, Mr. Melk served as a director of Psychemedics Corporation. 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 77, became one of our directors in August 1995. In 1957,
Mr. Pedersen founded the law firm of Pedersen & Houpt, P.C., in Chicago,
Illinois and currently serves as Chairman of the firm. Mr. Pedersen served as a
director of Aon Corporation from 1974 to 1998 and as a director of Waste
Management, Inc. from 1979 to 1998. He also currently serves as a director of
several privately-held companies.
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 2001, the Board of Directors
held four meetings and acted once by unanimous written consent. Except for one
meeting of our Board of Directors at which Mr. Pedersen was absent, all of our
directors attended each meeting during 2001.
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, Melk, 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 "Submitting Your
Proposals For The 2003 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 2001, the Audit Committee held five meetings and the Compensation
Committee acted 59 times by unanimous written consent. The Executive Committee
did not act during 2001. In 2001, no director participated in less than 75% of
the aggregate of all actions of the Board and all actions of committees of the
Board on which such director served.
3
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Report of the Audit
Committee", "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 Audit Committee
The Audit Committee operates under a written charter adopted by the Board
of Directors. All members of the Audit Committee meet the independence standards
established by the New York Stock Exchange.
The Audit Committee assists the Board of Directors in fulfilling its
responsibility to oversee management's implementation of Extended Stay America's
financial reporting process. In discharging its oversight role, the Audit
Committee reviewed and discussed with management and PricewaterhouseCoopers LLP,
the independent auditor, the audited financial statements of Extended Stay
America, Inc. as of and for the year ended December 31, 2001. Management of
Extended Stay America is responsible for those financial statements and the
reporting process, including the system of internal controls. The independent
auditor is responsible for expressing an opinion on the conformity of those
financial statements with accounting principles generally accepted in the United
States of America.
The Audit Committee met privately with PricewaterhouseCoopers, and
discussed issues deemed significant by the auditor, including those required by
Statements on Auditing Standards No. 61 and No. 90 (Communications with Audit
Committees), as amended. In addition, the Audit Committee received from
PricewaterhouseCoopers the written disclosures and the letter required by
Independence Standards Board Standard No. 1 and the Audit Committee has
discussed with PricewaterhouseCoopers its independence from Extended Stay
America and its management. The Audit Committee also considered whether the
provision of non-audit services by PricewaterhouseCoopers was compatible with
maintaining its independence.
Based upon the foregoing review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements
referred to above be filed with Extended Stay America's Annual Report on Form
10-K for the year ended December 31, 2001.
By the Audit Committee:
Donald F. Flynn
John J. Melk
Peer Pedersen
2. APPOINTMENT OF OUR INDEPENDENT AUDITORS
Subject to your ratification, the Audit Committee of the Board of Directors
has selected, and the Board of Directors has approved, the accounting firm of
PricewaterhouseCoopers LLP to serve as our independent auditors for 2002.
PricewaterhouseCoopers LLP has served as our independent auditors since the
formation of our Company in January 1995 and also has provided non-audit
services from time to time.
Audit Fees
The aggregate fees and expenses of PricewaterhouseCoopers LLP for
professional services for the audit of our annual consolidated financial
statements for 2001 and the review of the consolidated financial statements
included in our Reports on Form 10-Q for 2001 were $187,813.
Financial Information Systems Design and Implementation Fees
There were no fees billed by PricewaterhouseCoopers LLP to us for financial
information system design and implementation services during 2001.
4
All Other Fees
The aggregate fees and expenses billed to us for all other services
rendered by PricewaterhouseCoopers LLP during 2001 were $428,930. These services
included tax services, debt issuance services, human resources consulting, and
research.
All audit and non-audit services provided by PricewaterhouseCoopers LLP are
approved by the Audit Committee, which considers whether the provision of
non-audit services is compatible with maintaining the auditor's independence.
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 2002.
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.
5
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 25, 2002, certain information
regarding the beneficial ownership of our 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 300 record holders and approximately 6,000
beneficial holders of Common Stock and 93,579,492 shares of Common Stock
outstanding on that date.
Shares Beneficially
Owned
-------------------
Name(1) Number(2) Percent
------- --------- -------
Capital Research and Management Company (3) .... 6,340,000 6.8%
FMR Corp. (4) .................................. 5,859,603 6.3
Cascade Investment, L.L.C. (5) ................. 5,442,000 5.8
H. Wayne Huizenga (6) .......................... 10,710,410 11.3
George D. Johnson, Jr. (7) ..................... 6,619,860 6.9
Robert A. Brannon (8) .......................... 1,959,158 2.1
Gregory R. Moxley .............................. 237,229 *
Donald F. Flynn (9) ............................ 933,154 *
Stewart H. Johnson (10) ........................ 946,970 1.0
John J. Melk ................................... 90,000 *
Peer Pedersen .................................. 1,387,512 1.5
All directors and officers as a group
(8 persons) (6)(7)(8)(9)(10).................. 22,884,293 22.9%
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* Represents less than 1% of our outstanding Common Stock.
(1) Unless otherwise indicated, the address of such person is c/o Extended
Stay America, Inc., 101 North Pine Street, Suite 200, Spartanburg, South
Carolina 29302.
(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 25, 2002 had
been exercised by that person or group as follows: (i) H. Wayne
Huizenga-1,530,500; (ii) George D. Johnson, Jr.--2,862,500; (iii) Robert A.
Brannon-1,476,004; (iv) Donald F. Flynn-90,000; (v) Stewart H.
Johnson--90,000; (vi) John J. Melk--90,000; (vii) Peer Pedersen--20,000;
(viii) Gregory Moxley-216,828; and (ix) all directors and executive
officers as a group--6,375,832.
(3) The number of shares of Common Stock shown as beneficially owned was
derived from an Amendment to Schedule 13G dated February 11, 2002 filed
with the Securities and Exchange Commission by the listed stockholder.
Capital Research and Management Company is located at 333 South Hope
Street, Los Angeles, California 90071.
(4) The number of shares of Common Stock shown as beneficially owned was
derived from an Amendment to Schedule 13G dated February 14, 2001 filed
with the Securities and Exchange Commission by the listed stockholder. FMR
Corp. is located at 82 Devonshire Street, Boston, Massachusetts 02109.
(5) The number of shares of Common Stock shown as beneficially owned was
derived from a Schedule 13G dated February 12, 2002 filed with the
Securities and Exchange Commission by the listed stockholder. Cascade
Investment, L.L.C. is located at 2365 Carillon Point, Kirkland, Washington
98033.
(6) Includes 9,179,910 shares of Common Stock beneficially owned by Huizenga
Investments Limited Partnership, a limited partnership controlled by Mr.
Huizenga.
(7) Includes 3,757,360 shares of Common Stock beneficially owned by GDJ, Jr.
Investments Limited Partnership, a limited partnership controlled by George
D. Johnson, Jr.
(8) Includes 483,154 shares of Common Stock beneficially owned by Brannon
Investments, L.P., a limited partnership controlled by Mr. Brannon.
(9) Includes 843,154 shares of Common Stock beneficially owned by DNB, L.P., a
limited partnership controlled by Mr. Flynn.
(10) 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.
6
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 1999,
2000, and 2001. We do not have a restricted stock award program or a long-term
incentive plan. Our non-employee directors were paid $6,250 per quarter for
their services during 2001, and were reimbursed for their out-of-pocket
expenses.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ------------
Other Securities
Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options/SARs Compensation
Position Year ($) ($) ($) (#) ($)
------------------ ---- ------- ------ -------------- ------------- -------------
George D. Johnson, Jr.......... 2001 -- -- -- 625,000 28,561(1)
Chief Executive Officer 2000 -- -- -- 625,000
1999 -- -- -- 625,000 16,953(1)
Robert A. Brannon.............. 2001 350,000 -- -- 275,000 205,016(2)
President, Chief Operating 2000 300,000 -- -- 375,000
Officer, Secretary, and 1999 275,000 -- -- 275,000 2,622(1)
Treasurer
Gregory R. Moxley.............. 2001 200,000 -- -- 50,000 1,558(1)
Chief Financial Officer, 65,631(2)
Assistant Secretary and 2000 175,000 -- -- 100,000
Assistant Treasurer 1999 142,500 -- -- 36,000
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(1) Represents income attributed to use of corporate aircraft.
(2) 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 2001.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation
Granted to Exercise for Option Term(3)
Date of Options Employees in or Base Expiration -----------------------
Name Grant(1) Granted Fiscal Year Price(2) Date 5% 10%
---- -------- ------- ------------- -------- ---------- ---------- -----------
George D. Johnson, Jr... 10/30/01 625,000 17.10% $13.04 10/30/11 $5,123,526 $12,984,021
Robert A. Brannon....... 10/30/01 275,000 7.52% $13.04 10/30/11 $2,254,351 $ 5,712,969
Gregory R. Moxley....... 10/30/01 50,000 1.37% $13.04 10/30/11 $ 409,882 $ 1,038,722
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(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 our various employee stock option plans, the exercise price must be
the fair market value of our 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 our
Common Stock. We cannot assure you that the amounts reflected in this table
will be achieved.
7
The following table provides information about the value of unexercised options
to purchase our Common Stock at December 31, 2001 for the Named Executive
Officers.
AGGREGATE 2001 OPTION/SAR EXERCISES AND YEAR END VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at 12/31/01 SARs at 12/31/01*
Shares --------------------------- ---------------------------
Acquired On Value Exercisable Unexercisable Exercisable Unexercisable
Name Exercise (#) Realized ($) (#) (#) ($) ($)
---- ------------ ------------ ----------- ------------- ----------- -------------
George D. Johnson, Jr... -- -- 2,706,250 1,718,750 12,925,820 8,941,992
Robert A. Brannon....... -- -- 1,401,004 781,250 11,935,292 4,278,070
Gregory R. Moxley....... 30,000 378,735 195,328 167,250 846,246 985,759
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* This column indicates the aggregate amount, if any, by which the market
value of our Common Stock on December 31, 2001 exceeded the options'
exercise price, based on the closing per share sale price of our Common
Stock on December 31, 2001 of $16.40 on the New York Stock Exchange.
As of December 31, 2000, Mr. Moxley, our Chief Financial Officer, Vice
President--Finance, Assistant Secretary, and Assistant Treasurer, was indebted
to us in the amount of $149,588 in connection with an advance made to him during
1998. That advance was evidenced by a promissory note and bore interest at an
annual rate of 8.25%. Mr. Moxley repaid us in full in February 2001.
Equity Compensation Plan Information
We have six compensation plans (excluding plans assumed by us in connection
with acquisitions) under which we may issue our Common Stock to our employees,
officers, and directors. These plans are our: Amended and Restated 1995 Employee
Stock Option Plan; Amended and Restated 1995 Stock Option Plan for Non-Employee
Directors; 1996 Employee Stock Option Plan; 1997 Employee Stock Option Plan;
1998 Employee Stock Option Plan; and 2001 Employee Stock Option Plan. All of
these compensation plans have been approved by our stockholders. We do not have
any equity compensation plans that have not been approved by our stockholders.
The following table provides information about our Common Stock that may be
issued upon the exercise of options under all of our equity compensation plans
as of December 31, 2001.
Number of Number of
securities to be issued Weighted-average securities remaining
upon exercise of exercise price of available for future
outstanding options, outstanding options, issuance under equity
Plan Category (*) warrants, and rights warrants, and rights compensation plans
- ----------------- ----------------------- --------------------- ---------------------
Equity compensation plans
approved by stockholders ........... 17,813,214 $11.54 9,780,746
Equity compensation plans
not approved by stockholders ....... -- -- --
- -----------
* This table does not include information regarding equity compensation plans
assumed by us in mergers. A total of 175,000 shares of our Common Stock
were issuable at December 31, 2001 upon exercise of options assumed by us
in our acquisition of StudioPlus, Inc. in 1997. The weighted-average
exercise price per share of those options was $8.15. No additional options
may be granted under the assumed StudioPlus plan.
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.
8
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 believe
that during 2001 all filing requirements were complied with.
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 2001 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, 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 2001, 2000, and 1999, 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 (1) cash salaries of similarly sized or
otherwise comparable companies, (2) the contributions of the executive officers
to the Company's development and growth, and (3) 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
9
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 and Stock Options
George D. Johnson, Jr. founded the Company in January 1995 and has been its
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 2001 compensation package
reflected an appropriate balance of (1) the Company's performance in 2001, (2)
Mr. Johnson's own performance level, and (3) 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 2001, we granted Messrs. Huizenga, Johnson, Brannon, and Moxley options
to purchase 312,000, 625,000, 275,000, and 50,000 shares of Common Stock,
respectively, at an exercise price of $13.035 per share.
By the Compensation Committee:
Donald F. Flynn
John J. Melk
10
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 31, 1996 and ending on December 31, 2001 (which was the last day of our
2001 fiscal year).
Comparison of Cumulative Return
vs. Dow Jones Lodging and S&P 500 Indices *
[GRAPH]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
Extended Stay America, Inc. ........... $ 100.00 $ 61.80 $ 52.17 $ 37.58 $ 63.85 $ 81.49
Dow Jones Lodging Index ............... $ 100.00 $ 131.65 $ 95.73 $ 91.75 $ 124.94 $ 105.19
S&P 500 Index ......................... $ 100.00 $ 131.01 $ 165.95 $ 198.35 $ 178.24 $ 154.99
------------
* Assumes $100 invested on December 31, 1996 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 Chief Executive Officer,
Stewart Johnson, one of our directors, and members of their families. We paid an
aggregate of $2,951,000 under those leases for 2001. We believe that the terms
of the use of these aircraft were at least as favorable to us as we could have
obtained from an unaffiliated third party. We charged approximately $23,000 in
2001 to George D. Johnson, Jr. and other companies controlled by him for their
use of those airplanes.
We also leased space for our regional offices in Spartanburg, South
Carolina from companies controlled by George D. Johnson, Jr. and Stewart
Johnson. The leases for those regional offices called for aggregate monthly rent
of approximately $5,600 plus certain additional charges. We incurred charges of
$70,000 under those leases during 2001.
In 1996, we entered into a ten-year lease for a suite at Pro Player Stadium
with a base rent of $115,000 per year. In 1998, we entered into a seven-year
lease for a suite at the National Car Rental Center with a base rent of $120,000
per year, which was terminated in 2001. Both 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. He also is Chairman of the
Board of Directors of the company that operates the National Car Rental Center.
We believe that the terms of these
11
leases are comparable to those charged to other persons. In addition, in
September 2001, we entered into an agreement to sublease our former corporate
headquarters in Fort Lauderdale, Florida to NationsRent, Inc. Mr. Huizenga is a
director of NationsRent. The sublease is effective January 1, 2002 and provides
for monthly rent of $52,157 for a period of three years.
We use the services of Psychemedics Corporation to perform certain
employment related services, including drug screening, with respect to our
employees. We paid Psychemedics $479,000 for these services in 2001. Donald F.
Flynn, a director of the Company, is also a director of Psychemedics, which is a
publicly-traded company. Messrs. Huizenga, Flynn, and Melk beneficially own
approximately 11%, 10%, and 10%, respectively, 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 2003 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 2003 annual meeting of stockholders, you must do so
no later than November 29, 2002. 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.
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
President, Chief Operating Officer,
Secretary, and Treasurer
12
================================================================================
Revocable Proxy - Extended Stay America, Inc.
================================================================================
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
for the Annual Meeting of Stockholders on May 22, 2002 - 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 22, 2002, at 11:00 a.m., at Twitchell Auditorium at Converse
College, 580 East Main Street, Spartanburg, South Carolina, 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 (1) FOR each of the Nominees listed,
and (2) FOR the proposal to ratify the action of the Board of Directors in
appointing PricewaterhouseCoopers LLP as independent auditors for the Company
in 2002. 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.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE, AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
+
Extended Stay America, Inc.
Use a black pen. Print in
CAPITAL letters inside the grey [A B C] [1 2 3] [X]
areas as shown in this
example.
[_] Mark this box with an X if you have
made changes to your name or address details above.
================================================================================
Annual Meeting Proxy Card
================================================================================
[A] Election of Directors
1. The Board of Directors recommends a vote FOR the nominees listed:
For Withhold For Withhold
01 - H. Wayne Huizenga [_] [_] 05 - John J. Melk [_] [_]
02 - George D. Johnson, Jr. [_] [_] 06 - Peer Pedersen [_] [_]
03 - Donald F. Flynn [_] [_]
04 - Stewart H. Johnson [_] [_]
[B] Issue
The Board of Directors recommends a vote FOR the following proposal:
For Against Abstain
2. To ratify the action of the Board of Directors of the [_] [_] [_]
Company in appointing PricewaterhouseCoopers LLP as
independent auditors for the Company in 2002.
Mark this box with an X if you plan to attend [_]
the Annual Meeting.
3. In their discretion, on such other business as may properly
come before the meeting.
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.
[C] Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
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 29, 2002, and the Annual Report to Stockholders. Please sign exactly
as name appears hereon. Joint owners should each sign. Where applicable,
indicate official position or representative capacity.
Signature 1 Signature 2 Date (dd/mm/yyyy)
- ------------------------ ------------------------------ ----------------------
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