<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1996.
---------------------------------------------------------------------
REGISTRATION STATEMENT NO. _____________
********************************************************************************
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CHOICE HOTELS INTERNATIONAL, INC.
---------------------------------
(Exact name of issuer as specified in its charter)
Delaware 52-1985619
--------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10750 Columbia Pike
Silver Spring, Maryland 20901
----------------------- -----
(Address of Principal (Zip Code)
Executive Offices)
CHOICE HOTELS INTERNATIONAL, INC.
NONQUALIFIED RETIREMENT SAVINGS & INVESTMENT PLAN
-------------------------------------------------
(Full title of the plan)
Edward A. Kubis, Esq.
Senior Vice President, General Counsel and Secretary
10750 Columbia Pike
Silver Spring, MD 20901
------------------------
(Name and address of agent for service)
(301) 979-6233
--------------
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
********************************************************************************
<TABLE>
<CAPTION>
Proposed
Title of Proposed Maximum Maximum Amount
Each Class of Amount Offering Aggregate Of
Securities To Be Price Per Offering Registration
To Be Registered Registered Share* Price* Fee*
- ---------------- ---------- ------ ------ ----
<S> <C> <C> <C> <C>
Common Stock, 2,000,000 Shs. $15.9375 $31,875,000 $10,992
par value of $.01
per share
********************************************************************************
</TABLE>
(*) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee. Estimate based on the average of the high and low share
prices reported on the New York Stock Exchange for December 6, 1996.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Except as set forth below with respect to Items 4, 7, 8 and 9 of Form
S-8, the description of Registrant's common stock contained in the Registrant's
Registration Statement on Form 10 filed on July 11, 1996, as amended, and
Current Report on Form 8-K dated November 5, 1996 are incorporated by reference
into this registration statement.
All documents subsequently filed by the Choice Hotels International,
Inc. Nonqualified Retirement Savings and Investment Plan (the "Plan") or the
Registrant with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing such documents. Any
statement contained in a documents incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities. Not Applicable.
- ------- --------------------------
Item 6. Indemnification of Officers and Directors.
- ------- ------------------------------------------
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in summary, that directors and officers of Delaware
corporations such as the Registrant are entitled, under certain circumstances,
to be indemnified against all expenses and liabilities (including attorneys'
fees) incurred by them as a result of suits brought against them in their
capacity as a director or officer, if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper. Any such indemnification may be made
2
<PAGE>
by the corporation only as authorized in each specific case upon a determination
by the stockholders or disinterested directors that indemnification is proper
because the indemnitee has met the applicable standard of conduct. Article VII
of the Registrant's By-Laws entitles officers, directors and controlling persons
of the Registrant to indemnification to the full extent permitted by Section 145
of DGCL, as the same may be supplemented or amended from time to time.
Article VII of the Bylaws of Choice Hotels International, Inc. provides:
INDEMNIFICATION OF
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 1. Action, Other Than by or in the Right of the Corporation.
---------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or administrative,
and whether external or internal to the Corporation (other than a judicial
action or suit brought by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or trustee of the
Corporation, or that, being or having been such a director, officer, employee or
trustee, he is or was serving at the request of the Corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise (all such persons being referred to hereafter
as an "Agent"), against expenses (including attorneys' fees), judgements, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, or any appeal therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding -- whether by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
---- ----------
its equivalent -- shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
Section 2. Action, by or in the Right of the Corporation. The
----------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed judicial action or suit
brought by or in the right of the Corporation to procure a judgement in its
favor by reason of the fact that he is or was an Agent (as defined above)
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense, settlement or appeal of such action or suit
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no
3
<PAGE>
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
misconduct in the performance of the duty of the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or other such court shall deem proper.
Section 3. Determination of Right of Indemnification. Any
------------------------------------------
indemnification under Section 1 or 2 (unless ordered by a court) shall be made
by the Corporation unless a determination is reasonably and promptly made (i) by
the Board by a majority vote or a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders, that such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnification Against Expenses of Successful Party.
-----------------------------------------------------
Notwithstanding the other provisions of this Article, to the extent that an
Agent has been successful on the merits or otherwise, including the dismissal of
an action without admission of liability, in defense of any proceeding or in
defense of any claim, issue or matter therein, or on appeal from any such
proceeding, action, claim or matter, such Agent shall be indemnified against all
expenses incurred in connection therewith.
Section 5. Advances of Expenses. Except as limited by Section 6 of
---------------------
this Article, expenses incurred in any action, suit, proceeding or investigation
or any appeal therein shall be paid by the Corporation in advance of the final
disposition of such matter, if the Agent shall undertake to repay such amount in
the event that it is ultimately determined, as provided herein, that such person
is not entitled to indemnification. Notwithstanding the foregoing, no advance
shall be made by the Corporation if a determination is reasonably and promptly
made by the Board of Directors by a majority vote of a quorum of disinterested
directors, or (if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs) by independent legal counsel in a
written opinion, that, based upon the facts known to the Board or counsel at the
time such determination is made, such person acted in bad faith and in a manner
that such person did not believe to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal proceeding, that such
person believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Board or independent
legal counsel reasonably determines that such person deliberately breached his
duty to the Corporation or its shareholders.
4
<PAGE>
Section 6. Right of Agent to Indemnification Upon Application;
---------------------------------------------------
Procedure Upon Application. Any indemnification under Sections 1, 2, and 4, or
- ---------------------------
advance under Section 5 of this Article, shall be made promptly, and in any
event within ninety days, upon the written request of the Agent, unless with
respect to applications under Sections 1, 2, and 5, a determination is
reasonably and promptly made by the Board of Directors by a majority vote of a
quorum of disinterested directors that such Agent acted in a manner set forth in
such Sections as to justify the Corporation's not indemnifying or making an
advance to the Agent. In the event no quorum of disinterested directors is
obtainable, the Board of Directors shall promptly direct that independent legal
counsel shall decide whether the Agent acted in the manner set forth in such
Sections as to justify the Corporation's not indemnifying or making an advance
to the Agent. The right to indemnification or advances as granted by this
Article shall be enforceable by the Agent in any court of competent
jurisdiction, if the Board or independent legal counsel denies the claim, in
whole or in part, or if no disposition of such claim is made within ninety days.
The Agent's expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such proceeding shall also
be indemnified by the Corporation.
Section 7. Contribution. In order to provide for just and equitable
-------------
contribution in circumstances in which the indemnification provided for in this
Article is held by a court of competent jurisdiction to be unavailable to an
indemnitee in whole or in part, the Corporation shall, in such an event, after
taking into account, among other things, contributions by other directors and
officers of the Corporation pursuant to indemnification agreements or otherwise,
and in the absence of personal enrichment, acts of intentional fraud or
dishonesty or criminal conduct on the part of the agent, contribute to the
payment of Agent's losses to the extent that, after other contributions are
taken into account, such losses exceed: (i) in the case of a director of the
Corporation or any of its subsidiaries who is not an officer of the Corporation
or any of such subsidiaries, the amount of fees paid to him for serving as a
director during the 12 months preceding the commencement of the suit, proceeding
or investigation; or (ii) in the case of a director of the Corporation or any of
its subsidiaries who is also an officer of the Corporation or any of such
subsidiaries, the amount set forth in clause (i) plus 5% of the aggregate cash
compensation paid to said director for service in such office(s) during the 12
months preceding the commencement of the suit, proceeding or investigation; or
(iii) in the case of an officer of the Corporation or any of the subsidiaries,
5% of the aggregate cash compensation paid to such officer for service in such
office(s) during the 12 months preceding the commencement of such suit,
proceeding or investigation.
Section 8. Other Rights and Remedies. The indemnification provided
--------------------------
by this Article shall not be deemed exclusive of, and shall not affect, any
other rights to which an Agent seeking indemnification may be entitled under any
Bylaws, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official
5
<PAGE>
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be an Agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. All
rights to indemnification under this Article shall be deemed to be provided by a
contract between the Corporation and the Agent who serves in such capacity at
any time while these bylaws and other relevant provisions of the general
corporation law and other modification thereof shall not affect any rights or
obligations then existing.
Section 9. Insurance. Upon resolution passed by the Board, the
----------
Corporation may purchase and maintain insurance on behalf of any person who is
or was an Agent against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article. The Corporation may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Section 10. Constituent Corporations. For the purposes of this
-------------------------
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employees, or
trustee of such a constituent corporation or who, being or having been such a
director, officer employee or trustee, is or was serving at the request of such
constituent corporation as a director, officer, employee, trustee of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would if he had served the resulting or
surviving corporation in the same capacity.
Section 11. Other Enterprises, Fines, and Serving at Corporation's
------------------------------------------------------
Request. For purposes of this Article, references to "other enterprises" in
- --------
Sections 1 and 7 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service by Agent as director, officer, employee, trustee or
agent of the Corporation which imposes duties on, or involves services by, such
Agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interests of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
Section 12. Savings Clause. If this Article or any portion hereof
---------------
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Agent as to expenses
(including attorneys' fees),
6
<PAGE>
judgements, fines and amounts paid in settlement with respect to any action,
suit, appeal, proceeding or investigation, whether civil, criminal or
administrative, and whether internal or external, including a grand jury
proceeding and an action or suit brought by or in the right of the Corporation,
to the full extent permitted by any applicable portion of this Article that
shall not have been invalidated, or by any other applicable law.
The Registrant has entered into separate indemnification agreements
with directors and officers of the Registrant, pursuant to which the Registrant
will indemnify such directors and officers to the fullest extent permitted by
Delaware law, as the same may be amended from time to time.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Item 7. Exemptions from Registration Claimed. None.
- ------- -------------------------------------
Item 8. Exhibits.
- ------- ---------
4 Choice Hotels International, Inc. Nonqualified Retirement
Savings & Investment Plan.
5 Opinion regarding legality of shares to be offered.
23(i) Consent of Arthur Andersen LLP.
23(ii) Consent of Edward A. Kubis, Esq. (included in Exhibit 5)
24 Powers of Attorney authorizing execution of registration
statement of Form S-8 on behalf of certain directors of
Registrant.
Item 9. Undertaking.
- ------- ------------
(a) Rule 415 Offering.
------------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement;
7
<PAGE>
(i) To include any prospectus required by Section 10 (a) (3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do not
-------- -------
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by
----------------------------------------------------------
reference.
---------
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13 (a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Request for acceleration of effectiveness or filing of
------------------------------------------------------
registration statement on Form S-8.
----------------------------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is
8
<PAGE>
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
----------
The Registrant. Pursuant to the requirements of the Securities Act of
---------------
1933, the Registrant certifies that it meets all of the requirements for filing
on Form S-8, and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Silver
Spring, State of Maryland, on this 10th day of December, 1996.
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ Edward A. Kubis
-----------------------------
Edward A. Kubis
Secretary
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
* Executive Chairman December 10, 1996
- --------------------- of the Board and Director
Stewart Bainum, Jr.
* Vice Chairman of the Board, December 10, 1996
- --------------------- Chief Executive Officer and
William R. Floyd Director
* Director December 10, 1996
- ---------------------
Stewart Bainum
9
<PAGE>
*
- --------------------- Director December 10, 1996
Barbara Bainum
*
- --------------------- Director December 10, 1996
Paul A. Gould
*
- --------------------- Director December 10, 1996
Frederic V. Malek
*
- --------------------- Director December 10, 1996
Jerry E. Robertson
*
- --------------------- Director December 10, 1996
Robert C. Hazard, Jr.
*
- --------------------- Director December 10, 1996
Gerald W. Petitt
*
- --------------------- Executive Vice President, December 10, 1996
James A. MacCutcheon Chief Financial Officer,
and Treasurer (Principal
Financial Officer)
*
- --------------------- Vice President and Controller December 10, 1996
Charles G. Warczak, Jr. (Principal Accounting Officer)
* By: /s/ Edward A. Kubis
---------------------------
Edward A. Kubis
Attorney-in-fact
10
<PAGE>
The Plan. Pursuant to the requirements of the Securities Act of 1933, the
- --------
trustee (or other persons who administer the employee benefit plan) have duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on December 10, 1996.
CHOICE HOTELS INTERNATIONAL, INC.
RETIREMENT SAVINGS & INVESTMENT PLAN
By: CHASE MANHATTAN BANK
By: /s/ Catherine E. Kidder
-------------------------------------
Assistant Vice President
-------------------------------------
<PAGE>
EXHIBIT 4
THE CHOICE HOTELS INTERNATIONAL, INC.
NONQUALIFIED RETIREMENT SAVINGS AND INVESTMENT PLAN
---------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION ONE PURPOSE OF PLAN............................................. 1
A. Designation........................................................ 1
B. Purpose............................................................ 1
C. Voluntary Participation............................................ 1
SECTION TWO DEFINITIONS................................................. 2
SECTION THREE REQUIREMENTS FOR ELIGIBILITY................................ 14
SECTION FOUR PARTICIPATION IN THE PLAN................................... 15
SECTION FIVE ADMINISTRATION OF THE PLAN.................................. 15
A. Responsibility for Administration of the Plan...................... 15
B. Appointment of Administrative Committee............................ 15
C. Delegation of Powers............................................... 16
D. Records............................................................ 16
E. General Administrative Powers...................................... 16
F. Appointment of Professional Assistance and
Investment Manager................................................. 17
G. Actions by the Administrative Committee............................ 17
H. Discretionary Acts................................................. 17
I. Payment of Fees and Expenses....................................... 18
J. Plan Administrator................................................. 18
K. Allocation and Delegation of Administrative
Committee Responsibilities......................................... 18
SECTION SIX PARTICIPANTS' ACCOUNTS...................................... 19
A. Maintenance of Accounts............................................ 19
B. Accounts of Participant Transferred to an
Affiliated Company................................................. 20
C. Annual Adjustment of Participants' Accounts........................ 20
D. Investment of Contributions........................................ 20
E. No Right to Specific Assets........................................ 22
F. Special Rules Regarding Manor Care, Inc. Stock..................... 22
SECTION SEVEN ALLOCATIONS TO PARTICIPANT'S ACCOUNTS....................... 23
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
A. Salary Reduction Contributions..................................... 23
B. Company Matching Contributions..................................... 25
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION EIGHT DISABILITY BENEFITS......................................... 28
A. Disability Retirement Benefits..................................... 28
B. Determination of Disability........................................ 29
SECTION NINE RETIREMENT BENEFITS......................................... 29
SECTION TEN DEATH BENEFITS.............................................. 30
A. Death Benefits..................................................... 30
B. Designation of Beneficiaries....................................... 31
C. Failure of Participant to Designate................................ 31
D. Beneficiaries' Rights.............................................. 31
SECTION ELEVEN EMPLOYMENT TERMINATION BENEFITS............................. 32
A. Vesting Upon Termination of Employment............................. 32
B. Counting Years of Service.......................................... 32
C. Forfeiture of Non-Vested Amount.................................... 33
SECTION TWELVE PAYMENT OF BENEFITS......................................... 34
A. Retirement, Disability and Death Benefits.......................... 34
B. Employment Termination Benefits.................................... 34
C. Distribution of Benefits........................................... 36
D. Benefits of Persons Who Cannot Be Located.......................... 39
E. Distribution for Minor Beneficiary................................. 40
SECTION THIRTEEN BENEFIT CLAIMS PROCEDURE.................................. 41
A. Claims for Benefits................................................ 41
B. Request for Review of Denial....................................... 41
C. Decision on Review of Denial....................................... 42
SECTION FOURTEEN INALIENABILITY OF BENEFITS................................ 42
SECTION FIFTEEN AMENDMENT OF THE PLAN..................................... 42
SECTION SIXTEEN PERMANENCY OF THE PLAN.................................... 43
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C>
SECTION SEVENTEEN STATUS OF EMPLOYMENT RELATIONS........................... 44
SECTION EIGHTEEN FUNDING.................................................. 45
SECTION NINETEEN APPLICABLE LAW........................................... 46
SECTION TWENTY ADOPTION OF PLAN BY AFFILIATED
COMPANIES................................................ 46
</TABLE>
- iv -
<PAGE>
THE CHOICE HOTELS INTERNATIONAL, INC.
NONQUALIFIED RETIREMENT SAVINGS AND INVESTMENT PLAN
---------------------------------------------------
Effective November 1, 1996, Choice Hotels International, Inc. (the
"Sponsoring Company") hereby establishes the Choice Hotels International, Inc.
Nonqualified Retirement Savings and Investment Plan (the "Plan") in accordance
with the terms and conditions set forth below. It is anticipated that the rabbi
trust associated with the Plan shall receive an infusion of assets from the
rabbi trust associated with the Manor Care, Inc. Nonqualified Retirement Savings
and Investment Plan (the "Manor Care Plan") equal to the value of the accounts
in the Manor Care Plan attributable to all individuals who are employed by the
Sponsoring Company on or about November 1, 1996.
SECTION ONE
PURPOSE OF PLAN
---------------
A. Designation. The Plan is designated the "Choice Hotels International,
-----------
Inc. Nonqualified Retirement Savings and Investment Plan."
B. Purpose. The purpose of the Plan is to provide retirement,
-------
disability, death and employment termination benefits for a select group of
management and highly compensated employees
<PAGE>
of the Participating Companies and for the beneficiaries of those employees.
C. Voluntary Participation. An Employee who completes the
-----------------------
eligibility requirements set forth in Section Three of the Plan may voluntarily
elect to participate in the Plan by notifying the Administrative Committee as
described in Paragraph A of Section Seven.
SECTION TWO
DEFINITIONS
-----------
As used in the Plan:
A. "Accounts" shall mean a Participant's Company Contribution Account, his
Salary Reduction Contribution Account and if applicable, his Predecessor Account
and his Company Stock Account. The term "Accounts" shall also include any
additional accounts established by the Administrative Committee, in its sole
discretion.
B. "Administrative Committee" shall mean the person or persons or entity
appointed to administer the Plan in accordance with the provisions of Section
Five of the Plan. Notwithstanding the foregoing, "Administrative Committee" may
also include any
- 2 -
<PAGE>
individual or committee to which the Administrative Committee has delegated
authority to act with respect to a specific activity. The Administrative
Committee shall be the "named fiduciary," as referred to in Section 402(a) of
ERISA, with respect to the management, operation and administration of the Plan.
C. "Affiliated Company" shall mean (i) a member of a controlled group of
corporations of which the Sponsoring Company is a member, as determined in
accordance with Section 414(b) of the Internal Revenue Code and the regulations
issued thereunder, (ii) a trade or business which is under common control with
the Sponsoring Company, as determined in accordance with Section 414(c) of the
Internal Revenue Code and the regulations issued thereunder, or (iii) a member
of an affiliated service group of which the Sponsoring Company is a member, as
determined in accordance with Section 414(m) of the Internal Revenue Code. In
addition, "Affiliated Company" shall also include any other entity designated by
the Board of Directors in its sole discretion in which any Participating Company
owns an equity interest which exceeds fifty percent (50%).
- 3 -
<PAGE>
D. "Beneficiary" shall mean any person entitled to receive benefits which
are payable upon or after a Participant's death pursuant to Section Ten of the
Plan.
E. "Board of Directors" shall mean the Board of Directors of the
Sponsoring Company or any individual or committee to which the Board of
Directors has delegated authority to act with respect to a specific activity.
F. "Company Contribution Account" shall mean the account maintained for a
Participant reflecting Company Matching Contributions allocated to such
Participant pursuant to Paragraph B of Section Seven of the Plan, as adjusted
for earnings or losses thereon in accordance with the provisions of Section Six
of the Plan. In addition, a Participant's Company Contribution Account shall
include all amounts transferred on behalf of such Participant from the
Participant's corresponding company contribution account, if any, in the Manor
Care Plan.
G. "Company Matching Contribution" shall mean the contributions made by
the Participating Company to each Participant's Company Contribution Account
pursuant to Paragraph B of Section Seven. With respect to the Plan Year
beginning November 1, 1996, each Participant eligible to receive an
- 4 -
<PAGE>
allocation of Company Matching Contributions will receive 100% of such
allocation of Company Matching Contributions in the form of shares of Company
Stock, except that all or a portion of the Company Matching Contributions made
with respect to the Plan Year beginning November 1, 1996 may be made in the form
of shares of Manor Care, Inc. stock, subject to the provisions of Paragraph F of
Section Six.
H. "Company Stock" shall mean common stock issued by the Sponsoring
Company.
I. "Company Stock Account" shall mean the separate account maintained on
behalf of a Participant reflecting the Company Stock allocated to such
Participant's Company Stock Account, together with any cash or stock dividends
on such Company Stock. In addition, a Participant's Company Stock Account shall
include all amounts transferred on behalf of such Participant from the
Participant's corresponding company stock account, if any, in the Manor Care
Plan.
J. "Compensation" shall mean basic cash compensation before any payroll
deductions for taxes or any other purposes, including regular commissions paid
by the Participating Companies to an Employee in respect of such Employee's
service to the
- 5 -
<PAGE>
Participating Companies during the Plan Year increased by any amounts with
respect to which the Employee has elected to defer or reduce remuneration for
federal income tax purposes (i) under this Plan, (ii) under the Choice Hotels
International, Inc. Retirement Savings and Investment Plan or (iii) under any
"cafeteria plan" (as described in Section 125 of the Internal Revenue Code)
maintained by the Participating Companies. Compensation shall not include any
amounts paid to the Employee as (i) bonuses, (ii) overtime pay, (iii) except as
otherwise provided in the preceding sentence, any amounts paid during that Plan
Year on account of the Employee under this Plan or under any other employee
pension benefit plan (as defined in Section 3(2) of ERISA), and (iv) except as
otherwise provided in the preceding sentence, any amounts which are not
includible in the Employee's income for federal income tax purposes.
K. "Effective Date" of the Plan shall mean November 1, 1996.
L. "Eligibility Computation Period" for each Employee shall mean a
twelve (12) consecutive month period beginning on the date such Employee first
performs an Hour of Service with a Participating Company or an Affiliated
Company; provided,
- 6 -
<PAGE>
however, that if the Employee does not complete one thousand (1,000) or more
Hours of Service during such twelve (12) month period, the Eligibility
Computation Period shall be the Plan Year, beginning with the Plan Year
immediately following the Plan Year within which the Employee first performs an
Hour of Service with a Participating Company or an Affiliated Company. If the
Employee has a One-Year Break in Service prior to becoming eligible to
participate in the Plan and is subsequently rehired, his Eligibility Computation
Period shall be determined pursuant to this Paragraph beginning on the date the
Employee first completes an Hour of Service with the Participating Company or
the Affiliated Company immediately following his rehire.
M. "Eligible Participant" shall mean any Participant who (i)
completed at least one thousand (1,000) Hours of Service with the Participating
Companies during such Plan Year, (ii) was employed by a Participating Company on
the last day of the Plan Year, and (iii) elected, pursuant to Paragraph A of
Section Seven, to reduce his Compensation during such Plan Year.
Notwithstanding the foregoing, any Participant who is a key employee, as
determined in the sole discretion of the Administrative Committee, and who meets
the requirements of (ii)
- 7 -
<PAGE>
and (iii) of this Paragraph M but fails to complete 1,000 Hours of Service with
the Participating Company during such Plan Year and is, therefore, ineligible to
participate in the Choice Hotels International, Inc. Retirement Savings and
Investment Plan, shall be an Eligible Participant under the Plan eligible to
contribute an amount equal to the amount such Participant would have been
otherwise eligible to contribute to the Choice Hotels International, Inc.
Retirement Savings and Investment Plan during such Plan Year.
N. "Eligibility Year of Service" shall mean an Eligibility
Computation Period during which an Employee completes one thousand (1,000) or
more Hours of Service.
O. "Employee" shall mean any person employed by a Participating
Company who is or will be a "Highly Compensated Employee" (as defined in the
Choice Hotels International, Inc. Retirement Savings and Investment Plan) with
respect to a Plan Year. The term "Employee" shall not include nonresident aliens
who do not receive earned income (within the meaning of section 911(d)(2) of the
Internal Revenue Code) from the Participating Companies which constitute income
from sources within the United
- 8 -
<PAGE>
States (within the meaning of section 861(a)(3) of the Internal Revenue Code).
P. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. References in the Plan to any Section of
ERISA shall include any successor provision thereto.
Q. "Five-Percent Owner" shall mean an individual who (i) owns (or is
considered as owning within the meaning of Section 318 of the Internal Revenue
Code) more than five percent (5%) of the outstanding stock of a Participating
Company or an Affiliated Company or stock possessing more than five percent (5%)
of the total combined voting power of all stock of a Participating Company or an
Affiliated Company provided such entity is a corporation or (ii) owns more than
five percent (5%) of the capital or profits interest in a Participating Company
or an Affiliated Company if such entity is not a corporation.
R. "Hour of Service" shall be determined from records maintained by
the Participating Companies and the Affiliated Companies and shall include the
following:
(i) Performance of Duties. Each hour for which an Employee is
---------------------
directly or indirectly paid, or entitled to payment,
- 9 -
<PAGE>
by a Participating Company or an Affiliated Company for the performance of
duties. Each such Hour of Service shall be credited to the Eligibility
Computation Period or the Plan Year, as the case may be, in which the duties
were performed.
(ii) Back Pay. Each hour for which back pay (irrespective of
--------
mitigation of damages) has been either awarded or agreed to by a Participating
Company or an Affiliated Company. Each such Hour of Service shall be credited
to the Eligibility Computation Period or the Plan Year, as the case may be, to
which the agreement or award for back pay pertains rather than to the
Eligibility Computation Period or Plan Year, as the case may be, in which the
award, agreement or payment is made.
(iii) Non-Working Time Pay. Each hour for which an Employee is
--------------------
directly or indirectly paid, or entitled to payment, by a Participating Company
or an Affiliated Company on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), lay-off, jury duty or lease of absence. Each such Hour of Service
shall be computed and credited in accordance with Department of Labor Regulation
Section 2530.200b.
- 10 -
<PAGE>
(iv) No Duplication. An Employee shall not be credited with any
--------------
Hour of Service under both clause (ii) above and clause (i) or (iii) above (as
the case may be) with respect to the same item.
(v) Maternity and Paternity Leave. Solely for purposes of
-----------------------------
determining whether an Employee has incurred a One-Year Break in Service, such
Employee shall be credited for up to five hundred and one (501) Hours of Service
in respect of any period of absence attributable to a maternity or paternity
leave, based upon the number of Hours of Service which otherwise normally would
have been credited to such Employee but for such absence or, in any case in
which the Plan is unable to determine the number of Hours of Service which would
have normally been so credited, then such Employee shall be credited with eight
(8) Hours of Service per day of absence. Any such Hours of Service attributable
to a maternity or paternity leave shall be credited in the Eligibility
Computation Period or the Plan Year, as the case may be, in which the maternity
or paternity absence begins if such crediting will prevent the Employee from
incurring a One-Year Break in Service in such Eligibility Computation Period or
Plan Year. Otherwise, such Hours of Service shall be credited in
- 11 -
<PAGE>
the Eligibility Computation Period or the Plan Year, as the case may be,
following the Eligibility Computation Period or Plan Year in which the maternity
or paternity leave begins. For these purposes, a maternity or paternity leave of
absence shall include any time during which an Employee is absent from work for
any period: (a) by reason of the pregnancy of the Employee; (b) by reason of the
birth of a child of the Employee; (c) by reason of the placement of a child with
the Employee in connection with the adoption of such child by such individual;
or (d) for purposes of caring for such child for a period beginning immediately
following such birth or placement.
S. "Ineligible Participant" shall mean any Participant who (i) was
not employed by a Participating Company or an Affiliated Company on the last day
of the Plan Year, or (ii) did not elect, pursuant to Paragraph A of Section
Seven, to reduce his Compensation.
T. "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time. References in the Plan to any Section of
the Internal Revenue Code shall include any successor provision thereto.
- 12 -
<PAGE>
U. "Investment Election" shall mean the form, filed with the
Administrative Committee, or its delegate, or such other procedure as may be
specified by the Administrative Committee at any time, and from time to time,
through which a Participant may designate the manner in which his Accounts
(other than his Company Stock Account) shall be allocated among the Investment
Funds.
V. "Investment Election Date" shall mean the first business day of
each month.
W. "Investment Fund" shall mean each fund, contract, or other
arrangement designated by the Administrative Committee as an Investment Fund in
which Participants may direct their Accounts to be invested.
X. "Manor Care Plan" shall mean the Manor Care, Inc. Nonqualified
Retirement Savings and Investment Plan.
Y. "Net Profits" shall mean, with respect to any Fiscal Year that
ends within a Plan year with respect to which a determination of Net Profits is
made, the Sponsoring Company's consolidated net income or profit for such Fiscal
Year determined upon the basis of the Sponsoring Company's books of account in
accordance with generally accepted accounting principles, without
- 13 -
<PAGE>
any reduction for taxes based upon income, or for contributions made by the
Sponsoring Company to this Plan. "Net Profits" shall not include capital gains
or losses or income or loss which is determined to be a nonrecurring nature.
Such determination shall be made solely by the Administrative Committee.
Z. "One-Year Break in Service" shall mean an Eligibility Computation
Period or a Plan Year, as the case may be, during which an Employee does not
complete more than five hundred (500) Hours of Service.
AA. "Participant" shall mean an eligible Employee who becomes a
Participant in the Plan as provided in Section Four of the Plan.
BB. "Participating Company" shall mean the Sponsoring Company or any
Affiliated Company which adopts the Plan and Trust pursuant to the provisions of
Section Twenty of the Plan.
CC. "Plan" shall mean the Choice Hotels International, Inc.
Nonqualified Retirement Savings and Investment Plan as set forth in this
document, and as hereafter amended.
DD. "Plan Year" shall mean the twelve (12)-consecutive month period
ending on December 31.
- 14 -
<PAGE>
EE. "Predecessor Account" shall mean the total amount transferred
from a Participant's predecessor account, if any, in the Manor Care Plan.
FF. "Retirement Date" of a Participant shall mean the Participant's
sixty-fifth (65th) birthday.
GG. "Salary Reduction Contribution" shall mean the cumulative amount
the Participating Company contributes to the Trust each Plan year equal to the
amount by which a Participant elected to reduce his Compensation for such Plan
Year pursuant to Paragraph A of Section Seven.
HH. "Salary Reduction Contribution Account" shall mean the account
maintained for a Participant reflecting the Salary Reduction Contributions
allocated to such Participant pursuant to Paragraph A of Section Seven, as
adjusted by earnings or losses thereon in accordance with the provisions of
Section Six of the Plan. In addition, a Participant's Salary Reduction
Contribution Account shall include all amounts transferred on behalf of such
Participant from the Participant's corresponding salary reduction contribution
account, if any, in the Manor Care Plan.
II. "Sponsoring Company" shall mean Choice Hotels International, Inc.
- 15 -
<PAGE>
JJ. "Termination of Employment" shall mean termination of employment
with the Participating Companies, whether voluntarily or involuntarily, other
than by reason of a Participant's death or his retirement after attaining his
Retirement Date or after sustaining a Total and Permanent Disability.
KK. "Total and Permanent Disability" shall mean physical and/or
mental incapacity of such a nature that it prevents a Participant from engaging
in or performing the principal duties of his customary employment or occupation
on a continuing or sustained basis.
LL. "Valuation Date" shall mean the last day of each month or any
other date the Administrative Committee, in its sole discretion, shall select as
a Valuation Date.
MM. "Year of Service" shall mean a Plan Year during which an Employee
completes one thousand (1,000) or more Hours of Service. In addition, the Board
of Directors, in its sole discretion, may elect to grant Years of Service in
connection with a stock or asset acquisition to reflect employment periods prior
to the date of such stock of asset acquisition. "Years of Service," in the case
of an individual who transfers from the employment of Manor Care, Inc. to the
employment of a
- 16 -
<PAGE>
Participating Company prior to June 1, 1998, shall also include all Years of
Service earned with respect to service performed on behalf of Manor Care, Inc.
NN. Wherever appropriate, words used in the Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine.
- 17 -
<PAGE>
SECTION THREE
REQUIREMENTS FOR ELIGIBILITY
----------------------------
Any Employee (other than a Leased Employee) who was a participant in
the Manor Care, Inc. Nonqualified Retirement Savings and Investment Plan on
October 31, 1996 and who is employed by the Sponsoring Company on November 1,
1996 shall automatically become a Participant in this Plan on November 1, 1996.
Any other Employee (other than a Leased Employee) shall be eligible to elect to
have Salary Reduction Contributions made on his behalf under the Plan and to
share in the allocations of Company Matching Contributions under the Plan as of
the first day of the first full pay period of the month following the date upon
which such Employee has (i) completed an Eligibility Year of Service and (ii)
attained age twenty-one (21), provided such Employee is employed by a
Participating Company on such date. Any Employee who does not elect to have
Salary Reduction Contributions made on his behalf under the Plan as of the first
day of the first full pay period of the first month on which he is first
eligible shall be allowed to make a subsequent election to have Salary Reduction
Contributions made on his behalf as of
- 18 -
<PAGE>
the first business day of any subsequent month. Leased Employees shall not be
eligible to participate in the Plan.
Any Participant who suffers a Termination of Employment with a vested
benefit in the Plan and who is subsequently rehired by a Participating Company
shall become eligible to elect to have Salary Reduction Contributions withheld
from his Compensation and to receive allocations of Company Matching
Contributions under the Plan effective as of the date of his rehire.
SECTION FOUR
PARTICIPATION IN THE PLAN
-------------------------
Upon meeting the eligibility requirements of Section Three, each
eligible Employee shall be notified that he is eligible to participate in the
Plan and shall be provided with such information as is required by ERISA within
the time prescribed for providing such information. In addition, each
Participant shall be provided with a designation of beneficiary form with which
he may designate one or more Beneficiaries to receive benefits in the event of
his death.
SECTION FIVE
ADMINISTRATION OF THE PLAN
--------------------------
- 19 -
<PAGE>
A. Responsibility for Administration of the Plan. The
---------------------------------------------
Administrative Committee shall be responsible for the management, operation and
administration of the Plan.
B. Appointment of Administrative Committee. The Board of Directors
---------------------------------------
of the Sponsoring Company shall appoint an Administrative Committee consisting
of at least one (1) but not more than seven (7) persons. The Administrative
Committee shall be responsible for the management, operation and administration
of the Plan. Any member of the Administrative Committee may resign upon ten (10)
days prior written notice to the Board of Directors of the Sponsoring Company.
The Board of Directors of the Sponsoring Company shall be authorized to remove
any member of the Administrative Committee at any time and in its sole
discretion to appoint a successor whenever a vacancy on the Administrative
Committee occurs.
C. Delegation of Powers. The Administrative Committee may appoint
--------------------
such assistants or representatives as it deems necessary for the effective
exercise of its duties in administering the Plan. The Administrative Committee
may delegate to such assistants and representatives any powers and duties, both
- 20 -
<PAGE>
ministerial and discretionary, as it deems expedient or appropriate.
D. Records. All acts and determinations with respect to the
-------
administration of the Plan made by the Administrative Committee and any
assistants or representatives appointed by it shall be duly recorded by the
Administrative Committee or by the assistant or representative appointed by it
to keep such records. All records, together with such other documents as may be
necessary for the administration of the Plan, shall be preserved in the custody
of the Administrative Committee or the assistants or representatives appointed
by it.
E. General Administrative Powers. The Administrative Committee
-----------------------------
shall have all powers necessary to administer the Plan in accordance with its
terms, including the power to construe the Plan and to determine all questions
that may arise thereunder. In the exercise of such powers under the Plan, the
Administrative Committee shall have discretionary authority to interpret the
terms of the Plan and to determine eligibility for and entitlement to Plan
benefits in accordance with the terms of the Plan. Any interpretation or
determination made pursuant to such discretionary authority shall be given full
force and effect,
- 21 -
<PAGE>
unless it can be shown that the interpretation or determination was arbitrary
and capricious.
F. Appointment of Professional Assistance and Investment Manager.
-------------------------------------------------------------
The Administrative Committee may engage accountants, attorneys, physicians and
such other personnel as it deems necessary or advisable. The functions of any
such persons engaged by the Administrative Committee shall be limited to the
specific services and duties for which they are engaged, and such persons shall
have no other duties, obligations or responsibilities under the Plan. Such
persons shall exercise no discretionary authority or discretionary control
respecting the management of the Plan. The fees and costs of such services
shall be paid by the Participating Companies.
G. Actions by the Administrative Committee. All actions of the
---------------------------------------
Administrative Committee shall be taken pursuant to the decision of a majority
of the then members of the Administrative Committee.
H. Discretionary Acts. In the event the Administrative Committee
------------------
exercises any discretionary authority under the Plan with respect to a
Participant who is a member of the Administrative Committee, such discretionary
authority shall be
- 22 -
<PAGE>
exercised solely and exclusively by those members of the Administrative
Committee other than such Participant, or, if such Participant is the sole
member of the Administrative Committee, such discretionary authority shall be
exercised solely and exclusively by the Board of Directors of the Sponsoring
Company.
I. Payment of Fees and Expenses. The members of the Administrative
----------------------------
Committee and their assistants and representatives shall be entitled to payment
from the Participating Companies for all reasonable costs, charges and expenses
incurred in the administration of the Plan, including, but not limited to,
reasonable fees for accounting, legal and other services rendered, to the extent
incurred by the members of the Administrative Committee or their assistants and
representatives in the course of performance of their duties under the Plan.
Notwithstanding any other provision of the Plan, no person who receives full-
time pay from the Participating Companies shall receive compensation from the
Plan, except for reimbursement of expenses properly and actually incurred.
J. Plan Administrator. The Sponsoring Company shall be the
------------------
"administrator" (as defined in Section 3(16)(A) of ERISA) of the Plan. The Vice
President of Human Resources of the
- 23 -
<PAGE>
Sponsoring Company shall be the designated agent for service of legal process.
K. Allocation and Delegation of Administrative Committee
-----------------------------------------------------
Responsibilities. The Administrative Committee may upon approval of a majority
- ----------------
of the members of the Administrative Committee, (i) allocate among any of the
members of the Administrative Committee any of the responsibilities of the
Administrative Committee under the Plan or (ii) designate any person, firm or
corporation that is not a member of the Administrative Committee to carry out
any of the responsibilities of the Administrative Committee under the Plan. Any
such allocation or designation shall be made pursuant to a written instrument
executed by a majority of the members of the Administrative Committee.
SECTION SIX
PARTICIPANTS' ACCOUNTS
----------------------
A. Maintenance of Accounts. There shall be maintained on behalf of
-----------------------
each Participant a Company Contribution Account, a Salary Reduction Contribution
Account and, if applicable, a Predecessor Account. The Participant's interest
in his Company Contribution Account shall be subject to the vesting schedule set
- 24 -
<PAGE>
forth in Paragraph A of Section Eleven. The Participant's interest in his
Salary Reduction Contribution Account shall be one hundred percent (100%) vested
at all times. The Participant's interest in the deferral account component of
his Predecessor Account shall be one hundred percent (100%) vested at all times
and the matching account component of his Predecessor Account shall become
vested in accordance with Section 2.7 of the Manor Care, Inc. Supplemental
Savings Plan as in effect on December 31, 1991. All payments to a Participant
or his Beneficiaries shall be charged against the respective Accounts of such
Participant.
B. Accounts of Participant Transferred to an Affiliated Company. If
------------------------------------------------------------
a Participant is transferred to an Affiliated Company which has not adopted the
Plan, the amounts which are credited to his Accounts shall continue to be
governed by the provisions of the Plan.
C. Annual Adjustment of Participants' Accounts. Promptly after the
-------------------------------------------
last day of each Plan Year, the Administrative Committee shall adjust the
Accounts of each Participant so that the amount of net income, loss,
appreciation or depreciation in the value of the amount invested in an
Investment Fund shall be
- 25 -
<PAGE>
allocated equitably and exclusively to the Accounts of the Participants invested
in such Investment Fund.
D. Investment of Contributions.
---------------------------
(i) Participant-Directed Investments. In accordance with procedures
--------------------------------
established by the Administrative Committee, each Participant shall have the
opportunity, on or before each Investment Election Date, to make an Investment
Election with the Administrative Committee or its delegate. This election shall
be effective beginning on the Investment Election Date following its receipt by
the Administrative Committee, or its delegate, and shall continue in effect
until revoked or modified as of a subsequent Investment Election Date. Any such
modification or revocation of an Investment Election shall be effective on the
Investment Election Date following the receipt by the Administrative Committee
of a new Investment Election. The following restrictions shall apply to such
investment elections:
(a) No election may be made in violation of any applicable investment
contract or other agreement establishing an Investment Fund;
- 26 -
<PAGE>
(b) Transfers among the available Investment Funds may be made only in
whole percentage multiples of one percent (1%) of the balances therein; and
(c) Prior to January 1, 1997, no shares of Company Stock which have
been allocated to a Participant's Company Contribution Account or Company Stock
Account may be liquidated or otherwise converted into another form of investment
except in the case of a distribution of benefits from such Account. On and
after January 1, 1997, shares of Company Stock which have been allocated to a
Participant's Company Contribution Account or Company Stock Account may be
liquidated or otherwise converted into another form of investment. Any shares
of Company Stock which must be acquired by the Trust to effectuate an investment
election shall be purchased on the open market as soon as practicable after the
next applicable Valuation Date. Any dividends paid with respect to Company
Stock shall be used to purchase additional whole or partial shares of Company
Stock as soon as practicable after the next Valuation Date.
In addition, the Administrative Committee, in its sole discretion, may
from time to time establish special Investment Election Dates to provide the
Participants with additional
- 27 -
<PAGE>
opportunities to designate the manner in which their Accounts shall be allocated
among the then-available Investment Funds.
(ii) Other Investments. All Accounts not subject to an Investment
-----------------
Election filed with the Administrative Committee pursuant to subparagraph (i)
above shall be invested in a money market fund or other liquid or pooled fund
investment vehicle selected by the Administrative Committee.
E. No Right to Specific Assets. The fact that for administrative
---------------------------
purposes Accounts are maintained for each Participant under the Plan shall not
be deemed to segregate for such Participant, or to give such Participant any
direct interest in, any specific assets of the Participating Companies except as
otherwise provided in Section Eighteen below.
F. Special Rules Regarding Manor Care, Inc. Stock. It is anticipated
----------------------------------------------
that the Company Stock Accounts and Company Contribution Accounts of
Participants shall initially be credited with shares of Manor Care, Inc. stock
as a result of the transfer of assets from the Manor Care, Inc. Retirement
Savings and Investment Plan and the Company Matching Contributions made with
respect to the 1996 Plan Year. The Administrative Committee shall establish a
uniform and non-discriminatory set of
- 28 -
<PAGE>
procedures pursuant to which a Participant may elect that all or any portion of
the Manor Care, Inc. stock held in his Company Stock Account or Company
Contribution Account be liquidated and the proceeds therefrom reinvested among
the then-available investment funds. It is anticipated that such election period
shall occur in November and December of 1996. Manor Care, Inc. stock which is
not so liquidated will be retained in the Participant's Company Stock Account
and Company Contribution Account. Such shares may not be liquidated prior to the
payment of benefits to such Participant from his Company Stock Account and
Company Contribution Account in accordance with the provisions of the Plan. Any
dividends payable with respect to Manor Care, Inc. stock retained by the Plan
will be reinvested in additional shares of Manor Care, Inc. stock.
SECTION SEVEN
ALLOCATIONS TO PARTICIPANT'S ACCOUNTS
-------------------------------------
A. Salary Reduction Contributions. Each Plan Year, the Participating Company
------------------------------
employing a Participant who has elected to reduce his Compensation pursuant to
subparagraph (i) of this Paragraph A shall withhold from such Participant's
Compensation
- 29 -
<PAGE>
the Salary Reduction Contributions, as elected by such Participant.
(i) Compensation Reduction Election. (a) A Participant may elect to
-------------------------------
reduce his Compensation by an amount equal to the difference between the amount
of his Compensation which he elected to contribute to the Choice Hotels
International, Inc. Retirement Savings and Investment Plan and the actual amount
which he is allowed to contribute to the Choice Hotels International, Inc.
Retirement Savings and Investment Plan taking into account the various limits
and eligibility service requirements set forth in the Choice Hotels
International, Inc. Retirement Savings and Investment Plan; provided, however,
that the aggregate amount by which a Participant may elect to reduce his
Compensation under subparagraph (i)(a) of this Plan and under the Choice Hotels
International, Inc. Retirement Savings and Investment Plan shall be in whole
percentages of his Compensation and shall not exceed fifteen percent (15%) of
his Compensation for any Plan Year. Such contributions shall be made through
regular payroll deductions by notifying the Administrative Committee, no later
than the first business day of the month as of which such election is intended
to become effective, pursuant
- 30 -
<PAGE>
to such notification procedures as the Administrative Committee may establish,
from time to time. Such election shall remain in effect for subsequent Plan
Years until suspended or revoked pursuant to subparagraph (ii) of this
Paragraph A.
(b) In addition, a Participant may also elect to reduce his
Compensation by the amount, if any, paid to such Participant during the Plan
Year which is attributable to salary reduction contributions made by such
Participant to the Choice Hotels International, Inc. Retirement Savings and
Investment Plan. The Administrative Committee shall establish uniform and
nondiscriminatory procedures regarding the timing and manner in which such
additional Salary Reduction Contributions are made to the Plan.
(ii) Suspension of Reductions. A Participant may, by filing the
------------------------
appropriate form, elect to suspend his Compensation reductions. Such voluntary
suspension shall be effective as of the first day of the first applicable
payroll period commencing after the receipt and completion of processing of the
appropriate form by the Administrative Committee. Any such suspension shall
remain in effect until the following month, at which time the Participant may
recommence such Compensation reductions. During
- 31 -
<PAGE>
such period of suspension, the Compensation reductions of such Participant shall
be suspended. A Participant may not make up suspended Compensation reductions.
The Compensation reductions of a Participant shall be suspended automatically
for any payroll period in which such Participant does not receive any
Compensation.
(iii) Method of Allocating Salary Reduction Contributions. Each
---------------------------------------------------
Participant who elected to reduce his Compensation during a Plan Year pursuant
to the provisions of this Paragraph A shall receive an allocation of Salary
Reduction Contributions to his Salary Reduction Contribution Account for such
Plan Year equal to the amount by which he elected to reduce his Compensation for
such Plan Year pursuant to the provisions of this Paragraph A.
B. Company Matching Contributions.
------------------------------
(i) Each Plan Year, each Eligible Participant shall receive an
allocation to his Company Contribution Account for such Plan Year in an amount
(the "Company Matching Contribution"), equal to a percentage of the amount of
Salary Reduction Contributions allocated to such Eligible Participant under
Paragraph A(i)(a) and A(i)(b) above for such Plan Year. In order
- 32 -
<PAGE>
to receive a Company Matching Contribution with respect to a Salary Reduction
Contribution, which is attributable to a refund of a prior salary reduction
contribution made by such Eligible Participant to the Manor Care Inc. Retirement
Savings and Investment Plan which was refunded to the Participant due to
nondiscrimination rules or other limitations set forth in such plan, the
Eligible Participant must be employed by the Participating Company or an
Affiliated Company on the date such refund is made but need not have elected to
make Salary Reduction Contributions under Paragraph A with respect to the Plan
Year within which such refund is made. This percentage shall be based upon the
Eligible Participant's Years of Service in accordance with the following
schedule:
<TABLE>
<CAPTION>
Years of Service Matching Percentage
---------------- -------------------
<S> <C>
1 to 5 years 25%
6 to 9 years 75%
10 or more years 100%
</TABLE>
In addition, the Company Contribution Account of each Eligible Participant who
made a valid salary reduction contribution election with respect to the Choice
Hotels International, Inc. Retirement Savings and Investment Plan shall be
credited with an amount equal to any Company matching contributions made to the
- 33 -
<PAGE>
Choice Hotels International, Inc. Retirement Savings and Investment Plan and
earnings thereon for the Plan Year to which such Eligible Participant's salary
reduction contribution election pertains which were forfeited or foregone due to
(a) the requirements of Internal Revenue Code Sections 401(k) or 401(m),
(b) the refund of salary reduction contributions previously made by such
Eligible Participant under the Choice Hotels International, Inc. Retirement
Savings and Investment Plan, (provided that an amount equal to the refund was
contributed to this Plan), or (c) any other limitations placed on the Eligible
Participant's salary reduction contributions under the Choice Hotels
International, Inc. Retirement Savings and Investment Plan. The aggregate
amount of the Company Matching Contribution which may be allocated to each
Eligible Participant's Company Contribution Account for such Plan Year under
this Plan and under the Choice Hotels International, Inc. Retirement Savings and
Investment Plan shall not exceed six percent (6%) of his Compensation.
Notwithstanding the above, however, the combination of the Company Matching
Contribution made to this Plan for any Plan Year when combined with Company
Matching Contribution made with respect to such Plan Year under the Choice
- 34 -
<PAGE>
Hotels International, Inc. Retirement Savings and Investment Plan shall not
exceed six percent (6%) of Net Profits of the Sponsoring Company determined with
respect to the fiscal year that ends within such Plan Year. If the combined
Company Matching Contributions would otherwise exceed the six percent (6%)
limitation, then the amount of available Company Matching Contributions shall be
pro-rated among the two plans based upon the relative Company Matching
Contributions otherwise due to both programs.
(ii) From time to time, the Administrative Committee may, in its sole
discretion, determine that the inclusion of an Employee in the Plan jeopardizes
the ability of the Plan to continue to satisfy the requirements under Section
3(36) of ERISA. In such an instance, the Administrative Committee may direct
the immediate distribution to such Employee of any vested amount in his Company
Contribution Account and Salary Reduction Contribution Account.
(iii) If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the Plan
Year has been made and
- 35 -
<PAGE>
allocated, the Participating Company shall not be entitled to recover the
contribution made with respect to the Ineligible Participant regardless of
whether or not a deduction is allowable with respect to such contribution. In
such event, the amount contributed with respect to the Ineligible Participant
shall constitute a forfeiture for the Plan Year in which the discovery is made.
SECTION EIGHT
DISABILITY BENEFITS
-------------------
A. Disability Retirement Benefits. If a Participant retires by
------------------------------
reason of Total and Permanent Disability while in the employ of a Participating
Company, his Company Contribution Account shall fully vest, and he shall be
entitled to receive benefits equal to the total amount in his Accounts in the
Plan as determined in accordance with the provisions of Paragraph A of Section
Twelve hereof. Such benefits shall be paid at the time and in the manner
specified in Section Twelve of the Plan.
B. Determination of Disability. The Administrative Committee shall
---------------------------
determine whether a Participant has suffered a Total and Permanent Disability
and its determination in that
- 36 -
<PAGE>
respect shall be binding upon the Participant. In making its determination, the
Administrative Committee may (i) require the Participant to submit to medical
examinations by doctors selected by the Administrative Committee or (ii) rely
upon a determination that the Participant is entitled to disability benefits
payable under Title II of the Social Security Act, 42 U.S.C. 301 et. seq., or
-- ---
similar subsequent section, as evidenced by a certificate of Social Security
Insurance Award. The provisions of this Section Eight shall be uniformly and
consistently applied to all Participants.
SECTION NINE
RETIREMENT BENEFITS
-------------------
If a Participant is employed by a Participating Company on his
Retirement Date, his Company Contribution Account shall fully vest at that time.
If the Participant continues in a Participating Company's employ after his
Retirement Date, he shall continue to be eligible to reduce his Compensation
under the Plan and to share in the allocations of Company Matching Contributions
under the Plan until his actual retirement. Upon retirement on or after
attaining his Retirement Date, a Participant shall be entitled to receive
benefits equal to the total
- 37 -
<PAGE>
amount in his Accounts in the Plan as determined in accordance with the
provisions of Paragraph A of Section Twelve hereof. Such benefits shall be paid
at the time and in the manner specified in Section Twelve of the Plan.
SECTION TEN
DEATH BENEFITS
--------------
A. Death Benefits. Upon the death of a Participant who is employed
--------------
by a Participating Company at the time of his death, such deceased Participant's
Company Contribution Account shall fully vest, and his Beneficiary shall be
entitled to receive benefits equal to the total amount in the deceased
Participant's Accounts in the Plan as determined in accordance with the
provisions of Paragraph A of Section Twelve hereof. Upon the death of a
Participant who is not employed by a Participating Company at the time of his
death, such deceased Participant's Beneficiary shall be entitled to receive
benefits equal to the vested amount in the deceased Participant's Accounts in
the Plan as determined in accordance with the provisions of Paragraph A of
Section Eleven. In either event, such benefits shall be paid at
- 38 -
<PAGE>
the time and in the manner specified in Section Twelve of the Plan.
B. Designation of Beneficiaries. Each Participant may designate
----------------------------
one or more Beneficiaries and contingent Beneficiaries by delivering a written
designation thereof over his signature to the Administrative Committee. A
Participant may designate different Beneficiaries at any time by delivering a
new written designation over his signature to the Administrative Committee. Any
such designation shall become effective only upon its receipt by the
Administrative Committee. The last effective designation received by the
Administrative Committee shall supersede all prior designations. A designation
of a Beneficiary shall be effective only if the designated Beneficiary survives
the Participant.
C. Failure of Participant to Designate. If a Participant fails to
-----------------------------------
designate a Beneficiary, or if no designated Beneficiary survives the
Participant, the Participant shall be deemed to have designated the following
Beneficiaries (if then living) in the following order of priority: (1) his
spouse, (2) his children, including adopted children and stepchildren, in equal
shares, (3) his parents, in equal shares, and (4) his estate.
- 39 -
<PAGE>
D. Beneficiaries' Rights. Whenever the rights of a Participant are
---------------------
stated or limited in the Plan, his Beneficiaries shall be bound thereby.
- 40 -
<PAGE>
SECTION ELEVEN
EMPLOYMENT TERMINATION BENEFITS
-------------------------------
A. Vesting Upon Termination of Employment. In the event of the
--------------------------------------
Termination of Employment of a Participant, such Participant shall be entitled
to receive (i) one hundred percent (100%) of the amount in his Salary Reduction
Contribution Account, (ii) one hundred percent (100%) of the amount in the
deferral account component of his Predecessor Account and (iii) the following
percentage of the amount in his Company Contribution Account, based upon the
number of his Years of Service prior to such Termination of Employment, as
follows:
<TABLE>
<CAPTION>
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 3 years None
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 or more years 100%
</TABLE>
Such Participant's interest in the matching account component of his Predecessor
Account shall become vested in accordance with Section 2.7 of the Manor Care,
Inc. Supplemental Savings Plan as in effect on December 31, 1991. Such benefits
shall be paid at
- 41 -
<PAGE>
the time and in the manner set forth in Section Twelve of the Plan.
B. Counting Years of Service. For purposes of this Section Eleven,
-------------------------
all Years of Service (whether or not continuous) shall be taken into account,
except Years of Service which are disregarded as follows:
(i) In the case of any Participant who has a One-Year Break in
Service, Years of Service before such break shall not be taken into account
until such Participant has completed a Year of Service after such break.
(ii) In the case of any Participant who has no vested amount in his
Accounts in the Plan, Years of Service before any period of consecutive One-Year
Breaks in Service shall not be taken into account if the number of consecutive
One-Year Breaks in Service equals or exceeds the greater of (a) five (5) or (b)
the aggregate number of Years of Service before such break. Such aggregate
number of Years of Service before such break shall be deemed not to include any
Years of Service not required to be taken into account under this Paragraph B by
reason of any prior breaks in service.
- 42 -
<PAGE>
(iii) In the case of any Participant who has five (5) consecutive
One-Year Breaks in Service, Years of Service after such break shall not be taken
into account for purposes of determining the vested amount in his Company
Contribution Account which accrued prior to such break.
C. Forfeiture of Non-Vested Amount. The excess of (i) the amount
-------------------------------
in the Company Contribution Account of a Participant whose Termination of
Employment has occurred, over (ii) the vested amount in such Company
Contribution Account as determined in accordance with the vesting schedule set
forth in Paragraph A of this Section Eleven (such difference being referred to
herein as the "Non-Vested Amount") shall be forfeited upon the earlier of
(i) the Participant's receipt of a distribution of his total vested Accounts
under the Plan or (ii) his incurring his second (2nd) consecutive One-Year Break
in Service following his Termination of Employment.
SECTION TWELVE
PAYMENT OF BENEFITS
-------------------
A. Retirement, Disability and Death Benefits. The Administrative
-----------------------------------------
Committee shall make distribution of the benefits
- 43 -
<PAGE>
payable to a Participant (or, if applicable, his Beneficiary), pursuant to
Paragraph C of this Section Twelve, upon such Participant's retirement on or
after attaining his Retirement Date or after sustaining a Total and Permanent
Disability or upon such Participant's death while employed by a Participating
Company. The amount of such distribution shall be based upon the balance in such
Participant's Accounts as of the Valuation Date coincident with or immediately
preceding such distribution, supplemented, where applicable, by an amount
representing any amounts withheld from such Participant's Compensation under
Paragraph A of Section Seven subsequent to such Valuation Date.
B. Employment Termination Benefits. The Administrative Committee
-------------------------------
shall make an employment termination benefit distribution to a Participant who
has incurred a Termination of Employment. The amount of such distribution shall
be based upon the vested amount (as provided in Paragraph A of Section Eleven)
in his Company Contribution Account and the total amount in his Salary
Reduction Contribution Account and his Predecessor Account as of the Valuation
Date coincident with or immediately preceding the date on which the
distribution is made, supplemented, where applicable, by an amount representing
any amounts withheld from
- 44 -
<PAGE>
such Participant's Compensation under Paragraph A of Section Seven subsequent
to such Valuation Date.
In the event that a distribution is made pursuant to this Paragraph B
to a Participant who, at the time of such distribution, is not one hundred
percent (100%) vested in the amount in his Company Contribution Account, the
following rules shall apply:
(i) Establishment of Separate Ledger Account. The Administrative
----------------------------------------
Committee shall establish a separate ledger account (hereinafter referred to as
the "Separate Account") for such Participant as of the time of such
distribution. The balance in such Participant's Company Contribution Account
immediately following such distribution shall be transferred to this Separate
Account and shall constitute the initial balance of this Separate Account. For
this purpose, all references to a Participant's "Company Contribution Account"
in the Plan shall be deemed applicable to such Participant's Separate Account.
(ii) Subsequent Payments. In the event that after such distribution
-------------------
the former Employee is rehired by a Participating Company but then again incurs
a Termination of Employment at a time when such Participant is less than one
hundred percent
- 45 -
<PAGE>
(100%) vested in his Separate Account, then the nonforfeitable portion of such
Participant's Separate Account for purposes of Paragraph A of Section Eleven
shall be an amount equal to:
(A) The vesting percentage set forth in Paragraph A of
Section Eleven applicable to such Participant at the time of such subsequent
distribution,
Multiplied by:
-------------
(B) The sum of the present balance in the Separate
Account plus the sum of all prior distribution amounts,
----
Less:
----
The sum of all prior distribution amounts.
C. Distribution of Benefits. Upon a Participant's retirement on or
------------------------
after attaining his Retirement Date or after sustaining a Total and Permanent
Disability, his death, or his Termination of Employment, the Participating
Company which employed such Participant at such time shall pay such Participant
(or, if applicable, his Beneficiary) the benefits payable to him under Paragraph
A or B of this Section Twelve in one lump sum payment as soon as
administratively feasible after such event. However, if at least sixty (60)
days prior to his retirement, death or Termination of Employment, the
Participant made an
- 46 -
<PAGE>
irrevocable election to receive his benefits under the Plan in the form of
installment payments, such distribution shall instead be made in the form of
installment payments. If a Participant elects distribution in the form of
installment payments, he shall further designate the period of time (not to
exceed twenty (20) years) over which the installment payments are to be made and
whether such installment payments are to be made on a monthly, quarterly, semi-
annual or annual basis. During the period such installment payments are being
made, the remaining balances in the Participant's vested Accounts shall continue
to be credited with earnings or losses in accordance with the provisions of
Section Six of the Plan. If a Participant dies after having made an election to
receive his distribution in the form of installment payments but before the
receipt of all of the installment payments payable thereunder, the remaining
installment payments shall be paid to his Beneficiary for the remaining duration
of the elected installment period unless the Participant has provided in such
installment election for a different form of payment to his Beneficiary in the
event of the death of the Participant, in which event such different form of
payment shall be made to the Participant's Beneficiary. If a
- 47 -
<PAGE>
Participant dies after having elected to receive his distribution in the form of
installment payments but prior to receipt of any installment payments payable
thereunder, the benefits payable under Paragraph A or B of this Section Twelve
to such Participant's Beneficiary shall be paid in one lump sum payment as soon
as administratively feasible following such Participant's death.
The computation of the amount of any lump sum payment or the amount of
any installment payment shall be made by reference to the balances of the
Participant's vested Accounts as of the date of the distribution. A
Participating Company making any distribution hereunder shall withhold from the
distribution any applicable payroll taxes or required income taxes.
Notwithstanding the foregoing, the distribution of the benefits
attributable to that portion of the Participant's Company Stock Account and
Company Contribution Account held in the form of Company Stock shall be made (i)
in cash if the aggregate number of shares in such accounts is fifty (50) or
less, or (ii) in cash or Company Stock or both if the aggregate number of shares
in such accounts is more than fifty (50). Prior to making a distribution of
benefits, the Administrative
- 48 -
<PAGE>
Committee shall advise the Participant (or, if applicable, his Beneficiary) in
writing of the right to demand that that portion of the Participant's Company
Stock Account and Company Contribution Account held in the form of Company Stock
be distributed solely in Company Stock, if such accounts contain in the
aggregate greater than fifty (50) shares. If the Participant (or, if applicable,
his Beneficiary) fails to make such demand in writing within ninety (90) days
after receipt of such written notice, the Administrative Committee shall direct
the Trustee to make distribution of that portion of the Participant's Company
Stock Account and Company Contribution Account held in Company Stock in such
form as the Administrative Committee, in its sole discretion, shall determine.
If a Participant (or, if applicable, his Beneficiary) demands that
that portion of the Participant's Company Stock Account and Company Contribution
Account held in the form of Company Stock be distributed solely in Company
Stock, and if such accounts contain in the aggregate greater than fifty (50)
shares, the distribution of such applicable portion of his Company Stock Account
and Company Contribution Account held in the form of Company Stock shall be made
entirely in whole shares or other
- 49 -
<PAGE>
units of Company Stock. Any cash balance in the Participant's Company Stock
Account shall be used to acquire for distribution the maximum number of whole
shares or other units of Company Stock at the then fair market value. Any
fractional unit of the unexpended balance shall be distributed in cash. If
Company Stock is not available for purchase by the Trustee, then the Trustee
shall hold such balance until Company Stock is acquired and then make such
distribution. If the Trustee is unable to purchase the Company Stock required
for distribution, it shall make distribution in cash within one (1) year after
the date the distribution was to be made, except in the case of a retirement
distribution, which shall be made within sixty (60) days after the close of the
Plan Year in which the Participant's retirement occurs.
D. Benefits of Persons Who Cannot Be Located. If the Administrative
-----------------------------------------
Committee determines in good faith that a Participant or Beneficiary entitled to
receive a benefit payment hereunder cannot be located, the Administrative
Committee shall nevertheless give written notice to such person of the fact that
such benefit payment is payable to him under the Plan. Such written notice shall
be given by United States mail to the person
- 50 -
<PAGE>
entitled to the benefit payment (according to the records of the Plan) at the
last known address of such person. In addition, the Administrative Committee
shall use such other means as are reasonably available to it in order to
ascertain the location of such person. If such Participant or Beneficiary makes
no claim for such benefit payment before the earlier of (i) a period of two (2)
years after the giving of such written notice or (ii) the termination of the
Plan, then the Administrative Committee shall declare a forfeiture of the
benefits otherwise payable to such person, provided such person has not yet been
located.
E. Distribution for Minor Beneficiary. In the event a distribution
----------------------------------
is to be made to a minor, then the Administrative Committee may, in its sole
discretion, direct that such distribution be paid to the legal guardian, or if
none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian or parent of a minor Beneficiary shall fully discharge
- 51 -
<PAGE>
the Participating Company and Plan from further liability on account thereof.
- 52 -
<PAGE>
SECTION THIRTEEN
BENEFIT CLAIMS PROCEDURE
------------------------
A. Claims for Benefits. Any claim for benefits under the Plan shall be
-------------------
made in writing to the Administrative Committee. If such claim for benefits is
wholly or partially denied, the Administrative Committee shall, within ninety
(90) days after receipt of the claim, notify the Participant or Beneficiary of
the denial of the claim. Such notice of denial shall (i) be in writing, (ii) be
written in a manner calculated to be understood by the Participant or
Beneficiary, and (iii) contain (a) the specific reason or reasons for denial of
the claim, (b) a specific reference to the pertinent Plan provisions upon which
the denial is based, (c) a description of any additional material or information
necessary to perfect the claim, along with an explanation of why such material
or information is necessary, and (d) an explanation of the claim review
procedure as set forth in this Section Thirteen.
B. Request for Review of Denial. Within sixty (60) days after the
----------------------------
receipt by a Participant or Beneficiary of a written notice of denial of the
claim, or such later time as shall be
- 53 -
<PAGE>
deemed reasonable taking into account the nature of the benefit subject to the
claim and any other attendant circumstances, the Participant or Beneficiary may
file a written request with the Administrative Committee that it conduct a full
and fair review of the denial of the claim for benefits.
C. Decision on Review of Denial. The Administrative Committee shall
----------------------------
deliver to the Participant or Beneficiary a written decision on the claim within
sixty (60) days after the receipt of the aforesaid request for review. Such
decision shall (i) be written in a manner calculated to be understood by the
Participant or Beneficiary, (ii) include the specific reason or reasons for the
decision, and (iii) contain a specific reference to the pertinent Plan
provisions upon which the decision is based.
SECTION FOURTEEN
INALIENABILITY OF BENEFITS
--------------------------
The right of any Participant or Beneficiary to any benefit or payment
under the Plan shall not be subject to voluntary or involuntary transfer,
alienation, or assignment, and, to the fullest extent permitted by law, shall
not be subject to attachment, execution, garnishment, sequestration, or other
legal
- 54 -
<PAGE>
or equitable process. In the event a Participant or Beneficiary who is receiving
or is entitled to receive benefits under the Plan attempts to assign, transfer
or dispose of such right, or if an attempt is made to subject said right to such
process, such assignment, transfer or disposition shall be null and void.
SECTION FIFTEEN
AMENDMENT OF THE PLAN
---------------------
The Sponsoring Company may amend the Plan at any time, and from time
to time, pursuant to written resolutions of the Board of Directors of the
Sponsoring Company. No such amendment, however, shall have the effect of
reducing any then nonforfeitable percentage of benefits of any Participant as
computed in accordance with the vesting schedule under Paragraph A of Section
Eleven of the Plan. Notwithstanding the foregoing provisions of this Plan, the
Sponsoring Company may provide for distribution of some or all of the Accounts
established in connection with the Plan if the Sponsoring Company's chief legal
officer renders a written opinion that such distribution is required to enable
the Plan to qualify for exemption from the requirements of Parts 2-4 of Title I
of ERISA or as otherwise required by applicable law.
- 55 -
<PAGE>
SECTION SIXTEEN
PERMANENCY OF THE PLAN
----------------------
Each Participating Company reserves the right to terminate the Plan
with respect to such Participating Company, and the Sponsoring Company reserves
the right to terminate the Plan with respect to all the Participating Companies.
If the Board of Directors of a Participating Company determines to
terminate the Plan completely with respect to such Participating Company, the
Plan shall be terminated with respect to such Participating Company as of the
date specified in certified copies of resolutions of such Board of Directors of
the Participating Company delivered to the Administrative Committee. If the
Board of Directors of the Sponsoring Company determines to terminate the Plan
completely with respect to all the Participating Companies, the Plan shall be
terminated with respect to all the Participating Companies as of the date
specified in certified copies of resolutions of the Board of Directors of the
Sponsoring Company delivered to the Administrative Committee. Upon such
termination or partial termination of the Plan, after payment of all expenses
and proportional adjustment of the Accounts of the Participants
- 56 -
<PAGE>
affected by such termination to reflect expenses, profits or losses, and
allocations of any previously unallocated amounts to the date of termination,
the Participants affected by such termination shall be entitled to receive the
amount then credited to their respective Accounts in the Plan. The
Administrative Committee shall make payment of such amounts in cash.
Upon the termination or partial termination of the Plan, the right of
each Participant affected by such termination to the amount credited to his
Accounts at such time shall be nonforfeitable without reference to any formal
action on the part of the Administrative Committee or the Participating Company
employing such Participant.
SECTION SEVENTEEN
STATUS OF EMPLOYMENT RELATIONS
------------------------------
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between any Participating Company and its Employees or to
be consideration for, or an inducement or condition of, the employment of any
person. Nothing herein contained shall be deemed (i) to give to any Employee the
right to be retained in the employ of a Participating Company; (ii) to affect
the right of a Participating Company to discipline or
- 57 -
<PAGE>
or discharge any Employee at any time; (iii) to give a Participating Company the
right to require any Employee to remain in its employ; or (iv) to affect any
Employee's right to terminate his employment at any time.
SECTION EIGHTEEN
FUNDING
-------
No assets of the Participating Companies shall be set aside, earmarked
or placed in trust or escrow for the benefit of any Participant to fund any
obligation of any Participating Company which may exist under this Plan;
provided, however, that the Participating Companies may establish a grantor
trust to hold assets to secure their obligations to the Participants under this
Plan if the establishment of such a trust does not result in the Plan being
"funded" for purposes of the Internal Revenue Code. Except to the extent
provided through a grantor trust established under the provisions of the
preceding sentence, all payments to a Participant or Beneficiary under this Plan
shall be made out of the general revenue of the Participating Company which
employed the Participant to which such benefits were attributable, and the right
to such payments by the Participant or Beneficiary shall be
- 58 -
<PAGE>
solely that of an unsecured general creditor of the relevant Participating
Company.
SECTION NINETEEN
APPLICABLE LAW
--------------
The Plan shall be construed, regulated, interpreted and administered
under and in accordance with the laws of the State of Maryland, other than its
laws respecting choice of law, to the extent not preempted by ERISA.
SECTION TWENTY
ADOPTION OF PLAN BY AFFILIATED COMPANIES
----------------------------------------
Any Affiliated Company, whether or not presently existing, may, with
the approval of the Board of Directors of the Sponsoring Company, adopt the Plan
by means of appropriate corporate action of such Affiliated Company and by
executing such documents as the Board of Directors of the Sponsoring Company may
require in order for such Affiliated Company to become a party to any trust
established in connection with the Plan. Any such Affiliated Company which
adopts the Plan as provided above shall thereafter be included within the
meaning of the term "Participating Company" when used in the Plan.
- 59 -
<PAGE>
EXHIBIT 5
---------
December 10, 1996
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
RE: Choice Hotels International, Inc.
Registration Statement on Form S-8
Gentlemen:
I am General Counsel of Choice Hotels International, Inc. (the
"Company") and have acted for the Company in connection with the preparation of
the Company's Registration Statement on Form S-8 filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended. The Registration Statement covers shares of the Company's Common
Stock, $.01 par value, offered under the Company's Nonqualified Retirement
Savings & Investment Plan (the "Plan").
In connection with the rendering of the opinion set forth below, I
have reviewed the records of the Company, the minutes of the meetings of the
stockholders and directors of the Company and such other records and documents
as was necessary in my judgment to so render the following opinion.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated and existing under
the laws of the State of Delaware; and
2. The shares of Common Stock of the Company offered to the holders
under the exercise of options under the Plan, have been or will be legally
issued, fully paid and nonassessable.
I hereby consent to the filing of a copy of this opinion with the
Commission as an exhibit to the Registration Statement referred to above.
Very truly yours,
/s/ Edward A. Kubis
Edward A. Kubis
Senior Vice President
and General Counsel
<PAGE>
EXHIBIT 23(i)
-------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated June 28, 1996,
included in Choice Hotels International, Inc.'s Form 10/A-4 dated October 10,
1996 and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
December 10, 1996
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings & Investment
Plan and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Stewart Bainum, Jr.
------------------------------
Stewart Bainum, Jr.
Executive Chairman of the Board
and Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc.(the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ William R. Floyd
------------------------------
William R. Floyd
Vice Chairman of the Board,
Chief Executive Officer and
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Stewart Bainum
-------------------------------
Stewart Bainum
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for her and in her name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
10th day of December, 1996.
/s/ Barbara Bainum
------------------------------
Barbara Bainum
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Paul A. Gould
----------------------------
Paul A. Gould
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Frederic V. Malek
----------------------------------
Frederic V. Malek
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Jerry E. Robertson
--------------------------------
Jerry E. Robertson
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Robert C. Hazard, Jr.
---------------------------------------
Robert C. Hazard, Jr.
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Gerald W. Petitt
---------------------------------
Gerald W. Petitt
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ James A. MacCutcheon
----------------------------------
James A. MacCutcheon
Executive Vice President, Chief
Financial Officer and Treasurer
24
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints EDWARD A. KUBIS his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign Registration Statements or
amendments (including post-effective amendments) thereto with respect to the
registration under the Securities Act of 1933, as amended, of shares of Common
Stock, $.01 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Nonqualified Retirement Savings &
Investment Plan and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
10th day of December, 1996.
/s/ Charles G. Warczak, Jr.
-----------------------------------------
Charles G. Warczak, Jr.
Vice President and Controller
25
