<PAGE>
As filed with the Securities and Exchange Commission on December 2, 1997.
_____________________________________________________________________
REGISTRATION STATEMENT NO. 333-
********************************************************************************
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CHOICE HOTELS INTERNATIONAL, INC.
(formerly Choice Hotels Franchising, Inc.)
------------------------------------------
(Exact name of issuer as specified in its charter)
Delaware 52-1209792
--------- ----------
(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.
1997 Non-Employee Director Stock Option and Deferred
Compensation Stock Purchase Plan
and 1997 Non-Employee Director Stock Compensation Plan
-------------------------------------------------------
(Full title of the plans)
Michael J. DeSantis, Esq.
Senior Vice President, General Counsel and Secretary
10750 Columbia Pike
Silver Spring, MD 20901
------------------------
(Name and address of agent for service)
(301) 979-6237
--------------
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
******************************************************************************
Proposed Proposed
Title of 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, 200,000 Shs. $17.1563 $3,431,260 $1,184
par value of $.10
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 November 25, 1997.
In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the benefit plans described herein.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation by Reference.
- ------ ---------------------------
The following documents filed with the Securities and Exchange Commission
(the "Commission") by Choice Hotels International, Inc., a Delaware corporation
(the "Company") are incorporated as of their respective dates in this
Registration Statement on form S-8 (the "Registration Statement") by reference:
1. The Company's Registration Statement on Form 10, filed on September 18,
1997.
2. The Company's report on Form 10-Q for the quarter ended August 31, 1997.
All documents subsequently filed by 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 5. Interests of Named Experts and Counsel.
- ------- ---------------------------------------
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
2
<PAGE>
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 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.
3
<PAGE>
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 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
4
<PAGE>
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.
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.
5
<PAGE>
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 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
6
<PAGE>
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Agent as to expenses (including
attorneys' fees), 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.
- ------- ---------
4.1 Choice Hotels International, Inc. 1997 Non-Employee Director Stock
Option and Deferred Compensation Stock Purchase Program.
4.2 Choice Hotels International, Inc. 1997 Non-Employee Director Stock
Compensation Plan.
5 Opinion regarding legality of shares to be offered.
23(i) Consent of Arthur Andersen LLP.
23(ii) Consent of Michael J. DeSantis, 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.
------------------
7
<PAGE>
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;
(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
8
<PAGE>
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 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 1st day of December, 1997.
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ Michael J. DeSantis
----------------------------------
Michael J. DeSantis
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
- --------- ----- ----
* Chairman and Director December 1, 1997
- -------------------
Stewart Bainum, Jr.
* Director December 1, 1997
- -------------------
Stewart Bainum Director
* Vice Chairman, CEO December 1, 1997
- -------------------
William R. Floyd & Director
9
<PAGE>
* Director December 1, 1997
- -------------------
Barbara Bainum
* Director December 1, 1997
- -------------------
James H. Rempe
* Director December 1, 1997
- -------------------
Frederick V. Malek
* Director December 1, 1997
- -------------------
Jerry E. Robertson
* Vice President and December 1, 1997
- -------------------
Joseph M. Squeri Controller (Principal
Financial Officer &
Principal Accounting
Officer)
* By: /s/ Michael J. DeSantis
-------------------------------
Michael J. DeSantis
Attorney-in-fact
10
<PAGE>
EXHIBIT 4.1
-----------
<PAGE>
CHOICE HOTELS INTERNATIONAL, INC.
1997 NON-EMPLOYEE DIRECTOR
STOCK COMPENSATION PLAN
Choice Hotels International, Inc. (formerly Choice Hotels Franchising,
Inc.) has adopted and established a stock compensation plan for Non-Employee
Directors in accordance with the following terms and conditions.
SECTION ONE
DESIGNATION AND PURPOSE OF THE PLAN
A. Designation. This Plan is designated the "Choice Hotels
-----------
International, Inc. 1997 Non-Employee Director Stock Compensation Plan."
B. Purpose. The purpose of this Plan is to increase the stock-based
-------
component of Non-Employee Director compensation so as to encourage stock
ownership by Non-Employee Directors and to further align the interest of Non-
Employee Directors and stockholders.
SECTION TWO
DEFINITIONS
As used in the Plan, the following terms mean:
A. "Award" means restricted stock granted hereunder.
B. "Board" means the Board of Directors of the Company.
C. "Company" means Choice Hotels International, Inc.
D. "Custodial Account" means the account described in Section 7(A)
herein.
E. "Disability" means a permanent and total disability within the meaning
of Section 22(e)(3) of the Internal Revenue Code of 1986 as amended.
F. "Non-Employee Director" means a member of the Board of the Company who
is not an employee of the Company or any of its subsidiaries.
G. "Participant" means any Non-Employee Director who is granted an Award
as provided in this Plan.
1
<PAGE>
H. "Plan" means this Non-Employee Director Stock Compensation Plan.
I. "Retirement" means termination of service as a Director for either of
the following reasons: (i) after attaining 65 years of age or (ii) failure to
be re-elected as a Director by the shareholders of the Company at an Annual
Meeting of Stockholders.
J. "Stock" means the common stock of Choice Hotels International, Inc.
SECTION THREE
EFFECTIVE DATE, DURATION AND STOCKHOLDER APPROVAL
The Plan shall be effective upon the approval of the Plan by a majority of
the outstanding shares of Stock ("Stockholder Approval") and shall terminate on
October 15, 2007.
SECTION FOUR
ADMINISTRATION OF THIS PLAN
This Plan shall be administered by the Board. The Board shall have all the
powers vested in it by the terms of this Plan, such powers to include authority
(within the limitation described herein) to prescribe the form of the agreement
embodying Awards made under this Plan. Subject to the provisions of this Plan,
the Board shall have the power to construe this Plan, to determine all questions
arising thereunder, and to adopt and amend such rules and regulations for the
administration of this Plan as it may deem desirable. Any decision of the Board
in the administration of this Plan, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that the members thereof may authorize any one or more of their number or
the Secretary or any other officer of the Company to execute and deliver
documents on behalf of the Board.
SECTION FIVE
GRANT OF AWARDS AND LIMITATION OF
NUMBER OF SHARES SUBJECT TO AWARD
A. Compensation in Common Stock. Effective as of October 16, 1997 and as
----------------------------
of each annual meeting thereafter, each Non-Employee Director shall be granted
a number of shares equal to $30,000 fair market value (as determined in
accordance with Section 5(B) below) of Stock on the date of each annual meeting.
Such Award shall be in lieu of all Board retainer and Board attendance fees.
With respect to the initial grant on October 16, 1997, the grant shall be pro
rata based on the Company's change of fiscal year end from May 31 to December
31.
B. Determination of Fair Market Value. The fair market value of the
----------------------------------
Stock on the date of granting an Award shall be the mean of the high and low
prices at which the
2
<PAGE>
Stock was sold on the market on such date. In the event no such sales of Stock
occurred on such date, the fair market value of the Stock shall be determined by
the mean of the high and low prices at which the Stock was sold on the market on
the next preceding date for which the Stock was so sold.
C. Fractions of Shares. Whenever under the terms of the Plan fractional
-------------------
shares would be required to be issued, the fractional shares shall be rounded up
to the next full share.
D. Total Number of Shares. Subject to any adjustment pursuant to Section
----------------------
8, the total number of shares of Stock which may be awarded under this Plan is
150,000 shares. The maximum number of shares authorized may be increased from
time to time by approval of the Board and, if required pursuant to the
applicable rules of any stock exchange, the stockholders of the Company.
To the extent that an Award lapses or the rights of the Participant to
whom it was granted terminate, expire or are cancelled for any other reason, in
whole or in part, shares of Stock (or remaining shares) subject to such Award
shall again be available for the grant of an Award under the Plan. Shares
delivered by the Company under the Plan may be authorized and unissued Stock,
Stock held in the treasury of the Company or Stock purchased on the open market
(including private purchases) in accordance with applicable securities laws.
E. Insufficient Number of Shares. In the event that the number of shares
-----------------------------
of Stock available for future Awards under this Plan is insufficient to make all
Awards required to be made on any date, then all Participants entitled to an
Award on such date shall share ratably in the number of shares of Stock which
may be included in Awards granted to Participants under this Plan.
SECTION SIX
ELIGIBILITY
Each Non-Employee Director shall be eligible to receive an Award in
accordance with Section Five. Each Award granted under this Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with this Plan and shall comply with the terms and conditions
set forth in Section 7. Such an agreement shall incorporate the provisions of
this Plan by reference.
SECTION SEVEN
RESTRICTIONS ON SHARES
A. Custodial Account. The shares shall be held by the Company in a
-----------------
Custodial Account on behalf of the Participant until such time as the shares
have vested pursuant to the terms of Section 7(B) of this Plan.
3
<PAGE>
B. Vesting. The shares held by the Company shall remain in the
-------
Custodial Account until vesting which shall occur (a) to the extent of one-third
of the total number of shares, subject to an Award following the expiration of
one year from the date of the Award, (b) to the extent of an additional one-
third following the expiration of two years from the date of the Award, and (c)
to the extent of an additional one-third following the expiration of three years
from the date of the Award.
Upon vesting, the shares shall be distributed to the Participant within a
reasonable period of time not to exceed ninety (90) days from the date of
vesting and the Custodial Account shall be terminated as to such shares.
C. Forfeiture. Subject to Section 7(E) below, if the Participant ceases
----------
to be a Non-Employee Director for any reason prior to vesting, the Participant
shall forfeit the shares, and the Custodial Account shall be terminated.
Ownership of the forfeited shares shall revert back to the Company.
D. No Assignment. The shares granted under the Plan, while held by the
-------------
Company pursuant to the Custodial Account, shall not be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Upon any
attempt to so transfer, assign, pledge, hypothecate, or otherwise dispose of the
shares, or of any right or privilege conferred thereby, contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
such rights and privileges, the Participant shall forfeit the shares and
ownership of the forfeited shares shall revert back to the Company.
E. Death, Disability and Board Retirement. A Participant who ceases to
--------------------------------------
serve on the Board by reason of (i) death, (ii) Disability, or (iii) Retirement,
shall be vested in his or her entire Award notwithstanding the limitation of
Section 7(B) above.
SECTION EIGHT
CHANGES IN CAPITAL STRUCTURE
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, or extraordinary dividend or divestiture
(including a spin-off), or any other change in the capital structure or shares
of the Company, the Board shall make
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adjustments, determined by the Board in its discretion to be appropriate, as to
the number and kind of securities subject to this Plan and specified in Section
5 of this Plan and as to the number and kind of securities covered by each
outstanding Award and, where applicable, the price per share thereunder.
SECTION NINE
RIGHTS AS A STOCKHOLDER
The Participant shall be entitled to vote the shares held by the Company in
the Custodial Account. Any cash or non-cash dividend payable with respect to
shares held in the Custodial Account will remain in the Custodial Account
subject to risk of forfeiture until such time as the shares with respect to
which such cash or non-cash dividend, as the case may be, was declared is either
distributed to the Participant or forfeited by the Participant.
Notwithstanding anything to the contrary contained herein, no Stock or cash
dividends shall be transferred by the Company to a Custodial Account prior to
the date of Stockholder Approval, and no Non-Employee Director shall be entitled
to any rights as a stockholder with respect to any Stock granted hereunder,
including, without limitation voting rights until such Stock has been
transferred to a Custodial Account.
SECTION TEN
TITLE
Subject to Section 13 herein, the shares held by the Company in the
Custodial Account shall be held in the name of the Participant. Such shares
shall at all times remain in the Company Custodial Account until they have been
(i) forfeited by the Participant, (ii) distributed to the Participant, or (iii)
transferred to a grantor "Rabbi Trust" in accordance with the provisions of
Section 13.
SECTION ELEVEN
RISK OF LOSS
The Participant agrees to assume all risks in connection with any decrease
in the value of the shares granted to the Participant placed into the Custodial
Account for the benefit of the Participant.
SECTION TWELVE
NOTICE TO COMPANY
The Participant shall notify the Company immediately if he or she elects to
make an election under Section 83(b) of the Internal Revenue Code or upon the
occurrence
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of any other event resulting in the value of the shares being included in the
Participant's gross income prior to vesting.
SECTION THIRTEEN
DEFERRAL
A Participant, provided he or she has not made the election referred to in
Section 12 herein, may elect by written notice to defer payment on all or a
portion of the shares held in the Custodial Account prior to any vesting,
subject to the following conditions:
A. Such election shall be irrevocable. An election to defer payment
shall be made at least sixty (60) days prior to any vesting for which the
election to defer payment is made. The Participant may elect to defer the
receipt of the shares held in the Custodial Account prior to any vesting for a
period of time which ends no sooner than the earlier of (i) a date at least
twenty-four (24) months from the date of any such vesting or (ii) cessation of
service as a Non-Employee Director. During such deferral period, Participant
shall not be entitled to (i) vote the shares granted to him or her for which a
deferral has been elected, and (ii) currently receive cash dividends or non-cash
dividends.
B. The Company shall establish a grantor "Rabbi Trust" and shall
establish thereunder on behalf of the Participant upon a deferral election a
liability account (the "Deferred Compensation Account") which shall be credited
with any shares, cash dividends, and non-cash dividends subject to such deferral
election. Any shares transferred from the Custodial Account to the Deferred
Compensation Account shall be retitled and held in the name of the trustee of
the grantor "Rabbi Trust".
C. There shall be credited to the Deferred Compensation Account an
additional amount with respect to the cash dividends (i.e., in addition to the
items credited pursuant to paragraph (B) hereof) equal to the earnings generated
through the investment of the cash dividends by the trustee of the grantor
trust.
D. The Company will provide an annual statement of the Deferred
Compensation Account to the Participant showing amounts credited to his or her
account in accordance with paragraph (C).
E. Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of any
kind other than a grantor "Rabbi Trust", or a fiduciary relationship between the
Company and the Participant, his or her designated beneficiary or any other
person. Any amounts deferred under the provisions of this Plan shall continue
for all purposes to be a part of the general assets of the Company. To the
extent that Participant acquires a right to
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receive payment from the Company under this Plan, such right shall be no greater
than the right of any unsecured general creditor of the Company.
F. The right of the Company or any other person to the payment of
deferred compensation or other benefits under this Plan shall not be assigned,
transferred, pledged, or encumbered except by will or by the laws of descent and
distribution.
SECTION FOURTEEN
GENDER
Where applicable, words in the feminine shall include the masculine, words
in the neuter shall include the masculine and feminine, and words in the
singular shall include the plural, and vice versa.
SECTION FIFTEEN
SUCCESSORS
This Plan shall be binding upon and inure to the benefit of the Company and
its subsidiaries, its successors and assigns and the Participant and his or her
heirs, executors, administrators and legal representatives.
SECTION SIXTEEN
NO RIGHT TO CONTINUE AS A DIRECTOR
Neither the Plan, nor the granting of an Award, nor any other action taken
pursuant to Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a Non-Employee
Director for any period of time, or at any particular rate of compensation.
Nothing in this Plan shall in any way limit or affect the right of the Board or
the stockholders of the Company to remove any Non-Employee Director or otherwise
terminate his or her service as a director of the Company.
SECTION SEVENTEEN
MISCELLANEOUS PROVISIONS
A. Government and Other Regulations. The obligation of the Company to
--------------------------------
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any government agencies
as may be
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<PAGE>
required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended ("Act"), any of the shares of Stock issued,
delivered or paid in settlement under the Plan. If Stock awarded under the Plan
may in certain circumstances be exempt from registration under the Act, the
Company may restrict its transfer in such manner as it deems advisable to ensure
such exempt status.
B. Governing Law. All matters relating to the Plan or to Awards granted
-------------
hereunder shall be governed by the laws of the State of Maryland, without
regard to its principles of conflict of laws.
C. Titles and Headings. The titles and headings of the sections in the
-------------------
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles and headings, shall control.
SECTION EIGHTEEN
AMENDMENT AND TERMINATION
This Plan may be terminated or amended at any time and from time to time by
the Board as the Board shall deem advisable; provided, however, that (a) no such
amendment shall be effective without approval of the stockholders of the
Company, if stockholder approval of the amendment is then required under the
applicable rule of any securities exchange, and (b) to the extent prohibited by
Rule 16(b)-3 under the Securities Exchange Act of 1934, the Plan may not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code of 1986, as amended, or the regulations thereunder, or
the Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder. No modification or amendment of this Plan shall,
without the written consent of the Participant, materially and adversely affect
his or her rights under this Plan.
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EXHIBIT 4.2
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<PAGE>
CHOICE HOTELS INTERNATIONAL, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AND
DEFERRED COMPENSATION STOCK PURCHASE PLAN
Choice Hotels International, Inc. (formerly Choice Hotels Franchising,
Inc.) has adopted and established a non-qualified stock option plan for Non-
Employee Directors in accordance with the following terms and conditions. The
plan also provides Non-Employee Directors the ability to elect to defer
compensation and purchase stock with director fees.
SECTION ONE
DESIGNATION AND PURPOSE OF THE PLAN
A. DESIGNATION. This Plan is designated the "Choice Hotels International,
Inc. Non-Employee Director Stock Option and Deferred Compensation Stock Purchase
Plan".
B. PURPOSE. The purpose of this Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in increased ownership of
Company Stock by Non-Employee Directors. It is expected that such ownership
will provide such Non-Employee Directors with a more direct stake in the future
welfare of the Company and encourage them to remain directors of the Company.
It is also expected that the Plan will encourage qualified persons to become
directors of the Company.
C. GOVERNING LAW. This Plan shall be interpreted and enforced in
accordance with the laws of the State of Maryland, without reference to its
conflict of laws principles.
SECTION TWO
DEFINITIONS
As used in this Plan, the following terms mean:
A. "BOARD" means the Board of Directors of the Company.
B. "COMPANY" means Choice Hotels International, Inc.
C. "NON-EMPLOYEE DIRECTOR" means a member of the Board of the Company who
is not an employee of the Company or any of its subsidiaries.
D. "OPTION" means a non-qualified stock option granted to a Participant
under this Plan. It also means any Option which remains after a Participant has
exercised his Option with respect to part of the shares covered by an Option
agreement.
E. "PARTICIPANT" means any Non-Employee Director who is granted an Option
as provided in this Plan.
<PAGE>
F. "PLAN" means this Non-Employee Director Stock Option and Deferred
Compensation Stock Purchase Plan.
G. "STOCK" and "COMPANY STOCK" mean the common stock of Choice Hotels
International, Inc.
H. Wherever appropriate, words used in this Plan in the singular may mean
the plural, the plural may mean the singular and the masculine may mean the
feminine.
PART A
------
RULES RELATING TO STOCK OPTION PROGRAM
--------------------------------------
SECTION THREE
STOCK SUBJECT TO OPTION
A. TOTAL NUMBER OF SHARES. The total number of shares of Stock which may
be included in all Options granted to all Participants under this Part A is
150,000 shares. The maximum number of shares authorized may be increased from
time to time by approval of the Board, and if required, pursuant to Rule 16b-3
of the Securities and Exchange Commission or its successors or the applicable
rules of any stock exchange, the stockholders of the Company. Such Stock may be
either authorized and unissued Stock or reacquired Stock.
B. EXPIRED OPTIONS. If any Option granted under this Part A (i) is
unexercisable, or (ii) is terminated, or (iii) expires or is canceled for any
other reason, in whole or in part, the shares (or remaining shares) of Stock
subject to that particular Option shall again be available for grant under this
Part A.
SECTION FOUR
ADMINISTRATION OF THIS PART A
This Part A shall be administered by the Board. The Board shall have all
the powers vested in it by the terms of this Part A, such powers to include
authority (within the limitation described herein) to prescribe the form of the
agreement embodying awards of Options made under this Part A. Subject to the
provisions of this Part A, the Board shall have the power to construe this Part
A, to determine all questions arising thereunder, and to adopt and amend such
rules and regulations for the administration of this Part A as it may deem
desirable. Any decision of the Board in the administration of this Part A, as
described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or the Secretary or any other officer of the
Company to execute and deliver documents on behalf of the Board.
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<PAGE>
SECTION FIVE
SELECTION OF PARTICIPANTS
Each Non-Employee Director shall be eligible to receive an Option in
accordance with Section Six. Each Option granted under this Part A shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with this Part A and shall comply with the terms and
conditions set forth in Sections Six and Seven. Such an agreement shall
incorporate the provisions of this Part A by reference.
Notwithstanding any provision to the contrary contained herein, Options
shall be granted under this Plan to persons, including without limitation, non-
employee directors of Manor Care, Inc., its subsidiaries, and affiliated
companies in substitution for prior Options under plans of Manor Care, Inc. in
accordance with the Employee Benefits and Other Employee Matters Allocation
Agreement between Manor Care, Inc. and the Company
SECTION SIX
GRANT OF OPTIONS
AND LIMITATIONS ON EXERCISE
A. INITIAL GRANT FOR NEW MEMBERS OF THE BOARD. Each Non-Employee
Director, upon the date of his or her initial election or appointment as a
director of the Company, shall receive an Option to purchase for five years
5,000 shares of Stock, subject to the terms and conditions herein.
B. ANNUAL GRANT. As of each annual Stockholders Meeting of the Company
thereafter, commencing in the calendar year subsequent to the calendar year in
which an initial grant was awarded the Non-Employee Director pursuant to
Sections Six A or B above, each Non-Employee Director shall receive an Option to
purchase for five years 1,000 shares of Stock, subject to the terms and
conditions herein.
C. VESTING. The Option is not exercisable for a period of two years
from the date of grant. Thereafter, an Option becomes exercisable (a) to the
extent of one-third of the total number of shares subject to the option
following the expiration of two years from the date of grant; (b) to the extent
of an additional one-third following the expiration of three years from the date
of grant; and (c) to the extent of an additional one-third following the
expiration of four years from the date of grant. An Option is cumulative and
any portion of an Option not exercised at the time it becomes exercisable may be
exercised at any time thereafter prior to its termination date.
D. LIMITATION. In no event may an Option be exercised by anyone after
the expiration of five years from the date of grant.
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<PAGE>
E. BOARD RETIREMENT. A Participant who ceases to serve on the Board
after reaching age 65 and who has been a member of the Board for at least ten
years prior to the date of retirement shall be permitted to exercise his entire
Option notwithstanding the limitations of Section Six D above.
F. INSUFFICIENT NUMBER OF SHARES. In the event that the number of shares
of Stock available for future grant under this Part A is insufficient to make
all grants required to be made on any date, then all Participants entitled to a
grant on such date shall share ratably in the number of shares of Stock which
may be included in Options granted to Participants under this Part A.
SECTION SEVEN
OPTION PRICES
A. DETERMINATION OF OPTION PRICE. The Option price for Stock shall be
equal to 100% of the fair market value of the Stock on the date of grant.
B. DETERMINATION OF FAIR MARKET VALUE. The fair market value of the Stock
on the date of granting an Option shall be the mean of the high and low prices
at which the Stock was sold on the market on such date. In the event no such
sales of Stock occurred on such date, the fair market value of the Stock shall
be determined by the mean of the high and low prices at which the Stock was sold
on the market on the next preceding date for which the Stock was so sold.
SECTION EIGHT
EXERCISE OF OPTION
A. METHOD OF EXERCISING AN OPTION. Subject to the terms of a particular
Option, a Participant may exercise it in whole or in part by written notice to
the Company's President or Secretary stating in such written notice the number
of shares of Stock such Participant elects to purchase under his Option.
B. NO OBLIGATION TO EXERCISE OPTION. A Participant is under no obligation
to exercise an Option or any part thereof.
C. PAYMENT FOR OPTION STOCK. Stock purchased pursuant to an Option
agreement shall be paid in full at the time of purchase. Payment may be made
(a) in cash, (b) by delivery to the Company of shares of Stock having an
aggregate fair market value equal to the exercise price, or (c) a combination of
(a) and (b). Upon receipt of payment and subject to paragraph E of this Section
Eight, the Company shall, without transfer or issue tax to the Participant or
other person entitled to exercise the Option, deliver to the Participant (or
other person entitled to exercise the Option) a certificate or certificates for
such shares.
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<PAGE>
D. DELIVERY OF STOCK TO PARTICIPANT. The Company shall undertake and
follow all necessary procedures to make prompt delivery of the number of shares
of Stock which the Participant elects to purchase upon exercise of an Option
granted under this Part A. Such delivery, however, may be postponed, at the
sole discretion of the Company, to enable the Company to comply with any
applicable procedures, regulations or listing requirements of any government
agency, stock exchange or regulatory authority.
E. FAILURE TO ACCEPT DELIVERY OF STOCK. If a Participant refuses to pay
for Stock which he has elected to purchase under his Option, in accordance with
the terms of payment, which had previously been agreed upon, his Option shall
thereupon, at the sole discretion of the Board, terminate, and such funds
previously paid for unissued Stock shall be refunded. Stock which has been
previously issued to the Participant and been fully paid for shall remain the
property of the Participant and shall be unaffected by such termination.
SECTION NINE
TRANSFERABILITY OF OPTIONS
The Board may impose such restrictions on transferability of an Option, if
any, as it may in its sole discretion determine.
SECTION TEN
PURCHASE FOR INVESTMENT
A. WRITTEN AGREEMENT BY PARTICIPANTS. Unless a registration statement
under the Securities Act of 1933 is then in effect with respect to the Stock a
Participant receives upon exercise of his Option, a Participant shall acquire
the Stock he receives upon exercise of his Option for investment and not for
resale or distribution and he shall furnish the Company with a written statement
to that effect when he exercises his Option and a reference to such investment
warranty shall be inscribed on the Stock certificate(s).
B. REGISTRATION REQUIREMENT. Each Option shall be subject to the
requirement that, if at any time the Board determines that the listing,
registration or qualification of the shares subject to the Option upon any
securities exchange or under any state or Federal law is necessary or desirable
as a condition of, or in connection with, the issuance of shares thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration or qualification shall have been effected or obtained (and the same
shall have been free of any conditions not acceptable to the Board).
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<PAGE>
SECTION ELEVEN
CHANGES IN CAPITAL STRUCTURE OR SHARES
In the event any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, or extraordinary dividend or divestiture (including a
spin-off), or any other change in the capital structure or shares of the
Company, the Committee shall make adjustments, determined by the Committee in
its discretion to be appropriate, as to the number and kind of securities
subject to this Plan and specified in Section Three of this Plan and as to the
number and kind of securities covered by each outstanding Option and, where
applicable, the price per share thereunder.
SECTION TWELVE
CORPORATE REORGANIZATION OR DISSOLUTION
A. In the event of the dissolution or liquidation of the Company, any
Option granted under this Part A shall terminate as of a date to be fixed by the
Board, provided that not less than 15 days written notice of the date so fixed
shall be given to each Participant and each such Participant shall have the
right during such period to exercise his Option as to all or any part of the
Stock covered thereby including Stock as to which such Option would not
otherwise be exercisable by reason of an insufficient lapse of time.
B. In the event of a Reorganization (as hereinafter defined) in which the
Company is not the surviving or acquiring company, or in which the Company is or
becomes a wholly owned subsidiary of another company after the effective date of
the Reorganization, then:
1) If there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does
not specifically provide for the change, conversion, or exchange of
the Stock under outstanding and unexercised Options for securities of
another corporation, then the Board shall take such action, and the
Options shall terminate, as provided in paragraph A of this Section
Twelve, or
2) If there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or
exchange of the Stock under outstanding and unexercised Options for
securities of another corporation, then the Board shall adjust the
shares under such outstanding and unexercised Options (and shall
adjust the shares remaining under this Part A which are then to be
available for grant under this Part A, if the Reorganization Agreement
makes specific provisions therefor) in a manner not inconsistent with
the provisions of the Reorganization Agreement for the adjustment,
change, conversion, or exchange of such Options.
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<PAGE>
The term "Reorganization" as used in this paragraph B of this Section Twelve
shall mean any statutory merger, statutory consolidation, sale of all or
substantially all of the assets of the Company, or sale, pursuant to an
agreement with the Company, of securities of the Company pursuant to which the
Company is or becomes a wholly owned subsidiary of another company after the
effective date of the Reorganization.
C. Adjustments and determinations under this Section Twelve shall be made
by the Board, whose decisions as to what adjustments or determinations shall be
made, and the extent thereof, shall be final, binding, and conclusive.
SECTION THIRTEEN
TERMINATION OF SERVICE
A. SEVERANCE. Subject to the provision of Paragraph B of this Section
Thirteen, in the event a Participant ceases to be a Non-Employee Director, his
Option terminates one month from the date of such cessation of service. Subject
to the provisions of Paragraph F of Section Six, such Option shall be
exercisable only to the extent the Participant was entitled to exercise the
Option on the date of such cessation of service.
B. DEATH. If a Participant dies prior to the full exercise of his Option,
his Option to purchase Stock under such Option may be exercised to the extent,
if any, that Participant would be entitled to exercise it at the date of
Participant's death by the person to whom the Option shall pass by will or by
the laws of descent and distribution within twelve months of Participant's death
or the expiration of the term of the Option whichever date is sooner.
SECTION FOURTEEN
APPLICATION OF FUNDS
All proceeds received by the Company from the exercise of Options shall be
paid into its treasury and such proceeds shall be used for general corporate
purposes.
SECTION FIFTEEN
PARTICIPANT'S RIGHTS AS A STOCKHOLDER
A Participant has no rights as a stockholder with respect to any shares of
Stock covered by his Option until the date a stock certificate is issued to him
for such shares. Except as otherwise provided for in Section Eleven of this Part
A, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
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SECTION SIXTEEN
AMENDMENT AND TERMINATION OF THIS PART A
A. DISCRETION OF THE BOARD OF DIRECTORS. This Part A may be terminated or
amended at any time and from time to time by the Board as the Board shall deem
advisable including, but not limited to amendments necessary to qualify for any
exemption or to comply with applicable law or regulations; provided, however,
that this Part A shall not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code of 1986, as amended,
or the regulations thereunder, or the Employee Retirement Income Security Act of
1974, as amended, or the regulations thereunder. No amendment of this Part A
shall materially and adversely affect any right of any Participant with respect
to any Option theretofore granted without such Participant's written consent.
B. AUTOMATIC TERMINATION. This Part A shall terminate on September [
], 2006. Options may be granted under this Part A at any time and from time to
time prior to this Part A's termination. Any Option outstanding at the time
this Part A is terminated shall remain in effect until said Option is exercised
or expires.
PART B
------
RULES RELATING TO DEFERRED COMPENSATION
---------------------------------------
STOCK PURCHASE
--------------
SECTION SEVENTEEN
DEFERRAL OF FEES
A Non-Employee Director may elect by written notice to defer payment on all
or a portion of his fees (including Committee fees) for any year, subject to the
following conditions:
During the period of the active service (as hereinafter defined) of a Non-
Employee Director, the Non-Employee Director agrees to serve the Company
faithfully and, to the best of the ability of the Non-Employee Director, to
perform such services and duties as shall be assigned to the Non-Employee
Director by the Board.
For purposes of this Part B, the period of the active service of the Non-
Employee Director shall mean the period commencing with the date of election or
appointment of the Non-Employee Director and expiring on the date on which
occurs the termination of the service of the Non-Employee Director by reason of
expiration of term or the date of resignation, removal or death of the Non-
Employee Director, whichever shall occur first.
Nothing contained herein shall be construed as conferring upon the Non-
Employee Director the right to continue in the active service of the Company.
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SECTION EIGHTEEN
ELECTION AND DEFERRED ACCOUNTS
A. Prior to the thirty-first day of May of each year during the period of
the active service of the Non-Employee Director, the Non-Employee Director may
instruct the Company by delivery to it of written notice to withhold a specified
percentage (not less than 25%) of any fees otherwise payable to the Non-Employee
Director for services to be rendered in the following fiscal year (the "Deferred
Amounts"). Such election shall be irrevocable with respect to such fiscal year.
The Company shall establish a grantor "Rabbi Trust" and shall establish
thereunder on behalf of the Non-Employee Director upon a deferral election a
liability account which shall consist of a Stock Deferred Account and an
Interest Deferred Account (each a "Deferred Account").
B(i) Stock Deferred Account
----------------------
(a) An agent (the "Agent") shall be appointed by the Board or any
individual or committee to which the Board has delegated authority to act with
respect to the appointment of the Agent to perform the functions and have the
responsibilities assigned to the Agent in this Section Eighteen with respect to
the purchase of Stock. The Board or such individual or committee shall have the
right to change the Agent at any time. Except as provided in Section 18B(i)(b),
the Company shall pay the compensation and expenses of the Agent.
(b) Deferred Amounts shall initially be deposited to the Interest
Deferred Account (the "Initial Deferred Amounts"). For each fiscal year of the
Company, the Agent shall cause all Initial Deferred Amounts to be applied to the
open market purchase of whole shares of Stock within fifteen days after December
1, February 28 and May 31 of such fiscal year. The Agent shall have all
authority to determine the times of such purchases, the prices at which such
purchases are made, the manner of such purchases and the selection of brokers or
dealers (which may include the Agent) to make such purchases. All brokerage fees
and commissions with respect to such purchases shall be deducted from the
Initial Deferred Amounts. The Agent shall credit each Stock Deferred Account
with the number of whole shares of Stock equal to such account's Initial
Deferred Amount applied by the Agent to the purchase of Stock divided by the
average price per share purchased by the Agent. Initial Deferred Amounts
representing a fraction of the purchase price of a share shall be credited to
their respective Interest Deferred Account. Any shares of Stock held in a Stock
Deferred Account shall be voted by the trustee of the "Rabbi Trust".
(c) In the alternative, but only if and to the extent that the Company
shall have instructed the Agent concurrent with or prior to the delivery to the
Agent of the Initial Deferred Amounts, the Agent shall purchase whole shares of
Stock directly from the Company and not in the open market. Each such purchase
from the Company shall be
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at a price equal to the closing price of Stock on the market on the business day
preceding the date such purchase is made.
(d) During the period that such Stock Deferred Account is maintained,
on each date on which the Company pays dividends on its Stock, the Interest
Deferred Account shall be credited with an amount equivalent to the amount of
dividends declared by the Company with respect to the Stock held in the Stock
Deferred Account ("Dividend Equivalents").
(e) The total number of shares of Stock which may be purchased under
this Part B is 80,000 shares. The maximum number of shares may be increased
from time to time by approval of the Board, and if required, pursuant to Rule
16b-3 of the Securities and Exchange Commission or its successors or the
applicable rules of any stock exchange, the stockholders of the Company. Such
Stock may be either authorized and unissued shares or reacquired shares.
(f) In the event of a change in the capital structure or shares of
the Company as described in Section Eleven, the number and kind of securities
specified in Section Eighteen of this Part B, and the number and kind of
securities entered in a Stock Deferred Account shall be adjusted in a manner
consistent with Section Eleven.
B(ii) Interest Deferred Account
-------------------------
All additions to the Interest Deferred Account will be invested in short-
to mid-term fixed-income investments selected by the Company from time to time.
There shall be credited to the Interest Deferred Account all gains, losses, and
income attributable to such investments.
SECTION NINETEEN
ANNUAL STATEMENT
The Company will provide an annual statement of the Deferred Accounts to
each participant Non-Employee Director showing amounts of fees deferred and
additional amounts credited to his Deferred Accounts in accordance with Section
18.
SECTION TWENTY
PAYMENT
Upon the termination of active service of a Non-Employee Director, the
Company shall pay such Non-Employee Director his Deferred Accounts in one lump
sum payment as soon after his termination of active service as is
administratively feasible unless such
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Non-Employee Director had previously made an election, at least sixty (60) days
prior to the effective date of such termination of active service, to receive
his Deferred Accounts in the form of installment payments. At least sixty (60)
days prior to his termination of active service, a Non-Employee Director may
make an irrevocable election to receive his Deferred Accounts in the form of
installment payments over a period of time designated by the Non-Employee
Director but in no event to exceed twenty (20) years. In the event that the
installment method of payment is selected, the Non-Employee Director will
further designate whether installment payments are to be made on a monthly,
quarterly, semi-annual or annual basis. During the period of installment
distributions, the Interest Deferred Account will be credited with an earnings
factor computed pursuant to the principles described in Section 18 B(ii), above.
In the event that a Non-Employee Director dies after having made an installment
election but prior to the receipt of all installment payments thereunder, the
remaining payments will be made to the beneficiary by the Non-Employee Director
designated for purposes of this Part B through the remaining duration of the
elected installment period, unless the Non-Employee Director has provided in
such installment election for a different form of payment to the beneficiary of
the Non-Employee Director in the event of the death of the Non-Employee
Director, in which event such different form of payment shall be made to the
beneficiary of the Non-Employee Director. The computation of the amount of a
lump sum payment or the amount of an installment payment shall be made by
reference to the balance of the Deferred Account as of the date of the
distribution.
SECTION TWENTY-ONE
DEATH OF NON-EMPLOYEE DIRECTOR
Where the death of the Non-Employee Director occurs prior to making his
election, payments of compensation deferred shall be made in such manner
determined by the beneficiary.
SECTION TWENTY-TWO
DEATH OF NON-EMPLOYEE DIRECTOR AND BENEFICIARY
If both the Non-Employee Director and his designated beneficiary should
die, the total amount standing to the credit of the Non-Employee Director in the
Deferred Accounts shall be determined as of the date of death of the designated
beneficiary (including any additional amounts credited to such Account pursuant
to Section Eighteen B(ii)) and shall be paid as promptly as possible in one lump
sum to the estate of such designated beneficiary.
11
<PAGE>
SECTION TWENTY-THREE
TAXES
Payments will be made to the Non-Employee Director or beneficiary after
deducting taxes required by federal and/or state governments, if any.
SECTION TWENTY-FOUR
ADMINISTRATION OF THIS PART B
This Part B shall be administered by the Board, except as provided in
Section 18. The Board shall have all the powers vested in it by the terms of
Part B. Subject to the provisions of this Part B, the Board shall have the
power to construe this Part B, to determine all questions arising thereunder,
and to adopt and amend such rules and regulations for the administration of this
Part B as it may deem desirable. Any decision of the Board in the
administration of this Part B, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that members thereof may authorize any one or more of their number or the
Secretary or any other officer of the Company to execute and deliver documents
on behalf of the Board.
SECTION TWENTY-FIVE
UNSECURED GENERAL CREDITOR
Nothing contained in this Part B and no action taken pursuant to the
provisions of this Part B shall create or be construed to create a trust of any
kind other than a grantor "Rabbi Trust", or a fiduciary relationship between the
Company and the Non-Employee Director, his designated beneficiary or any other
person. Any compensation deferred under the provisions of this Part B shall
continue for all purposes to be a part of the general funds of the Company. To
the extent that any person acquires a right to receive payment from the Company
under this Part B, such right shall be no greater than the right of any
unsecured general creditor of the Company.
SECTION TWENTY-SIX
NO ASSIGNMENT
The right of the Non-Employee Director or any other person to the payment
of deferred compensation or other benefits under this Part B shall not be
assigned, transferred, pledged, or encumbered except by will or by the laws of
descent and distribution.
12
<PAGE>
SECTION TWENTY-SEVEN
SUCCESSORS AND ASSIGNS
This Part B shall be binding upon and inure to the benefit of the Company
and its subsidiaries, its successors and assigns and the Non-Employee Director
and his heirs, executors, administrators and legal representatives.
SECTION TWENTY-EIGHT
CHANGE OF CONTROL
In the event of a change of control of the Company, the Company shall
immediately pay the Non-Employee Director his Deferred Accounts, including
accrued interest. A "change of control" shall mean (i) a merger or
consolidation in which the Company is not the surviving corporation or (ii) the
acquisition of twenty-five percent or more of the voting securities of the
Company by a person, group, or entity or (iii) the sale of all or substantially
all of the assets of the Company or (iv) individuals who were members of the
Board immediately prior to a meeting of the stockholders of the Company
involving a contest for the election of Non-Employee Directors do not constitute
a majority of the Board immediately following such election, unless that
election of such new Non-Employee Directors was recommended to the stockholders
by management of the Company.
SECTION TWENTY-NINE
AMENDMENT AND TERMINATION OF THIS PART B
A. DISCRETION OF THE BOARD OF DIRECTORS. The Board of Directors may at
any time terminate or amend this Part B. Except as herein provided, no such
termination may affect Stock previously purchased.
B. AUTOMATIC TERMINATION. This Part B shall terminate on October 15,
2007.
13
<PAGE>
EXHIBIT 5
---------
December 1, 1997
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,
$.10 par value, offered under the Company's Non-Employee Director Stock Option
and Deferred Compensation Stock Purchase Plan (the "Option Plan") and Non-
Employee Director Stock Compensation Plan (the "Stock 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 Option Plan and the Stock 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/ Michael J. DeSantis
Michael J. DeSantis
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 reports dated June 24, 1997,
included in Choice Hotels International, Inc.'s Registration Statement on Form
10 dated September 18, 1997 and to all references to our Firm in this
registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
November 17, 1997
<PAGE>
EXHIBIT 24
---------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ Stewart Bainum, Jr.
----------------------------
Stewart Bainum, Jr.
Chairman and Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ Stewart Bainum
------------------------------
Stewart Bainum
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ William R. Floyd
-----------------------------
William R. Floyd
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ Barbara Bainum
-------------------------
Barbara Bainum
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ James H. Rempe
---------------------------
James H. Rempe
Director
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/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 MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/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 MICHAEL J. DeSANTIS 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, $.10 par value, of Choice Hotels International, Inc. (the "Company")
delivered pursuant to the Company's Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan and Non-Employee Director Stock
Compensation 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 26th day
of November, 1997.
/s/ Jospeh M. Squeri
-------------------------------
Joseph M. Squeri
Vice President and Treasurer (Principal
Financial Officer and Principal Accounting
Officer)
