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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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This Agreement ("Agreement") dated this 3rd day of May, 2000 between Choice
Hotels International, Inc. ("Employer"), a Delaware corporation with principal
offices at 10750 Columbia Pike, Silver Spring, Maryland 20901, and Daniel
Rothfeld ("Employee"), sets forth the terms and conditions governing the
employment relationship between Employee and Employer.
1. Employment. During the term of this Agreement, as hereinafter defined,
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Employer hereby employs Employee as Senior Vice President, E-Commerce and
Emerging Business Opportunites. Employee hereby accepts such employment upon the
terms and conditions hereinafter set forth and agrees to faithfully and to the
best of his ability perform such duties as may be from time to time assigned by
Employer's Board of Directors and Chief Executive Officer, such duties to be
rendered at the principal office of Employer, subject to reasonable travel.
Employee also agrees to perform his duties in accordance with policies
established by Employer's Board of Directors, which may be changed from time to
time.
2. Term. Subject to the provisions for termination hereinafter provided,
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the term of this Agreement shall begin on the date hereof ("Effective Date") and
shall terminate five (5) years thereafter (the "Termination Date"). The
Termination Date shall automatically be extended for successive one-year terms
unless either party gives written notice no less than nine months prior to the
Termination Date that it elects not to extend the Termination Date.
3. Compensation. For all services rendered by Employee under this
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Agreement during the term thereof, Employer shall pay Employee the following
compensation:
(a) Salary. A base salary of Two Hundred Ten Thousand Dollars
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($210,000) per annum payable in equal bi-weekly installments. Such
salary shall be reviewed by the Compensation Committee of the Board of
Directors of Employer at the next annual review of officers following
the Effective Date and may be increased at the discretion of Employer.
(b) Incentive Bonus. Effective January 1, 2000, Employee shall have
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the opportunity to earn a target bonus of Fifty Percent (50%) per
annum of the base salary set forth in subparagraph 3(a) above in
Employer's bonus plans as adopted from time to time by Employer's
Board of Directors.
(c) Automobile. Employer shall provide Employee with an allowance for
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automobile expenses of $850 per month subject to withholding of usual
taxes.
(d) Stock Options. Employee shall be eligible to receive options
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under the Choice Hotels International, Inc. Long Term Incentive Plan
("LTIP"), or similar plan, to purchase Common Stock in accordance with
the policy of the Employer's Board as in effect from time to time.
Additionally, the Employee shall be granted, as of the Effective Date,
options to purchase 20,000 shares of Common Stock. A number of the
options shall be incentive stock options granted under the LTIP, which
number shall be the
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maximum number permitted under the LTIP and Section 422(d) of the
Internal Revenue Code of 1986, as amended, but in no event more than
25% of the total number of options granted pursuant to this Section
3(d). The remainder of the options shall be nonqualified stock
options. The options shall be exercisable at an amount per share equal
to the average of the high and low trading price on the Effective Date
and shall vest in five equal annual installments beginning one year
from the Effective Date.
(e) Other Benefits. Employee shall, when eligible, be entitled to
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participate in all other fringe benefits, including vacation policy,
generally accorded the most senior executive officers of Employer as
are in effect from time to time on the same basis as such other senior
executive officers.
4. Extent of Services. Employee shall devote his full professional time,
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attention, and energies to the business of Employer, and shall not during the
term of this Agreement be engaged in any other business activity whether or not
such business activity is pursued for gain, profit, or other pecuniary
advantage; but the foregoing shall not be construed as preventing Employee from
investing his assets in (i) the securities of public companies, or (ii) the
securities of private companies or limited partnerships outside the lodging
industry if such holdings are passive investments of one percent or less of
outstanding securities and Employee does not hold positions of officer, employee
or general partner. Employee shall be permitted to serve as a director of
companies outside of the lodging industry so long as such service does not
inhibit his performance of services to the Employer. Employee shall not be
permitted to serve as a director of any company within the lodging industry
unless (i) the Corporate Compliance officer of the Employer has determined that
there is no conflict of interest and (ii) such service does not inhibit his
performance of services to the Employer. Employee warrants and represents that
he has no contracts or obligations to others which would materially inhibit the
performance of his services under this Agreement.
5. Disclosure and Use of Information. Employee recognizes and
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acknowledges that Employer's and affiliates' present and prospective clients,
franchises, management contracts, acquisitions and personnel, as they may exist
from time to time, are valuable, special and unique assets of Employer's
business. Throughout the term of this Agreement and for a period of two (2)
years after its termination or expiration for whatever cause or reason except as
required by applicable law, Employee shall not directly or indirectly, or cause
others to, make use of or disclose to others any information relating to the
business of Employer that has not otherwise been made public, including but not
limited to Employer's present or prospective clients, franchises, management
contracts or acquisitions. During the term of this Agreement and for a period of
two years thereafter, Employee agrees not to solicit for employment or contract
for services with, directly or indirectly, on his behalf or on behalf of any
other person or entity, any person employed by Employer, or its subsidiaries or
affiliates during such period, unless Employer consents in writing. In the event
of an actual or threatened breach by Employee of the provisions of this
paragraph, Employer shall be entitled to injunctive relief restraining Employee
from committing such breach or threatened breach. Nothing herein stated shall be
construed as preventing Employer from pursuing
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any other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
6. Notices. Any notice, request or demand required or permitted to be
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given under this Agreement shall be in writing, and shall be delivered
personally to the recipient or, if sent by certified or registered mail or
overnight courier service to his residence in the case of Employee, or to its
principal office in the case of the Employer. Such notice shall be deemed given
when delivered if personally delivered or when actually received if sent
certified or registered mail or overnight courier.
7. Elective Positions; Constructive Termination
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(a) Nothing contained in this Agreement is intended to nor shall be
construed to abrogate, limit or affect the powers, rights and
privileges of the Board of Directors or stockholders to remove
Employee from the positions set forth in Section 1, with or without
Cause (as defined in Section 10 below), during the term of this
Agreement or to elect someone other than Employee to those positions,
as provided by law and the By-Laws of Employer.
(b) If Employee is Constructively Terminated (as defined in Section
7(c) below) it is expressly understood and agreed that Employee's
rights under this Agreement shall in no way be prejudiced, Employee
shall not, thereafter, be required to perform any services under this
Agreement and Employee shall be entitled to receive all forms of
compensation referred to in Section 3 above, including, without
limitation, bonuses (calculated based only on the actual payout on the
EPS portion of the bonus as all Choice officers receive in a given
year) and the continued vesting through the term of this Agreement of
stock options and restricted stock outstanding at the time of the
Constructive Termination. However, Employee shall not be entitled to
receive new stock option grants or rights to ungranted stock options.
Employee upon removal shall not be required to mitigate damages but
nevertheless shall be entitled to pursue other employment, and
Employer shall be entitled to receive as an offset and thereby reduce
its payment by the amount received by Employee from any other active
employment. As a condition to Employee receiving his compensation from
Employer, Employee agrees to permit verification of his employment
records and income tax returns by an independent attorney or
accountant, selected by Employer but reasonably acceptable to
Employee, who agrees to preserve the confidentiality of the
information disclosed by Employee except to the extent required to
permit Employer to verify the amount received by Employee from other
active employment. Employer shall receive credit for unemployment
insurance benefits, social security insurance or other like amounts
payable during periods of unemployment actually received by Employee.
(c) For purposes of this Section 7 and 11, "Constructively
Terminated" shall mean (i) removal or termination of Employee other
than in accordance with Section 10, (ii) a decrease in Employee's
compensation or benefits (unless a similar decrease is imposed on all
senior executive officers), (iii) a significant reduction
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in the scope of Employee's authority, position, duties or
responsibilities, (iv) a significant change in Choice's annual bonus
program which adversely affects Employee, or (v) any other material
breach of this Agreement by Employer provided Employer shall be given
fourteen days advance written notice of such claim of material breach,
which written notice shall specify in reasonable detail the grounds
for such claim of material breach. Except in the case of bad faith,
Employer shall have an opportunity to cure the basis for Constructive
Termination during the fourteen day period after written notice.
8. Waiver of Breach. The waiver of either party of a breach of any
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provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
9. Assignment. The rights and obligations of Employer under this
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Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. The obligations of Employee hereunder may not be
assigned or delegated.
10. Termination of Agreement. This Agreement shall terminate upon the
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following events and conditions:
(a) Upon expiration of its term;
(b) For Cause, which means gross negligence, willful misconduct,
willful nonfeasance, deliberate and continued refusal to carry out
duties and instructions of the Employer's Board of Directors and Chief
Executive Officer consistent with the position, material dishonesty, a
violation or a willful breach of this Agreement or conviction of a
felony involving moral turpitude, fraud or misappropriation of
corporate funds. Employee shall be entitled to fourteen (14) days
advance written notice of termination, except where the basis for
termination constitutes wilful conduct on the part of Employee
involving dishonesty or bad faith, in which case the termination shall
be effective upon the sending of notice. Such written notice shall
specify in reasonable detail the grounds for Cause and Employee shall
have an opportunity to contest to the Board of Directors or cure the
basis for termination during the fourteen day period after written
notice.
(c) Subject to state and federal laws, if Employee is unable to
perform the essential functions of the services described herein,
after reasonable accommodation, for more than 180 days (whether or not
consecutive) in any period of 365 consecutive days, Employer shall
have the right to terminate this Agreement by written notice to
Employee. In the event of such termination, all non-vested stock
options and other non-vested obligations of Employer to Employee
pursuant to this Agreement shall terminate.
(d) In the event of Employee's death during the term of this
Agreement, the Agreement shall terminate as of the date thereof.
11. Severance.
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(a) If, within twelve months after a Change in Control, as defined in
Section 11(b), the Employer terminates or Constructively Terminates
Employee's employment other than in accordance with Section 10, the
amount of Employee's severance pay will be 200% of his base salary at
the rate in effect at the time of his termination or Constructive
Termination, plus 200% of the amount of any full year bonus awarded to
Employee in the prior year (or the maximum target bonus if no bonus
was awarded in the prior year). If Employee's employment is terminated
subject to this paragraph, the Employer will provide the Employee and
his family health insurance coverage, including, if applicable, COBRA
reimbursement, and will provide Employee disability insurance coverage
under the applicable Employer plans for a period of 12 months
following termination or until Employee starts other full time
employment, whichever is earlier.
(b) A Change in Control of the Employer shall occur upon the
happening of the earliest to occur of the following:
1. Any "person" as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (other than (i) the
Employer, (ii) any trustee or other fiduciary holding securities under an
employee benefit plan of the Employer, (iii) any corporations owned,
directly or indirectly, by the stockholders of the Employer in
substantially the same proportions as their ownership of stock, (iv)
Stewart Bainum, his wife, their lineal descendants and their spouses (so
long as they remain spouses) and the estate of any of the foregoing
persons, and any partnership, trust, corporation or other entity to the
extent shares of common stock (or their equivalent) are considered to be
beneficially owned by any of the persons or estates referred to in the
foregoing provisions of this subsection 11(b) or any transferee thereof, or
(v) the Baron Entities, unless such entities, in the aggregate,
beneficially own more than 19,715,000 shares of the Employer's common
stock) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Employer
representing 33% or more of the combined voting power of the Employer's
then outstanding voting securities;
2. Individuals constituting the Board on the Effective Date and
the successors of such individuals ("Continuing Directors") cease to
constitute a majority of the Board. For this purpose, a director shall be a
successor if and only if he or she was nominated by a Board (or a
Nominating Committee thereof) on which individuals constituting the Board
on the Effective Date and their successors (determined by prior application
of this sentence) constituted a majority.
3. The stockholders of the Employer approve a plan of merger or
consolidation ("Combination") with any other corporation or legal person,
other than a Combination which would result in stockholders of the Employer
immediately prior to the Combination owning, immediately thereafter, more
than sixty-five percent (65%) of the combined voting power of either the
surviving entity or the entity owning directly or indirectly all of the
common stock, or its
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equivalent, of the surviving entity; provided, however, that if stockholder
approval is not required for such Combination, the Change in Control shall
occur upon the consummation of such Combination.
4. The stockholders of the Employer approve a plan of complete
liquidation of the Employer or an agreement for the sale or disposition by
the Employer of all or substantially all of the Employer's stock and/or
assets, or accept a tender offer for substantially all of the Employer's
stock (or any transaction having a similar effect); provided, however, that
if stockholder approval is not required for such transaction, the Change in
Control shall occur upon consummation of such transaction.
(c) For purposes of Section 11(b), Baron Entities shall mean Baron Capital
Group, Inc., BAMCO, Inc., Baron Capital Management, Inc., Baron Asset Fund
and Ronald Baron.
12. Excise Taxes.
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(a) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution to the Employee
or for the Employee's benefit (whether paid or payable or distributed
or distributable) pursuant to the terms of this Agreement or otherwise
(the "Payment") would be subject to the excise tax imposed by section
4999 of the Internal Revenue Code (the "Excise Tax"), then the
Employee shall be entitled to receive from Choice an additional
payment (the "Gross-Up Payment") in an amount such that the net amount
of the Payment and the Gross-Up Payment retained by the Employee after
the calculation and deduction of all Excise Taxes (including any
interest or penalties imposed with respect to such taxes) on the
payment and all federal, state and local income tax, employment tax
and Excise Tax (including any interest or penalties imposed with
respect to such taxes) on the Gross-Up Payment provided for in this
Section, and taking into account any lost or reduced tax deductions on
account of the Gross-Up Payment, shall be equal to the Payment;
(b) All determinations required to be made under this Section,
including whether and when the Gross-Up Payment is required and the
amount of such Gross-Up Payment, and the assumptions to be utilized in
arriving at such determinations shall be made by Accountants which
Choice shall request provide the Employee and Choice with detailed
supporting calculations with respect to such Gross-Up Payment at the
time the Employee is entitled to receive the Payment. For the purposes
of this Section, the "Accountants" shall mean Choice's independent
certified public accountants. All fees and expenses of the Accountants
shall be borne solely by Choice. For the purposes of determining
whether any of the Payments will be subject to the Excise Tax and the
amount of such Excise Tax, such Payments will be treated as "parachute
payments" within the meaning of section 280G of the Code, and all
"parachute payments" in excess of the "base amount" (as defined under
section 280G(b)(3) of the Code) shall be treated as subject to the
excise Tax, unless and except to
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the extent that in the opinion of the Accountants such Payments (in
whole or in part) either do not constitute "parachute payments" or
represent reasonable compensation for services actually rendered
(within the meaning of section 280G(b)(4) of the Code) in excess of
the "base amount," or such "parachute payments" are otherwise not
subject to such Excise Tax; for purposes of determining the amount of
the Gross-Up Payment the Employee shall be deemed to pay Federal
income taxes at the highest applicable marginal rate of Federal income
taxation for the calendar year in which the Gross-Up Payment is to be
made and to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction
in Federal income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year (determined without
regard to limitations on deductions based upon the amount of the
Employee's adjusted gross income); and to have otherwise allowable
deductions for Federal, state and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-Up
Payment in the Employee's adjusted gross income. Any Gross-Up Payment
with respect to any Payment shall be paid by Choice at the time the
Employee is entitled to receive the Payment. Any determination by the
Accountants shall be binding upon Choice and the Employee. As a result
of uncertainty in the application of section 4999 of the Code at the
time of the initial determination by the Accountants hereunder, it is
possible that the Gross-Up Payment made will have been an amount less
than Choice should have paid pursuant to this Section (the
"Underpayment"). In the event that Choice exhausts its remedies and
the Employee is required to make a payment of any Excise Tax, the
Underpayment shall be promptly paid by Choice to or for the Employee's
benefit.
13. Entire Agreement. This instrument contains the entire agreement of the
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parties. It may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension, or
discharge is sought. This Agreement shall be governed by the laws of the State
of Maryland, and any disputes arising out of or relating to this Agreement shall
be brought and heard in any court of competent jurisdiction in the State of
Maryland.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
Employer:
CHOICE HOTELS INTERNATIONAL, INC.
/s/ Michael DeSantis
By: ______________________________
Michael DeSantis
Senior Vice President
Employee:
/s/ Daniel Rothfeld
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Daniel Rothfeld
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