-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UhbdI2bbHKi/tRCi6TicLKfafqFw/WaATH8tkvA+oqcHLyCwyN9weXhSN5TDdc6V pl3ePWjIHHT8wqLX2fo/Eg== 0000928385-97-001986.txt : 19971203 0000928385-97-001986.hdr.sgml : 19971203 ACCESSION NUMBER: 0000928385-97-001986 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19971202 EFFECTIVENESS DATE: 19971202 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHOICE HOTELS INTERNATIONAL INC /DE CENTRAL INDEX KEY: 0001046311 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 521209792 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-41355 FILM NUMBER: 97731325 BUSINESS ADDRESS: STREET 1: 10750 COLUMBIA PIKE CITY: SILVER SPRING STATE: MD ZIP: 20901 BUSINESS PHONE: 3019795000 MAIL ADDRESS: STREET 1: 10750 COLUMBIA PIKE CITY: SILVER SPRING STATE: MD ZIP: 20901 FORMER COMPANY: FORMER CONFORMED NAME: CHOICE HOTELS FRANCHISING INC DATE OF NAME CHANGE: 19971118 FORMER COMPANY: FORMER CONFORMED NAME: CHOICE HOTELS INTERNATIONAL INC/ DATE OF NAME CHANGE: 19971022 S-8 1 FORM S-8 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
****************************************************************************** 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* ****************************************************************************** Common Stock, 200,000 Shs. $17.1563 $3,431,260 $1,184 par value of $.10 per share ******************************************************************************
(*) 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. 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 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 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 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 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 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 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 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 * 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 EX-4.1 2 EXHIBIT 4.1 EXHIBIT 4.1 ----------- 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 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 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 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 4 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 5 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 6 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 7 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. 8 EX-4.2 3 EXHIBIT 4.2 EXHIBIT 4.2 ----------- 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. 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. 2 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. 3 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. 4 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). 5 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. 6 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. 7 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. 8 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 9 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 10 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 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 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 EX-5 4 EXHIBIT 5 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 EX-23 5 EXHIBIT 23(I) 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 EX-24 6 EXHIBIT 24 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 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 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 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 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 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 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 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) -----END PRIVACY-ENHANCED MESSAGE-----