EXHIBIT 10.01
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") dated this 13th day of November, 2002 between
Choice Hotels International, Inc. ("Employer"), a Delaware corporation with
principal offices at 00000 Xxxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000, and
Xxxxxxx X. Xxxxxxxxx ("Employee"), amends and restates that employment agreement
dated July 31, 1998 and 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,
Employer hereby employs Employee as President and Chief Executive Officer
("CEO"). 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, such duties to be rendered at the principal office of Employer,
subject to reasonable travel. The Employer shall assign to Employee only those
duties consistent with his position as President and CEO. The Employee, in his
position as President and CEO, shall report directly to the Employer's Board of
Directors and all senior executives of the Employer shall report either directly
to Employee or indirectly through other senior executives. 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. During the term of
this Agreement, Employee shall be nominated by the Board of Directors for
re-election to the Employer's Board of Directors as a Class III director.
2. Term. Subject to the provisions for termination hereinafter provided,
the term of this Agreement shall begin on November 13, 2002 ("Effective Date")
and shall terminate four (4) years thereafter (the "Termination Date"). The
Agreement shall automatically be extended for successive one-year terms unless
either party gives written notice no less than 270 days prior to the Termination
Date that it elects not to extend the Termination Date.
3. Compensation. For all services rendered by Employee under this
Agreement during the term thereof, Employer shall pay Employee the following
compensation:
(a) Salary. A base salary of Six Hundred Fourteen Thousand Eight
Hundred Dollars ($614,800) per annum payable in equal bi-weekly
installments. Such salary shall be reviewed by the Compensation
Committee of the Board of Directors of Employer on the next annual
review of officers and each annual review thereafter and may be
increased at the discretion of Employer.
(b) Incentive Bonus. Employee shall have the opportunity to earn a
target bonus of Sixty-Five Percent (65%) 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) Restricted Stock. At the Effective Date, Employer shall issue to
Employee 100,000 restricted shares of Choice Hotels common stock
("Common Stock"). The restrictions on such shares shall lapse upon
vesting, which shall occur in five (5) equal annual installments
beginning one year from the Effective Date; provided, however, vesting
of any then unvested shares shall accelerate and shall occur
immediately upon the death, Constructive Termination (as defined in
Section 7(c) below) or Change of Control Termination (as defined in
Section 11(d)) of Employee.
(d) Automobile. Employer shall provide Employee with an allowance for
automobile expenses of $1,100 per month beginning on the Effective
Date.
(e) Club Membership. Employer shall provide Employee with an
appropriate corporate membership, including initial and annual fees,
at a dining and/or recreational club at the choice of Employee for the
purpose of business entertainment.
(f) Stock Awards. Employee shall be eligible to receive annual awards
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 Choice Hotels Board as in effect from time to time.
(g) SERP and Deferred Compensation Plan. At the Commencement Date,
Employee shall participate in the Choice Hotels International, Inc.
Supplemental Executive Retirement Plan ("SERP") and the Choice Hotels
International Executive Deferred Compensation Plan approved September
25, 2002 ("Deferred Comp Plan"). As applied to the Employee:
. Section 1.10 of the SERP shall be amended by adding the following
at the end thereto:
"From and after attaining age 55, the Participant's Years of
Service shall be deemed to be his actual Years of Service plus 10
years";
. For purposes of Section 5.1 of the Deferred Comp Plan, Employee
upon attaining age fifty-five, shall be deemed to have ten Years
of Services.
(h) Other Benefits. Employee shall, when eligible, be entitled to
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,
attention, and energies to the business of Employer, and shall not during the
term of this Agreement be
2
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 (1%) 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 Confidential Information; Non-Compete.
(a) Employee recognizes and acknowledges that information about Employer's
and affiliates' present and prospective clients, customers, franchises,
management contracts, acquisitions and personnel, as they may exist from time to
time, and to the extent it has not been otherwise disclosed, is a valuable,
special and unique asset of Employer's business ("Confidential Information").
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 Confidential Information. Notwithstanding
the foregoing, Confidential Information does not include information which (i)
was or becomes generally available to the public other than as a result of a
disclosure by Employee or (ii) is developed by Employee or on his behalf without
reliance on information furnished to Employee by Employer or its agents.
(b) For a period of two years after the expiration or termination of the
Employee's employment with the Employer, the Employee will not, except with the
prior written consent of the Board, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise
with, or use or permit Employee's name to be used in connection with, any
business or enterprise which is engaged in the mid-market or economy hotel
franchising business or any other line of business in which the Employer is
materially engaged at the time of termination ("Competing Business"); provided,
however, the foregoing shall not be construed as preventing Employee from (i)
investing his assets in (A) the securities of any Competing Business that is a
public company or (B) the securities of any Competing Business that is a
privately-held corporation, limited partnership, limited liability company or
other business entity, if such holdings are passive investments of one percent
(1%) or less of such entity's outstanding securities or (ii) becoming an
employee, agent or representative of, consultant to, or otherwise connected with
any business entity that has multiple lines of business, some of which are not a
Competing Business, if
3
Employee's services for such entity are restricted so that he will provide no
services or other assistance in support of, and will not otherwise be involved
with, any such Competing Business conducted by such entity.
(c) During the term of this Agreement and for a period of two years after
its expiration or termination, Employee agrees not to solicit for employment,
directly or indirectly, on his behalf or on behalf of any person or entity,
other than on behalf of Employer, any person employed by Employer, or its
subsidiaries or affiliates during such period, unless Employer consents in
writing. Additionally, during such period, Employee agrees not to solicit for
business nor to solicit to end their relationship with Employer any person or
entity who was a franchisee of Employer (or its subsidiaries) during the Term of
this Agreement; provided, however, the foregoing shall not be construed as
preventing Employee from soliciting business from any such franchisee that is
for a line of business other than any Competing Business.
(d) The Employee acknowledges and agrees that the restrictions contained in
this Section are reasonable and necessary to protect and preserve the legitimate
interests, properties, goodwill and business of the Employer, that the Employer
would not have entered into this Agreement in the absence of such restrictions
and that irreparable injury will be suffered by the Employer should the Employee
breach any of those provisions. Employee represents and acknowledges that (i)
the Employee has been advised by the Employer to consult Employee's own legal
counsel in respect of this Agreement, and (ii) that the Employee has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with the Employee's counsel. The Employee further acknowledges and
agrees that a breach of any of the restrictions in this Section cannot be
adequately compensated by monetary damages and that the Employer shall be
entitled to seek preliminary and permanent injunctive relief, without the
necessity of proving actual damages, as well as any other appropriate equitable,
which rights shall be cumulative and in addition to any other rights or remedies
to which the Employer may be entitled. In the event that any of the provisions
of this Section should ever be adjudicated to exceed the time, geographic,
service, or other limitations permitted by applicable law in any jurisdiction,
it is the intention of the parties that the provision shall be amended to the
extent of the maximum time, geographic, service, or other limitations permitted
by applicable law, that such amendment shall apply only within the jurisdiction
of the court that made such adjudication and that the provision otherwise be
enforced to the maximum extent permitted by law.
6. Notices. Any notice, request or demand required or permitted to be
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, return receipt requested. 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. Constructive Termination.
4
(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. Accordingly, Employee shall be entitled
to receive all forms of compensation referred to in Section 3 above through the
expiration of the term specified in Section 2, including bonuses (calculated
based only on the actual payout of the EPS portion of the bonus as all
Employer's officers receive in a given year) but excluding ungranted stock
options. Additionally, all unvested Restricted Stock and stock options then held
by Employee shall become immediately fully vested. From and after the date of
Constructive Termination, Employee shall have no further obligation to provide
any services to Employer under this Agreement, and shall not be required to
mitigate damages but nevertheless shall be entitled in his sole discretion to
pursue other employment. If Employee chooses to pursue and accept other
employment after Constructive Termination, Employer shall be entitled to receive
as offset, and thereby reduce its payment, 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 Federal 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 like amounts
actually received by Employee.
(c) For purposes of this Agreement, "Constructively Terminated" shall mean
(i) Employer's removal or termination of Employee other than in accordance with
Section 10, (ii) failure of the Employer to place Employee's name in nomination
for re-election to the Employer's Board, (iii) assignment of duties by the
Employer inconsistent with Section 1, (iv) a decrease in Employee's compensation
or benefits (unless a similar decrease is imposed on all senior executives), (v)
a change in Employee's title or the line of reporting set forth in Section 1,
(vi) a significant reduction in the scope of Employee's authority, position,
duties or responsibilities, (vii) a significant change in Employer's annual
bonus program which adversely affects Employee, or (viii) any other material
breach of this Agreement by Employer, provided Employer shall be given fourteen
(14) 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, and "Constructive Termination" shall mean the occurrence of the
foregoing. Except in the case of bad faith, Employer shall have an opportunity
to cure the basis for Constructive Termination during the fourteen (14) day
period after written notice. If Employer fails to cure the material breach
within such fourteen (14) day period, Employee shall be Constructively
Terminated as of the last day of such fourteen (14) day period.
5
8. Waiver of Breach. The waiver of either party of a breach of any
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
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
following events and conditions:
(a) Upon expiration of its term;
(b) For Cause, which means Employee's gross negligence, willful
misconduct, willful nonfeasance, material breach of this Agreement,
conviction following final disposition of any available appeal of a felony,
or pleading guilty or no contest to a felony. Employee shall be entitled to
fourteen (14) days advance written notice of termination, except where the
basis for termination constitutes willful 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 or cure the basis for termination during the
fourteen (14) 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 option 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.
(e) Upon voluntary resignation of Employee not due to Constructive
Termination, so long as Employee has given Employer one hundred eighty
(180) days prior written notice of such resignation.
11. Change of Control Severance.
(a) If, within twelve (12) months after a Change in Control, as defined in
Section 11(c), there occurs a Change of Control Termination, as defined in
Section 11(d), Employee may elect to receive as severance compensation
either (i) the amount of salary and bonuses payable to him under this
Agreement through the end of the term, such
6
compensation to be paid and to be subject to offset as provided n Section
7(b), or (ii) a severance payment in an amount equal to 250% of his base
salary at the rate in effect at the time of termination plus 250% of the
amount of any full year bonus awarded to Employee for the year immediately
preceding the Change of Control (or the maximum target bonus if no bonus
was awarded in the prior year). Employee may make this election by giving
written notice to the Employer no later than sixty (60) days after the date
of the date of employment termination. If Employee makes this election, the
Employer shall pay the severance payment to Employee no later than thirty
(30) days after the date on which Employee gives notice of such election.
Regardless of which alternative form of severance compensation is elected
by Employee, all unvested Restricted Stock and stock options then held by
Employee shall automatically become fully vested as of the date of the
Change of Control Termination.
(b) Employee's right to receive the benefits described in Section 11(a)
shall be conditioned upon Employee executing Employer's standard release
agreement in which Employee releases all claims against Employer.
(c) 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)
Xxxxxxx Xxxxxx, 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.
7
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 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.
For purposes of this Section 11(c), Baron Entities shall mean Baron Capital
Group, Inc., BAMCO, Inc., Baron Capital Management, Inc., Baron Asset Fund
and Xxxxxx Xxxxx.
(d) A Change of Control Termination shall mean and include the
termination of Employee's employment with Employer at any time during the
twelve (12) month period after the Change of Control if such termination is
(i) by the Employer, (ii) a Constructive Termination or (iii) by the
resignation of Employee, in his discretion, upon written notice to Employer
given no less than sixty (60) days prior to the date of termination.
12. Excise Taxes.
(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 Employer
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;
8
(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 Employer shall request provide
the Employee and Employer 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
Employer's independent certified public accountants. All fees and expenses of
the Accountants shall be borne solely by Employer. 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
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 Employer at the time the Employee is entitled to
receive the Payment. Any determination by the Accountants shall be binding upon
Employer 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 Employer should have paid pursuant to this Section (the
"Underpayment"). In the event that Employer exhausts its remedies and the
Employee is required to make a payment of any Excise Tax, the Underpayment shall
be promptly paid by Employer to or for the Employee's benefit.
13. Legal Fees. Employer shall reimburse the Employee for all reasonable
attorneys fees incurred in connection with the negotiation and execution of this
Agreement.
14. Condition to Effectiveness. This Agreement shall not be effective
until approved by Employer's Board of Directors.
15. Entire Agreement. This instrument contains the entire agreement of the
parties. It
9
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 supersedes all previous agreements between the parties
with respect to the matters contained herein. 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.
By:
---------------------------------
Xxxxxxx X. XxXxxxxx
Senior Vice President
Employee:
------------------------------------
Xxxxxxx X. Xxxxxxxxx
10
