EXHIBIT 10.2
EMPLOYMENT AGREEMENT
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This Agreement ("Agreement") dated this 18th day of August, 2000 between
Choice Hotels International, Inc. ("Employer"), a Delaware corporation with
principal offices at 00000 Xxxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000, and
Xxxxx Xxxxxxx ("Employee"), sets forth the terms and conditions governing the
employment relationship between Employee and Employer.
1. Employment. During the term of this Agreement, as hereinafter defined,
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Employer hereby employs Employee as Senior Vice President, Marketing. Employee
hereby accepts such employment upon the terms and conditions hereinafter set
forth and agrees to faithfully and to the best of his ability perform such
duties as may be from time to time assigned by Employer's Board of Directors and
Chief Executive Officer, such duties to be rendered at the principal office of
Employer, subject to reasonable travel. Employee also agrees to perform his
duties in accordance with policies established by Employer's Board of Directors,
which may be changed from time to time. Employee reports directly to Employer's
President and CEO.
2. Term. Subject to the provisions for termination hereinafter provided,
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the term of this Agreement shall begin on Employee's first day of employment,
which is expected to be on or about September 5, 2000 ("Effective Date") and
shall terminate five (5) 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 nine months prior to the
Termination Date that it elects not to extend the Termination Date.
3. Compensation. For all services rendered by Employee under this
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Agreement, Employer shall pay Employee the following compensation:
(a) Salary. A base salary of Three Hundred Thousand Dollars
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($300,000) per annum payable in equal bi-weekly installments. The
salary will be reviewed by the Compensation Committee of the Board of
Directors at the next annual review of officers following the
Effective Date and may be increased thereafter at the discretion of
Employer.
(b) Incentive Bonus. Employee shall have the opportunity to earn a
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target bonus of Fifty Percent (50%) per annum of the base salary set
forth in subparagraph 3(a) above in Employer's bonus plans as adopted
from time to time by Employer's Board of Directors. For calendar year
2000, Employee shall be guaranteed a bonus of $150,000, payable in
February, 2001.
(c) Automobile. Employer shall provide Employee with an allowance for
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automobile expenses of $850 per month subject to withholding of usual
taxes.
(d) Stock Options. Employee shall be eligible to receive options
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under the Choice Hotels International, Inc. Long Term Incentive Plan
("LTIP"), or similar plan, to purchase Common Stock in accordance with
the policy of the Employer's Board as in effect from time to time.
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Additionally, the Employee shall be granted, on the Effective Date,
60,000 options to purchase such number of shares of Common Stock. Some
of the options will be deemed incentive stock options granted under
the LTIP, which number shall be the maximum number permitted under the
LTIP and Section 422(d) of the Internal Revenue Code of 1986, as
amended, but in no event more than 25% of the total number of options
granted pursuant to Section 3(e). The remainder of the options shall
be nonqualified stock options. The options shall be exercisable at an
amount per share equal to the average of the high and low trading
price of the Common Stock on the Effective Date and shall vest in five
equal annual installments following the first anniversary of the
Effective Date.
(e) SERP. As of the Effective Date, Employee shall participate in the
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Choice Hotels International, Inc. Supplemental Executive Retirement
Plan ("SERP").
(f) Other Benefits. Employee shall, when eligible, be entitled to
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participate in all other fringe benefits, including vacation policy,
generally accorded the most senior executive officers of Employer as
are in effect from time to time on the same basis as such other senior
executive officers. However, Employee shall be entitled to a minimum
of four weeks of vacation per year.
(g) Relocation Expenses. Employee shall be entitled to all benefits
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afforded officers under the Relocation Policy of Employer and Employer
shall pay Employee a housing subsidy in recognition of the higher cost
of living in the Washington, D.C. metropolitan area in the amount of
$125,000, payable 60% upon the Effective Date and 40% upon the one
year anniversary of the Effective Date. If Employee is terminated (for
any reason other than cause (see Section 10(b)) prior to the one year
anniversary of the Effective Date, the remaining 40% of the housing
subsidiary shall be paid to Employee within thirty (30) days of
termination. Employer shall also provide Employee with a $200,000
interest-free relocation loan, repayable in full upon the third
anniversary of the loan. The loan shall comply with all requirements
of IRS Reg. Section 7872(c) and Employee hereby certifies that the
proceeds of the loan will be used to purchase a principal residence
and that he reasonably expects to be entitled to and will (if legally
permitted) itemize deductions on his federal income tax return for
each year that the loan is outstanding.
4. Extent of Services. Employee shall devote his full professional time,
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attention, and energies to the business of Employer, and shall not during the
term of this Agreement be engaged in any other business activity whether or not
such business activity is pursued for gain, profit, or other pecuniary
advantage; but the foregoing shall not be construed as preventing Employee from
investing his assets in (i) the securities of public companies, or (ii) the
securities of private companies or limited partnerships outside the lodging
industry if such holdings are passive investments of one percent or less of
outstanding securities and Employee does not hold positions of officer, employee
or general partner. Employee shall be permitted to serve as a director of
companies outside of the lodging industry so long as such service does not
inhibit his performance of
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services to the Employer. Employee shall not be permitted to serve as a director
of any company within the lodging industry unless (i) the Employer's Corporate
Compliance officer has determined that there is no conflict of interest and (ii)
such service does not inhibit his performance of services to the Employer.
Employee warrants and represents that he has no contracts or obligations to
others which would materially inhibit the performance of his services under this
Agreement.
5. Disclosure and Use of Information. Employee recognizes and
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acknowledges that Employer's and affiliates' present and prospective clients,
franchises, management contracts, acquisitions and personnel, as they may exist
from time to time, are valuable, special and unique assets of Employer's
business. Throughout the term of this Agreement and for a period of two (2)
years after its termination or expiration for whatever cause or reason except as
required by applicable law, Employee shall not directly or indirectly, or cause
others to, make use of or disclose to others any information relating to the
business of Employer that has not otherwise been made public, including but not
limited to Employer's present or prospective clients, franchises, management
contracts or acquisitions. During the term of this Agreement and for a period of
two years thereafter, Employee agrees not to solicit for employment or contract
for services with, directly or indirectly, on his behalf or on behalf of any
other person or entity, any person employed by Employer, or its subsidiaries or
affiliates during such period, unless Employer consents in writing. In the event
of an actual or threatened breach by Employee of the provisions of this
paragraph, Employer shall be entitled to injunctive relief restraining Employee
from committing such breach or threatened breach. Nothing herein stated shall be
construed as preventing Employer from pursuing any other remedies available to
Employer for such breach or threatened breach, including the recovery of damages
from Employee.
6. Notices. Any notice, request or demand required or permitted to be
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given under this Agreement shall be in writing, and shall be delivered
personally to the recipient or, if sent by certified or registered mail or
overnight courier service to his residence in the case of Employee, or to its
principal office in the case of the Employer. Such notice shall be deemed given
when delivered if personally delivered or when received if sent certified or
registered mail or overnight courier.
7. Elective Positions; Constructive Termination
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(a) Nothing contained in this Agreement is intended to nor shall be
construed to abrogate, limit or affect the powers, rights and
privileges of the Board of Directors or stockholders to remove
Employee from the position referenced 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. However, if Employee
is terminated for any reason other than cause, Employee is entitled to
severance and all benefits provided in Section 7(b) or Section 11, as
applicable.
(b) If Employee is Constructively Terminated (as defined in Section
7(c) below), it is expressly understood and agreed that Employee's
rights under this Agreement shall in no way be prejudiced, Employee
shall not, thereafter, be required to perform any services under this
Agreement and
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Employee shall be entitled to receive all forms of compensation
referred to in Section 3 above, including, without limitation, bonuses
(calculated based only on the actual payout on the EPS portion of the
bonus as all Choice officers receive in a given year) and the
continued vesting through the term of this Agreement of stock options
and restricted stock outstanding at the time of the Constructive
Termination. However, Employee shall not be entitled to receive new
stock option grants or rights to ungranted stock options. Employee
upon removal shall not be required to mitigate damages but
nevertheless shall be entitled to pursue other employment, and
Employer shall be entitled to receive as an offset and thereby reduce
its payment by the amount received by Employee from any other active
employment. As a condition to Employee receiving his compensation from
Employer, Employee agrees to permit verification of his employment
records and income tax returns by an independent attorney or
accountant, selected by Employer but reasonably acceptable to
Employee, who agrees to preserve the confidentiality of the
information disclosed by Employee except to the extent required to
permit Employer to verify the amount received by Employee from other
active employment. Employer shall receive credit for unemployment
insurance benefits, social security insurance or other like amounts
payable during periods of unemployment actually received by Employee.
(c) For purposes of Sections 7 and 11, "Constructively Terminated"
shall mean (i) removal or termination of Employee other than in
accordance with Section 10, (ii) a decrease in Employee's compensation
or benefits (unless a similar decrease is imposed on all senior
executive officers), (iii) a significant reduction in the scope of
Employee's authority, position, duties or responsibilities, (iv) a
significant change in Employer's annual bonus program which adversely
affects Employee, or (v) any other material breach of this Agreement
by Employer provided Employer shall be given fourteen days advance
written notice of such claim of material breach, which written notice
shall specify in reasonable detail the grounds for such claim of
material breach. Except in the case of bad faith, Employer shall have
an opportunity to cure the basis for Constructive Termination during
the fourteen day period after written notice.
8. Waiver of Breach. The waiver of either party of any provision of this
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Agreement shall not operate or be construed as a waiver of any subsequent
breach.
9. Assignment. The rights and obligations of Employer under this
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Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. The obligations of Employee hereunder may not be
assigned or delegated.
10. Termination of Agreement. This Agreement shall terminate upon the
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following events and conditions:
(a) Upon expiration of its term;
(b) For Cause, which means gross negligence, willful misconduct,
willful nonfeasance, deliberate and continued
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refusal to carry out duties and instructions of the Employer's Board
of Directors and Chief Executive Officer consistent with the position,
material dishonesty, a willful breach of this Agreement or conviction
of a felony involving moral turpitude, fraud or misappropriation of
corporate funds. Employee shall be entitled to fourteen (14) days
advance written notice of termination, except where the basis for
termination constitutes wilful conduct on the part of Employee
involving dishonesty or bad faith, in which case the termination shall
be effective upon the sending of notice. Such written notice shall
specify in reasonable detail the grounds for Cause and Employee shall
have an opportunity to contest to the Board of Directors or cure the
basis for termination during the fourteen day period after written
notice.
(c) Subject to state and federal laws, if Employee is unable to
perform the essential functions of the services described herein,
after reasonable accommodation, for more than 180 days (whether or not
consecutive) in any period of 365 consecutive days, Employer shall
have the right to terminate this Agreement upon 60 days written notice
to Employee. In the event of such termination, all non-vested stock
options and other non-vested obligations of Employer to Employee
pursuant to this Agreement shall terminate.
(d) In the event of Employee's death during the term of this
Agreement, the Agreement shall terminate as of the date thereof.
11. Severance.
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(a) If, within twelve months after a Change in Control, as defined in
Section 11(b), the Employer terminates or Constructively Terminates
Employee's employment other than in accordance with Section 10,
(b) the amount of Employee's severance pay will be 200% of his base
salary at the rate in effect at the time of his termination or
Constructive Termination, plus 200% of the amount of any full year
bonus awarded to Employee in the prior year (or the maximum target
bonus if no bonus was awarded in the prior year). If Employee's
employment is terminated subject to this paragraph, the Employer will
provide the Employee and his family health insurance coverage,
including, if applicable, COBRA reimbursement, and will provide
Employee disability insurance coverage under the applicable Employer
plans and all other executive benefits then in effect for a period of
12 months following termination or until Employee starts other full
time employment, whichever is earlier.
(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
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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.
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.
(c) For purposes of Section 11(b), Baron Entities shall mean Baron Capital
Group, Inc., BAMCO, Inc., Baron Capital Management, Inc., Baron Asset Fund
and Xxxxxx Xxxxx.
12. Excise Taxes.
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(a) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution to the Employee
or for the Employee's benefit (whether paid or payable or distributed
or distributable) pursuant to the terms of this Agreement or otherwise
(the
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"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;
(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
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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. Entire Agreement. This instrument contains the entire agreement of the
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parties. It may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension, or
discharge is sought. This Agreement shall be governed by the laws of the State
of Maryland, and any disputes arising out of or relating to this Agreement shall
be brought and heard in any court of competent jurisdiction in the State of
Maryland.
14. Compensation Committee Approval. Notwithstanding any other provision
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to the contrary, this Agreement is subject to the approval of the Employer's
Compensation Committee or Board of Directors at its next meeting and shall not
be valid, binding and enforceable prior thereto. Prior to such approval, neither
party hereto shall make any public announcement with respect to this Agreement
or the employment of Employee by Employer.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
Employer:
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
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Xxxxxxx X. XxXxxxxx
Senior Vice President
Employee:
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
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