EXHIBIT 10.3
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
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This Agreement ("Agreement") dated this 13th day of April, 1999 between
Choice Hotels International, Inc. ( the "Employer"), a Delaware corporation
with principal offices at 00000 Xxxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000,
and Xxxxxx Xxxxxx ("Employee"), amends and restates that employment agreement
dated February 10, 1997 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
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defined, Employer hereby employs Employee as Senior Vice President --
Administration. 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 are consistent with his position, and which may
be from time to time assigned by Employer, its Board of Directors or its
designees, such duties to be rendered at the principal office of Employer or at
such other place or places as Employer shall require. Employee also agrees to
perform his duties in accordance with policies established by Employer's Board
of Directors, which may be changed from time to time.
2. Term. Subject to the provisions for termination hereinafter provided,
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the term of this Agreement shall begin as of March 3, 1997 ("Effective Date")
and shall terminate five (5) years thereafter (the "Termination Date"). The
Termination Date shall automatically be extended for successive one year terms
unless either party gives written notice no less than nine (9) months prior to
the Termination Date that it elects not to extend the Termination Date.
3. Compensation. For all services rendered by Employee under this
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Agreement during the term thereof, Employer shall pay Employee the following
compensation:
(a) Salary. A base salary of Two Hundred Thirty Thousand Dollars
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($230,000) per annum payable in accordance with Employee's standard payroll
practices from time to time in effect. Such salary shall be reviewed on
the first anniversary of the Effective Date and thereafter after the end of
each fiscal year and may be increased at the discretion of Employer.
(b) Incentive Bonus. Employee shall have the opportunity to earn up to a
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maximum 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 the Employer's 1997 fiscal
year, the Employee's bonus shall be calculated on a pro rata basis from the
Effective Date. Additionally, the Employer shall pay the Employee a one-
time cash payment of $50,000, payable in two installments, $25,000 payable
within thirty days of the Effective Date and $25,000 payable within thirty
days of the first anniversary of the Effective Date.
(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 under the
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Choice Hotels International, Inc. 1996 Long Term Incentive Plan ("LTIP"),
or similar plan, to purchase Common Stock in accordance with the policy of
the Choice Hotels Board of Directors as in effect from time to time.
Additionally, Employer shall recommend to the Compensation Committee and to
the Board of Directors at its next regularly scheduled meeting that the
Employee be granted, as of the date of such Board approval, or as of his
first day of employment with Employer, whichever is later, in accordance
with the LTIP, 30,000 non-qualified stock options and 10,000 incentive
stock options. Any such award shall be subject to (i) the approval of the
Board of Directors and (ii) Employee executing Employer's standard stock
option agreement in effect from time to time. Employee shall be eligible
for additional grants in accordance with the policies specified in the
LTIP.
(e) Other Benefits. Employee shall, when eligible, be entitled to
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participate in all other fringe benefits accorded headquarters employees of
similar status by Employer as are in effect from time to time excluding
incentive compensation or other programs not designed for a senior
executive.
(f) Relocation Expenses. Employee shall be entitled to all benefits under
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the Relocation Policy of Employer, as adopted in November 1996.
Notwithstanding Section VII of the Relocation Policy, Employer will
reimburse Employee for the reasonable costs of temporary lodging for a
period of 90 days from the Effective Date and two return trips (economy
class) per month until the earlier to occur of (i) the expiration of one
(1) year from the Effective Date or (ii) the sale of Employee's home in
Florida. Notwithstanding the foregoing, if, despite Employee's reasonable
efforts, he is unable to sell his primary residence in Florida within 90
days from the Effective Date, Employer will reimburse Employee the
reasonable costs of temporary lodging for up to an additional 90 days.
4. Extent of Services. Employee shall devote his full professional
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time, 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 in the securities of a company that is listed on a national securities
exchange or is regularly traded by national securities dealers, if such holdings
are passive investments of one percent (1%) or less of the market value of the
outstanding securities of such company and Employee does not hold positions of
director, officer, employee or general partner. 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, contracts, development and marketing plans, acquisitions, operating
data, policies 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, Employee shall not directly or indirectly, or
cause others to, (i) make use of or
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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, contracts, development and marketing plans,
acquisitions, operating data and policies, or (ii) without Employer's prior
written consent, offer employment to or employ on behalf of Employee or any
other person, any person who at any time is or has been within the preceding one
(1) year an employee of Employer or any parent, subsidiary or affiliate of
Employer or induce such person, directly or indirectly, to leave his or her
employment. 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 by overnight courier.
7. Elective Positions; Constructive Termination.
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(a) Nothing contained in this Agreement is intended to nor shall be
construed to abrogate, limit or affect the powers, rights and privileges of
the Board of Directors or stockholders to remove Employee from the
positions set forth in Section 1, with or without Cause (as defined in
Section 10 below), during the term of this Agreement or to elect someone
other than Employee to those positions, as provided by law and the By-Laws
of Employer.
(b) If Employee is Constructively Terminated (as defined in Section 7(c)
below) it is expressly understood and agreed that Employee's rights under
this Agreement shall in no way be prejudiced, Employee shall not,
thereafter, be required to perform any services under this Agreement and
Employee shall be entitled to receive all forms of compensation referred to
in Section 3 above, including, without limitation, bonuses (calculated
based only on the actual payout on the EPS portion of the bonus as all
Choice officers receive in a given year) and the continued vesting through
the term of this Agreement of stock options and restricted stock
outstanding at the time of the Constructive Termination. However, Employee
shall not be entitled to receive new stock option grants or rights to
ungranted stock options. Employee upon removal shall not be required to
mitigate damages but nevertheless shall be entitled to pursue other
employment, and Employer shall be entitled to receive as an offset and
thereby reduce its payment by the amount received by Employee from any
other active employment. As a condition to Employee receiving his
compensation from Employer, Employee agrees to permit verification of his
employment records and income tax returns by an independent attorney or
accountant, selected by Employer but reasonably acceptable to Employee,
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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 Choice's annual
bonus program which adversely affects Employee, or (v) any other material
breach of this Agreement by Employer provided Employer shall be given
fourteen days advance written notice of such claim of material breach,
which written notice shall specify in reasonable detail the grounds for
such claim of material breach. Except in the case of bad faith, Employer
shall have an opportunity to cure the basis for Constructive Termination
during the fourteen day period after written notice.
8. Waiver of Breach. The waiver of either party of a breach of any
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provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
9. Assignment. The rights and obligations of Employer under this
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Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. The obligations of Employee hereunder may not be
assigned or delegated.
10. Termination of Agreement. This Agreement shall terminate upon the
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following events and conditions:
(a) Upon expiration of its term.
(b) For Cause, which means gross negligence, willful misconduct, willful
nonfeasance, deliberate and continued refusal to carry out duties and
instructions of the Employer's Board of Directors and Chief Executive
Officer consistent with the position, material dishonesty, a violation or a
willful breach of this Agreement or conviction of a felony involving moral
turpitude, fraud or misappropriation of corporate funds. Employee shall be
entitled to fourteen (14) days advance written notice of termination,
except where the basis for termination constitutes wilful conduct on the
part of Employee involving dishonesty or bad faith, in which case the
termination shall be effective upon the sending of notice. Such written
notice shall specify in reasonable detail the grounds for Cause and
Employee shall have an opportunity to contest to the Board of Directors or
cure the basis for termination during the fourteen day period after written
notice.
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(c) Subject to state and federal laws, if Employee is unable to perform the
essential functions of the services described herein, after reasonable
accommodation, for more than 180 days (whether or not consecutive) in any
period of 365 consecutive days, Employer shall have the right to terminate
this Agreement by written notice to Employee. In the event of such
termination, all non-vested stock options and other non-vested obligations
of Employer to Employee pursuant to this Agreement shall terminate.
(d) In the event of Employee's death during the term of this Agreement, the
Agreement shall terminate as of the date thereof.
11. Severance.
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(a) If, within twelve months after a Change in Control, as defined in
Section 11(b), the Employer terminates or Constructively Terminates
Employee's employment other than in accordance with Section 10, the amount
of Employee's severance pay will be 200% of his base salary at the rate in
effect at the time of his termination or Constructive Termination, plus
200% of the amount of any full year bonus awarded to Employee in the prior
year (or the maximum target bonus if no bonus was awarded in the prior
year). If Employee's employment is terminated subject to this paragraph,
the Employer will provide the Employee and his family health insurance
coverage, including, if applicable, COBRA reimbursement, and will provide
Employee disability insurance coverage under the applicable Employer plans
for a period of 12 months following termination or until Employee starts
other full time employment, whichever is earlier.
(b) A Change in Control of the Employer shall occur upon the happening of
the earliest to occur of the following:
1. Any "person" as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (other than (i) the
Employer, (ii) any trustee or other fiduciary holding securities under an
employee benefit plan of the Employer, (iii) any corporations owned,
directly or indirectly, by the stockholders of the Employer in
substantially the same proportions as their ownership of stock, (iv)
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;
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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 "Payment") would be
subject to the excise tax imposed by section 4999 of the Internal Revenue Code
(the "Excise Tax"), then the Employee shall be entitled to receive from Choice
an additional payment (the "Gross-Up Payment") in an amount such that the net
amount of the Payment and the Gross-Up Payment retained by the Employee after
the calculation and deduction of all Excise Taxes (including any interest or
penalties imposed with respect to such taxes) on the payment and all federal,
state and local income tax, employment tax and Excise Tax (including any
interest or penalties imposed with respect to such taxes) on the Gross-Up
Payment provided for in this Section, and taking into account any lost or
reduced tax deductions on account of the Gross-Up Payment, shall be equal to the
Payment;
(b) All determinations required to be made under this Section,
including
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whether and when the Gross-Up Payment is required and the amount of such Gross-
Up Payment, and the assumptions to be utilized in arriving at such
determinations shall be made by Accountants which Choice shall request provide
the Employee and Choice with detailed supporting calculations with respect to
such Gross-Up Payment at the time the Employee is entitled to receive the
Payment. For the purposes of this Section, the "Accountants" shall mean Choice's
independent certified public accountants. All fees and expenses of the
Accountants shall be borne solely by Choice. For the purposes of determining
whether any of the Payments will be subject to the Excise Tax and the amount of
such Excise Tax, such Payments will be treated as "parachute payments" within
the meaning of section 280G of the Code, and all "parachute payments" in excess
of the "base amount" (as defined under section 280G(b)(3) of the Code) shall be
treated as subject to the excise Tax, unless and except to the extent that in
the opinion of the Accountants such Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4) of the
Code) in excess of the "base amount," or such "parachute payments" are otherwise
not subject to such Excise Tax; for purposes of determining the amount of the
Gross-Up Payment the Employee shall be deemed to pay Federal income taxes at the
highest applicable marginal rate of Federal income taxation for the calendar
year in which the Gross-Up Payment is to be made and to pay any applicable state
and local income taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year (determined without
regard to limitations on deductions based upon the amount of the Employee's
adjusted gross income); and to have otherwise allowable deductions for Federal,
state and local income tax purposes at least equal to those disallowed because
of the inclusion of the Gross-Up Payment in the Employee's adjusted gross
income. Any Gross-Up Payment with respect to any Payment shall be paid by Choice
at the time the Employee is entitled to receive the Payment. Any determination
by the Accountants shall be binding upon Choice and the Employee. As a result of
uncertainty in the application of section 4999 of the Code at the time of the
initial determination by the Accountants hereunder, it is possible that the
Gross-Up Payment made will have been an amount less than Choice should have paid
pursuant to this Section (the "Underpayment"). In the event that Choice exhausts
its remedies and the Employee is required to make a payment of any Excise Tax,
the Underpayment shall be promptly paid by Choice to or for the Employee's
benefit.
13. Entire Agreement. This instrument contains the entire agreement
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of the 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
Employer:
CHOICE HOTELS INTERNATIONAL, INC.
By:
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Xxxxxxx X. XxXxxxxx
Senior Vice President
Employee:
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Xxxxxx Xxxxxx
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