Exhibit 10.12

CHOICE HOTELS INTERNATIONAL, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

(FOR NON-GRANDFATHERED ACCOUNT BALANCES)

As Amended and Restated Effective January 1, 2009

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TABLE OF CONTENTS

 

          Page

PREAMBLE

      1

ARTICLE I

   INTRODUCTION    1

1.1

   Name    1

1.2

   Purpose    1

1.3

   Effective Date    1

1.4

   Scope    1

ARTICLE II

   DEFINITIONS    2

2.1

   Accounts    2

2.2

   Administrative Committee    2

2.3

   Affiliate    2

2.4

   Annual Account    2

2.5

   Annual Deferral Amount    2

2.6

   Base Salary    2

2.7

   Board    2

2.8

   Bonus    2

2.9

   Change in Control    3

2.10

   Code    4

2.11

   Company    4

2.12

   Disability (or Disabled)    4

2.13

   Discretionary Employer Contribution Account    5

2.14

   Discretionary Employer Contribution Amount    5

2.15

   Eligible Employee    5

2.16

   Employee Deferral Account    5

2.17

   Employer    5

2.18

   Employer Matching Account    5

2.19

   Employer Matching Amount    5

2.20

   ERISA    5

2.21

   Grandfathered Accounts    5

2.22

   Investment Fund    5

2.23

   Matching Contribution    6

2.24

   Match Rate    6

2.25

   Moody’s Rate of Return    7

2.26

   Moody’s Rate of Return Plus Three Percent    7

2.27

   Non-Grandfathered Accounts    7

2.28

   Participant    7

2.29

   Performance-Based Compensation    8

2.30

   Plan    8

2.31

   Plan Year    8

2.32

   Qualified Plan    8

 

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2.33

   Retirement Age    8

2.34

   Separation from Service    8

2.35

   Spouse    9

2.36

   Transfer Contributions Account    9

2.37

   Trust    9

2.38

   Unforeseeable Financial Emergency    9

2.39

   Valuation Date    10

2.40

   Years of Service    10

ARTICLE III

   PARTICIPATION    10

3.1

   Eligibility    10

3.2

   Participation    10

ARTICLE IV

   PARTICIPANT DEFERRALS    10

4.1

   Elective Deferrals    10

4.2

   Election To Defer Compensation    11

4.3

   Withholding and Crediting of Annual Deferral Amounts    12

4.4

   Vesting    12

ARTICLE V

   EMPLOYER CONTRIBUTION CREDITS    13

5.1

   Matching Contribution Credits    13

5.2

   Other Employer Contribution Credits    13

5.3

   Transfer Contributions    13

5.4

   Vesting    14

ARTICLE VI

   ACCOUNTING AND ACCOUNT ADJUSTMENTS    14

6.1

   Investment of Participant Accounts    14

6.2

   Transfers to Employer Grantor Trust    15

6.3

   Notice to Participants    15

ARTICLE VII

   PAYMENT OF PLAN BENEFITS    15

7.1

   Commencement of Payments    15

7.2

   Form and Amount of Payments    16

7.3

   Number/Form of Distribution Options    17

7.4

   Further Deferrals    17

7.5

   Withdrawals for Unforeseeable Financial Emergencies    17

7.6

   Automatic Cash-Out    18

ARTICLE VIII

   BENEFITS    18

8.1

   Form and Payment of Death Benefits    18

8.2

   Participant’s Beneficiary    19

8.3

   Proper Beneficiary    19

ARTICLE IX

   PLAN ADMINISTRATION    20

9.1

   Administration    20

9.2

   Determination of Benefits    20

9.3

   Liability for Benefit Payments    20

 

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9.4

   Expenses    21

9.5

   Administrative Committee    21

9.6

   Indemnity of Committee    21

ARTICLE X

   GENERAL PROVISIONS    21

10.1

   Amendment, Suspension and Termination    21

10.2

   Nontransferability of Benefits    23

10.3

   Participant’s Rights Unsecured    23

10.4

   Domestic Relations Orders    23

10.5

   Applicable Law    24

10.6

   Compliance with Section 409A    24

10.7

   Effect on Employment Rights    24

10.8

   Protective Provisions    24

10.9

   Severability    24

10.10

   Notice    24

10.11

   Tax Liability    24

10.12

   No Guarantee of Benefits    25

10.13

   Incapacity of Recipient    25

10.14

   Construction    25

10.15

   Successors    25

 

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CHOICE HOTELS INTERNATIONAL, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

PREAMBLE

WHEREAS, Choice Hotels International, Inc. (the “Company”) desires to amend and
restate the Choice Hotels International, Inc. Executive Deferred Compensation
Plan (the “Plan”) to comply with Section 409A of the Internal Revenue Code and
make other conforming changes.

NOW, THEREFORE, Choice Hotels hereby amends and restates the Plan, effective
January 1, 2009, as follows:

ARTICLE I

INTRODUCTION

1.1 Name. The name of the Plan is the Choice Hotels International, Inc.
Executive Deferred Compensation Plan.

1.2 Purpose. The purpose of the Plan is to make available to Eligible Employees
a nonqualified, deferred compensation program that meets the requirements of
Section 409A of the Code for amounts subject to the provisions thereof. The Plan
is not, and is not intended to be, a qualified plan for federal income tax
purposes. The Company acknowledges that the Plan is an “employee pension benefit
plan” within the meaning of Section 3(2) of ERISA, as amended from time to time.
The Plan is intended to be an unfunded plan maintained “primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees” which is eligible for the exemptions applicable to
such plans under Title I of ERISA.

1.3 Effective Date. The effective date of the Plan, as amended and restated, is
January 1, 2009.

1.4 Scope. This amendment and restatement shall only apply to a Participant’s
Non-Grandfathered Accounts (if any). The prior plan documents in effect on
October 3, 2004 shall remain in effect and continue to apply to the
Participant’s Grandfathered Accounts (if any).

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ARTICLE II

DEFINITIONS

2.1 Accounts. The notional accounts described in Sections 4.1, 5.1, 5.2, and
5.3.

2.2 Administrative Committee. The committee as defined in Section 9.5.

2.3 Affiliate. Any affiliate of the Company as determined by the Board.

2.4 Annual Account. An amount equal to the following: (a) The sum of the
Participant’s Annual Deferral Amount, Employer Matching Amount, and
Discretionary Employer Contribution Amount for a Plan Year, plus (b) any amounts
credited or debited to such Amounts pursuant to this Plan, less (c) any portion
of the Annual Account which has been distributed to the Participant or his or
her beneficiary pursuant to this Plan.

2.5 Annual Deferral Amount. That portion of a Participant’s Base Salary and
Bonus earned for a Plan Year that a Participant defers in accordance with
Article IV.

2.6 Base Salary. A Participant’s annual base compensation (including
commissions) payable by an Employer for services performed during a calendar
year. Base Salary shall not include distributions from a nonqualified plan,
bonus and incentive payments, overtime, stock options and other equity
compensation grants, relocation expenses, non-monetary awards, director and
other fees, fringe benefits, expense reimbursements and automobile and other
allowances (or such other or different items as may be established by the
Administrative Committee, in its sole discretion, prior to the Plan Year). Base
Salary shall be calculated before reduction for compensation voluntarily
deferred or contributed by the Participant under all qualified or nonqualified
plans of any Employer and shall be calculated to include amounts not otherwise
included in the Participant’s gross income under Code Sections 125, 402(e)(3) or
402(h).

2.7 Board. The Company’s Board of Directors.

2.8 Bonus. Any compensation, in addition to Base Salary, payable to a
Participant under (a) any management incentive plan maintained by an Employer;
or (b) such other or different bonus or incentive arrangements as may be
provided by the Administrative Committee in its sole discretion in the
applicable deferral election forms for the year.

 

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2.9 Change in Control. The first to occur of any of the following events:

(a) Any Person (other than those Persons in control of the Company as of the
Effective Date, or other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) becomes the “Beneficial
Owner,” directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company’s
then outstanding securities; or

(b) During any period of two (2) consecutive years after an employee becomes a
Participant, individuals who at the beginning of such period constitute the
Board (and any new member of the Board, whose election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was so approved), cease for
any reason to constitute a majority thereof; or

(c) Upon:

(i) A complete liquidation of the Company;

(ii) The sale or disposition of all or substantially all of the Company’s
assets; or

(iii) A merger, consolidation, or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power of
the voting securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.

 

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(d) Notwithstanding the foregoing, in no event shall a “Change in Control” be
deemed to have occurred, with respect to the Participant, if the Participant is
part of a purchasing group which consummates the Change in Control transaction.
The Participant shall be deemed “part of a purchasing group” for purposes of the
preceding sentence if the Participant is an equity participant in the purchasing
company or group except for:

(i) Passive ownership of less than two percent (2%) of the stock of the
purchasing company; or

(ii) Ownership of equity participation in the purchasing company or group which
is otherwise not significant, as determined prior to the Change in Control by a
majority of the continuing nonemployee members of the Board.

(e) For purposes of this Section, the terms “Person” and “Beneficial Owner”
shall have the meanings given those terms in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 and Rule 13d-3 under that Act.

2.10 Code. The Internal Revenue Code of 1986, as amended from time to time and
any regulations thereunder.

2.11 Company. Choice Hotels International, Inc. and any successor to such
company whether by merger, consolidation, liquidation or otherwise.

2.12 Disability (or Disabled). A Participant is Disabled if he or she is either
(a) unable to engage in the activities and duties of the Participant’s then
current job by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or (b) by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than 3 months under an accident and health plan covering employees of the
Participant’s Employer. For purposes of this Plan, a Participant shall be deemed
Disabled if he or she is determined to be totally disabled by the Social
Security Administration. A Participant shall also be deemed Disabled if
determined to be disabled in accordance with the applicable disability insurance
program of such Participant’s Employer, provided that the definition of
“disability” applied under such disability insurance program complies with the
requirements of this Section.

 

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2.13 Discretionary Employer Contribution Account. The account established on an
Employer’s books and records under Section 5.2.

2.14 Discretionary Employer Contribution Amount. The amount, if any, credited to
a participant in accordance with Section 5.2.

2.15 Eligible Employee. The Company’s Chief Executive Officer (CEO) and any
other management or highly compensated employee of an Employer as may be
designated by the Board or the Compensation Committee of the Board in its sole
discretion.

2.16 Employee Deferral Account. The account established on an Employer’s books
and records under Section 4.1.

2.17 Employer. The (a) Company and (b) any Affiliate designated by the Board or
the Compensation Committee as participating in the Plan (and any successor to
such Affiliate whether by merger, consolidation, liquidation or otherwise).

2.18 Employer Matching Account. The account established on an Employer’s books
and records under Section 5.1(b).

2.19 Employer Matching Amount. The amount, if any, credited to a Participant in
accordance with Section 5.1(a).

2.20 ERISA. The Employee Retirement Income Security Act of 1974, as amended from
time to time.

2.21 Grandfathered Accounts. That portion of a Participant’s Accounts that is
not part of the Participant’s Non-Grandfathered Accounts.

2.22 Investment Fund. Any investment fund (such as a mutual fund) or indices
selected by the Administrative Committee, in its sole discretion, for the
purpose of crediting or debiting investment gain or loss to Participant
Accounts. The Administrative Committee may, in

 

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its sole discretion, change, delete or add to the Investment Funds available
under the Plan at any time. Notwithstanding the foregoing, the Moody’s Rate of
Return Plus Three Percent and Moody’s Rate of Return shall only be available as
an Investment Fund for (a) all Eligible Employees and (b) any Participant who
dies or has a Separation from Service with the Company and all Affiliates (and
his or her beneficiary) in the following circumstances:

(i) The Moody’s Rate of Return Plus Three Percent shall be available to a
Participant who dies or has a Separation from Service at or after Retirement Age
(or as otherwise provided by the Board or its Compensation Committee).

(ii) The Moody’s Rate of Return shall be available to a Participant who dies or
has a Separation from Service (A) at or after reaching age fifty-five (55) or
(B) after completing ten (10) or more Years of Service (or as otherwise provided
by the Board or its Compensation Committee).

2.23 Matching Contribution. The contribution (if any) made by an Employer to the
Qualified Plan on account of an Eligible Employee’s elective deferrals under
that plan.

2.24 Match Rate. The rate at which Base Salary deferrals are matched determined
by reference to the Participant’s Years of Service as of the last day of the
Plan Year. The Match Rate shall be as follows:

(a) For Participants with a hire date of before January 1, 2000:

 

Years of
Service

   Matching
Rate  

1–5

   50 %

6–9

   75  

10 or More

   100  

 

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(b) For Participants with a hire date of on or after January 1, 2000:

 

Years of
Service

   Matching
Rate  

1 or More

   50 %

2.25 Moody’s Rate of Return. The monthly equivalent (determined each calendar
month) of the annual yield of the Moody’s Average Corporate Bond Yield Index for
the preceding calendar month as published by Moody’s Investor Services, Inc. (or
any successor thereto), or, if such index is no longer published, a
substantially similar index selected by the Board (or its delegate).

2.26 Moody’s Rate of Return Plus Three Percent. The monthly equivalent
(determined each calendar month) of three percentage points (3%) greater than
the annual yield of the Moody’s Average Corporate Bond Yield Index for the
preceding calendar month as published by Moody’s Investor Services, Inc. (or any
successor thereto), or, if such index is no longer published, a substantially
similar index selected by the Board (or its delegate).

2.27 Non-Grandfathered Accounts. That portion of a Participant’s Accounts that
was deferred or became vested on or after January 1, 2005, and any gains or
losses credited thereon in accordance with Section 6.1(b), as of the date of
determination.

2.28 Participant. Any (a) Eligible Employee who is participating in the Plan in
accordance with Section 3.2 and (b) employee or former employee who has an
Account hereunder.

 

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2.29 Performance-Based Compensation. Compensation the entitlement to or amount
of which is contingent on the satisfaction of pre-established organizational or
individual performance criteria relating to a performance period of at least 12
consecutive months, as determined by the Administrative Committee in accordance
with Treas. Reg. Section 1.409A-1(e).

2.30 Plan. The Choice Hotels International, Inc. Executive Deferred Compensation
Plan, as amended from time to time.

2.31 Plan Year. The Plan’s annual accounting period is the calendar year.

2.32 Qualified Plan. Choice Hotels International, Inc. Retirement Savings and
Investment Plan (or its successor).

2.33 Retirement Age. The attainment of age fifty-five (55) and the completion of
ten (10) Years of Service by an Eligible Employee prior to a Separation from
Service.

2.34 Separation from Service. The severing of an individual’s employment with
the Employer and all affiliates (within the meaning of Treas. Reg.
Section 1.409A-1(h)(3)) for any reason other than death, as determined by the
Administrative Committee in accordance with Section 1.409A-1(h) and any other
applicable provisions of the regulations. In determining whether a Participant
has experienced a Separation from Service, the following rules shall apply:

(a) A Participant shall be considered to have experienced a Separation from
Service when the facts and circumstances indicate that the Participant and his
or her Employer reasonably anticipate that either (i) no further services will
be performed for the Employer after a certain date, or (ii) that the level of
bona fide services the Participant will perform for the Employer after such date
(whether as an employee or as an independent contractor) will permanently
decrease to no more than twenty percent (20%) of the average level of bona fide
services performed by such Participant (whether as an employee or an independent
contractor) over the immediately preceding thirty-six (36) month period (or the
full period of services to the Employer if the Participant has been providing
services to the Employer less than thirty-six (36) months).

 

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(b) If a Participant is on military leave, sick leave, or other bona fide leave
of absence, the employment relationship between the Participant and the Employer
shall be treated as continuing intact, provided that the period of such leave
does not exceed six (6) months (twenty-nine (29) months in the case of
disability leave within the meaning of Treas. Reg. Section 1.409A-1(h)(i)), or
if longer, for such period as the Participant retains a right to reemployment
with the Employer under an applicable statute or by contract. If the period of
leave exceeds six (6) months (twenty-nine (29) months in the case of disability
leave) and the Participant does not retain a right to reemployment under an
applicable statute or by contract, the employment relationship shall be
considered to be terminated for purposes of this Plan as of the first day
immediately following the end of such six (6)-month period (twenty-nine
(29)-month period in the case of disability leave). In applying the provisions
of this paragraph, a leave of absence shall be considered a bona fide leave of
absence only if there is a reasonable expectation that the Participant will
return to perform services for the Employer.

2.35 Spouse. The person who by law is legally married to a Participant on the
date of determination.

2.36 Transfer Contributions Account. The contributions credits, if any,
transferred pursuant to Section 5.3.

2.37 Trust. The employer grantor trust established by the Company or any
Employer to which funds will be transferred in accordance with Section 6.1. Such
trust shall be subject to the claims of each Employer’s creditors as provided
under the terms of the trust agreement.

2.38 Unforeseeable Financial Emergency. A severe financial hardship of the
Participant resulting from (a) an illness or accident of the Participant, the
Participant’s Spouse, the Participant’s beneficiary or the Participant’s
dependent (as defined in Code Section 152 without regard to paragraphs (b)(1),
(b)(2) and (d)(1)(b) thereof), (b) a loss of the Participant’s property due to
casualty, or (c) such other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant, all as determined by the Administrative Committee, consistent with
Code Section 409A and any regulations or other guidance thereunder, based on the
relevant facts and circumstances.

 

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2.39 Valuation Date. The last day of each Plan Year and such other dates as may
be established by the Administrative Committee in its sole discretion.

2.40 Years of Service. Except as otherwise provided by the Company in its sole
discretion, the total number of full years in which a Participant has been
employed by the Company or any of its Affiliates since the Participant’s most
recent date of hire with the Company or Affiliate. For purposes of this
definition, a Year of Service shall be the twelve month period beginning on the
Eligible Employee’s date of hire and ending on any anniversary of that date
thereafter. Any partial year of employment shall not be counted.

ARTICLE III

PARTICIPATION

3.1 Eligibility. An Eligible Employee shall be eligible to become a Participant
as provided in Section 3.2.

3.2 Participation. An Eligible Employee shall, to the extent consistent with
Code Section 409A, commence participation as of the date designated by the
Company; provided that an Eligible Employee shall not become a Participant
hereunder until the Eligible Employee has met all enrollment requirements as may
be established by the Administrative Committee in its sole discretion consistent
with Section 409A.

ARTICLE IV

PARTICIPANT DEFERRALS

4.1 Elective Deferrals. Any Eligible Employee may elect to defer each Plan Year,
as his or her Annual Deferral Amount, up to ninety percent (90%) of the Eligible
Employee’s Base Salary (other than Bonus) earned during the year and all or any
portion of the Eligible Employee’s Bonus for that year regardless of when such
amounts are payable (less any required tax or other withholdings as provided in
the applicable election form). Such election shall be made in whole percentages
(or as otherwise permitted by the Administrative Committee in its sole
discretion). Any Base Salary or Bonus deferred under this Section 4.1 shall be
credited on the books and records of the Employer in an Employee Deferral
Account maintained in the name of the Eligible Employee.

 

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4.2 Election To Defer Compensation.

(a) A Participant’s election to defer Base Salary or Bonus for a Plan Year shall
be submitted prior to January 1 of the Plan Year in which such amounts are first
earned (or at such earlier time as may be established by the Administrative
Committee in its sole discretion).

(b) Notwithstanding subsection (a) above, the Administrative Committee may, in
its sole discretion, permit a newly Eligible Employee (to the extent permitted
under Code Section 409A and any regulations thereunder) to submit his or her
election for the year in which the Eligible Employee first becomes eligible to
participate in the Plan within thirty (30) days after the date on which he or
she first became so eligible (or at such earlier time as may be established by
the Administrative Committee in its sole discretion). Such election shall become
effective as of the first pay period after the date on which the election form
is submitted to the Administrative Committee.

(c) Notwithstanding subsection (a) above, the Administrative Committee may, in
its sole discretion, permit an Eligible Employee (to the extent permitted under
Code Section 409A and any regulations thereunder) to submit an election to defer
any Bonus which qualifies as Performance-Based Compensation no later than six
(6) months before the end of the performance period (or at such earlier time as
may be established by the Administrative Committee in its sole discretion). To
be eligible to make such a deferral election, the Eligible Employee must have
continuously performed services for the Employer from the later of (1) the
beginning of the performance period, or (2) the date upon which the performance
criteria for such compensation are established, through the date upon which the
Eligible Employee makes the deferral election for such compensation. In no event
shall a deferral election submitted under this Section 4.2(c) be permitted to
apply to any amount of Performance-Based Compensation that has become readily
ascertainable.

(d) All elections made in accordance with this Section shall be irrevocable as
of the last date such election may be made (or such earlier date as may be
established by the Administrative Committee in its sole discretion).

 

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(e) Notwithstanding subsection (d) above,

(i) the deferral election of a Participant who is determined by the
Administrative Committee to be suffering from a disability (within the meaning
of Treas. Reg. Section 1.409A-3(j)(4)(xii)) shall, to the extent provided by the
Administrative Committee in its sole discretion consistent with
Section 1.409A-3(j)(4)(xii), be cancelled for the remainder of the Plan Year
during which the Participant first suffers the disability; and

(ii) the deferral election of a Participant who has experienced an Unforeseeable
Financial Emergency shall, to the extent provided by the Administrative
Committee in its sole discretion consistent with Section 1.409A-3(j)(4)(viii),
be cancelled for the remainder of the Plan Year during which the Participant
experiences the Unforeseeable Financial Emergency.

To the extent permitted under Treas. Reg. Section 1.409A-3(j)(4)(viii), a
Participant’s deferral elections under this Plan shall also be cancelled if the
Administrative Committee determines that such action is necessary for the
Participant to obtain a hardship distribution from a tax qualified plan pursuant
to Treas. Reg. Section 1.401(k)-1(d)(3).

4.3 Withholding and Crediting of Annual Deferral Amounts. For each Plan Year,
any elected deferral of Base Salary shall be withheld in equal amounts from each
payment thereof which is made during the year, as adjusted from time to time for
increases or decreases in Base Salary. Any deferral of a Bonus shall be withheld
at the time the Bonus is otherwise payable to the Participant. These amounts
shall be treated as the Participant’s Annual Deferral Amount for the Plan Year
and credited to the Participant’s Annual Account for such Plan Year at the time
such amounts would otherwise have been paid to the Participant.

4.4 Vesting. A Participant’s Employee Deferral Account shall be fully vested and
nonforfeitable at all times.

 

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ARTICLE V

EMPLOYER CONTRIBUTION CREDITS

5.1 Matching Contribution Credits.

(a) The Employer shall credit to each Eligible Employee each Plan Year an amount
equal to the following: (a) The Eligible Employee’s total deferrals of Base
Salary for the Plan Year while a Participant (not to exceed fifteen (15%) of his
or her Base Salary while an Eligible Employee for the year) multiplied by the
applicable Match Rate for the year, (b) reduced by the maximum Matching
Contribution which the Eligible Employee could receive for that year under the
Qualified Plan.

(b) Any Employer Matching Amount credited under this Section 5.1 shall be
credited on the Employer’s books and records to an Employer Matching Account
maintained in the name of the Eligible Employee as of the date determined by the
Company in its sole discretion.

5.2 Other Employer Contribution Credits.

(a) The Employer may, in its sole discretion, make additional contributions in
such amounts and at such times as recommended by the Administrative Committee
and approved by the Board or the Compensation Committee of the Board. Such
amounts shall be credited on the Employer’s books and records to the
Discretionary Employer Contribution Account maintained in the name of the
Eligible Employee as of the date designated by the Company in its sole
discretion.

(b) Notwithstanding the foregoing, three percent (3%) of the Moody’s Rate of
Return Plus Three Percent credited with respect to a Participant’s Grandfathered
Account shall be treated as an additional Discretionary Employer Contribution
Amount for each Plan Year for which such rate of return applies and shall be
credited to the Participant’s Annual Account for that year.

5.3 Transfer Contributions. Upon becoming an Eligible Employee hereunder, the
liability for the Eligible Employee’s account balance (if any) under the
Company’s Nonqualified Retirement Savings and Investment Plan (other than his or
her “grandfathered” account balance

 

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under that plan) shall be transferred and made a part of the Eligible Employee’s
Account payable under this Plan; provided, that the payment of the amounts so
transferred, shall be made in accordance with the terms of the Nonqualified
Retirement Savings and Investment Plan applicable to the so transferred account
balance on the date of transfer.

5.4 Vesting.

(a) A Participant’s Employer Matching Account shall vest at the rate of twenty
percent (20%) for each completed Year of Service; provided, that a Participant
shall become one hundred percent (100%) vested if he or she dies or becomes
Disabled while an Eligible Employee. Notwithstanding the foregoing, the Board
(or the Compensation Committee of the Board) may, in its sole discretion,
accelerate the vesting of all or any portion of a Participant’s Employer
Matching Account at any time.

(b) Each amount credited to a Participant’s Discretionary Employer Contribution
Account (and allocable earnings) shall vest as determined by the Board or the
Compensation Committee of the Board.

(c) A Participant’s Transfer Contributions Account (if any) shall be vested as
provided in the Company’s Nonqualified Retirement Savings and Investment Plan;
provided, that a Participant shall become one hundred percent (100%) vested if
he or she dies or becomes Disabled while an Eligible Employee. Notwithstanding
the foregoing, the Board (or the Compensation Committee of the Board) may, in
its sole discretion, accelerate the vesting of all or any portion of a
Participant’s Matching Contribution Account at any time.

ARTICLE VI

ACCOUNTING AND ACCOUNT ADJUSTMENTS

6.1 Investment of Participant Accounts.

(a) The Participant (or his or her beneficiary, if applicable) may, to the
extent permitted by the Administrative Committee in its sole discretion, elect
one or more Investment Funds as the deemed investment(s) for his or her
Accounts. A Participant (or his or her beneficiary) may elect to change his or
her Investment Fund elections at such times and in such manner as may be
established by the Administrative Committee in its sole discretion. If a
Participant (or his or her beneficiary) does not make an election hereunder, the
Participant’s Accounts automatically shall deemed to be invested in such
Investment Fund(s) as established by the Administrative Committee in its sole
discretion.

 

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(b) The value of a Participant’s Accounts shall be adjusted upward or downward
(on a pro rata basis) each Valuation Date to reflect any appreciation or
depreciation in value of the Investment Fund(s) in which the Participant’s
Accounts are deemed to be invested under subsection (a) above since the last
Valuation Date. The value shall also be adjusted for any (i) all Participant and
Employer contribution credits made since the last Valuation Date and
(ii) payments made to the Participant (or his or her beneficiary) since that
date.

6.2 Transfers to Employer Grantor Trust. The Employer may (but is not required
to) transfer to a Trust an amount equal to the amounts credited at any time to
Employee Deferral Accounts under Section 4.1, Employer Matching Accounts under
Section 5.1, Discretionary Employer Contribution Accounts under Section 5.2, and
Transfer Contributions Accounts under Section 5.3 for its eligible Employees at
such time as it deems appropriate. A separate subaccount may be established
under the Trust representing each of the Participants’ Accounts, to which the
allocable portion of each transfer (if any) shall be credited. Title to and
beneficial ownership of the assets of the Trust shall at all times remain with
the Employer and Participants shall not have any property interest whatsoever in
such assets.

6.3 Notice to Participants. The Administrative Committee shall periodically
provide statements to each Participant (at such times as it deems appropriate in
its sole discretion) setting forth the balance of the Participant’s Accounts and
such other information as it deems appropriate.

ARTICLE VII

PAYMENT OF PLAN BENEFITS

7.1 Commencement of Payments.

(a) In connection with a Participant’s election to defer an Annual Deferral
Amount for a Plan Year, a Participant may elect when payment of his or her
vested Annual Account for such Plan Year will be paid. The Participant may elect
to have such payment begin

 

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(i) as of the sixth (6th) month anniversary of the Participant’s Separation from
Service (which payment shall be made within two and one-half months (2-1/2)
months after that date) or (ii) a January selected by the Participant, provided
that, the Participant may not select a January date that is less than three
(3) years after the year in which the election is made or later than the January
following the Participant’s sixty-fifth (65th) birthday (or such other period
established by the Committee and reflected in the applicable election form). If
the Participant has made no election, payment shall begin as of the sixth
(6th) month anniversary of the Participant’s Separation from Service (which
payment shall be made within two and one-half months (2-1/2) months after that
date).

(b) In addition to the foregoing, a Participant may also elect to have payment
of his or her vested Annual Account for a Plan Year be payable upon an earlier
Change In Control (to the extent it qualifies as such under Code Section 409A),
which Account shall be payable within ninety (90) days of the Change in Control.

(c) For any annual installment payments to be made hereunder, payment shall
commence as provided in subsection (a) above and the remaining installments
shall be paid in January of each succeeding year.

7.2 Form and Amount of Payments.

(a) In connection with a Participant’s election to defer an Annual Deferral
Amount, the Participant shall elect the form in which his or her Annual Account
for such Plan Year will be paid. The Participant may elect to receive each
Annual Account upon either Separation from Service or as of a date specific
permitted under Section 7.1(a)(ii) in the form of a lump sum or annual
installments of two (2) to twenty (20) years. If a Participant does not make any
election with respect to the payment of an Annual Account, the Participant shall
be deemed to have elected to receive such Annual Account in a lump sum.
Notwithstanding the foregoing, payment upon a Change in Control (as provided in
Section 7.1(b)) shall be made in a lump sum.

(b) The determination of the amount to be distributed under this Section shall
be based upon the value of the Participant’s vested Accounts as of the last
Valuation Date preceding the date of distribution, determined in accordance with
Section 6.1. The amount of each installment payment hereunder shall be
determined by dividing the value of the Accounts as of the last Valuation Date
by the number of installments if any remaining to be paid (including the current
installment).

 

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(c) Notwithstanding any other provision of the Plan to the contrary, a
Participant’s Annual Account for any Plan Year beginning on or after the date
the Participant has a Separation from Service shall (unless otherwise forfeited
hereunder) automatically be paid to the Participant in the form of a lump sum
payment in the following Plan Year.

7.3 Number/Form of Distribution Options. Notwithstanding the foregoing, the
Administrative Committee may, in its sole discretion consistent with Code
Section 409A, limit the number or forms of distributions that a Participant may
elect to have under Section 7.1 or 7.2.

7.4 Further Deferrals. Notwithstanding Sections 7.1 and Section 7.2, a
Participant may, to the extent permitted by the Administrative Committee in its
sole discretion consistent with Code Section 409A and any regulations
thereunder, elect to further defer the date when payment of his or her Accounts
are made, provided that —

(a) the election is made more than 1 year prior to the date payment is otherwise
scheduled to begin;

(b) the election does not become effective for 12 months;

(c) the date on which payment is to begin is delayed for at least 5 years; and

(d) the election meets such other or different requirements as may be determined
by the Administrative Committee to be necessary to comply with Code
Section 409A.

7.5 Withdrawals for Unforeseeable Financial Emergencies.

(a) In the event of an Unforeseeable Financial Emergency, the Participant may,
to the extent permitted by the Administrative Committee in its sole discretion,
apply for payment of all or a part of his or her vested Account (other than his
or her Grandfathered Account) as may be necessary to satisfy the Unforeseeable
Financial Emergency.

 

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(b) The Administrative Committee shall have the authority, in its sole
discretion, to approve a payment under subsection (a) above. The payment shall
not exceed the lesser of (i) the vested portion of the Participant’s Accounts,
valued as of the close of business on or around the date on which the amount
becomes payable, as determined by the Administrative Committee in its sole
discretion, or (ii) the amount necessary to satisfy the Unforeseeable Financial
Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated
as a result of the distribution. Such payment shall be made in a lump sum no
later than sixty (60) days after the Administrative Committee’s decision to
approve the payment.

(c) Notwithstanding the foregoing, a Participant may not receive a payment under
subsection (a) above to the extent that the Unforeseeable Financial Emergency is
or may be relieved (i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant’s assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship or
(iii) by suspension of deferrals under this Plan (to the extent permitted under
Code Section 409A).

7.6 Automatic Cash-Out. Notwithstanding any other provision of this Article or
Article VIII, if, as of the date payment of all or a designated portion of a
Participant’s Accounts is scheduled to begin under Section 7.1(a), the vested
value of such portion of the Accounts does not exceed one hundred thousand
dollars ($100,000), that portion of the Participant’s vested Accounts shall (to
the extent permitted under Code Section 409A) automatically be paid to the
Participant (or his or her beneficiary) in one lump sum at that time.

ARTICLE VIII

BENEFITS

8.1 Form and Payment of Death Benefits.

(a) Upon a Participant’s death, the Participant’s vested Accounts, if any, shall
be paid to the Participant’s beneficiary (determined in accordance with
Section 8.2) in the same form payable to the Participant under Section 7.2.
Payment of such death benefits shall be made or begin within ninety (90) days
following the Participant’s date of death.

 

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(b) The amount of the death benefit to be paid to a beneficiary hereunder shall
be determined in accordance with Section 7.2(b).

8.2 Participant’s Beneficiary.

(a) If a Participant is married at the time of his or her death, the
Participant’s beneficiary shall be his or her Spouse, unless the Participant
names another beneficiary in accordance with subsection (c) below and the named
beneficiary is alive (or, in the case of a trust, in existence) on the
Participant’s date of death.

(b) If a Participant is not married at the time of his or her death, the
Participant’s beneficiary shall be the individual or trust the Participant has
designated in accordance with subsection (c) below prior to his or her death. If
the Participant dies without naming a beneficiary or if the named beneficiary is
no longer living (or, in the case of a trust, in existence) on the Participant’s
date of death, the Participant’s beneficiary shall be his or her estate.

(c) A Participant may make a beneficiary designation (or change a prior
designation) as provided in subsection (a) or (b) above at any time prior to his
or her death by delivery of a written designation to the Administrative
Committee (on such forms or in such other manner as may be required or permitted
by the Administrative Committee). Both individuals and trusts may be designated
as beneficiaries under this Section.

8.3 Proper Beneficiary. If there is a dispute as to the proper beneficiary to
receive payment hereunder, the Employer shall, to the extent consistent with
Code Section 409A and any regulations thereunder, have the right to withhold
such payment until the matter is finally resolved or adjudicated; provided, that
any payment made in good faith by the Employer shall fully discharge the
Employer, Company and Administrative Committee from all further obligations with
respect to that payment.

 

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ARTICLE IX

PLAN ADMINISTRATION

9.1 Administration. The Administrative Committee shall, from time to time,
establish such rules, forms and procedures for the administration of the Plan as
it deems appropriate. The Administrative Committee shall have full discretionary
power and authority to interpret, construe and administer this Plan and to
delegate all or a part of its duties and responsibilities hereunder. The
interpretation and construction of the Plan by the Administrative Committee (or
its delegate), and any action taken hereunder, shall be final, binding and
conclusive upon all parties in interest. Neither the Administrative Committee
nor any of its agents or employees shall be liable to any person for any action
taken or omitted to be taken in connection with the interpretation, construction
or administration of this Plan, so long as such action or omission to act is
made in good faith.

9.2 Determination of Benefits. The Administrative Committee shall make all
determinations as to the rights to benefits under this Plan. Subject to and in
compliance with the specific procedures contained in the applicable regulations
under ERISA: (a) Any decision by the Administrative Committee denying a claim by
a Participant or his beneficiary for benefits under this Plan shall be stated in
writing and delivered or mailed to the Participant or beneficiary; (b) each such
notice shall set forth the specific reasons for the denial, written in a manner
that is intended to be understood by the claimant; and (c) the Administrative
Committee shall afford a reasonable opportunity to the Participant or
beneficiary for a full and fair review of the decision denying such claim. The
benefit claims procedures then in effect under Section 503 of ERISA, as amended,
and any regulations thereunder, shall be followed by the Administrative
Committee in making any benefit determinations under this Plan. All
interpretations, determinations and decisions of the Administrative Committee
with respect to any claim hereunder shall be made in its sole discretion and
shall be final and conclusive.

9.3 Liability for Benefit Payments. The obligation to pay a Participant’s
benefits under the Plan shall, at all times, be the sole and exclusive liability
and responsibility of the Employer that was responsible for the credits made to
his or her Accounts under the Plan, but only to extent of such credits and any
applicable appreciation or depreciation determined in accordance with
Section 6.1(b). No other Employer or other person or entity shall be liable for
such payments.

 

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9.4 Expenses. Unless the Company otherwise directs, the expenses of
administering the Plan and any Trust shall be borne by each Employer on a
proportionate basis as determined by the Administrative Committee.

9.5 Administrative Committee. The Plan shall be administered by an
Administrative Committee consisting of at least three (3) members as may be
appointed by the Company’s Chief Executive Officer (“CEO”) except after a Change
in Control. Members of the Administrative Committee may be Participants in this
Plan. The CEO may appoint, remove or replace members of the Committee at any
time upon advance notice. After a Change in Control, vacancies on the
Administrative Committee shall be filled by majority vote of the remaining
Administrative Committee members and Administrative Committee members may be
removed only by such a vote. If no Administrative Committee members remain, a
new Administrative Committee shall be elected by majority vote of the
Participants in the Plan immediately preceding such Change in Control. No
amendment shall be made to this Article or other Plan provisions regarding
Administrative Committee authority under the Plan without prior approval by the
Administrative Committee.

9.6 Indemnity of Committee. The Company shall indemnify and hold harmless the
members of the Administrative Committee against any and all claims, loss,
damage, expense or liability arising from any action or failure to act with
respect to this Plan on account of such person’s service on the Administrative
Committee, except in the case of willful misconduct.

ARTICLE X

GENERAL PROVISIONS

10.1 Amendment, Suspension and Termination.

(a) The Company reserves the right to amend the Plan by action of the Board or
the Compensation Committee of the Board; provided, that the Company’s CEO and
Administrative Committee may amend the Plan without such prior authorization in
the following circumstances:

(i) The Company’s CEO may amend the Plan in any respect to the extent that the
amendment does not result in an annual increase in the cost of maintaining the
Plan in excess of $250,000.

 

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(ii) The Administrative Committee may, to the extent that the amendment does not
result in an annual increase in the cost of maintaining the Plan in excess of
$100,000, amend the Plan to:

(A) Correct any defect, supply any omission or reconcile any inconsistency in
order to carry out the intent and purposes of the Plan;

(B) Maintain the Plan’s status as a “top-hat” plan for purposes of ERISA; or

(C) Comply with applicable law or Internal Revenue Service regulations.

Any amendment adopted by the Administrative Committee may be signed by any
member of the Committee.

(b) Notwithstanding the foregoing, no amendment shall —

(i) deprive a Participant of his or her Accounts hereunder determined as of the
date of such amendment,

(ii) after a Change in Control, reduce the crediting rate, including Moody’s
Rate of Return and Moody’s Rate of Return Plus Three Percent on deferrals made
prior to, or elected prior to, the date notice of the amendment is given to
Participant;

(iii) after a Change in Control, limit the payout options available to the
Participant under the Plan or in anyway automatically accelerate the payment of
the Participant’s vested Accounts.

 

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(c) Each Employer reserves the right by action of its board of directors (or by
such other means as may be prescribed by the Board or the Compensation Committee
of the Board) to withdraw from the Plan with respect to its Eligible Executives
and Participants or suspend the accrual of further benefits under Section 4.1,
5.1, 5.2, or 5.3 at any time. No such withdrawal or suspension shall deprive a
Participant of his or her vested Accounts as of the date of withdrawal or
suspension.

(d) The Company reserves the right by action of the Board or the Compensation
Committee of the Board; to terminate the Plan at any time; provided that upon
termination, no Participant shall be deprived of his or her vested Accounts
hereunder determined as of the date of termination. Upon termination of the
Plan, the vested Accounts shall be paid in accordance with the terms of the Plan
in effect on the date of termination.

10.2 Nontransferability of Benefits. The rights of a Participant and any
beneficiary under the Plan are not subject to the claims of their creditors and
may not be voluntarily or involuntarily transferred, assigned, alienated,
accelerated or encumbered. Notwithstanding the preceding sentence, the Accounts
payable to a Participant under the Plan may, consistent with the requirements of
Code Section 409A, be offset by any liability of the Participant owing to the
Employer or any Affiliate.

10.3 Participant’s Rights Unsecured. The Plan is intended to be unfunded for
purposes of both the Code and ERISA. The right of a Participant or his or her
beneficiary to receive payment of the Participant’s Accounts hereunder shall be
a general unsecured claim against the Employer’s general assets, and neither the
Participant nor his or her beneficiary shall have any rights in or against any
amount credited to any investment account, Trust, or any other specific assets
of the Employer. To the extent that any person acquires a right to receive
payments from an Employer under the Plan, such right shall be no greater than
the right of any general unsecured creditor of the Employer.

10.4 Domestic Relations Orders. If a court determines that a Spouse or former
Spouse of a Participant has an interest in the Participant’s vested Accounts
under a final domestic relations order, the Administrative Committee (or its
delegate) may, in its sole discretion consistent with Code Section 409A,
distribute the Spouse’s or former Spouse’s interest to that Spouse or former
Spouse in accordance with such order.

 

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10.5 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Maryland, to the extent applicable.

10.6 Compliance with Section 409A. This Plan is intended to comply with the
distribution and other applicable requirements of Section 409A of the Code. The
Plan shall be interpreted and applied in accordance with the requirements of
Section 409A (to the extent applicable).

10.7 Effect on Employment Rights. Nothing in this Plan shall be construed as
(a) giving any Participant any right to continued employment with an Employer or
any Affiliate, or (b) affecting the eligibility for, or calculation of, any
benefit provided to any Participant by the Employer to the extent permitted by
law. No Participant shall have the right to receive any benefit under the Plan
except in accordance with the Plan’s terms.

10.8 Protective Provisions. A Participant shall cooperate with the Employer or
Administrative Committee by furnishing any and all information requested by the
Employer or Administrative Committee in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer or
Administrative Committee may deem necessary and taking such other action as may
be requested by the Employer or Administrative Committee.

10.9 Severability. If any provision of the Plan shall be held invalid or
unlawful for any reason, such event shall not affect or render invalid or
unenforceable the remaining provisions of the Plan.

10.10 Notice. Any notice, consent, election, claim or demand required or
permitted to be given under the provisions of this Plan shall be in writing, and
shall be signed by the party giving or making the same. If such notice, consent,
election, claim or demand is to be mailed, it shall be sent by United States
certified mail, postage prepaid, addressed to the addressee’s last known
address. The date of such mailing shall be deemed the date of notice, consent,
election, claim or demand.

10.11 Tax Liability. Any required federal, state or local tax withholding may be
withheld from any payment made pursuant to this Plan or from any other
compensation payable to the Participant. Notwithstanding the foregoing, a
Participant may, to the extent permitted by

 

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the Administrative Committee consistent with Code Section 409A, elect to pay any
required employment taxes (and any resulting income taxes) that arise as of the
date of deferral (or, if later, vesting) hereunder either (a) by direct payment
or (b) through the withholding of such amounts from other compensation due the
Participant. In the alternative, the Administrative Committee may, in its sole
discretion, offset such taxes against the Participant’s vested Accounts to the
extent permitted under Treas. Reg. Section 1.409A-3(j)(4) or other applicable
regulations.

10.12 No Guarantee of Benefits. Nothing in this Plan shall constitute a
guarantee by Employer, Company, Administrative Committee or any other person or
entity that the Employer’s assets will be sufficient to pay any benefits
hereunder.

10.13 Incapacity of Recipient. If the Administrative Committee determines that
any person to whom any benefits are payable hereunder is (a) unable to care for
his or her affairs because of illness or accident or (b) a minor, any payment
due under the Plan may be paid to the duly appointed guardian or conservator of
such person or to any third party who is eligible to receive payment from the
Plan for the account of such person. Any such payment shall be a complete
discharge of the Employer’s liability for such payments hereunder.

10.14 Construction. Titles of articles and sections herein are for convenience
of reference only and are not to be taken into account in interpreting the Plan.
The masculine whenever used herein shall include the feminine. The singular
shall include the plural and the plural shall include the singular whenever used
herein unless the context requires otherwise.

10.15 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Employers and their successors and assigns. The term successors
as used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of an Employer, and successors of
any such corporation or other business entity.

 

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IN WITNESS WHEREOF, Choice Hotels International, Inc. has caused this document
to be executed by its duly authorized officer, this              day of
                    , 2008.

 

CHOICE HOTELS INTERNATIONAL, INC. By:     Title: