Edgar Filing: CHOICE HOTELS INTERNATIONAL INC /DE

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant ¨

Check the appropriate box:



¨		Preliminary Proxy Statement
¨		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý		Definitive Proxy Statement
¨		Definitive Additional Materials
¨		Soliciting Material Pursuant to §240.14a-12
Choice Hotels International, Inc.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):



ý	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		1)	Title of each class of securities to which transaction applies:

		2)	Aggregate number of securities to which transaction applies:

		3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

		4)	Proposed maximum aggregate value of transaction:

		5)	Total fee paid:
o	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
		1)	Amount previously paid:

		2)	Form, Schedule or Registration Statement No.:

		3)	Filing Party:

		4)	Date Filed:

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CHOICE HOTELS INTERNATIONAL, INC.

1 CHOICE HOTELS CIRCLE, SUITE 400

ROCKVILLE, MARYLAND 20850

NOTICE OF ANNUAL MEETING

TO BE HELD APRIL 21, 2017

To the shareholders of

CHOICE HOTELS INTERNATIONAL, INC.

You are cordially invited to attend the 2017 Annual Meeting of Shareholders (the "Annual Meeting") of Choice Hotels International, Inc., a Delaware corporation (the “Company”), to be held on April 21, 2017, at 9:00 a.m., Eastern Time at the Company's headquarters at 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850, for the following purposes:



1	To elect the nine director nominees listed in the attached proxy statement to hold office for a term of one year ending at the 2018 Annual Meeting of Shareholders or until their successors are elected and qualified;
2	To hold an advisory vote on the future frequency of advisory votes on executive compensation;
3	To hold an advisory vote to approve executive compensation;
4	To approve the 2017 Choice Hotels International, Inc. Long-Term Incentive Plan;
5	To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017; and
6	To transact other business properly coming before the Annual Meeting.

Shareholders who owned shares of the Company's common stock ("Common Stock") as of the close of business on the record date of March 1, 2017, are entitled to notice of, and to vote at, the Annual Meeting or any adjournment(s) or postponement(s) thereof. In order to have your shares represented at the meeting, you can vote your shares of Common Stock through any one of the following methods: (i) properly execute and return the enclosed proxy card; (ii) vote online; or (iii) vote by telephone.

A list of the Company’s shareholders will be available for inspection at the Annual Meeting and at the office of the Company located at 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850, at least 10 days prior to the Annual Meeting.



	By Order of the Board of Directors

	CHOICE HOTELS INTERNATIONAL, INC.

	Simone Wu Senior Vice President, General Counsel, Corporate Secretary & External Affairs

March 27, 2017

Rockville, Maryland

PLEASE READ THIS ENTIRE PROXY STATEMENT CAREFULLY AND SUBMIT YOUR

PROXY BY COMPLETING AND MAILING THE ENCLOSED

PROXY CARD OR PROVIDE YOUR VOTING INSTRUCTIONS BY TELEPHONE OR ONLINE.

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CHOICE HOTELS INTERNATIONAL, INC.

1 CHOICE HOTELS CIRCLE, SUITE 400

ROCKVILLE, MARYLAND 20850

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

April 21, 2017

GENERAL INFORMATION

The Board of Directors (the “Board”) is soliciting your proxy for the 2017 Annual Meeting of Shareholders (the “Annual Meeting”). As a shareholder of Choice Hotels International, Inc., you have a right to vote on certain matters affecting the Company. This proxy statement discusses the proposals on which you are being asked to vote this year. Please read it carefully because it contains important information for you to consider when deciding how to vote. Your vote is important.

In this proxy statement, we refer to Choice Hotels International, Inc., as “Choice,” “Choice Hotels” or the “Company.”

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 is being mailed with this proxy statement. The Annual Report on Form 10-K is not part of the proxy solicitation material.

The Board is sending proxy materials to you and all other shareholders on or about March 27, 2017. The Board is asking for you to vote your shares by completing and returning the proxy card, voting online or voting by telephone.

Shareholders who owned shares of the Company's common stock ("Common Stock") as of the close of business on March 1, 2017 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment(s) or postponement(s) thereof. At the close of business on March 1, 2017, there were 56,353,620 outstanding shares of Common Stock.

Driving Directions to Choice’s Corporate Headquarters in Rockville, Maryland

GPS

For GPS driving directions, please use 200 East Middle Lane, Rockville, Maryland, 20850 as our 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850 address is not updated in all navigation systems. Choice is located on the corner of East Middle Lane and Hungerford Drive in Rockville, Maryland.

From Washington, DC and points south

Take the George Washington Memorial Parkway north to I-495 ramp towards Maryland. Continue on the I-270-Spur north toward Rockville/Frederick. Take the MD-189 exit 5 to Falls Road North/Rockville/Town Center. Keep right at the fork. This becomes Maryland Avenue. Turn right onto East Middle Lane. Choice is located on the corner of East Middle Lane and Hungerford Drive.

From Frederick, Maryland and points north

Take I-270 South towards Rockville. Bear right at I-270 Local south and head towards Shady Grove Road/Local Lanes. Take the MD-28 west exit 6-A toward Rockville Town Center. Turn left on West Montgomery Ave. Continue onto West Jefferson St. Turn Left on Maryland Avenue. Turn Right onto East Middle Lane. Choice is located on the corner of East Middle Lane and Hungerford Drive.

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TABLE OF CONTENTS



TABLE OF CONTENTS	2
PROXY SUMMARY	3
QUESTIONS AND ANSWERS	8
PROPOSAL 1—ELECTION OF NINE DIRECTORS	12
Nomination	12
Family Relationships	12
Director Qualifications	12
Board Recommendation	18
CORPORATE GOVERNANCE	19
Board of Directors	19
Board Leadership Structure	19
Board’s Role in Risk Oversight	19
Director Independence	20
Corporate Governance Guidelines	20
Corporate Ethics Policy	20
Committees of the Board	20
Contacting the Board of Directors	23
Consideration of Director Candidates	23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	25
EXECUTIVE COMPENSATION	27
Compensation Discussion and Analysis	28
Executive Summary	29
Compensation Philosophy and Objectives	34
Compensation Competitive Analysis	35
Elements of Compensation	36
2016 Compensation	36
Short-Term Incentive Compensation	36
Long-Term Incentive Compensation	39
Other Benefit Programs and Policies	43
Compensation Decision-Making Process	46
Board Compensation and Management Development Committee Report on Executive Compensation	47
Summary Compensation Table	48
Grants of Plan-Based Awards	51
Equity Compensation Plan Information	53
Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table	54
Outstanding Equity Awards at Year - End	56
Option Exercises and Stock Vested	58
Non-Qualified Deferred Compensation	59
Potential Payments upon Termination or Change in Control	61
Non-Executive Director Compensation	71
PROPOSAL 2 - ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION	73
PROPOSAL 3 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION	74
PROPOSAL 4 - APPROVAL OF 2017 LONG-TERM INCENTIVE PLAN	75
PROPOSAL 5 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	81
ADDITIONAL INFORMATION	82
Certain Relationships and Related Transactions	82
Section 16(a) Beneficial Ownership Reporting Compliance	84
Audit Committee Report	85
Shareholder Proposals for 2018 Annual Meeting	86
Shareholders Sharing the Same Last Name and Address	86
Solicitation of Proxies	86
Other Matters to Come Before the Meeting	86
APPENDIX A - CHOICE HOTELS INTERNATIONAL, INC. 2017 LONG-TERM INCENTIVE PLAN	1

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PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the Company’s 2016 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

2017 Annual Meeting of Shareholders



Date and Time:	April 21, 2017, 9:00 a.m. Eastern Time
Location:	1 Choice Hotels Circle, Rockville, Maryland 20850
Record Date:	March 1, 2017
Voting:	Shareholders as of the record date are entitled to vote by internet at www.envisionreports.com/chh; by telephone at 1-800-652-8683; by completing and returning their proxy card or voting instruction card; or in person at the Annual Meeting. If you hold your stock in street name, please see "Questions and Answers" for more information about voting.

Voting Matters and Board Recommendations



		Board Recommendation
Proposal 1	Election of Directors	FOR each nominee
Proposal 2	Advisory Vote on the Future Frequency of Advisory Votes on Executive Compensation	1 YEAR
Proposal 3	Advisory Approval of the Compensation of the Company's Named Executive Officers	FOR
Proposal 4	Approval of the Choice Hotels International, Inc. 2017 Long-Term Incentive Plan (the "2017 LTIP")	FOR
Proposal 5	Ratification of Ernst & Young as the Company's Independent Registered Public Accounting Firm	FOR

Governance Highlights

The Company is committed to maintaining good corporate governance as a critical component of our success in driving sustained shareholder value. With a focus on serving the interests of shareholders, the Board of Directors collaborates with the Company's senior management and external advisors to remain abreast of and evaluate corporate governance trends and best practices.



þ Annual election of directors by majority vote	þ Independent Board committees - The Compensation and Management Development Committee, Audit Committee and Corporate Governance and Nominating Committee are made up entirely of independent directors
þ Separate positions for Chairman of the Board and CEO	þ Annual report of succession planning and management development by CEO
þ The independent directors of the Board meet regularly in executive session. Four independent director executive sessions were held in 2016	þ Annual assessment of Board and committee effectiveness by the Corporate Governance and Nominating Committee
þ Lead independent director - In addition to chairing the executive sessions, the lead independent director manages the Board’s review of the CEO’s performance, coordinates activities of the independent directors and performs any other duties assigned by the Board	þ Hedging policy - The Company has a comprehensive insider trading policy and prohibits hedging by any employees or directors, other than Bainum family directors in relation to certain indirectly held shares
þ Stock ownership and holding requirements - Directors and executive officers have stock ownership and holding requirements	þ Pledging policy - The Company prohibits directors and Section 16 officers from pledging shares without prior written approval of the General Counsel
þ Clawback policy - Executives' incentives are subject to a clawback that applies in the event of certain financial restatements	þ Global hotline and web portal to encourage employees to report financial, ethics and employee relations issues
þ Board governance training program	þ Long-standing commitment to sustainability and environmentally friendly building and operating practices

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Directors

You are being asked to vote for nine directors. Except for Mr. Bainum, Dr. Renschler and Mr. Joyce, all nominees meet the New York Stock Exchange (NYSE) listing standards for director independence.



Nominees
Name	Age	Director Since	Occupation	Independent	A	CMD	CGN	D
Barbara T. Alexander	68	2012	Independent Consultant, Former Senior Advisor for UBS	X	CH			M
Stewart W. Bainum, Jr.	70	1976, except 1996-1997	Chairman of the Board, Investor
William L. Jews	65	2000, except 2005-2006	Former President and Chief Executive Officer, CareFirst, Inc.	X		M	CH	M
Stephen P. Joyce	57	2008	Chief Executive Officer
Monte J. M. Koch	53	2014	Partner, BDT & Company; Co- Founder, Ten-X	X	M		M
Liza K. Landsman	47	2014	President, Jet.com	X	M			M
Scott A. Renschler, Psy.D.	47	2008	Clinical Psychologist in Private Practice					M
Ervin R. Shames	76	2002	Lead Independent Director, Management Consultant, Former Chief Executive Officer of Borden, Inc.	X	M	CH	M
John P. Tague	54	2012	Former President and Chief Executive Officer, Hertz Global Holdings, Inc.	X		M

*A= Audit Committee, CMD = Compensation and Management Development Committee, CGN = Corporate Governance and Nominating

Committee, D = Diversity Committee, CH = Chair, M = Member

+ Mr. Gordon A. Smith, a director who is not a nominee for the 2017 Annual Meeting, served as 2016-2017 Chair of the Diversity Committee

2016 Business Performance Highlights



Hotel Development	Shareholder Return and Financial	Operational
The Company’s domestic pipeline of hotels awaiting conversion, under construction or approved for development as of December 31, 2016, increased 19% from December 31, 2015.	Diluted earnings per share (EPS) increased 11% in 2016 to $2.46.	Domestic system-wide revenue per available room (RevPAR) increased 3.9% in 2016.
The Company executed 645 new domestic hotel franchise contracts in 2016, an increase of 2% over 2015.	The Company paid cash dividends totaling approximately $46 million in 2016.	Operating income in 2016 was $238.9 million, a 6% increase over 2015.
The domestic new construction pipeline for Cambria hotel & suites as of December 31, 2016, totaled 66 hotels, a 53% increase from December 31, 2015.	The Company repurchased 0.6 million shares of Common Stock under its share repurchase program during 2016, at a total cost of approximately $30 million.	Effective royalty rate increased 11 basis points in 2016.

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Stock Performance Graph

This graph shows the cumulative total shareholder return for Choice’s Common Stock in each of the five years from December 31, 2011 to December 31, 2016. The graph also compares the cumulative total returns for the same five-year period with the S&P 500 Index and our performance peer group of companies, weighted according to the respective peer’s stock market capitalization at the beginning of each annual period. The comparison assumes $100 was invested on December 31, 2011, in Choice stock, the S&P 500 Index and Choice’s performance peer group and assumes that all dividends were reinvested.

Five Years Ended December 31, 2016 (Initial Investment) ($)



	Initial	2012	2013	2014	2015	2016
Choice Hotels International, Inc.	100.00	120.01	178.32	206.48	188.56	213.15
NYSE Composite	100.00	115.99	146.47	156.36	149.97	167.87
S&P Hotels, Resorts & Cruise Lines	100.00	125.18	161.67	200.56	208.31	223.98
Performance Peer Index (2016 Peer Group)	100.00	140.31	194.77	228.64	223.34	231.9

Performance Peer Index - Boyd Gaming Corp., Brinker International Inc., Dunkin' Brands Group Inc., Expedia Inc., Host Hotels & Resorts Inc., Hyatt Hotels Corp., Intercontinental Hotels Group PLC, Marriott Vacations Worldwide Corp., Orbitz Worldwide Inc., Pinnacle Entertainment Inc., Starwood Hotels Resorts Worldwide Inc., Strategic Hotels & Resorts Inc., TripAdvisor Inc. and Wyndham Worldwide Corp. Data for Orbitz Worldwide Inc. and Strategic Hotels & Resorts Inc. included up to the month prior to their respective acquisitions.

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2016 Compensation Highlights

Choice’s executive compensation program links a substantial portion of each executive’s total compensation opportunity to achievement against performance metrics we believe drive shareholder value. In rewarding executives, the Company intends to continue its practice of providing direct accountability for individual, shared and organizational results, ensuring that rewards are commensurate with each executive's contributions to the results delivered for shareholders. Our performance measurement framework for incentive based pay for our NEOs is summarized below.

*Mr. Pepper's short-term incentive may be leveraged up or down by the Company's actual operating income achievement.

**Mr. Oaksmith's long-term incentive was made up of restricted stock and stock options.

Our executive compensation programs are designed to align pay with performance and to align the economic interests of executives and shareholders. The charts below show the mix of targeted total direct compensation (“TDC”) (base salary, target annual incentive and target long-term incentive) for the CEO and other NEOs in 2016. Consistent with our pay-for-performance philosophy, the largest portion of compensation (approximately 82% for our CEOand on average 69% for our other NEOs excluding Mr. White) is variable or performance-based annual and long-term incentives.

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2016 Executive Compensation Summary

Set forth below is the 2016 compensation for our Named Executive Officers ("NEOs"):



Name and Principal Position	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Preferred Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Stephen P. Joyce Chief Executive Officer	1,027,692	—	1,854,052	1,854,002	1,085,526	29,875	167,202	6,018,349
Scott E. Oaksmith Senior Vice President, Finance and Chief Accounting Officer	305,008	—	575,044	75,005	138,195	—	33,970	1,127,222
Patrick S. Pacious President and Chief Operating Officer	662,531	—	2,625,106	625,007	707,327	6,304	128,958	4,755,233
David A. Pepper Chief Development Officer	488,154	—	356,002	356,004	379,346	112,847	62,659	1,755,012
Simone Wu Senior Vice President, General Counsel, Corporate Secretary & External Affairs	422,308	—	195,044	195,002	224,485	—	53,036	1,089,875
David L. White Former Senior Vice President, Former Chief Financial Officer	520,769	—	352,500	352,507	381,575	32,584	117,155	1,757,090

*See all Summary Compensation Table and related footnotes beginning on page 48.

**Mr. Dominic Dragisich was appointed Chief Financial Officer effective March 6, 2017. Mr. Dragisich is not a 2016 NEO.

Response to the 2016 Say on Pay Vote

In 2016, 99% of votes cast were in favor of our compensation proposal. The Compensation and Management Development Committee considers the results of the advisory vote during its annual review of the total compensation provided to our NEOs and other executives. Given the significant level of shareholder support, the Committee concluded that our shareholders agree that our compensation program continues to provide a competitive pay-for-performance alignment that effectively incentivizes our named executive officers to maximize shareholder value and encourages long-term retention. Accordingly, the Committee determined not to make significant changes in 2016 to the executive compensation program. The Committee engages in outreach with its largest shareholders each year regarding compensation as well as governance matters. This outreach utilizes investor conferences, in-person meetings at Company headquarters and telephone contact. The Committee will continue to consider the outcome of our say-on-pay votes and views of our shareholders when making future compensation decisions.

Changes to Executive Compensation Program in 2017

For 2017 executive officer compensation, PVRSUs will make up half of the annual long-term incentive. We believe this will continue to enhance our pay-for-performance policies.

Important Dates for 2018 Annual Meeting of Shareholders

Shareholder proposals submitted for inclusion in our 2018 proxy statement pursuant to SEC Rule 14a-8 must be received by November 27, 2017.

Notice of shareholder proposals to nominate a person for election as a director or to introduce an item of business at the 2018 Annual Meeting of Shareholders outside Rule 14a-8 must be received no earlier than January 21, 2018 and no later than February 20, 2018.

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QUESTIONS AND ANSWERS



Q.	Who can vote at the Annual Meeting?



A.	Shareholders who owned Common Stock as of the close of business on March 1, 2017 may attend and vote at the Annual Meeting. Each share of Common Stock is entitled to one vote. There were 56,353,620 shares of Common Stock outstanding on March 1, 2017.



Q.	Why am I receiving this proxy statement?



A.	This proxy statement describes proposals which are being submitted to shareholders. It gives you information on these proposals, as well as other information, so that you can make informed decisions.



Q.	What is the proxy card?



A.	The proxy card enables you to vote whether or not you attend the meeting. Even if you plan to attend the meeting, we encourage you to complete and return your proxy card before the meeting date in case your plans change. By completing and returning the proxy card, you are authorizing the designated proxies, Simone Wu (the Company's Senior Vice President, General Counsel, Corporate Secretary & External Affairs) and Scott Oaksmith (the Company's Senior Vice President, Finance and Chief Accounting Officer) to vote your shares of Common Stock at the meeting, as you have instructed them on the proxy card, or in the absence of such instructions, in accordance with the recommendations of the Board of Directors. If a proposal is properly presented for a vote at the meeting that is not on the proxy card, Ms. Wu and Mr. Oaksmith will vote your shares, under your proxy, at their discretion.



Q.	On what issues am I voting?



A.	We are asking you to vote on:
	l	Proposal 1 - the election of the nine director nominees named in this proxy statement.
	l	Proposal 2 - an advisory vote on the future frequency of advisory votes on executive compensation.
	l	Proposal 3 - an advisory vote to approve executive compensation.
	l	Proposal 4 - the approval of the 2017 LTIP.
	l	Proposal 5 - the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017.



Q.	What is the difference between a record holder and a “street name” holder?



A.	If your shares of Common Stock are registered directly in your name, you are considered the holder of record with respect to those shares. If your shares of Common Stock are held in a brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the holder of record with respect to those shares, while you are considered the beneficial owner of those shares. In that case, your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using one of the methods described below.



Q.	How do I vote?



A.	If you are a record holder:



	You may vote by mail: You may do this by completing and signing your proxy card and mailing it in the enclosed, prepaid and addressed envelope.



	l	If you mark your voting instructions on the proxy card, your shares will be voted as you instruct.



	l	If you sign, but do not mark your voting instructions on the proxy card, your shares will be voted in accordance with the Board's recommendations.



	You may vote by telephone: You may do this by calling toll-free 1-800-652-8683 and following the instructions. You will need your proxy card available if you vote by telephone.



	You may vote online: You may do this by accessing www.envisionreports.com/chh and following the instructions. You will need your proxy card available if you vote online.

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	You may vote in person at the meeting: We will pass out written ballots to anyone who wants to vote at the meeting. However, if you hold your shares in street name, you must request a legal proxy from your broker in order to vote at the meeting.



	If you are a “street name” holder:



	If you hold your shares of Common Stock in street name, you must vote your shares through the procedures prescribed by your broker, bank, trust or other nominee. Your broker, bank, trust or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker, bank, trust or other nominee how to vote your shares. In many cases, you may be permitted to submit your voting instructions online or by telephone.



Q.	What does it mean if I receive more than one proxy card or voting instruction form?



A.	It means that you have multiple accounts at the transfer agent or with brokerage firms. Please complete and return all proxy cards or voting instruction forms you may receive, or otherwise vote your shares online or by telephone as described herein or on the voting instruction form, to ensure that all of your shares are voted.



Q.	What if I change my mind after I vote?



A.	If you are a holder of record, you may revoke your proxy by any of the following means:



	l	signing or submitting another proxy before the Annual Meeting as provided herein with a later date,
	l	sending us a written notice of revocation, which must be received prior to the Annual Meeting at the following address: Corporate Secretary, Choice Hotels International, Inc., 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850, or
	l	voting in person at the meeting.



	If you are a street name holder, you may change your vote by complying with the procedures contained in the voting instructions provided to you by your broker, bank, trust or other nominee.



Q.	Will my shares be voted if I do not return my proxy card?



A.	If you are a record holder, your shares will not be voted. If you are a street name holder, your brokerage firm, under certain circumstances, may vote your shares.



	Brokerage firms have authority under the NYSE rules to vote customers’ shares on certain “routine” matters if the customer has not provided the brokerage firm with voting instructions within a certain period of time before the meeting. A brokerage firm cannot vote customers’ unvoted shares on non-routine matters. Only Proposal Five is considered a routine matter under the NYSE rules.



	Accordingly, if you do not instruct your brokerage firm how to vote your shares, your brokerage firm may not vote your shares on Proposals One, Two, Three or Four. Likewise, your brokerage firm may either:



	l	vote your shares on Proposal Five and any other routine matters that are properly presented at the meeting, or
	l	leave your shares unvoted as to Proposal Five and any other routine matters that are properly presented at the meeting.



	When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted to determine if a quorum exists to conduct business at the meeting. When a brokerage firm does not vote a customer’s unvoted shares, these shares are counted to determine if a quorum exists; however, they are not treated as voting on a matter.



	We encourage you to provide instructions to your brokerage firm. This ensures your shares will be voted at the meeting.



Q.	How many shares must be present to hold the meeting?



A.	To hold the meeting and conduct business, a majority of the Company’s outstanding shares of Common Stock as of the close of business on March 1, 2017, must be present in person or represented by proxy at the meeting. This is called a quorum.



	Shares are counted as present at the meeting if the shareholder either:



	l	is present and votes in person at the meeting, or
	l	has properly submitted a proxy card, or voted their shares by telephone or online.

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Q.	What are my voting choices when voting on the election of directors? (Proposal 1)



A.	You may vote either “for” or “against” each nominee, or you may "abstain" from voting.



	If you give your proxy without voting instructions, your shares will be counted as a vote for each nominee.



Q.	How many votes must the nominees have to be elected as directors?



A.	Directors are elected by a majority of votes cast in person or by proxy at the meeting. Abstentions and broker non-votes are treated as not voting on the matter.



Q.	What happens if a nominee is unable to stand for election?



A.	The Board expects that each of the nominees will be available for election and willing to serve. If any nominee is unable to serve at the time the election occurs, the Board may reduce the number of directors or select a substitute nominee. In the latter case, if you have completed and returned your proxy card or voted by telephone or online, Simone Wu or Scott Oaksmith can vote your shares for a substitute nominee. They cannot vote for more than nine nominees.



Q.	What are my voting choices when voting on the advisory vote on the future frequency of the advisory votes on executive compensation? (Proposal 2)



A.	You may vote either “1 Yr." "2 Yrs." "3 Yrs." or you may “abstain” from voting.



	If you give your proxy without voting instructions, your shares will be voted for an annual vote ("1 Yr.") for the future frequency of advisory votes on executive compensation.



Q.	How many votes are needed to approve an annual vote on the future frequency of the advisory votes on executive compensation?



A.	The frequency that receives the highest number of votes will be considered the choice of shareholders.The proposal is an advisory vote, which means that it is non-binding on the Company. However, the Compensation and Management Development Committee of the Board (the "Compensation Committee") will take into account the outcome of the vote when considering future proposals regarding the future frequency of the advisory votes on executive compensation. Abstentions and broker non-votes are treated as not voting on the matter.



Q.	What are my voting choices when voting to approve the advisory vote to approve executive compensation? (Proposal 3)



A.	You may vote either “for” or “against” the approval of the proposal, or you may “abstain” from voting.



	If you give your proxy without voting instructions, your shares will be voted for approval of executive compensation.



Q.	How many votes are needed to approve the advisory vote to approve executive compensation?



A.	The vote of a majority of the shares present in person or represented by proxy and voting on the matter is required to approve the proposal on executive compensation. The proposal is an advisory vote, which means that it is non-binding on the Company. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. Abstentions and broker non-votes are treated as not voting on the matter.



Q.	What are my voting choices when voting to approve the 2017 Long-Term Incentive Plan? (Proposal 4)



A.	You may vote either “for” or “against” the approval of the proposal, or you may “abstain” from voting.



	If you give your proxy without voting instructions, your shares will be voted for approval of the 2017 LTIP.



Q.	How many votes are needed to approve the 2017 Long-Term Incentive Plan?



A.	The vote of a majority of the shares present in person or represented by proxy and voting on the matter is required to approve the 2017 LTIP. Abstentions and broker non-votes are treated as not voting on the matter.

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Q.	What are my voting choices when voting on the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017? (Proposal 5)



A.	You may vote either “for” or “against” the ratification, or you may “abstain” from voting.



	If you give your proxy without voting instructions, your shares will be voted for the ratification.



Q.	How many votes are needed to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017?



A.	The vote of a majority of the shares present in person or by proxy and voting on the matter is required to ratify the appointment of Ernst & Young LLP. Abstentions and broker non-votes are treated as not voting on the matter.



Q.	What happens if Ernst & Young LLP is not ratified as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017?



A.	Although ratification is not required by our Bylaws or otherwise, the Board is submitting this proposal as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered accounting firm. Even if the selection is ratified, the Committee may select a different independent registered accounting firm at any time during the year if it determines that this would be in the best interests of the Company and our share owners.



Q.	Is my vote kept confidential?



A.	Proxy cards, telephone and online voting reports, ballots and voting tabulations identifying shareholders are kept confidential and will not be disclosed by Choice Hotels except as required by law.



Q.	Where do I find voting results of the meeting?



A.	We will announce preliminary voting results at the Annual Meeting. We will publish the final results in a Form 8-K to be filed with the Securities and Exchange Commission (“SEC”) after the Annual Meeting.



Q.	How can I review the Company’s Annual Report on Form 10-K?



A.	The Annual Report of Choice Hotels on Form 10-K, including the financial statements and the schedules thereto, is being mailed to you together with this proxy statement. You may also view the Form 10-K, as well as the Company’s other proxy materials, on the website listed below. Click on the Investor Information link on the website. You may also view the Form 10-K through the SEC’s website at www.sec.gov. You may also obtain a copy of the Form 10-K free of charge by contacting the Company at (301) 592-5026.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS MEETING TO BE HELD ON APRIL 21, 2017.



	The proxy statement and the Company’s Annual Report on Form 10-K are available at www.envisionreports.com/chh.

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PROPOSAL 1—ELECTION OF NINE DIRECTORS

Nomination

Nine directors are to be elected at the 2017 Annual Meeting, to hold office until the 2018 Annual Meeting of Shareholders, or until their successors are elected and qualified. Although currently serving as a director, Gordon A. Smith will not stand for re-election at the 2017 Annual Meeting of Shareholders.

The Company’s Restated Certificate of Incorporation, as amended April 30, 2013, provides that the number of directors must be at least three but not more than 12. The exact number of directors within that range is determined from time to time by the Board. On February 25, 2017, the Board determined that as of April 21, 2017, the Board will consist of nine members as Mr. Smith will not seek re-election to the Board at the 2017 Annual Meeting.

At the 2013 Annual Meeting, the Company’s shareholders approved the elimination of the classification of the Board over a three-year period. Classification has been eliminated and all directors are now elected annually. On April 24, 2015, the Board of the Company unanimously approved an amendment to the Company’s Bylaws, changing the voting standard for the election of nominees to the Board from a plurality vote to a majority vote, except in the case of a contested election, in which case directors will be elected by a plurality vote.

The Board has nominated nine individuals to serve as directors for terms of one year, expiring at the 2018 Annual Meeting of Shareholders, or until their successors are elected and qualified. The nine individuals consist of Barbara T. Alexander, Stewart W. Bainum, Jr., William L. Jews, Stephen P. Joyce, Monte J. M. Koch, Liza K. Landsman, Scott A. Renschler, Ervin R. Shames and John P. Tague. Each of the nominees is currently a member of our Board of Directors.

Family Relationships

The Chairman of the Board, Stewart Bainum, Jr., is the uncle of one of our directors, Scott A. Renschler. Other than the family relationship between Mr. Bainum and Dr. Renschler, there are no other familial relationships among our directors or executive officers.

Director Nominee Information and Qualifications

The Board requires that its members possess the highest personal and professional integrity and be positioned to contribute to the Board’s effectiveness through their experience. The Board’s Corporate Governance and Nominating Committee regularly reviews the experience, qualifications, attributes and skills of each of the Board’s director nominees.

The names of Choice's proposed director nominees, their respective ages, their positions with Choice, and other biographical information as of March 17, 2017, are set forth below. The Corporate Governance and Nominating Committee’s assessment of the qualifications of each Board member is also included below.

Board Recommendation

The Board recommends a vote FOR each of the director nominees.

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CORPORATE GOVERNANCE

Board of Directors

The Board is responsible for overseeing the overall performance of the Company. Members of the Board are kept informed of the Company’s business primarily through discussions with the Chairman, the Chief Executive Officer and other members of the Company’s management, by reviewing materials provided to them and by participating in Board and committee meetings.

In 2016, the Board held eight meetings and each director attended at least 75% of all meetings of the Board and the standing committees of the Board on which he or she served. In 2016, all of the then current Board members attended the Annual Meeting. As stated in the Company's Corporate Governance Guidelines, the Company expects all directors to attend the Annual Meeting. The independent, non-management members of the Board are required to meet at least once a year in executive session without management. Mr. Shames, the lead independent director, chairs these meetings. Four such meetings were held in 2016.

The Board has adopted Corporate Governance Guidelines, a Corporate Ethics Policy and charters for each of its standing committees, including the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Diversity Committee, each of which is discussed further below. The Corporate Governance Guidelines and Corporate Ethics Policy are included in the investor relations section of the Company’s website at www.choicehotels.com.

Board Leadership Structure

The Board is led by the Chairman, Mr. Bainum, who has served in this role for more than 25 years. The benefits of Mr. Bainum’s leadership of the Board stem both from Mr. Bainum’s long-standing relationship and involvement with the Company, which provides a unique understanding of the Company’s culture and business, as well as his on-going role as the Board’s primary day-to-day contact with the Company’s senior management team, which ensures that a constant flow of Company-related information is available to the Board as a whole. This flow of communication enables Mr. Bainum to identify issues, proposals, strategies and other considerations for future Board discussions and informs his role as leader in many of the resulting discussions during Board meetings. Mr. Bainum also brings the perspective of a major shareholder to the Board.

The Company has elected to separate the positions of Chairman (held by Mr. Bainum) and Chief Executive Officer (held by Mr. Joyce). Although Mr. Joyce serves as a member of the Board, we believe that Mr. Bainum’s status as Chairman provides for a meaningful division of leadership between management and the Board.

In addition to this division of leadership between Chairman and Chief Executive Officer, leadership is further enhanced on the Board based on the Board’s annual election of a lead independent director. In light of the Company and Board leadership roles held by Mr. Bainum and Mr. Joyce, the Board believes that it is important to maintain a Board leadership position that is held by an independent director. Currently, Mr. Shames serves as the Board’s lead independent director. In his role as lead independent director, Mr. Shames serves as chairman of executive session meetings in which Mr. Bainum and Mr. Joyce (as well as Dr. Renschler) do not participate. The goal and purpose of these meetings chaired by Mr. Shames is to permit the non-management and independent members of the Board to freely discuss issues or concerns related to Company and Board performance, including issues or concerns related to Company or Board leadership. The Board meets regularly in executive session. Four such meetings were held in 2016. In addition to chairing the executive sessions, the lead independent director manages the Board’s review of the CEO’s performance, coordinates activities of the independent directors and performs any other duties assigned by the Board.

Board’s Role in Risk Oversight

The Board administers its risk oversight function through two primary mechanisms: (1) through the adoption and enforcement of Board policies and procedures intended to require the full Board to discuss, address and approve or disapprove certain items determined by their nature to involve various risks requiring Board consideration and (2) through the efforts of the Board’s Audit Committee, which focuses on the particular risks to the Company that arise out of financial reporting and other pertinent areas.

The Board’s primary role in risk oversight is to establish and maintain effective policies and procedures that serve to highlight or expose critical risks. The Board has adopted a set of Board policies applicable to various transactions involving the Company and its directors, officers and employees that the Board has determined are likely to involve a potentially higher degree of risk than ordinary course transactions and therefore are appropriately reviewable by the full Board. For these transactions, the Company is required to obtain Board approval, which provides the Board with an opportunity to discuss the transaction and attendant risk, prior to the transaction becoming binding on the Company. Those transactions requiring prior Board approval include transactions above certain limits, certain lending arrangements, certain litigation settlements, and certain related party transactions. In addition to the full Board’s role in risk oversight, different committees of the Board play a role in overseeing risks attendant to the committee’s particular area of focus. For instance, the Compensation Committee assumes primary responsibility for risk oversight as it relates specifically to the Company’s compensation policies and practices and the Corporate Governance and Nominating Committee and Diversity Committee are empowered to raise risks or potential risks brought to such Committee’s attention to the full Board for discussion. In addition, as discussed below, the Board’s Audit Committee has specific functions and responsibilities that generally relate to the risk oversight function.

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The general functions of the Audit Committee are as set forth under the heading Committees of the Board – Audit Committee. As a result of the Audit Committee’s performance of these functions, it is often provided with access to reports and analysis (either internally generated or created by the Company’s independent registered public accounting firm) relating to issues or concerns that, because of the potential for exposure to risk, the Committee determines to be proper for additional review and discussion. Often, these discussions may remain within the Audit Committee, if, after discussions with the Company’s Chief Executive Officer, Chief Financal Officer, Chief Accounting Officer and other relevant Company employees, the result of the review is a determination by the Audit Committee that the identified potential for risk is being adequately addressed by the Company. In certain circumstances, the Audit Committee may determine (either initially after identification of the potential risk or after a preliminary review conducted by the Audit Committee) that certain risks or potential risks be referred to the full Board for discussion.

Director Independence

The Board currently has ten directors, a majority (seven) of whom the Board has determined to be “independent” under the listing standards of the NYSE. The independent directors are Barbara T. Alexander, William L. Jews, Monte J. M. Koch, Liza K. Landsman, Ervin R. Shames, Gordon A. Smith and John P. Tague. Gordon A. Smith will not stand for re-election at the 2017 Annual Meeting of Shareholders. After the Annual Meeting, assuming all nominees are elected, the Board will consist of nine directors.

In determining director “independence,” the Board applies the standards as set forth in the listing standards of the NYSE and additional independence standards adopted by our Board as follows:


•	No director can be “independent” until five years following the termination or expiration of a director’s employment with the Company, rather than three years as currently required under the NYSE rules;


•	No director can be “independent” who is, or in the past five years has been, affiliated with or employed by a present or former outside auditor of the Company until five years after the end of either the affiliation or the auditing relationship, rather than three years as currently required under the NYSE rules; and


•	No director can be “independent” if he or she in the past five years has been part of an interlocking directorate, rather than three years as currently required under the NYSE rules.

Corporate Governance Guidelines

The Corporate Governance Guidelines, adopted by the Board, are a set of principles that provide a framework for the Company’s corporate governance. The main tenets of the Guidelines are:


•	Create value for shareholders by promoting their interests;


•	Focus on the future, formulate and evaluate corporate strategies;


•	Duty of loyalty to the Company by directors;


•	Annual Chief Executive Officer evaluation by independent directors;


•	Annual approval of three-year strategic plan and one-year operating plan or as the Board deems necessary in the event there are no material changes to the strategic and operating plans then in effect;


•	Annual assessment of Board and committee effectiveness by the Corporate Governance and Nominating Committee;


•	Directors are required to reach and maintain ownership of $300,000 of Company stock within five years of election to the Board;


•	Directors attendance expectations; and


•	Annual report of succession planning and management development by Chief Executive Officer.

Corporate Ethics Policy

The Board has established a Corporate Ethics Policy to aid each director, officer and employee of the Company (including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) and its subsidiaries in making ethical and legal decisions in his or her daily work. To the extent approved or granted, the Company will post amendments to or waivers from the Corporate Ethics Policy (to the extent applicable to the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) on the Company’s website.

Committees of the Board

The standing committees of the Board are the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Diversity Committee. The charters for each of these committees are included in the investor relations section of the Company’s website at www.choicehotels.com. All of the current members of each of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are independent, as required by the committee charters and the current listing standards of the NYSE and the rules of the SEC, as applicable.

The following provides a description of certain functions, current membership and meeting information for each of the Board committees for 2016.

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Compensation and Management Development Committee

Under the terms of its charter, the Compensation Committee discharges the Board’s responsibilities relating to compensation of the Company’s executives through the following functions, among others:


•	Overseeing the administration of the Company’s equity compensation plans and authorizing equity awards thereunder;


•	Establishing and updating the “peer group” used to compare the Company’s compensation practices;


•	Reviewing and approving the compensation of executive officers, in light of shareholder “Say on Pay” results and other relevant factors;


•	Setting the compensation for the non-employee members of the Board of Directors;


•	Reviewing bonus and incentive plans, pensions and retirement;


•	Reviewing other employee benefit plans and programs;


•	Reviewing the Company’s succession plan and management development;


•	Self-evaluating annually;


•	Setting criteria and guidelines for performance of the Chief Executive Officer;


•	Assessing performance of the Chief Executive Officer against performance objectives; and


•	Reviewing and discussing the Company’s Compensation Discussion and Analysis and producing the annual Compensation Committee report for the Company’s proxy statement.

The Compensation Committee discharges its responsibilities relating to executive management, talent development and succession planning of the Company’s executives by reviewing and discussing the Company’s management succession plan for the CEO and other key senior executives and by reviewing and discussing management development for key executives as part of the Company’s annual talent review process.

During 2016, at the direction of Mr. Shames, the Chairman of the Compensation Committee, Mr. Joyce – our Chief Executive Officer – assisted by Patrick Cimerola – our Chief Human Resources Officer – prepared and distributed to Committee members meeting agendas, consultant-provided compensation related information, and Company reports and data in preparation for Committee meetings. In addition, in conjunction with the Compensation Committee Chairman, Messrs. Joyce and Cimerola prepared and presented specific compensation proposals to the Compensation Committee, including Mr. Joyce’s assessment of individual executive officer performance and recommended compensation amounts for each officer other than himself. See the Compensation Discussion and Analysis section below for more information on Mr. Joyce’s role in recommending the compensation paid to our Named Executive Officers (as defined below in Compensation Discussion and Analysis) in 2016. None of our executive officers determined or recommended the amount or form of non-employee director compensation.

The Compensation Committee has delegated limited authority to our Stock Compensation Committee, currently consisting of our Chief Executive Officer, to make equity awards to employees at the vice president level or lower solely for the purpose of promotion, retention, or new hire. No individual award may exceed $250,000 in value.

In accordance with its charter, the Compensation Committee has the authority to retain, terminate and approve professional arrangements for outside compensation consultants to assist the Committee.

During 2016, the Compensation Committee retained Mercer (US) Inc. (“Mercer”) a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. ("MMC") to provide various compensation-related services and assistance. Mercer performed the following functions and services:


•	Attended Committee meetings;


•	Provided independent advice to the Committee on current trends and best practices in compensation design and program alternatives and advised on plans or practices that may improve effectiveness of our compensation program;


•	Provided and discussed peer group and various survey data; and, based on this information, offered independent recommendations on CEO and NEO compensation;


•	Reviewed the CD&A, compensation tables and other compensation-related disclosures in our proxy statements;


•	Offered recommendations, insights and perspectives on compensation related matters;


•	Evaluated and advised the Committee regarding enterprise and related risks associated with executive compensation components, plans and structures; and


•	Supported the Committee to ensure executive compensation programs are competitive and align the interests of our executives with those of our shareholders.

In 2016, Mercer attended all Committee meetings in person or by telephone, including executive sessions as requested, and consulted frequently with the Committee Chairman between meetings. Mercer reviewed the CD&A and the executive compensation tables contained in this proxy statement.

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The Company paid Mercer $203,622 in 2016 for services related to its engagement by the Compensation Committee. See Compensation Discussion and Analysis below for additional information related to the role of Mercer in the Company’s 2016 executive compensation decisions.

The Committee has analyzed whether the work of Mercer as a compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to the Company by Mercer or any of its affiliates; (ii) the amount of fees the Company paid to Mercer as a percentage of MMC’s total revenue; (iii) Mercer’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Mercer or the individual compensation advisors employed by the firm with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Committee; and (vi) any stock of the Company owned by Mercer or the individual compensation advisors whom it employs. The Committee has determined, based on its analysis of the above factors, that the work of Mercer and the individual compensation advisors employed by Mercer as compensation consultants to the Company has not created any conflict of interest.

In 2016, the Compensation Committee met six times. The Chair of the Compensation Committee was Ervin R. Shames and the other members were William L. Jews, Gordon A. Smith and John P. Tague. The Board determined that each member of the Compensation Committee was independent under the listing standards of the NYSE applicable to Compensation Committee members.

While the charter authorizes the Compensation Committee to delegate its responsibilities to subcommittees, to date, the Committee has not delegated any of its responsibilities in this manner.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is an officer, former officer, or employee of the Company. During 2016, no member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. During 2016, no interlocking relationship existed between any of our executive officers or Compensation Committee members, on the one hand, and the executive officers or Compensation Committee members of any other entity, on the other hand.

Audit Committee

Under the terms of its charter, the Audit Committee assists the Board to fulfill its oversight responsibilities with respect to the Company’s auditing, accounting and financial reporting processes generally. The Committee discharges these duties through the following functions, among others:


•	Conferring separately with the Company’s independent registered public accounting firm and internal auditors regarding their responsibilities;


•	Reviewing reports of the Company’s independent registered public accounting firm and internal auditors and annual and quarterly reports for filing with the SEC;


•	Reviewing reports of the Company’s independent registered public accounting firm concerning financial reporting processes and internal controls;


•	Establishing and monitoring an anonymous complaint hotline and other complaints procedures regarding accounting and auditing matters;


•	Pre-approving all audit and non-audit services provided by the Company’s independent registered public accounting firm;


•	Self-evaluating annually;


•	Determining the selection, compensation and appointment of the Company’s independent registered public accounting firm and overseeing their work;


•	Reviewing the Company’s policies with respect to risk management;


•	Reviewing with the Chief Executive Officer and Chief Financial Officer or Chief Accounting Officer, the Company’s disclosure controls and procedures; and


•	Overseeing the Company's cyber security and data security practices and procedures.

In 2016, the Audit Committee met eight times. Barbara T. Alexander served as Chair of the Committee. The other members of the Committee in 2016 were Ervin R. Shames, Monte J. M. Koch and Liza K. Landsman. The Board has determined that Ms. Alexander and Mr. Koch are qualified as audit committee financial experts within the meaning of the SEC’s regulations. Furthermore, each member of the Committee has accounting and related financial management expertise within the meaning of the listing standards of the NYSE. In addition, the Board also determined that each member of the Audit Committee was independent under SEC rules and the listing standards of the NYSE applicable to Audit Committee members.

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Corporate Governance and Nominating Committee

Under the terms of its charter, the Corporate Governance and Nominating Committee identifies individuals qualified to become members of the Board; selects, or recommends that the Board selects, the director nominees for election or to fill vacancies; develops and recommends to the Board a set of Corporate Governance Guidelines applicable to the Company; and oversees the evaluation of the Board. The Committee also has the following functions, among others:


•	Establishing criteria for Board membership;


•	Conducting the appropriate and necessary inquiries into the backgrounds and qualifications of proposed Board candidates;


•	Reviewing and making recommendations to the Board on the size and composition of the Board and its committees;


•	Reviewing and making recommendations to the Board with respect to directors, if any, who are unable to perform their duties;


•	Reviewing and making recommendations to the Board with respect to the retirement of directors;


•	Reviewing and making recommendations to the Board with respect to the Company’s policies regarding director or senior executive conflict of interest matters;


•	Monitoring and making recommendations to the Board concerning matters of corporate governance; and


•	Reviewing the outside board service by senior executives.

In 2016, the Committee met three times. William L. Jews was the Chair of the Committee and the other members of the Committee were Ervin R. Shames and Monte J. M. Koch.

Diversity Committee

Under the terms of its charter, the Diversity Committee seeks to assist and advise management in developing a workplace culture that values working with diverse groups of people, offering diversity of thought and perspective. The Committee seeks to achieve its goals through the following functions, among others:


•	Review and evaluate diversity efforts in workforce development, franchise development, vendor relations, marketing and philanthropy;


•	Review the efforts by management to increase the diversity of the Company's workforce, including at management levels; and


•	Reporting to the Board on diversity matters.

In 2016, the Committee met two times. Gordon Smith was the Chair of the Committee and the other members of the Committee were Barbara T. Alexander, William L. Jews, Scott A. Renschler and Liza Landsman.

Contacting the Board of Directors

Shareholders or other interested parties may contact an individual director, the lead independent director of the Board, or the independent directors as a group by mail at the following address:



	Mail:	Choice Hotels International, Inc.
		1 Choice Hotels Circle, Suite 400
		Rockville, Maryland 20850
		Attn: Board of Directors

Each communication should specify the applicable addressee or addressees to be contacted, as well as the general topic of the communication. The Company will initially receive and process communications before forwarding them to the addressee. The Company generally will not forward to the directors a shareholder communication that it determines to be primarily commercial in nature or relates to an improper or irrelevant topic, or that requests general information about the Company.

Consideration of Director Candidates

The Corporate Governance and Nominating Committee administers the process for nominating candidates to serve on the Company’s Board. The Committee recommends candidates for consideration by the Board as a whole, which is responsible for appointing candidates to fill any vacancy that may be created between meetings of the shareholders and for nominating candidates to be considered for election by shareholders at the Company’s Annual Meeting.

The Board has established selection criteria to be applied by the Corporate Governance and Nominating Committee and by the full Board in evaluating candidates for election to the Board. These criteria include: (i) independence, (ii) integrity, (iii) experience and sound judgment in areas relevant to the Company’s business, (iv) a proven record of accomplishment, (v) willingness to speak one’s mind, (vi) the ability to commit sufficient time to Board responsibilities, (vii) the ability to challenge and stimulate management and (viii) belief in and passion for the Company’s mission and vision. The Committee also periodically reviews with the Board the appropriate skills and characteristics required of Board members in the context of the current membership of the

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Board. This assessment includes considerations such as diversity, age and functional skills in relation to the perceived needs of the Board from time to time.

The Corporate Governance and Nominating Committee uses a variety of methods to identify potential nominees for election to the Board, including consideration of candidates recommended by directors, officers or shareholders of the Company. When reviewing and recommending candidates to join the Board, the Corporate Governance and Nominating Committee considers how each prospective new member’s unique background, experience and expertise will add to the Board’s overall perspective and ability to govern the Company. While the Committee has not established any formal diversity policy to be used to identify director nominees, the Committee recognizes that a current strength of the Board stems from the diversity of perspective and understanding that arises from discussions involving individuals of diverse background and experience. When assessing a Board candidate’s background and experience, the Committee takes into consideration all relevant components, including, but not limited to, a candidate’s gender and cultural and ethnic status. The Committee may also use one or more professional search firms or other advisors to assist the Committee in identifying candidates for election to the Board.

The Corporate Governance and Nominating Committee will consider director candidates recommended by shareholders and evaluate them using the same criteria as applied to candidates identified through other means, as set forth above. Shareholders seeking to recommend a prospective candidate for the Committee’s consideration should submit the candidate’s name and qualifications, including the candidate’s consent to serve as a director of the Company if nominated by the Committee and so elected by mail to: Corporate Secretary, Choice Hotels International, Inc., 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This table shows how much Common Stock is beneficially owned by (i) each director of the Company, (ii) each of the Company’s NEOs, (iii) all executive officers and directors of the Company as a group and (iv) all persons who are known to own beneficially more than 5% of the Company’s Common Stock, as of March 1, 2017 (unless otherwise noted). Unless otherwise specified, the address for each such person as of March 1, 2017, was 1 Choice Hotels Circle, Suite 400, Rockville, Maryland 20850.



Name of Beneficial Owner	Common Stock Beneficially Owned⁽¹⁾		Right to Acquire⁽²⁾	Unvested Restricted Stock⁽³⁾	Percentage of Shares Outstanding⁽⁴⁾
Stewart Bainum, Jr.	10,351,640	⁽⁵⁾⁽⁶⁾	—	—	18.37	%⁽⁵⁾⁽⁶⁾
Barbara T. Alexander	15,834		—	4,433	*
William L. Jews	28,132		—	4,433	*
Stephen P. Joyce	122,766	⁽¹⁴⁾	523,866	45,757	1.23	%
Monte J. M. Koch	2,316		—	4,433	*
Liza K. Landsman	638		—	3,610	*
Scott A. Renschler	335,124	⁽⁵⁾⁽⁷⁾	—	4,433	*
Ervin R. Shames	63,160		—	4,433	*
Gordon A. Smith	56,821		—	4,433	*
John P. Tague	15,800		—	4,433	*
Scott E. Oaksmith	18,333		10,484	13,082	*
Patrick S. Pacious	84,179		154,401	38,345	*
David A. Pepper	61,113		81,515	8,020	*
David L. White	84,369		95,928	2,848	*
Simone Wu	11,452		44,908	6,100	*
All Directors and Executive Officers as a Group (16 persons)	11,276,642		971,222	158,227	22.01	%
Principal Shareholders
Barbara J. Bainum	10,018,914	⁽⁵⁾⁽⁸⁾	—	—	17.78	% ⁽⁵⁾⁽⁸⁾
Bruce D. Bainum	11,441,697	⁽⁵⁾⁽⁹⁾	—	—	20.30	% ⁽⁵⁾⁽⁹⁾
Roberta D. Bainum	10,840,883	^(5)(10)	—	—	19.24	% ^(5)(10)
Realty Investment Company, Inc.	6,821,574	^(5)(12)	—	—	12.10	% ^(5)(12)
Baron Capital Group, Inc.	4,961,619	⁽¹¹⁾	—	—	8.84	% ⁽¹¹⁾
Christine A. Shreve	4,389,654	^(5)(13)	—	—	7.79	%^(5)(13)



*	Less than 1%.



1	Includes shares: (i) for which the named person has sole voting and investment power and (ii) for which the named person has shared voting and investment power. Does not include: (i) shares that may be acquired through stock option exercises within 60 days or (ii) unvested restricted stock holdings which the holder maintains voting rights, each of which is set out in a separate column.



2	Shares that can be acquired through stock option exercises within 60 days of March 1, 2017.



3	Shares for which the holder maintains voting rights, but are subject to a vesting schedule, forfeiture risk and other restrictions.



4	For each beneficial owner, ownership percentage is based on (i) the sum of the number of shares listed under each of the column headings Common Stock Beneficially Owned, Right to Acquire and Unvested Restricted Stock and (ii) 56,353,620 shares outstanding on March 1, 2017.

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5	Because of SEC reporting rules, shares held by Realty Investment Company, Inc. (“Realty”), a real estate management and investment company, and certain Bainum and Renschler family entities are attributed to Realty, Christine A. Shreve and more than one of the Bainums and Renschlers included in this table because Realty, Ms. Shreve and such named Bainums and Renschlers have shared voting or dispositive control. As of March 1, 2017, Realty, Ms. Shreve and members of the Bainum and Renschler families (including various partnerships, corporations and trusts established by members of the Bainum and Renschler families) in the aggregate have the right to vote 22,422,290 shares, approximately 39.79% of the shares of Common Stock outstanding as of March 1, 2017.



6	Includes 1,000,222 shares owned by the Stewart Bainum, Jr. Declaration of Trust of which Mr. Bainum, Jr. is the sole trustee and beneficiary. Also includes 1,417,056 shares owned by Leeds Creek Holdings, LLC whose only member is Mr. Bainum, Jr.’s trust; 978,482 shares owned by Mid Pines Associates Limited Partnership (“Mid Pines”), in which Mr. Bainum, Jr.’s trust is managing general partner and has shared voting authority; 6,821,574 shares owned by Realty in which Mr. Bainum, Jr.’s trust owns voting stock and has shared voting authority; 132,793 shares owned by the Foundation for the Greatest Good, a private foundation whose principal sponsor is Mr. Bainum, Jr. and for which he has sole voting authority; and 1,513 shares owned by a revocable trust for the benefit of Mr. Bainum Jr.'s adult son.



7	Includes 179,228 shares owned by the Scott Renschler Declaration of Trust, of which Dr. Renschler is the sole trustee and beneficiary; 120,849 shares owned by the BBB Trust J, a trust for the benefit of Dr. Renschler’s cousins for which he serves as trustee; and 7,296 shares owned by trusts for the benefit of Dr. Renschler's nephew and nieces for which Dr. Renschler is trustee. Also includes 27,751 shares Dr. Renschler is entitled to under the Company’s non-employee director plan.



8	Includes 1,030,826 shares owned by the Barbara Bainum Declaration of Trust of which Ms. Bainum is the sole trustee and beneficiary. Also includes 1,175,000 shares owned by Shadow Holdings, LLC for which she shares voting authority and whose sole members are Ms. Bainum and trusts for her benefit; 978,482 shares owned by Mid Pines, in which Ms. Bainum’s trust is a general partner and has shared voting authority; and 6,821,574 shares owned by Realty, in which Ms. Bainum’s trust owns voting stock and has shared voting authority. Also includes 13,032 shares owned by trusts for the benefit of Ms. Bainum’s nephews for which Ms. Bainum is the trustee. Ms. Bainum’s address is 8171 Maple Lawn Blvd., #375, Fulton, Maryland 20759.



9	Includes 1,949,985 shares owned by the Bruce Bainum Declaration of Trust of which Dr. Bainum is the sole trustee and beneficiary. Also includes 1,685,061 shares owned by Posadas Holdings, LLC for which he shares voting authority and whose sole members are Dr. Bainum, and various trusts for either his benefit or the benefit of his wife or adult children; 978,482 shares owned by Mid Pines, in which Dr. Bainum’s trust is a general partner and has shared voting authority; 6,821,574 shares owned by Realty, in which Dr. Bainum’s trust owns voting stock and has shared voting authority; and 6,595 shares owned by a trust for the benefit of certain of Dr. Bainum's descendants for which Dr. Bainum is the trustee. Dr. Bainum’s address is 8171 Maple Lawn Blvd., #375, Fulton, Maryland 20759.



10	Includes 1,520,202 shares owned by the Roberta Bainum Declaration of Trust of which Ms. Bainum is the sole trustee and beneficiary. Also includes 1,520,625 shares owned by Sweetwater Holdings, LLC for which she shares voting authority and whose sole members are Ms. Bainum and various trusts for either her benefit or the benefit of her adult children; 978,482 shares owned by Mid Pines, in which Ms. Bainum’s trust is a general partner and has shared voting authority; and 6,821,574 shares owned by Realty, in which Ms. Bainum’s trust owns voting stock and has shared voting authority. Ms. Bainum’s address is 8171 Maple Lawn Blvd., #375, Fulton, Maryland 20759.



11	The Company is relying on the Schedule 13G, filed on February 14, 2017, by Baron Capital Group, Inc. (“BCG”), BAMCO, Inc., Baron Capital Management, Inc. (“BCM”), Ronald Baron and Baron Growth Fund (“BGF”). According to this filing, BCG beneficially owns 4,912,119 shares, BAMCO, Inc. beneficially owns 4,579,900 shares, BCM beneficially owns 332,219 shares, Ronald Baron beneficially owns 4,961,619 shares and BGF beneficially owns 3,007,500 shares. These reporting persons disclaim beneficial ownership to the extent these shares are held by their investment advisory clients and not directly by the reporting persons. The address for the reporting persons is 767 Fifth Avenue, 49^th Floor, New York, New York 10153.



12	Realty is controlled and owned by members of the Bainum family, including Stewart Bainum, Jr., Scott Renschler, Barbara Bainum, Bruce Bainum and Roberta Bainum. Realty’s address is 8171 Maple Lawn Blvd., #375, Fulton, Maryland 20759. Christine A. Shreve is an officer and director of Realty.



13	Includes 2,800 shares owned by Ms. Shreve jointly with her husband; 1,175,000 shares owned by Shadow Holdings, LLC, an LLC whose sole members are Barbara Bainum and trusts for her benefit, for which Ms. Shreve is manager and has shared voting authority; 1,685,061 shares owned by Posadas Holdings, LLC, an LLC whose sole members are Bruce Bainum and various trusts for either his benefit or the benefit of his wife or adult children for which Ms. Shreve is manager and has shared voting authority; 1,520,625 shares owned by Sweetwater Holdings, LLC, an LLC whose sole members are Roberta Bainum and various trusts for either her benefit or the benefit of her adult children for which Ms. Shreve is manager and has shared voting authority; and 6,168 shares owned by trusts for the benefit of Renschler family members for which Ms. Shreve is the trustee. Ms. Shreve’s address is 8171 Maple Lawn Blvd., #375, Fulton, Maryland 20759.



14	For Mr. Joyce, as of March 1, 2017, includes 31,277 shares which, in addition to other assets, are held in an account that contains a personal credit line borrowing feature.

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Dear Choice Hotels Shareholders:

Over the past year, our key strategic decisions and a stable economy contributed to the Company’s strong financial and operating performance. Consistent with our pay-for-performance philosophy, this success was reflected in our executive pay outcomes and decisions for our NEOs as follows:


•	Short-term incentives on average paid out at 110% of target based primarily on performance at the following percentages of target: operating income: 112.5%, market share: 70%, and “likelihood to recommend”: 85%.


•	Long-term incentive grants were above the midpoint of the range of potential grant values for stock options, performance-vested restricted stock units (PVRSUs), and restricted stock to achieve the desired targeted level of total compensation and align the leadership team's interests with long-term growth.


•	645 domestic franchise agreements were executed in 2016, providing a deal value that overachieved at 139% of goal.

Each year we hold a shareholder advisory vote on our executive pay program and reach out to our largest shareholders to better understand their perspectives and concerns. In 2016, 99% of shareholder votes cast were in favor of the "Say on Pay" proposal.

In further support of our pay-for-performance philosophy and alignment with shareholder interests, the Company maintains the following best pay and governance practices:


•	A significant majority of pay is performance-based or variable (approximately 82% for the CEO and 69% for the other executives)


•	Realizable pay for the CEO is below the 50th percentile of our peer group companies for the most recent three-year period while total shareholder return was just below the median


•	Pay is aligned with the market of peer group companies in the hospitality industry and companies with franchise business models


•	Pay design features are aimed at risk mitigation and ensuring that pay plans do not create material risks


•	Clawback policy requires recoupment of bonus and long-term incentive compensation paid based on certain subsequently restated financials


•	Guidelines require stock ownership by executives at a targeted multiple of pay


•	Policies generally restrict hedging by employees and directors


•	Pay plans include best practice provisions, such as:


◦	No excise tax gross-ups on severance and change-in-control benefits


◦	No single-trigger vesting of equity awards on a change in control


◦	Dividends are paid on PVRSUs only to the extent the awards vest


•	Independent Compensation Committee makes pay decisions and is advised by an independent compensation consultant


•	For 2017 compensation, 50% of annual long-term incentive awards for all NEOs will be made up of performance vested restricted stock units (PVRSUs)

We value feedback from our shareholders, and we continue to consider shareholder input and market best practices as we design and review our executive pay program to ensure it is appropriate for Choice Hotels and our long-term strategy, and is in the best interests of shareholders.

Yours sincerely,

Ervin R. Shames

Chair, Compensation and Management Development Committee

Lead Independent Director

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COMPENSATION DISCUSSION AND ANALYSIS

This CD&A describes our executive compensation philosophy, summarizes the principles of our executive compensation program and analyzes our pay decisions for 2016. It also provides context for the data we present in the compensation tables below.

For purposes of this CD&A and the compensation tables, our NEOs for 2016 are:



Name		Title
Stephen P. Joyce		Chief Executive Officer ("CEO")
Scott E. Oaksmith		Senior Vice President, Finance and Chief Accounting Officer ("Principal Financial Officer")
Patrick S. Pacious		President and Chief Operating Officer ("COO")
David A. Pepper		Chief Development Officer ("CDO")
Simone Wu		Senior Vice President, General Counsel, Corporate Secretary & External Affairs
David L. White		Former Senior Vice President, Former Chief Financial Officer ("CFO")*

*As previously disclosed by the Company in its public filings, Mr. White ceased serving as an executive officer of the Company on June 3, 2016, and his employment with the Company ended on September 21, 2016. However, he is considered an NEO for 2016 under SEC rules. Mr. Dominic Dragisich was appointed Chief Financial Officer effective March 6, 2017. Mr. Dragisich is not an NEO for 2016.

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EXECUTIVE SUMMARY

Choice is committed to delivering shareholder value. The core principle of our executive compensation program is pay for performance, which guides our executive compensation decisions. Choice uses a combination of fixed and variable compensation to incent and reward strong performance and to align the interests of our executives with those of the Company’s shareholders. This executive summary provides an overview of our governance practices, 2016 Company performance, pay-for-performance alignment, incentive compensation framework, targeted total direct compensation, and say-on-pay feedback from shareholders.

Pay and Governance Practices

The Company has the following pay and governance practices that reinforce the soundness of our compensation programs:

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2016 Company Performance

The Company delivered strong financial and operational performance in 2016. We believe our pay-for-performance philosophy, key strategic efforts and a stable economic environment were primary drivers of our success. Our performance reflects the strength of our executive team and employees and their ability to successfully manage a complex and dynamic business. 2016 highlights include:

Compensation-Related Performance

Our focus on key brand and operational initiatives within a stable business environment enabled us to achieve the following performance goals that were specifically linked to executive compensation:


•	Operating Income: Achieved operating income of $238.9 million ($245.7 million as adjusted by the Committee for certain items as discussed on page 38), exceeding our 2016 corporate operating income target and resulting in an 11% increase over 2015 operating income, as adjusted by the Committee for certain items.


•	Market Share: Achieved 38 basis points above industry average, against a stretch goal of 132 basis points above industry average.


•	Likely-to-Recommend (LTR): Achieved a score of 8.41 against the LTR goal of 8.44.


•	Deal Value and Executed Franchise Contracts (in relation to Mr. Pepper's compensation): Significantly overachieved total deal value at 139% against our 2016 deal value goal and achieved 645 executed domestic franchise contracts against our 2016 goal of 688 contracts.

As a result, short-term incentive payouts to our executives exceeded the target payout for operating income, but were below target payouts for market share and LTR. Mr. Pepper,'s short-term incentive payout exceeded the target for deal value but was below target for the number of executed franchise contracts. See “Short-Term Incentive Compensation” below for more details.

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CEO Compensation and Pay-for-Performance Alignment

Each year, the Committee evaluates our CEO’s compensation relative to Company performance. The following graph shows the relationship of our CEO’s realizable pay (including actual total cash compensation and the realizable value of equity awards granted during the three-year period valued at December 31, 2016) and our cumulative shareholder return for the last three years relative to our 2016 peer group companies (see "Compensation Competitive Analysis" below). As illustrated, total shareholder return ("TSR") is slightly below the median and the Company's CEO pay is below the 50th percentile relative to peer group CEO pay.

*The Cumulative Total Shareholder Return numbers assume that the value of the investment in the Company's Common Stock was $100 on December 31, 2013 and track the investment through December 31, 2016.

**Based on availability of information, the above chart uses the time period of 2014 – 2016 for the Company and 2013 – 2015 for the peer group.

***Thomas B. Mangas is excluded from the realizable pay analysis because he began the role of Chief Executive Officer of Starwood Hotels and Resorts Worldwide effective December 31, 2015.

The Committee also assesses the pay positioning of our NEOs as a whole. We have found that the NEO pay rankings align with our one- and three-year TSR percentile rankings as set forth below.



Performance Period	Choice TSR Performance	Choice’s TSR Percentile Rank Among 2016 Peer Group
One-Year	13%	41%
Three-Year	6%	43%

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2016 Incentive Compensation Framework

Choice’s executive compensation program links a substantial portion of each executive’s total compensation opportunity to achievement of performance metrics we believe drive shareholder value. In rewarding executives, the Company provides direct accountability for individual, shared and organizational results, ensuring that rewards are commensurate with each executive's contributions to shareholder value. Our performance measurement framework for incentive based pay for our NEOs is summarized below.

*Mr. Pepper's short-term incentive may be leveraged up or down by the Company's actual operating income achievement.

**Mr. Oaksmith's long-term incentive was made up of restricted stock and stock options.

+Of note, for 2017 compensation, 50% of annual long-term incentive awards for all NEOs will be made up of PVRSUs

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2016 Targeted Total Direct Compensation Mix

The charts below show the mix of targeted total direct compensation (“TDC”) (base salary, target annual incentive and target long-term incentive) for the CEO and other NEOs in 2016. Consistent with our pay-for-performance philosophy, the largest portion of compensation (approximately 82% for our CEOand on average 69% for our other NEOs other than Mr. White) is variable or performance-based annual and long-term incentives.

2016 Targeted Total Direct Compensation

The Committee determined, based on market data and advice from its independent compensation consultant, Mercer, that the appropriate targeted TDC for our CEO in 2016 was $5,768,000 (base salary: $1,030,000, target annual incentive: $1,030,000 and target long-term incentive: $3,708,000). As shown below, Mr. Joyce’s actual TDC $5,821,272 slightly exceeded targeted TDC primarily due to annual incentive results that reflected strong achievement against operating income targets.



CEO Total Direct Compensation
	Target		Actual
Salary	$	1,030,000	$	1,027,692
Annual Incentive	$	1,030,000	$	1,085,526
Long-Term Incentive	$	3,708,000	$	3,708,054
Total	$	5,768,000	$	5,821,272

Say-on-Pay Feedback from Shareholders

We conduct an annual shareholder advisory vote on the compensation of our executive officers. In 2016, 99% of votes cast voted in favor of this proposal. This year, we are also conducting our second vote on the frequency of say-on-pay voting, with a recommendation to continue annual advisory voting.

The Committee considers the results of the advisory vote during its annual review of executive compensation. Given the significant level of shareholder support, the Committee concluded that our compensation program continues to provide a competitive pay-for-performance alignment that incentivizes our NEOs to maximize shareholder value and

encourages long-term retention. In order to further increase NEO performance-based pay, for 2017 compensation, PVRSUs will make up half of the annual long-term incentive awards.

The Company reaches out to its largest shareholders each year regarding compensation as well as governance matters. The Committee will continue to consider the outcome of our say-on-pay votes and our shareholder views when making future NEO compensation decisions.

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COMPENSATION PHILOSOPHY AND OBJECTIVES

Compensation Philosophy

Our executive compensation program and pay decisions are based on the following philosophy established by the Committee:

Emphasize pay for performance, pay competitively and focus on long-term shareholder value creation.


•	Emphasize Pay for Performance. by aligning incentives with short- and long-term strategic objectives. We reward executives who achieve or exceed Company and individual objectives that are designed to drive the organization to execute on our strategy and deliver value to shareholders.

•

Pay Competitively. by ensuring TDC for each executive is aligned with the appropriate competitive market. The compensation opportunity is designed to be competitive with other corporations of similar complexity and global scale in terms of system-wide revenue and market capitalization. Because the executive team is responsible for managing in an extensive system-wide gross room revenue and rapidly changing distribution and e-business environment, paying competitively to similarly complex organizations is of critical importance to recruiting and retaining strong talent.

•

Focus on Long-Term Shareholder Value. by linking executive pay opportunity to the Company's share value. This fosters the long-term focus required for premier performance in the hospitality industry and encourages continued investment in growth. The Company believes that shareholder value will increase through continued growth in the core business, investments in growth opportunities beyond the core, optimization of balance sheet debt levels and risk-adjusted returns of excess capital to shareholders. The execution of this strategy will be achieved through Choice's strong cultural values which drive results through leadership, performance excellence and enterprise-wide accountability.

Compensation Objectives

The Committee considers the following objectives in making compensation decisions for our NEOs and other executives:



Objective	Description
Pay for Performance	Link pay through short- and long-term incentives to corporate, team and individual performance to encourage and reward excellence and outcomes that further the Company's results and enhance shareholder value
Encourage Growth	Encourage the exploration of opportunities in business areas that are complementary to our core hotel franchising business, leverage core competencies and / or add to our franchising business model
Competitive Pay	Assure that compensation relates to performance relative to companies of similar complexity and global scale in terms of system-wide gross room revenue and market capitalization to provide effective incentives and encourage retention
Shareholder Alignment	Align the interests of executives with those of our shareholders through grants of equity-based compensation that, coupled with our stock ownership requirements, encourage significant ongoing equity ownership
Long-Term Focus	Foster long-term focus and continued investment in growth required for premier performance in the hospitality industry through equity incentives that vest over time
Internal Pay Equity	Consider internal pay equity so that the relationship between internal executive pay levels is appropriate
Recruitment and Retention	Enable the recruitment and retention of highly qualified executives able to excel within a complex organization that manages extensive system-wide gross room revenues in a rapidly changing, disruptive distribution environment

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COMPENSATION COMPETITIVE ANALYSIS

The Committee considers many factors in determining NEO compensation, including the following:


•	Company culture and philosophy


•	Historical performance of the individual and executive team


•	Importance of the executive’s role in the execution of the Company’s short- and long-term strategic objectives


•	Executive compensation market trends of peer companies in the hospitality, franchise and other related market sectors.

The Committee reviews competitive market data of companies with which we compete in business and/or for talent. Specifically, the Committee reviews data from companies with

1. Revenue comparability (considering franchise system-wide gross room revenue)

2. Business complexity

3. International presence

4. Status as a peer amongst peers (a leader to peers)

5. Technology focus

This market data gives the Committee insight into the range of compensation in the competitive market and a general understanding of marketplace compensation practices and policies. However, the Committee does not use comparative market data to “benchmark” the amount of total compensation or any specific element of compensation.

2016 Peer Group

Choice reevaluates its peer group annually with Mercer's assistance. In 2015, to better reflect the complexity of Choice's business, Mercer assisted the Committee with revising the peer group. For 2016, Choice's peer group was updated to reflect market transactions including company mergers. TripAdvisor, Inc. was added to the peer group for 2016. The Committee believes that this peer group, consisting of a diverse set of companies, including those with a technology focus, suitably matches the Company's increasingly complex business model and business mix, and exemplifies the incentives that the Company plans to use in driving future performance outcomes. Information from the peer group is used as a general reference in evaluating the Company's compensation practices.

*TripAdvisor, Inc. was added to the peer group for 2016. Even though subsequently acquired, Starwood, Strategic Hotels and Orbitz were included in the peer group for 2016 compensation decisions.

+OTA refers to an online travel agency

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2016 COMPENSATION

The Company’s executive compensation program consists of four primary components: base salary; short-term cash incentives; long-term equity incentives; and perquisites and other benefits. The table below summarizes the elements of our incentive compensation program.



Incentive Program	Description	Key Features
Short-Term Incentive (Cash)	Motivates and rewards executives for achievement of Company annual financial and operational goals and/or other strategic objectives measured over the fiscal year.	Cash incentive based on achieving annual operating income, market share, LTR and individual performance goals. Total potential payout ranges from 0% - 200% of target.
Long-Term Incentive (Equity)	Through a combination of equity vehicles, creates linkage to share value appreciation and alignment with shareholders. Motivates and rewards executives for sustaining long-term financial and operational performance that increases the value of our brands and shareholder value. Encourages continued employment through multi-year vesting periods. Share ownership and holding requirements align the financial interests of our executives with the financial interests of our shareholders.	Grants may vary from annual guidelines based on several factors including, among other things, individual performance, retention, competitive market, and strategic alignment. Stock Options: Option awards vest ratably over 4 years and expire 7 years from the grant date. The exercise price is equal to the closing price of Choice Common Stock on the date of grant. RSs: Service-based Restricted Stock (“RS”) vests 25% per year over 4 years. PVRSUs: PVRSU grants focus executives on achieving specific targeted objectives. PVRSUs are payable in stock and vest based on the achievement of performance goals over a 3-year period.

Base Salary

We believe the primary purpose of base salaries is to provide a level of fixed compensation that is competitive to attract and retain highly qualified executives. The table below reflects the change in each NEO’s salary from 2015 to 2016:



Named Executive Officer	2016 Increase		Base Salary as of 12/31/16 ($)
Joyce	3.0	%	1,030,000
Oaksmith	19.0	%	325,000
Pacious	27.2	%	700,000
Pepper	3.0	%	489,250
Wu	9.0	%	425,000
White	11.7	%	525,000

The Committee believes that each of these increases was consistent with the performance results the executive delivered to Choice as well as the competitive environment for executive talent as follows:


•	Mr. Pacious' salary was significantly increased primarily in recognition of his promotion to President and Chief Operating Officer.


•	Mr. Oaksmith's salary was significantly increased primarily in recognition of his promotion to Senior Vice President, Finance and Chief Accounting Officer.


•	Mr. White's 11.7% increase and Ms. Wu's 9.0% increase reflect the competitive marketplace for their positions.

Short-Term Incentive Compensation

The Company has established the Choice Hotels International, Inc. Executive Incentive Compensation Plan (the “EICP”), an umbrella plan establishing the maximum performance-based incentive payout for tax purposes. The Company's Management Incentive Plan (“MIP”) is a cash bonus program through which operating and individual objectives are set.

Short-Term Incentive Target Opportunities

Under these plans, each NEO has a target incentive opportunity equal to a percentage of the NEO’s base salary. The target percentage remained the same compared to 2015 for all NEOs other than Mr. Pacious and Mr. White. For Mr. Pacious, the percentage change (from 75% to 100%) reflected the increase in the scope and importance of his strategic role within the organization given his promotion to President and Chief Operating Officer. For Mr. White, the increase (from 60% to 70%) was part of a

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market alignment of his total cash compensation as CFO. There was also a change to Mr. Pepper's threshold percentage (43.0% to 48.3%) and maximum percentage (unlimited to 245.3%) corresponding with annual MIP Plan renewal.

The threshold, target and maximum incentive levels for each of the NEOs for 2016 were:

Bonus as a Percentage of Salary



Named Executive Officer	Threshold		Target		Maximum
Joyce	50.0	%	100.0	%	200.0	%
Oaksmith	20.0	%	40.0	%	80.0	%
Pacious	50.0	%	100.0	%	200.0	%
Pepper	48.3	%	65.0	%	245.3	%
Wu	25.0	%	50.0	%	100.0	%
White	35.0	%	70.0	%	140.0	%

Short-Term Incentive Performance Goals



Performance Metric	Why Goal is Used
Operating Income	Operating income heightens the focus on driving profitable operational revenue growth.
Market Share	Market share is the primary measure of how the Company is performing against competitors in growing our system size as well as our growth relative to our competitive index. Increasing market share drives financial performance.
Likelihood to Recommend (LTR)	LTR is the primary measure of customer satisfaction. LTR demonstrates value to our customers and allows us to demonstrate the value proposition of our brands to our franchisees to sell more franchises.
Individual Performance	Individual performance goals allow us to measure performance against strategic goals and departmental objectives of the executive and the executive's team.
Executed Franchise Agreements	Executed franchise agreements is the primary measure of growth of the Choice system size and market share.
Deal Value	Deal value drives the value to the Company over the term of each new franchise contract which impacts operating income today and in the future.



Performance Measure Weightings
NEO	Operating Income	Market Share	Likelihood to Recommend (LTR)	Individual Performance	Executed Franchise Agreements	Deal Value
Joyce	80%	10%	10%
Oaksmith	60%			40%
Pacious	70%	10%	10%	10%
Pepper					70%	30%
Wu	70%	10%	10%	10%
White	70%	10%	10%	10%

Operating Income

The operating income target of $241.1 million for the 2016 MIP payout was recommended to the Committee by

Mr. Joyce and approved in February 2016 based on the Company’s Board-approved 2016 business plan. The 2016 MIP was structured to pay the target bonus for each NEO upon achievement of the operating income target for the

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year and to pay a corresponding percentage of the target incentive for operating income performance above or below the target. For purposes of our incentive compensation, operating income is calculated in accordance with generally accepted accounting principles ("GAAP"), then adjusted by the Committee based on approved exceptions.

Because the operating income objective was the most heavily weighted factor for determining the actual MIP payout, the level of achievement against the operating income target relative to the NEO's target incentive opportunity was the primary driver of their annual incentive payout for the year. This is true for all NEOs other than Mr. Pepper, whose MIP payout is based primarily on the number of executed franchise contracts and the cumulative deal value of these contracts, leveraged by operating income.

Operating Income Results

The Company achieved operating income of $238.9 million in 2016. Under the MIP, operating income achievement may be adjusted at the discretion of the Committee for certain non-recurring items. After the adjustments discussed below, operating income for purposes of determining 2016 incentives was $245.7 million. The resulting payout was 112.5% of the target.

Operating Income Adjustments

In February 2017, the Committee approved four adjustments in calculating operating income for purposes of 2016 MIP. Operating income was increased by $1.5 million related to mark-to-market gains from non-qualified deferred compensation plan assets resulting from financial market performance outside of management's control, and increased by $2.2 million for M&A initiative diligence spending in excess of $1 million. Operating income was decreased by $0.3 million for the SkyTouch operating budget variance and decreased by $0.4 million for a gain on sale of land classified as operating income for GAAP purposes but excluded for bonus purposes.

In addition, in December 2008, the Committee approved standing MIP adjustments related to costs required to be accounted for in accordance with (i) Accounting Standards Codification (“ASC”) No. 712–“Compensation – Nonretirement Postemployment Benefits” and (ii) ASC No. 420–“Exit or Disposal Cost Obligations.” For 2016, the benefit to operating income attributable to the MIP standing adjustments was approximately $3.7 million.

Market Share and LTR

For 2016, the NEOs (other than Mr. Pepper and Mr. Oaksmith as discussed below) and other senior executives received two shared performance objectives associated with goals related to the Company’s market share and LTR (likelihood to recommend) ratings of the Company’s hotel portfolio. These objectives were also used in prior years and are a reflection of overall performance of the Company. Mr. Joyce’s performance objectives for 2016 consisted exclusively of the executive team’s shared objectives. For the other NEOs (other than Mr. Pepper and Mr. Oaksmith), the shared objectives were accompanied by specific individual or department objectives.

For 2016 annual incentive payments, the shared objectives related to:


•	Market share: Market share achievement was determined based on the projected total lodging industry supply growth.


•	LTR: LTR for equity brands was measured as the average ratings provided on the 10-point scale via the Guest Insight Systems survey administered by a third-party vendor.

Performance in 2016 against operating income, market share and LTR is captured in the chart below:



Criteria	Operating Income	Market Share*	Likelihood to Recommend (LTR)
Target	$241.1M	Grow domestic unit market share by +132 basis points in comparison to industry growth	8.44 for signature brands (Cambria Suites, Comfort Inn, Comfort Suites and Sleep Inn)
Actual	$245.7M as adjusted	1.65% net unit growth for Choice vs. 1.27% net unit growth for the U.S.	8.41
Achievement	102.0%	Under-performed; +38 basis points faster than the industry average	3 basis points below plan (99.6% of goal)
Payout Percentage	112.5%	70%	85%

*To arrive at market share for the Company and industry, Choice calculates the net number of hotel properties added to the Choice Hotels system at year-end 2016 compared to the total number of units at year-end 2015 as reported in the Choice Hotels Inns & Operating Report and the total number of open hotel units in the U.S. at year-end December 2016 versus the reported number of open units at year-end December 2015 as measured by the third-party firm Smith Travel Research.

Individual / Department Performance

For Messrs. Oaksmith, Pacious, White and Ms. Wu, a component of their short-term payout reflects individual and / or department objectives and their short-term incentive may be adjusted based on an assessment of their performance against pre-determined individual and / or department objectives. These performance objectives, where applicable, are based in part on a qualitative

evaluation of performance, but also include quantifiable measures such as RevPAR (revenue per available room) improvement, CRS (central reservation system) contribution, Choice Privileges contribution, corporate room nights, or other relevant measures.

Performance objectives are determined at the beginning of the year based on the role of the individual in the

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organization and each component is assigned a weighting. The Committee assesses performance against objectives and assigns payouts.

Short-Term Incentive Payouts

The following table details the weightings and 2016 payouts attributed to each performance measure for each NEO.



NEO	Operating Income ($)		Market Share ($)		Likelihood to Recommend (LTR) ($)		Individual /Department Objectives ($)		Franchise Agreements / Deal Value ($)
Joyce	80%	926,041	10%	72,025	10%	87,460	—%	—	—%	—
Oaksmith	60%	79,389	—%	—	—%	—	40%	58,807	—%	—
Pacious	70%	526,732	10%	46,821	10%	56,854	10%	76,920	—%	—
Pepper *	—%	—	—%	—	—%	—	—%	—	100%	366,146
Wu	70%	166,854	10%	14,831	10%	18,010	10%	24,790	—%	—
White	70%	288,240	10%	25,621	10%	31,112	10%	36,602	—%	—

* Mr. Pepper's short-term incentive payout was 70% weighted based on achievement of executed franchise sales contracts in 2016; subject to operating income leverage up to the target incentive opportunity; and 30% weighted based on deal values; see further description below.

Franchise Agreements and Deal Value - Pepper

Mr. Pepper is covered under an Executive Sales MIP intended to drive high-value franchise contract sales. The plan was designed to deliver his target MIP payment (65% of base salary) upon achievement of a targeted number of executed franchise agreements and aggregate deal value during 2016. The amount payable under the MIP is leveraged to increase performance payout for results above the sales targets and decrease payout for results below the sales targets. The target payout may be further adjusted up or down based on overall Company operating income performance, similar to the other executive officers.

The Company is not disclosing the executed franchise agreements and the cumulative deal value targets because we believe such disclosure would cause us competitive harm. As a franchise company focused on growing our brands in a very competitive market for sales talent, the disclosure of goals for our major business development executive would allow competitors to know the details of

Mr. Pepper's compensation structure and reveal his potential earnings. In addition, revealing targets and comparing them year over year would give competitors great insight into the Company’s growth strategy.

During 2016, the development team under the leadership of Mr. Pepper delivered 645 executed "domestic" franchise agreements covering the U.S., the Caribbean, and for certain brands, Canada, against a goal of 688 executed contracts. Further, within the franchise agreement goal, Mr. Pepper had minimum goals for certain Choice brands. Because minimums for certain brands were not met, the portion of Mr. Pepper's bonus related to executed deals was reduced by 8%. Although Mr. Pepper did not meet the target number of contracts, Mr. Pepper over delivered on total deal value at 139% against our 2016 plan deal value goal. Mr. Pepper's actual incentive is also leveraged based on the Company's operating income performance (112.5%). Based on overall achievement, Mr. Pepper earned a total cash bonus of $366,146.

Long-Term Incentive Compensation

Long-term equity incentive compensation is the largest component of total compensation for our NEOs. Linking the greatest portion of total compensation to long-term objectives aligns executives’ interests with the interests of shareholders. Also, the Committee believes this strategy focuses executives on addressing the potential risks facing the business through managing with a long-term perspective. To strengthen the tie between executive compensation and the Company’s performance, each executive’s targeted and actual pay mix may vary by position, with those having a greater impact on performance / operations generally having more pay at risk in the form of long-term incentives.

In 2015, Choice rebalanced its long-term compensation award mix and re-introduced PVRSUs equal to 25% of long-term compensation awards. The stock option component of our long-term compensation program remained strong (50%) in order to focus on the long-term vision needed to deliver on our accelerated growth strategy. The 2016 mix of components remained the same as 2015.

To further enhance our performance-based pay, for 2017 50% of annual long-term incentive awards for all NEOs will be made up of PVRSUs.

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Long-Term Incentive Target Opportunity

For all NEOs other than Mr. Oaksmith, the Committee approved awards of stock options, PVRSUs and service-based RS, at 50%, 25% and 25% of the total value of the grant, respectively. This mix provides 75% performance-based alignment through stock options and PVRSUs. The RS ensures that 25% of the award is focused on retention. For Mr. Oaksmith, the Committee approved an award of stock options and RS; PVRSUs were not awarded under his prior position's LTI program.

Equity Grant Policies

The value of the long-term incentive opportunity granted to each NEO in 2016 was determined based on an established multiple of the NEO’s base salary. Each NEO’s multiple was established based on a combination of the executive's performance, the criticality of the role within the organization in achieving the long-term strategic plan of the organization and the competitive market.

The Committee uses discretion to determine the value of the equity award to be granted within a target range. The following table sets forth the equity award grant value and base salary for each NEO as of December 31, 2016:



Named Executive Officer	Base Salary ($)	Target Range Grant Value Multiple as a Percentage of Salary	2016 Equity Award Grant Date Fair Value ($)
Joyce	1,030,000	288% - 432%	3,708,054
Oaksmith*	325,000	25% - 75%	650,049
Pacious*	700,000	160% - 240%	3,250,113
Pepper	489,250	125% - 175%	712,006
Wu	425,000	75% - 125%	390,046
White	525,000	125% - 175%	705,007

* Mr. Oaksmith's 2016 equity award grant date fair value includes an additional RS grant of $500,023 and Mr. Pacious' 2016 equity award includes an additional PVRSU grant valued at $2,000,018, each in recognition of their respective promotions.

In February 2016, Mr. Joyce's target range award value for 2016 compensation increased from 300% - 340% to 288% - 432% and Mr. Pacious' target range award value for 2016 compensation increased from 140% - 210% to 160% - 240% in conjunction with Mr. Pacious' promotion to President.

On May 19, 2016, upon his promotion to President and COO, Mr. Pacious was awarded a one-time PVRSU grant with a targeted value of $2,000,018 on the grant date of which 50% would vest on January 1, 2019 and the remaining 50% would vest on January 1, 2020, in each case assuming that applicable performance targets are met.

On December 15, 2016, Mr. Oaksmith was awarded a one-time RS grant of $500,023 in connection with his promotion to Senior Vice President, Finance and Chief Accounting Officer. These shares promote retention and will vest 100% on the third anniversary of the grant date.

Long-Term Incentive Grant

After reviewing the target range for each executive, Mr. Joyce recommended that each of the NEOs (other than himself) should receive 2016 equity awards valued above the midpoint level of the range of potential grant values for each type of award. He recommended this to achieve the targeted level of total compensation and align the leadership team's interests with long-term growth.

The following chart shows the actual stock options, PVRSUs and RS granted to each NEO as part of the Company’s annual equity grant process:



Name	# of Options		# of PVRSU ⁽¹⁾		# of Restricted Stock⁽²⁾
	Grant Based on Black Scholes of		Grant Based on FMV of		Grant Based on FMV of		TOTAL GRANT*
	$9.30		$51.49		$51.49
							Value ($)
	Shares	Value ($)	Shares	Value ($)	Shares	Value ($)	Value ($)
Joyce, Stephen P	199,355	1,854,002	18,004	927,026	18,004	927,026	3,708,054
Oaksmith, Scott	8,065	75,005	—	—	10,499	575,044	650,049
Pacious, Patrick S	67,205	625,007	50,594	2,312,562	6,070	312,544	3,250,113
Pepper, David A	38,280	356,004	3,457	178,001	3,457	178,001	712,006
Wu, Simone	20,968	195,002	1,894	97,522	1,894	97,522	390,046
White, David L	37,904	352,507	3,423	176,250	3,423	176,250	705,007

⁽¹⁾ Mr. Pacious received two PVRSU grants in 2016: 6,070 shares at a FMV of $51.49 on February 26, 2016 and 44,524 shares at a FMV of $44.92 on May 19, 2016.

⁽²⁾ Mr. Oaksmith received two RS grants in 2016: 1,457 shares at a FMV of $51.49 on February 26, 2016 and 9,042 shares at a FMV of $55.30 on December 15, 2016.

*For additional information on equity award values for each NEO in 2016, see the Grants of Plan-Based Awards Table.

The number of shares subject to the stock option portion of the equity award granted to each officer is based on the Black Scholes option-pricing model. See the preamble to

the Grants of Plan-Based Awards Table for more information on how the Company determines the actual number of shares subject to each type of equity award.

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Grants - PVRSUs

In relation to PVRSUs previously awarded under the long-term incentive program, performance achievement levels relative to threshold, target and maximum are established at the beginning of the performance period, as well as the corresponding percentage of the target grant that will be earned at each achievement level. As a result, the number of PVRSUs that actually vest during any performance period may range from 0% to 250% of the initial grant, based on cumulative EPS performance as compared to targeted EPS for the period as well as certain other measures. The charts below provide the performance achievement levels and the corresponding vesting percent at that achievement level.

Grants - 2016 and 2015 PVRSU Grants (All NEOs except Mr. Oaksmith)

The chart below provides the performance achievement levels and the corresponding vesting percent, applicable at that achievement level.



Criteria	Below Threshold	Threshold	Target	Maximum
Performance Achievement	<90%	90%	100%	120%
Corresponding Vesting Result	0%	50%	100%	200%

The 2016 PVRSUs granted to all NEOs other than Mr. Oaksmith cover the performance period of 2016 through 2018 and will vest, if earned, on February 26, 2019.

The 2015 PVRSUs granted to all NEOs other than Mr Oaksmith cover the performance period of 2015 through 2017 and will vest, if earned, on February 27, 2018.

Grants - Pepper 2015 PVRSU

In addition to the PVRSU grants awarded to the NEOs other than Mr Oaksmith in February, the Company granted a PVRSU in May 2015 to Mr. Pepper in connection with his promotion to Chief Development Officer. This PVRSU grant was focused on achieving certain strategic objectives related to cumulative sales growth for the performance period of 2015 through 2017 and will vest, if earned, on January 2, 2019.

The chart below provides the performance achievement levels and the corresponding vesting percent, applicable at that achievement level.

Pepper May 2015 PVRSU (2015-2017)



Criteria	Below Threshold	Threshold	Target	Maximum
Performance Achievement	<50%	50%	100%	160%
Corresponding Vesting Result	0%	50%	100%	160%

Grants - Pepper 2014 PVRSUs

Because the Committee decided to use stock options and RS rather than PVRSUs to award long-term compensation, in 2014 there were no PVRSU grants awarded, except Mr. Pepper's special grants discussed below.

Pepper 2014 PVRSU I - Royalties - (2014-2016)



Criteria	Below Threshold	Threshold	Target	Maximum
Performance Achievement	<100%	100%	100%	107%
Corresponding Vesting Result	0%	100%	100%	200%

Pepper 2014 PVRSU II - Rooms - (2014-2016)



Criteria	Below Threshold	Threshold	Target	Maximum
Performance Achievement	<100%	100%	100%	117%
Corresponding Vesting Result	0%	100%	100%	250%

The 2014 PVRSUs granted to Mr. Pepper cover the performance period of 2014 through 2016 and will vest, if earned, on March 26, 2017.

A capital performance multiplier is part of the PVRSU calculation for Mr. Pepper, providing Mr. Pepper with additional income if he is able to reach his goal while maintaining certain capital levels. For Mr. Pepper's PVRSU II, the maximum 250% vesting result assumes the Cambria room goal top tier is reached and the maximum capital performance multiplier is achieved. The growth of the Cambria brand was measured by number of rooms open and operating as of December 31, 2016.

In determining the cumulative EPS target for the prior performance periods, the Committee approved management’s recommendation based on the Company’s projected target growth under our strategic plan over the relevant time period. The Committee believes that the approved EPS targets are consistent with the Committee’s goal of making PVRSU EPS targets challenging, but achievable.

Grants - Joyce PBRSU (2012 - 2016)

In May 2012, the Company granted Mr. Joyce a PBRSU award in connection with the negotiation and execution of his five-year contract extension. The performance targets for these PBRSUs were significantly higher than the stretch plan. At 100% of the performance target, Mr. Joyce would receive $2,000,023 worth of stock as measured at the time of the grant.

The Company did not meet the aggressive threshold goals for either the 2012-2015 performance period or the 2012-2016 PBRSU performance periods. Based on the target number of shares underlying the PBRSU award and the stock price as of December 30, 2016, this results in the forfeiture of $3,107,020 worth of stock for Mr. Joyce.

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Long-Term Incentive Performance Results

Performance Results - PVRSUs Vested in 2016

PVRSUs granted in 2013 with a three-year performance period (2013 through 2015) paid out below target (50%) due to a decision to invest in the development and launch of SkyTouch as well as the decision to invest in the Company's accelerated growth strategy for its Comfort and Cambria brands. The expenses associated with such investment resulted in lower than expected EPS performance.



Performance Period		EPS Performance
2015		81%
2014		95%
2013		97%
Cumulative		90%

The EPS target was $6.91 for the performance period 2013 - 2015. The actual three-year cumulative EPS applicable to these PVRSUs was $6.23, reflecting 90% of target and a payout of 50% of target.

Performance Results - PVRSUs Vested in 2017

Mr. Pepper's 2014 PVRSU I and PVRSU II grants for the performance period 2014 - 2016 were scheduled to vest in March 2017. The minimum threshold goal, in excess of 7% three-year compounded annual growth rate for PVRSU I in relation to royalties, was significantly exceeded, and PVRSU I vested with 175% leveraging. The minimum threshold goal, of 6,000 rooms open and operating as of December 31, 2016 in relation to Cambria Suites, was not met for PVRSU II, so no PVRSUs vested for that grant.

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OTHER BENEFIT PROGRAMS AND POLICIES

Other Executive Benefits

Perquisite Allowance

The Company maintains a Flexible Perquisites Plan to enhance our ability to recruit and retain key executives. The plan design and prevalence of benefits are reviewed annually against our peer group and are consistent with market practice within the peer group.

Under the Company’s Flexible Perquisites Plan, each NEO and certain other executives are eligible to receive an aggregate amount that may be used by the executive officer for reimbursement for any of the following benefits: financial and estate planning, legal services, supplemental life insurance premiums, club membership dues, certain health care and fitness expenses and child care expenses. The reimbursement amount for each NEO is based on the executive’s title, role within the organization and scope of responsibilities. These reimbursements represent taxable income to the executive. The executive is responsible for paying any associated tax on amounts reimbursed under the Flexible Perquisites Plan and no tax gross-up is provided. If an executive incurs reimbursable costs that are less than the aggregate reimbursable amount, any remaining allowance is forfeited and cannot be carried forward to the next year. We believe the Company's cost to provide this Plan is minimal compared to the recruitment and retention value the program offers in competing for talent.

In 2016, the aggregate amount of reimbursement available to each NEO under the Flexible Perquisites Plan was as set forth below. For actual amounts reimbursed to each NEO, see the All Other Compensation column of the Summary Compensation Table.



Officer	2016 Eligible Reimbursement ($)
Joyce	31,800
Oaksmith	8,000
Pacious	15,000
Pepper	15,000
Wu	15,000
White	15,000

Stay at Choice and Other Benefits

Through the Stay at Choice program, the Company seeks to further our senior executives' use of our hotels when traveling on personal matters. The Company offers officers and directors reimbursements for nightly room charges when staying at the Company’s franchised properties for non-business related travel. There is no limit on an executive’s use of this plan during the year as they are a valuable source of input and feedback with regard to the value and consistency of our product. The Company pays the tax and gross-up associated with using the Stay at Choice program.

Under his employment agreement, Mr. Joyce is eligible for the personal use of the Company aircraft for up to 40 flight hours per year. The Company does not provide a tax gross-up on this benefit.

For the aggregate cost to the Company of each of the perquisites or other benefits described above, see the All Other Compensation column of the Summary Compensation Table.

Non-Qualified Deferred Compensation Plan

NEOs are eligible to defer their base salary, annual cash incentive and long-term incentive plan distribution. Deferrals are always 100% vested. The non-qualified plan provides the NEOs with a long-term capital accumulation opportunity through a range of investment opportunities designed to comply with section 409A of the Internal Revenue Code (the "Code").

We provide the non-qualified plans due to the regulatory limits on the amount of compensation that can be contributed to qualified retirement plans in any given year.

We believe these limits leave higher-paid executives without competitive retirement income replacement and that non-qualified plans are a vital part of an executive’s financial planning to bridge the divide between Social Security and retirement income.

For more information on these plans, see the All Other Compensation column of the Summary Compensation Table below, and the Non-Qualified Deferred Compensation Table below.

Executive Share Ownership and Holding Requirements

Our Executive Share Ownership Guidelines are intended to align the interests and actions of executives with the interests of shareholders and promote our longstanding commitment to sound corporate governance.

Under the guidelines, each NEO must attain ownership of qualifying shares with a market value equal to a multiple of

the executive’s then-current base salary within five years after first becoming a covered executive.

As of December 31, 2016, each NEO holds more than two times the required share ownership.

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The chart below details the required market value for each category of executive officer



Category		Required Ownership as a Multiple of Salary
Chief Executive Officer - Joyce		5x
Category 1 - White, Pacious		3x
Category 2 - Wu, Pepper		2x
Category 3 - Oaksmith		1.5x

Stock ownership counting toward satisfaction of the guidelines includes:


•	Stock purchased on the open market;


•	Stock obtained through stock option exercises;


•	Restricted stock issued by Choice, including time-based restricted stock, performance vested restricted stock and performance-based restricted stock, as long as the stock is continuously held; and


•	Stock beneficially owned in trust or by immediate family members residing in the same household.

If an executive does not attain the ownership levels within the five-year period, and thereafter maintain the ownership levels, the Committee may:


•	Require that the transfer of up to fifty percent (50%) of the executive’s MIP be paid in the form of Choice stock and/or adjust the amount or composition of any future cash or equity compensation;


•	Restrict the executive from selling or otherwise disposing of Choice stock;


•	Forego the future grant of any equity awards to the executive; or


•	Take any other actions reasonably designed to assist or enable the executive to satisfy the guidelines.

In addition, the NEOs must meet specified exemption criteria or obtain permission before selling stock that would result in their holdings dropping below the guideline requirements.

Hedging and Pledging Transactions

In February 2017, the Board amended the Company’s Insider Trading Policy to prohibit all employees (including NEOs) and directors from engaging in hedging transactions involving Company stock, such as prepaid variable forwards, equity swaps, collars and exchange funds.

In connection with this amendment to the Insider Trading Policy, the Board approved a limited exception to the policy for certain shares owned by directors that are members of the Bainum family - the Company’s founding family who currently collectively beneficially own approximately 39.8% of the Company’s outstanding shares. The exception provides that Choice securities indirectly held by a director that is a Bainum family member are not subject to the hedging policy so long as the relevant Choice securities (1) were not received as compensation by an individual

director and (2) are held by an entity in which the Bainum family director does not own a majority of the overall economic interest. In approving this limited exception to the hedging policy, the Board took into account the purpose of the Insider Trading Policy (which includes the hedging policy), namely, to govern actions of the Company employees, officers and directors, while recognizing the multiple existing ownership structures and vehicles (such as holding companies and trusts) pursuant to which one or more members of the Bainum family, the significant majority of whom are not directors of the Company, indirectly own shares of the Company.

The Insider Trading Policy also prohibits directors and Section 16 officers from pledging shares without prior approval of the General Counsel.

Executive Compensation Recovery "Clawback" Policy

The Company's Recoupment Policy (the “Clawback Policy”) gives the Committee the right to require the Company’s senior executives, including the NEOs, to pay back previous MIP distributions in the event that the Company

materially restates its financial results as a consequence of significant noncompliance with financial reporting requirements. Equity awards granted after January 1, 2016 are also subject to recoupment.

Severance and Change in Control Arrangements

Each of the NEOs is entitled to receive various payments and continued benefits upon various triggering events. For Mr. Joyce, these arrangements are set forth in an employment agreement and for each of Ms. Wu and Messrs. White and Pacious, they are set forth in a non-competition, non-solicitation and severance benefit agreement. For Mr. Pepper and Mr. Oaksmith, these arrangements are prescribed by the Choice Hotels International Severance Benefit Plan that is generally

applicable to all of the Company’s employees who do not otherwise have an employment agreement or severance agreement with the Company.

The terms of the severance provisions and benefits in each of these agreements and the Choice Severance Benefit Plan were based on what the Committee believed was competitive with market at the time of adoption. In addition, Mr. Joyce’s employment agreement was based on contract

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renewal negotiation, with the Committee giving due consideration to market terms.

In May 2012, the Company entered into an amended and restated employment agreement with Mr. Joyce, the terms of which were based on arms-length negotiations. Mr. Joyce’s employment agreement contains severance benefits following constructive termination and termination following a change in control.

The Company and each of Ms. Wu and Mr. Pacious are parties to an executive non-competition, non-solicitation and severance benefit agreement. The Committee believes that the severance, non-competition and non-solicitation provisions are typical within the hospitality and franchise industry and are reasonable and enforceable. Each of these agreements provides for 70 weeks of severance and termination benefits in the event of termination without cause or constructive termination, or for severance payments upon termination of the executive following a change in control (based on a “double trigger”) equal to a lump sum payment of 200% of his or her base salary plus 200% of his or her annual bonus. These agreements do not provide for gross-up payments for excise tax.

For Mr. Pepper and Mr. Oaksmith, who do not have a severance agreement or a written employment agreement that contains a severance provision, severance is determined in accordance with the Choice Severance Benefit Plan that is generally applicable to all employees of the Company. The Severance Benefit Plan’s severance benefit level for executives at or above Mr. Pepper’s and Mr. Oaksmith's level is generally five weeks of severance

pay for each year of service subject to a minimum and a cap, where the termination is not in connection with a change in control. For a termination following a change in control, the plan provides for severance payments equal to 200% of the executive’s base salary plus 200% of his annual bonus.

Mr. Joyce’s employment agreement, the severance benefit agreements with Ms. Wu and Mr. Pacious, and the Severance Benefit Plan for Mr. Pepper and Mr. Oaksmith contain provisions granting severance payments upon termination following a change in control. These provisions were adopted to ensure that these executives will not be tempted to act in their own interests rather than the interests of the Company’s shareholders in the event the Company is considering a change in control transaction. These executives may lose their ability to influence the Company’s performance after a change in control and may not be in a position to earn incentive awards or vest in equity awards, and thus might be biased against such a transaction. The Committee believes these provisions ensure executives who are unexpectedly terminated for reasons outside of their control are appropriately compensated for a limited period of time following termination.

For a more detailed discussion of the arrangements applicable to each NEO, including an estimated quantification of the benefits payable to each officer assuming a termination event as of December 31, 2016, see the Potential Payments Upon Termination or Change of Control section below.

Compensation Risk Mitigation

In 2016, the Committee reviewed the Company’s incentive plans, compensation programs and practices, and the processes for implementing these programs to determine whether any risks arising from our compensation policies and practices for our NEOs and other employees could create risks that are reasonably likely to have a material adverse effect on the Company. In conducting this review, the Committee considered analysis performed by Mercer, an independent compensation consulting firm, with regard to the Company’s compensation policies and practices.

The factors considered by the Committee include:


•	the general design philosophy of our compensation policies and practices for employees whose behavior would be most affected by the incentives established by our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;


•	our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;


•	how our compensation policies and practices relate to the realization of risks resulting from the

actions of employees in both the short and long term;


•	our policies regarding adjustments to our compensation programs and practices to address changes in our risk profile; and


•	material adjustments that we have made to our compensation policies and practices as a result of changes in our risk profile.

The Committee believes that it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because (i) the performance goals relate directly to the business plan approved by the Board, (ii) the Company has ownership requirements, restrictions on hedging, restrictions on pledging of securities by directors and Section 16 officers and a clawback policy and (iii) there is an appropriate balance between our annual incentives and long-term incentives, with a particular emphasis on long-term value creation for our executives that aligns with shareholder value creation.

Based on this review, the Committee determined that the risks arising from the Company’s compensation practices and policies are not reasonably likely to have a material adverse effect on the Company.

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COMPENSATION DECISION-MAKING PROCESS

Role of the Compensation and Management Development Committee

The Committee establishes the Company’s compensation principles that guide the design of compensation plans and programs for our executive officers. The Committee is charged with setting and implementing the compensation of the Company's executive officers as well as monitoring their development and succession planning. In carrying out its responsibilities, the Committee endeavors to achieve and maintain an executive compensation package that is both fair and competitive in furtherance of the Company’s goals, including increasing shareholder value.

As part of its responsibility and oversight, the Committee reviews corporate goals and objectives relevant to CEO compensation, evaluates performance in light of those goals and objectives and recommends CEO compensation based on this evaluation to the Board for approval. With regard to the other NEOs, the Committee reviews and approves changes to base salary, annual and long-term

incentive plan performance targets and the achievement against those goals, and equity-based compensation design, delivery and value. In addition, the Committee reviews and approves all compensation-related agreements, including employment agreements, severance and change-of-control arrangements and any other special supplemental compensation and/or benefits for executive officers, except for the CEO for which the Committee makes a recommendation to the Board for approval. The Committee also engages in a risk assessment.

The Compensation Committee has delegated limited authority to our Stock Compensation Committee, currently consisting of Mr. Joyce, to make equity awards to employees at the vice president level or lower solely for the purpose of promotion, retention, or new hire. No individual award may exceed $250,000 in value.

Role of the Independent Compensation Consultant

The Committee has authority to retain outside compensation consultants and advisors to assist the Committee. The Committee is directly responsible for the appointment, compensation and oversight of the Compensation Consultant. The Compensation Consultant reports directly to the Committee and pursuant to the Committee's instructions, works with management to compile information and gain an understanding of the

Company and any issues for consideration by the Committee.

The Committee currently retains Mercer to review market trends and advise the Committee regarding executive compensation matters. For a full description of Mercer's role in advising the Committee, see Committees of the Board above.

Role of Management

In conjunction with the Committee Chairman, management prepares and presents specific compensation proposals to the Committee for consideration as follows:


•	The CEO may make recommendations to the Committee with regard to the assessment of individual executive officer performance (other than his own) and corresponding compensation actions.


•	The CEO and Chief Human Resources Officer may make recommendations with regard to incentive and other benefits plan design and delivery.


•	The CEO and Chief Human Resources Officer may make recommendations with regard to financial and non-financial targets under our annual incentive plan and our PVRSU awards.

At the direction of the Chairman of the Committee, management prepares and distributes to Committee members agendas, meeting materials and Company data in preparation for Committee meetings. The NEOs do not play a role in their own individual compensation determinations, other than discussing individual performance objectives with the CEO.

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BOARD COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

ON EXECUTIVE COMPENSATION

Recommendation

The Compensation and Management Development Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussions, the Compensation and Management Development Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s proxy statement.

THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE

Ervin R. Shames, Chairman

William L. Jews

Gordon A. Smith

John P. Tague

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SUMMARY COMPENSATION TABLE

The following table summarizes total compensation paid or earned by each of the Named Executive Officers for the years ended December 31, 2016, 2015 and 2014:



Name and Principal Position	Year	Salary⁽¹⁾ ($)	Bonus⁽²⁾ ($)	Stock Awards⁽³⁾ ($)	Option Awards⁽³⁾ ($)	Non-Equity Incentive Plan Compensation⁽⁴⁾ ($)	Change in Pension Value and Preferred Non-Qualified Deferred Compensation Earnings⁽⁵⁾ ($)	All Other Compensation⁽⁶⁾ ($)	Total ($)
Stephen P. Joyce	2016	1,027,692	—	1,854,052	1,854,002	1,085,526	29,875	167,202	6,018,349
Chief Executive Officer	2015	998,462	249,970	1,600,078	1,600,007	1,065,000	35,227	158,083	5,706,827
	2014	958,846	292,578	833,340	1,666,671	1,302,610	29,137	233,871	5,317,053
Scott E. Oaksmith⁽⁷⁾	2016	305,008	—	575,044	75,005	138,195	—	33,970	1,127,222
Senior Vice President, Finance and
Chief Accounting Officer
Patrick S. Pacious	2016	662,531	—	2,625,106	625,007	707,327	6,304	128,958	4,755,233
President and	2015	549,142	67,498	577,578	577,510	450,984	7,433	136,186	2,366,331
Chief Operating Officer	2014	515,343	72,426	316,668	633,338	518,100	6,147	78,315	2,140,337
David A. Pepper	2016	488,154	—	356,002	356,004	379,346	112,847	62,659	1,755,012
Chief Development	2015	432,231	32,992	1,250,124	250,005	275,391	133,061	53,908	2,427,712
Officer	2014	352,116	46,555	495,061	240,001	178,556	110,058	43,295	1,465,642
Simone Wu	2016	422,308	—	195,044	195,002	224,485	—	53,036	1,089,875
Senior Vice President,	2015	389,038	32,992	200,058	200,012	211,088	—	64,049	1,097,237
General Counsel, Corporate Secretary & External Affairs	2014	363,839	—	633,370	266,673	244,404	—	41,329	1,549,615
David L. White⁽⁷⁾	2016	520,769	—	352,500	352,507	381,575	32,584	117,155	1,757,090
Former Senior Vice President,	2015	468,462	45,013	362,540	362,507	306,675	38,421	88,379	1,671,997
Former Chief Financial Officer	2014	413,000	61,428	233,375	466,675	337,707	31,779	78,414	1,622,378


(1)	Values reflect base salary actually received by each Named Executive Officer in the years presented, which depending on the position of pay periods within a calendar year, may not equal a Named Executive Officer’s stated annual salary. Mr. White's amount includes $121,154 of salary continuation under his Severance Benefit Agreement.

(2)

In addition to the cash awards described in footnote 4, the amounts under the 2014 and 2015 Management Incentive Plan include cash payments to compensate executive officers who would have received higher PVRSU distributions had the SkyTouch investment been included in target EPS at the time of the grant (the "SkyTouch Adjustment Award"). There were no Skytouch Adjustment Awards for 2016. In 2015 the total value of the NEO SkyTouch Adjustment Award covering the PVRSU performance period of 2013 through 2015 was $428,465. Mr. Joyce received $249,970, Mr. Pacious received $67,498, Mr. Pepper received $32,992, Ms. Wu received $32,992 and Mr. White received $45,013. In 2014 the total value of the NEO SkyTouch Adjustment Award covering the PVRSU performance period of 2012 through 2014 was $472,987. Mr. Joyce received $292,578, Mr. Pacious received $72,426, Mr. Pepper received $46,555 and Mr. White received $61,428. Ms. Wu did not receive a payment as she joined the Company in February 2012 and was not awarded a PVRSU grant by the Company at that time.

(3)

For each of the NEOs, amounts shown in the Stock Awards column for 2014, 2015 and 2016 include the grant date fair values for RS, PBRSUs and PVRSUs. The values included for PBRSUs and PVRSUs are based on the probable outcome of the performance goals on the grant date (100% of the performance target), computed in accordance with FASB ASC Topic 718. Assumptions used to calculate fair value for Stock and Option Awards for 2016 are discussed in Note 18 to the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. The actual value realized by each individual with respect to PVRSU awards will depend on the Company’s actual performance relative to the performance goals, with vesting options for actual shares ranging from 0% to 250% for PVRSUs based on actual performance against the performance target established at the time of grant.

The grant date fair value based on the probable outcome for the 2016 PVRSU awards was $927,026 for Mr. Joyce, $2,312,562 for Mr. Pacious, $178,001 for Mr. Pepper, $97,522 for Ms. Wu and $176,250 for Mr. White. The grant date fair value based on the maximum outcome for the 2016 PVRSU awards was $1,854,052 for Mr. Joyce, $4,625,124 for Mr. Pacious, $356,002 for Mr. Pepper, $195,044 for Ms. Wu and $352,500 for Mr. White. Mr. Oaksmith did not receive a PVRSU grant in 2016.

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The grant date fair value based on the probable outcome for the 2015 PVRSU awards was $800,039 for Mr. Joyce, $288,789 for Mr. Pacious, $1,125,088 for Mr. Pepper, $100,029 for Ms. Wu, and $181,270 for Mr. White. The grant date fair value based on the maximum outcome for the 2015 PVRSU awards was $1,600,078 for Mr. Joyce, $362,540 for Mr. White, $1,850,155 for Mr. Pepper, $577,578 for Mr. Pacious and $200,058 for Ms. Wu.

The grant date fair value based on the probable outcome for the 2014 PVRSU awards to Mr. Pepper was $375,024. The grant date fair value based on the maximum outcome for the 2014 PVRSU awards to Mr. Pepper was $843,804.

(4)

Values reflect the cash awards earned by each of the Named Executive Officers under the 2016 Management Incentive Plan. For a discussion of the performance targets under the 2016 Management Incentive Plan, see the description under the heading Short-Term Incentives above. For a discussion of the potential amounts payable to each Named Executive Officer under the 2016 Management Incentive Plan, see the Grants of Plan-Based Awards for 2016 table below.

Due to an administrative error, Mr. Pepper's 2015 amount on last year's proxy was incorrectly reported as $275,295. The corrected amount of $275,391 is shown in the Non-Equity Incentive Plan Compensation column above.

Mr. Pepper's 2016 MIP amount includes $13,200 in contingent payments earned by him for completing certain outstanding items associated with two of the franchise agreements executed in 2015; the remaining contingent balance was forfeited due to non-completion of the franchise agreement process. However, Mr. Pepper’s 2016 amount does not include payment of $9,517 that is pending for 22 of the executed franchise agreements that are subject to satisfying certain outstanding items with them during 2017.

The 2014 amount for Mr. Pepper includes $6,600 in contingent payments earned by him for satisfying certain outstanding items associated with one of the franchise agreements executed in 2013.


(5)	Values reflect the preferential earnings on non-qualified deferred compensation under the Executive Deferred Compensation Plan (“EDCP”). The values reported are based on the excess of the return on amounts credited to accounts in the EDCP at the annually designated rate of return over 120% of the applicable federal long-term rate.


(6)	See the All Other Compensation table below for additional information on the amounts included for each Named Executive Officer in the 2016 All Other Compensation column.

(7)

Mr. White ceased serving as an executive officer of the Company effective June 3, 2016. Scott Oaksmith, Senior Vice President, Finance and Chief Accounting Officer, became the principal financial officer for the Company at that time. Since Mr. Oaksmith was not an NEO previously, only the current year's information is presented for him. Mr. Dominic Dragisich was appointed Chief Financial Officer effective March 6, 2017. Mr. Dragisich is not a 2016 NEO.

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ALL OTHER COMPENSATION

The following table further illustrates the components of the 2016 All Other Compensation column in the Summary Compensation Table above:



	Company EDCP/Non- Qualified Match ($)	Company 401(k) Match ($)	Tax Payments^(a)($)	Other Benefits^(b)($)	Total ($)
Joyce	66,477	10,600	2,715	87,410	167,202
Oaksmith	1,600	10,600	5,308	16,462	33,970
Pacious	39,090	10,600	27,594	51,674	128,958
Pepper	26,964	10,600	4,036	21,059	62,659
Wu	21,073	10,600	1,696	19,667	53,036
White	25,422	10,600	29,872	51,261	117,155


(a)	Represents amounts paid during 2016 with respect to reimbursement for payment of taxes under our Stay at Choice program which provides reimbursements to senior executives when staying at Choice hotels properties for purposes other than business.


(b)	Benefits in this column include the following amounts or types of compensation:

•

reimbursement for personal stays during 2016 under our Stay at Choice program, which was $3,790 for Mr. Joyce; $9,223 for Mr. Oaksmith; $35,844 for Mr. Pacious; $5,993 for Mr. Pepper; $3,558 for Ms. Wu and $35,158 for Mr. White (Amounts do not necessarily reflect how often the NEOs stay at Choice properties. This policy applies only for personal stays, and some NEOs may not submit every personal stay for reimbursement under the Stay at Choice program.);


•	reimbursement of club dues incurred in 2016 under the Flexible Perquisites Program, which was $1,611 for Mr. Joyce; $2,221 for Mr Oaksmith; $6,070 for Mr. Pacious; $11,326 for Mr. Pepper; $3,130 for Ms. Wu; and $7,329 for Mr. White;


•	reimbursement of financial and tax planning services and legal expenses incurred during 2016 under the Flexible Perquisites Program, which was $24,187 for Mr. Joyce; $44 for Mr Oaksmith; $1,950 for Mr. Pacious; $4,825 for Ms. Wu and $1,725 for Mr. White;


•	reimbursement of health and wellness expenses incurred during 2016 under the Flexible Perquisites Program, which was $2,866 for Mr. Joyce; $2,863 for Mr. Oaksmith; $6,980 for Mr. Pacious; $6,341 for Ms. Wu and $4,954 for Mr. White;


•	group term life insurance premiums paid by Choice on behalf of each Named Executive Officer; and


•	the aggregate incremental cost to the Company for Mr. Joyce’s personal use of the Company’s aircraft during 2016, which was $50,457.

Choice calculates the aggregate incremental cost of the personal use of the Company’s aircraft by summing actual direct and direct variable costs associated with the use of the aircraft. These costs include fuel, crew travel expenses, landing fees, flight plans, catering and incremental cost associated with the aircraft lease. Per Mr. Joyce’s employment agreement, he is entitled to use the Company’s aircraft for personal use for up to 40 hours per year. Periodically, Mr. Joyce’s family members and guests may accompany him on business or personal trips on the aircraft; however, the aggregate incremental cost to the Company of their use of the aircraft is minimal, if any.

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GRANTS OF PLAN-BASED AWARDS FOR 2016

The Compensation Committee determines the aggregate equity value to be awarded to each NEO annually as discussed above in Compensation Discussion and Analysis, under the heading Long-Term Incentives. In 2016, the aggregate annual equity value (excluding extraordinary performance grants, employment and retention related grants and similar grants made outside of the annual process) for each of the NEOs except Mr. Oaksmith was divided into awards of approximately one-half stock options, one-quarter service-based restricted stock (“RS”) and one-quarter as performance vested restricted stock units (“PVRSU”). For options granted to these NEOs, the value of the aggregate equity grant to be delivered as options is divided by the Black-Scholes value on the date of grant to determine the number of shares to be granted. For example, as discussed above in Compensation Discussion and Analysis, Mr. Pacious' long-term equity grant value on February 26, 2016 was 178.6% of his base salary, or $1,250,095. Approximately one-half of this value, or $625,007, was granted as stock options. The Black-Scholes value was $9.30. Thus, the number of shares subject to Mr. Pacious' option grant on February 26, 2016 was determined as follows: $625,007/$9.30 = 67,205 shares. The value of the aggregate equity grant to be delivered as RS and PVRSUs ($625,088) was divided by the closing price of Choice’s Common Stock on the date of grant, or $51.49. Thus, Mr. Pacious' stock grant was determined as follows: $625,088/$51.49 = 12,140 shares, consisting of 6,070 RS and 6,070 PVRSUs.



Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾			Estimated Future Payouts Under Equity Incentive Plan Awards⁽²⁾			All Other Stock Awards: Number of Shares of Stock or Units (#)⁽³⁾	All Other Option Awards: Number of Securities Underlying Options (#)⁽⁴⁾	Exercise Price of Option Awards ($)⁽⁵⁾	Grant Date Fair Value of Stock and Option Awards ($)
		Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)
Joyce		515,000	1,030,000	2,060,000
	2/26/2016				9,002	18,004	36,008				927,026
	2/26/2016							18,004			927,026
	2/26/2016								199,355	51.49	1,854,002