Choice Hotels International (CHH)

Corporate Governance

The Board currently has ten directors, a substantial majority (eight) of whom the Board has determined are “independent” under the listing standards of the NYSE. The independent directors are Fiona Dias, Larry R. Levitan, William L. Jews, Raymond E. Schultz, John T. Schwieters, Ervin R. Shames, Gordon A. Smith and David C. Sullivan. In determining “independence”, the Board applies the analysis as set forth in the listing standards of the NYSE, except that the Company’s requirements are stricter as follows:

In fiscal year 2005, the Board held five 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. The Company requires that all Board members attend the annual meeting. In 2005, all of the then Board members attended the annual meeting. The non-management members of the Board are required to meet twice a year in executive session without management. Mr. Shames, the lead independent director, chairs these meetings. Two such meetings were held in 2005.

The Board is responsible for overseeing the overall performance of the Company. Members of the Board are kept informed of the Company’s business 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 February 2005, the Board of Directors amended the Company’s Rights Agreement (the “Poison Pill”) to accelerate the expiration date to February 14, 2005. As a result of the amendment, the Poison Pill terminated on February 14, 2005.

In November 2003, to further encourage executive officers of the Company to have significant ownership in the Company’s stock and to further align the interests of executive officers with those of shareholders, the Board of Directors established executive share ownership guidelines. The guidelines provide targets for the Chief Executive Officer and the executive officers. Specific features of the guidelines include:

To date, the CEO and all executive officers are in compliance with the guidelines.

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Corporate Governance

The Board currently has nine directors, a substantial majority (seven) of whom the Board has determined are “independent” under the listing standards of the NYSE. In determining “independence”, the Board applies the

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analysis as set forth in the listing standards of the NYSE, except that the Company’s requirements are stricter as follows:

In fiscal year 2004, the Board held five 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. The non-management members of the Board are required to meet twice a year in executive session without management. Dr. Robertson, the Lead Independent Director, chairs these meetings. Two such meetings were held in 2004.

The Board is responsible for overseeing the overall performance of the Company. Members of the Board are kept informed of the Company’s business 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.

The Nominating and Corporate Governance Committee is currently undertaking a search for a director to fill the vacancy created upon Dr. Robertson’s retirement. The Board expects to fill the vacancy in the near future but, in any event, prior to next year’s Annual Meeting.

In February 2005, the Board of Directors amended the Company’s Rights Agreement (the “Poison Pill”) to accelerate the expiration date to February 14, 2005. As a result of the amendment, the Poison Pill terminated on February 14, 2005.

In November 2003, to further encourage executive officers of the Company to have significant ownership in the Company’s stock and to further align the interests of executive officers with those of shareholders, the Board of Directors established executive share ownership guidelines. The guidelines provide targets for the Chief Executive Officer and the executive officers. Specific features of the guidelines include:

To date, the CEO and most executive officers have met or exceeded the guidelines.