DISTRIBUTION AGREEMENT
dated as of
October 31, 1996
between
Manor Care, Inc.
and
Choice Hotels Holdings, Inc.
(to be renamed Choice Hotels International, Inc.)
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions..................................... 2
ARTICLE II
TRANSFER OF LODGING BUSINESS
Section 2.01. Transfer of Assets.............................. 8
Section 2.02. Assignment and Assumption of Liabilities........ 9
Section 2.03. Assisted Living Facilities...................... 9
Section 2.04. Transfers Not Effected Prior to the
Distribution Date............................. 10
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS...... 10
Section 2.06. Conveyancing and Stock Assumption Instruments... 11
Section 2.07. Cash Allocation................................. 12
ARTICLE III
THE DISTRIBUTION
Section 3.01. Cooperation Prior to the Distribution........... 13
Section 3.02. Conduct of Lodging Business Pending
Distribution................................. 13
Section 3.03. Manor Care Board Action; Conditions Precedent
to the Distribution.......................... 14
Section 3.04. Outstanding Choice Stock....................... 15
Section 3.05. The Distribution............................... 15
ARTICLE IV
INDEMNIFICATION
Section 4.01. Choice Indemnification of Manor Care............ 16
Section 4.02. Manor Care Indemnification of Choice............ 16
Section 4.03. Notice and Payment of Claims.................... 16
Section 4.04. Notice and Defense of Third-Party Claims........ 17
Section 4.05 Insurance Proceeds.............................. 19
Section 4.06 Contribution.................................... 19
Section 4.07 Subrogation..................................... 20
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Page
Section 4.08 No Third-Party Beneficiaries.................... 20
Section 4.09 Remedies Cumulative............................. 20
Section 4.10 Survival of Indemnities......................... 20
Section 4.11 After-Tax Indemnification Payments.............. 20
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01. Intercompany Accounts........................... 21
Section 5.02. Manor Care Guarantees........................... 21
Section 5.03. Ancillary Agreements............................ 22
Section 5.04. Choice Officers and Board of Directors.......... 22
Section 5.05. Choice Certificate of Incorporation and
By-laws...................................... 22
Section 5.06. Credit Facilities............................... 22
Section 5.07. Sales and Transfer Taxes........................ 23
Section 5.08. Certain Post-Distribution Transactions.......... 23
Section 5.09. Non-Competition Agreement....................... 23
Section 5.10. Insurance Policies and Claims Administration.... 24
ARTICLE VI
ACCESS TO INFORMATION
Section 6.01. Delivery of Corporate Records................... 26
Section 6.02. Access to Information........................... 27
Section 6.03. Litigation Cooperation.......................... 27
Section 6.04. Reimbursement................................... 27
Section 6.05. Retention of Records............................ 27
Section 6.06. Confidentiality................................. 28
Section 6.07. Mail............................................ 28
ARTICLE VII
INTENTIONALLY OMITTED
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Termination..................................... 29
Section 8.02. Expenses........................................ 29
Section 8.03. Notices......................................... 29
Section 8.04. Amendment and Waiver............................ 30
Section 8.05. Counterparts.................................... 30
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Page
Section 8.06. Governing Law; Jurisdiction; Forum.............. 30
Section 8.07. Entire Agreement................................ 31
Section 8.08. Parties in Interest............................. 31
Section 8.09. Tax Sharing Agreement; After-Tax Payments....... 31
Section 8.10. Further Assurances and Consents................. 31
Section 8.11. Exhibits and Schedules.......................... 32
Section 8.12. Legal Enforceability............................ 32
Section 8.13. Dispute Resolution.............................. 32
Section 8.14. Titles and Headings............................. 34
Schedule 1...................... Lodging Subsidiaries
Schedule 2.01(b)................ Transferred Hotels
Schedule 2.03................... Assisted Living Facilities
Schedule 5.02(a)................ Manor Care Guarantees
Schedule 5.10(a)................ Covered Claims
Exhibit A....................... Form of Corporate Services Agreement
Exhibit B....................... Form of Employee Benefits Adminis-
tration Agreement
Exhibit C....................... Form of Employee Benefits & Other
Employment Matters Allocation
Agreement
Exhibit D....................... Form of Gaithersburg Sublease Agreement
Exhibit E....................... Form of Loan Agreement
Exhibit F....................... Form of Pikesville Sublease Agreement
Exhibit G....................... Form of Procurement Services Agreement
Exhibit H....................... Form of Risk Management Consulting
Services Agreement
Exhibit I....................... Form of Silver Spring Lease Agreement
Exhibit J....................... Form of Tax Administration Agreement
Exhibit K....................... Form of Tax Sharing Agreement
Exhibit L....................... Form of Time Sharing Agreement
Exhibit M....................... Form of Trademark Agreement
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT ("Agreement") dated as of October 31, 1996 by
and between Manor Care, Inc., a Delaware corporation (together with its
successors and permitted assigns, "Manor Care"), and Choice Hotels Holdings,
Inc., a Delaware corporation (to be renamed Choice Hotels International, Inc.
and together with its successors and permitted assigns, "Choice").
RECITALS
WHEREAS, Manor Care currently conducts the business of owning,
managing and franchising hotels and conducts certain related operations (the
"Lodging Business") primarily through certain subsidiaries of Manor Care (the
"Direct Lodging Subsidiaries"), their respective subsidiaries and certain
partnerships, all as identified on Schedule 1 hereto (collectively, the "Lodging
Subsidiaries").
WHEREAS, Choice is presently a wholly-owned subsidiary of Manor Care
established for the purposes of taking title to the capital stock and associated
goodwill of the Direct Lodging Subsidiaries and certain assets associated with
the Lodging Business, and assuming the liabilities associated with the Lodging
Business and certain other liabilities, all as specified herein, such that
Choice will own substantially all of the assets, business and operations of the
Lodging Business.
WHEREAS, the Board of Directors of Manor Care has determined that it
is in the best interest of Manor Care and the stockholders of Manor Care to
distribute (the "Distribution") to the holders of Manor Care Common Stock (as
defined herein) all of the outstanding shares of Choice Common Stock (as defined
herein).
WHEREAS, it is the intention of the parties that the Distribution will
not be taxable to Manor Care or to the stockholders of Manor Care (pursuant to
Section 355 of the Code (as defined herein)).
WHEREAS, the parties have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and to set forth other agreements that will govern certain
other matters following the Distribution.
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NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements, provisions and covenants contained in this Agreement, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used herein, the following terms have
the following meaning:
"Action" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal.
"Affiliate" of any specified person means any other person that,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such specified person.
"Ancillary Agreements" means the Corporate Services Agreement, the
Employee Benefits Administration Agreement, the Employee Benefits and Other
Employment Matters Allocation Agreement, the Gaithersburg Sublease Agreement,
the Loan Agreement, the Pikesville Sublease Agreement, the Procurement Services
Agreement, the Risk Management Consulting Services Agreement, the Silver Spring
Lease Agreement, the Tax Administration Agreement, the Tax Sharing Agreement,
the Time Sharing Agreement and the Trademark Agreement.
"Assisted Living Liabilities" means all Liabilities arising
exclusively from the operation of the assisted living facilities described on
Schedule 2.03 or the ownership or use of assets exclusively in connection
therewith.
"Assumed Liabilities" means the Liabilities arising from the operation
of the Lodging Business or the ownership or use of assets (including the
Transferred Assets) or other activities in connection therewith, whether arising
before, on or after the Distribution Date, including but not limited to any
Liabilities arising under or in connection with or related to (i) the Choice
Liabilities that are guaranteed by Manor Care, as specified in Schedule 5.02(a),
(ii) information
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contained in or omitted from the Form 10 or the Information Statement, (iii) any
Liabilities set forth or referenced in the audited financial statements of
Choice included in the Form 10 or the Information Statement, (iv) hotel leases
under which Manor Care may be deemed to be liable, (v) liabilities arising from
Franchise Agreements, (vi) liabilities in connection with a Reimbursement and
Indemnification Agreement of Chemical Bank regarding a Chemical Bank-France
guarantee and (vii) liabilities under indemnification agreements between Manor
Care and certain employees and directors with respect to services rendered by
such employee or director to Choice Hotels or the Lodging Business.
Notwithstanding the foregoing, the Assumed Liabilities shall not include (i) any
debt of Manor Care for money borrowed (including but not limited to any such
debt evidenced by a note, debenture or other instrument), (ii) (X) any
third-party claims arising from the conduct or operation of the Lodging Business
or the ownership or use of assets in connection therewith prior to the
Distribution Date if such claims are Covered Claims, (Y) any self-insured
retention or deductible for such Covered Claims that would be covered but for
such retention or deductible, other than any amount payable by Choice in respect
of Shock Losses (as defined) pursuant to Section 5.10(a), (Z) any letters of
credit of Manor Care in favor of an insurance carrier relating to such retention
or deductible, (iii) the Assisted Living Liabilities, and (iv) any claims,
losses, damages, demands, costs, expenses or liabilities for any Tax (which
shall be governed by the Tax Sharing Agreement and Sections 4.11 and 5.07
hereof).
"Choice Bylaws" means the bylaws of Choice in the form filed as an
exhibit to the Form 10.
"Choice Certificate" means the restated certificate of incorporation
of Choice in the form filed as an exhibit to the Form 10.
"Choice Common Stock" means the outstanding shares of common stock,
par value $.01 per share, of Choice.
"Choice Credit Facility" means a revolving credit facility for Choice
in the amount of $100.0 million.
"Choice Hotels" means Choice Hotels International, Inc., a Delaware
corporation (to be renamed Choice Hotels Franchising, Inc.), and, prior to the
Distribution, a wholly-owned subsidiary of Manor Care.
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"Choice Liabilities" means all of (i) the Liabilities of Choice under
this Agreement, (ii) the Assumed Liabilities, and (iii) the Liabilities of
Choice arising after the Distribution Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Corporate Services Agreement" means the agreement to be entered into
between Manor Care and Choice, on or before the Distribution Date, providing for
certain matters relating to corporate, administrative, consulting and other
services, in substantially the form set forth as Exhibit A, as amended from time
to time.
"Covered Claims" means any claim that is of a type covered by
insurance or self insurance of Manor Care as in effect on the Distribution Date
and that is a type of claim specified as a covered claim on Schedule 5.10(a).
"Direct Lodging Subsidiaries" has the meaning specified in the first
recital of this Agreement.
"Distribution" has the meaning specified in the third recital of this
Agreement.
"Distribution Agent" means Chase-Mellon Shareholder Services, L.L.C.
"Distribution Date" means the date determined by the Board of
Directors of Manor Care as the date on which the Distribution shall be effected,
which is contemplated to occur on November 1, 1996.
"Employee Benefits Administration Agreement" means the agreement to be
entered into between Manor Care and Choice, on or before the Distribution Date,
providing for certain matters relating to the administration of employee
benefits, in substantially the form set forth as Exhibit B, as amended from time
to time.
"Employee Benefits & Other Employment Matters Allocation Agreement"
means the agreement to be entered into between Manor Care and Choice, on or
before the Distribution Date,
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providing for certain matters relating to the allocation of employee benefits,
the treatment of employee stock options and other employee matters, in
substantially the form set forth as Exhibit C, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Credit Facility" means the $250 million revolving credit
facility dated as of November 30, 1994, as amended June 23, 1995, among Chase
Manhattan Bank, Manor Care and the subsidiary guarantors named therein.
"Form 10" means the registration statement on Form 10 filed by Choice
with the Commission to effect the registration of the Choice Common Stock
pursuant to the Exchange Act, as such registration statement may be amended from
time to time.
"Franchise Agreements" means all franchise agreements to which Manor
Care or any Lodging Subsidiary is a party, pursuant to which Manor Care (either
directly or through any such Lodging Subsidiary) has granted franchise rights
with respect to the operation of hotel properties, and in exchange therefor,
receives franchise fees, royalties, license fees and service fees.
"Gaithersburg Sublease Agreement" means the agreement to be entered
into between Manor Care and Choice, on or before the Distribution Date with
respect to property located in Gaithersburg, Maryland, in substantially the form
set forth as Exhibit D, as amended from time to time.
"Healthcare Business" means any business conducted now or in the
future by Manor Care that is not part of the Lodging Business.
"Indemnifiable Loss" has the meaning specified in Section 4.01.
"Information Statement" means the information statement in the form
sent to each holder of Manor Care Common Stock in connection with the
Distribution.
"Insurance Charges" has the meaning specified in Section 5.10(c)(ii).
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"IRS Ruling" means the ruling of the Internal Revenue Service dated
January 22, 1996 that the Distribution should not be taxable to Manor Care or
the stockholders of Manor Care pursuant to Section 355 of the Code.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or not accrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, under any law, rule,
regulation, action, order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
"Loan Agreement" means the Loan Agreement to be entered into among MNR
and Choice, on or before the Distribution Date, providing for the
recapitalization of the Promissory Notes and repayment of certain advances made
by Manor Care to one or more of the Lodging Subsidiaries prior to the
Distribution Date, in substantially the form set forth as Exhibit E, as amended
from time to time.
"Lodging Business" has the meaning specified in the first recital of
this Agreement.
"Lodging Subsidiaries" has the meaning specified in the first recital
of this Agreement.
"Manor Care Common Stock" means the outstanding shares of common
stock, par value $.10 per share, of Manor Care.
"Manor Care Liabilities" means all of (i) the Liabilities of Manor
Care under this Agreement, (ii) the Liabilities of Manor Care (other than any
Choice Liabilities), whether arising before, on or after the Distribution Date,
(iii) (X) any third-party claims arising from the conduct or operation of the
Lodging Business or the ownership or use of assets in connection therewith prior
to the Distribution Date if such claims are Covered Claims, (Y) any self-insured
retention or deductible for such Covered Claims that would be covered but for
such retention or deductible other than any amount payable by Choice in respect
of Shock Losses pursuant to Section 5.10(a), (Z) any letters of credit of Manor
Care in favor of an insurance carrier relating to such retention or deductible,
(iv) the Assisted Living Liabilities and (v) any claims, losses, damages,
demands, costs, expenses or liabilities for
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any Tax (which shall be governed by the Tax Sharing Agreement and Sections 4.11
and 5.07 hereof).
"MNR" means MNR Finance Corp., a Delaware corporation.
"Pikesville Sublease Agreement" means the agreement to be entered into
between Manor Care and Choice, on or before the Distribution Date, with respect
to the Subleased Hotel, in substantially the form set forth as Exhibit F, as
amended from time to time.
"Procurement Services Agreement" means the agreement to be entered
into between Manor Care and Choice, on or before the Distribution Date,
providing for certain matters relating to procurement of products and supplies
used in the Lodging Business, in substantially the form set forth as Exhibit G,
as amended from time to time.
"Promissory Notes" means promissory notes issued by Boulevard Motel
Corp. in the aggregate principal amount of $225,722,500.
"Record Date" means the date determined by Manor Care's Board of
Directors as the date for determining the stockholders of record of Manor Care
entitled to receive the Distribution, which record date is contemplated to be
October 10, 1996, subject to fulfillment of certain conditions to the
Distribution set forth herein.
"Risk Management Consulting Services Agreement" means the agreement to
be entered into between Manor Care and Choice on or prior to the Distribution
Date relating to risk management, in substantially the form set forth as Exhibit
H, as amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Silver Spring Lease Agreement" means the lease agreement to be
entered into by Manor Care and Choice, on or before the Distribution Date, with
respect to property located in Silver Spring, Maryland, in substantially the
form set forth as Exhibit I, as amended from time to time.
"Subleased Hotel" means the Comfort Inn Hotel located at 100 Wooded
Way, Pikesville, Maryland 21208, which prior to
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the Distribution Date was operated by Manor Care under a lease from a third
party.
"Tax" shall have the meaning given to such term in the Tax Sharing
Agreement.
"Tax Administration Agreement" means the agreement to be entered into
between Manor Care and Choice on or prior to the Distribution Date providing for
certain tax administration matters, in substantially the form set forth as
Exhibit J, as amended from time to time.
"Tax Sharing Agreement" means the agreement to be entered into between
Manor Care and Choice on or prior to the Distribution Date providing for certain
tax related matters, in substantially the form set forth as Exhibit K, as
amended from time to time.
"Time Sharing Agreement" means the agreement to be entered into
between Manor Care and Choice, on or before the Distribution Date, providing for
the use of certain aircraft, in substantially the form set forth as Exhibit L,
as amended from time to time.
"Trademark Agreement" means the agreement to be entered into between
Manor Care and Choice, on or before the Distribution Date, providing for certain
matters relating to the transfer of certain trademarks and other intellectual
property, in substantially the form set forth as Exhibit M, as amended from time
to time.
"Transferred Assets" has the meaning specified in Section 2.01.
ARTICLE II
TRANSFER OF LODGING BUSINESS
Section 2.01. Transfer of Assets. Prior to the Distribution Date,
Manor Care shall take or shall cause to be taken all actions necessary to cause
the transfer, assignment, delivery and conveyance to Choice of all of Manor
Care's and its subsidiaries' rights, title and interest in the assets listed
below (collectively, the "Transferred Assets"):
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(a) the shares of common stock and preferred stock, if any, and
associated goodwill, of the Direct Lodging Subsidiaries owned by Manor
Care as set forth on Schedule 1;
(b) the hotels described on Schedule 2.01(b) (the "Transferred
Hotels") and the real property on which such hotels are located and all
fixtures, furnishings, furniture, equipment, supplies and other tangible
personal property located at the Transferred Hotels and the Subleased
Hotel;
(c) all contracts, agreements (including Franchise Agreements),
arrangements or commitments of any kind and all licenses and permits of
Manor Care that relate exclusively to the Transferred Hotels and the
Subleased Hotel;
(d) the trademarks, service marks, goodwill and other
intangible properties and rights covered by the Assignment of Marks
Agreement; and
(e) all books, records and files of, or relating exclusively
to, the Lodging Business.
Section 2.02. Assignment and Assumption of Liabilities. On or prior to
the Distribution Date, Manor Care shall assign to Choice and Choice shall assume
all of the Choice Liabilities. Except as set forth in one or more of the
Ancillary Agreements, from and after the Distribution Date, (i) Choice shall,
and/or shall cause its subsidiaries to, assume, pay, perform and discharge in
due course all of the Choice Liabilities, and (ii) Manor Care shall, and/or
shall cause its subsidiaries to, pay, perform and discharge in due course all of
the Manor Care Liabilities and have assigned all of the Assumed Liabilities to
Choice.
Section 2.03. Assisted Living Facilities. (a) Prior to the transfer of
the Transferred Assets, Boulevard Motel Corp., a Direct Lodging Subsidiary,
shall transfer to Manor Care the assisted living facilities described on
Schedule 2.03, including the real property on which such facilities are located,
and all (i) fixtures, furnishings, furniture, equipment, supplies and other
tangible personal property located at such facilities, and (ii) contracts,
agreements, arrangements or commitments of any kind, and all licenses and
permits and books, records and files, in each case that relate to such
facilities.
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(b) Manor Care shall, and/or shall cause its subsidiaries to, assume,
pay, perform and discharge in due course all of the Assisted Living Liabilities.
Section 2.04. Transfers Not Effected Prior to the Distribution Date.
To the extent any transfers contemplated by this Article II shall not have been
fully effected prior to the Distribution Date, Manor Care and Choice shall
cooperate to effect such transfers as promptly as possible following the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities that by their terms or by operation
of law cannot be transferred or assumed; provided, however, that Manor Care and
Choice and their respective subsidiaries and Affiliates shall cooperate in
seeking to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities as contemplated by this Article II. In the event that any
such transfer of assets or Liabilities has not been consummated as of the
Distribution Date, the party retaining such asset or Liability shall thereafter
hold such asset in trust for the use and benefit of the party entitled thereto
(at the expense of the party entitled thereto) and retain such Liability for the
account of the party by whom such Liability is to be assumed pursuant hereto,
and take such other actions as may be reasonably required in order to place the
parties, insofar as reasonably possible, in the same position as would have
existed had such asset been transferred or such Liability been assumed as
contemplated hereby. As and when any such asset or Liability becomes
transferable, such transfer and assumption shall be effected forthwith. Manor
Care and Choice agree that, as of the Distribution Date, each party hereto shall
be deemed to have acquired complete and sole beneficial ownership over all of
the assets, together with all of the rights, powers and privileges incidental
thereto, that such party is entitled to acquire pursuant to the terms of this
Agreement.
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. EACH OF THE
PARTIES HERETO UNDERSTANDS AND AGREES THAT NO PARTY HERETO IS, IN THIS AGREEMENT
OR IN ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT OR
OTHERWISE, REPRESENTING OR WARRANTING IN ANY WAY AS TO THE VALUE OR FREEDOM FROM
ENCUMBRANCE OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS
TO THE LEGAL SUFFICIENCY TO CONVEY TITLE TO ANY ASSET TRANSFERRED PURSUANT TO
THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY
CONVEYANCING OR ASSUMPTION INSTRUMENTS. IT IS ALSO AGREED AND UNDERSTOOD THAT
THERE ARE NO WARRANTIES WHATSOEVER, EXPRESS OR
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IMPLIED, GIVEN BY EITHER PARTY TO THE AGREEMENT, AS TO THE CONDITION, QUALITY,
MERCHANTABILITY OR FITNESS OF ANY OF THE ASSETS, BUSINESSES OR OTHER RIGHTS
TRANSFERRED OR RETAINED BY THE PARTIES, AS THE CASE MAY BE, AND ALL SUCH ASSETS,
BUSINESSES AND OTHER RIGHTS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS"
(PROVIDED THAT THE ABSENCE OF WARRANTIES GIVEN BY THE PARTIES SHALL NOT NEGATE
THE ALLOCATION OF LIABILITIES UNDER THIS AGREEMENT AND SHALL HAVE NO EFFECT ON
ANY MANUFACTURERS, SELLERS, OR OTHER THIRD PARTY WARRANTIES THAT ARE INTENDED TO
BE TRANSFERRED WITH SUCH ASSETS). SIMILARLY, EACH PARTY HERETO UNDERSTANDS AND
AGREES THAT NO PARTY HERETO IS, IN THIS AGREEMENT OR IN ANY OTHER AGREEMENT OR
DOCUMENT CONTEMPLATED BY THIS AGREEMENT OR OTHERWISE, REPRESENTING OR WARRANTING
IN ANY WAY THAT THE OBTAINING OF ANY CONSENTS OR APPROVALS, THE EXECUTION AND
DELIVERY OF ANY AMENDATORY AGREEMENTS AND THE MAKING OF ANY FILINGS OR
APPLICATIONS CONTEMPLATED BY THIS AGREEMENT WILL SATISFY THE PROVISIONS OF ANY
OR ALL APPLICABLE LAWS OF JUDGMENTS OR OTHER INSTRUMENTS OR AGREEMENTS RELATING
TO SUCH ASSETS. Notwithstanding the foregoing, the parties shall use their good
faith efforts to obtain all consents and approvals, to enter into all reasonable
amendatory agreements and to make all filings and applications contemplated by
this Agreement, and shall take all such further actions as shall be deemed
reasonably necessary to preserve for each of Manor Care and Choice, to the
greatest extent reasonably feasible, consistent with this Agreement, the
economic and operational benefits of the allocation of assets provided for in
this Agreement. In case at any time after the Distribution Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary or desirable action, provided, that any financial cost shall be
borne by the party receiving the benefit of the action.
Section 2.06. Conveyancing and Stock Assumption Instruments. In
connection with the asset and stock transfers and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or cause to be
executed by the appropriate entities conveyancing and assumption instruments,
including using reasonable efforts to obtain from third-parties appropriate
releases and novations, in such forms as the parties shall reasonably agree,
including deeds as may be appropriate, the assignment of trademarks and
franchise rights, and the assignment and assumption of existing lease
agreements. Any transfer of capital stock shall be effected by means of delivery
of stock certificates and executed stock powers and notation on the stock record
books of the corporation or other
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legal entities involved and, to the extent required by applicable law, by
notation on public registries.
Section 2.07. Cash Allocation.
(a) Cash Allocation on the Distribution Date. The allocation between
Manor Care and Choice of all domestic and international cash bank balances,
short-term investments and outstanding checks and drafts of Manor Care and its
subsidiaries recorded per the books of Manor Care and its subsidiaries shall be
in accordance with the following:
(i) all cash received in, and deposits of cash, checks, drafts or
short-term investments made to, depositary accounts as of the close of
business on the Distribution Date shall be remitted to Manor Care; and
(ii) all petty cash of the Lodging Business shall be allocated
to Choice on the Distribution Date; and
(iii) all Liabilities for payment of outstanding checks or drafts
drawn on or prior to the Distribution Date on accounts allocated to Choice
pursuant to Section 2.07(b) shall be paid by Choice.
(b) Cash Management After the Distribution Date. The petty cash,
depositary and disbursement accounts of the Lodging Business shall be
transferred to Choice on the Distribution Date after the allocations are made
pursuant to Section 2.07(a)(i) and (ii). Choice shall establish and maintain a
separate cash management system and accounting records with respect to the
Lodging Business effective as of 12:01 a.m. New York time on the day following
the Distribution Date.
(c) For purposes of this Section 2.07, the parties contemplate that
the Lodging Business and the businesses to be retained by Manor Care after the
Distribution, including, but not limited to, the administration of accounts
payable and accounts receivable, will be conducted in the ordinary course of
business consistent with past practice prior to the Distribution Date.
(d) For purposes of this Section 2.07, any disagreement or dispute
shall be resolved by the Assistant Treasurer of Manor Care, which resolution
shall be binding and final upon each of the parties hereto and not subject to
further review.
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ARTICLE III
THE DISTRIBUTION
Section 3.01. Cooperation Prior to the Distribution. (a) Manor Care
and Choice have prepared, and Manor Care shall mail to the holders of Manor Care
Common Stock, the Information Statement, which sets forth disclosure concerning
Choice, the Distribution and other matters. Manor Care and Choice have also
prepared, and Choice has filed with the Commission, the Form 10, which includes
or incorporates by reference the Information Statement. Manor Care and Choice
shall use their reasonable efforts to cause the Form 10 to become effective
under the Exchange Act.
(b) Manor Care and Choice shall cooperate in preparing, filing with
the Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the Employee
Benefits and Other Matters Allocation Agreement.
(c) Manor Care and Choice shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of the states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement.
(d) Choice has prepared and filed a preliminary listing application
and will pursue the approval of the application to permit listing of the Choice
Common Stock on the New York Stock Exchange.
Section 3.02. Conduct of Lodging Business Pending Distribution.
(a) Prior to the Distribution Date, the Lodging Business shall be
operated by Manor Care for the sole benefit of Manor Care and its stockholders.
(b) Prior to the Distribution Date, Choice shall have no operations or
conduct any business except in preparation for the consummation of the
transactions contemplated by this Agreement.
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Section 3.03. Manor Care Board Action; Conditions Precedent to the
Distribution. Manor Care's Board of Directors shall, in its sole discretion,
establish the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution. In no event shall the
Distribution occur unless the following conditions shall, unless waived by Manor
Care in its sole discretion, have been satisfied:
(a) all necessary regulatory approvals and consents of third
parties shall have been received;
(b) the Form 10 shall have been declared effective under the
Exchange Act;
(c) a favorable response shall have been received from the Staff of
the Commission with respect to Manor Care's no-action request concerning,
among other things, whether the Distribution may be effected without
registration of the Choice Common Stock under the Securities Act;
(d) the Choice Credit Facility shall be available;
(e) Choice's Board of Directors, as named in the Form 10, shall have
been elected by Manor Care, as sole stockholder of Choice, and the Choice
Certificate and Choice Bylaws shall be in effect;
(f) the Choice Common Stock shall have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance;
(g) Manor Care's Board of Directors shall have formally approved the
Distribution and shall not have abandoned, deferred or modified the
Distribution at any time prior to the Distribution Date;
(h) The IRS Ruling shall be in full force and effect and shall not
have been modified and the representations made to the IRS therein shall
be true in all material respects;
(i) the transactions contemplated by Sections 2.01 and 2.02 and
Article V shall have been consummated in all material respects and each of
the Ancillary Agreements, in form and substance satisfactory to Manor
Care, shall have been executed by the parties thereto and each of the
transactions contemplated by the Ancillary Agreements to
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be consummated on or prior to the Distribution Date shall have been
consummated;
(j) Choice shall have obtained, or Manor Care shall have obtained
for Choice, insurance (or binders therefor) providing coverage to Choice
similar to the coverage provided by insurance in place prior to the
Distribution Date;
(k) Manor Care shall have amended and restated the Existing
Credit Facility on terms acceptable to it in its sole discretion; and
(l) no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission, and no statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, shall be in effect preventing the payment of the Distribution;
provided that the satisfaction of such conditions shall not create any
obligation on the part of Manor Care to effect the Distribution or in any way
limit Manor Care's power of termination set forth in Section 8.01 or alter the
consequences of any such termination from those specified in such Section.
Section 3.04. Outstanding Choice Stock. On or prior to the
Distribution Date, Manor Care and Choice shall take all steps necessary to
increase the outstanding shares of Choice Common Stock so that immediately prior
to the Distribution, Manor Care will hold a number of shares of Choice Common
Stock equal to the number of shares of Manor Care Common Stock outstanding on
the Record Date.
Section 3.05. The Distribution. On the Distribution Date, or as soon
thereafter as practicable, subject to the conditions set forth in this
Agreement, Manor Care shall deliver to the Distribution Agent a certificate or
certificates representing all of the then outstanding shares of Choice held by
Manor Care, endorsed in blank, and shall instruct the Distribution Agent to
distribute to each holder of record of Manor Care Common Stock on the Record
Date a certificate or certificates representing one share of Choice Common Stock
for each share of Manor Care Common Stock so held. Choice agrees to provide all
certificates for shares of Choice Common Stock that the Distribution Agent shall
require in order to effect the Distribution.
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ARTICLE IV
INDEMNIFICATION
Section 4.01. Choice Indemnification of Manor Care. Except as
otherwise expressly provided in any of the Ancillary Agreements hereof, from and
after the Distribution Date, Choice shall indemnify, defend and hold harmless
Manor Care and its subsidiaries, and each of their respective directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Manor Care Indemnitees")
from and against any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any or all such investigations
or any and all Actions or threatened Actions) (collectively, "Indemnifiable
Losses") incurred or suffered by any of the Manor Care Indemnitees and arising
out of or related to the failure of Choice or any of its subsidiaries to pay,
perform or otherwise discharge any of the Choice Liabilities.
Section 4.02. Manor Care Indemnification of Choice. Except as
otherwise expressly provided in any of the Ancillary Agreements, from and after
the Distribution Date, Manor Care shall indemnify, defend and hold harmless
Choice and its subsidiaries, and each of their respective directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "Choice Indemnitees") from and against
any and all Indemnifiable Losses incurred or suffered by any of the Choice
Indemnitees and arising out of or related to the failure of Manor Care or any of
its subsidiaries to pay, perform or otherwise discharge any of the Manor Care
Liabilities.
Section 4.03. Notice and Payment of Claims. If any Manor Care
Indemnitee or Choice Indemnitee (the "Indemnified Party") determines that it is
or may be entitled to indemnification by Choice or Manor Care, as the case may
be (the "Indemnifying Party"), under this Article IV (other than in connection
with any Action subject to Section 4.04), the Indemnified Party shall deliver to
the Indemnifying Party a written notice specifying, to the extent reasonably
practicable, the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. After the Indemnifying Party shall have been notified of the amount
for which the Indemnified Party seeks
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indemnification, the Indemnifying Party shall, within 15 days after receipt of
such notice, either (i) pay the Indemnified Party such amount in cash or other
immediately available funds (or reach agreement with the Indemnified Party as to
a mutually agreeable alternative payment schedule) or (ii) object to the claim
for indemnification or the amount thereof by giving the Indemnified Party
written notice setting forth the grounds therefor. Any objection shall be
resolved in accordance with Section 8.13. If the Indemnifying Party does not
give such notice, the Indemnifying Party shall be deemed to have acknowledged
its liability for such claim and the Indemnified Party may exercise any and all
of its rights under applicable law to collect such amount.
Section 4.04. Notice and Defense of Third-Party Claims. (a) Promptly
following the earlier of (a) receipt of written notice of the commencement by a
third party of any Action against or otherwise involving any Indemnified Party,
or (b) receipt of written information from a third party alleging the existence
of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party prompt written
notice thereof. The failure of the Indemnified Party to give notice as provided
in this Section 4.04 shall not relieve the Indemnifying Party of its obligations
under this agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail and shall indicate the amount of the
Indemnifiable Loss that has been or will be sustained by the Indemnified Party.
(b) Within 30 days after receipt of such notice, the Indemnifying
Party may, by giving written notice thereof to the Indemnified Party, (i)
acknowledge liability for and at its option elect to assume the defense of such
Third-Party Claim at its sole cost and expense, or (ii) object to the claim of
indemnification for such Third-Party Claim setting forth the grounds therefor.
Any objection shall be resolved in accordance with Section 8.13. If the
Indemnifying Party does not within such 30-day period give the Indemnified Party
such notice, the Indemnifying Party shall be deemed to have acknowledged its
liability for such Third- Party Claim.
(c) Any defense of a Third-Party Claim as to which the Indemnifying
Party has elected to assume the defense shall be conducted by attorneys employed
by the Indemnifying Party
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and reasonably satisfactory to Manor Care in the case of Manor Care Indemnitees
and Choice in the case of Choice Indemnitees. The Indemnified Party shall have
the right to participate in such proceedings and to be represented by attorneys
of its own choosing at the Indemnified Party's sole cost and expense; provided
that if the defendants or parties against which relief is sought in any such
claim include both the Indemnifying Party and one or more Indemnified Parties
and, in the reasonable judgment of Manor Care in the case of Manor Care
Indemnitees and Choice in the case of Choice Indemnitees, a conflict of interest
between such Indemnified Parties and such Indemnifying Party exists in respect
of such claim, such Indemnified Parties shall have the right to employ one firm
of counsel selected by Manor Care or Choice, as the case may be, and in that
event the reasonable fees and expenses of such separate counsel (but not more
than one separate counsel reasonably satisfactory to the Indemnifying Party)
shall be paid by such Indemnifying Party.
(d) If the Indemnifying Party assumes the defense of a Third- Party
Claim, the Indemnifying Party may settle or compromise the claim without the
prior written consent of the Indemnified Party; provided that without the prior
written consent of Manor Care in the case of Manor Care Indemnitees and Choice
in the case of Choice Indemnitees, the Indemnifying Party may not agree to any
such settlement unless as a condition to such settlement the Indemnified Party
receives a written release from any and all liability relating to such
Third-Party Claim and such settlement or compromise does not include any remedy
or relief to be applied to or against the Indemnified Party, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder.
(e) If the Indemnifying Party does not assume the defense of a
Third-Party Claim for which it has acknowledged liability for indemnification
under this Article IV, Manor Care in the case of Manor Care Indemnitees and
Choice in the case of Choice Indemnitees may pursue the defense of such
Third-Party Claim and choose one firm of counsel in connection therewith. The
Indemnifying Party is required to reimburse Manor Care or Choice, as the case
may be, on a current basis for its reasonable expenses of investigation,
reasonable attorney's fees and reasonable out-of-pocket expenses incurred by
Manor Care in the case of Manor Care Indemnitees and Choice in the case of
Choice Indemnitees in defending against such Third-Party Claim and the
Indemnifying Party shall be bound by the result obtained with respect thereto;
provided that the Indemnifying Party shall not be liable for any settlement
effected without the consent of
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Manor Care in the case of Manor Care Indemnitees and Choice in the case of
Choice Indemnitees, which consent shall not be unreasonably withheld.
(f) The Indemnifying Party shall pay to the Indemnified Party in cash
the amount for which the Indemnified Party is entitled to be indemnified (if
any) within 15 days after the final resolution of such Third-Party Claim
(whether by the final nonappealable judgment of a court of competent
jurisdiction or otherwise) or, in the case of any Third-Party Claim as to which
the Indemnifying Party has not acknowledged liability, within 15 days after such
Indemnifying Party's objection has been resolved pursuant to Section 8.13.
Section 4.05. Insurance Proceeds. The amount that any Indemnifying
Party is or may be required to pay to any Indemnified Party pursuant to this
Article IV shall be reduced (including, without limitation, retroactively) by
any insurance proceeds or other amounts actually recovered by or on behalf of
such Indemnified Parties in reduction of the related Indemnifiable Loss. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of an Indemnifiable Loss and shall
subsequently actually receive insurance proceeds, or other amounts in respect of
such Indemnifiable Loss as specified above, then such Indemnified Party shall
pay to such Indemnifying Party a sum equal to the amount of such insurance
proceeds or other amounts actually received after deducting therefrom all of the
Indemnified Party's costs and expenses associated with the recovery of any such
amount.
Section 4.06. Contribution. If the indemnification provided for in
this Article IV is unavailable to an Indemnified Party in respect of any
Indemnifiable Loss arising out of or related to information contained in or
omitted from the Information Statement or the Form 10, then Choice, in lieu of
indemnifying the Manor Care Indemnitees, shall contribute to the amount paid or
payable by the Manor Care Indemnitees as a result of such Indemnifiable Loss in
such proportion as is appropriate to reflect the relative fault of Choice, on
the one hand, and Manor Care, on the other hand, in connection with the
statements or omissions that resulted in such Indemnifiable Loss. The relative
fault of the Choice Indemnitees on the one hand and of the Manor Care
Indemnitees on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates
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to information concerning Choice on the one hand or Manor Care on the other
hand.
Section 4.07. Subrogation. In the event of payment by an Indemnifying
Party to any Indemnified Party in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnified Party as to any events or circumstances in respect of which such
Indemnified Party may have any right or claim relating to such Third-Party
Claim. Such Indemnified Party shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 4.08. No Third-Party Beneficiaries. This Article IV shall
inure to the benefit of, and be enforceable by, Manor Care, the Manor Care
Indemnitees, Choice and the Choice Indemnitees and their respective successors
and permitted assigns. The indemnification provided for by this Article IV shall
not inure to the benefit of any other third party or parties and shall not
relieve any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto and each
party agrees to waive such rights against the other to the fullest extent
permitted.
Section 4.09. Remedies Cumulative. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnified Party of any other rights or the seeking of any and all other
remedies against any Indemnifying Party. The procedures set forth in this
Article IV, however, shall be the exclusive procedures governing any indemnity
action brought under this Article IV or otherwise relating to Indemnifiable
Losses; provided, however, that nothing in this Article IV shall be deemed to
govern any indemnity action brought under Article VII relating to Indemnifiable
Claims.
Section 4.10. Survival of Indemnities. The obligations of each of
Manor Care and Choice under this Article IV shall survive the sale or other
transfer by it of any assets or businesses or the assignment by it of any
Liabilities, with respect to any Indemnifiable Loss of the other related to such
assets, businesses or Liabilities.
Section 4.11. After-Tax Indemnification Payments. Except as otherwise
expressly provided herein or in an
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Ancillary Agreement, any indemnification payment made by any Indemnifying Party
under this Article IV shall be computed by taking into account the value of any
and all applicable deductions, losses, credits, offsets or other items for
Federal, state or other tax purposes attributable to the payment of the
indemnified liability by the Indemnified Party and any Tax incurred by the
Indemnified Party attributable to receipt of the indemnification payment.
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01. Intercompany Accounts. On the Distribution Date, Manor
Care shall contribute to MNR the Promissory Notes and MNR and Choice shall
execute the Loan Agreement. All intercompany amounts payable or receivable by
Manor Care or Choice to the other not covered by the Loan Agreement shall be
cancelled on the Distribution Date.
Section 5.02. Manor Care Guarantees. (a) After the Distribution Date,
Manor Care shall continue and maintain, in full force and effect, the guarantees
issued by Manor Care (the "Guaranteed Obligations"), set forth on Schedule
5.02(a) hereto, with respect to certain obligations of the Lodging Business.
Choice shall use its reasonable best efforts to obtain a release of Manor Care
from its obligations under the Guaranteed Obligations if and to the extent that
such efforts are consistent with the business of Choice and do not adversely
affect the relationship between Choice and the other parties to the Guaranteed
Obligations. Choice shall provide to Manor Care, so long as the Guaranteed
Obligations have not been fully and finally discharged, such information or
certificates as Manor Care shall reasonably request regarding the financial
position of Choice and the status of the Guaranteed Obligations.
(b) Choice agrees to pay to Manor Care on the Distribution Date and on
each anniversary of the Distribution Date thereafter until the Guaranteed
Obligations are terminated a guarantee fee equal to 2% per annum of the
aggregate principal amount of obligations (including financing leases) subject
to such guarantees outstanding on the Distribution Date or the relevant
anniversary of the Distribution Date. Such fee is not subject to any refund and
shall not be prorated.
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(c) Neither Choice nor any subsidiary thereof shall take any action
(including, without limitation, by amendment, renewal or extensions of any
Guaranteed Obligations (or any part thereof), except for any such change in any
Guaranteed Obligation that is caused by the exercise of rights contained in the
agreements governing the underlying obligation as in effect on the Distribution
Date) that could reasonably be expected to adversely affect Manor Care's
potential liability with respect to the Guaranteed Obligations, whether by
increasing the likelihood or amount of any such liability, extending the time
during which such liability remains outstanding or otherwise.
Section 5.03. Ancillary Agreements. On or prior to the Distribution
Date, Manor Care and Choice shall execute and deliver the Ancillary Agreements.
Section 5.04. Choice Officers and Board of Directors. On or prior to
the Distribution Date, Manor Care shall take, and shall cause Choice to take,
all actions necessary to appoint as officers and directors of Choice those
persons named in the Form 10 to constitute the officers and directors of Choice
on the Distribution Date.
Section 5.05. Choice Certificate of Incorporation and By-laws. Prior
to the Distribution Date, Manor Care shall take all action necessary to cause
the certificate of incorporation and by-laws of Choice to be amended and
restated substantially in the form attached to the Form 10 as exhibits thereto.
Section 5.06. Credit Facilities. (a) Prior to the Distribution Date,
Manor Care shall take all necessary action to replace its credit facility so as
to release Choice and the Lodging Subsidiaries from any liability or obligation
with respect thereto from and after the Distribution Date.
(b) Prior to the Distribution Date, Manor Care and Choice shall take
all necessary action to obtain the Choice Credit Facility.
Section 5.07. Sales and Transfer Taxes. Manor Care and Choice agree to
cooperate to determine the amount of sales, transfer or other taxes or fees
(including, without limitation, all real estate, patent, copyright and trademark
transfer taxes and recording fees) payable in connection with the transactions
contemplated by this Agreement (the "Transaction Taxes").
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Manor Care agrees to file promptly and timely the returns for such Transaction
Taxes with the appropriate taxing authorities and remit payment of the
Transaction Taxes and Choice will join in the execution of any such tax returns
or other documentation. Payment of all such Transaction Taxes shall be the
responsibility of Choice and shall be reimbursed to Manor Care by Choice
promptly upon request by Manor Care.
Section 5.08. Certain Post-Distribution Transactions. Each of Manor
Care and Choice shall, and shall cause each of their respective subsidiaries to,
comply in all material respects with each representation and statement made, or
to be made, to any taxing authority in connection with the IRS Ruling or any
other ruling obtained, or to be obtained, by Manor Care and Choice acting
together, from any such taxing authority with respect to any transaction
contemplated by this Agreement.
Section 5.09. Non-Competition Agreement.
(a) Manor Care. Until five years after the Distribution Date, Manor
Care and its subsidiaries shall not, without the express written consent of
Choice, compete with the Lodging Business of Choice, provided that this covenant
shall not prevent Manor Care or any of its subsidiaries from engaging in any
line of business in which Choice is not engaged, or in which Choice is
prohibited by law or by contract from engaging, on the Distribution Date,
including, without limitation, the business conducted by the Assisted Living
Facilities, any independent living facilities and any business similar thereto.
(b) Choice. Until five years after the Distribution Date, Choice and
its subsidiaries shall not, without the express written consent of Manor Care,
compete with the Healthcare Business of Manor Care, including, without
limitation, the business conducted by the Assisted Living Facilities, any
independent living facilities or any business similar thereto.
Section 5.10. Insurance Policies and Claims Administration.
(a) Manor Care to Maintain Insurance Coverage Prior to Distribution
Date. Manor Care shall use reasonable efforts to maintain in full force and
effect at all times up to and including the Distribution Date its current
property and casualty insurance programs, including, without limitation, primary
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and excess general liability, automobile, workers' compensation, property and
crime insurance policies (collectively, the "Policies" and individually, a
"Policy"). Manor Care and its subsidiaries shall retain with respect to any
Covered Claims as set forth on Schedule 5.10(a) relating to periods prior to the
Distribution Date all of their respective rights, benefits and privileges, if
any, under such Policies. To the extent not already provided for by the terms of
a Policy, Manor Care shall use reasonable efforts to cause Choice and its
subsidiaries, as appropriate, to be named as additional insureds under such
Policy in respect of Covered Claims arising or relating to periods prior to the
Distribution Date; provided, however, that nothing contained herein shall be
construed to require Manor Care or any of its subsidiaries to pay any additional
premium or other charges in respect to, or waive or otherwise limit any of its
rights, benefits or privileges under, any such Policy to effect the naming of
Choice and its subsidiaries as such additional insureds; provided, further, that
with respect to any existing Covered Claim that Manor Care determines, in its
sole discretion, has a potential total out-of-pocket cost to Manor Care in
excess of $250,000 (including loss reserves and actual cash payments, if any),
as set forth on Schedule 5.10(a) (collectively, "Shock Losses"), it is
specifically understood that (x) if the amount of Insurance Charges actually
payable by Manor Care with respect to such Shock Loss shall be equal to or
exceed $250,000, the full amount of such payment shall be the responsibility of,
and shall be paid by, Choice and (y) if the amount of Insurance Charges actually
payable by Manor Care with respect to such Shock Loss shall be less than
$250,000, such amount shall be the responsibility of, and shall be paid by,
Manor Care.
(b) Choice Responsible for Establishing Insurance Coverage on and
After Distribution Date. Commencing on and as of the Distribution Date, Choice
and each of its subsidiaries shall be responsible for establishing and
maintaining its own separate insurance programs (including, without limitation,
primary and excess general liability, automobile, workers' compensation,
property, director and officer liability, fire, crime, surety and other similar
insurance policies) for activities and claims relating to any period on or after
the Distribution Date involving Choice or any of its subsidiaries.
Notwithstanding any other agreement or understanding to the contrary, except as
set forth in Section 5.10(a) with respect to Covered Claims relating to periods
prior to the Distribution Date and Section 5.10(c) with respect to claims
administration and financial administration of the Policies, neither Manor
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Care nor any of its subsidiaries shall have any responsibility for or obligation
to Choice or its subsidiaries relating to liability and casualty insurance
matters for any period, whether prior to, at or after the Distribution Date.
(c) Administration and Procedure. (i) Manor Care or a subsidiary of
Manor Care, as appropriate, shall be responsible for the claims administration
and financial administration of all Policies for Covered Claims relating to the
assets, ownership or operation prior to the Distribution Date of the Lodging
Business; provided, however, that such retention by Manor Care of the Policies
and the responsibility for claims administration and financial administration of
the Policies are in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Covered Claims of a named insured under the Policies.
Manor Care shall be entitled to compensation for and reimbursement of expenses
incurred in connection with performing the claims administration and financial
administration of the Policies in accordance with the terms of the Corporate
Services Agreement. Except as set forth in the Risk Management Consulting
Services Agreement, Choice or a subsidiary thereof, as appropriate, shall be
responsible for all administrative and financial matters relating to insurance
policies established and maintained by Choice and its subsidiaries for claims
relating to any period on or after the Distribution Date involving Choice or any
of its subsidiaries.
(ii) Choice shall notify Manor Care of any Covered Claim relating to
Choice or a subsidiary thereof under one or more of the Policies relating to any
period prior to the Distribution Date, and Choice agrees to cooperate and
coordinate with Manor Care concerning any strategy Manor Care may reasonably
elect to pursue to secure coverage and payment for such Covered Claim by the
appropriate insurance carrier. Notwithstanding anything contained herein, in any
other agreement or applicable Policy or any understanding to the contrary,
Choice or an appropriate subsidiary thereof assumes responsibility for, and
shall pay to the appropriate insurance carriers or otherwise, any premiums,
retrospectively- rated premiums, defense costs, indemnity payments, deductibles,
retentions or other charges, as appropriate (collectively, "Insurance Charges"),
whenever arising, which shall become due and payable under the terms and
conditions of any applicable Policy in respect of any liabilities, losses,
claims, actions or occurrences, whenever arising or becoming known, involving or
relating to any of the assets, businesses, operations or liabilities of Choice
or any of its subsidiaries, which charges relate to
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(i) any Shock Losses to the extent set forth in Section 5.10(a) or (ii) the
period after the Distribution Date. To the extent that the terms of any
applicable Policy provide that Manor Care or a subsidiary thereof, as
appropriate, shall have an obligation to pay or guarantee the payment of any
Insurance Charges, Manor Care or such subsidiary shall be entitled to demand
that Choice or a subsidiary thereof make such payment directly to the person or
entity entitled thereto. In connection with any such demand, Manor Care shall
submit to Choice or a subsidiary thereof a copy of any invoice received by Manor
Care or a subsidiary pertaining to such Insurance Charges, together with
appropriate supporting documentation, if available. In the event that Choice or
its subsidiary fails to pay any Insurance Charges when due and payable, whether
at the request of the party entitled to payment or upon demand by Manor Care or
a subsidiary of Manor Care, Manor Care or a subsidiary of Manor Care may (but
shall not be required to) pay such Insurance Charges for and on behalf of Choice
or its subsidiary and, thereafter, Choice or its subsidiary shall forthwith
reimburse Manor Care or such subsidiary of Manor Care for such payment.
ARTICLE VI
ACCESS TO INFORMATION
Section 6.01. Delivery of Corporate Records. Each of Manor Care and
Choice shall arrange as soon as practicable following the Distribution Date for
the delivery to the other of existing corporate governance documents (e.g.
minute books, stock registers, stock certificates, documents of title, etc.) in
its possession relating to the other or to its business and affairs.
Section 6.02. Access to Information. From and after the Distribution
Date each of Manor Care and Choice shall afford the other, including its
accountants, counsel and other designated representatives, reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contacts, instruments, computer data and other data and
information in such party's possession relating to the business and affairs of
the other (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by the other
party including, without limitation, for audit,
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accounting and litigation purposes, as well as for purposes of fulfilling
disclosure and reporting obligations.
Section 6.03. Litigation Cooperation. Each of Manor Care and Choice
shall use reasonable efforts to make available to the other, upon written
request, its officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
legal, administrative or other proceedings arising out of the business of the
other prior to the Distribution Date in which the requesting party may from time
to time be involved.
Section 6.04. Reimbursement. Each party providing information or
witnesses under Sections 6.01, 6.02 or 6.03 to the other shall be entitled to
receive from the recipient, upon the presentation of invoices therefor, payment
for all out-of-pocket costs and expenses as may be reasonably incurred in
providing such information or witnesses.
Section 6.05. Retention of Records. Except as otherwise required by
law or agreed to in writing, each party shall, and shall cause each of its
respective subsidiaries to, retain all information relating to the other party's
business in accordance with the past practice of such party. Notwithstanding the
foregoing, except as provided in the Tax Sharing Agreement, any party may
destroy or otherwise dispose of any information at any time, providing that,
prior to such destruction or disposal, (a) such party shall provide no less than
90 days' prior written notice to the other party, specifying the information
proposed to be destroyed or disposed of, and (b) if the recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
Section 6.06. Confidentiality. Each party shall hold and shall cause
its directors, officers, employees, agents, consultants and advisors to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
information concerning the other party (except to the extent that such
information can be shown to have been (a) in the public domain through no fault
of such party, (b) later lawfully acquired on a non-confidential basis from
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other sources by the party to which it was furnished or (c) information that
typically would have been disclosed by Manor Care or Choice, as the case may be,
in the ordinary course of business consistent with past practice). Neither party
shall release or disclose any such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and comply with the provisions of this Section
6.06.
Section 6.07. Mail. After the Distribution Date, each of Manor Care
and Choice may receive mail, telegrams, packages and other communications
properly belonging to the other. Accordingly, at all times after the
Distribution Date, each of Manor Care and Choice authorizes the other to receive
and open all mail, telegrams, packages and other communications received by it
and not unambiguously intended for the other party or any of the other party's
officers or directors specifically in their capacities as such, and to retain
the same to the extent that they relate to the business of the receiving party
or, to the extent that they do not relate to the business of the receiving party
and do relate to the business of the other party, or to the extent that they
relate to both businesses, the receiving party shall promptly contact the other
party by telephone for delivery instructions and such mail, telegrams, packages
or other communications (or, in case the same relate to both businesses, copies
thereof) shall promptly be forwarded to the other party in accordance with its
delivery instructions. The foregoing provisions of this Section 6.07 shall
constitute full authorization to the postal authorities, all telegraph and
courier companies and all other persons to make deliveries to Manor Care or
Choice, as the case may be, addressed to either of them or to any of their
officers or directors specifically in their capacities as such. The provisions
of this Section 6.07 are not intended to and shall not be deemed to constitute
an authorization by either Manor Care or Choice to permit the other to accept
service of process on its behalf, and neither party is or shall be deemed to be
the agent of the other for service of process purposes or for any other purpose.
-29-
ARTICLE VII
INTENTIONALLY OMITTED
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Termination. This Agreement may be terminated and the
Distribution deferred, modified or abandoned at any time prior to the
Distribution Date by and in the sole discretion of the Board of Directors of
Manor Care without the approval of Choice or of Manor Care's stockholders. In
the event of such termination, no party shall have any liability to any other
party pursuant to this Agreement.
Section 8.02. Expenses. Except as specifically provided in this
Agreement or in an Ancillary Agreement, all costs and expenses incurred in
connection with the preparation, execution, delivery and implementation of this
Agreement and with the consummation of the transactions contemplated by this
Agreement shall be paid by the party incurring the expense. The determination of
who has incurred an expense shall be made by the Chief Financial Officer of
Manor Care, which determination shall be binding and final upon each of the
parties hereto and not subject to further review. In addition, it is understood
and agreed that Choice shall pay the legal, filing, accounting, printing and
other accountable and out-of-pocket expenditures in connection with (i) the
preparation, printing and filing of the Form 10 and the Information Statement,
(ii) obtaining of the Choice Credit Facility and (iii) amending the Existing
Credit Facility.
Section 8.03. Notices. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to Manor Care, to:
Manor Care, Inc.
11555 Darnestown Rd.
Gaithersburg, Maryland 20878-3200
Attn: General Counsel
Telecopy Number: 301-979-4007
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If to Choice, to:
Choice Hotels International, Inc.
10750 Columbia Pike
Silver Spring, Maryland 20901
Attn: General Counsel
Telecopy Number: 301-979-4062
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.
Section 8.04. Amendment and Waiver. This Agreement may not be altered
or amended, nor may rights hereunder be waived, except by an instrument in
writing executed by the parties hereto. No waiver of any terms, provision or
condition of or failure to exercise or delay in exercising any rights or
remedies under this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, provision,
condition, right or remedy or as a waiver of any other term, provision or
condition of this Agreement.
Section 8.05. Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same Agreement.
Section 8.06. Governing Law; Jurisdiction; Forum. This Agreement shall
be construed in accordance with, and governed by, the laws of the State of
Delaware, without regard to the conflicts of law rules of such state. Each party
hereto agrees that any action or proceeding to enforce, or which arises out of
or in any way relates to, directly or indirectly, this Agreement, or any of the
Ancillary Agreements, shall, subject to Section 8.13, be brought or prosecuted
in state court or courts in the State of Maryland or, in any action or
proceeding with respect to which federal courts shall have exclusive subject
matter jurisdiction, in the United States District Court for the District of
Maryland. Subject to Section 8.13, each party hereto expressly submits and
consents in advance to such jurisdiction in any action or proceeding commenced
hereunder or under any Ancillary Agreement, and hereby waives any claim that any
such state or federal court is an inconvenient or improper forum.
-31-
Section 8.07. Entire Agreement. This Agreement including the schedules
and exhibits hereto, together with the Ancillary Agreements, constitute the
entire understanding of the parties hereto with respect to the subject matter
hereof, superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter. To the extent that the
provisions of this Agreement are inconsistent with the provisions of any
Ancillary Agreements, the provisions of such Ancillary Agreement shall prevail.
Section 8.08. Parties in Interest. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without the
prior written consent of the other party. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express
or implied, is intended to confer any benefits, rights or remedies upon any
person or entity other than Manor Care and Choice, and the Manor Care
Indemnitees and Choice Indemnitees pursuant to Article IV and Indemnitee
pursuant to Article VII hereof. Notwithstanding the rights of Indemnified
Parties pursuant to Article IV and Indemnitee pursuant to Article VII, this
Agreement may be altered or amended, and rights hereunder may be waived, by an
instrument in writing executed only by the parties hereto.
Section 8.09. Tax Sharing Agreement; After-Tax Payments. (a) Other
than as provided in this Section 8.09 and Sections 4.11 and 5.07, this Agreement
shall not govern any Tax, and any and all claims, losses, damages, demands,
costs, expenses, liabilities, refunds, deductions, write-offs, or benefits
relating to Taxes shall be exclusively governed by the Tax Sharing Agreement or
the Tax Administration Agreement, as applicable.
(b) If, at the time Choice is required to make any payment to Manor
Care under this Agreement, Manor Care owes Choice any amount under the Tax
Sharing Agreement, then such amounts shall be offset and the excess shall be
paid by the party liable for such excess. Similarly, if, at the time Manor Care
is required to make any payment to Choice under this Agreement, Choice owes
Manor Care any amount under the Tax Sharing Agreement, then such amounts shall
be offset and the excess shall be paid by the party liable for such excess.
Section 8.10. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in
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this Agreement, each of the parties hereto will use its reasonable efforts to
(i) execute and deliver such further instruments and documents and take such
other actions as any other party may reasonably request in order to effectuate
the purposes of this Agreement and to carry out the terms hereof and (ii) take,
or cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to obtain any consents and approvals and to make any filings
and applications necessary or desirable in order to consummate the transactions
contemplated by this Agreement; provided that no party hereto shall be obligated
to pay any consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents, approvals and amendments
are requested or to take any action or omit to take any action if the taking of
or the omission to take such action would be unreasonably burdensome to the
party or its business.
Section 8.11. Exhibits and Schedules. The exhibits and schedules
hereto shall be construed with and as an integral part of this Agreement to the
same extent as if the same had been set forth verbatim herein.
Section 8.12. Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 8.13. Dispute Resolution. (a) Except as otherwise set forth in
Section 2.07 or Section 8.02 or the Lease Agreement, resolution of any and all
disputes arising from or in connection with this Agreement or any of the
Ancillary Agreements, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third
-33-
parties (collectively, "Disputes") shall be exclusively governed by and settled
in accordance with the provisions of this Section 8.13; provided, however, that
nothing contained herein shall preclude either party from seeking or obtaining
(a) injunctive relief or (b) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of Disputes
hereunder.
(b) Manor Care or Choice (each a "Party") may commence proceedings
hereunder by delivering a written notice to the other Party providing a
reasonable description of the Dispute to the other (the "Demand").
(c) Promptly following a Demand, the Dispute shall be referred to
representatives of the parties for decision, each party being represented by a
senior executive officer who has no direct operational responsibility for the
matters contemplated by this Agreement (the "Representatives"). The
Representatives shall promptly meet in a good faith effort to resolve the
dispute. If the Representatives do not agree upon a decision within thirty (30)
calendar days after reference of the matter to them, each of Manor Care and
Choice shall be free to exercise the remedies available to them under Section
8.13(d).
(d) The parties hereby agree to submit all Disputes not resolved by
negotiation pursuant to Section 8.13(c) to arbitration under the terms hereof,
which arbitration shall be final, conclusive and binding upon the parties, their
successors and assigns. The arbitration shall be conducted in Maryland by three
arbitrators acting by majority vote (the "Panel") selected by agreement of the
Parties not later than ten (10) days after the failure of the Representatives to
resolve the dispute as set forth in Section 8.13(c) or, failing such agreement,
appointed pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If an
arbitrator so selected becomes unable to serve, his or her successors shall be
similarly selected or appointed. The arbitration shall be conducted pursuant to
the United States Arbitration Act, 9 U.S.C. { 1, et seq. and such procedures as
the Parties may agree, or, in the absence of or failing such agreement, pursuant
to the AAA Rules. Notwithstanding the foregoing: (a) each Party shall have the
right to audit the books and records of the other Party that are reasonably
related to the Dispute; (b) each Party shall provide to the other, reasonably in
advance of any hearing, copies of all documents which a Party intends to
-34-
present in such hearing; (c) each party shall be allowed to conduct reasonable
discovery through written requests for information, document requests, requests
for stipulation of fact and depositions, the nature and extent of which
discovery shall be determined by the Panel, taking into account the needs of the
Parties and the desirability of making discovery expeditious and cost effective.
All hearings shall be conducted on an expedited schedule, and all proceedings
shall be confidential. Either party may at its expense make a stenographic
record thereof. The Panel shall complete all hearings not later than ninety (90)
days after its selection or appointment, and shall make a final award not later
than thirty (30) days thereafter. The award shall be in writing and shall
specify the factual and legal basis for the award. The fees and expenses of the
arbitrators shall be shared equally by the Parties and advanced by them from
time to time as required; provided that at the conclusion of the arbitration,
the Panel shall allocate costs and expenses (including the costs of the
arbitration previously advanced and the fees and expenses of attorneys,
accountants and other experts) and interest as the Panel determines is
appropriate among the parties. The arbitrators shall not be empowered to award
to any Party any consequential damages, lost profits or punitive damages in
connection with any Dispute and each party hereby irrevocably waives any right
to recover such damages.
Section 8.14. Titles and Headings. Titles and headings to sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
-35-
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY BE
ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
Manor Care, Inc.,
a Delaware corporation
By:/s/ James H. Rempe
----------------------------------
Name: James H. Rempe
Title: Senior Vice President
Choice Hotels Holdings, Inc.,
a Delaware corporation
By:/s/James A. MacCutcheon+
-----------------------------------
Name: James A. MacCutcheon
Title: Executive Vice President
Schedule 1
LODGING SUBSIDIARIES*
BOULEVARD MOTEL CORP.
Biscayne Land Associates, Inc.
Biscayne Properties, Inc.
Bowling Green Inn - Brandywine, Inc.
Cardinal Beverage Corp.
Everglades Beverage Corp.
Fairways Beverage Corp.
Fairways, Inc.
K & A Corp.
MCH Baltimore Corp.
MCH Hot Springs Corp.
MCH Lincoln Corp.
MCH Management, Inc.
MCH Roanoke Corp.
MCH Shady Grove Corp.
MCH Springfield Corp.
MCH Sturgis Corp.
MCH Wichita Corp.
MCHD Cypress Creek Corp.
MCHD Ft. Lauderdale Corp.
MCHD Hampton Corp.
Raleigh Hotel Holdings, Inc.
West Montgomery Hotel Holdings, Inc.
CACTUS HOTEL CORP.
CHOICE HOTELS INTERNATIONAL, INC. (Formerly Quality Inns International,
Inc.) ("Choice Hotels")
CH Europe, Inc. (d)
Choice Capital Corp.
Choice Hotels Australia Pty. Ltd. (90%)
Choice Hotels Canada Inc. (50%)
Choice Hotels (Cayman) Ltd. (10%)
Choice Hotels International Asia Pacific Pty. Ltd.
Choice Hotels International Pty. Ltd. (Formerly Quality Inn Pty.
Ltd.) (d)
Choice Hotels (Ireland) Limited (d)
Choice Hotels Japan, Inc. (Formerly Quality Hotels Japan, Inc.)
Choice Hotels Limited
Choice Hotels of Brazil, Inc.
- -------------------------
* Direct Lodging Subsidiaries are set forth below in capital letters with
their subsidiaries immediately following. Entities are wholly owned except
where indicated.
-2-
Choice Hotels Pacific Asia K.K. (Formerly Quality Hotels Pacific
Asia, Inc.) (d)
Choice Hotels Pty. Ltd. (Formerly Quality Hotels Pty. Ltd.) (d)
Choice Hotels Systems, Inc.
Choice Hotels Venezuela, C.A. (20%)
Clarion Hotel Pty. Ltd. (Formerly Royale Hotels Pty. Ltd.) (d)
Comfort Hotels Pty. Ltd. (d)
Comfort Inn Pty. Ltd. (d)
Comfort Inns New Zealand Limited (Formerly Quality Inns New Zealand
Limited) (d)
Hoteles Cono Sur S.A.
QI Capital Corp. (d)
Quality Hotels (Ireland) Limited (d)
Quality Hotels Limited (Formerly Quality Hotels (China) Limited (50%;
50% Manor Care, Inc.) (d)
Quality Hotels and Resorts, Inc. (d)
Baltimore Hotel Management. Inc. (d)
Myrtle Beach Hotel Management, Inc. (d)
Quality Inns International, Inc. (Formerly Choice Hotels
International, Inc.)
Quality Inter-Americas, Inc. (d)
Sleep Inn Pty. Ltd. (d)
COMFORT CALIFORNIA, INC.
GULF HOTEL CORP.
HEFRU FOOD SERVICES, INC.
QCM BEVERAGES, INC. (49%; 51% Texas resident)
QCM CORPORATION (d)
QI ADVERTISING AGENCY, INC.
QUALITY ARIZONA, INC. (d)
QH Europe, Inc. (d)
QUALITY HOTELS EUROPE, INC.
QUALITY INNS WORLD MARKETING CORPORATION
QUALITY INSURANCE ASSOCIATES, INC. (d)
REVERE GROUP, INC. (THE) (d)
SUNBURST HOTEL CORP.
THICKET, INC. (THE) (Non-Profit; owned by members)
-3-
PARTNERSHIPS
QH Europe Partnership (80% Quality Hotels Europe, Inc. ("QHE"), 20% Choice
Hotels International, Inc.)
Choice Hotels (Deutschland) G.m.b.H. (99%; 1% Choice Hotels)
Choice Hotels (France) S.a.r.l. (99%; 1% Choice Hotels)
Choice Hotels Benelux S.A. (51%)
Manor Care Hotels (France) S.A.
Manor Care Hotels France No. 1 S.a.r.l.
Manor Care Hotels France No. 2 S.A.
Manor Care Hotels France No. 3 S.a.r.l.
Manor Care Hotels France No. 4 S.a.r.l.
Quality Hotels Limited (Formerly QI Hotels (U.K.) Limited) (99%; 1%
Choice Hotels)
Choice Hotels (UK) Limited
Quality Hotels Europe (Alsdorf) G.m.b.H. (99%; 1% QHE) (d)
Quality Hotels Europe (Herleshausen) G.m.b.H. (99%; 1% QHE) (d)
Quality Hotels Europe (Jena) G.m.b.H. (formerly Quality Hotels Europe
(Deutschland) G.m.b.H.) (99%; 1% QHE)
Quality Hotels Europe (Leipzig) G.m.b.H. (99%; 1% QHE) (d)
Quality Hotels Europe (Peine) G.m.b.H. (99%; 1% QHE)
Quality Hotels Europe (Troisdorf) G.m.b.H. (99%; 1% QHE)
(d) = dormant companies
Schedule 2.01(b)
Transferred Hotels
(1) Quality Inn Midvalley
4465 Century Drive
Salt Lake City, UT 84123; and
(2) Quality Hotel
1190 N. Courthouse Road
Arlington, VA 22201
Schedule 2.03
Assisted Living Facilities
Springhouse Assisted Living
26111 Telegraph Road
Southfield, Michigan 48034
Schedule 5.02(a)
Manor Care Guarantees:
1. Guarantee of Industrial Revenue Bonds relating to the Phoenix
Reservations Center.
2. Guarantee pursuant to Leases for the California properties in effect
on the Distribution Date.
Schedule 5.10(a)
Covered Claims
General Liability
Commercial Property
Automobile Liability
Workers' Compensation Program (Insured States) Workers' Compensation Program
(Self-Insured States OH, PA, FL, CA) Texas Salary Maintenance & Medical
Reimbursement Program Texas Stop Gap Liability Foreign Property & Liability
DIC/DIL Commerical Package Policy (Canada) Commercial Property (Germany)
Commercial Property (Australia) Commercial Property (France) Commercial Property
(UK) Commercial Property (Japan) General Liability (QH Jena) General Liability
(QH Peine) General Liability (QH Troisdorf) General Liability (France) General
Liability (UK) General Liability (Japan) Automobile Physical Damage & Liability
(UK) Automobile Physical Damage & Liability (Australia) Automobile Physical
Damage & Liability (Germany) Automobile Physical Damage & Liability (France)
Workers' Compensation & Employer's Liability (Australia) Workers' Compensation &
Employer's Liability (Canada) Employer's Liability (UK) Employer's Liability
(All Foreign Operations except UK/CAN/Australia) Sabotage & Terrorism (UK)
Juridical Protection (France) Umbrella Liability Crime Boiler & Machinery
Products Liability Aircraft Liability Director's & Officer's Liability
Shock Losses
Any potential costs associated with the matter of Frederick v. Choice
Hotels International, Inc. et. al.