TAX SHARING AGREEMENT
THIS AGREEMENT, executed this ____ day of ________________, 1996, is
entered into by and among Choice Hotels Holdings, Inc. (to be renamed Choice
Hotels International, Inc.), a Delaware corporation ("Choice"), Manor Care,
Inc., a Delaware corporation, ("Manor"), and all direct and indirect
subsidiaries of one or both of Choice and Manor.
RECITALS
A. Choice, Manor, and the subsidiaries of Choice and Manor have
heretofore joined in filing consolidated federal income tax returns under the
Internal Revenue Code of 1986, as amended (the "Code"), and the applicable
Treasury Regulations promulgated thereunder by the Treasury Department (the
"Regulations") and have heretofore joined in filing certain consolidated,
combined, and unitary state income tax returns.
B. Pursuant to the Distribution Agreement of even date herewith between
Choice and Manor, Manor will distribute all of its stock in Choice to the common
shareholders of Manor in a transaction intended to qualify for tax free
treatment under Section 355 of the Code, and Choice and its subsidiaries will
therefore leave the affiliated group (within the meaning of Section 1504(a) of
the Code) of corporations (the "Manor Group") of which Manor is the common
parent.
C. The parties hereto desire to allocate their respective federal,
state, and local income tax liabilities, assessed in connection with the filing
of returns, including but not limited to consolidated, unitary, combined, or
separate returns, among themselves for the following fiscal years: (a) the
fiscal year ending May 31, 1996 ("FY 1996"); (b) the fiscal year commencing on
June 1, 1996 and ending on May 31, 1997 ("FY 1997"); (c) where relevant, the
fiscal year ending on the Distribution Date ("Stub 97"); and (d) where relevant,
the fiscal year commencing on the day after the Distribution Date and ending on
May 31, 1997 ("Short 97").
D. The parties hereto desire to provide for the compensation and
reimbursement of each other for federal and state income tax deficiencies paid,
by one party hereto although allocated pursuant to this Agreement to the other,
(plus interest and penalties) or refunds received (plus interest) as a result of
audits by the Internal Revenue Service (the "Service") and other taxing
authorities and judicial determination, if any, involving consolidated federal
and state income tax returns ("Joint Return Deficiencies/Refunds").
E. The parties hereto desire to provide and fix the responsibilities
for: (1) the preparation and filing of tax returns along with the payments of
taxes shown to be due and payable thereon (as well as estimated or advance
payments required prior to the filing of said returns) for all periods prior and
subsequent to the Distribution Date; (2) the retention and maintenance of all
relevant records necessary to prepare and file appropriate tax returns, as well
as providing for appropriate access to those records for all parties to this
Agreement; (3) the conduct of audits, examinations, and
proceedings by appropriate governmental authorities which could result in a
redetermination of tax liabilities (for all periods prior to or subsequent to
the Distribution Date) of any party to this Agreement; and (4) the cooperation
of all parties with one another in order to fulfill their duties and
responsibilities under this Agreement and under applicable law.
NOW THEREFORE, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(a) "Affiliated Group" shall have the meaning attributed to that term
in Section 1504 of the Code, determined without regard to Section
1504(b) of the Code.
(b) "Manor Group" shall mean the group of corporations at any given
time (either prior to, or subsequent to, the Distribution)
consisting of the Affiliated Group of which Manor is the Common
Parent.
(c) "Code" is defined in the preamble.
(d) "Common Parent" shall have the meaning attributed to that term in
the Consolidated Return Regulations (Treas. Reg. Section 1.1502-1
et seg.) promulgated pursuant to Section 1502 of the Code.
(e) "Consolidated Return Regulations" is defined in section 4 hereof.
(f) "Distribution" shall mean the distribution by Manor of all its
stock in Choice to its shareholders.
(g) "Distribution Date" shall mean the date on which the Distribution
occurs.
(h) "Choice" is defined in the preamble.
(i) "Choice Group" shall mean the group of corporations immediately
after the Distribution Date consisting of the Affiliated Group of
which Choice is the Common Parent, as well as all other
corporations which would be included in such group subsequent to
the Distribution.
(j) "I.R.S." or "Service" shall mean the Internal Revenue Service.
(k) "Joint Contest" shall mean a Tax Contest seeking a
redetermination of Taxes involving one or more Members
(determined by reference to the time period for which such return
was filed) of the Manor Group and one or more Members of the
Choice Group,
whether such corporations joined in the filing of
returns on a consolidated, combined, or unitary basis or
otherwise.
(l) "Joint Return Deficiencies/Refunds" is defined in the preamble.
(m) "Member" shall have the meaning attributed to that term in
Section 1.1502-1(b) of the Regulations, but without regard to
whether a corporation qualifies to be a Member of an Affiliated
Group under Section 1504(b) of the Code.
(n) "Minimum Tax Credit" is defined in section 5 hereof.
(o) "Regulations" is defined in the preamble.
(p) "Separate Contest" shall mean a Tax Contest involving only
Members of either the Manor Group or the Choice Group.
(q) "Tax Attributes" shall mean any losses, credits and other tax
attributes that may be carried forward or back by any Member of
the Manor Group or the Choice Group on a separate return or
consolidated basis to a taxable year other than the taxable year
in which such attribute is recognized, including, but not limited
to, net operating losses, alternative minimum tax credits,
targeted jobs tax credits, investment tax credits, foreign tax
credits, research and development credits, and similar credits
under state or local law.
(r) "Taxes" shall mean (i) all federal income taxes and state, local,
and foreign income and franchise taxes (or taxes in lieu thereof)
plus (ii) any penalties, fines or additions to tax with respect
thereto, plus (iii) any interest with respect to the items
contained in (i) and (ii).
(s) "Tax Contest" shall mean an audit, review, examination or the
like, inclusive of litigation, with the purpose of redetermining
taxes of any corporation (without regard to whether such matter
was initiated by an appropriate taxing authority or in response
to a claim for refund by one or more corporations).
SECTION 2. COMPUTATION OF TAX; ALLOCATION OF CERTAIN YEARS' TAXES
(a) Computations & Elections. In determining the federal and state
income tax liabilities of the Manor Group and its Members for FY
1996, FY 1997, and where relevant, Stub 97 and Short 97, the
computations of the tax liabilities of the Manor Group and its
Members shall, to the extent permitted by law, be made in
accordance with the methods used in the consolidated returns
which include Manor and Choice for the fiscal years ending prior
to the beginning of FY 1996.
(b) Allocation of Tax (i) The taxes assessed pursuant to the returns
described in the preceding subsection will be allocated among the
Members of the Manor Group pursuant to the Manor Group's historic
tax allocation method, described in section 1552(a)(2) of the
Code and section 1502-33(d)(2)(ii) of the Regulations. (ii) With
respect to FY 1997, if the consolidated tax liability of the
Manor Group for FY 1997 (the "97 Manor Liability") is less than
the sum of the taxes allocated for FY 1997 to Choice and its
subsidiaries pursuant to section 2(b)(i) hereof (the "Choice
Separate Allocations"), the amounts allocated pursuant to section
2(b)(i) to Choice and its subsidiaries will be reduced by an
amount equal to the excess of the Choice Separate Allocations
over the 97 Manor Liability. (iii) With respect to the state and
local taxes which are determined on a combined or unitary basis,
similar principles as those described in section 2(b)(i) and (ii)
shall govern the allocation of such tax liabilities among the
parties hereto.
(c) Post-Distribution Date Allocations and Payments. (i) The final
allocations of FY 1996 Taxes and FY 1997 Taxes (to be made by
Manor for FY 1996 and FY 1997) will be made not later than 90
days following the filing of the Federal consolidated income tax
return of the Manor Group for such period. With respect to the
final allocations of FY 1996 and FY 1997 Taxes, Choice and/or its
subsidiaries shall make payments to Manor and/or its
subsidiaries, or receive payments from Manor and/or its
subsidiaries based on the following principles:
(1) the payment shall equal the amount of the adjustments, if
any, to taxable income or loss of Members of the Choice
Group multiplied by the applicable highest marginal rate
of taxation in effect for the period for which the
adjustment is made; or
(2) in the case of adjustments to credits, the payments made
or received shall be in an amount equal to the
adjustments, if any, of the credit of Members of the
Choice Group.
SECTION 3. SEPARATE COMPANY LIABILITIES.
Notwithstanding the provisions of section 2 hereof, for all years
through and including FY 1997, Taxes (including income taxes imposed by state or
foreign jurisdictions or political subdivisions thereof) imposed upon Choice or
any of its direct and indirect subsidiaries and which are determined or assessed
on a separate company basis will be the separate liability of Choice or such
subsidiary and not subject to allocation or sharing among other Members of the
Manor Group.
SECTION 4. ALLOCATION OF TAX ATTRIBUTES.
All Tax Attributes of the Manor Group will be allocated among Manor,
Choice, and their respective subsidiaries in accordance with the Regulations
promulgated pursuant to Section 1502 of the Code or analogous provisions of
state, local, or foreign law (the "Consolidated Return Regulations").
SECTION 5. CARRYBACKS OF TAX ATTRIBUTES.
(a) Choice Carrybacks. If for any taxable year beginning on or after
the Distribution Date, Choice or any Member of the Choice Group
recognizes a Tax Attribute which Choice or such Member of the
Choice Group, under the applicable provisions of the Code and
Treasury Regulations promulgated under Section 1502 thereof, is
permitted or required to carry back to a prior Taxable year of
the Manor Group or the prior Taxable year of a Member of the
Manor Group (either on a consolidated or separate return basis)
Manor (or a Member of the Manor Group) shall file appropriate
refund claims within a reasonable period after being requested by
Choice with the consent of Manor, which consent shall not be
unreasonably withheld. Manor (or the Member of the Manor Group
receiving such refund) shall promptly remit to Choice any refund
of Taxes it receives with respect to any Tax Attribute so carried
back.
(b) Manor Carrybacks. If for any taxable year Manor or a Member of
the Manor Group recognizes a Tax Attribute which Manor or the
Member of the Manor Group, under the applicable provision of the
Code and Consolidated Return Regulations is permitted or required
to carry back to one of its prior taxable years, Manor or the
Member of the Manor Group may file appropriate refund claims and
shall be entitled to any refund of Taxes resulting from such
claims.
SECTION 6. CONDUCT OF TAX CONTESTS.
(a) "Joint Contests."
(i) The conduct of Joint Contests shall be the responsibility of
Manor. Choice, as the common parent of the Choice Group or
otherwise, agrees to take all such actions and to cause its
subsidiaries to take all such actions as may be necessary to
permit Manor to conduct such contests.
(ii) In the case of a Joint Contest of a consolidated federal or
state income tax return which included Choice and/or its
subsidiaries, Choice and/or its subsidiaries as appropriate,
shall be notified by Manor of such Tax Contest and shall be
entitled to participate, at their own expense, in contesting all
relevant items that affect the tax liability
or tax attributes of such entities with respect to such Tax
Contest in administrative and judicial proceedings. Choice and
its subsidiaries agree to notify Manor of any actual or proposed
Tax Contest of a consolidated federal or state income tax return
of the Manor Group for any period ending on or before May 31,
1997. Choice will, and shall cause any of its subsidiaries to
cooperate in connection with any such Tax Contest. Manor and
Choice shall share jointly in any decisions involved in
connection with settlements of tax disputes to the extent that
items are involved that affect the tax, penalty, or interest
liability or tax attributes of Choice or its subsidiaries. Manor
may not agree to settle such a dispute without the consent of
Choice unless Manor releases Choice from its liability to pay its
share of the disputed amount hereunder. If both parties agree to
contest a tax matter, then the costs of contesting the matter
shall be borne equally by each party. If only one party requests
the contest of a tax matter, the party requesting the contest
shall bear its expenses associated with such contest; provided
however, that the other party will agree to cooperate with the
contesting party, and further provided that the non-contesting
party shall bear its own costs and expenses, if any, and shall
not be entitled to reimbursement for the fair cost of its own
employees related to its participation in, or cooperation with
the contesting party in such contest.
(b) Separate Contests. Any Separate Contests with respect to tax
returns filed by any Member of either the Choice Group or Manor
Group on a separate company basis shall be conducted by the
entity which filed such tax return (or the Common Parent of the
Affiliated Group of which such entity is a Member at the time of
such contest), and such entity shall have sole and compete
authority to conduct such contest, including the authority to
negotiate with and enter into settlements with any Taxing
authority. If at any point of the proceedings of a "Separate
Contest," it becomes a Joint Contest, then it shall thereafter be
conducted as a Joint Contest.
(c) Cooperation. Choice (and the Member of the Choice Group) and
Manor (and the Members of the Manor Group) shall each provide the
assistance reasonably requested by other with respect to
conducting any Tax Contest, including providing access to books,
records, tax returns and supporting work papers and providing any
powers of attorney required to conduct any Tax Contest.
SECTION 7. REDETERMINED TAX LIABILITIES.
In the event of a redetermination of federal, state or local income tax
liabilities as a result of audits by the Service or other taxing authority
and/or judicial determinations, payments in connection therewith, if any, made
or received by or among Choice, Manor, and their respective subsidiaries, shall
be governed by the following principles:
(a) Upon the redetermination of any tax liability upon audit,
examination, etc. the redetermined liability will be borne by
(that is, any increases in liability will be paid by, and any
decreases in liability will be received by) the applicable
entities in the case of matters arising out of Separate Contests.
(b) In the case of liabilities redetermined with respect to
consolidated, combined, or unitary returns, which
redeterminations are Joint Contests, the increase to the
liabilities shall be paid to the relevant taxing authority by,
and the decreases received from the relevant taxing authority
shall be paid to, Manor and/or its subsidiaries. Whether or not a
payment is required to or from a relevant taxing jurisdiction and
subject to the provisions of section 7(c) hereof, Choice and/or
its subsidiaries shall make payments to Manor and/or its
subsidiaries, or receive payments from Manor and/or its
subsidiaries based on the following principles:
(1) the payment shall equal the amount of the adjustments, if
any, to taxable income or loss of Members of the Choice
Group multiplied by the applicable highest marginal rate
of taxation in effect for the period for which the
adjustment is made; or
(2) in the case of adjustments to credits, the payments made
or received shall be in an amount equal to the
adjustments, if any, of the credit of Members of the
Choice Group.
(c) If there is a redetermination of tax liabilities in connection
with either a Joint Contest or a Separate Contest, and as a
result thereof there is an adjustment to credits or attributes
allocated among the parties hereto pursuant to section 4 hereof,
Manor shall make a payment to Choice equal to the amount of any
resulting reduction in items allocated to Members of the Choice
Group to the extent such reduction is attributable to income
adjustments to Members of the Manor Group and Choice shall make a
payment to Manor equal to the amount of any resulting reduction
in items allocated to Members of the Manor Group to the extent
such reduction is attributable to income adjustments to Members
of the Choice Group.
(d) Any liability arising from adjustments to income made by (1)
treating the Distribution as a taxable distribution of property
or (2) recognizing "boot" in connection with the reorganization
of, and the transfer of assets and liabilities to, Choice
precedent to the Distribution shall be borne entirely by Choice.
SECTION 8.RETENTION OF RECORDS: ACCESS TO RECORDS; COOPERATION AND ASSISTANCE.
(a) Retention of Records.
(i) Duties of Choice. Choice shall retain all tax returns, tax
reports, related work papers and all schedules (along with all
documents that pertain to any such tax returns, reports or work
papers) which relate to a tax period ending on or before May 31,
1997. Choice shall make such documents available to Manor and/or
its subsidiaries at Manor's request. Choice shall not dispose of
such documents without the permission of Manor.
(ii) Duties of Manor. Manor shall retain all tax returns, tax
reports, related work papers and all schedules (along with all
documents that pertain to any such tax returns, reports or work
papers) which relate to a tax period ending on or before May 31,
1997. Manor shall make such documents available to Choice and/or
its subsidiaries at Choice's request. Manor shall not dispose of
such documents without the permission of Choice.
(b) Access to Records.
(i) Duties of Choice. Choice will permit Manor or its
subsidiaries, or their designated representative, to have access
at any reasonable time and from time to time, after the
Distribution Date, to all relevant tax returns and supporting
papers therefor of Choice and the other members of the Choice
Group (as they were constituted immediately prior to the
Distribution Date) in respect of periods ending on or before the
Distribution Date, wherever located, and furnish, and request
that the independent accountants of Choice or any of the member
of the Choice Group furnish, to Manor and its subsidiaries, as
the case may be, such additional tax and other information and
documents with respect to consolidated federal and state income
tax returns filed in respect of periods ending on or before May
31, 1997, as Manor or any of its subsidiaries may from time to
time reasonably request.
(ii) Duties of Manor. Manor will permit Choice or its
subsidiaries, or their designated representative, to have access
at any reasonable time and from time to time, after the
Distribution Date, to all relevant tax returns and supporting
papers therefor of Manor and the other members of the Manor
Group (as they were constituted immediately prior to the
Distribution Date) in respect of periods ending on or before the
Distribution Date, wherever located, and furnish, and request
that the independent accountants of Manor or any of the member
of the Manor Group furnish, to Choice and its subsidiaries, as
the case may be, such additional tax and other information and
documents with respect to consolidated federal and state income
tax returns filed in respect of periods ending on or before May
31, 1997, as Choice or any of its subsidiaries may from time to
time reasonably request.
(c) Assistance and Cooperation. Manor (and Members of the Manor
Group) and Choice (and Members of the Choice Group) will provide
each other with such cooperation, assistance and information as
either of them reasonably may request of the other with respect
to the filing of any tax return amended return, claim for refund
or other document with any taxing authority. With respect to the
federal consolidated tax return or any combined state tax return
filed by Manor for tax periods which begin before the
Distribution Date and end after the Distribution Date, such
assistance shall include the timely submission by Choice to Manor
of pro forma tax returns for Choice and each Member of the Choice
Group, prepared on the basis that each such Member's tax period
ended on the Distribution Date.
SECTION 9. PREPARATION OF TAX RETURNS: ESTIMATED PAYMENTS.
(a) FY 1996. Manor and Choice shall work together to prepare the
consolidated, separate, and combined returns for FY 1996. It
shall be the responsibility of Manor to timely file such returns
and to make any payments required in connection with the
consolidated and combined returns to the applicable taxing
authorities.
(b) FY 1997. Manor shall prepare and timely file the consolidated
returns for FY 1997. In connection with the preceding sentence,
Choice and its subsidiaries will, on or prior to December 15,
1997 with respect to the Stub 97: (1) furnish to Manor all
information and documentation (with respect to Choice and its
subsidiaries) necessary or useful in the preparation of the
consolidated federal and state income tax returns for the Manor
Group for FY 1997; (2) permit Manor to have access at any
reasonable time and from time to time, after the Distribution
Date, to all tax returns and supporting papers therefor of Choice
and its subsidiaries, wherever located; and (3) furnish to Manor
such additional tax and other information and documents in the
possessions of such companies, with respect to consolidated
federal and state income tax returns filed in respect of periods
including or ending before the Distribution Date, as Manor may
from time to time reasonably request. Choice will, and shall
cause its subsidiaries to, cooperate in connection with the
preparation of the consolidated federal and state income tax
returns of the Manor Group for FY 1997. It shall be the
responsibility of Manor to make any payments required in
connection therewith to the applicable taxing authorities. Choice
and its subsidiaries shall file its own tax returns which are
filed on a separate or combined basis for FY 1997. Manor and its
subsidiaries shall prepare and file its own tax returns which are
filed on a separate or combined basis for FY 1997.
(c) Taxable Period Before FY 1996. All tax returns of the Manor Group
which are filed on a consolidated or combined basis for tax
periods ending before May 31, 1996 were prepared and filed by
Manor. Manor shall be solely responsible for the payment of all
Taxes for such periods. Manor shall not file or amend such
consolidated or combined tax returns without affording Choice the
opportunity to review and comment on such tax returns to the
extent that the tax liabilities relating to such returns are, or
could be allocated, assessed or charged to Choice and/or any of
its subsidiaries, whether such allocation, assessment, or charge
is by law or by contract or agreement.
(d) Post-Distribution Date Taxable Years.
(i) Choice's Separate Returns. All tax returns of the Choice
Group which are filed on a consolidated, separate or combined
basis for Choice and/or any of its subsidiaries for tax periods
beginning on or after the Distribution Date shall be prepared
and filed by Choice. Choice shall be solely responsible for the
payment of all Taxes due with respect to such tax returns for
such tax periods.
(ii) Manor's Separate Returns. All tax returns of the Manor
Group which are filed on a consolidated, separate, or combined
basis for Manor and/or any of its subsidiaries for tax periods
beginning on or after the Distribution Date shall be prepared
and filed by Manor. Manor shall be solely responsible for the
payment of all Taxes due with respect to such tax returns for
such tax periods.
(e) Estimated Payments. All payments (including estimated payments or
payments made in connection with requests for extensions of time
to file such returns) made subsequent to the date hereof with
respect to consolidated, combined, or unitary income tax
liabilities of the Manor Group and its Members for FY 1996 and FY
1997 shall be made by Manor. Manor shall promptly thereafter
notify Choice of the portion, if any, of such payment which it in
good faith believes to be attributable to Choice's share of the
FY 1996 and FY 1997 liability, as determined under the provisions
of section 2 hereof. Choice shall thereafter promptly pay such
amount to Manor or advise Manor of the basis for its
disagreement. Choice must make estimated payments for its Group
for periods beginning on/after the Distribution Date.
SECTION 10. PAYROLL TAX REPORTING AND WITHHOLDING IN STOCK OPTIONS.
(a) Upon the exercise of any nonqualified stock option covered by
Employee Benefits and Other Employment Matters Allocation
Agreement, the employer of the employee exercising such option
shall be responsible for collecting from the employee and timely
remitting to the applicable taxing authority any required income,
employment, payroll, or other tax withholding with respect to the
income to be recognized by such employee as a result of such
exercise, and shall include on such employee's annual wage
statement or other payroll tax reporting form for the calendar
year in which the option is exercised, the amount of such income
and withholdings. In addition, upon the exercise of any
nonqualified stock option covered by the Employee Benefits and
Other Employee Matters Allocation Agreement, the employer of the
employee exercising such option shall be responsible for paying
to any applicable taxing authority any taxes imposed on an
employer in connection with such exercise. If an employee
exercises an option with respect to, other than his or her
employer's stock, then the issuer of that
stock shall be required to provide the employer with information
sufficient to allow the employer to satisfy its withholding and
reporting obligations, including, without limitation, the number
of option shares exercised, the fair market value of the issuer's
stock on the date of exercise and the option price paid for the
stock. The issuer of such stock shall retain the stock to be
issued upon the exercise of an option by a person who is not an
employee of such issuer until such time as both the exercise
price for the stock has been paid and any required withholding
with respect to the income to be recognized by such person has
been remitted to his or her employer. The employer, if the
employer is not the issuer of the stock shall promptly notify the
issuer when such required withholding has been remitted. The
employer of an employee exercising a stock option, covered by the
Employee Benefits and Other Employee Matters Allocation Agreement
shall be entitled to claim any and all deductions, to the extent
permitted, on any tax return for the income recognized by such
employee as a result of such exercise.
(b) If an employee is employed by both Manor and Choice, for the
purpose of this Section 10, such employee shall be treated as an
employee of Manor with respect to his or or her Manor stock
options and as an employee of Choice with respect to his or her
Choice stock options.
(c) For purposes of this Section 10, the term "employee" shall
include Directors, whether or not employed.
SECTION 11. INDEMNIFICATION.
With respect to all consolidated federal and state income tax returns
filed by the Manor Group:
(a) Choice shall indemnify, defend and hold harmless Manor and its
subsidiaries, and Manor shall indemnify, defend and hold harmless
Choice and its subsidiaries from and against any liability, cost,
or expense, including, without limitation, and fine, penalty,
interest charge (restricted to interest in excess of the rate
established under Section 6621 of the Code and interest which is
in respect of the penalty portion of an assessment), or
accountants' or attorney's fee, arising out of fraudulent or
negligently prepared information, workpapers, documents, and
other items used in the preparation of, or presented in, any
return, amended return, or claim or refund filed for the Manor
Group for the FY 1996, Stub 97, Short 97, or FY 1997, and which
information, workpapers, documents, or other items originated
with and/or were prepared by such indemnifying party.
(b) Choice shall indemnify, defend and hold harmless Manor from and
against any liability, cost, or expense incurred or paid by Manor
in excess of its share thereof as allocated
pursuant to this Agreement hereof, including any amount paid by
Manor in connection with an assessment by the Service or other
taxing authority.
(c) Manor shall indemnify, defend and hold harmless Choice from and
against any liability, cost, or expense incurred or paid by
Choice in excess of its share thereof as allocated pursuant to
this Agreement hereof, including any amount paid by Choice in
connection with an assessment by the Service or other taxing
authority.
SECTION 12. RESOLUTION OF DISPUTES.
Any disputes among the parties with respect to this Agreement shall be
resolved by a public accounting firm or a law firm reasonably satisfactory to
Manor and Choice. The fees and expenses of such firm shall be borne equally by
Choice and Manor. In the event that Choice and Manor are unable to appoint such
a firm, then all disputes arising under this Agreement shall be resolved under
the terms of the Distribution Agreement.
SECTION 13. SUBSIDIARIES.
Any reference herein to a subsidiary or subsidiaries does not include
any corporation that is or was, in the relevant tax year, not permitted to join
in the filing of a consolidated federal income tax return pursuant to Section
1504 of the Code. To the extent that the provisions of the Agreement pertain to
a subsidiary or subsidiaries of Manor or Choice, Manor and Choice respectively
agree that it will cause the respective subsidiary or subsidiaries to carry out
the terms of this Agreement.
SECTION 14. SURVIVABILITY.
This Agreement and each of its provisions shall be binding upon and
inure to the benefit of the parties and their respective heirs and successors.
This Agreement shall be effective only from and after the close of business on
the Distribution Date. Nothing in this Agreement is intended or shall be
construed to give any person or entity other than the parties and their
respective heirs or successors any rights or remedies under or by reason of the
Agreement.
SECTION 15. NOTICES.
All notices and other communications required or permitted under this
Agreement shall be in writing, shall be deemed delivered upon receipt by hand or
shall be deemed to have been properly made and given one (1) business day after
being deposited with a reputable overnight courier service such as Federal
Express, Airborne Express or UPS Next Day Air for next business day delivery to
the parties at their respective addresses set forth below, or as to any party at
such other address as
shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this paragraph:
To Choice: Choice Hotels Holdings, Inc.
10750 Columbia Pike
Silver Spring, MD 20901
Attn: General Counsel
To Manor: Manor Care, Inc.
11555 Darnestown Road
Gaithersburg, MD 20878-3200
Attn: General Counsel
SECTION 16. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the state of Maryland, without reference to its conflict of laws
principles.
SECTION 17. COSTS AND EXPENSES.
In any action brought to enforce or interpret this Agreement, each
party shall pay its own costs and expenses of maintaining or defending such
action.
SECTION 18. REMEDIES CUMULATIVE.
The remedies provided in this Agreement are cumulative and not
excluding of any remedies provided by law.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute but one and the same Agreement.
SECTION 20. SEVERABILITY.
In the event that any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court, or governmental agency having
jurisdiction, this Agreement shall be construed as if such portion had not been
inserted herein, except when such construction would operate as an
undue hardship on any party to this Agreement or constitute a substantial
deviation from the general intent and purpose of said parties as reflected in
this Agreement
SECTION 21. AMENDMENTS; WAIVER.
This Agreement may be amended, and the observance of any term of this
Agreement may be waived, in a written document signed by Manor and Choice.
SECTION 22. EFFECTIVENESS OF AGREEMENT.
This Agreement shall become effective on the Distribution Date and
shall continue in effect until otherwise agreed in writing by Manor and Choice,
or their successors.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
CHOICE HOTELS HOLDINGS, INC.
By: /s/ James A. MacCutcheon
Name:James A. MacCutcheon
Title:Executive Vice President, Chief
Financial Officer and Treasurer
MANOR CARE, INC.
By: /s/ James H. Rempe
Name:James H. Rempe
Title:Senior Vice President and Secretary