1
Exhibit 10.01
DISTRIBUTION AGREEMENT
dated as of
October 31, 1996
between
Manor Care, Inc.
and
Choice Hotels Holdings, Inc.
(to be renamed Choice Hotels International, Inc.)
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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..... 9
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
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
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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
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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
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
Administration 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
currently conducted by 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 such Distribution.
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:
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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.
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"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 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 contained in or omitted from the Form 10 or the Information
Statement and (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).
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"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.
"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.
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"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 Xxxxx-Xxxxxx 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.
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"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, 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 and 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).
"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.
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"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 and the subsidiary guarantors to be named therein, 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 and only to the extent that 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 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.
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"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 000 Xxxxxx
Xxx, Xxxxxxxxxx, Xxxxxxxx 00000, which prior to 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
or 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.
(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.
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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 effective 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.
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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 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.
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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 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 xxxxx 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 xxxxx 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 clause 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.
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(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.
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.
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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.
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;
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(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 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, 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 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.
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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 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.
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(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 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.
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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 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.
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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 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.
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(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.
(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.
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(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"). 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.
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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
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.
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(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 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.
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(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 (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.
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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, 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.
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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 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.
32
ARTICLE VII
INTENTIONALLY OMMITTED
33
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.
00000 Xxxxxxxxxx Xx.
Xxxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: General Counsel
Telecopy Number: 000-000-0000
If to Choice, to:
Choice Hotels International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Telecopy Number: 000-000-0000
34
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.
Section 8.07. Entire Agreement. This Agreement including the
schedules 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 be waived, by an
instrument in writing executed only by the parties hereto.
35
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 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.
36
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 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).
37
(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 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.
38
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.
39
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:
Name:
Title:
Choice Hotels Holdings, Inc.,
a Delaware corporation
By:
Name:
Title:
40
Schedule 1
LODGING SUBSIDIARIES (1)
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 Xxxxxxxxxx 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)
-------------------
(1) Direct Lodging Subsidiaries are set forth below in capital letters with
their subsidiaries immediately following. Entities are wholly owned except
where indicated.
41
-2-
Choice Hotels Japan, Inc. (Formerly Quality Hotels Japan,
Inc.)
Choice Hotels Limited
Choice Hotels of Brazil, Inc.
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)
QUALITY HOTELS EUROPE, INC.
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)
00
-0-
XXXXXXXXXXXX
XX 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 (Xxxxx) G.m.b.H. (99%; 1% QHE)
Quality Hotels Europe (Troisdorf) G.m.b.H. (99%; 1% QHE)
(d) = dormant companies
43
Schedule 2.01(b)
Transferred Hotels
(1) Quality Inn Midvalley
0000 Xxxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000; and
(2) Quality Hotel
0000 X. Xxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
44
Schedule 2.03
Assisted Living Facilities
Springhouse Assisted Living
00000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
45
Schedule 5.02(a)
Manor Care Guarantees:
1. Guarantee of $1,971,000 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.
46
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
Commercial 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 Xxxxx)
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