1
EXHIBIT 10.14
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
1
2
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,
2
3
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.
3
4
(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.
4
5
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
5
6
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:
6
7
(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.
7
8
(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
8
9
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.
9
10
(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
initial 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 unqualified 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 to 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 the 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 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.
10
11
(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
section 7 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
section 7 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
11
12
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.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attn: General Counsel
To Manor: Manor Care, Inc.
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000-0000
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
12
13
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.
SECTION 23. COMMERCIALLY REASONABLE TERMS AND CONDITIONS.
The terms and provisions of this Agreement are intended to reflect
commercially reasonable terms and conditions (including, but not limited to,
pricing) that are at least as favorable and as competitive to Choice as the
terms and conditions Manor would grant or require of third parties for
substantially similar goods and services.
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:_________________________________
Name:_______________________________
Title:______________________________
MANOR CARE, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
13
