Exhibit 99.12
OMNIBUS AMENDMENT AND GUARANTY
THIS OMNIBUS AMENDMENT AND GUARANTY (this "Amendment") to amend certain
agreements between Manor Care, Inc., a Delaware corporation ("Manor Care") and
Choice Hotels International, Inc., a Delaware corporation (to be renamed
Sunburst Hospitality Corporation) ("Sunburst") is made and entered into as of
October 15, 1997 by and among Manor Care, Sunburst and Choice Hotels
Franchising, Inc., a Delaware corporation (to be renamed Choice Hotels
International, Inc.)("Choice").
RECITALS
1) Pursuant to a Distribution Agreement dated as of November 1, 1996 (the
"Distribution Agreement"), Manor Care and Sunburst entered into the following
agreements, all dated as of November 1, 1996:
A) Corporate Services Agreement ("Corporate Services Agreement");
B) Risk Management Consulting Services Agreement ("Risk Management
Agreement");
C) Tax Sharing Agreement ("Tax Sharing Agreement");
D) Tax Administration Agreement ("Tax Administration Agreement");
E) Employee Benefits and Other Employment Matters Allocation Agreement
("Employee Benefits Agreement");
F) Gaithersburg Lease Agreement ("Gaithersburg Lease");
G) Silver Spring Lease Agreement; and
H) Loan Note ("Note") in the principal amount of $225,772,500 by
Sunburst payable to MNR Finance Corp. ("MNR Finance").
2) Manor Care and Sunburst now desire to amend the Distribution Agreement,
the Corporate Services Agreement, the Risk Management Agreement, the Tax Sharing
Agreement, the Tax Administration Agreement and the Employee Benefits Agreement
to, among other things, add Choice as a party. Choice desires to become a party
to such agreements and to provide a guaranty for certain obligations of Sunburst
under the Corporate Services Agreement, the Gaithersburg Lease, the Silver
Spring Lease and the Note.
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NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the receipt and sufficiency of which are hereby acknowledged, Manor Care,
Sunburst and Choice agree as follows:
1. Amendments
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The Distribution Agreement, the Corporate Services Agreement, the Risk
Management Agreement, the Tax Sharing Agreement, the Tax Administration
Agreement and the Employee Benefits Agreement are hereby amended as provided in
Exhibits A, B, C, D, E and F, respectively.
2. Guaranty of Gaithersburg Lease and Silver Spring Lease
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(A) Choice hereby irrevocably and unconditionally guarantees to Manor
Care the full and prompt payment and performance of all Lease Obligations (as
defined below). As used herein, "Lease Obligations" means all obligations and
liabilities of Sunburst to Manor Care under the Gaithersburg Lease and the
Silver Spring Lease, including any modifications or renewals thereof.
(B) This Section 2 is a guaranty of payment. If any Lease Obligation
is not satisfied when due, Choice shall forthwith satisfy such Lease Obligation
upon demand, and no such satisfaction shall discharge the obligations of Choice
hereunder until all Lease Obligations have been satisfied in full. This Section
2 shall be a continuing guaranty and shall be binding upon Choice until any and
all Lease Obligations have been performed and paid in full.
3. Guaranty of Annual Retainer Fee
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(A) Choice hereby irrevocably and unconditionally guarantees to Manor
Care the full and prompt payment of the Annual Retainer Fee, set forth in
Exhibit C to the Corporate Services Agreement, with respect to the Consulting
Services. The obligations of this Section 3 shall be continuing and shall be
binding upon Choice until and any and all obligations under this Section 3 have
been performed and paid in full.
(B) This Section 3 is a guaranty of payment. If any payment of the
Annual Retainer Fee is not satisfied when due, Choice shall forthwith satisfy
such obligation upon demand, and no such satisfaction shall discharge the
obligations of Choice hereunder until all payments of the Annual Retainer Fee
have been satisfied in full. This Section 3 shall be a continuing guaranty and
shall be binding upon Choice until any and all payments of the Annual Retainer
Fee have been performed and paid in full.
4. Guaranty of Note
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(A) Choice hereby irrevocably and unconditionally guarantees to MNR
Finance
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the full and prompt payment and performance of all Note Obligations (as defined
below). As used herein, "Note Obligations" means all obligations and liabilities
of Sunburst to MNR Finance under the Note, including any modifications or
renewals thereof.
(B) This Section 4 is a guaranty of payment. If any Note Obligation
is not satisfied when due, Choice shall forthwith satisfy such Note Obligation
upon demand, and no such satisfaction shall discharge the obligations of Choice
hereunder until all Note Obligations have been satisfied in full. This Section
4 shall be a continuing guaranty and shall be binding upon Choice until any and
all Note Obligations have been performed and paid in full.
5. Binding Nature; Enforceability. The obligations of Sections 2, 3 and
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4 shall be binding upon Choice and its successors and permitted assigns;
provided that the obligations under this Amendment shall not be assigned by
Choice or amended in any respect without the prior written consent of Manor
Care. If any term or provision of this Amendment shall be invalid or
unenforceable to any extent, the remainder of this Amendment shall not be
affected thereby.
6. Governing Law. This Amendment shall be governed by and construed in
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accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first written above.
MANOR CARE, INC.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Senior Vice President
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
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Name: Xxxxxxx X. XxXxxxxx
Title: Senior Vice President
CHOICE HOTELS FRANCHISING, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
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Name: Xxxxxxx X. XxXxxxxx
Title: Senior Vice President
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EXHIBIT A
DISTRIBUTION AGREEMENT
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The Distribution Agreement is hereby amended as follows:
A. All references to "Choice" in Article IV shall mean Sunburst and/or
Choice, as applicable.
B. Sunburst and Choice shall be jointly and severally liable to Manor Care
with respect to the indemnity obligations of Section 4.01.
EXHIBIT B
CORPORATE SERVICES AGREEMENT
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The Corporate Services Agreement is hereby amended as follows:
A. Definitions
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All capitalized terms used in this Exhibit B and not otherwise defined in
the Amendment shall have the meaning ascribed to such term in the Corporate
Services Agreement.
B. Addition of Choice as a Party
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Choice is hereby added as a party to the Corporate Services Agreement under
the same terms and conditions and with the same rights and liabilities as
Sunburst, except as may be further modified in this Amendment. Choice hereby
assumes all obligations and liabilities under the Corporate Services Agreement,
except as may be further modified in this Amendment.
C. Payment for Services
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(1) Sunburst and Choice shall each pay Manor Care only for services
requested by and rendered to such party in accordance with the price and payment
provisions of Section 5 of the Corporate Services Agreement. Nothing in this
Amendment, however, shall amend or limit the obligation of Sunburst to pay to
Manor Care the Annual Retainer Fee, as set forth in Exhibit C to the Corporate
Services Agreement, with respect to the Consulting Services.
(2) Except as set forth in Section 3 of the Amendment, Choice shall have no
liability with respect to the payment to Manor Care of the Annual Retainer Fee,
set forth in Exhibit C to the Corporate Services Agreement, with respect to the
Consulting Services.
EXHIBIT C
RISK MANAGEMENT AGREEMENT
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The Risk Management Consulting Services Agreement is hereby amended as follows:
A. Definitions
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All capitalized terms used in this Exhibit C and not otherwise defined in
the Amendment shall have the meaning ascribed to such term in the Risk
Management Agreement.
B. Addition of Choice as a Party
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Choice is hereby added as a party to the Risk Management Agreement under
the same terms and conditions and with the same rights and liabilities as
Sunburst, except as may be further modified in this Amendment. Choice hereby
assumes all obligations and liabilities under the Risk Management Agreement,
except as may be further modified in this Amendment.
C. Amendment and Restatement of First Paragraph of Section 4.
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The first paragraph of Section 4 of the Risk Management Agreement is hereby
amended and restated to read in its entirety as follows:
(1) Fees payable by Sunburst to Manor Care will be $394,200
(annualized) prorated through May 31, 1998, payable in equal monthly
installments.
(2) Fees payable by Choice to Manor Care will be $43,800 (annualized)
prorated through May 31, 1998, payable in equal monthly installments.
(3) Fees for the period of June 1, 1998 through December 31, 1998
shall be determined within sixty (60) days prior to June 1, 1998. Fees for
future fiscal years commencing on or after January 1, 1999 shall be
determined within sixty (60) days prior to the commencement of such fiscal
year.
EXHIBIT D
TAX SHARING AGREEMENT
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The Tax Sharing Agreement shall be amended as follows:
Addition of Choice as a Party
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Choice is hereby added as a party to the Tax Sharing Agreement under the
same terms and conditions and with the same rights and liabilities as Sunburst.
Choice hereby assumes all obligations and liabilities under the Tax Sharing
Agreement.
EXHIBIT E
TAX ADMINISTRATION AGREEMENT
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The Tax Administration Agreement is hereby amended as follows:
Addition of Choice as a Party
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Choice is hereby added as a party to the Tax Administration Agreement under
the same terms and conditions and with the same rights and liabilities as
Sunburst. Choice hereby assumes all obligations and liabilities under the Tax
Administration Agreement.
EXHIBIT F
EMPLOYEE BENEFITS AGREEMENT
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The Employee Benefits & Other Employment Matters Allocation Agreement is hereby
amended as follows:
A. Definitions
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All capitalized terms used in this Exhibit F and not otherwise defined in
the Amendment shall have the meaning ascribed to such term in the Employee
Benefits Agreement. For purposes of convenience of description, the various
employee benefit and retirement plans and programs maintained by Sunburst will
be referenced herein under a new name, which identifies the program as being
sponsored by Sunburst Hospitality Corporation, rather than the original name of
Choice Hotels International, Inc., and any program to be established by Choice
after the Distribution will be identified by reference to the name Choice Hotels
International, Inc.
B. Addition of Articles VI and VII
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The following new Articles VI and VII are hereby added to the Employee
Benefits Agreement:
ARTICLE VI
UNDERSTANDINGS WITH RESPECT TO SPIN-OFF
Section 6.01 Choice Guarantee. Choice hereby agrees to assume joint and
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several liability with Sunburst for any and all obligations undertaken by
Sunburst in respect of the guarantees referred in Sections 2.02(b)(v),
2.03(a)(v) and 2.03(c)(v) of the Employee Benefits Agreement.
Section 6.02 Manor Care Guarantee. Manor Care hereby agrees that its
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guarantees of certain benefits to Sunburst employees with respect to certain
plans which were spun-off from programs originally sponsored by Manor Care, as
referenced in Section 2.02(b)(v), 2.03(a)(v) and 2.03(c)(v) of the Employee
Benefits Agreement shall also extend to benefits of Choice employees with
respect to corresponding plans which are to be spun-off from programs maintained
by Sunburst. Such guarantees shall be subject to the temporal limitations
described in Section 2.02(b)(v), 2.03(a)(v) and 2.03(c)(v) of the Employee
Benefits Agreement.
Section 6.03 Right of Contribution. In the event that either Sunburst or
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Choice incurs a liability to make payments as a result of any of the guarantees
referenced in Section 6.01, above, then Choice and Sunburst agrees that the
aggregate economic outlay resulting from such guarantees shall be shared equally
between the two of them and each will undertake to pay over to the other such
amount as will equalize the net economic outlay incurred by Choice and by
Sunburst with respect to the above-referenced guarantees to be equal.
Section 6.04 Treatment of Choice Employees.
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(i) Stock Plans. The last sentence of Section 2.04(c)(ii) and the
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last sentence of Section 2.04(c)(iii) are each hereby amended to read as
follows:
"At such time as Manor Care stock is released from
restriction, Manor Care shall claim a compensation deduction
for the then-current value of such stock and shall cause the
unrestricted shares of Manor Care stock to be delivered
directly to the Employee entitled to such shares whether such
Employee is currently employed by Manor Care, Sunburst or
Choice Hotels.
(ii) Conversion Awards. Notwithstanding the language of Section
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2.04(f) and Section 2.04(g), future service for Choice shall be treated as
service for Manor Care for purposes of determining satisfaction of the
restrictions attributable to prior restricted awards of Manor Care Common Stock
and Sunburst Common Stock and employees of Choice shall be provided the same
treatment as employees of Sunburst with respect to transfers of employment with
Manor Care. Future service for Manor Care or Sunburst shall be treated as
service for Choice for purposes of determining satisfaction of the restrictions
attributable restricted awards of Choice Common Stock received as part of a
Conversion Award.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Adoption by Choice. Choice hereby adopts the Employee
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Benefits Agreement, to the extent relevant to the undertakings set forth in
Article VI of this Amendment, and agrees to be bound by its terms and
conditions.
Section 7.02 Notices. All notices, consents, approvals and other
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communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight courier
or three days after being mailed by registered or certified mail (postage
prepaid, return receipt requested) to the named representatives of the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):
(a) if to Manor Care
MANOR CARE, INC.
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: GENERAL COUNSEL
(b) if to Choice
CHOICE HOTELS INTERNATIONAL, INC.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention: GENERAL COUNSEL
(c) if to Sunburst
SUNBURST HOSPITALITY CORPORATION
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention: GENERAL COUNSEL
Section 7.03 Affirmation of Agreement. Except to the extent specifically
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amended by this Amendment, the terms and conditions of the Employee Benefits
Agreement are confirmed and ratified in all respects.
