EMPLOYEE BENEFITS ADMINISTRATION AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
_______________, 1996, by and between Manor Care, Inc., a Delaware corporation
("Manor") and Choice Hotels Holdings, Inc., a Delaware corporation ("Choice").
R E C I T A L S
WHEREAS, pursuant to a Distribution Agreement (the "Distribution
Agreement") dated as of _____________, 1996, Choice and Manor have agreed to
enter into an employee benefits administration agreement with the terms and
conditions set forth herein; and
WHEREAS, in accordance with said Distribution Agreement, Choice and
Manor also have entered into an Employee Benefits & Other Employment Matters
Allocation Agreement (the Allocation Agreement") dated as of _________________,
1996, pursuant to which Choice and Manor each assumed certain liabilities and
obligations, each generally with respect to its own employees, to adopt or
continue certain employee benefit, stock and retirement plans and programs
substantially equivalent to those provided by Manor on the Distribution Date;
and
WHEREAS, Manor shall retain the personnel and systems formerly utilized
in the maintenance and administration of the aforesaid Manor employee plans and
programs; and
WHEREAS, Choice desires to retain Manor in the maintenance and
administration of Choice's employee plans and programs, and Manor desires to
render such assistance on an equitable, arms length basis for a fee;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Choice and Manor agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms shall have the meanings indicated:
"Accounting Services" means the services provided by Manor to or on
behalf of Choice or any participant in any of the Plans, as provided
under Section 2.1 and Exhibit B of this Agreement.
1
"Ancillary Agreement" shall have the meaning described in the
Distribution Agreement.
"Benefit and Compensation Additional Consulting Services" means the
services provided by Manor to or on behalf of Choice or any participant
in any of the Plans, as provided under Section 2.2 and Exhibit C of
this Agreement.
"Claims" means any claims reported on or after the Distribution Date by
any employee of the Lodging Business (and/or covered dependents) for
coverage or benefits under the Retirement Plans, Medical/Dental Plans,
Welfare Plans, Deferred Compensation or the Stock Plans. "Claims" also
includes any claims by any beneficiary of a deceased employee. For
purposes of this definition, employee of the Lodging Business includes
any active, disabled, former or retired employee (except a Retiree,
Qualified Beneficiary or an active, former or retired employee whose
account balance under the applicable Deferred Compensation Plan or the
applicable Retirement Plan has been transferred to a Manor deferred
compensation plan or a Manor retirement plan pursuant to the
Distribution).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"COBRA Administration Services" means the services provided by Manor to
or on behalf of Choice or any participant in any of the Medical/Dental
Plans or Qualified Beneficiary, as provided under Section 2.4 and
Exhibit E of this Agreement.
"COBRA Claims" means any claims reported on or after the Distribution
Date by any Qualified Beneficiary for coverage or benefits under any
Medical/Dental Plan (or any predecessor thereto).
"COBRA Continuation Coverage" means the coverage following a Qualifying
Event provided by Choice to a Qualified Beneficiary as required by
COBRA.
"Compliance Services" means the services provided by Manor to or on
behalf of Choice or any participant in any of the Plans, as provided
under Section 2.5 and Exhibit F of this Agreement.
"Deferred Compensation Plan(s)" means the deferred compensation plan(s)
set forth in the attached Schedule A, as it may be amended from time to
time with the written consent of both parties to this Agreement.
"Determination Period" means any 12 months during which the premium for
COBRA Continuation Coverage with respect to a Qualified Beneficiary
must remain fixed and may not be increased.
"Distribution" means the distribution to the holders of Manor Care
Common Stock all the outstanding shares of Choice Common Stock.
"Distribution Agreement" mans the agreement described in the first
recital of this Agreement.
"Distribution Date" means the date determined by the Board of Directors
of Manor as the date on which the Distribution shall be effected.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Fiduciary Services" means the services provided by Manor to or on
behalf of Choice or any participant in any of the Plans, as provided
under Section 2.6 of this Agreement.
"Health and Welfare Plans" means those plans listed on Schedule A
herein.
"HMO(s)" means health maintenance organization(s).
"Imprest Account(s)" means the account(s) established pursuant to
Section 4.1 of this Agreement.
"Lodging Business" means any business or operation of Choice or its
subsidiaries which is, pursuant to the Distribution Agreement, to be
conducted, following the Distribution, by Choice.
"Medical/Dental Plan(s)" means the medical and dental plans as set
forth in the attached Schedule A, as it may be amended from time to
time with the written consent of both parties to this Agreement.
"Plans" means the Choice Medical/Dental Plans, Welfare Plans,
Retirement Plans, Deferred Compensation Plans, and Stock Plans set
forth in the attached Schedule A, as it may be amended from time to
time with the written consent of both parties to this agreement.
"Plan Administrator" means the administrator as defined in ERISA
Section 3(16)(A).
"Plan Administration Services" means the services provided by Manor to
or on behalf of Choice or any participant in any of the Plans, as
provided under Section 2.3 and Exhibit D of this Agreement.
"Prime Rate" means the rate identified from time to time in the New
York edition of the Wall Street Journal as being the prime rate of
interest.
"Qualified Beneficiary" means any former or part-time employee of the
Lodging Business (or dependent thereof) who either experiences (or
experienced) a Qualifying Event while a participant in any
Medical/Dental Plan (or any predecessor thereto), or becomes (or
became) a Qualified Beneficiary, as that term is defined in Internal
Revenue Code Section 4980B(g)(a) and ERISA 607(3), under any
Medical/Dental Plan (or any predecessor thereto).
"Qualifying Event" means an event upon which a Qualified Beneficiary
must be given the opportunity to elect COBRA Continuation Coverage as
specified in Internal Revenue Code Section 4980B(f)(3) and ERISA
Section 603.
"Retirement Plans" means the retirement plans set forth in the attached
Schedule A, as it may be amended from time to time with the written
consent of both parties to this Agreement.
"Services" means the Accounting Services, the Benefit and Compensation
Additional Consulting Services, the COBRA Administration Services, the
Plan Administration Services, the Compliance Services and the Fiduciary
Services, all as described in Section 2 of this Agreement.
"Stock Plans" means the stock plans set forth in the attached Schedule
A, as it may be amended from time to time with the written consent of
both parties to this Agreement.
"Welfare Plans" means the welfare plans set forth in the attached
Schedule A, as it may be amended from time to time with the written
consent of both parties to this Agreement.
Any capitalized terms defined in the Distribution Agreement and used herein
shall have the meanings ascribed to them in the Distribution Agreement unless
otherwise defined herein.
2.0 Duties of Manor. Upon the request of Choice, Manor shall:
(a) Provide the Services to Choice with respect to the Plans;
(b) Provide such other services in connection with the Plans as shall
be mutually agreed upon by the parties to this Agreement (such other
services and costs thereof to be set forth as an addendum to this
Agreement); and
(c) Arrange for the maintenance of all records used to perform the
Services (and any other services), including Claims and COBRA Claims
files and records, for six (6) calendar years following any year in
which it performs Services (or any other services) hereunder.
The Services (and any other services) shall be administered in accordance with
Manor's standard policies, procedures and practices in effect as of the date
hereof and as may be changed, and as more particularly described below; or as
otherwise specified in accordance with the terms thereof. In so doing, Manor
shall exercise the standards of care set forth in Section 5.0.
It is expressly understood that in providing the Services (any other services)
to Choice, Manor shall be a service provider and not a plan sponsor, as defined
in ERISA 3(16)(B), of any of the Plans, and shall have the right to delegate its
obligations hereunder to or contact with any other party to provide such
Services (or any other services). Furthermore, it is the intent of the parties
to this Agreement that Manor shall be an independent contractor in providing the
Services (any other services) under this Agreement, and not as employee or agent
of Choice. Manor agrees to provide such Services only if it reasonably believes
the service will not interfere with the conduct of the business of Manor or pose
an unreasonable burden.
2.1 Accounting Services. Upon the request of Choice, Manor shall
provide the Accounting Services to Choice, as set forth in Exhibit B, to assist
Choice in meeting its accounting and financial reporting obligations under the
Plans.
2.2 Benefit and Compensation Additional Consulting Services. Upon the
request of Choice, Manor shall provide Benefit and Compensation Consulting
Services, as set forth in Exhibit C, to Choice to assist Choice in designing and
updating employee benefit plans and establishing competitive compensation
practices.
2.3 Plan Administration Services. Upon the request of Choice, Manor
shall provide the Plan Administration Services, as set forth in Exhibit D, to
assist in the administration of its Plans.
2.4 COBRA Administration Services. Upon the request of Choice, Manor
shall provide the COBRA Administration Services, as set forth in Exhibit E, to
assist Choice, the Plan Administrator and the Medical/Dental Plans in the
performance of their responsibilities under COBRA.
2.5 Compliance Services. Upon the request of Choice, Manor or its
contractors shall provide the Compliance Services, as set forth in Exhibit F, to
assist Choice in fulfilling its disclosure and reporting obligations under
ERISA, the Internal Revenue Code and any other applicable federal or state law.
2.6 Fiduciary Services. Upon the request of Choice, Manor shall
provide the Fiduciary Services, as set forth in Exhibit G, in its administration
of Claims for disability (including payment), retirement, stock and deferred
compensation benefits (and appeals of denied or disputed Claims with respect
thereto), and in its final review of appeals of denied or disputed Claims and
COBRA Claims under the Medical/Dental Plans. Manor shall obtain and maintain
customary such fiduciary insurance coverage. Other than the fiduciary services
set forth in Exhibit G, Manor is vested only with ministerial authority and
shall have no discretionary authority to make decisions as to policies,
interpretations, practices and procedures under any of the Plans (except to the
extent otherwise set forth in Exhibit G), but shall perform its duties and
functions under this Agreement within the framework of the terms of each of the
Plans and policies, interpretations, rules, practices and procedures made by
Choice. Except as otherwise specified in this Section 2.6, Manor is not a
fiduciary with respect to any of the Plans and shall not be considered the Plan
Administrator, fiduciary, or named fiduciary under any of the Plans, within the
meaning of those terms as defined in ERISA.
3.0 Duties of Choice. Except as provided in Section 2.6, Choice shall
have the sole and primary responsibility as sponsor of the Plans for all
discretionary decisions and actions with respect thereto, for all financial and
other obligations arising therefrom, and for all funding and employer
contribution requirements under the terms of the Plans. In addition, Choice
shall, except to the extent expressly delegated to Manor:
(a) Provide Manor with assistance or authorizations to third parties
reasonably required for Manor to perform the Services and any other
services under this Agreement;
(b) Obtain and maintain qualification for all tax-qualified,
tax-exempt or otherwise tax-favored Plans;
(c) Request from Choice shareholders share authorizations sufficient
to meet awards under the Stock Plans;
(d) For active employees participating in any of the Plans, collect
payroll deductions for each pay period for the amount of employee
contributions owed for the pay period and withhold applicable payroll
taxes under Choice's payroll system with respect to the Plans;
(e) Maintain all necessary records and documentation as required by
law or as needed for efficient administration of the Plans;
(f) Perform all necessary employee communications, including sending
notices required by law, determining eligibility and conducting
enrollment under the Plans;
(g) Complete required Securities and Exchange Commission registrations
and other filings required with respect to all Plans.
(h) Furnish Manor with any and all information in its possession
necessary to enable Manor to perform the Services under this
Agreement.
(i) At the request of Manor, maintain the Imprest Account(s) with
sufficient funds to satisfy expenses of the Plans as they become due
and payable. Manor is not responsible for funding the Plans with any
contributions.
(j) Timely pay the Service Fees as they become due and payable.
4.0 Financial Provisions.
4.1 Imprest Account(s). Choice will open and maintain an imprest
account(s) against which Manor may write checks or initiate fund transfers to
cover all Claims and COBRA Claims payments and out-of-pocket expenses for
medical reports, "second opinions" obtained to evaluate claims, HMO premiums,
insurance company premiums, costs incurred for separately tracking Claims and
COBRA Claims, administrative contract fees paid to contractors for processing
Claims and COBRA Claims, toll-free phone service charged separately by claims
administrators, medical case management, hospital utilization review, claim
audits, outside legal fees and fees of other outside service providers, claim
settlement
charges and expenses, and all other similar expenses that are
normally incurred in the administration of Claims and COBRA Claims.
4.2 Pricing and Payment for Services. Choice shall pay Manor for
services requested and rendered hereunder as follows:
(a) The charging mechanisms for rates or charges for each service shall
include (i) activity-based charges where the per unit price will be
multiplied by the variable number of units (for example, the number of
active associates times the per associate charge will determine the per
Accounting Period charge); (ii)fixed fee based charges, meaning a fixed
amount per Accounting Period for Manor to perform the service; (iii)
usage based charges for which Choice will pay according to actual use
of the service; (iv) time and materials charges; or (v) a variation or
a combination of any of the foregoing methods as agreed to by the
parties.
(b) Except as provided in the Distribution Agreement, the Allocation
Agreement or any Ancillary Agreement, Choice shall pay any and all
additional costs and expenses which Manor may incur for the express
purpose of providing services to Choice.
(c) Choice shall pay Manor on a time and materials basis for all costs
incurred by Manor in converting Choice business information and records
from Manor services systems to either a third party provider or to
Choice.
(d) Choice shall pay Manor for all services provided hereunder within
thirty (30) days after receipt of an invoice therefor. Choice shall pay
fixed charges in advance on the first business day of the applicable
Accounting Period. Any payments not made by Choice to Manor when due
shall bear interest, computed daily from the date due to the date of
payment based on the annual percentage rate equal to the Prime Rate
plus two (2) percentage points, as same may vary from time to time.
5.0 Warranties and Limitations of Liability.
(a) MANOR DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES PROVIDED
HEREUNDER. Manor will use reasonable efforts to perform the Services provided
hereunder in a professional and workmanlike manner but the results of the
Services are furnished "as is."
(b) Manor's sole liability to Choice or any third party for
claims, notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of errors or omissions in the Services provided or to be
provided by Manor hereunder which are caused solely by Manor shall be to furnish
correct information, payment, and/or adjustment in the Services provided
hereunder provided that Choice promptly advises Manor thereof.
(c) Manor's sole liability to Choice or any third party for
claims, notwithstanding the form of such claims (e. g. contract, negligence or
otherwise), arising out of the unavailability of the Services provided hereunder
or the interruption in or delay in performing the Services provided hereunder
for any reason beyond Manor's reasonable control shall be to use all reasonable
efforts to make such services available, and/or to resume performing the
Services, as promptly as reasonably practicable. Manor will maintain the same
back-up procedures for Choice's information that Manor has for its own
information.
(d) MANOR SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS,
DELAYS, OR LOSSES UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH
OR GROSS NEGLIGENCE. CHOICE AGREES THAT IN NO EVENT WILL MANOR BE LIABLE FOR
INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES. CHOICE FURTHER AGREES
THAT IN NO EVENT WILL THE TOTAL AGGREGATE LIABILITY OF MANOR FOR ANY AND ALL
CLAIMS, LOSSES, OR DAMAGES ARISING UNDER THIS AGREEMENT AND FOR THE SERVICES
PERFORMED HEREUNDER EXCEED THE VALUE OF CHOICE'S PAYMENT FOR SAID SPECIFIC
SERVICE IN DISPUTE OVER ONE FOUR-WEEK ACCOUNTING PERIOD'S TIME.
(e) The forgoing provisions of this Section 5 set forth the
full extent of Manor's liability hereunder (monetary or otherwise) for any claim
or action, regardless of the form in which any such claim or action may be
asserted against Manor (e.g. contract, negligence or otherwise).
6.0 Indemnification: Standard of Care. Manor shall use the same care and skill
in the performance of its duties under this Agreement as a similarly situated
provider of like services would exercise following commonly accepted standards
of prudence in the relevant industry engaged in the provision of such services.
6.1 Manor Held Harmless. Choice will indemnify, defend and hold
harmless Manor and its directors, officers and employees from Losses (as defined
below) resulting from or arising out of or in connection with Manor's actions or
failure to act where such action or failure to act is required by any Choice
employment, compensation or benefits policy or
practice, other than Losses for which Choice is indemnifiable by Manor under
Section 6.2. The term "Losses" shall include costs of any claim, lawsuit,
settlement, judgment, penalty, attorneys' fees, and other expenses in connection
with the Plans. In addition, Choice will indemnify Manor against any premium
taxes or any other fees or levies of any local, state or federal government
(including sales, use or similar taxes) assessed in connection with any of the
Plans, and against any income or payroll taxes, interest or penalties assessed
against any participant or beneficiary of any Plan or against Choice as a result
of such participant or beneficiary recognizing income from benefits payable
under any Plan.
6.2 Choice Held Harmless. Manor will indemnify, defend and hold
harmless Choice and its directors, officers and employees from Losses (other
than benefits due and payable under the terms of any Plan) resulting from or
arising out of or in connection with Manor's criminal conduct, fraud, bad faith
or gross negligence, unless the actions (or inaction) causing the Losses were
taken (or not taken) at the specific direction of Choice, its subsidiaries,
employees, or agents.
6.3 Notice and Defense. The party seeking indemnification must notify
the other party promptly in writing of any claim that may result in Losses, and
give the indemnifying party the opportunity to assist in the defense of the case
(at the indemnifying party's cost and expense), and must provide all necessary
information and assistance for such defense. In addition, Manor will provide all
necessary information and assistance to Choice (at Choice's cost and expense) in
the defense of any Claims, COBRA Claims, or other actions brought under any of
the Plans which could result in Losses for which Choice is primarily liable.
7.0 Access to Information: Cooperation. Subject to the requirements of
Section 24.0, Choice and its authorized agents will be given reasonable access
to and may take copies of all information relating to the Claims and COBRA
Claims (to the extent permitted by federal and state confidentiality laws) in
Manor's and/or its subcontractor's custody, as applicable. The parties will
cooperate with one another to minimize the disruption caused by any such access.
8.0 Term. The term of this Agreement shall commence on the Distribution
Date and shall remain in effect through the end of the first full Fiscal Year
immediately following the Distribution Date. Unless terminated pursuant to the
terms hereof, the Agreement shall automatically renew each Fiscal Year
thereafter for the extended term of said Fiscal Year and shall not extend beyond
30 months from the Distribution Date unless otherwise extended by the parties in
writing; provided, however, that Choice may terminate this Agreement or any
services provided hereunder at any time for any reason or no reason upon sixty
(60) days' prior written notice to Manor and provided, further, in the event any
service herein is dependent upon any Function as defined in that certain
Corporate Services Agreement
between the parties and dated the date hereof, notice of termination shall be
determined by reference to the Corporate Services Agreement. This Agreement may
also be terminated in the event of a default (past the expiration of any
applicable cure period provided herein) in accordance with the provisions of
this Agreement or may be terminated by mutual agreement. In the event of any
termination, Articles 4,5,6 and 15 shall survive and remain in effect.
9.0 Default. If either party materially defaults hereunder, the
non-defaulting party may terminate this Agreement effective immediately (subject
to the cure periods set forth herein below) upon written notice to the
defaulting party. The non-defaulting party shall be entitled to all remedies
provided by law or equity (including reasonable attorney's fees and costs of
suit incurred). The following events shall be deemed to be material defaults
hereunder:
(a) Failure by either party to make any payment required to be made to
the other hereunder, which failure is not remedied within five (5) days
after receipt of written notice thereof; or
(b) Except as otherwise provided herein, failure by either party
substantially to perform in accordance with the terms and conditions of
this Agreement, which failure is not remedied within thirty (30) days
after receipt of written notice from the other party specifying the
nature of such default; or
(c) (i) Filing of a voluntary bankruptcy petition by either party; (ii)
filing of an involuntary bankruptcy petition against either party which
is not withdrawn within sixty (60) days after filing; (iii) assignment
for the benefit of creditors made by either party; or (iv) appointment
of a receiver for either party.
Notwithstanding the foregoing, the correction period provided for in Sections
9.0(a) and 9.0(b) shall apply only if such failure is due to reasonable cause
and not willful neglect.
10.0 Force Majeure. Manor and Choice shall incur no liability to each
other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other event beyond each other's reasonable control. In
addition, Manor shall not be liable or deemed to be in default for any delay or
failure to perform hereunder resulting, directly or indirectly, from any cause
beyond Manor's reasonable control, including limitations upon the availability
of communications facilities or failures of other communications equipment or
failure of Choice to prepare data properly for input into the Corporate Systems.
However,
nothing in this provision shall relieve Choice of any liability for
failure to make any payments required to be made under this Agreement because
Choice Employees are on strike or engaged in a lock-out, work stoppage or
slow-down, or labor disputes.
11.0. Relationship of Parties. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of independent contract administrator and
client.
12.0. Assignment. Subject to the provisions of Section 2.0, Neither
party shall, without the prior written consent of the other, assign any rights
or delegate any obligations under this Agreement, such consent not to be
unreasonably withheld, conditioned or delayed; provided, however, such consent
not to be required if the agreement is assigned to a wholly-owned subsidiary of
either party.
13.0 Headings. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
14.0 Severability of Provisions: Neither Manor nor Choice intend to
violate statutory or common law by executing this Agreement. If any section,
sentence, paragraph, clause or combination of provisions in this Agreement is in
violation of any law, such sections, sentences, paragraphs, clauses or
combinations shall be inoperative and the remainder of this Agreement shall
remain in full force and effect and shall be binding upon the parties.
15.0 Parties Bound. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
16.0 Notices. All notices and other communications hereunder shall be
in writing and shall be delivered by hand or shall be deemed to have been
properly made and given one (1) business day after being deposited with a
reputable overnight courier service such as Federal Express, Airborne Express or
UPS Next Day Air for next business day delivery or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and shall be deemed given on the date on which such notice is received:
To Choice:
Choice Hotels International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: General Counsel
To Manor:
Manor Care, Inc.
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: General Counsel
17.0 Further Action. Manor and Choice each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
18.0 Waiver. Manor and Choice each agree that the waiver of any default
under any term or condition of this Agreement shall not constitute any waiver of
any subsequent default or nullify the effectiveness of that term or condition.
19.0 Governing Law. All controversies and disputes arising out of or
under this Agreement shall be determined pursuant to the laws of the District of
Maryland, regardless of the laws that might be applied under applicable
principles of conflicts of laws, except to the extent preempted by ERISA or
other applicable federal laws..
20.0 Consent to Jurisdiction. The parties irrevocably submit to the
exclusive jurisdiction of (a) the Courts of the State of Maryland in Xxxxxxxxxx
County, and (b) the United States District Court for the State of Maryland for
the purposes of any suit, action or other proceeding arising out of this
Agreement.
21.0 Entire Agreement. This Agreement and the Distribution Agreement
constitute the entire understanding between the parties hereto, and supersede
all prior written or oral communications, relating to the subject matter covered
by said agreements. No amendment, modification, extension or failure to enforce
any condition of this Agreement by either party shall be deemed a waiver of any
of its rights herein. this Agreement shall not be amended except by a writing
executed by the parties.
22.0 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.
23.0 Representatives. Choice and Manor shall each appoint a managerial
level individual (hereinafter "Representatives") to facilitate communications
and performance hereunder. Each party may treat an act of the Representative of
the other party as being authorized by such other party without inquiring behind
such act or ascertaining whether such Representative had authority to so act.
The initial Representatives are named on Exhibit A. Each party shall have the
right at any time and from time to time to replace its Representative by giving
notice in writing to the other party setting forth the name of (i) the
Representative to be replaced and (ii) the replacement, and certifying that the
replacement Representative is authorized to act for the party giving the notice
in all matters relating to this Agreement.
24.0 Confidentiality. Manor and Choice agree that the terms of this
Agreement are confidential and further agree that this Agreement shall not be
released to any third parties, excluding such parties' counsel, agents or
lenders. However, one party may release this Agreement or such information to a
third party upon the prior approval of the other party (such approval not to be
unreasonably withheld, conditioned or delayed) upon court order, or as required
by any rules, regulations or laws. All confidential and proprietary information
which either party has obtained from the other shall be returned upon the
expiration or earlier termination of this Agreement. The provisions of this
paragraph shall survive expiration or earlier termination of this Agreement.
25.0 Expenses. Except as otherwise set forth in this Agreement or any
Ancillary Agreement (as defined in the Distribution Agreement), the parties
shall bear their own costs and expenses in connection with the preparation,
execution, delivery and implementation of this Agreement and the consummation of
the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHOICE HOTELS HOLDINGS, INC., a
Delaware corporation
By:/s/ Xxxxx X. XxxXxxxxxxx
Name:Xxxxx X. XxxXxxxxxxx
Title:Executive Vice President
and Chief Financial Officer
and Treasurer
MANOR CARE, INC., a
Delaware corporation
By:/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Senior Vice President &
Secretary
EXHIBIT A
REPRESENTATIVES
_________________________________________ - Manor
_________________________________________ - Choice
EXHIBIT B
ACCOUNTING SERVICES
B.0 General. The Accounting Services shall be limited to the following
services:
B.1 Accounting Services for Health and Welfare Plans. Manor shall:
(a) Arrange for the calculation, collection and remittance of
employee payroll deductions for each of the Health and Welfare
Plans, where required;
(b) Maintain financial records and prepare financial statements for
each of the Health and Welfare Plans, where needed;
(c) Arrange for the preparation of an independent certified public
accountant's report for each of the Health and Welfare Plans,
where needed;
(d) Prepare for Choice's review, signature and filing the Form 5500
for each of the Health and Welfare Plans, where needed;
(e) Review and reconcile bank and investment accounts for each of the
Health and Welfare Plans, where required;
(f) Reconcile billing statements and payments to HMOs and insurance
carriers with participant records;
(g) Reconcile claim reports;
(h) Initiate fund transfers in connection with the Health and Welfare
Plans;
(i) Assist in developing premium rates for Choice self-insured Health
and Welfare Plans;
(j) Beginning January 1, 1997, develop, recommend, and maintain
records showing employer contribution amounts under each of the
Health and Welfare Plans relating to the total cost of Health and
Welfare Plans for Choice to accrue on its books; and
B.2 Accounting Services for Retirement Plans. Manor shall:
(a) Establish, maintain and update a roster of participants in each
of the Retirement Plans;
(b) Maintain records of participant account balances or accrued
benefit, as applicable, for each of the Retirement Plans,
including records as to vesting;
(c) Coordinate the distribution of shares, cash and account
contributions under each of the Retirement Plans;
(d) Arrange for the calculation, collection and remittance of direct
employee contributions and employee payroll deductions for each
of the Retirement Plans, where required;
(e) Maintain financial records and prepare financial statements for
each of the Retirement Plans, where needed;
(f) Arrange for the preparation of an independent certified public
accountant's report for each of the Retirement Plans, where
needed;
(g) Prepare for Choice's review, signature, and filing of the Form
5500 for each of the Retirement Plans, where needed;
(h) Review and reconcile bank and investment accounts for each of the
Retirement Plans;
(i) Develop, recommend, and maintain records showing employer
contribution amounts under each of the Retirement Plans for
Choice to accrue on its books; and
(j) Manage the process of withholding applicable payroll taxes
otherwise payable by Choice, where required.
B.3 Accounting Services for Stock Plans. Manor shall:
(a) Establish, maintain and update a roster of participants in each
of the Stock Plans;
(b) Maintain records of participant account balances for each of the
Stock Plans, including records as to vesting;
(c) Coordinate the distribution of shares (and cash, where
applicable) under each of the Stock Plans;
(d) Arrange for the calculation, collection and remittance of stock
purchase proceeds or employee payroll deductions for each of the
Stock Plans where applicable;
(e) Maintain financial records and prepare financial statements for
each of the Stock Plans, where needed;
(f) Develop, recommend and maintain records showing employee
contribution amounts under each of the Stock Plans for Choice to
accrue on its books;
(g) Maintain for each of the Stock Plans share authorization,
issuance, cancellation, and forfeiture records; and
(h) Manage the process of withholding applicable payroll taxes
otherwise payable by Choice, where required.
B.4 Accounting Services for Deferred Compensation Plans. Manor shall:
(a) Establish, maintain and update a roster of participants in each
of the Deferred Compensation Plans;
(b) Maintain records of participant account balances for each of the
Deferred Compensation Plans, including records as to vesting;
(c) Coordinate the distribution of shares, cash and account
contributions under each of the Deferred Compensation Plans;
(d) Develop, recommend, and maintain records showing employer
contribution amounts under each of the deferred Compensation
Plans for Choice to accrue on its books; and
(e) Manage the process of withholding applicable payroll taxes
otherwise payable by Choice, where required.
EXHIBIT C
BENEFIT AND COMPENSATION ADDITIONAL CONSULTING SERVICES
C.0 General. the Benefit and Compensation Additional Consulting Services
shall be limited to the following services:
C.1 Benefit Additional Consulting Services for Health and Welfare Plans
Manor shall:
Assist Choice annually to identify desired Additional
Consulting services and appropriate responsibility.
C.2 Benefit Additional Consulting Services for Retirement Plans. Manor
shall:
Assist Choice annually to identify desired Additional
Consulting services and appropriate responsibility.
C.3. Benefit Additional Consulting Services for Stock Plans. Manor shall:
Assist Choice annually to identify desired additional
consulting services and appropriate responsibility.
C.4 Benefit Additional Consulting Services for Deferred Compensation
Plans. Manor shall:
Assist Choice annually to identify desired additional
consulting services and appropriate responsibility.
C.5 Compensation Additional Consulting Services for Choice. Manor shall:
Assist Choice annually to identify desired additional
consulting services and appropriate responsibility.
EXHIBIT D
PLAN ADMINISTRATION SERVICES
D.0 General. the Plan Administration Services shall be limited to the
following services:
D.1 Plan Administration Services for Health and Welfare Plans. Manor
shall:
(a) Assist in the preparation of enrollment and communication
materials for each of the Health and Welfare Plans;
(b) Coordinate the production, printing and distribution of
enrollment and communication materials for each of the Health and
Welfare Plans;
(c) Assist Choice to negotiate contracts with insurance carriers and
HMOs;
(d) Assist Choice to negotiate contracts with insurance carriers and
HMOs;
(e) Assist Choice to negotiate fees for "administrative services
only" contracts and premiums for insured Health and Welfare
Plans;
(f) Coordinate the competitive bidding process among prospective
service providers and evaluate resulting bids for Choice.
(g) Oversee Choice contracts with insurance carriers and HMOs;
(h) Arrange for plan eligibility information to be provided to
insurance carriers and HMOs;
(i) Coordinate independent audits of medical and dental claim
administrators;
(j) Coordinate recovery of claims advances involving third party
liability claims;
(k) Assist Choice in pursuing recovery of overpayments made by
medical and dental claim administrators;
(l) Coordinate the administration, review and evaluation of Health
and Welfare Claims in accordance with the terms of the Health and
Welfare Plans, standard policies, procedures and practices;
(m) Investigate Claims under the Health and Welfare Plans to the
extent deemed necessary in its best judgment;
(n) Arrange for the payment of Claims in accordance with the terms of
the Health and Welfare Plans, standard policies, procedures and
practices; and
(o) Obtain consents, approvals, and elections under the Health and
Welfare Plans as provided under the terms thereof.
D.2 Plan Administration Services for Retirement Plans. Manor shall:
(a) Assist in the preparation of enrollment and communication
materials for each of the Retirement Plans;
(b) Coordinate the production and printing of enrollment and
communication materials for each of the Retirement Plans;
(c) Coordinate the competitive bidding process among prospective
service providers and evaluate resulting bids for Choice;
(d) Coordinate the administration, review and evaluation of Claims in
accordance with the terms of the Retirement Plans, standard
policies, procedures and practices;
(e) Investigate Claims under the Retirement Plans to the extend
deemed necessary in its best judgment;
(f) Arrange for the payment of Claims in accordance with the terms of
the Retirement Plans, standard policies, procedures and
practices; and
(g) Obtain consents, approvals, and elections under the Retirement
Plans as provided under the terms thereof.
D.3 Plan Administration Services for Stock Plans. Manor shall:
(a) Assist in the preparation of enrollment (where applicable),
nomination and communication materials for each of the Stock
Plans;
(b) Coordinate the production, printing and distribution of
enrollment (where applicable), nomination and communication
materials for each of the Stock Plans;
(c) Coordinate the competitive bidding process among prospective
service providers and evaluate resulting bids for Choice;
(d) Arrange for plan eligibility information to be provided to awards
administrators;
(e) Coordinate the administration, review and evaluation of awards in
accordance with the terms of the Stock Plans, standard policies,
procedures and practices;
(f) Investigate awards under the Stock Plans to the extent deemed
necessary in its best judgment;
(g) Arrange for the distribution of shares in accordance with the
terms of the Stock Plans, standard policies, procedures and
practices;
(h) Coordinate the exercise of stock options and the distribution of
shares and payments of dividends under the Stock Plans; and
(i) Obtain consents, approvals, and elections under the Stock Plans
as provided under the terms thereof.
D.4 Plan Administration Services for Deferred Compensation Plans.
Manor shall:
(a) Assist in the preparation of enrollment and communication
materials for each of the Deferred Compensation Plans;
(b) Coordinate the production, printing and distribution of
enrollment and communication materials for each of the Deferred
Compensation Plans;
(c) Coordinate the competitive bidding process among prospective
service providers and evaluate resulting bids for Choice.
(d) Arrange for plan eligibility information to be provided to claim
administrators;
(e) Coordinate the administration, review and evaluation of Claims in
accordance with the terms of the Deferred Compensation Plans,
standard policies, procedures and practices;
(f) Investigate Claims under the deferred Compensation Plans to the
extent deemed necessary in its best judgment;
(g) Arrange for the payment of Claims in accordance with the terms of
the Deferred Compensation Plans, standard policies, procedures
and practices; and
(h) Obtain consents, approvals, and elections under the Deferred
Compensation Plans as provided under the terms thereof.
EXHIBIT E
COBRA ADMINISTRATION SERVICES
E.0 General. The COBRA administration Services shall be limited to
the following services:
E.1 COBRA Administration Services for Medical/Dental Plans. Manor
shall:
(a) Send initial COBRA notices to Choice employees (and the
dependents thereof), as identified by Choice, who are enrolled in
the Medical/Dental Plans after the date of this Agreement;
(b) Send COBRA notices and election forms to Qualified Beneficiaries
who are identified by Choice or Manor, as appropriate, such COBRA
notices to include, among other things:
(1) Identification of the coverage on the date before the
Qualifying Event;
(2) The date the coverage ended;
(3) The reason the coverage ended;
(4) The right to elect COBRA Continuation Coverage;
(5) The duration of the COBRA Continuation Coverage;
(6) The duration of the grace period for payment of the initial
premium payment for COBRA Continuation Coverage; and
(7) The Determination Period;
(c) Receive and process duly executed COBRA election forms received
from Qualified Beneficiaries in accordance with the procedures
established by Choice.
(d) Send payment coupons to Qualified Beneficiaries who have elected
COBRA Continuation Coverage stating the amount of the monthly
COBRA premium payment as established by Choice, where required;
(e) Receive and process amounts received as monthly COBRA premium
payments from Qualified Beneficiaries;
(f) Notify Qualified Beneficiaries of the extension of COBRA
Continuation Coverage from 18 months to 29 or 36 months or
termination of their COBRA Continuation Coverage, as appropriate,
under procedures established by Choice;
(g) Respond to telephone and written inquiries concerning COBRA
Continuation Coverage;
(h) Notify Qualified Beneficiaries of their right to convert to other
coverage, if applicable;
(i) Maintain an accounting of the COBRA premium payments to be
charged Qualified Beneficiaries;
(j) Assist Choice in developing COBRA premium payments to be charged
Qualified Beneficiaries;
(k) Coordinate the administration, review and evaluation of COBRA
Claims in accordance with the terms of the Medical/Dental Plan as
applicable, and stand policies, procedures and practices;
(l) Investigate the COBRA Claims to the extent deemed necessary in
its best judgment; and
(m) Arrange for the payment of COBRA Claims in accordance with the
terms of the appropriate Medical/Dental Plan, standard policies,
procedures and practices.
EXHIBIT F
COMPLIANCE SERVICES
F.0 General. the Compliance Services shall be limited to the
following services:
F.1 Compliance Services for Health and Welfare Plans. Manor shall:
(a) Assist Choice in the preparation of compliance and disclosure
documents pertaining to the Health and Welfare Plans, e.g., Plan
documents, Plan amendments, summary Plan descriptions, summaries
of material modifications, and summary annual reports;
(b) Assist Choice in the preparation of forms and disclosures
required by the Internal Revenue Service, the Department of Labor
and other regulatory agencies;
(c) Make recommendations and propose necessary amendments to Plan
documents and procedures for compliance with the Plan documents,
administrative procedures, ERISA and other applicable laws and
regulations; and
(d) Assist Choice to prepare for and respond to any government audit
or enforcement action with respect to the Health and Welfare
Plans.
F.2 Compliance Services for Retirement Plans. Manor shall:
(a) Assist Choice in the preparation of compliance and disclosure
documents pertaining to the Retirement Plans, e.g., Plan
documents, Plan amendments, summary Plan descriptions, summaries
of material modifications, and summary annual reports;
(b) Assist Choice in the preparation of application for tax exempt
status for its Retirement Plans;
(c) Assist Choice in the preparation of forms and disclosures
required by the Internal Revenue Service, the Department of Labor
and other regulatory agencies;
(d) Make recommendations and propose necessary amendments to Plan
documents and procedures for compliance with the Plan documents,
administrative procedures, ERISA and other applicable laws and
regulations; and
(e) Assist Choice to prepare for and respond to any government audit
or enforcement action with respect to the Retirement Plans.
F.3 Compliance Services for Stock Plans. Manor shall:
(a) Assist Choice in the preparation of compliance and disclosure
documents pertaining to the Retirement Plans, e.g., Plan
documents, Plan amendments, summary Plan descriptions, summaries
of material modifications, and summary annual reports;
(b) Assist Choice in the preparation of forms and disclosures
required by the Internal Revenue Service, the Department of Labor
and other regulatory agencies;
(c) Make recommendations and propose necessary amendments to Plan
documents and procedures for compliance with the Plan documents,
administrative procedures, ERISA and other applicable laws and
regulations; and
(d) Assist Choice to prepare for and respond to any government audit
or enforcement action with respect to the Retirement Plans.
F.4 Compliance Services for Deferred Compensation Plans. Manor shall:
(a) Assist Choice in the preparation of compliance and disclosure
documents pertaining to the Deferred Compensation Plans, e.g.,
Plan documents, Plan documents, Plan amendments, summary Plan
descriptions, summaries of material modifications, and summary
annual reports;
(b) Assist Choice in the preparation of forms and disclosures
required by the Internal Revenue Service, the Department of Labor
and other regulatory agencies;
(c) Make recommendations and propose necessary amendments to Plan
documents and procedures for compliance with the Plan documents,
administrative procedures, ERISA and other applicable laws and
regulations; and
(d) Assist Choice to prepare for and respond to any government audit
or enforcement action with respect to the Deferred Compensation
Plans.
EXHIBIT G
FIDUCIARY SERVICES
G.0 General. the Fiduciary Services shall be limited to the following
services:
G.1 Fiduciary Services for Health and Welfare Plans. Manor shall have
the discretionary authority to:
(a) Administer and pay claims for disability benefits; and
(b) Review final appeals of denied or disputed Claims and COBRA
Claims under the Health and Welfare Plans in accordance with the
terms of the Health and Welfare Plans, standard policies,
procedures and practices and make final decisions with respect
thereto, subject to Choice's approval.
G.2 Fiduciary Services for Retirement Plans. Manor shall:
(a) Develop investment guidelines and evaluate money managers for
decision by the Retirement Committee;
(b) Review performance of each money manager selected and discuss
investment results and overall strategy with money manager;
(c) Hold periodic meetings with Choice's Retirement Committee and
prepare minutes of each meeting;
(d) Collect and implement participant direction regarding investment
selection;
(e) Arrange for the maintenance of custodial accounts for all
Retirement Plan assets;
(f) Develop procedures for and monitor asset transfers among funds;
(g) Reconcile plan assets to detailed participant accounts;
(h) arrange for the allocation of monthly earnings to participant
accounts;
(i) Prepare financial statements in accordance with generally
accepted accounting principles for Retirement Plans and obtain
annual audit;
(j) arrange for the performance of annual discrimination testing and
adjustment of participant accounts as instructed by the Plan
document;
(k) Administer Qualified Domestic Relations Orders, as defined in
Internal Revenue Code Section 414(p), plan loans, hardship
withdrawals, and beneficiary accounts;
(l) Have the discretionary authority to administer Claims for the
Retirement Plans; and
(m) Have the discretionary authority to review appeals of denied or
disputed Claims under the Retirement Plan in accordance with the
terms of the retirement plans, standard policies, procedures and
practices and make final decisions with respect thereto, subject
to Choice's approval.
G.3 Fiduciary Services for Stock Plans. Manor shall:
(a) Have the discretionary authority to administer awards for the
Stock Plans; and
(b) Have the discretionary authority to review appeals of denied or
disputed Claims under the Stock Plans in accordance with the
terms of the Stock Plans, standard policies, procedures and
practices and make final decisions with respect thereto, subject
to Choice's approval.
G.4 Fiduciary Services for Deferred Compensation Plans. Manor shall:
(a) Have the discretionary authority to administer Claims for the
Deferred Compensation Plans; and
(b) Have the discretionary authority to review appeals of denied or
disputed Claims under the Deferred Compensation Plans in
accordance with the terms of the deferred compensation plans,
standard policies, procedures and practices and make final
decisions with respect thereto, subject to Choice's approval.
SCHEDULE A
HEALTH AND WELFARE PLANS
Medical plans
Dental Plan
Group-Term Life
Pretax Spending Accounts
Hyatt Legal Services
Short-term Disability
Long-term Disability
Accidental Death & Dismemberment
Vacation Benefit
Sick Leave
RETIREMENT PLANS STOCK PLANS
Choice Hotels International, Inc. Choice Hotels International, Inc.
Retirement Savings and Investment Plan Employee Stock Purchase Plan
Choice Hotels International, Inc. Non-Qualified
Retirement Savings and Investment Plan
Supplemental Executive Retirement Plan
DEFERRED COMPENSATION PLANS
Deferred Compensation Plan
