0000950123-95-002442.txt : 19950829
0000950123-95-002442.hdr.sgml : 19950829
ACCESSION NUMBER: 0000950123-95-002442
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950928
FILED AS OF DATE: 19950828
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MANOR CARE INC/NEW
CENTRAL INDEX KEY: 0000354604
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051]
IRS NUMBER: 521200376
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08195
FILM NUMBER: 95567351
BUSINESS ADDRESS:
STREET 1: 10750 COLUMBIA PIKE
CITY: SILVER SPRING
STATE: MD
ZIP: 20901
BUSINESS PHONE: 3016819400
MAIL ADDRESS:
STREET 1: 10750 COLUMBIA PIKE
CITY: SILVER SPRING
STATE: MD
ZIP: 20901
FORMER COMPANY:
FORMER CONFORMED NAME: MANOR CARE HOLDING CO
DATE OF NAME CHANGE: 19810826
DEF 14A
1
DEFINITIVE PROXY MATERIALS
1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
MANOR CARE, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
2
Notice of Annual Meeting
and Proxy Statement
-----------------------------------
MANOR CARE, INC.
-----------------------------------
Annual Meeting of Stockholders
September 28, 1995
3
MANOR CARE, INC.
10750 COLUMBIA PIKE
SILVER SPRING, MARYLAND 20901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 28, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Manor
Care, Inc. (the "Company"), will be held at the Terrace Room, 10770 Columbia
Pike, Silver Spring, Maryland, on September 28, 1995, at 9:00 a.m., to consider
and vote upon the following matters:
1. To elect a Board of Directors consisting of seven persons to serve
until the next Annual Meeting of Stockholders of the Company and until
their successors are duly elected and qualified.
2. To approve a proposal to adopt the Manor Care, Inc. 1995 Long-Term
Incentive Plan.
3. To approve a proposal to adopt the Manor Care, Inc. 1995 Employee Stock
Purchase Plan.
4. To transact such other business as may properly come before such
meeting or any adjournment thereof.
The close of business on July 31, 1995, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof.
Your management sincerely desires the presence in person of every
stockholder able to attend the meeting; however, in order to be assured of the
representation of the greatest number of stockholders either in person or by
proxy, it is requested that you date and sign the accompanying proxy and return
it as promptly as possible in the enclosed self-addressed envelope. No postage
is required if mailed in the United States.
If you attend the meeting in person, you may revoke your proxy at such
meeting and cast your vote in person. If you receive more than one proxy because
your shares are held in various names or accounts, each proxy should be
completed and returned.
By Order of the Board of Directors:
James H. Rempe
Secretary
Silver Spring, Maryland
August 28, 1995
4
MANOR CARE, INC.
10750 COLUMBIA PIKE
SILVER SPRING, MARYLAND 20901
301-681-9400
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 28, 1995
INTRODUCTION
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Manor Care, Inc. (the "Company"), a Delaware corporation, to be
used at the 1995 Annual Meeting of Stockholders to be held on Thursday,
September 28, 1995, at 9:00 a.m., in the Terrace Room, 10770 Columbia Pike,
Silver Spring, Maryland, and at any and all adjournments thereof. All shares
represented by proxies will be voted at the meeting in accordance with the
specifications marked thereon, or if no specifications are made, proxies will be
voted FOR all matters set forth in the attached Notice of Meeting and in the
discretion of the proxy holder as to any other business which comes before the
meeting. Any stockholder giving a proxy may revoke the same at any time prior to
the voting of such proxy by giving written notice of revocation to the
Secretary, by submitting a later dated proxy or by attending the meeting and
voting in person. The Proxy Statement is first being mailed to stockholders on
or about August 28, 1995.
The Company's Annual Report (including certified financial statements)
for the fiscal year ended May 31, 1995, is accompanying this Proxy Statement.
The Annual Report is not a part of the proxy soliciting material.
Except where the context requires otherwise, the term "Company"
includes Manor Care, Inc. and its subsidiaries.
VOTING AT THE ANNUAL MEETING
The Board of Directors has fixed July 31, 1995 (the "Record Date") as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting. On that date, there were outstanding 62,425,203
shares of Common Stock, par value $.10 per share (the "Common Stock"). Each such
share of Common Stock is entitled to one vote. The presence in person or by
proxy of the holders of a majority of the Company's outstanding shares of Common
Stock will constitute a quorum.
1
5
The affirmative vote of a majority of the Company's outstanding shares
of Common Stock present and voting at the Annual Meeting, in person or by proxy,
will be necessary for approval of the proposal to adopt the Manor Care, Inc.
1995 Long-Term Incentive Plan, for approval of the proposal to adopt the
Manor Care, Inc. 1995 Employee Stock Purchase Plan, the election of directors
and for the taking of all other action at the Annual Meeting.
A stockholder who is present in person or by proxy at the Annual
Meeting and who abstains from voting on any or all proposals will be included in
the number of stockholders present at the meeting for the purpose of determining
the presence of a quorum. However, an abstention with respect to any matter will
not be counted either in favor of or against such matter.
Brokers who hold shares for the account of their clients may vote such
shares either as directed by their clients or in their own discretion if
permitted by the exchange or other organization of which they are members.
Members of the New York Stock Exchange are permitted to vote their clients'
proxies in their own discretion as to the election of directors but not as to
the Company's proposals relating to the approval of the proposals to adopt the
Manor Care, Inc. 1995 Long-Term Incentive Plan and the Manor Care, Inc. 1995
Employee Stock Purchase Plan. Shares held by a broker who does not receive
instructions on these matters will not be voted. Proxies which are voted by
brokers on some but not all of the proposals are referred to as "broker
non-votes." Broker non-votes will be included in determining the presence of a
quorum. However, a broker non-vote is not treated as being in favor of or
against the particular proposal under consideration.
If any nominee for election to the Board of Directors named in this
Proxy Statement shall become unavailable for election for any reason, the proxy
will be voted for a substitute nominee selected by the Board of Directors, or
the Board of Directors may elect not to fill the vacancy and reduce the number
of directors.
SOLICITATION OF PROXIES
The cost of the proxy solicitations will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of the Company without additional compensation, by
personal interview, telephone, telegram or otherwise. Arrangements may also be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of soliciting material to the beneficial owners of Common Stock held
of record by such persons, and the Company will reimburse such respective
brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket
expenses incurred by them in connection therewith.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's reporting officers and directors, and persons who own
more than ten percent of the Company's Common Stock, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the
2
6
Securities and Exchange Commission (the "Commission"), the New York Stock
Exchange and the Company. Based solely on the Company's review of the forms
filed with the Commission and written representations from reporting persons
that they were not required to file Form 5 for certain specified years, the
Company believes that, except to the extent previously reported in the Company's
1994 Proxy Statement, all of its reporting officers, directors and greater than
ten percent beneficial owners complied with all filing requirements applicable
to them during the fiscal year ended May 31, 1995, except that Regina
Herzlinger, a director, failed to timely file reports on Form 4 showing
purchases totalling 1,000 shares made between July 25, 1994 and September 28,
1994.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of the Record Date the amount of the
Company's Common Stock beneficially owned by (1) each director and nominee, (2)
the chief executive officer and the four other most highly compensated executive
officers and (3) all officers and directors as a group. Stewart Bainum is the
only person, to the knowledge of the Company, who owned beneficially more than
5% of the Company's Common Stock as of the Record Date. Stewart Bainum's address
is 10750 Columbia Pike, Silver Spring, MD 20901.
Percent
Name of Beneficial Owner Total of Class(1)
------------------------ ------------- -----------
Stewart Bainum 17,638,014(2) 28.3%
Stewart Bainum, Jr 1,932,481(3) 3.1%
Jack R. Anderson 30,000 *
Regina E. Herzlinger 1,250 *
William H. Longfield 2,500 *
Frederic V. Malek 1,000 *
Jerry E. Robertson, Ph. D 13,500 *
Donald C. Tomasso, 52,644(4) *
Robert C. Hazard, Jr 60,126(5) *
Gerald W. Petitt 68,250(6) *
Donald J. Landry 22,644(7) *
All Directors and Officers
as a Group (26 persons) 20,213,408(8) 31.9%
----------------------------------
* Less than 1% of class.
(1) Percentages are based on 62,425,203 shares outstanding on the
Record Date plus shares which would be issued assuming that the
person exercises all options which are exercisable within 60
days thereafter.
(2) Includes 3,567,869 shares held directly or indirectly by Realty
Investment Company, Inc. and its subsidiaries ("Realty"), a real
estate investment and management company owned by Mr. Bainum,
his wife and their family,
3
7
4,044,928 shares held by The Stewart Bainum Trust Dated May 23,
1995, the sole trustee of which is Mr. Bainum, his pro-rata
interests in 5,417,761 shares owned by Bainum Associates Limited
Partnership, 1,679,628 shares owned by Mid Pines Associates
Limited Partnership, 4,415,250 shares owned by MC Investments
Limited Partnership, limited partnerships in which Mr. Bainum is
a limited partner. Also includes 798,711 shares held by The Jane
L. Bainum Trust Dated May 23, 1995, the sole trustee of which is
his wife, and her pro-rata interest in 1,679,628 shares owned by
Mid Pines Associates Limited Partnership, a limited partnership
in which his wife is a limited partner. Does not include shares
owned beneficially by Stewart Bainum, Jr., whose interests are
stated in the above table, nor does it include 195,513 shares
held by his other three adult children.
(3) Includes his pro-rata interests in 5,417,761 shares owned by
Bainum Associates Limited Partnership and in 4,415,250 shares
owned by MC Investments Limited Partnership, in both of which
Mr. Bainum, Jr. is managing general partner but does not have
authority to vote such shares. Also includes his pro-rata
interest in 1,679,628 shares owned by Mid Pines Associates
Limited Partnership, in which Mr. Bainum, Jr. is managing
general partner and has shared voting authority, and his
pro-rata interest in 3,567,869 shares owned by Realty, a
corporation in which Mr. Bainum, Jr. owns approximately 21.3% of
common stock. Also includes 565,500 shares which Mr. Bainum, Jr.
has the right to acquire pursuant to stock options which are
presently exercisable or which become exercisable within 60 days
after the Record Date, and 1,265 shares and 96 shares,
respectively, which Mr. Bainum, Jr. has the right to receive
upon termination of his employment with the Company pursuant to
the terms of the Manor Care, Inc. Retirement Savings and
Investment Plan described on page 11 (the "401(k) Plan") and the
Manor Care, Inc. Nonqualified Retirement Savings and Investment
Plan described on page 12 (the "Nonqualified Savings Plan").
(4) Includes 40 shares held in trust for minor children for which
Mr. Tomasso is trustee. Beneficial ownership of such shares is
disclaimed. Also includes 36,000 shares which Mr. Tomasso has
the right to acquire pursuant to stock options which are
presently exercisable or which become exercisable within 60 days
after the Record Date, and 57 shares and 47 shares,
respectively, which Mr. Tomasso has the right to receive upon
termination of his employment with the Company pursuant to the
terms of the 401(k) Plan and the Nonqualified Savings Plan.
(5) Includes 58,500 shares which Mr. Hazard has the right to acquire
pursuant to stock options which are presently exercisable or
which become exercisable within 60 days after the Record Date,
and 46 shares and 218 shares, respectively, which Mr. Hazard has
the right to receive upon termination of his employment with the
Company pursuant to the terms of the 401(k) Plan and the
Nonqualified Savings Plan.
(6) Includes 8,661 shares held in trust for minor children for which
Mr. Petitt is trustee. Beneficial ownership of such shares is
disclaimed. Also includes 38,300 shares which Mr. Petitt has the
right to acquire pursuant to stock options which are presently
exercisable or which become exercisable within 60 days after the
Record Date.
(7) Includes 22,500 shares which Mr. Landry has the right to acquire
pursuant to stock options which are presently exercisable or
which become exercisable within 60 days after the Record Date,
and 62 shares and 82 shares, respectively, which Mr. Landry has
the right to receive upon termination of his employment with the
Company pursuant to the terms of the 401(k) Plan and the
Nonqualified Savings Plan.
(8) Includes a total of 1,007,401 shares which the officers and
directors included in the group have the right to acquire
pursuant to stock options which are presently exercisable or
which become exercisable within 60 days after the Record Date,
and a total of 4,532 shares and 843 shares, respectively, which
such directors and officers have the right to receive upon
termination of their employment with the Company pursuant to the
terms of the 401(k) Plan and the Nonqualified Savings Plan.
4
8
NOMINATION AND ELECTION OF DIRECTORS
The entire Board of Directors, which consists of seven (7) members,
will be elected to serve until the next Annual Meeting of Stockholders of the
Company and until their successors are duly elected and qualified.
Stewart Bainum, Jr. is Stewart Bainum's son. Aside from the foregoing,
no nominee has any family relationship with any other director or executive
officer of the Company.
The following table sets forth information with respect to each nominee
for election as a Director of the Company. All of the nominees have previously
been elected by the stockholders of the Company.
SERVED AS
NAME AND AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY; BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
------------ -------------- --------------------------------------------------------------------
Stewart Bainum, Jr. (49) 1976 Chairman of the Board since March 1987; also President since June 1989; Vice
Chairman from June 1982 to March 1987. Director: Vitalink Pharmacy Services,
Inc.
Stewart Bainum (76) 1968 Vice Chairman of the Board since March 1987; Chairman of the Board from 1968
to March 1987; President from December 1980 through October 1981, and May
1982 through July 1985; Chairman of the Board of Realty Investment Company,
Inc. (private real estate investment company) since 1965.
Jack R. Anderson (70) 1980 President of Calver Corporation since May 1982. Director: FHP International
Corporation, Horizon Mental Health Management, Inc., Navistar International
Corporation and United Dental Care, Inc.
Regina E. Herzlinger (51) 1992 Nancy R. McPherson Professor of Business Administration, Harvard Business
School, since 1971. Director: C. R. Bard, Inc., Deere & Company, Salick
Health Care, Inc., and Schering-Plough Corporation.
William H. Longfield (55) 1989 President and Chief Executive Officer of C. R. Bard, Inc. (medical equipment)
since October 1993; President and Chief Operating Officer of C. R. Bard, Inc.
from September 1991 to October 1993; Executive Vice President and Chief
Operating Officer of C. R. Bard, Inc. from February 1989 to September 1991.
Director: C. R. Bard, Inc., Horizon Mental Health Management, Inc., United Dental
Care, Inc. and The West Company.
Frederic V. Malek (58) 1990 Chairman, Thayer Capital Partners since January 1993; Co-chairman of CB
Commercial Real Estate Group, Inc. since April 1989; Campaign Manager,
Bush-Quayle '92 Campaign from December 1991 to December 1992; Vice Chairman
of NWA, Inc. (airlines) from June 1990 to December 1991. Director: American
Management Systems, Inc., Automatic Data Processing Corp., FPL Group, Inc.,
ICF Kaiser International, Inc., Intrav, Inc., National Education Corporation,
Northwest Airlines and various Paine Webber mutual funds.
Jerry E. Robertson, Ph.D. (62) 1989 Retired; Executive Vice President of 3M Life Sciences Sector and Corporate
Services from November 1984 to March 1994. Director: Allianz Life Insurance
Company of North America, Cardinal Health, Inc., Coherent, Inc., Haemonetics
Corporation, Life Technologies, Inc., Project Hope, Medwave, Inc. and Steris
Corporation.
STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during the fiscal year ended
May 31, 1995. During such fiscal year, each incumbent attended 75% or more of
the aggregate of (1) the total number of
5
9
meetings of the Board of Directors and (2) the total number of meetings of all
Committees on which such director served. The standing committees of the Board
include the Audit Committee, the Finance Committee, the Compensation/Key
Executive Stock Option Plan Committee and the Nominating Committee, the current
members of which are as follows:
Compensation/Key Executive
Stock Option Plan Committee Finance Committee
--------------------------- -----------------
Jerry E. Robertson, Chairman Stewart Bainum, Chairman
Stewart Bainum Stewart Bainum, Jr.
William H. Longfield Jack R. Anderson
Frederic V. Malek Jerry E. Robertson
Audit Committee Nominating Committee
--------------- --------------------
Jack R. Anderson, Chairman Jack R. Anderson, Chairman
Regina E. Herzlinger Frederic V. Malek
The Compensation/Key Executive Stock Option Plan Committee, which held
two meetings during the 1995 fiscal year, administers the Company's stock option
plans and grants stock options thereunder, reviews compensation of officers and
key management employees, recommends development programs for employees such as
training, bonus and incentive plans, pensions and retirement, and reviews other
employee fringe benefit programs.
The Finance Committee, which held three meetings during the 1995 fiscal
year, reviews the financial affairs of the Company and recommends financial
objectives, goals and programs to the Board of Directors and to management.
The Audit Committee, which held two meetings during the 1995 fiscal
year, reviews the scope and results of the annual audit, reviews and approves
the services and related fees of the Company's independent public accountants,
reviews the Company's internal accounting controls and reviews the Company's
Internal Audit Department and its activities.
The Nominating Committee, which held one meeting during the 1995 fiscal
year, recommends to the Board of Directors the members to serve on the Board of
Directors during the ensuing year. The Committee does not consider nominees
recommended by stockholders.
Directors who are full-time employees of the Company receive no
separate remuneration for their services as directors. The remuneration of all
non-employee directors is currently $12,650 per annum and $2,185 per diem for
Board meetings attended and $1,610 per diem for Committee meetings attended,
except where the Committee meeting is on the same day as a Board meeting. In
addition, directors are also reimbursed for travel expenses and other
out-of-pocket costs incurred in attending meetings.
6
10
Pursuant to the Directors Retirement Plan adopted in September 1990, a
non-employee director who retires after serving as director for at least ten
years is entitled to an annual benefit for the remainder of his or her lifetime
or five years, whichever is less, which equals 75% of the annual retainer
payable to directors on the date of retirement plus 5% for each year served as a
non-employee director in excess of ten years, but not to exceed 100% of the
annual retainer payable to the director on the date of retirement. Unpaid
benefits will be forfeited if such director becomes an owner, director, officer,
employee or consultant either of a nursing home facility located within 25 miles
of a Company nursing home facility or of a lodging facility located within 10
miles of a Company-owned or franchised lodging facility, provided that such
other facility is, in the opinion of the Board, in competition with the business
of the Company.
In June 1992, Stewart Bainum, a director, retired from full-time
employment with the Company. Mr. Bainum is subject to a non-competition covenant
similar to that described in the preceding paragraph. During the 1995 fiscal
year, Mr. Bainum received consulting fees totalling $14,719 in addition to
Directors' fees as indicated above.
Pursuant to the Manor Care, Inc. Non-Employee Director Stock Option
and Deferred Compensation Stock Purchase Plan approved by the stockholders at
the 1994 Annual Meeting, eligible non-employee directors may elect, prior to
May 31 of each year, to defer a minimum of 25% of Board and committee fees
earned during the ensuing fiscal year. The fees which are so deferred will be
used to purchase Common Stock on the open market within 15 days after December
1, February 28 and May 31 of such fiscal year. Pending such purchases, the
funds are credited to an Interest Deferred Account, which is interest bearing.
Stock which is so purchased is deposited in a Stock Deferred Account pending
distribution in accordance with the Plan. Three of the incumbent Directors
(Professor Herzlinger and Messrs. Anderson and Robertson) have elected to
participate in the Plan for the 1996 fiscal year. The amount of compensation
that will accrue to such participating directors is not currently determinable.
In addition, pursuant to the Manor Care, Inc. Non-Employee Director
Stock Option and Deferred Compensation Plan, eligible non-employee directors
were each granted options to purchase 5,000 shares of Common Stock on September
9, 1994 and will be granted options to purchase 1,000 shares on the date of
election in subsequent calendar years. Pursuant to the Plan, on September 9,
1994 Messrs. Anderson, Bainum, Longfield, Malek, and Robertson and Professor
Herzlinger were granted options to purchase 5,000 shares at $27.94. The amount
of compensation that will accrue to such directors is not currently
determinable.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
annual and long term compensation for services in all capacities to the Company
for the fiscal years ended May 31, 1995, 1994 and 1993, of the chief executive
officer and the four other most highly compensated executive officers in the
Company's employ at May 31, 1995.
7
11
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------------------ ------------------------------
Stock Option All Other
Name and Principal Position Year Salary Bonus Other Shares(#) Compensation(1)
--------------------------- ---- -------- -------- ----- ------------ ---------------
Stewart Bainum, Jr 1995 $572,308 $343,385 (3) -- $ 9,000
Chairman, President and 1994 457,867(2) 274,720 (3) 40,000 14,150
Chief Executive Officer 1993 499,200 269,568 (3) 30,000 13,732
Donald C. Tomasso (4) 1995 345,737 164,365 (3) -- 2,250
President, Long Term Care Division 1994 316,187 173,903 (3) 35,000 3,538
Manor Healthcare Corp. 1993 292,600 160,930 (3) 45,000 1,973
Robert C. Hazard, Jr (5) 1995 373,709 186,855 (3) -- 9,000
Co-Chairman 1994 346,124 173,062 (3) -- 14,150
Choice Hotels International, Inc. 1993 320,578 160,289 (3) -- 13,732
Gerald W. Petitt (5) 1995 323,553 161,776 (3) -- 9,000
Co-Chairman 1994 283,193 141,596 (3) -- 14,150
Choice Hotels International, Inc. 1993 262,291 131,146 (3) -- 13,732
Donald J. Landry (6) 1995 311,635 171,399 (3) 40,000 2,250
President 1994 275,712 144,059 (3) 25,000 3,537
Choice Hotels International, Inc. 1993 254,856 25,000 (3) 15,000 --
------------------------
(1) Represents amounts contributed by the Company for fiscal 1995, 1994 and
1993 for the five individuals named in the above Summary Compensation
Table (the "Named Officers") under the 401(k) Plan and the Nonqualified
Savings Plan, which provide retirement and other benefits to eligible
employees, including the Named Officers. Amounts contributed in cash or
stock by the Company during fiscal 1995 under the 401(k) Plan for the
Named Officers were as follows: Mr. Bainum, $9,000; Mr. Tomasso,
$1,648; Mr. Hazard, $4,079; Mr. Petitt, $3,324; and Mr. Landry, $1,420.
Amounts contributed in cash or stock by the Company during fiscal 1995
under the Nonqualified Savings Plan for the Named Officers were as
follows: Mr. Bainum, $0; Mr. Tomasso, $602; Mr. Hazard, $4,921; Mr.
Petitt, $5,676; and Mr. Landry, $830.
(2) Mr. Bainum took an unpaid leave of absence during April and May 1994
while he devoted a substantial portion of his time exploring the
possibility of seeking an elective governmental position, resulting in
a decrease in salary paid in fiscal 1994 compared to fiscal 1993.
(3) The value of perquisites and other compensation does not exceed the
lesser of $50,000 or 10% of the amount of annual salary and bonus paid
as to any of the Named Officers.
(4) Prior to February 1995, Mr. Tomasso served as President of Manor Care
Healthcare Corp. In February 1995 he became President of its Long
Term Care Division.
(5) Prior to January 1, 1995, Mr. Hazard served as Chairman and Chief
Executive Officer of Choice Hotels International, Inc. and Mr. Petitt
served as President and Chief Operating Officer of Choice Hotels
International, Inc.
(6) Prior to January 1, 1995, Mr. Landry served as President of the Manor
Care Hotel Division. On January 1, 1995, he also became President of
Choice Hotels International, Inc.
The following tables set forth certain information at May 31, 1995 and
for the fiscal year then ended concerning stock options granted to the Named
Officers. All Common Stock figures and exercise prices have been adjusted to
reflect stock dividends and stock splits effective in prior fiscal years.
8
12
STOCK OPTION GRANTS IN FISCAL 1995
Individual Grants
-------------------------------------------- Potential Realizable Value of
Percentage of Assumed Annual Rate of Stock
Total Options Price Appreciation for Option Term(1)
Number of Granted to all Exercise --------------------------------------------
Options Employees in Base Price Expiration
Name Granted(2) Fiscal 1995 Per Share Date 5%(3) 10%(4)
---- ---------- ----------- --------- ---------- ----- ------
Stewart Bainum, Jr -- -- -- -- -- --
Donald C. Tomasso -- -- -- -- -- --
Robert C. Hazard, Jr -- -- -- -- -- --
Gerald W. Petitt -- -- -- -- -- --
Donald J. Landry 40,000 50% $28.63 11/16/2004 $720,000 $1,824,800
------------------------
(1) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast future possible
appreciation, if any, of the Company's stock price. Since options are
granted at market price, a zero percent gain in the stock price will
result in no realizable value to the optionees.
(2) The options granted to Mr. Landry vest at the rate of 10% per year
commencing on the second through the fifth anniversary of the date of
the stock option grant and 20% per year on the sixth through the eighth
anniversaries.
(3) A 5% per year appreciation in stock price from $28.63 per share yields
$46.63.
(4) A 10% per year appreciation in stock price from $28.63 per share yields
$74.25.
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND YEAR-END OPTION VALUES
Number of Unexercised
Options at May 31, 1995
Shares Acquired Value -------------------------- Value of Unexercised in-the-money
on Exercise Realized Exercisable Unexercisable Options at May 31, 1995 (1)
--------------- -------- ----------- ------------- ---------------------------------
# $ # # Exercisable Unexercisable
--------------- -------- ----------- ------------- -------------- --------------
Stewart Bainum, Jr. - - 565,500 239,500 $9,758,070 $3,792,480
Donald C. Tomasso - - 36,000 149,000 511,875 1,674,225
Robert C. Hazard, Jr. - - 58,500 54,000 1,127,865 1,091,160
Gerald W. Petitt 10,000 $146,966 38,300 54,000 765,781 1,091,160
Donald J. Landry - - 22,500 162,500 284,445 1,391,255
-----------------------
(1) The closing price of the Company's Common Stock as reported by the New
York Stock Exchange on May 31, 1995, was $29.25. The value is calculated
on the basis of the difference between the option exercise price and such
closing price multiplied by the number of shares of Common Stock
underlying the option.
EMPLOYMENT AGREEMENTS
Under the terms of an employment agreement between Mr. Hazard and
Choice Hotels International, Inc., a subsidiary of the Company ("CHI"), his
annual salary is presently $404,065 with
9
13
annual cost-of-living increases. The agreement, which extends through May 31,
1996, provides for an annual bonus based on performance of the Company of up to
12.5% of his base compensation and based on performance of CHI (including a
customer satisfaction component) of up to 37.5% of his base compensation. Mr.
Hazard served as Chairman and Chief Executive Officer of CHI until January 1,
1995 when he became Co-Chairman of CHI.
Under the terms of an employment agreement between Mr. Petitt and CHI,
his annual salary is presently $330,599 with annual cost-of-living increases.
The agreement, which extends through May 31, 1996, provides for an annual bonus
based on performance of the Company of up to 12.5% of his base compensation and
based on performance (including a customer satisfaction component) of CHI of up
to 37.5% of his base compensation. Mr. Petitt served as President and Chief
Operating Officer of CHI until January 1, 1995 when he became Co-Chairman of
CHI.
Under the terms of an employment agreement with Mr. Landry and the
Company, his annual salary is presently $350,000 with annual cost-of-living
increases. The agreement extends through February 28, 1997. From February 17,
1992 to January 1, 1995, Mr. Landry served as President of the Manor Care Hotel
Division. On January 1, 1995, Mr. Landry also became President of CHI. The
agreement provides for an annual bonus of up to 55% of his base compensation
based in part on performance of the Company and based in part on performance
(including a customer satisfaction component) of the Lodging Division, which
consists of both the Manor Care Hotel Division and CHI.
Under the terms of an employment agreement between Mark Gildea
and Manor Healthcare Corp., a wholly-owned subsidiary of the Company ("MHC"),
his annual salary is presently $195,000. The agreement currently extends
through December 3, 1998. Mr. Gildea is entitled to an annual bonus of up to
50% of his base compensation based in part on performance of the Company and
based in part on performance (including a customer satisfaction component) of
the Alternate Site Services Division of MHC, of which Mr. Gildea serves as
President. On June 22, 1995, the Board determined that Mr. Gildea is an
"executive officer" within the meaning of applicable regulations.
Under the terms of an employment agreement between Donna
DeNardo and Vitalink Pharmacy Services, Inc. ("Vitalink"), a majority-owned
subsidiary of MHC, her annual salary is presently $181,000. The agreement
currently extends through December 1, 1999. Ms. DeNardo is entitled to an
annual bonus of up to 75% of her base compensation based on performance
(including a customer satisfaction component) of Vitalink, of which Ms.
DeNardo serves as President and Chief Operating Officer. On June 22, 1995,
the Board determined that Ms. DeNardo is an "executive officer" within the
meaning of applicable regulations.
RETIREMENT PLANS
In February 1985, the Board of Directors adopted the Supplemental
Executive Retirement Plan (the "SERP"). Participants are selected by the Board
and are at the level of Senior Vice President
10
14
or above. A total of eight officers of the Company, including all of the Named
Officers except for Mr. Tomasso and Mr. Landry, have been selected to
participate in the SERP.
Participants in the SERP will receive a monthly benefit for life based
upon final average salary and years of service. Final average salary is the
average of the monthly base salary, excluding bonuses or commissions, earned in
a 60 month period out of the 120 months of employment, which produces the
highest average, prior to the first occurring of the early retirement date or
the normal retirement date. The normal retirement age is 65, and participants
must have a minimum of 15 years of service. Participants may retire at age 60
and may elect to receive reduced benefits commencing prior to age 65, subject to
Board approval. All of the Named Officers who are participants, except for Mr.
Hazard, are age 55 or younger, so that none of their compensation reported
above would be included in the final average salary calculation.
Assuming that the following officers continue to be employed by the
Company until they reach age 65, their credited years of service would be as
follows:
Current Years Years of Service
Name of Individual of Service at Age 65
---------------------- ------------------ ----------------
Stewart Bainum, Jr. 22.5 38
Robert C. Hazard, Jr. 14.5 19
Gerald W. Petitt 14.5 30
The table below sets forth estimated annual benefits payable upon
retirement to persons in specified compensation and years of service
classifications. These benefits are straight life annuity amounts, although
participants have the option of selecting a joint and 50% survivor annuity or
ten-year certain payments. The benefits are not subject to offset for Social
Security and other amounts.
Years of Service/Benefit as
Percentage of Final Average Salary
------------------------------------------
25 or
Remuneration 15/15% 20/22.5% more/30%
------------ ------ -------- --------
$300,000 $45,000 $ 67,500 $ 90,000
350,000 52,500 78,750 105,000
400,000 60,000 90,000 120,000
450,000 67,500 101,250 135,000
500,000 75,000 112,500 150,000
600,000 90,000 135,000 180,000
Effective January 1, 1992, the Company established the Manor Care, Inc.
Retirement Savings and Investment Plan (the "401(k) Plan"), a defined
contribution retirement, savings and investment plan for its employees and the
employees of its participating affiliated companies. The 401(k) Plan is
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and includes a cash or deferred arrangement under Section 401(k)
of the Code. All employees age
11
15
21 or over and who have worked for the Company for a twelve month period during
which such employee completed at least 1,000 hours are eligible to participate.
Subject to certain non-discrimination requirements, each employee may contribute
an amount to the 401(k) Plan on a pre-tax basis up to 15% of the employee's
salary, but not more than the current federal limit of $9,240. The Company will
match contributions made by its employees subject to certain limitations
described in greater detail below. The amount of the match will be equal to a
percentage of the amount of salary reduction contribution made on behalf of a
participant during the plan year based upon a formula that involves the profits
of the Company for the year and the number of years of service of the
participant. In no event will the Company make a matching contribution which
exceeds 6% of a participant's salary. Amounts contributed by the Company
pursuant to the 401(k) Plan for the Named Officers are included in the Summary
Compensation Table under the column headed "All Other Compensation".
Effective January 1, 1992, the Company adopted the Manor Care, Inc.
Nonqualified Retirement Savings and Investment Plan (the "Nonqualified Savings
Plan"). Certain select highly compensated members of management of the Company
are eligible to participate in the Plan. The Nonqualified Savings Plan mirrors
the provisions of the 401(k) Plan, to the extent feasible, and is intended to
provide the participants with a pre-tax savings vehicle to the extent that
pre-tax savings are limited under the 401(k) Plan as a result of various
governmental regulations, such as non-discrimination testing. All of the Named
Officers have elected to participate in the Nonqualified Savings Plan. Amounts
contributed by the Company under the Nonqualified Savings Plan for fiscal year
1995 for the Named Officers are included in the Summary Compensation Table under
the column headed "All Other Compensation".
The Company match under the 401(k) Plan and the Nonqualified Savings
Plan is limited to a maximum aggregate of 6% of the annual salary of a
participant. Effective December 1993, participants were given the right to elect
to receive the Company matching contribution either in Company stock or cash or
a combination. Likewise, participant contributions under the two plans may not
exceed the aggregate of 15% of the annual salary of a participant.
Effective January 1, 1992, the Company adopted a non-contributory Cash
Accumulation Retirement Plan (the "CARP") maintained by the Company for its
employees and those employees of its participating affiliated companies. The
CARP is qualified under Section 401(a) of the Code. All employees age 21 or over
and who have worked for the Company for a twelve month period during which such
employee completed at least 1,000 hours are automatically members of the CARP.
Each year the account of each employee is adjusted to reflect interest at a rate
calculated in accordance with the CARP. Amounts accrued under the CARP become
fully vested after five years of service. Pursuant to an amendment to the CARP
effective January 1, 1995, when the age and years of service of an employee
totals 45 or more, the Company will increase the rate of benefit to the account
of such employee, with an additional increase when the age and years of service
exceeds 55 or more. The annual benefit accrual made by the Company will be based
on salary as follows:
12
16
Base Percentage Base Percentage Base Percentage
If Age Plus Service If Age Plus Service If Age Plus Service
Annual Salary Is Less Than 45 Is 45 to 55 Is 55 or More
------------- ------------------- ------------------- -------------------
First $12,000 ........................ 3% 3.5% 4%
Next $6,000 .......................... 2% 2.5% 3%
Additional Compensation up to $100,000 1% 1.5% 2%
COMPENSATION/KEY EXECUTIVE STOCK OPTION PLAN COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The compensation philosophy of Manor Care, Inc. (the "Company") is to
be competitive with the leading service companies and selected direct
competitors in the marketplace, to attract, retain and motivate a highly
qualified workforce, and to provide career opportunities. The Company uses
various compensation surveys, primarily conducted and evaluated by independent
consultants, to provide data to support the development of competitive
compensation plans which reinforce this philosophy. Summary data on service
companies of similar size participating in each survey are utilized as the basis
for the evaluations. This is the same philosophy applied by the Compensation/Key
Executive Stock Option Plan Committee of the Board of Directors (the
"Committee") in determining compensation for the CEO and executive officers. In
evaluating the CEO's performance, the Committee, in addition to financial
performance, considers factors important to the Company such as ethical business
conduct, progress against the Company's strategic plan objectives, management
succession planning, customer service satisfaction and the general overall
perception of the Company by financial leaders and customers.
The Committee is responsible for setting and administering the policies
which govern executive compensation and the stock based programs of the Company.
The members of the Committee are Messrs. Robertson (Chairman), Bainum, Longfield
and Malek. Mr. Bainum served as Chairman and CEO prior to March 1987.
Compensation of the Company's officers is reviewed annually by the
Committee. Changes proposed for these employees are evaluated and approved by
the Committee on an individual basis.
There are three components in the Company's executive compensation
program:
1. Base salary
2. Cash bonus
3. Long-term incentive compensation
The Committee has determined that compensation for the CEO and other
executive officers should be weighted in favor of more "pay at risk" or
"variable pay."
13
17
BASE SALARY
Base salary is the only component that is not variable. Scope and
complexity of the position as well as external market factors are used to
determine base salary levels. Salary changes are based on guidelines established
for all employees using individual performance to determine the change. Mr.
Bainum, Jr.'s base salary paid in fiscal 1995 is shown under the heading
"Salary" in the Summary Compensation Table.
CASH BONUS
A cash bonus based on return on beginning equity or business unit
profit and on customer satisfaction surveys of the business unit is used to
focus management's attention on profits and the effective use of Company assets.
LONG-TERM INCENTIVE COMPENSATION
Long-term compensation, which in the past has comprised of
non-qualified stock options, has been established to:
a. Focus attention on the Company's and stockholders'
long term goals;
b. Increase ownership and retention in the Company's
stock.
The Committee has granted non-qualified stock options with a vesting
schedule of up to eight years in order to recruit and retain management and
focus optionees on the long term goals of the Company to be more closely aligned
with the interests of stockholders. If the proposed Manor Care, Inc. 1995
Long-Term Incentive Plan is approved by the stockholders at the Annual Meeting,
the Committee will have the discretion to grant Restricted Shares, Incentive
Stock Options, Nonqualified Stock Options, Stock Appreciation Rights or
Performance Shares as it may determine to be desirable in order to recruit and
retain management and to focus the optionees on the long term goals of the
Company to be more closely aligned with the interests of stockholders.
The Committee believes the Company has an overall compensation plan
which fulfills current Company philosophy and, in addition, promotes increased
stockholder value through performance-based compensation.
EXECUTIVE STOCK OWNERSHIP PROGRAM
Effective June 1, 1995, the Company established an Executive Stock
Ownership program for the Chairman and the officers who report directly to the
Chairman. The program requires the relevant officers to own qualifying Common
Stock as a condition of employment in order to ensure a direct relationship
between such executives and the stockholders. The relevant officers will be
required to reach and maintain ownership of a specified amount of Common Stock
within five years from the effective date of the program, or upon the fifth
anniversary of employment, whichever is later. The amount of shares of Common
Stock required to be owned by each officer is determined by the beginning base
salary times a multiple which varies from 1.5 to 4, depending upon the level of
responsibility of the particular officer.
14
18
IMPACT OF INTERNAL REVENUE CODE SECTION 162(M)
The Omnibus Budget Reconciliation Act of 1993 disallows, effective
January 1, 1994, a federal income tax deduction for compensation, other than
certain performance-based compensation, in excess of $1 million annually paid by
the Company to any currently serving officer named in the Summary Compensation
Table. Stock option awards under the Key Executive Stock Option Plan of 1969,
which expired in 1993, and under the Key Executive Stock Option Plan of 1993,
which is scheduled to expire in 2003, qualify as performance-based compensation
and are exempt from consideration for purposes of calculating the one million
dollar limit. If the stockholders approve the Manor Care, Inc. 1995 Long-Term
Incentive Compensation Plan at the Annual Meeting, appropriate steps will be
taken to qualify awards made thereafter as performance-based compensation and
thus be exempt from consideration for purposes of calculating the one million
dollar limit and the Key Executive Stock Option Plan of 1993 will be
terminated, except as to possible reissuance of forfeited shares. No individual
named in the Summary Compensation Table is likely to receive compensation, not
including performance-based compensation, in fiscal 1996 which would be in
excess of $1 million by more than a de minimis amount. The Committee intends
to monitor the Company's compensation programs with respect to such laws.
COMPENSATION/KEY EXECUTIVE STOCK OPTION PLAN COMMITTEE
JERRY E. ROBERTSON, PH.D., CHAIRMAN
STEWART BAINUM
WILLIAM H. LONGFIELD
FREDERIC V. MALEK
15
19
PERFORMANCE GRAPH-STOCKHOLDER RETURN
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return on the S&P Composite-500 Stock Index and a peer group
selected by the Company for the five fiscal years ended May 31, 1995, assuming
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG MANOR CARE, INC., S&P500 AND PEER GROUP
Assumes $100 invested on June 1, 1990 in the Common
Stock of Manor Care, Inc., the S&P500 Index and Peer
Group Companies (weighted by market capitalization).
Total return assumes reinvestment of dividends.
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Manor Care, Inc. 100 159 180 240 294 333
S&P 500 100 112 123 137 143 172
Peer Group (Weighted Average) 100 161 146 198 304 331
16
20
The peer group consists of thirteen other companies primarily involved
in the Company's lines of business. Nine of the companies are involved in
ownership and operation of nursing homes: Beverly Enterprises, Inc., Geriatric
and Medical Centers, Inc., Grancare Inc., Healthsouth Corp., Hillhaven Corp.,
Horizon Healthcare Corp., Integrated Health Services, Inc., Mariner Health
Group, Inc., and National Healthcorp, L.P. Three companies are involved in hotel
franchising, management or ownership: Hospitality Franchise Systems, Inc., La
Quinta Motor Inns, Inc., and Red Lion Inn L.P. One company is involved in the
institutional pharmacy business: Omnicare, Inc. One company which was in the
peer group last year, United Inns, Inc., has been removed because of its
acquisition during the year, and one company which was in the peer group last
year, Synetic, Inc., has been removed because of its disposition of its
institutional pharmacy business during the year.
PROPOSED APPROVAL OF MANOR CARE, INC.
1995 LONG-TERM INCENTIVE PLAN
GENERAL
In 1993 the stockholders approved the 1993 Key Executive Stock Option
Plan (the "Stock Option Plan") which provides for the issuance of up to
2,000,000 shares of Common Stock pursuant to non-qualified stock options. At
the June 21, 1995 meeting of the Key Executive Stock Option Plan Committee, the
Committee awarded a total of 60,000 shares to Stewart Bainum, Jr., 37,500
shares to Donald Tomasso, 111,750 shares to 13 other executive officers and
174,128 shares to 29 other key employees pursuant to the Stock Option Plan.
All of such awards will vest at the rate of twenty percent per year for the
first five years, expire ten years after the date of the award and are
exercisable at $30.31 per share. As of June 23, 1995, there remained for
issuance a total of 1,110,122 shares pursuant to the Stock Option Plan. On June
22, 1995, the Board terminated the Stock Option Plan, except as to possible
reissuance of forfeited shares and adopted the Manor Care, Inc. 1995 Long-Term
Incentive Plan (the "Incentive Plan") for key employees (including officers)
of the Company and its subsidiaries, subject to approval of the Incentive Plan
by the affirmative vote of the holders of a majority of the number of shares of
Common Stock present in person or by proxy at the Annual Meeting. The Incentive
Plan authorizes the awarding of a maximum of 1,110,122 shares (subject to
adjustment for stock splits and similar capital changes) of Common Stock to
eligible employees as described in greater detail below. Thus, if the Incentive
Plan is approved by the stockholders at the Annual Meeting, there will be no
increase in shares available for issuance pursuant to the Incentive Plan over
shares remaining for issuance pursuant to the Stock Option Plan.
The continuing growth and development and financial success of the
Company and its subsidiaries are dependent upon ensuring the best possible
management. The Board believes the Incentive Plan will be an important aid to
the Company in attracting and retaining individuals of outstanding abilities and
in rewarding them for the continued profitable performance of the Company and
its subsidiaries.
The types of awards that may be granted under the Incentive Plan are
restricted shares, incentive stock options, nonqualified stock options, stock
appreciation rights and performance shares. The Incentive Plan provides that
over the next ten years restricted shares, incentive stock options, nonqualified
stock options, stock appreciation rights, and/or performance shares involving up
to 1,110,122 shares (subject to adjustment for stock splits and similar capital
changes) of Common Stock may be granted. Common Stock issued under the Incentive
Plan may be authorized and unissued stock, treasury stock or stock purchased on
the open market (including private transactions). Except
17
21
in certain circumstances pertaining to the forfeiture of restricted shares, to
the extent that an award lapses or the rights of a participant to whom it was
granted terminate, any shares of Common Stock subject to the award will again be
available for awards under the Incentive Plan. The following description of the
Incentive Plan is qualified in its entirety by reference to the Manor Care, Inc.
1995 Long-Term Incentive Plan, a copy of which is attached as Exhibit A
to this Proxy Statement. The amount of compensation that will accrue to the
participants pursuant to the Incentive Plan, if approved by the stockholders at
the Annual Meeting, is not currently determinable.
The Incentive Plan was drafted to obtain the benefits of the exemption
from Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act")
provided by Rule 16b-3. Section 16(b) of the Exchange Act provides, among other
things, that an officer who purchases and sells the stock of the corporation
which employs him within a six month period is liable to the corporation for the
difference between the purchase price and sale price. Rule 16b-3 promulgated
under the Exchange Act provides that the acquisition of stock by an officer of
the corporation pursuant to an incentive plan which meets certain requirements
(one of which is stockholder approval of the plan) does not constitute a
"transaction" subject to Section 16(b) of the Exchange Act.
ADMINISTRATION
The Incentive Plan provides that it will be administered by a Key
Executive Stock Option Plan Committee of the Board, which establishes the
conditions of each grant made under the Incentive Plan and determines which key
employees will receive awards as well as the type and amount of each award.
Members of the Key Executive Stock Option Plan Committee are not eligible to
receive awards under the Incentive Plan.
ELIGIBILITY
Key employees of the Company and its subsidiaries (including employees
who are members of the Board, but excluding directors who are not employees)
who, in the opinion of the Key Executive Stock Option Plan Committee, are
mainly responsible for the continued growth and development and financial
success of the business of the Company or one of its subsidiaries are eligible
to be granted awards under the Incentive Plan. Subject to the provisions of the
Incentive Plan, the Committee shall from time to time select from such eligible
persons those to whom awards shall be granted and determine the number of
shares to be granted. Because eligibility is determined by these subjective
criteria, it is not possible at this time to determine (except as to awards
described in the following paragraph) either the number of employees eligible
to participate in the Incentive Plan or the amount of awards which will be
made.
At its June 21, 1995 meeting, the Key Executive Stock Option Plan
Committee granted to Donald Tomasso 12,500 shares pursuant to Incentive Stock
Options, to 13 other executive officers a total of 37,250 shares pursuant to
Incentive Stock Options and to 29 other key employees a total of 58,040 shares
pursuant to Incentive Stock Options, all under the Incentive Plan. All of such
awards will vest at the rate of twenty percent per year for the first five
years, expire ten years, expire ten years after the date of the award and are
exercisable at $30.31 per share. Exercisability of such awards is subject to
stockholder approval of the Incentive Plan at the Annual Meeting.
18
22
RESTRICTED SHARES
Restricted share awards are shares of Common Stock bearing restrictive
legends prohibiting their sale, transfer, pledge or hypothecation until the
expiration of a restriction period of not more than ten years set at the time of
grant. In addition or in lieu of a restriction period, the Committee may
establish a performance goal which must be achieved as a condition to retention
of the award. Restrictions may be removed as to some or all of the shares upon
the occurrence of events determined by the Committee in its sole discretion to
justify such removal, such as retirement, or disability. The recipient of an
award is entitled to receive dividends and vote the restricted shares, unless
forfeited. Under the Plan, no Covered Employee (as defined in Section 162(m)(3)
of The Internal Revenue Code) may be granted more than 100,000 shares of
Restricted Stock during any calendar year.
STOCK OPTIONS
Options granted under the Incentive Plan may be either incentive stock
options, as defined in the Internal Revenue Code, as amended, or options which
do not so qualify ("nonqualified options"). At the time an option is granted,
the Committee determines the number of shares of Common Stock subject to each
stock option, the manner and time of exercise, and the vesting schedule. No
options granted under the Incentive Plan may be exercised more than 10 years
after date of grant; however, Incentive Stock Options granted to a Ten Percent
Shareholder (as defined) may not be exercised more than 5 years after the date
of grant. The option price per share for stock options will be set in the grant,
but will be equal to or greater than the fair market value of a share of Common
Stock on the date of grant, except with respect to an Incentive Stock Option
granted to a Ten Percent Shareholder (as defined) shall be at least 110% of the
fair market value on the date of grant. The option exercise price may be paid
with cash and/or shares of Common Stock. Options will be evidenced by stock
option agreements in a form approved by the Committee and are transferable, to
the extent vested at the death of an optionee, only except by will or descent.
Under the Plan, no Covered Employee (as defined in Section 162(m)(3) of The
Internal Revenue Code) may be granted more than 100,000 shares of Stock Options
during any calendar year. With respect to Incentive Stock Options granted to
any employee, the aggregate fair market value determined on the date of grant
with respect to which any Incentive Stock Option is first exercisable shall not
exceed $100,000.
The granting of an option does not entitle the participant to any
dividends, voting or other rights of a stockholder, unless and until the
participant receives stock upon exercise of the option. Options which are not
exercisable immediately upon being granted may be made immediately exercisable
upon the occurrence of events determined by the Committee in its sole discretion
to justify such immediate exercisability, such as retirement or disability.
19
23
STOCK APPRECIATION RIGHTS
A stock appreciation right (SAR) is the right to payment for the
appreciation in value of one share of Common Stock over a specified price. An
SAR may be granted either in tandem with a stock option award or independently.
If the SAR is granted in tandem with a stock option award, the payment is
measured by the excess of the fair market value of the Common Stock at the time
of exercise over the option price (which can not be less than the fair market
value of the stock at the time of grant). If the SAR is granted independent of
a stock option, the Committee will specify whether the award is a "regular" SAR
or whether the award is a "book value" SAR. If the award is a "regular" SAR,
the payment is measured by the excess of the fair market value of the stock at
the time of exercise over the fair market value at the time of grant. If the
award is a "book value" SAR, the payment is measured by the excess of the book
value of the Common Stock at the time of exercise over the book value of the
Common Stock at the time of grant.
Stock appreciation payments, at the election of the participant, may
be made in cash or Common Stock or a combination of both. The Committee must
approve and election to receive cash and such election can only be made during
certain window periods.
An SAR issued pursuant to an option cannot be exercised less than six
months after the grant except, in the discretion of the Commitee, in case of
disability of the participant; an SAR issued independently is subject to the
terms and conditions established on grant. SARs are deemed to be exercised on
the last day of the Exercise Period, if not previously exercised, which may not
extend more than ten years beyond the date of grant. SARs are transferable, to
the extent vested at the death of an optionee, only by will or descent.
The granting of an SAR does not entitle the participant to any
dividend, voting or other rights of a stockholder, unless and until the
participant receives stock upon the exercise of an SAR. SARs which are not
exercisable immediately upon being granted may be made immediately exercisable
upon the occurrence of events determined by the Committee in its sole discretion
to justify such exercisability, such as retirement or disability. Under the
Plan, no Covered Employee (as defined in Section 162(m)(3) of The Internal
Revenue Code) may be granted more than 100,000 SARs
during any calendar year.
PERFORMANCE SHARES
A performance share award involves the grant of a right to receive a
specified number of shares of the Common Stock upon satisfaction of certain
performance-related objectives specified in the granting instrument. The
performance-related objectives may relate to the individual, the Company, a
department or a division of the Company and/or a group or class of participants.
The measuring period used to establish the performance criteria will be
specified by the Committee at the time of grant and may be subsequently waived
or reduced, or the performance criteria may be adjusted, upon the occurrence of
events determined by the Committee in its sole discretion to justify such
waiver, reduction or adjustment. Under the Plan, no Covered Employee (as
defined in Section 162(m)(3) of The Internal Revenue Code) may be granted more
than 100,000 shares of Performance Shares during any calendar year.
INCOME TAX CONSEQUENCES
The Federal income tax consequences of an award under the Incentive
Plan depend on the type of award, as discussed below. The grant of a restricted
share award or a performance share award does not immediately produce taxable
income to a recipient or a tax deduction to the Company.
20
24
However, at the time the restrictions expire or the performance objectives have
been achieved, as the case may be, a recipient will recognize taxable ordinary
income in an amount equal to the fair market value of the stock on the date the
restrictions expire or the performance criteria are achieved and the Company
will be entitled to a corresponding income tax deduction. In the case of a
restricted share award, during the restriction period, a recipient will be taxed
on the dividends received from the restricted shares as additional compensation,
and the Company will be entitled to a corresponding compensation deduction.
Generally, a recipient of an incentive stock option will not recognize
taxable income at the time of grant or exercise and the Company will not be
entitled to an income tax deduction. Provided the minimum holding periods are
satisfied, any gain on a disposition of stock acquired through an incentive
stock option will be taxable to a recipient as long-term capital gain. If the
minimum holding periods are not satisfied, a recipient will recognize ordinary
income in the amount of the excess of the fair market value of the stock on the
date the option is exercised over the option price, and the Company will be
entitled to a corresponding income tax deduction.
The grant of a nonqualified stock option does not result in taxable
income to a recipient or a tax deduction for the Company. Upon exercise, a
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the stock on the date of exercise over the
option price, and the Company will be entitled to a corresponding income tax
deduction.
A recipient of a stock appreciation right will not recognize taxable
income at the time the right is granted, and the Company will not be entitled to
a tax deduction. However, ordinary taxable income will be recognized by a
recipient and a corresponding deduction will be taken by the Company, at the
time of exercise, in an amount equal to the cash and the fair market value of
the stock received.
AMENDMENT AND TERMINATION
The Board may amend, modify or terminate the Incentive Plan at any
time, except that (1) further stockholder approval is required if such action
(i) materially increases the maximum number of shares of Common Stock which may
be issued under the Incentive Plan, (ii) materially increases the benefits
accruing to participants under the Incentive Plan, (iii) extends the period for
granting awards under the Incentive Plan, or (iv) materially modifies the
eligibility requirements for participation
21
25
in the Incentive Plan; and (2) the consent of a participant is required if such
action is not required by law or regulations and diminishes, reduces or cancels
an award previously granted to such participant.
VOTE REQUIRED
Approval of the Incentive Plan requires approval by the holders of a
majority of the shares of Common Stock present in person or by proxy at the
Annual Meeting.
The Board of Directors recommends a vote FOR the proposal to adopt the
Manor Care, Inc. 1995 Long-Term Incentive Plan. Proxies received by the Board of
Directors will be so voted unless stockholders specify a contrary choice.
PROPOSED APPROVAL OF MANOR CARE, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
On June 22, 1995, the Board of Directors unanimously approved the Manor
Care, Inc. 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") subject
to approval of the Stock Purchase Plan by the affirmative vote of a majority of
the shares of Common Stock present in person or by proxy at the Annual Meeting.
The purposes of the Stock Purchase Plan are to build a proprietary
interest among employees of the Company and to assist the Company in its goal of
recruiting and retaining highly qualified employees at all levels of the
organization.
The following description of the Stock Purchase Plan is qualified in
its entirety by reference to the Manor Care, Inc. 1995 Employee Stock Purchase
Plan, a copy of which is attached as Exhibit B to this Proxy Statement. The
amount of compensation that will accrue to the employees pursuant to the Stock
Purchase Plan, if approved by the stockholders, is not currently determinable.
The Stock Purchase Plan authorizes the purchase of a maximum of
1,000,000 shares (subject to adjustment for stock splits and similar capital
changes) of Common Stock to eligible employees.
The Stock Purchase Plan was drafted to obtain the benefits of the
exemption from Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") provided by Rule 16b-3. Section 16(b) of the Exchange Act
requires (1) directors, officers and holders of more than ten percent of an
issuer's securities file statements with the Securities and Exchange Commission,
reporting the purchase or sale of such securities and (2) provides for the
recovery by the issuer of any profits realized by such persons resulting from
the purchase and sale or sale and purchase of such securities
22
26
within a period of six months. Section 16 potentially applies to directors and
officers of the Company and stockholders who own 10% or more of the outstanding
Common Stock (the "Section 16 Persons"). Generally, each quarterly purchase of
Common Stock pursuant to the Plan on behalf of a participant who is also a
Section 16 Person would be deemed to be a new purchase for purposes of Section
16. Thus, a participant who is also a Section 16 Person would be required to
file a statement on Form 4 each quarter a purchase was made on his behalf.
Furthermore, to sell any shares without exposure to Section 16 liability could
require a participant who is also a Section 16 Person to terminate his
participation in the Plan and wait six months thereafter before selling any
shares of Common Stock. Under Rule 16b-3, however, if the Plan is approved by
the stockholders, such a participant would not be required to file a Form 4 each
quarter a purchase under the Stock Purchase Plan was made on his behalf, nor
would such purchases be subject to the six month trading limitations.
ELIGIBILITY
Each employee of the Company and its subsidiaries having at least one
year of continuous service on the first day of each January, April, July and
October (an "Offering Date"), beginning January 1, 1996, is eligible to
participate in the Stock Purchase Plan. All employees will be eligible to
participate after completing one year of employment. Any employee who
immediately after the grant of a right owns 5% or more of the Common Stock,
however, would not be eligible to participate. The Company presently employs
approximately 28,000 persons, of whom 21,000 meet the eligibility requirements
set forth above. The Company anticipates that approximately 3,500 to 4,500
employees will elect to participate in the Stock Purchase Plan if approved by
the stockholders at the Annual Meeting.
ADMINISTRATION
The Stock Purchase Plan will be administered by the Board of Directors.
Rights will be granted quarterly on each Offering Date, and are
exercisable effective on the succeeding last trading day of March, June,
September and December, respectively. Eligible employees may purchase shares of
Common Stock through accumulation of payroll deductions (of not less than 2% nor
more than 10% of compensation, as defined in the Stock Purchase Plan). No
participant shall have the right to purchase shares of Common Stock under the
Plan at a rate of more than $25,000 in value in any calendar year, such value
to be based on the fair market value of the Common Stock as of the Offering
Date on which the participant becomes eligible to purchase Common Stock in such
year under the terms of the Plan. At the end of each three month Offering
Period, the Company will contribute cash equal to ten percent (10%) of the
purchase price of the Common Stock, and the Company's designated transfer agent
will use the aggregate employee payroll deductions and the Company contribution
to purchase Common Stock in the open market. The agent will allocate the
purchased Common Stock among the employee accounts in proportion to their
payroll deductions. The Company will pay the administrative expenses for the
purchase of the Common Stock, including broker's commissions, transfer fees and
similar costs. On August 17, 1995, the closing price of the Common Stock on the
New York Stock Exchange was $32.625.
23
27
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the Stock
Purchase Plan except that no such amendment may be made without the approval of
stockholders, if such amendment would (i) materially increase the benefits
accruing to participants under such plan, (ii) increase the number of shares
which may be available for purchase under such plan, or (iii) materially
modify the requirements as to eligibility for participation under such plan.
INCOME TAX CONSEQUENCES
Generally, a recipient of stock acquired through the Stock Purchase
Plan will not recognize taxable income until such recipient disposes of the
stock and the Company will not be entitled to an income tax deduction. Provided
the minimum holding periods are satisfied, upon disposition of stock acquired
through the Stock Purchase Plan, the lesser of (1) the excess of the fair market
value of the stock on the date of purchase over the exercise price paid; or (2)
the excess of the fair market value of the stock at the time of disposition over
the exercise price paid, will be taxable to a recipient as ordinary income
(compensation), and the Company will not be entitled to a corresponding income
tax deduction. Any additional gain will be taxable to such recipient as
long-term capital gain. If the minimum holding periods are not satisfied, a
recipient will recognize ordinary income (compensation) in the amount of the
excess of the fair market value of the stock on the date of purchase over the
exercise price paid, and the Company will be entitled to a corresponding income
tax deduction. Any additional gain will be taxable to such recipient as
long-term capital gain.
VOTE REQUIRED
Approval of the Stock Purchase Plan requires approval by the holders of
a majority of the shares of Common Stock present in person or by proxy at the
Annual Meeting.
The management of the Company recommends a vote FOR the proposal to
adopt the Manor Care, Inc. 1995 Employee Stock Purchase Plan. Proxies received
by the Board of Directors will be so voted unless stockholders specify a
contrary choice.
CERTAIN TRANSACTIONS
On September 1, 1994, Manor Care, Inc. entered into a Master Aircraft
Lease Agreement with Wilderness Investment Company, Inc. ("Wilderness"), a
corporation which is solely owned by Stewart Bainum. The lease, which permits
the Company to lease from time to time a Cessna Citation VI owned by Wilderness
at the rate of $1,150 per flight hour. During the 1995 fiscal year, the Company
incurred a total of $40,399 for aircraft usage pursuant to the Lease.
As of May 31, 1995, the Company purchased from Messrs. Hazard and
Petitt 25 shares each, representing one-half of their shares, of CHI Common
Stock. In accordance with a formula contained in an agreement dated December
20, 1994, the Company paid Messrs. Hazard and Petitt the sum of $13,683,704
each for
24
28
such shares. After the transaction, Messrs. Hazard and Petitt each owned 25
shares of CHI Common Stock and the Company owned 850 shares of CHI Common Stock.
In the opinion of management, the foregoing transactions were on terms
at least as advantageous to the Company as could have been obtained from
non-affiliated persons.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has been the Company's independent public
accountants since June 1976. In the Spring of 1996, the Board of Directors will
select the Company's independent public accountants to audit the accounts of the
Company for the current fiscal year. Representatives of Arthur Andersen & Co.
are expected to be present at the Meeting, and will have an opportunity, if they
so desire, to make a statement and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
The Company's 1996 Annual Meeting is presently scheduled to be held on
September 12, 1996. Stockholder proposals must be submitted to the Secretary no
later than April 12, 1996, in order to be eligible for inclusion in the
Company's proxy materials for such meeting.
OTHER BUSINESS
As of the date of the Proxy Statement, management does not know of any
business other than that mentioned above which will be presented for
consideration. However, if any other matter should properly come before the
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxies in accordance with their judgment on such matter.
After the business session and a report to the stockholders on the
progress of the Company, a discussion period will take place during which
stockholders will have an opportunity to discuss matters of interest concerning
the Company.
------------------------
A COPY OF THE COMPANY'S 1995 FORM 10-K (EXCLUDING EXHIBITS) FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE MADE AVAILABLE TO STOCKHOLDERS,
WITHOUT CHARGE, UPON WRITTEN
25
29
REQUEST TO THE ASSISTANT TREASURER OF MANOR CARE, INC., 10750 COLUMBIA PIKE,
SILVER SPRING, MARYLAND 20901. THE REPRODUCTION COST WILL BE CHARGED IF EXHIBITS
ARE REQUESTED.
26
30
EXHIBIT A
MANOR CARE, INC.
1995 LONG-TERM INCENTIVE PLAN
SECTION ONE. DESIGNATION AND PURPOSE OF PLAN
The purpose of the Manor Care, Inc. 1995 Long-Term Incentive Plan (the
"Plan") is to increase the ownership of Company Stock by those officers,
professional staff and other key employees who are mainly responsible for the
continued growth and development and financial success of the Company and its
subsidiaries. Such stock ownership gives such employees a proprietary interest
in the Company which induces them to continue in its employ. The Plan also
enables the Company to attract and retain such employees and reward them for
the continued profitable performance of Manor Care, Inc.
SECTION TWO. DEFINITIONS
The following definitions are applicable herein:
A. "Award" - Individually or collectively, Options, Stock Appreciation
Rights, Performance Shares or Restricted Stock granted hereunder.
B. "Award Period" - the period of time during which a Stock
Appreciation Right which has not been granted pursuant to an Option may be
exercised. The Award Period shall be set forth in the document issuing the Stock
Appreciation Right to the selected Eligible Employee.
C. "Board" - the Board of Directors of the Company.
D. "Book Value" - the book value of a share of Stock determined in
accordance with the Company's regular accounting practices as of the last
business day of the month immediately preceding the month in which a Stock
Appreciation Right is exercised as provided in Section Nine D.
E. "Code" - the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any amendments or
successor provisions to such section and any regulations promulgated thereunder.
F. "Committee" - the Key Executive Stock Option Plan Committee
appointed to administer the Plan pursuant to Section Four.
G. "Company" - Manor Care, Inc., including any present or future
"subsidiary corporation" as such term is defined in Section 424(f) of the 1986
Internal Revenue Code, as amended.
H. "Covered Employee" - an individual described in Section 162(m)(3) of
the Code.
I. "Date of Grant" - the date on which the granting of an Award is
authorized by the Committee or such later date as may be specified by the
Committee in such authorization.
J. "Eligible Employee" - any person employed by the Company or a
Subsidiary on a regularly scheduled basis who satisfies all of the requirements
of Section Six.
K. "Exercise Period" - the period or periods during which a Stock
Appreciation Right is exercisable as described in Section Nine B.
27
31
L. "Fair Market Value" - the fair market value of the Stock as
determined in accordance with Section Eight D.
M. "Incentive Stock Option" - an incentive stock option within the
meaning of Section 422 of the Code.
N. "Option" or "Stock Option" - either a nonqualified stock option or
an Incentive Stock Option granted under Section Eight. It also means any Option
which remains after a Participant has exercised his Option with respect to part
of the shares covered by a Stock Option Agreement as described in Section Eight
B.
O. "Option Period" or "Option Periods" - the period or periods during
which an Option is exercisable as described in Section Eight E.
P. "Option Price" - the price, expressed on a per share basis, for
which the Company Stock can be acquired by the holder of an Option pursuant to
the exercise of such Option.
Q. "Participant" - an Eligible Employee of the Company or a Subsidiary
who has been granted an Option, a Stock Appreciation Right, a Performance Share
Award or a Restricted Stock Award under this Plan.
R. "Performance Share" - an Award granted under Section Ten.
S. "Restricted Stock" - an Award granted under Section Seven.
T. "Stock" and "Company Stock" - the common stock of the Company.
U. "Stock Appreciation Right" - an Award granted under Section Nine.
V. "Subsidiary" - any corporation of which fifty percent (50%) or more
of its outstanding voting stock or voting power is beneficially owned, directly
or indirectly, by the Company.
W. "Ten Percent Shareholder" - a Participant who, at the Date of Grant,
owns directly or indirectly (within the meaning of Section 424(d) of the
Internal Revenue Code) stock possessing more then ten percent (10%) of the total
combined voting power of all classes of stock of the Company or a subsidiary
thereof.
X. Wherever appropriate, words used in this Plan in the singular may
mean the plural, the plural may mean the singular and the masculine may mean the
feminine.
SECTION THREE. EFFECTIVE DATE, DURATION AND STOCKHOLDER APPROVAL
A. Effective Date and Stockholder Approval. Subject to the approval of
the Plan by a majority of the outstanding shares of Stock voted at the 1995
Annual Meeting of Stockholders, the Plan shall be effective as of June 21, 1995.
B. Period for Grant of Awards. Awards may be made as provided herein
for a period of ten (10) years after June 21, 1995.
SECTION FOUR. ADMINISTRATION
A. Appointment of Committee. The Board of Directors shall appoint one
or more Key Executive Stock Option Plan Committees which shall consist of not
less than two (2) members of such Board of Directors and which members shall
28
32
be disinterested persons as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (or such greater number of members which may be required
by said Rule 16b-3). In addition, such Board of Directors shall designate a
member of the Committee to act as Chairman of the Committee, and such Board of
Directors may remove any member of the Committee at any time and appoint any
director to fill any vacancy on the Committee.
B. Committee Meetings. The Committee shall hold its meetings at such
times and places as specified by the Committee Chairman. A majority of the
Committee shall constitute a quorum. All actions of the Committee shall be taken
by all of the members of the meeting duly called by its Chairman; provided,
however, any action taken by a written document signed by a majority of the
members of the Committee shall be as effective as action taken by the Committee
at a meeting duly called and held.
C. Committee Powers. Subject to the provisions of this Plan, the
Committee shall have full authority in its discretion to (i) designate the
Participants to whom Awards shall be granted, (ii) determine the number of
shares to be made available under each such Award, (iii) determine the period or
periods in which the Participant may exercise such Award (iv) determine the date
when such Award expires, (v) determine the price for Stock under such Award, and
(vi) determine the grounds of forfeiture of an Award. The Committee shall have
all powers necessary to administer the Plan in accordance with its terms,
including the power to interpret this Plan and resolve all questions arising
thereunder. The Committee may prescribe such rules and regulations for
administering this Plan as the Committee deems appropriate.
SECTION FIVE. GRANT OF AWARDS AND LIMITATION OF NUMBER OF SHARES SUBJECT TO
AWARD
The Committee may, from time to time, grant Awards to one or more
Eligible Employees, provided that (i) subject to any adjustment pursuant to
Section Eleven, the aggregate number of shares of Stock subject to Stock
Options, Stock Appreciation Rights, Performance Share Awards or Restricted Stock
Awards under this Plan may not exceed 1,110,122 shares; (ii) to the extent that
a Stock Option, Stock Appreciation Right, Performance Share Award or Restricted
Stock Award lapses or the rights of the Participant to whom it was granted
terminate, expire or are cancelled for any other reason, in whole or in part,
shares of Stock (or remaining shares) subject to such Award shall again be
available for the grant of an Award under the Plan (provided that the forfeiting
Participant received no benefits of ownership from the Stock, such as
dividends); and (iii) Shares delivered by the Company under the Plan may be
authorized and unissued Stock, Stock held in the treasury of the Company or
Stock purchased on the open market (including private purchases) in accordance
with applicable securities laws. In determining the size of Awards, the
Committee shall take into account the responsibility level, performance,
potential, and cash compensation level of a Participant, and the Fair Market
Value of the Stock at the time of Awards, as well as such other considerations
it deems appropriate.
SECTION SIX. ELIGIBILITY
Key employees of the Company and its Subsidiaries (including employees
who are members of the Board, but excluding directors who are not employees)
who, in the opinion of the Committee, are mainly responsible for the continued
growth and development and financial success of the business of the Company or
one or more of its Subsidiaries shall be eligible to be granted Awards under the
Plan. Subject to the provisions of the Plan, the Committee may from time to time
select from such eligible persons those to whom Awards shall be granted and
determine the nature and amount of each Award. No employee of the Company or its
Subsidiaries shall have any right to be granted an Award under this Plan. A
member of the Committee shall not be eligible for any Award hereunder.
SECTION SEVEN. RESTRICTED STOCK AWARDS
A. Grants of Shares of Restricted Stock. An Award made pursuant to this
Section Seven shall be granted in the form of shares of Stock, restricted as
provided in this Section Seven. Shares of the Restricted Stock shall be issued
to the Participant without the payment of consideration by the Participant. The
shares of Restricted Stock shall be issued in the name of the Participant and
shall bear a restrictive legend prohibiting sale, transfer, pledge or
hypothecation of the shares of Restricted Stock until the expiration of the
restriction period.
29
33
The Committee may also impose such other restrictions and conditions on
the shares of Restricted Stock as it deems appropriate.
B. Restriction Period. At the time a Restricted Stock Award is made,
the Committee may establish a restriction period applicable to such Award which
shall not be more than ten (10) years. Each Restricted Stock Award may have a
different restriction period, at the discretion of the Committee. In addition to
or in lieu of a restriction period, the Committee may establish a performance
goal which must be achieved as a condition to the retention of the Restricted
Stock. The performance goal may be based on the attainment of specified types of
performance measurement criteria, which may differ as to various Participants or
classes or categories of Participants. Such criteria may include, without
limitation, the attainment of certain performance levels by the individual
Participant, the Company, a department or division of the Company and/or a group
or class of participants. Any such performance goals, together with the ranges
of Restricted Stock Awards for which the Participants may be eligible shall be
set from time to time by the Committee and shall be timely communicated to the
Eligible Employees in advance of the commencement of the performance of services
to which such performance goals relate. The total number of shares of Restricted
Stock which may be granted to any single Covered Employee under this Plan during
any calendar year shall be limited to 100,000.
C. Forfeiture or Payout of Award. In the event a Participant ceases
employment during a restriction period, or in the event performance goals
attributable to a Restricted Stock Award are not achieved, subject to the terms
of each particular Restricted Stock Award, and subject to discretionary action
by the Committee as set forth below in Section Thirteen, a Restricted Stock
Award is subject to forfeiture of the shares of stock which had not previously
been removed from restriction under the terms of the Award.
Any shares of Restricted Stock which are forfeited will be transferred
to the Company.
Upon completion of the restriction period and satisfaction of any
performance-goal criteria, all restrictions upon the Award will expire and new
certificates representing the Award will be issued without the restrictive
legend described in Section Seven A. As a condition precedent to receipt of the
new certificates, the Participant (or the designated beneficiary or personal
representative of the Participant) will agree to make payment to the Company in
the amount of any taxes, payable by the Participant, which are required to be
withheld with respect to such shares of Stock.
SECTION EIGHT. STOCK OPTIONS
A. Grant of Option. One or more Options may be granted to any Eligible
Employee. Upon the grant of an Option to an Employee, the Committee shall
specify whether the Option is intended to constitute a non-qualified stock
option or an Incentive Stock Option. The total number of shares of Stock subject
to Options which may be granted to any single Covered Employee under this Plan
during any calendar year shall be limited to 100,000.
B. Stock Option Agreement. Each Option granted under the Plan shall be
evidenced by a written "Stock Option Agreement" between the Company and the
Participant containing such terms and conditions as the Committee determines,
including, without limitation, provisions to qualify Incentive Stock Options as
such under Section 422 of the Code. Such agreements shall incorporate the
provisions of this Plan by reference. The date of granting an Option is the date
specified in the written Stock Option Agreement which is signed by the
Participant and the Company.
C. Determination of Option Price. The Option price for Stock shall be
not less than 100% of the fair market value of the Stock on the date of grant.
Notwithstanding the foregoing, in the case of an Option which is designed to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code)
which is granted to a Ten Percent Shareholder, the Option Price shall not be
less than 110% of such fair market value.
D. Determination of Fair Market Value. The fair market value of the
Stock on the date of granting an Option shall be the mean of the high and low
prices at which the Stock was sold on the market on such date. In the event no
such
30
34
sales of Stock occurred on such date, the fair market value of the Stock shall
be determined by the Committee in accordance with applicable Regulations of the
Internal Revenue Service.
E. Term of Option. The term of an Option may vary within the
Committee's discretion; provided, however, that the term of an Option shall not
exceed ten (10) years from the date of granting the Option to the Participant,
and, to this end, all Options granted pursuant to this Plan must provide that
each such Option cannot be exercised after the expiration of ten (10) years from
the date each such Option is granted. Notwithstanding the foregoing, in the case
of any Option which is designed to qualify as an Incentive Stock Option (as
defined in Section 422 of the Code) which is granted to a Ten Percent
Shareholder, the term of such Option may not exceed five (5) years from the date
of grant of such Option.
F. Limitation on Exercise of Option. The Committee may limit an Option
by restricting its exercise in whole or in part for specified periods.
G. Method of Exercising an Option. Subject to the terms of a particular
Option, a Participant may exercise it in whole or in part by written notice to
the Secretary of the Company stating in such written notice the number of shares
of Stock such Participant elects to purchase under his Option.
H. No Obligation to Exercise Option. A Participant is under no
obligation to exercise an Option or any part thereof.
I. Payment for Option Stock. Stock purchased pursuant to an Option
shall be paid in full at the time of purchase. Payment may be made (a) in cash,
(b) with the approval of the Committee, by delivery to the Company of shares of
Stock having an aggregate fair market value equal to the exercise price, or (c)
a combination of (a) and (b). Payment may also be made, in the discretion of the
Committee, by delivery (including by facsimile transmission) to the Company or
its designated agent of an executed irrevocable Option exercise form together
with irrevocable instructions to a broker-dealer to sell (or margin) a
sufficient portion of the shares and deliver the sale (or margin loan) proceeds
directly to the Company to pay for the exercise price. Upon receipt of payment
and subject to paragraph J of this Section Eight, the Company shall, without
transfer or issue tax to the Participant or other person entitled to exercise
the Option, deliver to the Participant (or other person entitled to exercise the
Option) a certificate or certificates for such shares.
J. Delivery of Stock to Participant. The Company shall undertake and
follow all necessary procedures to make prompt delivery of the number of shares
of Stock which the Participant elects to purchase upon exercise of an Option
granted under this Plan. Such delivery, however, may be postponed, at the sole
discretion of the Company, to enable the Company to comply with any applicable
procedures, regulations or listing requirements of any government agency, stock
exchange or regulatory authority.
K. Failure to Accept Delivery of Stock. If a Participant refuses to pay
for Stock which he has elected to purchase under his Option, in accordance with
the terms of payment, which had previously been agreed upon, his Option shall
thereupon, at the sole discretion of the Committee, terminate, and such funds
previously paid for unissued Stock shall be refunded. Stock which has been
previously issued to the Participant and been fully paid for shall remain the
property of the Participant and shall be unaffected by such termination.
L. Non-Transferability of Options. During the lifetime of a
Participant, an Option granted to him may be exercised only by him. It may not
be sold, assigned, pledged or otherwise transferred except by will or by the
laws of descent and distribution. No Option or any right thereunder shall be
subject to execution, attachment or similar process. Upon any attempt by a
Participant to so sell, assign, pledge or otherwise transfer any Option, or any
right thereunder, contrary to the provisions hereof, the Option and all rights
thereunder shall immediately become null and void.
M. Stock Restriction. Stock that a Participant receives upon exercise
of an Option, if such exercise occurs before six (6) months have elapsed from
the Date of Grant of a Option, shall bear a restrictive legend prohibiting sale,
transfer, pledge, or hypothecation of such stock for a period of six (6) months
from the Date of Grant of the Option.
31
35
N. Purchase for Investment
(a) Written Agreement by Participants. Unless a registration
statement under the Securities Act of 1933 is then in effect with respect to the
Stock a Participant receives upon exercise of his Option, a Participant shall
acquire the Stock he receives upon exercise of his Option for investment and not
for resale or distribution and he shall furnish the Company with a written
statement to that effect when he exercises his Option and a reference to such
investment warranty shall be inscribed on the Stock certificate(s).
(b) Registration Requirement. Each Option shall be subject to
the requirement that, if at any time the Board determines that the listing,
registration or qualification of the shares subject to the Option upon any
securities exchange or under any state or Federal law is necessary or desirable
as a condition of, or in connection with, the issuance of shares thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration or qualification shall have been effected or obtained (and the same
shall have been free of any conditions not acceptable to the Board).
O. Special Limitations on Exercise of Incentive Stock Options. The
aggregate fair market value (determined at the time the Incentive Stock Option
is granted) of the Stock with respect to which any Incentive Stock Option is
first exercisable during any calendar year shall not exceed $100,000.
SECTION NINE. STOCK APPRECIATION RIGHTS
A. Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted under the Plan in conjunction with an Option either at the time of grant
or by amendment or may be separately awarded. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose. However, the total number of Stock Appreciation Rights
which may be granted to a single Covered Employee under this Plan during any
calendar year shall be limited to 100,000.
B. Right to Exercise; Exercise Period. A Stock Appreciation Right
issued pursuant to an Option shall be exercisable to the extent the Option is
exercisable. Both such Stock Appreciation Right and the Option to which it
relates shall not be exercisable during the six (6) months following their
respective Dates of Grant except, in the discretion of the Committee, in the
event of the disability of the Participant. A Stock Appreciation Right issued
independent of an Option shall be exercisable pursuant to such terms and
conditions established in the grant.
C. Automatic Redemption of Unexercised Stock Appreciation Rights. If on
the last day of the Option Period, in the case of a Stock Appreciation Right
granted pursuant to an Option, or the specified Award Period, in the case of a
Stock Appreciation Right issued independent of an Option, the Participant has
not exercised such Stock Appreciation Right, then such Stock Appreciation Right
shall be automatically redeemed by the Company for an amount equal to the
payment that would otherwise have been made to the Participant if the
Participant had chosen to exercise the Stock Appreciation Right on the last day
of the Option Period or the specified Award Period, as the case may be.
D. Rights Upon Exercise. An exercisable Stock Appreciation Right
granted pursuant to an Option shall entitle the Participant to surrender
unexercised the Option or any portion thereof to which the Stock Appreciation
Right is attached, and to receive in exchange for the Stock Appreciation Right a
payment (in cash or Stock or a combination thereof as described below) equal to
the Fair Market Value of one share of Stock at the date of exercise minus the
Option Price times the number of shares called for by the Stock Appreciation
Right (or portion thereof) which is so exercised. With respect to the issuance
of Stock Appreciation Rights which are not granted pursuant to an Option, the
Committee shall specify upon the Date of the Grant of the Stock Appreciation
Right whether the Stock Appreciation Right is a "regular" Stock Appreciation
Right or a "book value" Stock Appreciation Right. Upon the exercise of a regular
Stock Appreciation Right, the Participant will receive a payment equal to the
Fair Market Value of one share of Stock at the date of exercise minus the Fair
Market Value of one share of Stock as of the Date of Grant of the Stock
Appreciation Right times the number of shares called for by the Stock
Appreciation Right (or portion thereof) which is so exercised. Upon the exercise
of a book value Stock Appreciation Right, the Participant will receive a payment
equal to the Book Value of one share of Stock at the date of
32
36
exercise minus the Book Value of one share of Stock as of the Date of the Grant
of the Stock Appreciation Right times the number of shares called for by the
Stock Appreciation Right (or portion thereof) which is so exercised.
If the Participant elects to receive cash in full or partial settlement
of the Stock Appreciation Right (i) the Committee must consent to or disapprove
such election and (ii) the election and the exercise must be made during the
period beginning on the 3rd business day following the date of public release of
quarterly or year-end earnings and ending on the 12th business day following the
date of public release of quarterly or year-end earnings. The value of any Stock
to be received upon exercise of a Stock Appreciation Right shall be the Fair
Market Value of the Stock on such date of exercise. Stock Appreciation Right
is exercised. To the extent that a Stock Appreciation Right issued pursuant to
an Option is exercised, such Option shall be deemed to have been exercised,
and shall not be deemed to have lapsed.
E. Nontransferable. A Stock Appreciation Right shall not be
transferable by the Participant except by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant or by the guardian or legal representative of the
Participant.
SECTION TEN. PERFORMANCE SHARES
A. Grant of Performance Share Units. Awards made pursuant to this
Section Ten shall be granted in the form of Performance Shares, subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose. Performance Shares shall be issued to the Participant without the
payment of consideration by the Participant. Awards shall be based on the
attainment of specified types and combination of performance measurement
criteria, which may differ as to various Participants or classes or categories
of Participants. Such criteria may include, with limitation, the attainment of
certain performance levels by the individual Participant, the Company, a
department or division of the Company and/or a group or class of Participants.
Such criteria, together with the ranges of Performance Shares from which
employees may be eligible shall be set from time to time by the Committee and
shall be timely communicated to the Eligible Employees in advance of the
performance of services to which the performance criteria relate. The total
number of Performance Shares which may be granted to any single Covered Employee
under this Plan during any calendar year shall be limited to 100,000.
B. Performance Period. The measuring period to establish the
performance criteria set forth in a Performance Share Award shall be determined
by the Committee. Notwithstanding the other provisions of this Section, a
Performance Share Award may initially provide, or the Committee may at any time
thereafter, but no more frequently than once in any six (6) month period, amend
it to provide, for waiver or reduction of the measuring period and, if
appropriate, for adjustment of the performance criteria set forth in the
Performance Share Award, upon the occurrence of events determined by the
Committee in its sole discretion to justify such waiver, reduction or
adjustment.
C. Form of Payment. Upon the completion of the applicable measuring
period, a determination shall be made by the Committee in accordance with the
Award as to the number of shares of Stock to be awarded to the Participant. The
appropriate number of shares of Stock shall thereupon be issued to the
Participant in accordance with the Award in satisfaction of such Performance
Share Award.
SECTION ELEVEN. CHANGES IN CAPITAL STRUCTURE
In the event of a change in the capital structure of the Company, the
number of shares specified in Section Five of this Plan, the number of shares
covered by each outstanding Award and the price per share shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock resulting from the splitting or consolidation of shares, or the
payment of a stock dividend, or effected in any other manner without receipt of
additional or further consideration by the Company.
33
37
SECTION TWELVE. CORPORATE REORGANIZATION OR DISSOLUTION
A. Discontinuation of the Plan. The Plan shall be discontinued in the
event of the dissolution or liquidation of the Company or in the event of a
Reorganization (as hereinafter defined) in which the Company is not the
surviving or acquiring company, or in which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization and no plan or agreement respecting the Reorganization is
established which specifically provides for the continuation of the Plan and the
change, conversion, or exchange of the stock relating to existing Awards under
this Plan for securities of another corporation. Upon the dissolution of the
Plan in connection with an event described in this Paragraph A, all Awards shall
become fully vested and all outstanding Options and Stock Appreciation Rights
shall become immediately exercisable by the holder thereof. Any Options or Stock
Appreciation Rights granted under the Plan may be terminated as of a date fixed
by the Committee, provided that no less than fifteen (15) days written notice of
the date so fixed shall be given to each Participant and each such Participant
shall have the right during such period to exercise all or any portion of such
Options or Stock Appreciation Rights. Any Stock Appreciation Rights not so
exercised shall be redeemed.
B. Continuation of the Plan Upon a Reorganization. In the event of a
Reorganization (as hereinafter defined) (i) in which the Company is not the
surviving or acquiring company, or in which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization, and (ii) with respect to which there is a reorganization
agreement which undertakes to continue the Plan and to provide for the change,
conversion or exchange of the Stock attributable to outstanding Awards for
securities of another corporation, then the Plan shall continue and the
Committee shall adjust the shares under such outstanding Awards (and shall
adjust the shares remaining under the Plan which are then to be available for
the grant of additional Awards under the Plan, if the reorganization agreement
makes specific provisions therefor), in a manner not inconsistent with the
provisions of the reorganization agreement and this Plan for the adjustment,
change, conversion or exchange of such Awards.
The term "Reorganization" as used in this Section Twelve shall mean any
statutory merger, statutory consolidation, sale of all or substantially all of
the assets of the Company, or sale, pursuant to an agreement with the Company,
of securities of the Company pursuant to which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization.
C. Adjustments and Determinations. Adjustments and determinations
under this Section Twelve shall be made by the Committee, whose decisions as to
what adjustments or determinations shall be made, and the extent thereof, shall
be final, binding, and conclusive.
SECTION THIRTEEN. RETIREMENT AND DISABILITY
The Committee may, in its discretion, waive the forfeiture,
termination, or lapse of an Award in the event of retirement or disability of a
Participant (each as determined by the Committee, in its discretion). Exercise
of such discretion by the Committee in any individual case, however, shall not
be deemed to require, or to establish a precedent suggesting such exercise in
any other case.
SECTION FOURTEEN. MISCELLANEOUS PROVISIONS.
A. Nontransferability. No benefit provided under this Plan shall be
subject to alienation or assignment by a Participant (or by any person entitled
to such benefit pursuant to the terms of this Plan), nor shall it be subject to
attachment or other legal process of whatever nature. Any attempted alienation,
assignment or attachment shall be void and of no effect whatsoever. Payment
shall be made only to the Participant entitled to receive the same or said
Participant's authorized legal representative. Deposit of any sum in any
financial institution to the credit of any Participant (or a person entitled to
such sum pursuant to the terms of this Plan) shall constitute payment to that
Participant (or such person).
B. No Employment Right. Neither this Plan nor any action taken
hereunder shall be construed as giving any right to be retained as an officer or
employee of the Company or any of its Subsidiaries.
34
38
C. Tax Withholding. Either the Company or a Subsidiary, as appropriate,
shall have the right to deduct from all Awards paid in cash any federal, state
or local taxes as it deems to be required by law to be withheld with respect to
such cash payments. In the case of Awards paid in Stock, the employee or other
person receiving such Stock may be required to pay to the Company or a
Subsidiary, as appropriate, the amount of any such taxes which the Company or
Subsidiary is required to withhold with respect to such Stock. At the request of
a Participant, or as required by law, such sums as may be required for the
payment of any estimated or accrued income tax liability may be withheld and
paid over to the governmental entity entitled to receive the same.
D. Fractional Shares. Any fractional shares concerning Awards shall be
eliminated at the time of payment by rounding down for fractions of less than
one-half and rounding up for fractions of equal to or more than one-half. No
cash settlements shall be made with respect to fractional shares eliminated by
rounding.
E. Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any government agencies
as may be required. The Company shall be under no obligation to register under
the Securities Act of 1933, as amended ("Act"), any of the shares of Stock
issued, delivered or paid in settlement under the Plan. If Stock awarded under
the Plan may in certain circumstances by exempt from registration under the Act,
the Company may restrict its transfer in such manner as it deems advisable to
ensure such exempt status.
F. Severance. Subject to the provision of Paragraph B of this Section
Fourteen, in the event a Participant's employment with the Company terminates,
his rights under any Award which constitutes an Option or a Stock Appreciation
Right terminates one (1) month from the date of such termination of employment.
Such rights shall be exercisable only to the extent the Participant was entitled
to exercise such rights under the Award on the date of such termination of
employment.
G. Death. If a Participant dies prior to the full exercise of his
Option and/or Stock Appreciation Right, his Option to purchase Stock under such
Option and/or Stock Appreciation Right may be exercised to the extent, if any,
that Participant would be entitled to exercise it at the date of the death of
the Participant by the person to whom the Option and/or Stock Appreciation
Right shall pass by will or by the laws of descent and distribution within
twelve (12) months of thedeath of the Participant or the expiration of the term
of the Option and/or Stock Appreciation Right whichever date is sooner.
H. Limitation. In no event may an Option be exercised by anyone after
the expiration date provided for in Section Eight of the Plan.
I. Governing Law. All matters relating to the Plan or to Awards granted
hereunder shall be governed by the laws of the State of Maryland, without regard
to its principles of conflict of laws.
J. Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles and headings, shall control.
SECTION FIFTEEN. AMENDMENT OF PLAN.
A. Discretion of the Board. The Board may at any time and from time to
time alter, amend, suspend or terminate the Plan in whole or in part, except (i)
no action may be taken without stockholder approval which materially increases
the benefits accruing to Participants pursuant to the Plan, materially increases
the number of securities which may be issued pursuant to the Plan (except as
provided in Section Eleven), extends the period for granting Options under the
Plan or materially modifies the requirements as to eligibility for participation
in the Plan and (ii) no such action may be taken without the consent of the
Participant to whom any Award shall theretofore have been granted, which
adversely affects the rights of such Participant concerning such Award, except
as such termination or amendment of the Plan is required by statute, or rules
and regulations promulgated thereunder.
35
39
B. Automatic Termination. This Plan shall terminate on June 21, 2005.
Awards may be granted under this Plan at any time and from time to time prior to
the termination of the Plan. Any Award outstanding at the time the Plan is
terminated shall remain in effect until said Award is exercised or expires.
36
40
EXHIBIT B
MANOR CARE, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
SECTION ONE. PURPOSES
The Manor Care, Inc. 1995 Employee Stock Purchase Plan (the "Plan")
is intended to provide a method whereby employees of Manor Care, Inc. and its
Subsidiaries (hereinafter referred to, unless the context otherwise requires, as
the "Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of Common Stock. Such stock ownership
induces such employees to continue in the employ of the Company. The Plan also
enables the Company to attract and retain such employees. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. The provisions of the Plan shall, accordingly, be
construed as to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
SECTION TWO. DEFINITIONS
A. Agent. The term "Agent" shall have the meaning set forth in Section
Thirteen hereof.
B. Board of Directors. The term "Board of Directors" shall mean the
Board of Directors of the Company or any individual or committee to which the
Board of Directors has delegated authority to act with respect to a specific
activity.
C. Code. The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
D. Common Stock. The term "Common Stock" shall mean the $.10 par value
Common Stock of the Company.
E. Company. The term "Company" shall mean Manor Care, Inc., a Delaware
corporation.
F. Compensation. The term "Compensation" shall mean basic cash
compensation, before any payroll deductions for taxes or any other purposes,
including regular commissions paid by the Company or a Subsidiary to a
Participant in respect of the service of such Participant to the Company or a
Subsidiary during an Offering Period increased by any amounts with respect to
which the Participant has elected to defer or reduce remuneration for federal
income tax purposes (i) under the Manor Care, Inc. Retirement Savings and
Investment Plan, (ii) under the Manor Care, Inc. Nonqualified Retirement Savings
and Investment Plan, or (iii) under any "cafeteria plan" (as described in
Section 125 of the Code) maintained by the Company or a Subsidiary. Compensation
shall not include any amounts paid to the Participant as (i) bonuses, (ii)
overtime pay, (iii) any amounts paid during that Offering Period on account of
the Participant under any other employee pension benefit plan (as defined in
Section 3(2) of ERISA), and (iv) except as otherwise provided in the preceding
sentence, any amounts which are not includible in the income of the Participant
for federal income tax purposes.
G. Continuous Service. The term "Continuous Service" as of any date
shall mean the period determined by the Company, on a uniform basis for
employees similarly situated, to represent the then unbroken period of service
of an employee as an employee of the Company or of a Subsidiary designed by the
Board of Directors to participate in the Plan; provided, however, that in the
case of such a Subsidiary, Continuous Service shall not include service prior to
the date of its affiliation with the Company, unless the Board of Directors
otherwise provides for recognition of such service. A break in Continuous
Service shall be deemed to have occurred whenever an employee voluntarily or
involuntarily ceases to be an employee. The transfer by an employee from one
corporation to another corporation participating in the Plan shall not affect
the Continuous Service of the employee.
H. Designated Subsidiary. The term "Designated Subsidiary" shall mean a
Subsidiary designated by the Board of Directors to participate in the Plan.
37
41
I. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
J. Market Price. The term "Market Price" shall mean the price at which
the Agent purchases Common Stock in accordance with Section Thirteen hereof.
K. Nominee. The term "Nominee" shall have the meaning as set forth in
Section Seven hereof.
L. Offering Date. The term "Offering Date" shall mean the first day of
each January, April, July and October, commencing January 1, 1996.
M. Offering Period. The term "Offering Period" shall mean a three-month
period commencing with an Offering Date and ending with the following Purchase
Date.
N. Option. The term "Option" shall mean the right of a Participant to
acquire Common Stock pursuant to the provisions of the Plan.
O. Participant. The term "Participant" shall mean an eligible employee
who has authorized payroll deductions for the purchase of Common Stock under the
Plan in accordance with Section Four hereof.
P. Purchase Date. The term "Purchase Date" shall mean the last trading
day of each March, June, September, and December, commencing March, 1996 or if a
pay period ends on the last day of a calendar quarter, the next trading day.
Q. Retirement. The term "Retirement" shall mean termination of
employment of a Participant on or after the sixty-fifth birthday of the
Participant.
R. Section 16 Person. The term "Section 16 Person" shall mean any
Participant subject to the limitations of Section 16 of the Securities Exchange
Act of 1934, as amended.
S. Subsidiary. The term "Subsidiary" shall mean a Subsidiary
corporation of the Company as defined by Section 424(f) of the Code.
T. Wherever appropriate, words used in this Plan in the singular may
mean the plural, the plural may mean the singular and the masculine may mean the
feminine.
SECTION THREE. ELIGIBILITY
All employees of the Company, or Designated Subsidiaries of the
Company, who shall have completed one year of Continuous Service as of any
Offering Date, shall be eligible to participate in the Plan, provided that (i)
no employee shall be eligible who, immediately after any Option is granted, owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Subsidiary of the Company
(applying the rules of Section 424(d) of the Code in determining stock
ownership), (ii) no Director of the Company or of any Subsidiary, who is not an
officer or other employee of any thereof, shall participate in the Plan and
(iii) no employee shall be eligible whose customary employment is twenty hours
or less per week or whose customary employment is for not more than five months
in any calendar year.
38
42
SECTION FOUR. METHOD OF PURCHASE
A. On each Offering Date, each Participant shall be granted the right
to purchase such number of shares of Common Stock as may be purchased, as
provided herein, by a sum equal to (i) the amount of the Compensation of the
Participant deducted in accordance with the following paragraph of this Section
Four during an Offering Period and (ii) the amount of the share of the
Participant of the contribution of the Company during such Offering Period.
An eligible employee shall become a Participant in the Plan by
authorizing payroll deductions for the purchase of Common Stock under the Plan
prior to an Offering Date with instructions for the purchase of Common Stock
under the Plan. At the time a Participant files his or her authorization, the
Participant shall elect to have deductions made from his or her pay on each
payday during the time he or she is a Participant at a rate not less than two
percent (2%) and not in excess of ten percent (10%) in whole percentages of his
or her Compensation. All payroll deductions made for a Participant shall be
credited to his or her account under the Plan. A Participant may not make any
separate cash payment into such account. No interest will be paid on funds in
the account of a Participant.
A Participant shall be deemed to have continued his or her most recent
election to participate in the Plan for the next Offering Period unless he or
she notifies the Company on or before the twentieth day of the month preceding
the beginning of the next Offering Period that he or she elects not to
participate in the Plan for the next Offering Period. Such notice may not be
revoked. A Section 16 Person who gives such notice shall not again be eligible
to participate in the Plan before the elapse of the next two full Offering
Periods. Similarly, a Participant may elect to increase or decrease the amount
of his or her payroll deduction on or before the twentieth day of the month
preceding the beginning of the next Offering Period, such increase or decrease
to be effective at the beginning of the next Offering Period.
On or before each Purchase Date, the Company shall contribute to the
Agent an amount equal to ten percent (10%) of the purchase price of the Common
Stock. The Agent shall cause all the proceeds received from contributions of the
Participant and the contribution of the Company to be applied to the open market
purchase of Common Stock. The account of each Participant shall be credited with
the number of shares of Common Stock equal to the sum of the contributions of
the Participant and the share of the Participant of the contribution of the
Company applied by the Agent to the purchase of Common Stock divided by the
average price per share of Common Stock purchased by the Agent. Unless the
Company otherwise directs, the Agent may, but shall not be obligated to,
allocate fractional shares of Common Stock for any Participant or purchase
shares of Common Stock in odd lots. Upon termination of an account, any
fractional shares in the Participant's account will be sold, and the proceeds
therefrom shall be delivered to such Participant. In the event fractional shares
are not allocated to the accounts of Participants under the Plan, any
accumulated payroll deductions which would have been used to purchase fractional
shares shall remain in the accounts of Participants. No interest will be paid on
such funds in accounts of Participants and shall be deemed to be a payroll
deduction of the next Offering Period.
B. No Participant shall have the right to purchase Common Stock under
the Plan at a rate of more than $25,000 in value thereof in any calendar year,
such value to be based on the fair market value per share of the Common Stock as
of the Offering Date on which a Participant becomes eligible to purchase Common
Stock in such year under the terms of the Plan.
C. A Participant may not increase or reduce the amount of his or her
payroll deduction during an Offering Period, provided, however, that a
Participant may reduce the amount of his or her payroll deduction to zero at any
time during the Offering Period in which case the employee may not participate
again in the Plan until the following Offering Period, except that if the
employee is a Section 16 Person then he or she shall not again be eligible to
participate in the Plan before the elapse of the next two full Offering Periods.
A Participant shall be deemed to have elected to purchase all of the shares
which his or her authorized payroll deductions and share of the contribution of
the Company would purchase on a Purchase Date.
D. If at any time the number of shares as to which Options have been
granted shall exceed the remaining number of shares authorized for purchase
under the Plan, the number of shares which may be purchased by each Participant
shall be reduced proportionately.
39
43
E. At any time prior to a Purchase Date the Board of Directors may
terminate the Plan without any obligation whatsoever to the Participants, other
than to refund to each Participant, without interest, any sum accumulated for
him or her by payroll deductions.
SECTION FIVE. WITHDRAWALS
A Participant may withdraw funds in his or her account under the Plan
only by withdrawal from the Plan; in the event of the withdrawal of the
Participant, he or she shall not be eligible to participate in the Plan until
the next Offering Date, except that if the withdrawing Participant is a Section
16 Person then he or she shall not again be eligible to participate in the Plan
before the elapse of the next two full Offering Periods.
SECTION SIX. TERMINATION OF EMPLOYMENT
A. Upon termination of the employment of a Participant for any reason,
excluding death while in the employ of the Company or a Designated Subsidiary or
Retirement, the Common Stock and/or cash credited to his or her account and not
used to purchase shares will be returned to the Participant within sixty days
after the end of the then current Offering Period or as soon as administratively
practicable thereafter. As an alternative to a distribution of Common Stock, a
Participant may request that the Agent sell the Common Stock in the account of a
Participant and forward the net proceeds to such person or persons.
B. Upon termination of the employment of a Participant because of (i)
death, or (ii) Retirement, his or her beneficiary (as defined in Section Nine),
or the Participant, as the case may be, shall have the right to elect, by
written notice given to the Secretary of the Company prior to the expiration of
the period of thirty days commencing with the date of the death of the
Participant, or Retirement of the Participant, as the case may be, either
(i) to withdraw all of the payroll deductions credited to the account
of the Participant under the Plan or
(ii) to exercise the Option of the Participant on the Purchase Date
next following the date of the death of the Participant or Retirement
of the Participant, as the case may be, for the purchase of the number
of full shares of Common Stock which the accumulated payroll deductions
in the account of the Participant at the date of the death of the
Participant or Retirement of the Participant, as the case may be, and
the proportionate share of the contribution of the Company, will
purchase at the applicable Purchase Price, and any excess in such
account will be returned to said beneficiary or Participant, as the
case may be.
In the event that no such written notice of election shall be duly received by
the office of the Secretary of the Company, the beneficiary or Participant, as
the case may be, shall automatically be deemed to have elected to withdraw the
payroll deductions credited to the account of the Participant at the date of the
death or Retirement of the Participant, as the case may be, and the same will be
paid to the said beneficiary or Participant within sixty days after the end of
the current Offering Period or as soon as administratively practicable
thereafter.
In addition, upon termination of the employment of a Participant
because of (i) death, or (ii) Retirement, the Common Stock and/or cash (except
as otherwise provided in this Section Six B) shall be distributed to the
Participant or to the person or persons entitled thereto under Section Nine
within sixty days after the end of the current Offering Period or as soon as
administratively practicable thereafter. As an alternative to a distribution of
Common Stock, a Participant or such person or persons entitled to receive the
account of a Participant under Section Nine may request that the Agent sell the
Common Stock in the account of a Participant and forward the net proceeds to the
Participant or such person or persons.
40
44
SECTION SEVEN. STOCK
Subject to adjustment upon changes in capitalization of the Company as
provided in Section Ten, the maximum number of shares of Common Stock which
shall be made available for purchase under the Plan is 1,000,000 shares.
Shares purchased pursuant to an Option will initially be registered in
the name of a Nominee designated by the Company, as custodian for the account of
the Participant entitled thereto. Stock certificates will not be issued to
Participants for shares held in the name of the Nominee, but all rights accruing
to an owner of record of such shares (including voting rights) will belong to
the Participant for whose account such shares are held. Notwithstanding the
foregoing, each Participant may elect to have some or all of the full shares of
Common Stock previously purchased and registered in the name of the Nominee on
his or her behalf registered in the name of such Participant. Written notice of
such an election must be given by the Participant to the Nominee, specifying the
number of full shares of Common Stock to be registered in the name of such
Participant. The specified number of shares of Common Stock will be transferred
to and registered in the name of the notifying Participant as soon as
administratively practicable.
The Board of Directors may, in its discretion, require as a condition
to the grant of the right to purchase hereunder that the shares of Common Stock
reserved for issuance upon the exercise of the Option shall have been duly
authorized for trading on a national securities exchange and that either
(i) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective; or
(ii) the Participant shall have represented in form and substance
satisfactory to the Company that it is the intention of the Participant
to purchase such shares for investment.
SECTION EIGHT. NONASSIGNABILITY
Neither payroll deductions credited to the account of a Participant nor
any rights with regard to the exercise of an Option or to receive Common Stock
under the Plan may be assigned, transferred, pledged or otherwise disposed of in
any way by the Participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section Five.
SECTION NINE. DESIGNATION OF BENEFICIARY
A Participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
Participant prior to the delivery of such shares or cash to Participant. Such
designation of beneficiary may be changed by the Participant at any time by
written notice to the Secretary of the Company. Within thirty days after the
death of the Participant, the beneficiary may, as provided in Section Six, elect
to exercise the Option of the Participant when it becomes exercisable on the
Purchase Date next following the date of the death of the Participant. Upon the
death of a Participant and upon receipt by the Company of proof of the identity
and survivorship of a beneficiary validly designated by the Participant under
the Plan, and notice of election of the beneficiary to exercise the Option, the
Company shall deliver such Common Stock and/or cash to such beneficiary. In the
event of the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such death of a
Participant, the Company shall deliver such Common Stock and/or cash to the
executor or administrator of the estate of the Participant within sixty days
after the end of the current Offering Period or as soon as administratively
practicable thereafter, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion, may
deliver such Common Stock and/or cash to the spouse or to any one or more
dependents of the Participant as the Company may designate. No beneficiary
shall, prior to the death of the Participant by whom he or she has been
designated, acquire any interest in the Common Stock or cash credited to the
Participant under the Plan.
41
45
SECTION TEN. RECAPITALIZATION
In the event of any change in the number of outstanding shares of
Common Stock by reason of a recapitalization, merger, consolidation,
reorganization, separation, liquidation, stock split, stock dividend,
combination of shares, or any other change in the corporate structure or shares
of stock of the Company, the Board of Directors will make an appropriate
adjustment, in accordance with applicable provisions of the Code and rulings and
regulations thereunder, in the number and kind of shares which may be offered
under the Plan, both in the aggregate and as to each Participant, the number of
shares then subject to offerings theretofore made, and the price of shares
offered under the Plan.
SECTION ELEVEN. RIGHTS AS A STOCKHOLDER
An employee shall have no rights as a stockholder with respect to any
shares offered hereunder until completion of payment therefor. Participants will
not be issued stock certificates unless requested. All Common Stock purchased
under the Plan during an Offering Period will be held by the Nominee for at
least two years from the Offering Date of the Offering Period. Common Stock may
be sold during this two-year period, but may not be transferred to another agent
or nominee. Common Stock purchased under the Plan by a Section 16 Person may not
be sold before six months after its Purchase Date. Notwithstanding the
foregoing, a Participant must sell a minimum of fifty shares of Common Stock
each time he or she elects to sell Common Stock or such fewer whole shares of
Common Stock in the account of the Participant upon termination of employment.
SECTION TWELVE. STATUS OF PLAN FUNDS
All amounts held by the Company under the Plan shall be added to the
general funds of the Company and shall be used for such purposes as the Company
shall from time to time determine. The Company shall not be obligated to
segregate such payroll deductions.
SECTION THIRTEEN. ADMINISTRATION
The Plan shall be administered by the Board of Directors. The
interpretation and construction of any provision of the Plan and the adoption of
rules and regulations for administering the Plan shall be made by the Board of
Directors. Determinations made by the Board of Directors with respect to any
matter or provision contained in the Plan shall be final, conclusive and binding
upon the Company and upon all Participants, their heirs or legal
representatives. Any rule or regulation adopted by the Board of Directors shall
remain in full force and effect unless and until altered, amended, or repealed
by the Board of Directors. The Board of Directors may delegate to a committee
any authority of the Board of Directors under this Plan.
An Agent may be appointed by the Board of Directors to perform the
functions and have the responsibilities assigned to the Agent in this Section
Thirteen with respect to the purchase of Common Stock. The Board of Directors
shall have the right to change the Agent at any time.
Notwithstanding any other provision to the contrary contained herein,
the Agent shall have all authority to determine the times of such purchases, the
prices at which such purchases are made, the manner of such purchases and the
selection of brokers or dealers (which may include the Agent) to make such
purchases. If Common Stock is purchased at varying Market Prices, an average
price will be allocated to the account of each Participant.
All costs and expenses incurred in administering the Plan shall be paid
by the Company, excluding (i) costs associated with requests for the issuing of
stock certificates to Participants or to the person or persons entitled to
receive the same under Section Nine hereof (ii) the costs of the sale of
Common Stock, and (iii) costs associated with a Participant terminating or
withdrawing from the Plan.
SECTION FOURTEEN. AMENDMENT OR TERMINATION
Subject to Section Four, the Board of Directors may at any time
terminate or amend the Plan. No amendment may be made without prior approval of
the stockholders of the Company if such amendment would (a) materially increase
the
42
46
benefits accruing to Participants under the Plan, (b) increase the number of
shares which may be available for purchase under the Plan, or (c) materially
modify the requirements as to eligibility for participation under the Plan.
SECTION FIFTEEN. NOTICES
All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been given when
received by the Secretary of the Company.
SECTION SIXTEEN. APPROVAL OF STOCKHOLDERS
The effectiveness of this Plan is subject to its approval by the
stockholders of the Company within twelve months after the date it is adopted by
the Board of Directors.
SECTION SEVENTEEN. REGISTRATION AND QUALIFICATION OF THE PLAN UNDER
APPLICABLE SECURITIES LAWS
No Option shall be granted under the Plan until such time as the
Company has qualified or registered the shares which are subject to the Option
under the applicable state and federal securities laws to the extent required by
such laws.
43
47
MANOR CARE, INC.
10750 Columbia Pike
Silver Spring, MD 20901
This Proxy is Solicited on Behalf of the Board of Directors
PROXY FOR ANNUAL MEETING SEPTEMBER 28, 1995
The undersigned hereby appoints JACK R. ANDERSON and FREDERIC V. MALEK,
and each of them, the true and lawful attorneys and proxies, with full power of
substitution, to attend the Annual Meeting of Stockholders of MANOR CARE, INC.
to be held in the Terrace Room, 10770 Columbia Pike, Silver Spring, Maryland, on
Thursday, September 28, 1995 at 9:00 a.m. and at any adjournment thereof, and to
vote all shares of common stock held of record which the undersigned could vote,
with all the powers the undersigned would possess if personally present at such
meeting, as designated below.
(1) Election of Directors: / / FOR all nominees listed below:
/ / WITHHOLD AUTHORITY to vote FOR all
nominees listed below:
S. BAINUM, JR., S. BAINUM, J. R. ANDERSON, R. E. HERZLINGER, W. H. LONGFIELD, F.
V. MALEK and J. E. ROBERTSON, Ph.D.
(Instructions: to withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
-----------------------------------------------------------------
(2) Approval of the Manor Care, Inc. 1995 Long-Term Incentive Plan
/ / FOR / / AGAINST / / ABSTAIN
(3) Approval of the Manor Care, Inc. 1995 Employee Stock Purchase Plan
/ / FOR / / AGAINST / / ABSTAIN
(4) In their discretion, upon such other business as may properly come before
the meeting.
(Continued and to be signed on the reverse side)
48
The Board of Directors recommends a vote FOR items (1), (2) and (3).
This proxy, when properly executed, will be used in the manner directed
herein by the undersigned stockholder. If not otherwise specified, the shares
represented by this proxy will be voted FOR items (1), (2) and (3), and for and
in accordance with the discretion of the persons named as proxies as to such
other matters as may properly come before the meeting, or at any and all
adjournments thereof.
If you plan to attend the Annual Meeting of Stockholders, please mark
the following box and promptly return this Proxy Card. / /
Dated , 1995
----------------------------------------
----------------------------------------------
Signature
----------------------------------------------
Signature
(Signature should agree exactly with the name or names appearing above. Joint
owners should both sign. In signing as attorney, administrator, executor,
guardian or trustee, please set forth your full title. If the signer is a
corporation, please sign the full corporate name by a duly authorized officer.)