-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DmZ/24f7zWapt8xJ9ITlP1tjbzfpHgV/aO+6PIjvMbRuJZzWBYpJF60QZc51pvDL i4PM2XsrT2vKZWqt/4N5yA== 0000950152-01-501450.txt : 20010504 0000950152-01-501450.hdr.sgml : 20010504 ACCESSION NUMBER: 0000950152-01-501450 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 20010503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANOR CARE INC CENTRAL INDEX KEY: 0000878736 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 341687107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108 FILM NUMBER: 1621084 BUSINESS ADDRESS: STREET 1: 333 N. SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604-2617 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: P.O. BOX 10086 CITY: TOLEDO STATE: OH ZIP: 43699-0086 FORMER COMPANY: FORMER CONFORMED NAME: HCR MANOR CARE INC DATE OF NAME CHANGE: 19981001 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH CARE & RETIREMENT CORP / DE DATE OF NAME CHANGE: 19930328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE & RETIREMENT CORP OF AMERICA CENTRAL INDEX KEY: 0000355648 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 344403510 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-01 FILM NUMBER: 1621085 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVON MANOR CORP CENTRAL INDEX KEY: 0000856961 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232093337 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-02 FILM NUMBER: 1621086 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHIVE RETRIEVAL SYSTEMS INC CENTRAL INDEX KEY: 0001048348 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521734402 STATE OF INCORPORATION: MD FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-03 FILM NUMBER: 1621087 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHIVE ACQUISITION INC CENTRAL INDEX KEY: 0001048349 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521840315 STATE OF INCORPORATION: MD FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-04 FILM NUMBER: 1621088 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HOSPITAL BUILDING CORP CENTRAL INDEX KEY: 0001048357 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520985621 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-05 FILM NUMBER: 1621089 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICANA HEALTHCARE CORP OF GEORGIA CENTRAL INDEX KEY: 0001048369 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 371087694 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-06 FILM NUMBER: 1621090 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 11555 DARNESTOWN RD CITY: GAITHERSBURG STATE: MD ZIP: 20878-3200 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICANA HEALTHCARE CORP OF NAPLES CENTRAL INDEX KEY: 0001048370 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 371087694 STATE OF INCORPORATION: FL FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-07 FILM NUMBER: 1621091 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAILY NURSING HOME INC CENTRAL INDEX KEY: 0001048373 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231674218 STATE OF INCORPORATION: PA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-08 FILM NUMBER: 1621092 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISTCO INC CENTRAL INDEX KEY: 0001048384 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520853907 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-09 FILM NUMBER: 1621093 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXECUTIVE ADVERTISING INC CENTRAL INDEX KEY: 0001048387 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520912751 STATE OF INCORPORATION: MD FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-10 FILM NUMBER: 1621094 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEKALB HEALTHCARE CORP CENTRAL INDEX KEY: 0001048390 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 371019112 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-11 FILM NUMBER: 1621095 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARLES MANOR INC CENTRAL INDEX KEY: 0001048405 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520902287 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-12 FILM NUMBER: 1621096 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHESAPEAKE MANOR INC CENTRAL INDEX KEY: 0001048406 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520902288 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-13 FILM NUMBER: 1621097 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOUR SEASONS NURSING CENTERS INC CENTRAL INDEX KEY: 0001048424 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 730783484 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-14 FILM NUMBER: 1621098 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT ST CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBUQUERQUE ARDEN LLC CENTRAL INDEX KEY: 0001139276 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522118781 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-15 FILM NUMBER: 1621099 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP INC CENTRAL INDEX KEY: 0001139277 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 531352950 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-16 FILM NUMBER: 1621100 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANCILLARY SERVICES MANAGEMENT INC CENTRAL INDEX KEY: 0001139279 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 34163874 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-17 FILM NUMBER: 1621101 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREE CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANCILLARY SERVICES LLC CENTRAL INDEX KEY: 0001139280 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522166500 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-18 FILM NUMBER: 1621102 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNANDALE ARDEN LLC CENTRAL INDEX KEY: 0001139281 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522111069 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-19 FILM NUMBER: 1621103 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAINBRIDGE ARDEN LLC CENTRAL INDEX KEY: 0001139282 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522098028 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-20 FILM NUMBER: 1621104 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BATH ARDEN LLC CENTRAL INDEX KEY: 0001139283 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522099206 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-21 FILM NUMBER: 1621105 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BINGHAM FARMS ARDEN LLC CENTRAL INDEX KEY: 0001139284 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522106495 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-22 FILM NUMBER: 1621106 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIRCHWOOD MANOR INC CENTRAL INDEX KEY: 0001139285 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 381719951 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-23 FILM NUMBER: 1621107 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE RIDGE REHABILITATION SERVICES INC CENTRAL INDEX KEY: 0001139286 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 541508699 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-24 FILM NUMBER: 1621108 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOOTH LTD PARTNERSHIP CENTRAL INDEX KEY: 0001139287 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 371080797 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-25 FILM NUMBER: 1621109 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTERBURY VILLAGE INC CENTRAL INDEX KEY: 0001139288 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 382032536 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-26 FILM NUMBER: 1621110 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF ANDERSON LLC CENTRAL INDEX KEY: 0001139289 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973297 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-27 FILM NUMBER: 1621111 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF AUSTIN LLC CENTRAL INDEX KEY: 0001139290 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973318 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-28 FILM NUMBER: 1621112 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF KENWOOD LLC CENTRAL INDEX KEY: 0001139291 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-29 FILM NUMBER: 1621113 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF SAN ANTONIO LLC CENTRAL INDEX KEY: 0001139292 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973324 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-30 FILM NUMBER: 1621114 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF SUSQUEHANNA LLC CENTRAL INDEX KEY: 0001139293 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973366 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-31 FILM NUMBER: 1621115 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIRE BRIDGE OF WARMINSTER LLC CENTRAL INDEX KEY: 0001139294 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391973327 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-32 FILM NUMBER: 1621116 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLEWOOD LTD PARTNERSHIP CENTRAL INDEX KEY: 0001139295 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521335634 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-33 FILM NUMBER: 1621117 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIE ARDEN LLC CENTRAL INDEX KEY: 0001139308 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522130894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-34 FILM NUMBER: 1621118 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRESTVIEW HILLS ARDEN LLC CENTRAL INDEX KEY: 0001139309 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522092155 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-35 FILM NUMBER: 1621119 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIVERSIFIED REHABILITATION SERVICES INC CENTRAL INDEX KEY: 0001139310 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 382690352 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-36 FILM NUMBER: 1621120 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONAHOE MANOR INC CENTRAL INDEX KEY: 0001139311 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251147049 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-37 FILM NUMBER: 1621121 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAST MICHIGAN CARE CORP CENTRAL INDEX KEY: 0001139314 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 381747681 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-38 FILM NUMBER: 1621122 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERSON SPRINGHOUSE LLC CENTRAL INDEX KEY: 0001139315 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522099201 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-39 FILM NUMBER: 1621123 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EYE Q NETWORK INC CENTRAL INDEX KEY: 0001139316 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 341760305 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-40 FILM NUMBER: 1621124 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST LOUISVILLE ARDEN LLC CENTRAL INDEX KEY: 0001139317 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522092159 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-41 FILM NUMBER: 1621125 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESNO ARDEN LLC CENTRAL INDEX KEY: 0001139318 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522098630 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-42 FILM NUMBER: 1621126 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEVA ARDEN LLC CENTRAL INDEX KEY: 0001139319 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522124930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-43 FILM NUMBER: 1621127 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIAN BLOOMFIELD INC CENTRAL INDEX KEY: 0001139320 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 381982410 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-44 FILM NUMBER: 1621128 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENVIEW MANOR INC CENTRAL INDEX KEY: 0001139321 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 386062040 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-45 FILM NUMBER: 1621129 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER ARDEN LLC CENTRAL INDEX KEY: 0001139323 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522098633 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-46 FILM NUMBER: 1621130 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR ACQUISITION CORP CENTRAL INDEX KEY: 0001139325 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 341848444 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-47 FILM NUMBER: 1621131 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR HOME HEALTH CARE & HOSPICE INC CENTRAL INDEX KEY: 0001139326 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 341787978 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-48 FILM NUMBER: 1621132 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR HOSPITAL HOLDING CO INC CENTRAL INDEX KEY: 0001139328 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 922038485 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-49 FILM NUMBER: 1621133 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR INFORMATION CORP CENTRAL INDEX KEY: 0001139330 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 311494764 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-50 FILM NUMBER: 1621134 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR MANORCARE MEDICAL SERVICES OF FLORIDA INC CENTRAL INDEX KEY: 0001139331 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650666550 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-51 FILM NUMBER: 1621135 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR MANORCARE MESQUITE LP CENTRAL INDEX KEY: 0001139332 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522229490 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-52 FILM NUMBER: 1621136 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR PHYSICIAN MANAGEMENT SERVICES INC CENTRAL INDEX KEY: 0001139333 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582242001 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-53 FILM NUMBER: 1621137 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCR REHABILITATION CORP CENTRAL INDEX KEY: 0001139334 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 341720345 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-54 FILM NUMBER: 1621138 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCRA OF TEXAS INC CENTRAL INDEX KEY: 0001139335 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 742788668 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-55 FILM NUMBER: 1621139 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCRC INC CENTRAL INDEX KEY: 0001139336 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222784172 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60108-56 FILM NUMBER: 1621140 BUSINESS ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: 333 NORTH SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604 S-4 1 l87647as-4.txt MANOR CARE, INC. S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2001 REGISTRATION NO. 333-______ ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- MANOR CARE, INC. (EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 8051 34-1687107 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 333 N. SUMMIT STREET TOLEDO, OHIO 43604-2617 (419) 252-5500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) ------------------- SEE TABLE OF ADDITIONAL CO-REGISTRANTS INCLUDED IN THIS REGISTRATION ------------------- R. JEFFREY BIXLER VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY MANOR CARE, INC. 333 N. SUMMIT STREET TOLEDO, OHIO 43604-2617 (419) 252-5500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------- Copy to: MICHAEL D. LEVIN LATHAM & WATKINS SEARS TOWER, SUITE 5800 CHICAGO, ILLINOIS 60606 (312) 876-7700 ------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ] IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ] IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(d) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ] CALCULATION OF REGISTRATION FEE
========================================================================================================= TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED PER NEW NOTES OFFERING PRICE(1) FEE(2) - --------------------------------------------------------------------------------------------------------- 8.00% Senior Notes due March 1, 2008 $200,000,000 100% $200,000,000 $50,000 - ---------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended. (2) Calculated pursuant to Section 6(b) and Rule 457 of the Securities Act. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 TABLE OF ADDITIONAL CO-REGISTRANTS
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- ALBUQUERQUE ARDEN, LLC Delaware 52-2118781 N/A - -------------------------------------------------------------------------------------------------------------------- AMERICAN HOSPITAL BUILDING CORPORATION Delaware 52-0985621 8051 - -------------------------------------------------------------------------------------------------------------------- AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, Illinois 53-1352950 8051 INC. - -------------------------------------------------------------------------------------------------------------------- AMERICANA HEALTHCARE CORPORATION OF GEORGIA Georgia 37-1087694 8051 - -------------------------------------------------------------------------------------------------------------------- AMERICANA HEALTHCARE CORPORATION OF NAPLES Florida 37-1087695 8051 - -------------------------------------------------------------------------------------------------------------------- ANCILLARY SERVICES MANAGEMENT, INC. Ohio 34-163874 5999 - -------------------------------------------------------------------------------------------------------------------- ANCILLARY SERVICES, LLC Delaware 52-2166500 8049 - -------------------------------------------------------------------------------------------------------------------- ANNANDALE ARDEN, LLC Delaware 52-2111069 8059 - -------------------------------------------------------------------------------------------------------------------- ARCHIVE ACQUISITION, INC. Maryland 52-1840315 N/A - -------------------------------------------------------------------------------------------------------------------- ARCHIVE RETRIEVAL SYSTEMS, INC. Maryland 52-1734402 N/A - -------------------------------------------------------------------------------------------------------------------- BAILY NURSING HOME, INC. Pennsylvania 23-1674218 8051 - -------------------------------------------------------------------------------------------------------------------- BAINBRIDGE ARDEN, LLC Delaware 52-2098028 N/A - -------------------------------------------------------------------------------------------------------------------- BATH ARDEN, LLC Delaware 52-2099206 N/A - -------------------------------------------------------------------------------------------------------------------- BINGHAM FARMS ARDEN, LLC Delaware 52-2106495 N/A - -------------------------------------------------------------------------------------------------------------------- BIRCHWOOD MANOR, INC. Michigan 38-1719951 8051 - -------------------------------------------------------------------------------------------------------------------- BLUE RIDGE REHABILITATION SERVICES, INC. Virginia 54-1508699 8049 - -------------------------------------------------------------------------------------------------------------------- BOOTH LIMITED PARTNERSHIP Florida 37-1080797 8059 - -------------------------------------------------------------------------------------------------------------------- CANTERBURY VILLAGE, INC. Michigan 38-2032536 8051 - -------------------------------------------------------------------------------------------------------------------- CHARLES MANOR, INC. Maryland 52-0902287 8051 - -------------------------------------------------------------------------------------------------------------------- CHESAPEAKE MANOR, INC. Maryland 52-0902288 8051 - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF ANDERSON, LLC Delaware 39-1973297 8059 - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF AUSTIN, LLC Delaware 39-1973318 8059 - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF KENWOOD, LLC Delaware 39-1973322 8059 - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF SAN ANTONIO, LLC Delaware 39-1973324 N/A - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF SUSQUEHANNA, LLC Delaware 39-1973366 8059 - -------------------------------------------------------------------------------------------------------------------- CLAIRE BRIDGE OF WARMINSTER, LLC Delaware 39-1973327 8059 - -------------------------------------------------------------------------------------------------------------------- COLEWOOD LIMITED PARTNERSHIP Maryland 52-1335634 8059 - --------------------------------------------------------------------------------------------------------------------
3
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- COLONIE ARDEN, LLC Delaware 52-2130894 6531 - -------------------------------------------------------------------------------------------------------------------- CRESTVIEW HILLS ARDEN, LLC Delaware 52-2092155 6531 - -------------------------------------------------------------------------------------------------------------------- DEKALB HEALTHCARE CORPORATION Delaware 37-1019112 8051 - -------------------------------------------------------------------------------------------------------------------- DEVON MANOR CORPORATION Pennsylvania 23-2093337 8051 - -------------------------------------------------------------------------------------------------------------------- DISTCO, INC. Maryland 52-0853907 6977 - -------------------------------------------------------------------------------------------------------------------- DIVERSIFIED REHABILITATION SERVICES, INC. Michigan 38-2690352 8049 - -------------------------------------------------------------------------------------------------------------------- DONAHOE MANOR, INC. Pennsylvania 25-1147049 8051 - -------------------------------------------------------------------------------------------------------------------- EAST MICHIGAN CARE CORPORATION Michigan 38-1747681 8051 - -------------------------------------------------------------------------------------------------------------------- EMERSON SPRINGHOUSE, LLC Delaware 52-2099201 N/A - -------------------------------------------------------------------------------------------------------------------- EXECUTIVE ADVERTISING, INC. Maryland 52-0912751 8051 - -------------------------------------------------------------------------------------------------------------------- EYE-Q NETWORK, INC. Ohio 34-1760305 8011 - -------------------------------------------------------------------------------------------------------------------- FIRST LOUISVILLE ARDEN, LLC Delaware 52-2092159 8059 - -------------------------------------------------------------------------------------------------------------------- FOUR SEASONS NURSING CENTERS, INC. Delaware 73-0783484 8051 - -------------------------------------------------------------------------------------------------------------------- FRESNO ARDEN, LLC Delaware 52-2098630 6531 - -------------------------------------------------------------------------------------------------------------------- GENEVA ARDEN, LLC Delaware 52-2124930 N/A - -------------------------------------------------------------------------------------------------------------------- GEORGIAN BLOOMFIELD, INC. Michigan 38-1982410 8051 - -------------------------------------------------------------------------------------------------------------------- GREENVIEW MANOR, INC. Michigan 38-6062040 8051 - -------------------------------------------------------------------------------------------------------------------- HANOVER ARDEN, LLC Delaware 52-2098633 8059 - -------------------------------------------------------------------------------------------------------------------- HCR ACQUISITION CORPORATION Ohio 34-1848444 6719 - -------------------------------------------------------------------------------------------------------------------- HCR HOME HEALTH CARE AND HOSPICE, INC. Ohio 34-1787978 6719 - -------------------------------------------------------------------------------------------------------------------- HCR HOSPITAL HOLDING COMPANY, INC. Nevada 92-2038485 6719 - -------------------------------------------------------------------------------------------------------------------- HCR HOSPITAL, LLC Nevada 91-2039256 8062 - -------------------------------------------------------------------------------------------------------------------- HCR INFORMATION CORPORATION Ohio 31-1494764 7338 - -------------------------------------------------------------------------------------------------------------------- HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. Florida 65-0666550 8011 - -------------------------------------------------------------------------------------------------------------------- HCR MANORCARE MESQUITE, L.P. Delaware 52-2229490 8062 - -------------------------------------------------------------------------------------------------------------------- HCR PHYSICIAN MANAGEMENT SERVICES, INC. Florida 58-2242001 8011 - -------------------------------------------------------------------------------------------------------------------- HCR REHABILITATION CORP. Ohio 34-1720345 6719 - -------------------------------------------------------------------------------------------------------------------- HCRA OF TEXAS, INC. Texas 74-2788668 8051 - -------------------------------------------------------------------------------------------------------------------- HCRC INC. Delaware 22-2784172 6719 - --------------------------------------------------------------------------------------------------------------------
4
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- HEALTH CARE AND RETIREMENT CORPORATION OF Ohio 34-4402510 8051 AMERICA - -------------------------------------------------------------------------------------------------------------------- HEALTHCARE CONSTRUCTION CORP. North Carolina 52-1519915 N/A - -------------------------------------------------------------------------------------------------------------------- HEARTLAND CAREPARTNERS, INC. Ohio 34-1838217 N/A - -------------------------------------------------------------------------------------------------------------------- HEARTLAND EMPLOYMENT SERVICES, INC. Ohio 34-1903270 7363 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND HOME CARE, INC. Ohio 34-1787895 8082 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND HOME HEALTH CARE SERVICES, INC. Ohio 34-1787967 8082 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND HOSPICE SERVICES, INC. Ohio 34-1788398 8082 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND MANAGEMENT SERVICES, INC. Ohio 34-1808700 8049 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND MEDICAL INFORMATION SERVICES, INC. Ohio 31-1488831 7338 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. Florida 59-2504386 8049 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND REHABILITATION SERVICES, INC. Ohio 34-1280619 8049 - -------------------------------------------------------------------------------------------------------------------- HEARTLAND SERVICES CORP. Ohio 34-1760503 5912 - -------------------------------------------------------------------------------------------------------------------- HERBERT LASKIN, RPT-JOHN MCKENZIE, RPT PHYSICAL New Jersey 22-2137595 8049 THERAPY PROFESSIONAL ASSOCIATES, INC. - -------------------------------------------------------------------------------------------------------------------- HGCC OF ALLENTOWN, INC. Tennessee 23-2244532 8051 - -------------------------------------------------------------------------------------------------------------------- IN HOME HEALTH, INC. Minnesota 41-1458213 8082 - -------------------------------------------------------------------------------------------------------------------- INDUSTRIAL WASTES, INC. Pennsylvania 25-1264509 4953 - -------------------------------------------------------------------------------------------------------------------- IONIA MANOR, INC. Michigan 38-1749970 8051 - -------------------------------------------------------------------------------------------------------------------- JACKSONVILLE HEALTHCARE CORPORATION Delaware 37-1069936 8051 - -------------------------------------------------------------------------------------------------------------------- JEFFERSON ARDEN, LLC Delaware 52-2111068 N/A - -------------------------------------------------------------------------------------------------------------------- KANSAS SKILLED NURSING, LLC Delaware 52-2124929 N/A - -------------------------------------------------------------------------------------------------------------------- KENSINGTON MANOR, INC. Florida 59-1289690 8051 - -------------------------------------------------------------------------------------------------------------------- KENWOOD ARDEN, LLC Delaware 52-2116657 N/A - -------------------------------------------------------------------------------------------------------------------- KNOLLVIEW MANOR, INC. Michigan 38-1724149 8051 - -------------------------------------------------------------------------------------------------------------------- LAKE ZURICH ARDEN, LLC Delaware 52-2098619 N/A - -------------------------------------------------------------------------------------------------------------------- LAURELDALE ARDEN, LLC Delaware 52-2124931 N/A - -------------------------------------------------------------------------------------------------------------------- LEADER NURSING AND REHABILITATION CENTER OF Delaware 52-1462046 8051 BETHEL PARK, INC. - -------------------------------------------------------------------------------------------------------------------- LEADER NURSING AND REHABILITATION CENTER OF Maryland 52-1352949 8051 GLOUCESTER, INC. - -------------------------------------------------------------------------------------------------------------------- LEADER NURSING AND REHABILITATION CENTER OF SCOTT Delaware 52-1462056 8051 TOWNSHIP, INC. - --------------------------------------------------------------------------------------------------------------------
5
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- LEADER NURSING AND REHABILITATION CENTER OF Virginia 52-1363206 8051 VIRGINIA INC. - -------------------------------------------------------------------------------------------------------------------- LEXINGTON ARDEN, LLC Delaware 52-2092157 N/A - -------------------------------------------------------------------------------------------------------------------- LINCOLN HEALTH CARE, INC. Ohio 34-1352822 8051 - -------------------------------------------------------------------------------------------------------------------- LINWOOD ARDEN, LLC Delaware 52-2098962 N/A - -------------------------------------------------------------------------------------------------------------------- LIVONIA ARDEN, LLC Delaware 52-2104704 N/A - -------------------------------------------------------------------------------------------------------------------- MANOR CARE AVIATION, INC. Delaware 52-1462072 4522 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE MANAGEMENT CORPORATION Delaware 52-2004467 N/A - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF AKRON, INC. Ohio 52-0970447 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF AMERICA, INC Delaware 52-1200376 6519 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF ARIZONA, INC. Delaware 52-1751861 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF ARLINGTON, INC. Virginia 52-1067426 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF BOCA RATON, INC. Florida 52-1297340 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF BOYNTON BEACH, INC. Florida 52-1288882 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF CANTON, INC. Ohio 52-1019576 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF CENTERVILLE, INC Delaware 52-1933544 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF CHARLESTON, INC. South Carolina 52-1187059 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF CINCINNATI, INC. Ohio 52-0943592 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF COLUMBIA, INC. South Carolina 52-0940578 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF DARIEN, INC. Connecticut 52-1934884 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF DELAWARE COUNTY, INC. Delaware 52-1916053 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF DUNEDIN, INC. Florida 52-1252397 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF FLORIDA, INC. Florida 52-1479084 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF HINSDALE, INC. Illinois 52-0970446 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF KANSAS, INC. Delaware 52-1462071 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF KINGSTON COURT, INC. Pennsylvania 52-1314648 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF LARGO, INC. Maryland 52-1065213 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF LEXINGTON, INC. South Carolina 52-1048770 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF MEADOW PARK, INC. Washington 52-1339998 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF MIAMISBURG, INC Delaware 52-1708219 8051 - --------------------------------------------------------------------------------------------------------------------
6
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF NORTH OLMSTEAD, INC. Ohio 52-0970448 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF PINEHURST, INC. North Carolina 52-1069744 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF PLANTATION, INC. Florida 52-1383874 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF ROLLING MEADOWS, INC. Illinois 52-1077856 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF ROSSVILLE, INC. Maryland 52-1077857 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF SARASOTA, INC. Florida 52-1252364 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF WILLOUGHBY, INC. Ohio 52-0970449 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF WILMINGTON, INC. Delaware 52-1252362 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF YORK (NORTH), INC. Pennsylvania 52-1314645 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE OF YORK (SOUTH), INC. Pennsylvania 52-1314644 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR CARE PROPERTIES, INC. Delaware 52-2061834 8051 - -------------------------------------------------------------------------------------------------------------------- MANOR LIVING CENTERS, INC. Delaware 52-1465781 N/A - -------------------------------------------------------------------------------------------------------------------- MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. Delaware 52-2055100 8051 - -------------------------------------------------------------------------------------------------------------------- MANORCARE HEALTH SERVICES OF GEORGIA, INC. Delaware 52-2055102 8051 - -------------------------------------------------------------------------------------------------------------------- MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, Pennsylvania 52-2004471 8051 INC. - -------------------------------------------------------------------------------------------------------------------- MANORCARE HEALTH SERVICES OF VIRGINIA, INC. Delaware 52-2002773 8051 - -------------------------------------------------------------------------------------------------------------------- MANORCARE HEALTH SERVICES, INC. Delaware 52-0886946 8051 - -------------------------------------------------------------------------------------------------------------------- MARINA VIEW MANOR, INC. Wisconsin 39-1164707 8051 - -------------------------------------------------------------------------------------------------------------------- MCHS OF NEW YORK, INC. New York 52-2071500 N/A - -------------------------------------------------------------------------------------------------------------------- MEDICAL AID TRAINING SCHOOLS, INC. Delaware 52-0963178 N/A - -------------------------------------------------------------------------------------------------------------------- MEDI-SPEECH SERVICE, INC. Michigan 38-2343280 8049 - -------------------------------------------------------------------------------------------------------------------- MEMPHIS ARDEN, LLC Delaware 52-2098029 N/A - -------------------------------------------------------------------------------------------------------------------- MESQUITE HOSPITAL, LLC Delaware 52-2229486 8062 - -------------------------------------------------------------------------------------------------------------------- METUCHEN ARDEN, LLC Delaware 52-2098964 N/A - -------------------------------------------------------------------------------------------------------------------- MIDDLETOWN ARDEN, LLC Delaware 52-2098965 N/A - -------------------------------------------------------------------------------------------------------------------- MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. New Jersey 22-2575292 8049 - -------------------------------------------------------------------------------------------------------------------- MILESTONE HEALTH SYSTEMS, INC. Texas 75-2245197 8062 - -------------------------------------------------------------------------------------------------------------------- MILESTONE HEALTHCARE, INC. Delaware 75-2592398 8062 - -------------------------------------------------------------------------------------------------------------------- MILESTONE REHABILITATION SERVICES, INC. Texas 75-2190857 5049 - --------------------------------------------------------------------------------------------------------------------
7
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- MILESTONE STAFFING SERVICES, INC. Texas 74-2963093 7363 - -------------------------------------------------------------------------------------------------------------------- MILESTONE THERAPY SERVICES, INC. Texas 75-2406307 5049 - -------------------------------------------------------------------------------------------------------------------- MNR FINANCE CORP. Delaware 51-0348281 6159 - -------------------------------------------------------------------------------------------------------------------- MONROE ARDEN, LLC Delaware 52-2098969 N/A - -------------------------------------------------------------------------------------------------------------------- MOORESTOWN ARDEN, LLC Delaware 52-2098971 N/A - -------------------------------------------------------------------------------------------------------------------- MRC REHABILITATION, INC. Florida 59-3357644 8049 - -------------------------------------------------------------------------------------------------------------------- MRS, INC. Delaware 52-1164725 N/A - -------------------------------------------------------------------------------------------------------------------- NAPA ARDEN, LLC Delaware 52-2108866 N/A - -------------------------------------------------------------------------------------------------------------------- NASHVILLE ARDEN, LLC Delaware 52-2111070 N/A - -------------------------------------------------------------------------------------------------------------------- NEW MANORCARE HEALTH SERVICES, INC. Delaware 52-2053999 8051 - -------------------------------------------------------------------------------------------------------------------- NISHAYUNA ARDEN, LLC Delaware 52-2107731 N/A - -------------------------------------------------------------------------------------------------------------------- OVERLAND PARK ARDEN, LLC Delaware 52-2099492 N/A - -------------------------------------------------------------------------------------------------------------------- OVERLAND PARK SKILLED NURSING, LLC Delaware 52-2098627 N/A - -------------------------------------------------------------------------------------------------------------------- PEAK REHABILITATION, INC. Delaware 52-1833202 8049 - -------------------------------------------------------------------------------------------------------------------- PERRYSBURG PHYSICAL THERAPY, INC Ohio 34-1363071 8049 - -------------------------------------------------------------------------------------------------------------------- PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. Florida 59-3377552 8049 - -------------------------------------------------------------------------------------------------------------------- PNEUMATIC CONCRETE, INC. Tennessee 62-0716951 1542 - -------------------------------------------------------------------------------------------------------------------- PORTFOLIO ONE, INC. New Jersey 22-1604502 4953 - -------------------------------------------------------------------------------------------------------------------- REHABILITATION ADMINISTRATION CORPORATION Kentucky 61-1295825 8049 - -------------------------------------------------------------------------------------------------------------------- REHABILITATION ASSOCIATES, INC. New Jersey 22-3290567 8049 - -------------------------------------------------------------------------------------------------------------------- REHABILITATION SERVICES OF ROANOKE, INC. Virginia 54-0993013 8049 - -------------------------------------------------------------------------------------------------------------------- REINBOLT & BURKAM, INC. Ohio 34-1479648 8049 - -------------------------------------------------------------------------------------------------------------------- RICHARDS HEALTHCARE, INC. Texas 76-0339241 8049 - -------------------------------------------------------------------------------------------------------------------- RIDGEVIEW MANOR, INC. Michigan 38-1734212 8051 - -------------------------------------------------------------------------------------------------------------------- ROANOKE ARDEN, LLC Delaware 52-2104706 N/A - -------------------------------------------------------------------------------------------------------------------- ROCKFORD ARDEN, LLC Delaware 52-2098626 N/A - -------------------------------------------------------------------------------------------------------------------- ROCKLEIGH ARDEN, LLC Delaware 52-2098984 N/A - -------------------------------------------------------------------------------------------------------------------- ROLAND PARK NURSING CENTER, INC. Maryland 52-1890169 8051 - -------------------------------------------------------------------------------------------------------------------- RVA MANAGEMENT SERVICES, INC. Ohio 34-1791517 8011 - --------------------------------------------------------------------------------------------------------------------
8
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- SAN ANTONIO ARDEN, LLC Delaware 52-2106496 8059 - -------------------------------------------------------------------------------------------------------------------- SECOND LOUISVILLE ARDEN, LLC Delaware 52-2092161 N/A - -------------------------------------------------------------------------------------------------------------------- SETAUKET ARDEN, LLC Delaware 52-2107732 N/A - -------------------------------------------------------------------------------------------------------------------- SILVER SPRING - WHEATON NURSING HOME, INC. Maryland 53-0245649 8051 - -------------------------------------------------------------------------------------------------------------------- SILVER SPRING ARDEN, LLC Delaware 52-2107728 6531 - -------------------------------------------------------------------------------------------------------------------- SPRINGHILL MANOR, INC. Michigan 38-1890497 8051 - -------------------------------------------------------------------------------------------------------------------- STEWALL CORPORATION Maryland 52-0798475 8051 - -------------------------------------------------------------------------------------------------------------------- STRATFORD MANOR, INC. Virginia 52-0902020 8051 - -------------------------------------------------------------------------------------------------------------------- STUTEX CORP. Texas 52-0884091 8051 - -------------------------------------------------------------------------------------------------------------------- SUN VALLEY MANOR, INC. Michigan 38-1798425 8051 - -------------------------------------------------------------------------------------------------------------------- SUSQUEHANNA ARDEN LLC Delaware 52-2124933 N/A - -------------------------------------------------------------------------------------------------------------------- TAMPA ARDEN, LLC Delaware 52-2113270 N/A - -------------------------------------------------------------------------------------------------------------------- THE NIGHTINGALE NURSING HOME, INC. Pennsylvania 23-1719762 8051 - -------------------------------------------------------------------------------------------------------------------- THERAPY ASSOCIATES, INC. Virginia 54-1234646 8051 - -------------------------------------------------------------------------------------------------------------------- THERASPORT PHYSICAL THERAPY, INC. Michigan 38-3324355 8049 - -------------------------------------------------------------------------------------------------------------------- THREE RIVERS MANOR, INC. Michigan 38-2479940 8051 - -------------------------------------------------------------------------------------------------------------------- TOM'S RIVER ARDEN, LLC Delaware 52-2098987 N/A - -------------------------------------------------------------------------------------------------------------------- TOTALCARE CLINICAL LABORATORIES, INC. Delaware 52-1740933 8071 - -------------------------------------------------------------------------------------------------------------------- TUSCAWILLA ARDEN, LLC Delaware 52-2092162 N/A - -------------------------------------------------------------------------------------------------------------------- TUSTIN ARDEN, LLC Delaware 52-2108869 N/A - -------------------------------------------------------------------------------------------------------------------- WALL ARDEN, LLC Delaware 52-2098990 6531 - -------------------------------------------------------------------------------------------------------------------- WARMINSTER ARDEN LLC Delaware 52-2124931 N/A - -------------------------------------------------------------------------------------------------------------------- WASHTENAW HILLS MANOR, INC. Michigan 38-2686882 8051 - -------------------------------------------------------------------------------------------------------------------- WAYNE ARDEN, LLC Delaware 52-2098991 N/A - -------------------------------------------------------------------------------------------------------------------- WAYNE SPRINGHOUSE, LLC Delaware 52-2099204 N/A - -------------------------------------------------------------------------------------------------------------------- WEST DEPTFORD ARDEN, LLC Delaware 52-2098993 N/A - -------------------------------------------------------------------------------------------------------------------- WEST ORANGE ARDEN, LLC Delaware 52-2099197 N/A - -------------------------------------------------------------------------------------------------------------------- WEST ORANGE SPRINGHOUSE, LLC Delaware 52-2099205 N/A - -------------------------------------------------------------------------------------------------------------------- WEST WINDSOR ARDEN, LLC Delaware 52-2099198 N/A - --------------------------------------------------------------------------------------------------------------------
9
- -------------------------------------------------------------------------------------------------------------------- (EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.) STANDARD INCORPORATION OR INDUSTRIAL ORGANIZATION) CLASSIFICATION CODE NUMBER) - -------------------------------------------------------------------------------------------------------------------- WHITEHALL MANOR, INC. Michigan 38-2189772 8051 - -------------------------------------------------------------------------------------------------------------------- WILLIAMS VILLE ARDEN, LLC Delaware 52-2107735 6531 - --------------------------------------------------------------------------------------------------------------------
10 - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED MAY 3, 2001 PRELIMINARY PROSPECTUS MANOR CARE, INC. Offer to Exchange All Our Outstanding 8% Senior Notes due 2008 $200,000,000 aggregate principal amount In Exchange for 8% Senior Notes Due 2008 Which Have Been Registered Under the Securities Act of 1933 We are offering to exchange all of our outstanding 8% Senior Notes due 2008, which we refer to as old notes, for our registered 8% Senior Notes due 2008, which we refer to as new notes. We refer to the old notes and new notes collectively as the notes. We issued the old notes on March 8, 2001. The terms of the new notes are identical to the terms of the old notes except that we registered the new notes under the Securities Act of 1933. *PLEASE CONSIDER THE FOLLOWING: - - YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 19 OF THIS PROSPECTUS. - - Our offer to exchange old notes for new notes will be open until 5:00 p.m., New York City time, on __________, 2001, unless we extend the offer. - - You should also carefully review the procedures for tendering the old notes beginning on page 10 of this prospectus. - - If you fail to tender your old notes, you will continue to hold unregistered securities and your ability to transfer them could be adversely affected. - - No public market currently exists for the notes. We do not intend to list the new notes on any securities exchange and, therefore we do not anticipate that an active public market will develop. INFORMATION ABOUT THE NOTES: - - The notes will mature on March 1, 2008. - - Interest will accrue from March 8, 2001. - - We will pay interest on the notes semi-annually on March 1 and September 1 of each year beginning September 1, 2001, at the rate of 8% per year. - - We may redeem some or all of the notes at any time. The redemption price is described beginning on page 13. - - The notes will be guaranteed on a senior unsecured basis by Manor Care of America, Inc., our wholly-owned subsidiary, and all of our subsidiaries that have guaranteed, or will in the future guarantee, obligations under the $150,000,000 principal amount of 7 1/2% Senior Notes Due 2006 issued by Manor Care of America, Inc. - - These guarantees will be senior obligations of our subsidiary guarantors. If we fail to make payments on the notes, our subsidiary guarantors must make them instead. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------- THE DATE OF THIS PROSPECTUS IS ______, 2001 11 IN MAKING YOUR INVESTMENT DECISION, YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. EACH BROKER-DEALER THAT RECEIVES NEW NOTES FOR ITS OWN ACCOUNT IN CONNECTION WITH THE EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A PROSPECTUS IF IT RESELLS THOSE NEW NOTES. THE TRANSMITTAL LETTER STATES THAT BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, A BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT. THIS PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A BROKER-DEALER IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES ACQUIRED BY THE BROKER-DEALER AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. WE HAVE AGREED THAT, FOR A PERIOD ENDING ON THE EARLIER OF: - 180 DAYS AFTER THE DATE OF THIS PROSPECTUS; AND - THE DATE ON WHICH A BROKER-DEALER IS NO LONGER REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION WITH MARKET-MAKING OR OTHER TRADING ACTIVITIES, WE WILL MAKE THIS PROSPECTUS AVAILABLE TO ANY BROKER-DEALER FOR USE IN CONNECTION WITH ANY SUCH RESALE. SEE "PLAN OF DISTRIBUTION." TABLE OF CONTENTS Page ---- Where You Can Find More Information...........................................2 Documents Incorporated By Reference...........................................2 Forward Looking Statements....................................................3 Prospectus Summary............................................................5 Risk Factors .................................................................19 Use of Proceeds...............................................................28 Capitalization................................................................29 Selected Historical Consolidated Financial Data...............................30 Certain Relationships and Related Transactions................................32 The Exchange Offer............................................................32 The New Notes.................................................................41 Description of Other Debt.....................................................54 United States Federal Income Tax Considerations...............................55 Plan of Distribution..........................................................55 Legal Matters.................................................................56 Experts.......................................................................56 Glossary......................................................................56 1 12 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements, and other documents with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Our SEC filings are available to the public at the SEC's website at http://www.sec.gov. You may also read and copy any document we file at the following SEC public reference rooms: Judiciary Plaza, Room 1024 Citicorp Center, Suite 1400 7 World Trade Center 450 Fifth Street, N.W. 500 West Madison Street Suite 1300 Washington, D.C. 20549 Chicago, Illinois 60621 New York, New York 10048
You may obtain information regarding the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, because our common stock is listed on the New York Stock Exchange, you may read our reports, proxy statements, and other documents at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. This prospectus is part of a registration statement on Form S-4 we have filed with the SEC under the Securities Act of 1933, as amended. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the notes, you should refer to the registration statement. In this prospectus we summarize material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement. This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. This information is available without charge to you upon written or oral request. If you would like a copy of any of this information, please submit your request to Manor Care, Inc., 333 N. Summit Street, Toledo, Ohio 43604-2617, Attention: Legal Department, or call (419) 252-5500 and ask to speak to someone in our legal department. IN ADDITION, TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU REQUEST, YOU MUST SUBMIT YOUR REQUEST NO LATER THAN __________, 2001, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE THE EXCHANGE OFFER EXPIRES. DOCUMENTS INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" certain documents, which means that we can disclose important information to you by referring you to those documents. The information in the documents incorporated by reference is considered to be part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act: - Our annual report on Form 10-K/A for the fiscal year ended December 31, 2000; and - Our proxy statement for the annual stockholders' meeting to be held May 8, 2001, which we filed with the SEC on April 5, 2001. We will provide to you, at no charge, a copy of the documents we incorporate by reference in this prospectus. To request a copy of any or all of these documents, you should write or telephone us at the following address and telephone number: Manor Care, Inc., 333 N. Summit Street, Toledo, Ohio, 43604-2617, Attention: Legal Department. Our telephone number is: (419) 252-5500. 2 13 FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. We identify forward-looking statements in this prospectus by using words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "may be," "objective," "plan," "predict," "project," and "will be" and similar words or phrases, or the negative of those words or phrases. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by us in those statements include, among others, the following: - our existing and future debt that may affect our ability to obtain financing in the future or to comply with current debt covenants; - integration of acquired businesses; - changes in Medicare, Medicaid and certain private payors' reimbursement levels; - existing government regulations and changes in, or the failure to comply with, governmental regulations; - changes in, or the failure to comply with, regulations governing the transmission and privacy of health information; - state regulation of the construction or expansion of health care providers; - legislative proposals for health care reform; - competition; - the ability to attract and retain qualified personnel; - the failure to comply with occupational health and safety regulations; - changes in the treatment of interest deductions on certain policy loans related to corporate-owned life insurance; - changes in current trends in the cost and volume of general and professional liability claims; - the ability to enter into managed care provider arrangements on acceptable terms; - litigation; - a reduction in cash reserves and shareholders' equity upon our repurchase of our stock; and - an increase in senior debt or reduction in cash flow upon our purchase or sale of assets. - other factors discussed under the heading "Risk Factors" and in filings with the Securities and Exchange Commission. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will 3 14 not be material. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this prospectus to reflect any change in our expectations with regard to these statements or any change in events, conditions or circumstances on which any such statement is based. ---------------------------- INDUSTRY AND MARKET DATA In this prospectus we rely on and refer to information and statistics regarding the health care industry and our market share in the sectors in which we compete. We obtained this information and statistics from various third-party sources, discussions with our customers and our own internal estimates. We believe that these sources and estimates are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness. 4 15 PROSPECTUS SUMMARY This summary highlights the information contained elsewhere in or incorporated by reference into this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus and the documents to which we refer you. You should read the following summary together with the more detailed information and consolidated financial statements and the notes to those statements included elsewhere in or incorporated by reference into this prospectus. In this prospectus, "Company," "Manor Care," "we," "our," and "us" refer to Manor Care, Inc. With respect to the descriptions of our business contained in this prospectus, such terms refer to Manor Care, Inc. and our subsidiaries. SUMMARY COMPANY OVERVIEW We are a leading provider of long-term health care with one of the largest networks of skilled nursing and assisted living facilities in the United States. We own or operate over 350 high-quality long-term care centers in 32 states, with approximately 46,000 beds. We generated approximately 86% of our total revenues for the year ended December 31, 2000 from skilled nursing and assisted living services. We derived the balance of our revenues from a broad range of ancillary health care services, including subacute medical and rehabilitation care, rehabilitation therapy and home health and hospice care. We provide these services through many of our long-term care facilities and through 87 outpatient rehabilitation clinics, an acute care hospital and 78 home health care offices in 18 states. We enjoy a favorable quality mix of revenue with approximately 67% of our long-term care and rehabilitation revenues for the year ended December 31, 2000 generated from private-pay and Medicare sources. We operate primarily under the respected "ManorCare," "Heartland" and "Arden Courts" names. Our common stock trades on the New York Stock Exchange under the symbol "HCR." For the year ended December 31, 2000, we generated revenues of $2.4 billion and EBITDA -- which represents income from continuing operations before other income or expenses, income taxes, minority interest, depreciation and amortization, and unusual or nonrecurring expenses -- of $297.1 million. We discuss EBITDA on page 16 of this prospectus, and you should consider our cautions on that page about how we calculate EBITDA. INDUSTRY OVERVIEW The Health Care Financing Administration, which we refer to as HCFA, estimated total U.S. health care spending to grow at an annual average rate of 6.6% in 2001 and 6.5% from 2001 through 2008. By these estimates, health care expenditures will account for approximately $2.2 trillion, or 16.2%, of the total U.S. gross domestic product, by 2008. The nursing home care segment of the U.S. health care industry encompasses a broad range of health care services provided in skilled nursing facilities, including traditional skilled nursing care and specialty medical services. HCFA estimated total revenues generated by the nursing home industry in 2000 at $94.1 billion and indicated that these revenues have grown at a compound annual growth rate of 4.5% from 1995 to 2000. According to Managed Care Digest, the long-term care industry consisted of approximately 15,130 skilled nursing facilities and 1,707,234 nursing home beds at December 31, 1999. According to the United States Census Bureau, there are approximately 34.9 million people over the age of 65 in the United States. The Census Bureau expects this number to grow by 54% to 53.7 million by 2020. The fastest growing segment of the population is comprised of people over the age of 85. There are approximately 4.3 million people 85 years of age or older today and growth rates for this segment are expected to average 2.2% per year from 2000 through 2020. We believe that demand for long-term care will continue to grow due to longer average life expectancy, the growing segment of the U.S. population over 85 years of age, and cost-containment efforts by payors to encourage shorter stays in acute care facilities. HCFA projects the overall nursing home care industry to grow at an average annual rate of 6.1% from 2000 to 2008. Throughout the 1990s, there were numerous initiatives on the federal and state levels to achieve comprehensive reforms affecting the payment for, and availability of, health care services. Aspects of these initiatives included changes in reimbursement regulations by HCFA and enhanced pressure to contain health care 5 16 costs by Medicare, Medicaid and other payors. The Balanced Budget Act, passed in 1997, was designed to reduce and control the rate of increase in Medicare spending for services by various providers. Specifically, the Balanced Budget Act eliminated the previous "cost-based" reimbursement system and implemented a prospective payment system that reimburses nursing home providers based on health care services required by various categories of patients. The Balanced Budget Act reduced Medicare reimbursement more than Congress or the industry expected and created an extremely difficult operating environment for many long-term care and other health care providers. As a result, Congress passed the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, which restored a portion of the lost reimbursement resulting from the Balanced Budget Act. The Balanced Budget Act required that for each year within the phase-in period, the Medicare program would reimburse a facility at rates that combined a facility-specific base rate with a federal rate. After the phase-in period, a facility would be reimbursed based upon the full federal rates. Through this 1999 legislation, skilled nursing facilities received a 20% reimbursement increase for 15 service categories beginning in April 2000 and a 4% across-the-board increase for both fiscal 2001 and 2002. Moreover, this 1999 legislation gave skilled nursing facilities the option to waive the prospective payment system transition period and elect to receive 100% of the federal daily rate. Additionally, Congress passed the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000, which restored an additional $1.6 billion to the nursing home industry over a five-year period. Many of the key long-term care provisions of this legislation became effective on April 1, 2001. As a result of the positive trends in the reimbursement environment over the past two years, we believe the operating environment for the long-term care industry is more positive than it has been for several years. We believe we are well positioned to take advantage of these favorable demographic and industry reimbursement trends. We expect these positive market conditions will provide significant growth opportunities for our business. COMPETITIVE STRENGTHS Leading Provider of Health Care Services. Since opening our first long-term care facility more than 30 years ago, we have developed a reputation for being one of the leading long-term health care providers in the industry. We are one of the largest long-term care providers in the country, generating over $2.0 billion in annual revenue. We believe our network of highly functional facilities, experienced management team, high-quality services and conservative fiscal management are competitive strengths which have established a strong foundation for our status as one of the leading long term health care providers. Established Network of Modern, Highly Functional Facilities. We currently own 94% of our long-term care facilities and, over the past three years, we have spent over $400.0 million on new construction, renovations and improvements in our operations and support systems, excluding divested facilities. We believe our assets are among the highest quality in the industry and have enabled us to introduce more specialized services, such as subacute medical and rehabilitation care, which has led to greater revenue growth and cash flow. These facilities have enhanced our ability to increase the percentage of attractive private-pay and Medicare patients. These patients accounted for 67% of our long-term care and rehabilitation revenues for the year ended December 31, 2000. Experienced Management Team. The members of our senior management team, led by our President and CEO Paul A. Ormond, have an average of over 20 years in the health care industry. Under Mr. Ormond's leadership, our management team has successfully established Manor Care as a leading operator in health care. Mr. Ormond has successfully led our company through difficult periods of industry and regulatory change. In addition to managing the successful 1998 merger of Health Care and Retirement Corporation and the former Manor Care, Inc., the current management team has completed over 40 acquisitions. 6 17 Breadth of Health Care Services. With over 54,000 employees, we provide a variety of health care services, including: - skilled nursing centers providing 24-hour nursing supervision, seven days a week; - subacute medical and rehabilitation services, which shorten hospital stays and offer a lower cost alternative for those recovering from major surgery or illness; - assisted living facilities for those desiring to live independently with assistance for the general activities of daily living; - Alzheimer's care where we are a leader in providing care for those suffering from Alzheimer's disease and other forms of dementia; - comprehensive home health services including nursing care, rehabilitation, personal care and homemaking services; - hospice services offering palliative care, end-of-life planning and psychosocial support to the terminally ill and their families; and - outpatient rehabilitation, including physical, occupational and speech therapy in selected markets throughout the country. Our continuing investment in specialty services gives us the opportunity to offer services to higher acuity patients in areas such as chronic disease management, wound treatment and oncology. We support our commitment to delivering high quality care to our residents by developing strong clinical programs which include thorough training for our employees, comprehensive policies, procedures and protocols and an extensive support organization. Conservative Fiscal Management. We believe we have performed well over the past several years, a period in which the health care industry underwent significant transformation as a result of governmental legislation aimed at reducing Medicare spending. A significant reason for our strong performance during this period was our conservative fiscal management, which is demonstrated by our: - diversified revenue sources; - tight cost controls; - strong balance sheet with a debt to capital ratio below 50%; - measured growth without an emphasis on large acquisitions; and - investment grade debt rating by Standard and Poor's, the only such rating in our industry. BUSINESS STRATEGY Focus on Margin Improvement. In addition to capitalizing on planned reimbursement rate increases, we will continue to pursue numerous opportunities and initiatives to improve our margins and profitability. These initiatives include improving our occupancy rates, which will enhance our ability to increase our operating efficiency by better leveraging our infrastructure and fixed costs. We also intend to improve our quality mix and revenue per patient by continuing to focus on private pay patients and growing our population of attractive Medicare rehabilitation patients. In addition, we will continue to focus on managing our labor costs and increasing our labor efficiency, particularly by reducing our use of temporary labor and agency staffing services. Increase Cash Flow Growth from Existing Assets. We believe we can grow revenue and operating cash flow by improving our use of existing assets. We plan to pursue this initiative by expanding our offering of services and 7 18 by reducing our use of outsourced services to provide care for higher complexity patients. This will allow us to capture additional revenue and cash flow per patient. We believe we will be able to pursue this strategy with minimal additional capital expenditures. Construction and Acquisition of New Facilities. We expect to selectively construct and acquire individual skilled nursing, assisted living and other facilities that complement our existing business. We will focus on acquiring and constructing facilities in existing markets that offer attractive demographics and enable us to achieve operating synergies. For example, during 1999 and 2000 we began construction of 16 new facilities, 11 of which opened by December 31, 2000. As these facilities increase occupancy during their start-up phase, they should provide us with the margin improvement and earnings growth characteristic of mature facilities. In addition, we believe difficult operating conditions in the industry over the past several years provide opportunities for us to acquire selective strategic facilities at attractive prices. Vertical Integration and Service Expansion. Our strategy is to expand services such as home health care, hospice care and outpatient therapy, which extend our coverage along the continuum of health care services and allow us to capture a greater share of health care expenditures in our key markets. For example, our recent acquisition of In Home Health provided us with a core base of 39 home health offices in 15 states and $99.1 million in additional revenues in 2000. We intend to integrate In Home Health's product offerings into our core business and grow our home care and hospice operations. Provider Networks and Joint Ventures. In addition to other growth initiatives, we expect to focus on further expanding our provider networks by establishing new relationships with physicians, hospitals and other health care organizations within our existing markets. We will also evaluate and expect to enter into joint ventures that will allow us to develop new business lines and enter new markets. We anticipate that these joint ventures will allow us to leverage the expertise and market knowledge of our partners and minimize the capital costs to develop and grow these businesses. 8 19 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER Old notes........................................ On March 8, 2001 we completed a private offering of the old notes, which consist of $200,000,000 aggregate principal amount of 8% Senior Notes due 2008. In connection with the initial sale of the old notes, we entered into a registration rights agreement in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer. The exchange offer............................... We are offering to issue up to $200,000,000 aggregate principal amount of our 8% Senior Notes due 2008, which have been registered under the Securities Act, in exchange for an equal aggregate principal amount of our outstanding unregistered notes. The terms of the new notes are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidation damages provisions and the transfer restrictions that apply to the old notes, do not apply to the new notes. You may tender old notes only in $1,000 increments. Subject to the satisfaction or waiver of specified conditions, we will exchange the new notes for all old notes that are validly tendered and not withdrawn before the exchange offer expires. We discuss these conditions in "The Exchange Offer--Terms of the Exchange Offer." We will cause the exchange to be effected promptly after the exchange offer expires. Resale of the new notes.......................... We believe that the new notes issued in the exchange offer may be offered for sale, resold or otherwise transferred by you, without compliance with the registration and prospectus delivery requirements of the Securities Act, if you: - acquire the new notes in the ordinary course of your business; - are not engaging in and do not intend to engage in a distribution of the new notes; - do not have an arrangement or understanding with any person to participate in a distribution of the new notes; - are not an affiliate of ours within the meaning of Rule 405 under the Securities Act; and - are not a broker-dealer that acquired the old notes directly from us. If any of these conditions is not satisfied and you transfer any new notes without delivering a proper prospectus or without qualifying for an exemption from registration, you may incur liability under the Securities Act. In addition, if you are a broker-dealer seeking to receive new notes for your own account in exchange for old notes that you acquired as a result of market-making or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any offer to resell, or any resale or other
9 20 transfer of the new notes that you receive in the exchange offer. See "Plan of Distribution." Expiration date.................................. The exchange offer will expire at 5:00 p.m., New York City time, on _________, 2001, unless we extend it. Withdrawal....................................... You may withdraw the tender of your old notes at any time before the exchange offer expires. We will return to you any of your old notes that we do not accept for exchange for any reason, without expense to you, promptly after the exchange offer expires or terminates. Interest on the new notes and the old notes...... The new notes will bear interest at the rate of 8% per year beginning March 8, 2001. This interest will be payable semi-annually on each March 1 and September 1, with the first payment on September 1, 2001. We will not pay interest on the old notes after we accept them for exchange. See "The New Notes." Conditions to the exchange offer................. The exchange offer is subject to various conditions. We reserve the right to terminate or amend the exchange offer at any time before the expiration date if various specified events occur. The exchange offer is not conditioned upon any minimum principal amount of outstanding old notes being tendered. See "The Exchange Offer--Conditions of the Exchange Offer." Procedures for tendering old notes............... If you wish to tender your old notes, you must cause the following to be transmitted to and received by the exchange agent no later than 5:00 p.m., New York City time, on the expiration date: - a confirmation of the book-entry transfer of the tendered old notes into the exchange agent's account at The Depository Trust Company; - a properly completed and duly executed transmittal letter in the form accompanying this prospectus, with any required signature guarantees, or, at your option in the case of a book entry tender, an agent's message in lieu of the transmittal letter; and - any other documents required by the transmittal letter.
10 21 Guaranteed delivery procedures................... If you wish to tender your old notes and you cannot cause the old notes or any other required documents to be transmitted to and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date, you may tender your old notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." Special procedures for beneficial owners......... If you are the beneficial owner of old notes that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the exchange offer, you should promptly contact the person in whose name your outstanding old notes are registered and instruct that person to tender your old notes on your behalf. See "The Exchange Offer--Procedures for Tendering." Representations of tendering holders............. By tendering old notes pursuant to the exchange offer, you will, in addition to other customary representations, represent to us that you: - are acquiring the new notes in the ordinary course of business; - are not engaging in a distribution of the new notes; - have no arrangement or understanding with any person to participate in a distribution of the new notes; - are not an affiliate of ours, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act; and - are not a broker-dealer tendering old notes acquired directly from us. Acceptance of old notes and delivery of new notes..................................... Subject to the satisfaction or waiver of the conditions to the exchange offer, we will accept for exchange any and all old notes that are properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date. We will cause the exchange to be effected promptly after the exchange offer expires. Exchange agent................................... National City Bank is serving as exchange agent for the exchange offer. Federal income tax considerations................ The exchange of old notes for new notes pursuant to the exchange offer will not be a taxable event for United States federal income tax purposes. See "United States Federal Income Tax Considerations."
11 22 Consequences of failing to exchange your old notes........................................ The exchange offer satisfies our obligations and your rights under the registration rights agreement. After the exchange offer is completed, you will not be entitled to any registration rights with respect to your old notes. Therefore, if you do not exchange your old notes, you will not be able to reoffer, resell or otherwise dispose of your old notes unless: - you comply with the registration and prospectus delivery requirements of the Securities Act; or - you qualify for an exemption from the Securities Act registration requirements. Appraisal or dissenters' rights.................. You will have no appraisal or dissenters' rights in connection with the exchange offer. Use of proceeds.................................. We will not receive any proceeds from the issuance of new notes pursuant to the exchange offer. We will pay all expenses incident to the exchange offer.
12 23 SUMMARY OF THE TERMS OF THE NEW NOTES The terms of the new notes will be identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes do not apply to the new notes. The new notes will evidence the same debt as the old notes. The new notes and the old notes will be governed by the same indenture. The following summary contains basic information about the new notes and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of the new notes, please refer to the section of this prospectus entitled "The New Notes." For purposes of the description of the notes included in this prospectus, references to the "Company," "Issuer," "us," "we" and "our" refer only to Manor Care, Inc. and do not include our subsidiaries. Issuer........................................... Manor Care, Inc. Securities....................................... $200,000,000 in principal amount of 8% Senior Notes due 2008. Maturity......................................... March 1, 2008 Interest payment dates........................... March 1 and September 1 of each year, commencing September 1, 2001. Optional redemption.............................. The new notes will be redeemable, at our option, in whole at any time or in part from time to time, at a redemption price equal to the greater of: 1. 100% of their principal amount plus accrued but unpaid interest to the date of redemption, or 2. (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity, except for currently accrued but unpaid interest, discounted to the date of redemption, on a semi-annual basis, at the treasury rate plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. When we refer to the treasury rate, we mean the treasury rate at the time of redemption for treasury notes with a maturity comparable to the remaining term of the notes, determined as described in "The New Notes." Change of control................................ Upon a change of control that is accompanied by a ratings decline, you may require us to repurchase your notes, in whole or in part, at a purchase price equal to 101% of the principal amount of your notes plus accrued but unpaid interest to the purchase date.
13 24 Guarantees; Elimination; Reinstatement........... The new notes will be guaranteed by Manor Care of America, Inc., our wholly-owned subsidiary, and each of our existing and future subsidiaries that guarantee the obligations of Manor Care of America, Inc. under its $150.0 million principal amount of 7-1/2% Senior Notes due 2006. The guarantees are unsecured senior debt of our subsidiary guarantors. If the obligations of any subsidiary guarantor under the 7-1/2% Senior Notes due 2006 or our senior credit facilities terminate, that subsidiary guarantor will also be released from its obligations under its Subsidiary Guarantee. If an existing or future subsidiary of ours guarantees any of our debt, then that subsidiary will guarantee our debt under the new notes. Ranking.......................................... The notes will rank equally in right of payment with all our existing and future unsecured senior debt and are senior in right of payment to all our future subordinated debt. The indenture does not limit the amount of debt that we or our subsidiaries may incur. The guarantees will rank equally in right of payment with the existing and future unsecured senior debt of our subsidiary guarantors and will be senior in right of payment to the future subordinated debt of our subsidiary guarantors. The notes and the guarantees will effectively rank junior to any secured debt of ours or our subsidiary guarantors, to the extent of the assets securing that debt. If the guarantees of the notes are eliminated, the notes will be structurally junior to all liabilities of our subsidiaries. Covenants........................................ We will issue the notes under an indenture with National City Bank, as trustee. The indenture, among other things, restricts our ability to: - incur or permit to exist liens; - engage in transactions with our affiliates; - enter into sale and lease-back transactions; and - merge or consolidate with or into other companies. Use of proceeds.................................. We will not receive any proceeds from the exchange offer. For a description of the use of proceeds from the offering of the old notes, see "Use of Proceeds." Form of the new notes............................ The new notes will be represented by one or more permanent global securities in registered form deposited with National City Bank, as custodian, for the benefit of The Depository Trust Company. You will not receive notes in registered form unless one of the events set forth under the heading "Book-Entry, Delivery and Form" occurs. Instead, beneficial interests in the new notes will be shown on, and transfers of these interests will be effected only through, records maintained in book-entry form by The Depository Trust Company for its participants.
14 25 Transfer restrictions; Absence of a public market for the notes.................................... There has been no public market for the old notes, and we do not anticipate that an active market for the new notes will develop. We do not intend to apply to list the new notes on any securities exchange or to include them in any automated quotation system. We cannot make any assurances regarding the liquidity of the market for the new notes, your ability to sell your new notes or the price at which you may sell your new notes. See "Plan of Distribution."
15 26 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary of our consolidated financial information for the years ended December 31, 1998, 1999 and 2000 on an actual basis and, for the year ended December 31, 2000, on an adjusted basis to give effect to the offering of the old notes and the use of proceeds from that offering, should be read in conjunction with "Selected Historical Consolidated Financial Data" beginning on page 30 and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and related notes contained elsewhere in our annual report on form 10-K/A for the fiscal year ended December 31, 2000, which we incorporate by reference into this prospectus. See "Documents Incorporated by Reference." In our consolidated financial information, EBITDA represents income from continuing operations before other income (expenses), income taxes, minority interest, depreciation and amortization, and unusual or non-recurring expenses. We have included certain information concerning EBITDA because management believes EBITDA is generally accepted as providing useful information about a company's ability to service and incur debt. You should not consider EBITDA, however, in isolation or as a substitute for net income, cash flows or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. We have calculated EBITDA for the periods presented as follows:
ADJUSTED 1998 1999 2000 2000 ---- ---- ---- ---- (IN THOUSANDS) Income from continuing operations before other income (expenses), income taxes, and minority interest........................ $ 11 $218,755 $139,085 $139,085 Depreciation and amortization............... 119,223 114,601 121,208 121,208 Unusual or Non-recurring items: Provision for restructuring charge, merger expenses, asset impairment and other related charges........................ 278,261 14,787 Expenses related to general and professional liability reserve...................... 33,618 33,618 Expenses related to terminated Company buy-out transaction.................... 3,175 3,175 -------- -------- -------- -------- EBITDA...................................... $397,495 $348,143 $297,086 $297,086 ======== ======== ======== ========
For a complete discussion of the charges set forth in "Provision for restructuring charge, merger expenses, asset impairment and other related charges," see the "Management's Discussion and Analysis of Financial Conditions and Results of Operations," incorporated by reference into this prospectus. In the above table, "Expenses related to general and professional liability reserve" represents the amount of general and professional liability expense related to a change in estimate for claims originating in policy years 1994 through 1999. See "Risk Factors" for a discussion of the cost of general and professional liability claims. In the above table, the entry, "Expenses related to terminated Company buy-out transaction," represents transaction costs related to our exploring various strategic alternatives, including a possible sale of Manor Care. We terminated these efforts in May 2000. 16 27
ADJUSTED 1998 1999 2000 2000 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA) RESULTS OF OPERATIONS Revenues.................................... $2,209,087 $2,135,345 $2,380,578 $2,380,578 Income from continuing operations before other income (expenses), income taxes, and minority interest.................. 11 218,755 139,085 139,085 Income (loss) from continuing operations.... (46,162) (55,158) 39,055 38,435 OTHER FINANCIAL DATA EBITDA...................................... $ 397,495 $ 348,143 $ 297,086 $ 297,086 Interest expense(1)......................... 46,587 54,082 60,733 61,767 Capital expenditures........................ 327,600 186,900 149,300 149,300 Ratio of EBITDA to interest expense................................ 8.5x 6.4x 4.9x 4.8x Ratio of total debt to EBITDA............... 2.3x 2.5x 2.7x 2.7x Ratio of earnings to fixed charges(2)....... 1.7x 1.7x BALANCE SHEET DATA Total assets................................ $2,722,727 $2,289,777 $2,358,468 $2,358,468 Total debt.................................. 929,727 873,119 804,533 808,033 Total shareholders' equity.................. 1,199,168 980,037 1,012,729 1,012,109 SKILLED NURSING AND ASSISTED LIVING SEGMENT DATA Number of facilities........................ 360 346 354 354 Number of beds.............................. 47,138 45,715 46,020 46,020
- ----------------- (1) We have adjusted the interest expense for adjusted 2000 to include interest expense incurred from the old notes issued at a coupon rate of 8% and the annual amortization of the related financing costs, and to exclude interest expense that was incurred in 2000 on the portion of our revolving credit agreement borrowings that we repaid with the net proceeds of the issue of old notes. (2) We do not show a ratio result for 1998 and 1999 because earnings were insufficient to cover fixed charges by $38.6 million and $108.8 million, respectively. Earnings in the ratio of earnings to fixed charges represent our income from continuing operations before taxes and minority interest that have been adjusted to exclude: - the effect of any fixed charges that reduced such earnings; and - the undistributed income or losses of affiliates accounted for by the equity method, except for losses of an equity method affiliate whose debt we guaranteed. We have not included any of the adjustments for unusual and non-recurring items in this calculation that were reflected in the calculation of EBITDA. Our fixed charges include interest expense, whether or not classified as such in our earnings statement, as well as the portion of rental expense that we estimated to represent the interest portion (approximately 40%). Interest expense includes capitalized interest, interest on guaranteed debt of an equity method affiliate that is incurring losses, and interest on our loans against the cash surrender value of corporate-owned life insurance. In the adjusted 2000 calculation, we adjusted both earnings before taxes and fixed charges to reflect the change in interest expense described in footnote (1). 17 28 GENERAL Manor Care, Inc. is incorporated in Delaware. Our principal executive offices are located at 333 North Summit Street, Toledo, Ohio 43604-2617. Our telephone number is (419) 252-5500. 18 29 RISK FACTORS Our business, operations and financial condition are subject to various risks. We describe some of these risks below, and you should take these risks into account in deciding whether to participate in the exchange offer proposed in this prospectus. This section does not describe all risks applicable to us, our industry or our business, and we intend it only as a summary of certain material factors. YOU MAY BE ADVERSELY AFFECTED IF YOU DO NOT EXCHANGE YOUR NOTES. If you do not exchange your old notes for new notes pursuant to the exchange offer, you will continue to be subject to the transfer restrictions on your old notes. You will have no further registrations rights. The transfer restrictions on your old notes arise because we issued the old notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold pursuant to an exemption from those requirements. We do not intend to register the old notes under the Securities Act. In addition, if you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities. In those circumstances, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. To the extent old notes are tendered and accepted in the exchange offer, the trading market, if any, for the old notes would be adversely affected. See "The Exchange Offer -- Consequences of Failure to Exchange Old Notes." THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, SO YOU MAY BE UNABLE TO SELL THEM. We will not list the new notes on any securities exchange. These new notes are new securities for which there is currently no market. The notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities, our performance and other factors. We have been advised by the initial purchasers that they intend to make a market in the new notes, as well as the old notes, as permitted by applicable laws and regulations. However, they are not obligated to do so and their market making activities may be limited during our exchange offer. Therefore, we cannot assure you that an active market for the new notes will develop. IF A MARKET DEVELOPS FOR THE NEW NOTES, THE NOTES MIGHT TRADE AT VOLATILE PRICES. If a market develops for the new notes, the notes might trade at prices higher or lower than their initial public offering price. The trading price would depend on many factors, such as prevailing interest rates, the market for similar securities, general economic conditions and our financial condition, performance and prospects. YOU MUST TENDER THE OLD NOTES IN ACCORDANCE WITH PROPER PROCEDURES IN ORDER TO ENSURE THE EXCHANGE WILL OCCUR. We will only exchange old notes for new notes if you follow the proper procedures, as detailed in this prospectus. We will issue the new notes in exchange for the old notes if the exchange agent receives the old notes or a book-entry confirmation, a properly completed and executed transmittal letter, or an agent's message, and all other required documentation in a timely manner. If you want to tender your old notes in exchange for new notes, you should allow sufficient time to ensure timely delivery. Neither we nor the exchange agent is under any duty to give you notification of defects or irregularities with respect to tenders of old notes for exchange. In addition, if you are an affiliate of ours or you tender the old notes in the exchange offer in order to participate in a distribution of the new notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. For additional information, please refer to the sections entitled "The Exchange Offer" and "Plan of Distribution." 19 30 OUR DEBT COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND MAKE IT MORE DIFFICULT FOR US TO FULFILL OUR OBLIGATIONS UNDER THE NOTES. At December 31, 2000, our total consolidated indebtedness was approximately $804.5 million, or approximately $808.0 million after giving effect to the offering of the old notes and use of proceeds. We may also borrow more debt under our existing revolving credit facilities or otherwise. The indenture does not limit the amount of debt that we or our subsidiaries may incur. Our debt could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the notes; - increase our vulnerability to general adverse economic and industry conditions; - require us to dedicate a substantial portion of our cash flow from operations to debt payments, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures and other general corporate purposes; - limit, along with the financial and other restrictive covenants in our debt, our ability to borrow a significant amount of additional funds; - limit, along with the financial and other restrictive covenants in our debt, our flexibility to plan for, or react to, changes in our business and the industry in which we operate; and - place us at a competitive disadvantage compared to our competitors that have less debt. THE EXPECTED SALE OF THE FACILITIES IN OUR JOINT VENTURE WITH ALTERRA MAY NOT YIELD PROCEEDS SUFFICIENT TO PAY THE JOINT VENTURE'S DEBT. We entered into a development joint venture with Alterra Healthcare Corporation, which we refer to as Alterra, where each party has a 50% interest. Together, we jointly and severally guaranteed a $57.0 million line of credit with an adjusted maturity date of June 29, 2001. The development joint venture is the 10% owner and managing owner or partner in the various project companies and partnerships which are entitled to borrow under the credit agreement. We and Alterra are undertaking efforts to sell the facilities using the proceeds of the sale to repay the debt. Although we do not presently anticipate any loss to be associated with the guarantee of related debt, we cannot assure you that the proceeds of the sales of each of these facilities will exceed the amount of guaranteed debt related to each such facility, and we could be liable for a portion or all of any excess guaranteed debt. OUR BUSINESS IS CONDUCTED THROUGH OUR SUBSIDIARIES. We conduct operations through our subsidiaries. As a result, we depend on dividends, loans or advances, or payments from our subsidiaries to satisfy our financial obligations and make payments to our investors. The ability of our subsidiaries to pay dividends and make other payments to us is restricted by, among other things, applicable corporate and other laws and regulations. This ability may be further restricted in the future by, agreements to which our subsidiaries may be a party. Although the notes are guaranteed by the subsidiary guarantors, each guarantee is subordinated to all secured debt of the relevant subsidiary guarantor. NOT ALL OF OUR SUBSIDIARIES ARE GUARANTORS AND ASSETS OF NON-GUARANTOR SUBSIDIARIES MAY NOT BE AVAILABLE TO MAKE PAYMENTS ON THE NOTES. Our existing and future subsidiaries that do not guarantee the obligations of Manor Care of America, Inc., or MCA, under its $150.0 million principal amount of 7-1/2% Senior Notes Due 2006, will also not guarantee the notes. Only we and the subsidiary guarantors must make payments on the notes. As a result, no payments are required to be made from assets of subsidiaries that do not guarantee the notes unless these subsidiaries transfer those assets, by dividend or otherwise, to us or a subsidiary guarantor. In the event of a bankruptcy, liquidation or reorganization of 20 31 any of the non-guarantor subsidiaries, holders of their debt, including their trade creditors, will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. For the year ended December 31, 2000, our non-guarantor subsidiaries with respect to the notes represented less than 3% of our revenues, assets, income from continuing operations and EBITDA. OUR SUBSIDIARY GUARANTEES MAY BE RELEASED IN THE FUTURE IF CERTAIN EVENTS OCCUR. Each subsidiary guarantor that is released from its obligations under MCA's notes that are due in 2006 or any related guarantees and from its guarantee under our senior credit facilities and any guarantee with respect to the credit facilities will also be released as a guarantor under the notes. Upon such release, the notes will effectively rank junior to all liabilities of that subsidiary, whether or not those liabilities are secured or unsecured. ALTHOUGH WE REFER TO YOUR NOTES AS SENIOR NOTES, AND THE SUBSIDIARY GUARANTEES ARE SENIOR OBLIGATIONS OF OUR SUBSIDIARIES, EACH WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT AND ANY SECURED LIABILITIES OF OUR SUBSIDIARIES. The notes will effectively rank junior to any of our secured debt or any secured debt of our subsidiaries, to the extent of the assets securing that debt. In the event of bankruptcy, liquidation, reorganization or other winding up of Manor Care, our assets that secure secured debt will be available to pay obligations on the notes only after that secured debt has been repaid in full from these assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all the notes then outstanding. The guarantees of the notes will similarly effectively rank junior to any secured debt of the applicable subsidiary, to the extent of the assets securing that debt. Our subsidiaries had $41.4 million of secured debt as of December 31, 2000. A CHANGE IN CONTROL MAY ADVERSELY AFFECT US OR THE NOTES. Our senior credit facilities provide that certain change of control events with respect to us will constitute a default. In addition, future debt we incur may limit our ability to repurchase the notes upon a change of control or require us to offer to redeem that future debt upon a change of control. Moreover, if you or other investors in our notes exercise the repurchase right for a change of control, it may cause a default under that debt, even if the change of control itself does not cause a default, due to the financial effect of such a purchase on us. Finally, if a change of control event occurs, we cannot assure you that we will have enough funds to repurchase all the notes. Furthermore, the change in control provisions may in certain circumstances make more difficult or discourage a takeover of Manor Care and the removal of incumbent management. OUR BUSINESS AND FINANCIAL RESULTS DEPEND ON OUR ABILITY TO GENERATE SUFFICIENT CASH FLOWS TO SERVICE OUR DEBT OR REFINANCE OUR DEBT ON COMMERCIALLY REASONABLE TERMS. Our ability to make payments on and to refinance our debt and to fund planned expenditures depends on our ability to generate cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. In addition, our ability to borrow funds under our credit agreements will depend on our satisfying various covenants. These covenants, among other things: - limit our ability and the ability of our subsidiaries to borrow and to place liens on our assets or their assets; - require us to comply with a debt to capitalization ratio test, fixed charge coverage ratio test and leverage ratio test; - limit our ability to merge with other parties or sell all or substantially all of our assets; - limit our and our subsidiaries' ability to acquire and dispose of assets; and 21 32 - limit our ability to pay dividends and redeem capital stock. Our inability to generate sufficient cash flow to service our debt or refinance our debt on commercially reasonable terms would have a material adverse effect on our business and results of operations. We cannot assure you that our business will generate cash flows from operations or that future borrowings will be available to us under our credit facilities in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. REFINANCING OUR EXISTING DEBT COULD HAVE ADVERSE EFFECTS. Our five year credit agreement terminates on September 24, 2003. Our 364 day credit agreement terminates on September 21, 2001. MCA's notes mature in 2006. We cannot assure you that we will be able to refinance these borrowing arrangements, or any other outstanding debt, on commercially reasonable terms or at all. Refinancing our borrowing arrangements could result in: - an increase in the interest rate over the rate we currently pay; - additional or more restrictive covenants than those outlined above; and - our granting of a security interest in collateral. WE MAY MAKE ACQUISITIONS THAT COULD SUBJECT US TO A NUMBER OF OPERATING RISKS. We anticipate that we may continue to make acquisitions of, investments in, and strategic alliances with complementary businesses to enable us to add services for our core customer base and for adjacent markets, and to expand each of our businesses geographically. However, implementing this strategy entails a number of risks, including: - inaccurate assessment of undisclosed liabilities; - entry into markets in which we may have limited or no experience; - diversion of management's attention from our core business; - difficulties in assimilating the operations of an acquired business or in realizing projected efficiencies and cost savings; and - increase in our debt and a limitation in our ability to access additional capital when needed. Some changes may be necessary to integrate the acquired businesses into our operations, to assimilate many new employees and to implement reporting, monitoring, compliance and forecasting procedures. We may also have difficulty obtaining anticipated revenue synergies or cost reductions in many acquisitions. WE DEPEND UPON REIMBURSEMENT BY THIRD-PARTY PAYORS. We derive substantially all of our long-term care and rehabilitation revenues from private and governmental third-party payors. In 2000, we derived approximately 24% of our revenues from Medicare, 33% from Medicaid and approximately 43% from commercial insurers, managed care plans, workers' compensation payors and other private pay revenue sources. There are increasing pressures from many payors to control health care costs and to reduce or limit increases in reimbursement rates for medical services. Governmental payment programs are subject to statutory and regulatory changes, retroactive rate adjustments, administrative or executive orders and government funding restrictions, all of which may materially increase or decrease the rate of program payments to us for our services. In the recent past, we have experienced a decrease in revenues primarily attributable to declines in government reimbursement as a result of the Balanced Budget Act of 1997. Although certain rate reductions 22 33 resulting from the Balanced Budget Act are being mitigated by the Balanced Budget Refinement Act of 1999 and will be mitigated by the Benefits Improvement Protection Act of 2000, the Balanced Budget Act significantly changed the method of payment under the Medicare and Medicaid programs for our services. We cannot assure you that payments from governmental or private payors will remain at levels comparable to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to these programs. Our financial condition and results of operations may be affected by the reimbursement process, which in the health care industry is complex and can involve lengthy delays between the time that we recognize revenue and the time that the reimbursement amounts are settled. We are subject to periodic audits by the Medicare and Medicaid programs, and the paying agencies for these programs have various rights and remedies against us if they assert that we have overcharged the programs or failed to comply with program requirements. These payment agencies could seek to require us to repay any overcharges or amounts billed in violations of program requirements, or could make deductions from future amounts due to us. We could also be subject to fines, criminal penalties or program exclusions. Private pay sources also reserve rights to conduct audits and make monetary adjustments. IF WE FAIL TO COMPLY WITH EXTENSIVE LAWS AND GOVERNMENT REGULATIONS, WE COULD SUFFER PENALTIES OR BE REQUIRED TO MAKE SIGNIFICANT CHANGES TO OUR OPERATIONS. The health care industry, including our company, is required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things: - licensure and certification; - adequacy and quality of health care services; - qualifications of health care and support personnel; - quality of medical equipment; - confidentiality, maintenance and security issues associated with medical records; - relationships with physicians and other referral sources; - operating policies and procedures; - addition of facilities and services; and - billing for services. Many of these laws and regulations are expansive, and we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. In addition, certain regulatory developments, such as revisions in the building code requirements for assisted living and skilled nursing facilities, mandatory increases in scope and quality of care to be offered to residents and revisions in licensing and certification standards, could have a material adverse effect on us. In the future, different interpretations or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses. If we fail to comply with applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties, including the loss of our licenses to operate one or more of our facilities, and exclusion of one or more of our facilities from participation in the Medicare, Medicaid and other federal and state health care programs. 23 34 Both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of health care companies and, in particular, skilled nursing facilities and home health agencies. These investigations relate to a wide variety of topics, including: - cost reporting and billing practices; - quality of care; - financial relationships with referral sources; and - medical necessity of services provided. In addition, the Office of the Inspector General of the U.S. Department of Health and Human Services and the Department of Justice have, from time to time, established national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Like others in the health care industry, we receive requests for information from governmental agencies in connection with their regulatory or investigational authority. Moreover, health care providers are also subject to the federal False Claims Act amendments which in 1986 made it easier for private parties to bring "qui tam" whistleblower lawsuits -- actions brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive -- against companies. Some states have adopted similar state whistleblower and false claims provisions. WE ARE REQUIRED TO COMPLY WITH LAWS GOVERNING THE TRANSMISSION AND PRIVACY OF HEALTH INFORMATION. The Health Insurance Portability and Accountability Act of 1996, requires us to comply with standards for the exchange of health information within our company and with third parties, such as payors, business associates, and patients. These include standards for common health care transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; unique identifiers for providers, employers, health plans and individuals; security; privacy; and enforcement. To date, the Department of Health and Human Services has released two standards, one governing health care transactions and the second relating to the privacy of individually identifiable health information. Rules governing the security of health information have been proposed but not finalized. We generally have two years from the effective date of these standards to comply. Therefore, we have to comply by October 2002 for the transaction standards, and by April 14, 2003 for the privacy standards. While the government intended this legislation to reduce administrative expenses and burdens for the health care industry, the law may require significant and costly changes for us. If we fail to comply with these standards, we could be subject to criminal penalties and civil sanctions. STATE EFFORTS TO REGULATE THE CONSTRUCTION OR EXPANSION OF HEALTH CARE PROVIDERS COULD IMPAIR OUR ABILITY TO EXPAND OUR OPERATIONS. Some states require health care providers, including skilled nursing facilities, home health agencies, hospices and assisted living facilities, to obtain prior approval, known as a certificate of need, for: - the purchase, construction or expansion of health care facilities; - capital expenditures exceeding a prescribed amount; or - changes in services or bed capacity. To the extent that we require a certificate of need or other similar approvals to expand our operations, either by acquiring facilities or expanding or providing new services or other changes, our expansion could be adversely affected by the failure or inability to obtain the necessary approvals, changes in the standards applicable to those approvals, and possible delays and expenses associated with obtaining those approvals. We cannot assure you that we will be able to obtain certificate of need approval for all future projects requiring that approval. 24 35 IF CERTAIN OF OUR OPERATIONS ARE FOUND NOT TO QUALIFY FOR AN EXCEPTION UNDER MEDICARE'S RELATED PARTY RULE, WE MAY BE REQUIRED TO RETURN PAYMENTS WE RECEIVED IN THE PAST. Before the Medicare program implemented the prospective payment system for skilled nursing facilities, it limited certain allowable costs for items and services provided by companies that are associated or affiliated with a Medicare provider or have control of, or are controlled by, a Medicare provider. Many state Medicaid programs have adopted the same rule in determining costs that will be included in the payment rates. Unless a provider qualifies for the exception to the related party rule, the Medicare program will only reimburse the provider for the cost incurred by the related party in providing products or services, rather than the related party's charge. An organization can qualify for the exception to the related party rule by meeting the following criteria: - the entities are bona fide separate organizations; - a substantial part of the supplying organization's business activity is conducted with non-related organizations and there is an open, competitive market for the services or products; - the services or products are commonly obtained by a provider from other organizations and are not a basic element of patient care ordinarily furnished directly to patients by the providers; and - the charge to the provider is in line with the charge for these services and products in the open market and no more than the charge made under comparable circumstances to others. The Medicare program has taken the position that one of our subsidiaries providing rehabilitation management services is a related party and that certain fees paid to this entity should be adjusted based upon the related party rule. We are in the process of appealing the Medicare program's decision to adjust these fees. We believe that, to the extent the Medicare program considers this subsidiary or any other subsidiary of ours to be a related party for purposes of this rule, the operations of each subsidiary would qualify for the exception to the related party rule. However, we cannot assure you that the interpretation and application of the related party rule and its exception by governmental authorities will result in Manor Care qualifying for the exception. The application of the Medicare related party rule could adversely affect allowable payments to our skilled nursing facilities for pre-July 1, 1998, cost reports. HEALTH CARE REFORM LEGISLATION MAY AFFECT OUR BUSINESS. In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for and availability of health care services. Aspects of certain of these health care initiatives, such as reductions in funding of the Medicare and Medicaid programs; potential changes in reimbursement regulations by the Health Care Financing Administration; enhanced pressure to contain health care costs by Medicare, Medicaid and other payors; and greater state flexibility and additional operational requirements in the administration of Medicaid, could adversely affect us. We cannot predict the ultimate content, timing or effect of any health care reform legislation, nor can we estimate the impact of potential legislation on us. This impact may be material to our financial condition or our results of operations. WE FACE NATIONAL, REGIONAL AND LOCAL COMPETITION. Our nursing facilities compete primarily on a local and regional basis with many long-term care providers, some of whom may own as few as a single nursing center. Our ability to compete successfully varies from location to location and depends on a number of factors, which include: 25 36 - the number of competing centers in the local market; - the types of services available; - quality of care; - reputation, age and appearance of each center; and - the cost of care in each locality. In general, we seek to compete in each market by establishing a reputation within the local community for quality and caring health services, attractive and comfortable facilities, and providing specialized health care. We also compete with a variety of other companies in providing assisted living services, rehabilitation therapy services and home health care services. Given the relatively low barriers to entry and continuing health care cost containment pressures in the assisted living industry, we expect that the assisted living industry will become increasingly competitive in the future. Increased competition in the future could limit our ability to attract and retain residents, to maintain or increase resident service fees, or to expand our business. LABOR COSTS MAY INCREASE WITH A POTENTIAL SHORTAGE OF QUALIFIED PERSONNEL. A shortage of nurses or other trained personnel and general inflationary pressures have required us to enhance our wage and benefits packages in order to compete for qualified personnel. Although we do not currently have a staffing shortage in all markets where we operate, in certain markets with shortages of health care workers we have used high priced temporary help to supplement staffing levels. If a shortage of nurses or other health care workers occurred in all geographic areas in which we operate, it could adversely affect our ability to attract and retain qualified personnel and could further increase our operating costs. OUR OPERATIONS ARE SUBJECT TO OCCUPATIONAL HEALTH AND SAFETY REGULATIONS. We are subject to a wide variety of federal, state and local occupational health and safety laws and regulations. Among the types of regulatory requirements faced by health care providers such as us are: - air and water quality control requirements; - occupational health and safety requirements, such as standards regarding blood-borne pathogens; - waste management requirements; - specific regulatory requirements applicable to asbestos; - polychlorinated biphenyls and radioactive substances; and - requirements for providing notice to employees and members of the public about hazardous materials and wastes. THE COST OF GENERAL AND PROFESSIONAL LIABILITY CLAIMS MAY INCREASE. General and professional liability claims for the long-term care industry, especially in the state of Florida, have become increasingly expensive and unpredictable due to substantial increases in both the number and size of patient care claims. Industry sources report that the average cost of a claim in Florida in 1999 was two and one-half times higher than in the rest of the country and three times higher in 2000. Industry providers in the state of Florida experienced three times the number of claims in 1999 and four times the number of claims in 2000 compared to the national average. We and other affected providers are actively pursuing legislative and regulatory changes that include tort reform. However, we cannot assure you that legislative changes will be made, or that any such change 26 37 will have a positive impact on the current trend. If patient care claims continue to increase in number and size, our future financial condition and operating results may be adversely affected. WE MAY NOT BE ALLOWED TO DEDUCT INTEREST ON CERTAIN POLICY LOANS RELATED TO CORPORATE-OWNED LIFE INSURANCE. Legislation phased out interest deductions on certain policy loans related to corporate-owned life insurance, also known as COLI, as of January 1, 1999. We have recorded a cumulative reduction to income tax expense of approximately $34.0 million resulting from these interest deductions for tax periods prior to 1999. While the Internal Revenue Service has not asserted any claim challenging our COLI interest expense deductions, the IRS has challenged other taxpayers' COLI interest deductions and has prevailed in certain lower court decisions. Although we intend to defend vigorously our right to deduct the entire amount of these interest payments, were the IRS to challenge these deductions, we cannot assure you that we would ultimately be able to deduct these amounts. If we owed additional taxes, we could have to pay additional interest and possibly penalties. WE ARE SUBJECT TO MATERIAL LITIGATION. We are, and may in the future be, subject to litigation that, if determined adversely to us, could have a material adverse effect on our business or financial condition. In addition, some of the companies and businesses we have acquired have been subject to similar litigation. We cannot assure you that pending or future litigation, whether or not described in this prospectus, will not have a material adverse effect on our financial condition or our results of operations. A COURT COULD VOID THE SUBSIDIARIES' GUARANTEES AND REQUIRE YOU TO RETURN PAYMENTS RECEIVED FROM US OR OUR SUBSIDIARY GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor: - issued the guarantee to delay, hinder or defraud present or future creditors; or - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee, and at the time it issued the guarantee. These provisions apply if the guarantor, at the time it issued the guarantee: - was insolvent or rendered insolvent by reason of incurring the debt evidenced by the guarantee; or - was engaged or about to engage in a business or transaction for which the guarantor's remaining unencumbered assets constituted unreasonably small capital to carry on its business; or - intended to incur, or believed that it would incur, debts beyond its ability to pay the debts as they mature. In addition, you could be required to return any payment by that guarantor pursuant to its guarantee, or you could be required to pay amounts you received from the guarantor to a fund for the benefit of the creditors of the guarantor. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if, at the time it incurred the debt: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; 27 38 - the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. Other creditors of a subsidiary guarantor, or a receiver or debtor-in-possession, might also claim that, since the guarantee was incurred for our benefit and only indirectly for the benefit of the subsidiary guarantor, the applicable guarantor incurred the obligations for less than fair consideration. We cannot be sure of the standards that a court would use to determine whether or not the subsidiary guarantors were solvent at the relevant time. Regardless of the standard that the court uses, we cannot assure you that any guarantee would not be voided or subordinated to the applicable subsidiary guarantor's other debt. WE MAY REPURCHASE OUR STOCK AND REDUCE CASH RESERVES AND SHAREHOLDERS' EQUITY THAT IS AVAILABLE TO REPAY THE NOTES. We have in the past repurchased, and expect to continue to repurchase, our stock in the open market or in privately negotiated transactions. We may purchase this stock with cash or other assets of Manor Care. These purchases may be significant. Any purchase would reduce cash and shareholders' equity that is available to pay these notes. WE MAY PURCHASE ASSETS, WHICH MAY INCREASE SENIOR DEBT, OR SELL ASSETS, WHICH MAY REDUCE CASH FLOW. We frequently purchase and sell assets. Purchases may reduce cash or increase senior debt. We also sell assets which may reduce our cash flow as earnings from sold operations are no longer available. The remainder of this prospectus uses some capitalized terms. We have defined these terms in a glossary beginning on page 56. USE OF PROCEEDS We intend the exchange offer to satisfy our obligations under the registration rights agreement that we entered into in connection with the private offering of the old notes. We will not receive any cash proceeds from the issuance of the new notes pursuant to the exchange offer. Old notes surrendered in exchange for the new notes will be retired and canceled and cannot be reissued. As a result, the issuance of the new notes will not result in any increase or decrease in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer. The net proceeds from the issuance and sale of the old notes was approximately $196.5 million. We used all of the net proceeds from the sale of the old notes to repay all borrowings outstanding under an existing $200.0 million 364 day revolving credit facility, also known as the 364 Day Agreement, with a balance of $130.0 million at January 31, 2001, and a portion of the borrowings outstanding under the existing $500.0 million five year revolving credit facility, also known as the Five Year Agreement, which would represent approximately $66.5 million of the $460.0 million outstanding at January 31, 2001 Repayments of borrowings under the revolving credit facilities did not reduce the amount of commitments under such facilities, and to the extent future borrowings do not violate certain financial ratio tests under the credit facilities they may be used for future borrowings. Our 364 Day Agreement matures September 21, 2001. Loans under the amended 364 Day Agreement bear interest at variable rates that reflect, at our election, either the agent bank's base lending rate or an increment over Eurodollar indices of .500% to 1.275%, depending on the quarterly performance of a key ratio. In addition, the 364 Day Agreement provides for a fee on the total amount of the facility, ranging from .125% to .225%, depending on the performance of the same ratio. 28 39 Loans under our Five Year Agreement, which matures September 24, 2003, bear interest at variable rates that reflect, at our election, the agent bank's base lending rate, rates offered by any of the participating banks under bid procedures or an increment over Eurodollar indices of .150% to .500%, depending on the quarterly performance of a key ratio. The Five Year Agreement also provides for a fee on the total amount of the facility, ranging from .125% to .250%, depending on the performance of the same key ratio. Whenever the aggregate utilization of both credit facilities exceeds $350.0 million, our lenders charge an additional fee of .050% on loans due under the Five Year Agreement and charge an additional fee ranging from .100% to .125% on loans under the 364 Day Agreement, based on the performance of a key ratio. The average interest rate on loans under the Five Year and 364 Day Agreements was 7.480% at December 31, 2000, excluding the fee on the total facility. CAPITALIZATION The following table sets forth our audited consolidated capitalization as of December 31, 2000 on an actual basis and an as adjusted basis to give effect to the offering of the old notes and the application of the proceeds from that offering. See "Use of Proceeds." This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Historical Consolidated Financial Data" and our consolidated financial statements and related notes contained elsewhere in or incorporated by reference into this prospectus.
AS OF DECEMBER 31, 2000 ACTUAL ADJUSTED ------ -------- (DOLLARS IN THOUSANDS) Total debt (including current portion of long-term debt): Five year $500.0 million credit agreement(1) ............... $ 452,000 $ 410,500 364 day $200.0 million credit agreement(1) ................. 155,000 7-1/2% senior notes due 2006(2) ............................ 149,675 149,675 8% senior notes due 2008 ................................... 200,000 Mortgages and other notes .................................. 42,456 42,456 Capital lease obligations .................................. 5,402 5,402 ----------- ----------- Total debt ........................................... $ 804,533 $ 808,033 =========== =========== Shareholders' equity Preferred stock, $.01 par value, 5 million shares authorized Common stock, $.01 par value, 300 million shares authorized, 111 million shares issued ............................ $ 1,110 $ 1,110 Capital in excess of par value ............................. 335,609 335,609 Retained earnings(3) ....................................... 837,123 836,503 Treasury stock, at cost, 8.4 million shares ................ (161,113) (161,113) ----------- ----------- Total shareholders' equity ........................... $ 1,012,729 $ 1,012,109 ----------- ----------- Total capitalization ............................................. $ 1,817,262 $ 1,820,142 =========== ===========
- ---------- (1) Actual amounts outstanding under the five year and 364 day agreements on January 31, 2001 were $460.0 million and $130.0 million, respectively. (2) Net of unamortized discount of $325,000. (3) Retained earnings has been adjusted to include the after-tax effect of pro forma interest expense and annual amortization of financing costs. 29 40 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA We provide you with our selected consolidated historical information and other operating data for the fiscal years ended December 31, 2000, 1999, 1998, 1997 and 1996 in the following table. Ernst & Young LLP, acting as independent auditors, audited this historical information and data. We prepared this consolidated selected financial information using our consolidated financial statements for the five years ended December 31, 2000. When you read this selected historical consolidated financial and other data, it is important that you read along with it the historical financial statements and related notes in our consolidated financial statements, as well as the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section incorporated by reference into this prospectus.
FIVE-YEAR FINANCIAL HISTORY 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- (In thousands, except per share and other data) Results of Operations Revenues ............................................... $ 2,380,578 $ 2,135,345 $ 2,209,087 $ 2,228,534 $ 2,022,710 Expenses: Operating ........................................... 2,016,258 1,697,459 1,715,575 1,760,923 1,598,826 General and administrative .......................... 104,027 89,743 96,017 99,881 100,971 Depreciation and amortization ....................... 121,208 114,601 119,223 112,723 99,165 Provision for restructuring charge, merger expenses, asset impairment and other related charges ....... 14,787 278,261 26,300 ----------- ----------- ----------- ----------- ----------- 2,241,493 1,916,590 2,209,076 1,973,527 1,825,262 ----------- ----------- ----------- ----------- ----------- Income from continuing operations before other income (expenses), income taxes, and minority interest ..... 139,085 218,755 11 255,007 197,448 Other income (expenses): Interest expense .................................... (60,733) (54,082) (46,587) (56,805) (47,799) Impairment of investments ........................... (20,000) (274,120) Equity in earnings of affiliated companies .......... 812 1,729 5,376 2,806 1,500 Other income ........................................ 2,505 5,322 16,635 23,289 11,353 Interest income from advances to discontinued lodging segment .................................. 16,058 20,314 ----------- ----------- ----------- ----------- ----------- Total other expenses, net .......................... (77,416) (321,151) (24,576) (14,652) (14,632) ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before income taxes and minority interest ................ 61,669 (102,396) (24,565) 240,355 182,816 Income taxes (benefit) ................................. 21,489 (47,238) 21,597 85,064 64,177 Minority interest income ............................... 1,125 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations ............... $ 39,055 $ (55,158) $ (46,162) $ 155,291 $ 118,639 =========== =========== =========== =========== =========== Earnings per share - Income (loss) from continuing operations: Basic ............................................... $ 0.38 $ (0.51) $ (.42) $ 1.44 $ 1.10 Diluted ............................................. $ 0.38 $ (0.51) $ (.42) $ 1.40 $ 1.06 Manor Care of America, Inc. dividends per share ........ $ 0.04 $ 0.09 $ 0.09 Financial Position Total assets ........................................... $ 2,358,468 $ 2,289,777 $ 2,722,727 $ 2,568,368 $ 2,382,038 Long-term debt ......................................... 644,054 687,502 693,180 751,281 731,346 Shareholders' equity ................................... 1,012,729 980,037 1,199,168 1,163,029 994,690 Other Data (Unaudited) Number of skilled nursing and assisted living facilities 354 346 360 335 323
The financial results represent the combined results of Health Care and Retirement Corporation, or HCR, and Manor Care of America, Inc., or MCA, for all periods presented. For 1998 and forward, the financial information was based on a year ended December 31. For 1997 and 1996, HCR's financial information for the years ended December 31, 1997 and 1996 was 30 41 combined with MCA's financial information for the 12 months ended November 30, 1997 and 1996, respectively, due to different fiscal year ends. We changed our method of accounting for our investment in In Home Health, Inc., or IHHI, over the past five years due to changes in ownership or control. See Note 1 to our consolidated financial statements incorporated by reference into this prospectus for further discussion. We consolidated IHHI's financial results in 2000, 1997 and 1996 and recorded them under the equity method in 1999 and 1998. IHHI's results are not included on the individual line items when recording under the equity method. For a consistent trend of revenues and operating expenses, you must add the amounts above with IHHI's revenues of $84.3 million for 1999 and $87.7 million for 1998 and IHHI's operating expenses of $72.2 million for 1999 and $83.7 million for 1998. On November 1, 1996, MCA completed the spin-off of its lodging segment, and the financial results above reflect this segment as a discontinued operation in 1996. MCA recorded interest income related to cash advances provided to the discontinued lodging segment for the acquisition and renovation of lodging assets. RATIO OF EARNINGS TO FIXED CHARGES We present in the following table our historical and pro forma ratios of earnings to fixed charges for the years 2000, 1999, 1998, 1997 and 1996, each ended December 31:
ADJUSTED 2000 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- Ratio........ 1.7x 1.7x 3.4x 3.1x
No fixed charge coverage ratio result for 1998 and 1999 because earnings are insufficient to cover fixed charges by $38.6 million and $108.8 million, respectively. Earnings in the ratio of earnings to fixed charges represent our income from continuing operations before taxes and minority interest that have been adjusted to exclude (i) the effect of any fixed charges that reduced those earnings and (ii) the undistributed income or losses of affiliates accounted for by the equity method, except for losses of an equity method affiliate whose debt we guarantee. Fixed charges include interest expense, whether or not classified as such in the earnings statement, as well as the portion of rental expense that is estimated to represent the interest portion -- approximately 40%. Interest expense includes capitalized interest, interest on guaranteed debt of an equity method affiliate that is incurring losses, and interest on our loans against the cash surrender value of corporate-owned life insurance. 31 42 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2000, National City Corporation and some of its subsidiaries provided commercial banking, private banking and trust services to us and to some of our officers. Mr. Ormond is a director, and Mr. Siefers is an executive officer, of National City Corporation and both served in these capacities during 2000. The trustee with respect to the indenture is wholly-owned by National City Corporation. In addition, we and Mr. Bainum, Jr. have entered into a non-competition agreement which prohibited Mr. Bainum, Jr. from engaging in certain competitive activity as described in the agreement until June 9, 2001. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We sold the old notes to the initial purchasers in a private offering on March 8, 2001. These initial purchasers resold the old notes to qualified institutional buyers under Rule 144A and outside the United States pursuant to Regulation S under the Securities Act. As of the date of this prospectus, $200.0 million aggregate principal amount of old notes are outstanding. In connection with the private offering of the old notes, we and our subsidiary guarantors entered into an exchange and registration rights agreement in which we and our subsidiary guarantors agreed to file a registration statement with the Securities and Exchange Commission relating to an offer to exchange the old notes and the guarantees under the Securities Act for new notes and guarantees. We have filed the exchange and registration rights agreement as an exhibit to the registration statement. EFFECT OF THE EXCHANGE OFFER We believe that you may offer for resale, resell or otherwise transfer any new notes issued to you in the exchange offer without further registration under the Securities Act or delivery of a prospectus if you: - are acquiring the new notes in the ordinary course of your business; - are not participating, do not intend to participate and have no arrangement or understanding with any person to participate, in a distribution of the new notes; - are not an affiliate of ours as defined in Rule 405 under the Securities Act; and - are not a broker-dealer who acquired old notes from us. If you do not satisfy these criteria: - you will not be able to rely on the interpretations of the staff of the SEC in connection with any offer for resale, resale or other transfer of new notes; and - you must comply with the registration and prospectus delivery requirements of the Securities Act, or have an exemption available to you, in connection with any offer for resale, resale or other transfer of the new notes. Each broker-dealer that receives new notes for its own account in exchange for old notes it acquired as a result of market-making or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of its new notes. This will not be an admission by the broker-dealer that it is an underwriter within the meaning of the Securities Act. See "Plan of Distribution." 32 43 TERMS OF THE EXCHANGE OFFER - We will accept all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. - You should read "--Expiration Date; Extensions; Amendments" below for an explanation of how the expiration date may be amended. - We will issue and deliver $1,000 principal amount of new notes in exchange for each $1,000 principal amount of outstanding old notes accepted in the exchange offer. Holders may exchange some or all of their old notes in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1000. - By tendering old notes in exchange for new notes and by signing the transmittal letter -- or delivering an agent's message in lieu of the transmittal letter, you will be representing that, among other things: (1) any new notes to be received by you will be acquired in the ordinary course of your business; (2) you are not engaged in, and do not intend to engage in, and you have no arrangement or understanding with any person to participate in, a distribution of the new notes; (3) you acknowledge and agree that any person who is a broker-dealer or is participating in the exchange offer for the purpose of distributing the new notes must comply with the registration and prospectus delivery requirements of the Securities Act; (4) you are not an affiliate of ours within the meaning of Rule 405 under the Securities Act. - The terms of the new notes are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes do not apply to the new notes. The new notes will evidence the same debt as the old notes and will be entitled to the benefits of the indenture governing the old notes. - We are sending this prospectus and the transmittal letter to all registered holders of old notes as of the close of business on ____________, 2001. - We are not conditioning the exchange offer upon the tender of any minimum amount of old notes. - The exchange offer is subject to the condition that the exchange offer not violate applicable law, rules or regulations or applicable interpretations of the staff of the SEC. See "--Conditions of the Exchange Offer." - We may accept tendered old notes by giving oral or written notice to the exchange agent. We must promptly confirm oral notice in writing. The exchange agent will act as your agent for the purpose of receiving the new notes from us and delivering them to you. - You will not be required to pay brokerage commissions or fees or, subject to the instructions in the transmittal letter, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses in connection with the exchange offer, other than taxes specified under "--Transfer Taxes." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time, on, ____________, 2001, unless we, in our sole discretion, extend it. We may extend the exchange offer at any time and from time to time by giving oral or written notice to the exchange agent and by publicly announcing the extension before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We must promptly confirm oral notice in writing. We may also accept all properly tendered old notes as of the expiration date and extend the expiration date in respect of the remaining outstanding old notes. We may, in our sole discretion: 33 44 - amend the terms of the exchange offer in any manner; - delay acceptance of, or refuse to accept, any old notes not previously accepted; - extend the exchange offer; or - terminate the exchange offer. We will give prompt notice of any amendment to the registered holders of the old notes. If we materially amend the exchange offer, we will promptly disclose the amendment in a manner reasonably calculated to inform you of the amendment and we will extend the exchange offer to the extent required by law. PROCEDURES FOR TENDERING Only a holder of old notes may tender them in the exchange offer. For purposes of the exchange offer, the term "holder" or "registered holder" includes any participant in The Depository Trust Company whose name appears on a security position listing as a holder of old notes. To tender in the exchange offer, you must cause the following to be transmitted to and received by the exchange agent no later than 5:00 p.m., New York City time, on the expiration date: - a confirmation of the book-entry transfer of the tendered old notes into the exchange agent's account at The Depository Trust Company; - a properly completed and duly executed transmittal letter in the form accompanying this prospectus, with any required signature guarantees, or, at the option of the tendering holder in the case of a book-entry tender, an agent's message in lieu of the transmittal letter; and - any other documents required by the transmittal letter. If you wish to tender your old notes and you cannot cause the old notes or any other required documents to be transmitted to and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date, you may tender your old notes according to the guaranteed delivery procedures described in this section under the heading "--Guaranteed Delivery Procedures." If you beneficially own old notes that are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to participate in the exchange offer, you should promptly contact the person through which you beneficially own your old notes and instruct that person to tender your old notes on your behalf. See "Instructions Forming Part of the Terms and Conditions of the Exchange Offer" included with the transmittal letter. If you wish to tender on your own behalf, you must, before completing and executing the transmittal letter and delivering your old notes, either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. The tender by a holder of old notes will constitute an agreement between the holder, us and the exchange agent in accordance with the terms and subject to the conditions specified in this prospectus and in the transmittal letter. If a holder tenders less than all the old notes held, the holder should fill in the amount of old notes being tendered in the appropriate box on the transmittal letter. The exchange agent will deem the entire amount of old notes delivered to it to have been tendered unless the holder has indicated otherwise. The method of delivery of the transmittal letter and all other required documents to the exchange agent is at your election and risk. Instead of delivery by mail, we recommend that you use an overnight or hand delivery service. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND YOUR TRANSMITTAL LETTER OR OTHER REQUIRED DOCUMENTS TO US. 34 45 SIGNATURE REQUIREMENTS AND SIGNATURE GUARANTEE You must arrange for an "eligible institution" to guarantee your signature on the transmittal letter or a notice of withdrawal, unless the old notes are tendered: - by the registered holder of the old notes; or - for the account of an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act. The following are "eligible institutions:" - a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; or - a commercial bank or trust company having an office or correspondent in the United States; or - an eligible guarantor institution. If a transmittal letter is signed by a person other than the registered holder of any old notes listed in the transmittal letter, the old notes must be endorsed or accompanied by a properly completed bond power and signed by the registered holder as the registered holder's name appears on the old notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, sign or endorse any required documents, they should so indicate when signing, and unless waived by us, submit evidence satisfactory to us of their authority to so act with the transmittal letter. BOOK-ENTRY TRANSFER The exchange agent will make a request promptly after the date of this prospectus to establish an account for the old notes. Once the exchange agent establishes the account, any financial institution that is a participant in The Depository Trust Company's system may make book-entry delivery of old notes by causing The Depository Trust Company to transfer them into the exchange agent's account for the old notes. However, the exchange agent will only exchange the old notes so tendered after it confirms their book-entry transfer into the exchange agent's account, and receives an agent's message and any other documents required by the transmittal letter in a timely manner. The term "agent's message" means a message, transmitted by The Depository Trust Company to, and received by, the exchange agent and forming part of the confirmation of a book-entry transfer, which states that: - The Depository Trust Company has received an express acknowledgment from a participant tendering old notes stating the aggregate principal amount of old notes that have been tendered by such participant; - the participant has received the transmittal letter and agrees to be bound by its terms; and - we may enforce this agreement against the participant. Although you may deliver old notes through The Depository Trust Company into the exchange agent's account at The Depository Trust Company, you must provide the exchange agent a completed and executed transmittal letter with any required signature guarantee -- or an agent's message in lieu thereof -- and all other required documents before the expiration date. If you comply with the guaranteed delivery procedures described below, you must provide the transmittal letter -- or an agent's message in lieu thereof -- to the exchange agent within the time period provided. DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 35 46 GUARANTEED DELIVERY PROCEDURES If you wish to tender your old notes and (1) you cannot deliver the transmittal letter or any other required documents to the exchange agent before the expiration date or (2) you cannot complete the procedure for book-entry transfer on a timely basis, you may instead effect a tender if: - you make the tender through an eligible guarantor institution; - before the expiration date, the exchange agent receives from the eligible guarantor institution, (a) a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery, specifying the name and address of the holder and the principal amount of the old notes tendered, stating that the tender is being made, and guaranteeing that, within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the old notes being tendered, (b) a properly completed and duly executed transmittal letter or a confirmation of a book-entry transfer into the exchange agent's account at The Depository Trust Company and (c) an agent's message and any other documents required by the transmittal letter, will be deposited by the eligible guarantor institution with the exchange agent; and - the exchange agent receives the old notes and transmittal letter or confirmation of a book-entry transfer into its account at The Depository Trust Company and an agent's message and all other documents required by the transmittal letter within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, you may withdraw tendered old notes at any time before 5:00 p.m., New York City time, on the expiration date. To do so, you must provide the exchange agent with a written or facsimile transmission notice of withdrawal before 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must: - identify the old notes to be withdrawn, including the principal amount of the old notes and the name and number of the account at The Depository Trust Company to be credited; and - be signed by you in the same manner as the original signature on your transmittal letter, including any required signature guarantee, or be accompanied by transfer documents sufficient to permit the registrar to register the transfer of the withdrawn old notes into your name. Our determination shall be final and binding on all parties. We will not deem any old notes so withdrawn to be validly tendered for purposes of the exchange offer and will not issue new notes with respect to them unless the holder of these old notes validly retenders them. You may retender withdrawn old notes by following one of the procedures described above under "--Procedures for Tendering" at any time before the expiration date. DETERMINATION OF VALIDITY We will determine all questions as to the validity, form, eligibility -- including time of receipt -- acceptance and withdrawal of the tendered old notes, and will interpret the terms and conditions of the exchange offer -- including any instructions in the transmittal letter -- in our sole discretion. Our determination will be final and binding. We may reject any and all old notes that are not properly tendered or any old notes that, in the opinion of our counsel, we cannot lawfully accept. We also may waive any irregularities or conditions of tender as to particular old notes. Unless we waive them, you must cure any defects or irregularities in your tender of old notes within such time as we shall determine. 36 47 Although we intend to notify tendering holders of defects or irregularities with respect to tenders of old notes, neither we nor anyone else has any duty to do so. Neither we nor anyone else will incur any liability for failing to notify you of these defects or irregularities. Your old notes will not be deemed tendered until you have cured or we have waived any irregularities. As soon as practicable following the expiration date, the exchange agent will return any old notes that we reject due to improper tender or otherwise unless you cured all defects or irregularities or we waive them. We reserve the right in our sole discretion: - to purchase or make offers for any old notes that remain outstanding after the expiration date; - to terminate the exchange offer, as set forth in "--Conditions of the Exchange Offer;" and - to the extent permitted by applicable law, to purchase old notes in the open market, in privately negotiated transactions or otherwise. The terms of any of these purchases or offers may differ from the terms of the exchange offer. CONDITIONS OF THE EXCHANGE OFFER Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or to issue new notes for, any old notes, and we may terminate or amend the exchange offer as provided in this prospectus before we accept old notes, if the exchange offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the SEC. If we reasonably determine that we cannot lawfully complete the exchange offer we may: - refuse to accept any old notes and return all tendered old notes to the tendering holders; or - extend the exchange offer and retain all old notes tendered before the expiration of the exchange offer, subject, however, to the rights of holders to withdraw such old notes. See "--Withdrawal of Tenders." ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes that have been validly tendered and not withdrawn, and will issue the applicable new notes in exchange for such old notes promptly after our acceptance of such old notes. For purposes of the exchange offer, we will be deemed to have accepted validly tendered old notes for exchange when, as, and if we have given written notice of such acceptance to the exchange agent. For each old note accepted for exchange, the holder of the old note will receive a new note having a principal amount equal to that of the surrendered old note. The new notes will bear interest from the most recent date to which interest has been paid on the old notes or, if no interest has been paid on the old notes, from March 8, 2001. Accordingly, registered holders of new notes on the relevant record date for the first interest payment date following the completion of the exchange offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from March 8, 2001. Old notes accepted for exchange will cease to accrue interest from and after the date we accept them for exchange. You will not receive any payment for accrued interest on the old notes otherwise payable on any interest payment date if the record date occurs on or after date on which we accept the old notes for exchange and you will be deemed to have waived your rights to receive the accrued interest on the old notes. If we do not accept any tendered old notes for any reason or if you submit old notes for a greater principal amount than you desire to exchange, we will return the unaccepted or non-exchanged old notes at our expense or, if the old notes were tendered by book-entry transfer, the exchange agent will credit the non-exchanged old notes to an 37 48 account maintained with the book-entry transfer facility. In either case, these old notes will be returned promptly after the expiration or termination of the exchange offer. REGISTRATION RIGHTS; LIQUIDATED DAMAGES Pursuant to the terms of the exchange and registration rights agreement, we agreed to use our best efforts to complete the exchange offer and issue the new notes in exchange for the old notes. The following description is a summary of the material provisions of the exchange and registration rights agreement. It does not restate that agreement in its entirety. We urge you to read the exchange and registration rights agreement. If - we are not permitted to effect the exchange offer as contemplated by this prospectus because of any change in law or applicable interpretations of the law by the staff of the Securities and Exchange Commission; or - for any other reason we do not consummate the exchange offer within 150 days after we issued the old notes; or - we do not exchange any old notes validly tendered pursuant to the exchange offer for new notes within 10 days after we accepted them in the exchange offer; or - any initial purchaser so requests with respect to old notes held by the initial purchasers that are not eligible to be exchanged for new notes in the exchange offer; or - any applicable law or interpretation does not permit any holder of old notes to participate in the exchange offer; or - any holder of old notes that participates in the exchange offer does not receive freely transferable new notes in exchange for tendered old notes, then we will use our reasonable best efforts to file with the Securities and Exchange Commission as promptly as practicable, but in no event more than 20 business days after so required or requested, a shelf registration statement to cover resales of Transfer Restricted Securities by those holders who provide the information required for the shelf registration statement. We will use our commercially reasonable efforts to have the exchange offer registration statement or, if applicable, the shelf registration statement declared effective by the Securities and Exchange Commission as promptly as practicable after it is filed. Unless the exchange offer would not be permitted by policy of the Securities and Exchange Commission, we will commence the exchange offer and will use our reasonable best efforts to consummate the exchange offer as promptly as practicable, but in any event before 150 days after the date we issued the old notes. If applicable, we will use our reasonable best efforts to keep the shelf registration statement effective for a period ending on the earlier of two years after the date we issued the old notes or the date all Transfer Restricted Securities become eligible for resale without volume restrictions under Rule 144 under the Securities Act. The occurrence of any of the following events is a registration default: - the shelf registration statement is not filed with the SEC on or before the 20th business day after it is requested or required to be filed; or - the exchange offer registration statement is not declared effective within 120 days after the date we issued the old notes or the shelf registration statement is not declared effective within 90 days after the shelf filing date; or - the exchange offer is not consummated on or before 150 days after the date we issued the old notes; or 38 49 - the shelf registration statement is declared effective within 90 days after the shelf filing date but thereafter ceases to be effective, at any time that we and our subsidiary guarantors are obligated to maintain its effectiveness, without being succeeded within 30 days by an additional registration statement filed and declared effective. If a registration default occurs, we and our subsidiary guarantors will be obligated to pay additional interest to each holder of Transfer Restricted Securities, during the period of one or more registration defaults, in an amount equal to $0.05 per week per $1,000 principal amount of the old notes constituting Transfer Restricted Securities held by the holder until the applicable registration statement is filed, the exchange offer registration statement is declared effective and the exchange offer is consummated, or the shelf registration statement is declared effective or again becomes effective, as the case may be. This rate will be increased by an additional $0.05 per week per $1,000 principal amount of the old notes for each 90 day period that any additional interest described in this paragraph continues to accrue. However, the rate for additional interest will not exceed $0.15 per week per $1,000 principal amount of old notes. All accrued additional interest will be paid to holders in the same manner as interest payments on the old notes on semi-annual payment dates that correspond to interest payment dates for the old notes. Additional interest only accrues during a registration default. The exchange and registration rights agreement also provides that we will: - make available, for a period of 180 days after the consummation of the exchange offer, a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any new notes; and - pay all expenses incident to the exchange offer, including the expense of one counsel to the holders of the old notes, and will indemnify certain holders of the old notes, including any broker-dealer, against some liabilities, including liabilities under the Securities Act. A broker-dealer that delivers a prospectus to purchasers in connection with resales of the new notes will be subject to civil liability provisions under the Securities Act and will be bound by the provisions of the exchange and registration rights agreement, including indemnification rights and obligations. You will be required to deliver information to be used in connection with the shelf registration statement in order to have your old notes included in the shelf registration statement and benefit from the provisions regarding additional interest set forth in the preceding paragraphs. If you sell old notes pursuant to the shelf registration statement you generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers. You will also be subject to civil liability provisions under the Securities Act in connection with these sales and will be bound by the provisions of the exchange and registration rights agreement that apply to you, including indemnification obligations. EXCHANGE AGENT We have appointed National City Bank as the exchange agent for the exchange offer. National City Bank also acts as trustee under the indenture. You should send all executed transmittal letters to the exchange agent and direct all communications with the exchange agent, including requests for assistance or for additional copies of this prospectus or of the transmittal letters as follows: NATIONAL CITY BANK, EXCHANGE AGENT By Mail: National City Bank P.O. Box 92301 Cleveland, Ohio 44193-0900
39 50 By Hand: National City Bank Corporate Trust Operations 3rd Floor - North Annex 4100 West 150th Street Cleveland, Ohio 44135-1385 New York Drop: National City Bank Mellon Securities Trust Company 120 Broadway 13th Floor New York, NY 10271 By Facsimile for Eligible Institutions: (216) 575-9326 Facsimile Confirmation: (216) 575-9613 For Information: (800) 622-6757
IF YOU DELIVER THE TRANSMITTAL LETTER TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMIT INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, YOUR DELIVERY OR INSTRUCTIONS WILL NOT BE EFFECTIVE. FEES AND EXPENSES We will bear all expenses of the exchange offer. We are making the principal solicitation pursuant to the exchange offer by mail. Our officers and employees and our affiliates may also make solicitations in person, by telegraph, telephone or facsimile transmission. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse its reasonable out-of-pocket costs and expenses and will indemnify the exchange agent for all losses and claims incurred by it as a result of the exchange offer. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the old notes and in handling or forwarding tenders for exchange. TRANSFER TAXES We will pay any transfer taxes applicable to the exchange of old notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of old notes pursuant to the exchange offer, then the amount of any of these transfer taxes -- whether imposed on you or any other person -- will be payable by you. For example, you will pay transfer taxes, if: - new notes for principal amounts not tendered, or accepted for exchange are to be registered or issued in the name of any person other than the registered holder of the old notes tendered; or - tendered old notes are registered in the name of any person other than the person signing the transmittal letter. If you do not submit satisfactory evidence of payment of taxes for which you are liable or exemption from them with your transmittal letter, we will bill you for the amount of these transfer taxes directly. 40 51 ACCOUNTING TREATMENT We will record the new notes at the same carrying value as the old notes, which is the principal amount as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will capitalize the expenses of the exchange offer for accounting purposes. We will classify these expenses as prepaid expenses and include them in other assets on our balance sheet. We will amortize these expenses on a straight line basis over the life of the new notes. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES If you do not exchange your old notes for new notes pursuant to the exchange offer, you will continue to be subject to the transfer restrictions of your old notes. The old notes were originally issued in a transaction exempt from registration under the Securities Act, and may be offered, sold, pledged, or otherwise transferred only: - in the United States to a person whom the seller reasonably believes is a qualified institutional buyer as defined in Rule 144A under the Securities Act; or - outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act; or - pursuant to an exemption from registration under the Securities Act provided by Rule 144, if available; or - pursuant to an effective registration statement under the Securities Act. The offer, sale, pledge or other transfer of old notes must also be made in accordance with any applicable securities laws of any state of the United States, and the seller must notify any purchaser of the old notes of the restrictions on transfer described above. We do not currently anticipate that we will register the old notes under the Securities Act. APPRAISAL OR DISSENTERS' RIGHTS You will not have appraisal or dissenters' rights in connection with the exchange offer. THE NEW NOTES We will issue the new notes under an existing indenture dated as of March 8, 2001 between ourselves and National City Bank, as trustee. The terms of the notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. The following describes some general terms and provisions of the new notes, which are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes, do not apply to the new notes. The new notes will be a separate series of securities under the indenture. This description of new notes is intended to be a useful overview of the material provisions of the notes and the indenture. Since this description is only a summary, you should refer to the indenture for a complete description of our obligations and your rights. For purposes of this description, references to "Manor Care," "we," "our," and "us" refer only to Manor Care, Inc. and not to our subsidiaries. For the purposes of this section, the term "notes" will refer to the new notes. 41 52 GENERAL THE NOTES The notes: - are our general unsecured, senior obligations; - are limited to an aggregate principal amount of $200.0 million; - mature on March 1, 2008; - will be issued in denominations of $1,000 and integral multiples of $1,000; - will be represented by one or more registered notes in global form, but in certain limited circumstances may be represented by notes in definitive form. See "Book-Entry, Delivery and Form"; and - rank equally in right of payment to any of our future unsecured senior debt. INTEREST Interest on the notes will compound semi-annually and: - accrue at the rate of 8% per year; - accrue from March 8, 2001, or the most recent interest payment date on which interest has been paid; - be payable in cash semi-annually in arrears on March 1 and September 1, with the first payment on September 1, 2001; - be payable to the holders of record on the February 15 and August 15 immediately preceding the related interest payment dates; and - be computed on the basis of a 360-day year comprised of twelve 30-day months. PAYMENTS ON THE NOTES; PAYING AGENT AND REGISTRAR We will pay principal of, premium, if any, and interest on the notes at the office or agency designated by us in the Borough of Manhattan, The City of New York, except that we may, at our option, pay interest on the notes by check mailed to holders of the notes at their registered address as it appears in the registrar's books. We have initially designated National City Bank as our paying agent and registrar and its agency in New York, New York as a place where notes may be presented for payment or for registration of transfer. We may, however, change the paying agent or registrar without prior notice you, and we may act as paying agent or registrar. We will pay principal of, premium, if any, and interest on, notes in global form registered in the name of or held by The Depository Trust Company or its nominee in immediately available funds to The Depository Trust Company or its nominee, as the case may be, as the registered holder of the global notes. TRANSFER AND EXCHANGE You may transfer or exchange the notes at the office of the registrar in accordance with the indenture. The registrar and the trustee may require you, among other things, to furnish appropriate endorsements and transfer documents. No service charge will be imposed by us, the trustee or the registrar to register, transfer or exchange the notes, but we may require you to pay a sum sufficient to cover any transfer tax or other similar governmental charge required by law or permitted by the indenture. We are not required to transfer or exchange any note selected for 42 53 redemption. Also, we are not required to register any transfer or exchange of any note for a period of 15 days before the notes are selected for redemption. GENERAL The registered holder of a note will be treated as the owner of it for all purposes. We do not intend to list the notes on a national securities exchange. The indenture does not limit the amount of debt that we or our subsidiaries may issue under the indenture or otherwise. MCA has issued, and is permitted to continue to issue, additional series of debt securities under the other indentures to which it is a party, including the indenture, dated as of June 4, 1996, between MCA and Wilmington Trust Company, as trustee. Other than restrictions described under "--Change of Control" and in "--Limitations on Liens," "--Limitations on Sale and Lease-Back Transactions" and "--Consolidation, Merger and Sale of Assets" under "--Covenants" below, the indenture does not contain any covenants or other provisions designed protect you if we enter a highly leveraged transaction or if our credit rating or the rating of the notes declines as the result of a takeover, recapitalization, highly leveraged transaction or similar restructuring involving us that could adversely affect you. OPTIONAL REDEMPTION We may redeem the notes, at our option, in whole at any time or in part from time to time, on at least 30 days, but not more than 60 days' prior notice mailed to the registered address of each holder of notes to be so redeemed, at a redemption price equal to the greater of (1) 100% of their principal amount plus accrued but unpaid interest to the date of redemption, or (2)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity, except for currently accrued but unpaid interest, discounted to the date of redemption, on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. We are not required to make mandatory redemption payments or sinking fund payments for the notes. CHANGE OF CONTROL If a Change of Control occurs and is accompanied by a Rating Decline (together, a "Change of Control Triggering Event"), you will have the right to require us to offer to repurchase all or any part of your notes at a purchase price in cash equal to 101% of the principal amount of the notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date. We will only redeem notes in a amount of $1,000 or an integral multiple of $1,000. Within 30 days following any Change of Control Triggering Event, we will mail a notice (the "Change of Control Offer") to each registered holder with a copy to the trustee stating: (1) that a Change of Control Triggering Event has occurred and that you have the right to require us to purchase your notes at a purchase price in cash equal to 101% of the principal amount of your notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of holders of record on a record date to receive interest on the relevant interest payment date (the "Change of Control Payment"); 43 54 (2) the repurchase date, which will be no earlier than 30 days nor later than 60 days from the date we mail the notice (the "Change of Control Payment Date"); and (3) the procedures determined by us, consistent with the indenture, that you must follow to have your notes repurchased. On the Change of Control Payment Date, we will, to the extent lawful: (1) accept for payment all notes or portions of notes in integral multiples of $1,000 properly tendered under the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment for all notes or portions of notes so tendered; and (3) deliver or cause to be delivered to the trustee the notes so accepted together with an officers' certificate stating the aggregate principal amount of notes or portions of notes being purchased by us. The paying agent will promptly mail to each holder of notes so tendered the Change of Control Payment for the notes, and the trustee will promptly authenticate and mail, or cause to be transferred by book entry, to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such new note will be in a principal amount of $1,000 or an integral multiple of $1,000. If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, will be paid to the person in whose name a note is registered at the close of business on such record date, and no additional interest will be payable to holders who tender pursuant to the Change of Control Offer. The Change of Control provisions described above will apply whether or not any other provisions of the indenture apply. Except as described above for a Change of Control Triggering Event, the indenture does not contain provisions that permit you to require that we repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. Before mailing a Change of Control Offer, and as a condition to that mailing: - the requisite holders of each issue of Debt issued under an indenture or other agreement that may be violated by the payment will have consented to the Change of Control Offer and waived any event of default, caused by the Change of Control Triggering Event or - we will repay all outstanding Debt issued under an indenture or other agreement that may be violated by a payment to the holders of notes under a Change of Control Offer or we must offer to repay all such Debt, and make payment to the holders of such Debt that accept such offer and obtain waivers of any event of default from the remaining holders of such Debt. We covenant to effect this repayment or obtain these consents and waivers within 30 days after any Change of Control Triggering Event. It will be a default under the indenture if we fail to comply with this covenant within 30 days after we received written notice from the trustee or the holders of at least 25% in principal amount of the notes. A default under the indenture will result in a default under the Senior Credit Agreement. We will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture and purchases all notes validly tendered and not withdrawn under the Change of Control Offer. 44 55 We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations that apply to the repurchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of the indenture, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations described in the indenture by virtue of the conflict. Our ability to repurchase notes pursuant to a Change of Control Offer may be limited by a number of factors. Some of the events that constitute a Change of Control Triggering Event would also constitute a default under the Senior Credit Agreement. In addition, certain events that may constitute a change of control and cause a default under the Senior Credit Agreement may not constitute a Change of Control Triggering Event under the indenture. Our future Debt and that of our subsidiaries may also prohibit certain events that would constitute a Change of Control or require such Debt to be repurchased upon a Change of Control. Moreover, the exercise by the holders of their right to require us to repurchase the notes could cause a default under such Debt, even if the Change of Control Triggering Event itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the holders upon a repurchase may be limited by our then existing financial resources. We cannot assure you that sufficient funds will be available when necessary to make any required repurchases. Even if sufficient funds were otherwise available, the terms of the Senior Credit Agreement will and future Debt may prohibit us from prepaying notes before their scheduled maturity. Consequently, if we cannot prepay the Bank Debt and any other Debt containing similar restrictions or obtain requisite consents, as described above, we will be unable to fulfill our repurchase obligations you exercise your repurchase rights following a Change of Control Triggering Event. This will result in a default under the indenture, which may in turn result in a default under the Senior Credit Agreement. The Change of Control provisions described above may deter certain mergers, tender offers and other takeover attempts involving us by increasing the capital required for these transactions. The definition of "Change of Control" includes a disposition of all or substantially all of our property and assets and those of our subsidiaries taken as a whole to any person. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, we may not know with certainty whether a particular transaction would involve a disposition of "all or substantially all" of our and our subsidiaries, property or assets. As a result, it may be unclear as to whether a Change of Control Triggering Event has occurred and whether you may require us to make an offer to repurchase the notes as described above. RANKING - The notes will be our general unsecured obligations that rank senior in right of payment to all existing and future Debt that is expressly subordinated in right of payment to the notes. - The notes will rank equally in right of payment with all of our existing and future liabilities that are not so subordinated. - The notes will effectively rank junior to any of our secured indebtedness or our Subsidiary Guarantors, to the extent of the assets securing such indebtedness. In the event of bankruptcy, liquidation, reorganization or other winding up of Manor Care, our assets that secure secured Debt will be available to pay obligations on the notes only after all Debt under the secured Debt has been repaid in full from those assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all the notes then outstanding. The guarantees of the notes will have a similar ranking with respect to secured and unsecured senior Debt of the Subsidiary Guarantors as the notes do with respect to our secured and unsecured senior Debt as well as with respect to any unsecured obligations expressly subordinated in right of payment to the guarantees. 45 56 As of December 31, 2000, on a pro forma basis after giving effect to the issuance of the old notes and the application of the estimated net proceeds from the old notes, we and our subsidiaries would have had approximately $808.0 million of total indebtedness. Of this pro forma amount, $410.5 million would have been incurred by us under the Five Year and 364 Day Agreements. Those borrowed amounts have been guaranteed by most of our subsidiaries. The notes will be guaranteed by all of our subsidiaries, except for certain subsidiaries that, as of December 31, 2000, in the aggregate represented less than 3% of our consolidated revenues, assets, income from continuing operations and EBITDA. MCA is also a party to the Five Year and 364 Day Agreements. Although MCA currently has no loans outstanding under the credit agreements, it has guaranteed our borrowings under the credit agreements and is therefore liable for any of our outstanding obligations under the credit agreements. On a pro forma basis after giving effect to the issuance of the old notes, as of January 31, 2001, we and MCA would have had additional borrowing capacity under the credit agreements of $278.1 million, after giving effect to $28.4 million of outstanding letters of credit. In addition, MCA issued the 2006 Notes, which senior notes have been guaranteed by us and each of our subsidiaries that have guaranteed borrowings under the credit agreements. In addition to the guarantees of debt under the credit agreements and the 2006 Notes, our subsidiaries had additional debt of $47.9 million as of December 31, 2000, consisting of industrial revenue bonds, mortgages and other liabilities. Each Subsidiary Guarantee of the notes will be effectively subordinated to all secured Debt of the relevant Subsidiary Guarantor to the extent of the value of the assets securing that Debt our Subsidiary Guarantors had $41.4 million of secured debt as of December 31, 2000. The ability of our subsidiaries to pay dividends and make other payments to us is also restricted by, among other things, applicable corporate and other laws and regulations, as well as agreements to which our subsidiaries may become a party. We may not be able to comply with the provision of the notes that provides that upon a Change of Control you may require us to repurchase all or a portion of the notes. SUBSIDIARY GUARANTEES The Subsidiary Guarantors will, jointly and severally, unconditionally guarantee our obligations under the notes. Each Subsidiary Guarantee will rank equally in right of payment with all existing and future liabilities of Subsidiary Guarantors that are not subordinated. Each Subsidiary Guarantee will effectively rank junior to any secured debt of its respective Subsidiary Guarantor to the extent of the value of the assets securing that debt. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law. If we sell or dispose of a Subsidiary Guarantor, whether by merger, consolidation, the sale of its capital stock or the sale of all or substantially all of its assets, other than by lease, and whether or not the Subsidiary Guarantor is the surviving corporation in such transaction -- to a Person which is not us or a subsidiary of us, then - for Subsidiary Guarantors other than MCA, each such Subsidiary Guarantor will be released from obligations under its Subsidiary Guarantee if all the obligations of such Subsidiary Guarantor under the Senior Credit Agreement, the 2006 Notes and related documentation terminate upon consummation of such transaction and - with respect to MCA, MCA will be released from its obligations under its Subsidiary Guarantee if we and our remaining subsidiaries are not liable with respect to any Debt of MCA. If a Subsidiary Guarantor or MCA, as the case may be, is released from obligations under its Subsidiary Guarantee, the notes will be effectively subordinated to all liabilities of that subsidiary, whether or not those liabilities are secured or unsecured. 46 57 COVENANTS LIMITATION ON LIENS Except as provided below, we will not, and will not permit our subsidiaries to, create, Incur or assume any Lien on any property or assets of ours or any of our subsidiaries in order to secure any Debt of ours or any of our subsidiaries, without effectively providing that the notes -- together with, if we shall so determine, any other Debt that is not subordinated to the notes - -- will be secured equally and ratably with, or prior to, that Debt, so long as that Debt will be so secured. This covenant will not apply to: (1) any Lien if, after giving effect to those Liens, the aggregate amount of all our Debt and the Debt of our subsidiaries secured by Liens existing at the time, excluding any Debt secured by Liens permitted to be incurred by clauses (2) through (17) below, would not exceed our Applicable Percentage of the Consolidated Net Assets; (2) any Lien if we or our subsidiaries use an amount of cash equal to the net proceeds of the Debt secured by the Lien within 12 months of the creation, incurrence or assumption of the Lien to (a) acquire additional property -- or assets, or to make investments in Persons who, after giving effect to those investments, will become subsidiaries -- or (b) make an offer to purchase the notes at 100% of the principal amount of the notes plus accrued interest, if any, to the date of purchase; (3) Liens on our property or assets or any subsidiary existing on March 8, 2001 and Liens created, incurred or assumed after March 8, 2001 on our property or assets or any subsidiary that were subject to a Liens on our property or assets or any subsidiary existing on March 8, 2001; (4) Liens on property or assets of any Person existing at the time the Person becomes a subsidiary or merges into or consolidates with us or a subsidiary; (5) Liens on property or assets existing at the we or any subsidiary acquire the property or assets; (6) Liens to secure the financing of the acquisition, construction, alteration or improvement of property or assets of ours or any subsidiary, or of any Person who, after giving effect to such financing, will become a subsidiary, provided that - we or our subsidiaries create the Liens not later than 18 months after we acquire the property or assets; or - we or our subsidiaries create the Liens no later than we complete construction, alteration or improvement of the property or assets, or commence commercial operation of the property or assets, which ever is later. (7) Liens in favor of us or any subsidiary; (8) Liens in favor of or required by federal, state or local governmental authorities, including any department or instrumentality of one of these authorities; (9) Liens on property or assets of, or on any shares of stock or other equity interest in, a Foreign Subsidiary to secure Debt of a Foreign Subsidiary or a Non-Recourse Subsidiary to secure Non-Recourse Debt; (10) Liens to secure Debt of joint ventures in which we or a subsidiary has an interest, to the extent those Liens are on property or assets of or equity interests in those joint ventures; (11) Liens on current assets to secure Debt incurred for working capital purposes, provided that the Debt matures no later than 18 months from the date we incur the Liens; 47 58 (12) Liens on receivables in connection with Receivables Securitizations; (13) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith by appropriate proceedings and for which we will have set aside adequate reserves on our books; (14) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of bids, tenders, trade contracts other than for Debt, statutory obligations, leases and contracts other than for Debt, entered into in the ordinary course of business or to secure obligations on surety or appeal bonds or performance bonds; (15) easements, restrictions and other minor defects of title that are not, in the aggregate, material and that do not, individually or in the aggregate, have a materially adverse effect; (16) leases or subleases granted to others that do not interfere in any material respect with our business or any subsidiary's business and any interest or title of a lessor under any lease permitted under the indenture; and (17) any extension, renewal or replacement as a whole or in part, of any Lien referred to in the foregoing clauses (1) to (16), provided, however, that: - the extension, renewal or replacement Lien will be limited to all or a part of the same property or assets that secured the Lien being extended, renewed or replaced and - (a) the principal amount of the Debt secured by such extended, renewed or replaced Lien, does not exceed the principal amount of Debt that was secured by the Lien being extended, renewed or replaced, or (b) if the Debt provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, the lesser amount secured by such extended, renewed or replaced Lien, does not exceed the lesser amount that was secured by the Lien being extended, renewed or replaced. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS We will not, and will not permit any subsidiary to, enter into any arrangement with any Person to lease any property or assets from any Person, if we or our subsidiaries have sold or transferred or will sell or transfer the applicable property to that Person, unless: (1) the arrangement involves a lease for a term, including renewal rights, of not more than 36 months, (2) the arrangement involves a lease of property within 18 months from the acquisition or, in the case of the construction, alteration or improvement of property, the later of the completion of the construction, alteration or improvement of such property or the commencement of commercial operation of the property, or (3) the arrangement involves leases between or among us and a subsidiary or subsidiaries, or (4) we or the subsidiary would, at the time of entering into a Sale and Lease-Back Transaction, be entitled to Incur Debt secured by a Lien on the property or asset to be leased in an amount at least equal to the Attributable Debt in respect of the transaction without equally and ratably securing the notes pursuant to the provisions described under "--Limitations on Liens" above, or (5) the proceeds of the sale of the property or assets to be leased are at least equal to their fair value -- the fair value of such proceeds, if other than in cash, to be determined by our chief financial or 48 59 accounting officer -- and we or our subsidiaries apply an amount in cash equal to the net proceeds, within 12 months of the effective date of such transaction, to (a) acquire additional property or assets, or to make investments in entities that after giving effect to the investment will become subsidiaries, (b) to retire Debt that is equal in right of payment with the notes -- provided that in connection with any such retirement, any related loan commitment or the like shall be reduced in an amount equal to the principal amount so retired -- or (c) offer to purchase the notes at 100% of the in principal amount, plus accrued interest, if any, to the date of purchase. LIMITATION ON AFFILIATE TRANSACTIONS Neither we nor any of our subsidiaries will enter into an Affiliate Transaction having a value, or for consideration having a value, in excess of $20,000,000 individually or in the aggregate, unless our board of directors determines that the terms of the Affiliate Transaction are no less favorable to us or such subsidiary than those that might be obtained at the time of the Affiliate Transaction from Persons who are not Affiliates. The restrictions of this "Limitation on Affiliate Transactions" covenant do not apply to the payment of reasonable and customary fees to our directors or the directors of a subsidiary who are not employees, the payment of compensation to our officers or a subsidiary and any transaction between or among us and any of our subsidiaries. CONSOLIDATION, MERGER AND SALE OF ASSETS We will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another Person, unless: - the resulting, surviving or transferee Person, if not us, is a Person organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, and such entity, if not us, expressly assumes by supplemental indenture all our obligations under the notes and the indenture; and - immediately after giving effect to the transaction, no default has occurred and is continuing under the indenture. Upon any such consolidation, merger or transfer, the resulting, surviving or transferee Person shall succeed to, and may exercise each of our rights and powers under the indenture. If, upon any consolidation or merger of us with or into any other corporation, or upon any sale, conveyance or lease of all or substantially all of our property and assets to any other corporation, any of our property or the property of any subsidiary would become subject to any Lien, we will first secure the notes equally and ratably with any other of our obligations or any subsidiary's obligations then entitled to be secured by a direct Lien on all such property prior to all Liens other than any Liens previously existing on the property. FUTURE SUBSIDIARY GUARANTORS After March 8, 2001, we will cause each new subsidiary created or acquired by us or one or more of our subsidiaries to execute and deliver to the trustee a Subsidiary Guarantee to unconditionally guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and interest on the notes on a senior basis. This provision will not apply to subsidiaries that do no guarantee the 2006 Notes. (a) A Subsidiary Guarantee from any subsidiary, other than MCA so long as all or any portion of the 2006 Notes shall remain outstanding will be released when the subsidiary is released from any liability under ( -- ) the indenture relating to the 2006 Notes or any related guarantee or similar obligation and (y) any Senior Credit Agreement and any guarantee or similar obligation in respect of that Senior Credit Agreement and (b) MCA shall be released from its obligations under its Subsidiary Guarantee upon the repayment in full of the 2006 Notes -- so long as no default or event of default shall 49 60 have occurred as a consequence of the repayment and the release of MCA from any obligation it may have in respect of the Senior Credit Agreement and any guarantee or similar obligation in respect of the Senior Credit Agreement; provided that the release of a Subsidiary Guarantor will not occur in the event that Subsidiary Guarantor is required to deliver a Guarantee in accordance with the paragraph below and then will only be released in accordance with the paragraph below. We will not permit any subsidiary to guarantee the payment of our Debt unless: (1) the subsidiary simultaneously executes and delivers a supplemental indenture to the indenture providing for a Guarantee of payment of the notes by the subsidiary; (2) the subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against us or any subsidiary as a result of any payment by the subsidiary under its Guarantee; and (3) the subsidiary delivers to the trustee an opinion of counsel to the effect that (a) the Guarantee of the notes has been duly executed and authorized and (b) the Guarantee of the notes constitutes a valid, binding and enforceable obligation of the subsidiary; however, the enforceability of the Guarantee may be limited by bankruptcy, insolvency or similar laws, including, without limitation, all laws relating to fraudulent transfers, and except insofar as enforcement thereof is subject to general principles of equity; provided that such Subsidiary Guarantee shall be released upon the release of such subsidiary from liability in respect of our Guarantees of Debt; and, provided, further, that any release of a Subsidiary Guarantee under the preceding proviso will not impair the rights of the holders to receive Subsidiary Guarantees of the notes in accordance with this paragraph in the event our future Debt is Guaranteed by the subsidiary. FINANCIAL STATEMENTS So long as we are not subject to Section 13 or 15(d) of the Exchange Act, we will file with the trustee the following: - within 120 days after the end of each fiscal year, our balance sheet as of the end of such fiscal year and the preceding fiscal year and our statements of income, shareholders' equity and cash flows for such fiscal year and the two preceding fiscal years, all audited by an independent public accounting firm of recognized national standing and accompanied by a "Management's Discussion and Analysis of Financial Condition and Results of Operations" with respect to these financial statements; and - within 60 days after the end of each of the first three fiscal quarters of each fiscal year, our balance sheet as of the end of such fiscal quarter and as of the end of the preceding fiscal year and the statements of income for such fiscal quarter, and the corresponding quarter in the preceding fiscal year, and the statements of income and cash flows for the then elapsed portion of such fiscal year and the corresponding period in the preceding fiscal year, accompanied by a "Management's Discussion and Analysis of Financial Condition and Results of Operations" with respect to these financial statements. EVENTS OF DEFAULT Each of the following is an Event of Default: (1) default in any payment of interest, or additional interest as required by the exchange and registration rights agreement, on any note when due and payable and the default continues for a period of 30 days; 50 61 (2) default in the payment of principal of or premium, if any, on any note when due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise; (3) our failure to comply with our obligations under "Covenants -- Consolidation, Merger and Sale of Assets"; (4) our failure for 30 days after written notice from the trustee or the holders of at least 25% in principal amount of the notes then outstanding has been received to comply with any of our obligations described under "--Change of Control" above or under "--Covenants" above, other than a failure to comply with "--Covenants -- Consolidation, Merger and Sale of Assets" which is covered by clause (3); (5) our failure for 60 days after written notice from the trustee or the holders of at least 25% in principal amount of the notes then outstanding has been received to comply with any of our other agreements contained in the notes or indenture; (6) default by us or any subsidiary in the payment of the principal or interest on any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced any of our and/or our subsidiaries' Debt for money borrowed, other than Non-Recourse Debt of a Non-Recourse Subsidiary, in excess of $20.0 million in the aggregate, whether the Debt exists now or will be created on a later date, resulting in the Debt becoming or being declared due and payable, and the acceleration will not have been rescinded or annulled within 10 days after written notice of the acceleration has been received by us or our subsidiary; (7) certain events of bankruptcy, insolvency or reorganization of Manor Care; or (8) a final judgment for the payment of $20.0 million or more rendered against us or any subsidiary, which judgment is not fully covered by insurance or not discharged or stayed within 90 days after (a) the date on which the right to appeal the judgment has expired if no appeal has commenced, or (b) the date on which all rights to appeal have been extinguished. If an Event of Default occurs and is continuing, the trustee by notice to us, or the holders of at least 25% in principal amount of the outstanding notes by notice to us and the trustee, may, and the trustee at the request of such holders will, declare 100% of the principal of, premium, if any, and accrued and unpaid interest, if any, on all the notes to be due and payable. Upon such a declaration, principal, premium and accrued and unpaid interest will be due and payable immediately. The holders of a majority in principal amount of the outstanding notes may waive all past defaults, except with respect to nonpayment of principal, premium or interest, and rescind any such acceleration with respect to the notes and its consequences if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the notes that have become due solely by such declaration of acceleration, have been cured or waived. Subject to the provisions of the indenture relating to the duties of the trustee, if an Event of Default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the holders unless the holders have offered to the trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no holder may pursue any remedy with respect to the indenture or the notes unless: (1) the holder has previously given the trustee notice that an Event of Default is continuing; 51 62 (2) holders of at least 25% in principal amount of the outstanding notes have requested the trustee to pursue the remedy; (3) the holders have offered the trustee reasonable security or indemnity against any loss, liability or expense; (4) the trustee has not complied with the request within 60 days after receiving the request and the offer of security or indemnity; and (5) the holders of a majority in principal amount of the outstanding notes have not given the trustee a direction that, in the opinion of the trustee, is inconsistent with that request within such 60-day period. Subject to certain restrictions, the holders of a majority in principal amount of the outstanding notes may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or of exercising any trust or power conferred on the trustee. If an Event of Default has occurred and is continuing, the trustee will be required in the exercise of its powers to use the degree of care that a prudent Person would use in the conduct of its own affairs. The trustee, however, may refuse to follow any direction that conflicts with law or the indenture or that the trustee determines is unduly prejudicial to the rights of any other holder or that would involve the trustee in personal liability. Before taking any action under the indenture, the trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. If a default occurs and is continuing and is known to the trustee, the trustee must mail to each holder notice of the default within 90 days after it occurs. Except in the case of a default in the payment of principal of, premium, if any, or interest on any note, the trustee may withhold notice if and so long as a committee of trust officers of the trustee in good faith determines that withholding notice is in the interests of the holders. In addition, we are required to deliver to the trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers of the certificate know of any default that occurred during the previous year. We also are required to deliver to the trustee, within 30 days after the occurrence of any default, written notice of any events that would constitute certain defaults, their status and what action we are taking or proposes to take in respect of them. AMENDMENTS AND WAIVERS Subject to certain exceptions, we may amend the indenture or the notes with the consent of the holders of at least a majority in principal amount of the notes then outstanding, including without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes and, subject to certain exceptions, the holders of a majority in principal amount of the notes then outstanding may waive any past default or compliance with any provisions, including, without limitation, by consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes. However, we may not amend this indenture or the notes without the consent of each holder of an outstanding note affected to among other things: (1) reduce the amount of notes whose holders must consent to an amendment; (2) reduce the stated rate of or extend the stated time for payment of interest on any note; (3) reduce the principal of or extend the Stated Maturity of any note; (4) reduce the premium payable upon the redemption or repurchase of any note or change the time at which any note may be redeemed or repurchased as described above under "--Optional Redemption," "--Change of Control" or any similar provision, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise; 52 63 (5) make any note payable in money other than that stated in the note or, other than in accordance with the provisions of the indenture, eliminate any existing guarantees of the notes; (6) impair the right of any holder to receive payment of, premium, if any, principal of and interest on such holder's notes on or after the due dates for payment or to institute suit to enforce any payment on or with respect to such holder's notes; or (7) make any change in the amendment provisions that require each holder's consent or in the waiver provisions. Without the consent of any holder, we and the trustee may amend the indenture to: (1) cure any ambiguity, omission, defect or inconsistency; (2) provide for the assumption by a successor corporation, partnership, trust or limited liability company of our obligations under the indenture; (3) provide for uncertificated notes in addition to or in place of certificated notes, provided that the uncertificated notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated notes are described in Section 163(f) (2) (b) of the Code; (4) add guarantees with respect to the notes; (5) secure the notes; (6) add to our covenants for the benefit of the holders or surrender any right or power conferred upon us; (7) make any change that does not materially adversely affect the rights of any holder; or (8) comply with any requirement of the Commission in connection with the qualification of the indenture under the Trust Indenture Act. The consent of the holders is not necessary under the indenture to approve the particular form of any proposed amendment. It is sufficient if the consent approves the substance of the proposed amendment. After an amendment under the indenture becomes effective, we are required to mail to the holders a notice briefly describing the amendment. However, if we fail to give such notice to all the holders, or the notice has any defect, the amendment will still be valid. DEFEASANCE We at any time may terminate all of our obligations under the notes and the indenture, except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the notes, to replace mutilated, destroyed, lost or stolen notes and to maintain a registrar and paying agent for the notes. This is known as legal defeasance. We at any time may terminate our obligations under the covenants described under "--Covenants," other than those described under "--Consolidation, Merger and Sale of Assets", the operation of the cross-default upon a payment default, cross acceleration provisions and the judgment default provision described under "--Events of Default" above. This is know as covenant defeasance. We may exercise our legal defeasance option even if we previously exercised our covenant defeasance option. If we exercise our legal defeasance option, you may not accelerate payment of the notes because of an Event 53 64 of Default. If we exercise our covenant defeasance option, you may not accelerate payment of the notes because of an Event of Default specified in clause (4), (5), (6) or (8) under "--Events of Default" above. In order to exercise either defeasance option, we must irrevocably deposit in a defeasance trust with the trustee money or U.S. Government Securities for the payment of principal, premium, if any, and interest on the notes to redemption or maturity, as the case may be, and must comply with other conditions, including delivering to the trustee an opinion of counsel, subject to customary exceptions and exclusions, to the effect that you will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if we had not made the deposit and defeasance had not occurred. For legal defeasance only, the opinion of counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Manor Care, as such, shall have any liability for our obligations under the notes or the indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. By accepting a note you waive and release all such liability. The waiver and release are part of the consideration for issuance of the notes. This waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. CONCERNING THE TRUSTEE National City Bank is the trustee under the indenture and has been appointed by us as registrar and paying agent with regard to the notes. Mr. Ormond is a director, and Mr. Siefers is an executive officer, of National City Corporation. The trustee is wholly-owned by National City Corporation. See "Certain Relationships and Related Transactions." GOVERNING LAW The indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York. DESCRIPTION OF OTHER DEBT We established the Five Year Agreement and 364 Day Agreement to provide additional credit capacity for future developments and to provide credit back-up for the issuance of commercial paper. The credit agreements contain various covenants, restrictions and events of default. Among other things, these provisions require us to maintain certain financial ratios and impose limits on our and our subsidiaries' ability to incur debt, create liens and declare dividends, repurchase stock, dispose of assets and make acquisitions. At January 31, 2001, outstanding borrowings of both companies aggregated $460.0 million under the Five Year Agreement and $130.0 million under the 364 Day Agreement -- a total of $590.0 million. Most of our subsidiaries guaranteed the borrowed amounts under the Five Year Agreement and 364 Day Agreement. We amended the 364 Day Agreement, which matured September 22, 2000, to now mature September 21, 2001. Loans under the amended 364 Day Agreement bear interest at variable rates that reflect, at our election, either the agent bank's base lending rate or an increment over Eurodollar indices of .500% to 1.275%, depending on the quarterly performance of a key ratio. In addition, the 364 Day Agreement provides for a fee on the total amount of the facility, ranging from .125% to .225%, depending on the performance of the same ratio. Loans under the Five Year Agreement, which mature September 24, 2003, bear interest at variable rates that reflect, at our election, the agent bank's base lending rate, rates offered by any of the participating banks under bid procedures or an increment over Eurodollar indices of .150% to .500%, depending on the quarterly performance of a 54 65 key ratio. In addition to direct borrowings, we may use the Five Year Agreement to support the issuance of up to $100.0 million of letters of credit. The Five Year Agreement also provides for a fee on the total amount of the facility, ranging from .125% to .250%, depending on the performance of the same key ratio. Whenever our aggregate use of both credit facilities exceeds $350.0 million, our lenders charge an additional fee of .050% on loans due under the Five Year Agreement and charge an additional fee ranging from .100% to .125% on loans under the 364 Day Agreement, based on the performance of a key ratio. The average interest rate on loans under the Five Year and 364 Day Agreements was 7.480% at December 31, 2000, excluding the fee on the total facility. At December 31, 2000, after consideration of usage for letters of credit, the remaining credit availability under the combined agreements totaled $66.7 million. In June 1996, MCA issued the 2006 Notes. These notes are redeemable at the option of MCA at any time at a price equal to the greater of (a) the principal amount or (b) the sum of the present values of the remaining scheduled payments of principal and interest, discounted with an applicable treasury rate plus 15 basis points, plus accrued interest to the date of the redemption. We used the proceeds of the offering to repay borrowings under MCA's prior credit facility. The 2006 Notes contain covenants limiting, among other things, the ability to incur liens, enter into sale and leaseback transactions, and engage in affiliate transactions by us, MCA and the subsidiary guarantors. The 2006 Notes are guaranteed by us and each of the subsidiaries that have guaranteed borrowings under the credit agreements. UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of the material federal income tax considerations relevant to the exchange of old notes for new notes pursuant to the exchange offer. This discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations, Internal Revenue Service rulings and pronouncements, and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively in a manner that could adversely affect your notes. We have not and will not seek any rulings from the Internal Revenue Service with respect to the matters discussed below. We cannot assure you that the Internal Revenue Service will not take positions concerning tax consequences of the exchange offer which are different from those discussed below. This discussion does not consider the effect any applicable foreign, state, local or other tax laws or estate or gift tax considerations. This discussion also does not address the federal income tax consequences to holders subject to special treatment under the federal income tax laws, such as dealers in securities or foreign currency, tax-exempt entities, banks, thrifts, insurance companies, persons that hold the notes as part of a straddle, hedge or conversion transaction, persons that have a functional currency other than the United States dollar, and investors in pass-through entities. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF EXCHANGING OLD NOTES FOR NEW NOTES PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. The exchange of old notes for new notes pursuant to the exchange offer will not constitute a taxable exchange for federal income tax purposes. You will have a tax basis in the new notes equal to its tax basis in the old notes exchanged therefor and your holding period for the new notes will include its holding period for the old notes exchanged therefor. Accordingly, the exchange should have no material federal income tax consequences to you. PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account in connection with the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed that for a period ending on the earlier of 55 66 (1) 180 days after the date of this prospectus and (2) the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market- making or other trading activities, we will make available and provide promptly upon reasonable request this prospectus, in a form meeting the requirements of the Securities Act, to any broker-dealer for use in connection with any such resale. We will receive no proceeds in connection with the exchange offer. Exchange notes received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. A resale may be made directly to purchasers or through brokers or dealers who may receive compensation in the form of commissions or concessions from the broker-dealer and/or the purchasers of new notes. Any broker-dealer that resells new notes that it received for its own account in the exchange offer and any broker or dealer that participates in a distribution of the new notes may be an underwriter within the meaning of the Securities Act, and any profit on the resale of exchange notes and any commissions or concessions received by these persons may be underwriting compensation under the Securities Act. The transmittal letter states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be considered to admit that it is an underwriter. We have agreed to pay all expenses incident to our performance of, or compliance with, the exchange and registration rights agreement and will indemnify the holders of Transfer Restricted Securities, including any broker-dealers, and certain parties related to such holders, against certain liabilities including liabilities under the Securities Act. LEGAL MATTERS The validity of the new notes will be passed upon for us by Latham & Watkins, Chicago, Illinois, and certain other matters will be passed on for us by R. Jeffrey Bixler, our Vice President, General Counsel and Secretary. EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements and schedule included in our annual report on form 10-K/A for the year ended December 31, 2000, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. GLOSSARY "364 DAY AGREEMENT" means the our $200 million dollar 364 day revolving credit facility. "2006 NOTES" means MCA's $150.0 million principal amount of 7-1/2% Senior Notes Due 2006. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing; provided, however, that the existence of a management contract by us or an Affiliate of ours to manage another entity shall not be deemed to be control. 56 67 "AFFILIATE TRANSACTION" means the sale, lease, transfer or otherwise disposition of any of our or our subsidiaries' properties or assets to or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, an Affiliate of ours, other than a subsidiary. "APPLICABLE PERCENTAGE" means (1) 15%, if the aggregate principal amount of notes and debt securities issued by us under other indentures or fiscal agency agreements or other similar instruments then outstanding exceeds $100,000,000, (2) 20%, if the aggregate principal amount of such notes and securities then outstanding exceeds $50,000,000 but is less than or equal to $100,000,000, or (3) 25%, if the aggregate principal amount of such notes and securities outstanding is less than or equal to $50,000,000. "ATTRIBUTABLE DEBT" in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value, discounted at the interest rate borne by the notes, compounded semi-annually, of the total obligations of the lessee for rental payments during the remaining term of the lease included in the Sale and Lease-Back Transaction, including any period for which such lease has been extended. "BANK DEBT" means any and all amounts, whether outstanding on March 8, 2001 or incurred after March 8, 2001, payable by us under or in respect of the Senior Credit Agreement and any related notes, collateral documents, letters of credit and guarantees and any Interest Rate Agreement entered into in connection with the Senior Credit Agreement, including principal, premium, if any, interest, fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. Interest includes any interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us at the rate specified therein whether or not a claim for post filing interest is allowed in such proceedings. "CAPITALIZED LEASE OBLIGATIONS" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of the obligation represented by that obligation will be the capitalized amount of the obligation at the time any determination of the obligations is to be made as determined in accordance with GAAP, and the Stated Maturity of the obligation will be the date of the last payment of rent or any other amount due under such lease prior to the first date the lease may be terminated without penalty. "CHANGE OF CONTROL" means: (1) any "person" or "group" of related persons is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of our Voting Stock, or our successor by merger, consolidation or purchase of all or substantially all of our assets. For the purposes of this clause, we refer to a "person" or "group" as such terms are used in Sections 13(d) and 14(d) of the Exchange Act. A "beneficial owner" is defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be deemed to have "beneficial ownership" of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time. In addition, such person or group shall be deemed to beneficially own any of our Voting Stock held by a parent entity, if such person or group "beneficially owns", directly or indirectly, more than 50% of the voting power of the Voting Stock of such parent entity; or (2) the first day on which a majority of the members of our board of directors are not Continuing Directors; or 57 68 (3) the sale, lease, transfer, conveyance or other disposition, other than by way of merger or consolidation, in one or a series of related transactions, of all or substantially all of our assets and our subsidiaries taken as a whole to any "person" as the term is used in Sections 13(d) and 14(d) of the Exchange Act; or (4) the adoption by our stockholders of a plan or proposal for our liquidation or dissolution. "CHANGE OF CONTROL OFFER" means a notice for us stating that you will have the right to require us to repurchase all or any party of your notes at a purchase price in cash equal to 101% of the principal amount to your notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of the holders of record on a record date to receive interest on the relevant interest pay date. "CHANGE OF CONTROL PAYMENT" means a cash equal to 101% of the principal amount to your notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of the holders of record on a record date to receive interest on the relevant interest pay date. "CHANGE OF CONTROL PAYMENT DATE" means the repurchase date, which will be no earlier than 30 days no later than 60 days from the date we mail the Change of Control Offer. "CHANGE OF CONTROL TRIGGERING EVENT" means a Change of Control accompanied by a Rating Decline. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the notes to be redeemed that would be used, at the time of selection and in accordance with customary financial practice, to price new issues of corporate debt securities of comparable maturity to the remaining term of the notes. "COMPARABLE TREASURY PRICE" means, with for any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue -- expressed in each case as a percentage of its principal amount -- on the third business day preceding such redemption date, (1) as set forth in the daily statistical release, or any successor release, published by the Federal Reserve Bank of New York or published on the website of the Federal Reserve Bank of New York at http://www.ny.frb.org and designated "Composite 3:30 p.m. Quotations for the U.S. Government Securities" or (2) if such release, or any successor release, is not published or does not contain such prices on such business day, the average of the Reference Treasury Dealer Quotations for such redemption date. "CONTINUING DIRECTORS" means, as of any date of determination, any member of our board of directors who: (1) was a member of the board of directors on the date of the indenture; or (2) was nominated for election or elected to the board of directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of the nomination or election. "CONSOLIDATED NET ASSETS" means, with respect to any Person as of any date of determination, the total assets of such Person and its subsidiaries on a consolidated basis less current liabilities of such Person and its subsidiaries on a consolidated basis as of such date, all determined in accordance with GAAP. "DEBT" means, for any Person on any date of determination; without duplication: 58 69 (1) the principal of and premium, if any, in respect of debt of the Person for borrowed money; (2) the principal of and premium, if any, in respect of obligations of the Person evidenced by bonds, debentures, notes or other similar instruments; (3) the principal component of all obligations of the Person in respect of letters of credit, bankers' acceptances or other similar instruments. The principal components include reimbursement obligations except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 30 days of incurrence; (4) the principal component of all obligations of such Person, except trade payables, to pay the deferred and unpaid purchase price of property, which purchase price is due more than six months after the date of placing the property in service or taking delivery and title to the property; (5) Capitalized Lease Obligations and all Attributable Debt of the Person; and (6) the principal component of Debt of other Persons to the extent Guaranteed by the Person. The amount of Debt of any Person at any date will be the outstanding balance at the date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "EBITDA" means income from continuing operations before other income (expenses), income taxes, minority interest, depreciation and amortization, and unusual or non-recurring expenses. "FIVE YEAR AGREEMENT" means our $500 million five year revolving credit facility. "FOREIGN SUBSIDIARY" means any subsidiary of Manor Care that is incorporated or organized in a jurisdiction outside the United States and any subsidiary of such a subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession as in effect from time to time. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay, or advance or supply funds to purchase or pay the Debt of the other Person, whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise; or (2) entered into to assure in any other manner the obligee of such Debt of the payment or to protect the obligee against loss in respect in whole or in part of the Debt. provided, however, that the term "Guarantee" will not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "INCUR" means issue, create, assume, Guarantee, incur or otherwise become liable for; and the terms "incurred" and "incurrence" have meanings correlative to the foregoing. 59 70 "INDEPENDENT INVESTMENT BANKER" means the Reference Treasury Dealer appointed by the trustee after consultation with us. "INTEREST RATE AGREEMENT" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind; including any conditional sale or other title retention agreement or lease in the nature of conditional sale or title retention agreement. "MCA" means Manor Care of America, Inc., a Delaware corporation and a wholly owned subsidiary of Manor Care, or any of its successors and assigns. "MOODY'S" means Moody's Investors Service, Inc. or, if Moody's Investors Service, Inc. shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, the successor Person; provided, however, that if there is no successor Person, then "Moody's" will mean any other national recognized rating agency, other than S&P, that rates debt securities having a maturity at original issuance of at least one year that we designate. "NON-RECOURSE DEBT" means Debt or that portion of Debt: (1) as to which neither we nor our subsidiaries, other than a Non-Recourse Subsidiary: (a) provides credit support; including any undertaking, agreement or instrument which would constitute Debt; (b) is directly or indirectly liable; or (c) constitute the lender; and (2) for which a default, including any rights which the holders of the debt may have to take enforcement action against a Non-Recourse Subsidiary, would not permit (upon notice, lapse of time or both) any holder of our or our subsidiaries' other Debt, including any Non-Recourse Subsidiary, to declare a default on such other Debt or cause a payment thereof to be accelerated or payable prior to its Stated Maturity. "NON-RECOURSE SUBSIDIARY" means a subsidiary which (1) has not acquired any assets, other than cash, directly or indirectly from us or any subsidiary, (2) only owns assets acquired after March 8, 2001 or assets acquired prior to the date such entity becomes a subsidiary and (3) has no Debt other than Non-Recourse Debt. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or any agency or political subdivision hereof or any other entity. "PREFERRED STOCK", as applied to the capital stock of any corporation, means capital stock of any class or classes, however designated, which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of the corporation, over shares of capital stock of any other class of the corporation. "PRIMARY TREASURY DEALER" means a primary U.S. Government securities dealer in The City of New York. "RATING AGENCIES" mean Moody's and S&P. 60 71 "RATING DATE" means the earlier of the date of public notice of (1) a Change of Control or (2) our intention to effect a Change of Control. "RATING DECLINE" shall be deemed to have occurred if, no later than 90 days after the Rating Date -- which period shall be extended so long as the rating of the notes is under publicly announced consideration for possible downgrade by either of the Rating Agencies -- either of the Rating Agencies assigns a rating to the notes that is lower than the applicable rating of the notes on the Rating Date. A downgrade within rating categories, as well as between rating categories, will be considered a Rating Decline. "RECEIVABLES SECURITIZATION" means a public or private transfer of or creation of an interest in receivables in the ordinary course of our and our subsidiaries' business and by which we or any subsidiary directly or indirectly securitize a pool of receivables, including but not limited to any such transaction involving the sale of or creation of an interest in specified receivables to a special purpose entity. "REFERENCE TREASURY DEALER" means JPMorgan, a division of Chase Securities Inc. and its successors; provided, however, that if JPMorgan ceases to be a primary U.S. government securities dealer in New York City (a Primary Treasury Dealer), we will substitute another Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, for each Reference Treasury Dealer and any redemption date, the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue -- expressed in each case as a percentage of its principal amount -- quoted in writing to the trustee by the Reference Treasury Dealer at 5:00 p.m. on the third business day preceding the redemption date. "SALE AND LEASE-BACK TRANSACTION" means any arrangement with any Person providing for the leasing by us or our subsidiaries of any property or assets, other than any arrangement involving: - a lease for a term, including renewal rights, of not more than 36 months; - a lease of property within 18 months from the acquisition or in the case of construction, alteration or improvement of property, the later of the completion of the construction, alteration or improvement of such property; or - leases between or among us and a subsidiary or subsidiaries, which property or asset has been or is to be sold or transferred by us or our subsidiary to such Person. "S&P" means Standard & Poor's Ratings Service or, if Standard & Poor's Ratings Service shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if there is no successor Person, then "S&P" shall mean any other national recognized rating agency, other than Moody's, that rates debt securities having a maturity at original issuance of at least one year and that we have designated. "SENIOR CREDIT AGREEMENT" means, with respect to Manor Care, one or more debt facilities or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and whether or not with the original administrative agent and lenders or another administrative agent or agents or other lenders and whether provided under the original Credit Agreement or any other credit or other agreement or indenture. Our debt facilities include, without limitation: (1) the Credit Agreement, dated as of September 25, 1998, among the Company, Manor Care of America, Inc., Bank of America, N.A., as Administrative Agent, and the lenders parties thereto from time to time, as amended by the First Amendment to Five Year Credit Agreement, dated as of February 9, 2000, and by the Second Amendment to Five Year Credit Agreement, dated as of September 22, 2000, and as may be further amended or modified from time to time; and 61 72 (2) the Credit Agreement, dated as of September 25, 1998, among Manor Care, MCA, Bank of America, N.A., as Administrative Agent, and the lenders parties thereto from time to time, as amended by the First Amendment to 364 Day Credit Agreement, dated as of September 24, 1999, and by the Second Amendment to 364 Day Credit Agreement, dated as of February 9, 2000, and by the Third Amendment to 364 Day Credit Agreement, dated as of September 22, 2000, and as may be further amended or modified from time to time. "STATED MATURITY" means, for any security, the date specified in the security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any contingent obligations to repay, redeem or repurchase any such principal before the date originally scheduled for payment. "SUBSIDIARY GUARANTEE" means, individually, any guarantee of payment of the notes by a Subsidiary Guarantor pursuant to the terms of the indenture and any supplemental indenture, and, collectively, all such guarantees. Each such Subsidiary Guarantee will be in the form prescribed by the indenture. "SUBSIDIARY GUARANTOR" means MCA, each of our subsidiaries, other than a subsidiary that does not guarantee obligations under the 2006 Notes, in existence on March 8, 2001, and any subsidiary that is required to guarantee the notes under the terms of the indenture. "TRANSFER RESTRICTED SECURITIES" means each old note, until the earliest to occur of: - the date on which that old note has been exchanged for a freely transferable new note in the exchange offer; - the date on which that old note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement; or - the date on which that old note is distributed to the public pursuant to Rule 144 under the Securities Act or may be sold under Rule 144(k) under the Securities Act. "TREASURY RATE" means, for any redemption date, the rate per year equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the Comparable Treasury Price for the redemption date. "U.S. GOVERNMENT SECURITIES" means securities that are: (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America. In either case, they are not callable or redeemable at the option of the issuer of the securities, and will also include a depository receipt issued by a bank, as defined in Section 3(a)(2) of the Securities Act, as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt; provided that, except as required by law, such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Securities or the specific payment of principal of or interest on the U.S. Government Securities evidenced by such depository receipt. "VOTING STOCK" of a corporation means all classes of capital stock of the corporation then outstanding and normally entitled to vote in the election of directors. 62 73 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") grants corporations the right to limit or eliminate the personal liability of their directors in certain circumstances in accordance with provisions therein set forth. Article VIII of the Manor Care Certificate of Incorporation contains a provision eliminating or limiting director liability to Manor Care and its stockholders for monetary damages arising from acts or omissions in the director's capacity as a director. The provision does not, however, eliminate or limit the personal liability of a director (i) for any breach of such director's duty of loyalty to Manor Care or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under the Delaware statutory provision making directors personally liable, under a negligence standard, for unlawful dividends or unlawful stock purchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit. This provision offers persons who serve on the board of directors of Manor Care protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above). As a result of this provision, the ability of Manor Care or a stockholder thereof to successfully prosecute an action against a director for a breach of his duty of care is limited. However, the provision does not affect the availability of equitable remedies such as an injunction or rescission based upon a director's breach of his duty of care. The SEC has taken the position that the provision will have no effect on claims arising under the Federal securities laws. Section 145 of the DGCL grants corporations the right to indemnify their directors, officers, employees and agents in accordance with the provisions therein set forth. Article VIII of the Manor Care Certificate of Incorporation and Article 3, Section 14 of the Manor Care Bylaws provide for mandatory indemnification rights, subject to limited exceptions, to any director, officer, employee, or agent of Manor Care who, by reason of the fact that he or she is a director, officer, employee, or agent of Manor Care, is involved in a legal proceeding of any nature. Such indemnification rights include reimbursement for expenses incurred by such director, officer, employee, or agent in advance of the final disposition of such proceeding in accordance with the applicable provisions of the DGCL. Manor Care has entered into agreements with all of its directors and its executive officers pursuant to which Manor Care has agreed to indemnify such directors and executive officers against liability incurred by them by reason of their services as a director or executive officer to the fullest extent allowable under applicable law. II-1 74 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 4.1............... Indenture, dated as of March 8, 2001, among Manor Care, Inc., the subsidiary guarantors as named therein and National City Bank, as trustee 4.2............... Form of old 8.00% Senior Note due 2008 (included in Exhibit 4.1) 4.3............... Form of new 8.00% Senior Note due 2008 (included in Exhibit 4.1) 4.4............... Exchange and Registration Rights Agreement, dated March 8, 2001, among Manor Care, Inc, the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC 5.1............... Opinion of Latham & Watkins 5.2............... Opinion of R. Jeffrey Bixler 10.1.............. Purchase Agreement, dated March 1, 2001, among Manor Care Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC 12.1.............. Statement re Computation of Ratios 13.1.............. Annual report on Form 10-K/A for the fiscal year ended December 31, 2000 23.1.............. Consent of Ernst & Young LLP 23.2.............. Consent of Latham & Watkins (included in Exhibit 5.1) 23.3.............. Consent of R. Jeffrey Bixler (included in Exhibit 5.2) 24.1.............. Power of Attorney of the Company 24.2.............. Power of Attorney of the Guarantors 25.1.............. Statement of Eligibility of Trustee 99.1.............. Form of Transmittal Letter 99.2.............. Form of Notice of Guaranteed Delivery 99.3.............. Form of Letter to DTC Participants 99.4.............. Form of Letter to Beneficial Holders 99.5.............. Form of Letter to Clients 99.6.............. Form of Guidelines for Certification
II-2 75 ITEM 22. UNDERTAKINGS (a) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; II-2 (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (e) The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of each registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 76 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on date set forth below. Manor Care, Inc. By: /s/ R. Jeffrey Bixler --------------------------------------------- R. Jeffrey Bixler Vice President, General Counsel and Secretary DATE: April 25, 2001 S-1 77 Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on April 25, 2001 in the capacities indicated. SIGNATURE TITLE - --------- ----- * - --------------------------------- Stewart Bainum, Jr. Chairman of the Board; Director * - --------------------------------- Joseph H. Lemieux Director * - --------------------------------- William H. Longfield Director * - --------------------------------- Frederic V. Malek Director * - --------------------------------- Geoffrey G. Meyers Executive Vice President and Chief Financial Officer (Principal Financial Officer) * - --------------------------------- Spencer C. Moler Vice President and Controller (Principal Accounting Officer) * - --------------------------------- Paul A. Ormond President and Chief Executive Officer (Principal Executive Officer); Director * - --------------------------------- John T. Schwieters Director * - --------------------------------- Robert G. Siefers Director * - --------------------------------- M. Keith Weikel Senior Executive Vice President and Chief Operating Officer; Director * - --------------------------------- Gail R. Wilensky Director 78 * Director - --------------------------------- Thomas L. Young - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Company pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ----------------------------------- R. Jeffrey Bixler, Attorney-in-fact 79 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HCR REHABILITATION CORP. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ---------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ---------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ---------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Director - ---------------------------- Paul A. Ormond * Director - ---------------------------- Geoffrey G. Meyers - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------------------------ R. Jeffrey Bixler, Attorney-in-fact 80 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOSPITAL HOLDING COMPANY, INC. HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCRA OF TEXAS, INC. HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. 81 MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. 82 By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of each of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant - ------------------------------ Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Sole Director - ------------------------------ R. Jeffrey Bixler - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler -------------------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 83 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. MNR FINANCE CORP. By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above-referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant - ------------------------------- Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Director - ------------------------------- Geoffrey G. Meyers * Director - ------------------------------- R. Jeffrey Bixler - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 84 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC By: /s/ R. Jeffrey Bixler --------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of each of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ----------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ----------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ----------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) 85 * Vice President, General Counsel & Secretary of - ----------------------------- Manor Care of America, Inc., Sole Member of R. Jeffrey Bixler each of the above-referenced limited liability companies - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 86 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC By: /s/ R. Jeffrey Bixler --------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of each of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ----------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ----------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ----------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) 87 * Vice President, General Counsel & Secretary of - ----------------------------- ManorCare Health Services, Inc., Sole Member R. Jeffrey Bixler of each of the above-referenced limited liability companies - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 88 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. ANCILLARY SERVICES, LLC By: /s/ R. Jeffrey Bixler --------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of each of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ----------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ----------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ----------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Vice President, General Counsel & Secretary of - ----------------------------- Heartland Rehabilitation Services, Inc., sole R. Jeffrey Bixler member of the above-referenced limited liability company - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------------------------ R. Jeffrey Bixler, Individually and as Attorney-in-fact 89 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HCR HOSPITAL, LLC By: /s/ R. Jeffrey Bixler ---------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ------------------------------ & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Vice President, General Counsel & Secretary - ------------------------------ of HCR Hospital Holding Company, Inc., sole R. Jeffrey Bixler member of the above-referenced limited liability company - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 90 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HCR INFORMATION CORPORATION By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ----------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ----------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - ----------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Director - ----------------------------- Paul A. Ormond * Director - ----------------------------- Geoffrey G. Meyers * Director - ----------------------------- M. Keith Weikel - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Attorney-in-fact 91 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. DIVERSIFIED REHABILITATION SERVICES, INC. HCR HOME HEALTH CARE AND HOSPICE, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. MEDI-SPEECH SERVICE, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. RICHARDS HEALTHCARE, INC. By: /s/ R. Jeffrey Bixler ----------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of each of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman & Chief Executive Officer - -------------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - -------------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant - -------------------------------- Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Sole Director - -------------------------------- R. Jeffrey Bixler 92 - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 93 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HEARTLAND REHABILITATION SERVICES, INC. By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant - ------------------------------ Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Director - ------------------------------ Paul A. Ormond * Director - ------------------------------ Geoffrey G. Meyers - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Attorney-in-fact 94 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HEARTLAND MEDICAL INFORMATION SERVICES, INC. By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman & Chief Executive Officer - --------------------------- (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - --------------------------- Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, Assistant Treasurer - --------------------------- & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Director - --------------------------- Paul A. Ormond * Director - --------------------------- Geoffrey G. Meyers * Director - --------------------------- M. Keith Weikel - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------------------------- R. Jeffrey Bixler, Attorney-in-fact 95 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. HCR MANORCARE MESQUITE, L.P. By: /s/ R. Jeffrey Bixler ------------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial Officer) * Vice President, Controller, - ------------------------------ Assistant Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Vice President, General Counsel & Secretary - ------------------------------ of ManorCare Health Services, Inc., Sole R. Jeffrey Bixler Member of Mesquite Hospital, LLC, General Partner of the above-referenced limited partnership - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 96 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. BOOTH LIMITED PARTNERSHIP By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial Officer) * Vice President, Controller, Assistant - ------------------------------ Treasurer & Assistant Secretary Spencer C. Moler (Principal Accounting Officer) * Vice President, General Counsel, Secretary and - ------------------------------ Sole Director of Jacksonville Healthcare R. Jeffrey Bixler Corporation, General Partner of the above-referenced limited partnership - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 97 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on April 25, 2001. COLEWOOD LIMITED PARTNERSHIP By: /s/ R. Jeffrey Bixler ---------------------------------------- Name: R. Jeffrey Bixler Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on April 25, 2001. SIGNATURE TITLE * Chairman, President & Chief Executive Officer - ------------------------------ (Principal Executive Officer) Paul A. Ormond * Executive Vice President, Chief Financial - ------------------------------ Officer & Assistant Secretary Geoffrey G. Meyers (Principal Financial and Accounting Officer) * Vice President, Controller, - ------------------------------ Assistant Treasurer Spencer C. Moler & Assistant Secretary (Principal Accounting Officer) * Vice President, General Counsel, Secretary - ------------------------------ and Sole Director of American Hospital R. Jeffrey Bixler Building Corporation, General Partner of the above-referenced limited partnership - ---------- * R. Jeffrey Bixler, by signing his name hereto, does hereby sign this document individually and on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler -------------------------------------- R. Jeffrey Bixler, Individually and as Attorney-in-fact 98 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.1................ Indenture, dated as of March 8, 2001, among Manor Care, Inc., the subsidiary guarantors as named therein and National City Bank, as trustee 4.2................ Form of old 8.00% Senior Note due 2008 (included in Exhibit 4.1) 4.3................ Form of new 8.00% Senior Note due 2008 (included in Exhibit 4.1) 4.4................ Exchange and Registration Rights Agreement, dated March 8, 2001, among Manor Care, Inc, the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC 5.1................ Opinion of Latham & Watkins 5.2................ Opinion of R. Jeffrey Bixler 10.1............... Purchase Agreement, dated March 1, 2001, among Manor Care Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC 12.1............... Statement re Computation of Ratios 13.1............... Annual report on Form 10-K/A for the fiscal year ended December 31, 2000 23.1............... Consent of Ernst & Young LLP 23.2............... Consent of Latham & Watkins (included in Exhibit 5.1) 23.3............... Consent of R. Jeffrey Bixler (included in Exhibit 5.2) 24.1............... Power of Attorney of the Company 24.2............... Power of Attorney of the Guarantors 25.1............... Statement of Eligibility of Trustee 99.1............... Form of Transmittal Letter 99.2............... Form of Notice of Guaranteed Delivery 99.3............... Form of Letter to DTC Participants 99.4............... Form of Letter to Beneficial Holders 99.5............... Form of Letter to Clients 99.6............... Form of Guidelines for Certification EX-4.1 2 l87647aex4-1.txt EXHIBIT 4.1 1 EXHIBIT 4.1 MANOR CARE, INC., THE SUBSIDIARY GUARANTORS PARTIES HERETO, AND NATIONAL CITY BANK, AS TRUSTEE 8% Senior Notes due 2008 INDENTURE Dated as of March 8, 2001 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1. Definitions............................................................................... 1 Section 1.2. Other Definitions......................................................................... 10 Section 1.3. Incorporation by Reference of Trust Indenture Act......................................... 11 Section 1.4. Rules of Construction..................................................................... 11 ARTICLE II THE SECURITIES Section 2.1. Form, Dating and Terms.................................................................... 12 Section 2.2. Execution and Authentication.............................................................. 18 Section 2.3. Registrar and Paying Agent................................................................ 19 Section 2.4. Paying Agent To Hold Money in Trust....................................................... 19 Section 2.5. Securityholder Lists...................................................................... 20 Section 2.6. Transfer and Exchange..................................................................... 20 Section 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors.............................................................. 23 Section 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S. 25 Section 2.9. Mutilated, Destroyed, Lost or Stolen Securities........................................... 26 Section 2.10. Outstanding Securities.................................................................... 26 Section 2.11. Temporary Securities...................................................................... 27 Section 2.12. Cancellation.............................................................................. 27 Section 2.13. Payment of Interest; Defaulted Interest................................................... 28 Section 2.14. Computation of Interest................................................................... 29 Section 2.15. CUSIP and ISIN Numbers.................................................................... 29 ARTICLE III COVENANTS Section 3.1. Payment of Securities..................................................................... 29 Section 3.2. [Reserved]................................................................................ 29 Section 3.3. Limitation on Liens....................................................................... 29 Section 3.4. Limitation on Sale and Lease-Back Transactions............................................ 31 Section 3.5. Limitation on Affiliate Transactions...................................................... 31 Section 3.6. Change of Control......................................................................... 31 Section 3.7. Financial Statements...................................................................... 33 Section 3.8. Future Subsidiary Guarantors; Release of Guarantees....................................... 34 Section 3.9. Maintenance of Office or Agency........................................................... 35 Section 3.10. Corporate Existence....................................................................... 35 Section 3.11. Payment of Taxes and Other Claims......................................................... 35 Section 3.12. Payments for Consent...................................................................... 36 Section 3.13. Compliance Certificate.................................................................... 36 Section 3.14. Further Instruments and Acts.............................................................. 36 Section 3.15. Statement by Officers as to Default....................................................... 36
i 3 ARTICLE IV SUCCESSOR COMPANY Section 4.1. Consolidation, Merger and Sale of Assets.................................................. 36 ARTICLE V REDEMPTION OF SECURITIES Section 5.1. Optional Redemption....................................................................... 37 Section 5.2. Applicability of Article.................................................................. 38 Section 5.3. Election to Redeem; Notice to Trustee..................................................... 38 Section 5.4. Selection by Trustee of Securities to Be Redeemed......................................... 38 Section 5.5. Notice of Redemption...................................................................... 38 Section 5.6. Deposit of Redemption Price............................................................... 39 Section 5.7. Securities Payable on Redemption Date..................................................... 39 Section 5.8. Securities Redeemed in Part............................................................... 40 ARTICLE VI DEFAULTS AND REMEDIES Section 6.1. Events of Default......................................................................... 40 Section 6.2. Acceleration.............................................................................. 42 Section 6.3. Other Remedies............................................................................ 42 Section 6.4. Waiver of Past Defaults................................................................... 42 Section 6.5. Control by Majority....................................................................... 43 Section 6.6. Limitation on Suits....................................................................... 43 Section 6.7. Rights of Holders to Receive Payment...................................................... 43 Section 6.8. Collection Suit by Trustee................................................................ 43 Section 6.9. Trustee May File Proofs of Claim.......................................................... 44 Section 6.10. Priorities................................................................................ 44 Section 6.11. Undertaking for Costs..................................................................... 44 ARTICLE VII TRUSTEE Section 7.1. Duties of Trustee.......................................................................... 45 Section 7.2. Rights of Trustee.......................................................................... 46 Section 7.3. Individual Rights of Trustee............................................................... 46 Section 7.4. Trustee's Disclaimer....................................................................... 47 Section 7.5. Notice of Defaults......................................................................... 47 Section 7.6. Reports by Trustee to Holders.............................................................. 47 Section 7.7. Compensation and Indemnity................................................................. 47 Section 7.8. Replacement of Trustee..................................................................... 48 Section 7.9. Successor Trustee by Merger................................................................ 49 Section 7.10. Eligibility; Disqualification............................................................. 49 Section 7.11. Preferential Collection of Claims Against Company......................................... 49 Section 7.12. Trustee's Application for Instruction from the Company.................................... 50 ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE Section 8.1. Discharge of Liability on Securities; Defeasance........................................... 50 Section 8.2. Conditions to Defeasance................................................................... 51 Section 8.3. Application of Trust Money................................................................. 53 Section 8.4. Repayment to Company....................................................................... 53 Section 8.5. Indemnity for U.S. Government Securities................................................... 53 Section 8.6. Reinstatement.............................................................................. 53
ii 4 ARTICLE IX AMENDMENTS Section 9.1. Without Consent of Holders................................................................. 53 Section 9.2. With Consent of Holders.................................................................... 54 Section 9.3. Compliance with Trust Indenture Act........................................................ 55 Section 9.4. Revocation and Effect of Consents and Waivers.............................................. 55 Section 9.5. Notation on or Exchange of Securities...................................................... 55 Section 9.6. Trustee To Sign Amendments................................................................. 56 ARTICLE X SUBSIDIARY GUARANTEE Section 10.1. Subsidiary Guarantee...................................................................... 56 Section 10.2. Limitation on Liability; Termination, Release and Discharge Upon Merger or Consolidation.. 57 Section 10.3. Right of Contribution..................................................................... 58 Section 10.4. No Subrogation............................................................................ 58 ARTICLE XI MISCELLANEOUS Section 11.1. Trust Indenture Act Controls.............................................................. 59 Section 11.2. Notices................................................................................... 59 Section 11.3. Communication by Holders with other Holders............................................... 60 Section 11.4. Certificate and Opinion as to Conditions Precedent........................................ 60 Section 11.5. Statements Required in Certificate or Opinion............................................. 60 Section 11.6. When Securities Disregarded............................................................... 61 Section 11.7. Rules by Trustee, Paying Agent and Registrar.............................................. 61 Section 11.8. Legal Holidays............................................................................ 61 SECTION 11.9. GOVERNING LAW............................................................................. 61 Section 11.10. No Recourse Against Others............................................................... 61 Section 11.11. Successors............................................................................... 62 Section 11.12. Multiple Originals....................................................................... 62 Section 11.13. Variable Provisions...................................................................... 62 Section 11.14. Qualification of Indenture............................................................... 62 Section 11.15. Table of Contents; Headings.............................................................. 62
iii 5 EXHIBIT A Form of the Initial Security EXHIBIT B Form of the Exchange Security EXHIBIT C Form of Indenture Supplement to Add Subsidiary Guarantors iv 6 CROSS-REFERENCE TABLE
TIA Indenture Section Section 310(a)(1) ........................................... 7.10 (a)(2) ........................................... 7.10 (a)(3) ........................................... N.A. (a)(4) ........................................... N.A. (b) ........................................... 7.8; 7.10 (c) ........................................... N.A. 311(a) ........................................... 7.11 (b) ........................................... 7.11 (c) ........................................... N.A. 312(a) ........................................... 2.5 (b) ........................................... 11.3 (c) ........................................... 11.3 313(a) ........................................... 7.6 (b)(1) ........................................... N.A. (b)(2) ........................................... 7.6 (c) ........................................... 7.6 (d) ........................................... 7.6 314(a) ........................................... 3.13; 11.2, 11.5 (b) ........................................... N.A. (c)(1) ........................................... 11.4 (c)(2) ........................................... 11.4 (c)(3) ........................................... N.A. (d) ........................................... N.A. (e) ........................................... 11.5 315(a) ........................................... 7.1 (b) ........................................... 7.5; 11.2 (c) ........................................... 7.1 (d) ........................................... 7.1 (e) ........................................... 6.11 316(a)(last sentence) ........................................... 11.6 (a)(1)(A) ........................................... 6.5 (a)(1)(B) ........................................... 6.4 (a)(2) ........................................... N.A. (b) ........................................... 6.7 317(a)(1) ........................................... 6.8 (a)(2) ........................................... 6.9 (b) ........................................... 2.4 318(a) ........................................... 11.1
N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. v 7 INDENTURE dated as of March 8, 2001, among MANOR CARE, INC., a Delaware corporation (the "Company"), THE SUBSIDIARY GUARANTORS (as defined) and NATIONAL CITY BANK, a national banking association (the "Trustee"), as Trustee. Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Company's 8% Senior Notes due 2008 on the date hereof and the guarantees thereof by certain of the Company's subsidiaries (the "Original Securities" or "Initial Securities"), and (ii) if and when issued in exchange for Initial Securities as provided in the Exchange and Registration Rights Agreement or a similar agreement relating to Initial Securities, the Company's 8% Series B Senior Notes due 2008 and the guarantees thereof by certain of the Company's subsidiaries (the "Exchange Securities") and (iii) if and when issued as provided in the Exchange and Registration Rights Agreement, the Private Exchange Securities (as defined in the Exchange and Registration Rights Agreement; together with Initial Securities and Exchange Securities, the "Securities"). ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions. "2006 Notes" means MCA's $150.0 million principal amount of 7-1/2% Senior Notes Due 2006. "Affiliate" of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing; provided, however, that the existence of a management contract by the Company or an Affiliate of the Company to manage another entity shall not be deemed to be control. "Applicable Percentage" means (i) 15%, if the aggregate principal amount of notes and debt securities issued under other indentures or fiscal agency agreements or other similar instruments (collectively, "Debt Securities") then outstanding exceeds $100,000,000, (ii) 20%, if the aggregate principal amount of Debt Securities then outstanding exceeds $50,000,000 but is less than or equal to $100,000,000, or (iii) 25%, if the aggregate principal amount of Debt Securities outstanding is less than or equal to $50,000,000. "Attributable Debt" in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded semi-annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended). 1 8 "Bank Debt" means any and all amounts, whether outstanding on the Issue Date or Incurred after the Issue Date, payable by the Company under or in respect of the Senior Credit Agreement and any related notes, collateral documents, letters of credit and guarantees and any Interest Rate Agreement entered into in connection with the Senior Credit Agreement, including principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company at the rate specified therein whether or not a claim for post filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City and Cleveland, Ohio. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Debt represented by such obligation will be the capitalized amount of such obligation at the time any determination thereof is to be made as determined in accordance with GAAP, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date such lease may be terminated without penalty. "Change of Control" means: (1) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be deemed to have "beneficial ownership" of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for the purposes of this clause, such person or group shall be deemed to beneficially own any Voting Stock of the Company held by a parent entity, if such person or group "beneficially owns" (as defined above), directly or indirectly, more than 50% of the voting power of the Voting Stock of such parent entity); or 2 9 (2) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; (3) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act); or (4) the adoption by the stockholders of the Company of a plan or proposal for the liquidation or dissolution of the Company. "Change of Control Triggering Event" means the occurrence of a Change of Control accompanied by a Rating Decline. "Closing Date" with respect to any Initial Securities, means the date on which such Initial Securities are originally issued. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Manor Care, Inc. or its successor. "Consolidated Net Assets" means, with respect to any Person as of any date of determination, the total assets of such Person and its subsidiaries on a consolidated basis less current liabilities of such Person and its subsidiaries on a consolidated basis as of such date, all determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of the Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Debt" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) the principal component of all obligations of such Person in respect of letters of credit, bankers' acceptances or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 30 days of Incurrence); 3 10 (4) the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property (except trade payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto; (5) Capitalized Lease Obligations and all Attributable Debt of such Person; and (6) the principal component of Debt of other Persons to the extent Guaranteed by such Person. The amount of Debt of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Definitive Securities" means certificated Securities. "DTC" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated the Issue Date among the Initial Purchasers, the Subsidiary Guarantors and the Company. "Exchange Securities" has the meaning ascribed to it in the second introductory paragraph of this Indenture. "Existing Liens" means Liens on property or assets of the Company or any Subsidiary existing on the Issue Date. "Fiscal Year" means the fiscal year of the Company ending on December 31 of each year. "Foreign Subsidiary" of the Company shall mean any Subsidiary which is incorporated or organized in a jurisdiction outside the United States and any Subsidiary of such a Subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession as in effect from time to time. 4 11 "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" will not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" or "Securityholder" means the Person in whose name a Security is registered in the Note Register. "Incur" means issue, create, assume, Guarantee, incur or otherwise become liable for; and the terms "Incurred" and "Incurrence" have meanings correlative to the foregoing. "Indenture" means this Indenture, as amended or supplemented from time to time. "Initial Purchasers" means, collectively, JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC. "Initial Securities" has the meaning ascribed to it in the second introductory paragraph of this Indenture. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Issue Date" means the date on which the Original Securities are originally issued. "Legal Holiday" has the meaning ascribed to it in Section 11.8. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). 5 12 "MCA" means Manor Care of America, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, or any of its successors and assigns. "Moody's" means Moody's Investors Service, Inc., or, if Moody's Investors Service, Inc. shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if there is no successor Person, then "Moody's" shall mean any other national recognized rating agency, other than S&P, that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by the Company. "Non-Recourse Debt" means Debt or that portion of Debt (i) as to which neither the Company nor its Subsidiaries (other than a Non-Recourse Subsidiary) (A) provides credit support (including any undertaking, agreement or instrument which would constitute Debt), (B) is directly or indirectly liable or (C) constitute the lender and (ii) in respect of which a default (including any rights which the holders thereof may have to take enforcement action against a Non-Recourse Subsidiary) would not permit (upon notice, lapse of time or both) any holder of any other Debt of the Company or its Subsidiaries (including any Non-Recourse Subsidiary) to declare a default on such other Debt or cause a payment thereof to be accelerated or payable prior to its Stated Maturity. "Non-Recourse Subsidiary" means a Subsidiary which (i) has not acquired any assets (other than cash) directly or indirectly from the Company or any Subsidiary, (ii) only owns assets acquired after the Issue Date or assets acquired prior to the date such entity becomes a Subsidiary and (iii) has no Debt other than Non-Recourse Debt. "Non-U.S. Person" means a person who is not a U.S. person, as defined in Regulation S. "Note Register" means the register of Securities, maintained by the Registrar, pursuant to Section 2.3. "Obligations" has the meaning ascribed to it in Section 10.1. "Officer" means the Chairman of the Board, the President, the Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers or attorneys-in-fact or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company or the Subsidiary Guarantors, as applicable. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Original Securities" means the Company's 8% Senior Notes due 2008 originally issued on the Issue Date. 6 13 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or any agency or political subdivision hereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Private Exchange Securities" shall have the meaning set forth in the Exchange and Registration Rights Agreement or a similar agreement relating to Initial Securities. "QIB" means any "qualified institutional buyer" (as defined in Rule 144A under the Securities Act). "Rating Agencies" mean Moody's and S&P. "Rating Date" means the earlier of the date of public notice of (i) the occurrence of a Change of Control or (ii) the intention of the Company to effect a Change of Control. "Rating Decline" shall be deemed to have occurred if, no later than 90 days after the Rating Date (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by either of the Rating Agencies), either of the Rating Agencies assigns a rating to the Securities that is lower than the applicable rating of the Securities on the Rating Date. A downgrade within rating categories, as well as between rating categories, will be considered a Rating Decline. "Receivables Securitization" means a public or private transfer of or creation of an interest in receivables in the ordinary course of business of the Company and its Subsidiaries and by which the Company or any such Subsidiary directly or indirectly securitizes a pool of receivables, including but not limited to any such transaction involving the sale of or creation of an interest in specified receivables to a special purpose entity. "Redemption Date" means, with respect to any redemption of Securities, the date of redemption with respect thereto. "Registered Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Restricted Period" means the 40 consecutive days beginning on and including the later of (A) the day on which the Initial Securities are offered to persons other than distributors (as defined in Regulation S under the Securities Act) and (B) the Issue Date. "Restricted Securities Legend" means the Private Placement Legend set forth in clause (1) of Section 2.1(c) or the Regulation S Legend set forth in clause (2) of Section 2.1(c), as applicable. 7 14 "S&P" means Standard & Poor's Ratings Service or, if Standard & Poor's Ratings Service shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if there is no successor Person, then "S&P" shall mean any other national recognized rating agency, other than Moody's, that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by the Company. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Company or its Subsidiaries of any property or assets (other than any such arrangement involving (i) a lease for a term, including renewal rights, of not more than 36 months, (ii) a lease of property within 18 months from the acquisition or, in the case of the construction, alteration or improvement of property, the later of the completion of the construction, alteration or improvement of such property or the commencement of commercial operation of the property, or (iii) leases between or among the Company and a Subsidiary or Subsidiaries), which property or asset has been or is to be sold or transferred by the Company or a Subsidiary to such Person. "SEC" means the Securities and Exchange Commission. "Securities" means the collective reference to the Initial Securities, Exchange Securities and Private Exchange Securities. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Security (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee. "Senior Credit Agreement" means, with respect to the Company, one or more debt facilities (including, without limitation, (i) the Credit Agreement, dated as of September 25, 1998, among the Company, MCA, Bank of America, N.A., as Administrative Agent, and the lenders parties thereto from time to time, as amended by the First Amendment to Five Year Credit Agreement, dated as of February 9, 2000, and by the Second Amendment to Five Year Credit Agreement, dated as of September 22, 2000, and as may be further amended or modified from time to time, and (ii) the Credit Agreement, dated as of September 25, 1998, among the Company, MCA, Bank of America, N.A., as Administrative Agent, and the lenders parties thereto from time to time, as amended by the First Amendment to 364 Day Credit Agreement, dated as of September 24, 1999, and by the Second Amendment to 364 Day Credit Agreement, dated as of February 9, 2000, and by the Third Amendment to 364 Day Credit Agreement, dated as of September 22, 2000, and as may be further amended or modified from time to time) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time (and whether or not with the original administrative agent and lenders or another administrative agent or agents or other lenders and whether provided under the original Credit Agreement or any other credit or other agreement or indenture). 8 15 "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof. "Subsidiary" of the Company means (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by the Company, by the Company and one or more Subsidiaries of the Company or by one or more Subsidiaries of the Company or (ii) any other Person (other than a corporation) in which the Company, one or more Subsidiaries of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination thereof, has greater than a 50% ownership interest. "Subsidiary Guarantee" means, individually, any Guarantee of payment of the Securities by a Subsidiary Guarantor pursuant to the terms of this Indenture and any supplemental indenture hereto (including pursuant to Exhibit C), and, collectively, all such Guarantees. Each such Subsidiary Guarantee will be in the form prescribed by this Indenture. "Subsidiary Guarantor" means MCA and each Subsidiary of the Company (other than a Subsidiary that does not guarantee obligations under the 2006 Notes) in existence on the Issue Date and, any Subsidiary that is required to Guarantee the Securities under the terms of this Indenture. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "U.S. Government Securities" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a 9 16 depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Securities or the specific payment of principal of or interest on the U.S. Government Securities evidenced by such depository receipt. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. SECTION 1.2. Other Definitions.
Defined in Term Section ---- ---------- "Affiliate Transaction" 3.5 "Agent" 3.9 "Agent Member" 2.1(d) "Authenticating Agent" 2.2 "Bankruptcy Law" 6.1 "Change of Control" 3.8 "Change of Control Offer" 3.6 "Change of Control Payment" 3.6 "Change of Control Payment Date" 3.6 "Company Order" 2.2 "covenant defeasance option" 8.1(b) "cross-acceleration provision" 6.1 "Custodian" 6.1 "Defaulted Interest" 2.13 "Event of Default" 6.1 "Exchange Global Note" 2.1(a) "Global Securities" 2.1(a) "Global Securities Legend" 2.1(c) "IAI" 2.1(a) "Institutional Accredited Investor Global Note" 2.1(a) "legal defeasance option" 8.1(b) "Paying Agent" 2.3 "Private Placement Legend" 2.1(c) "Payment Default" 6.1 "Registrar" 2.3 "Regulation S" 2.1(a) "Regulation S Global Note" 2.1(a) "Regulation S Legend" 2.1(c) "Regulation S Note" 2.1(a) "Resale Restriction Termination Date" 2.6 "Rule 144A" 2.1(a)
10 17 "Rule 144A Global Note" 2.1(a) "Rule 144A Note" 2.1(a) "Special Interest Payment Date" 2.13 "Special Record Date" 2.13 "Successor Company" 4.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.4. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (7) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. 11 18 ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms. (a) The Original Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated March 1, 2001, among the Company, the Subsidiary Guarantors and the Initial Purchasers. The Original Securities will be resold initially only to (A) qualified institutional buyers (as defined in Rule 144A under the Securities Act ("Rule 144A")) in reliance on Rule 144A ("QIBs") and (B) Persons other than U.S. Persons (as defined in Regulation S under the Securities Act ("Regulation S")) in reliance on Regulation S. Such Original Securities may thereafter be transferred to among others, QIBs, purchasers in reliance on Regulation S and IAIs in accordance with Rule 501 of the Securities Act in accordance with the procedure described herein. Initial Securities offered and sold to the Initial Purchasers, and subsequently resold to QIBs in the United States of America in reliance on Rule 144A (the "Rule 144A Note"), will be issued on the Issue Date in the form of a permanent global Security, without interest coupons, substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, including appropriate legends as set forth in (c) (the "Rule 144A Global Note"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Initial Securities offered, sold and resold outside the United States of America (the "Regulation S Note") in reliance on Regulation S shall be issued in the form of a permanent global Security substantially in the form of Exhibit A, including appropriate legends as set forth in (c) (the "Regulation S Global Note"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Regulation S Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Initial Securities resold after an initial resale to QIBs in reliance on Rule 144A or an initial resale in reliance on Regulation S to institutional "accredited investors" (as defined in Rules 501(a)(1), (2), (3) and (7) under the Securities Act) who are not QIBs ("IAIs") in the United States of America will be issued in the form of a permanent global Security substantially in the form of Exhibit A (the "Institutional Accredited Investor Global Note") deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Institutional Accredited Investor Global Note may be represented by more that one certificate, if so required by DTC's rules regarding the maximum principal 12 19 amount to be represented by a single certificate. The aggregate principal amount of the Institutional Accredited Investor Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Exchange Securities exchanged for interests in the Rule 144A Note, the Regulation S Note and the Institutional Accredited Investor Global Note will be issued in the form of a permanent global Security substantially in the form of Exhibit B, which is hereby incorporated by reference and made a part of this Indenture, deposited with the Trustee as hereinafter provided, including the appropriate legend set forth in (c) (the "Exchange Global Note"). The Exchange Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The Rule 144A Global Note, the Regulation S Global Note, the Institutional Investor Global Note and the Exchange Global Note are sometimes collectively herein referred to as the "Global Securities." Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3; provided, however, that, at the option of the Company, each installment of interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by DTC. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). The Private Exchange Securities shall be in the form of Exhibit A. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth on Exhibits A and B and in (c). The Company and the Trustee shall approve the forms of the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms. (b) Denominations. The Securities shall be issuable only in fully registered form, without coupons, and only in denominations of $1,000 and any integral multiple thereof. 13 20 (c) Restrictive Legends. Unless and until (i) an Initial Security is sold under an effective registration statement or (ii) an Initial Security is exchanged for an Exchange Security in connection with an effective registration statement, in each case pursuant to the Exchange and Registration Rights Agreement or a similar agreement, 1. the Rule 144A Global Note and the Institutional Accredited Investor Global Note shall bear the following legend (the "Private Placement Legend") on the face thereof: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR 14 21 TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."; and 2. the Regulation S Global Note shall bear the following legend (the "Regulation S Legend") on the face thereof: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER 15 22 INFORMATION SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." 3. The Global Securities, whether or not an Initial Security, shall bear the following legend on the face thereof: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only to Global Securities deposited with the Trustee, as custodian for DTC. (ii) Each Global Security initially shall (x) be registered in the name of DTC for such Global Security or the nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z) bear legends as set forth in Section 2.1(c). (iii) Members of, or participants in, DTC ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by DTC or by the Trustee as the custodian of DTC or under such Global Security, and DTC may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of 16 23 such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a Holder of a beneficial interest in any Global Security. (iv) In connection with any transfer of a portion of the beneficial interest in a Global Security pursuant to subsection (e) of this Section to beneficial owners who are required to hold Definitive Securities, the Securities Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Securities of like tenor and amount. (v) In connection with the transfer of an entire Global Security to beneficial owners pursuant to subsection (e) of this Section, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. (vi) The registered Holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (e) Definitive Securities. (i) Except as provided below, owners of beneficial interests in Global Securities will not be entitled to receive Definitive Securities. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Securities in exchange for their beneficial interests in a Global Security upon written request in accordance with DTC's and the Registrar's procedures. In addition, Definitive Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Security if (a) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Security or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or, (b) the Company executes and delivers to the Trustee and Registrar an Officers' Certificate stating that such Global Security shall be so exchangeable or (c) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC. (ii) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d)(iv) or (v) shall, except as otherwise provided by Section 2.6(c), bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c). (iii) In connection with the exchange of a portion of a Definitive Security for a beneficial interest in a Global Security, the Trustee shall cancel such Definitive Security, and the 17 24 Company shall execute, and the Trustee shall authenticate and deliver, to the transferring Holder a new Definitive Security representing the principal amount not so transferred. SECTION 2.2. Execution and Authentication. One Officer shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless, after giving effect to any exchange of Initial Securities for Exchange Securities. A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. A Security shall be dated the date of its authentication. At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Original Securities for original issue on the Issue Date in an aggregate principal amount of $200.0 million and (2) Exchange Securities for issue only in a Registered Exchange Offer pursuant to the Exchange and Registration Rights Agreement, and only in exchange for Initial Securities of an equal principal amount, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). Such Company Order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of notes which may be authenticated and delivered under this Indenture is limited to $200.0 million outstanding, except for Securities authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, other Securities of the same class pursuant to Section 2.6, Section 2.9, Section 2.11, Section 5.8, Section 9.5 and except for transactions similar to the Registered Exchange Offer. All Securities issued on the Issue Date shall be identical in all respects other than issue dates, the date from which interest accrues and any changes relating thereto. Notwithstanding anything to the contrary contained in this Indenture, all notes issued under this Indenture shall vote and consent together on all matters as one class and no series of notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent. An Authenticating Agent has the same rights as a Paying Agent to deal with Holders or an Affiliate of the Company. In case the Company or any Subsidiary Guarantor, pursuant to Article IV, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or any Subsidiary Guarantor shall have been merged, or the Person which shall have received a 18 25 conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time outstanding for Securities authenticated and delivered in such new name. SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Note Register"). The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any of its Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints DTC to act as depository with respect to the Global Securities. The Trustee is authorized to enter into a letter of representations with DTC in the form provided to the Trustee by the Company and to act in accordance with such letter. The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 10:00 a.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal or interest when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by such Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee in writing of any default by the Company or any Subsidiary Guarantor in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and 19 26 hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company, on its own behalf and on behalf of each of the Subsidiary Guarantors, shall furnish to the Trustee, in writing at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.6. Transfer and Exchange. (a) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Note or an Institutional Accredited Investor Global Note prior to the date which is two years after the later of the date of its original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"): (i) a transfer of a Rule 144A Note or an Institutional Accredited Investor Global Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee in the form as set forth on the reverse of the Security that it is purchasing for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Rule 144A Note or an Institutional Accredited Investor Global Note or a beneficial interest therein to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Rule 144A Note or an Institutional Accredited Investor Global Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 from the proposed transferee and, if requested by the Company or the 20 27 Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them. (b) The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Restricted Period: (i) a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee, in the form of assignment on the reverse of the certificate, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Regulation S Note or a beneficial interest therein to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Regulation S Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 hereof from the proposed transferee and, if requested by the Company or the Trustee, receipt by the Trustee or its agent of an opinion of counsel, certification and/or other information satisfactory to each of them. After the expiration of the Restricted Period, interests in the Regulation S Note may be transferred without requiring certification set forth in Section 2.7, Section 2.8 or any additional certification. (c) Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities not bearing a Restricted Securities Legend, the Registrar shall deliver Securities that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities bearing a Restricted Securities Legend, the Registrar shall deliver only Securities that bear a Restricted Securities Legend unless there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar. (e) Obligations with Respect to Transfers and Exchanges of Securities. 21 28 (i) To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require from a Holder payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Section 3.6 or Section 9.5). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning (1) 15 days before the mailing of a notice of an offer to repurchase or redeem Securities and ending at the close of business on the day of such mailing or (2) 15 days before an interest payment date and ending on such interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d) shall, except as otherwise provided by Section 2.6(c), bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c). (vi) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (f) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Securities (or other security or property) under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Securities shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Trustee may rely and shall be fully protected 22 29 in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among DTC participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors. [Date] Manor Care, Inc. c/o National City Bank 4100 W. 150th Street, 3rd Floor Cleveland, OH 44135-1385 Attention: Corporate Trust Operations Locator 01-5352 Dear Sirs: This certificate is delivered to request a transfer of $_________ principal amount of the 8% Senior Notes due 2008 (the "Notes") of Manor Care, Inc. (the "Company"). Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes and we invest in or purchase securities similar 23 30 to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE:________________________ BY:________________________________ 24 31 SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S. [Date] Manor Care, Inc. c/o National City Bank 4100 W. 150th Street, 3rd Floor Cleveland, OH 44135-1385 Attention: Corporate Trust Operations Locator 01-5352 Re: Manor Care, Inc. 8% Senior Notes due 2008 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $200,000,000 aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (a) (1) the offer of the Securities was not made to a person in the United States; (2) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (b) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(a)(2) or Rule 904(a)(2) of Regulation S, as applicable; and (c) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a distribution compliance period and the provisions of Rule 903(b)(2) or Rule 904(b)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. 25 32 Very truly yours, [Name of Transferor] By:____________________________ _______________________________ Authorized Signature SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced, and, in the absence of notice to the Company, any Subsidiary Guarantor or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, any Subsidiary Guarantor (if applicable) and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.10. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it 26 33 for cancellation and those described in this Section as not outstanding. A Security ceases to be outstanding in the event the Company or a Subsidiary of the Company holds the Security, provided, however, that (i) for purposes of determining which are outstanding for consent or voting purposes hereunder, Securities shall cease to be outstanding in the event the Company or an Affiliate of the Company holds the Security and (ii) in determining whether the Trustee shall be protected in making a determination whether the Holders of the requisite principal amount of outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, or relying upon any such quorum, consent or vote, only Securities which a Trust Officer of the Trustee actually knows to be held by the Company or an Affiliate of the Company shall not be considered outstanding. If a Security is replaced pursuant to Section 2.9, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.11. Temporary Securities. Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a holder of Definitive Securities. SECTION 2.12. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and return to the Company all Securities surrendered for registration of transfer, exchange, payment or cancellation. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange. 27 34 SECTION 2.13. Payment of Interest; Defaulted Interest. Interest on any Security which is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the Person in whose name such Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 2.3. Any interest on any Security which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular record date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment (the "Special Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 11.2, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. 28 35 Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of, transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.14. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.15. CUSIP and ISIN Numbers. The Company in issuing the Securities may use "CUSIP" and "ISIN" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" and "ISIN" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such CUSIP or ISIN numbers. The Company shall promptly notify the Trustee of any change in the CUSIP and ISIN numbers. ARTICLE III Covenants SECTION 3.1. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 3.2. [Reserved] SECTION 3.3. Limitation on Liens. (a) Except as provided in Section 3.3(b), the Company shall not, and shall not permit any Subsidiary to, create, Incur or assume any Lien on any property or assets of the Company or any Subsidiary in order to secure any Debt of the Company or any Subsidiary, without effectively providing that the Securities (together with, if the Company shall so determine, any other Debt which is not subordinated to the Securities) shall be secured equally and ratably with (or prior to) such Debt, so long as such Debt shall be so secured. 29 36 (b) The limitation set forth in Section 3.3(a) shall not apply to (i) any Lien if, after giving effect thereto, the aggregate amount of all Debt of the Company and its Subsidiaries secured by Liens existing at the time (excluding any Debt secured by Liens permitted to be Incurred by clauses (ii) through (xvii) below) would not exceed the Applicable Percentage of the Consolidated Net Assets of the Company; (ii) any Lien if an amount of cash equal to the net proceeds of the Debt secured by such Lien is used within 12 months of such creation, Incurrence or assumption to (x) acquire additional property or assets (or to make investments in Persons who, after giving effect to such investments, will become Subsidiaries) or (y) make an offer to purchase the Securities at 100% of the principal amount thereof plus accrued interest, if any, to the date of purchase; (iii) Existing Liens and Liens created, Incurred or assumed after the Issue Date on property or assets of the Company or of any Subsidiary that were subject to an Existing Lien; (iv) Liens on property or assets of any Person existing at the time such Person becomes a Subsidiary or merges into or consolidates with the Company or a Subsidiary; (v) Liens on property or assets existing at the time of acquisition thereof by the Company or any Subsidiary; (vi) Liens to secure the financing of the acquisition, construction, alteration or improvement of property or assets of the Company or any Subsidiary (or of any Person who, after giving effect to such financing, will become Subsidiaries), provided that such Liens are created not later than 18 months after such acquisition or, in the case of construction, alteration or improvement of property or assets, the later of the completion thereof or commencement of commercial operation of such property or assets; (vii) Liens in favor of the Company or any Subsidiary; (viii) Liens in favor of or required by federal, state or local governmental authorities, including any department or instrumentality thereof; (ix) Liens on property or assets of, or on any shares of stock or other equity interest in, a Foreign Subsidiary to secure Debt of a Foreign Subsidiary or, a Non-Recourse Subsidiary to secure Non-Recourse Debt; (x) Liens to secure Debt of joint ventures in which the Company or a Subsidiary has an interest, to the extent such Liens are on property or assets of or equity interests in such joint ventures; (xi) Liens on current assets to secure Debt Incurred for working capital purposes, provided that such Debt matures no later than 18 months from the date of Incurrence; (xii) Liens on receivables in connection with Receivables Securitizations; (xiii) Liens of carriers, warehousemen, mechanics, materialmen and landlords Incurred in the ordinary course of business for sums not overdue or being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on the Company's books; (xiv) Liens Incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of bids, tenders, trade contracts (other than for Debt), statutory obligations, leases and contracts (other than for Debt) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds or performance bonds; (xv) easements, restrictions and other minor defects of title which are not, in the aggregate, material and which do not, individually or in the aggregate, have a materially adverse effect; (xvi) leases or subleases granted to others not interfering in any material respect with the business of the Company or any Subsidiary, and any interest or title of a lessor under any lease permitted under the Indenture; and (xvii) any extension, renewal or replacement, as a whole or in part, of any Lien referred to in the foregoing clauses (i) to (xvi), provided, however, that (a) such extension, renewal or replacement Lien shall be limited to all or a part of the same property or assets that secured the Lien being extended, renewed or replaced and (b) the principal amount of Debt (or, if such Debt provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) secured by such extended, 30 37 renewed or replaced Lien does not exceed the principal amount of Debt (or, if such Debt provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) which was secured by the Lien being extended, renewed or replaced. SECTION 3.4. Limitation on Sale and Lease-Back Transactions. The Company will not, and will not permit any Subsidiary to, enter into any Sale and Lease-Back Transaction unless (a) the Company or such Subsidiary would, at the time of entering into a Sale and Lease-Back Transaction, be entitled to Incur Debt secured by a Lien on the property or asset to be leased in an amount at least equal to the Attributable Debt in respect of such transaction without equally and ratably securing the Securities pursuant to Section 3.3, or (b) the proceeds of the sale of the property or assets to be leased are at least equal to their fair value (the amount of such proceeds, if other than in cash, to be determined by the chief financial or accounting officer of the Company whose determination shall be conclusive) and an amount in cash equal to the net proceeds is applied, within 12 months of the effective date of such transaction to (i) acquire additional property or assets (or to make investments in entities which, after giving effect to such investment, will become Subsidiaries), (ii) to retire Debt which is pari passu with the Securities (provided that in connection with any such retirement, any related loan commitment or the like shall be reduced in an amount equal to the principal amount so retired) or (iii) offer to purchase the Securities at 100% of the principal amount thereof, plus accrued interest, if any, to the date of purchase. SECTION 3.5 . Limitation on Affiliate Transactions. Neither the Company nor any of its Subsidiaries shall sell, lease, transfer or otherwise dispose of any of its properties or assets to or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, an Affiliate of the Company (other than a Subsidiary) (an "Affiliate Transaction") having a value, or for consideration having a value, in excess of $20,000,000 individually or in the aggregate unless the Board of Directors of the Company shall determine that the terms of such Affiliate Transaction are no less favorable to the Company or such Subsidiary than those which might be obtained at the time of such Affiliate Transaction from Persons who are not Affiliates. The restrictions of this Section 3.5 are not applicable to the payment of reasonable and customary fees to directors of the Company or a Subsidiary who are not employees, the payment of compensation to officers of the Company or a Subsidiary and any transaction between or among any of the Company and its Subsidiaries. SECTION 3.6. Change of Control. Upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require the Company to offer to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount of the Securities plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Within 30 days following any Change of Control Triggering Event, the Company shall mail a notice (the "Change of Control Offer") to each Holder at the address as it appears on the Note Register, with a copy to the Trustee, stating: (i) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company pursuant to this Section 3.6 to purchase such Holder's Securities at a purchase price in cash equal to 101% of the 31 38 principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date) (the "Change of Control Payment"); (ii) the repurchase date (which shall be a Business Day that is no earlier than 30 days nor later than 60 days from the date that the Company mails or causes to be mailed such notice to the Holders) (the "Change of Control Payment Date"); (iii) that any Security not tendered shall continue to accrue interest, if any; (iv) that, unless the Company defaults in the payment of principal or interest, all Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest, if any, after the Change of Control Payment Date; (v) that Holders electing to have any Securities purchased pursuant to a Change of Control Offer shall be required to surrender the Securities to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the date of purchase for the Change of Control Payment Date; (vi) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities delivered for purchase, and a statement that such Holder is withdrawing its election to have the Securities purchased; (vii) that Holders whose Securities are being purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; and (viii) the procedures determined by the Company, consistent with this Section 3.6, that a Holder must follow in order to have its Securities repurchased. Prior to mailing a Change of Control Offer, and as a condition to such mailing (i) the requisite holders of each issue of Debt issued under an indenture or other agreement that may be violated by such payment shall have consented to such Change of Control Offer being made and waived the event of default, if any, caused by the Change of Control Triggering Event or (ii) the Company will repay all outstanding Debt issued under an indenture or other agreement that may be violated by a payment to the holders of Securities under a Change of Control Offer or the Company must offer to repay all such Debt, and make payment to the holders of such Debt that accept such offer and obtain waivers of any event of default from the remaining holders of such Debt. The Company will effect such repayment or obtain such consent and waiver within 30 days following any Change of Control Triggering Event, it being a Default of this Section 3.6 if the Company fails to so comply. On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment all Securities or portions thereof (equal to $1,000 or an in integral multiple thereof) properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all the Securities or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of such Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of the Securities so tendered the Change of Control Payment for such Securities, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that each such new Security shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly 32 39 announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, if any, will be paid to the Person in whose name a note is registered at the close of business on such record date, and no additional interest will be payable to holders who tender pursuant to the Change of Control Offer. The Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 3.6 applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 3.6. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. SECTION 3.7. Financial Statements. So long as the Company is not subject to Section 13 or 15(d) of the Exchange Act, it shall file with the Trustee and mail to each Holder at such Holder's registered address the following: (a) within 120 days after the end of each fiscal year, its consolidated balance sheets as of the close of such fiscal year and the preceding fiscal year and related consolidated statements of income and shareholders' equity and cash flows, showing the financial condition of the Company and its consolidated Subsidiaries as of the close of such fiscal year and the two preceding fiscal years, all audited by an independent public accounting firm of recognized national standing and accompanied by an opinion of such accounting firm to the effect that such financial statements fairly present the financial condition and results of operations of the Company and its consolidated Subsidiaries in accordance with GAAP consistently applied, except as disclosed in the notes thereto. Such balance sheets and related statements shall be substantially comparable in detail to the audited balance sheets and related statements included in the Company's Offering Memorandum dated March 1, 2001 (the "Offering Memorandum"), relating to the Original Securities and shall be accompanied by a "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") substantially comparable in detail to the MD&A included in the Offering Memorandum with respect to the Company's fiscal years ended December 31, 1998, 1999 and 2000; and (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheets and related consolidated statements of income and cash flows, stating the financial condition of the Company and its consolidated Subsidiaries as of the close of such fiscal quarter and as of the end of the preceding fiscal year (and the corresponding quarter in the preceding fiscal year) and the then-elapsed portion of such fiscal 33 40 year (and the corresponding period in the preceding fiscal year). Such balance sheets and related statements shall be prepared in accordance with GAAP consistently applied except as disclosed in the notes thereto and shall be accompanied by an MD&A substantially comparable in detail to the MD&A included in the Offering Memorandum. (c) The Company shall deliver to the Holder, upon request of such Holder, as many copies of the foregoing as may be reasonably requested by such Holder. SECTION 3.8. Future Subsidiary Guarantors; Release of Guarantees. After the Issue Date, the Company will cause (i) each Subsidiary (other than a Subsidiary that does not guarantee obligations under the 2006 Notes) created or acquired by the Company or one or more of its Subsidiaries to execute and deliver to the Trustee a Subsidiary Guarantee pursuant to which such Subsidiary Guarantor will unconditionally Guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and interest on the Securities on a senior basis; provided that (A) a Subsidiary Guarantee from any Subsidiary (other than MCA so long as all or any portion of the 2006 Notes shall remain outstanding) shall be released upon the release of such Subsidiary from any liability under (x) the indenture relating to the 2006 Notes or any related guarantee or similar obligation and (y) any Senior Credit Agreement and any guarantee or similar obligation in respect thereof and (B) MCA shall be released from its obligations under its Subsidiary Guarantee upon the repayment in full of the 2006 Notes (so long as no default or event of default shall have occurred as a consequence thereof) and the release of MCA from any obligation it may have in respect of the Senior Credit Agreement and any guarantee or similar obligation in respect thereof; provided that such release of a Subsidiary Guarantor shall not occur in the event such Subsidiary Guarantor is required to deliver a Guarantee in accordance with the paragraph below and then such Subsidiary Guarantee shall only be released in accordance with the paragraph below. Upon notice by the Company to the Trustee of the occurrence of the events described in either of the two preceding sentences, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under the Subsidiary Guarantee. The Company will not permit any Subsidiary to Guarantee the payment of any Debt of the Company unless (i) such Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Guarantee of payment of the Securities by such Subsidiary; (ii) such Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any Subsidiary as a result of any payment by such Subsidiary under its Guarantee; and (iii) such Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that (A) the supplemental indenture has been duly executed and authorized and (B) the supplemental indenture constitutes a valid, binding and enforceable obligation of such Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that such Subsidiary Guarantee shall be released upon the release of such Subsidiary from liability in respect of Guarantees of Debt of the Company; and, provided, further, that any release of a Subsidiary Guarantee under the preceding proviso will not impair the rights of the Holders to receive Subsidiary Guarantees of the Securities in accordance with this paragraph in the event future Debt of the Company is Guaranteed by such Subsidiary. 34 41 SECTION 3.9. Maintenance of Office or Agency. The Company will maintain in The City of New York, an office or agency where the Securities may be presented or surrendered for payment, where, if applicable, the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The agency of National City Bank (the "Agent") currently located at National City Bank c/o Mellon Securities Trust Company, 120 Broadway, 13th Floor, New York, New York, 10271 in the City of New York shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Agent of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 3.10. Corporate Existence. Subject to Article IV and Section 10.2, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Significant Subsidiary or the respective corporate, partnership or other existences of each member of any group of Subsidiaries that taken together would constitute a Significant Subsidiary of the Company and the rights (charter and statutory) licenses and franchises of the Company and each Significant Subsidiary or each member of any group of Subsidiaries that taken together would constitute a Significant Subsidiary of the Company; provided, however, that the Company shall not be required to preserve any such right, license or franchise or the corporate, partnership or other existence of any Significant Subsidiary or the respective corporate, partnership or other existences of each member of any group of Subsidiaries that taken together would constitute a Significant Subsidiary of the Company, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and each of its Subsidiaries, taken as a whole, and that the loss thereof is not, and will not be, disadvantageous in any material respect to the Holders; provided, further, that the Company shall not be required to preserve any such right, license or franchise or the corporate, partnership or other existence of a Subsidiary that is neither a Significant Subsidiary nor a member of any group of Subsidiaries that taken together would constitute a Significant Subsidiary of the Company; and, provided, further, the Company may consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, a Person in accordance with Section 4.1 and 10.2. SECTION 3.11. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all 35 42 material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (ii) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP or where the failure to effect such payment will not be disadvantageous to the Holders. SECTION 3.12. Payments for Consent. Neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fees or otherwise, to any Holder of any Securities for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid or is paid to all Holders of the Securities that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 3.13. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each Fiscal Year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). SECTION 3.14. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.15. Statement by Officers as to Default. The Company shall deliver to the Trustee, as soon as possible and in any event within 30 days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto. ARTICLE IV Successor Company SECTION 4.1. Consolidation, Merger and Sale of Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: 36 43 (i) the resulting, surviving or transferee Person (the "Successor Company") if not the Company shall be a corporation, partnership, trust or limited liability company organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities, this Indenture and the Exchange and Registration Rights Agreement; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) each Subsidiary Guarantor (unless it is the other party to the transactions described above, in which case clause (i) and Section 10.2 shall apply) shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply for such Person's obligations in respect of this Indenture and the Securities and its obligations under the Exchange and Registration Rights Agreement shall continue to be in effect; and (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture. For purposes of this Section 4.1, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but, in the case of a lease of all or substantially all its assets, the Company will not be released from the obligation to pay the principal of and interest on the Securities. If, upon any consolidation or merger of the Company with or into any other corporation, or upon any sale, conveyance or lease of all or substantially all of its property and assets to any other corporation, any of the property of the Company or of any Subsidiary would thereupon become subject to any Lien, the Company will first secure the Securities equally and ratably with any other obligations of the Company or any Subsidiary then entitled thereto by a direct Lien on all such property prior to all Liens other than any theretofore existing thereon. ARTICLE V Redemption of Securities SECTION 5.1. Optional Redemption. The Securities may be redeemed, as a whole or from time to time in part, subject to the conditions and at the redemption prices specified in the form of Securities set forth in Exhibits A and B hereto, which are hereby 37 44 incorporated by reference and made a part of this Indenture, together with accrued and unpaid interest to the Redemption Date. SECTION 5.2. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 5.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 5.1 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, upon not later than the earlier of the date that is 30 days prior to the Redemption Date fixed by the Company or the date on which notice is given to the Holders (except as provided in Section 5.5 or unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 5.4. SECTION 5.4. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed at any time pursuant to an optional redemption, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the outstanding Securities not previously called for redemption, in compliance with the requirements of the principal securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of the Securities; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $1,000. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 5.5. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 11.2 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed. The Trustee shall give notice of redemption in the Company's name and at the Company's expense; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall state: 38 45 (1) the Redemption Date, (2) the redemption price and the amount of accrued interest to the Redemption Date payable as provided in Section 5.7, if any, (3) if less than all outstanding Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption, (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the redemption price (and accrued interest, if any, to the Redemption Date payable as provided in Section 5.7) will become due and payable upon each such Security, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Securities called for redemption (or the portion thereof) will cease to accrue on and after said date, (6) the place or places where such Securities are to be surrendered for payment of the redemption price and accrued interest, if any, (7) the name and address of the Paying Agent, (8) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price, (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Securities, and (10) the paragraph of the Securities pursuant to which the Securities are to be redeemed. SECTION 5.6. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.4) an amount of money sufficient to pay the redemption price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 5.7. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the redemption price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the redemption price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, 39 46 such Security shall be paid by the Company at the redemption price, together with accrued interest, if any, to the Redemption Date (subject to the rights of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities. SECTION 5.8. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.9 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security at the expense of the Company, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered, provided that each such new Security will be in a principal amount of $1,000 or integral multiple thereof. ARTICLE VI Defaults and Remedies SECTION 6.1. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest or additional interest (as required by the Exchange and Registration Rights Agreement) on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal or premium, if any, on any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise; (3) the Company or any Subsidiary Guarantor fails to comply with Article IV or Section 10.2 of this Indenture; (4) the Company fails to comply with any of Section 3.3, Section 3.4, Section 3.5, Section 3.6, Section 3.7, Section 3.8 and Section 3.12 (in each case other than a failure to repurchase Securities when required pursuant to Section 3.6, which failure shall constitute an Event of Default under Section 6.1(2)) and such failure continues for 30 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities; (5) the Company defaults in the performance of or a breach by the Company of any other covenant or agreement in this Indenture or under the Securities (other than those referred to in (1), (2), (3) or (4) above) and such default continues for 60 days after 40 47 written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities; (6) there is a default under any mortgage, indenture or instrument under which there may be issued or by which there may be outstanding, or by which there may be secured or evidenced any Debt for money borrowed by the Company or any of its Subsidiaries (other than Non-Recourse Debt of a Non-Recourse Subsidiary), whether such Debt now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Debt prior to the expiration of the grace period provided in such Debt ("Payment Default") or (b) results in the acceleration of such Debt prior to its maturity (the "cross acceleration provision") and, in each case, the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more or its foreign currency equivalent at the time and such acceleration shall not have been rescinded or annulled within 10 days after written notice of such acceleration has been received by the Company or such Subsidiary; (7) the Company pursuant to or within the meaning of any Bankruptcy Law (as defined below): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined below) of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company for all or substantially all of the Company's property; or (C) orders the winding up or liquidation of the Company; and in each case the order or decree remains unstayed and in effect for 90 days; or (9) there has been entered in a court of competent jurisdiction a final judgment for the payment of $20.0 million or more rendered against the Company or any Subsidiary, which judgment is not fully covered by insurance or not discharged or stayed within 90 days after (A) the date on which the right to appeal thereof has expired if no 41 48 such appeal has commenced, or (B) the date on which all rights to appeal have been extinguished. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Default or Event of Default under clauses (3), (4), (5), (6), (7), (8) or (9) of this Section 6.1, which such notice shall contain the status thereof and a description of the action being taken or proposed to be taken by the Company in respect thereof. SECTION 6.2. Acceleration. If an Event of Default occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in outstanding principal amount of the Securities by notice to the Company and the Trustee, may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued and unpaid interest, on all the Securities to be due and payable. Upon such a declaration, such principal, premium, if any, and accrued and unpaid interest shall be immediately due and payable. SECTION 6.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of (or premium, if any) or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may (a) waive, by their consent (including, without limitation consents obtained in connection with a purchase of, or tender offer or exchange offer for, Securities), an existing Default or Event of Default and its consequences except (i) a Default or Event of Default in the payment of the principal of, or premium, if any, or interest on a Security or (ii) a Default or Event of Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Securityholder affected and (b) rescind any such acceleration with respect to the Securities and its consequences if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and 42 49 interest on the Securities that have become due solely by such declaration of acceleration, have been cured or waived. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.5. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.1 and Section 7.2, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.6. Limitation on Suits. Subject to Section 6.7, a Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in outstanding principal amount of the Securities make a request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture (including, without limitation, Section 6.6), the right of any Holder to receive payment of principal of, premium (if any) or interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing 43 50 (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.7. SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company, its Subsidiaries or its or their respective creditors or properties and, unless prohibited by law or applicable regulations, may be entitled and empowered to participate as a member of any official committee of creditors appointed in such matter and, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.7. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.7; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in outstanding principal amount of the Securities. 44 51 ARTICLE VII Trustee SECTION 7.1. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs; provided that if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against loss, liability or expense. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 45 52 (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. (i) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (j) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.2. Rights of Trustee. Subject to Section 7.1, (a) The Trustee may conclusively rely on any document (whether in its original or facsimile form) reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee shall receive and retain financial reports and statements of the Company as provided herein, but shall have no duty to review or analyze such reports or statements to determine compliance under covenants or other obligations of the Company. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, provided however, that the Trustee's conduct does not constitute willful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying 46 53 Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Section 7.10 and Section 7.11. In addition, the Trustee shall be permitted to engage in transactions with the Company; provided, however, that if the Trustee acquires any conflicting interest the Trustee must (i) eliminate such conflict within 90 days of acquiring such conflicting interest, (ii) apply to the Commission for permission to continue acting as Trustee or (iii) resign. SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, shall not be accountable for the Company's use of the proceeds from the Securities, shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.5. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if a Trust Officer has actual knowledge thereof, the Trustee shall mail by first class mail to each Securityholder at the address set forth in the Note Register notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium (if any), or interest on any Security (including payments pursuant to the optional redemption or required repurchase provisions of such Security, if any), the Trustee may withhold the notice if and so long as its board of directors, a committee of its board of directors or a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.6. Reports by Trustee to Holders. Within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports required by TIA Section 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.7. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Securityholders and reasonable costs of counsel retained by the Trustee in connection with the delivery of an Opinion of Counsel or otherwise, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall 47 54 indemnify the Trustee against any and all loss, liability, damages, claims or expense (including reasonable attorneys' fees and expenses) incurred by it without negligence or bad faith on its part in connection with the administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 7.7) and of defending itself against any claims (whether asserted by any Securityholder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel, provided that the Company shall not be required to pay such fees and expenses if it assumes the Trustee's defense, and, in the reasonable judgment of outside counsel to the Trustee, there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture. The Trustee's right to receive payment of any amounts due under this Section 7.7 shall not be subordinate to any other liability or Debt of the Company. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. 48 55 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition, at the Company's expense, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; provided that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall only apply to its successor or successors by merger, consolidation or conversion. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. 49 56 SECTION 7.12. Trustee's Application for Instruction from the Company. Any application by the Trustee for written instructions from the Company may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a) Subject to Section 8.1(c), when (i)(x) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.9) for cancellation or (y) all outstanding Securities not theretofore delivered for cancellation have become due and payable, whether at maturity or upon redemption or will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name and at the expense of the Company and the Company or any Subsidiary Guarantor irrevocably deposits or causes to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders money in U.S. dollars, non-callable U.S. Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption, (ii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound; (iii) the Company or any Subsidiary Guarantor has paid or caused to be paid all sums payable by it under this Indenture and the Securities; and (iv) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Securities at maturity or the Redemption Date, as the case may be, then the Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company (accompanied by an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with) and at the cost and expense of the Company. (b) Subject to Sections 8.1(c) and Section 8.2, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option"), and after giving effect to such legal defeasance, any omission to comply with such obligations shall no longer constitute a Default or Event of Default or (ii) its obligations under Section 3.3, Section 3.4, Section 3.5, Section 3.6, Section 3.7, Section 3.8 and Section 3.12, and 50 57 the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply with such covenants shall no longer constitute a Default or an Event of Default under Section 6.1(4), and the operation of Sections 6.1(5), 6.1(6), and 6.1(9) and the events specified in such Sections shall no longer constitute an Event of Default (clause (ii) being referred to as the "covenant defeasance option"), but except as specified above, the remainder of this Indenture and the Securities shall be unaffected thereby. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its covenant defeasance option, the Company may elect to have any Subsidiary Guarantees in effect at such time terminate. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default, and the Subsidiary Guarantees in effect at such time shall terminate. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.1(4) (as such Section relates to Section 3.3, Section 3.4, Section 3.5, Section 3.6, Section 3.7, Section 3.8 and Section 3.12), Section 6.1(5), 6.1(6) or 6.1(9). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding the provisions of Section 8.1(a) and (b), the Company's obligations in Section 2.2, Section 2.3, Section 2.4, Section 2.5, Section 2.6, Section 2.9, Section 2.10, Section 2.11, Section 2.12, Section 3.1, Section 3.9, Section 3.10, Section 3.11, Section 3.13, Section 3.14, Section 3.15, Section 6.7, Section 7.7, Section 7.8 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive. SECTION 8.2. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee for the benefit of the Holders money in U.S. dollars or U.S. Government Securities or a combination thereof for the payment of principal, premium, if any, and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Securities plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity; 51 58 (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, with respect to certain bankruptcy or insolvency Events of Default, on the 91st day after such date of deposit; (4) such legal defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (5) the Company shall have delivered to the Trustee an Opinion of Counsel (subject to customary assumptions and exclusions) to the effect that (A) the Securities and (B) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and that no Holder of the Securities is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' right generally; (6) the deposit does not constitute a default under any other agreement binding on the Company; (7) the Company delivers to the Trustee an Opinion of Counsel (subject to customary assumptions and exclusions) to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (8) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel (subject to customary assumptions and exclusions) in the United States stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred; (9) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel (subject to customary assumptions and exclusions) in the United States to the effect that the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred; and (10) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and 52 59 discharge of the Securities and this Indenture as contemplated by this Article VIII have been complied with. SECTION 8.3. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Securities deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Securities through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them upon payment of all the obligations under this Indenture. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal of or interest on the Securities that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.5. Indemnity for U.S. Government Securities. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Securities or the principal and interest received on such U.S. Government Securities. SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Securities in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Securities in accordance with this Article VIII; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Securities held by the Trustee or Paying Agent. The Trustee's rights under this Article VIII shall survive termination of this Indenture. ARTICLE IX Amendments SECTION 9.1. Without Consent of Holders. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; 53 60 (2) to comply with Article IV in respect of the assumption by a Successor Company of an obligation of the Company under this Indenture; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add Guarantees with respect to the Securities; (5) to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (8) to make any change that does not materially adversely affect the rights of any Securityholder; or (9) to provide for the issuance of the Exchange Securities, which will have terms substantially identical in all material respects to the Initial Securities (except that the transfer restrictions contained in the Initial Securities will be modified or eliminated, as appropriate), and which will be treated, together with any outstanding Initial Securities, as a single issue of securities. SECTION 9.2. With Consent of Holders. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Securities). However, without the consent of each Securityholder affected, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the stated rate of or extend the stated time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption or repurchase of any Security or change the time at which any Security may or shall be redeemed or repurchased as described above under Section 3.6 (including an amendment to the definition of "Change of Control") or Article V or any similar provision, whether through an amendment to or waiver of Section 3.6 or Article V, a definition or otherwise; 54 61 (5) make any Security payable in money other than that stated in the Security or, other than in accordance with the provisions of this Indenture in effect on the Issue Date, eliminate any existing Guarantee of the Securities; (6) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; or (7) make any change to the amendment provisions which require each Holder's consent or to the waiver provisions. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective or otherwise in accordance with any related solicitation documents. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver shall become effective upon receipt by the Trustee of the requisite number of written consents under Section 9.1 or 9.2 as applicable. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date. SECTION 9.5. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the 55 62 Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company and any Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions and complies with the provisions hereof (including Section 9.3). ARTICLE X Subsidiary Guarantee SECTION 10.1. Subsidiary Guarantee. Each Subsidiary Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Subsidiary Guarantor, to each Holder of the Securities and the Trustee the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the principal of, premium, if any, and interest on the Securities and all other obligations of the Company under this Indenture (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees (to the extent permitted by law) that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article X notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder to exercise any right or remedy against any other Subsidiary Guarantor; or (f) any change in the ownership of the Company. Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a Guarantee of payment when due (and not a Guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Obligations. 56 63 The obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any of the Obligations is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay any of the Obligations when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such Obligations then due and owing and (ii) accrued and unpaid interest on such Obligations then due and owing (but only to the extent not prohibited by law). Each Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in this Indenture for the purposes of its Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby and (y) in the event of any such declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantor for the purposes of this Subsidiary Guarantee. Each Subsidiary Guarantor also agrees to pay any and all reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or the Holders in enforcing any rights under this Section. SECTION 10.2. Limitation on Liability; Termination, Release and Discharge Upon Merger or Consolidation. The obligations of each Subsidiary Guarantor hereunder will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any guarantees under the Senior Credit Agreement and the 2006 Notes) and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of 57 64 such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor without limitation. Subject to Article III and Article IV, each Subsidiary Guarantor may consolidate with or merge into or sell all or substantially all its assets to a corporation, partnership or trust other than the Company or another Subsidiary Guarantor (whether or not affiliated with the Subsidiary Guarantor), except that if the surviving corporation of any such merger or consolidation is a Subsidiary of the Company, such merger, consolidation or sale shall not be permitted unless (i) the Person formed by or surviving any such consolidation or merger assumes all the obligations of such Subsidiary under the Subsidiary Guarantee pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee in respect of the Securities, this Indenture and the Subsidiary Guarantee, (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Trustee with respect to the foregoing matters. Upon the sale or disposition of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital Stock or the sale of all or substantially all of its assets (other than by lease)) and whether or not the Subsidiary Guarantor is the surviving corporation in such transaction to a Person (whether or not an Affiliate of the Subsidiary Guarantor) which is not the Company or a Subsidiary of the Company, which sale or disposition is otherwise in compliance with this Indenture, such Subsidiary Guarantor will be released from all its obligations under this Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee will terminate; provided, however, that any such termination will occur only to the extent that (x) with respect to each Subsidiary Guarantor other than MCA, each such Subsidiary Guarantor will be released from obligations under its Subsidiary Guarantee if all the obligations of such Subsidiary Guarantor under the Senior Credit Agreement, the 2006 Notes and related documentation terminate upon consummation of such transaction and (y) with respect to MCA, MCA will be released from its obligations under its Subsidiary Guarantee if the Company and its remaining Subsidiaries are not liable with respect to any Debt of MCA. SECTION 10.3. Right of Contribution. Each Subsidiary Guarantor hereby agrees that to the extent that any Subsidiary Guarantor shall have paid more than its proportionate share of any payment made on the obligations under the Subsidiary Guarantees, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against the Company or any other Subsidiary Guarantor who has not paid its proportionate share of such payment. The provisions of this Section 10.3 shall in no respect limit the obligations and liabilities of each Subsidiary Guarantor to the Trustee and the Holders and each Subsidiary Guarantor shall remain liable to the Trustee and the Holders for the full amount guaranteed by such Subsidiary Guarantor hereunder. SECTION 10.4. No Subrogation. Notwithstanding any payment or payments made by each Subsidiary Guarantor hereunder, no Subsidiary Guarantor shall be entitled to be subrogated to any of the rights of the Trustee or any Holder against the Company or any other Subsidiary Guarantor or any collateral security or guarantee or right of offset held by the Trustee 58 65 or any Holder for the payment of the Obligations, nor shall any Subsidiary Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Subsidiary Guarantor in respect of payments made by such Subsidiary Guarantor hereunder, until all amounts owing to the Trustee and the Holders by the Company on account of the Obligations are paid in full. If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Subsidiary Guarantor in trust for the Trustee and the Holders, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to the Trustee in the exact form received by such Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee, if required), to be applied against the Obligations. ARTICLE XI Miscellaneous SECTION 11.1. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. Each Subsidiary Guarantor in addition to performing its obligations under its Subsidiary Guarantee shall perform such other obligations as may be imposed upon it with respect to this Indenture under the TIA. SECTION 11.2. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Manor Care, Inc. 333 North Summit Street Toledo, Ohio 43604 Attention: Mr. Paul Ormond, Chief Executive Officer With a copy to: Latham & Watkins Sears Tower, Suite 5800 Chicago, Illinois 60606 Attention: Michael Levin, Esq. if to the Trustee: National City Bank 629 Euclid Avenue Cleveland, OH 44114-3484 Attention: Corporate Trust Department Locator 01-3116 59 66 With a copy to: Winston & Strawn 200 Park Avenue New York, NY 10166 Attention: Jeffrey H. Elkin, Esq. For purposes of Section 2.3 (with respect to presentation of Securities for payment or for registrations of transfer or exchange) if to the Trustee: National City Bank, c/o Mellon Securities Trust Company, 120 Broadway, 13th Floor, New York, NY 10271. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a registered Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that notices to the Trustee shall be effective only upon receipt. SECTION 11.3. Communication by Holders with other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.4. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; 60 67 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officers' Certificate or on certificates of public officials. SECTION 11.6. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or other day on which commercial banking institutions are authorized or required to be closed in New York City or Cleveland, Ohio. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.9. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 11.10. No Recourse Against Others. An incorporator, director, officer, employee, affiliate or stockholder of the Company or any Subsidiary Guarantor, solely by reason of this status, shall not have any liability for any obligations of the Company under the Securities, this Indenture or the Subsidiary Guarantees or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. 61 68 SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar and custodian with respect to any Global Securities. SECTION 11.14. Qualification of Indenture. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the Exchange and Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys' fees and expenses for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Securities and printing this Indenture and the Securities. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA. SECTION 11.15. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 62 69 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. MANOR CARE, INC. By: /s/ Geoffrey G. Meyers -------------------------------- Name: Geoffrey G. Meyers Title: Executive Vice President and Chief Financial Officer [SIGNATURE PAGE TO INDENTURE] 70 SUBSIDIARY GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION [SIGNATURE PAGE TO INDENTURE] 71 EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. [SIGNATURE PAGE TO INDENTURE] 72 HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. [SIGNATURE PAGE TO INDENTURE] 73 LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. [SIGNATURE PAGE TO INDENTURE] 74 MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. [SIGNATURE PAGE TO INDENTURE] 75 MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTERS, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. [SIGNATURE PAGE TO INDENTURE] 76 REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. WASHTENAW HILLS MANOR, INC. [SIGNATURE PAGE TO INDENTURE] 77 WHITEHALL MANOR, INC. By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary of each of the above-referenced corporations. Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 78 HCR HOSPITAL, LLC By: HCR Hospital Holding Company, Inc., its sole member By: /s/ R. Jeffrey Bixler -------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 79 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Services, Inc., its sole member By: /s/ R. Jeffrey Bixler ----------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 80 BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC [SIGNATURE PAGE TO INDENTURE] 81 WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC By: Manor Care Health Services, Inc., the sole member of each of the above- referenced limited liability companies By: /s/ R. Jeffrey Bixler ---------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 82 ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC [SIGNATURE PAGE TO INDENTURE] 83 SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC By: Manor Care of America, Inc., its sole member By: /s/ R. Jeffrey Bixler ------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 84 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By: /s/ R. Jeffrey Bixler ----------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 85 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By: /s/ R. Jeffrey Bixler ----------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 86 HCR MANOR CARE MESQUITE, L.P. By: Mesquite Hospital, LLC, its general partner By: /s/ R. Jeffrey Bixler ----------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO INDENTURE] 87 NATIONAL CITY BANK, as Trustee By: /s/ Christine Robinette ---------------------------------------- Name: Christine Robinette Title: Vice President [SIGNATURE PAGE TO INDENTURE] 88 EXHIBIT A [FORM OF FACE OF INITIAL SECURITY] [Applicable Restricted Securities Legend] [Depository Legend, if applicable] No. [___] Principal Amount $[_____________], as revised by the Schedule of Increases and Decreases in Global Security attached hereto CUSIP NO. _______________ ISIN: _______________ 8% Senior Notes due 2008 Manor Care, Inc., a Delaware corporation, promises to pay to [__________], or registered assigns, the principal sum of [_______________] Dollars, as revised by the Schedule of Increases and Decreases in Global Security attached hereto, on March 1, 2008. Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Additional provisions of this Security are set forth on the other side of this Security. MANOR CARE, INC. By:_____________________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION NATIONAL CITY BANK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By Authorized Signatory Date: [________] __, 2001 A-1 89 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 8% Senior Note due 2008 1. Interest Manor Care, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 1 and September 1 of each year commencing September 1, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from March 8, 2001. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Securities to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment By at least 10:00 a.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who are registered Holders of Securities at the close of business on the February 15 or August 15 next preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3 of the Indenture; provided, however, that, at the option of the Company, each installment of interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). A-2 90 3. Paying Agent and Registrar Initially, National City Bank (the "Trustee"), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of March 8, 2001 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured senior obligations of the Company limited to $200.0 million aggregate principal amount (subject to Section 2.9 of the Indenture). This Security is one of the Original Securities (also referred to as Initial Securities) referred to in the Indenture. The Initial Securities, Private Exchange Securities and the Exchange Securities will be treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on, among other things: the Incurrence of Liens by the Company or its Subsidiaries, Sale and Lease-Back Transactions by the Company or its Subsidiaries, consolidation, mergers and sale of assets of the Company, and transactions with Affiliates. To guarantee the due and punctual payment of the principal, premium, if any, and interest on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors, together with the Subsidiary Guarantors, will unconditionally guarantee), jointly and severally, such obligations on a senior basis pursuant to the terms of the Indenture. 5. Redemption The Securities will be redeemable, at the option of the Company, in whole at any time or in part from time to time, on at least 30 days but not more than 60 days' prior notice mailed to the registered address of each Holder of Securities to be so redeemed, at a redemption price equal to the greater of (i) 100% of their principal amount plus accrued but unpaid interest to the date of redemption or (ii) the sum of (a) the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity (except for currently accrued but unpaid interest) discounted to the date of redemption, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at the Treasury Rate (as defined below), plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. A-3 91 For purposes of determining the optional redemption price, the following definitions are applicable: "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Comparable Treasury Price" means, with respect to any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, (i) as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York or published on the website of the Federal Reserve Bank of New York at http://www.ny.frb.org and designated "Composite 3:30 p.m. Quotations for the U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, the average of the Reference Treasury Dealer Quotations for such redemption date. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means JPMorgan, a division of Chase Securities Inc. ("JPMorgan"), and its successors; provided, however, that if JPMorgan shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not listed, then on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Securities of $1,000 in original principal amount or less will be redeemed in part. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after A-4 92 the redemption date, interest will cease to accrue on Securities or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. 6. Repurchase Provisions Upon the occurrence of a Change of Control Triggering Event, any Holder of Securities will have the right to cause the Company to offer to repurchase all or any part of the Securities of such Holder at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 7. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) for a period beginning 15 days before the mailing of a notice of Securities to be redeemed and ending on the date of such mailing or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 8. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 9. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 10. Defeasance Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Securities for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. A-5 93 11. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and (ii) any default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Securityholder affected) or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the then outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities, or to secure the Securities, or to add additional covenants of the Company or its Subsidiaries, or surrender rights and powers conferred on the Company or its Subsidiaries, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder, or to provide for the issuance of Exchange Securities. 12. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest when due on the Securities; (ii) default in payment of principal or premium, if any, on the Securities at Stated Maturity, upon required repurchase or upon optional redemption pursuant to paragraph 5 of the Securities, upon declaration or otherwise; (iii) the failure by the Company or any Subsidiary Guarantor to comply with its obligations under Article IV or Section 10.2 of the Indenture; (iv) failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under Sections 3.3 through 3.8 inclusive and Section 3.12 of the Indenture (in each case, other than a failure to purchase Securities when required pursuant to Section 3.6, which failure shall constitute an Event of Default under clause (ii) above); (v) the failure by the Company to comply for 60 days after written notice with its other agreements contained in the Indenture or under the Securities (other than those referred to in (i), (ii), (iii) or (iv) above); (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be outstanding, or by which there may be secured or evidenced any Debt for money borrowed by the Company or any of its Subsidiaries (other than Non-Recourse Debt of a Non-Recourse Subsidiary), whether such Debt now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Debt prior to the expiration of the grace period provided in such Debt ("Payment Default") or (b) results in the acceleration of such Debt prior to its maturity (the "cross acceleration provision") and, in each case, the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more or its foreign currency equivalent at the time and such acceleration shall not have been rescinded or annulled within 10 days after written notice of such acceleration has been received by the Company or such Subsidiary; (vii) certain events of bankruptcy, insolvency or reorganization of the Company (the "bankruptcy provisions"); or (viii) entry in a court of competent jurisdiction of a final judgment for the payment of $20.0 million or more rendered against the Company or any Subsidiary, which judgment is not fully covered by insurance or not discharged or stayed within A-6 94 90 days after (A) the date on which the right to appeal thereof has expired if no such appeal has commenced, or (B) the date on which all rights to appeal have been extinguished (the "judgment default provision"). However, a default under clauses (iv) and (v) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities by notice to the Company to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest. 13. Trustee Dealings with the Company Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 14. No Recourse Against Others An incorporator, director, officer, employee, affiliate or stockholder, of each of the Company, or any Subsidiary Guarantor, solely by reason of this status, shall not have any liability for any obligations of the Company under the Securities, the Indenture or any Subsidiary Guarantees or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 16. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). A-7 95 17. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 18. Governing Law This Security shall be governed by, and construed in accordance with, the laws of the State of New York. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Manor Care, Inc. 333 North Summit Street Toledo, Ohio 43604 Attention: Mr. Geoffrey Meyers, Chief Financial Officer A-8 96 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to __________________________________________________________ (Print or type assignee's name, address and zip code) _____________________________________________ (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint ___________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:____________________ Your Signature:_____________________________ Signature Guarantee:____________________________________________________________ (Signature must be guaranteed) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being: CHECK ONE BOX BELOW: [ ] 1 acquired for the undersigned's own account, without transfer; or [ ] 2 transferred to the Company; or [ ] 3 transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); or [ ] 4 transferred pursuant to an effective registration statement under the Securities Act; or [ ] 5 transferred pursuant to and in compliance with Regulation S under the Securities Act; or A-9 97 [ ] 6 transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.7 of the Indenture); or [ ] 7 transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in their sole discretion, such legal opinions, certifications and other information as the Trustee or the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ________________________________ Signature Signature Guarantee: ______________________________ ________________________________ (Signature must be guaranteed) Signature ________________________________________________________________________________ The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. TO BE COMPLETED BY PURCHASER IF (1) OR (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. ________________________________ Dated: A-10 98 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Principal Amount of Signature of Date of Amount of decrease in Amount of increase in this Global Security authorized signatory Exchange Principal Amount of Principal Amount of following such of Trustee or this Global Security this Global Security decrease or increase Securities Custodian - --------------- ---------------------- ---------------------- ---------------------- ---------------------
A-11 99 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have only part of this Security purchased by the Company pursuant to Section 3.6 of the Indenture, state the amount in principal amount (must be integral multiple of $1,000): $ Date: __________ Your Signature ________________________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: ___________________________________________________________ (Signature must be guaranteed) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. A-12 100 EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] [Depository Legend, if applicable] No. [_____] Principal Amount $[____________], as revised by the Schedule of Increases and Decreases in Global Security attached hereto CUSIP NO. _______________ ISIN: _______________ 8% Series B Senior Notes due 2008 Manor Care, Inc., a Delaware corporation, promises to pay to [______________], or registered assigns, the principal sum of [_______________] Dollars, as revised by the Schedule of Increases and Decreases in Global Security attached hereto, on March 1, 2008. Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Additional provisions of this Security are set forth on the other side of this Security. MANOR CARE, INC. By:______________________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION NATIONAL CITY BANK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: Authorized Signatory Date: ____________________ B-1 101 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 8% Series B Senior Notes due 2008 1. Interest Manor Care, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 1 and September 1 of each year commencing September 1, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from March 8, 2001. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Securities to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment By at least 10:00 a.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who are registered Holders of Securities at the close of business on the February 15 or August 15 next preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3 of the Indenture; provided, however, that, at the option of the Company, each installment of interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). B-2 102 3. Paying Agent and Registrar Initially, National City Bank (the "Trustee"), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of March 8, 2001 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured senior obligations of the Company limited to $200.0 million aggregate principal amount (subject to Section 2.9 of the Indenture). The Initial Securities, Private Exchange Securities and the Exchange Securities will be treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on, among other things: the Incurrence of Liens by the Company or its Subsidiaries, Sale and Lease-Back Transactions by the Company or its Subsidiaries, consolidation, mergers and sale of assets of the Company, and transactions with Affiliates To guarantee the due and punctual payment of the principal, premium, if any, and interest on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors, together with the Subsidiary Guarantors, will unconditionally guarantee), jointly and severally, such obligations on a senior basis pursuant to the terms of the Indenture. 5. Redemption The Securities will be redeemable, at the option of the Company, in whole at any time or in part from time to time, on at least 30 days but not more than 60 days' prior notice mailed to the registered address of each Holder of Securities to be so redeemed, at a redemption price equal to the greater of (i) 100% of their principal amount plus accrued but unpaid interest to the date of redemption or (ii) the sum of (a) the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity (except for currently accrued but unpaid interest) discounted to the date of redemption, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at the Treasury Rate (as defined below), plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. B-3 103 For purposes of determining the optional redemption price, the following definitions are applicable: "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Comparable Treasury Price" means, with respect to any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, (i) as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York or published on the website of the Federal Reserve Bank of New York at http://www.ny.frb.org and designated "Composite 3:30 p.m. Quotations for the U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, the average of the Reference Treasury Dealer Quotations for such redemption date. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means JPMorgan, a division of Chase Securities Inc. ("JPMorgan"), and its successors; provided, however, that if JPMorgan shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not listed, then on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Securities of $1,000 in original principal amount or less will be redeemed in part. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after B-4 104 the redemption date, interest will cease to accrue on Securities or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. 6. Repurchase Provisions Upon the occurrence of a Change of Control Triggering Event, any Holder of Securities will have the right to cause the Company to offer to repurchase all or any part of the Securities of such Holder at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 7. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) for a period beginning 15 days before the mailing of a notice of Securities to be redeemed and ending on the date of such mailing or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 8. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 9. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 10. Defeasance Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Securities for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. B-5 105 11. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and (ii) any default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Securityholder affected) or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the then outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities, or to secure the Securities, or to add additional covenants of the Company or its Subsidiaries, or surrender rights and powers conferred on the Company or its Subsidiaries, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder, or to provide for the issuance of Exchange Securities. 12. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest when due on the Securities; (ii) default in payment of principal or premium, if any, on the Securities at Stated Maturity, upon required repurchase or upon optional redemption pursuant to paragraph 5 of the Securities, upon declaration or otherwise; (iii) the failure by the Company or any Subsidiary Guarantor to comply with its obligations under Article IV or Section 10.2 of the Indenture; (iv) failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under Sections 3.3 through 3.8 inclusive and Section 3.12 of the Indenture (in each case, other than a failure to purchase Securities when required pursuant to Section 3.6, which failure shall constitute an Event of Default under clause (ii) above); (v) the failure by the Company to comply for 60 days after written notice with its other agreements contained in the Indenture or under the Securities (other than those referred to in (i), (ii), (iii) or (iv) above); (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be outstanding, or by which there may be secured or evidenced any Debt for money borrowed by the Company or any of its Subsidiaries (other than Non-Recourse Debt of a Non-Recourse Subsidiary), whether such Debt now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Debt prior to the expiration of the grace period provided in such Debt ("Payment Default") or (b) results in the acceleration of such Debt prior to its maturity (the "cross acceleration provision") and, in each case, the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more or its foreign currency equivalent at the time and such acceleration shall not have been rescinded or annulled within 10 days after written notice of such acceleration has been received by the Company or such Subsidiary; (vii) certain events of bankruptcy, insolvency or reorganization of the Company (the "bankruptcy provisions"); or (viii) entry in a court of competent jurisdiction of a final judgment for the payment of $20.0 million or more rendered against the Company or any Subsidiary, which judgment is not fully covered by insurance or not discharged or stayed within B-6 106 90 days after (A) the date on which the right to appeal thereof has expired if no such appeal has commenced, or (B) the date on which all rights to appeal have been extinguished (the "judgment default provision"). However, a default under clauses (iv) and (v) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities by notice to the Company to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest. 13. Trustee Dealings with the Company Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 14. No Recourse Against Others An incorporator, director, officer, employee, affiliate or stockholder of each of the Company, or any Subsidiary Guarantor, solely by reason of this status, shall not have any liability for any obligations of the Company under the Securities, the Indenture or any Subsidiary Guarantees or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 16. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). B-7 107 17. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 18. Governing Law This Security shall be governed by, and construed in accordance with, the laws of the State of New York. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Manor Care, Inc. 333 North Summit Street Toledo, Ohio 43604 Attention: Mr. Geoffrey Meyers, Chief Financial Officer B-8 108 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to _____________________________________________________ (Print or type assignee's name, address and zip code) ____________________________________________ (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint ____________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _______________ Your Signature __________________________________________ Signature Guarantee: __________________________________________________________ (Signature must be guaranteed) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. B-9 109 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Principal Amount of Signature of Amount of decrease in Amount of increase in this Global Security authorized signatory Date of Principal Amount of Principal Amount of following such of Trustee or Exchange this Global Security this Global Security decrease or increase Securities Custodian - ------- ---------------------- ---------------------- --------------------- --------------------
B-10 110 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have only part of this Security purchased by the Company pursuant to or Section 3.6 of the Indenture, state the amount in principal amount (must be integral multiple of $1,000): $ Date: _______________ Your Signature: _____________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: ___________________________________________________________ (Signature must be guaranteed) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. B-11 111 EXHIBIT C FORM OF INDENTURE SUPPLEMENT TO ADD SUBSIDIARY GUARANTORS This Supplemental Indenture, dated as of [__________] (this "Supplemental Indenture" or "Guarantee"), among [name of future Subsidiary Guarantor] (the "Guarantor"), Manor Care, Inc. (together with its successors and assigns, the "Company"), each other then existing Subsidiary Guarantor under the Indenture referred to below, and National City Bank, as Trustee under the Indenture referred to below. W I T N E S S E T H: WHEREAS, the Company, the Subsidiary Guarantors and the Trustee have heretofore executed and delivered an Indenture, dated as of March 8, 2001 (as amended, supplemented, waived or otherwise modified, the "Indenture"), providing for the issuance of an aggregate principal amount of $200.0 million of 8% Senior Notes due 2008 of the Company (the "Securities"); WHEREAS, Section 3.8 of the Indenture provides that the Company is required to cause each Subsidiary (other than a Subsidiary that does not guarantee obligations under the 2006 Notes) created or acquired by the Company or one or more of its Subsidiaries or any Subsidiary that Guarantees the payment of Debt of the Company to execute and deliver to the Trustee a Supplemental Indenture pursuant to which such Subsidiary will unconditionally Guarantee, on a joint and several basis with the other Subsidiary Guarantors, the full and prompt payment of the principal of, premium, if any, and interest on the Securities on a senior basis; and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and the Company are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Securityholder; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor, the Company, the other Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows: ARTICLE I Definitions SECTION 1.1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term "Holders" in this Guarantee shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders. The words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. C-1 112 ARTICLE II Agreement to be Bound; Guarantee SECTION 2.1. Agreement to be Bound. The Guarantor hereby becomes a party to the Indenture as a Subsidiary Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Subsidiary Guarantor under the Indenture. The Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Subsidiary Guarantor and to perform all of the obligations and agreements of a Subsidiary Guarantor under the Indenture. SECTION 2.2. Guarantee. The Guarantor fully, unconditionally and irrevocably Guarantees to each Holder of the Securities and the Trustee the Obligations pursuant to Article X of the Indenture on a senior basis. ARTICLE III Miscellaneous SECTION 3.1. Notices. All notices and other communications to the Guarantor shall be given as provided in the Indenture to the Guarantor, at its address set forth below, with a copy to the Company as provided in the Indenture for notices to the Company. SECTION 3.2. Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained. SECTION 3.3. Governing Law. This Supplemental Indenture shall be governed by the laws of the State of New York. SECTION 3.4. Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 3.5. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture. SECTION 3.6. Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. C-2 113 SECTION 3.7. Headings. The headings of the Articles and the sections in this Guarantee are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR], as a Subsidiary Guarantor By:_________________________________ Name: Title: NATIONAL CITY BANK, as Trustee By:_________________________________ Name: Title: MANOR CARE, INC. By:_________________________________ Name: Title: [SUBSIDIARY GUARANTORS] By:_________________________________ Name: Title: C-3 EX-4.4 3 l87647aex4-4.txt EXHIBIT 4.4 1 EXHIBIT 4.4 MANOR CARE, INC. $200,000,000 8% Senior Notes due 2008 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT March 8, 2001 JPMORGAN, a division of CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANC OF AMERICA SECURITIES LLC UBS WARBURG LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Manor Care, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to JPMorgan, a division of Chase Securities Inc. ("JPMorgan") and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC (together with JPMorgan, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated March 1, 2001 (the "Purchase Agreement"), $200,000,000 aggregate principal amount of its 8% Senior Notes due 2008 (the "Securities") to be jointly and severally guaranteed (the "Guarantees") by the subsidiaries of the Company listed on Schedule 1 and signatories hereto (collectively, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: 1. Registered Exchange Offer. Unless the Registered Exchange Offer (as defined herein) shall not be permitted by applicable federal law, the Company shall (i) use reasonable best efforts to prepare and, not later than 60 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of 1 2 the Securities and the Guarantees (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the Securities and the Guarantees, a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Exchange Securities") that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 120 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 150 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above). As soon as practicable after the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer. If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, by notice to the Company within 30 days of the Registered Exchange Offer, no later than 30 days after the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), 2 3 a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Private Exchange Securities") that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: (a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (b) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging 3 4 Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 150 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) 4 5 any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Guarantors shall use their reasonable best efforts to file as promptly as practicable (but in no event more than 20 business days after so required or requested pursuant to this Section 2) with the Commission (the "Shelf Filing Date"), and thereafter shall use their commercially reasonable efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) In the absence of the events described in clauses (i) through (vi) of the first paragraph of this Section 2, the Company and the Guarantors shall not be permitted to discharge its obligations hereunder by means of the filing of a Shelf Registration Statement. 5 6 3. Additional Interest. (a) The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date or the Shelf Registration Statement is not filed with the Commission on or before the Shelf Filing Date, (ii) the Exchange Offer Registration Statement is not declared effective within 120 days after the Issue Date or the Shelf Registration Statement is not declared effective within 90 days of the Shelf Filing Date, (iii) the Registered Exchange Offer is not consummated on or prior to 150 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 90 days after the Shelf Filing Date but shall thereafter cease to be effective (at any time that the Company and the Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors will be jointly and severally obligated to pay additional interest to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be, which rate will be increased by an additional $ 0.05 per week per $1,000 principal amount of Transfer Restricted Securities for each 90 day period that any additional interest described in this Section 3 continues to accrue; provided that the rate for additional interest will not exceed $0.15 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued additional interest will be paid to each Holder in the same manner as interest payments on the Transfer Restricted Securities on semi-annual payment dates that correspond to interest payment dates for the Transfer Restricted Securities. Additional interest only accrues during a Registration Default. Following the cure of all Registration Defaults, the accrual of additional interest will cease. As used herein, the term "Transfer Restricted Securities" means each Security or Private Exchange Security, until the earliest to occur of: (i) the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) the date on which such Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), neither the Company nor the Guarantors shall be required to pay additional interest to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the additional interest due on the Transfer Restricted 6 7 Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the additional interest then due. The additional interest due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay additional interest shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the additional interest provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose within five business days after the delivery of such document to such Initial Purchaser; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; 7 8 (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons 8 9 may reasonably request; and the Company and the Guarantors consent to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company and the Guarantors will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company and the Guarantors will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing at least two business days prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company and the Guarantors are required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act covering a twelve month period beginning after the effective date of the Registration Statement (as such term is 9 10 defined in paragraph (c) of Rule 158 under the Act); provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v) (a "Suspension Notice"), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. 10 11 (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or 11 12 alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds 12 13 received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment or if the indemnifying party has not paid the expenses and fees for which 13 14 it is liable 20 days after notice by the indemnified party of request for reimbursement. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement or admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by such Holder with respect to the Securities, Exchange Securities or Private Exchange Securities, on the other, bear to the total gross proceeds from the sale of Securities, Exchange Securities or Private Exchange Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Holders' Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Securities, Exchange Securities or 14 15 Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Rules 144 and 144A. So long as any Transfer Restricted Securities remain outstanding, the Company shall use its reasonable best efforts to file the reports required to be filed by it under Rule 144A(d)(4) under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities, the Company and the Guarantors shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and 15 16 that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; (3) if to the Company, initially at the address of the Company set forth in the Purchase Agreement; and (4) if to the Guarantors, initially at the address of the Guarantors set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company, the Guarantors and their respective successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 16 17 (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (h) Remedies. In the event of a breach by the Company or any of the Guarantors or by any Holder of any of their respective obligations under this Agreement, each Holder or the Company or any Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any Guarantor of their obligations under Sections 1 or 2 hereof for which additional interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, each Guarantor and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. Each of the Company and each Guarantor represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor the Guarantors nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 17 18 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchasers. Very truly yours, MANOR CARE, INC. By: /s/ Geoffrey G. Meyers ------------------------------- Name: Geoffrey G. Meyers Title: Executive Vice President and Chief Financial Officer [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 19 GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 20 EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 21 HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 22 LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 23 MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 24 MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTERS, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 25 PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 26 WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. By: /s/ R. Jeffrey Bixler -------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary of each of the above-referenced corporations. Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 27 HCR HOSPITAL, LLC By: HCR Hospital Holding Company, Inc., its sole member By: /s/ R. Jeffrey Bixler --------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 28 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Services, Inc., its sole member By: /s/ R. Jeffrey Bixler ----------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 29 BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 30 WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC By: Manor Care Health Services, Inc., the sole member of each of the above-referenced limited liability companies By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 31 ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 32 SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC By: Manor Care of America, Inc., its sole member By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 33 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 34 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 35 HCR MANOR CARE MESQUITE, L.P. By: Mesquite Hospital, LLC, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 36 Accepted: CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANK OF AMERICA SECURITIES LLC UBS WARBURG LLC By: CHASE SECURITIES INC. By: /s/ G. S. Benson --------------------------------- Name: G.S. Benson Title: Vice President [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 37 SCHEDULE I GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. * HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION * HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. S-1 38 HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. * HCRA OF TEXAS, INC. HCRC INC. * HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA * HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. * ** HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. * HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. S-2 39 LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC * MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. S-3 40 MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. * MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE AND LASER SURGERY CENTERS, INC. ** PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. S-4 41 ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. ** WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. COLEWOOD LIMITED PARTNERSHIP BOOTH LIMITED PARTNERSHIP HCR MANORCARE MESQUITE, L.P. HCR HOSPITAL, LLC ANCILLARY SERVICES, LLC BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC S-5 42 ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC S-6 43 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". A-1 44 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution". B-1 45 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until ______, 2008, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. C-1 46 ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. D-1 EX-5.1 4 l87647aex5-1.txt EXHIBIT 5.1 1 EXHIBIT 5.1 Latham & Watkins BOSTON ATTORNEYS AT LAW NEW YORK WWW.LW.COM CHICAGO NORTHERN VIRGINIA FRANKFURT __________ ORANGE COUNTY HAMBURG SAN DIEGO HONG KONG SAN FRANCISCO LONDON SILICON VALLEY LOS ANGELES SINGAPORE MOSCOW TOKYO NEW JERSEY WASHINGTON, D.C. May 3, 2001 Manor Care, Inc. 333 N. Summit Street Toledo, Ohio 43604-2617 Re: Registration Statement for $200,000,000 Aggregate Principal Amount of Senior Notes and Related Guarantees Ladies and Gentlemen: In connection with the registration of $200,000,000 aggregate principal amount of its 8.00% Senior Notes due 2008 (the "Exchange Notes") by Manor Care, Inc., a Delaware corporation (the "Company"), and the related guarantees of the Exchange Notes pursuant to the Indenture (as defined below) (the "Guarantees") by the guarantors listed on Schedule 1 attached hereto (the "Guarantors"), under the Securities Act of 1933, as amended, on Form S-4 to be filed with the Securities and Exchange Commission on May 3, 2001 (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Exchange Notes and the Guarantees will be issued pursuant to an indenture dated as of March 8, 2001 (the "Indenture"), among the Company, the Guarantors and National City Bank, as trustee (the "Trustee"). The Exchange Notes will be issued in exchange for the Company's outstanding 8.00% Senior Notes due 2008 (the "Private Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Transmittal Letter filed as an exhibit thereto (the "Exchange Offer"). In our capacity as your special counsel in connection with the Exchange Offer, we are familiar with the proceedings taken by the Company in connection with the authorization of the Exchange Notes. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies. - -------------------------------------------------------------------------------- Sears Tower, Suite 5800 - Chicago, Illinois 60606 TELEPHONE: (312) 876-7700 - FAX: (312) 993-9767 2 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 2 We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state. Various issues concerning the Guarantees are addressed in the opinion of R. Jeffrey Bixler of even date herewith, which has separately been provided to you, and we express no opinion with respect to those matters. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, the Exchange Notes to be exchanged for the Private Notes pursuant to the Exchange Offer have been duly authorized by the Company and, when the Exchange Notes have been duly executed, issued, authenticated and delivered in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Notes will be legally valid and binding obligations of the Company, enforceable in accordance with their terms. The opinion rendered in the foregoing paragraph relating to the enforceability of the Exchange Notes is subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; and (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought. To the extent that the obligations of the Company under the Exchange Notes and the Indenture may be dependent upon such matters, we have assumed for purposes of this opinion that (i) the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under the Indenture; (c) is duly qualified to engage in the activities contemplated by the Indenture; and (d) has duly authorized, executed and delivered the Indenture; (ii) the Indenture constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations. We have not been requested to express and, with your knowledge and consent, do not render any opinion with respect to the applicability to the obligations of the Company under the Exchange Notes and the Indenture of Section 548 of the Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor & Creditor Law) relating to fraudulent transfers and obligations. 3 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 3 We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters." Very truly yours, /s/ Latham & Watkins 4 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 4 SCHEDULE 1 GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. 5 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 5 HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND 6 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 6 REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. 7 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 7 MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. 8 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 8 PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. COLEWOOD LIMITED PARTNERSHIP BOOTH LIMITED PARTNERSHIP HCR MANORCARE MESQUITE, L.P. HCR HOSPITAL, LLC ANCILLARY SERVICES, LLC BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC 9 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 9 FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC 10 LATHAM & WATKINS Manor Care, Inc. May 3, 2001 Page 10 ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC EX-5.2 5 l87647aex5-2.txt EXHIBIT 5.2 1 EXHIBIT 5.2 MANOR CARE INC. 333 North Summit Street Toledo, Ohio 43604 May 3, 2001 Manor Care, Inc. 333 N. Summit Street Toledo, Ohio 43604-2617 Re: Registration Statement for $200,000,000 Aggregate Principal Amount of Senior Notes and Related Guarantees Ladies and Gentlemen: In connection with the registration of $200,000,000 aggregate principal amount of its 8.00% Senior Notes due 2008 (the "Exchange Notes") by Manor Care, Inc., a Delaware corporation (the "Company"), and the related guarantees of the Exchange Notes pursuant to the Indenture (as defined below) (the "Guarantees") by the guarantors listed on Schedule 1 attached hereto (the "Guarantors"), under the Securities Act of 1933, as amended, on Form S-4 to be filed with the Securities and Exchange Commission on May 3, 2001 (the "Registration Statement"), you have requested my opinion with respect to the matters set forth below. The Exchange Notes and the Guarantees will be issued pursuant to an indenture dated as of March 8, 2001 (the "Indenture"), among the Company, the Guarantors and National City Bank, as trustee (the "Trustee"). The Exchange Notes will be issued in exchange for the Company's outstanding 8.00% Senior Notes due 2008 (the "Private Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Transmittal Letter filed as an exhibit thereto (the "Exchange Offer"). In my capacity as Vice President and General Counsel of the Company, I am familiar with the proceedings taken by the Company and the Guarantors in connection with the authorization of the Exchange Notes and the Guarantees, respectively. In addition, I have made such legal and factual examinations and inquiries, including an examination of originals or 2 copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments, as I have deemed necessary or appropriate for purposes of this opinion. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as copies. Various issues concerning the Exchange Notes are addressed in the opinion of Latham & Watkins of even date herewith, which has separately been provided to you, and I express no opinion with respect to those matters. Subject to the foregoing and the other matters set forth herein, it is my opinion that, as of the date hereof, each of the Guarantees as set forth in the Indenture has been duly authorized by the respective Guarantor and, upon due execution, issuance, authentication and delivery of the Exchange Notes in accordance with the terms of the Exchange Offer and the Indenture, each Guarantee will be the legally valid and binding obligation of the respective Guarantor, enforceable in accordance with its terms. The opinion rendered in the foregoing paragraph relating to the enforceability of the Guarantees is subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; and (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought. To the extent that the obligations of the Guarantors under the Exchange Notes and the Indenture may be dependent upon such matters, I have assumed for purposes of this opinion that (i) the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under the Indenture; (c) is duly qualified to engage in the activities contemplated by the Indenture; and (d) has duly authorized, executed and delivered the Indenture; (ii) the Indenture constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations. I have not been requested to express and, with your knowledge and consent, do not render any opinion with respect to the applicability to the obligations of the Guarantors under the Indenture (including the Guarantees set forth therein) of Section 548 of the Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor & Creditor Law) relating to fraudulent transfers and obligations. 3 I consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to my name contained under the heading "Legal Matters." Very truly yours, /s/ R. Jeffrey Bixler R. Jeffrey Bixler Vice President and General Counsel 4 SCHEDULE 1 GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. 5 HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. 6 LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. 7 MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. 8 ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. COLEWOOD LIMITED PARTNERSHIP BOOTH LIMITED PARTNERSHIP HCR MANORCARE MESQUITE, L.P. HCR HOSPITAL, LLC ANCILLARY SERVICES, LLC BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC 9 TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC EX-10.1 6 l87647aex10-1.txt EXHIBIT 10.1 1 EXHIBIT 10.1 MANOR CARE, INC. $200,000,000 8% Senior Notes due 2008 PURCHASE AGREEMENT March 1, 2001 JPMORGAN, a division of CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANC OF AMERICA SECURITIES LLC UBS WARBURG LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Manor Care, Inc., a Delaware corporation (the "Company"), proposes to issue and sell $200,000,000 aggregate principal amount of its 8% Senior Notes due 2008 (the "Securities"). The Securities will be issued pursuant to an Indenture to be dated as of March 8, 2001 (the "Indenture") between the Company, each of the subsidiaries of the Company listed on Schedule 1 hereto (each a "Guarantor" and together, the "Guarantors") and National City Bank, as trustee (the "Trustee"). The Securities will be guaranteed by guarantees (the "Guarantees", and each a "Guarantee") of each of the Guarantors. The Company hereby confirms its agreement with JPMorgan, a division of Chase Securities Inc. ("JPMorgan") and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC (together with JPMorgan, the "Initial Purchasers") concerning the purchase of the Securities from the Company by the several Initial Purchasers. The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Company has prepared a preliminary offering memorandum dated February 26, 2001 (including the documents incorporated by reference therein, the "Preliminary Offering Memorandum") and will prepare an offering memorandum dated the date hereof (including the documents incorporated by reference therein, the "Offering Memorandum") setting forth information concerning the Company and the Securities. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. 1 2 Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to which the Company will agree to file with the Securities and Exchange Commission (the "Commission") a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior notes of the Company and guarantees of each of Guarantors (the "Exchange Securities") which are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and the Guarantees and under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 1. Representations, Warranties and Agreements of the Company and each of the Guarantors. The Company and the Guarantors jointly and severally represent and warrant to, and agree with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a)Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company and each of the Guarantors make no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company or the Guarantors by or on behalf of any Initial Purchaser specifically for use therein as specified in Section 16 hereof (the "Initial Purchasers' Information"). (b) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all of the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (c) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) The Company and each of its subsidiaries have been duly incorporated or formed, as the case may be, and are validly existing corporations or limited liability companies, as the case may be, in good standing under the laws of their respective jurisdictions of incorporation or formation as the case may be, are duly qualified to do 2 3 business and are in good standing as foreign corporations or foreign limited liability companies, as the case may be, in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, reasonably be expected to result in a material adverse effect on the condition (financial or otherwise), results of operations or business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). Schedule 2 sets forth all of the direct and indirect subsidiaries of the Company. (e) The Company has an authorized capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable. Except as noted on Schedule 2, all the outstanding shares of capital stock or membership interests, as the case may be, of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. (f) The Company and each of the Guarantors has full right and authority to execute and deliver this Agreement, the Indenture (including the Guarantees set forth therein), the Registration Rights Agreement and the Securities (in the case of the Company only) (collectively, the "Transaction Documents") and to perform their respective obligations hereunder and thereunder; and, as of the Closing Date, all corporate or limited liability company action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby will have been duly and validly taken. (g) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and constitutes a valid and legally binding agreement of the Company and each of the Guarantors, except as rights to indemnification and contribution may be limited by public policy considerations or applicable law. (h) The Registration Rights Agreement has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (i) The Indenture has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the 3 4 Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (j) The Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture (assuming the Indenture is the valid and legally binding obligation of the Trustee and due authentication of the Securities by the Trustee) and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company, as issuer, and each of the Guarantors, as guarantors, entitled to the benefits of the Indenture and enforceable against the Company, as issuer, and each of the Guarantors, as guarantors, in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) Each of the guarantors that, as of the date of the Guarantees, is a guarantor of the $150,000,000 of 7-1/2% Senior Notes due 2006 issued by Manor Care of America, Inc. is also a Guarantor of the Securities. Schedule 3 attached hereto sets forth all the Significant Subsidiaries of the Company (as within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC) and each such Significant Subsidiary is a Guarantor of the Securities. The Guarantees have been duly authorized by each of the Guarantors and, when the Securities have been duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein (assuming due authorization, execution and delivery of the Indenture by the Trustee and due authentication of the Securities by the Trustee), will constitute valid and legally binding obligations of each of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general equitable principles (whether considered in a proceeding in equity or at law). (l) The Exchange Securities have been duly authorized by the Company and the related guarantees have been duly authorized by each of the Guarantors and, when duly executed, authenticated, issued and delivered as provided in the Indenture and the Registration Rights Agreement (assuming the Indenture is the valid and legally binding obligation of the Trustee) will constitute a valid and legally binding obligation of the Company, as issuer, and each of the Guarantors, as guarantors, enforceable against the Company, as issuer, and each of the Guarantors, as guarantors, in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (m) Each of the Indenture and the Registration Rights Agreement conforms in all material respects to the description thereof contained in the Offering Memorandum. 4 5 (n) The execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which it is a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws (or any other comparable organizational documents) of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities, the issuance of the Guarantees and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications which shall have been obtained or made prior to the Closing Date and as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement. (o) Ernst & Young LLP are independent certified public accountants with respect to the Company and its subsidiaries (i) as required by the Securities Act and the rules and regulations of the Commission thereunder and (ii) within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Offering Memorandum comply as to form in all material respects with the requirements applicable to a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Offering Memorandum Summary -- Summary Consolidated Financial Data", "Capitalization of the Company", "Selected Historical Consolidated Financial Data", and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The as adjusted financial information contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the adjustments specified therein). The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, accurately presented and prepared on 5 6 a basis consistent with such financial statements and the books and records of the Company. (p) Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect, and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (q) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or the issuance of the Guarantees or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Securities or the issuance of the Guarantees or the use of the Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or the issuance of the Guarantees or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and the Offering Memorandum. (r) Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws (or other comparable organizational documents), (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (s) The Company and each of its subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. 6 7 (t) The Company and each of its subsidiaries have filed all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due and owing thereon, other than those being contested in good faith and for which adequate reserves have been provided. No tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect, except those deficiencies for which adequate reserves have been established. (u) Neither the Company nor any of its subsidiaries is an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder. (v) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (w) The Company and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, as are consistent with industry practice to protect the Company and its subsidiaries and their respective businesses. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. (x) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) presently employed by them in connection with the respective businesses now operated by them; and the use of such rights in connection with their respective businesses will not conflict in any material respect with, and the Company and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others, except such conflicts which, singularly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (y) The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or could not reasonably be expected to have a Material Adverse Effect, except with respect to secured debt described in the Offering Memorandum. 7 8 (z) Except for those that could not reasonably be expected to have a Material Adverse Effect, no labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened. (aa) Except to the extent such events could not reasonably be expected to have a Material Adverse Effect, no "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) or accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries; each such employee benefit plan is in compliance with applicable law, including ERISA and the Code; the Company and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification. (bb) Except as described in the Offering Memorandum, there has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability that could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has any knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (cc) On and immediately after the Closing Date, the Company and each of the Guarantors (after giving effect to the issuance of the Securities and to the other transactions related thereto as described in the Offering Memorandum) will be Solvent. As used in this paragraph, the term "Solvent" means, with respect to a particular date, that on such date the present fair market value (or present fair saleable value) of the assets of the Company or such Guarantor, as the case may be, is not less than the total amount required to pay the probable liabilities of the Company or such Guarantor on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, the Company or such Guarantor is able to realize upon its assets and pay its 8 9 debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, assuming the sale of the Securities as contemplated by this Agreement and the Offering Memorandum, the Company or such Guarantor is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature and the Company or such Guarantor is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Company or such Guarantor is engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (dd) Except as described in the Offering Memorandum, there are no outstanding subscriptions, rights, warrants, calls or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity or other ownership interest in the Company or any of its subsidiaries. (ee) Neither the Company nor any of its subsidiaries or agents has taken, and none of them will take, any action that might cause this Agreement or the issuance and sale of the Securities or the issuance of the Guarantees to violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. (ff) Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. (gg) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (hh) None of the Company, any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (ii) Exclusive of the Initial Purchasers, neither the Company nor any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (jj) None of the Company or any of its affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (kk) Neither the Company nor any of its affiliates has taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. 9 10 (ll) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. (mm) Since the date as of which information is given in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), except as otherwise stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company, whether or not arising in the ordinary course of business, (ii) none of the Company or any of its subsidiaries has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) none of the Company or any of its subsidiaries has entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by the Company or any of its subsidiaries on any class of its capital stock, or any redemption in respect thereof. 2. Purchase and Resale of the Securities. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 4 hereto at a purchase price equal to 98.75% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) The Initial Purchasers have advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents, warrants to and agrees with the Company that (i) it is purchasing the Securities pursuant to an exemption from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of their initial offering, only (A) within the United States to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and (B) outside the United States to persons other than U.S. persons in reliance on Regulation S under the Securities Act ("Regulation S"). (c) In connection with the offer and sale of Securities in reliance on Regulation S, each Initial Purchaser, severally and not jointly, represents, warrants and agrees that: 10 11 (i) such Initial Purchaser is a Qualified Institutional Buyer, with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Securities. (ii) the Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. (iii) such Initial Purchaser has offered and sold the Securities, and will offer and sell the Securities, (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering of the Securities and the Closing Date, only in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. (iv) none of such Initial Purchaser or any of its affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S) with respect to the Securities or the Guarantees, and all such persons have complied and will comply with the offering restrictions requirement of Regulation S. (v) at or prior to the confirmation of sale of any Securities sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities and the date of original issuance of the Securities, except in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S." (vi) it has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. Terms used in this Section 2(c) have the meanings given to them by Regulation S. (d) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that (i) it has not offered or sold and prior to the date six months after the Closing Date will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Public Offers of Securities Regulations 1995 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and 11 12 will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. (e) Each Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser of any of the Securities purchased by such Initial Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale where required by applicable law). In addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 5(d), (e) and (g), counsel for the Company and for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (f) The Company acknowledges and agrees that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to an Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Simpson Thacher & Bartlett, New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on March 8, 2001, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time of payment and delivery being referred to herein as the "Closing Date"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Securities. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in global form, registered in such names and in such denominations as JPMorgan on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Securities available for inspection by JPMorgan on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Company and each of the Guarantors. Each of the Company and each of the Guarantors agrees with each of the several Initial Purchasers: (a) during the period referred to in Section 4(d), to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the 12 13 statements therein, in the light of the circumstances under which they were made, not misleading; to advise the Initial Purchasers promptly of any order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use its reasonable best efforts to prevent the issuance of any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); (f) for so long as the Securities are outstanding, upon the request of an Initial Purchaser, to furnish to the Initial Purchasers copies of any annual reports, quarterly reports and current reports filed by the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; 13 14 (g) to promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may reasonably request; provided that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations or limited liability companies in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; (h) to assist the Initial Purchasers in arranging for the Securities to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through The Depository Trust Company ("DTC"); (i) not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; (j) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause its affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (k) for a period of 90 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities) without the prior written consent of the Initial Purchasers; (l) during the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act; (m) in connection with the offering of the Securities, until JPMorgan on behalf of the Initial Purchasers shall have notified the Company of the completion of the resale of the Securities, not to, and to cause its affiliated purchasers (as defined in Regulation M 14 15 under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Securities, or attempt to induce any person to purchase any Securities; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent active trading in or of raising the price of the Securities; (n) in connection with the offering of the Securities, to make its officers, employees, independent accountants and legal counsel reasonably available upon request by the Initial Purchasers; (o) to furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (p) to do and perform all things required to be done and performed by it under this Agreement that are within its reasonable control prior to or after the Closing Date, and to use its reasonable best efforts to satisfy all conditions precedent on its part to the delivery of the Securities; (q) to not take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (r) to not take any action prior to the Closing Date which would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(d); (s) prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchasers are notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (t) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 5. Conditions of Initial Purchasers' Obligations. The respective obligations of the several Initial Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to the accuracy of the statements of the Company, the Guarantors and each of their respective officers made in any certificates delivered pursuant hereto, to the performance by the Company and the Guarantors of their obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceedings for the purpose shall have been commenced or shall be pending or threatened. 15 16 (b) None of the Initial Purchasers shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate or limited liability company proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and the Company and each of the Guarantors shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) Latham & Watkins shall have furnished to the Initial Purchasers their written opinion, as special counsel to the Company and certain of the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-1 hereto. (e) R. Jeffrey Bixler, General Counsel of the Company, shall have furnished to the Initial Purchasers his written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-2 hereto. (f) Reed Smith LLP, special regulatory counsel for the Company, shall have furnished to the Initial Purchasers their written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-3 hereto. (g) The Initial Purchasers shall have received from Simpson Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they request for the purpose of enabling them to pass upon such matters. (h) Epstein Becker & Green, P.C., special regulatory counsel for the Initial Purchasers, shall have furnished to the Initial Purchasers their written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers. (i) The Company shall have furnished to the Initial Purchasers a letter (the "Initial Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (j) The Company shall have furnished to the Initial Purchasers a letter (the "Bring-Down Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated the Closing Date (A) confirming that they are independent public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (B) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving 16 17 changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such accountants with respect to the financial information and other matters covered by the Initial Letter are accurate and (C) confirming in all material respects the conclusions and findings set forth in the Initial Letter. (k) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief executive officer or its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company and the each of the Guarantors, as applicable, in this Agreement are true and correct in all material respects, the Company and the each of the Guarantors, as applicable, have complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), there has been no material adverse change in the financial position or results of operation of the Company or any of its subsidiaries, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, except as set forth in the Offering Memorandum (exclusive of amendments or supplements after the date hereof). (l) The Initial Purchasers shall have received a counterpart of the Registration Rights Agreement that shall have been executed and delivered by a duly authorized officer or agent of the Company and of each of the Guarantors. (m) The Indenture shall have been duly executed and delivered by the Company, each of the Guarantors and the Trustee, and the Securities shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (n) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (o) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. 17 18 (p) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities contemplated hereby. (q) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (r) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities or the issuance of the Guarantees; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities or the issuance of the Guarantees. (s) Subsequent to the execution and delivery of this Agreement no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other debt securities by a "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act and no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or any of the Company's other debt securities. (t) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in any securities of the Company on any exchange or in the over-the-counter market shall have been suspended or any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery 18 19 of the Securities on the terms and in the manner contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to Simpson Thacher & Bartlett. 6. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(p), (q), (r), (s) or (t) shall have occurred and be continuing. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchasers may make arrangements for the purchase of the Securities which such defaulting Initial Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchasers, but if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers, the Company, or the Guarantors, except that the Company and the Guarantors will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 4 hereto that, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company, the Guarantors or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, any of the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 19 20 8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement shall have been terminated due to the failure to comply with any of subsection of Section 5 (other than due to the events described in Section 5(p), (r) or (t), in which case each party will be responsible for its own expenses) or pursuant to Section 6, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under this Agreement or (c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company and the each of the Guarantors shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Securities. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, neither the Company nor the Guarantors shall be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 9. Indemnification. (a) The Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which that Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company or any Guarantor pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and each of the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum was corrected in the Offering Memorandum unless, in either case, such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). 20 21 (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information provided by such Initial Purchaser, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel 21 22 will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceedings. The obligations of the Company, each of the Guarantors and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company, each of the Guarantors or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and each of the Guarantors on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the each of the Guarantors on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omissions. The Company, each of the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were 22 23 treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company, each of the Guarantors and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company, each of the Guarantors and the Initial Purchasers and in Section 4(e) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Company and each of the Guarantors agrees with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(g) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchasers); (g) any fees charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; and (j) all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement which are not otherwise specifically provided for in this Section 12; provided, however, that except as provided in this Section 12 and Section 8, the Initial Purchasers shall pay their own costs and expenses, including the fees and disbursements of their counsel and any advertising expenses (other than with respect to any roadshow presentation) connected with any offers they may make. 23 24 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, each of the Guarantors and the Initial Purchasers contained in this Agreement or made by or on behalf of the Company, each of the Guarantors or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to JPMorgan, a division of Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Legal Department (telecopier no.: (212) 270-7487); or (b) if to the Company or the Guarantors, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: R. Jeffrey Bixler (telecopier no.: (419) 252-5599). Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by JPMorgan. 15. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Initial Purchasers' Information consists solely of the following information in the Preliminary Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchasers; and (ii) the statements concerning the Initial Purchasers contained in the third, fifth, eleventh, twelfth and thirteenth paragraphs under the heading "Plan of Distribution". 17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 18. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed agreement, counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 19. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 24 25 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company, the Guarantors and the several Initial Purchasers in accordance with its terms. Very truly yours, MANOR CARE, INC. By: /s/ Geoffrey G. Meyers ------------------------------- Name: Geoffrey G. Meyers Title: Executive Vice President and Chief Financial Officer [SIGNATURE PAGE TO PURCHASE AGREEMENT] 26 AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 27 FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 28 HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 29 MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC [SIGNATURE PAGE TO PURCHASE AGREEMENT] 30 MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 31 MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTERS, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 32 RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. WASHTENAW HILLS MANOR, INC. [SIGNATURE PAGE TO PURCHASE AGREEMENT] 33 WHITEHALL MANOR, INC. By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary of each of the above- referenced corporations. Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 34 HCR HOSPITAL, LLC By: HCR Hospital Holding Company, Inc., its sole member By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 35 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Services, Inc., its sole member By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 36 BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC [SIGNATURE PAGE TO PURCHASE AGREEMENT] 37 WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC [SIGNATURE PAGE TO PURCHASE AGREEMENT] 38 WEST ORANGE SPRINGHOUSE, LLC By: Manor Care Health Services, Inc., the sole member of each of the above-referenced limited liability companies By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 39 ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC [SIGNATURE PAGE TO PURCHASE AGREEMENT] 40 SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC [SIGNATURE PAGE TO PURCHASE AGREEMENT] 41 WILLIAMS VILLE ARDEN, LLC By: Manor Care of America, Inc., its sole member By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 42 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 43 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 44 HCR MANOR CARE MESQUITE, L.P. By: Mesquite Hospital, LLC, its general partner By: /s/ R. Jeffrey Bixler ------------------------------------ Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO PURCHASE AGREEMENT] 45 Accepted: CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANK OF AMERICA SECURITIES LLC UBS WARBURG LLC By: CHASE SECURITIES INC. By: /s/ G. S. Benson ----------------------------------------- Name: G.S. Benson Title: Vice President Address for notices pursuant to Section 9(c): 1 Chase Manhattan Plaza, 26th Floor New York, New York 10081 Attention: Legal Department [SIGNATURE PAGE TO PURCHASE AGREEMENT] 46 SCHEDULE 1 GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. 47 HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. 48 LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. 49 MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE AND LASER SURGERY CENTERS, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. 50 REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. * WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. COLEWOOD LIMITED PARTNERSHIP BOOTH LIMITED PARTNERSHIP HCR MANORCARE MESQUITE, L.P. HCR HOSPITAL, LLC ANCILLARY SERVICES, LLC BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN,LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC 51 MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC 52 TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC 53 SCHEDULE 2 SUBSIDIARIES ALBUQUERQUE ARDEN, LLC AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ANCILLARY SERVICES, LLC ANNANDALE ARDEN, LLC ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BAINBRIDGE ARDEN, LLC BATH ARDEN, LLC BINGHAM FARMS ARDEN, LLC BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. BOOTH LIMITED PARTNERSHIP CANTERBURY VILLAGE, INC. CENCO HOSPITAL MANAGEMENT CORPORATION CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF PALOS HEIGHTS, L.P. CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC CLINICAL LABORATORY ASSOCIATES PARTNERSHIP * COLEWOOD LIMITED PARTNERSHIP COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC DECA LIMITED PARTNERSHIP * DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EISELE & COMPANY, INC. ELMHURST AMERICANA, INC. 54 ELMHURST LIMITED PARTNERSHIP EMERSON SPRINGHOUSE, LLC EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FIRST LOUISVILLE ARDEN, LLC FOCUS EYE CENTRE, INC. * FOUR SEASONS NURSING CENTERS, INC. FRESNO ARDEN, LLC GENEVA ARDEN, LLC GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HANOVER ARDEN, LLC HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR HOSPITAL, LLC HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR MANORCARE MESQUITE, L.P. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCR VISION MANAGEMENT SERVICES, INC. * HCR/ALTERRA DEVELOPMENT, LLC * HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEART LAND ASIA (MAURITIUS) LTD. * HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HEALTHCARE SERVICES * HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. * HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION 55 JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENSINGTON MANOR, INC. KENWOOD ARDEN, LLC KLTH/MCC, P.L.L. * KLTH/MCM PARTNERSHIP * KNOLLVIEW MANOR, INC. LAKE ZURICH ARDEN, LLC LAURELDALE ARDEN, LLC LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LEXINGTON ARDEN, LLC LINCOLN HEALTH CARE, INC. LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTREVILLE, INC. MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NEW YORK, INC. MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. 56 MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF UNION COUNTY, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR CARE ROSEWOOD, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF ARIZONA INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF CENTREVILLE INC. MANORCARE HEALTH SERVICES OF COLORADO INC. MANORCARE HEALTH SERVICES OF DELAWARE COUNTY INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF INDIANA INC. MANORCARE HEALTH SERVICES OF KANSAS INC. MANORCARE HEALTH SERVICES OF KENTUCKY, INC. MANORCARE HEALTH SERVICES OF MARYLAND INC. MANORCARE HEALTH SERVICES OF NEW JERSEY, INC. MANORCARE HEALTH SERVICES OF NORTH DAKOTA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF PLANTATION, INC. MANORCARE HEALTH SERVICES OF SYCAMORE GLEN, INC. MANORCARE HEALTH SERVICES OF TEXAS, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES OF WASHINGTON, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS FINANCE CORP. (fka MNR FINANCE CORP II) MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MEMPHIS ARDEN, LLC MERCY/ MANOR PARTNERSHIP * MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MHS, INC. MID-ATLANTIC POST ACUTE NETWORK, INC. * MIDDLETOWN ARDEN, LLC MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. 57 MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC MOORHEAD AMERICANA INC. MRC REHABILITATION, INC. MRS, INC. NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NEW MANORCARE HEALTH SERVICES, INC. NEW MANORCARE HEALTH SERVICES OF VIRGINIA, INC. NISHAYUNA ARDEN, LLC NUVISTA REFRACTIVE SURGERY AND LASER CENTERS, INC. * OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL OCCUPATIONAL AND SPEECH THERAPY, INC. PLM, INC. PLM LIMITED PARTNERSHIP * PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROANOKE ARDEN, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING - WHEATON NURSING HOME, INC. SILVER SPRING ARDEN, LLC SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN PHARMACY LIMITED LIABILITY COMPANY 58 SUN VALLEY MANOR, INC. SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOM'S RIVER ARDEN, LLC TOTALCARE CLINICAL LABORATORIES, INC. TUSCAWILLA ARDEN, LLC TUSTIN ARDEN, LLC VISION MANAGEMENT SERVICES, INC. * WALL ARDEN, LLC WARMINSTER ARDEN, LLC WASHTENAW HILLS MANOR, INC. WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC WEST WINDSOR ARDEN, LLC WHITEHALL MANOR, INC. WILLIAMSVILLE ARDEN, LLC WINTER PARK NURSING CENTER, INC. * *indicates subsidiaries that are not 100% owned (directly or indirectly) by Manor Care, Inc. 59 SCHEDULE 3 SIGNIFICANT SUBSIDIARIES HCRC Inc. Manor Care of America Inc. Manor Care Health Services, Inc. HCR Information Corporation Health Care and Retirement Corporation of America HCR Home Health Care and Hospice Inc. HCR Rehabilitation Corporation Heartland Rehabilitation Services, Inc. Heartland Medical Information Services, Inc. 60 SCHEDULE 4 INITIAL PURCHASERS
Principal Amount Initial Purchasers of Securities - ------------------ ------------- JPMorgan $84,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated 76,000,000 Banc of America Securities LLC 20,000,000 UBS Warburg LLC 20,000,000 Total $200,000,000
61 ANNEX A [Form of Exchange and Registration Rights Agreement] 62 MANOR CARE, INC. $200,000,000 8% Senior Notes due 2008 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT March 8, 2001 JPMORGAN, a division of CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANC OF AMERICA SECURITIES LLC UBS WARBURG LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Manor Care, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to JPMorgan, a division of Chase Securities Inc. ("JPMorgan") and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC (together with JPMorgan, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated March 1, 2001 (the "Purchase Agreement"), $200,000,000 aggregate principal amount of its 8% Senior Notes due 2008 (the "Securities") to be jointly and severally guaranteed (the "Guarantees") by the subsidiaries of the Company listed on Schedule 1 and signatories hereto (collectively, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: 21. Registered Exchange Offer. Unless the Registered Exchange Offer (as defined herein) shall not be permitted by applicable federal law, the Company shall (i) use reasonable best efforts to prepare and, not later than 60 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Securities and the Guarantees (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the 1 63 Securities and the Guarantees, a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Exchange Securities") that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 120 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 150 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above). As soon as practicable after the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer. If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, by notice to the Company within 30 days of the Registered Exchange Offer, no later than 30 days after the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), 2 64 a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Private Exchange Securities") that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: A. accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (f) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (g) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers 3 65 have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 22. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 150 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) 4 66 any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Guarantors shall use their reasonable best efforts to file as promptly as practicable (but in no event more than 20 business days after so required or requested pursuant to this Section 2) with the Commission (the "Shelf Filing Date"), and thereafter shall use their commercially reasonable efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) In the absence of the events described in clauses (i) through (vi) of the first paragraph of this Section 2, the Company and the Guarantors shall not be permitted to discharge its obligations hereunder by means of the filing of a Shelf Registration Statement. 5 67 23. Additional Interest. (a) The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date or the Shelf Registration Statement is not filed with the Commission on or before the Shelf Filing Date, (ii) the Exchange Offer Registration Statement is not declared effective within 120 days after the Issue Date or the Shelf Registration Statement is not declared effective within 90 days of the Shelf Filing Date, (iii) the Registered Exchange Offer is not consummated on or prior to 150 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 90 days after the Shelf Filing Date but shall thereafter cease to be effective (at any time that the Company and the Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors will be jointly and severally obligated to pay additional interest to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be, which rate will be increased by an additional $0.05 per week per $1,000 principal amount of Transfer Restricted Securities for each 90 day period that any additional interest described in this Section 3 continues to accrue; provided that the rate for additional interest will not exceed $0.15 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued additional interest will be paid to each Holder in the same manner as interest payments on the Transfer Restricted Securities on semi-annual payment dates that correspond to interest payment dates for the Transfer Restricted Securities. Additional interest only accrues during a Registration Default. Following the cure of all Registration Defaults, the accrual of additional interest will cease. As used herein, the term "Transfer Restricted Securities" means each Security or Private Exchange Security, until the earliest to occur of: (i) the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) the date on which such Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), neither the Company nor the Guarantors shall be required to pay additional interest to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the additional interest due on the Transfer Restricted 6 68 Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the additional interest then due. The additional interest due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay additional interest shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the additional interest provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 24. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose within five business days after the delivery of such document to such Initial Purchaser; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (a) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (b) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; 7 69 (c) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (d) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (e) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons 8 70 may reasonably request; and the Company and the Guarantors consent to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company and the Guarantors will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company and the Guarantors will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing at least two business days prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company and the Guarantors are required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act covering a twelve month period beginning after the effective date of the Registration Statement (as such term is 9 71 defined in paragraph (c) of Rule 158 under the Act); provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v) (a "Suspension Notice"), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. 10 72 (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 25. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 26. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, 11 73 (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds 12 74 received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment or if the indemnifying party has not paid the expenses and fees for which 13 75 it is liable 20 days after notice by the indemnified party of request for reimbursement. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement or admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. 27. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by such Holder with respect to the Securities, Exchange Securities or Private Exchange Securities, on the other, bear to the total gross proceeds from the sale of Securities, Exchange Securities or Private Exchange Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Holders' Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or 14 76 Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 28. Rules 144 and 144A. So long as any Transfer Restricted Securities remain outstanding, the Company shall use its reasonable best efforts to file the reports required to be filed by it under Rule 144A(d)(4) under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities, the Company and the Guarantors shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 29. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 30. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and 15 77 that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to JPMorgan, a division of Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and UBS Warburg LLC; (ii) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; (iii) if to the Company, initially at the address of the Company set forth in the Purchase Agreement; and (iv) if to the Guarantors, initially at the address of the Guarantors set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company, the Guarantors and their respective successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 16 78 (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (h) Remedies. In the event of a breach by the Company or any of the Guarantors or by any Holder of any of their respective obligations under this Agreement, each Holder or the Company or any Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any Guarantor of their obligations under Sections 1 or 2 hereof for which additional interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, each Guarantor and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. Each of the Company and each Guarantor represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor the Guarantors nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (l) Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchasers. 17 79 Very truly yours, MANOR CARE, INC. By: ---------------------------- Name: Geoffrey G. Meyers Title: Executive Vice President and Chief Financial Officer [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 80 GUARANTORS ---------- AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 81 EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 82 HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 83 MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 84 MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 85 MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTERS, INC. PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 86 RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 87 By: ------------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary of each of the above-referenced corporations. Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 88 HCR HOSPITAL, LLC By: HCR Hospital Holding Company, Inc., its sole member By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 89 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Services, Inc., its sole member By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 90 BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 91 WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 92 By: Manor Care Health Services, Inc., the sole member of each of the above-referenced limited liability companies By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 93 ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 94 SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 95 By: Manor Care of America, Inc., its sole member By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 96 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 97 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 98 HCR MANOR CARE MESQUITE, L.P. By: Mesquite Hospital, LLC, its general partner By: --------------------------- Name: R. Jeffrey Bixler Title: Vice President, General Counsel and Secretary Address: One Seagate Toledo, Ohio 43604-2616 Fax No. 419-252-5571 Telephone: 419-252-5500 [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 99 Accepted: CHASE SECURITIES INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BANK OF AMERICA SECURITIES LLC UBS WARBURG LLC By: CHASE SECURITIES INC. By: --------------------- Name: G.S. Benson Title: Vice President [SIGNATURE PAGE TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] 100 SCHEDULE I GUARANTORS AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FOUR SEASONS NURSING CENTERS, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. * HCR HOSPITAL HOLDING COMPANY, INC. HCR INFORMATION CORPORATION * HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. * HCRA OF TEXAS, INC. 101 HCRC INC. * HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA * HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. * ** HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. * HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LINCOLN HEALTH CARE, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. 102 MANOR CARE OF AMERICA, INC * MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. 103 MANORCARE HEALTH SERVICES, INC. * MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MRC REHABILITATION, INC. MRS, INC. NEW MANORCARE HEALTH SERVICES, INC. NUVISTA REFRACTIVE AND LASER SURGERY CENTERS, INC. ** PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SILVER SPRING - WHEATON NURSING HOME, INC. SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. 104 THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOTALCARE CLINICAL LABORATORIES, INC. VISION MANAGEMENT SERVICES, INC. ** WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. COLEWOOD LIMITED PARTNERSHIP BOOTH LIMITED PARTNERSHIP HCR MANORCARE MESQUITE, L.P. HCR HOSPITAL, LLC ANCILLARY SERVICES, LLC BATH ARDEN, LLC CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC ALBUQUERQUE ARDEN, LLC ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC COLONIE ARDEN, LLC 105 CRESTVIEW HILLS ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC GENEVA ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENWOOD ARDEN, LLC LAURELDALE ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WEST WINDSOR ARDEN, LLC WILLIAMS VILLE ARDEN, LLC 106 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". 107 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution". 108 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until ______, 2008, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 109 ANNEX D - CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 110 ANNEX B-1 [Form of Opinion of Latham & Watkins] 111 [Latham & Watkins Letterhead] March 8, 2001 JPMorgan, a division of Chase Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Banc of America Securities LLC UBS Warburg LLC c/o Chase Securities Inc. 270 Park Avenue, 4th Floor New York, New York 10017 Re: $200,000,000 8% Senior Notes Due 2008 of Manor Care, Inc. Ladies and Gentlemen: We have acted as special counsel to Manor Care, Inc., a Delaware corporation (the "Company"), in connection with the sale to you on the date hereof by the Company of $200,000,000 in aggregate principal amount of the Company's 8% Senior Notes Due 2008 (the "Securities") and the guarantee of the Securities pursuant to the Indenture (as defined below) (the "Guarantees") by the Guarantors (as defined in the Purchase Agreement), pursuant to a Purchase Agreement, dated March 1, 2001 (the "Purchase Agreement"), among you, the Company and the Guarantors. The Securities and the Guarantees are being issued pursuant to an Indenture, dated the date hereof (the "Indenture"), among the Company, the Guarantors and National City Bank, as trustee (the "Trustee"). This opinion is being rendered to you pursuant to Section 5(d) of the Purchase Agreement. The Purchase Agreement, the Indenture (including the Guarantees set forth therein), the Securities and the Registration Rights Agreement (as defined in the Purchase Agreement) are sometimes referred to herein collectively as the "Transaction Documents." Other capitalized terms used herein without definition have the meanings assigned to them in the Purchase Agreement. As such counsel, we have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion, including a review of the Offering Memorandum, the Securities, the Indenture (including the Guarantees set forth therein), the Registration Rights Agreement and the Purchase Agreement. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company, the Guarantors and others. In addition, we 1 112 have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. We are opining herein as to the effect on the subject transaction only of the federal laws of the United States, the internal laws of the State of New York and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state. Various issues concerning certain laws and regulations applicable to the Company are addressed in the opinions or statements of belief of R. Jeffrey Bixler and Reed Smith LLP of even date herewith, which have separately been provided to you, and we express no opinion or belief with respect to those matters except as expressly set forth herein. The opinions expressed herein apply only to the Company and the following subsidiaries of the Company: (i) HCRC Inc., a Delaware corporation, Manor Care of America, Inc., a Delaware corporation, and ManorCare Health Services, Inc., a Delaware corporation, together, the "Delaware Significant Subsidiaries"; and (ii) HCR Information Corporation, an Ohio corporation, Health Care and Retirement Corporation of America, an Ohio corporation, HCR Home Health Care and Hospice Inc., an Ohio corporation, HCR Rehabilitation Corp., an Ohio corporation, Heartland Rehabilitation Services, Inc., an Ohio corporation, and Heartland Medical Information Services, Inc., an Ohio corporation, together, the "Ohio Significant Subsidiaries." The Ohio Significant Subsidiaries and the Delaware Significant Subsidiaries are referred to herein, together, as the "Significant Subsidiaries." Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 1. The Indenture, including the Guarantees set forth therein, has been duly authorized, executed and delivered by the Company and each of the Delaware Significant Subsidiaries and, assuming the power of, and the due authorization, execution and delivery of the Indenture by, the Ohio Significant Subsidiaries, constitutes a legally valid and binding agreement of the Company and each of the Significant Subsidiaries, enforceable against the Company and each of the Significant Subsidiaries in accordance with its terms. The Indenture conforms in all material respects to the description thereof contained in the Offering Memorandum and with the requirements of the Trust Indenture Act and the rules and regulations of the Securities and Exchange Commission applicable to an indenture that is qualified thereunder. 2. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and each of the Delaware Significant Subsidiaries and, assuming the power of, and the due authorization, execution and delivery of the Registration Rights Agreement by, the Ohio Significant Subsidiaries, constitutes a legally valid and binding agreement of the Company and each of the Significant Subsidiaries, enforceable against the Company and each of the Significant Subsidiaries in accordance with its terms. The Registration Rights Agreement conforms in all material respects to the description thereof contained in the Offering Memorandum. 3. The Securities have been duly authorized by the Company, and when executed, issued and authenticated in accordance with the terms of the Indenture and delivered to and paid for by you in accordance with the terms of the Purchase Agreement and assuming the power of, and the due authorization, execution and delivery of the Indenture by, the Ohio Significant Subsidiaries, the Securities will be legally valid and binding obligations of the Company 2 113 enforceable in accordance with their terms and the Guarantees as set forth in the Indenture will be the legally valid and binding obligation of each of the Significant Subsidiaries, enforceable in accordance with their terms. 4. The Exchange Securities have been duly authorized by the Company and, when executed, issued, authenticated and delivered against payment therefor in accordance with the terms of the Indenture and the Registration Rights Agreement and assuming the power of, and the due authorization, execution and delivery of the Indenture by, the Ohio Significant Subsidiaries, the Exchange Securities will be legally valid and binding obligations of the Company enforceable in accordance with their terms and the Guarantees as set forth in the Indenture will be the legally valid and binding obligation of each of the Significant Subsidiaries, enforceable in accordance with their terms. 5. Assuming the accuracy of the representations, warranties and agreements of the Company and each of the Guarantors and of the Initial Purchasers contained in the Purchase Agreement, no registration of the Securities under the Securities Act, and no qualification of the Indenture under the Trust Indenture Act, is required for the purchase of the Securities, together with the related Guarantees, by you or the initial resale of the Securities, and the related Guarantees, by you to Qualified Institutional Buyers or to purchasers in compliance with Regulation S, in each case, in the manner contemplated by the Purchase Agreement and the Offering Memorandum. We express no opinion, however, as to when or under what circumstances any Securities initially sold by you may be reoffered or resold. 6. We have reviewed the statements in the Offering Memorandum under the heading "Certain Federal Income Tax Considerations," to the extent that they constitute summaries of matters of law or regulation or legal conclusions, and such statements fairly summarize the matters described therein in all material respects. In addition, we have participated in conferences with officers and other representatives of the Company, counsel to the Company, representatives of the independent public accountants for the Company, and your representatives, at which the contents of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto and related matters were discussed and, although we are not passing upon, and do not assume any responsibility (except to the extent set forth in paragraphs 1 and 2) for, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum or any amendments or supplements thereto and have not made any independent check or verification thereof, during the course of such participation, no facts came to our attention that caused us to believe that the Offering Memorandum or any amendment or supplement thereto, as of its date or as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, it being understood that we express no belief with respect to (i) the financial statements or other financial data included in, or omitted from, the Offering Memorandum, (ii) Health Care Laws (as defined in the opinion of Reed Smith LLP of even date herewith) and the legal matters, documents and proceedings relating to such Health Care Laws and (iii) statutes, ordinances, administrative decisions, rules or regulations of counties, towns, municipalities or special political subdivisions relating to long-term care facilities (including nursing facilities, skilled nursing facilities and assisted living facilities), home health agencies, hospices and acute care hospitals. The opinions rendered in paragraphs 1, 2, 3 and 4 relating to the enforceability of the Indenture (including the Guarantees set forth therein), the Registration Rights Agreement, the 3 114 Securities and the Exchange Securities, respectively, are subject to the following exceptions, limitations and qualifications: (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and (ii) exclusively with respect to paragraph 2, the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. We have not been requested to express and, with your knowledge and consent, do not render any opinion as to the applicability to the obligations of (i) the Company under the Indenture and the Securities or (ii) the Significant Subsidiaries under the Indenture (including the Guarantees set forth therein) of Section 548 of the United States Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor and Creditor Law) relating to fraudulent transfers and obligations. To the extent that the obligations of the Company and the Significant Subsidiaries under the Transaction Documents may be dependent upon such matters, we have assumed for purposes of this opinion that (i) each of the Initial Purchasers and the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under each of the Transaction Documents to which it is a party; (c) is duly qualified to engage in the activities contemplated by each such Transaction Document; and (d) has duly authorized, executed and delivered each such Transaction Document; (ii) with respect to each of the Initial Purchasers and the Trustee, each Transaction Document to which it is a party constitutes its legally valid and binding agreement, enforceable against it in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations. This opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose, or furnished to, quoted to, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. Very truly yours, 4 115 ANNEX B-2 [Form of Opinion of R. Jeffrey Bixler] 116 [MANOR CARE, INC. LETTERHEAD] March 8, 2001 JPMorgan, a division of Chase Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Banc of America Securities LLC UBS Warburg LLC c/o Chase Securities Inc. 270 Park Avenue, 4th Floor New York, New York 10017 Re: $200,000,000 8% Senior Notes Due 2008 of Manor Care, Inc. Ladies and Gentlemen: I am Vice President and General Counsel of Manor Care, Inc. and represented it in connection with the sale to you on the date hereof by Manor Care, Inc., a Delaware corporation (the "Company"), of $200,000,000 in aggregate principal amount of the Company's 8% Senior Notes Due 2008 (the "Securities") and the guarantee of the Securities pursuant to the Indenture (as defined below) (the "Guarantees") by the Guarantors, as defined in the Purchase Agreement (the "Guarantors"), pursuant to a Purchase Agreement, dated March 1, 2001 (the "Purchase Agreement"), among you, the Company and the Guarantors. The Securities and the Guarantees are being issued pursuant to an Indenture, dated the date hereof (the "Indenture"), among the Company, the Guarantors and National City Bank, as trustee (the "Trustee"). This opinion is being rendered to you pursuant to Section 5(e) of the Purchase Agreement. The Purchase Agreement, the Indenture (including the Guarantees set forth therein), the Securities and the Registration Rights Agreement (as defined in the Purchase Agreement) are sometimes referred to herein collectively as the "Transaction Documents." Other capitalized terms used herein without definition have the meanings assigned to them in the Purchase Agreement. As such counsel, I have made such legal and factual examinations and inquiries as I have deemed necessary or appropriate for purposes of this opinion. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, and the conformity to authentic original documents of all documents submitted to me as copies. In addition, I have obtained and relied upon certificates and assurances from public officials as I have deemed necessary. 1 117 Various issues concerning certain laws and regulations applicable to the Company are addressed in the opinions of Latham & Watkins and Reed Smith LLP of even date herewith, which have separately been provided to you, and I express no opinion or belief with respect to those matters except as expressly set forth herein. Subject to the foregoing and the other matters set forth herein, it is my opinion that, as of the date hereof: 7. Each of the Company and each of its subsidiaries has been duly incorporated or formed, as the case may be, and is validly existing as a corporation, limited liability company, partnership or limited partnership, as the case may be, in good standing under the laws of its respective jurisdiction or incorporation or formation as the case may be, is duly qualified to do business and is in good standing as a foreign corporation, limited liability company, partnership or limited partnership, as the case may be, in each jurisdiction in which its ownership or lease of property or the conduct of its respective businesses requires such qualification, and has all power and authority necessary to own or hold its respective properties and to conduct the businesses in which it is engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect). 8. The Company has an authorized capitalization as set forth in the Offering Memorandum, and all of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; except as described on Schedule 2 of the Purchase Agreement, all of the issued Shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and other than as set forth or contemplated in the Offering Memorandum, are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. 9. The descriptions in the Offering Memorandum of statutes, legal and governmental proceedings and contracts and other documents except for the matters addressed in the Reed Smith LLP opinion, to which I am not opining, are accurate in all material respects; and I do not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required. 10. The Company and each of the Guarantors has full right, power and authority to execute and deliver each of the Transaction Documents and to perform their respective obligations thereunder, and all corporate, partnership or limited liability company action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby by the Company and each of the Guarantors have been duly and validly taken. 11. The Purchase Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and constitutes a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms. 12. The execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities, the issuance of the Guarantees and compliance by the Company and each of the 2 118 Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws (or other comparable organizational documents) of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities, the issuance of the Guarantees and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement. 13. Except as otherwise disclosed in the Offering Memorandum, to the best of my knowledge, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which the Company or any of the Guarantors is a party or of which any property or assets of the Company or any of the Guarantors is the subject which (i) singularly or in the aggregate, if determined adversely to the Company or any of the Guarantors, could reasonably be expected to have a Material Adverse Effect or (ii) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken thereto; and, except as otherwise disclosed in the Offering Memorandum, to the best of my knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. 14. Neither the Company nor any of the Guarantors is (i) in violation of its charter or by-laws (or other comparable organizational documents), (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. In addition, I have participated in conferences with officers and other representatives of the Company, counsel to the Company, representatives of the independent public accountants for the Company, and your representatives, at which the contents of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto and related matters were discussed and, although I am not passing upon, and 3 119 do not assume any responsibility (except to the extent set forth in paragraph 3) for, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum or any amendments or supplements thereto and have not made any independent check or verification thereof, during the course of such participation, no facts came to my attention that caused me to believe that the Offering Memorandum or any amendment or supplement thereto, as of its date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, it being understood that I express no belief with respect to (i) the financial statements or other financial data included in, or omitted from, the Offering Memorandum and (ii) Health Care Laws (as defined in the opinion of Reed Smith LLP of even date herewith) and the legal matters, documents and proceedings relating to such Health Care Laws, but do express a belief with respect to statutes, ordinances, administrative decisions, rules and regulations of counties, towns, municipalities and special political subdivisions relating to long-term care facilities (including nursing facilities, skilled nursing facilities and assisted living facilities), home health agencies, hospices and acute care hospitals. The opinions rendered in paragraph 5, relating to the enforceability of the Purchase Agreement, is subject to the following exceptions, limitations and qualifications: (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and (ii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. To the extent that the obligations of the Company and its subsidiaries under the Transaction Documents may be dependent upon such matters, I have assumed for purposes of this opinion that (i) each of the Initial Purchasers and the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under each of the Transaction Documents to which it is a party; (c) is duly qualified to engage in the activities contemplated by each such Transaction Document; and (d) has duly authorized, executed and delivered each such Transaction Document; (ii) with respect to each of the Initial Purchasers and the Trustee, each Transaction Document to which it is a party constitutes its legally valid and binding agreement, enforceable against it in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations. This opinion and statements of belief are rendered only to you and are solely for your benefit in connection with the transactions covered hereby. This opinion and statements of belief may not be relied upon by you for any other purpose, or furnished to, quoted to, or relied upon by any other person, firm or corporation for any purpose, without my prior written consent. Very truly yours, 4 120 ANNEX B-3 [Form of Opinion of Reed Smith LLP] 121 REED SMITH LLP March 8, 2001 JPMorgan, a division of Chase Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Banc of America Securities LLC UBS Warburg LLC c/o Chase Securities Inc. 270 Park Avenue, 4th Floor New York, New York 10017 Re: $200,000,000 8% Senior Notes Due 2008 of Manor Care, Inc. Ladies and Gentlemen: We have acted as special health care regulatory counsel to Manor Care, Inc. in connection with the sale to you on the date hereof by Manor Care, Inc., a Delaware corporation (the "Company"), of $200,000,000 in aggregate principal amount of the Company's 8% Senior Notes Due 2008 (the "Securities") and the guarantee of the Securities pursuant to the Indenture (as defined below) (the "Guarantees") by the Guarantors, as defined in the Purchase Agreement (the "Guarantors"), pursuant to a Purchase Agreement, dated March 1, 2001 (the "Purchase Agreement"), among you, the Company and the Guarantors. The Securities and the Guarantees are being issued pursuant to an Indenture, dated the date hereof (the "Indenture"), among the Company, the Guarantors and National City Bank, as trustee (the "Trustee"). This opinion is being rendered to you pursuant to Section 5(f) of the Purchase Agreement. The Purchase Agreement, the Indenture (including the Guarantees set forth therein), the Securities and the Registration Rights Agreement (as defined in the Purchase Agreement) are sometimes referred to herein collectively as the "Transaction Documents." Other capitalized terms used herein without definition have the meanings assigned to them in the Purchase Agreement. For purposes of issuing this opinion letter, we have been requested to review the Offering Memorandum dated March 1, 2001 relating to the Securities and specifically those sections of the Offering Memorandum describing Health Care Laws. For purposes of this opinion letter, "Health Care Laws" means statutes, judicial rulings and decrees, and administrative or governmental regulations regulating long-term care facilities (including nursing facilities, skilled nursing facilities and assisted living facilities), home health agencies, hospices and acute care hospitals of the United States and of the states in which the Company and its subsidiaries operate, including, but not limited to, the Health Insurance Portability and Accountability Act of 1996; Titles XVIII and XIX of the Social Security Act, 42 U.S.C. Section 1395 et seq. and Section 1396 et seq., the federal anti-kickback statute, 42 U.S.C. Section 1320a-7b(b); the civil monetary penalties law, 42 U.S.C. Section 1320a-7a; the False Claims Act, 31 U.S.C.. Sections 3729-3733; the physician self-referral law, 42 U.S.C. Section 1395nn, and state licensure and other state laws, but specifically excluding statutes, ordinances, administrative decisions, rules or regulations of counties, towns, municipalities or special political subdivisions to the extent that they deal with any of the foregoing. Further, we have not examined or otherwise considered, and this opinion 1 122 letter does not address, any other laws or questions of law, statutes, ordinances, rules or regulations other than the Health Care Laws. We have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company, the Guarantors and others. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. Based upon, subject to and limited by the foregoing and the exceptions and limitations set forth below, it is our opinion that, as of the date hereof, the descriptions in the Offering Memorandum of statutes and amendments or proposed amendments thereto, proposed legislation, legal and governmental proceedings and contracts and other documents, insofar as such descriptions constitute summaries of the Health Care Laws and the legal matters, documents and proceedings relating to such Health Care Laws, are accurate in all material respects . Furthermore, we do not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings arising under or pursuant to a Health Care Law, to which the Company or any subsidiary is a party, which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required. In addition, we have participated in conferences with officers and other representatives of the Company, counsel to the Company, representatives of the independent public accountants for the Company, and your representatives, at which the contents of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto and related matters were discussed and, although we are not passing upon, and do not assume any responsibility (except to the extent set forth in the immediately preceding paragraph) for, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum or any amendments or supplements thereto and have not made any independent check or verification thereof, during the course of such participation, no facts came to our attention that caused us to believe that the Offering Memorandum or any amendment or supplement thereto, as of its date or as of the date hereof, with respect to Health Care Laws and the legal matters, documents and proceedings relating to such Health Care Laws, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein with respect to Health Care Laws, in the light of the circumstances under which they were made, not misleading (it being understand that we express no belief with respect to the financial statements or other financial data included in, or omitted from, the Offering Memorandum). The foregoing opinions are subject to the following additional assumptions, exceptions, limitations and qualifications: We are members of the Bar of the District of Columbia and do not hold ourselves out as experts on the general laws of any other state. We do, however, as a practice area of specialization, provide legal representation to companies such as and including the Company with respect to the laws and regulations of states which directly or indirectly impact upon the provision of health care services. Therefore, this opinion does not relate to the laws of any other state other than the District of Columbia except certain state and 2 123 federal regulatory laws that are specifically relevant to the rendering of this opinion and which specifically apply to the nature and scope of the Company's business. Any opinion herein as to the laws of other states is based solely on the latest compilations of the relevant statutes and case law of other states available to us through online services and compilations. The opinions in this letter are limited to the matters set forth herein, no opinion may be inferred or implied beyond the opinions expressly stated in this letter, and our opinions must be read in conjunction with the assumptions, limitations, exceptions and qualifications set forth in this letter. We assume no obligation to update this opinion letter to advise you of any change in facts or laws subsequent to the date hereof. This opinion and statements of belief are rendered only to you and are solely for your benefit in connection with the transactions covered hereby. This opinion and statements of belief may not be relied upon by you for any other purpose, or furnished to, quoted to, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. Very truly yours, REED SMITH LLP 3 EX-12.1 7 l87647aex12-1.txt EXHIBIT 12.1 1 Exhibit 12.1 Manor Care, Inc. Computation of Ratio of Earnings to Fixed Charges (In thousands, except ratios)
Years ended December 31, -------------------------------------------------------------------- Adjusted 2000 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- EARNINGS AVAILABLE TO COVER FIXED CHARGES: Income (loss) from continuing operations before income taxes and minority interests ........... $ 60,635 $ 61,669 $(102,396) $ (24,565) $ 227,110 $ 180,647 Less: Equity in earnings of affiliates, excluding affiliate with guaranteed debt........... (2,016) (2,016) (2,276) (5,376) (2,806) (1,500) Add: Dividends received from equity affiliate................. 6,000 6,000 -- -- -- -- Fixed charges deducted from earnings (see below) 76,545 75,511 67,838 62,613 88,279 75,744 --------- --------- --------- --------- --------- --------- Earnings available to cover fixed charges....................... $ 141,164 $ 141,164 $ (36,834) $ 32,672 $ 312,583 $ 254,891 ========= ========= ========= ========= ========= ========= FIXED CHARGES: Interest expense, including amounts in operating expense................ $ 66,460 $ 66,460 $ 60,646 $ 55,340 $ 79,309 $ 68,915 Interest within rent expense.......... 9,051 9,051 7,192 7,273 8,970 6,829 Adjusted interest expense and amortization of financing costs .. 1,034 -- -- -- -- -- --------- --------- --------- --------- --------- --------- Fixed charges deducted from earnings....................... 76,545 75,511 67,838 62,613 88,279 75,744 Interest expense on guaranteed debt of affiliate..................... 4,309 4,309 922 -- -- -- Interest capitalized............... 4,457 4,457 3,235 8,623 4,887 5,657 --------- --------- --------- --------- --------- --------- Fixed charges..................... $ 85,311 $ 84,277 $ 71,995 $ 71,236 $ 93,166 $ 81,401 ========= ========= ========= ========= ========= ========= RATIO OF EARNINGS TO FIXED CHARGES (1)................... 1.7x 1.7x 3.4x 3.1x ========= ========= ========= =========
(1) We do not show a ratio for 1998 and 1999 because earnings were insufficient to cover fixed charges by $38.6 million in 1998 and $108.8 million in 1999. EX-13.1 8 l87647aex13-1.txt EXHIBIT 13.1 1 EXHIBIT 13.1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10858 MANOR CARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 34-1687107 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 333 N. SUMMIT STREET, TOLEDO, OHIO 43604-2617 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 252-5500 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered ------------------------------- ------------------------ COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A [X] (Cover page 1 of 2 pages) 2 Based on the closing price of $22.95 per share on March 15, 2001, the aggregate market value of the registrant's voting stock held by non-affiliates was $2,229,582,517. Solely for purposes of this computation, the registrant's directors and executive officers have been deemed to be affiliates. Such treatment is not intended to be, and should not be construed to be, an admission by the registrant or such directors and officers that all of such persons are "affiliates," as that term is defined under the Securities Act of 1934. The number of shares of Common Stock, $.01 par value, of Manor Care, Inc. outstanding as of March 15, 2001 was 103,039,664. DOCUMENTS INCORPORATED BY REFERENCE The following document is incorporated by reference in the Part indicated: We incorporate by reference specific portions of the registrant's Proxy Statement for the Annual Stockholders' Meeting to be held May 8, 2001 in Part III. EXPLANATORY NOTE We are filing this amendment to our Form 10-K for the year ended December 31, 2000 to implement the SEC's plain English rules for Items 1-7a and 9-14, changing merely their form but not substance. We have not made any changes to Item 8, "Financial Statements and Supplementary Data" from the original filing. (Cover page 2 of 2 pages) 3 TABLE OF CONTENTS PART I Item 1. Business ....................................................2 Item 2. Properties .................................................14 Item 3. Legal Proceedings ..........................................16 Item 4. Submission of Matters to a Vote of Security Holders ........18 PART II Item 5. Market for Registrant's Common Stock and Related Shareholder Matters ........................................19 Item 6. Selected Financial Data ....................................20 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................21 Item 7a. Quantitative and Qualitative Disclosures about Market Risk..34 Item 8. Financial Statements and Supplementary Data ................34 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................63 PART III Item 10. Directors and Executive Officers of the Registrant .........63 Item 11. Executive Compensation .....................................65 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................65 Item 13. Certain Relationships and Related Transactions .............65 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ................................................66 SIGNATURES ............................................................73 EXHIBITS ............................................................76 1 4 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS Manor Care, Inc., which we also refer to as Manor Care, provides a range of health care services, including skilled nursing care, assisted living, subacute medical and rehabilitation care, rehabilitation therapy, home health care, hospice care, and management services for subacute care and rehabilitation therapy. The most significant portion of our business relates to long-term care, including skilled nursing care and assisted living, which is our only reportable operating segment. We provide greater detail about the revenues of certain health care services and other segment information in Notes 5 and 16 to the consolidated financial statements. At December 31, 2000, we operated 298 skilled nursing facilities and 56 assisted living facilities in 32 states with more than 60 percent of our facilities located in Ohio, Michigan, Illinois, Pennsylvania and Florida. Some of our centers include medical specialty units that provide subacute medical and rehabilitation care, and/or Alzheimer's care programs. At December 31, 2000, we operated 87 outpatient rehabilitation clinics, an acute care hospital and 78 home health care offices that include the offices of In Home Health, Inc., or IHHI. We owned 41 percent of IHHI at December 31, 1999 and acquired additional shares in June 2000 to increase our ownership to 61 percent. On December 28, 2000, pursuant to a merger agreement approved by the IHHI stockholders, we purchased the remaining shares of IHHI to increase our ownership to 100 percent. We paid approximately $14.0 million for the additional ownership interest during 2000. In 1998, we formed a strategic alliance with Alterra Healthcare Corporation, or Alterra, to develop a broad-based network primarily dedicated to the care of patients suffering from Alzheimer's disease. In 1999, as part of this alliance we: - sold 26 assisted living centers to Alterra for $154.5 million and leased two other centers to Alterra; - created a joint venture to develop and construct up to $500 million of Alzheimer's dementia care assisted living facilities in our core markets over the next three to five years; - formed a new company to provide a variety of ancillary services, including rehabilitation therapy and home and hospice care, to residents in Alterra centers;and - contributed 20 facilities valued at $77.8 million to various project companies or partnerships of which the joint venture had a 10 percent equity interest. 2 5 We and Alterra jointly and severally guaranteed a line of credit related to the joint venture that was to mature September 30, 2002. In 2000 we took the following actions with respect to the joint venture: - Together with Alterra, we curtailed current and ceased future development activities; - Together with Alterra, we reduced the joint venture's revolving line of credit from $200 million to $60 million; and - We purchased seven facilities that we originally contributed to the joint venture in 1999. In January 2001, we and Alterra further reduced the line of credit to $57 million and adjusted the maturity date to June 29, 2001. Our executive offices are located at 333 N. Summit Street, Toledo, Ohio 43604-2617. Our telephone number is (419) 252-5500. NARRATIVE DESCRIPTION OF BUSINESS LONG-TERM CARE SERVICES We are a leading owner and operator of long-term care centers in the United States, with the majority of our facilities operating under the respected Heartland, ManorCare and Arden Courts names. Skilled Nursing Centers. Our facilities use interdisciplinary teams of experienced medical professionals to provide services prescribed by physicians. These teams include registered nurses, licensed practical nurses and certified nursing assistants, who provide individualized comprehensive nursing care around the clock. We designed "Quality of Life" programs to give the highest possible level of functional independence to residents. Licensed therapists provide physical, speech, respiratory and occupational therapy for patients recovering from strokes, heart attacks, orthopedic conditions, or other illnesses, injuries or disabilities. In addition, the centers provide first-class dietary services, social services, therapeutic recreational activities, housekeeping and laundry services. The Joint Commission on Accreditation of Healthcare Organizations has accredited many of our centers. Assisted Living Services. We have a number of stand-alone assisted living centers as well as units within our skilled nursing centers dedicated to providing personal care services and assistance with general activities of daily living such as dressing, bathing, meal preparation and medication management. We use a comprehensive resident assessment to help determine the appropriate package of services desired or required by each resident. Our assisted living staff encourages residents to socialize and participate in a broad spectrum of activities. 3 6 SPECIALTY SERVICES Subacute Medical and Rehabilitation Care. Our leadership in subacute programs designed to shorten or eliminate hospital stays exemplifies our commitment to reducing the cost of quality health care. Working closely with patients, families and insurers, interdisciplinary teams of experienced medical professionals develop comprehensive, individualized patient care plans that target the essential medical, functional and discharge planning objectives. We provide medical and rehabilitation programs for patients recovering from major surgery; severe injury; or serious cardiovascular, respiratory, infectious, endocrine or neurological illnesses. Alzheimer's Care. As an industry leader in Alzheimer's care, we provide innovative services and facilities to care for Alzheimer's patients in early, middle and advanced stages of the disease. Trained staffs provide specialized care and programming for persons with Alzheimer's or related disorders in freestanding Arden Courts facilities and in dedicated units within many of our skilled nursing centers. HEALTH CARE SERVICES We provide rehabilitation therapy in our long-term care centers, other skilled centers, hospitals and our 87 outpatient therapy clinics serving the Midwestern and Mid-Atlantic states, Texas and Florida. Our home health care business specializes in all levels of home health, hospice care and rehabilitation therapy from 78 offices in 18 states. We provide program management services for subacute care and acute rehabilitation programs in hospitals and skilled nursing centers. We own and operate a general medical/surgical acute care hospital with 172 licensed beds in Texas. We entered into long-term management contracts with physician practices in the Midwestern states, specializing in vision care and refractive eye surgery. OTHER SERVICES We own approximately 96 percent of a start-up medical transcription company that converts medical dictation into electronically formatted patient records. Health care providers use the records in connection with patient care and other administrative purposes. LABOR Labor costs, including temporary staffing, account for approximately 64 percent of our operating expenses, and we compete with other health care providers to attract and retain qualified or skilled personnel. We also compete with various industries for lower-wage employees. A shortage of nurses or other trained personnel and general inflationary pressures required us to enhance our wage and benefits packages in order to compete for qualified personnel. Although we currently do not face a staffing shortage in all markets where we operate, we have used high priced temporary help to supplement staffing levels in markets with shortages of health care workers. If a shortage of 4 7 nurses or other health care workers occurred in all geographic areas in which we operate, it could adversely affect our ability to attract and retain qualified personnel and could further increase our operating costs. CUSTOMERS No individual customer or related group of customers accounts for a significant portion of our revenue. We do not expect that the loss of a single customer or group of related customers would have a material adverse effect. Certain classes of patients rely on a common source of funds to pay the cost of their care. The following table reflects the allocation of revenue sources among Medicare, Medicaid, and private pay and other sources for the last three years for services related to skilled nursing, assisted living and rehabilitation operations. 2000 1999 1998 ---- ---- ---- Medicaid 33% 33% 29% Medicare 24% 20% 22% Private pay & other 43% 47% 49% ---- ---- ---- 100% 100% 100% ==== ==== ==== Medicaid is a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government. Medicare is a health insurance program for the aged and certain other chronically disabled individuals, operated by the federal government. Private pay and other sources include commercial insurance, individual patients' own funds, managed care plans and the Veterans Administration. Although payment rates vary among these sources, market forces and costs largely determined these rates. Government reimbursement programs such as Medicare and Medicaid prescribe, by law, the billing methods and amounts that may be charged and reimbursed to care for patients covered by these programs. On August 5, 1997, Congress enacted the Balanced Budget Act of 1997, or the Budget Act, which sought to achieve a balanced federal budget by, among other things, reducing federal spending on Medicare and Medicaid. The Budget Act contained numerous changes affecting Medicare and Medicaid payments to skilled nursing facilities, home health agencies, hospices and therapy providers, among others. Medicare and Medicaid Payment Changes Under the Budget Act. Medicare reimbursed skilled nursing facilities retrospectively for cost reporting periods that began before July 1, 1998. Under this system, each facility received an interim payment during the year. The skilled nursing facility then submitted a cost report at the end of each year and Medicare adjusted the payment to reflect actual allowable direct and indirect costs of services. The Budget Act changed the Medicare payment system to a prospective system in which Medicare reimburses skilled nursing facilities at a daily rate for specific covered services regardless of their actual cost based on various categories of patients. The Medicare program phased in this prospective payment system over three cost reporting periods beginning on or after July 1, 1998. The Budget Act also required a prospective 5 8 payment system to be established for home health services that began October 1, 2000. The Budget Act also reduced payments to many providers and suppliers, including therapy providers and hospices, and gave states greater flexibility to administer their Medicaid programs by repealing the federal requirement that payment be reasonable and adequate to cover the costs of "efficiently and economically operated" nursing facilities. Federal Medicare Payment Legislation. In November 1999, Congress passed the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, or BBRA 99. In addition, in December 2000 Congress passed the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, or BIPA 2000. Both BBRA 99 and BIPA 2000 redress certain reductions in Medicare reimbursement resulting from the Budget Act. Several provisions of BBRA 99 positively affected us, beginning primarily in the latter half of 2000. These favorable provisions include: - a temporary increase in the payment for certain high cost nursing home patients, for services provided beginning April 1, 2000. BIPA 2000 amended this provision to redistribute the amounts applicable to rehabilitation patients from three specific categories to all rehabilitation categories. This temporary increase will continue until the Secretary of the Department of Health and Human Services implements a refined patient classification to better account for medically complex patients; - increases in federal daily rates by an additional 4 percent per year for the 12 months ending September 30, 2001 and 2002; - for cost reporting periods beginning on or after January 1, 2000, skilled nursing facilities may waive the prospective payment system transition period and elect to receive 100 percent of the federal daily rate; - specific services or items, such as ambulance services in conjunction with renal dialysis, chemotherapy items and prosthetic devices, furnished on or after April 1, 2000, may be reimbursed in addition to the prospective payment system daily rate; - a two-year moratorium on the annual $1,500 therapy cap on each of physical/speech therapy and occupational therapy beginning with services provided on or after January 1, 2000. BIPA 2000 amended this provision, extending the moratorium through December 31, 2002; and - a delay in the 15 percent reduction in the base payment level for our home health business until October 2001. BIPA 2000 further amended this provision, extending the delay through September 30, 2002. In addition, BIPA 2000 requires that the Government Accounting Office submit a report to Congress by April 1, 2002 analyzing the need to reduce payment limits for home health services by 15 percent. 6 9 We expect the positive effects of these provisions to continue through 2001. In addition to the changes noted above, several other BIPA 2000 provisions will positively affect us beginning in the second quarter of 2001. These provisions include the following: - BIPA 2000 increased the skilled nursing facility prospective payment adjustment upward for rates effective October 1, 2000 through September 30, 2001; - effective April 1, 2001 and continuing through September 30, 2002, the nursing component of the federal prospective rate will be increased by 16.66 percent; and - BIPA 2000 provides a 5 percent increase in rates for hospice services furnished on or after April 1, 2001 through September 30, 2002. We cannot assure you that payments from governmental or private payors will remain at levels comparable to levels described above. Furthermore, we cannot assure you that these payments will be sufficient to cover our costs for patients in these programs in the future. We cannot now predict whether any changes in reimbursement will be adopted in the future or what effect any changes, if adopted, would have on us. REGULATION AND LICENSES General. Health care is an area of extensive and frequent regulatory change. The federal government and the states in which we operate regulate various aspects of our business. These regulatory bodies, among other things, require us annually to license our skilled nursing facilities, assisted living facilities in some states, and other health care businesses, including home health agencies and hospices. In particular, to operate nursing facilities and provide health care services we must comply with federal, state and local laws relating to the delivery and adequacy of medical care, distribution of pharmaceuticals, equipment, personnel, operating policies, fire prevention, rate-setting, and building codes and environmental protection. Governmental and other authorities periodically inspect our skilled nursing facilities to assure that we continue to comply with their various standards. We must pass these inspections to continue our licensing under state law, to obtain certification under the Medicare and Medicaid programs and to continue our participation in the Veterans Administration program. We can only participate in other third-party programs if our facilities pass these inspections. In addition, these authorities inspect our record keeping and inventory control. From time to time, we, like others in the health care industry, may receive notices from federal and state regulatory agencies alleging that we failed to comply with applicable standards. These notices may require us to take corrective action, and may impose civil money penalties and/or other operating restrictions on us. If our skilled nursing facilities fail to comply with these directives or otherwise fail to comply substantially with licensure and certification laws, rules and regulations, we could lose our certification as a Medicare and Medicaid provider and/or lose our licenses. 7 10 Local and state health and social service agencies and other regulatory authorities specific to their location regulate, to varying degrees, our assisted living facilities. While regulations and licensing requirements often vary significantly from state to state, they typically address, among other things: - personnel education, training and records; - facility services, including administration of medication, assistance with supervision of medication management and limited nursing services; - physical plant specifications; - furnishing of resident units; - food and housekeeping services; - emergency evacuation plans; and - resident rights and responsibilities. If assisted living facilities fail to comply with licensing requirements, these facilities could lose their licenses. Most states also subject assisted living facilities to state or local building codes, fire codes and food service licensure or certification requirements. In addition, since the assisted living industry is relatively new, the manner and extent to which it is regulated at federal and state levels are evolving. Changes in the laws or new interpretations of existing laws as applied to the skilled nursing facilities, the assisted living facilities or other components of our health care businesses may significantly impact our methods and costs of doing business. Licensing and Certification. Our success depends in part upon our ability to satisfy applicable regulations and requirements to procure and maintain required licenses and Medicare and Medicaid certifications in rapidly changing regulatory environments. If we fail to satisfy applicable regulations or to procure or maintain a required license or certification, it could have a material adverse effect on us. In addition, certain regulatory developments, such as revisions in the building code requirements for assisted living and skilled nursing facilities, mandatory increases in scope and quality of care to be offered to residents, and revisions in licensing and certification standards, could have a material adverse effect on us. 8 11 Health Care Reforms. In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reform affecting the payment for and availability of health care services. Some aspects of these health care initiatives could adversely affect us such as: - reductions in funding of the Medicare and Medicaid programs; - potential changes in reimbursement regulations by the Health Care Financing Administration; - enhanced pressure to contain health care costs by Medicare, Medicaid and other payors; and - greater state flexibility in the administration of Medicaid. Certificate of Need Laws. Many states have adopted Certificate of Need or similar laws that generally require that the appropriate state agency approve certain acquisitions and determine that a need exists for certain bed additions, new services and capital expenditures or other changes before health care providers add beds and/or new services or undertake capital expenditures. To the extent that state agencies require us to obtain a Certificate of Need or other similar approvals to expand our operations, either by acquiring facilities or by expanding or providing new services or other changes, our expansion plans could be adversely affected if we cannot obtain the necessary approvals. Our expansion of operations could be adversely affected by changes in standards applicable to approvals and possible delays and expenses associated with obtaining the approvals. We cannot assure you that we will be able to obtain Certificate of Need approval for all future projects requiring approval. Federal and State Fraud and Abuse. We are also subject to federal and state laws that govern financial and other arrangements involving health care providers. These laws prohibit certain direct and indirect payments or fee-splitting arrangements between health care providers designed to induce or encourage providers to refer patients to, or recommend or arrange, a particular provider for medical products and services. These laws include the federal "Stark Legislation" which, with limited exceptions, prohibits physicians from referring Medicare and Medicaid patients for certain designated health services, including home health services, physical therapy and occupational therapy, to an entity in which the physician has a financial interest. The January 2001 final rule to implement the Stark Legislation makes clear that the restrictions apply to referrals for designated health services provided in skilled nursing facilities. This final rule is commonly referred to as Phase I. Certain statutory exceptions are available for employment agreements, leases, in-office ancillary services and other physician arrangements. Phase I of the final rule also sets forth additional exceptions. Most of this rule will become effective January 4, 2002, except for provisions governing referrals for home health care services, which became effective April 6, 2001. We expect Phase II of the final rule, which will cover the remaining portions of the statute, including those pertaining to Medicaid, to be released in 2001. Phase I of the final rule eases 9 12 certain of the restrictions in the proposed rule, including the criteria for qualifying as a group practice. The final rule also, among other things: - recognizes an exception for referrals for residents covered under a Medicare Part A skilled nursing facility stay and for patients covered under the Medicare hospice benefit; - conforms the supervision requirements to Medicare coverage and payment policies for the specific services; - clarifies the definitions of designated health services and indirect financial relationships; and - creates various new exceptions, including exceptions for indirect compensation arrangements and fair market value transactions. We have sought to comply in all respects with all applicable provisions of the Stark Legislation; however, we cannot assure you that our physician arrangements will be found to comply with the Stark Legislation, as the law may ultimately be interpreted. In addition, we are subject to the federal "anti-kickback law." Among other things, this law prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for the referral of patients, or the purchasing, leasing, ordering, or arranging for any goods, services or items for which payment can be made under Medicare, Medicaid or other federal health care programs. Possible sanctions for violating the anti-kickback law include criminal penalties, civil money penalties and/or exclusion from participation in Medicare, Medicaid or other federal health care programs. Furthermore, many states restrict business relationships between physicians and other providers of health care services, and some have enacted laws similar to the federal Stark Legislation and the anti-kickback law. False Claim Regulation. Several criminal and civil statutes prohibit false claims. Criminal provisions at 42 U.S.C. Section 1320a-7b prohibit filing false claims or making false statements to receive payment or certification under Medicare and Medicaid, or failing to refund overpayments or improper payments. Offenses for violation are felonies punishable by up to five years imprisonment and/or $25,000 fines. Criminal penalties may also be imposed pursuant to the Federal False Claim Act, 18 U.S.C. Section 287. In addition, under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress enacted a criminal health care fraud statute for fraud involving a health care benefit program, which it defined to include both public and private payors. Civil provisions at 31 U.S.C. Section 3729 prohibit the known filing of a false claim or the known use of false statements to obtain payment. Penalties for violations are fines ranging from $5,500 to $11,000, plus treble damages, for each claim filed. Also, the statute allows any individual to bring a suit, known as a qui tam action, alleging false or fraudulent Medicare or Medicaid claims or other violations of the statute and to potentially share in any amounts paid by the entity to the government in fines or settlement. We have sought to comply with these statutes; however, we cannot assure you that these laws will ultimately be interpreted in a manner consistent with our practices or business transactions. 10 13 The federal government, private insurers and various state enforcement agencies have increased their scrutiny of providers' business practices and claims in an effort to identify and prosecute fraudulent and abusive practices. The federal government has issued fraud alerts concerning home health services, the provision of medical services and supplies to skilled nursing facilities, and arrangements between hospices and nursing facilities; accordingly, these areas may come under closer scrutiny by the government. In addition, the Department of Health and Human Services, Office of Inspector General and the Department of Justice have from time to time established enforcement initiatives focusing on specific billing practices or other suspected areas of abuse. Current initiatives include: - the appropriateness of therapy services provided to Medicare beneficiaries residing in skilled nursing facilities; - appropriate cost allocation between the Medicare-certified and non-certified portions of the facility; and - billing for ancillary supplies, resident assessments and quality of care. HIPAA, which became effective January 1, 1997, expands the scope of certain fraud and abuse laws to include all health care services, whether or not they are reimbursed under a federal health care program, and creates new enforcement mechanisms to combat fraud and abuse. The Budget Act also expands numerous health care fraud provisions. In addition, some states prohibit business corporations from providing, or holding themselves out as a provider of, medical care. Possible sanctions for violating any of these restrictions or prohibitions include loss of licensure or eligibility to participate in reimbursement programs and civil and criminal penalties. These laws vary from state to state and have seldom been interpreted by the courts or regulatory agencies. We have sought to structure our business relationships and transactions in compliance with these federal and state fraud and abuse laws; however, we cannot assure you that these laws will ultimately be interpreted in a manner consistent with our practices or business transactions. Our failure to comply with these laws could result in civil money penalties, exclusion from the Medicare, Medicaid and other federal health care programs, and criminal convictions. Related Party Rule. Before implementation of the prospective payment system for skilled nursing facilities, the Medicare program limited certain allowable costs for items and services provided by companies that are associated or affiliated with a Medicare provider or have control of, or are controlled by, a Medicare provider. Many state Medicaid programs have adopted the same rule in determining costs that will be included in the payment rates. Unless a provider qualifies for the exception to the related party rule, the Medicare program will only reimburse the provider for the cost incurred by the related party in providing products or services, rather than the related party's charge. An organization can qualify for the exception to the related party rule by meeting the following criteria: 11 14 - the entities are bona fide separate organizations; - a substantial part of the supplying organization's business activity is conducted with non-related organizations and there is an open, competitive market for the services or products; - the services or products are commonly obtained by a provider from other organizations and are not a basic element of patient care ordinarily furnished directly to patients by the providers; and - the charge to the provider is in line with the charge for these services and products in the open market and no more than the charge made under comparable circumstances to others. The Medicare program has taken the position that one of our subsidiaries providing rehabilitation management services is a related party and that certain fees paid to this entity should be adjusted based upon the related party rule. We are in the process of appealing the Medicare program's decision to adjust these fees. We believe that, to the extent the Medicare program considers this subsidiary or any other subsidiary of ours to be a related party for purposes of this rule, the operations of each subsidiary would qualify for the exception to the related party rule. However, we cannot assure you that the interpretation and application of the related party rule and its exception by governmental authorities will result in Manor Care qualifying for the exception. The application of the Medicare related party rule could adversely affect allowable payments to our skilled nursing facilities for pre-July 1, 1998 cost reports. Health Information Practices. HIPAA also mandates, among other things, that the Department of Health and Human Services adopt standards for the exchange of electronic health information in an effort to encourage overall administrative simplification and enhance the effectiveness and efficiency of the health care industry. The Department of Health and Human Services has adopted standards for the following: - electronic transactions and code sets; - unique identifiers for providers, employers, health plans and individuals; - security and electronic signatures; - privacy; and - enforcement. 12 15 Although HIPAA was intended ultimately to reduce administrative expenses and burdens faced within the health care industry, we believe the law will initially bring about significant and, in some cases, costly changes. The Department of Health and Human Services has released two rules to date mandating the use of new standards with respect to certain health care transactions and health information. The first rule establishes standards for the use of electronic signatures and requires the use of uniform standards for common health care transactions, including: - health care claims information; - plan eligibility, referral certification and authorization; - claims status; - plan enrollment and disenrollment; - payment and remittance advice; - plan premium payments; and - coordination of benefits. Second, the Department of Health and Human Services has released standards relating to the privacy of individually identifiable health information. These standards not only require our compliance with rules governing the use and disclosure of protected health information, but they also require us to impose those rules, by contract, on any business associate to whom we disclose information. The Department of Health and Human Services has proposed rules governing the security of health information, but has not yet issued these rules in final form. The Department of Health and Human Services finalized the new transaction standards on August 17, 2000, and we will be required to comply with them by October 16, 2002. The Department of Health and Human Services issued the privacy standards on December 28, 2000, which became effective on April 14, 2001, with a compliance date of April 14, 2003. Once the Department of Health and Human Services has issued the security regulations in final form, affected parties will have approximately two years to be fully compliant. Sanctions for failing to comply with the HIPAA health information practices provisions include criminal penalties and civil sanctions. Management is in the process of evaluating the effect of HIPAA on us. At this time, management anticipates that we will be able to fully comply with those HIPAA requirements that have been adopted. However, management cannot at this time estimate the cost of compliance, nor can we estimate the cost of compliance with standards that have not yet been finalized by the Department of Health and Human Services. Although the new and proposed health information standards are likely to have a significant effect on the manner in which we handle health data and communicate with payors, based on our current knowledge, we believe that the cost of our compliance will not have a material adverse effect on our business, financial condition or results of operations. 13 16 COMPETITIVE CONDITIONS Our nursing facilities compete primarily on a local and regional basis with many long-term care providers, some of whom may own as few as a single nursing center. Our ability to compete successfully varies from location to location and depends on a number of factors, which include: - the number of competing centers in the local market; - the types of services available; - quality of care; - reputation, age and appearance of each center; and - the cost of care in each locality. In general, we seek to compete in each market by establishing a reputation within the local community for quality and caring health services, attractive and comfortable facilities, and providing specialized health care. We also compete with a variety of other companies in providing assisted living services, rehabilitation therapy services and home health care services. Given the relatively low barriers to entry and continuing health care cost containment pressures in the assisted living industry, we expect that the assisted living industry will become increasingly competitive in the future. Increased competition in the future could limit our ability to attract and retain residents, to maintain or increase resident service fees, or to expand our business. EMPLOYEES As of December 31, 2000, we had approximately 54,000 full- and part-time employees. Approximately 6,000 of our employees are salaried and we pay the remainder on an hourly basis. Approximately 2,000 of our employees are members of labor unions. ITEM 2. PROPERTIES Our principal properties and those of our subsidiaries, which are of material importance to the conduct of our and their business, consist of 354 long-term care centers located in 32 states. The centers are predominately single-story structures with brick or stucco facades, dry wall partitions and attractive interior finishes. Common areas of the skilled nursing facilities include dining, therapy, personal care and activity rooms, and resident and visitor lounges, as well as administrative offices and employee lounges. We believe that all of our centers have been well maintained and are suitable for the conduct of our business. For the year ended December 31, 2000, approximately 86 percent of the beds were utilized. 14 17 The following table shows the number and location of centers and beds we operated as of December 31, 2000. Number of Centers ----------------- Assisted Skilled Living Number of Beds ------- ------ -------------- Pennsylvania 46 10 8,146 Florida 36 11 6,005 Ohio 43 6 5,996 Illinois 29 6 4,194 Michigan 26 1 3,490 Texas 19 2 3,122 Maryland 13 8 2,570 California 9 1 1,388 Wisconsin 10 1,154 Indiana 5 1 1,061 Virginia 6 1 978 West Virginia 7 940 South Carolina 7 853 New Jersey 4 4 736 Oklahoma 6 714 Washington 4 483 Kansas 3 466 New Mexico 3 455 Missouri 3 430 Iowa 4 406 Delaware 2 1 347 Colorado 2 300 Kentucky 1 1 264 Georgia 2 257 North Dakota 2 215 Tennessee 1 211 Connecticut 3 180 Nevada 1 180 Utah 1 140 Arizona 1 120 North Carolina 1 120 South Dakota 1 99 ---- ---- -------- 298 56 46,020 ==== ==== ======== We own 332 of these centers, lease 19, and have partnerships in three centers. We operate 56 assisted living facilities with a total of 4,699 beds. Sixteen of our properties are subject to liens that encumber the properties in an aggregate amount of $41,382,000. We lease space for our corporate headquarters in Toledo, Ohio. We also lease space for our outpatient therapy clinics and home health care offices. In addition, we own one hospital in Texas. 15 18 ITEM 3. LEGAL PROCEEDINGS Since May of 1999, we and other related persons and entities have been parties to several actions by or against Genesis Health Ventures, Inc. and its subsidiary, NeighborCare Pharmacy Services, Inc. On or about June 22, 2000, Genesis and NeighborCare filed voluntary petitions for bankruptcy under Chapter 11 of the Bankruptcy Code, which effectively stayed the actions to the extent they had not been stayed already. The status of the various Genesis/NeighborCare lawsuits is as follows: First Action. On May 7, 1999, Genesis filed suit in federal district court in Delaware against us, our wholly owned subsidiary, Manor Care of America, Inc., formerly known as Manor Care, Inc., or MCA, our Chief Executive Officer, Paul A. Ormond, and our Chairman, Stewart Bainum, Jr. The complaint alleges that the defendants fraudulently induced Genesis to acquire, in August 1998, all of the outstanding stock of Vitalink Pharmacy Services, Inc., an approximately 50 percent-owned subsidiary of MCA. The complaint further alleges that the defendants' alleged conduct constituted violations of Section 10(b) of the Securities Exchange Act of 1934, and constituted common law fraudulent misrepresentation and negligent misrepresentation. The suit also alleges that our ownership in a partnership known as Heartland Healthcare Services violates a non-compete provision signed by MCA. The suit seeks compensatory and punitive damages in excess of $100 million and preliminary and permanent injunctive relief enforcing the covenant not to compete. On June 29, 1999, the defendants moved to dismiss or, in the alternative, to stay the lawsuit in its entirety. On March 22, 2000, the court granted the defendants' motion to stay the action in its entirety pending the arbitration discussed below, but denied the motion with respect to the alternative request to dismiss the action. We intend to vigorously defend the lawsuit. Although the ultimate outcome of the case is uncertain, management believes that it is not likely to have a material adverse effect on our financial condition. Second Action. On August 27, 1999, MCA filed a separate action in federal district court in Delaware against Genesis concerning Genesis's 1998 acquisition of Vitalink. MCA's lawsuit charges that Genesis violated Section 11 and Section 12 of the Securities Act of 1933, when Genesis issued approximately $293 million of Genesis Preferred Stock to MCA for MCA's interest in Vitalink. The suit alleges that Genesis misrepresented and/or omitted material facts. MCA seeks, among other things, compensatory damages and recission, which would void MCA's purchase of the Genesis Preferred Stock and require Genesis to return to MCA the consideration that it paid at the time of the Vitalink sale. On November 23, 1999, Genesis moved to dismiss the lawsuit in its entirety. On or about January 18, 2000, Genesis moved to consolidate MCA's lawsuit with the suit that Genesis had filed in Delaware district court on May 7, 1999. On or about September 29, 2000, the court granted in part and denied in part Genesis' motion to dismiss and also denied Genesis' motion to consolidate the lawsuits. On October 6, 2000, MCA advised the court by letter that the automatic stay in bankruptcy--a provision of the bankruptcy laws that prevents creditors from taking collection and other actions against a bankrupt debtor outside of the bankruptcy courts--had stayed MCA's lawsuit. However, pursuant to 11 U.S.C. ss. 108(c), MCA reserved any and all rights it may have concerning the September 29, 2000 order and the MCA litigation, 16 19 including the right to seek clarification and reconsideration of the order, following termination or expiration of the automatic stay. We intend to vigorously prosecute this lawsuit following relief from the bankruptcy stay. Third Action. Additionally, on May 7, 1999, NeighborCare instituted a lawsuit in the Circuit Court for Baltimore City, Maryland against us, MCA and ManorCare Health Services, Inc. seeking damages, preliminary and permanent injunctive relief, and a declaratory judgment related to allegations that the defendants had improperly sought to terminate certain Master Service Agreements between Vitalink, now known as NeighborCare, and ManorCare Health Services, Inc. NeighborCare also instituted arbitration proceedings against the same defendants. These proceedings seek substantially the same relief as sought in the Maryland action with respect to one of the Master Service Agreements at issue in the Maryland action and also certain additional permanent relief with respect to that contract. On May 13, 1999, NeighborCare and the defendants agreed: - to consolidate the Maryland action into the arbitration; - to dismiss the Maryland action with prejudice as to jurisdiction and without prejudice as to the merits; and - to stay termination of the agreements at issue until a decision can be reached in the arbitration. NeighborCare has since dismissed the Maryland action and consolidated certain of those claims into the arbitration by filing an amended demand for arbitration. On June 15, 1999, the defendants filed an answer and counterclaim, denying the material allegations in the amended demand. They subsequently moved to dismiss three of the six claims alleged in the amended demand. On or about May 17, 2000, the arbitrator, in response to the defendants' motion, dismissed two of NeighborCare's six claims. On or about May 23, 2000, based upon NeighborCare's representation that it would likely file for bankruptcy before it could complete the arbitration hearing set for the weeks of June 12 and July 3, 2000, the Arbitrator vacated the hearing dates. NeighborCare's June 22, 2000 bankruptcy effectively stayed the matter. The defendants then asked the bankruptcy court to enforce the arbitration clause and relieve them from the automatic stay to the extent necessary to complete the arbitration. NeighborCare, in turn, opposed this motion and filed its own motion to assume the Master Service Agreements in the bankruptcy. On or about February 6, 2001, the bankruptcy court granted the defendants' motion to enforce the arbitration clause and for relief from the automatic stay, returning the matter to arbitration for hearing. The bankruptcy court deferred consideration of NeighborCare's motion to assume the Master Service Agreements until the arbitration is complete. The arbitration hearing is scheduled to begin on July 30, 2001. We intend to vigorously defend the arbitration demand and to vigorously prosecute our counterclaim following relief from the automatic stay. Although we cannot predict the ultimate outcome of the arbitration, management believes that it is not likely to have a material adverse effect on our financial condition. 17 20 Additional NeighborCare Complaint. On July 26, 1999, NeighborCare filed an additional complaint in the Circuit Court for Baltimore County, Maryland against Omnicare, Inc. and Heartland Healthcare Services, Inc. seeking injunctive relief and compensatory and punitive damages. Heartland Healthcare Services, Inc. is a partnership between us and subsidiaries of Omnicare. The complaint includes counts for tortious interference with Vitalink's purported contractual rights under the Master Service Agreements. On October 4, 1999, the defendants moved to dismiss or, in the alternative, to stay the lawsuit in its entirety. On November 12, 1999, the court stayed the matter pending the arbitration. Although we cannot predict the ultimate outcome of the case, management believes that it is not likely to have a material adverse effect on our financial condition. Fourth Action. On December 22, 1999, MCA filed suit in federal court in Toledo, Ohio against Genesis; Cypress Group, L.L.C.; TPG Partners II, L.P.; and Nazem, Inc. The complaint alleges that the issuance by Genesis of its Series H and Series I Preferred Stock violated the terms of the Series G Preferred Stock and the terms of a rights agreement entered into between Genesis and MCA in connection with the Vitalink transaction. On February 29, 2000, the defendants moved to dismiss the case. That motion was pending before the court as of the time the matter was automatically stayed by Genesis' June 22, 2000 bankruptcy filing. See the "Commitments and Contingencies" section on pages 31-32 under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of litigation related to environmental matters and patient-care related claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 18 21 PART II ITEM 5. MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS Our common stock is listed under the symbol "HCR" on the New York Stock Exchange, which is the principal market on which the stock is traded. NYSE MARKET PRICE HISTORY LOW HIGH 1999 First Quarter.................... $21.9375 $33.5000 Second Quarter................... $22.0000 $30.2500 Third Quarter.................... $15.6875 $24.7500 Fourth Quarter................... $12.7500 $21.2500 2000 First Quarter.................... $8.2500 $17.3750 Second Quarter................... $6.5000 $13.7500 Third Quarter.................... $6.8750 $16.1875 Fourth Quarter................... $13.4375 $21.1875 We have not declared or paid any cash dividends on our common stock. On January 31, 2001, we had 3,777 stockholders of record. Approximately 93% of our outstanding shares were registered in the name of The Depository Trust Company, or Cede & Co., which held these shares on behalf of several hundred brokerage firms, banks and other financial institutions. We estimate that the shares attributed to these financial institutions represent the interests of nearly 20,000 beneficial owners. 19 22 ITEM 6. SELECTED FINANCIAL DATA FIVE-YEAR FINANCIAL HISTORY
2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (Dollars in thousands, except per share and Other Data) RESULTS OF OPERATIONS Revenues ............................................... $ 2,380,578 $ 2,135,345 $ 2,209,087 $ 2,228,534 $ 2,022,710 Expenses: Operating ............................................ 2,016,258 1,697,459 1,715,575 1,760,923 1,598,826 General and administrative ........................... 104,027 89,743 96,017 99,881 100,971 Depreciation and amortization ........................ 121,208 114,601 119,223 112,723 99,165 Provision for restructuring charge, merger expenses, asset impairment and other related charges .... 14,787 278,261 26,300 ----------- ----------- ----------- ----------- ----------- 2,241,493 1,916,590 2,209,076 1,973,527 1,825,262 ----------- ----------- ----------- ----------- ----------- Income from continuing operations before other income (expenses), income taxes, and minority interest ...... 139,085 218,755 11 255,007 197,448 Other income (expenses): Interest expense ..................................... (60,733) (54,082) (46,587) (56,805) (47,799) Impairment of investments ............................ (20,000) (274,120) Equity in earnings of affiliated companies ........... 812 1,729 5,376 2,806 1,500 Other income ......................................... 2,505 5,322 16,635 23,289 11,353 Interest income from advances to discontinued lodging segment ................................... 16,058 20,314 ----------- ----------- ----------- ----------- ----------- Total other expenses, net ........................... (77,416) (321,151) (24,576) (14,652) (14,632) ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before income taxes and minority interest ................... 61,669 (102,396) (24,565) 240,355 182,816 Income taxes (benefit) ................................. 21,489 (47,238) 21,597 85,064 64,177 Minority interest income ............................... 1,125 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations ............... $ 39,055 $ (55,158) $ (46,162) $ 155,291 $ 118,639 =========== =========== =========== =========== =========== Earnings per share - Income (loss) from continuing operations: Basic ................................................ $ .38 $ (.51) $ (.42) $ 1.44 $ 1.10 Diluted .............................................. $ .38 $ (.51) $ (.42) $ 1.40 $ 1.06 Manor Care of America, Inc. dividends per share ........ $ .04 $ .09 $ .09 FINANCIAL POSITION Total assets ........................................... $ 2,358,468 $ 2,289,777 $ 2,722,727 $ 2,568,368 $ 2,382,038 Long-term debt ......................................... 644,054 687,502 693,180 751,281 731,346 Shareholders' equity ................................... 1,012,729 980,037 1,199,168 1,163,029 994,690 OTHER DATA (UNAUDITED) Number of skilled nursing and assisted living facilities 354 346 360 335 323
The financial results represent the combined results of Health Care and Retirement Corporation, or HCR, and Manor Care of America, Inc., or MCA, for all periods presented. For 1998 and forward, the financial information was based on a year ended December 31. For 1997 and 1996, HCR's financial information for the years ended December 31, 1997 and 1996 was combined with MCA's financial information for the 12 months ended November 30, 1997 and 1996, respectively, due to different fiscal year ends. We changed our method of accounting for our investment in In Home Health, Inc., or IHHI, over the past five years due to changes in ownership or control. See Note 1 to our consolidated financial statements for further discussion. We consolidated IHHI's financial results in 2000, 1997 and 1996 and recorded them under the equity method in 1999 and 1998. IHHI's results are not included on the individual line items when recording under the equity method. For a consistent trend, you 20 23 must add the amounts above with IHHI's revenues of $84.3 million for 1999 and $87.7 million for 1998, and IHHI's operating expenses of $72.2 million for 1999 and $83.7 million for 1998. On November 1, 1996, MCA completed the spin-off of its lodging segment, and the financial results above reflect this segment as a discontinued operation in 1996. MCA recorded interest income related to cash advances provided to the discontinued lodging segment for the acquisition and renovation of lodging assets. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - OVERVIEW On September 24, 1998, the shareholders of Health Care and Retirement Corporation, or HCR, and the shareholders of the former Manor Care, Inc., or MCA, now known as Manor Care of America, Inc., separately approved the merger of MCA into a subsidiary of HCR, effective September 25, 1998. As a result, MCA became a wholly owned subsidiary of HCR and HCR changed its name to HCR Manor Care, Inc. and then to Manor Care, Inc. in 1999. We accounted for the merger by the pooling-of-interests method. Accordingly, our consolidated financial statements give retroactive effect to the merger and include the combined operations for all periods. We provide a range of health care services, including skilled nursing care, assisted living, subacute medical and rehabilitation care, rehabilitation therapy, home health care, hospice care and management services for subacute care and rehabilitation therapy. The most significant portion of our business relates to skilled nursing care and assisted living. At December 31, 2000, we operated 298 skilled nursing facilities and 56 assisted living facilities in 32 states with more than 60 percent of our facilities located in Ohio, Michigan, Illinois, Pennsylvania and Florida. Within some of our centers, we have medical specialty units, which provide subacute medical and rehabilitation care and/or Alzheimer's care programs. Some of our assisted living facilities operate under the brand names "Arden Courts" and "Springhouse." The Arden Courts facilities focus specifically on providing care to persons suffering from early to middle-stage Alzheimer's disease and related memory impairment. The Springhouse facilities serve the general assisted living population of frail elderly. Our assisted living facilities provide housing, personalized support and health care services in a non-institutional setting designed to address the needs of the elderly or Alzheimer's patients. Expansion Growth in our long-term care segment continued as we constructed new facilities. The table below details the number of skilled nursing and assisted living facilities and beds that we built or sold during the past three years. We have not included in the table (1) the sixteen facilities that we sold to either Alterra or the joint venture that were not open at the time of sale or (2) any activity related to managed facilities. 21 24
2000 1999 1998 FACILITIES BEDS FACILITIES BEDS FACILITIES BEDS Skilled nursing facilities: Built/Acquired..................... -- -- 3 414 2 240 Closed/Lease expired............... 2 349 -- -- -- -- Assisted living facilities: Built/Acquired..................... 12 728 12 752 26 1,680 Sold/Leased to others.............. -- -- 31 2,602 2 185
In 1998 and 1999, we owned 41 percent of the common stock of In Home Health, Inc., or IHHI, and accounted for our investment under the equity method. In June 2000, we increased our ownership to 61 percent and changed our accounting to consolidation. Retroactive to January 1, 2000, we began consolidating IHHI's results and deducting the minority owners' share of earnings on an after-tax basis. On December 31, 2000, pursuant to a merger agreement approved by the IHHI stockholders, we purchased the remaining shares of IHHI to increase our ownership to 100 percent. Medicare Legislation In the last three years, major changes in Medicare legislation affected our results. The Balanced Budget Act of 1997, or the Budget Act, initialized a new Medicare prospective payment system on July 1, 1998. The new payment system became effective for different types of health care providers (hospitals, skilled nursing, home health, etc.) at different times and at different dates for different nursing facilities. Although we believed that the prospective payment system would ultimately be a net positive for our skilled nursing business, this was not believed to be true in 1998 for our other businesses and customers. MileStone Healthcare, Inc., one of our wholly owned subsidiaries, provides management services to skilled nursing, subacute care and acute rehabilitation programs, primarily in hospitals. MileStone lost certain contracts during the second and third quarters of 1998 that have not been replaced due to the impact of the prospective payment system on its customers. In addition, the Budget Act had an unfavorable impact on home health care reimbursement because of an interim payment system that was effective in October 1997 for IHHI and in January 1998 for our home health subsidiary. This interim payment system reduced reimbursement rates by revising the rate ceilings and establishing an annual payment limitation per individual. Accordingly, we have been focusing on reducing our costs to offset these revenue reductions. The prospective payment system replaced the interim payment system for home health reimbursement in October 2000. However, a reduction in the base payment rate has been delayed by BBRA 99, which we discuss in the "Business" section. We do not believe that the impact of the prospective payment system on our home health business will have a significant effect on our results. In April 1998, Medicare implemented reimbursement ceilings for speech and occupational therapy salaries, which reduced reimbursement to our rehabilitation business. See our discussion below for the impairment charges in 1998 on these businesses. 22 25 YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 As we explained in the overview, we changed the accounting for our investment in IHHI retroactive to January 1, 2000. In the table below, we include IHHI's actual financial results in our revenues and expenses for 1999 so that you may compare these numbers to our 2000 revenues and expenses in a more meaningful way. The narrative that follows includes IHHI in 1999 only for these four line items in the table. Percent 2000 1999 Change ---- ---- ------ (In thousands) Revenues............................... $2,380,578 $2,219,651 7% Expenses: Operating............................ 2,016,258 1,769,706 14% General and administrative........... 104,027 96,749 8% Depreciation and amortization........ 121,208 116,079 4% Revenues. Our revenues increased $160.9 million, or 7 percent, from 1999 to 2000. By excluding the facilities we sold or leased in 1999, our revenues increased $181.9 million, or 8 percent. Our revenues from skilled nursing and assisted living facilities that are included in 2000 operations increased $147.2 million, or 8 percent. This increase was due to increases in rates--$123.0 million and increases in bed capacity--$33.1 million, which increases were partially offset by a decrease in occupancy--$8.9 million. Our revenues from the combined home health businesses increased $41.1 million primarily because of an increase in hospice services and home health visits. Our rate increases for the skilled nursing and assisted living facilities relate to private pay, Medicaid and Medicare sources. The Medicare rate increase related to BBRA 99 provisions. Our bed capacity grew between 1999 and 2000 primarily because we opened eleven assisted living facilities in 2000, and added other skilled nursing beds. Our occupancy levels for facilities in operation in 2000 were 87 percent for 1999 compared with 86 percent for 2000. When excluding start-up facilities, our occupancy levels were 87 percent for both years. Our occupancy levels for skilled nursing facilities were 87 percent for both years. In addition, our skilled nursing occupancy increased to 88 percent in the fourth quarter of 2000. The quality mix of revenue from Medicare, private pay and insured patients that related to skilled nursing and assisted living facilities and rehabilitation operations remained constant at 67 percent for 1999 and 2000. Operating Expenses. Our operating expenses in 2000 increased $246.6 million, or 14 percent, compared with 1999. If we exclude facilities sold or leased in 1999, operating expenses increased $265.4 million, or 15 percent. Operating expenses from our home health businesses increased $36.5 million, which is consistent with the revenues increase mentioned above. Operating expenses from skilled nursing and assisted living facilities increased $208.4 million. We attribute the largest portion of this skilled nursing and assisted living operating expense increase to labor costs and temporary staffing in the amount of $88.8 million. An additional $57.0 million of the skilled nursing and assisted living operating expense increase resulted from our recording an increased general and professional liability expense in 23 26 2000 compared with 1999. This increase related to a change in estimate incorporating industry experience. Despite our continuing good quality record and generally low historical claims experience, we decided to obtain independent evaluations of our growing potential liability for patient-related litigation in response to the dramatic increases in the average cost per claim and volume of lawsuits filed against us and the long-term care industry in general. We adjusted our expenses to reflect the additional litigation and settlement costs we could incur if there is no change in the current environment, particularly in the state of Florida. General and professional liability claims for the long-term care industry, especially in the state of Florida, have become increasingly expensive. The average cost of a claim in Florida in 1999 was two and one-half times higher than the rest of the country and increased to three times higher in 2000. Florida industry providers experienced three times the number of claims in 1999 and four times the number of claims in 2000 compared to the national average. We, along with other affected providers, are actively pursuing legislative and regulatory changes, that include tort reform. However, we cannot assure you that legislative changes will be made, or that any such changes will have a positive impact on the current trend. General and Administrative Expenses. Our general and administrative expenses, which approximated 4 percent of revenues, increased $7.3 million compared with 1999, primarily as a result of legal expenses, other professional services and general cost increases. Depreciation and Amortization. Our depreciation and amortization increased $5.1 million primarily due to computer software amortization. Interest Expense. Although our average debt outstanding has declined, our interest expense increased $6.7 million compared with the prior year due to an increase in interest rates. Impairment of Investments. On April 26, 1998, Vitalink Pharmacy Services, Inc. entered into an Agreement and Plan of Merger with Genesis Health Ventures, Inc. Pursuant to the Vitalink merger agreement, which was effective on August 28, 1998, MCA and one of its subsidiaries received 586,240 shares of Genesis Series G Cumulative Convertible Preferred Stock valued at $293.1 million as consideration for all of MCA's common stock of Vitalink. After a third-party valuation, we reduced the carrying value of our Genesis stock investment by $274.1 million in 1999 because of Genesis' inability to pay dividends and its operating performance. Because of Genesis' bankruptcy filing on June 22, 2000, we reduced the carrying value of our investment by $19.0 million to zero and wrote off a separate Genesis-related investment of $1.0 million in 2000. Dividend Income. The Genesis Series G Preferred Stock bears cash dividends at the initial rate of 5.9375 percent. In 1999, we recorded $4.4 million of dividend income each quarter and then fully reserved the dividends at the end of the year due to non-payment. Because Genesis did not pay cumulative dividends for four consecutive quarters, all future dividends beginning in 2000 are payable in additional shares of Genesis Series G Preferred Stock. Based on Genesis' inability to pay cash dividends and its bankruptcy filing, we fully reserved the dividends of $17.4 million in 2000. We own 100 percent of the IHHI preferred stock, which has a 12 percent annual dividend. As a result of changing the accounting for our investment in IHHI in 2000, we eliminated the preferred 24 27 stock dividend of $2.4 million in consolidation. In 1999, however, we fully reported the dividend on the line item, "Other income." Minority Interest Income. The minority interest income for 2000 represented the minority owners' share of IHHI's net income. In 1999, we did not consolidate IHHI's financial results with our financial results. Instead, we recorded our share of IHHI's earnings on the line item, "Equity in earnings of affiliated companies." Extraordinary Item. During 1999, we sold assets for a net after tax gain of $11.5 million. We recorded the net gain as an extraordinary item, as is required after a business combination accounted for as a pooling of interests. We sold 26 facilities to Alterra for $154.5 million, realizing a gain of $6.1 million--$3.7 million after tax. We also exercised a purchase option on MCA's corporate headquarters in Gaithersburg, Maryland, and sold the property, realizing net proceeds of $24.5 million and a $10.1 million gain--$6.1 million after tax. Inflation. We believe that inflation has had no material impact on our results of operations. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Revenues. Our revenues decreased $73.7 million, or 3 percent, from the prior year. Revenues from skilled nursing and assisted living facilities decreased $76.1 million, or 4 percent, due to decreases in rates--$64.9 million and occupancy--$65.2 million, which were partially offset by an increase in bed capacity--$54.0 million. We primarily attribute the decline in rates to transitioning onto the Medicare prospective payment system in 1999. The occupancy level for all facilities including start-up facilities was 89 percent in 1998 compared with 86 percent in 1999. Our skilled nursing facilities' occupancy declined from 89 percent in 1998 to 87 percent in 1999, reflecting a decline in Medicare patients and private pay patients. Our bed capacity grew between 1999 and 2000 primarily because we opened 3 skilled nursing and 12 assisted living facilities in 1999 and 2 skilled nursing and 26 assisted living facilities in 1998, our divestiture of 31 assisted living facilities in 1999 partially offset our capacity. The quality mix of revenue from Medicare, private pay and insured patients related to skilled nursing and assisted living facilities and rehabilitation operations declined from 71 percent in 1998 to 67 percent in 1999. This decline was primarily because Medicare rates and number of Medicare patients decreased due to the Medicare prospective payment system, and the number of private pay patients also declined. Operating Expenses. Our operating expenses decreased $18.1 million, or 1 percent, compared to 1998. Operating expenses from skilled nursing and assisted living facilities decreased $31.2 million, or 2 percent. If we exclude the effect of start-up facilities in 1999 and 1998, operating expenses for the mature facilities decreased $28.1 million. We attribute the decrease to a decline in ancillary costs as we found alternate methods of service that resulted in lower costs. The decrease was partially offset by an increase in labor costs, primarily as a result of temporary 25 28 staffing in certain markets. Operating expenses increased $12.4 million in 1999 because of start-up losses related to our medical transcription business. General and Administrative Expenses. Our general and administrative expenses decreased $6.3 million in 1999 from 1998. By excluding the net gains from the sale of assets in 1998, general and administrative expenses decreased $11.7 million as a result of synergies obtained from combining HCR and MCA. In 1998, we included in general and administrative expenses, a gain of $7.4 million from the sale of three former MCA corporate office buildings and a loss of $2.0 million from the sale of two Springhouse facilities. Depreciation and Amortization. Depreciation decreased $2.2 million from the prior year because we sold some of our property and equipment as previously mentioned. Amortization decreased $2.4 million because we wrote down assets in 1998. Restructuring Charge, Merger Expenses, Asset Impairment and Other Related Charges. The table and narrative below disclose the components of the restructuring charge, merger expenses, asset impairment and other charges for 1998 and 1999. In 2000, we paid the liability outstanding at December 31, 1999 related to these charges.
Cash 1998 1998 Liability 1999 1999 Liability Non-cash Charge Activity At 12/31/98 Charge Activity At 12/31/99 -------- ------ -------- ----------- ------ -------- ----------- (In thousands) MCA planned spin-off: Employee benefits.............. cash $5,917 $(5,300) $617 $219 $(836) Transaction costs.............. cash 6,805 (6,805) Write-down of assets........... non-cash 778 (778) ------- -------- ------- ------- -------- ------- 13,500 (12,883) 617 219 (836) ------- -------- ------- ------- -------- ------- HCR and MCA transaction: Employee benefits.............. cash 41,028 (12,734) 28,294 (27,184) $1,110 Deferred compensation.......... non-cash 11,867 (11,867) Other exit costs............... cash 4,234 4,234 (3,314) 920 Merger transaction costs....... cash 21,122 (21,122) Write-down of assets........... non-cash 56,468 (56,468) ------- -------- ------- ------- -------- ------- 134,719 (102,191) 32,528 (30,498) 2,030 ------- -------- ------- ------- -------- ------- Other costs: Amortization................... non-cash 7,863 (7,863) 10,554 (10,554) Duplicate costs................ cash 5,725 (5,725) 2,328 (2,328) Other.......................... cash 1,685 (685) 1,000 (1,000) Asset impairment unrelated to merger...................... non-cash 114,769 (114,769) 1,686 (1,686) ------- -------- ------- ------- -------- ------- 130,042 (129,042) 1,000 14,568 (15,568) ------- -------- ------- ------- -------- ------- Total.......................... $278,261 $(244,116) $34,145 $14,787 $(46,902) $2,030 ======== ========= ======= ======= ======== ======
In 1998, we recorded a $278.3 million charge related to restructuring, merger expenses, asset impairment and other related charges. One component pertains to MCA's $13.5 million charge in connection with its plan to separate its skilled nursing facility management, assisted living and home health businesses from its skilled nursing facility ownership, real estate and health care facility development business. MCA recorded this charge in the second quarter of 1998. Because of the transaction with HCR, the separation of MCA's businesses did not occur. 26 29 Charges related to the HCR and MCA transaction totaled $134.7 million. In connection with the merger, we developed a plan to integrate the businesses of both companies, which included closing MCA's corporate office in Gaithersburg, Maryland, and realigning the operating divisions from eight to six. The remaining $130.0 million of the charge related to other unusual costs as a result of the merger and asset impairment unrelated to the restructuring. In 1999, we recorded a $14.8 million charge. The major portion of this charge related to the amortization of MCA's software applications before the final transition to HCR's software applications. We amortized the carrying value of the software over its estimated useful life ranging from six to nine months. We recorded the outstanding liability relating to all restructuring and other charges in other accrued liabilities. In MCA's planned spin-off of its non-health care businesses, it terminated a total of 208 employees. The employees did not receive a lump-sum severance payment upon termination, but rather received their severance as biweekly payments through 1999. The transaction costs primarily included financial advisory, legal, and accounting fees and expenses, and printing and mailing costs. The employee benefit costs in the transaction between HCR and MCA related to severance payments and retention bonuses for 505 corporate employees and 26 field employees of MCA who were terminated. At December 31, 1998, 364 employees, who received termination notices, were no longer working for us, but we continued to pay 269 of these employees their severance payments on a biweekly basis. The majority of the MCA employees, who received termination notices, and were working for us at December 31, 1998 had termination dates in the first quarter of 1999. At December 31, 1999, all but three employees who received termination notices had left Manor Care. The cash severance payments continued through 2000. We also recorded deferred compensation expense of $11.9 million because restrictions on HCR's restricted stock lapsed due to the merger. The other exit costs pertain to various lease agreements and hardware and software contracts that were terminated in 1999 or 2000. The merger transaction costs primarily included financial advisory, legal, and accounting fees and expenses, and printing and mailing costs. We identified two groups of assets that were impaired as a result of the merger. We have integrated the information systems of the companies, which resulted in the write-off of the net book value--$45.2 million--of MCA's computer hardware and software that was no longer being utilized by us as of December 31, 1998. We have abandoned some construction development projects due to a change in strategy, at a cost of $11.3 million excluding the land value. We recorded other unusual costs as a result of the merger. Certain general and administrative costs of $5.7 million in 1998 and $2.3 million in 1999 represented salaries and benefits for employees performing duplicate services in Toledo or Gaithersburg. In 1998, we also recorded a charge for impairment of certain assets based on our quarterly review of long-lived and intangible assets. Management determined that MileStone's intangible assets with a net book value of $52.5 million were impaired based on the effects of changes in the Medicare reimbursement system discussed above. Therefore, we reduced the book value by $44.6 million to the assets' estimated fair value. We determined the fair value based on a multiple of projected annual earnings, and adjusted the remaining useful life from 38 years to 18 years. 27 30 The asset impairment of our home health businesses was also largely related to the Medicare reimbursement changes discussed above. Based on the impact of the interim payment system in 1998 and the anticipated effects of the prospective payment system after October 2000, management determined that the expected future earnings did not support the carrying value of these assets. Therefore, we reduced the book value of the related goodwill by $22.0 million to zero in 1998. We determined the estimated fair value of this goodwill based on a multiple of projected annual earnings. Management determined that the fixed assets for five skilled nursing facilities and two assisted living facilities were impaired because the carrying value exceeded the undiscounted cash flows. The skilled nursing facilities were generating negative cash flows, and we wrote off the fixed assets except for the land. We determined the estimated fair value of the assisted living facilities based on a multiple of projected annual earnings. The fixed assets of the skilled nursing and assisted living facilities had a carrying value of $26.8 million and we wrote them down by $19.9 million in 1998. We determined that three of our vision management businesses had impaired assets. The first business was a start-up business in 1995 that had $4.6 million in advances and $1.0 million in fixed assets. Because the business had not been able to generate cash flows to cover its expenses, we wrote off the assets in 1998. We made advances to the second business of $1.5 million, which we wrote down by $1.1 million in 1998. The third business had a 40-year management contract with a carrying value of $11.8 million. Based on a multiple of projected annual earnings, we determined that the estimated fair value was $3.4 million and reduced the remaining estimated useful life from 36 years to 16 years. The primary reason for the decrease in projected annual earnings was declining reimbursement. Management determined that the intangible assets for six rehabilitation businesses were impaired because the carrying value exceeded the undiscounted cash flows. The businesses were generating negative cash flows, and we had exhausted all measures to return the operations to a level of profitability. We reduced the book value of the related intangible assets from $8.4 million to zero in 1998. Interest Expense. Our interest expense increased $7.5 million compared with 1998 due to an increase in average debt outstanding under the bank credit facilities and a decrease in the amount of interest capitalized for construction projects. Dividend Income. We accrued $5.8 million of dividend income for the Genesis Series G Preferred Stock in 1998 for four months, which we recorded on the line item, "Other income." Genesis paid these dividends in 1999. We continued to accrue dividend income of $4.4 million each quarter in 1999. At December 31, 1999, Genesis had failed to pay dividends on the preferred stock for four consecutive quarters. After a third-party valuation, we recorded a reserve of $17.4 million for accrued 1999 dividends and reduced the carrying value of our preferred stock investment by $274.1 million because of Genesis' inability to pay dividends and its current operating performance. Income Taxes. The income taxes recorded in 1999 included the tax effects of the impairment of the Genesis investment and an adjustment of our prior years' estimated tax liabilities. 28 31 The income taxes recorded in 1998 included the tax effects of the provision for restructuring charge, merger expenses, asset impairment and other related charges, some of which were not deductible for income tax purposes. The effective tax rate, excluding these items, was 39.5 percent in 1999 compared with 36.1 percent in 1998. Our effective tax rate increased because our deductions for corporate-owned life insurance and our dividend received deduction declined and state and local income taxes increased. Discontinued Operations. During 1998, we recorded a gain of $99.8 million, or $59.9 million after tax, from converting our Vitalink common stock to Genesis Series G Preferred Stock. We recorded the financial results of Vitalink as income from discontinued pharmacy operations. Extraordinary Item. During 1998, we recorded an extraordinary loss from the early extinguishment of debt totaling $31.7 million, or $19.0 million after tax. On September 25, 1998, we repaid the outstanding debt under HCR's and MCA's prior credit arrangements. When we repaid the debt, we terminated three interest rate swaps with a total notional amount of $350 million, which were designated as a hedge of MCA's debt. The extraordinary loss primarily related to the termination of these swaps but also included the unamortized debt issue costs. Cumulative Effect. During 1998, we elected to adopt Statement of Position 98-5, "Reporting on the Costs of Start-up Activities," which requires start-up costs to be expensed as incurred. The cumulative effect of expensing start-up costs capitalized as of January 1, 1998, was $9.4 million, or $5.6 million after tax. Inflation. We believe that inflation has had no material impact on our results of operations. FINANCIAL CONDITION - DECEMBER 31, 2000, AND 1999 Our December 31, 2000 balance sheet included the balances of IHHI due to consolidation as of January 1, 2000. The most significant IHHI line items were current assets of $34.5 million, which included receivables of $29.3 million, and current liabilities of $27.6 million. Property and equipment increased $26.9 million in 2000, primarily because we added $116.9 million of property and equipment and transferred $19.2 million from receivables for facilities purchased from the development joint venture with Alterra. These additions and transfers were partially offset by depreciation of $111.2 million. Net intangible assets of $102.7 million at December 31, 2000 include $80.6 million of goodwill related to numerous acquisitions over the past nine years. When we acquired IHHI in 2000, we recorded $13.0 million of goodwill. Accrued insurance liabilities increased $64.9 million to $107.8 million at December 31, 2000, with $42.6 million classified as other long-term liabilities. The increase resulted primarily from the accrual for general and professional liabilities, as we discussed previously. 29 32 NEW ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which was postponed in Statement No. 137 and is now effective January 1, 2001. This statement requires us to recognize all derivatives on the balance sheet at fair value. Because we currently do not use derivatives, management believes that the adoption of this statement will have no effect on our earnings or our financial position. CAPITAL RESOURCES AND LIQUIDITY During 2000, we satisfied our cash requirements from cash generated from operating activities. Cash flows from operating activities were $210.1 million for 2000, an increase of $73.0 million from 1999. Liabilities increased because of the additional accrual for general and professional liability claims discussed previously. We used the cash principally for capital expenditures, to acquire businesses and to repay debt. Expenditures for property and equipment during 2000 were $116.9 million, which included $51.8 million to construct new facilities. We expect planned capital expenditures in 2001, excluding acquisitions, to approximate $125 million, of which 50 percent relates to renovations and capital improvements to our long-term care facilities. As part of our diversification into other health care services, we paid $14.0 million for the acquisition of IHHI and paid $8.3 million for the acquisition of various businesses and contingent consideration for prior years' acquisitions. Payment of long-term debt of $18.6 million included a prepayment of $12.5 million. We have a five-year, $500 million credit agreement and a 364-day, $200 million credit agreement with a group of banks. At December 31, 2000, outstanding borrowings aggregated $452 million under the five year agreement and $155 million under the 364 day agreement for a total of $607 million. We plan to annually refinance the 364 day agreement unless longer term financing becomes available. At December 31, 2000, after consideration of usage for letters of credit, the remaining credit availability under the combined agreements totaled $66.7 million. On May 4, 1999, our board of directors authorized us to purchase up to $200 million of our common stock through December 31, 2000. On February 8, 2000, the board authorized an additional $100 million through December 31, 2001. We purchased 440,000 shares in 2000 for $6.2 million and a total of 9.1 million shares for $186.5 million since May 1999. We may use the shares for internal stock option and 401(k) match programs and for other uses, such as possible future acquisitions. We believe that our cash flow from operations will be sufficient to cover debt payments, future capital expenditures and operating needs. It is likely that we will pursue growth from acquisitions, partnerships and other ventures, that we would fund from excess cash from operations, credit available under the bank credit agreement and other financing arrangements that are normally available in the marketplace. 30 33 COMMITMENTS AND CONTINGENCIES As of December 31, 2000, we had contractual commitments of $8.4 million relating to our internal construction program. We had total letters of credit of $32.9 million at December 31, 2000, that benefit certain third-party insurers and bondholders of certain industrial revenue bonds, and 89 percent of these letters of credit relate to recorded liabilities. We had obligations under non-cancelable operating leases totaling $80.4 million at December 31, 2000. Joint Venture. In 1999, we, along with Alterra and the development joint venture jointly and severally guaranteed a $200 million revolving credit agreement, which was to mature September 30, 2002. Together with Alterra, we reduced the line of credit to $60 million in March 2000. In January 2001, we and Alterra further reduced the line of credit to $57 million and adjusted the maturity date to June 29, 2001. We and Alterra each have a 50 percent interest in the development joint venture, which is the 10 percent owner and managing owner or partner in the various project companies and partnerships that are entitled to borrow under the credit agreement. There was $57 million of guaranteed debt outstanding under the revolving credit agreement at December 31, 2000. The joint venture used the funds to construct and support start-up working capital for assisted living residences. We and Alterra are undertaking efforts to sell the facilities. The joint venture will repay the debt upon the sale of each facility. Although it is impossible to determine the ultimate results of the sale of these facilities, we do not presently anticipate any loss associated with the guarantee of the debt related to these properties. Beginning January 1, 2001, we will record 50 percent of the joint venture's expected losses as compared to approximately 10 percent in 2000 due to the elimination of third-party equity. We anticipate our share of net losses to be approximately $1.0 million per quarter through June 2001. Acquisition Agreements. Certain acquisition agreements provide for additional consideration to be paid contingent upon the future financial results of the businesses. The maximum contingent consideration aggregates $14.9 million and will, if earned, be paid over the next five years and treated as additions to the purchase price of the businesses. Environmental Liabilities. One or more subsidiaries or affiliates of MCA have been identified as potentially responsible parties in a variety of actions relating to waste disposal sites that allegedly are subject to remedial action under the federal Comprehensive Environmental Response Compensation Liability Act, or CERCLA, and similar state laws. CERCLA imposes retroactive, strict joint and several liability on potentially responsible parties for the costs of hazardous waste clean-up. The actions arise out of the alleged activities of Cenco, Incorporated and its subsidiary and affiliated companies. Cenco was acquired in 1981 by a wholly owned subsidiary of MCA. The actions allege that Cenco transported or generated hazardous substances that came to be located at the sites in question. Environmental proceedings may involve owners and/or operators of the hazardous waste site, multiple waste generators and multiple waste transportation disposal companies. These proceedings involve efforts by governmental entities or private parties to allocate or recover site investigation and clean-up costs, which costs may be substantial. We cannot quantify with precision the potential liability exposure for currently pending environmental claims and litigation, without regard to insurance coverage, because of the inherent uncertainties of litigation and because the ultimate cost of the remedial actions for some of the waste disposal sites where MCA is 31 34 alleged to be a potentially responsible party has not yet been determined. Based upon our current assessment of the likely outcome of the actions, we believe that our future environmental liabilities will be approximately $22.5 to $28 million. We have received or expect to receive between $18.0 million and $23.5 million of insurance proceeds, depending upon the ultimate liabilities, which will offset some of our potential liability. Corporate-owned Life Insurance. Legislation phased out interest deductions on certain policy loans related to corporate-owned life insurance as of January 1, 1999. We have recorded a cumulative reduction to income tax expense of approximately $34 million resulting from interest deductions for tax periods prior to 1999. While the Internal Revenue Service has not asserted any claim challenging our corporate-owned life insurance interest expense deductions, the IRS has challenged other taxpayers' corporate-owned life insurance interest deductions and has prevailed in certain lower court decisions. We intend to vigorously defend our right to deduct the entire amount of these interest payments, were the IRS to challenge these deductions. However, we cannot assure you that we would ultimately be able to deduct these amounts. Furthermore, if we owe additional taxes, we may have to pay interest on the additional taxes and possibly penalties. We are party to various other legal matters arising in the ordinary course of business, including patient care-related claims and litigation. We believe that the resolution of such matters will not result in liability materially in excess of established accounting accruals. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This report includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. We identify forward-looking statements in this report by using words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "may be," "objective," "plan," "predict," "project," and "will be" and similar words or phrases, or the negative thereof. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by us in those statements include, among others, the following: - our existing and future debt which may affect our ability to obtain financing in the future or compliance with current debt covenants; - integration of acquired businesses; - changes in Medicare, Medicaid and certain private payors' reimbursement levels; - existing government regulations and changes in, or the failure to comply with, governmental regulations; - changes in, or the failure to comply with, regulations governing the transmission and privacy of health information; - state regulation of the construction or expansion of health care providers; 32 35 - legislative proposals for health care reform; - competition; - the ability to attract and retain qualified personnel; - the failure to comply with occupational health and safety regulations; - changes in the treatment of interest deductions on certain policy loans related to corporate-owned life insurance; - changes in current trends in the cost and volume of general and professional liability claims; - the ability to enter into managed care provider arrangements on acceptable terms; - litigation; - a reduction in cash reserves and shareholders' equity upon our repurchase of our stock; and - an increase in senior debt or reduction in cash flow upon our purchase or sale of assets. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 33 36 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Changes in U.S. interest rates expose us to market risks inherent with derivatives and other financial instruments. We are not a party to any material derivative financial instruments. Our interest expense is most sensitive to changes in the general level of U.S. interest rates applicable to our U.S. dollar indebtedness. To lessen the impact of fluctuations in variable interest rates, we could, at our option, convert to fixed interest rates by either refinancing variable rate debt with fixed rate debt or entering into interest rate swaps. The following table provides information about our significant interest rate risk at December 31:
2000 1999 ---- ---- Fair Fair Outstanding Value Outstanding Value ----------- ----- ----------- ----- (In thousands) Variable rate debt: 364 day credit agreement, matures September 2001 and 2000, interest at a Eurodollar based rate plus 1.625% and 1.00%, respectively $155,000 $155,000 $179,000 $179,000 Five year credit agreement, matures September 2003, interest at a Eurodollar based rate plus .80% and .50%, respectively 452,000 452,000 476,500 476,500 Fixed rate debt: Senior notes, due June 2006, interest rate at 7.5% 150,000 141,003 150,000 143,020
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PAGE ---- Report of Ernst & Young LLP, Independent Auditors 35 Consolidated Balance Sheets 36 Consolidated Statements of Operations 37 Consolidated Statements of Cash Flows 38 Consolidated Statements of Shareholders' Equity 39 Notes to Consolidated Financial Statements 40 Supplementary Data (Unaudited) - Summary of Quarterly Results 62 34 37 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Shareholders Manor Care, Inc. We have audited the accompanying consolidated balance sheets of Manor Care, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also include the financial statement schedule listed in the Index at Item 14. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Manor Care, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Toledo, Ohio January 25, 2001 35 38 MANOR CARE, INC. Consolidated Balance Sheets
December 31, December 31, 2000 1999 ---- ---- (In thousands, except per share data) ASSETS Current assets: Cash and cash equivalents $ 24,943 $ 12,287 Receivables, less allowances for doubtful accounts of $61,137 and $58,975, respectively 389,943 294,449 Receivable from sale of assets 3,107 44,467 Prepaid expenses and other assets 24,867 28,409 Deferred income taxes 62,019 51,539 ----------- ---------- Total current assets 504,879 431,151 Net property and equipment 1,577,378 1,550,507 Intangible assets, net of amortization of $20,921 and $13,513, respectively 102,711 88,286 Investment in Genesis preferred stock 19,000 Other assets 173,500 200,833 ----------- ----------- Total assets $2,358,468 $2,289,777 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 90,390 $ 86,614 Employee compensation and benefits 81,065 52,376 Accrued insurance liabilities 65,165 35,870 Income tax payable 27,274 14,906 Other accrued liabilities 48,172 33,266 Revolving loans 155,000 179,000 Long-term debt due within one year 5,479 6,617 ----------- ----------- Total current liabilities 472,545 408,649 Long-term debt 644,054 687,502 Deferred income taxes 108,916 126,754 Other liabilities 120,224 86,835 Shareholders' equity: Preferred stock, $.01 par value, 5 million shares authorized Common stock, $.01 par value, 300 million shares authorized, 111.0 million shares issued 1,110 1,110 Capital in excess of par value 335,609 358,958 Retained earnings 837,123 798,068 ---------- ---------- 1,173,842 1,158,136 Less treasury stock, at cost (8.4 and 8.7 million shares, respectively) (161,113) (178,099) ----------- ---------- Total shareholders' equity 1,012,729 980,037 ----------- ----------- Total liabilities and shareholders' equity $2,358,468 $2,289,777 ========== ==========
See accompanying notes. 36 39 MANOR CARE, INC. Consolidated Statements of Operations
Year ended December 31 ---------------------- 2000 1999 1998 ---- ---- ---- (In thousands, except per share data) Revenues $2,380,578 $2,135,345 $2,209,087 Expenses: Operating 2,016,258 1,697,459 1,715,575 General and administrative 104,027 89,743 96,017 Depreciation and amortization 121,208 114,601 119,223 Provision for restructuring charge, merger expenses, asset impairment and other related charges 14,787 278,261 ---------- ---------- ---------- 2,241,493 1,916,590 2,209,076 ---------- ---------- ---------- Income from continuing operations before other income (expenses), income taxes and minority interest 139,085 218,755 11 Other income (expenses): Interest expense (60,733) (54,082) (46,587) Impairment of investments (20,000) (274,120) Equity in earnings of affiliated companies 812 1,729 5,376 Other income 2,505 5,322 16,635 ---------- ---------- ---------- Total other expenses, net (77,416) (321,151) (24,576) ---------- ---------- ---------- Income (loss) from continuing operations before income taxes and minority interest 61,669 (102,396) (24,565) Income taxes (benefit) 21,489 (47,238) 21,597 Minority interest income 1,125 ---------- ---------- ---------- Income (loss) from continuing operations 39,055 (55,158) (46,162) Discontinued operations: Income from discontinued pharmacy operations (net of taxes of $7,256) 8,044 Gain on conversion of Vitalink stock (net of taxes of $39,908) 59,861 ---------- ---------- ---------- Income (loss) before extraordinary item and cumulative effect 39,055 (55,158) 21,743 Extraordinary item (net of taxes of $7,508 and $12,690, respectively) 11,500 (19,036) Cumulative effect of change in accounting principle (net of taxes of $3,759) (5,640) ---------- ---------- ---------- Net income (loss) $39,055 $(43,658) $ (2,933) ========== ========== ========== Earnings per share - basic and diluted Income (loss) from continuing operations $.38 $(.51) $(.42) Income from discontinued operations (net of taxes) .62 Extraordinary item (net of taxes) .11 (.17) Cumulative effect (net of taxes) (.05) ---------- ---------- ---------- Net income (loss) $.38 $(.41)* $(.03)* ========== ========== ========== Weighted-average shares: Basic 102,203 107,627 108,958 Diluted 103,126 107,627 108,958 *Doesn't add due to rounding
See accompanying notes. 37 40 MANOR CARE, INC. Consolidated Statements of Cash Flows
Year ended December 31 ---------------------- 2000 1999 1998 ---- ---- ---- (In thousands) OPERATING ACTIVITIES Net income (loss) $39,055 $ (43,658) $(2,933) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Income from discontinued operations (67,905) Depreciation and amortization 121,208 115,910 119,329 Asset impairment and other non-cash charges 12,240 191,745 Impairment of investments 20,000 274,120 Provision for bad debts 32,911 29,005 39,485 Deferred income taxes (26,518) (112,984) (46,537) Net gain on sale of assets (506) (18,963) (6,545) Equity in earnings of affiliated companies (812) (1,729) (5,376) Minority interest income 1,125 Changes in assets and liabilities, excluding sold facilities and acquisitions: Receivables (91,649) (69,974) (83,798) Prepaid expenses and other assets 10,371 (6,355) 23,956 Liabilities 104,964 (40,502) (26,018) ------- -------- -------- Total adjustments 171,094 180,768 138,336 ------- ------- -------- Net cash provided by operating activities 210,149 137,110 135,403 ------- ------- ------- INVESTING ACTIVITIES Investment in property and equipment (116,941) (166,503) (295,578) Investment in systems development (10,067) (11,122) (22,158) Acquisitions (22,263) (9,229) (9,841) Proceeds from sale of assets 8,893 263,941 24,137 Consolidation (deconsolidation) of subsidiary 15,701 (13,948) Other, net (9,646) ------- ------- ------- Net cash provided by (used in) investing activities (124,677) 77,087 (327,034) ------- ------- ------- FINANCING ACTIVITIES Net borrowings (repayments) under bank credit agreements (48,500) (50,500) 191,940 Principal payments of long-term debt (18,630) (6,712) (6,788) Proceeds from stock options and common stock 474 1,954 3,120 Purchase of common stock for treasury (6,160) (180,370) (4,838) Dividends paid by Manor Care of America, Inc. (2,805) ------- ------- ------- Net cash provided by (used in) financing activities (72,816) (235,628) 180,629 ------- ------- ------- Net increase (decrease) in cash and cash equivalents 12,656 (21,431) (11,002) Net Manor Care of America, Inc. cash flows for December 1997 (3,213) Cash and cash equivalents at beginning of period 12,287 33,718 47,933 ------- ------- ------- Cash and cash equivalents at end of period $24,943 $12,287 $33,718 ======= ======= =======
See accompanying notes. 38 41 MANOR CARE, INC. Consolidated Statements of Shareholders' Equity
Capital Total Common Stock in Excess Treasury Stock Share- ------------ of Par Retained -------------- holders' Shares Amount Value Earnings Shares Amount Equity ------ ------ ----- -------- ------ ------ ------ (In thousands, except per share data) Balance at January 1, 1998 115,868 $7,199 $471,930 $850,539 (7,845) $(166,639) $1,163,029 Adjustment to conform Manor Care of America, Inc.'s fiscal year 9 121 4,627 4,748 Issue and vesting of restricted stock 339 3 13,110 13,113 Purchase of treasury stock (369) (16,056) (16,056) Exercise of stock options 218 6 2,138 (6,993) 577 10,742 5,893 Tax benefit from restricted stock and exercise of stock options 34,997 34,997 Net loss (2,933) (2,933) Manor Care of America, Inc. cash dividends ($.044 per share) (2,805) (2,805) Exchange of Manor Care of America, Inc. common stock and stock options for the Company's common stock (5,488) (6,099) (165,854) 7,637 171,953 Other (109) (709) (818) ------- ------ -------- -------- ------- ---------- ---------- Balance at December 31, 1998 110,946 1,109 356,333 841,726 1,199,168 Purchase of treasury stock (8,793) (181,268) (181,268) Exercise of stock options 87 1 (1,165) 125 3,169 2,005 Tax benefit from restricted stock and exercise of stock options 3,790 3,790 Net loss (43,658) (43,658) ------- ------ -------- -------- ------- ---------- ---------- Balance at December 31, 1999 111,033 1,110 358,958 798,068 (8,668) (178,099) 980,037 Issue and vesting of restricted stock (14,451) 550 14,656 205 Purchase of treasury stock (777) (11,409) (11,409) Exercise of stock options (10,840) 507 13,739 2,899 Tax benefit from restricted stock and exercise of stock options 1,942 1,942 Net income 39,055 39,055 ------- ------ -------- -------- ------- ---------- ---------- Balance at December 31, 2000 111,033 $1,110 $335,609 $837,123 (8,388) $(161,113) $1,012,729 ======= ====== ======== ======== ======= ========== ==========
See accompanying notes. 39 42 MANOR CARE, INC. Notes to Consolidated Financial Statements 1. ACCOUNTING POLICIES NATURE OF OPERATIONS Manor Care, Inc. (the Company) is a provider of a range of health care services, including skilled nursing care, assisted living, subacute medical and rehabilitation care, rehabilitation therapy, home health care, hospice care, and management services for subacute care and rehabilitation therapy. The most significant portion of the Company's business relates to skilled nursing care and assisted living, operating 354 centers in 32 states with more than 60 percent located in Ohio, Michigan, Illinois, Pennsylvania and Florida. The Company provides rehabilitation therapy in nursing centers of its own and others, and in the Company's 87 outpatient therapy clinics serving the Midwestern and Mid-Atlantic states, Texas and Florida. The home health care business specializes in all levels of home health, hospice care and rehabilitation therapy from 78 offices located in 18 states. The Company operates one hospital in Texas. In addition, the Company owns a majority of a start-up medical transcription business, which converts medical dictation into electronically formatted patient records. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. As a result of the merger of Vitalink Pharmacy Services, Inc. (Vitalink) with and into Genesis Health Ventures, Inc. (Genesis) in 1998, the accompanying consolidated financial statements reflect the pharmacy segment as discontinued operations. Significant intercompany accounts and transactions have been eliminated in consolidation. On September 24, 1998, the shareholders of Health Care and Retirement Corporation (HCR) and the shareholders of the former Manor Care, Inc., now known as Manor Care of America, Inc. (MCA), separately approved the merger of MCA into a subsidiary of HCR, effective September 25, 1998. In accordance with the merger agreement, each share of MCA common stock was converted into one share of HCR common stock for a total of approximately 63.9 million shares, and MCA stock options outstanding were converted into approximately 2.1 million shares of HCR common stock. As a result of the transaction, MCA became a wholly owned subsidiary of HCR and HCR changed its name to HCR Manor Care, Inc and then to Manor Care, Inc. in 1999. The merger has been accounted for by the pooling-of-interests method. Accordingly, the accompanying consolidated financial statements give retroactive effect to the merger and include the combined operations for all periods presented. The Company uses the equity method to account for investments in entities in which it has less than a majority interest but can exercise significant influence. These investments are classified on the accompanying balance sheets as other long-term assets. Under the equity method, the investment, originally recorded at cost, is adjusted to recognize the Company's share of the net earnings or losses of the affiliate as it occurs. Losses are limited to the extent of the Company's investments in, advances to and guarantees for the investee. 40 43 The Company has controlling investments in certain entities which are not wholly owned. Amounts reflected as minority interest represent the minority owners' share of income in these entities. Minority interest liability represents the cumulative minority owners' share of income in these entities and is classified as other long-term liabilities. In June 2000, the Company changed the accounting method for its investment in In Home Health, Inc. (IHHI) from the equity method to consolidation due to an increase in ownership from 41 percent to 61 percent. Retroactive to January 1, 2000, the Company began consolidating the results of IHHI and deducting the minority interest share on an after-tax basis. On December 28, 2000, pursuant to a merger agreement approved by IHHI stockholders, the Company purchased the remaining shares of IHHI to increase its ownership to 100 percent. In 1998, the Company changed the accounting for its investment in IHHI from consolidation to the equity method, retroactive to January 1, 1998, as a result of modifications to the preferred stock agreement that changed the Company's voting rights related to its preferred stock ownership. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS Investments with a maturity of three months or less when purchased are considered cash equivalents for purposes of the statements of cash flows. RECEIVABLES AND REVENUES Revenues are recognized when the related patient services are provided. Receivables and revenues are stated at amounts estimated by management to be the net realizable value. See Note 5 for further discussion. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the estimated useful lives of the assets, generally three to 20 years for equipment and furnishings and 10 to 40 years for buildings and improvements. Direct incremental costs are capitalized for major development projects and are amortized over the lives of the related assets. The Company capitalizes interest on borrowings applicable to facilities in progress. INTANGIBLE ASSETS Goodwill and other intangible assets of businesses acquired are amortized by the straight-line method over periods ranging from five to 15 years for non-compete agreements, 20 to 40 years for management contracts and 20 to 40 years for goodwill. Deferred financing costs are amortized to interest expense over the life of the related borrowings, using the interest method. 41 44 INVESTMENT The Company's investment in Genesis preferred stock is recorded at the lower of cost or net realizable value. Unrealized losses that are other than temporary are recognized in net income. See Note 4 for further discussion. IMPAIRMENT OF LONG-LIVED ASSETS The carrying value of long-lived and intangible assets is reviewed quarterly to determine if facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers external factors relating to each asset, including contract changes, local market developments, national health care trends and other publicly available information. If these external factors and the projected undiscounted cash flows of the company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the estimated fair value. See Note 2 for further discussion of impairment charges in 1998. SYSTEMS DEVELOPMENT COSTS Costs incurred for systems development include direct payroll and consulting costs. These costs are capitalized and are amortized over the estimated useful lives of the related systems. START-UP COSTS Prior to 1998, the Company capitalized start-up costs and amortized the costs over two years. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5), which requires start-up costs to be expensed as incurred. In the fourth quarter of 1998, the Company elected to adopt SOP 98-5 as of January 1, 1998. The cumulative effect of expensing all capitalized start-up costs as of January 1 was $9.4 million, or $5.6 million after tax. INVESTMENT IN LIFE INSURANCE Investment in corporate-owned life insurance policies is recorded net of policy loans in other assets. The net life insurance expense, which includes premiums and interest on cash surrender borrowings, net of all increases in cash surrender values, is included in operating expenses. INTEREST RATE SWAPS Gains and losses on terminations of interest rate swap agreements are deferred as an adjustment to the carrying amount of the outstanding debt and amortized as an adjustment to interest expense related to the debt over the remaining term of the original contract life of the terminated swap agreement. In the event of the early extinguishment of a designated debt obligation and its associated interest rate swap, any realized or unrealized gain or loss from the swap is recognized in income coincident with the extinguishment gain or loss. ADVERTISING EXPENSE The cost of advertising is expensed as incurred. The Company incurred $9.9 million, $9.5 million and $20.3 million in advertising costs for the years ended December 31, 2000, 1999 and 1998, respectively. 42 45 TREASURY STOCK The Company records the purchase of its common stock for treasury at cost. The treasury stock is reissued on a first-in, first-out method. If the proceeds from reissuance of treasury stock exceed the cost of the treasury stock, the excess is recorded in capital in excess of par value. If the cost of the treasury stock exceeds the proceeds from reissuance of the treasury stock, the difference is first charged against any excess previously recorded in capital in excess of par value and any remainder is charged to retained earnings. STOCK-BASED COMPENSATION Stock options are granted for a fixed number of shares to employees with an exercise price equal to the fair market value of the shares at the date of grant. The Company accounts for the stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, the Company recognizes no compensation expense for the stock options. EARNINGS PER SHARE Basic earnings per share (EPS) is computed by dividing net income (income available to common shareholders) by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to basic EPS except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Dilutive potential common shares for the Company include shares issuable upon exercise of the Company's non-qualified stock options and restricted stock that has not vested. NEW ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which was postponed in Statement No. 137 and is now effective January 1, 2001. This Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Because the Company currently does not use derivatives, management believes that the adoption of this statement will have no effect on earnings or the financial position of the Company. RECLASSIFICATIONS Certain reclassifications affecting other assets, other liabilities and operating expenses have been made in the 1999 financial statements to conform with the 2000 presentation. 2. RESTRUCTURING CHARGE, MERGER EXPENSES, ASSET IMPAIRMENT AND OTHER CHARGES The components of the restructuring charge, merger expenses, asset impairment and other charges in 1998 of $278.3 million and in 1999 of $14.8 million are disclosed in the table below. The liability outstanding at December 31, 1999 related to these charges was included in other accrued liabilities and paid in 2000. 43 46
Cash 1998 1998 Liability 1999 1999 Liability Non-cash Charge Activity At 12/31/98 Charge Activity At 12/31/99 -------- ------ -------- ----------- ------ -------- ----------- (In thousands) MCA planned spin-off: Employee benefits cash $5,917 $(5,300) $617 $219 $(836) Transaction costs cash 6,805 (6,805) Write-down of assets non-cash 778 (778) -------- --------- ------- ------- -------- ------ 13,500 (12,883) 617 219 (836) -------- --------- ------- ------- -------- ------ HCR and MCA transaction: Employee benefits cash 41,028 (12,734) 28,294 (27,184) $1,110 Deferred compensation non-cash 11,867 (11,867) Other exit costs cash 4,234 4,234 (3,314) 920 Merger transaction costs cash 21,122 (21,122) Write-down of assets non-cash 56,468 (56,468) -------- --------- ------- ------- -------- ------ 134,719 (102,191) 32,528 (30,498) 2,030 -------- --------- ------- ------- -------- ------ Other costs: Amortization non-cash 7,863 (7,863) 10,554 (10,554) Duplicate costs cash 5,725 (5,725) 2,328 (2,328) Other cash 1,685 (685) 1,000 (1,000) Asset impairment unrelated to merger non-cash 114,769 (114,769) 1,686 (1,686) -------- --------- ------- ------- -------- ------ 130,042 (129,042) 1,000 14,568 (15,568) -------- --------- ------- ------- -------- ------ Total $278,261 $(244,116) $34,145 $14,787 $(46,902) $2,030 ======== ========= ======= ======= ======== ======
One component of the 1998 charge pertains to MCA's $13.5 million charge in connection with its plan to separate its skilled nursing facility management, assisted living and home health businesses from its skilled nursing facility ownership, real estate and health care facility development business. As a result of the transaction with HCR, the separation of MCA's businesses did not occur. Under the planned spin-off, 208 employees were terminated and received their severance as biweekly payments. Charges related to the HCR-MCA transaction totaled $134.7 million in 1998. In connection with the merger, the Company developed a plan to integrate the businesses of both companies that included closing MCA's corporate office in Gaithersburg, Maryland and realigning the operating divisions from eight to six. The employee benefit costs related to severance payments and retention bonuses for 505 corporate employees and 26 field employees of MCA who received termination notices. The terminated employees received their severance as biweekly payments. The deferred compensation expense of $11.9 million was attributable to the lapsing of restrictions on HCR's restricted stock due to the merger. The other exit costs pertained to various lease agreements and hardware and software contracts that have been terminated. The merger transaction costs primarily included financial advisory, legal, and accounting fees and expenses, and printing and mailing costs. The write-down of assets as a result of the merger included MCA's computer hardware and software that was no longer being utilized by the Company and certain abandoned construction development projects. Of the charges, $130.0 million in 1998 and $14.6 million in 1999 related to other unusual costs as a result of the merger and asset impairment unrelated to the restructuring. The non-cash charge primarily related to the amortization of certain MCA software applications until the transition to HCR's applications. Certain general and administrative costs represented salaries and benefits for employees performing duplicate services in Toledo or Gaithersburg. 44 47 In 1998, the Company also recorded a charge for impairment of certain assets based on its quarterly review of long-lived and intangible assets. The charge of $114.8 million consisted of a majority of the goodwill related to the Company's program management service business, all of the goodwill related to the Company's home health businesses, the intangible assets related to six of the Company's rehabilitation businesses, a majority of the fixed assets related to seven facilities and certain assets relating to the Company's vision management businesses. A significant feature of the Company's evaluation was the evolving impact of the Balanced Budget Act of 1997 (Budget Act) under which a new Medicare prospective payment system (PPS) commenced on July 1, 1998 and an interim payment system (IPS) for home health businesses that commenced on October 1, 1997 for the Company. These new reimbursement systems had an unfavorable impact on the program management service, home health and vision management businesses, resulting in an impairment loss. The write-off of the facility fixed assets and the rehabilitation company intangible assets resulted from specific entities, which were not generating cash flow despite efforts by the Company to return the operations to a level of profitability. The estimated fair value of the impaired assets was based on a multiple of projected annual earnings. 3. ACQUISITIONS/DIVESTITURES The Company owned 41 percent of In Home Health, Inc (IHHI) at December 31, 1999 and acquired the remaining interest in 2000 for $14.0 million. The acquisition was recorded under the purchase method of accounting, and the Company recorded $13.0 million of goodwill which will be amortized over 20 years. The pro forma unaudited results of operations for the years ended December 31, 2000 and 1999, assuming the purchase of IHHI had been consummated as of January 1, 1999, follows: 2000 1999 ---- ---- (In thousands, except per share data) Revenues $2,380,578 $2,219,651 Operating expenses 2,016,258 1,769,706 Income (loss) before extraordinary item and cumulative effect 39,305 (53,332) Net income (loss) 39,305 (41,832) Net income (loss) per share - basic and diluted $.38 $(.39) The Company also paid $8.3 million, $9.2 million and $9.8 million in 2000, 1999 and 1998, respectively, for the acquisition of rehabilitation therapy businesses, home health businesses and additional consideration for prior acquisitions. The acquisitions were accounted for under the purchase method of accounting. Certain acquisition agreements contain a provision for additional consideration contingent upon the future financial results of the businesses. The maximum contingent consideration aggregates $14.9 million and will, if earned, be paid over the next five years and treated as additions to the purchase price of the businesses. The results of operations of the acquired businesses are included in the consolidated statements of income from the date of acquisition. The pro forma consolidated results of operations would not be materially different from the amounts reported in prior years. 45 48 The Company formed a strategic alliance with Alterra Healthcare Corporation (Alterra) in 1998. Two of the key provisions of the alliance included the sale of 26 centers and the lease of two centers to Alterra in 1999 and the creation of a joint venture in 1999 to develop and construct specialized assisted living residences in the Company's core markets. In 1999, the Company completed the sale of 26 facilities for $154.5 million, realizing a gain of $6.1 million ($3.7 million after tax). As part of the development joint venture, the Company contributed 20 facilities to various project companies or partnerships of which the joint venture has a 10 percent equity interest. The facilities had a net book value of $77.8 million, and the Company recognized no gain or loss on the sale. Due to a change in development intentions of the partners, the Company purchased seven facilities in 2000 that were originally contributed by the Company in 1999. The Company reclassified its receivable of $26.4 million related to developing these assets to property and equipment. Of this amount, $19.2 was a receivable at December 31, 1999. During 1999, the Company exercised a purchase option on MCA's corporate headquarters in Gaithersburg, Maryland and sold the property, realizing net proceeds of $24.5 million and a $10.1 million gain ($6.1 million after tax). The gains on asset sales in 1999 have all been recorded as extraordinary items as required after a business combination accounted for as a pooling of interests. 4. DISCONTINUED PHARMACY OPERATIONS MCA and one of its subsidiaries owned approximately 50 percent of Vitalink Pharmacy Services, Inc. (Vitalink) common stock. On April 26, 1998, Vitalink entered into an Agreement and Plan of Merger (Vitalink Merger Agreement) with Genesis Health Ventures, Inc. (Genesis). Pursuant to the Vitalink Merger Agreement, on August 28, 1998, MCA received .045 shares of Series G Cumulative Convertible Preferred Stock of Genesis (Series G Preferred Stock) for each share of Vitalink common stock. MCA received 586,240 preferred shares valued at $293.1 million as consideration for all of its common stock of Vitalink. As a result of the conversion of stock, MCA recorded a gain of $99.8 million ($59.9 million after tax). Accordingly, the Vitalink results are reported as discontinued operations for all periods presented. The Series G Preferred Stock bears cash dividends at an initial annual rate of 5.9375 percent. The Company accrued $5.8 million of dividend income in 1998 which was paid in 1999. The Company continued to accrue dividend income of $4.4 million each quarter in 1999. At December 31, 1999, Genesis had failed to pay dividends on the Series G Preferred Stock for four consecutive quarters. Based on Genesis' inability to pay dividends and its operating performance in 1999, the Company recorded a reserve of $17.4 million for accrued 1999 dividends and reduced the basis of its $293.1 million investment by $274.1 million. As a result of the non-payment of the cumulative dividends for four consecutive quarters, all future dividends are payable in additional shares of Series G Preferred Stock valued at $500 per share, and the holders of Series G Preferred Stock elected two additional directors to the Genesis board until such time as all accrued and unpaid dividends are paid in full in cash. Subsequent to their election, the additional directors resigned and replacement directors have 46 49 not been named as of December 31, 2000. In 2000, the Company recorded a reserve of $17.4 million for the dividends paid in additional shares of Series G Preferred Stock and due to Genesis' bankruptcy filing on June 22, 2000, reduced the basis of its investment by $19.0 million to zero. Series G Preferred Stock holders are initially entitled to 13.441 votes per share of Series G Preferred Stock, and will vote together with the holders of Genesis common stock and as a separate class on matters as to which the Pennsylvania Business Corporation Law requires a separate class vote. At the option of MCA, each share of Series G Preferred Stock is convertible at any time into Genesis common stock at a conversion price of $37.20 per share, subject to adjustment under certain circumstances. Beginning April 26, 2001, Genesis may, under certain circumstances, force conversion of the Series G Preferred Stock, at conversion prices ranging from $37.20 to $38.87 per share of Genesis common stock. Dividends will cease to accrue in respect to the Series G Preferred Stock as of the date of the conversion. The financial results for the discontinued pharmacy operations for the year ended December 31, 1998 are as follows: revenues of $381.1 million that includes sales to MCA's skilled nursing and assisted living facilities of $31.8 million, income before income taxes of $15.3 million and net income of $8.0 million. 5. REVENUES The Company receives reimbursement under the federal Medicare program and various state Medicaid programs. Revenues under these programs totaled $1.4 billion, $1.1 billion and $1.1 billion for the years ended December 31, 2000, 1999 and 1998, respectively. Medicare and certain Medicaid program revenues are subject to audit and retroactive adjustment by government representatives. In the opinion of management, any differences between the net revenue recorded and final determination will not materially affect the consolidated financial statements. Net third-party settlements amounted to a $4.2 million receivable and $9.6 million payable at December 31, 2000 and 1999, respectively. There were no non-governmental receivables which represented amounts in excess of 10 percent of total receivables at December 31, 2000 and 1999. Revenues for certain health care services are as follows:
2000 1999 1998 ---- ---- ---- (In thousands) Skilled nursing and assisted living services $2,037,959 $1,911,720 $1,987,815 Rehabilitation services 71,111 63,767 70,522 Home health services 186,475 61,062 48,416 Other services 85,033 98,796 102,334 ---------- ---------- ---------- $2,380,578 $2,135,345 $2,209,087 ========== ========== ==========
47 50 6. PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31: 2000 1999 ---- ---- (In thousands) Land and improvements $ 234,719 $ 217,457 Buildings and improvements 1,579,336 1,473,425 Equipment and furnishings 341,412 347,455 Capitalized leases 29,974 31,329 Construction in progress 38,415 77,232 ------------ ----------- 2,223,856 2,146,898 Less accumulated depreciation 646,478 596,391 ----------- ----------- Net property and equipment $1,577,378 $1,550,507 ========== ========== Depreciation expense, including amortization of capitalized leases, amounted to $111.2 million, $108.5 million and $110.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. Accumulated depreciation includes $11.9 million and $10.8 million at December 31, 2000 and 1999, respectively, relating to capitalized leases. 7. DEBT Debt consists of the following at December 31: 2000 1999 ---- ---- (In thousands) Five Year Agreement $452,000 $476,500 364 Day Agreement (revolving loans) 155,000 179,000 Senior Notes, net of discount 149,675 149,615 Mortgages and other notes 42,456 61,135 Capital lease obligations (see Note 8) 5,402 6,869 -------- -------- 804,533 873,119 Less: 364 Day Agreement 155,000 179,000 Amounts due within one year 5,479 6,617 --------- --------- Long-term debt $644,054 $687,502 ======== ======== Concurrent with the merger, a five-year, $500 million credit agreement (Five Year Agreement) and a 364-day, $300 million credit agreement (364 Day Agreement) were established with a group of banks, under which both the Company and MCA are borrowers. The credit agreements were established to repay borrowings of HCR and MCA under prior credit arrangements, as discussed below, to provide additional credit capacity for future developments and to provide credit back-up for the issuance of commercial paper. The credit agreements contain various covenants, restrictions and events of default. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain 48 51 limits on its ability to incur indebtedness, create liens, pay dividends, repurchase stock, dispose of assets and make acquisitions. The Company's $300 million credit agreement was amended in 1999 and now provides for a $200 million credit agreement (364 Day Agreement). Loans under the amended 364 Day Agreement, which mature September 21, 2001, bear interest at variable rates that reflect, at the election of the Company, either the agent bank's base lending rate or an increment over Eurodollar indices of .50 percent to 1.275 percent, depending on the quarterly performance of a key ratio. In addition, the 364 Day Agreement provides for a fee on the total amount of the facility, ranging from .125 percent to .225 percent, depending on the performance of the same ratio. Loans under the Five Year Agreement, which mature September 24, 2003, bear interest at variable rates that reflect, at the election of the Company, the agent bank's base lending rate, rates offered by any of the participating banks under bid procedures or an increment over Eurodollar indices of .15 percent to .50 percent, depending on the quarterly performance of a key ratio. In addition to direct borrowings, the Five Year Agreement may be used to support the issuance of up to $100 million of letters of credit. The Five Year Agreement also provides for a fee on the total amount of the facility, ranging from .125 percent to .25 percent, depending on the performance of the same key ratio. Whenever the aggregate utilization of both credit facilities exceeds $350 million, an additional fee of .05 percent is charged on loans due under the Five Year Agreement and an additional fee ranging from .10 percent to .125 percent is charged on loans under the 364 Day Agreement, based on the performance of a key ratio. The average interest rate on loans under the Five Year and 364 Day Credit Agreements was 7.48 percent at December 31, 2000, excluding the fee on the total facility. After consideration of usage for letters of credit, the remaining credit availability under the combined agreements totaled $66.7 million. In 1999, the Company, Alterra and the development joint venture jointly and severally guaranteed a $200 million revolving credit agreement, which was to mature September 30, 2002. The line of credit was reduced to $60 million in March 2000. In January 2001, the line of credit was further reduced to $57 million and the maturity date was adjusted to June 29, 2001. The Company and Alterra each have a 50 percent interest in the development joint venture which is the 10 percent owner and managing owner or partner in the various project companies and partnerships which are entitled to borrow under the credit agreement. There was $57 million and $48 million of guaranteed debt outstanding under the revolving credit agreement at December 31, 2000 and 1999, respectively. Funds were used to construct and support start-up working capital for assisted living residences. The Company and Alterra are undertaking efforts to sell the facilities. The debt will be repaid upon the sale of each facility. On September 25, 1998, the Company repaid $264 million outstanding under HCR's prior credit agreement and $325 million on MCA's prior credit arrangements. The repayment of the prior credit facilities was accounted for as an early extinguishment of debt. In conjunction with the extinguishment of debt, the Company terminated three interest rate swaps with a total notional amount of $350 million that were designated as a hedge of MCA's debt. The loss on 49 52 terminating the swaps of $31.3 million along with the unamortized debt issue costs was recorded as an extraordinary item that totaled $31.7 million ($19.0 million after tax). In June 1996, MCA issued $150 million of 7.5% Senior Notes due 2006. These notes are redeemable at the option of MCA at any time at a price equal to the greater of (a) the principal amount or (b) the sum of the present values of the remaining scheduled payments of principal and interest, discounted with an applicable treasury rate plus 15 basis points, plus accrued interest to the date of the redemption. The proceeds of the offering were used to repay borrowings under MCA's prior credit facility. Interest rates on mortgages and other long-term debt ranged from 5.40 percent to 10.75 percent. Maturities ranged from 2001 to 2018. Owned property with a net book value of $93.0 million was pledged or mortgaged. Interest paid on all debt amounted to $63.7 million, $56.4 million and $47.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. Capitalized interest costs amounted to $4.5 million, $3.2 million and $8.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. Debt maturities for the five years subsequent to December 31, 2000 are as follows: 2001 - $160.5 million; 2002 - $5.6 million; 2003 - $460.7 million; 2004 - - $3.5 million; and 2005 - $3.7 million. 8. LEASES The Company leases certain property and equipment under both operating and capital leases, which expire at various dates to 2036. Certain of the facility leases contain purchase options, and the Company's headquarters lease includes a residual guarantee of $22.8 million. Payments under non-cancelable operating leases, minimum lease payments and the present value of net minimum lease payments under capital leases as of December 31, 2000 are as follows: Operating Capital Leases Leases --------- ------ (In thousands) 2001 $ 15,610 $ 645 2002 12,962 659 2003 10,810 654 2004 4,268 615 2005 2,416 620 Later years 34,301 11,716 ------- ------ Total minimum lease payments $80,367 14,909 ======= Less amount representing interest 9,507 ------- Present value of net minimum lease payments (included in long-term debt - see Note 7) $ 5,402 ======= 50 53 Rental expense was $22.4 million, $17.8 million and $18.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. 9. INCOME TAXES The provision (benefit) for income taxes consists of the following:
2000 1999 1998 ---- ---- ---- (In thousands) Current: Federal $41,353 $51,865 $58,885 State and local 8,453 15,641 9,249 ------ -------- ------- 49,806 67,506 68,134 Deferred: Federal (22,947) (93,983) (39,782) State and local (5,370) (20,761) (6,755) ------- -------- ------- (28,317) (114,744) (46,537) ------- -------- ------- Provision (benefit) for income taxes from continuing operations 21,489 (47,238) 21,597 Provision for income taxes from discontinued operations 47,164 Provision (benefit) for income taxes from extraordinary items 7,508 (12,690) Benefit for income taxes from cumulative effect of change in accounting principle (3,759) ------- -------- ------- Total provision (benefit) for income taxes $21,489 $(39,730) $52,312 ======= ======== =======
The reconciliation of the amount computed by applying the statutory federal income tax rate to income (loss) from continuing operations before income taxes to the provision (benefit) for income taxes from continuing operations is as follows:
2000 1999 1998 ---- ---- ---- (In thousands) Income taxes (benefit) computed at statutory rate $21,584 $(35,839) $(8,598) Differences resulting from: Write-off of non-deductible goodwill 22,028 Non-deductible transaction costs 7,217 State and local income taxes 2,004 (3,328) 1,621 Non-deductible compensation 911 1,870 2,028 Exclusion of dividends received (588) (2,093) Jobs tax credits (1,770) (1,520) (1,484) Corporate-owned life insurance (163) (1,079) Unrealized losses of subsidiary 4,340 Reversal of valuation allowance (3,931) Adjustment to prior years' estimated tax liabilities (11,653) Other 2,691 (357) 1,957 ------- -------- ------- Provision (benefit) for income taxes from continuing operations $21,489 $(47,238) $21,597 ======= ======== =======
51 54 The Internal Revenue Service has examined the Company's federal income tax returns for all years through May 31, 1995 for MCA and through December 31, 1996 for HCR. The years have been closed through May 31, 1995 for MCA and through December 31, 1992 for HCR. The Company believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of the Company's federal and state deferred tax assets and liabilities are as follows: 2000 1999 ---- ---- (In thousands) Deferred tax assets: Accrued insurance reserves $44,305 $16,890 Net loss on Genesis investment 43,526 35,499 Allowances for receivables and settlements 33,433 31,565 Employee compensation and benefits 27,610 27,998 Net operating loss carryover 11,622 11,553 Other 3,932 4,471 --------- --------- $164,428 $127,976 ========= ========= Deferred tax liabilities: Fixed asset and intangible asset bases differences $155,784 $150,588 Leveraged leases 35,978 36,646 Pension receivable 8,984 7,832 Other 10,579 8,125 --------- --------- $211,325 $203,191 ========= ========= Net deferred tax liabilities $ (46,897) $ (75,215) ========= ========= At December 31, 2000, the Company had approximately $45.4 million of net operating loss carryforwards for tax purposes which expire in 2017-2019, and the maximum amount to be used in any year is $6.8 million. Net income taxes paid amounted to $33.7 million, $50.0 million and $9.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. 10. COMMITMENTS/CONTINGENCIES One or more subsidiaries or affiliates of MCA have been identified as potentially responsible parties (PRPs) in a variety of actions (the Actions) relating to waste disposal sites which allegedly are subject to remedial action under the Comprehensive Environmental Response Compensation Liability Act, as amended, 42 U.S.C. Sections 9601 et seq. (CERCLA) and similar state laws. CERCLA imposes retroactive, strict joint and several liability on PRPs for the costs of hazardous waste clean-up. The Actions arise out of the alleged activities of Cenco, Incorporated and its subsidiary and affiliated companies (Cenco). Cenco was acquired in 1981 by a wholly owned subsidiary of MCA. The Actions allege that Cenco transported 52 55 and/or generated hazardous substances that came to be located at the sites in question. Environmental proceedings such as the Actions may involve owners and/or operators of the hazardous waste site, multiple waste generators and multiple waste transportation disposal companies. Such proceedings involve efforts by governmental entities and/or private parties to allocate or recover site investigation and clean-up costs, which costs may be substantial. The potential liability exposure for currently pending environmental claims and litigation, without regard to insurance coverage, cannot be quantified with precision because of the inherent uncertainties of litigation in the Actions and the fact that the ultimate cost of the remedial actions for some of the waste disposal sites where MCA is alleged to be a potentially responsible party has not yet been quantified. Based upon its current assessment of the likely outcome of the Actions, the Company believes that its future environmental liabilities will be approximately $22.5 to $28 million. The Company has received or expects to receive between $18.0 million and $23.5 million of insurance proceeds, depending upon the ultimate liabilities, which will offset amounts due as a result of these exposures. Legislation phased out interest deductions on certain policy loans related to corporate-owned life insurance (COLI) as of January 1, 1999. The Company has recorded a cumulative reduction to income tax expense of approximately $34 million resulting from interest deductions for tax periods prior to 1999. While the Internal Revenue Service (IRS) has not asserted any claim challenging the Company's COLI interest expense deductions, the IRS has challenged other taxpayers' COLI interest deductions and has prevailed in certain lower court decisions. Management understands that these decisions and the IRS's position are being subjected to extensive challenges in court. The Company intends to defend vigorously its right to deduct the entire amount of such interest payments, were the IRS to challenge these deductions. The Company is party to various other legal matters arising in the ordinary course of business including patient care-related claims and litigation. The Company believes that the resolution of such matters will not result in liability materially in excess of accounting accruals established with respect to such matters. As of December 31, 2000, the Company had contractual commitments of $8.4 million relating to its internal construction program. As of December 31, 2000, the Company has total letters of credit of $32.9 million that benefit certain third-party insurers and bondholders of certain industrial revenue bonds, and 89 percent of such letters of credit relate to recorded liabilities. 53 56 11. EARNINGS PER SHARE The calculation of earnings per share (EPS) is as follows:
2000 1999 1998 ---- ---- ---- (In thousands, except EPS) Numerator: Income (loss) from continuing operations (income available to common shareholders) $39,055 $(55,158) $(46,162) Denominator: Denominator for basic EPS - weighted- average shares 102,203 107,627 108,958 Effect of dilutive securities: Stock options 839 Non-vested restricted stock 84 ------- ------- ------- Denominator for diluted EPS - adjusted for weighted-average shares and assumed conversions 103,126 107,627 108,958 ======= ======= ======= EPS- income (loss) from continuing operations Basic and diluted $.38 $(.51) $(.42)
Options to purchase 2,950,000 shares of the Company's common stock at an average price of $30.47 were not included in the computation of diluted EPS for 2000 because the options' exercise prices were greater than the average market price of the common shares. In 1999 and 1998, the dilutive effect of stock options would have been 1,121,000 and 2,349,000 shares, respectively. These shares were not included in the calculation because the effect would be anti-dilutive with a loss from continuing operations. 12. STOCK PLANS The Company has stock option plans for key employees and for outside directors which authorize the grant of options for up to 11,199,000 and 800,000 shares, respectively. There were 2,486,684 and 3,962,016 shares available for future grant at December 31, 2000 and 1999, respectively. Generally, the exercise price of each option equals the market price of the Company's stock on the date of grant, and an option's maximum term is 10 years. The options for key employees vest between three and five years, and the options for outside directors vest immediately. The Company has elected to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans, and, accordingly, did not recognize compensation expense for options granted in 1995 through 2000. If the Company had accounted for its 1995 through 2000 options under the fair value method, net income and earnings per share would have been reduced to the pro forma amounts indicated below: 54 57
2000 1999 1998 ---- ---- ---- (In thousands, except earnings per share) Net income (loss) - as reported $39,055 $(43,658) $(2,933) Net income (loss) - pro forma $36,039 $(46,346) $(17,581) Earnings per share - as reported: Basic and diluted $.38 $(.41) $(.03) Earnings per share - pro forma: Basic and diluted $.35 $(.43) $(.16)
The pro forma effect on net income for 2000, 1999 and 1998 is not representative of the pro forma effect on net income in future years because a limited number of options were granted in 1999 and the vesting of options were accelerated in 1998. In 1998, all outstanding MCA options were converted, under their original terms, into the right to receive shares of the Company's common stock. Therefore, the remaining fair value of 1995 through 1998 grants was expensed in 1998 on a pro forma basis. Also, the vesting was accelerated for stock options granted in 1996 and 1997 for certain HCR executive officers, which required the remaining fair value to be expensed in 1998 on a pro forma basis. The fair value of each option grant is estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998, respectively: dividend yield of 0 percent for the Company in 2000 and 1999 and HCR in 1998; dividend yield based on historical dividends of $.088 per share annually for MCA in 1998; expected volatility of 46 percent, 35 percent and 28 percent; risk-free interest rates of 6.18 percent, 5.35 percent and 4.72 percent; and expected lives of 4.2, 4.8 and 4.5 years. The weighted-average fair value of options granted is $3.36, $10.25 and $10.53 per share in 2000, 1999 and 1998, respectively. The option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Since the Company's stock options have characteristics significantly different from those of traded options, and since variations in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 55 58 Information regarding these option plans for 1998, 1999 and 2000 is as follows: Weighted- Average Exercise Shares Price ------ ----- Options outstanding at January 1, 1998 8,373,945 $15.53 Options granted 1,808,370 $34.22 Options forfeited (256,838) $29.01 Options exercised (804,489) $7.47 Converted to stock (see Note 1) (3,313,467) ---------- Options outstanding at December 31, 1998 5,807,521 $20.04 Options granted 38,001 $26.31 Options forfeited (227,226) $31.59 Options exercised (211,679) $9.33 ---------- Options outstanding at December 31, 1999 5,406,617 $20.02 Options granted 1,635,444 $9.11 Options forfeited (160,112) $30.76 Options exercised (506,800) $5.41 ---------- Options outstanding at December 31, 2000 6,375,149 $18.11 ========= Options exercisable at December 31, 1998 3,984,996 $14.24 December 31, 1999 3,952,392 $15.14 December 31, 2000 3,936,324 $17.56 56 59 The following tables summarize information about options outstanding and options exercisable at December 31, 2000: OPTIONS OUTSTANDING ------------------- Weighted- Weighted- Average Range of Average Remaining Exercise Number Exercise Contractual Prices Outstanding Price Life ------ ----------- ----- ---- $ 5 - $10 2,899,334 $ 6.46 4.8 $10 - $20 967,185 $15.78 3.1 $20 - $30 673,498 $24.67 5.5 $30 - $45 1,835,132 $35.34 6.6 --------- 6,375,149 $18.11 5.1 ========= OPTIONS EXERCISABLE ------------------- Weighted- Range of Average Exercise Number Exercise Prices Exercisable Price ------ ----------- ----- $ 5 - $10 1,619,334 $ 6.04 $10 - $20 967,185 $15.78 $20 - $30 673,498 $24.67 $30 - $45 676,307 $40.64 --------- 3,936,324 $17.56 ========= The Company has a restricted stock plan for corporate officers and certain key senior management employees which authorizes up to 1,892,866 restricted shares to be issued. There were 112,250 restricted shares available for future grant at December 31, 2000. During 2000, certain executive officers were issued 550,000 restricted shares with a fair value of $7.00 that vest at retirement. During 1998, certain executive officers and key senior management employees were issued 339,500 restricted shares with a fair value of $38.63. The restrictions associated with the 1998 restricted stock lapsed as a result of the merger, and the total deferred compensation expense of $11.9 million was recorded in the provision for restructuring charge. Compensation expense related to restricted stock was $0.2 million and $12.7 million for the years ended December 31, 2000 and 1998, respectively. 57 60 13. EMPLOYEE BENEFIT PLANS The Company has two qualified defined benefit pension plans which were amended in 1994 and 1996 to freeze all future benefits. The funded status of these plans is as follows: 2000 1999 ---- ---- (In thousands) CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $35,512 $39,298 Interest cost 2,341 2,575 Actuarial gains (2,486) (1,957) Benefits paid (4,058) (4,404) ------- ------- Benefit obligation at end of year 31,309 35,512 ------ ------ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 65,132 61,965 Actual return on plan assets 1,228 7,571 Benefits paid (4,058) (4,404) ------ ------ Fair value of plan assets at end of year 62,302 65,132 ------ ------ Excess funded status of the plans 30,993 29,620 Unrecognized net actuarial gains (8,410) (10,103) -------- -------- Prepaid benefit cost $22,583 $19,517 ======= ======= Both plans have prepaid benefit costs at December 31, 2000. The prepaid benefit under one plan was $19.7 million at December 31, 1999. The accrued pension cost under the other plan was $0.2 million at December 31, 1999. At December 31, 2000 and 1999, the fair value of one plan's assets was $15.0 million and $16.4 million, respectively, with an associated accumulated benefit obligation of $15.5 million and $17.7 million, respectively. The components of the net pension income for these plans are as follows: 2000 1999 1998 ---- ---- ---- (In thousands) Interest cost $2,341 $ 2,575 $ 2,528 Expected return on plan assets (5,408) (5,395) (4,691) ------ ------ ------ Net pension income $(3,067) $(2,820) $(2,163) ======= ======= ======= The actuarial present value of benefit obligations is based on an average discount rate of 7.75 percent at December 31, 2000 and 1999. The freezing of future pension benefits eliminated any future salary increases from the computation. The average expected long-term rate of return on assets is 10 percent for 2000 and 1999. The Company has two senior executive retirement plans which are non-qualified plans designed to provide pension benefits and life insurance for certain officers. Pension benefits 58 61 are based on compensation and length of service. The benefits under one of the plans are provided from a combination of the benefits to which the corporate officers are entitled under a defined benefit pension plan and from life insurance policies that are owned by certain officers who have assigned the corporate interest (the Company's share of premiums paid) in the policies to the Company. The Company's share of the cash surrender value of the policies was $36.2 million and $30.1 million at December 31, 2000 and 1999, respectively, and was included in other assets. The other plan is unfunded. During 2000, the unfunded plan recognized a curtailment gain of $1.8 million due to the resignation of employees which reduced accrued benefits. The accrued liability for both plans was $8.1 million and $9.4 million at December 31, 2000 and 1999, respectively, and was included in other long-term liabilities. The Company maintains three savings programs qualified under Section 401(k) of the Internal Revenue Code (401(k)) and two non-qualified, deferred compensation programs. The Company contributes up to a maximum matching contribution ranging from 2 percent to 6 percent of the participant's compensation, as defined in each plan. The Company's expense for these plans amounted to $6.5 million, $11.1 million and $8.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in expense for 2000 and 1998 was primarily due to a decline in earnings on the non-qualified, deferred compensation programs. 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount and fair value of the financial instruments are as follows:
2000 1999 ---- ---- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- (In thousands) Cash and cash equivalents $ 24,943 $ 24,943 $ 12,287 $ 12,287 Debt, excluding capitalized leases 799,131 790,086 866,250 861,255
The carrying amount of cash and cash equivalents is equal to its fair value due to the short maturity of the investments. The carrying amount of debt, excluding capitalized lease obligations, approximates its fair value due to the significant amount of variable rate debt. The fair value is estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates. 15. SHAREHOLDER RIGHTS PLAN Each outstanding share of the Company's common stock includes an exercisable Right which, under certain circumstances, will entitle the holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock for an exercise price of $150, subject to adjustment. The Rights expire on May 2, 2005. Such rights will not be 59 62 exercisable nor transferable apart from the common stock until 10 days after a person or group acquires 15 percent, except as noted below, of the Company's common stock or initiates a tender offer or exchange offer that would result in ownership of 15 percent of the Company's common stock. In the event that the Company is merged, and its common stock is exchanged or converted, the Rights will entitle the holders to buy shares of the acquirer's common stock at a 50 percent discount. Under certain other circumstances, the Rights can become rights to purchase the Company's common stock at a 50 percent discount. The Rights may be redeemed by the Company for one cent per Right at any time prior to the first date that a person or group acquires a beneficial ownership of 15 percent of the Company's common stock. The description and terms of the Rights are set forth in a Rights Agreement, dated as of May 2, 1995, and amended on June 10, 1998 (Rights Agreement), between the Company and Harris Trust and Savings Bank, as Rights Agent. Pursuant to the Rights Agreement, the trigger percentage is raised to 20 percent in the case of a Bainum Family Member or Bainum Family Entity, as defined in the Rights Agreement. 16. SEGMENT INFORMATION The Company provides a range of health care services. The Company has one reportable operating segment, long-term care, which includes the operation of skilled nursing and assisted living facilities. The "Other" category includes the non-reportable segments and corporate items not considered to be an operating segment. The revenues in the "Other" category include services for rehabilitation, home health and hospital care. Asset information by segment, including capital expenditures, is not provided to the Company's chief operating decision maker. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (see Note 1). The Company evaluates performance and allocates resources based on operating margin which represents revenues less operating expenses. The operating margin does not include general and administrative expense, depreciation and amortization, the provision for restructuring and other charges, other income and expense items, and income taxes. The "Other" category is not comparative as IHHI is included on a consolidated basis in 2000 and on the equity method in 1999 and 1998. The Company recorded an additional $57 million of general and professional liability expense in 2000 in comparison to 1999. The change in estimate incorporates industry experience and relates to the long-term care segment. 60 63
Long-term Care Other Total -------------- ----- ----- (In thousands) Year ended December 31, 2000 Revenues from external customers $2,037,959 $342,619 $2,380,578 Intercompany revenues 27,825 27,825 Depreciation and amortization 109,213 11,995 121,208 Operating margin 335,291 29,029 364,320 Year ended December 31, 1999 Revenues from external customers $1,911,720 $223,625 $2,135,345 Intercompany revenues 20,993 20,993 Depreciation and amortization 107,185 7,416 114,601 Operating margin 398,668 39,218 437,886 Year ended December 31, 1998 Revenues from external customers $1,987,815 $221,272 $2,209,087 Intercompany revenues 38,319 38,319 Depreciation and amortization 94,506 24,717 119,223 Operating margin 443,609 49,903 493,512
61 64 MANOR CARE, INC. Supplementary Data (Unaudited) Summary Of Quarterly Results
Year Ended December 31, 2000 ---------------------------- First Second Third Fourth Year ----- ------ ----- ------ ---- (In thousands, except per share amounts) Revenues $569,918 $581,247 $604,531 $624,882 $2,380,578 Income from continuing operations before other income (expenses), income taxes and minority interest 11,948 28,810 45,869 52,458 139,085 Net income (loss) (783) (3,429) 20,373 22,894 39,055 Earnings per share - net income (loss): Basic and diluted $(.01) $(.03) $.20 $.22 $.38 Year Ended December 31, 1999 ---------------------------- First Second Third Fourth Year ----- ------ ----- ------ ---- (In thousands, except per share amounts) Revenues $531,848 $530,454 $536,732 $536,311 $2,135,345 Income from continuing operations before other income (expenses), income taxes, and minority interest 66,571 55,687 55,837 40,660 218,755 Income (loss) before extraordinary item and cumulative effect 41,028 33,616 33,497 (163,299) (55,158) Net income (loss) 41,028 40,506 39,544 (164,736) (43,658) Earnings per share - Income (loss) before extraordinary item and cumulative effect: Basic $.37 $.30 $.32 $(1.59) $(.51) Diluted $.37 $.30 $.31 $(1.59) $(.51)
The results for the first quarter of 2000 differ from the amounts in the respective 10-Q due to the change in the accounting for the Company's investment in In Home Health, Inc. (IHHI) from the equity method to consolidation, retroactive to January 1, 2000. The Company increased its ownership in IHHI in June 2000. See Note 1 to the consolidated financial statements for additional discussion. In the first quarter of 2000, the Company recorded general and professional liability expense of $33.6 million ($21.5 million after tax) that related to a change in estimate incorporating industry experience. In the second quarter of 2000, the Company reduced the basis of its investment in Genesis preferred stock and another Genesis investment by $20.0 million ($12.8 million after tax). See the Management's Discussion and Analysis for further discussion of these items. In the fourth quarter of 1999, the Company reduced the basis of its investment in Genesis preferred stock by $274.1 million ($165.8 million after tax) and recorded a reserve of $17.4 million ($16.2 million after tax) related to accrued 1999 dividend income. See Note 4 to the consolidated financial statements for further discussion. In the fourth quarter of 1999, the Company also recorded losses of $12.4 million related to a start-up business. In the first, second and third quarters of 1999, the Company recorded a provision for restructuring charge, merger expenses, asset impairment and other related charges of $6.9 million ($4.6 million after tax), $3.8 million ($2.5 million after tax) and $4.1 million ($2.7 million after tax), respectively. 62 65 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT We incorporate by reference information on our directors under the heading "Election of Directors" in our Proxy Statement which we filed pursuant to Regulation 14A with the Commission on April 5, 2001. The names, ages, offices and positions held during the last five years of each of our executive officers are as follows: EXECUTIVE OFFICERS NAME AGE OFFICE AND EXPERIENCE PAUL A. ORMOND 51 President and Chief Executive Officer of Manor Care since August 1991 and Chairman of the Board of Manor Care from August 1991 to September 1998. Member of Class I of the Board of Directors of Manor Care, with a term expiring in 2001. M. KEITH WEIKEL 62 Senior Executive Vice President and Chief Operating Officer of Manor Care since August 1991. Member of Class III of the Board of Directors of Manor Care, with a term expiring in 2003. GEOFFREY G. MEYERS 56 Executive Vice President and Chief Financial Officer of Manor Care since August 1991 and Treasurer of Manor Care from August 1991 to August 1998. R. JEFFREY BIXLER 55 Vice President and General Counsel of Manor Care since November 1991 and Secretary of Manor Care since December 1991. NANCY A. EDWARDS 50 Vice President and General Manager of Central Division of Manor Care since December 1993. 63 66 JOHN K. GRAHAM 40 Vice President and Director of Rehabilitation Services of Manor Care since September 1998, Assistant Vice President and General Manager of Vision Management and Ancillary Businesses of Health Care and Retirement Corporation of America, or HCRA, a subsidiary of Manor Care, from January 1997 to August 1998, and Assistant Vice President and Director of Planning and Marketing of HCRA from January 1996 to December 1996. JEFFREY A. GRILLO 42 Vice President and General Manager of Mid-Atlantic Division of Manor Care since February 1999, Regional Director of Operations in Mid-Atlantic District of ManorCare Health Services, Inc., or MCHS, a subsidiary of Manor Care, from 1996 to January 1999, and Regional Director of Operations in Southeast District of MCHS from 1994 to 1996. LARRY C. LESTER 58 Vice President and General Manager of Midwest Division of Manor Care since January 2000, Regional Director of Operations in Midwest Region of HCRA, from January 1998 to December 1999, and Vice President of Oakwood Healthcare System from January 1993 to December 1997. SPENCER C. MOLER 53 Vice President and Controller of Manor Care since August 1991. O. WILLIAM MORRISON 62 Vice President and General Manager of Eastern Division of Manor Care since March 1999, Assistant Vice President and General Manager of Texas of Manor Care from October 1998 to February 1999, and Regional Manager in the Central Division of HCRA from September 1995 to September 1998. RICHARD W. PARADES 44 Vice President and General Manager of Mid-States Division of Manor Care since January 1999, District Vice President and General Manager of Mid-States of MCHS from February 1997 to December 1998, and Regional Director of Operations in Mid-States District of MCHS from 1994 to January 1997. F. JOSEPH SCHMITT 52 Vice President and General Manager of Southern Division of Manor Care since December 1993. 64 67 JO ANN YOUNG 51 Vice President and General Manager of Assisted Living Division of Manor Care since June 2000, Vice President and Director of Assisted Living of Manor Care from September 1998 to May 2000, Vice President and Director of Assisted Living of MCHS from February 1997 to August 1998, and Vice President of Operations of Caretenders HealthCorp from 1996 to January 1997. ITEM 11. EXECUTIVE COMPENSATION We incorporate by reference information on executive compensation under the heading "Executive Compensation" in our Proxy Statement, which we filed with the Commission on April 5, 2001. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT We incorporate by reference information on security ownership of some beneficial owners under the heading "Security Ownership of Certain Management and Beneficial Owners" in our Proxy Statement, which we filed with the Commission on April 5, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We incorporate by reference information on certain relationships and related transactions under the heading "Election of Directors" in our Proxy Statement which we filed with the Commission on April 5, 2001. 65 68 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Manor Care filed the following consolidated financial statements of Manor Care, Inc. and subsidiaries as part of this Form 10-K/A in Item 8 on the pages indicated: PAGE Report of Ernst & Young LLP, Independent Auditors 35 Consolidated Balance Sheets - December 31, 2000 and 1999 36 Consolidated Statements of Operations - Years ended December 31, 2000, 1999 and 1998 37 Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999 and 1998 38 Consolidated Statements of Shareholders' Equity - Years ended December 31, 2000, 1999 and 1998 39 Notes to Consolidated Financial Statements - December 31, 2000 40 Manor Care includes the following consolidated financial statement schedule of Manor Care, Inc. and subsidiaries in this Form 10-K/A on page 67: Schedule II Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 66 69 MANOR CARE, INC. Schedule II - Valuation and Qualifying Accounts
Charged Additions Balance at to Costs Deduc- From Balance Beginning Other and tions Acquisi- at End of of Period (Note 1) Expenses (Note 2) Tions Period ---------- -------- -------- -------- --------- ------- (In thousands) Year ended December 31, 2000: Deducted from asset accounts: Allowance for doubtful accounts $58,975 $32,911 $(31,868) $1,119 $61,137 ======= ======= ======== ====== ======= Reserve of Genesis dividend $17,404 $17,404 $34,808 ======= ======= ======= Year ended December 31, 1999: Deducted from asset accounts: Allowance for doubtful accounts $58,125 $29,005 $(28,230) $75 $58,975 ======= ======= ======== === ======= Reserve of Genesis dividend $ $17,404 $17,404 ======= ======= ======= Year ended December 31, 1998: Deducted from asset accounts: Allowance for doubtful accounts $52,590 $(469) $39,485 $(33,481) $58,125 ======= ===== ======= ======== =======
(1) Amount includes $1,725,000 for MCA's December 1997 net activity offset by the removal of In Home Health, Inc.'s (IHHI) allowance for doubtful accounts of $2,194,000 as of January 1, 1998 due to the deconsolidation of IHHI. (2) Uncollectible accounts written off, net of recoveries. 67 70 EXHIBITS S-K Item 601 No. Document - ------------- 2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of June 10, 1998, by and among Manor Care, Inc., Catera Acquisition Corp. and the Registrant (filed as Annex A to Health Care and Retirement Corporation's (HCR) Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 3.1 -- Certificate of Incorporation of Health Care and Retirement Corporation (filed as Exhibit 4.1 to HCR's Registration Statement on Form S-1, File No. 33-42535 and incorporated herein by reference). 3.2 -- Form of Certificate of Amendment of Certificate of Incorporation of the Registrant (filed as Annex D to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 3.3 -- Form of Amended and Restated By-laws of the Registrant (filed as Exhibit 3 to Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). 4.1 -- Rights Agreement, dated as of May 2, 1995, between Health Care and Retirement Corporation and Harris Trust and Savings Bank (filed as Exhibit 1 to HCR's Registration Statement on Form 8-A and incorporated herein by reference). 4.2 -- Second Amendment to Rights Agreement dated as of June 10, 1998 between Health Care and Retirement Corporation and Harris Trust and Savings Bank (filed as Exhibit 4.1 to HCR Manor Care Inc.'s Form 8-K filed on October 1, 1998 and incorporated herein by reference). 4.3 -- Third Amendment to Rights Agreement dated as of March 11, 2000 between Manor Care, Inc., as successor to Health Care and Retirement Corporation, and Harris Trust and Savings Bank (filed as Exhibit 4.1 to Manor Care Inc.'s Form 8-K filed on March 14, 2000 and incorporated herein by reference). 4.4 -- Registration Rights Amendment dated as of September 25, 1998 between HCR Manor Care, Inc. and Stewart Bainum, Stewart Bainum, Jr., Bainum Associates Limited Partnership, MC Investment Limited Partnership, Realty Investment Company, Inc., Mid Pines Associates Limited Partnership, The Stewart Bainum Declaration of Trust and The Jane L. Bainum Declaration of Trust (filed as Exhibit 4.2 to HCR Manor Care, Inc.'s Form 8-K filed on October 1, 1998 and incorporated herein by reference). 4.5 -- Credit Agreement dated as of September 25, 1998 among HCR Manor Care, Inc., Manor Care, Inc., Bank of America National Trust and Savings Association, The Chase Manhattan Bank, TD Securities (USA) Inc., and the Other Financial Institutions Party Hereto (filed as Exhibit 4 to HCR Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and incorporated herein by reference). 4.6 -- First Amendment to Five Year Credit Agreement dated as of February 9, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent (filed as Exhibit 4.6 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 68 71 4.7 -- Second Amendment to Five Year Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent (filed as Exhibit 4 to Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference). 4.8 -- 364 Day Credit Agreement dated as of September 25, 1998 among HCR Manor Care, Inc., Manor Care, Inc., Bank of America National Trust and Savings Association, The Chase Manhattan Bank, TD Securities (USA) Inc., and the Other Financial Institutions Party Hereto (filed as Exhibit 4.1 to HCR Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and incorporated herein by reference). 4.9 -- 364 Day Credit Agreement dated as of September 25, 1998, as amended as of September 24, 1999, among HCR Manor Care, Inc., Manor Care, Inc., Bank of America, National Association, the Chase Manhattan Bank, Deutsche Bank and the Other Financial Institutions Party Hereto (filed as Exhibit 4 to Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). 4.10 -- The Second Amendment to the 364 Day Credit Agreement dated as of February 9, 2000 among Manor Care, Inc. (formerly HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent (filed as Exhibit 4.9 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 4.11 -- The Third Amendment to the 364 Day Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent (filed as Exhibit 4.1 to Manor Care, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference). 4.12 -- Indenture dated as of June 4, 1996 between Manor Care, Inc. and Wilmington Trust Company, Trustee (filed as Exhibit 4.1 to Manor Care of America, Inc.'s (MCA), formerly known as Manor Care, Inc., Form 8-K dated June 4, 1996 and incorporated herein by reference). 4.13 -- Supplemental Indentures dated as of June 4, 1996 between Manor Care, Inc. and Wilmington Trust Company, Trustee (filed as Exhibit 4.2 to MCA's Form 8-K dated June 4, 1996 and incorporated herein by reference). 10.1 -- Stock Purchase Agreement and amendment among HCR, HCRC Inc., O-I Health Care Holding Corp. and Owens-Illinois, Inc. dated as of August 30, 1991 (filed as Exhibit 10.1 and 10.1(a) to HCR's Registration Statement on Form S-1, File No. 33-42535 and incorporated herein by reference). 10.2 -- Form of Annual Incentive Award Plan (filed as Exhibit 10.2 to HCR's Registration Statement on Form S-1, File No. 33-42535 and incorporated herein by reference). 10.3 -- Performance Award Plan (filed on pages A1 to A3 of Manor Care, Inc.'s Proxy Statement dated March 30, 2000 in connection with its Annual Meeting held on May 2, 2000 and incorporated herein by reference). 10.4 -- Amended Stock Option Plan for Key Employees (filed as Exhibit 4 to HCR's Registration Statement on Form S-8, File No. 33-83324 and incorporated herein by reference). 69 72 10.5 -- First Amendment, Second Amendment and Third Amendment to the Amended Stock Option Plan for Key Employees (filed as Exhibits 4.1, 4.2 and 4.3, respectively, to HCR's Registration Statement on Form S-8, File No. 333-64181 and incorporated herein by reference). 10.6 -- Revised form of Non-Qualified Stock Option Agreement between HCR and various Key Employees participating in the Stock Option Plan for Key Employees (filed as Exhibit 4.7 to HCR's Registration Statement on Form S-8, File No.33-48885 and incorporated herein by reference). 10.7 -- Amended Restricted Stock Plan (filed on pages A1 to A9 of HCR's Proxy Statement dated March 25, 1997 in connection with its Annual Meeting held on May 6, 1997 and incorporated herein by reference). 10.8 -- First Amendment to Amended Restricted Stock Plan (filed as Exhibit 4.2 to HCR's Registration Statement on Form S-8, File No. 333-64235 and incorporated herein by reference). 10.9 -- Revised form of Restricted Stock Plan Agreement between Manor Care, Inc. and officers participating in the Amended Restricted Stock Plan (filed as Exhibit 10.9 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). 10.10 -- Executive Officer Deferred Compensation Plan dated December 18, 1991 (filed as Exhibit 10.12 to HCR's Annual Report on Form 10-K for the period ended December 31, 1991 and incorporated herein by reference). 10.11 -- Form of Indemnification Agreement between HCR and various officers and directors (filed as Exhibit 10.9 to HCR's Registration Statement on Form S-1, File No. 33-42535 and incorporated herein by reference). 10.12 -- Amended and Restated Health Care and Retirement Corporation Senior Executive Retirement Plan, effective October 1, 1992, restated January 1, 1998 (filed as Exhibit 10.12 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference) 10.13 -- First Amendment to Amended and Restated Health Care and Retirement Corporation Senior Executive Retirement Plan, effective January 1, 1998 (filed as Exhibit 10.13 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). 10.14 -- Senior Management Savings Plan dated December 17, 1992 (filed as Exhibit 10.16 to HCR's Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). 10.15 -- Form of Severance Agreement between HCR Manor Care, Inc., HCRA, and Paul A. Ormond (filed as Exhibit 10.14 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.16 -- Form of Severance Agreement between HCR Manor Care, Inc., HCRA and M. Keith Weikel (filed as Exhibit 10.15 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.17 -- Form of Severance Agreement between HCR Manor Care, Inc., HCRA and Geoffrey G. Meyers (filed as Exhibit 10.16 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 70 73 10.18 -- Form of Severance Agreement between HCR Manor Care, Inc., HCRA and R. Jeffrey Bixler (filed as Exhibit 10.17 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.19 -- Form of Executive Retention Agreement among the Registrant, HCRA and Paul A. Ormond (filed as Exhibit 10.1 to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 10.20 -- Form of Executive Retention Agreement among the Registrant, HCRA and M. Keith Weikel (filed as Exhibit 10.2 to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 10.21 -- Form of Executive Retention Agreement among the Registrant, HCRA and Geoffrey G. Meyers (filed as Exhibit 10.3 to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 10.22 -- Form of Executive Retention Agreement among the Registrant, HCRA and R. Jeffrey Bixler (filed as Exhibit 10.4 to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 10.23 -- Form of Retention Agreement among the Registrant, Manor Care, Inc. and Stewart Bainum, Jr. (filed as Exhibit 10.13 to MCA's Annual Report on Form 10-K for the year ended May 31, 1998 and incorporated herein by reference). 10.24 -- Form of Noncompetition Agreement among the Registrant, Manor Care, Inc. and Stewart Bainum, Jr.(filed as Exhibit 10.12 to MCA's Annual Report on Form 10-K for the year ended May 31, 1998 and incorporated herein by reference). 10.25 -- Form of Chairman's Service Agreement between the Registrant and Stewart Bainum, Jr. (filed as Exhibit 10.7 to HCR's Registration Statement on Form S-4, File No. 333-61677 and incorporated herein by reference). 10.26 -- Stock Option Plan for Outside Directors (filed as Exhibit 4.4 to HCR's Registration Statement on Form S-8, File No. 33-48885 and incorporated herein by reference). 10.27 -- First Amendment, Second Amendment and Third Amendment to the Stock Option Plan for Outside Directors (filed as Exhibits 4.4, 4.5 and 4.6, respectively, to HCR's Registration Statement on Form S-8, File No. 333-64181 and incorporated herein by reference). 10.28 -- Form of Non-Qualified Stock Option Agreement between HCR and various outside directors participating in Stock Option Plan for Outside Directors (filed as Exhibit 4.6 to HCR's Registration Statement on Form S-8, File No. 33-48885 and incorporated herein by reference). 10.29 -- Manor Care, Inc.'s Non-Employee Director Stock Compensation Plan (filed as Exhibit A to MCA's Proxy Statement dated August 28, 1996 which is Exhibit 99 to the Annual Report on Form 10-K for the year ended May 31, 1997 and incorporated herein by reference). 21 -- Subsidiaries of the Registrant (filed as Exhibit 21 to Manor Care, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference) *23 -- Consent of Independent Auditors *24 -- Power of Attorney - -------------------- * Filed herewith. 71 74 REPORTS ON FORM 8-K Manor Care filed a Form 8-K on December 28, 2000 regarding the completion of the merger of In Home Health, Inc. with a subsidiary of Manor Care, Inc. 72 75 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Manor Care, Inc. (Registrant) by /s/ R. Jeffrey Bixler -------------------------------------- R. Jeffrey Bixler Vice President, General Counsel and Secretary Date: April 30, 2001 73 76 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on April 30, 2001 on behalf of Manor Care, Inc. and in the capacities indicated.
SIGNATURE TITLE --------- ----- * - ----------------------------- Stewart Bainum, Jr. Chairman of the Board, Director * - ----------------------------- Joseph H. Lemieux Director * - ----------------------------- William H. Longfield Director * - ----------------------------- Frederic V. Malek Director * - ----------------------------- Geoffrey G. Meyers Executive Vice President and Chief Financial Officer (Principal Financial Officer) * - ----------------------------- Spencer C. Moler Vice President and Controller (Principal Accounting Officer) * - ----------------------------- Paul A. Ormond President and Chief Executive Officer (Principal Executive Officer); Director * - ----------------------------- John T. Schwieters Director * - ----------------------------- Robert G. Siefers Director * - ----------------------------- M. Keith Weikel Senior Executive Vice President and Chief Operating Officer; Director * - ----------------------------- Gail R. Wilensky Director
74 77 * - ----------------------------- Thomas L. Young Director
- ------------------- * R. Jeffrey Bixler, signing his name hereto, does sign this document on behalf of each of the above named officers and/or directors of the Company pursuant to powers of attorney duly executed by such persons. By: /s/ R. Jeffrey Bixler ------------------------------------ R. Jeffrey Bixler, Attorney-in-fact 75 78 EXHIBIT INDEX Exhibit Number Description ------- ----------- 23 Consent of Independent Auditors 24 Power of Attorney 76 EX-23.1 9 l87647aex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-4 and related Prospectus of Manor Care, Inc. for the registration of $200,000,000 of 8% Senior Notes due March 1, 2008 and to the incorporation by reference therein of our report dated January 25, 2001, with respect to the consolidated financial statements and schedule of Manor Care, Inc. included in its Annual Report (Form 10-K/A) for the year ended December 31, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Toledo, Ohio April 30, 2001 EX-24.1 10 l87647aex24-1.txt EXHIBIT 24.1 1 EXHIBIT 24.1 MANOR CARE, INC. Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of Manor Care, Inc. does hereby make, constitute, and appoint R. Jeffrey Bixler and Geoffrey G. Meyers, each of the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for each of the undersigned and in each undersigned's name, place, and stead in any and all capacities, to sign and affix each of the undersigned's name as such director and/or officer of Manor Care, Inc. to: (i) the Annual Report on Form 10-K/A or other applicable form for the fiscal year ended December 31, 2000 and any and all amendments thereto that are to be filed by Manor Care, Inc. with the Securities and Exchange Commission, Washington, D.C., and file the same, with all exhibits thereto, with said Commission; and (ii) a Registration Statement or Registration Statements, on Form S-4 or other applicable form, and any or all amendments, including post-effective amendments, thereto, and all registration statements for the same offering that are to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be filed by Manor Care, Inc. with the Securities and Exchange Commission, Washington, D.C. in connection with the registration under the Act of securities proposed to be exchanged for securities issued privately by Manor Care, Inc. and guaranteed by certain guarantors, and file the same, with all exhibits thereto and other supporting documents pertaining to the registration of the securities covered thereby, with said Commission, granting unto said attorneys-in-fact and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary or incidental to the performance and execution of the powers herein expressly granted, to be done in and about the premises, as fully to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and confirming that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 2 IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 25th day of April, 2001. /s/ Stewart Bainum, Jr ------------------------------- Stewart Bainum, Jr. /s/ Joseph H. Lemieux ------------------------------- Joseph H. Lemieux /s/ William H. Longfield ------------------------------- William H. Longfield /s/ Frederic V. Malek ------------------------------- Frederic V. Malek /s/ Geoffrey G. Meyers ------------------------------- Geoffrey G. Meyers /s/ Spencer C. Moler ------------------------------- Spencer C. Moler /s/ Paul A. Ormond ------------------------------- Paul A. Ormond 3 /s/ John T. Schwieters ------------------------------ John T. Schwieters /s/ Robert G. Siefers ------------------------------ Robert G. Siefers /s/ M. Keith Weikel ------------------------------ M. Keith Weikel /s/ Gail R. Wilensky ------------------------------ Gail R. Wilensky /s/ Thomas L. Young ------------------------------ Thomas L. Young EX-24.2 11 l87647aex24-2.txt EXHIBIT 24.2 1 EXHIBIT 24.2 GUARANTORS Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby make, constitute, and appoint R. Jeffrey Bixler and Geoffrey G. Meyers, each of the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for each undersigned and in each undersigned's name, place, and stead, to sign and affix each undersigned's name as such director and/or officer of said Guarantors to a Registration Statement or Registration Statements, on Form S-4 or other applicable form, and any or all amendments, including post-effective amendments, thereto, and all registration statements for the same offering that are to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be filed by said Guarantors with the Securities and Exchange Commission, Washington, D.C. in connection with the registration under the Act of securities proposed to be exchanged for securities issued privately by Manor Care, Inc. and guaranteed by said Guarantors, and file the same, with all exhibits thereto and other supporting documents pertaining to the registration of the securities covered thereby, with said Commission, granting unto said attorneys-in-fact and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary or incidental to the performance and execution of the powers herein expressly granted, to be done in and about the premises, as fully to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and confirming that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 25th day of April, 2001. /s/ Paul A. Ormond -------------------------- Paul A. Ormond /s/ Geoffrey G. Meyers -------------------------- Geoffrey G. Meyers /s/ Spencer C. Moler -------------------------- Spencer C. Moler 2 EXHIBIT A Guarantors ALBUQUERQUE ARDEN, LLC AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ANCILLARY SERVICES MANAGEMENT, INC. ANCILLARY SERVICES, LLC ANNANDALE ARDEN, LLC ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. BAINBRIDGE ARDEN, LLC BATH ARDEN, LLC BINGHAM FARMS ARDEN, LLC BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. BOOTH LIMITED PARTNERSHIP CANTERBURY VILLAGE, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. CLAIRE BRIDGE OF ANDERSON, LLC CLAIRE BRIDGE OF AUSTIN, LLC CLAIRE BRIDGE OF KENWOOD, LLC CLAIRE BRIDGE OF SAN ANTONIO, LLC CLAIRE BRIDGE OF SUSQUEHANNA, LLC CLAIRE BRIDGE OF WARMINSTER, LLC COLEWOOD LIMITED PARTNERSHIP COLONIE ARDEN, LLC CRESTVIEW HILLS ARDEN, LLC DEKALB HEALTHCARE CORPORATION DEVON MANOR CORPORATION DISTCO, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. 3 EAST MICHIGAN CARE CORPORATION EMERSON SPRINGHOUSE, LLC EXECUTIVE ADVERTISING, INC. EYE-Q NETWORK, INC. FIRST LOUISVILLE ARDEN, LLC FOUR SEASONS NURSING CENTERS, INC. FRESNO ARDEN, LLC GENEVA ARDEN, LLC GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HANOVER ARDEN, LLC HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR HOSPITAL HOLDING COMPANY, INC. HCR HOSPITAL, LLC HCR INFORMATION CORPORATION HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. HCR MANORCARE MESQUITE, L.P. HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEALTHCARE CONSTRUCTION CORP. HEARTLAND CAREPARTNERS, INC. HEARTLAND EMPLOYMENT SERVICES, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND MEDICAL INFORMATION SERVICES, INC. HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IN HOME HEALTH, INC. INDUSTRIAL WASTES, INC. 4 IONIA MANOR, INC. JACKSONVILLE HEALTHCARE CORPORATION JEFFERSON ARDEN, LLC KANSAS SKILLED NURSING, LLC KENSINGTON MANOR, INC. KENWOOD ARDEN, LLC KNOLLVIEW MANOR, INC. LAKE ZURICH ARDEN, LLC LAURELDALE ARDEN, LLC LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. LEXINGTON ARDEN, LLC LINCOLN HEALTH CARE, INC. LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF AMERICA, INC MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CENTERVILLE, INC MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DELAWARE COUNTY, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. 5 MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MIAMISBURG, INC MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR CARE OF YORK (NORTH), INC. MANOR CARE OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANORCARE HEALTH SERVICES, INC. MARINA VIEW MANOR, INC. MCHS OF NEW YORK, INC. MEDICAL AID TRAINING SCHOOLS, INC. MEDI-SPEECH SERVICE, INC. MEMPHIS ARDEN, LLC MESQUITE HOSPITAL, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATION SERVICES, INC. MILESTONE STAFFING SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MNR FINANCE CORP. MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC MRC REHABILITATION, INC. MRS, INC. NAPA ARDEN, LLC 6 NASHVILLE ARDEN, LLC NEW MANORCARE HEALTH SERVICES, INC. NISHAYUNA ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC PEAK REHABILITATION, INC. PERRYSBURG PHYSICAL THERAPY, INC PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. REHABILITATION ADMINISTRATION CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT & BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. ROANOKE ARDEN, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC ROLAND PARK NURSING CENTER, INC. RVA MANAGEMENT SERVICES, INC. SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING - WHEATON NURSING HOME, INC. SILVER SPRING ARDEN, LLC SPRINGHILL MANOR, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. SUN VALLEY MANOR, INC. SUSQUEHANNA ARDEN LLC TAMPA ARDEN, LLC THE NIGHTINGALE NURSING HOME, INC. THERAPY ASSOCIATES, INC. THERASPORT PHYSICAL THERAPY, INC. THREE RIVERS MANOR, INC. TOM'S RIVER ARDEN, LLC TOTALCARE CLINICAL LABORATORIES, INC. 7 TUSCAWILLA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WARMINSTER ARDEN LLC WASHTENAW HILLS MANOR, INC. WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC WEST WINDSOR ARDEN, LLC WHITEHALL MANOR, INC. WILLIAMS VILLE ARDEN, LLC 8 CERTAIN GUARANTORS Power of Attorney of Director The undersigned director of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby make, constitute, and appoint R. Jeffrey Bixler and Geoffrey G. Meyers, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place, and stead, to sign and affix the undersigned's name as such director of said Guarantors to a Registration Statement or Registration Statements, on Form S-4 or other applicable form, and any or all amendments, including post-effective amendments, thereto, and all registration statements for the same offering that are to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be filed by said Guarantors with the Securities and Exchange Commission, Washington, D.C. in connection with the registration under the Act of securities proposed to be exchanged for securities issued privately by Manor Care, Inc. and guaranteed by said Guarantors and certain other guarantors, and file the same, with all exhibits thereto and other supporting documents pertaining to the registration of the securities covered thereby, with said Commission, granting unto said attorneys-in-fact and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary or incidental to the performance and execution of the powers herein expressly granted, to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 25th day of April, 2001. /s/ M. Keith Weikel ------------------------- M. Keith Weikel 9 EXHIBIT A Guarantors HCR INFORMATION CORPORATION HEARTLAND MEDICAL INFORMATION SERVICES, INC. EX-25.1 12 l87647aex25-1.txt EXHIBIT 25.1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to section 305(b) (2) NATIONAL CITY BANK (Exact name of Trustee as specified in its charter) 34-0420310 (I.R.S. Employer Identification No.) 1900 East Ninth Street Cleveland, Ohio 44114 (Address of principal executive (zip code) offices) David L. Zoeller Senior Vice President and General Counsel National City Corporation 1900 East Ninth Street Cleveland, Ohio 44114 (216) 575-9313 (Name, address and telephone number of agent for service) MANOR CARE, INC. (Exact name of obligor as specified in its charter) DELAWARE 34-1687107 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 North Summit Street Toledo, Ohio 43604 Attn: Mr.Paul Ormond, CEO (Address of principal (zip code) executive offices) SEE TABLE OF ADDITIONAL CO-REGISTRANTS INCLUDED IN THIS REGISTRATION 8% Senior Notes due 2008 2 TABLE OF ADDITIONAL CO-REGISTRANTS
(EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ------------------------------------------------ ------------- ------------------- ALBUQUERQUE ARDEN, LLC Delaware 52-2118781 AMERICAN HOSPITAL BUILDING CORPORATION Delaware 52-0985621 AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. Illinois 53-1352950 AMERICANA HEALTHCARE CORPORATION OF GEORGIA Georgia 37-1087694 AMERICANA HEALTHCARE CORPORATION OF NAPLES Florida 37-1087695 ANCILLARY SERVICES MANAGEMENT, INC. Ohio 34-163874 ANCILLARY SERVICES, LLC Delaware 52-2166500 ANNANDALE ARDEN, LLC Delaware 52-2111069 ARCHIVE ACQUISITION, INC. Maryland 52-1840315 ARCHIVE RETRIEVAL SYSTEMS, INC. Maryland 52-1734402 BAILY NURSING HOME, INC. Pennsylvania 23-1674218 BAINBRIDGE ARDEN, LLC Delaware 52-2098028 BATH ARDEN, LLC Delaware 52-2099206 BINGHAM FARMS ARDEN, LLC Delaware 52-2106495 BIRCHWOOD MANOR, INC. Michigan 38-1719951 BLUE RIDGE REHABILITATION SERVICES, INC. Virginia 54-1508699 BOOTH LIMITED PARTNERSHIP Florida 37-1080797 CANTERBURY VILLAGE, INC. Michigan 38-2032536 CHARLES MANOR, INC. Maryland 52-0902287 CHESAPEAKE MANOR, INC. Maryland 52-0902288 CLAIRE BRIDGE OF ANDERSON, LLC Delaware 39-1973297 CLAIRE BRIDGE OF AUSTIN, LLC Delaware 39-1973318 CLAIRE BRIDGE OF KENWOOD, LLC Delaware 39-1973322 CLAIRE BRIDGE OF SAN ANTONIO, LLC Delaware 39-1973324 CLAIRE BRIDGE OF SUSQUEHANNA, LLC Delaware 39-1973366 CLAIRE BRIDGE OF WARMINSTER, LLC Delaware 39-1973327
3
(EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ------------------------------------------------ ------------- ------------------- COLEWOOD LIMITED PARTNERSHIP Maryland 52-1335634 COLONIE ARDEN, LLC Delaware 52-2130894 CRESTVIEW HILLS ARDEN, LLC Delaware 52-2092155 DEKALB HEALTHCARE CORPORATION Delaware 37-1019112 DEVON MANOR CORPORATION Pennsylvania 23-2093337 DISTCO, INC. Maryland 52-0853907 DIVERSIFIED REHABILITATION SERVICES, INC. Michigan 38-2690352 DONAHOE MANOR, INC. Pennsylvania 25-1147049 EAST MICHIGAN CARE CORPORATION Michigan 38-1747681 EMERSON SPRINGHOUSE, LLC Delaware 52-2099201 EXECUTIVE ADVERTISING, INC. Maryland 52-0912751 EYE-Q NETWORK, INC. Ohio 34-1760305 FIRST LOUISVILLE ARDEN, LLC Delaware 52-2092159 FOUR SEASONS NURSING CENTERS, INC. Delaware 73-0783484 FRESNO ARDEN, LLC Delaware 52-2098630 GENEVA ARDEN, LLC Delaware 52-2124930 GEORGIAN BLOOMFIELD, INC. Michigan 38-1982410 GREENVIEW MANOR, INC. Michigan 38-6062040 HANOVER ARDEN, LLC Delaware 52-2098633 HCR ACQUISITION CORPORATION Ohio 34-1848444 HCR HOME HEALTH CARE AND HOSPICE, INC. Ohio 34-1787978 HCR HOSPITAL HOLDING COMPANY, INC. Nevada 92-2038485 HCR HOSPITAL, LLC Nevada 91-2039256 HCR INFORMATION CORPORATION Ohio 31-1494764 HCR MANORCARE MEDICAL SERVICES OF FLORIDA, INC. Florida 65-0666550 HCR MANORCARE MESQUITE, L.P. Delaware 52-2229490 HCR PHYSICIAN MANAGEMENT SERVICES, INC. Florida 58-2242001 HCR REHABILITATION CORP. Ohio 34-1720345
4
(EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ------------------------------------------------ ------------- ------------------- HCRA OF TEXAS, INC. Texas 74-2788668 HCRC INC. Delaware 22-2784172 HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA Ohio 34-4402510 HEALTHCARE CONSTRUCTION CORP. North Carolina 52-1519915 HEARTLAND CAREPARTNERS, INC. Ohio 34-1838217 HEARTLAND EMPLOYMENT SERVICES, INC. Ohio 34-1903270 HEARTLAND HOME CARE, INC. Ohio 34-1787895 HEARTLAND HOME HEALTH CARE SERVICES, INC. Ohio 34-1787967 HEARTLAND HOSPICE SERVICES, INC. Ohio 34-1788398 HEARTLAND MANAGEMENT SERVICES, INC. Ohio 34-1808700 HEARTLAND MEDICAL INFORMATION SERVICES, INC. Ohio 31-1488831 HEARTLAND REHABILITATION SERVICES OF FLORIDA, INC. Florida 59-2504386 HEARTLAND REHABILITATION SERVICES, INC. Ohio 34-1280619 HEARTLAND SERVICES CORP. Ohio 34-1760503 HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. New Jersey 22-2137595 HGCC OF ALLENTOWN, INC. Tennessee 23-2244532 IN HOME HEALTH, INC. Minnesota 41-1458213 INDUSTRIAL WASTES, INC. Pennsylvania 25-1264509 IONIA MANOR, INC. Michigan 38-1749970 JACKSONVILLE HEALTHCARE CORPORATION Delaware 37-1069936 JEFFERSON ARDEN, LLC Delaware 52-2111068 KANSAS SKILLED NURSING, LLC Delaware 52-2124929 KENSINGTON MANOR, INC. Florida 59-1289690 KENWOOD ARDEN, LLC Delaware 52-2116657 KNOLLVIEW MANOR, INC. Michigan 38-1724149 LAKE ZURICH ARDEN, LLC Delaware 52-2098619 LAURELDALE ARDEN, LLC Delaware 52-2124931 LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. Delaware 52-1462046
5
(EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ------------------------------------------------ ------------- ------------------- LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. Maryland 52-1352949 LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. Delaware 52-1462056 LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. Virginia 52-1363206 LEXINGTON ARDEN, LLC Delaware 52-2092157 LINCOLN HEALTH CARE, INC. Ohio 34-1352822 LINWOOD ARDEN, LLC Delaware 52-2098962 LIVONIA ARDEN, LLC Delaware 52-2104704 MANOR CARE AVIATION, INC. Delaware 52-1462072 MANOR CARE MANAGEMENT CORPORATION Delaware 52-2004467 MANOR CARE OF AKRON, INC. Ohio 52-0970447 MANOR CARE OF AMERICA, INC Delaware 52-1200376 MANOR CARE OF ARIZONA, INC. Delaware 52-1751861 MANOR CARE OF ARLINGTON, INC. Virginia 52-1067426 MANOR CARE OF BOCA RATON, INC. Florida 52-1297340 MANOR CARE OF BOYNTON BEACH, INC. Florida 52-1288882 MANOR CARE OF CANTON, INC. Ohio 52-1019576 MANOR CARE OF CENTERVILLE, INC Delaware 52-1933544 MANOR CARE OF CHARLESTON, INC. South Carolina 52-1187059 MANOR CARE OF CINCINNATI, INC. Ohio 52-0943592 MANOR CARE OF COLUMBIA, INC. South Carolina 52-0940578 MANOR CARE OF DARIEN, INC. Connecticut 52-1934884 MANOR CARE OF DELAWARE COUNTY, INC. Delaware 52-1916053 MANOR CARE OF DUNEDIN, INC. Florida 52-1252397 MANOR CARE OF FLORIDA, INC. Florida 52-1479084 MANOR CARE OF HINSDALE, INC. Illinois 52-0970446 MANOR CARE OF KANSAS, INC. Delaware 52-1462071 MANOR CARE OF KINGSTON COURT, INC. Pennsylvania 52-1314648 MANOR CARE OF LARGO, INC. Maryland 52-1065213
6
EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ----------------------------------------------- ------------- ------------------- MANOR CARE OF LEXINGTON, INC. South Carolina 52-1048770 MANOR CARE OF MEADOW PARK, INC. Washington 52-1339998 MANOR CARE OF MIAMISBURG, INC Delaware 52-1708219 MANOR CARE OF NORTH OLMSTEAD, INC. Ohio 52-0970448 MANOR CARE OF PINEHURST, INC. North Carolina 52-1069744 MANOR CARE OF PLANTATION, INC. Florida 52-1383874 MANOR CARE OF ROLLING MEADOWS, INC. Illinois 52-1077856 MANOR CARE OF ROSSVILLE, INC. Maryland 52-1077857 MANOR CARE OF SARASOTA, INC. Florida 52-1252364 MANOR CARE OF WILLOUGHBY, INC. Ohio 52-0970449 MANOR CARE OF WILMINGTON, INC. Delaware 52-1252362 MANOR CARE OF YORK (NORTH), INC. Pennsylvania 52-1314645 MANOR CARE OF YORK (SOUTH), INC. Pennsylvania 52-1314644 MANOR CARE PROPERTIES, INC. Delaware 52-2061834 MANOR LIVING CENTERS, INC. Delaware 52-1465781 MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. Delaware 52-2055100 MANORCARE HEALTH SERVICES OF GEORGIA, INC. Delaware 52-2055102 MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, Pennsylvania 52-2004471 INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. Delaware 52-2002773 MANORCARE HEALTH SERVICES, INC. Delaware 52-0886946 MARINA VIEW MANOR, INC. Wisconsin 39-1164707 MCHS OF NEW YORK, INC. New York 52-2071500 MEDICAL AID TRAINING SCHOOLS, INC. Delaware 52-0963178 MEDI-SPEECH SERVICE, INC. Michigan 38-2343280 MEMPHIS ARDEN, LLC Delaware 52-2098029 MESQUITE HOSPITAL, LLC Delaware 52-2229486 METUCHEN ARDEN, LLC Delaware 52-2098964 MIDDLETOWN ARDEN, LLC Delaware 52-2098965
7
EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ----------------------------------------------- ------------- ------------------- MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. New Jersey 22-2575292 MILESTONE HEALTH SYSTEMS, INC. Texas 75-2245197 MILESTONE HEALTHCARE, INC. Delaware 75-2592398 MILESTONE REHABILITATION SERVICES, INC. Texas 75-2190857 MILESTONE STAFFING SERVICES, INC. Texas 74-2963093 MILESTONE THERAPY SERVICES, INC. Texas 75-2406307 MNR FINANCE CORP. Delaware 51-0348281 MONROE ARDEN, LLC Delaware 52-2098969 MOORESTOWN ARDEN, LLC Delaware 52-2098971 MRC REHABILITATION, INC. Florida 59-3357644 MRS, INC. Delaware 52-1164725 NAPA ARDEN, LLC Delaware 52-2108866 NASHVILLE ARDEN, LLC Delaware 52-2111070 NEW MANORCARE HEALTH SERVICES, INC. Delaware 52-2053999 NISHAYUNA ARDEN, LLC Delaware 52-2107731 OVERLAND PARK ARDEN, LLC Delaware 52-2099492 OVERLAND PARK SKILLED NURSING, LLC Delaware 52-2098627 PEAK REHABILITATION, INC. Delaware 52-1833202 PERRYSBURG PHYSICAL THERAPY, INC Ohio 34-1363071 PHYSICAL, OCCUPATIONAL, AND SPEECH THERAPY, INC. Florida 59-3377552 PNEUMATIC CONCRETE, INC. Tennessee 62-0716951 PORTFOLIO ONE, INC. New Jersey 22-1604502 REHABILITATION ADMINISTRATION CORPORATION Kentucky 61-1295825 REHABILITATION ASSOCIATES, INC. New Jersey 22-3290567 REHABILITATION SERVICES OF ROANOKE, INC. Virginia 54-0993013 REINBOLT & BURKAM, INC. Ohio 34-1479648 RICHARDS HEALTHCARE, INC. Texas 76-0339241 RIDGEVIEW MANOR, INC. Michigan 38-1734212
8
EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ----------------------------------------------- ------------- ------------------- ROANOKE ARDEN, LLC Delaware 52-2104706 ROCKFORD ARDEN, LLC Delaware 52-2098626 ROCKLEIGH ARDEN, LLC Delaware 52-2098984 ROLAND PARK NURSING CENTER, INC. Maryland 52-1890169 RVA MANAGEMENT SERVICES, INC. Ohio 34-1791517 SAN ANTONIO ARDEN, LLC Delaware 52-2106496 SECOND LOUISVILLE ARDEN, LLC Delaware 52-2092161 SETAUKET ARDEN, LLC Delaware 52-2107732 SILVER SPRING - WHEATON NURSING HOME, INC. Maryland 53-0245649 SILVER SPRING ARDEN, LLC Delaware 52-2107728 SPRINGHILL MANOR, INC. Michigan 38-1890497 STEWALL CORPORATION Maryland 52-0798475 STRATFORD MANOR, INC. Virginia 52-0902020 STUTEX CORP. Texas 52-0884091 SUN VALLEY MANOR, INC. Michigan 38-1798425 SUSQUEHANNA ARDEN LLC Delaware 52-2124933 TAMPA ARDEN, LLC Delaware 52-2113270 THE NIGHTINGALE NURSING HOME, INC. Pennsylvania 23-1719762 THERAPY ASSOCIATES, INC. Virginia 54-1234646 THERASPORT PHYSICAL THERAPY, INC. Michigan 38-3324355 THREE RIVERS MANOR, INC. Michigan 38-2479940 TOM'S RIVER ARDEN, LLC Delaware 52-2098987 TOTALCARE CLINICAL LABORATORIES, INC. Delaware 52-1740933 TUSCAWILLA ARDEN, LLC Delaware 52-2092162 TUSTIN ARDEN, LLC Delaware 52-2108869 WALL ARDEN, LLC Delaware 52-2098990 WARMINSTER ARDEN LLC Delaware 52-2124931 WASHTENAW HILLS MANOR, INC. Michigan 38-2686882
9
EXACT NAME OF THE CO-REGISTRANT AS SPECIFIED IN (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER ITS CHARTER) OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) - ----------------------------------------------- ------------- ------------------- WAYNE ARDEN, LLC Delaware 52-2098991 WAYNE SPRINGHOUSE, LLC Delaware 52-2099204 WEST DEPTFORD ARDEN, LLC Delaware 52-2098993 WEST ORANGE ARDEN, LLC Delaware 52-2099197 WEST ORANGE SPRINGHOUSE, LLC Delaware 52-2099205 WEST WINDSOR ARDEN, LLC Delaware 52-2099198 WHITEHALL MANOR, INC. Michigan 38-2189772 WILLIAMS VILLE ARDEN, LLC Delaware 52-2107735
10 GENERAL 1. General information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency, Washington, D.C. The Federal Reserve Bank of Cleveland, Cleveland, Ohio Federal Deposit Insurance Corporation, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. National City Bank is authorized to exercise corporate trust powers. 2. Affiliations with obligor. If the obligor is an affiliate of the trustee, describe such affiliation. NONE 16. List of exhibits (1) A copy of the Articles of Association of the Trustee. Incorporated herein by reference is Charter No. 786 Merger No. 1043 the Articles of Association of National City Bank, which Articles of Association were included as a part of Exhibit 1 to Form T-1 filing made by said National City Bank with the Securities and Exchange Commission in November 1973 (File No. 2-49786). Incorporated herein by reference is an amendment to the Articles of Association of National City Bank, which amendment was included as a part of Exhibit 1 to Form T-1 filing made by said National City Bank with the Securities and Exchange Commission in April 1996 (File No. 333-02761) (2) A copy of the certificate of authority of the Trustee to commence business: (a) a copy of the certificate of NCB National Bank to commence business. 11 Incorporated herein by reference is a true and correct copy of the certificate issued by the Comptroller of the Currency under date of April 26, 1973, whereby NCB National Bank was authorized to commence the business of banking as a National banking Association, which true copy of said Certificate was included as Exhibit 2(a) to Form T-1 filing made by said National City Bank with the Securities and Exchange Commission in November 1973 (File 2-49786) (b) a copy of the approval of the merger of The National City Bank of Cleveland into NCB National Bank under the charter of NCB National Bank and under the title "National City Bank." Incorporated herein by reference is a true and correct copy of the certificate issued by the Comptroller of the Currency under date of April 27, 1973, whereby the National City Bank of Cleveland was merged into NCB National Bank, which true copy of said certificate was included as Exhibit 2(b) to Form T-1 filing made by said National City Bank with the Securities and Exchange Commission in November 1973 (File 2-49786). (3) A copy of the authorization of the Trustee to exercise corporate trust powers. Incorporated herein by reference is a true and correct copy of the certificate dated April 13, 1973 issued by the Comptroller of the Currency whereby said National City Bank has been granted the right to exercise certain trust powers, which true copy of said certificate was included as Exhibit 3 to Form T-1 filing made by said National City Bank with the Securities and Exchange Commission in November 1973 (File 2-49786). (4) A copy of existing By-Laws of the Trustee. Incorporated herein by reference is a true and correct copy of the National City Bank By-Laws as amended through January 1, 1993. This true copy of said By-Laws was included as Exhibit 4 to Form T-1 filing made by National City Bank with the Securities and Exchange Commission in March, 1995 (File 22-26594). (5) Not applicable. 12 (6) Consent of the United States Institutional Trustee required by Section 321(b) of the Act. Attached hereto as Exhibit 6 is the Consent of the Trustee in accordance with Section 321 (b) of the Trust Indenture Act of 1939 as amended. (7) A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. Attached hereto as Exhibit 7 is the latest report of condition of National City Bank. (8) Not applicable. (9) Not applicable. 13 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, National City Bank, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Cleveland, and State of Ohio, on the 3rd day of April, 2001. NATIONAL CITY BANK By:/s/ Christine Robinette ----------------------- Christine Robinette Vice President 14 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, and to the extent required thereby to enable it to act as an indenture trustee, National City Bank hereby consents as of the date hereof that reports of examinations of it by the Treasury Department, the Comptroller of the Currency, the Board of Governors of the Federal Reserve Banks, the Federal Deposit Insurance Corporation or of any other Federal or State authority having the right to examine National City Bank, may be furnished by similar authorities to the Securities and Exchange Commission upon request thereon. NATIONAL CITY BANK By: /s/ Christine Robinette ----------------------- Christine Robinette Vice President EX-99.1 13 l87647aex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL MANOR CARE, INC. OFFER TO EXCHANGE ITS $200,000,000 8.00% SENIOR NOTES DUE 2008 FOR ANY AND ALL UNREGISTERED 8.00% SENIOR NOTES DUE 2008 PURSUANT TO THE PROSPECTUS DATED ______, 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ___________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. The Exchange Agent is: NATIONAL CITY BANK Deliver to:
BY MAIL: BY HAND: NEW YORK DROP: National City Bank National City Bank National City Bank P.O. Box 92301 Corporate Trust Operations Mellon Securities Trust Company Cleveland, Ohio 44193-0900 3rd Floor - North Annex 120 Broadway 4100 West 150th Street 13th Floor Cleveland, Ohio 44135-1385 New York, NY 10271
BY FACSIMILE: (216)575-9326 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT. The instructions set forth in this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. The undersigned acknowledges that he or she has received and reviewed the prospectus (the "Prospectus") dated ____________________, 2001, of Manor Care, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's offer (the "Exchange Offer") to exchange $200,000,000 principal amount of its 8.00% Senior Notes due 2008 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for $200,000,000 principal amount of its outstanding 8.00% Senior Notes due 2008 (the "Private Notes"). Recipients of the Prospectus should read the requirements described in the Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW. This Letter of Transmittal is to be used by a holder of Private Notes (i) if certificates representing tendered Private Notes are to be forwarded herewith, (ii) if a tender is made pursuant to the guaranteed delivery procedures in the section of the Prospectus entitled "The Exchange Offer, Procedures for Tendering." Holders that are tendering by book,entry transfer to the Exchange Agent's account at DTC can execute the tender through DTC's Automated Tender Offer Program for which the Exchange Offer will be eligible. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC which will verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send an agent's message forming part of a book-entry transfer in which the participant agrees to be bound by the terms of the 1 2 Letter of Transmittal (an "Agent's Message") to the Exchange Agent for its acceptance. Transmission of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. In order to properly complete this Letter of Transmittal, a holder of Private Notes must (i) complete the box entitled, "Description of Private Notes Tendered," (ii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance Instructions and Special Delivery Instructions, (iii) sign the Letter of Transmittal by completing the box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder of Private Notes should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Private Notes who desire to tender their Private Notes for exchange and whose Private Notes are not immediately available or who cannot deliver their Private Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent or complete the procedures for book-entry transfer on or prior to the Expiration Date, must tender the Private Notes pursuant to the guaranteed delivery procedures set forth in the section of Prospectus entitled "The Exchange Offer, Procedures for Tendering." See Instruction 2. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. In order to ensure participation in the Exchange Offer, Private Notes must be properly tendered prior to the Expiration Date. Holders of Private Notes who wish to tender their Private Notes for exchange must complete columns (1) through (3) in box below entitled "Description of Private Notes Tendered," and sign the box below entitled "Sign Here." If only those columns are completed, such holder of Private Notes will have tendered for exchange all Private Notes listed in column (3) below. If the holder of Private Notes wishes to tender for exchange less than all of such Private Notes, column (4) must be completed in full. In such case, such holder of Private Notes should refer to Instruction 5. The Exchange Offer may be extended, terminated or amended, as provided in the Prospectus. During any such extension of the Exchange Offer, all Private Notes previously tendered and not withdrawn pursuant to the Exchange Offer will remain subject to such Exchange Offer. The Exchange Offer is scheduled to expire at 5:00 p.m., New York City time, on _______, 2001, unless extended by the Company. The undersigned hereby tenders for exchange the Private Notes described in the box entitled "Description of Private Notes Tendered" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. DESCRIPTION OF PRIVATE NOTES TENDERED
(1) (2) (3) (4) AGGREGATE NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL AMOUNT REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY TENDERED FOR (PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S)(A) EXCHANGE (B) Total Principal Amount Tendered
(A) Unless otherwise indicated in this column, any tendering holder will be deemed to have tendered the entire principal amount represented by the Private Notes indicated in the column labeled "Aggregate Principal Amount Represented by Certificate(s)." See Instruction 5. (B) The minimum permitted tender is $1,000 in principal amount of Private Notes. All other tenders must be integral multiples of $1,000. 2 3 [ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered Holder(s) ------------------------------------------ Window Ticket Number (if any) ------------------------------------------ Date of Execution of Notice of Guaranteed Delivery ---------------------- Name of Institution that guaranteed delivery -------------------------- Only registered holders are entitled to tender their Private Notes for exchange in the Exchange Offer. Any financial institution that is a participant in DTC's system and whose name appears on a security position listing as the record owner of the Private Notes and who wishes to make book-entry delivery of Private Notes as described above must complete and execute a participant's letter (which will be distributed to participants by DTC) instructing DTC's nominee to tender such Private Notes for exchange. Persons who are beneficial owners of Private Notes but are not registered holders and who seek to tender Private Notes should (i) contact the registered holder of such Private Notes and instruct such registered holder to tender on his or her behalf, (ii) obtain and include with this Letter of Transmittal, Private Notes properly endorsed for transfer by the registered holder or accompanied by a properly completed bond power from the registered holder, with signatures on the endorsement or bond power guaranteed by a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., a commercial bank or trading company having an office in the United States or certain other eligible guarantors (each, an "Eligible Institution"), or (iii) effect a record transfer of such Private Notes from the registered holder to such beneficial owner and comply with the requirements applicable to registered holders for tendering Private Notes prior to the Expiration Date. See "The Exchange Offer, Procedures for Tendering." SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 3 4 Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company for exchange the Private Notes indicated above. Subject to, and effective upon, acceptance for purchase of the Private Notes tendered herewith, the undersigned hereby sells, assigns, transfers and exchanges to the Company all right, title and interest in and to all such Private Notes tendered for exchange hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as agent of the Company) with respect to such Private Notes, with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver certificates representing such Private Notes, or transfer ownership of such Private Notes on the account books maintained by DTC, together, in each such case, with all accompanying evidences of transfer and authenticity to the Company, (b) present and deliver such Private Notes for transfer on the books of the Company, and (c) receive all benefits or otherwise exercise all rights and incidents of beneficial ownership of such Private Notes, all in accordance with the terms of the Exchange Offer. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Private Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Private Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Private Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Private Notes or transfer ownership of such Private Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Private Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement. By tendering, each holder of Private Notes represents that the Exchange Notes acquired in the exchange will be obtained in the ordinary course of such holder's business, that such holder has no arrangement with any person to participate in the distribution of such Exchange Notes, that such holder is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that such holder is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. Any holder of Private Notes who is an affiliate of the Company or who tenders Private Notes in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") enunciated in its series of interpretive "no-action" letters with respect to exchange offers and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer holding Private Notes that were acquired for its own account as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Private Notes pursuant to the Exchange Offer, however, by so acknowledging and by delivering a prospectus in connection with the exchange of Private Notes, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy, and personal and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Private Notes properly tendered may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. The Exchange Offer is subject to certain conditions, each of which may be waived or modified by the Company, in whole or in part, at any time and from time to time, as described in the Prospectus under the caption "The Exchange Offer, Conditions." The undersigned recognizes that as a result of such conditions the Company may not be required to accept for exchange, or to issue Exchange Notes in exchange for, any of the Private Notes properly tendered hereby. In such event, the tendered Private Notes not accepted for exchange will be returned to the undersigned without cost to the undersigned at the address shown below the undersigned's signature(s) unless otherwise indicated under "Special Issuance Instructions" below. Unless otherwise indicated under "Special Issuance Instructions" below, please return any certificates representing Private Notes not tendered or not accepted for exchange in the name(s) of the holder(s) appearing under 4 5 "Description of Private Notes Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail any certificates representing Private Notes not tendered or not accepted for exchange (and accompanying document, as appropriate) to the address(es) of the holder(s) appearing under "Description of Private Notes Tendered." In the event that both the "Special Issuance Instructions" and the "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Private Notes accepted for exchange in the name(s) of, and return any Private Notes not tendered or not accepted for exchange to, the person or persons so indicated. Unless otherwise indicated under "Special Issuance Instructions," in the case of a book-entry delivery of Private Notes, please credit the account maintained at DTC with any Private Notes not tendered or not accepted for exchange. The undersigned recognizes that the Company does not have any obligation pursuant to the Special Issuance Instructions, to transfer any Private Notes from the name of the holder thereof if the Company does not accept for exchange any of the Private Notes so tendered or if such transfer would not be in compliance with any transfer restrictions applicable to such Private Notes. SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if (i) Exchange Notes issued for Private Notes, certificates for Private Notes in a principal amount not exchanged for Exchange Notes, or Private Notes (if any) not tendered for exchange are to be issued in the name of someone other than the undersigned, or (ii) Private Notes tendered by book-entry transfer which are not exchanged are to be returned by credit to an account maintained at DTC other than the account indicated above. Issue to: Name: ------------------------------------------ (PLEASE PRINT) Address: ---------------------------------------- - ------------------------------------------------ - ----------------------------------------------- (INCLUDE ZIP CODE) - ----------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) Credit Private Notes not exchanged and delivered by book-entry transfer to the DTC account set forth below: - ------------------------------------------------ (ACCOUNT NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the Exchange Notes issued for Private Notes, certificates for Private Notes in a principal amount not exchanged for Exchange Notes, or Private Notes (if any) not tendered for exchange are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Mail to: Name: ------------------------------------------ (PLEASE PRINT) Address: ---------------------------------------- --------------------------------------- ---------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) 5 6 SIGN HERE TO TENDER YOUR PRIVATE NOTES IN THE EXCHANGE OFFER - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) OF PRIVATE NOTES Dated: -------------------------------------------------------------------------- (Must be signed by the registered holder(s) of Private Notes exactly as name(s) appear(s) on certificate(s) representing the Private Notes or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 6.) Capacity (Full Title) ---------------------------------------------------------- Name(s) ----------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address ------------------------------------------------------------------------ ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------ Tax Identification or Social Security No. ------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 6) Authorized Signature ----------------------------------------------------------- Name --------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Title --------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address ------------------------------------------------------------------------ ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------- Dated: ------------------------------------------------------------------------ IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF TRANSMITTAL 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal need not be guaranteed if the Private Notes tendered hereby are tendered (a) by the registered holder(s) of Private Notes thereof, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (b) or the account of a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office in the United States (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by in Eligible Institution. Persons who are beneficial owners of Private Notes but are not the registered holder(s) and who seek to tender Private Notes for exchange should (i) contact the registered holder(s) of such Private Notes and instruct such registered holder(s) to tender on such beneficial owner's behalf, (ii) obtain and include with this Letter of Transmittal, Private Notes properly endorsed for transfer by the registered holder(s) or accompanied by a properly completed bond power from the registered holder(s) with signatures on the endorsement or bond power guaranteed by an Eligible Institution, or (iii) effect a record transfer of such Private Notes from the registered holder(s) to such beneficial owner and comply with the requirements applicable to registered holder(s) for tendering Private Notes for exchange prior to the Expiration Date. See Instruction 6. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR PRIVATE NOTES OR BOOK-ENTRY CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by registered holder(s) if certificates representing Private Notes are to be forwarded herewith. All physically delivered Private Notes, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents, must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date or the tendering holder must comply with the guaranteed delivery procedures set forth below. Delivery of the documents to DTC does not constitute delivery to the Exchange Agent. The method of delivery of this Letter of Transmittal, Private Notes and all other required documents to the Exchange Agent is at the election and risk of the holder thereof. If such delivery is by mail, it is suggested that holders use properly insured registered mail, return receipt requested, and that the mailing be sufficiently in advance of the Expiration Date, to permit delivery to the Exchange Agent prior to such date. Except as otherwise provided below, the delivery will be deemed made when actually received or confirmed by the Exchange Agent. This Letter of Transmittal and Private Notes tendered for exchange should be sent only to the Exchange Agent, not to the Company. A holder who desires to tender Private Notes for exchange and who cannot comply with the procedures set forth herein for tender on a timely basis or whose Private Notes are not immediately available must comply with the guaranteed delivery procedures described below. If holders desire to tender Private Notes for exchange pursuant to the Exchange Offer and (i) certificates representing such Private Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing Private Notes or other required documents to reach the Exchange Agent prior to the Expiration Date, or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such holder may effect a tender of Private Notes for exchange in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering." Pursuant to the guaranteed delivery procedures: (a) such tender must be made by or through an Eligible Institution (defined as an institution that is a recognized member in good standing of a Medallion Signature Guarantee Program recognized by the Exchange Agent, i.e., the Securities Transfer Agent's Medallion Program, the Stock Exchange's Medallion Program and the New York Stock Exchange's Medallion Signature Program); (b) prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution, at one of the addresses of the Exchange Agent set forth herein, a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile, mail or hand delivery) substantially in the form provided by the Company setting forth the name(s) and address(es) of the registered holder(s) of such Private Notes, the certificate number(s) and the principal amount of Private Notes being tendered for exchange and stating that the tender is being made thereby and guaranteeing that, within three (3) New York Stock Exchange trading days after the Expiration Date, a properly completed and duly executed Letter of Transmittal, or a facsimile thereof, together with certificates representing the Private Notes (or confirmation of book-entry transfer of such Private Notes into the Exchange Agent's account with DTC and an Agent's Message) and any other documents required 7 8 by this Letter of Transmittal and the instructions hereto, will be deposited by such Eligible Institution with the Exchange Agent; and (c) this Letter of Transmittal or a facsimile thereof, properly completed together with duly executed certificates for all physically delivered Private Notes in proper form for transfer (or confirmation of book-entry transfer of such Private Notes into the Exchange Agent's account with DTC as described above) and all other required documents must be received by the Exchange Agent within three (3) New York Stock Exchange trading days after the date of the Notice of Guaranteed Delivery. All tendering holders, by execution of this Letter of Transmittal, waive any right to receive any notice of the acceptance of their Private Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Private Notes Tendered" above is adequate, the certificate numbers and principal amounts of Private Notes tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWAL OF TENDERS. A tender of Private Notes may be withdrawn at any time prior to the Expiration Date by delivery of written or facsimile (receipt confirmed by telephone) notice of withdrawal to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal. To be effective, a notice of withdrawal must (i) specify the name of the person having tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes), (iii) specify the principal amount of Private Notes to be withdrawn, (iv) include a statement that such holder is withdrawing his election to have such Private Notes exchanged, (v) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered or as otherwise described above (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee under the Indenture register the transfer of such Private Notes into the name of the person withdrawing the tender and (vi) specify the name in which any such Private Notes are to be registered, if different from that of the Depositor. The Exchange Agent will return the properly withdrawn Private Notes promptly following receipt of notice of withdrawal. If Private Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility. All questions as to the validity of notices of withdrawals, including, time of receipt, will be determined by the Company and such determination will be final and binding on all parties. Any Private Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Private Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Private Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Private Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Private Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF PRIVATE NOTES WHO TENDER BY BOOK-ENTRY TRANSFER). Tenders of Private Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Private Notes, fill in the principal amount of Private Notes which are tendered for exchange in column (4) of the box entitled "Description of Private Notes Tendered," as more fully described in the footnotes thereto. In the case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Private Notes, will be sent to the holders of Private Notes unless otherwise indicated in the boxes entitled "Special Issuance Instructions" or "Special Delivery Instructions" above, as soon as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the holder(s) of the Private Notes tendered for exchange hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Private Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Private Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are names in which certificates are held. 8 9 If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Company of its authority so to act must be submitted, unless waived by the Company. If this Letter of Transmittal is signed by the holder(s) of the Private Notes listed and transmitted hereby, no endorsements of certificates or separate bond powers are required unless certificates for Private Notes not tendered or not accepted for exchange are to be issued or returned in the name of a person other than for the holder(s) thereof. Signatures on such certificates must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Private Notes, the certificates representing such Private Notes must be properly endorsed for transfer by the registered holder or be accompanied by a properly completed bond power from the registered holder, in either case signed by such registered holder(s) exactly as the name(s) of the registered holder(s) the Private Notes appear(s) on the certificates. Signatures on the endorsement or bond power must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay or cause to be paid any transfer taxes applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Private Notes pursuant to the Exchange Offer, then the amount of any transfer taxes (whether imposed on the registered holder(s) or any other persons) will be payable by the tendering holder. If satisfactory evidence of the payment of such taxes or exemptions therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued or if any Private Notes not tendered or not accepted for exchange are to be issued or sent to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not accepted for exchange be credited to such account maintained at DTC as such holder may designate. 9. IRREGULARITIES. All questions as to the forms of all documents and the validity of (including time of receipt) and acceptance of the tenders and withdrawals of Private Notes will be determined by the Company, in its sole discretion, which determination shall be final and binding. Alternative, conditional or contingent tenders will not be considered valid. The Company reserves the absolute right to reject any or all tenders of Private Notes that are not in proper form or the acceptance of which would, in the Company's opinion, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretations of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding. Any defect or irregularity in connection with tenders of Private Notes must be cured within such time as the Company determines, unless waived by the Company. Tenders of Private Notes shall not be deemed to have been made until all defects or irregularities have been waived by the Company or cured. Neither the Company, the Exchange Agent, nor any other person will be under any duty to give notice of any defects or irregularities in tenders of Private Notes, or will incur any liability to registered holders of Private Notes for failure to give such notice. 10. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the Company reserves the right to waive any and all conditions to the Exchange Offer as described under "The Exchange Offer -- Conditions of the Exchange Offer" in the Prospectus, and accept for exchange any Private Notes tendered. 11. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law generally requires that a holder of Private Notes whose tendered Private Notes are accepted for exchange or such holder's assignee (in either case, the "Payee"), provide the Exchange Agent (the "Payor") with such Payee's correct Taxpayer Identification Number ("TIN"), which, in the case of a Payee who is an individual, is such Payee's social security number. If the Payor is not provided with the correct TIN or an adequate basis for an exemption, such Payee may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding in an amount equal to 31% of the gross proceeds received pursuant to the Exchange Offer. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each Payee must provide such Payee's correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Payee is awaiting a 9 10 TIN) and that (i) the Payee is exempt from backup withholding, (ii) the Payee has not been notified by the Internal Revenue Service that such Payee is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the Payee that such Payee is no longer subject to backup withholding. If the Payee does not have a TIN, such Payee should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the Payee does not provide such Payee's TIN to the Payor within 60 days, backup withholding will begin and continue until such Payee furnishes such Payee's TIN to the Payor. Note: Writing "Applied For" on the form means that the Payee has already applied for a TIN or that such Payee intends to apply for one in the near future. If Private Notes are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. Exempt Payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt Payee must enter its correct TIN in Part I of the Substitute Form W-9, write "Exempt" in Part 2 of such form and sign and date the form. See the W-9 Guidelines for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8, "Certificate of Foreign Status," signed under penalty of perjury attesting to such exempt status. Such form may be obtained from the Payor. 12. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any holder of Private Notes whose Private Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal for further instructions. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Exchange Agent at its address set forth on the cover of this Letter of Transmittal. IMPORTANT- THIS LETTER OF TRANSMITTAL, TOGETHER WITH CERTIFICATES FOR TENDERED PRIVATE NOTES AND ALL OTHER REQUIRED DOCUMENTS, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 10 11 PAYOR'S NAME: NATIONAL CITY BANK
Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY TIN____________ SUBSTITUTE SIGNING AND DATING BELOW (Social Security Number or FORM W-9 Employer Identification Number) Part 2 - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS)_________________________ Department of the Treasury Internal Part 3 - CERTIFICATION UNDER PENALTIES OF PERJURY, I Revenue Service CERTIFY THAT (1) The the Treasury number shown on this form is my correct TIN (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report Payor's Request for all interest or dividends or (c) the IRS has notified Taxpayer Identification me that I am no longer subject to Taxpayer Number ("TIN") Identification backup withholding. and Certification THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACK-UP WITHHOLDING SIGNATURE___________________ DATE_________________
You must cross out item (2) of Part 3 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND THAT I MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATIVE OFFICE (OR I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE). I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYOR WITHIN 60 DAYS, THE PAYOR IS REQUIRED TO WITHHOLD 31 PERCENT OF ALL CASH PAYMENTS MADE TO ME THEREAFTER UNTIL I PROVIDE A NUMBER. Signature_______________________ Date____________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 EX-99.2 14 l87647aex99-2.txt EXHIBIT 99.2 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO TENDER OF ANY AND ALL OUTSTANDING 8.00% SENIOR NOTES DUE 2008 IN EXCHANGE FOR 8.00% SENIOR NOTES DUE 2008 OF MANOR CARE, INC. PURSUANT TO THE PROSPECTUS DATED _______, 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. The Exchange Agent is: NATIONAL CITY BANK Deliver to:
BY MAIL: BY HAND: NEW YORK DROP: National City Bank National City Bank National City Bank P.O. Box 92301 Corporate Trust Operations Mellon Securities Trust Company Cleveland, Ohio 44193-0900 3rd Floor - North Annex 120 Broadway 4100 West 150th Street 13th Floor Cleveland, Ohio 44135-1385 New York, NY 10271
BY FACSIMILE: (216)575-9326 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth in the prospectus (the "Prospectus") dated _________, 2001 of Manor Care, Inc. (the "Company") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent thereto must be used to accept the Company's offer (the "Exchange Offer") to exchange new 8.00% Senior Notes due 2008 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for all of its outstanding 8.00% Senior Notes due 2008 (the "Private Notes") if the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or Private Notes cannot be delivered or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered by an Eligible Institution (as defined in the Prospectus) by mail or hand delivery or transmitted via facsimile to the Exchange Agent as set forth above. Capitalized terms used but not defined herein shall have the meaning given to them in the Prospectus. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. 1 2 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Private Notes specified below pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering holder of Private Notes set forth in the Letter of Transmittal. The undersigned understands that tenders of Private Notes may be withdrawn if the Exchange Agent receives at one of its addresses specified on the cover of this Notice of Guaranteed Delivery, prior to the Expiration Date, a facsimile transmission or letter which specifies the name of the person who deposited the Private Notes to be withdrawn and the aggregate principal amount of Private Notes delivered for exchange, including the certificate number(s) (if any) of the Private Notes, and which is signed in the same manner as the original signature on the Letter of Transmittal by which the Private Notes were tendered, including any signature guarantees, all in accordance with the procedures set forth in the Prospectus. All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. 2 3 The undersigned hereby tenders the Private Notes listed below: PLEASE SIGN AND COMPLETE
CERTIFICATE NUMBERS OF PRIVATE NOTES (IF AVAILABLE) PRINCIPAL AMOUNT OF PRIVATE NOTES TENDERED - -------------------------------------------------------------------------------------------------
IF PRIVATE NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, CHECK THE TRUST COMPANY BELOW: - ---------------------------------------------------- SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY [ ] THE DEPOSITORY TRUST COMPANY NAME(S) (PLEASE TYPE OR PRINT) DEPOSITORY ACCOUNT NO.: ----------------------- - ---------------------------------------------------- TITLE - ---------------------------------------------------- - ---------------------------------------------------- - ---------------------------------------------------- ADDRESS - ---------------------------------------------------- AREA CODE AND TELEPHONE NO. - ---------------------------------------------------- DATE
3 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in a recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Private Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). SIGN HERE Name of Firm: --------------------------------------------------- Authorized Signature: ------------------------------------------ Name (please type or print): ----------------------------------- Address: -------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- Area Code and Telephone No.: ------------------------------------ Date: ----------------------------------------------------------- DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 4 5 INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the holder use properly insured, registered mail with return receipt requested. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer - Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the holder(s) referred to herein, then the signature must correspond with the name(s) as written on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the holder(s) listed, this Notice of Guaranteed Delivery must be accompanied by a properly completed bond power signed as the name of the holder(s) appear(s) on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. 5 EX-99.3 15 l87647aex99-3.txt EXHIBIT 99.3 1 EXHIBIT 99.3 LETTER TO DTC PARTICIPANTS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 8.00% SENIOR NOTES DUE 2008 FOR 8.00% SENIOR NOTES DUE 2008 OF MANOR CARE, INC. PURSUANT TO THE PROSPECTUS DATED ________, 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. _________, 2001 To Securities Dealers, Commercial Banks Trust Companies and Other Nominees: Enclosed for you consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Manor Care, Inc., a Delaware corporation (the "Company"), to exchange up to $200,000,000 in principal amount of its 8.00% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 8.00% Senior Notes due 2008, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. We are asking you to contact your clients for whom you hold Private Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Private Notes registered in their own name. Enclosed are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal for your use in connection with the tender of Private Notes and for the information of your clients; 3. The Notice of Guaranteed Delivery to be used to accept the Exchange Offer if the Private Notes and all other required documents cannot be delivered to the Exchange Agent prior to the Expiration Date; 4. A form of letter that may be sent to your clients for whose accounts you hold Private Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. DTC participants will be able to execute tenders through the DTC Automated Tender Offer Program. 1 2 PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 2001, UNLESS EXTENDED BY THE COMPANY. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. You will be reimbursed by the Company for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Additional copies of the enclosed material may be obtained form the Exchange Agent, at the address and telephone numbers set forth below. Very truly yours, NATIONAL CITY BANK National City Bank P.O. BOX 92301 CLEVELAND, OHIO 44193-0900 Facsimile: (216)575-9326 NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 2 EX-99.4 16 l87647aex99-4.txt EXHIBIT 99.4 1 EXHIBIT 99.4 LETTER TO BENEFICIAL HOLDERS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 8.00% SENIOR NOTES DUE 2008 FOR 8.00% SENIOR NOTES DUE 2008 OF MANOR CARE, INC. PURSUANT TO THE PROSPECTUS DATED _____________, 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. __________, 2001 To Our Clients: Enclosed for you consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Manor Care, Inc., a Delaware corporation (the "Company"), to exchange up to $200,000,000 in principal amount of its 8.00% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 8.00% Senior Notes due 2008, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. These materials are being forwarded to you as the beneficial owner of Private Notes carried by us for your account or benefit but not registered in your name. A tender of any Private Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Private Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Private Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all of your Private Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Private Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Private Notes on your behalf in accordance with the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 2001. Private Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. If you wish to have us tender any or all of your Private Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Private Notes held by us and registered in our name for your account or benefit. 1 2 INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 8.00% SENIOR NOTES DUE 2008 OF MANOR CARE, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed materials referred to therein relating to the Exchange Offer of the Company. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you to tender the principal amount of Private Notes indicated below held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. The aggregate face amount of the Private Notes held by you for the account of the undersigned is (fill in amount): $___________ of the Private Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Private Notes held by you for the account of the undersigned (insert principal amount of Private Notes to be tendered, if any): $___________ of the Private Notes. [ ] NOT to TENDER any Private Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Private Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Private Notes, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) _____________, (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned has no arrangement or understanding with any person to participate in the distribution of Exchange Notes, (iv) the undersigned acknowledges that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of Section 10 of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in certain no action letters (See the section of the Prospectus entitled "The Exchange Offer -- Effect of the Exchange Offer"), (v) the undersigned understands that a secondary resale transaction described in clause (iv) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of Section 10 of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering such prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the 2 3 undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Private Notes. The purchaser status of the undersigned is (check the box that applies): [ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) [ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) [ ] A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Private Notes outside the United States in accordance with Rule 904 of the Securities Act [ ] Other (describe) ---------------------------------------------------- SIGN HERE Name of Beneficial Owner(s): --------------------------------------------------- Signature(s): ------------------------------------------------------------------ Name(s) (please print): -------------------------------------------------------- Address: ----------------------------------------------------------------------- Principal place of business (if different from address listed above): ----------------------------------------------------------------------- Telephone Number(s): ----------------------------------------------------------- Taxpayer Identification or Social Security Number(s): -------------------------- Date: -------------------------------------------------------------------------- 3 EX-99.5 17 l87647aex99-5.txt EXHIBIT 99.5 1 EXHIBIT 99.5 LETTER TO CLIENTS REGARDING THE OFFER TO EXCHANGE $200,000,000 PRINCIPAL AMOUNT OF 8.00% SENIOR NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING $200,000,000 PRINCIPAL AMOUNT OF 8.00% SENIOR NOTES DUE 2008 OF MANOR CARE, INC. To Our Clients: We are enclosing herewith a Prospectus, dated _______, 2001, of Manor Care, Inc. (the "Company") and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by the Company to exchange its new 8.00% Senior Notes due 2008 (the "Exchange Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 8.00% Senior Notes due 2008 (the "Private Notes") upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 2001, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Private Notes being tendered. We are the Registered Holder or DTC participant through which you hold an interest in the Private Notes. A tender of such Private Notes can be made only by us pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender your beneficial ownership of Private Notes held by us for your account. We request instructions as to whether you wish to tender any or all of your Private Notes held by us for your account pursuant to the terms and subject to the conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal that are to be made with respect to you as beneficial owner. Pursuant to the Letter of Transmittal, each holder of Private Notes must make certain representations and warranties that are set forth in the Letter of Transmittal and in the attached form that we have provided to you for your instructions regarding what action we should take in the Exchange Offer with respect to your interest in the Private Notes. 1 EX-99.6 18 l87647aex99-6.txt EXHIBIT 99.6 1 EXHIBIT 99.6 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security Numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the type of number to give the payer.
GIVE THE GIVE THE FOR THIS TYPE OF SOCIAL SECURITY FOR THIS TYPE OF EMPLOYER IDENTIFICATION NUMBER ACCOUNT: NUMBER OF -- ACCOUNT: OF -- - --------------------------------- ---------------------- ---------------------- --------------------------------- 1. An individual's account The individual 8. Sole proprietorship The owner (4) account 2. Two or more individuals (joint The actual owner of the 9. A valid trust, estate The legal entity (Do not furnish account) account or, if combined or pension trust the identifying number of the funds, any one of the personal representative or individuals (1) trustee unless the legal entity itself is not designated in the account title) (5) 3. Husband and wife (joint account) The actual owner of the 10. Corporate account The corporation account or, if joint funds, either person (1) 4. Custodian account of a minor The minor (2) 11. Religious, The organization (Uniform Gift to Minors Act) charitable, or educational organization account 5. Adult and minor (joint account) The adult or, if the 12. Partnership account The partnership minor is the only held in the name of contributor, the minor the business (1) 6. Account in the name of guardian The ward, minor, or 13. Association, club, or The organization or committee for a designated incompetent person (3) other tax-exempt ward, minor, or incompetent organization person 7. a. The usual revocable saving The grantor-trustee (1) 14. A broker or The broker or nominee trust account (grantor is registered nominee also trustee) b. So-called trust account that The actual owner (1) 15. Account with the The public entity is not a legal or valid trust Department of under State law Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- ------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business" name. You may use either your Social Security Number or Employer Identification Number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 1 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees specifically exempted from backup withholding on ALL payments by brokers include the following: - - A corporation. - - A financial institution. - - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(2). - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - - An international organization or any agency or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under Section 584(a). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. - - A futures commission merchant registered with the Commodity Futures Trading Commission. - - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under Section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - - Payments described in Section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under Section 1451. - - Payments made by certain foreign corporations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, which are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. -----END PRIVACY-ENHANCED MESSAGE-----