10-K405

FORM 10-K

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, 2001
	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 incorporation or organization)	(IRS Employer 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:

Title of each class	Name of each exchange 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 or any amendment to this Form 10-K [ X ]

(Cover page 1 of 2 pages)

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission Of Matters To A Vote Of Security Holders
PART II
	Item 5. Market for Our Common Stock and Related Shareholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7a. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements And Supplementary Data
	Report of Ernst & Young LLP, Independent Auditors
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Cash Flows
		Consolidated Statements of Shareholders’ Equity
		Notes to Consolidated Financial Statements
		Supplementary Data (Unaudited) Summary Of Quarterly Results
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership Of Certain Beneficial Owners And Management
	Item 13. Certain Relationships And Related Transactions
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
Exhibit Index
EX-4.11 Indenture
EX-10.13 Senior Executive Retirement Plan
EX-10.14 Senior Management Savings Plan
EX-10.15 1st Amend. to Sr. Mgmt. Savings Plan
EX-21 Subsidiaries of the Company
EX-23 Consent of Independent Auditors

Based on the closing price of $18.75 per share on February 28, 2002, the aggregate market value of the registrant’s voting stock held by non-affiliates was $1,841,488,106. 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 February 28, 2002 was 101,591,015.

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 7, 2002 in Part III.

(Cover page 2 of 2 pages)

Table Of Contents

PART I
	Item 1.	Business	2
	Item 2.	Properties	13
	Item 3.	Legal Proceedings	15
	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	18
	Item 6.	Selected Financial Data	19
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 7a	Quantitative and Qualitative Disclosures about Market Risk	35
	Item 8.	Financial Statements and Supplementary Data	36
	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	65
Signatures			72
Exhibits			74

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.

     Assets Held for Sale. On July 2, 2001, we paid in full a $57.1 million revolving line of credit, which we guaranteed, of a development joint venture. As a result of the repayment, we were assigned the full rights and privileges of the lenders including security interests in 13 Alzheimer’s assisted living facilities. During 2001, we reached a settlement with all joint venture parties and received title to the 13 facilities. We intend to sell these facilities within the next year. Accordingly, we have classified the net assets of $57.7 million for these assisted living facilities as held for sale.

     Arbitration Decision. We had an additional long-term care operating expense of $23.6 million in the fourth quarter of 2001 related to a damage award from the arbitration decision with NeighborCare Pharmacy Services, or NeighborCare. On February 14, 2002, a decision was rendered in an arbitration hearing between NeighborCare, an institutional pharmacy services subsidiary of Genesis Health Ventures, Inc., and us. The decision denies our right to terminate our NeighborCare supply agreements before their expiration on September 30, 2004. The decision requires us to pay damages and certain related amounts of approximately $23.6 million to NeighborCare for profits lost, as well as pre-judgment interest of $1.0 million, as a result of their being precluded from supplying other facilities of ours. The results of the arbitration will not increase our pharmaceutical costs for the remainder of the supply agreement terms. See Item 3, Legal Proceedings, on pages 15-17 for additional discussion.

Our executive offices are located at 333 N. Summit Street, Toledo, Ohio 43604-2617. Our telephone number is (419) 252-5500.

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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. At December 31, 2001, we operated 299 skilled nursing facilities and 56 assisted living facilities in 32 states with more than 60 percent of our facilities located in Florida, Illinois, Michigan, Ohio and Pennsylvania.

     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 design “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.

     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.

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Health Care Services

We provide rehabilitation therapy in our long-term care centers, other skilled centers, hospitals and our 96 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 with 81 offices in 19 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.

On February 25, 2002, we signed a definitive purchase agreement with Health Management Associates, Inc., or HMA, to sell certain assets of our hospital to a subsidiary of HMA for approximately $80 million in cash. Separately, we will invest $16 million to acquire 20 percent of the HMA entity owning the hospital. We expect the total gain to be $20 million to $30 million, of which 20 percent will be deferred. Simultaneously, we will acquire a 20 percent interest in HMA’s entity that recently acquired Medical Center of Mesquite. The transactions are subject to normal regulatory approvals and other standard closing conditions. Closing on the transactions is anticipated in the first half of 2002.

Other Services

We have long-term management contracts with physician practices in the Midwestern states, specializing in vision care and refractive eye surgery. We own approximately 97 percent of a 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 nursing staffing, account for approximately 64 percent of our operating expenses. 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. 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. We also implemented certain training and education programs, which have helped with retention of employees. In the fourth quarter of 2001, our temporary staffing costs decreased by over 35 percent in comparison with each of the first three quarters of 2001. 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.

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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.

	2001			2000			1999
Medicaid		33	%		33	%		33	%
Medicare		28	%		24	%		20	%
Private pay & other		39	%		43	%		47	%
		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 determine 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 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

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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. See the “Results of Operations — Overview” section on pages 22-23 under Item 7, Management’s Discussion and Analysis, for a discussion of how this legislation affected us.

Certain of the increases in Medicare reimbursement for skilled nursing facilities provided for under BBRA 99 and BIPA 2000 will sunset in October 2002. Unless Congress enacts additional legislation, the loss of revenues associated with this occurrence could have a material adverse effect on us. If Congress fails to act, we estimate our fourth-quarter 2002 pretax earnings would be reduced by approximately $10 million related to this issue, including the actions we would take to mitigate the reduction in revenues. While Congress could promptly act on this issue, no assurances can be given as to whether Congress will take action, the timing of any action or the form of any relief enacted.

We cannot now predict whether any other changes in reimbursement will be adopted in the future or what effect any other 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.

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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.

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 have a significant impact on 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.

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     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 Centers for Medicare & Medicaid Services, formerly known as 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 became effective January 4, 2002, except for provisions governing referrals for home health care services, which became effective April 6, 2001.

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Phase II of the final rule, which has not yet been issued, will cover the remaining portions of the statute, including those pertaining to Medicaid. Phase I of the final rule eases 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

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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.

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. Recent initiatives include reviews of:

• 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

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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 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 must adopt 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.

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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 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 transaction standards on August 17, 2000. While we initially were required to comply with them by October 16, 2002, Congress passed legislation in December 2001 that delays for one year (until October 16, 2003) the compliance date, but only for entities that submit a compliance plan to the Department of Health and Human Services by the original implementation deadline. The Department of Health and Human Services issued the privacy standards on December 28, 2000, and, after certain delays, they 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

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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.

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, 2001, we had approximately 59,000 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 355 long-term care centers located in 32 states. In addition, we have 13 assisted living centers that are held for sale and located in five states. The centers are predominately single-story structures with brick or stucco facades, dry wall partitions

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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, 2001, approximately 87 percent of the beds were utilized.

The following table shows the number and location of centers and beds we operated as of December 31, 2001.

		Number of Centers
				Assisted
		Skilled		Living		Number of Beds
Pennsylvania			47		9		8,222
Florida			36		11		6,005
Ohio			42		6		5,891
Illinois			30		7		4,487
Michigan			26		1		3,535
Texas			19		2		3,118
Maryland			13		8		2,562
California			9		1		1,388
Wisconsin			10				1,140
Indiana			5		1		1,041
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				118
North Carolina			1				120
South Dakota			1				99
	Total of long-term care segment		299		56		46,281
	Held for sale (five states)				13		754

We own 347 of these centers, lease 20, and have a partnership in one center. We operate 56 assisted living facilities with a total of 4,668 beds, excluding the 13 facilities held for sale. Eleven of our properties are subject to liens that encumber the properties in an aggregate amount of $31,356,000.

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We lease space for our corporate headquarters in Toledo, Ohio under a synthetic lease. We discuss our off balance sheet obligation for this lease in the “Capital Resources and Liquidity” section on page 33 under Item 7, Management’s Discussion and Analysis. We also lease space for our outpatient therapy clinics and home health care offices. In addition, we own one hospital in Texas that we signed a definitive agreement on February 25, 2002 to sell.

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. On or about September 20, 2001, Genesis’ bankruptcy court confirmed its plan of reorganization, or the Genesis Bankruptcy Plan, and the Genesis Bankruptcy Plan became effective on or about October 3, 2001. 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 at that time, 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’ 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

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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. § 108(c), MCA reserved any and all rights it may have concerning the September 29, 2000 order and the MCA litigation, including the right to seek clarification and reconsideration of the order, following termination or expiration of the automatic stay.

Pursuant to the Genesis Bankruptcy Plan, virtually all affirmative claims against Genesis and/or its affiliated debtors that arose prior to September 20, 2001 were discharged. MCA’s set-off and recoupment rights, however, were specifically preserved by the Genesis Bankruptcy Plan. Accordingly, on October 22, 2001, MCA filed a motion for reconsideration or clarification of the Court’s September 29, 2000 order for the limited purpose of obtaining reconsideration or clarification of the September 29, 2000 order insofar as it might affect MCA’s set-off and recoupment rights against Genesis. On or about December 5, 2001, Genesis filed its cross-motion to dismiss the lawsuit by MCA in its entirety, including the MCA claims sustained by the September 29, 2000 Order. Genesis based its cross-motion on the discharge provision of its Bankruptcy Plan. MCA’s motion and Genesis’ cross-motion are pending before the Court.

     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., or MCHS, seeking damages, preliminary and permanent injunctive relief, and a declaratory judgment related to allegations that the defendants had improperly sought to terminate certain long-term Master Service Agreements between Vitalink, now known as NeighborCare, and MCHS. MCHS had sought to terminate the Master Service Agreements effective June 1, 1999, although they did not expire by their terms until September 30, 2004. NeighborCare also instituted arbitration proceedings against the same defendants. The arbitration proceedings sought 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;

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• 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 subsequently dismissed the Maryland action and consolidated certain of those claims into the arbitration by filing an amended demand for arbitration.

Following a hearing held in the summer of 2001, the arbitrator rendered a decision and award on February 14, 2002. The decision and award denied defendants’ right to terminate the Master Service Agreements, thus requiring MCHS to continue performing under the agreements until they expire September 30, 2004. The decision also ordered defendants to pay damages and certain related amounts to NeighborCare as a result of NeighborCare being precluded from supplying certain facilities owned by affiliates of MCHS. We have estimated a total charge of $24.6 million arising from the decision and award and have booked this amount as a fourth-quarter charge for 2001.

     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 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. Following the bankruptcy filing, the case was closed subject to being reopened on motion by any party after entry of an injunction imposed by Section 524 of the Bankruptcy Code. Such an injunction was issued by the bankruptcy court on September 20, 2001, as part of the order confirming the Genesis Bankruptcy Plan. Pursuant to the Genesis Bankruptcy Plan, virtually all affirmative claims against Genesis and its affiliated debtors that arose prior to September 20, 2001 were discharged. MCA’s set-off and recoupment rights, however, were specifically preserved by the Genesis Bankruptcy Plan. MCA is currently evaluating whether any further action is appropriate or necessary with respect to this matter.

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See the “Commitments and Contingencies” section on pages 33-34 under Item 7, Management’s Discussion and Analysis, 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.

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		Close
2001
	First Quarter	$	17.3125	$	25.0000	$	20.4000
	Second Quarter	$	18.9900	$	31.7500	$	31.7500
	Third Quarter	$	23.9000	$	34.5000	$	28.1000
	Fourth Quarter	$	20.4500	$	29.1500	$	23.7100
2000
	First Quarter	$	8.2500	$	17.3750	$	13.5000
	Second Quarter	$	6.5000	$	13.7500	$	7.0000
	Third Quarter	$	6.8750	$	16.1875	$	15.6875
	Fourth Quarter	$	13.4375	$	21.1875	$	20.6250

We have not declared or paid any cash dividends on our common stock.

On January 31, 2002, we had 3,171 stockholders of record. Approximately 94 percent 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 more than 21,000 beneficial owners.

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Item 6. Selected Financial Data

Five-Year Financial History

			2001			2000			1999			1998			1997
			(Dollars in thousands, except per share and Other Data)
Results of Operations
Revenues				$2,694,056		$	2,380,578		$	2,135,345		$	2,209,087		$	2,228,534
Expenses:
	Operating			2,271,808			2,016,764			1,697,459			1,715,575			1,760,923
	General and administrative			115,094			104,027			89,743			96,017			99,881
	Depreciation and amortization			128,159			121,208			114,601			119,223			112,723
	Provision for restructuring charge, merger expenses, asset impairment and other related charges									14,787			278,261
				2,515,061			2,241,999			1,916,590			2,209,076			1,973,527
Income from continuing operations before other income (expenses), income taxes and minority interest				178,995			138,579			218,755			11			255,007
Other income (expenses):
	Interest expense			(50,800	)		(60,733	)		(54,082	)		(46,587	)		(56,805	)
	Impairment of investments						(20,000	)		(274,120	)
	Equity in earnings of affiliated companies			1,407			812			1,729			5,376			2,806
	Other income			390			3,011			5,322			16,635			23,289
	Interest income from advances to discontinued lodging segment															16,058
		Total other expenses, net		(49,003	)		(76,910	)		(321,151	)		(24,576	)		(14,652	)
Income (loss) from continuing operations before income taxes and minority interest				129,992			61,669			(102,396	)		(24,565	)		240,355
Income taxes (benefit)				61,502			21,489			(47,238	)		21,597			85,064
Minority interest income							1,125
Income (loss) from continuing operations			$	68,490		$	39,055		$	(55,158	)	$	(46,162	)	$	155,291
Earnings per share - Income (loss) from continuing operations:
	Basic		$	.67		$	.38		$	(.51	)	$	(.42	)	$	1.44
	Diluted		$	.66		$	.38		$	(.51	)	$	(.42	)	$	1.40
Manor Care of America, Inc. dividends per share												$	.04		$	.09
Financial Position
Total assets			$	2,424,071		$	2,358,468		$	2,289,777		$	2,722,727		$	2,568,368
Long-term debt				715,830			644,054			687,502			693,180			751,281
Shareholders’ equity				1,046,538			1,012,729			980,037			1,199,168			1,163,029
Other Data (Unaudited)
Number of skilled nursing and assisted living facilities				368			354			346			360			335

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 is based on a year ended December 31. For 1997, HCR’s financial information for the year ended December 31, 1997 was combined with MCA’s financial information for the 12 months ended November 30, 1997 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. We consolidated IHHI’s financial results in 2001, 2000 and 1997 and recorded them under the equity method in 1999 and 1998. See Note 1 to our consolidated financial statements for further discussion of the change from the equity method to consolidation of IHHI in 2000. We changed from consolidation to the equity method of accounting for IHHI in 1998 as a result of modifications to a preferred stock agreement that changed our voting rights related to our

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preferred stock ownership. IHHI’s results are not included on the individual line items when recording under the equity method. For a consistent trend, 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. MCA recorded interest income in 1997 related to cash advances provided to this segment.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations — Overview

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.

     Long-Term Care. The most significant portion of our business relates to long-term care, including skilled nursing care and assisted living. At December 31, 2001, we operated 299 skilled nursing facilities and 56 assisted living facilities in 32 states with more than 60 percent of our facilities located in Florida, Illinois, Michigan, Ohio and Pennsylvania. Within some of our centers, we have medical specialty units which provide subacute medical and rehabilitation care and/or Alzheimer’s care programs.

Growth in our long-term care segment continued as we constructed new facilities. The table below details the activity in the number of skilled nursing and assisted living facilities and beds during the past three years. We have not included in the table (1) 13 assisted living facilities that are held for sale, (2) 16 facilities that we sold in 1999 that were not open at the time of sale or (3) any activity related to managed facilities.

		2001				2000				1999
		Facilities		Beds		Facilities		Beds		Facilities		Beds
Skilled nursing facilities:
	Built/Acquired/Leased		3		475		—		—		3		414
	Closed/Lease expired		—		—		2		349		—		—
Assisted living facilities:
	Built/Acquired		1		60		12		728		12		752
	Closed/Sold/Leased to others		1		60		—		—		31		2,602

     Home Health and Hospice Care. Our home health and hospice business includes all levels of home care, hospice care and rehabilitation therapy with 81 offices in 19 states. The growth in our home health and hospice business is a result of opening three additional offices and expansion of our hospice client base in 2001, as well as our acquisition of In Home Health, Inc., or IHHI, in 2000, as discussed below.

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In 1999, we owned 41 percent of the common stock of IHHI and accounted for our investment under the equity method. In June 2000, we increased our ownership to 61 percent and began consolidating IHHI’s results and deducting the minority owners’ share of earnings on an after-tax basis, retroactive to January 1, 2000. 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.

     Health Care Services. We provide rehabilitation therapy in skilled nursing centers of others, hospitals and our 96 outpatient therapy clinics serving the Midwestern and Mid-Atlantic states, Texas and Florida. 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.

On February 25, 2002, we signed a definitive purchase agreement with Health Management Associates, Inc., or HMA, to sell certain assets of our hospital to a subsidiary of HMA for approximately $80 million in cash. Separately, we will invest $16 million to acquire 20 percent of the HMA entity owning the hospital. We expect the total gain to be $20 million to $30 million, of which 20 percent will be deferred. Simultaneously, we will acquire a 20 percent interest in HMA’s entity that recently acquired Medical Center of Mesquite. The transactions are subject to normal regulatory approvals and other standard closing conditions. Closing on the transactions is anticipated in the first half of 2002.

     Other Services. We have long-term management contracts with physician practices in the Midwestern states, specializing in vision care and refractive eye surgery. We own a majority of a 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.

     Medicare and Medicaid Payment Changes under the Budget Act. 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 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

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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 payment system to be established for home health services, which 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 federal fiscal years 2001 and 2002;

• For cost-reporting periods beginning on or after January 1, 2000, skilled nursing facilities were able to 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 outside of 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

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• 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.

In addition to the changes noted above, several other BIPA 2000 provisions positively affected us beginning in the second quarter of 2001. These provisions include the following:

• BIPA 2000 increased the skilled nursing facility prospective payment system 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 increased by 16.66 percent; and

• BIPA 2000 provided a 5 percent increase in rates for hospice services furnished on or after April 1, 2001 through September 30, 2001. This increase continued to apply after fiscal 2001.

Certain of the increases in Medicare reimbursement for skilled nursing facilities provided for under BBRA 99 and BIPA 2000 will sunset in October 2002. Unless Congress enacts additional legislation, the loss of revenues associated with this occurrence could have a material adverse effect on us. If Congress fails to act, we estimate our fourth-quarter 2002 pretax earnings would be reduced by approximately $10 million related to this issue, including the actions we would take to mitigate the reduction in revenues. While Congress could promptly act on this issue, no assurances can be given as to whether Congress will take action, the timing of any action or the form of any relief enacted.

We cannot now predict whether any other changes in reimbursement will be adopted in the future or what effect any other changes, if adopted, would have on us.

     Labor. Labor costs, including temporary nursing staffing, account for approximately 64 percent of our operating expenses. 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. 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. We also implemented certain training and education programs, which have helped with retention of employees. In the fourth quarter of 2001, our temporary staffing costs decreased by over 35 percent in comparison with each of the first three quarters of 2001. If a shortage of nurses or other health care workers occurred in all geographic areas in which we

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operate, it could adversely affect our ability to attract and retain qualified personnel and could further increase our operating costs.

     General and Professional Liability Costs. The significant increase in patient care liability costs in the past two years is a critical issue for our industry. General and professional liability claims for the long-term care industry, especially in the state of Florida, have become increasingly expensive. Industry sources report 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 with the national average. The long-term care industry received some assistance with the passage of a measure of tort reform in Florida in May 2001 that became fully effective on October 5, 2001. The industry was not included in previously passed tort reform in Florida, as were other health care providers. The legislation that was passed includes caps on punitive damages, limits to add-on legal fees, tougher rules of evidence and a reduced statute of limitations. While we cannot assure you that the legislative changes will have a positive impact on the current trend, we believe that this will be the first step in reducing the long-term care industry’s current litigation burden.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, we select the principle or method that is appropriate in our specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the financial statements, giving due regard to materiality.

     Receivables and Revenue Recognition. Revenues are recognized when the related patient services are provided. Receivables and revenues are stated at amounts estimated by us to be the net realizable value. No individual customer or group of customers accounts for a significant portion of our revenues or receivables. Certain classes of patients rely on a common source of funds to pay the cost of their care, such as the federal Medicare program and various state Medicaid programs. Medicare program revenues for the years prior to the implementation of the prospective payment system and certain Medicaid program revenues are subject to audit and retroactive adjustment by government representatives. We believe that any differences between the net revenues recorded and final determination will not materially affect the consolidated financial statements.

     Allowance for Doubtful Accounts. We evaluate the collectibility of our accounts receivable based on certain factors, such as payor types, historical collection trends and aging categories. We calculate our reserve for bad debts based on the length of time that the receivables are past due.

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The percentage that we apply to the receivable balances in the various aging categories is based on our historical experience and time limits, if any, for each particular pay source, such as private, insurance, Medicare and Medicaid.

     Impairment of Property and Equipment and Intangible Assets. We evaluate our property and equipment and intangible assets on a quarterly basis to determine if facts and circumstances suggest that the assets may be impaired or the life of the asset may need to be changed. We consider internal and external factors of the individual facility or asset, including changes in the regulatory environment, changes in national health care trends, current period cash flow loss combined with a history of cash flow losses and local market developments. If these factors and the projected undiscounted cash flow of the entity over its remaining life indicate that the asset will not be recoverable, the carrying value will be adjusted to its fair value if it is lower. If our projections or assumptions change in the future, we may be required to record impairment charges not previously recorded for our assets.

     General and Professional Liability. Our general and professional reserves include amounts for patient care-related claims and incurred but not reported claims. The amount of our reserves is determined based on an estimation process that uses information obtained from both company-specific and industry data. The estimation process requires us to continuously monitor and evaluate the life cycle of the claims. Using data obtained from this monitoring and our assumptions about emerging trends, we along with our independent actuary develop information about the size of ultimate claims based on our historical experience and other available industry information. The most significant assumptions used in the estimation process include determining the trend in costs, the expected cost of claims incurred but not reported and the expected costs to settle unpaid claims. Our assumptions take into consideration our internal efforts to contain our costs by reviewing our risk management programs, our operational and clinical initiatives, and other industry changes affecting the long-term care market. We also monitor the reasonableness of the judgments made in the prior-year estimation process and adjust our current year assumptions accordingly. We will evaluate the adequacy of our general and professional liability reserves with our independent actuary semi-annually during 2002. We can give you no assurance that this liability will not require material adjustment in future periods.

Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

     Revenues. Our revenues increased $313.5 million, or 13 percent, from 2000 to 2001. Our revenues from skilled nursing and assisted living facilities increased $239.6 million, or 12 percent, due to increases in rates-$213.8 million, increases in bed capacity -$17.4 million and increases in occupancy - -$8.4 million. Our revenues from the home health business increased $53.0 million primarily because of an increase in hospice services and home health visits.

Our rate increases for the skilled nursing and assisted living facilities related to Medicare, Medicaid and private pay sources. Our average Medicare rate increased 14 percent from $278 per day in 2000 to $317 in 2001 related to BBRA 99 and BIPA 2000 provisions, as well as our

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higher acuity patients. Our average Medicaid rate increased 7 percent from $108 per day in 2000 to $116 per day in 2001. Private and other rates for our skilled nursing facilities increased 5 percent from $164 per day in 2000 to $172 per day in 2001.

Our bed capacity grew between 2000 and 2001 primarily because we opened two facilities with 180 beds, purchased/leased two facilities with 355 beds and expanded the number of beds in seven facilities in 2001. Our occupancy levels were 86 percent for 2000 compared with 87 percent for 2001. When excluding start-up facilities, our occupancy levels were 87 percent for 2000 and 88 percent for 2001. Our occupancy levels for skilled nursing facilities increased from 87 percent for 2000 to 88 percent for 2001. The quality mix of revenues 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 2000 and 2001.

     Operating Expenses. Our operating expenses in 2001 increased $255.0 million, or 13 percent, compared with 2000. Operating expenses from our home health business increased $42.6 million due to an increase in services and bad debt expense. Operating expenses from skilled nursing and assisted living facilities increased $203.2 million, or 12 percent. We attribute the largest portion of this skilled nursing and assisted living operating expense increase in the amount of $119.3 million to labor costs and temporary staffing.

Our other long-term care operating expense increases included ancillary costs, excluding internal labor, of $23.7 million and general and professional liability expense of $19.4 million. Ancillary costs, which include various types of therapies, medical supplies and prescription drugs, increased as a result of our more medically complex patients. Our general and professional liability expense increased from $79.2 million in 2000 to $98.6 million in 2001. Our 2001 expense included $60.6 million for our current policy periods and $38.0 million for a change in estimate on policy periods prior to June 2000. Our 2000 expense included $45.6 million for our current policy periods at that time and $33.6 million for prior policy periods. Refer to the overview for our additional explanation of general and professional liability costs.

We had an additional long-term care operating expense of $23.6 million in the fourth quarter of 2001 related to the damage award from the arbitration decision with NeighborCare Pharmacy Services, or NeighborCare. On February 14, 2002, a decision was rendered in an arbitration hearing between NeighborCare, an institutional pharmacy services subsidiary of Genesis Health Ventures, Inc., and us. The decision denies our right to terminate our NeighborCare supply agreements before their expiration on September 30, 2004. The decision requires us to pay damages and certain related amounts of approximately $23.6 million to NeighborCare for profits lost, as well as pre-judgment interest of $1.0 million, as a result of their being precluded from supplying other facilities of ours. The estimated interest cost of $1.0 million was recorded in interest expense. The results of the arbitration will not increase our pharmaceutical costs for the remainder of the supply agreement terms.

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     General and Administrative Expenses. Our general and administrative expenses, which approximated 4 percent of revenues, increased $11.1 million compared with 2000, primarily as a result of stock appreciation rights, legal expenses, other professional services and general cost increases.

     Depreciation and Amortization. Depreciation increased $4.2 million from the prior year because of additional depreciation for our new construction projects and renovation of existing facilities completed in the past year. Amortization increased $2.8 million primarily due to computer software amortization.

     Interest Expense. When excluding capitalized interest and $1.0 million of estimated interest from the arbitration decision with NeighborCare, our interest expense decreased $13.5 million compared with 2000. The decrease related to a decline in average interest rates and debt levels.

     Equity in Earnings of Affiliated Companies. On July 2, 2001, we paid in full a $57.1 million revolving line of credit, which we guaranteed, of a development joint venture. As a result of the repayment, we were assigned the full rights and privileges of the lenders including security interests in 13 Alzheimer’s assisted living facilities. During 2001, we reached a settlement with all joint venture parties and received title to the 13 facilities. We consolidated the results of these facilities in the third quarter of 2001 and classified them as held for sale. During the first half of 2001 (prior to our consolidation), we recorded equity losses of $3.1 million related to this development joint venture. We recorded equity losses of $1.2 million in 2000.

We were a 50 percent owner in a partnership that sold its only nursing home in June 2001. During the second quarter of 2001, we reversed $1.5 million of previously recorded losses for this partnership. These losses were booked in excess of our investment because we had guaranteed the partnership’s debt, which was paid off with the sale of the nursing home.

     Interest Income and Other. Our interest income decreased $1.6 million from 2000 to 2001. In 2000, IHHI had interest income of $1.2 million because of high cash balances prior to our acquisition of its remaining shares in December 2000. This line item also includes the gain on the sale of assets of $0.5 million in 2000 compared with a loss of $0.4 million in 2001.

     Income Taxes. During the fourth quarter of 2001, we recorded a $12.0 million charge related to the final resolution with the Internal Revenue Service, or IRS, for corporate-owned life insurance, or COLI. In November 2001, we received a notice from the IRS denying interest deductions on policy loans related to COLI for years 1993 through 1998. We agreed to a final COLI settlement with the IRS for an estimated $38.0 million including interest, which allowed us to retain a portion of these deductions. We expect to pay the settlement in the next 18 months. We expect our effective tax rate for 2002 to be comparable to our 2001 effective tax rate of 38 percent, before the COLI charge.

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     Minority Interest Income. The minority interest income for 2000 represented the minority owners’ share of IHHI’s net income. In December 2000, we purchased the remaining shares of IHHI to increase our ownership to 100 percent.

     Inflation. We believe that inflation has had no material impact on our results of operations.

Year Ended December 31, 2000 Compared with 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 with 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		2,016,764		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 related 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 11 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 revenues 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.

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     Operating Expenses. Our operating expenses in 2000 increased $247.1 million, or 14 percent, compared with 1999. If we exclude facilities sold or leased in 1999, operating expenses increased $265.9 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 2000 compared with 1999. This increase related to a change in estimate incorporating industry experience.

     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, Manor Care of America, Inc., or 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.

In October 2001, Genesis emerged from Chapter 11 protection following the completion of its plan of reorganization resulting in no distribution to its preferred or common shareholders. Under the terms of the reorganization, all preferred and common shares were canceled.

     Dividend Income. The Genesis Series G Preferred Stock bore 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

29

were 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 owned 100 percent of the IHHI preferred stock, which had a 12 percent annual dividend. As a result of changing the accounting for our investment in IHHI in 2000, we eliminated the preferred stock dividend of $2.4 million in consolidation. In 1999, however, we fully reported the dividend on the line item, “Interest income and other.”

     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 Healthcare Corporation 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.

Financial Condition — December 31, 2001 and 2000

Assets held for sale of $57.7 million at December 31, 2001 included 13 assisted living facilities that we intend to sell within the next year. We acquired these assets from a development joint venture as a settlement for our payment of its outstanding revolving line of credit, which we guaranteed, that matured June 29, 2001.

Accrued insurance liabilities increased $67.7 million to $175.4 million at December 31, 2001, with $99.0 million classified as other long-term liabilities. The increase resulted primarily from the accrual for general and professional liabilities that we discussed previously.

Other accrued liabilities included $24.6 million related to the damage awards in our arbitration hearing with NeighborCare, as discussed previously.

New Accounting Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 142, “Goodwill and Other Intangible Assets,” that we are required to adopt beginning January 1, 2002.

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Under this Statement, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Manor Care has no indefinite-lived intangible assets. Our amortization of goodwill was $3.4 million in 2001. During 2002, management will perform the initial impairment test on recorded goodwill which totals $80.4 million as of January 1, 2002. Management has not determined the effect, if any, of the initial impairment test on its consolidated financial position or results of operations.

In August 2001, the FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (FAS 144), that we are required to adopt beginning January 1, 2002 with transition provisions for certain matters. The new rules on asset impairment supersede Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (FAS 121), and provide a single accounting model for long-lived assets to be disposed of. In accordance with the new standard, we will continue to follow the guidance in FAS 121 for the disposal of the 13 assisted living facilities, which are held for sale. There will be no additional effect on our consolidated financial position or results of operations as a result of adopting FAS 144.

Capital Resources and Liquidity

     Cash Flows. During 2001, we satisfied our cash requirements from cash generated from operating activities. Cash flows from operating activities were $283.4 million for 2001, an increase of $73.3 million from 2000. Our operating cash flows increased primarily because of an increase in net income, an improvement in our days sales outstanding for receivables and an additional accrual for the arbitration award discussed previously. We used the cash principally for capital expenditures, to acquire businesses, to repay debt and to purchase our common stock. Expenditures for property and equipment during 2001 were $89.4 million, which included $24.8 million to construct new facilities and expand existing facilities.

     Debt Agreements. In March 2001, we issued $200 million of 8% Senior Notes due in 2008. We used the net proceeds of $196.6 million from the Senior Notes to repay borrowings outstanding under our two bank credit agreements, including all loans under our 364-day, $200 million credit agreement that was scheduled to mature September 21, 2001. Having paid off all borrowings under the 364-day agreement, we reduced the commitment under this credit facility by $150 million in March and canceled the remaining $50 million commitment in August 2001.

At December 31, 2001, we had a five-year, $500 million credit agreement with a group of banks that is scheduled to mature September 24, 2003. At December 31, 2001, outstanding borrowings totaled $334.0 million under the five-year agreement. After consideration of usage for letters of credit, we had $135.8 million remaining credit available under the five-year agreement on December 31, 2001.

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Our five-year credit agreement requires us to meet certain measurable financial ratio tests, to refrain from certain prohibited transactions (such as certain liens, larger-than-permitted dividends, stock redemptions and asset sales), and to fulfill certain affirmative obligations (such as paying taxes when due and maintaining properties and licenses). We met all covenants at December 31, 2001. None of our debt agreements permit the lenders to determine in their sole discretion that a material adverse change has occurred and either refuse to lend additional funds or accelerate current loans. Our 8% Senior Note agreement contains a clause that is triggered if we have a change-of-control that is immediately followed by a downgrade in debt rating by either Standard & Poor’s Ratings Service or Moody’s Investors Service, Inc. If a change-of-control is followed by a rating agency downgrade, we are obligated to offer to redeem the 8% Senior Notes. As long as we offer to make such redemption, we will have satisfied the conditions of the 8% Senior Notes.

     Stock Purchase. On February 8, 2000, our board of directors authorized us to spend up to $100 million to purchase our common stock through December 31, 2001. We purchased 1,627,700 shares in 2001 for $42.8 million. On December 4, 2001, the board authorized an additional $100 million from January 1, 2002 through December 31, 2003. We may use the shares for internal stock option and 401(k) match programs and for other uses, such as possible acquisitions.

     Sale of Hospital. We anticipate closing on the sale of our hospital and simultaneously acquiring a 20 percent interest in two entities, one that will own our hospital, in the first half of 2002. We estimate the net cash provided by these transactions to be $48 million.

     Sale of Assisted Living Facilities. We had 13 assisted living facilities held for sale at December 31, 2001. We would expect to receive at least $57.7 million if all these facilities were sold in the next year.

     BBRA 99 and BIPA 2000. Certain of the increases in Medicare reimbursement for skilled nursing facilities provided for under BBRA 99 and BIPA 2000 will sunset in October 2002. Unless Congress enacts additional legislation, the loss of revenues with this occurrence could have a material adverse effect on us. If Congress fails to act, we estimate our fourth-quarter 2002 pretax earnings would be reduced by approximately $10 million related to this issue, including the actions we would take to mitigate the reduction in revenues. While Congress could promptly act on this issue, no assurances can be given as to whether Congress will take action, the timing of any action or the form of any relief enacted.

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     Contractual Obligations. The following table provides information about our contractual obligations at December 31, 2001, excluding current liabilities except for the current portion of long-term debt:

	Payments Due by Years
					2003-		2005-		After
	Total		2002		2004		2006		2006
					(In thousands)
Debt (excluding capital lease obligations)	$	715,939	$	5,224	$	345,237	$	156,727	$	208,751
Capital lease obligations		14,276		657		1,270		1,257		11,092
Operating leases (1)		93,059		17,233		21,543		8,567		45,716
Internal construction projects		4,473		4,473
Long-term environmental liability		19,358				19,358
Total	$	847,105	$	27,587	$	387,408	$	166,551	$	265,559

(1)  The operating lease obligation includes the annual operating lease payments on our corporate headquarters that reflect interest only on the lessor’s $22.8 million of underlying debt obligations as well as a residual guarantee of that amount at the lease maturity in 2009. At the maturity of the lease, we will be obligated to either purchase the building and refinance the $22.8 million of underlying debt or vacate the building and cover the difference, if any, between that amount and the then fair market value of the building.

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.

Commitments and Contingencies

     Letters of Credit. We had total letters of credit of $32.1 million at December 31, 2001, which benefit certain third-party insurers and bondholders of certain industrial revenue bonds, and 90 percent of these letters of credit related to recorded liabilities.

     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 $5.8 million and will, if earned, be paid over the next four 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

33

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 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 $24.0 to $28.5 million. We have received or expect to receive between $20.3 million and $24.5 million of insurance proceeds, depending upon the ultimate liabilities, which will offset some of our potential liability.

     General and Professional Liability. We are party to various other legal matters arising in the ordinary course of business, including patient care-related claims and litigation. At December 31, 2001, the general and professional liability consisted of short-term reserves of $48.0 million and long-term reserves of $88.5 million. We can give you no assurance that this liability will not require material adjustment in future periods.

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,” “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:

• Changes in Medicare, Medicaid and certain private payors’ reimbursement levels;

• Existing government regulations and changes in, or the failure to comply with, governmental regulations or the interpretations thereof;

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• Changes in current trends in the cost and volume of general and professional liability claims;

• The ability to attract and retain qualified personnel;

• 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, 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 failure to comply with occupational health and safety regulations;

• The ability to enter into managed care provider arrangements on acceptable terms; and

• Litigation.

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.

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.

During March 2001, we issued $200 million of 8% Senior Notes. The net proceeds were used to repay borrowings outstanding under our two bank credit agreements, including all loans under our 364-day credit agreement that was scheduled to mature September 21, 2001. Because of the

35

decline in U.S. interest rates in 2001, the fair value of our fixed rate debt is higher than its carrying value.

The following table provides information about our significant interest rate risk at December 31:

		2001				2000
				Fair				Fair
		Outstanding		Value		Outstanding		Value
		(In thousands)
Variable rate debt:
	364-day credit agreement, canceled August 2001, interest at a Eurodollar-based rate plus 1.625%					$	155,000	$	155,000
	Five-year credit agreement, matures September 2003, interest at a Eurodollar-based rate plus .50% and .80%, respectively	$	334,000	$	334,000		452,000		452,000
Fixed rate debt:
	Senior notes, due June 2006, interest rate at 7 1/2%		150,000		157,959		150,000		141,003
	Senior notes, due March 2008, interest rate at 8%		200,000		211,179

Item 8. Financial Statements And Supplementary Data

	Page
Report of Ernst & Young LLP, Independent Auditors		37
Consolidated Balance Sheets		38
Consolidated Statements of Operations		39
Consolidated Statements of Cash Flows		40
Consolidated Statements of Shareholders’ Equity		41
Notes to Consolidated Financial Statements		42
Supplementary Data (Unaudited) — Summary of Quarterly Results		62

36

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, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, 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 24, 2002,
except for Notes 17 and 18,
as to which the date
is February 25, 2002

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Manor Care, Inc.
Consolidated Balance Sheets

		December 31,			December 31,
		2001			2000
		(In thousands, except per share data)
Assets
Current assets:
	Cash and cash equivalents	$	26,691		$	24,943
	Receivables, less allowances for doubtful accounts of $68,827 and $61,137, respectively		391,109			393,050
	Prepaid expenses and other assets		31,630			24,867
	Assets held for sale		57,735
	Deferred income taxes		82,465			62,019
Total current assets			589,630			504,879
Net property and equipment			1,556,910			1,577,378
Intangible assets, net of amortization of $22,469 and $17,869, respectively			97,650			100,022
Other assets			179,881			176,189
Total assets		$	2,424,071		$	2,358,468
Liabilities And Shareholders’ Equity
Current liabilities:
	Accounts payable	$	88,615		$	90,390
	Employee compensation and benefits		115,533			81,065
	Accrued insurance liabilities		76,450			65,165
	Income tax payable		34,342			27,274
	Other accrued liabilities		71,031			48,172
	Revolving loans					155,000
	Long-term debt due within one year		5,388			5,479
Total current liabilities			391,359			472,545
Long-term debt			715,830			644,054
Deferred income taxes			103,095			108,916
Other liabilities			167,249			120,224
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		348,199			335,609
	Retained earnings		878,250			837,123
	Accumulated other comprehensive income		328
			1,227,887			1,173,842
	Less treasury stock, at cost (8.7 and 8.4 million shares, respectively)		(181,349	)		(161,113	)
Total shareholders’ equity			1,046,538			1,012,729
Total liabilities and shareholders’ equity		$	2,424,071		$	2,358,468

See accompanying notes.

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Manor Care, Inc.
Consolidated Statements of Operations

		Year ended December 31
		2001			2000			1999
		(In thousands, except per share data)
Revenues		$	2,694,056		$	2,380,578		$	2,135,345
Expenses:
Operating			2,271,808			2,016,764			1,697,459
	General and administrative		115,094			104,027			89,743
	Depreciation and amortization		128,159			121,208			114,601
	Provision for restructuring charge, merger expenses, asset impairment and other related charges								14,787
			2,515,061			2,241,999			1,916,590
Income before other income (expenses), income taxes and minority interest			178,995			138,579			218,755
Other income (expenses):
	Interest expense		(50,800	)		(60,733	)		(54,082	)
	Impairment of investments					(20,000	)		(274,120	)
	Equity in earnings of affiliated companies		1,407			812			1,729
	Interest income and other		390			3,011			5,322
	Total other expenses, net		(49,003	)		(76,910	)		(321,151	)
Income (loss) before income taxes and minority interest			129,992			61,669			(102,396	)
Income taxes (benefit)			61,502			21,489			(47,238	)
Minority interest income						1,125
Income (loss) before extraordinary item			68,490			39,055			(55,158	)
Extraordinary item (net of taxes of $7,508)									11,500
Net income (loss)		$	68,490		$	39,055		$	(43,658	)
Earnings per share — basic:
	Income (loss) before extraordinary item	$	.67		$	.38		$	(.51	)
	Extraordinary item (net of taxes)								.11
	Net income (loss)	$	.67		$	.38		$	(.41	)*
Earnings per share — diluted:
	Income (loss) before extraordinary item	$	.66		$	.38		$	(.51	)
	Extraordinary item (net of taxes)								.11
	Net income (loss)	$	.66		$	.38		$	(.41	)*
Weighted-average shares:
	Basic		102,066			102,203			107,627
	Diluted		103,685			103,126			107,627

*     Doesn’t add due to rounding

See accompanying notes.

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Manor Care, Inc.
Consolidated Statements of Cash Flows

			Year ended December 31
			2001			2000			1999
			(In thousands)
Operating Activities
Net income (loss)			$	68,490		$	39,055		$	(43,658	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization			128,159			121,208			115,910
	Asset impairment and other non-cash charges									12,240
	Impairment of investments						20,000			274,120
	Provision for bad debts			45,884			32,911			29,005
	Deferred income taxes			(25,474	)		(26,518	)		(112,984	)
	Net (gain) loss on sale of assets			445			(506	)		(18,963	)
	Equity in earnings of affiliated companies			(1,407	)		(812	)		(1,729	)
	Minority interest income						1,125
	Changes in assets and liabilities, excluding sold facilities and acquisitions:
		Receivables		(44,889	)		(91,649	)		(69,974	)
		Prepaid expenses and other assets		(9,902	)		10,371			(6,355	)
		Liabilities		122,121			104,964			(40,502	)
Total adjustments				214,937			171,094			180,768
Net cash provided by operating activities				283,427			210,149			137,110
Investing Activities
Investment in property and equipment				(89,400	)		(116,941	)		(166,503	)
Investment in systems development				(6,721	)		(10,067	)		(11,122	)
Acquisition of assets from development joint venture				(57,063	)
Acquisitions				(12,743	)		(22,263	)		(9,229	)
Proceeds from sale of assets				8,046			8,893			263,941
Consolidation of subsidiary							15,701
Net cash provided by (used in) investing activities				(157,881	)		(124,677	)		77,087
Financing Activities
Net repayments under bank credit agreements				(273,000	)		(48,500	)		(50,500	)
Principal payments of long-term debt				(10,315	)		(18,630	)		(6,712	)
Proceeds from issuance of senior notes				200,000
Payment of deferred financing costs				(3,397	)
Proceeds from stock options and common stock				5,667			474			1,954
Purchase of common stock for treasury				(42,753	)		(6,160	)		(180,370	)
Net cash used in financing activities				(123,798	)		(72,816	)		(235,628	)
Net increase (decrease) in cash and cash equivalents				1,748			12,656			(21,431	)
Cash and cash equivalents at beginning of period				24,943			12,287			33,718
Cash and cash equivalents at end of period			$	26,691		$	24,943		$	12,287

See accompanying notes.

40

Manor Care, Inc.
Consolidated Statements of Shareholders’ Equity

												Accumulated
						Capital						Other									Total
		Common Stock				in Excess						Compre-			Treasury Stock						Share-
						of Par			Retained			hensive									holders'
		Shares		Amount		Value			Earnings			Income			Shares			Amount			Equity
		(In thousands)
Balance at January 1, 1999			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
Issue and vesting of restricted stock							(2,610	)		(1,721	)					185			5,062			731
Purchase of treasury stock																(2,703	)		(73,957	)		(73,957	)
Exercise of stock options										(25,642	)					2,164			48,659			23,017
Tax benefit from restricted stock and exercise of stock options							15,200															15,200
Comprehensive income:
	Net income									68,490
	Other comprehensive income (loss), net of tax:
	Unrealized gain on invest- ments, net of tax of $659											$	1,009
	Minimum pension liability, net of tax benefit of $296												(453	)
	Derivative loss, net of tax benefit of $152												(228	)
Total comprehensive income																						68,818
Balance at December 31, 2001			111,033	$	1,110	$	348,199		$	878,250		$	328			(8,742	)	$	(181,349	)	$	1,046,538

See accompanying notes.

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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 355 centers in 32 states with more than 60 percent located in Florida, Illinois, Michigan, Ohio and Pennsylvania. The Company also has 13 assisted living centers located in five states that are currently held for sale. The Company provides rehabilitation therapy in nursing centers of its own and others, and in the Company’s 96 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 with 81 offices located in 19 states. The Company operates one hospital in Texas. In addition, the Company owns a majority of a 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. Significant intercompany accounts and transactions have been eliminated in consolidation.

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.

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 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. 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 was accounted for by the pooling-of-interests method. The Company recorded a charge in 1998 for restructuring, merger expenses, asset

42

impairment and other expenses with a residual charge of certain expenses in 1999. The most significant component of the $14.8 million charge related to the amortization of certain MCA software applications until the transition to HCR’s applications.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Assets Held for Sale

Assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell and are not depreciated.

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, five to 40 years for management contracts and 20 to 40 years for goodwill. See the discussion of new accounting standards for a change in accounting principles related to goodwill amortization beginning January 1, 2002.

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 internal and external factors relating to each asset, including cash flow, contract changes, local market developments, national health care trends and other publicly available information. If these 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

43

value. See the discussion of new accounting standards for a change in accounting principles related to goodwill beginning January 1, 2002.

Systems Development Costs

Costs incurred for systems development include eligible direct payroll and consulting costs. These costs are capitalized and are amortized over the estimated useful lives of the related systems.

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.

General and Professional Liability

The Company purchases general and professional liability insurance and has maintained an unaggregated self-insured retention per occurrence ranging from $0.5 million to $2.0 million depending on the policy year and state. Provisions for estimated settlements, including incurred but not reported claims, are provided on an undiscounted basis in the period of the related coverage. These provisions are based on internal and external evaluations of the merits of the individual claims, analysis of claim history and the estimated reserves assigned by the Company’s third-party administrator. The methods of making such estimates and establishing the resulting accrued liabilities are reviewed with the Company’s independent actuary. Any adjustments resulting from the review are reflected in current earnings. Claims are paid over varying periods, which generally range from one to six years.

Advertising Expense

The cost of advertising is expensed as incurred. The Company incurred $11.6 million, $9.9 million and $9.5 million in advertising costs for the years ended December 31, 2001, 2000 and 1999, respectively.

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.

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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, excluding non-vested restricted stock, 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 Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 142, “Goodwill and Other Intangible Assets,” that the Company is required to adopt beginning January 1, 2002. Under this Statement, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. The Company has no indefinite-lived intangible assets. The Company’s amortization of goodwill was $3.4 million in 2001. During 2002, management will perform the initial impairment test on recorded goodwill which totals $80.4 million as of January 1, 2002. Management has not determined the effect, if any, of the initial impairment test on its consolidated financial position or results of operations.

In August 2001, the FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (FAS 144), that the Company is required to adopt beginning January 1, 2002 with transition provisions for certain matters. The new rules on asset impairment supersede Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (FAS 121), and provide a single accounting model for long-lived assets to be disposed of. In accordance with the new standard, the Company will continue to follow the guidance in FAS 121 for the disposal of 13 assisted living facilities. There will be no additional effect on the Company’s consolidated financial position or results of operations as a result of adopting FAS 144.

Reclassifications

Certain reclassifications affecting intangible assets, other assets, operating expenses and other income have been made in the 2000 financial statements to conform with the 2001 presentation.

2. Assets Held For Sale

In 1999, the Company and Alterra Healthcare Corporation (Alterra) formed a development joint venture and jointly and severally guaranteed a revolving line of credit which matured June 29, 2001. On July 2, 2001, the Company paid in full the $57.1 million revolving line of credit of the development joint venture. As a result of the repayment, the Company was assigned the full rights and privileges of the lenders including security interests in 13 Alzheimer’s assisted living facilities. During 2001, the Company, Alterra and the third-party equity investors reached a settlement on all matters related to the development joint venture. As a result of the settlement, the Company received title to the 13 facilities.

45

The Company intends to sell these facilities within the next year. Accordingly, the Company has classified the net assets of $57.7 million for these assisted living facilities as held for sale in the consolidated balance sheet. The results of operations for these facilities, which were included in the Company’s results for the second half of 2001, were not material and were at a breakeven operating level. Prior to July 2, 2001, the results of these facilities were recorded under the equity method.

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 with an estimated life of 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		2,016,764		1,769,706
Income (loss) before extraordinary item		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 $12.7 million, $8.3 million and $9.2 million in 2001, 2000 and 1999, respectively, for the acquisition of a skilled nursing facility, 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 $5.8 million and will, if earned, be paid over the next four years and treated as additions to the purchase price of the businesses. The results of operations of the acquired businesses were included in the consolidated statements of operations from the date of acquisition. The pro forma consolidated results of operations would not be materially different from the amounts reported in prior years.

During 1999, the Company sold 26 facilities and MCA’s corporate headquarters, realizing net proceeds of $179.0 million and a $16.2 million gain ($9.8 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.

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4. Impairment of Investments

MCA and one of its subsidiaries owned approximately 50 percent of Vitalink Pharmacy Services, Inc. (Vitalink) common stock. In 1998, Vitalink entered into a merger agreement with Genesis Health Ventures, Inc. (Genesis). Pursuant to the merger agreement, MCA received 586,240 shares of Series G Cumulative Convertible Preferred Stock of Genesis (Series G Preferred Stock) valued at $293.1 million for its Vitalink common stock.

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 were payable in additional shares of Series G Preferred Stock valued at $500 per share. 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.

In October 2001, Genesis emerged from Chapter 11 protection following the completion of its plan of reorganization resulting in no distributions to its preferred and common shareholders. Under the terms of the reorganization, all preferred and common shares were canceled.

5. Revenues

The Company receives reimbursement under the federal Medicare program and various state Medicaid programs. Revenues under these programs totaled $1.6 billion, $1.4 billion and $1.1 billion for the years ended December 31, 2001, 2000 and 1999, respectively. Medicare program revenues prior to June 1999 for skilled nursing facilities and October 2000 for home health agencies 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 revenues recorded and final determination will not materially affect the consolidated financial statements. Net third-party settlements amounted to an $8.2 million and $5.4 million payable at December 31, 2001 and 2000, respectively. There were no non-governmental receivables which represented amounts in excess of 10 percent of total receivables at December 31, 2001 and 2000.

Revenues for certain health care services are as follows:

	2001		2000		1999
	(In thousands)
Skilled nursing and assisted living services	$	2,277,509	$	2,037,959	$	1,911,720
Home health and hospice services		239,433		186,475		61,062
Rehabilitation services		92,135		89,590		85,111
Hospital care		60,823		50,952		44,016
Other services		24,156		15,602		33,436
	$	2,694,056	$	2,380,578	$	2,135,345

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6. Property and Equipment

Property and equipment consist of the following at December 31:

	2001		2000
	(In thousands)
Land and improvements	$	232,486	$	234,719
Buildings and improvements		1,602,742		1,579,336
Equipment and furnishings		322,967		341,412
Capitalized leases		28,324		29,974
Construction in progress		51,202		38,415
		2,237,721		2,223,856
Less accumulated depreciation		680,811		646,478
Net property and equipment	$	1,556,910	$	1,577,378

Depreciation expense, including amortization of capitalized leases, amounted to $115.4 million, $111.2 million and $108.5 million for the years ended December 31, 2001, 2000 and 1999, respectively. Accumulated depreciation included $11.6 million and $11.9 million at December 31, 2001 and 2000, respectively, relating to capitalized leases.

7. Debt

Debt consists of the following at December 31:

	2001		2000
	(In thousands)
Five Year Agreement	$	334,000	$	452,000
364 Day Agreement (revolving loans)				155,000
8% Senior Notes		200,000
7 1/2% Senior Notes, net of discount		149,735		149,675
Mortgages and other notes		32,204		42,456
Capital lease obligations (see Note 8)		5,279		5,402
		721,218		804,533
Less:
364 Day Agreement				155,000
Amounts due within one year		5,388		5,479
Long-term debt	$	715,830	$	644,054

In March 2001, the Company issued $200 million of 8% Senior Notes due in 2008 that are guaranteed by substantially all of its subsidiaries. All of the subsidiaries that guaranteed the 8% Senior Notes are 100 percent owned. The guarantees are full and unconditional and joint and several, and the non-guarantor subsidiaries are minor. The parent company has no independent assets or operations. In May 2001, the Company registered identical Senior Notes with the Securities and Exchange Commission that were exchanged for the Senior Notes issued in March. Interest on the notes is payable semi-annually in March and September.

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The net proceeds of $196.6 million from the Senior Notes were used to repay borrowings outstanding under two bank credit agreements, including all loans under the Company’s 364-day, $200 million credit agreement (364 Day Agreement) that was scheduled to mature September 21, 2001. Having paid off all borrowings under the 364 Day Agreement, the Company reduced the commitment under this credit facility by $150 million in March, and canceled the remaining $50 million commitment in August 2001.

While it existed, loans under the 364 Day Agreement bore interest at variable rates that reflected, 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 provided 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.

At December 31, 2001, the Company still has a five-year, $500 million credit agreement (Five Year Agreement) with a group of banks that is scheduled to mature September 24, 2003. This credit agreement, under which both the Company and MCA may borrow, contains various covenants, restrictions and events of default. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on its ability to incur indebtedness, create liens, pay dividends, repurchase stock, dispose of assets and make acquisitions.

Loans under the Five Year Agreement 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. 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. 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.

Whenever the aggregate credit facility utilization exceeds $250 million ($350 million while both the Five Year Agreement and 364 Day Agreement were in existence), an additional fee of .05 percent is charged on loans due under the Five Year Agreement (and, based on the performance of a key ratio, an additional fee ranging from .10 percent to .125 percent on loans under the 364 Day Agreement). At December 31, 2001, the average interest rate on loans under the Five Year Credit Agreement was 2.43 percent, excluding the fee on the total facility. After consideration of usage for letters of credit, the remaining credit availability under the agreement totaled $135.8 million.

In June 1996, MCA issued $150 million of 7 1/2% Senior Notes due 2006 and used the proceeds to repay borrowings under MCA’s prior credit facility. In 1998, the notes were guaranteed by the Company. Interest on these notes is payable semi-annually in June and December.

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Interest rates on mortgages and other long-term debt ranged from 2.73 percent to 10.75 percent. Maturities ranged from 2002 to 2009. Owned property with a net book value of $72.0 million was pledged or mortgaged. Interest paid on all debt amounted to $44.8 million, $63.7 million and $56.4 million for the years ended December 31, 2001, 2000 and 1999, respectively. Capitalized interest costs amounted to $1.9 million, $4.5 million and $3.2 million for the years ended December 31, 2001, 2000 and 1999, respectively.

Debt maturities for the five years subsequent to December 31, 2001 are as follows: 2002 — $5.4 million; 2003 — $342.4 million; 2004 — $3.2 million; 2005 — $3.4 million; and 2006 — $153.7 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, 2001 are as follows:

	Operating		Capital
	Leases		Leases
	(In thousands)
2002	$	17,233	$	657
2003		14,525		655
2004		7,018		615
2005		4,659		620
2006		3,908		637
Later years		45,716		11,092
Total minimum lease payments	$	93,059		14,276
Less amount representing interest				8,997
Present value of net minimum lease payments (included in long-term debt — see Note 7)			$	5,279

Rental expense was $23.0 million, $22.4 million and $17.8 million for the years ended December 31, 2001, 2000 and 1999, respectively.

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9. Income Taxes

The provision (benefit) for income taxes consists of the following:

		2001			2000			1999
		(In thousands)
Current:
	Federal	$	75,116		$	41,353		$	51,865
	State and local		11,860			8,453			15,641
			86,976			49,806			67,506
Deferred:
	Federal		(20,959	)		(22,947	)		(93,983	)
	State and local		(4,515	)		(5,370	)		(20,761	)
			(25,474	)		(28,317	)		(114,744	)
Provision (benefit) for income taxes before extraordinary item			61,502			21,489			(47,238	)
Provision for income taxes from extraordinary item									7,508
Total provision (benefit) for income taxes		$	61,502		$	21,489		$	(39,730	)

The reconciliation of the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes and minority interest to the provision (benefit) for income taxes before extraordinary item is as follows:

		2001			2000			1999
		(In thousands)
Income taxes (benefit) computed at statutory rate		$	45,497		$	21,584		$	(35,839	)
Differences resulting from:
	State and local income taxes		4,774			2,004			(3,328	)
	Corporate-owned life insurance		12,000
	Non-deductible compensation		1,084			911			1,870
	Reversal of valuation allowance		(2,151	)		(3,931	)
	Jobs tax credits		(1,313	)		(1,770	)		(1,520	)
	Unrealized losses of subsidiary								4,340
	Adjustment to prior years’ estimated tax liabilities								(11,653	)
	Other		1,611			2,691			(1,108	)
Provision (benefit) for income taxes before extraordinary item		$	61,502		$	21,489		$	(47,238	)

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.

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In November 2001, the Company received a notice from the Internal Revenue Service (IRS) denying interest deductions on certain policy loans related to corporate-owned life insurance (COLI) for years 1993 through 1998. The Company has agreed to a final settlement with the IRS for an estimated $38.0 million including interest, which allowed the Company to retain a portion of these deductions. The Company recorded a $12.0 million charge in the fourth quarter of 2001 related to the final resolution with the IRS for COLI.

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:

		2001			2000
		(In thousands)
Deferred tax assets:
	Accrued insurance reserves	$	69,219		$	42,719
	Allowances for receivables and settlements		32,961			33,433
	Employee compensation and benefits		34,077			27,610
	Net capital loss on Genesis investment		25,980			43,526
	Environmental reserve		9,957			7,412
	Arbitration reserve		9,712
	Net operating loss carryover		8,934			11,622
	Other		2,780			1,759
		$	193,620		$	168,081
Deferred tax liabilities:
	Fixed asset and intangible asset bases differences	$	155,779		$	155,784
	Leveraged leases		33,920			35,978
	Pension receivable		10,420			8,984
	Other		14,131			14,232
		$	214,250		$	214,978
Net deferred tax liabilities		$	(20,630	)	$	(46,897	)

At December 31, 2001, the Company had approximately $32.7 million of acquired net operating loss carryforwards for tax purposes which expire in 2018-2019, and the maximum amount to be used in any year is $9.5 million. At December 31, 2001, the Company had approximately $65.8 million of capital loss carryforward related to the Genesis investment that expires in 2006. Income taxes paid, net of refunds, amounted to $64.8 million, $33.7 million and $50.0 million for the years ended December 31, 2001, 2000 and 1999, respectively.

52

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 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 $24.0 to $28.5 million. The Company has received or expects to receive between $20.3 million and $24.5 million of insurance proceeds, depending upon the ultimate liabilities, which will offset some amounts due as a result of these exposures.

The Company is party to various other legal matters arising in the ordinary course of business including patient care-related claims and litigation. At December 31, 2001 and 2000, the general and professional liability consisted of short-term reserves of $48.0 million and $43.1 million, respectively, which were included in accrued insurance liabilities, and long-term reserves of $88.5 million and $34.1 million, respectively, which were included in other long-term liabilities. The expense for general and professional liability was $98.6 million, $79.2 million and $22.2 million for the years ended December 31, 2001, 2000 and 1999, respectively, which was included in operating expenses. There can be no assurance that such provision and liability will not require material adjustment in future periods.

As of December 31, 2001, the Company had contractual commitments of $4.5 million relating to its internal construction program. As of December 31, 2001, the Company had total letters of credit of $32.1 million that benefit certain third-party insurers and bondholders of certain industrial revenue bonds, and 90 percent of such letters of credit related to recorded liabilities.

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11. Earnings Per Share

The calculation of earnings per share (EPS) is as follows:

				2001		2000		1999
				(In thousands, except EPS)
Numerator:
		Income (loss) before extraordinary item (income available to common shareholders)		$	68,490	$	39,055	$	(55,158	)
Denominator:
		Denominator for basic EPS – weighted- average shares			102,066		102,203		107,627
		Effect of dilutive securities:
			Stock options		1,345		839
			Non-vested restricted stock		274		84
		Denominator for diluted EPS — adjusted for weighted-average shares and assumed conversions			103,685		103,126		107,627
	EPS — income (loss) before extraordinary item
		Basic		$	.67	$	.38	$	(.51	)
		Diluted		$	.66	$	.38	$	(.51	)

Options to purchase shares of the Company’s common stock that were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common shares were: 2,195,000 million shares with an average exercise price of $33.69 in 2001 and 2,950,000 million shares with an average exercise price of $30.47 in 2000. In 1999, the dilutive effect of stock options would have been 1,121,000 shares. These shares were not included in the calculation because the effect would be anti-dilutive with a loss before extraordinary item.

12. Stock Plans

The Company’s Equity Incentive Plan (Equity Plan) that was approved by shareholders in May 2001 allows the Company to grant awards of non-qualified stock options, incentive stock options and restricted stock to key employees and directors. A maximum of 4,000,000 shares of common stock are authorized for issuance under the Equity Plan with no more than 750,000 shares to be granted as restricted stock. Shares covered by expired or canceled options, by surrender or repurchase of restricted stock, or by shares withheld or delivered in payment of the exercise price or tax withholding thereon, may again be awarded under the Equity Plan. The Equity Plan replaced the Company’s previous key employee stock option plan, outside director stock option plan and key senior management employee restricted stock plan. Under the Equity Plan, there are 3,912,564 shares available for future awards at December 31, 2001. During 2001, employees delivered shares to the Company valued at $31.2 million to cover the payment of the option price and related tax withholdings of the option exercise.

54

Certain executive officers were issued 185,000 and 550,000 restricted shares in 2001 and 2000, respectively, with a weighted-average fair value of $21.28 and $7.00, respectively, that vest at retirement. Compensation expense related to restricted stock was $0.7 million and $0.2 million for the years ended December 31, 2001 and 2000, respectively.

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. Activity in the Company’s stock option plans for the three-year period ended December 31, 2001 is as follows:

					Weighted-
					Average
					Exercise
		Shares			Price
Options outstanding at January 1, 1999			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 granted			2,537,431		$	21.32
Options forfeited			(117,200	)	$	26.28
Options expired			(567,068	)	$	36.30
Options exercised			(2,164,253	)	$	10.46
Options outstanding at December 31, 2001			6,064,059		$	20.33
Options exercisable at December 31, 1999			3,952,392		$	15.14
	December 31, 2000		3,936,324		$	17.56
	December 31, 2001		2,384,182		$	25.27

55

The following tables summarize information about options outstanding and options exercisable at December 31, 2001:

	Options Outstanding
					Weighted-
			Weighted-		Average
Range of			Average		Remaining
Exercise	Number		Exercise		Contractual
Prices	Outstanding		Price		Life
$5 - $10		1,480,900	$	7.36		7.5
$10 - $20		2,339,991	$	18.27		7.7
$20 - $30		716,075	$	24.75		5.1
$30 - $45		1,527,093	$	33.98		6.6
		6,064,059	$	20.33		7.0

	Options Exercisable
			Weighted-
Range of			Average
Exercise	Number		Exercise
Prices	Exercisable		Price
$5 - $10		200,900	$	9.63
$10 - $20		539,441	$	15.01
$20 - $30		716,075	$	24.75
$30 - $45		927,766	$	35.01
		2,384,182	$	25.27

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 stock option plans, and, accordingly, did not recognize compensation expense for options granted in 1995 through 2001. If the Company had accounted for its 1995 through 2001 options under the fair value method, net income and earnings per share would have been reduced to the pro forma amounts indicated below:

		2001		2000		1999
		(In thousands, except earnings per share)
Net income (loss) — as reported		$	68,490	$	39,055	$	(43,658	)
Net income (loss) — pro forma		$	61,914	$	36,039	$	(46,346	)
Earnings per share — as reported:
	Basic	$	.67	$	.38	$	(.41	)
	Diluted	$	.66	$	.38	$	(.41	)
Earnings per share — pro forma:
	Basic	$	.61	$	.35	$	(.43	)
	Diluted	$	.60	$	.35	$	(.43	)

56

The pro forma effect on net income for 2001, 2000 and 1999 is not representative of the pro forma effect on net income in future years because only executive officers were granted options in 2000, a limited number of options were granted in 1999, and the vesting of certain options were accelerated in 1998.

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:

	2001			2000			1999
Dividend yield		0	%		0	%		0	%
Expected volatility		46	%		46	%		35	%
Risk-free interest rate		4.53	%		6.18	%		5.35	%
Expected life (in years)		3.8			4.2			4.8
Weighted-average fair value	$	7.39		$	3.36		$	10.25

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.

13. Employee Benefit Plans

The Company had two qualified defined benefit pension plans that were merged in 2001. These plans were amended in 1994 and 1996 to freeze all future benefits.

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The funded status of these plans is as follows:

	2001			2000
	(In thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	31,309		$	35,512
Interest cost		2,283			2,341
Actuarial (gain) loss		1,901			(2,486	)
Benefits paid		(4,758	)		(4,058	)
Benefit obligation at end of year		30,735			31,309
Change in plan assets
Fair value of plan assets at beginning of year		62,302			65,132
Actual return on plan assets		(1,488	)		1,228
Benefits paid		(4,758	)		(4,058	)
Fair value of plan assets at end of year		56,056			62,302
Excess funded status of the plans		25,321			30,993
Unrecognized net actuarial (gain) loss		507			(8,410	)
Prepaid benefit cost	$	25,828		$	22,583

The components of the net pension income for these plans are as follows:

	2001			2000			1999
	(In thousands)
Interest cost	$	2,283		$	2,341		$	2,575
Expected return on plan assets		(5,527	)		(5,408	)		(5,395	)
Net pension income	$	(3,244	)	$	(3,067	)	$	(2,820	)

The actuarial present value of benefit obligations is based on an average discount rate of 7.50 percent and 7.75 percent at December 31, 2001 and 2000, respectively. 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 2001 and 2000.

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 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 $49.4 million and $36.2 million at December 31, 2001 and 2000, 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 $9.2 million and $8.1 million at December 31, 2001 and 2000, respectively, and was included in other long-term liabilities.

58

The Company maintains two 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 $4.5 million, $6.5 million and $11.1 million for the years ended December 31, 2001, 2000 and 1999, respectively. The decrease in expense for 2001 and 2000 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:

	2001				2000
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In thousands)
Cash and cash equivalents	$	26,691	$	26,691	$	24,943	$	24,943
Debt, excluding capitalized leases		715,939		735,976		799,131		790,086

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 computed using discounted cash flow analyses, based on the Company’s estimated 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 exercisable or transferable apart from the common stock until 10 days after a person or group acquires 15 percent 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.

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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. The revenues in the “Other” category include services for assisted living facilities held for sale, rehabilitation, home health and hospice, 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 2001 and 2000 and on the equity method in 1999. The Company recorded an additional $19.4 million of general and professional liability expense in 2001 compared with 2000 and an additional $57.0 million in 2000 compared with 1999 that relates to the long-term care segment. The Company also recorded $23.6 million of operating expense in 2001 due to the arbitration decision (see Note 17) that relates to the long-term care segment.

		Long-Term Care		Other		Total
		(In thousands)
Year ended December 31, 2001
	Revenues from external customers	$	2,277,509	$	416,547	$	2,694,056
	Intercompany revenues				41,505		41,505
	Depreciation and amortization		115,827		12,332		128,159
	Operating margin		371,677		50,571		422,248
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		28,523		363,814
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

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17. Arbitration Decision

On February 14, 2002, a decision was rendered in an arbitration hearing between the Company and NeighborCare Pharmacy Services (NeighborCare), an institutional pharmacy services subsidiary of Genesis that provides pharmaceuticals to certain of the Company’s facilities. The decision denies the Company’s right to terminate its NeighborCare supply agreements before their expiration on September 30, 2004. In addition, the decision requires the Company to pay damages and certain related amounts of approximately $24.6 million to NeighborCare for profits lost and pre-judgment interest as a result of their being precluded from supplying other facilities of the Company. The charge was recorded in the fourth quarter of 2001. The liability was included in other accrued liabilities at December 31, 2001.

18. Subsequent Event

On February 25, 2002, the Company signed a definitive purchase agreement with Health Management Associates, Inc. (HMA) to sell certain assets of its hospital to a subsidiary of HMA for approximately $80 million in cash. Separately, the Company will invest $16 million to acquire 20 percent of the HMA entity owning the hospital. The total gain is expected to be $20 million to $30 million, of which 20 percent will be deferred. Simultaneously, the Company will acquire a 20 percent interest in HMA’s entity that recently acquired Medical Center of Mesquite. The transactions are subject to normal regulatory approvals and other standard closing conditions. Closing on the transactions is anticipated in the first half of 2002.

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Manor Care, Inc.
Supplementary Data (Unaudited)
Summary Of Quarterly Results

		Year ended December 31, 2001
		First		Second		Third		Fourth			Year
		(In thousands, except per share amounts)
Revenues		$	638,193	$	663,336	$	687,639	$	704,888		$	2,694,056
Income before other income (expenses), income taxes and minority interest			53,582		60,396		61,621		3,396			178,995
Net income (loss)			24,983		30,212		31,218		(17,923	)		68,490
Earnings per share — net income (loss):
	Basic	$	.24	$	.30	$	.31	$	(.18	)	$	.67
	Diluted	$	.24	$	.29	$	.30	$	(.18	)	$	.66

		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 before other income (expenses), income taxes and minority interest			11,506			28,805			45,955		52,313		138,579
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

In the fourth quarter of 2001, the Company recorded three charges. First, the Company recorded general and professional liability expense of $38.0 million ($23.6 million after tax) that related to a change in estimate for claims in policy periods prior to June 2000. Second, the Company recorded income tax expense of $12.0 million related to its final resolution with the Internal Revenue Service for corporate-owned life insurance. Third, the Company recorded $24.6 million of expense ($15.2 million after tax) due to an arbitration decision that requires the Company to pay damages and certain related amounts to NeighborCare Pharmacy Services.

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 Management’s Discussion and Analysis for further discussion of these items.

62

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 will file pursuant to Regulation 14A with the Commission prior to April 30, 2002. 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		52	President and Chief Executive Officer of Manor Care since August 1991. Chairman of the Board of Manor Care since September 2001 and from August 1991 to September 1998. Member of Class I of the Board of Directors of Manor Care, with a term expiring in 2004.
M. Keith Weikel		64	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		57	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		56	Vice President and General Counsel of Manor Care since November 1991 and Secretary of Manor Care since December 1991.
Nancy A. Edwards		51	Vice President and General Manager of Central Division of Manor Care since December 1993.

63

Name	Age		Office and Experience
John K. Graham		41	Vice President and Director of Rehabilitation Services of Manor Care since September 1998 and 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.
Jeffrey A. Grillo		43	Vice President and General Manager of Mid-Atlantic Division of Manor Care since February 1999 and 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.
Larry C. Lester		59	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		54	Vice President and Controller of Manor Care since August 1991.
O. William Morrison		63	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		45	Vice President and General Manager of Mid-States Division of Manor Care since January 1999 and District Vice President and General Manager of Mid-States of MCHS from February 1997 to December 1998.
F. Joseph Schmitt		53	Vice President and General Manager of Southern Division of Manor Care since December 1993.
Jo Ann Young		52	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, and Vice President and Director of Assisted Living of MCHS from February 1997 to August 1998.

64

Item 11. Executive Compensation

We incorporate by reference information on executive compensation under the heading “Executive Compensation” in our Proxy Statement, which we will file with the Commission prior to April 30, 2002.

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 will file with the Commission prior to April 30, 2002.

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 will file with the Commission prior to April 30, 2002.

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 in Item 8 on the pages indicated:

	Page
Report of Ernst & Young LLP, Independent Auditors		37
Consolidated Balance Sheets — December 31, 2001 and 2000		38
Consolidated Statements of Operations - Years ended December 31, 2001, 2000 and 1999		39
Consolidated Statements of Cash Flows - Years ended December 31, 2001, 2000 and 1999		40
Consolidated Statements of Shareholders’ Equity - Years ended December 31, 2001, 2000 and 1999		41
Notes to Consolidated Financial Statements — December 31, 2001		42

65

Manor Care includes the following consolidated financial statement schedule of Manor Care, Inc. and subsidiaries in this Form 10-K 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

Manor Care, Inc.
Schedule II — Valuation and Qualifying Accounts

				Charged					Additions
		Balance at		to Costs		Deduc-			From		Balance
		Beginning		and		tions			Acquisi-		at End of
		of Period		Expenses		(Note 1)			tions		Period
		(In thousands)
Year ended December 31, 2001:
Deducted from asset accounts:
	Allowance for doubtful accounts	$	61,137	$	45,884	$	(38,324	)	$	130	$	68,827
	Reserve of Genesis dividend	$	34,808	$	13,053	$	(47,861	)			$	—
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

(1) Uncollectible accounts written off, net of recoveries.

67

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 —	Amendment to Rights Agreement dated June 10, 1998 between Health Care and Retirement Corporation and Harris Trust and Savings Bank (filed as Exhibit 4.3 to HCR’s Form 8-K filed on June 16, 1998 and incorporated herein by reference)
4.3 —	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)
4.4 —	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)
4.5 —	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)
4.6 —	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)
4.7 —	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

68

S-K Item 601
No.	Document
	Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference)
4.8 —	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)
4.9 —	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)
4.10 —	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)
*4.11 —	Indenture dated as of May 8, 2002 between Manor Care, Inc., the Subsidiary Guarantors Parties Hereto and National City Bank as Trustee
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 —	The Equity Incentive Plan (filed as Appendix C to Manor Care, Inc.’s Proxy Statement dated April 6, 2001 in connection with its Annual Meeting held on May 8, 2001 and incorporated here in by reference)
10.5 —	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)
10.6 —	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)
10.7 —	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)
10.8 —	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)
10.9 —	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)
10.10 —	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,

69

	S-K Item 601
	No.	Document
		Inc.’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference)
	10.11 —	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)
	10.12 —	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)
*	10.13 —	HCR Manor Care Senior Executive Retirement Plan, effective October 1, 1992, restated January 1, 2001.
*	10.14 —	Manor Care, Inc. Senior Management Savings Plan for Corporate Officers, effective January 1, 1993, restated as of January 1, 2001.
*	10.15 —	First Amendment to the Manor Care, Inc. Senior Management Savings Plan for Corporate Officers effective January 1, 2001.
	10.16 —	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)
	10.17 —	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)
	10.18 —	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)
	10.19 —	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)
	10.20 —	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)
	10.21 —	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)
	10.22 —	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)
	10.23 —	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)
	10.24 —	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)
	10.25 —	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)
	10.26 —	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)
	10.27 —	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

70

	S-K Item 601
	No.	Document
		HCR’s Registration Statement on Form S-8, File No. 33-48885 and incorporated herein by reference)
	10.28 —	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
*	23      —	Consent of Independent Auditors

* Filed herewith.

Reports on Form 8-K

None

71

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: March 14, 2002

72

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on March 14, 2002 on behalf of Manor Care, Inc. and in the capacities indicated.

Signature	Title
/s/ Stewart Bainum, Jr. Stewart Bainum, Jr.	Director
/s/ Joseph H. Lemieux Joseph H. Lemieux	Director
/s/ William H. Longfield William H. Longfield	Director
/s/ Frederic V. Malek Frederic V. Malek	Director
/s/ Geoffrey G. Meyers Geoffrey G. Meyers	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ Spencer C. Moler Spencer C. Moler	Vice President and Controller (Principal Accounting Officer)
/s/ Paul A. Ormond Paul A. Ormond	Chairman of the Board and Director; President and Chief Executive Officer (Principal Executive Officer)
/s/ John T. Schwieters John T. Schwieters	Director
/s/ Robert G. Siefers Robert G. Siefers	Director
/s/ M. Keith Weikel M. Keith Weikel	Senior Executive Vice President and Chief Operating Officer; Director
/s/ Gail R. Wilensky Gail R. Wilensky	Director
/s/ Thomas L. Young Thomas L. Young	Director

73

Exhibit Index

Exhibit
Number	Description
4.11	Indenture dated as of May 8, 2002 between Manor Care, Inc., the Subsidiary Guarantors Parties Hereto and National City Bank as Trustee
10.13	HCR Manor Care Senior Executive Retirement Plan, effective October 1, 1992, restated as of January 1, 2001.
10.14	Manor Care, Inc. Senior Management Savings Plan for Corporate Officers, effective January 1, 1993, restated as of January 1, 2001.
10.15	First Amendment to the Manor Care, Inc. Senior Management Savings Plan for Corporate Officers effective January 1, 2001.
21	Subsidiaries of the Registrant
23	Consent of Independent Auditors

74 EX-4.11 3 l93110aex4-11.txt EX-4.11 INDENTURE Exhibit 4.11 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 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 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

PAGE ---- 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 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 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 1 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). 2 "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 3 (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); 4 (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. 5 "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). 6 "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. 7 "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. 8 "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). 9 "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 10 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.

Term Defined in ---- 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)

11 "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. 12 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 13 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. 14 (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 15 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 16 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 17 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 18 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 19 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 20 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 21 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. 22 (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 23 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 24 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: -------------------------------- 25 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. 26 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 27 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. 28 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. 29 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. 30 (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, 31 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, 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 32 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 33 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 34 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. 35 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 36 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: 37 (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 38 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: 39 (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, 40 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 41 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 42 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 43 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 44 (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. 45 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. 46 (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 47 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 48 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. 49 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. 50 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 51 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; 52 (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 53 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; 54 (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; 55 (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 56 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. 57 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 58 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 59 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 60 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; 61 (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. 62 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. 63 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 64 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. 65 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. HEARTLAND HOME HEALTH CARE SERVICES, INC. 66 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. 67 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. 68 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. 69 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. 70 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. 71 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No.: 419-252-5599 Telephone: 419-252-5500 72 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 73 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 74 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 75 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 76 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 77 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 78 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 79 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 80 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: 333 N. Summit St. Toledo, Ohio 43604 Fax No. 419-252-5599 Telephone: 419-252-5500 81 NATIONAL CITY BANK, as Trustee By: /s/ Christine Robinette ------------------------------------- Name: Christine Robinette Title: Vice President 82 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 [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 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 A-3 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. 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 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 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 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 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 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 [ ] 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 [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 Signature of Amount of Amount of Amount of this authorized decrease in increase in Global Security signatory of Principal Principal following Trustee or Date of Amount of this Amount of this such decrease Securities Exchange Global Security Global Security or increase Custodian - -------- --------------- --------------- --------------- -------------

A-11 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 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 [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 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 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 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 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 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 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 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 [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 Signature of Amount of Amount of Amount of this authorized decrease in increase in Global Security signatory of Principal Principal following Trustee or Date of Amount of this Amount of this such decrease Securities Exchange Global Security Global Security or increase Custodian - -------- --------------- --------------- --------------- ------------

B-10 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 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 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 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-10.13 4 l93110aex10-13.txt EX-10.13 SENIOR EXECUTIVE RETIREMENT PLAN Exhibit 10.13 HCR MANOR CARE SENIOR EXECUTIVE RETIREMENT PLAN EFFECTIVE OCTOBER 1, 1992 RESTATED AS OF JANUARY 1, 2001 HCR MANOR CARE SENIOR EXECUTIVE RETIREMENT PLAN EFFECTIVE JANUARY 1, 2001 INDEX -----

PAGE ---- ARTICLE I - Name, Effective Date and Purpose of Plan 1 1.01 - Name 1 1.02 - Effective Date 1 1.03 - Purpose 1 1.04 - No Duplication of Benefits 1 ARTICLE II - Eligible Participants 2 2.01 - Eligible Participants 2 2.02 - Executive Officers 2 ARTICLE III - Credited Earnings 3 3.01 - Elements of Compensation 3 3.02 - Basis for Determination 4 3.03 - Effect of Disability 4 ARTICLE IV - Credited Service 5 4.01 - Determination of Credited Service 5 4.02 - General Provisions as to Credited Service 5 4.03 - Disabled Participants 5 ARTICLE V - No Funding of Plan Benefits 7 ARTICLE VI - Normal Retirement Date 8 ARTICLE VII - Retirement Benefits 9 7.01 - Amount of Benefit 9 7.02 - Gross Retirement Benefit 9 (a) - Method I 9 (b) - Method II 10 7.03 - Average Annual Earnings 10 7.04 - Social Security Taxable Wage Base 10 7.05 - Protection of Benefit 11 7.06 - Present Value of Designated Plans 11

-i- ARTICLE VIII - Payment of Retirement Benefits 12 8.01 - Normal or Postponed Retirement 12 8.02 - Early Retirement-- Hired Before January 1, 1992 12 (a) - General Rules and Reduction Factors 12 (b) - Early Retirement 12 1) - Age 60, Less Than Age 65 12 2) - Age 55, Less Than Age 60 13 8.03 - Early Retirement-- Hired After December 31, 1991 13 (a) - General Rules and Reduction Factors 13 (b) - Early Retirement 13 8.04 - Option to Postpone Commencement of Benefits 14 8.05 - Commencement of Retirement Benefits and Modes of Payment 14 8.06 - Commencement of Vested Benefits and Modes of Payment 14 8.07 - Death Benefits 15 8.08 - Designation and Change of Beneficiary 16 8.09 - Death or Failure to Designate Beneficiary 16 8.10 - Qualified Domestic Relations Order 16 ARTICLE IX - Suspension of Retirement Benefits 19 ARTICLE X - Administration of the Plan 20 10.01 - General 20 10.02 - Duties of the Vice President of Human Resources 20 10.03 - Authority of the Vice President of Human Resources 21 ARTICLE XI - Amendment, Modification or Termination of Plan 22 11.01 - Amendment or Modification of Plan 22 11.02 - Termination of the Plan 22 ARTICLE XII - Merger, Consolidation, etc. of the Plan 23 ARTICLE XIII - Miscellaneous Provisions 24 13.01 - Inalienability 24 13.02 - Facility of Payment 24 13.03 - Liability Limited 24 13.04 - Performance of Acts 24 13.05 - Claims Procedure 25 13.06 - Definitions 25 ADOPTION PAGE 26 APPENDIX A - List of Covered Participants 27 -ii- HCR MANOR CARE -------------- SENIOR EXECUTIVE RETIREMENT PLAN -------------------------------- (Effective January 1, 2001) ARTICLE I --------- NAME, EFFECTIVE DATE AND PURPOSE OF PLAN 1.01 - NAME. The name of this plan is the "HCR Manor Care Senior Executive Retirement Plan", formerly known as the "Amended and Restated Health Care and Retirement Corporation Senior Executive Retirement Plan", hereinafter called the "Plan". 1.02 - EFFECTIVE DATE. The Plan was adopted as of October 1, 1992. Effective Date of the Plan, as amended and restated, is January 1, 2001. 1.03 - PURPOSE. The purpose of the Plan is to provide retirement and related benefits to Corporate Officers and senior management employees of HCR Manor Care, the "Company". The Plan is and is intended to be an unfunded deferred compensation plan for a select group of management or highly compensated employees, commonly known as a "top hat" plan. 1.04 - NO DUPLICATION OF BENEFITS. This Plan is only intended to provide retirement and related benefits over and above those provided, if any, under the Health Care and Retirement Corporation Pension Plan (the "HCR Pension Plan"), a defined benefit plan, and/or the HCR Manor Care Key Employee Insurance Program (the "HCR Manor Care Key Employee Insurance Program", a welfare benefit plan, (hereinafter collectively referred to as "Designated Plans"). -1- ARTICLE II ---------- ELIGIBLE PARTICIPANTS 2.01 - ELIGIBLE PARTICIPANTS. Designated Corporate Officers and senior management employees of the Company whose names are set forth in Appendix A hereof (List of Covered Participants) shall be eligible to participate in this Plan. 2.02 - CORPORATE OFFICERS. The term "Corporate Officer" shall mean an officer of the Company who is chosen by the Board of Directors of the Company to hold an executive position in the Company. -2- ARTICLE III ----------- CREDITED EARNINGS 3.01 - ELEMENTS OF COMPENSATION. With respect to earnings received during each calendar year or portion thereof, the term "Credited Earnings" shall mean: (a) annual base salary, (b) any annual bonus earned (accrued) by a Participant under an annual bonus plan of the Company, (c) any amount earned (accrued) under the HCR Manor Care Performance Award Plan (the "HCR Manor Care Performance Award Plan"), and (d) any payments made to a Participant for a period of illness or disability prior to such Participant's retirement pursuant to the HCR Manor Care Salary Continuation Plan (the "HCR Manor Care Sick Leave Plan"), the HCR Manor Care Group Short-Term Disability Plan (the "HCR Manor Care STD Plan") or the HCR Manor Care Group Long-Term Disability Plan (the "HCR Manor Care LTD Plan"); provided, however, that any bonus paid in a subsequent calendar year shall be treated as Credited Earnings in the year for which such bonus was earned (accrued) and any performance award paid in a subsequent year shall be treated as Credited Earnings for the year prior to the year of payment. For all purposes of the Plan, annual base salary, bonus payments, performance awards and sick leave and disability payments shall include any salary deferral contributions made pursuant to the Participant's elections under the HCR Manor Care Stock Purchase and Retirement Savings Plan (the "HCR Manor Care SPARS"), the HCR Manor Care Retirement Savings and Investment Plan (the "HCR Manor Care RSIP"), the HCR Manor Care Pre-Tax Reimbursement Account Plan (the "HCR Manor Care Reimbursement Plan"), the HCR Manor Care Senior Management Savings Plan for Corporate Officers (the "HCR Manor Care SMSP for Corporate Officers"), and the HCR Manor Care Senior Management Savings Plan and (the "HCR Manor Care SMSP") or pursuant to any other Company-sponsored qualified or non-qualified plan. -3- 3.02 - BASIS FOR DETERMINATION. Credited Earnings shall be determined annually on a calendar-year basis. 3.03 - EFFECT OF DISABILITY. Except as otherwise provided in Section 3.01 hereof (Elements of Compensation), no reduction shall be made in a Participant's Credited Earnings during a period of disability on account of any decrease in the Participant's Credited Earnings if at the date of disability such Participant shall have one or more full years of Credited Service and if such decrease is because of such Participant's total disability evidenced by the continuing award of benefits for disability under the HCR Manor Care Sick Leave Plan and, after the expiration of benefits under the HCR Manor Care Sick Leave Plan, by the continuing award of benefits under the HCR Manor Care LTD Plan. -4- ARTICLE IV ---------- CREDITED SERVICE 4.01 - DETERMINATION OF CREDITED SERVICE. Each Corporate Officer and senior management employee of the Company designated on Appendix A hereof (List of Covered Participants) shall receive credit under this Plan for periods of employment: (a) with the Company; and (b) if hired before January 1, 1992, with Owens-Illinois, Inc., except to the extent such Participant is entitled to, or has received a retirement or other vested benefit for such periods of service under the Owens-Illinois Salary Retirement Plan from the Participant's adjusted service date set forth on Appendix A hereof. All such periods of credited employment or service shall be referred to herein as "Credited Service." 4.02 - GENERAL PROVISIONS AS TO CREDITED SERVICE. The "General Provisions as to Credited Service" provided in Section 4.03 (General Provisions as to Credited Service) of the HCR Pension Plan shall be incorporated, where applicable, herein. 4.03 - DISABLED PARTICIPANTS. Each Participant shall continue to be a Participant in this Plan for periods during which the Participant is totally disabled if at the date of such disability such Participant shall be covered under the HCR Manor Care LTD Plan if and so long as such disability shall be evidenced by the continuing award of benefits for disability under the HCR Manor Care Sick Leave Plan, the HCR Manor Care STD Plan and the HCR Manor Care LTD Plan. A Participant who, upon recovery from disability, resumes full-time employment with the Company within such period of time as may be fixed from time to time by the Vice President, Director of Human Resources and Labor Relations of the Company (hereinafter referred to as the "Vice President of Human Resources" or the "Vice President") shall not be deemed to have terminated employment or interrupted a Period of Service; -5- provided, however, that if a disabled Participant shall request and become entitled to receive the early retirement benefit provided by Section 8.02 hereof (Early Retirement), that Participant shall be deemed to have terminated employment as of the last day of the month in which the request for early retirement is approved. -6- ARTICLE V --------- NO FUNDING OF PLAN BENEFITS The benefits provided under this Plan shall be completely unfunded. If the Company acquires or has acquired any asset for the purpose of fulfilling its obligations hereunder, any such asset shall remain an asset of the Company and not an asset of this Plan. Each Participant shall have only the rights of an unsecured general creditor of the Company with respect to any benefits payable under this Plan. -7- ARTICLE VI ---------- NORMAL RETIREMENT DATE The normal retirement date for a Participant shall be the last day of the month in which such Participant attains age 65. -8- ARTICLE VII ----------- RETIREMENT BENEFITS 7.01 - AMOUNT OF BENEFIT. A Participant who retires or whose employment terminates with vested rights shall receive an annual retirement benefit, payable as a straight single life annuity, the present value of which shall be (at commencement of the normal retirement benefit) equal to the excess of (i) the present value of the "Gross Retirement Benefit", as defined below, (assuming such benefit is payable as a straight single life annuity) less (ii) the present value of benefits provided to the Participant under the Designated Plans (measured in accordance with Section 7.06 hereof (Present Value of Designated Plans)). 7.02 - GROSS RETIREMENT BENEFIT. As used in this Article VII, the term "Gross Retirement Benefit" for each Participant designated with an asterisk in Appendix A hereof (List of Covered Participants) shall mean an annual benefit to be paid monthly calculated pursuant to Method I or Method II below whichever provides the greater benefit. The term "Gross Retirement Benefit" for each Participant not designated with an asterisk in Appendix A shall mean an annual benefit to be paid monthly calculated pursuant to Method II below (a) Method I-- An annual benefit to be paid monthly based on the sum of the following amounts: (1) If such Participant shall have 35 Years of Credited Service from the Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants), an amount equal to 50% of the Participant's Final Average Earnings less one-half of the Primary Insurance Amount; or (2) If such Participant shall have more than 35 years of Credited Service from the Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants) there shall be added to the aforesaid percentage 0.50% for each such Year of Credited Service in excess of 35; or (3) If such participant shall have less than 35 Years of Credited Service from the -9- Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants), an amount equal to that which would have been payable if such participant had 35 Years of Credited Service multiplied by a fraction, the numerator of which shall be the number of the Participant's Years of Credited Service and denominator of which shall be 35. (b) Method II-- An annual benefit to be paid monthly based on the following amounts: (1) 1.212% of such Participant's Average Annual Earnings multiplied by the Participant's number of Years of Credited Service from the Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants), plus (2) 0.176% of such Participant's Average Annual Earnings in excess of the Social Security Taxable Wage Base as defined in Section 7.05 hereof (Social Security Taxable Wage Base) multiplied by the Participant's number of Years of Credited Service from the Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants), plus (3) If such Participant shall have more than 35 Years of Credited Service from the Participant's adjusted service date set forth on Appendix A hereof (List of Covered Participants), there shall be added to the aforesaid amounts 0.50% of Average Annual Earnings for each Year of Credited Service in excess of 35. 7.03 - AVERAGE ANNUAL EARNINGS. As used in this Article VII, the term "Average Annual Earnings" shall mean the average of the Credited Earnings of a Participant for the three calendar years during which the aggregate of the Participant's Credited Earnings was the highest. 7.04 - SOCIAL SECURITY TAXABLE WAGE BASE. As used in this Article VII, the term "Social Security Taxable Wage Base" shall mean the -10- maximum amount of annual wages subject to the tax imposed under the Federal Insurance Contributions Act ("FICA"), as amended, in effect: (a) on the date of such Participant's retirement or other termination of employment, with respect to a Participant who retires under such circumstances as to be eligible for the normal or early retirement benefit under the Plan, or who otherwise terminates employment with vested rights under the Plan; or (b) on the date of such Participant's entitlement to benefits under the HCR Manor Care LTD Plan, with respect to a participant receiving, at date of retirement, benefits under such HCR Manor Care LTD Plan and who retires upon attainment of age 65. 7.05 - PROTECTION OF BENEFIT. No future amendment shall reduce the benefit a Participant has earned under this Plan up to the day immediately preceding the date of such amendment with respect to the Participant's Credited Service and Average Annual Earnings as of such date. 7.06 - PRESENT VALUE OF DESIGNATED PLANS. The present value of the HCR Pension Plan shall be the actuarially determined lump sum value of any benefit payable to the Participant or the Participant's designated beneficiary pursuant to such plan, measured as of the appropriate date. The present value of the Manor Care Key Employee Insurance Program shall be deemed to be equal to the Participant's cash surrender value (if any), measured as of the appropriate date, of any life insurance policy subject to the terms of such plan. -11- ARTICLE VIII ------------ PAYMENT OF BENEFITS 8.01 - NORMAL OR POSTPONED RETIREMENT. A Participant who retires on or after the normal retirement date shall be paid a normal retirement benefit in the amount and form described in Article VII hereof (Retirement Benefits), based on the Participant's Credited Service accrued as of the normal retirement date and reduced (in the manner described in Article VII hereof (Retirement Benefits)) for amounts, if any, provided through Designated Plans. Such normal retirement benefit shall commence in the month described in Section 8.05 hereof (Commencement of Retirement Benefits and Optional Modes of Payment). Any other provision of this Plan to the contrary notwithstanding, a Participant shall become fully vested in the Participant's normal retirement benefit hereunder upon attaining age 65 while employed by the Company. 8.02 - EARLY RETIREMENT -- HIRED BEFORE JANUARY 1, 1992. (a) GENERAL RULES AND REDUCTION FACTORS. A Participant whose employment commencement date with the Company is before January 1, 1992 and who has completed at least ten full years of Credited Service, may retire on any date within ten years prior to the Participant's normal retirement date. Such early retirement benefit shall commence in the month described in Section 8.05 hereof (Commencement of Retirement Benefits and Optional Modes of Payment) unless postponed pursuant to Section 8.04 hereof (Option to Postpone Commencement of Early Retirement Benefits). (b) EARLY RETIREMENT. 1) AGE 60, LESS THAN AGE 65. A Participant who retires after attainment of the age of 60 but prior to the Participant's normal retirement date shall be paid an unreduced early retirement benefit, in the form and amount provided in Article VII hereof (Retirement Benefits), based on the Participant's Credited Service accrued as -12- of the date of early retirement and reduced (in the manner described in Article VII) for amounts, if any, provided through Designated Plans. 2) AGE 55, LESS THAN AGE 60. If at the date of such early retirement the Participant shall not have attained the age of 60 years, the benefit specified in subsection 1) above shall be reduced by 5/12 of 1% for each month by which the first day of the month for which the initial retirement payment is made is in advance of the first day of the month following the attainment of age 60; provided, however, that this subsection 2) shall not apply to a Participant who retires after attainment of the age of 55, if at such early retirement date such Participant shall have completed at least 30 years of Credited Service. 8.03 - EARLY RETIREMENT -- HIRED AFTER DECEMBER 31, 1991. (a) GENERAL RULES AND REDUCTION FACTORS. A Participant whose employment commencement date with the Company is after December 31, 1991 and who has completed at least ten full years of Credited Service, may retire on any date within five years prior to the Participant's normal retirement date. Such early retirement benefit shall commence in the month described in Section 8.05 hereof (Commencement of Retirement Benefits and Optional Modes of Payment) unless postponed pursuant to Section 8.04 hereof (Option to Postpone Commencement of Early Retirement Benefits). (b) EARLY RETIREMENT. A Participant who retires after attainment of the age of 60 but prior to the Participant's normal retirement date shall be paid an annual early retirement benefit, in the form and amount provided in Article VII hereof (Retirement Benefits), based on the Participant's Credited Service accrued as of the date of early retirement and reduced (in the manner described in Article VII) for amounts, if any, provided through Designated Plans. The early retirement benefit shall be reduced by 5/12 of 1% for each month by which the first day of the month for which the initial -13- retirement payment is made is in advance of the first day of the month following the attainment of age 65 8.04 - OPTION TO POSTPONE COMMENCEMENT OF EARLY RETIREMENT BENEFITS. Any Participant eligible for such early retirement benefits who retires prior to the normal retirement date may, by giving written notice to the Vice President, Director of Human Resources at least one year prior to such actual early retirement, elect to postpone the commencement of payment of early retirement benefits to any month that is not later than the month following attainment of age 65. 8.05 - COMMENCEMENT OF RETIREMENT BENEFITS AND OPTIONAL MODES OF PAYMENT. Early and normal retirement benefits shall be paid in the normal form specified, commencing with the month following that in which the Participant's early, normal or postponed retirement occurs (unless Section 8.02(c) hereof (Option to Postpone Commencement of Early Retirement Benefits) is exercised) and ceasing with the payment made in and for the month in which the Participant dies. A Participant may, however, request in writing to the Vice President of Human Resources to receive his or her retirement benefits hereunder in the form of an actuarially equivalent lump sum payment, (using the actuarial assumptions for lump sum conversions that are then in effect under the HCR Pension Plan at the time of such election) payable at the time the Participant's retirement benefits would otherwise commence; provided further, however, that no such election shall be effective unless it is both: (a) given by the Participant and (b) approved by the Vice President at least one year prior to the benefit commencement date. 8.06 - COMMENCEMENT OF VESTED BENEFITS AND OPTIONAL MODES OF PAYMENT. In the event of the termination of employment of a Participant, other than: (a) by reason of death or (b) a retirement qualifying under Section 8.01 hereof (Normal or Postpone Retirement) -14- or Section 8.02 hereof (Early Retirement), after such Participant accrues at least five full years of Credited Service, such Participant shall be eligible for a vested benefit in an amount equal to the Participant's accrued benefit immediately before the date of such termination of employment, reduced (in the manner described in Article VII hereof (Retirement Benefits)) for amounts, if any, provided through Designated Plans. Vested benefits shall be paid in the normal form specified, commencing at the same time the Participant commences his or her vested benefit under the HCR Pension Plan, if applicable, or if not applicable any time after attaining age 55, but on or before attaining age 65, subject to the same actuarial equivalent reduction factors as set forth in the HCR Pension Plan for commencement prior to attaining age 65. Such payment shall cease with the payment made in and for the month in which the Participant dies. A Participant, however, may request in writing to the Vice President of Human Resources to receive his or her vested benefits hereunder in the form of an actuarially equivalent lump sum payment, (using the actuarial assumptions for lump sum conversions that are then in effect under the HCR Pension Plan at the time of such election) payable at the time the Participant's vested benefits would otherwise commence; provided further, however, that no such election shall be effective unless it is both: (a) given by the Participant and (b) approved by the Vice President at least one year prior to the benefit commencement date. 8.07 - DEATH BENEFITS. In the event a retired Participant who is eligible for retirement benefits under Section 8.01 hereof (Normal or Postpone Retirement), Section 8.02 hereof (Early Retirement -- Hired Before January 1, 1992) or Section 8.03 hereof (Early Retirement -- Hired After December 31, 1991) dies before commencement of such retirement benefits, a death benefit shall be paid to the Participant's designated beneficiary. If there is no living designated beneficiary, the death benefit shall be paid to the Participant's estate. The death benefit shall be paid in a single payment in the month following the month in which the Participant dies. The death benefit shall be the present value of -15- the early or normal retirement benefit (reduced for benefits provided by Designated Plans) the Participant would have received in accordance with Section 8.01 hereof (Normal or Postpone Retirement), Section 8.02 hereof (Early Retirement -- Hired Before January 1, 1992), or Section 8.03 hereof (Early Retirement -- Hired After December 31, 1991), had the Participant received a single sum distribution on the day the Participant died. 8.08 - DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant shall, upon such form as the Vice President of Human Resources may provide for that purpose, designate the Participant's beneficiary or beneficiaries, and the person or persons so designated or, where applicable, the person or persons designated by the Vice President pursuant to Section 8.09 hereof (Death of or Failure to Designate Beneficiary), shall receive, any payment which may be or become payable hereunder by reason of the death of such Participant as a death benefit under this Plan as constituted as of the date of such death. The designation of a Participant's spouse as beneficiary under this Section 8.08 shall be automatically revoked, and such spouse shall not be entitled to receive any death benefit to which the Participant might otherwise be entitled under this Section, if such Participant and such spouse are divorced after the date of such designation, unless thereafter the Participant shall redesignate such former spouse as the Participant's beneficiary. 8.09 - DEATH OF OR FAILURE TO DESIGNATE BENEFICIARY If any death benefit shall be payable to a beneficiary not then living and no contingent beneficiary shall then survive, or if any death benefit shall be payable on behalf of a deceased Participant who shall have failed to designate a beneficiary, the death benefit shall be paid to the Participant's estate. 8.10 - QUALIFIED DOMESTIC RELATIONS ORDERS Benefits shall be payable to an individual other than a Participant in accordance with the applicable requirements of a Qualified Domestic Relations Order pursuant to the following provisions: -16- (a) The term "Qualified Domestic Relations Order" shall mean any judgment, decree, or court order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a Participant (collectively an "Alternate Payee" as defined in Section 414(p)(8) of the Code), which creates or recognizes the existence of an Alternative Payee's right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan, and which meets the following requirements: (1) Such order shall specify the name and last known mailing address (if any) of the Participant and each Alternate Payee covered by the order; (2) Such order shall specify the amount or percentage of the Participant's benefits to be paid by the Plan to each such Alternate Payee or the manner in which such amount or percentage is to be determined as of a given date; (3) Such order shall provide when the Alternate Payee may first take a distribution of the Alternate Payee's benefit hereunder, if silent the Alternate Payee's benefit would first be distributable, unless limited by the order, when the Participant is first eligible to take a distribution of the Participant's benefit pursuant to Section 8.05 hereof (Commencement of Retirement Benefits and Optional Modes of Payment); (4) If applicable, such order shall specify the number of payments or period to which the order applies; (5) Such order shall identify the Plan as to which the order applies; (6) Such order shall not require the Plan to provide any type or form of benefits or any option not otherwise provided under the Plan; and (7) Such order shall not require the payment of benefits to an Alternate Payee which are required to be paid to another Alternate Payee under another order previously determined to be a Qualified Domestic Relations Order. (b) The Company shall determine a set of nondiscriminatory and reasonable procedures to determine the qualified status of a domestic relations order and to administer -17- distributions under such qualified orders in accordance with Section 414(p) of the Code. -18- ARTICLE IX ---------- SUSPENSION OF RETIREMENT BENEFITS Retirement or vested benefits shall be suspended during any period in which a retired Participant or a Participant terminated with vested rights is in the full-time employ of the Company, in accordance with regulations of uniform application adopted by the Vice President of Human Resources, for all or part of any period for which additional service credits are provided for the purpose of determining the amount of the Participant's retirement benefits pursuant to Article VII hereof (Retirement Benefits). -19- ARTICLE X --------- ADMINISTRATION OF THE PLAN 10.01 - GENERAL. All rights, powers, duties, authority, and responsibility in connection with the administration of this Plan, which are herein or otherwise reserved to or conferred upon the Company have been delegated by the Board of Directors of the Company to, and shall be exercised, performed or discharged on behalf of the Company by, the Chief Executive Officer of the Company or by such other officer or officers of the Company, as the Chief Executive Officer's delegate, pursuant to the procedures hereinafter provided. Whenever reference is made in this Plan to an appropriate officer or officers of the Company, such reference shall be to the Chief Executive Officer of the Company or such other officer or officers of the Company, to whom said Chief Executive Officer or, to the extent authorized by said Chief Executive Officer, another officer or officers of the Company may at the time concerned have delegated any one or more of such rights, powers, duties, authority, or responsibility hereunder. Each such delegation and any modification or revocation thereof shall be recorded in writing and kept on file with the Secretary of the Company. Any act performed in the exercise of delegated authority under this Plan shall be deemed the act of the Company or, as the case may be, of such other Employer. The right to revoke or modify any delegation under this Plan is reserved to the Board of Directors of the Company. Said Chief Executive Officer of the Company and each appropriate officer to whom authority is delegated hereunder shall be a named fiduciary with respect to this Plan. If at any time there is no person duly designated as Chief Executive Officer of the Company, any person who is President of the Company shall have the full authority conferred upon such Chief Executive Officer hereunder for all purposes hereof. The rights, powers, duties, authority, and responsibility of the Vice President of Human Resources of the Company expressly conferred in this Plan may be exercised, performed and discharged without the necessity of any delegation hereunder but are subject to modification or revocation in accordance with the procedures herein provided. 10.02 - DUTIES OF THE VICE PRESIDENT OF HUMAN RESOURCES. The Vice President of Human Resources shall administer the Plan and shall determine what -20- and when Participants and their Beneficiaries are entitled to receive benefits hereunder and the amount of such benefits. The Vice President shall keep complete records of all pertinent data and facts, and actions taken. The Vice President shall, from time to time, adopt actuarial tables, methods, factors and assumptions for purposes of the Plan. 10.03 - AUTHORITY OF THE VICE PRESIDENT OF HUMAN RESOURCES. The Vice President of Human Resources shall have full power and authority to adopt, modify and rescind any and all regulations necessary or appropriate for the administration of the Plan, and to make fair, equitable and nondiscriminatory rulings and decisions on any questions which may arise with respect to Participants and their Beneficiaries, payments and amounts of retirement and other benefits, and on any question concerning the construction or interpretation of the Plan. All such regulations, rulings and decisions of the Vice President made in good faith shall be consistent with the Plan and shall be final and binding as to all persons interested and as to all rights and obligations hereunder. The Vice President shall serve without compensation but shall be entitled to reimbursement from the Company for expenses of administering this Plan, including, but not limited to, fees of accountants, actuaries, counsel, investment advisors and other specialists, and, to the extent permitted by ERISA, the Vice President shall be fully protected in any action or failure to act taken by the Vice President in good faith reliance upon the advice or opinions of such specialists. Nothing herein shall preclude the Company from indemnifying the Vice President or other fiduciary from any liabilities incurred by them in connection with the administration of this Plan or from purchasing insurance to provide for such indemnification. -21- ARTICLE XI ---------- AMENDMENT, MODIFICATION OR TERMINATION OF PLAN 11.01 - AMENDMENT OR MODIFICATION OF PLAN. The Company, by its appropriate officers on its behalf, shall have the right, at any time and from time to time, to amend or modify the Plan by a written instrument executed on behalf of the Company by such officers; provided, however, that no amendment or modification shall have any adverse retroactive effect on or reduce the benefit accrued before the amendment by eliminating or reducing a retirement type subsidy or an early retirement benefit or eliminating an optional form of benefit, with respect to benefits accrued before such amendment, of any Corporate Officer, Participant or Beneficiary unless the same shall be required by the Internal Revenue Service, or an officer or agent thereof, or unless the same shall be required to comply with the Act, the Internal Revenue Code or any other applicable law or laws. 11.02 - TERMINATION OF THE PLAN. It is the expectation of the Company that it will continue the Plan indefinitely, but the continuance of the Plan is not a contractual obligation of the Company, or of any company, and is not in consideration of, an inducement to, or condition of the employment of any person. The Company reserves the right, by action of its Board of Directors, to terminate the Plan. -22- ARTICLE XII ----------- MERGER, CONSOLIDATION, ETC. OF THE PLAN Any provision herein to the contrary notwithstanding, this Plan shall not be merged or consolidated with, nor shall any liabilities of this Plan be transferred to any other plan unless each Participant hereunder will be entitled to receive a benefit immediately after such merger, consolidation or transfer which shall be equal to or greater than the benefit the Participant would have been entitled to receive if this Plan had been terminated immediately prior to such merger, consolidation or transfer. -23- ARTICLE XIII ------------ MISCELLANEOUS PROVISIONS 13.01 - INALIENABILITY. No benefit or interest payable hereunder shall be alienated, disposed of, sold, assigned or in any manner encumbered by any Participant or Beneficiary. 13.02 - FACILITY OF PAYMENT. Any payment which is otherwise required to be made to any person under a disability may, in the discretion of the Vice President of Human Resources, be made to or for the benefit of such person, notwithstanding such disability, to any guardian, conservator or trustee of such person, to any spouse, child, parent, other relative or any dependent of such person, or any one or more of them, or may be applied directly to others on behalf of such person, in such amount and to such of them as the Vice President may deem advisable. Any monthly installment of retirement benefits due at the death of a Participant which otherwise is required to be paid to the Participant's executor, Administrator or estate may, when authorized by the Vice President, be paid to such Participant's Beneficiary, or to the person designated by the decedent as beneficiary under any group insurance policy provided for the Participant by the Company or to a surviving spouse, child, parent, relative, dependent or next of kin of the decedent. 13.03 - LIABILITY LIMITED. No Participant or Beneficiary shall have any right or interest in this Plan, nor shall the Company, nor the Vice President of Human Resources nor any other officer, director or Corporate Officer of the Company, have any liability or responsibility with respect to this Plan or under the Agreement, except as may be otherwise expressly provided herein, in the Agreement or by the Act. 13.04 - PERFORMANCE OF ACTS. Each Participant, Beneficiary or other person claiming any interest hereunder agrees to furnish such data, perform any and all other acts and to execute any and all applications or other -24- documents as may be necessary or desirable for carrying out the intent of this Plan and as may be required by the Vice President of Human Resources. 13.05 - CLAIMS PROCEDURE. Claims for benefits under this Plan shall be filed by a Participant or Beneficiary or other claimant with the Vice President of Human Resources of the Company on forms to be supplied. Written notice of the disposition of the claim shall be furnished the Participant within 30 days of the filing of such claim. Any Participant, Beneficiary or other person claiming any interest hereunder who is denied, in whole or in part, a claim for benefits under this Plan shall be entitled, upon written request therefor to the Vice President, to receive in written form a clear and concise statement explaining the computation of such benefit or such other action under the Plan as to which such person shall object, together with an explanation of the claims review procedure as set forth in this Section 13.05 and any additional documents or information which may be necessary to perfect such person's claim. Within 60 days after receipt by such person of the statement and explanation described in the preceding sentence, such person, if desiring further consideration of the claim, shall file with the Vice President, in written form a statement in support of the position together with a request for reconsideration of such claim and, if desired, a request for hearing before the Vice President thereon. If requested, and if in the discretion of the Vice President, necessary or desirable, the Vice President shall schedule an opportunity for a full and complete hearing within 30 days after receipt of such request for reconsideration, and a final and binding decision shall be made within 30 days after the date of such hearing or within 30 days after the receipt of such request for reconsideration if no hearing shall be held. Such decision shall be communicated in writing to such person together with a statement of the reasons therefor. 13.06 - DEFINITIONS. The terms used in this Plan, unless otherwise defined herein, have the same meaning and definition as those terms are used in the HCR Pension Plan. -25- IN WITNESS WHEREOF, Manor Care, Inc. has caused this HCR Manor Care Senior Executive Retirement Plan, to be adopted and effective as of January 1, 2001. MANOR CARE, INC. By: /s/ Paul A. Ormond ------------------------------------- President and Chief Executive Officer Date: 1/6/01 ----------------------------------- ATTEST: By: /s/ R. Jeffrey Bixler ------------------------- Secretary -26- APPENDIX A HCR MANOR CARE SENIOR EXECUTIVE RETIREMENT PLAN -------------------------------- LIST OF COVERED PARTICIPANTS ---------------------------- AS OF JANUARY 1, 2001 The list of Covered Participants is maintained in the office of the Vice President, Director of Human Resources and Labor Relations -27- EX-10.14 5 l93110aex10-14.txt EX-10.14 SENIOR MANAGEMENT SAVINGS PLAN Exhibit 10.14 MANOR CARE, INC. SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS Effective January 1, 1993 Restated as of January 1, 2001 MANOR CARE, INC. ---------------- SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS ----------------------------------------------------- In exercise of the powers and authority conferred upon and reserved to the Board of Directors of Manor Care, Inc. under and by virtue of Article VIII of the First Amended and Restated Health Care and Retirement Corporation Senior Management Savings Plan For Corporate Officers, the Board hereby amends, restates and renames said Plan, to read as set forth in the document attached hereto and incorporated herein, entitled "Manor Care, Inc. Senior Management Savings Plan For Corporate Officers", herein called the "Amended and Restated Plan" and in such document called the "Plan". In no event shall the adoption of the Amended and Restated Plan pursuant to this instrument cause any benefit under the Plan that is accrued or treated as accrued to be less than such benefit immediately before the adoption of this Amended and Restated Plan. The Amended and Restated Plan shall be effective, except as otherwise stated, January 1, 2001. IN WITNESS WHEREOF, the Board has caused the Amended and Restated Plan to be executed by a duly authorized officer as of the 1st day of January, 2001. MANOR CARE, INC. By /s/ Paul A. Ormond ----------------------------------- President ATTEST: /s/ R. Jeffrey Bixler - ----------------------------- Secretary MANOR CARE, INC. ---------------- SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS ----------------------------------------------------- ARTICLE I --------- NAME, EFFECTIVE DATE AND PURPOSE OF PLAN ---------------------------------------- 1.01 The name of this plan is the "Manor Care, Inc. Senior Management Savings Plan For Corporate Officers", formerly known as the "First Amended and Restated Health Care and Retirement Corporation Senior Management Savings Plan For Corporate Officers", hereinafter called the "Plan". 1.02 The effective date of the Plan, as amended and restated, is January 1, 2001. 1.03 The purpose of this Manor Care, Inc. Senior Management Savings Plan for Corporate Officers is to permit selected executive officers of Manor Care, Inc. and certain companies affiliated with it to elect to defer receipt of all or part of their compensation. To the extent any of such officers are unable to participate in the HCR Stock Purchase and Retirement Savings Plan, this Plan is also intended to provide them, as nearly as practicable, with an equivalent benefit. The Plan is and is intended to be an unfunded deferred compensation plan for a select group of management or highly compensated employees, commonly known as a "top hat" plan. -1- ARTICLE II ---------- DEFINITIONS ----------- 2.01 "Account" means a Deferral Account or Matching Account. 2.02 "Annual Award" means an "Annual Bonus Award" as defined in and payable to an Officer under the Annual Award Plan. 2.03 "Annual Award Plan" means the Manor Care, Inc. Annual Incentive Award Plan, as from time to time in effect. 2.04 "Award" means an Annual Award or a Performance Award. 2.05 "Award Period" means, with respect to an Annual Award, the calendar year to which it relates and, with respect to a Performance Award, means the "Award Period", as defined in the Performance Award Plan, to which it relates. 2.06 "Board" means the Board of Directors of Manor Care, Inc. or any committee of said Board of Directors to which any or all of its powers or duties under the Plan may be delegated. 2.07 "CEO" means the Chief Executive Officer of Manor Care, Inc. or as the context hereof may indicate, any other officer, employee, or committee of Manor Care, Inc. designated by said CEO to whom any or all of the CEO's powers or duties under the Plan may be delegated. 2.08 "Code" means the Internal Revenue Code of 1986, as amended. 2.09 "Company" means Manor Care, Inc. and its Subsidiaries. -2- 2.10 "Compensation" means any salary, bonus, and/or other form of current cash remuneration for services rendered to or on behalf of the Company by an Officer, other than an Award. 2.11 "Deferral Account" means a deferred compensation memorandum account established and maintained on the books of the Company to reflect the value of a Participant's interest in the Plan attributable to his Deferral Elections. 2.12 "Deferral Election" means an election made by a Participant pursuant to and in accordance with Section 5.01 of the Plan. 2.13 "401(k) Plan" means the HCR Stock Purchase and Retirement Savings Plan, as from time to time in effect. 2.14 "Investment Unit" means a unit of value by which the value of a Participant's Accounts is determined pursuant to and in accordance with Section 6.03 of the Plan. 2.15 "Matching Account" means a deferred compensation memorandum account established and maintained on the books of the Company to reflect the value of a Participant's interest in the Plan attributable to the Company's Matching Credits for his benefit. 2.16 "Matching Credit" means a credit by the Company to a Participant's Matching Account pursuant to and in accordance with Section 5.03 of the Plan. 2.17 "Officer" means an executive officer of the Company eligible to participate in the Plan pursuant to and in accordance with Article IV of the Plan. 2.18 "Participant" means an eligible Officer who becomes a Participant in the Plan as provided in Article IV of the Plan. -3- 2.19 "Performance Award" means a "Performance Award" as defined in and payable to an Officer under the Performance Award Plan. 2.20 "Performance Award Plan" means the Manor Care, Inc. Performance Award Plan, as from time to time in effect. 2.21 "Plan" means this Manor Care, Inc. Senior Management Savings Plan for Corporate Officers, as further amended from time to time. 2.22 "Subsidiary" means a corporation (or unincorporated business entity) 50 percent or more of the voting shares (or other ownership interests) of which are owned, directly or indirectly, by Manor Care, Inc. 2.23 Words of the masculine gender include correlative words of the feminine and neuter genders and vice versa, and words denoting the singular include the plural and vice versa. -4- ARTICLE III ----------- ADMINISTRATION -------------- The Plan shall be administered by the Board. The administrative powers of the Board shall include the powers to interpret the Plan and to exercise full and complete discretion to adopt, modify, and/or rescind (or to authorize the CEO or one or more other appropriate officers of Manor Care, Inc. to adopt, modify, and/or rescind) any rulings, determinations, policies, or procedures deemed necessary or appropriate for the maintenance and administration of the Plan. No member of the Board who is not an employee of the Company shall be eligible to participate in the Plan, but a member of the Board who is otherwise eligible to participate in the Plan shall not be disqualified from such participation solely by reason of such Board membership. Any provision hereof to the contrary notwithstanding, only the Board may exercise any discretionary and/or administrative authority under the Plan with respect to the CEO's participation in the Plan, and the Board may not delegate any such authority to the CEO or to any other officer, employee, or committee of Manor Care, Inc. (other than a committee of the Board of which the CEO is not a voting member). -5- ARTICLE IV ---------- ELIGIBILITY AND PARTICIPATION. ------------------------------ 4.01 Each officer of the Company who is a "highly compensated employee" of the Company (within the meaning of Section 414(q) of the Code) and who is otherwise eligible to participate in the 401(k) Plan, but is excluded therefrom solely because, as determined by the Board, his participation in the 401(k) Plan would jeopardize the qualification of the 401(k) Plan under Section 401(a) of the Code, shall be eligible to participate in this Plan. 4.02 Any other officer of the Company who is a "Participant" under (and as defined in) either or both of the Annual or Performance Award Plans shall be eligible to participate in this Plan if, and for so long as, he is selected to do so by the CEO, but only with respect to his Awards and not with respect to his Compensation. -6- ARTICLE V --------- DEFERRAL ELECTIONS AND MATCHING CREDITS --------------------------------------- 5.01 Each Officer eligible to participate in the Plan under Section 4.01 of the Plan may elect from time to time, by written notice to the Vice President, Human Resources of the Company, given before the first day of any regular Company pay period, to defer his receipt, subject to the provisions of the Plan, of a specified part of his Compensation earned in the next pay period and thereafter. The amount of a Participant's Compensation to be deferred pursuant to his Deferral Elections under this Plan without Board approval shall not exceed, on an annual basis, 50% of his Compensation. With Board approval a Participant may elect to defer on an annual basis more than 50% and up to 100% of his Compensation. 5.02 A Participant may elect prospectively by written notice to the Vice President, Human Resources of the Company, to change the rate of or revoke his Deferral Election with respect to his future Compensation at such times and with such frequency as may be permitted pursuant to rules and procedures of uniform application adopted by the Company. Until so changed or revoked, a Participant's Deferral Election shall remain in effect with respect to all Compensation earned by the Participant after the date thereof. 5.03 The Company shall post a Matching Credit to the Matching Account of each Executive who has made a Deferral Election under Section 5.01 in an amount equal to 50 percent of the amount of such Deferral Election, up to a maximum annual Matching Credit equal to the Excess of: (a) three percent of the sum of the Participant's Compensation and Annual Award that absent of a Deferral Election would be payable in a calendar year, over (b) the amount of the annual "Company Matching Contribution" made on his behalf under (and as defined in) the 401(k) Plan during the same calendar year. -7- 5.04 For purposes of Sections 5.01 and 5.03 of the Plan, a Participant who is eligible to participate in the 401(k) Plan for all or any part of a year shall be deemed conclusively to have made "Employee MTSO Contributions" under (and as defined in) the 401(k) Plan in the maximum amount which is permitted to make thereunder for the period of such eligibility. 5.05 Each Officer eligible to participate in the Plan under Section 4.02 of the Plan may elect from time to time, by written notice to the CEO or, in the case of an election by the CEO, to the Board, given on or before December 31 of any year, to defer his receipt without Board approval, subject to the provisions of the Plan, of up to 100% of his Annual or Performance Award, if any, for the applicable Award Period next following. . 5.06 Each Deferral Election with respect to an Award shall be irrevocable and shall apply only to the Award with respect to which it is made. A Participant may elect prospectively to change the rate of or revoke his Deferral Election with respect to his future Compensation at such times and with such frequency as may be permitted pursuant to rules and procedures of uniform application adopted by the Board. Until so changed or revoked such a Deferral Election shall remain in effect with respect to all future Compensation earned by the Participant. -8- ARTICLE VI ---------- ACCOUNTS -------- 6.01 All amounts deferred under the Plan shall be credited by the Company, as of the date such amounts would otherwise be payable to the Participant in the absence of a Deferral Election, to the Participant's Deferral Account. All Matching Credits shall be posted concurrently with the deferred amounts to which they relate. 6.02 The dollar amounts credited to each Account shall be converted to, and thereafter expressed in terms of a number of Investment Unity and the value of each Account shall at all times be equal to the value of the Investment Units so allocated to it. The Investment Units available for allocation under the Plan shall be equivalent in value and rate of return to: (a) Shares of the common stock of Manor Care, Inc. ("Company Stock Unit "); (b) Shares of the registered investment companies (mutual funds) sponsored by Harbor Capital Advisors, Inc. ("Harbor Fund Units"); (c) Units of participation in the series of funds offered by Harbor Trust, a qualified group trust sponsored by Harbor Capital Advisors, Inc. ("Harbor Trust Units"); and (d) A hypothetical bond or other evidence of indebtedness in the principal amount of each amount credited to a Deferral Account on which interest, compounded monthly, is paid at an annual rate equal from time to time to the average annual yield on domestic corporate bonds of Moody's A-rated companies (as most recently reported in the Survey of Current Business published by the United States Department of Commerce or a successor publication) or at such other rate as the Board may at any time and from time to time designate prospectively (the "Moody's A Bond Units"). -9- The value of an Investment Unit (other than a Moody's A Bond Unit) shall at all times be equal to the value of its equivalent under the 401(k) Plan. The Board may, in its discretion, adopt or cause to be adopted any other method of accounting for the value of the Accounts that accurately reflects the value and rate of return of the Investment Unit equivalencies allocated to the Accounts. 6.03 Each Participant, at the time of making a Deferral Election, shall specify in writing the percentage of each amount to be credited to his Deferral Account that is to be allocated to Company Stock Units, one or more of the Harbor Fund and/or Harbor Trust Units, and/or Moody's A Bond Units. All amounts credited to Matching Accounts shall be allocated to Company Stock Units. Whenever interest, dividends, or any other form of realized investment return are paid on any of the Investment Unit equivalencies, a like amount shall be credited to each Account to which such Investment Units have been allocated and shall be allocated to additional Investment Units of the same equivalency. 6.04 A Participant may change the allocation of amounts to be credited to his Deferral Account in the future, and/or of amounts previously credited to his Deferral Account, at such times and with such frequency as may be permitted pursuant to rules and procedures of uniform application adopted by the Board; provided, however, that no amount previously allocated to Company Stock Units in the Participant's Matching Account may be reallocated to any other Investment Unit. 6.05 The Company shall be under no duty to segregate or set aside any amount credited to any Account from the general assets of the Company, but the Board may, in its discretion, direct the establishment of any trusteed, insured, or other payment arrangement from which the Company's obligations as to a Participant under the Plan may be paid. No Participant, beneficiary, estate, or other person claiming through or under a Participant shall have any legal or beneficial property interest whatsoever in any assets of the Company or in any such payment arrangement which may be established at the direction of the Board except as may be expressly provided by such payment arrangement. Neither the establishment of an Account nor the crediting of any amounts thereto nor -10- the establishment of any payment arrangement (except as may be expressly provided by such payment arrangement) shall be deemed to create a trust of any kind, any fiduciary relationship between the Company and any person, or any collateral security for the Company's obligations under the Plan. To the extent that a Participant or any other person acquires a right to receive any payment from the Company under this Plan, such right shall be no greater than that of any other unsecured general creditor of the Company. The Company shall provide to each Participant who has made any Deferral Election, at least annually, a statement of his Account balances. -11- ARTICLE VII ----------- PAYMENT OF ACCOUNT BALANCES --------------------------- 7.01 Each Participant shall at all times have a nonforfeitable, fully vested interest in the amount credited to his Deferral Account. Each Participant who was a participant in the 401(k) Plan before January 1, 1992 shall at all times have a nonforfeitable, fully vested interest in the amount credited to his Matching Account. Each Participant who first became a participant in the 401(k) Plan or this Plan after December 31, 1991 shall have a nonforfeitable, vested interest in a portion of his Matching Account determined by reference to the length of his combined participation in the 401(k) Plan and this Plan, according to the following table: Combined Years Vested of Participation Percentage ---------------- ---------- Less than one..................................... 20% One but less than two............................. 40% Two but less than three........................... 60% Three but less than four.......................... 80% Four or more...................................... 100% Notwithstanding the foregoing, in the event of the termination of the Plan, each Participant shall thereupon have a nonforfeitable, fully vested interest in the entire amount credited to his Matching Account. 7.02 The entire amount credited to a Participant's Accounts shall become payable upon termination of the Participant's employment with the Company by reason of his death, total and permanent disability, or normal or early retirement pursuant to any retirement plan sponsored by the Company. The nonforfeitable, vested portion of a Participant's Accounts shall become payable upon termination -12- of the Participant's employment with the Company for any other reason. Amounts so payable shall be paid to the Participant in cash in a lump sum as soon as practicable after such termination of employment, but in no event later than March 31 of the following year. However, if at least one year prior to his retirement, or termination of employment, the Participant may make an irrevocable election to delay receiving his benefits from the Plan to a date specific on or before the Participant attains age 65. In addition, if at least one year prior to his retirement, or termination of employment, the Participant may make an irrevocable election to receive his benefits in installment payments. If a Participant elects distribution in the form of installment payments, he shall further designate the commencement date and period of time (not to exceed 20 years) over which the installment payments are to be made and whether such installment payments are to be made on a monthly, quarterly, semi-annual or annual basis. During the period such installment payments are being made, the remaining balances in the Participant's Accounts shall continue to be credited with earnings or losses in accordance with the provisions of Article VI of the Plan. For purpose of a Participant who is retiring or terminating employment in 2001, such election must be given to the CEO on or before March 31, 2001. 7.03 In the event of a Participant's death before his Accounts have been paid to him in full, the entire amount then credited to his Accounts shall be paid in cash in a lump sum to the beneficiary or beneficiaries named by him in a written designation filed with the Company (or, in the absence of such a designation, to his estate). 7.04 Before termination of employment, a Participant may request a withdrawal from any portion of his Deferral Account not allocated to Company Stock Units of an amount sufficient to meet a hardship. For these purposes a "hardship" shall mean a demonstrated and sever financial hardship resulting from any one or more of the following: (a) a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Code) of the Participant; -13- (b) a loss of the Participant's property due to casualty; or (c) any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control; in each case only to the extent that the "hardship" is not relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of the Participant's assets (to the extent that such liquidation does not itself cause a "hardship); or (c) cessation of deferrals under the Plan. The Board shall determine the existence of a bona fide hardship based on non-discriminatory procedures, taking into account any then applicable rulings or regulations from the Internal Revenue Service. The standards established by the Board for determining the existence of a hardship shall be uniformly applied to all Participants who request such a withdrawal, and the Board's decision with respect to each such request shall he final. An approved hardship withdrawal shall be paid to the Participant in cash as soon as practicable after approval. -14- ARTICLE VIII ------------ QUALIFIED DOMESTIC RELATIONS ORDER ---------------------------------- 8.01 Benefits shall be payable to an individual other than a Participant in accordance with the applicable requirements of a Qualified Domestic Relations Order pursuant to the following provisions: (a) The term "Qualified Domestic Relations Order" shall mean any judgment, decree, or court order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a Participant (collectively an "Alternate Payee" as defined in Section 414(p)(8) of the Code), which creates or recognizes the existence of an Alternative Payee's right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan, and which meets the following requirements: (1) Such order shall specify the name and last known mailing address (if any) of the Participant and each Alternate Payee covered by the order; (2) Such order shall specify the amount or percentage of the Participant's benefits to be paid by the Plan to each such Alternate Payee or the manner in which such amount or percentage is to be determined, or in the alternative the amount or percentage transferred from the Participant's Accounts to Accounts set up for the Alternate Payee as of a given date; (3) Such order shall provide when the Alternate Payee may first take a distribution of the Alternate Payee's Accounts, if silent the Alternate Payee's Accounts would first be distributable, unless limited by the order, when the Participant is first eligible to take a distribution of the Participant's Accounts -15- pursuant to Section 7.02 hereof; (4) If applicable, such order shall specify the number of payments or period to which the order applies; (5) Such order shall identify the Plan as to which the order applies; (6) Such order shall not require the Plan to provide any type or form of benefits or any option not otherwise provided under the Plan; (7) Such order shall not require the Plan to provide increased benefits (determined on the basis of actuarial value); and (8) Such order shall not require the payment of benefits to an Alternate Payee which are required to be paid to another Alternate Payee under another order previously determined to be a Qualified Domestic Relations Order. (b) The Company shall determine a set of nondiscriminatory and reasonable procedures to determine the qualified status of a domestic relations order and to administer distributions under such qualified orders in accordance with Section 414(p) of the Code. 8.02 If pursuant to a Qualified Domestic Relations Order, all or a portion of a Participant's Accounts in the Plan have been transferred to corresponding Accounts in the Plan set up for a spouse, former spouse, child or other dependent of the Participant (collectively an "Alternate Payee" as defined in section 414(p)(8) of the Code), such Accounts shall be distributable to the Alternate Payee, unless otherwise limited by the order, when the Participant is first eligible to take a distribution of the Participant's Accounts pursuant to Section 7.02. 8.03 If pursuant to a Qualified Domestic Relations Order, the Alternate Payee may take a -16- distribution of the Alternate Payee's Accounts when the Participant attains "earliest retirement age" under the Plan, for purpose of this provision, such Accounts shall be distributable to the Alternate Payee when the Participant attains age 50 or anytime thereafter. 8.04 If pursuant to a Qualified Domestic Relations Order, the Alternate Payee may take a distribution of the Alternate Payee's Account at the time the Alternate Payee's Accounts are established, such Accounts shall be immediately or anytime thereafter distributable to the Alternate Payee. 8.05 Not withstanding the foregoing, if the Alternate Payee will be receiving a Qualified Domestic Relations Order distribution from the 401(k) Plan, the timing of the Alternate Payee's distribution from this Plan, should coincide with the Alternate Payee's distribution from the 401(k) Plan. 8.06 If the present value of the Alternate Payee's Accounts does not exceed $5,000 when established or thereafter, such Alternate Payee's Accounts shall be paid to the Alternate Payee in a lump sum, in an amount equal to such present value. -17- ARTICLE IX ---------- AMENDMENT AND TERMINATION OF THE PLAN ------------------------------------- The Board may at any time and from time to time amend, suspend, or terminate the Plan in whole or in part and may, in connection with any Plan termination, elect in its sole discretion to either continue to maintain the Participants' accounts under the Plan or fully vest each Participant's account and distribute the entire amount credited to the Participant's accounts; provided, however, that no such amendment, suspension, or termination may, without the consent of each Participant affected thereby, have any adverse retroactive effect on the rights of any Participant (or any person claiming through or under him) under the Plan unless required by applicable law. -18- ARTICLE X --------- MISCELLANEOUS ------------- 10.01 At the request of a Participant or on its own initiative, the Board may, at any time and in its sole and unlimited discretion, accelerate the payment of any part of a Participant's Deferral Account not allocated to Company Stock Units, if the Board determines that such accelerated payment would be in the interests of such Participant and not prejudicial to the interests of other Participants or the Company. 10.02 Nothing in the Plan shall confer on any Participant or any other employee of the Company any right to continue in the employ of the Company or affect in any way the right of the Company to terminate any such person's employment at any time. 10.03 Except as otherwise provided in Article VIII, rights under the Plan shall not be assignable or transferable or subject to encumbrance or charge of any nature, other than by designation of beneficiary to take effect at death or, in the absence of such designation, by will or the laws of descent and distribution. 10.04 The Plan shall be binding on and inure to the benefit of the Company, each Participant, and every person claiming through or under a Participant, and their respective heirs, successors, and assigns. 10.05 Deferral Elections under the Plan are intended to defer Participants' recognition of income, for purposes of the Code, until their actual receipt of payments from their Accounts, and the Plan shall be interpreted and administered in a manner consistent with such intent. -19- EX-10.15 6 l93110aex10-15.txt EX-10.15 1ST AMEND. TO SR. MGMT. SAVINGS PLAN FIRST AMENDMENT TO THE ---------------------- MANOR CARE, INC. SENIOR MANAGEMENT SAVINGS PLAN ----------------------------------------------- FOR CORPORATE OFFICERS ---------------------- In exercise of the powers and authority conferred upon and reserved to the Board of Directors of Manor Care, Inc. under and by virtue of Article VIII of the Manor Care, Inc. Senior Management Savings Plan For Corporate Officers, the Board hereby amends said Plan in the manner and to the extent set forth herein: 1. Section 2.19 and 2.20 of the Plan are renumbered 2.20 and 2.21 respectively. A new Section 2.19 is added to the Plan to read as follows: "2.19 "Retirement" means the termination of employment with the Company for reasons other than death after a Participant has attained age 65 or has attained age 55 or older with ten or more years of service with the Company." 2. Section 7.02 of the Plan is amended to read as follows: "7.02. The entire amount credited to a Participant's Accounts shall become payable upon termination of the Participant's employment with the Company by reason of his death, total and permanent disability, or Retirement. The nonforfeitable, vested portion of a Participant's Accounts shall become payable upon termination of the Participant's employment with the Company for any other reason. Amounts so payable shall be paid to the Participant at the election of the Participant in cash or in shares of Manor Care, Inc. common stock, or a combination thereof, in a lump sum payment as soon as practicable after such termination of employment, but in no event later than January 31 of the following year. However, at least one year prior to his Retirement, the Participant may make an irrevocable election to delay receiving his benefits from the Plan to a date specific on or before the Participant attains age 65. In addition, at least one year prior to his Retirement, the Participant may make an irrevocable election to receive his benefits in -1- installment payments. If a Participant elects distribution in the form of installment payments, he shall further designate the commencement date and period of time (not to exceed ten years) over which the installment payments are to be made. Such installment payments shall be made on an annual basis in the month of January commencing the first January following the Participant's Retirement. During the period such installment payments are being made, the remaining balances in the Participant's Accounts shall continue to be credited with earnings or losses in accordance with the provisions of Article VI of the Plan. For purpose of a Participant who is retiring in 2001, such election must be given to the CEO on or before December 31, 2001." 3. Appendix A, List of Covered Officers, attached hereto, has been revised as of September 1, 2000. 4. The amendments set forth in this First Amendment to the Manor Care, Inc. Senior Management Savings Plan for Corporate Officers shall be effective January 1, 2001 unless otherwise stated. 5. The Manor Care, Inc. Senior Management Savings Plan for Corporate Officers, as amended, shall continue in full force and effect. IN WITNESS WHEREOF, the Board of Directors of Manor Care, Inc. has caused this First Amendment to the Manor Care, Inc. Senior Management Savings Plan for Corporate Officers to be executed by its duly authorized officers as of the 1st day of January, 2001. MANOR CARE, INC. By /s/ Paul A. Ormond ------------------------------------------ President and Chief Executive Officer ATTEST: -2- By /s/ R. Jeffrey Bixler ---------------------------------- Secretary -3- APPENDIX A ---------- MANOR CARE, INC. SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS ---------------------- LIST OF COVERED OFFICERS ------------------------ AS OF SEPTEMBER 1, 2000 The list of Covered Officers is maintained in the office of the Vice President, Director of Human Resources and Labor Relations - A-1 - EX-21 7 l93110aex21.txt EX-21 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 Manor Care, Inc. Subsidiaries of the Company Manor Care, Inc. is a Delaware corporation. The following list sets forth the principal subsidiaries of the Company and the place of their incorporation. Except as otherwise noted, all of these subsidiaries are directly or indirectly wholly owned by the Company. 1. ManorCare Health Services, Inc., a Delaware corporation - includes 48 active omitted subsidiaries operating in the United States and providing health care services. 2. New ManorCare Health Services, Inc., a Delaware corporation - includes 2 active omitted subsidiaries operating in the United States and providing health care services. 3. Four Seasons Nursing Centers, Inc., a Delaware corporation. 4. Health Care and Retirement Corporation of America, an Ohio corporation - includes 19 active omitted subsidiaries operating in the United States and providing health care services. 5. Heartland Rehabilitation Services, Inc., an Ohio corporation - includes 21 active omitted subsidiaries operating in the United States and providing health care services. 6. HCR Home Health Care and Hospice, Inc., an Ohio corporation - includes two active omitted subsidiaries operating in the United States and providing health care services. 7. In Home Health, Inc., a Minnesota corporation. 8. MileStone Healthcare, Inc., a Delaware corporation. 9. HCR ManorCare Mesquite, L.P., a Delaware Limited Partnership. 10. Heartland Medical Information Services, Inc., an Ohio corporation, of which the Company owns approximately 97 percent of its common stock. 11. MNR Finance Corp., a Delaware corporation. 1 EX-23 8 l93110aex23.txt EX-23 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8, No. 333-64181) pertaining to the Health Care and Retirement Corporation Stock Option Plan for Outside Directors and the Stock Option Plan for Key Employees of Health Care and Retirement Corporation, the Registration Statement (Form S-8, No. 333-81833) pertaining to the Manor Care, Inc. Retirement Savings and Investment Plan of HCR Manor Care, Inc., the Registration Statement (Form S-8, No. 333-93575) pertaining to the Manor Care, Inc. Nonqualified Retirement Savings and Investment Plan of Manor Care, Inc., the Registration Statement (Form S-8, No. 333-93573) pertaining to the HCR Stock Purchase and Retirement Savings Plan of Manor Care, Inc., and the Registration Statement (Form S-8, No. 333-67592) pertaining to The Equity Incentive Plan of Manor Care, Inc. of our report dated January 24, 2002, except for Notes 17 and 18, as to which the date is February 25, 2002, with respect to the consolidated financial statements and schedule of Manor Care, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2001. /s/Ernst & Young LLP Toledo, Ohio March 12, 2002 10-K405 10 l93110ae10-k405_pdf.pdf COURTESY COPY OF MANOR CARE'S 10-K405 begin 644 l93110ae10-k405_pdf.pdf M)5!$1BTQ+C(-)>+CS],-"C(U-R`P(&]B:@T\/"`-+TQI;F5A7!E("]#871A;&]G(`TO4&%G97,@,C,X(#`@4B`-+TI4 M(#(U-2`P(%(@#3X^(`UE;F1O8FH-,C)C4=CA\A-KE"Q9MV+^7+Y@GF->4_+"ZB M\,OH/9^GW+Q@?0-]WO.&_[6S79C%@BS9)4S,%=F,'`VX,_DX.=\S,+@G2YV5 M;9&YSE+(8,4;QISB-679P8"L*4LUWGJ'+-4\%33KR,I5Q2'75GI%3=JJZ14T MJ533,VC*4A!K\4H@,:4!XJ$VIXWL06&'>%RMA)9VMFB<:U5-TI2XP:L1^6BA M0>OD!68K-;J>E1M,DKRPY,PZA24'#ZZV4C99D9O"J:YD;!5RB'>#E="*+2G- M?"VK="2EF1=J=;.Y'7CAM>C@1)#$Q&;'2XN,_"1=.M>\#&8)DLT,DC`2"JIMO(=FBONDO8L@T3@"X]DI*<$&@K&'EID4%!]JDE M'!=!!H1-XJDXU['64UGA^I1"*Y$M$W*T+VQ>ZII\PD3G96#$)UYNJY!O`HN` M!JQ94\G6.E>KFB-XH58TEV/G031N?2(F5K(!(:,LY+DSWZCH^(0-H![($ M6$?$B2.RG@HWPM&4K'RCZ->R,A79MC";9J=S4P5;*Q#.`/H#+B':KX#ION5P MM_1(\6%3@JS71_E4B:HWQ!\WG.9R!AU@8.CH:&!@!!*,+B`6$YA0[NCH`"8& M00DPK0'FN$:`.2P>0!5,H2!E8*U@7:$P%M`@!D'5"!"7`\AD%-*`JU&":V$# MLT`*&A@$09H$X68P&X,M"0612G#W@+0!13U`)HJX@-C"QA8@9T#,9`6K-O:` M6\4&\Q,#DP=,(]AFL*,8)$`$F&6!RN6`J0-9!!:.0!%FA'N!!>1L,;A=@G`) M1KBC&6&!`"8L8`K0")!2B%50Y8.W1`%&PU,&KB<7@#0/$(N`RXLR!E[&``:6 M+C6!#VQ.$@]X/R[H=4J?5AC0R1%R:!&'KAOCI#,!0&4``08`DM;,W0UE;F1S M=')E86T-96YD;V)J#3(W,B`P(&]B:@TX-#D@#65N9&]B:@TR-3D@,"!O8FH- M/#P@#2]4>7!E("]086=E(`TO4&%R96YT(#(S-R`P(%(@#2]297-O=7)C97,@ M,C8P(#`@4B`-+T-O;G1E;G1S(#(V-2`P(%(@#2]-961I84)O>"!;(#`@,"`V M,3(@,3`P."!=(`TO0W)O<$)O>"!;(#`@,"`V,3(@,3`P."!=(`TO4F]T871E M(#`@#3X^(`UE;F1O8FH-,C8P(#`@;V)J#3P\(`TO4')O8U-E="!;("]01$8@ M+U1E>'0@72`-+T9O;G0@/#P@+T8R(#(V,B`P(%(@+T8V(#(V,2`P(%(@/CX@ M#2]%>'1'4W1A=&4@/#P@+T=3,2`R-C8@,"!2(#X^(`T^/B`-96YD;V)J#3(V M,2`P(&]B:@T\/"`-+U1Y<&4@+T9O;G0@#2]3=6)T>7!E("]4>7!E,2`-+T9I M7!E("]4>7!E,2`-+T9I7!E("]&;VYT1&5S8W)I<'1O"]Y+V5M9&%S:"]B+TTO7`UA;7!E MB]C+T\O<75O=&5R:6=H="]E:6=H="]E+U$O;FEN92]P M87)E;FQE9G0O9B]2+V-O;&]N+U,O<&%<#7)E;G)I9VAT+V@O"]B+U8O M0R]S+V$O5R]C+W-<#65V96XO1"]C;VUM82]L+W0O96EG:'0O6"]E+TF5R;R]-+V%M M<&5R65R*51J"BTP+C8Y,#4@+3$N,3$Y,B!4 M1`HH261E;G1I9FEC871I;VX@3F\N7"DI5&H*,3(@,"`P(#$R(#$R,RXX,2`V M,3(N.#$P,2!4;0HH("E4:@HO1C8@,2!49@HQ,"XP-SD@,"`P(#$P+C`W.2`Q M,S&-H86YG92E4:@HP M+C@U-S(@+3$N,3$Y,B!41`HH;VX@=VAI8V@@&-H86YG92E4:@HO1C(@,2!49@HM,S`N M-3(V-R`M,BXV-#,Q(%1$"B@@("`@("`I5&H*+T8V(#$@5&8*,2XU-S$V(#`@ M5$0**%-E8W5R:71I97,@&-H86YG92!!8W0@;V8@,3DS-"!D=7)I;F<@=&AE M('!R96-E9&EN9R`Q,B!M;VYT:',@7"AO'D@;W(@:6YF;W)M871I;VX@7!E("]% M>'1'4W1A=&4@#2]302!F86QS92`-+U--(#`N,#(@#2]/4"!F86QS92`-+T)' M(#(V.2`P(%(@#2]50U(@,C8X(#`@4B`-+TA4("]$969A=6QT(`TO5%(@+TED M96YT:71Y(`T^/B`-96YD;V)J#3(V-R`P(&]B:@T\/"`O1FEL=&5R("]&;&%T M941E8V]D92`O3&5N9W1H(#@91!ATF@;LEN[!:+**"ABCCT=X>ZWU]/"TWR)7R-2+-BL5TN@/XV4< MC7&S>9RM$I2I&J9)J9*&+)1*/J"C)Y@\7U)+-,K5,%6>8?I0J MD:LE4HE&)0V5*:2J2(DR3.(KCU9J]L?()!YK)=+H4`>E2B(W\-3[=JOEH7*I M2BY3_X_[T>;'[U]M8SS#PW`!9FZ!S:&P51BV>A86AF%R#%-BF`;#M!B6C6$! 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EX-4.11

                                                                    Exhibit 4.11




                                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

                                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

                                                                         
                          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





                                                                            PAGE
                                                                            ----
                                                                         
                              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

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

                              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

                                                                               1

            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).

                                                                               2


            "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

                                                                               3


            (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);

                                                                               4


            (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.

                                                                               5


            "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).

                                                                               6


            "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.

                                                                               7


            "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.

                                                                               8


            "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).

                                                                               9


            "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

                                                                              10


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.



                     Term                                      Defined in
                     ----                                        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)


                                                                              11


                                                            
        "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.

                                                                              12


                                   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

                                                                              13


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.

                                                                              14


            (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

                                                                              15


      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

                                                                              16


      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

                                                                              17


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

                                                                              18


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

                                                                              19


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

                                                                              20


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

                                                                              21


      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.

                                                                              22


            (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

                                                                              23


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

                                                                              24


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:
                                             --------------------------------

                                                                              25


            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.

                                                                              26


            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

                                                                              27


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.

                                                                              28


            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.

                                                                              29


            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.

                                                                              30


            (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,

                                                                              31


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, 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

                                                                              32


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

                                                                              33


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

                                                                              34


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.

                                                                              35


            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

                                                                              36


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:

                                                                              37


            (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

                                                                              38


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:

                                                                              39


            (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,

                                                                              40


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

                                                                              41


      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

                                                                              42


      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

                                                                              43


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

                                                                              44


(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.

                                                                              45


                                   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.

                                                                              46


            (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

                                                                              47


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

                                                                              48


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.

                                                                              49


            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.

                                                                              50


            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

                                                                              51


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;

                                                                              52


            (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

                                                                              53


      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;

                                                                              54


            (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;

                                                                              55


            (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

                                                                              56


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.

                                                                              57


            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

                                                                              58


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

                                                                              59


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

                                                                              60




                  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;

                                                                              61


            (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.

                                                                              62


            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.

                                                                              63





            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

                                                                              64


                                        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.

                                                                              65


                                        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.

                                        HEARTLAND HOME HEALTH CARE SERVICES,
                                        INC.

                                                                              66


                                        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.

                                                                              67


                                        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.

                                                                              68


                                        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.

                                                                              69


                                        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.

                                                                              70


                                        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.

                                                                              71



                                    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:     333 N. Summit St.
                                                 Toledo, Ohio  43604
                                    Fax No.:     419-252-5599
                                    Telephone:   419-252-5500

                                                                              72



                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              73



                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              74


                                    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

                                                                              75


                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              76



                                    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

                                                                              77


                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              78


                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              79



                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              80


                                    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:    333 N. Summit St.
                                                Toledo, Ohio  43604

                                    Fax No.     419-252-5599
                                    Telephone:  419-252-5500

                                                                              81



                                    NATIONAL CITY BANK, as Trustee


                                    By: /s/ Christine Robinette
                                       -------------------------------------
                                       Name:  Christine Robinette
                                       Title: Vice President

                                                                              82



                                    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

                   [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

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



                                      A-3

            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.

            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

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

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

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

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

                                 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

[ ]   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

                      [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         Signature of
           Amount of         Amount of         Amount of this    authorized
           decrease in       increase in       Global Security   signatory of
           Principal         Principal         following         Trustee or
Date of    Amount of this    Amount of this    such decrease     Securities
Exchange   Global Security   Global Security   or increase       Custodian
- --------   ---------------   ---------------   ---------------   -------------
                                                     






                                      A-11

                       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

                                                                       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

                   [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

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

            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

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

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

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

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

                                 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

                      [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          Signature of
           Amount of          Amount of          Amount of this     authorized
           decrease in        increase in        Global Security    signatory of
           Principal          Principal          following          Trustee or
Date of    Amount of this     Amount of this     such decrease      Securities
Exchange   Global Security    Global Security    or increase        Custodian
- --------   ---------------    ---------------    ---------------    ------------
                                                        







                                      B-10

                       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

                                                                       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

                                   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

            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-10.13

                                                                   Exhibit 10.13












                                 HCR MANOR CARE
                        SENIOR EXECUTIVE RETIREMENT PLAN
















                            EFFECTIVE OCTOBER 1, 1992

                         RESTATED AS OF JANUARY 1, 2001





                                 HCR MANOR CARE
                        SENIOR EXECUTIVE RETIREMENT PLAN

                            EFFECTIVE JANUARY 1, 2001


                                      INDEX
                                      -----



                                                                                               PAGE
                                                                                               ----
                                                                                             
         ARTICLE I  -  Name, Effective Date and Purpose of Plan                                   1
                  1.01  -  Name                                                                   1
                  1.02  -  Effective Date                                                         1
                  1.03  -  Purpose                                                                1
                  1.04  -  No Duplication of Benefits                                             1

         ARTICLE II  -  Eligible Participants                                                     2
                  2.01  -  Eligible Participants                                                  2
                  2.02  -  Executive Officers                                                     2

         ARTICLE III  -  Credited Earnings                                                        3
                  3.01  -  Elements of Compensation                                               3
                  3.02  -  Basis for Determination                                                4
                  3.03  -  Effect of Disability                                                   4

         ARTICLE IV  -  Credited Service                                                          5
                  4.01  -  Determination of Credited Service                                      5
                  4.02  -  General Provisions as to Credited Service                              5
                  4.03  -  Disabled Participants                                                  5

         ARTICLE V  -  No Funding of Plan Benefits                                                7

         ARTICLE VI  - Normal Retirement Date                                                     8

         ARTICLE VII  -  Retirement Benefits                                                      9
                  7.01  -  Amount of Benefit                                                      9
                  7.02  -  Gross Retirement Benefit                                               9
                   (a)  -  Method I                                                               9
                   (b)  -  Method II                                                             10
                  7.03  -  Average Annual Earnings                                               10
                  7.04  -  Social Security Taxable Wage Base                                     10
                  7.05  -  Protection of Benefit                                                 11
                  7.06  -  Present Value of Designated Plans                                     11



                                       -i-




                                                                                             
         ARTICLE VIII  -  Payment of Retirement Benefits                                         12
                  8.01  -  Normal or Postponed Retirement                                        12
                  8.02  -  Early Retirement-- Hired Before January 1, 1992                       12
                   (a)  -  General Rules and Reduction Factors                                   12
                   (b)  -  Early Retirement                                                      12
                           1)  - Age 60, Less Than Age 65                                        12
                           2)  - Age 55, Less Than Age 60                                        13
                  8.03  -  Early Retirement-- Hired After December 31, 1991                      13
                   (a)  -  General Rules and Reduction Factors                                   13
                   (b)  -  Early Retirement                                                      13
                  8.04  -   Option to Postpone Commencement of Benefits                          14
                  8.05  -   Commencement of Retirement Benefits and Modes of Payment             14
                  8.06  -   Commencement of Vested Benefits and Modes of Payment                 14
                  8.07  -   Death Benefits                                                       15
                  8.08  -   Designation and Change of Beneficiary                                16
                  8.09  -   Death or Failure to Designate Beneficiary                            16
                  8.10  -   Qualified Domestic Relations Order                                   16

         ARTICLE IX - Suspension of Retirement Benefits                                          19

         ARTICLE X -  Administration of the Plan                                                 20
                  10.01  -  General                                                              20
                  10.02  -  Duties of the Vice President of Human Resources                      20
                  10.03  -  Authority of the Vice President of Human Resources                   21

         ARTICLE XI - Amendment, Modification or Termination of Plan                             22
                  11.01  -  Amendment or Modification of Plan                                    22
                  11.02  -  Termination of the Plan                                              22

         ARTICLE XII  -  Merger, Consolidation, etc. of the Plan                                 23

         ARTICLE XIII -  Miscellaneous Provisions                                                24
                  13.01  -  Inalienability                                                       24
                  13.02  -  Facility of Payment                                                  24
                  13.03  -  Liability Limited                                                    24
                  13.04  -  Performance of Acts                                                  24
                  13.05  -  Claims Procedure                                                     25
                  13.06  -  Definitions                                                          25

         ADOPTION PAGE                                                                           26

         APPENDIX A - List of Covered Participants                                               27





                                      -ii-





                                 HCR MANOR CARE
                                 --------------
                        SENIOR EXECUTIVE RETIREMENT PLAN
                        --------------------------------


                           (Effective January 1, 2001)



                                    ARTICLE I
                                    ---------

                    NAME, EFFECTIVE DATE AND PURPOSE OF PLAN

         1.01 - NAME.

         The name of this plan is the "HCR Manor Care Senior Executive
Retirement Plan", formerly known as the "Amended and Restated Health Care and
Retirement Corporation Senior Executive Retirement Plan", hereinafter called the
"Plan".

         1.02 - EFFECTIVE DATE.

         The Plan was adopted as of October 1, 1992. Effective Date of the Plan,
as amended and restated, is January 1, 2001.

         1.03 - PURPOSE.

         The purpose of the Plan is to provide retirement and related benefits
to Corporate Officers and senior management employees of HCR Manor Care, the
"Company". The Plan is and is intended to be an unfunded deferred compensation
plan for a select group of management or highly compensated employees, commonly
known as a "top hat" plan.

         1.04 - NO DUPLICATION OF BENEFITS.

         This Plan is only intended to provide retirement and related benefits
over and above those provided, if any, under the Health Care and Retirement
Corporation Pension Plan (the "HCR Pension Plan"), a defined benefit plan,
and/or the HCR Manor Care Key Employee Insurance Program (the "HCR Manor Care
Key Employee Insurance Program", a welfare benefit plan, (hereinafter
collectively referred to as "Designated Plans").


                                       -1-







                                   ARTICLE II
                                   ----------

                              ELIGIBLE PARTICIPANTS


         2.01 - ELIGIBLE PARTICIPANTS.

         Designated Corporate Officers and senior management employees of the
Company whose names are set forth in Appendix A hereof (List of Covered
Participants) shall be eligible to participate in this Plan.

         2.02 - CORPORATE OFFICERS.

         The term "Corporate Officer" shall mean an officer of the Company who
is chosen by the Board of Directors of the Company to hold an executive position
in the Company.



                                      -2-





                                   ARTICLE III
                                   -----------

                                CREDITED EARNINGS


         3.01 - ELEMENTS OF COMPENSATION.

         With respect to earnings received during each calendar year or portion
thereof, the term "Credited Earnings" shall mean:

         (a)      annual base salary,

         (b)      any annual bonus earned (accrued) by a Participant under an
                  annual bonus plan of the Company,

         (c)      any amount earned (accrued) under the HCR Manor Care
                  Performance Award Plan (the "HCR Manor Care Performance Award
                  Plan"), and

         (d)      any payments made to a Participant for a period of illness or
                  disability prior to such Participant's retirement pursuant to
                  the HCR Manor Care Salary Continuation Plan (the "HCR Manor
                  Care Sick Leave Plan"), the HCR Manor Care Group Short-Term
                  Disability Plan (the "HCR Manor Care STD Plan") or the HCR
                  Manor Care Group Long-Term Disability Plan (the "HCR Manor
                  Care LTD Plan");

provided, however, that any bonus paid in a subsequent calendar year shall be
treated as Credited Earnings in the year for which such bonus was earned
(accrued) and any performance award paid in a subsequent year shall be treated
as Credited Earnings for the year prior to the year of payment. For all purposes
of the Plan, annual base salary, bonus payments, performance awards and sick
leave and disability payments shall include any salary deferral contributions
made pursuant to the Participant's elections under the HCR Manor Care Stock
Purchase and Retirement Savings Plan (the "HCR Manor Care SPARS"), the HCR Manor
Care Retirement Savings and Investment Plan (the "HCR Manor Care RSIP"), the HCR
Manor Care Pre-Tax Reimbursement Account Plan (the "HCR Manor Care Reimbursement
Plan"), the HCR Manor Care Senior Management Savings Plan for Corporate Officers
(the "HCR Manor Care SMSP for Corporate Officers"), and the HCR Manor Care
Senior Management Savings Plan and (the "HCR Manor Care SMSP") or pursuant to
any other Company-sponsored qualified or non-qualified plan.


                                      -3-





         3.02 - BASIS FOR DETERMINATION.

         Credited Earnings shall be determined annually on a calendar-year
basis.

         3.03 - EFFECT OF DISABILITY.

         Except as otherwise provided in Section 3.01 hereof (Elements of
Compensation), no reduction shall be made in a Participant's Credited Earnings
during a period of disability on account of any decrease in the Participant's
Credited Earnings if at the date of disability such Participant shall have one
or more full years of Credited Service and if such decrease is because of such
Participant's total disability evidenced by the continuing award of benefits for
disability under the HCR Manor Care Sick Leave Plan and, after the expiration of
benefits under the HCR Manor Care Sick Leave Plan, by the continuing award of
benefits under the HCR Manor Care LTD Plan.



                                      -4-





                                   ARTICLE IV
                                   ----------

                                CREDITED SERVICE


         4.01 - DETERMINATION OF CREDITED SERVICE.

         Each Corporate Officer and senior management employee of the Company
designated on Appendix A hereof (List of Covered Participants) shall receive
credit under this Plan for periods of employment:

         (a)      with the Company; and

         (b)      if hired before January 1, 1992, with Owens-Illinois, Inc.,
                  except to the extent such Participant is entitled to, or has
                  received a retirement or other vested benefit for such periods
                  of service under the Owens-Illinois Salary Retirement Plan

from the Participant's adjusted service date set forth on Appendix A hereof. All
such periods of credited employment or service shall be referred to herein as
"Credited Service."

         4.02 - GENERAL PROVISIONS AS TO CREDITED SERVICE.

         The "General Provisions as to Credited Service" provided in Section
4.03 (General Provisions as to Credited Service) of the HCR Pension Plan shall
be incorporated, where applicable, herein.

         4.03 - DISABLED PARTICIPANTS.

         Each Participant shall continue to be a Participant in this Plan for
periods during which the Participant is totally disabled if at the date of such
disability such Participant shall be covered under the HCR Manor Care LTD Plan
if and so long as such disability shall be evidenced by the continuing award of
benefits for disability under the HCR Manor Care Sick Leave Plan, the HCR Manor
Care STD Plan and the HCR Manor Care LTD Plan. A Participant who, upon recovery
from disability, resumes full-time employment with the Company within such
period of time as may be fixed from time to time by the Vice President, Director
of Human Resources and Labor Relations of the Company (hereinafter referred to
as the "Vice President of Human Resources" or the "Vice President") shall not be
deemed to have terminated employment or interrupted a Period of Service;


                                      -5-





provided, however, that if a disabled Participant shall request and become
entitled to receive the early retirement benefit provided by Section 8.02 hereof
(Early Retirement), that Participant shall be deemed to have terminated
employment as of the last day of the month in which the request for early
retirement is approved.


                                      -6-





                                    ARTICLE V
                                    ---------

                           NO FUNDING OF PLAN BENEFITS


         The benefits provided under this Plan shall be completely unfunded. If
the Company acquires or has acquired any asset for the purpose of fulfilling its
obligations hereunder, any such asset shall remain an asset of the Company and
not an asset of this Plan. Each Participant shall have only the rights of an
unsecured general creditor of the Company with respect to any benefits payable
under this Plan.


                                      -7-




                                   ARTICLE VI
                                   ----------

                             NORMAL RETIREMENT DATE


         The normal retirement date for a Participant shall be the last day of
the month in which such Participant attains age 65.



                                       -8-





                                   ARTICLE VII
                                   -----------

                               RETIREMENT BENEFITS


         7.01 - AMOUNT OF BENEFIT.

         A Participant who retires or whose employment terminates with vested
rights shall receive an annual retirement benefit, payable as a straight single
life annuity, the present value of which shall be (at commencement of the normal
retirement benefit) equal to the excess of (i) the present value of the "Gross
Retirement Benefit", as defined below, (assuming such benefit is payable as a
straight single life annuity) less (ii) the present value of benefits provided
to the Participant under the Designated Plans (measured in accordance with
Section 7.06 hereof (Present Value of Designated Plans)).

         7.02 - GROSS RETIREMENT BENEFIT.

         As used in this Article VII, the term "Gross Retirement Benefit" for
each Participant designated with an asterisk in Appendix A hereof (List of
Covered Participants) shall mean an annual benefit to be paid monthly calculated
pursuant to Method I or Method II below whichever provides the greater benefit.
The term "Gross Retirement Benefit" for each Participant not designated with an
asterisk in Appendix A shall mean an annual benefit to be paid monthly
calculated pursuant to Method II below

         (a)      Method I-- An annual benefit to be paid monthly based on the
                  sum of the following amounts:

                  (1)      If such Participant shall have 35 Years of Credited
                           Service from the Participant's adjusted service date
                           set forth on Appendix A hereof (List of Covered
                           Participants), an amount equal to 50% of the
                           Participant's Final Average Earnings less one-half of
                           the Primary Insurance Amount; or
                  (2)      If such Participant shall have more than 35 years of
                           Credited Service from the Participant's adjusted
                           service date set forth on Appendix A hereof (List of
                           Covered Participants) there shall be added to the
                           aforesaid percentage 0.50% for each such Year of
                           Credited Service in excess of 35; or
                  (3)      If such participant shall have less than 35 Years of
                           Credited Service from the


                                       -9-



                           Participant's adjusted service date set forth on
                           Appendix A hereof (List of Covered Participants), an
                           amount equal to that which would have been payable if
                           such participant had 35 Years of Credited Service
                           multiplied by a fraction, the numerator of which
                           shall be the number of the Participant's Years of
                           Credited Service and denominator of which shall be
                           35.

         (b)      Method II-- An annual benefit to be paid monthly based on the
                  following amounts:

                  (1)      1.212% of such Participant's Average Annual Earnings
                           multiplied by the Participant's number of Years of
                           Credited Service from the Participant's adjusted
                           service date set forth on Appendix A hereof (List of
                           Covered Participants), plus

                  (2)      0.176% of such Participant's Average Annual Earnings
                           in excess of the Social Security Taxable Wage Base as
                           defined in Section 7.05 hereof (Social Security
                           Taxable Wage Base) multiplied by the Participant's
                           number of Years of Credited Service from the
                           Participant's adjusted service date set forth on
                           Appendix A hereof (List of Covered Participants),
                           plus

                  (3)      If such Participant shall have more than 35 Years of
                           Credited Service from the Participant's adjusted
                           service date set forth on Appendix A hereof (List of
                           Covered Participants), there shall be added to the
                           aforesaid amounts 0.50% of Average Annual Earnings
                           for each Year of Credited Service in excess of 35.

         7.03 - AVERAGE ANNUAL EARNINGS.

         As used in this Article VII, the term "Average Annual Earnings" shall
mean the average of the Credited Earnings of a Participant for the three
calendar years during which the aggregate of the Participant's Credited Earnings
was the highest.

         7.04 - SOCIAL SECURITY TAXABLE WAGE BASE.

         As used in this Article VII, the term "Social Security Taxable Wage
Base" shall mean the


                                      -10-





maximum amount of annual wages subject to the tax imposed under the Federal
Insurance Contributions Act ("FICA"), as amended, in effect:

         (a)      on the date of such Participant's retirement or other
                  termination of employment, with respect to a Participant who
                  retires under such circumstances as to be eligible for the
                  normal or early retirement benefit under the Plan, or who
                  otherwise terminates employment with vested rights under the
                  Plan; or

         (b)      on the date of such Participant's entitlement to benefits
                  under the HCR Manor Care LTD Plan, with respect to a
                  participant receiving, at date of retirement, benefits under
                  such HCR Manor Care LTD Plan and who retires upon attainment
                  of age 65.

         7.05 - PROTECTION OF BENEFIT.

         No future amendment shall reduce the benefit a Participant has earned
under this Plan up to the day immediately preceding the date of such amendment
with respect to the Participant's Credited Service and Average Annual Earnings
as of such date.

         7.06 - PRESENT VALUE OF DESIGNATED PLANS.

         The present value of the HCR Pension Plan shall be the actuarially
determined lump sum value of any benefit payable to the Participant or the
Participant's designated beneficiary pursuant to such plan, measured as of the
appropriate date. The present value of the Manor Care Key Employee Insurance
Program shall be deemed to be equal to the Participant's cash surrender value
(if any), measured as of the appropriate date, of any life insurance policy
subject to the terms of such plan.


                                      -11-





                                  ARTICLE VIII
                                  ------------

                               PAYMENT OF BENEFITS


         8.01 - NORMAL OR POSTPONED RETIREMENT.

         A Participant who retires on or after the normal retirement date shall
be paid a normal retirement benefit in the amount and form described in Article
VII hereof (Retirement Benefits), based on the Participant's Credited Service
accrued as of the normal retirement date and reduced (in the manner described in
Article VII hereof (Retirement Benefits)) for amounts, if any, provided through
Designated Plans. Such normal retirement benefit shall commence in the month
described in Section 8.05 hereof (Commencement of Retirement Benefits and
Optional Modes of Payment). Any other provision of this Plan to the contrary
notwithstanding, a Participant shall become fully vested in the Participant's
normal retirement benefit hereunder upon attaining age 65 while employed by the
Company.

         8.02 - EARLY RETIREMENT -- HIRED BEFORE JANUARY 1, 1992.

         (a)      GENERAL RULES AND REDUCTION FACTORS.

                  A Participant whose employment commencement date with the
                  Company is before January 1, 1992 and who has completed at
                  least ten full years of Credited Service, may retire on any
                  date within ten years prior to the Participant's normal
                  retirement date. Such early retirement benefit shall commence
                  in the month described in Section 8.05 hereof (Commencement of
                  Retirement Benefits and Optional Modes of Payment) unless
                  postponed pursuant to Section 8.04 hereof (Option to Postpone
                  Commencement of Early Retirement Benefits).

         (b)      EARLY RETIREMENT.

                  1)       AGE 60, LESS THAN AGE 65.

                           A Participant who retires after attainment of the age
                           of 60 but prior to the Participant's normal
                           retirement date shall be paid an unreduced early
                           retirement benefit, in the form and amount provided
                           in Article VII hereof (Retirement Benefits), based on
                           the Participant's Credited Service accrued as


                                      -12-





                           of the date of early retirement and reduced (in the
                           manner described in Article VII) for amounts, if any,
                           provided through Designated Plans.

                  2)       AGE 55, LESS THAN AGE 60.

                           If at the date of such early retirement the
                           Participant shall not have attained the age of 60
                           years, the benefit specified in subsection 1) above
                           shall be reduced by 5/12 of 1% for each month by
                           which the first day of the month for which the
                           initial retirement payment is made is in advance of
                           the first day of the month following the attainment
                           of age 60; provided, however, that this subsection 2)
                           shall not apply to a Participant who retires after
                           attainment of the age of 55, if at such early
                           retirement date such Participant shall have completed
                           at least 30 years of Credited Service.

         8.03 - EARLY RETIREMENT -- HIRED AFTER DECEMBER 31, 1991.

         (a)      GENERAL RULES AND REDUCTION FACTORS.

                  A Participant whose employment commencement date with the
                  Company is after December 31, 1991 and who has completed at
                  least ten full years of Credited Service, may retire on any
                  date within five years prior to the Participant's normal
                  retirement date. Such early retirement benefit shall commence
                  in the month described in Section 8.05 hereof (Commencement of
                  Retirement Benefits and Optional Modes of Payment) unless
                  postponed pursuant to Section 8.04 hereof (Option to Postpone
                  Commencement of Early Retirement Benefits).

         (b)      EARLY RETIREMENT.

                  A Participant who retires after attainment of the age of 60
                  but prior to the Participant's normal retirement date shall be
                  paid an annual early retirement benefit, in the form and
                  amount provided in Article VII hereof (Retirement Benefits),
                  based on the Participant's Credited Service accrued as of the
                  date of early retirement and reduced (in the manner described
                  in Article VII) for amounts, if any, provided through
                  Designated Plans. The early retirement benefit shall be
                  reduced by 5/12 of 1% for each month by which the first day of
                  the month for which the initial


                                      -13-





                  retirement payment is made is in advance of the first day of
                  the month following the attainment of age 65

         8.04 - OPTION TO POSTPONE COMMENCEMENT OF EARLY RETIREMENT BENEFITS.

         Any Participant eligible for such early retirement benefits who retires
prior to the normal retirement date may, by giving written notice to the Vice
President, Director of Human Resources at least one year prior to such actual
early retirement, elect to postpone the commencement of payment of early
retirement benefits to any month that is not later than the month following
attainment of age 65.

         8.05 - COMMENCEMENT OF RETIREMENT BENEFITS AND OPTIONAL MODES OF
PAYMENT.

         Early and normal retirement benefits shall be paid in the normal form
specified, commencing with the month following that in which the Participant's
early, normal or postponed retirement occurs (unless Section 8.02(c) hereof
(Option to Postpone Commencement of Early Retirement Benefits) is exercised) and
ceasing with the payment made in and for the month in which the Participant
dies. A Participant may, however, request in writing to the Vice President of
Human Resources to receive his or her retirement benefits hereunder in the form
of an actuarially equivalent lump sum payment, (using the actuarial assumptions
for lump sum conversions that are then in effect under the HCR Pension Plan at
the time of such election) payable at the time the Participant's retirement
benefits would otherwise commence; provided further, however, that no such
election shall be effective unless it is both:

         (a)      given by the Participant and

         (b)      approved by the Vice President at least one year prior to the
                  benefit commencement date.

         8.06 - COMMENCEMENT OF VESTED BENEFITS AND OPTIONAL MODES OF PAYMENT.

         In the event of the termination of employment of a Participant, other
than:

         (a)      by reason of death or

         (b)      a retirement qualifying under Section 8.01 hereof (Normal or
                  Postpone Retirement)


                                      -14-





                  or Section 8.02 hereof (Early Retirement),

after such Participant accrues at least five full years of Credited Service,
such Participant shall be eligible for a vested benefit in an amount equal to
the Participant's accrued benefit immediately before the date of such
termination of employment, reduced (in the manner described in Article VII
hereof (Retirement Benefits)) for amounts, if any, provided through Designated
Plans.

         Vested benefits shall be paid in the normal form specified, commencing
at the same time the Participant commences his or her vested benefit under the
HCR Pension Plan, if applicable, or if not applicable any time after attaining
age 55, but on or before attaining age 65, subject to the same actuarial
equivalent reduction factors as set forth in the HCR Pension Plan for
commencement prior to attaining age 65. Such payment shall cease with the
payment made in and for the month in which the Participant dies. A Participant,
however, may request in writing to the Vice President of Human Resources to
receive his or her vested benefits hereunder in the form of an actuarially
equivalent lump sum payment, (using the actuarial assumptions for lump sum
conversions that are then in effect under the HCR Pension Plan at the time of
such election) payable at the time the Participant's vested benefits would
otherwise commence; provided further, however, that no such election shall be
effective unless it is both:

         (a)      given by the Participant and

         (b)      approved by the Vice President at least one year prior to the
                  benefit commencement date.

         8.07 - DEATH BENEFITS.

         In the event a retired Participant who is eligible for retirement
benefits under Section 8.01 hereof (Normal or Postpone Retirement), Section 8.02
hereof (Early Retirement -- Hired Before January 1, 1992) or Section 8.03 hereof
(Early Retirement -- Hired After December 31, 1991) dies before commencement of
such retirement benefits, a death benefit shall be paid to the Participant's
designated beneficiary. If there is no living designated beneficiary, the death
benefit shall be paid to the Participant's estate. The death benefit shall be
paid in a single payment in the month following the month in which the
Participant dies. The death benefit shall be the present value of


                                      -15-





the early or normal retirement benefit (reduced for benefits provided by
Designated Plans) the Participant would have received in accordance with Section
8.01 hereof (Normal or Postpone Retirement), Section 8.02 hereof (Early
Retirement -- Hired Before January 1, 1992), or Section 8.03 hereof (Early
Retirement -- Hired After December 31, 1991), had the Participant received a
single sum distribution on the day the Participant died.

         8.08 - DESIGNATION AND CHANGE OF BENEFICIARY.

         Each Participant shall, upon such form as the Vice President of Human
Resources may provide for that purpose, designate the Participant's beneficiary
or beneficiaries, and the person or persons so designated or, where applicable,
the person or persons designated by the Vice President pursuant to Section 8.09
hereof (Death of or Failure to Designate Beneficiary), shall receive, any
payment which may be or become payable hereunder by reason of the death of such
Participant as a death benefit under this Plan as constituted as of the date of
such death. The designation of a Participant's spouse as beneficiary under this
Section 8.08 shall be automatically revoked, and such spouse shall not be
entitled to receive any death benefit to which the Participant might otherwise
be entitled under this Section, if such Participant and such spouse are divorced
after the date of such designation, unless thereafter the Participant shall
redesignate such former spouse as the Participant's beneficiary.

         8.09 - DEATH OF OR FAILURE TO DESIGNATE BENEFICIARY

         If any death benefit shall be payable to a beneficiary not then living
and no contingent beneficiary shall then survive, or if any death benefit shall
be payable on behalf of a deceased Participant who shall have failed to
designate a beneficiary, the death benefit shall be paid to the Participant's
estate.

         8.10 - QUALIFIED DOMESTIC RELATIONS ORDERS

         Benefits shall be payable to an individual other than a Participant in
accordance with the applicable requirements of a Qualified Domestic Relations
Order pursuant to the following provisions:


                                      -16-





         (a)      The term "Qualified Domestic Relations Order" shall mean any
                  judgment, decree, or court order (including approval of a
                  property settlement agreement) which relates to the provision
                  of child support, alimony payments, or marital property rights
                  to a spouse, former spouse, child or other dependent of a
                  Participant (collectively an "Alternate Payee" as defined in
                  Section 414(p)(8) of the Code), which creates or recognizes
                  the existence of an Alternative Payee's right to, or assigns
                  to an Alternate Payee the right to, receive all or a portion
                  of the benefits payable with respect to a Participant under
                  the Plan, and which meets the following requirements:

                  (1)      Such order shall specify the name and last known
                           mailing address (if any) of the Participant and each
                           Alternate Payee covered by the order;

                  (2)      Such order shall specify the amount or percentage of
                           the Participant's benefits to be paid by the Plan to
                           each such Alternate Payee or the manner in which such
                           amount or percentage is to be determined as of a
                           given date;

                  (3)      Such order shall provide when the Alternate Payee may
                           first take a distribution of the Alternate Payee's
                           benefit hereunder, if silent the Alternate Payee's
                           benefit would first be distributable, unless limited
                           by the order, when the Participant is first eligible
                           to take a distribution of the Participant's benefit
                           pursuant to Section 8.05 hereof (Commencement of
                           Retirement Benefits and Optional Modes of Payment);

                  (4)      If applicable, such order shall specify the number of
                           payments or period to which the order applies;

                  (5)      Such order shall identify the Plan as to which the
                           order applies;

                  (6)      Such order shall not require the Plan to provide any
                           type or form of benefits or any option not otherwise
                           provided under the Plan; and

                  (7)      Such order shall not require the payment of benefits
                           to an Alternate Payee which are required to be paid
                           to another Alternate Payee under another order
                           previously determined to be a Qualified Domestic
                           Relations Order.

         (b)      The Company shall determine a set of nondiscriminatory and
                  reasonable procedures to determine the qualified status of a
                  domestic relations order and to administer


                                      -17-



                  distributions under such qualified orders in accordance with
                  Section 414(p) of the Code.


                                      -18-





                                   ARTICLE IX
                                   ----------

                        SUSPENSION OF RETIREMENT BENEFITS


Retirement or vested benefits shall be suspended during any period in which a
retired Participant or a Participant terminated with vested rights is in the
full-time employ of the Company, in accordance with regulations of uniform
application adopted by the Vice President of Human Resources, for all or part of
any period for which additional service credits are provided for the purpose of
determining the amount of the Participant's retirement benefits pursuant to
Article VII hereof (Retirement Benefits).


                                      -19-





                                    ARTICLE X
                                    ---------

                           ADMINISTRATION OF THE PLAN

         10.01 - GENERAL.

         All rights, powers, duties, authority, and responsibility in connection
with the administration of this Plan, which are herein or otherwise reserved to
or conferred upon the Company have been delegated by the Board of Directors of
the Company to, and shall be exercised, performed or discharged on behalf of the
Company by, the Chief Executive Officer of the Company or by such other officer
or officers of the Company, as the Chief Executive Officer's delegate, pursuant
to the procedures hereinafter provided. Whenever reference is made in this Plan
to an appropriate officer or officers of the Company, such reference shall be to
the Chief Executive Officer of the Company or such other officer or officers of
the Company, to whom said Chief Executive Officer or, to the extent authorized
by said Chief Executive Officer, another officer or officers of the Company may
at the time concerned have delegated any one or more of such rights, powers,
duties, authority, or responsibility hereunder. Each such delegation and any
modification or revocation thereof shall be recorded in writing and kept on file
with the Secretary of the Company. Any act performed in the exercise of
delegated authority under this Plan shall be deemed the act of the Company or,
as the case may be, of such other Employer. The right to revoke or modify any
delegation under this Plan is reserved to the Board of Directors of the Company.
Said Chief Executive Officer of the Company and each appropriate officer to whom
authority is delegated hereunder shall be a named fiduciary with respect to this
Plan. If at any time there is no person duly designated as Chief Executive
Officer of the Company, any person who is President of the Company shall have
the full authority conferred upon such Chief Executive Officer hereunder for all
purposes hereof. The rights, powers, duties, authority, and responsibility of
the Vice President of Human Resources of the Company expressly conferred in this
Plan may be exercised, performed and discharged without the necessity of any
delegation hereunder but are subject to modification or revocation in accordance
with the procedures herein provided.

         10.02 - DUTIES OF THE VICE PRESIDENT OF HUMAN RESOURCES.

         The Vice President of Human Resources shall administer the Plan and
shall determine what


                                      -20-





and when Participants and their Beneficiaries are entitled to receive benefits
hereunder and the amount of such benefits. The Vice President shall keep
complete records of all pertinent data and facts, and actions taken. The Vice
President shall, from time to time, adopt actuarial tables, methods, factors and
assumptions for purposes of the Plan.

         10.03 - AUTHORITY OF THE VICE PRESIDENT OF HUMAN RESOURCES.

         The Vice President of Human Resources shall have full power and
authority to adopt, modify and rescind any and all regulations necessary or
appropriate for the administration of the Plan, and to make fair, equitable and
nondiscriminatory rulings and decisions on any questions which may arise with
respect to Participants and their Beneficiaries, payments and amounts of
retirement and other benefits, and on any question concerning the construction
or interpretation of the Plan. All such regulations, rulings and decisions of
the Vice President made in good faith shall be consistent with the Plan and
shall be final and binding as to all persons interested and as to all rights and
obligations hereunder. The Vice President shall serve without compensation but
shall be entitled to reimbursement from the Company for expenses of
administering this Plan, including, but not limited to, fees of accountants,
actuaries, counsel, investment advisors and other specialists, and, to the
extent permitted by ERISA, the Vice President shall be fully protected in any
action or failure to act taken by the Vice President in good faith reliance upon
the advice or opinions of such specialists. Nothing herein shall preclude the
Company from indemnifying the Vice President or other fiduciary from any
liabilities incurred by them in connection with the administration of this Plan
or from purchasing insurance to provide for such indemnification.


                                      -21-





                                   ARTICLE XI
                                   ----------

                 AMENDMENT, MODIFICATION OR TERMINATION OF PLAN


         11.01 - AMENDMENT OR MODIFICATION OF PLAN.

         The Company, by its appropriate officers on its behalf, shall have the
right, at any time and from time to time, to amend or modify the Plan by a
written instrument executed on behalf of the Company by such officers; provided,
however, that no amendment or modification shall have any adverse retroactive
effect on or reduce the benefit accrued before the amendment by eliminating or
reducing a retirement type subsidy or an early retirement benefit or eliminating
an optional form of benefit, with respect to benefits accrued before such
amendment, of any Corporate Officer, Participant or Beneficiary unless the same
shall be required by the Internal Revenue Service, or an officer or agent
thereof, or unless the same shall be required to comply with the Act, the
Internal Revenue Code or any other applicable law or laws.

         11.02 - TERMINATION OF THE PLAN.

         It is the expectation of the Company that it will continue the Plan
indefinitely, but the continuance of the Plan is not a contractual obligation of
the Company, or of any company, and is not in consideration of, an inducement
to, or condition of the employment of any person. The Company reserves the
right, by action of its Board of Directors, to terminate the Plan.


                                      -22-




                                   ARTICLE XII
                                   -----------

                     MERGER, CONSOLIDATION, ETC. OF THE PLAN


         Any provision herein to the contrary notwithstanding, this Plan shall
not be merged or consolidated with, nor shall any liabilities of this Plan be
transferred to any other plan unless each Participant hereunder will be entitled
to receive a benefit immediately after such merger, consolidation or transfer
which shall be equal to or greater than the benefit the Participant would have
been entitled to receive if this Plan had been terminated immediately prior to
such merger, consolidation or transfer.


                                      -23-





                                  ARTICLE XIII
                                  ------------

                            MISCELLANEOUS PROVISIONS


         13.01 - INALIENABILITY.

         No benefit or interest payable hereunder shall be alienated, disposed
of, sold, assigned or in any manner encumbered by any Participant or
Beneficiary.

         13.02 - FACILITY OF PAYMENT.

         Any payment which is otherwise required to be made to any person under
a disability may, in the discretion of the Vice President of Human Resources, be
made to or for the benefit of such person, notwithstanding such disability, to
any guardian, conservator or trustee of such person, to any spouse, child,
parent, other relative or any dependent of such person, or any one or more of
them, or may be applied directly to others on behalf of such person, in such
amount and to such of them as the Vice President may deem advisable. Any monthly
installment of retirement benefits due at the death of a Participant which
otherwise is required to be paid to the Participant's executor, Administrator or
estate may, when authorized by the Vice President, be paid to such Participant's
Beneficiary, or to the person designated by the decedent as beneficiary under
any group insurance policy provided for the Participant by the Company or to a
surviving spouse, child, parent, relative, dependent or next of kin of the
decedent.

         13.03 - LIABILITY LIMITED.

         No Participant or Beneficiary shall have any right or interest in this
Plan, nor shall the Company, nor the Vice President of Human Resources nor any
other officer, director or Corporate Officer of the Company, have any liability
or responsibility with respect to this Plan or under the Agreement, except as
may be otherwise expressly provided herein, in the Agreement or by the Act.

         13.04 - PERFORMANCE OF ACTS.

         Each Participant, Beneficiary or other person claiming any interest
hereunder agrees to furnish such data, perform any and all other acts and to
execute any and all applications or other


                                      -24-






documents as may be necessary or desirable for carrying out the intent of this
Plan and as may be required by the Vice President of Human Resources.

         13.05 - CLAIMS PROCEDURE.

         Claims for benefits under this Plan shall be filed by a Participant or
Beneficiary or other claimant with the Vice President of Human Resources of the
Company on forms to be supplied. Written notice of the disposition of the claim
shall be furnished the Participant within 30 days of the filing of such claim.
Any Participant, Beneficiary or other person claiming any interest hereunder who
is denied, in whole or in part, a claim for benefits under this Plan shall be
entitled, upon written request therefor to the Vice President, to receive in
written form a clear and concise statement explaining the computation of such
benefit or such other action under the Plan as to which such person shall
object, together with an explanation of the claims review procedure as set forth
in this Section 13.05 and any additional documents or information which may be
necessary to perfect such person's claim. Within 60 days after receipt by such
person of the statement and explanation described in the preceding sentence,
such person, if desiring further consideration of the claim, shall file with the
Vice President, in written form a statement in support of the position together
with a request for reconsideration of such claim and, if desired, a request for
hearing before the Vice President thereon. If requested, and if in the
discretion of the Vice President, necessary or desirable, the Vice President
shall schedule an opportunity for a full and complete hearing within 30 days
after receipt of such request for reconsideration, and a final and binding
decision shall be made within 30 days after the date of such hearing or within
30 days after the receipt of such request for reconsideration if no hearing
shall be held. Such decision shall be communicated in writing to such person
together with a statement of the reasons therefor.

         13.06 - DEFINITIONS.

         The terms used in this Plan, unless otherwise defined herein, have the
same meaning and definition as those terms are used in the HCR Pension Plan.


                                      -25-






         IN WITNESS WHEREOF, Manor Care, Inc. has caused this HCR Manor Care
Senior Executive Retirement Plan, to be adopted and effective as of January 1,
2001.

                                        MANOR CARE, INC.



                                        By: /s/ Paul A. Ormond
                                           -------------------------------------
                                           President and Chief Executive Officer

                                        Date: 1/6/01
                                             -----------------------------------


ATTEST:


By: /s/ R. Jeffrey Bixler
   -------------------------
        Secretary



                                      -26-






                                   APPENDIX A

                                 HCR MANOR CARE
                        SENIOR EXECUTIVE RETIREMENT PLAN
                        --------------------------------

                          LIST OF COVERED PARTICIPANTS
                          ----------------------------

                              AS OF JANUARY 1, 2001


                 The list of Covered Participants is maintained
                      in the office of the Vice President,
                 Director of Human Resources and Labor Relations



                                      -27-

EX-10.14

                                                                   Exhibit 10.14













                                MANOR CARE, INC.

                         SENIOR MANAGEMENT SAVINGS PLAN

                             FOR CORPORATE OFFICERS













                            Effective January 1, 1993

                         Restated as of January 1, 2001







                                MANOR CARE, INC.
                                ----------------
              SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS
              -----------------------------------------------------

         In exercise of the powers and authority conferred upon and reserved to
the Board of Directors of Manor Care, Inc. under and by virtue of Article VIII
of the First Amended and Restated Health Care and Retirement Corporation Senior
Management Savings Plan For Corporate Officers, the Board hereby amends,
restates and renames said Plan, to read as set forth in the document attached
hereto and incorporated herein, entitled "Manor Care, Inc. Senior Management
Savings Plan For Corporate Officers", herein called the "Amended and Restated
Plan" and in such document called the "Plan".

         In no event shall the adoption of the Amended and Restated Plan
pursuant to this instrument cause any benefit under the Plan that is accrued or
treated as accrued to be less than such benefit immediately before the adoption
of this Amended and Restated Plan.

         The Amended and Restated Plan shall be effective, except as otherwise
stated, January 1, 2001.

         IN WITNESS WHEREOF, the Board has caused the Amended and Restated Plan
to be executed by a duly authorized officer as of the 1st day of January, 2001.

                                         MANOR CARE, INC.


                                         By /s/ Paul A. Ormond
                                            -----------------------------------
                                            President

ATTEST:

/s/ R. Jeffrey Bixler
- -----------------------------
Secretary






                                MANOR CARE, INC.
                                ----------------
              SENIOR MANAGEMENT SAVINGS PLAN FOR CORPORATE OFFICERS
              -----------------------------------------------------

                                    ARTICLE I
                                    ---------

                    NAME, EFFECTIVE DATE AND PURPOSE OF PLAN
                    ----------------------------------------

1.01     The name of this plan is the "Manor Care, Inc. Senior Management
Savings Plan For Corporate Officers", formerly known as the "First Amended and
Restated Health Care and Retirement Corporation Senior Management Savings Plan
For Corporate Officers", hereinafter called the "Plan".

1.02     The effective date of the Plan, as amended and restated, is January 1,
2001.

1.03     The purpose of this Manor Care, Inc. Senior Management Savings Plan for
Corporate Officers is to permit selected executive officers of Manor Care, Inc.
and certain companies affiliated with it to elect to defer receipt of all or
part of their compensation. To the extent any of such officers are unable to
participate in the HCR Stock Purchase and Retirement Savings Plan, this Plan is
also intended to provide them, as nearly as practicable, with an equivalent
benefit. The Plan is and is intended to be an unfunded deferred compensation
plan for a select group of management or highly compensated employees, commonly
known as a "top hat" plan.


                                       -1-





                                   ARTICLE II
                                   ----------

                                   DEFINITIONS
                                   -----------

2.01     "Account" means a Deferral Account or Matching Account.

2.02     "Annual Award" means an "Annual Bonus Award" as defined in and payable
         to an Officer under the Annual Award Plan.

2.03     "Annual Award Plan" means the Manor Care, Inc. Annual Incentive Award
         Plan, as from time to time in effect.

2.04     "Award" means an Annual Award or a Performance Award.

2.05     "Award Period" means, with respect to an Annual Award, the calendar
         year to which it relates and, with respect to a Performance Award,
         means the "Award Period", as defined in the Performance Award Plan, to
         which it relates.

2.06     "Board" means the Board of Directors of Manor Care, Inc. or any
         committee of said Board of Directors to which any or all of its powers
         or duties under the Plan may be delegated.

2.07     "CEO" means the Chief Executive Officer of Manor Care, Inc. or as the
         context hereof may indicate, any other officer, employee, or committee
         of Manor Care, Inc. designated by said CEO to whom any or all of the
         CEO's powers or duties under the Plan may be delegated.

2.08     "Code" means the Internal Revenue Code of 1986, as amended.

2.09     "Company" means Manor Care, Inc. and its Subsidiaries.

                                       -2-





2.10     "Compensation" means any salary, bonus, and/or other form of current
         cash remuneration


         for services rendered to or on behalf of the Company by an Officer,
         other than an Award.

2.11     "Deferral Account" means a deferred compensation memorandum account
         established and maintained on the books of the Company to reflect the
         value of a Participant's interest in the Plan attributable to his
         Deferral Elections.

2.12     "Deferral Election" means an election made by a Participant pursuant to
         and in accordance with Section 5.01 of the Plan.

2.13     "401(k) Plan" means the HCR Stock Purchase and Retirement Savings Plan,
         as from time to time in effect.

2.14     "Investment Unit" means a unit of value by which the value of a
         Participant's Accounts is determined pursuant to and in accordance with
         Section 6.03 of the Plan.

2.15     "Matching Account" means a deferred compensation memorandum account
         established and maintained on the books of the Company to reflect the
         value of a Participant's interest in the Plan attributable to the
         Company's Matching Credits for his benefit.

2.16     "Matching Credit" means a credit by the Company to a Participant's
         Matching Account pursuant to and in accordance with Section 5.03 of the
         Plan.

2.17     "Officer" means an executive officer of the Company eligible to
         participate in the Plan pursuant to and in accordance with Article IV
         of the Plan.

2.18     "Participant" means an eligible Officer who becomes a Participant in
         the Plan as provided in Article IV of the Plan.

                                       -3-





2.19     "Performance Award" means a "Performance Award" as defined in and
         payable to an Officer under the Performance Award Plan.



2.20     "Performance Award Plan" means the Manor Care, Inc. Performance Award
         Plan, as from time to time in effect.

2.21     "Plan" means this Manor Care, Inc. Senior Management Savings Plan for
         Corporate Officers, as further amended from time to time.

2.22     "Subsidiary" means a corporation (or unincorporated business entity) 50
         percent or more of the voting shares (or other ownership interests) of
         which are owned, directly or indirectly, by Manor Care, Inc.

2.23     Words of the masculine gender include correlative words of the feminine
         and neuter genders and vice versa, and words denoting the singular
         include the plural and vice versa.


                                       -4-





                                   ARTICLE III
                                   -----------

                                 ADMINISTRATION
                                 --------------

         The Plan shall be administered by the Board. The administrative powers
of the Board shall include the powers to interpret the Plan and to exercise full
and complete discretion to adopt, modify, and/or rescind (or to authorize the
CEO or one or more other appropriate officers of Manor Care, Inc. to adopt,
modify, and/or rescind) any rulings, determinations, policies, or procedures
deemed necessary or appropriate for the maintenance and administration of the
Plan. No member of the Board who is not an employee of the Company shall be
eligible to participate in the Plan, but a member of the Board who is otherwise
eligible to participate in the Plan shall not be disqualified from such
participation solely by reason of such Board membership. Any provision hereof to
the contrary notwithstanding, only the Board may exercise any discretionary
and/or administrative authority under the Plan with respect to the CEO's
participation in the Plan, and the Board may not delegate any such authority to
the CEO or to any other officer, employee, or committee of Manor Care, Inc.
(other than a committee of the Board of which the CEO is not a voting member).



                                       -5-





                                   ARTICLE IV
                                   ----------

                         ELIGIBILITY AND PARTICIPATION.
                         ------------------------------

4.01     Each officer of the Company who is a "highly compensated employee" of
the Company (within the meaning of Section 414(q) of the Code) and who is
otherwise eligible to participate in the 401(k) Plan, but is excluded therefrom
solely because, as determined by the Board, his participation in the 401(k) Plan
would jeopardize the qualification of the 401(k) Plan under Section 401(a) of
the Code, shall be eligible to participate in this Plan.

4.02     Any other officer of the Company who is a "Participant" under (and as
defined in) either or both of the Annual or Performance Award Plans shall be
eligible to participate in this Plan if, and for so long as, he is selected to
do so by the CEO, but only with respect to his Awards and not with respect to
his Compensation.



                                       -6-





                                    ARTICLE V
                                    ---------

                     DEFERRAL ELECTIONS AND MATCHING CREDITS
                     ---------------------------------------

5.01     Each Officer eligible to participate in the Plan under Section 4.01 of
the Plan may elect from time to time, by written notice to the Vice President,
Human Resources of the Company, given before the first day of any regular
Company pay period, to defer his receipt, subject to the provisions of the Plan,
of a specified part of his Compensation earned in the next pay period and
thereafter. The amount of a Participant's Compensation to be deferred pursuant
to his Deferral Elections under this Plan without Board approval shall not
exceed, on an annual basis, 50% of his Compensation. With Board approval a
Participant may elect to defer on an annual basis more than 50% and up to 100%
of his Compensation.

5.02     A Participant may elect prospectively by written notice to the Vice
President, Human Resources of the Company, to change the rate of or revoke his
Deferral Election with respect to his future Compensation at such times and with
such frequency as may be permitted pursuant to rules and procedures of uniform
application adopted by the Company. Until so changed or revoked, a Participant's
Deferral Election shall remain in effect with respect to all Compensation earned
by the Participant after the date thereof.

5.03     The Company shall post a Matching Credit to the Matching Account of
each Executive who has made a Deferral Election under Section 5.01 in an amount
equal to 50 percent of the amount of such Deferral Election, up to a maximum
annual Matching Credit equal to the Excess of:

         (a)      three percent of the sum of the Participant's Compensation and
                  Annual Award that absent of a Deferral Election would be
                  payable in a calendar year, over

         (b)      the amount of the annual "Company Matching Contribution" made
                  on his behalf under (and as defined in) the 401(k) Plan during
                  the same calendar year.


                                       -7-





5.04     For purposes of Sections 5.01 and 5.03 of the Plan, a Participant who
is eligible to participate in the 401(k) Plan for all or any part of a year
shall be deemed conclusively to have made "Employee MTSO Contributions" under
(and as defined in) the 401(k) Plan in the maximum amount which is permitted to
make thereunder for the period of such eligibility.

5.05     Each Officer eligible to participate in the Plan under Section 4.02 of
the Plan may elect from time to time, by written notice to the CEO or, in the
case of an election by the CEO, to the Board, given on or before December 31 of
any year, to defer his receipt without Board approval, subject to the provisions
of the Plan, of up to 100% of his Annual or Performance Award, if any, for the
applicable Award Period next following. .

5.06     Each Deferral Election with respect to an Award shall be irrevocable
and shall apply only to the Award with respect to which it is made. A
Participant may elect prospectively to change the rate of or revoke his Deferral
Election with respect to his future Compensation at such times and with such
frequency as may be permitted pursuant to rules and procedures of uniform
application adopted by the Board. Until so changed or revoked such a Deferral
Election shall remain in effect with respect to all future Compensation earned
by the Participant.





                                       -8-





                                   ARTICLE VI
                                   ----------

                                    ACCOUNTS
                                    --------

6.01     All amounts deferred under the Plan shall be credited by the Company,
as of the date such amounts would otherwise be payable to the Participant in the
absence of a Deferral Election, to the Participant's Deferral Account. All
Matching Credits shall be posted concurrently with the deferred amounts to which
they relate.

6.02     The dollar amounts credited to each Account shall be converted to, and
thereafter expressed in terms of a number of Investment Unity and the value of
each Account shall at all times be equal to the value of the Investment Units so
allocated to it. The Investment Units available for allocation under the Plan
shall be equivalent in value and rate of return to:

         (a)      Shares of the common stock of Manor Care, Inc. ("Company Stock
                  Unit ");

         (b)      Shares of the registered investment companies (mutual funds)
                  sponsored by Harbor Capital Advisors, Inc. ("Harbor Fund
                  Units");

         (c)      Units of participation in the series of funds offered by
                  Harbor Trust, a qualified group trust sponsored by Harbor
                  Capital Advisors, Inc. ("Harbor Trust Units"); and

         (d)      A hypothetical bond or other evidence of indebtedness in the
                  principal amount of each amount credited to a Deferral Account
                  on which interest, compounded monthly, is paid at an annual
                  rate equal from time to time to the average annual yield on
                  domestic corporate bonds of Moody's A-rated companies (as most
                  recently reported in the Survey of Current Business published
                  by the United States Department of Commerce or a successor
                  publication) or at such other rate as the Board may at any
                  time and from time to time designate prospectively (the
                  "Moody's A Bond Units").


                                       -9-





The value of an Investment Unit (other than a Moody's A Bond Unit) shall at all
times be equal to the value of its equivalent under the 401(k) Plan. The Board
may, in its discretion, adopt or cause to be adopted any other method of
accounting for the value of the Accounts that accurately reflects the value and
rate of return of the Investment Unit equivalencies allocated to the Accounts.

6.03     Each Participant, at the time of making a Deferral Election, shall
specify in writing the percentage of each amount to be credited to his Deferral
Account that is to be allocated to Company Stock Units, one or more of the
Harbor Fund and/or Harbor Trust Units, and/or Moody's A Bond Units. All amounts
credited to Matching Accounts shall be allocated to Company Stock Units.
Whenever interest, dividends, or any other form of realized investment return
are paid on any of the Investment Unit equivalencies, a like amount shall be
credited to each Account to which such Investment Units have been allocated and
shall be allocated to additional Investment Units of the same equivalency.

6.04     A Participant may change the allocation of amounts to be credited to
his Deferral Account in the future, and/or of amounts previously credited to his
Deferral Account, at such times and with such frequency as may be permitted
pursuant to rules and procedures of uniform application adopted by the Board;
provided, however, that no amount previously allocated to Company Stock Units in
the Participant's Matching Account may be reallocated to any other Investment
Unit.

6.05     The Company shall be under no duty to segregate or set aside any amount
credited to any Account from the general assets of the Company, but the Board
may, in its discretion, direct the establishment of any trusteed, insured, or
other payment arrangement from which the Company's obligations as to a
Participant under the Plan may be paid. No Participant, beneficiary, estate, or
other person claiming through or under a Participant shall have any legal or
beneficial property interest whatsoever in any assets of the Company or in any
such payment arrangement which may be established at the direction of the Board
except as may be expressly provided by such payment arrangement. Neither the
establishment of an Account nor the crediting of any amounts thereto nor

                                      -10-



the establishment of any payment arrangement (except as may be expressly
provided by such payment arrangement) shall be deemed to create a trust of any
kind, any fiduciary relationship between the Company and any person, or any
collateral security for the Company's obligations under the Plan. To the extent
that a Participant or any other person acquires a right to receive any payment
from the Company under this Plan, such right shall be no greater than that of
any other unsecured general creditor of the Company. The Company shall provide
to each Participant who has made any Deferral Election, at least annually, a
statement of his Account balances.



                                      -11-





                                   ARTICLE VII
                                   -----------

                           PAYMENT OF ACCOUNT BALANCES
                           ---------------------------

7.01     Each Participant shall at all times have a nonforfeitable, fully vested
interest in the amount credited to his Deferral Account. Each Participant who
was a participant in the 401(k) Plan before January 1, 1992 shall at all times
have a nonforfeitable, fully vested interest in the amount credited to his
Matching Account. Each Participant who first became a participant in the 401(k)
Plan or this Plan after December 31, 1991 shall have a nonforfeitable, vested
interest in a portion of his Matching Account determined by reference to the
length of his combined participation in the 401(k) Plan and this Plan, according
to the following table:

                 Combined Years                                 Vested
                  of Participation                           Percentage
                  ----------------                           ----------

                 Less than one.....................................  20%
                 One but less than two.............................  40%
                 Two but less than three...........................  60%
                 Three but less than four..........................  80%
                 Four or more...................................... 100%

Notwithstanding the foregoing, in the event of the termination of the Plan, each
Participant shall thereupon have a nonforfeitable, fully vested interest in the
entire amount credited to his Matching Account.

7.02     The entire amount credited to a Participant's Accounts shall become
payable upon termination of the Participant's employment with the Company by
reason of his death, total and permanent disability, or normal or early
retirement pursuant to any retirement plan sponsored by the Company. The
nonforfeitable, vested portion of a Participant's Accounts shall become payable
upon termination

                                      -12-




of the Participant's employment with the Company for any other reason. Amounts
so payable shall be paid to the Participant in cash in a lump sum as soon as
practicable after such termination of employment, but in no event later than
March 31 of the following year. However, if at least one year prior to his
retirement, or termination of employment, the Participant may make an
irrevocable election to delay receiving his benefits from the Plan to a date
specific on or before the Participant attains age 65. In addition, if at least
one year prior to his retirement, or termination of employment, the Participant
may make an irrevocable election to receive his benefits in installment
payments. If a Participant elects distribution in the form of installment
payments, he shall further designate the commencement date and period of time
(not to exceed 20 years) over which the installment payments are to be made and
whether such installment payments are to be made on a monthly, quarterly,
semi-annual or annual basis. During the period such installment payments are
being made, the remaining balances in the Participant's Accounts shall continue
to be credited with earnings or losses in accordance with the provisions of
Article VI of the Plan. For purpose of a Participant who is retiring or
terminating employment in 2001, such election must be given to the CEO on or
before March 31, 2001.

7.03     In the event of a Participant's death before his Accounts have been
paid to him in full, the entire amount then credited to his Accounts shall be
paid in cash in a lump sum to the beneficiary or beneficiaries named by him in a
written designation filed with the Company (or, in the absence of such a
designation, to his estate).

7.04     Before termination of employment, a Participant may request a
withdrawal from any portion of his Deferral Account not allocated to Company
Stock Units of an amount sufficient to meet a hardship. For these purposes a
"hardship" shall mean a demonstrated and sever financial hardship resulting from
any one or more of the following:

         (a)      a sudden and unexpected illness or accident of the Participant
                  or of a dependent (as defined in Section 152(a) of the Code)
                  of the Participant;


                                      -13-



         (b)      a loss of the Participant's property due to casualty; or





         (c)      any other similar extraordinary and unforeseeable
                  circumstances arising as a result of events beyond the
                  Participant's control;

in each case only to the extent that the "hardship" is not relieved:

         (a)      through reimbursement or compensation by insurance or
                  otherwise;

         (b)      by liquidation of the Participant's assets (to the extent that
                  such liquidation does not itself cause a "hardship); or

         (c)      cessation of deferrals under the Plan.

The Board shall determine the existence of a bona fide hardship based on
non-discriminatory procedures, taking into account any then applicable rulings
or regulations from the Internal Revenue Service. The standards established by
the Board for determining the existence of a hardship shall be uniformly applied
to all Participants who request such a withdrawal, and the Board's decision with
respect to each such request shall he final. An approved hardship withdrawal
shall be paid to the Participant in cash as soon as practicable after approval.



                                      -14-





                                  ARTICLE VIII
                                  ------------

                       QUALIFIED DOMESTIC RELATIONS ORDER
                       ----------------------------------

8.01 Benefits shall be payable to an individual other than a Participant in
accordance with the applicable requirements of a Qualified Domestic Relations
Order pursuant to the following provisions:

         (a)      The term "Qualified Domestic Relations Order" shall mean any
                  judgment, decree, or court order (including approval of a
                  property settlement agreement) which relates to the provision
                  of child support, alimony payments, or marital property rights
                  to a spouse, former spouse, child or other dependent of a
                  Participant (collectively an "Alternate Payee" as defined in
                  Section 414(p)(8) of the Code), which creates or recognizes
                  the existence of an Alternative Payee's right to, or assigns
                  to an Alternate Payee the right to, receive all or a portion
                  of the benefits payable with respect to a Participant under
                  the Plan, and which meets the following requirements:

                  (1)      Such order shall specify the name and last known
                           mailing address (if any) of the Participant and each
                           Alternate Payee covered by the order;

                  (2)      Such order shall specify the amount or percentage of
                           the Participant's benefits to be paid by the Plan to
                           each such Alternate Payee or the manner in which such
                           amount or percentage is to be determined, or in the
                           alternative the amount or percentage transferred from
                           the Participant's Accounts to Accounts set up for the
                           Alternate Payee as of a given date;

                  (3)      Such order shall provide when the Alternate Payee may
                           first take a distribution of the Alternate Payee's
                           Accounts, if silent the Alternate Payee's Accounts
                           would first be distributable, unless limited by the
                           order, when the Participant is first eligible to take
                           a distribution of the Participant's Accounts

                                      -15-






                           pursuant to Section 7.02 hereof;

                  (4)      If applicable, such order shall specify the number of
                           payments or period to which the order applies;

                  (5)      Such order shall identify the Plan as to which the
                           order applies;

                  (6)      Such order shall not require the Plan to provide any
                           type or form of benefits or any option not otherwise
                           provided under the Plan;

                  (7)      Such order shall not require the Plan to provide
                           increased benefits (determined on the basis of
                           actuarial value); and

                  (8)      Such order shall not require the payment of benefits
                           to an Alternate Payee which are required to be paid
                           to another Alternate Payee under another order
                           previously determined to be a Qualified Domestic
                           Relations Order.

         (b)      The Company shall determine a set of nondiscriminatory and
                  reasonable procedures to determine the qualified status of a
                  domestic relations order and to administer distributions under
                  such qualified orders in accordance with Section 414(p) of the
                  Code.

8.02     If pursuant to a Qualified Domestic Relations Order, all or a portion
of a Participant's Accounts in the Plan have been transferred to corresponding
Accounts in the Plan set up for a spouse, former spouse, child or other
dependent of the Participant (collectively an "Alternate Payee" as defined in
section 414(p)(8) of the Code), such Accounts shall be distributable to the
Alternate Payee, unless otherwise limited by the order, when the Participant is
first eligible to take a distribution of the Participant's Accounts pursuant to
Section 7.02.


8.03     If pursuant to a Qualified Domestic Relations Order, the Alternate
 Payee may take a

                                      -16-







distribution of the Alternate Payee's Accounts when the Participant attains
"earliest retirement age" under the Plan, for purpose of this provision, such
Accounts shall be distributable to the Alternate Payee when the Participant
attains age 50 or anytime thereafter.

8.04     If pursuant to a Qualified Domestic Relations Order, the Alternate
Payee may take a distribution of the Alternate Payee's Account at the time the
Alternate Payee's Accounts are established, such Accounts shall be immediately
or anytime thereafter distributable to the Alternate Payee.

8.05     Not withstanding the foregoing, if the Alternate Payee will be
receiving a Qualified Domestic Relations Order distribution from the 401(k)
Plan, the timing of the Alternate Payee's distribution from this Plan, should
coincide with the Alternate Payee's distribution from the 401(k) Plan.

8.06     If the present value of the Alternate Payee's Accounts does not exceed
$5,000 when established or thereafter, such Alternate Payee's Accounts shall be
paid to the Alternate Payee in a lump sum, in an amount equal to such present
value.

                                      -17-





                                   ARTICLE IX
                                   ----------

                      AMENDMENT AND TERMINATION OF THE PLAN
                      -------------------------------------

         The Board may at any time and from time to time amend, suspend, or
terminate the Plan in whole or in part and may, in connection with any Plan
termination, elect in its sole discretion to either continue to maintain the
Participants' accounts under the Plan or fully vest each Participant's account
and distribute the entire amount credited to the Participant's accounts;
provided, however, that no such amendment, suspension, or termination may,
without the consent of each Participant affected thereby, have any adverse
retroactive effect on the rights of any Participant (or any person claiming
through or under him) under the Plan unless required by applicable law.



                                      -18-




                                    ARTICLE X
                                    ---------

                                  MISCELLANEOUS
                                  -------------

10.01    At the request of a Participant or on its own initiative, the Board
may, at any time and in its sole and unlimited discretion, accelerate the
payment of any part of a Participant's Deferral Account not allocated to Company
Stock Units, if the Board determines that such accelerated payment would be in
the interests of such Participant and not prejudicial to the interests of other
Participants or the Company.

10.02    Nothing in the Plan shall confer on any Participant or any other
employee of the Company any right to continue in the employ of the Company or
affect in any way the right of the Company to terminate any such person's
employment at any time.

10.03    Except as otherwise provided in Article VIII, rights under the Plan
shall not be assignable or transferable or subject to encumbrance or charge of
any nature, other than by designation of beneficiary to take effect at death or,
in the absence of such designation, by will or the laws of descent and
distribution.

10.04    The Plan shall be binding on and inure to the benefit of the Company,
each Participant, and every person claiming through or under a Participant, and
their respective heirs, successors, and assigns.

10.05    Deferral Elections under the Plan are intended to defer Participants'
recognition of income, for purposes of the Code, until their actual receipt of
payments from their Accounts, and the Plan shall be interpreted and administered
in a manner consistent with such intent.


                                      -19-

EX-10.15

                             FIRST AMENDMENT TO THE
                             ----------------------
                 MANOR CARE, INC. SENIOR MANAGEMENT SAVINGS PLAN
                 -----------------------------------------------
                             FOR CORPORATE OFFICERS
                             ----------------------


In exercise of the powers and authority conferred upon and reserved to the Board
of Directors of Manor Care, Inc. under and by virtue of Article VIII of the
Manor Care, Inc. Senior Management Savings Plan For Corporate Officers, the
Board hereby amends said Plan in the manner and to the extent set forth herein:

1.       Section 2.19 and 2.20 of the Plan are renumbered 2.20 and 2.21
         respectively. A new Section 2.19 is added to the Plan to read as
         follows:
         "2.19    "Retirement" means the termination of employment with the
                  Company for reasons other than death after a Participant has
                  attained age 65 or has attained age 55 or older with ten or
                  more years of service with the Company."

2.       Section 7.02 of the Plan is amended to read as follows:
         "7.02.   The entire amount credited to a Participant's Accounts shall
                  become payable upon termination of the Participant's
                  employment with the Company by reason of his death, total and
                  permanent disability, or Retirement. The nonforfeitable,
                  vested portion of a Participant's Accounts shall become
                  payable upon termination of the Participant's employment with
                  the Company for any other reason. Amounts so payable shall be
                  paid to the Participant at the election of the Participant in
                  cash or in shares of Manor Care, Inc. common stock, or a
                  combination thereof, in a lump sum payment as soon as
                  practicable after such termination of employment, but in no
                  event later than January 31 of the following year. However, at
                  least one year prior to his Retirement, the Participant may
                  make an irrevocable election to delay receiving his benefits
                  from the Plan to a date specific on or before the Participant
                  attains age 65. In addition, at least one year prior to his
                  Retirement, the Participant may make an irrevocable election
                  to receive his benefits in


                                      -1-


                  installment payments. If a Participant elects distribution in
                  the form of installment payments, he shall further designate
                  the commencement date and period of time (not to exceed ten
                  years) over which the installment payments are to be made.
                  Such installment payments shall be made on an annual basis in
                  the month of January commencing the first January following
                  the Participant's Retirement. During the period such
                  installment payments are being made, the remaining balances in
                  the Participant's Accounts shall continue to be credited with
                  earnings or losses in accordance with the provisions of
                  Article VI of the Plan. For purpose of a Participant who is
                  retiring in 2001, such election must be given to the CEO on or
                  before December 31, 2001."

3.       Appendix A, List of Covered Officers, attached hereto, has been revised
         as of September 1, 2000.

4.       The amendments set forth in this First Amendment to the Manor Care,
         Inc. Senior Management Savings Plan for Corporate Officers shall be
         effective January 1, 2001 unless otherwise stated.

5.       The Manor Care, Inc. Senior Management Savings Plan for Corporate
         Officers, as amended, shall continue in full force and effect.

IN WITNESS WHEREOF, the Board of Directors of Manor Care, Inc. has caused this
First Amendment to the Manor Care, Inc. Senior Management Savings Plan for
Corporate Officers to be executed by its duly authorized officers as of the 1st
day of January, 2001.

                             MANOR CARE, INC.



                             By  /s/ Paul A. Ormond
                                 ------------------------------------------
                                 President and Chief Executive Officer

ATTEST:



                                      -2-


By /s/ R. Jeffrey Bixler
   ----------------------------------
     Secretary


                                      -3-



                                   APPENDIX A
                                   ----------

                                MANOR CARE, INC.
                         SENIOR MANAGEMENT SAVINGS PLAN
                             FOR CORPORATE OFFICERS
                             ----------------------


                            LIST OF COVERED OFFICERS
                            ------------------------

                             AS OF SEPTEMBER 1, 2000


                   The list of Covered Officers is maintained
                      in the office of the Vice President,
                 Director of Human Resources and Labor Relations


                                     - A-1 -

EX-21

                                                                      EXHIBIT 21

                                Manor Care, Inc.
                           Subsidiaries of the Company

Manor Care, Inc. is a Delaware corporation. The following list sets forth the
principal subsidiaries of the Company and the place of their incorporation.
Except as otherwise noted, all of these subsidiaries are directly or indirectly
wholly owned by the Company.

1.       ManorCare Health Services, Inc., a Delaware corporation - includes 48
         active omitted subsidiaries operating in the United States and
         providing health care services.
2.       New ManorCare Health Services, Inc., a Delaware corporation - includes
         2 active omitted subsidiaries operating in the United States and
         providing health care services.
3.       Four Seasons Nursing Centers, Inc., a Delaware corporation.
4.       Health Care and Retirement Corporation of America, an Ohio corporation
         - includes 19 active omitted subsidiaries operating in the United
         States and providing health care services.
5.       Heartland Rehabilitation Services, Inc., an Ohio corporation - includes
         21 active omitted subsidiaries operating in the United States and
         providing health care services.
6.       HCR Home Health Care and Hospice, Inc., an Ohio corporation - includes
         two active omitted subsidiaries operating in the United States and
         providing health care services.
7.       In Home Health, Inc., a Minnesota corporation.
8.       MileStone Healthcare, Inc., a Delaware corporation.
9.       HCR ManorCare Mesquite, L.P., a Delaware Limited Partnership.
10.      Heartland Medical Information Services, Inc., an Ohio corporation, of
         which the Company owns approximately 97 percent of its common stock.
11.      MNR Finance Corp., a Delaware corporation.












                                       1

EX-23

                                                                      EXHIBIT 23



                         Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statement (Form
S-8, No. 333-64181) pertaining to the Health Care and Retirement Corporation
Stock Option Plan for Outside Directors and the Stock Option Plan for Key
Employees of Health Care and Retirement Corporation, the Registration Statement
(Form S-8, No. 333-81833) pertaining to the Manor Care, Inc. Retirement Savings
and Investment Plan of HCR Manor Care, Inc., the Registration Statement (Form
S-8, No. 333-93575) pertaining to the Manor Care, Inc. Nonqualified Retirement
Savings and Investment Plan of Manor Care, Inc., the Registration Statement
(Form S-8, No. 333-93573) pertaining to the HCR Stock Purchase and Retirement
Savings Plan of Manor Care, Inc., and the Registration Statement (Form S-8, No.
333-67592) pertaining to The Equity Incentive Plan of Manor Care, Inc. of our
report dated January 24, 2002, except for Notes 17 and 18, as to which the date
is February 25, 2002, with respect to the consolidated financial statements and
schedule of Manor Care, Inc. included in the Annual Report (Form 10-K) for the
year ended December 31, 2001.


                                                            /s/Ernst & Young LLP


Toledo, Ohio
March 12, 2002