<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Manor Care, Inc.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Manor Care, Inc.
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1
- - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - - --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - - --------------------------------------------------------------------------------
(3) Filing party:
- - - --------------------------------------------------------------------------------
(4) Date filed:
- - - --------------------------------------------------------------------------------
- - - ---------------
/1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
PRELIMINARY
Notice of Annual Meeting
and Proxy Statement
------------------------------
MANOR CARE, INC.
------------------------------
Annual Meeting of Stockholders
September 9, 1994
<PAGE> 3
MANOR CARE, INC.
10750 Columbia Pike
Silver Spring, Maryland 20901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 9, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Manor Care, Inc. (the "Company"), will be held at the Clarion Hotel,
1981 North Central Expressway, Richardson, Texas, on September 9, 1994,
at 9:00 a.m., to consider and vote upon the following matters:
1. To elect a Board of Directors consisting of seven persons to serve
until the next Annual Meeting of Stockholders of the Company and
until their successors are duly elected and qualified.
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock from
80,000,000 shares to 160,000,000 shares.
3. To approve the Manor Care, Inc. Non-Employee Director Stock Option
and Deferred Compensation Stock Purchase Plan.
4. To transact such other business as may properly come before such
meeting or any adjournment thereof.
The close of business on July 13, 1994, has been fixed as the
record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof.
Your management sincerely desires the presence in person of every
stockholder able to attend the meeting; however, in order to be assured
of the representation of the greatest number of stockholders either in
person or by proxy, it is requested that you date and sign the
accompanying proxy and return it as promptly as possible in the enclosed
self-addressed envelope. No postage is required if mailed in the United
States.
If you attend the meeting in person, you may revoke your proxy at
such meeting and cast your vote in person. If you receive more than one
proxy because your shares are held in various names or accounts, each
proxy should be completed and returned.
By Order of the Board of Directors:
James H. Rempe
Secretary
Silver Spring, Maryland
August 8, 1994
<PAGE> 4
MANOR CARE, INC.
10750 Columbia Pike
Silver Spring, Maryland 20901
301-681-9400
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 9, 1994
INTRODUCTION
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Manor Care, Inc. (the "Company"), a Delaware corporation,
to be used at the 1994 Annual Meeting of Stockholders to be held on
Friday, September 9, 1994, at 9:00 a.m., at the Clarion Hotel, 1981
North Central Expressway, Richardson, Texas, and at any and all
adjournments thereof. All shares represented by proxies will be voted
at the meeting in accordance with the specifications marked thereon, or
if no specifications are made, proxies will be voted FOR all matters set
forth in the attached Notice of Meeting and in the discretion of the
proxy holder as to any other business which comes before the meeting.
Any stockholder giving a proxy may revoke the same at any time prior to
the voting of such proxy by giving written notice of revocation to the
Secretary, by submitting a later dated proxy or by attending the meeting
and voting in person. The Proxy Statement is first being mailed to
stockholders on or about August 8, 1994.
The Company's Annual Report (including certified financial
statements) for the fiscal year ended May 31, 1994, is accompanying this
Proxy Statement. The Annual Report is not a part of the proxy
soliciting material.
Except where the context requires otherwise, the term "Company"
includes Manor Care, Inc. and its subsidiaries.
VOTING AT THE MEETING
The Board of Directors has fixed July 13, 1994, as the record date
for determination of stockholders entitled to notice of and to vote at
the Meeting. On that date, there were outstanding 62,359,897 shares of
Common Stock, par value $.10 per share. Each such share of Common Stock
is entitled to one vote.
The presence in person or by proxy of the holders of a majority of
the Company's outstanding shares of Common Stock will constitute a
quorum. The affirmative vote of the holders of a majority of the
Company's outstanding shares of Common Stock will be necessary for
approval of the
1
<PAGE> 5
amendment to the Company's Certificate of Incorporation
to increase the authorized Common Stock from 80,000,000 shares to
160,000,000 shares and for approval of the Manor Care, Inc. Non-Employee
Director Stock Option and Deferred Compensation Purchase Plan. A
plurality of the shares present and voting at the meeting, in person or
by proxy, will be necessary for the election of directors and for the
taking of all other action at the meeting.
A stockholder who is present in person or by proxy at the Annual
Meeting and who abstains from voting on any or all proposals will be
included in the number of stockholders present at the meeting for the
purpose of determining the presence of a quorum. However, an abstention
with respect to any matter will not be counted either in favor of or
against such matter.
Brokers who hold shares for the account of their clients may vote
such shares either as directed by their clients or in their own
discretion if permitted by the exchange or other organization of which
they are members. Members of the New York Stock Exchange are permitted
to vote their clients' proxies in their own discretion as to the
election of directors but not as to the Company's proposals relating to
the amendment to the Company's Certificate of Incorporation increasing
the authorized number of shares of Common Stock and the approval of the
Manor Care, Inc. Non-Employee Director Stock Option and Deferred
Compensation Purchase Plan. Shares held by a broker who does not
receive instructions on these matters will not be voted. Proxies which
are voted by brokers on some but not all of the proposals are referred
to as "broker non-votes." Broker non-votes will be included in
determining the presence of a quorum. However, a broker non-vote is not
treated as being in favor of or against such matter.
If any nominee for election to the Board of Directors named in
this Proxy Statement shall become unavailable for election for any
reason, the proxy will be voted for a substitute nominee selected by the
Board of Directors, or the Board of Directors may elect not to fill the
vacancy and reduce the number of directors.
SOLICITATION OF PROXIES
The cost of the proxy solicitations will be borne by the Company.
In addition to the use of the mails, proxies may be solicited by the
directors, officers and employees of the Company without additional
compensation, by personal interview, telephone, telegram or otherwise.
Arrangements may also be made with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of soliciting material to
the beneficial owners of Company Common Stock held of record by such
persons, and the Company will reimburse such respective brokers,
custodians, nominees and fiduciaries for the reasonable out-of-pocket
expenses incurred by them in connection therewith.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's reporting officers and directors, and persons who
own more than ten percent of the Company's
2
<PAGE> 6
Common Stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the Securities and Exchange Commission (the "Commission"), the
New York Stock Exchange and the Company. Based solely on the Company's review
of the forms filed with the Commission and written representations from
reporting persons that they were not required to file Form 5 for certain
specified years, the Company believes that all of its reporting officers,
directors and greater than ten percent beneficial owners complied with all
filing requirements applicable to them during fiscal 1994 and during the period
since June 1, 1994 to the date of this Proxy Statement, except that William H.
Longfield, a director, Regina E. Herzlinger, a director, and Frederick W.
Mosser, a former executive officer who left the Company's employ in March 1994,
each inadvertently filed untimely one report for one transaction.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of July 13, 1994, the amount of
the Company's Common Stock beneficially owned by each director and
nominee, the chief executive officer and the four other most highly
compensated executive officers (the "Named Officers") and all officers
and directors as a group. Stewart Bainum is the only person, to the
knowledge of the Company, who owned beneficially more than 5% of the
Company's Common Stock as of July 13, 1994. Stewart Bainum's address is 10750
Columbia Pike, Silver Spring, MD 20901.
<TABLE>
<CAPTION>
Number of Shares Options Exercisable Percent
Name of Beneficial Owner Beneficially Owned Within 60 Days Total of Class(1)
------------------------ ------------------ ------------------- ----- -----------
<S> <C> <C> <C> <C>
Stewart Bainum 17,663,669 (2) 0 17,663,669 (2) 28.3%
Stewart Bainum, Jr. 1,371,645 (3) 432,000 1,803,645 (3) 2.9%
Jack R. Anderson 30,000 0 30,000 *
Regina E. Herzlinger 250 0 250 *
William H. Longfield 2,500 0 2,500 *
Frederic V. Malek 1,000 0 1,000 *
Jerry E. Robertson, Ph. D. 13,500 0 13,500 *
Donald C. Tomasso, Jr. 16,603 (4) 21,000 37,603 (4) *
Robert C. Hazard, Jr. 1,612 (5) 43,500 45,112 (5) *
Gerald W. Petitt 19,950 (6) 33,900 53,850 (6) *
Donald J. Landry 64 (7) 10,500 10,564 (7) *
All Directors and Officers
as a Group (24 persons) 19,219,070 (8) 743,700 19,962,770 (8) 31.6%
</TABLE>
- - - --------------------------------------
(*) Less than 1% of class.
(1) Percentages are based on 62,359,897 shares
outstanding on the record date plus shares which
would be issued assuming that the person exercises
all options which are exercisable within 60 days.
(2) Includes 3,567,869 shares held directly or indirectly
by Realty Investment Company, Inc. and its
subsidiaries ("Realty"), a real estate investment and
management company owned by Mr. Bainum with his wife
and their family, his pro-rata interests in 5,417,761
shares owned by Bainum Associates Limited
Partnership, 1,679,628 shares owned by Mid Pines
Associates Limited Partnership, 4,415,250 shares
owned by MC Investments Limited Partnership, limited
partnerships in which Mr. Bainum is a limited
partner. Also includes 798,711 shares held
3
<PAGE> 7
solely by his wife and her pro-rata interest
in 1,679,628 shares owned by Mid Pines Associates
Limited Partnership, a limited partnership in which
his wife is a limited partner. Does not include
195,513 shares held by three adult children, in
addition to shares owned beneficially by Stewart
Bainum, Jr., whose interests are stated in the
above table.
(3) Includes his pro-rata interests in 5,417,761 shares
owned by Bainum Associates Limited Partnership and in
4,415,250 shares owned by MC Investments Limited
Partnership, in both of which Mr. Bainum, Jr. is
managing general partner but does not have authority
to vote such shares. Also includes his pro-rata
interest in 1,679,628 shares owned by Mid Pines
Associates Limited Partnership, in which Mr. Bainum,
Jr. is managing general partner and has shared voting
authority and his pro-rata interest in 3,567,869 shares
owned by Realty, a corporation in which Mr. Bainum, Jr.
owns approximately 21.3% of common stock. Also includes
432,000 shares which Mr. Bainum, Jr. has the right to
acquire pursuant to presently exercisable stock options,
and 940 shares and 94 shares, respectively, which Mr.
Bainum, Jr. has the right to acquire upon termination
of his employment with the Company pursuant to the
terms of the Manor Care, Inc. Retirement
Savings and Investment Plan described on page [11]
(the "401(k) Plan") and the Manor Care, Inc.
Nonqualified Retirement Savings and Investment Plan
described on page [12] (the "Nonqualified Savings
Plan"). Does not include 373,000 shares which Mr.
Bainum, Jr. has the right to acquire upon exercise of
stock options but which are not presently
exercisable.
(4) Includes 40 shares held in trust for minor children
for which Mr. Tomasso is trustee. Beneficial
ownership of such shares is disclaimed. Also
includes 27 shares and 36 shares, respectively, which
Mr. Tomasso has the right to acquire upon termination
of his employment with the Company pursuant to the
terms of the 401(k) Plan and the Nonqualified Savings
Plan.
(5) Includes 44 shares and 212 shares, respectively,
which Mr. Hazard has the right to acquire upon
termination of his employment with the Company
pursuant to the terms of the 401(k) Plan and the
Nonqualified Savings Plan.
(6) Includes 8,661 shares held in trust for minor
children for which Mr. Petitt is trustee. Beneficial
ownership of such shares is disclaimed.
(7) Includes 12 shares and 52 shares, respectively,
which Mr. Landry has the right to acquire upon
termination of his employment with the Company
pursuant to the terms of the 401(k) Plan and the
Nonqualified Savings Plan.
(8) Includes a total of 3,796 shares and 575 shares,
respectively, which the directors and officers
included in the group have the right to acquire upon
termination of their employment with the Company
pursuant to the terms of the 401(k) Plan and the
Nonqualified Savings Plan.
NOMINATION AND ELECTION OF DIRECTORS
The entire Board of Directors, which consists of seven (7)
members, will be elected to serve until the next Annual Meeting of
Stockholders of the Company and until their successors are duly elected
and qualified.
Stewart Bainum, Jr. is Stewart Bainum's son. Aside from the
foregoing, no nominee has any family relationship with any other
director or executive officer of the Company.
The following table sets forth information with respect to each
nominee for election as a Director of the Company. All of the nominees
have previously been elected by the stockholders of the Company.
4
<PAGE> 8
<TABLE>
<CAPTION>
SERVED AS
NAME AND AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY; BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- - - ------------ -------------- --------------------------------------------------------------------
<S> <C> <C>
Stewart Bainum, Jr. (48) 1976 Chairman of the Board since March 1987; also President since
June 1989; Vice Chairman from June 1982 to March 1987.
Director: Vitalink Pharmacy Services, Inc.
Stewart Bainum (75) 1968 Vice Chairman of the Board since March 1987; Chairman of the Board
from 1968 to March 1987; President from December 1980 through October
1981, and May 1982 through July 1985; Chairman of the Board of
Realty Investment Company, Inc. (private real estate investment
company) since 1965. Director: Vitalink Pharmacy Services, Inc.
Jack R. Anderson (69) 1980 President of Calver Corporation since May 1982. Director: FHP
International Corporation, Horizon Mental Health Corporation,
Medical Care America, Inc., Navistar International Corp. and United
Dental Care, Inc.
Regina E. Herzlinger (50) 1992 Nancy R. McPherson Professor of Business Administration, Harvard
Business School, since 1971. Director: C. R. Bard, Inc., Deere &
Company, Salick Health Care, Inc., and Schering-Plough Corporation.
William H. Longfield (54) 1989 President and Chief Executive Officer of C. R. Bard, Inc. (medical
equipment) since June 1994; President and Chief Operating Officer
of C. R. Bard, Inc. from September 1991 to June 1994; Executive
Vice President and Chief Operating Officer of C. R. Bard, Inc. from
February 1989 to September 1991. Director: C. R. Bard, Inc. and
United Dental Care, Inc.
Frederic V. Malek (57) 1990 Chairman, Thayer Capital Partners since January 1993; Co-
chairman of CB Commercial Real Estate Group, Inc. since April
1989; Campaign Manager, Bush-Quayle '92 Campaign from December
1991 to December 1992; Vice Chairman of NWA, Inc. (airlines)
from June 1990 to December 1991; President of NWA, Inc. from
September 1989 to June 1990. Director: American Management
Systems, Inc., Automatic Data Processing Corp., FPL Group, Inc.,
ICF International, Inc., National Education Corp., Northwest
Airlines and various Paine Webber mutual funds.
Jerry E. Robertson, Ph.D (61) 1989 Retired; Executive Vice President of 3M Life Sciences Sector and
Corporate Services from November 1984 to March 1994. Director:
Allianz Life Insurance Company of North America, Cardinal
Health, Inc., Coherent, Inc., Haemonetics Corporation, Life
Technologies, Inc., Project Hope and Steris Corporation.
</TABLE>
STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during the fiscal year
ended May 31, 1994. During such fiscal year, each incumbent attended
75% or more of the aggregate of (1) the total number of meetings of the
Board of Directors and (2) the total number of meetings of all
Committees on which such director served. The standing committees of
the Board include the Audit Committee, the Finance Committee, the
Compensation/Key Executive Stock Option Plan Committee and the
Nominating Committee, the current members of which are as follows:
Compensation/Key Executive
Stock Option Plan Committee Finance Committee
--------------------------- -----------------
Jerry E. Robertson, Chairman Stewart Bainum, Chairman
Stewart Bainum Stewart Bainum, Jr.
5
<PAGE> 9
William H. Longfield Jack R. Anderson
Frederic V. Malek
Audit Committee Nominating Committee
--------------- --------------------
Jack R. Anderson, Chairman Jack R. Anderson, Chairman
Regina E. Herzlinger Frederic V. Malek
The Compensation/Key Executive Stock Option Plan Committee, which
held two meetings during the 1994 fiscal year, administers the Company's
stock option plans and grants stock options thereunder, reviews
compensation of officers and key management employees, recommends
development programs for employees such as training, bonus and incentive
plans, pensions and retirement, and reviews other employee fringe
benefit programs.
The Finance Committee, which held two meetings during the 1994
fiscal year, reviews the financial affairs of the Company and recommends
financial objectives, goals and programs to the Board of Directors and
to management.
The Audit Committee, which held two meetings during the 1994
fiscal year, reviews the scope and results of the annual audit, reviews
and approves the services and related fees of the Company's independent
public accountants, reviews the Company's internal accounting controls
and reviews the Company's Internal Audit Department and its activities.
The Nominating Committee, which held one meeting during the 1994
fiscal year, recommends to the Board of Directors the members to serve
on the Board of Directors during the ensuing year. The Committee does
not consider nominees recommended by stockholders.
Directors who are full-time employees of the Company receive no
separate remuneration for their services as directors. The remuneration
of all non-employee directors is currently $12,650 per annum and $2,185
per diem for Board meetings attended and $1,610 per diem for Committee
meetings attended, except where the Committee meeting is on the same day
as a Board meeting. In addition, directors are also reimbursed for
travel expenses and other out-of-pocket costs incurred in attending
meetings.
In September 1990, the Company adopted the Directors Retirement
Plan. Pursuant to the Plan, a non-employee director who retires after
serving at least ten years as such is entitled to an annual benefit for
the remainder of his or her lifetime or five years, whichever is less,
which equals 75% of the annual retainer payable to directors on the date
of retirement plus 5% for each year served as a non-employee director in
excess of ten years, but not to exceed 100% of the annual retainer
payable to the director on the date of retirement. Unpaid benefits will
be forfeited if such director becomes an owner, director, officer,
employee or consultant either of a nursing home facility located within
25 miles of a Company nursing home facility or of a lodging facility
located within 10 miles of a Company-owned or franchised lodging
facility, provided that such other facility is, in the opinion of
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<PAGE> 10
the Board, in competition with the business of the Company.
In June 1992, Stewart Bainum, a director, retired from full-time
employment with the Company. Mr. Bainum is subject to a non-competition
covenant similar to that described in the preceding paragraph. During
the 1994 fiscal year, Mr. Bainum received consulting fees totalling
$9,375 in addition to Directors' fees as indicated above.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
annual and long term compensation for services in all capacities to the
Company for the fiscal years ended May 31, 1994, 1993 and 1992, of the
chief executive officer and the four other most highly compensated
executive officers in the Company's employ at May 31, 1994 (the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------- -----------------------------------------
Stock Option All Other
Name and Principal Position Year Salary Bonus Other Shares(#) Compensation(1)
- - - --------------------------- ---- ------ ----- ---- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Stewart Bainum, Jr. (2) 1994 $457,867 $274,720 (3) 40,000 $ 14,150
Chairman, President and 1993 499,200 269,568 (3) 30,000 13,732
Chief Executive Officer 1992 462,500 249,750 (3) 45,000 6,693
Donald C. Tomasso 1994 316,187 173,903 (3) 35,000 3,538
President, 1993 292,600 160,930 (3) 45,000 1,973
Manor Healthcare Corp. 1992 255,846 140,715 (3) - -
Robert C. Hazard, Jr. 1994 346,124 173,062 (3) - 14,150
Chairman and Chief Executive Officer, 1993 320,578 160,289 (3) - 13,732
Choice Hotels International, Inc. 1992 296,745 115,088 (3) - 6,967
Gerald W. Petitt 1994 283,193 141,596 (3) - 14,150
President and Chief Operating Officer, 1993 262,291 131,146 (3) - 13,732
Choice Hotels International, Inc. 1992 253,520 94,163 (3) - 6,967
Donald J. Landry (4) 1994 275,712 144,059 (3) 25,000 3,537
President, 1993 254,856 25,000 (3) 15,000 -
Manor Care Hotel Division 1992 60,577 34,375 (3) 105,000 -
</TABLE>
(1) Represents amounts contributed by the Company for fiscal 1994,
1993 and 1992 for the individuals named in the above Summary
Compensation Table under the 401(k) Plan and the Nonqualified Savings
Plan, which provide retirement and other benefits to eligible
employees, including the above named individuals. Amounts
contributed in cash or stock by the Company during fiscal 1994 under
the 401(k) Plan for the above named individuals were as follows: Mr.
Bainum, $8,994; Mr. Tomasso, $1,539; Mr. Hazard, $2,456; Mr. Petitt,
$3,617; and Mr. Landry, $676. Amounts contributed in cash or stock
by the Company during fiscal 1994 under the Nonqualified Savings Plan
for the above named individuals were as follows: Mr. Bainum, $5,156;
Mr. Tomasso, $1,999; Mr. Hazard, $11,694; Mr. Petitt, $10,533; and
Mr. Landry, $2,861.
(2) Mr. Bainum took an unpaid leave of absence during April and May 1994
while he devoted a substantial portion of his time exploring the
possibility of seeking an elective governmental position, resulting
in a decrease in salary paid in fiscal 1994 compared to fiscal 1993.
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<PAGE> 11
(3) The value of perquisites and other compensation does not exceed the
lesser of $50,000 or 10% of the amount of annual salary and bonus
paid as to any of the above named individuals.
(4) Mr. Landry was employed by the Company on March 1, 1992.
The following tables set forth certain information at May
31, 1994 and for the fiscal year then ended concerning stock options
granted to the individuals named in the above Summary Compensation
Table. None of such individuals exercised stock options during the 1994
fiscal year. All Common Stock figures and exercise prices have been
adjusted to reflect stock dividends and stock splits effective in prior
fiscal years.
STOCK OPTION GRANTS IN FISCAL 1994
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed Annual
Rate of Stock Price Appreciation for Option
Individual Grants Term(1)
------------------------------------------------ ---------------------------------------------
Percentage of
Total Options
Number of Granted to all Exercise
Options Employees in Base Price Expiration
Name Granted(2) Fiscal 1994 Per Share Date 5%(3) 10%(4)
- - - ---- ---------- ----------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stewart Bainum, Jr. 40,000 8.4% $22.56 12/05/2003 $567,600 $1,438,000
Donald C. Tomasso 35,000 7.3% 22.56 12/05/2003 496,650 1,258,250
Robert C. Hazard, Jr. - - - - - -
Gerald W. Petitt - - - - - -
Donald J. Landry 25,000 5.2% 22.56 12/05/2003 354,750 898,750
</TABLE>
- - - --------------------
(1) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast future possible
appreciation, if any, of the Company's stock price. Since options
are granted at market price, a zero percent gain in the stock price
will result in no realizable value to the optionees.
(2) The options granted to Messrs. Bainum, Tomasso and Landry vest at
the rate of 10% per year commencing on the second through the fifth
anniversary of the date of the stock option grant and 20% per year
on the sixth through the eighth anniversaries.
(3) A 5% per year appreciation in stock price from $22.56 per share
yields $36.75.
(4) A 10% per year appreciation in stock price from $22.56 per share
yields $58.51.
8
<PAGE> 12
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised
Options at May 31, 1994 Value of Unexercised
Exercisable Unexercisable In-The-Money
----------- ------------- Options at May 31, 1994 (1)
# # Exercisable Unexercisable
----------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Stewart Bainum, Jr. 432,000 373,000 $5,985,735 $4,851,965
Donald C. Tomasso 21,000 164,000 245,900 1,316,740
Robert C. Hazard, Jr. 43,500 69,000 689,640 1,150,260
Gerald W. Petitt 33,900 68,400 560,712 1,142,202
Donald J. Landry 0,500 134,500 100,695 1,061,555
</TABLE>
- - - --------------------
(1) The closing price of the Company's Common Stock as reported by
the New York Stock Exchange on May 31, 1994, was $25.875. The
value is calculated on the basis of the difference between the
option exercise price and $25.875, multiplied by the number of
shares of Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
Under the terms of an employment agreement between Mr. Hazard and
Choice Hotels International, Inc., a subsidiary of the Company ("CHI"),
his annual salary is presently $374,134 with annual cost-of-living
increases. The agreement, which extends through May 31, 1996, provides
for an annual bonus based on performance of the Company of up to 12.5%
of his base compensation and based on performance of CHI of up to 37.5%
of his base compensation. Mr. Hazard, who is Chairman and Chief
Executive Officer of CHI, owns approximately 5.6% of the Common Stock of
CHI.
Under the terms of an employment agreement between Mr. Petitt and
CHI, his annual salary is presently $306,109 with annual cost-of-living
increases. The agreement, which extends through May 31, 1996, provides
for an annual bonus based on performance of the Company of up to 12.5%
of his base compensation and based on performance of CHI of up to 37.5%
of his base compensation. Mr. Petitt, who is President and Chief
Operating Officer of CHI, owns approximately 5.6% of the Common Stock of
CHI.
On February 17, 1992, Donald J. Landry, President of the Manor
Care Hotel Division, entered into an employment agreement with the
Company, effective March 1, 1992, and expiring February 28, 1997. Under
the terms of the agreement, Mr. Landry's annual salary is presently
$283,500. The agreement provides for an annual bonus based on
performance of the Manor Care Hotel Division of up to 55% of his base
compensation.
RETIREMENT PLANS
In February 1985, the Board of Directors adopted the Supplemental
Executive Retirement Plan (the "SERP"). Participants are selected by the Board
and are at the level of Senior Vice President or
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<PAGE> 13
above. A total of eight officers, including all of the Named Officers,
except for Mr. Tomasso and Mr. Landry, have been selected to participate
in the SERP.
Participants in the SERP will receive a monthly benefit for life
based upon final average salary and years of service. Final average
salary is the average of the monthly base salary, excluding bonuses or
commissions, earned in a 60 month period out of the 120 months of
employment, which produces the highest average, prior to the first
occurring of the early retirement date or the normal retirement date.
The normal retirement age is 65, and participants must have a minimum of
15 years of service. Participants may retire at age 60 and may elect to
receive reduced benefits commencing prior to age 65, subject to Board
approval. All of the Named Officers who are participants, except for
Mr. Hazard, are age 55 or younger, so that none of their compensation
reported above would be included in the final average salary
calculation.
Assuming that the following officers continue to be employed by
the Company until they reach age 65, their credited years of service
would be as follows:
Current Years Years of Service
Name of Individual of Service at Age 65
-------------------- ------------- ----------------
Stewart Bainum, Jr. 21.5 38
Robert C. Hazard, Jr. 13.5 19
Gerald W. Petitt 13.5 30
The table below sets forth estimated annual benefits payable upon
retirement to persons in specified compensation and years of service
classifications. These benefits are straight life annuity amounts,
although participants have the option of selecting a joint and 50%
survivor annuity or ten-year certain payments. The benefits are not
subject to offset for Social Security and other amounts.
Years of Service/Benefit as
Percentage of Final Average Salary
----------------------------------------
25 or
Remuneration 15/15% 20/22.5% more/30%
------------ -------- ---------- ----------
$250,000 $37,500 $56,250 $ 75,000
300,000 45,000 67,500 90,000
350,000 52,500 78,750 105,000
400,000 60,000 90,000 120,000
450,000 67,500 101,250 135,000
500,000 75,000 112,500 150,000
Effective January 1, 1992, the Company established the Manor
Care, Inc. Retirement Savings and Investment Plan (the "401(k) Plan"),
a defined contribution retirement, savings and investment plan for its
employees and the employees of its participating affiliated companies.
The 401(k) Plan is intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and includes a
cash or deferred arrangement intended to qualify under Section 401(k) of
the Code. All employees over age 21 with at least one year of service and
who have worked at least
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<PAGE> 14
1,000 hours during the year are eligible to participate. Employees may
contribute to the 401(k) Plan on a pre-tax basis (up to the federal limit,
$9,240 in 1994, subject to increases for inflation in subsequent years)
up to 15% of the employee's salary. The Company will match contributions made
by its employees subject to certain limitations. The amount of the match will
be equal to a percentage of the amount of salary reduction contribution made on
behalf of a participant during the plan year up to a dollar-for-dollar basis
based upon a formula that involves the profits of the Company for the year and
the number of years of service of the participant. In no event will the
Company make a matching contribution which exceeds 6% of a participant's
salary. Amounts contributed by the Company pursuant to the 401(k) Plan for the
Named Officers are included in the Summary Compensation Table under the
column headed "All Other Compensation".
Effective January 1, 1992, the Company adopted the Manor Care, Inc.
Nonqualified Retirement and Savings Investment Plan (the "Nonqualified Savings
Plan"). Certain select highly compensated members of management of the Company
are eligible to participate in the Plan. The Nonqualified Savings Plan mirrors
the provisions of the 401(k) Plan, to the extent feasible, and is intended to
provide the participants with a pre-tax savings vehicle to the extent that
pre-tax savings are not permissible under the 401(k) Plan as a result of
various governmental regulations, such as non- discrimination testing. All of
the Named Officers have elected to participate in the Nonqualified Savings
Plan. Amounts contributed by the Company under the Nonqualified Savings Plan
for fiscal year 1994 for the Named Officers are included in the Summary
Compensation Table under the column headed "All Other Compensation".
The employer match under the 401(k) Plan and the Nonqualified
Savings Plan is limited to a maximum aggregate of 6% of the annual
salary of a participant. In December 1993, both plans were amended to
allow participants the right to elect to receive the Company matching
contribution either in Company stock or cash or a combination.
Likewise, participant contributions under the two plans may not exceed
the aggregate of 15% of the annual salary of a participant.
Effective January 1, 1992, the Company adopted a non-contributory
Cash Accumulation Retirement Plan (the "CARP") maintained by the Company
for its employees and those employees of its participating affiliated
companies. The CARP is intended to qualify under Section 401(a) of the
Code. All employees over age 21 with at least one year's service and
who have worked at least 1,000 hours during the year, are automatically
members of the CARP. Each year the account of each employee is adjusted
to reflect interest at a rate calculated in accordance with the CARP.
Amounts accrued under the CARP become fully vested after five years of
service. When the age and years of service of an employee totals 55 or
more, the Company will increase the rate of benefit to the account of
such employee. The annual benefit accrual made by the Company will be
based on salary as follows:
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<PAGE> 15
Base Percentage Base Percentage
If Age Plus Service If Age Plus Service
Annual Salary Is Less Than 55 Is 55 or More
------------- ------------------- ----------------
First $12,000................... 3% 4%
Next $6,000..................... 2% 3%
Additional Salary up to $100,000 1% 2%
COMPENSATION/KEY EXECUTIVE STOCK OPTION PLAN COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The compensation philosophy of Manor Care, Inc. (the "Company") is
to be competitive with the leading service companies and selected direct
competitors in the marketplace, to attract, retain and motivate a highly
qualified workforce, and to provide career opportunities. The Company
uses various compensation surveys, primarily conducted and evaluated by
independent consultants, to provide data to support the development of
competitive compensation plans which reinforce this philosophy. Summary
data on service companies of similar size participating in each survey
are utilized as the basis for the evaluations. This is the same
philosophy applied by the Compensation/Key Executive Stock Option Plan
Committee of the Board of Directors (the "Committee") in determining
compensation for the CEO and executive officers. In evaluating the
CEO's performance, the Committee, in addition to financial performance,
considers factors important to the Company such as ethical business
conduct, progress against the Company's strategic plan objectives,
management succession planning, customer service satisfaction and the
general overall perception of the Company by financial leaders and
customers.
The Committee is responsible for setting and administering the
policies which govern executive compensation and the stock based
programs of the Company. The members of the Committee are Messrs.
Robertson (Chairman), Bainum, Longfield and Malek. Mr. Bainum served
as Chairman and CEO prior to March 1987.
Compensation of the Company's officers is reviewed annually by the
Committee. Changes proposed for these employees are evaluated and
approved by the Committee on an individual basis.
There are three components in the Company's executive compensation
program:
1. Base salary
2. Cash bonus
3. Long-term incentive compensation (stock options)
The Committee has determined that compensation for the CEO and
other executive officers should be weighted in favor of more "pay at
risk" or "variable pay."
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<PAGE> 16
BASE SALARY
Base salary is the only component that is not variable. Scope and
complexity of the position as well as external market factors are used
to determine base salary levels. Salary changes are based on guidelines
established for all employees using individual performance to determine
the change. Mr. Bainum, Jr.'s base salary paid in fiscal 1994 is shown
under the heading "Salary" in the Summary Compensation Table.
CASH BONUS
A cash bonus based on return on beginning equity or business unit
profit is used to focus management's attention on profits and the
effective use of Company assets.
LONG-TERM INCENTIVE COMPENSATION (STOCK OPTIONS)
Long-term compensation comprised of stock options has been established to:
a. focus attention on the Company's and stockholders'
long term goals;
b. increase ownership and retention in the Company's
stock.
The Committee has granted stock options with a vesting schedule of
up to eight years in order to retain management and focus optionees on
the long term goals of the Company to be more closely aligned with the
interests of stockholders.
The Committee believes the Company has an overall compensation
plan which fulfills current Company philosophy and, in addition,
promotes increased shareholder value through performance-based
compensation.
COMPENSATION/KEY EXECUTIVE STOCK OPTION PLAN COMMITTEE
JERRY E. ROBERTSON, PH.D., CHAIRMAN
STEWART BAINUM
WILLIAM H. LONGFIELD
FREDERIC V. MALEK
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<PAGE> 17
PERFORMANCE GRAPH-SHAREHOLDER RETURN
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock
against the cumulative total return on the S&P Composite-500 Stock Index
and a peer group selected by the Company for the five fiscal years
ended May 31, 1994 assuming reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG MANOR CARE, INC., S&P500 AND PEER GROUP
[LINE GRAPH]
Assumes $100 invested on June 1, 1989 in the Common Stock of Manor
Care, Inc., the S&P500 Index and Peer Group Companies (weighted by market
capitalization). Total return assumes reinvestment of dividends.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Manor Care, Inc. 100 83 132 150 200 244
S&P500 100 117 130 143 160 166
Peer Group (Weighted Average) 100 76 133 130 173 236
</TABLE>
The peer group consists of eleven other companies primarily
involved in the Company's lines of business. Six of the companies are
involved in ownership and operation of nursing homes: Beverly
Enterprises, Inc., Geriatric and Medical Centers, Inc., Hillhaven Corp.,
Horizon Healthcare Corp., Integrated Health Services, Inc., and National
Healthcorp, L.P. Three companies are involved in hotel franchising,
management or ownership: Hospitality Franchise Systems, Inc., United
Inns, Inc. and La
14
<PAGE> 18
Quinta Motor Inns, Inc. Two companies are involved in
the institutional pharmacy business: Omnicare, Inc. and Synetic, Inc.
National Heritage, Inc. and Vari-Care, Inc., which were in the peer
group last year, have been removed because of their acquisition during
the year.
PROPOSED INCREASE OF AUTHORIZED SHARES OF COMMON STOCK
The authorized capital stock of the Company is 85,000,000 shares,
consisting of 80,000,000 shares of Common Stock, of which 62,359,897
shares were issued and outstanding as of the Record Date, and 5,000,000
shares of Preferred Stock, of which no shares were outstanding. An
additional 3,068,750 shares of Common Stock are reserved for issuance
under the Company's Key Executive Stock Option Plan of 1969, which
expired on September 30, 1993, and 2,000,000 shares are reserved for
issuance under the Company's Key Executive Stock Option Plan of 1993,
which was approved by the stockholders in September 1993 and which will
expire on August 31, 2003.
On June 23, 1994, the Board of Directors of the Company, at a
regular meeting, unanimously adopted resolutions setting forth a
proposed amendment to the Company's Certificate of Incorporation for the
purpose of increasing the authorized shares of Common Stock from
80,000,000 shares to 160,000,000 shares (the "Amendment") and providing that
the Amendment be submitted to a vote of the Company's stockholders. The
favorable vote of a majority of the issued and outstanding shares entitled to
vote thereon is required to amend the Certificate of Incorporation. The text
of the Amendment is as follows:
"RESOLVED, that ARTICLE FOURTH of the Certificate of
Incorporation of Manor Care, Inc. shall be amended to read as
follows:
"FOURTH: The total number of shares of capital stock of all
classifications which the Corporation shall have authority
to issue is One Hundred Sixty-Five Million (165,000,000)
shares, of which One Hundred Sixty Million (160,000,000)
shares having a par value of Ten Cents ($.10) per share
shall be of a class designated 'Common Stock' and Five
Million (5,000,000) shares having a par value of One Dollar
($1.00) per share shall be of a class designated 'Preferred
Stock.'"
As of the record date, there are currently 12,571,353 shares
available for issuance. Accordingly, if the Amendment becomes
effective, based on the number of shares issued and outstanding or
reserved for issuance pursuant to the Company's Stock Option Plans on
the Record Date, the Company will have 92,571,353 authorized but
unissued shares of Common Stock and 5,000,000 authorized but unissued
shares of Preferred Stock uncommitted to any purpose. The Company has
no present plans or understanding for issuing any uncommitted authorized
but unissued shares of Common Stock and Preferred Stock. The Board of
Directors believes it advisable to have these shares available for issuance
from time to time for such purposes as stock splits or dividends,
15
<PAGE> 19
financing, acquisitions or such other purposes as the Board may
determine to be in the Company's interest. Approval of additional
authorized shares at this time will eliminate the necessity of calling a
special meeting of stockholders in the future to consider such an
increase.
Increases in the amount of authorized shares have been viewed in
some instances as measures to prevent or delay corporate takeovers. For
example, the Board of Directors has the authority to fix the rights,
preferences and powers of any Preferred Stock issued, and could
discourage a takeover by approving the issuance of shares at a certain
time and with certain voting rights.
At this time, the Company is not aware of any specific effort to
accumulate its securities or to obtain control of the Company by means
of a merger, tender, offer, solicitation in opposition to management, or
otherwise. The Company's Certificate of Incorporation and By-Laws do
not currently include provisions having an anti-takeover effect. The
Company does not consider the proposed Amendment to be an anti-takeover
device, nor does the Company currently intend to propose anti-takeover
measures in the future.
Issuance of any authorized shares normally will be made without
stockholder approval. However, the New York Stock Exchange, which lists
the Company's Common Stock, requires stockholder approval in some
instances, including an acquisition where the present or potential
issuance of Common Stock could result in an increase in outstanding
shares of 18 1/2% or more. Current stockholders have no preemptive right
to subscribe to any newly authorized shares.
The management of the Company recommends a vote FOR the proposal
to increase the number of authorized shares of Common Stock from
80,000,000 shares to 160,000,000 shares. Proxies received by the Board
of Directors will be so voted unless the stockholders specify a contrary
choice.
Delaware law grants to dissenting stockholders no rights of
appraisal or similar rights with respect to the proposal.
PROPOSED APPROVAL OF MANOR CARE, INC. NON-EMPLOYEE DIRECTOR
STOCK OPTION AND DEFERRED COMPENSATION STOCK PURCHASE PLAN
In September 1993, the Company's Stockholders approved the Manor
Care, Inc. Key Executive Stock Option Plan of 1993 which permits the
grant of up to 2,000,000 shares to executive officers and other key
employees until August 31, 2003, when the plan will expire. The
non-employee Directors on the Company's Board of Directors are not
eligible to participate in the plan.
On June 23, 1994, the Board of Directors of the Company
unanimously approved the adoption of the Manor Care, Inc. Non-Employee
Director Stock Option and Deferred Compensation Stock Purchase Plan (the
"Plan"), and directed that the Plan be submitted for stockholder
approval at the
16
<PAGE> 20
Annual Meeting. The Plan shall become effective upon the affirmative
vote of a majority of the shares of Common Stock issued and outstanding on the
Record Date. No options will be granted under the Plan or other rights will
accrue if the Plan is not approved by the stockholders of the Company.
The purposes of the Plan are to build a proprietary interest among
non-employee Directors serving on the Board of Directors, thereby
securing for the Company's stockholders the benefits associated with
stock ownership by those who will oversee the Company's future growth
and success, and to make service on the Board of Directors more
attractive to prospective directors.
The management of the Company recommends a vote FOR the proposal
to approve the Manor Care, Inc. Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan. Proxies received by the
Board of Directors will be so voted unless stockholders specify a
contrary choice.
SUMMARY DESCRIPTION OF PLAN
The following description of the Plan is qualified in its entirety
by reference to the Manor Care, Inc. Non-Employee Stock Option and
Deferred Compensation Plan, a copy of which is attached hereto as
Exhibit A to this Proxy Statement. The amounts that will accrue to the
Non-Employee Directors pursuant to the Plan, if approved by the
stockholders, are not currently determinable.
PART A - STOCK OPTIONS
ELIGIBILITY. Each member of the Board of Directors of the Company
who is not an employee of the Company or any subsidiary of the Company
("Non-Employee Director"), will be eligible to receive a grant of stock options
under Part A of the Plan. The eligibility status of such a Director will
terminate as to future stock option grants at the time the individual ceases
to be a Director, or the individual becomes an employee of the Company or any
subsidiary of the Company.
ADMINISTRATION. Part A of the Plan will be administered by the
Board of Directors of the Company. The Board of Directors has full
power to administer and interpret Part A of the Plan to carry out its
purpose. It is expected that the Board of Directors will designate
Company personnel to assist it in carrying out its responsibilities
under Part A of the Plan.
OPTIONS; EXERCISE PRICE. Each eligible Non-Employee Director
under Part A of the Plan will automatically be granted an option to
purchase 5,000 shares of Common Stock on September 8, 1994, and each
person subsequently elected to the Board of Directors will receive an
option to purchase 5,000 shares of Common Stock on the date of his or
her initial election. In addition, each eligible Non-Employee Director
under Part A of the Plan will automatically be granted in subsequent
calendar years an option to purchase 1,000 shares on the date of
election of such director during the
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<PAGE> 21
term of Part A of the Plan. The maximum number of shares available for
grant and issuance under Part A of the Plan is 150,000.
All options under Part A of the Plan are granted at 100 percent of
the fair market value of Common Stock on the relevant grant date.
In the case of events such as stock dividend, stock splits,
recapitalizations or other changes in the Company's capitalization, an
automatic adjustment will be made to the number of unexercised shares,
the number of shares to be granted in the future, and the aggregate
number of shares which are available for option grants under Part A of
the Plan.
An option granted under Part A of the Plan may be evidenced by a
written instrument describing the terms and conditions of the grant.
Options granted under Part A of the Plan are not assignable or
transferable by the eligible Non-Employee Director, other than by will
or the laws of descent and distribution. During the Non-Employee
Director's lifetime, an option is exercisable only by the Non-Employee
Director.
VESTING; EXERCISE OF OPTIONS. Each option granted under Part A of
the Plan becomes exercisable as to one-third of the shares covered by
the option commencing on each of the second through the fourth
anniversary of the date of the grant. For example, with respect to the
options granted on September 9, 1994, one-third of the shares covered by
the grant are scheduled to become exercisable on September 9, 1996, an
additional one-third of the shares covered by the grant are scheduled to
become exercisable on September 9, 1997, and the remaining one-third of
the shares covered by the grant are scheduled to become exercisable on
September 9, 1998.
Options may be exercised by the delivery of cash or shares of
Common Stock, or any combination of such forms of payment.
If the eligibility of a Non-Employee Director ceases for a reason
other than death or retirement at age 65 following at least 10 years'
service on the Board of Directors, options which are not exercisable at
that time are forfeited; any exercisable options must be exercised
within one month from the date the Non-Employee Director loses eligible status.
TERM OF PLAN AND OPTION. Unless terminated earlier by the Board
of Directors, Part A of the Plan will terminate on September 9, 2004.
Options granted prior to such termination date will continue to be
exercisable in accordance with the terms of Part A of the Plan.
Each option granted under Part A of the Plan will automatically
expire ten years from the date the option is granted and may be
exercised only by the optionee during his or her lifetime, or, for up to
12 months following the death of the optionee, by the person acquiring
the right by will or by the laws of descent and distribution.
AMENDMENT AND TERMINATION OF PART A OF THE PLAN. The Board of
Directors may amend or
18
<PAGE> 22
terminate Part A of the Plan at any time without stockholder approval,
including amendments necessary to conform with Rule 16b-3 of the Securities
Exchange Act of 1934 (the "Exchange Act"), unless the particular amendment or
modification requires stockholder approval under Section 16 of the Exchange
Act, the Internal Revenue Code of 1986, as amended (the "Code"), under the
rules and regulations of the exchange or system on which the Common Stock is
listed or reported, or pursuant to other applicable laws, rules or regulations.
Currently, Rule 16b-3 under the Exchange Act requires stockholder approval of
any amendments which would materially modify the Plan's eligibility
requirements, materially increase the shares of Common Stock available under
Part A of the Plan, or materially increase the benefits of the eligible
Non-Employee Directors.
FEDERAL INCOME TAX CONSEQUENCES. A Non-Employee Director who is
granted a stock option under Part A of the Plan will not recognize
taxable income at the time of the grant, but will generally recognize
income upon the exercise of the stock option. The amount of income
recognized upon the exercise of the stock option will be measured by the
excess, if any, of the fair market value of the shares of Common Stock
at the time of exercise over the exercise price. The Company will
generally be entitled to a corresponding deduction for the amount of
income recognized by the Non-Employee Director.
The foregoing does not purport to be a complete summary of the
federal income tax considerations that are relevant to stock options
granted under Part A of the Plan. Additionally, the tax consequences
under applicable state, local or foreign tax laws may not be the same as
under the federal income tax laws.
PART B - DEFERRED COMPENSATION STOCK PURCHASE
ELIGIBILITY. Each Non-Employee Director will be eligible to
participate in the deferred compensation stock purchase provisions under
Part B of the Plan.
ADMINISTRATION. Part B of the Plan will be administered by the
Board of Directors of the Company. The Board of Directors has full
power to administer and interpret Part B of the Plan to carry out its
purpose. It is expected that the Board of Directors will designate
Company personnel to assist it in carrying out its responsibilities under
Part B of the Plan.
DEFERRED COMPENSATION STOCK PURCHASE. Under Part B of the Plan,
each eligible Non-Employee Director may elect, prior to May 31 of each
fiscal year to defer a minimum of 25% of Board and committee fees earned
during the ensuing fiscal year. The fees so deferred will be used to
make open-market purchases of Company Common Stock within 15 days after
December 1, February 28, and May 31 of such fiscal year. Pending such
purchases, the funds will be credited to an Interest Deferred Account,
which will be interest bearing. Stock which is so purchased shall be
deposited in a Stock Deferred Account pending distribution in accordance
with the Plan.
19
<PAGE> 23
AMENDMENT AND TERMINATION OF PART B OF THE PLAN. The Board of
Directors may terminate or amend Part B of the Plan at any time without
further stockholder approval, except if the amendment involves a
material increase of benefits accruing to participants, a material
increase in the number of shares which may be purchased under Part B of
the Plan, or a material modification to the eligibility requirements.
Part B of the Plan will automatically expire on September 9, 2004.
A maximum of 80,000 shares may be purchased under Part B of the Plan.
DISTRIBUTION OF STOCK AND PAYMENT. On the termination of service
of a participant, all stock in the Stock Deferred Account will be
distributed to the director and all amounts remaining in the Interest
Deferred Account shall be paid to the director, unless the director
elects to receive the distribution of stock and payment of funds in the
form of installment payments.
FEDERAL INCOME TAX CONSEQUENCES. A Non-Employee Director who
purchases stock under Part B of the Plan will not recognize taxable
income under the federal income tax laws until distribution of the
shares. The amount of income recognized by the participant will be
measured by the fair market value of the shares of Common Stock at the
time of distribution and the amounts paid from the Interest Deferred
Account at the time of payment. The Company will generally be
entitled to a corresponding deduction of the amount of income recognized
by the Non-Employee Director.
The foregoing does not purport to be a complete summary of the
federal income tax considerations that are relevant to shares purchased
under Part B of the Plan. Additionally, the tax consequences under
applicable state, local or foreign tax laws may not be the same as under
the federal income tax laws.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has been the Company's independent public
accountants since June 1976. In the Spring of 1995, the Board of
Directors will select the Company's independent public accountants to
audit the accounts of the Company for the current fiscal year.
Representatives of Arthur Andersen & Co. are expected to be present at
the Meeting, and will have an opportunity, if they so desire, to make a
statement and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
The Company's 1995 Annual Meeting is presently scheduled to be
held on September 28, 1995. Stockholder proposals must be submitted to
the Secretary no later than April 28, 1995, in order to be eligible for
inclusion in the Company's proxy materials for such meeting.
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<PAGE> 24
OTHER BUSINESS
As of the date of the Proxy Statement, management does not know of
any business other than that mentioned above which will be presented for
consideration. However, if any other matter should properly come before
the Meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxies in accordance with their
judgment on such matter.
After the business session and a report to the stockholders on the
progress of the Company, a discussion period will take place during
which stockholders will have an opportunity to discuss matters of
interest concerning the Company.
- - - ----------------------------
A COPY OF THE COMPANY'S 1994 FORM 10-K (EXCLUDING EXHIBITS) FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WILL BE MADE AVAILABLE TO
STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE ASSISTANT
TREASURER OF MANOR CARE, INC., 10750 COLUMBIA PIKE, SILVER SPRING,
MARYLAND 20901. THE REPRODUCTION COST WILL BE CHARGED IF EXHIBITS ARE
REQUESTED.
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<PAGE> 25
EXHIBIT A
MANOR CARE, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AND
DEFERRED COMPENSATION STOCK PURCHASE PLAN
Manor Care, Inc. has adopted and established a non-qualified stock
option plan for Non-Employee Directors in accordance with the following
terms and conditions. The plan also provides Non-Employee Directors the
ability to elect to defer compensation and purchase stock with director
fees.
SECTION ONE
DESIGNATION AND PURPOSE OF THE PLAN
A. DESIGNATION. This Plan is designated the "Manor Care, Inc.
Non-Employee Director Stock Option and Deferred Compensation Stock
Purchase Plan".
B. PURPOSE. The purpose of this Plan is to secure for the
Company and its stockholders the benefits of the incentive inherent in
increased ownership of Company Stock by Non-Employee Directors. It is
expected that such ownership will provide such Non-Employee Directors
with a more direct stake in the future welfare of the Company and
encourage them to remain directors of the Company. It is also expected
that the Plan will encourage qualified persons to become directors of
the Company.
C. GOVERNING LAW. This Plan shall be interpreted and enforced
in accordance with the laws of the State of Maryland, without reference
to its conflict of laws principles.
SECTION TWO
DEFINITIONS
As used in this Plan, the following terms mean:
A. "BOARD" means the Board of Directors of the Company.
B. "COMPANY" means Manor Care, Inc., including any present or
future "subsidiary corporation" as such term is defined in Section
424(f) of the 1986 Internal Revenue Code, as amended.
C. "NON-EMPLOYEE DIRECTOR" means a member of the Board of the
Company who is not an employee of the Company or any of its
subsidiaries.
22
<PAGE> 26
D. "OPTION" means a non-qualified stock option granted to a
Participant under this Plan. It also means any Option which remains
after a Participant has exercised his Option with respect to part of the
shares covered by an Option agreement.
E. "PARTICIPANT" means any Non-Employee Director who is granted
an Option as provided in this Plan.
F. "PLAN" means this Non-Employee Director Stock Option and
Deferred Compensation Stock Purchase Plan.
G. "STOCK" and "COMPANY STOCK" mean the common stock of Manor
Care, Inc.
H. Wherever appropriate, words used in this Plan in the
singular may mean the plural, the plural may mean the singular and the
masculine may mean the feminine.
PART A
RULES RELATING TO STOCK OPTION PROGRAM
SECTION THREE
STOCK SUBJECT TO OPTION
A. TOTAL NUMBER OF SHARES. The total number of shares of Stock
which may be included in all Options granted to all Participants under
this Part A is 150,000 shares. The total number of shares of Stock
which may be granted may be increased by a resolution adopted by the
Board and approved by the Company's stockholders. Such Stock may be
either authorized and unissued Stock or reacquired Stock.
B. EXPIRED OPTIONS. If any Option granted under this Part A (i)
is unexercisable, or (ii) is terminated, or (iii) expires or is canceled
for any other reason, in whole or in part, the shares (or remaining
shares) of Stock subject to that particular Option shall again be
available for grant under this Part A.
SECTION FOUR
ADMINISTRATION OF THIS PART A
This Part A shall be administered by the Board. The Board shall
have all the powers vested in it by the terms of this Part A, such
powers to include authority (within the limitation described herein) to
prescribe the form of the agreement embodying awards of Options made
under this Part A. Subject to the provisions of this Part A, the Board
shall have the power to construe this Part A, to determine all questions
arising thereunder, and to adopt and amend such rules and regulations
for the administration of this Part A as it may deem desirable. Any
decision of the Board in the administration of this Part A, as described
herein, shall be final and conclusive. The Board may act only by a
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majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other
officer of the Company to execute and deliver documents on behalf of the
Board.
SECTION FIVE
SELECTION OF PARTICIPANTS
Each Non-Employee Director shall be eligible to receive an Option
in accordance with Section Six. Each Option granted under this Part A
shall be evidenced by an agreement in such form as the Board shall
prescribe from time to time in accordance with this Part A and shall
comply with the terms and conditions set forth in Sections Six and
Seven. Such an agreement shall incorporate the provisions of this Part
A by reference.
SECTION SIX
GRANT OF OPTIONS
AND LIMITATIONS ON EXERCISE
A. INITIAL GRANT FOR INCUMBENT MEMBERS OF THE BOARD. Each
Non-Employee Director as of September 9, 1994 shall receive an Option (a
"September 9, 1994 Option") to purchase for ten years 5,000 shares of
Stock, subject to the terms and conditions herein.
B. INITIAL GRANT FOR NEW MEMBERS OF THE BOARD. Each
Non-Employee Director who is not a recipient of a September 9, 1994
Option, upon the date of his initial election or appointment as a
director of the Company, shall receive an Option to purchase for ten
years 5,000 shares of Stock, subject to the terms and conditions herein.
C. ANNUAL GRANT. Annually upon election as a Non-Employee
Director, commencing in the calendar year subsequent to the calendar
year in which an initial grant was awarded the Non-Employee Director
pursuant to Sections Six A or B above, each Non-Employee Director shall
receive an Option to purchase for ten years 1,000 shares of Stock,
subject to the terms and conditions herein.
D. VESTING. An Option to purchase Stock may be exercised only
by a Participant during his lifetime. The Option is not exercisable for
a period of two years from the date of grant. Thereafter, an Option
becomes exercisable (a) to the extent of one-third of the total number
of shares subject to the option following the expiration of two years
from the date of grant; (b) to the extent of an additional one-third
following the expiration of three years from the date of grant; and (c)
to the extent of an additional one-third following the expiration of
four years from the date of grant. An Option is cumulative and any
portion of an Option not exercised at the time it becomes exercisable
may be exercised at any time thereafter prior to its termination date.
E. LIMITATION. In no event may an Option be exercised by
anyone after the expiration of ten years from the date of grant.
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F. BOARD RETIREMENT. A Participant who ceases to serve on the
Board after reaching age 65 and who has been a member of the Board for
at least ten years prior to the date of retirement shall be permitted to
exercise his entire Option notwithstanding the limitations of Section
Six D above.
G. INSUFFICIENT NUMBER OF SHARES. In the event that the number
of shares of Stock available for future grant under this Part A is
insufficient to make all grants required to be made on any date, then
all Participants entitled to a grant on such date shall share ratably in
the number of shares of Stock which may be included in Options granted
to Participants under this Part A.
SECTION SEVEN
OPTION PRICES
A. DETERMINATION OF OPTION PRICE. The Option price for Stock
shall be equal to 100% of the fair market value of the Stock on the date
of grant.
B. DETERMINATION OF FAIR MARKET VALUE. The fair market value of
the Stock on the date of granting an Option shall be the mean of the
high and low prices at which the Stock was sold on the market on such
date. In the event no such sales of Stock occurred on such date, the fair
market value of the Stock shall be determined by the mean of the high and low
prices at which the Stock was sold on the market on the next preceding date for
which the Stock was so sold.
SECTION EIGHT
EXERCISE OF OPTION
A. METHOD OF EXERCISING AN OPTION. Subject to the terms of a
particular Option, a Participant may exercise it in whole or in part by
written notice to the Company's President or Secretary stating in such
written notice the number of shares of Stock such Participant elects to
purchase under his Option.
B. NO OBLIGATION TO EXERCISE OPTION. A Participant is under no
obligation to exercise an Option or any part thereof.
C. PAYMENT FOR OPTION STOCK. Stock purchased pursuant to an
Option agreement shall be paid in full at the time of purchase. Payment
may be made (a) in cash, (b) by delivery to the Company of shares of
Stock having an aggregate fair market value equal to the exercise price,
or (c) a combination of (a) and (b). Upon receipt of payment and
subject to paragraph E of this Section Eight, the Company shall, without
transfer or issue tax to the Participant or other person entitled to
exercise the Option, deliver to the Participant (or other person
entitled to exercise the Option) a certificate or certificates for such
shares.
D. DELIVERY OF STOCK TO PARTICIPANT. The Company shall undertake
and follow all necessary procedures to make prompt delivery of the
number of shares of Stock which the Participant elects to purchase upon
exercise of an Option granted under this Part A. Such delivery,
however, may be
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postponed, at the sole discretion of the Company, to enable the Company
to comply with any applicable procedures, regulations or listing requirements
of any government agency, stock exchange or regulatory authority.
E. FAILURE TO ACCEPT DELIVERY OF STOCK. If a Participant refuses
to pay for Stock which he has elected to purchase under his Option, in
accordance with the terms of payment, which had previously been agreed
upon, his Option shall thereupon, at the sole discretion of the Board,
terminate, and such funds previously paid for unissued Stock shall be
refunded. Stock which has been previously issued to the Participant and
been fully paid for shall remain the property of the Participant and
shall be unaffected by such termination.
SECTION NINE
NON-TRANSFERABILITY OF OPTIONS
During a Participant's lifetime, an Option granted to him may be
exercised only by him. It may not be sold, assigned, pledged or
otherwise transferred except by will or by the laws of descent and
distribution. No Option or any right thereunder shall be subject to
execution, attachment or similar process. Upon any attempt by a
Participant to so sell, assign, pledge or otherwise transfer any Option,
or any right thereunder, contrary to the provisions hereof, the Option
and all rights thereunder shall immediately become null and void.
SECTION TEN
PURCHASE FOR INVESTMENT
A. WRITTEN AGREEMENT BY PARTICIPANTS. Unless a registration
statement under the Securities Act of 1933 is then in effect with
respect to the Stock a Participant receives upon exercise of his Option,
a Participant shall acquire the Stock he receives upon exercise of his
Option for investment and not for resale or distribution and he shall
furnish the Company with a written statement to that effect when he
exercises his Option and a reference to such investment warranty shall
be inscribed on the Stock certificate(s).
B. REGISTRATION REQUIREMENT. Each Option shall be subject to the
requirement that, if at any time the Board determines that the listing,
registration or qualification of the shares subject to the Option upon
any securities exchange or under any state or Federal law is necessary
or desirable as a condition of, or in connection with, the issuance of
shares thereunder, the Option may not be exercised in whole or in part
unless such listing, registration or qualification shall have been
effected or obtained (and the same shall have been free of any
conditions not acceptable to the Board).
SECTION ELEVEN
CHANGES IN CAPITAL STRUCTURE
In the event of a change in the capital structure of the Company,
the number of shares specified in Section Three of this Part A,
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the number of shares specified in Section Six of this Part A, the
number of shares covered by each outstanding Option and the price per share
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from the splitting or consolidation of shares,
or the payment of a stock dividend, or effected in any other manner without
receipt of additional or further consideration by the Company.
SECTION TWELVE
CORPORATE REORGANIZATION OR DISSOLUTION
A. In the event of the dissolution or liquidation of the Company,
any Option granted under this Part A shall terminate as of a date to be
fixed by the Board, provided that not less than 15 days written notice
of the date so fixed shall be given to each Participant and each such
Participant shall have the right during such period to exercise his
Option as to all or any part of the Stock covered thereby including
Stock as to which such Option would not otherwise be exercisable by
reason of an insufficient lapse of time.
B. In the event of a Reorganization (as hereinafter defined) in
which the Company is not the surviving or acquiring company, or in which
the Company is or becomes a wholly owned subsidiary of another company
after the effective date of the Reorganization, then:
1) If there is no plan or agreement respecting the
Reorganization ("Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide for
the change, conversion, or exchange of the Stock under
outstanding and unexercised Options for securities of
another corporation, then the Board shall take such action,
and the Options shall terminate, as provided in paragraph A
of this Section Twelve, or
2) If there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the
change, conversion, or exchange of the Stock under
outstanding and unexercised Options for securities of
another corporation, then the Board shall adjust the shares
under such outstanding and unexercised Options (and shall
adjust the shares remaining under this Part A which are then
to be available for grant under this Part A, if the
Reorganization Agreement makes specific provisions therefor)
in a manner not inconsistent with the provisions of the
Reorganization Agreement for the adjustment, change,
conversion or exchange of such Options.
The term "Reorganization" as used in this paragraph B of this Section
Twelve shall mean any statutory merger, statutory consolidation, sale of
all or substantially all of the assets of the Company, or sale, pursuant
to an agreement with the Company, of securities of the Company pursuant
to which the Company is or becomes a wholly owned subsidiary of another
company after the effective date of the Reorganization.
C. Adjustments and determinations under this Section Twelve shall
be made by the Board, whose decisions as to what adjustments or
determinations shall be made, and the extent thereof, shall be final,
binding and conclusive.
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SECTION THIRTEEN
TERMINATION OF SERVICE
A. SEVERANCE. Subject to the provision of Paragraph B of this
Section Thirteen, in the event a Participant ceases to be a Non-Employee
Director, his Option terminates one month from the date of such
cessation of service. Subject to the provisions of Paragraph F of
Section Six, such Option shall be exercisable only to the extent the
Participant was entitled to exercise the Option on the date of such
cessation of service.
B. DEATH. If a Participant dies prior to the full exercise of
his Option, his Option to purchase Stock under such Option may be
exercised to the extent, if any, that Participant would be entitled to
exercise it at the date of Participant's death by the person to whom the
Option shall pass by will or by the laws of descent and distribution
within twelve months of Participant's death or the expiration of the
term of the Option whichever date is sooner.
SECTION FOURTEEN
APPLICATION OF FUNDS
All proceeds received by the Company from the exercise of Options
shall be paid into its treasury and such proceeds shall be used for
general corporate purposes.
SECTION FIFTEEN
PARTICIPANT'S RIGHTS AS A STOCKHOLDER
A Participant has no rights as a stockholder with respect to any
shares of Stock covered by his Option until the date a stock certificate
is issued to him for such shares. Except as otherwise provided for in
Section Eleven of this Part A, no adjustment shall be made for dividends
or other rights for which the record date is prior to the date such
stock certificate is issued.
SECTION SIXTEEN
AMENDMENT AND TERMINATION OF THIS PART A
A. DISCRETION OF THE BOARD OF DIRECTORS. This Part A may be
terminated or amended at any time and from time to time by the Board as
the Board shall deem advisable including, but not limited to, amendments
necessary to qualify for any exemption or to comply with applicable law
or regulations; provided, however, that this Part A shall not be amended
more than once every six months, other than to comport with changes in
the Internal Revenue Code of 1986, as amended, or the regulations
thereunder, or the Employee Retirement Income Security Act of 1974, as
amended, or the regulations thereunder; and provided, further, that
except as provided in Section Eleven, the Board may not, without further
approval by the stockholders of the Company, increase the maximum number
of shares of Stock as to which Options may be granted under this Part A,
increase the number of shares subject to an Option, reduce the minimum
Option exercise price described in Section Seven, extend the period
during which Options may be granted or exercised under this Part A or
change the
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class of persons eligible to receive Options under this Part
A. No amendment of this Part A shall materially and adversely affect
any right of any Participant with respect to any Option theretofore
granted without such Participant's written consent.
B. AUTOMATIC TERMINATION. This Part A shall terminate on
September 9, 2004. Options may be granted under this Part A at any time
and from time to time prior to this Part A's termination. Any Option
outstanding at the time this Part A is terminated shall remain in effect
until said Option is exercised or expires.
PART B
RULES RELATING TO DEFERRED COMPENSATION
STOCK PURCHASE
SECTION SEVENTEEN
DEFERRAL OF FEES
A Non-Employee Director may elect by written notice to defer
payment on all or a portion of his fees (including Committee fees) for
any year, subject to the following conditions:
During the period of the active service (as hereinafter defined)
of a Non-Employee Director, the Non-Employee Director agrees to serve
the Company faithfully and, to the best of the ability of the
Non-Employee Director, to perform such services and duties as shall be
assigned to the Non-Employee Director by the Board.
For purposes of this Part B, the period of the active service of
the Non-Employee Director shall mean the period commencing with the date
of election or appointment of the Non-Employee Director and expiring on
the date on which occurs the termination of the service of the
Non-Employee Director by reason of expiration of term or the date of
resignation, removal or death of the Non-Employee Director, whichever
shall occur first. Nothing contained herein shall be construed as
conferring upon the Non-Employee Director the right to continue in the
active service of the Company.
SECTION EIGHTEEN
ELECTION AND DEFERRED ACCOUNTS
A. Prior to the thirty-first day of May of each year during the
period of the active service of the Non-Employee Director, the
Non-Employee Director may instruct the Company by delivery to it of
written notice to withhold a specified percentage (not less than 25%) of
any fees otherwise payable to the Non-Employee Director for services to
be rendered in the following fiscal year (the "Deferred Amounts"). Such
election shall be irrevocable with respect to such fiscal year. The
Company shall establish a grantor "Rabbi Trust" and shall establish
thereunder on behalf of the Non-Employee Director upon a deferral
election a liability account which shall consist of a Stock Deferred
Account and an Interest Deferred Account (each a "Deferred Account").
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B(i) Stock Deferred Account
(a) An agent (the "Agent") shall be appointed by the Board
or any individual or committee to which the Board has delegated
authority to act with respect to the appointment of the Agent to perform
the functions and have the responsibilities assigned to the Agent in
this Section Eighteen with respect to the purchase of Stock. The Board
or such individual or committee shall have the right to change the Agent
at any time. Except as provided in Section 18B(i)(b), the Company shall
pay the compensation and expenses of the Agent.
(b) Deferred Amounts shall initially be deposited to the
Interest Deferred Account (the "Initial Deferred Amounts"). For each
fiscal year of the Company, the Agent shall cause all Initial Deferred
Amounts to be applied to the open market purchase of whole shares of
Stock within fifteen days after December 1, February 28 and May 31 of
such fiscal year. The Agent shall have all authority to determine the
times of such purchases, the prices at which such purchases are made,
the manner of such purchases and the selection of brokers or dealers
(which may include the Agent) to make such purchases. All brokerage
fees and commissions with respect to such purchases shall be deducted
from the Initial Deferred Amounts. The Agent shall credit each Stock
Deferred Account with the number of whole shares of Stock equal to such
account's Initial Deferred Amount applied by the Agent to the purchase
of Stock divided by the average price per share purchased by the Agent.
Initial Deferred Amounts representing a fraction of the purchase price
of a share shall be credited to their respective Interest Deferred
Account. Any shares of Stock held in a Stock Deferred Account shall be
voted by the trustee of the "Rabbi Trust".
(c) In the alternative, but only if and to the extent that
the Company shall have instructed the Agent concurrent with or prior to
the delivery to the Agent of the Initial Deferred Amounts, the Agent
shall purchase whole shares of Stock directly from the Company and not
in the open market. Each such purchase from the Company shall be at a
price equal to the closing price of Stock on the market on the business
day preceding the date such purchase is made.
(d) During the period that such Stock Deferred Account is
maintained, on each date on which the Company pays dividends on its
Stock, the Interest Deferred Account shall be credited with an amount
equivalent to the amount of dividends declared by the Company with
respect to the Stock held in the Stock Deferred Account ("Dividend
Equivalents").
(e) The total number of shares of Stock which may be
purchased under this Part B is 80,000 shares. The total number of
shares of Stock which may be purchased may be increased by a resolution
adopted by the Board and approved by the Company's stockholders. Such
Stock may be either authorized and unissued shares or reacquired shares.
(f) In the event of a change in the capital structure of
the Company, the number of shares of Stock specified in Section Eighteen
of this Part B, and the number of shares of Stock entered in a Stock
Deferred Account shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from the
splitting or consolidation of shares, or the
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payment of a stock dividend, or effected in any other manner without
receipt of additional or further consideration by the Company.
B(ii) Interest Deferred Account
All additions to the Interest Deferred Account will be invested in
short- to mid-term fixed-income investments selected by the Company
from time to time. There shall be credited to the Interest Deferred
Account all gains, losses and income attributable to such investments.
SECTION NINETEEN
ANNUAL STATEMENT
The Company will provide an annual statement of the Deferred
Accounts to each participant Non-Employee Director showing amounts of
fees deferred and additional amounts credited to his Deferred Accounts
in accordance with Section 18.
SECTION TWENTY
PAYMENT
Upon the termination of active service of a Non-Employee Director,
the Company shall pay such Non-Employee Director his Deferred Accounts
in one lump sum payment as soon after his termination of active service
as is administratively feasible unless such Non-Employee Director had
previously made an election, at least sixty (60) days prior to the
effective date of such termination of active service, to receive his
Deferred Accounts in the form of installment payments. At least sixty
(60) days prior to his termination of active service, a Non-Employee
Director may make an irrevocable election to receive his Deferred
Accounts in the form of installment payments over a period of time
designated by the Non-Employee Director but in no event to exceed twenty
(20) years. In the event that the installment method of payment is
selected, the Non-Employee Director will further designate whether
installment payments are to be made on a monthly, quarterly, semi-annual
or annual basis. During the period of installment distributions, the
Interest Deferred Account will be credited with an earnings factor
computed pursuant to the principles described in Section 18 B(ii),
above. In the event that a Non-Employee Director dies after having made
an installment election but prior to the receipt of all installment
payments thereunder, the remaining payments will be made to the
beneficiary by the Non-Employee Director designated for purposes of this
Part B through the remaining duration of the elected installment period,
unless the Non-Employee Director has provided in such installment
election for a different form of payment to the beneficiary of the
Non-Employee Director in the event of the death of the Non-Employee
Director, in which event such different form of payment shall be made to
the beneficiary of the Non-Employee Director. The computation of the
amount of a lump sum payment or the amount of an installment payment
shall be made by reference to the balance of the Deferred Account as of the
date of the distribution.
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SECTION TWENTY-ONE
DEATH OF NON-EMPLOYEE DIRECTOR
Where the death of the Non-Employee Director occurs prior to
making his election, payments of compensation deferred shall be made in
such manner determined by the beneficiary.
SECTION TWENTY-TWO
DEATH OF NON-EMPLOYEE DIRECTOR AND BENEFICIARY
If both the Non-Employee Director and his designated beneficiary
should die, the total amount standing to the credit of the Non-Employee
Director in the Deferred Accounts shall be determined as of the date of
death of the designated beneficiary (including any additional amounts
credited to such Account pursuant to Section Eighteen B(ii)) and shall
be paid as promptly as possible in one lump sum to the estate of such
designated beneficiary.
SECTION TWENTY-THREE
TAXES
Payments will be made to the Non-Employee Director or beneficiary
after deducting taxes required by federal and/or state governments, if
any.
SECTION TWENTY-FOUR
ADMINISTRATION OF THIS PART B
This Part B shall be administered by the Board, except as provided
in Section 18. The Board shall have all the powers vested in it by the
terms of Part B. Subject to the provisions of this Part B, the Board
shall have the power to construe this Part B, to determine all questions
arising thereunder, and to adopt and amend such rules and regulations
for the administration of this Part B as it may deem desirable. Any
decision of the Board in the administration of this Part B, as described
herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that members thereof may
authorize any one or more of their number or the Secretary or any other
officer of the Company to execute and deliver documents on behalf of the
Board.
SECTION TWENTY-FIVE
UNSECURED GENERAL CREDITOR
Nothing contained in this Part B and no action taken pursuant to
the provisions of this Part B shall create or be construed to create a
trust of any kind other than a grantor "Rabbi Trust", or a fiduciary
relationship between the Company and the Non-Employee Director, his
designated beneficiary or any other person. Any compensation deferred
under the provisions of this Part B shall continue for all purposes to
be a part of the general funds of the Company. To the extent that any
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<PAGE> 36
person acquires a right to receive payment from the Company under this
Part B, such right shall be no greater than the right of any unsecured general
creditor of the Company.
SECTION TWENTY-SIX
NO ASSIGNMENT
The right of the Non-Employee Director or any other person to the
payment of deferred compensation or other benefits under this Part B
shall not be assigned, transferred, pledged or encumbered except by will
or by the laws of descent and distribution.
SECTION TWENTY-SEVEN
SUCCESSORS AND ASSIGNS
This Part B shall be binding upon and inure to the benefit of the
Company and its subsidiaries, its successors and assigns and the
Non-Employee Director and his heirs, executors, administrators and legal
representatives.
SECTION TWENTY-EIGHT
CHANGE OF CONTROL
In the event of a change of control of the Company, the Company
shall immediately pay the Non-Employee Director his Deferred Accounts,
including accrued interest. A "change of control" shall mean (i) a
merger or consolidation in which the Company is not the surviving
corporation or (ii) the acquisition of twenty-five percent or more of
the voting securities of the Company by a person, group or entity or
(iii) the sale of all or substantially all of the assets of the Company
or (iv) individuals who were members of the Board immediately prior to a
meeting of the stockholders of the Company involving a contest for the
election of Non-Employee Directors do not constitute a majority of the
Board immediately following such election, unless that election of such
new Non-Employee Directors was recommended to the stockholders by
management of the Company.
SECTION TWENTY-NINE
AMENDMENT AND TERMINATION OF THIS PART B
A. DISCRETION OF THE BOARD OF DIRECTORS. The Board of
Directors may at any time terminate or amend this Part B. Except as
herein provided, no such termination may affect Stock previously
purchased. No amendment may be made without prior approval of the
stockholders of the Company if such amendment would (a) materially
increase the benefits accruing to participants under this Part B, (b)
materially increase the number of shares which may be purchased under
this Part B, or (c) materially modify the requirements as to eligibility
for participation under this Part B.
B. AUTOMATIC TERMINATION. This Part B shall terminate on
September 9, 2004.
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MANOR CARE, INC.
This Proxy is Solicited on Behalf of the Board of Directors
PROXY FOR ANNUAL MEETING SEPTEMBER 9, 1994
The undersigned hereby appoints JACK R. ANDERSON and FREDERIC V.
MALEK, and each of them, the true and lawful attorneys and proxies, with full
power of substitution, to attend the Annual Meeting of Stockholders of MANOR
CARE, INC. to be held at the Clarion Hotel, 1981 North Central Expressway,
Richardson, Texas, on Friday, September 9, 1994 at 9:00 a.m. and at any
adjournment thereof, and to vote all shares of common stock held of record
which the undersigned could vote, with all the powers the undersigned would
possess if personally present at such meeting, as designated below.
<TABLE>
<S> <C>
(1) Election of Directors: / / FOR all nominees listed below:
/ / WITHHOLD AUTHORITY to vote FOR all nominees listed below:
</TABLE>
S. BAINUM, JR., S. BAINUM, J. R. ANDERSON, R. E. HERZLINGER, W. H.
LONGFIELD, F. V. MALEK and J. E. ROBERTSON, Ph.D.
(Instructions: to withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
-----------------------------------------------------------------
(2) Approval of Amendment to the Company's Certificate of
Incorporation increasing the authorized common stock from
80,000,000 shares to 160,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
(3) Approval of the Manor Care, Inc. Non-Employee Director Stock
Option and Deferred Compensation Stock Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
(4) In their discretion, upon such other business as may properly
come before the meeting.
(Continued and to be signed on the reverse side)
<PAGE> 38
The Board of Directors recommends a vote FOR items (1), (2) and (3).
This proxy, when properly executed, will be used in the manner
directed herein by the undersigned stockholder. If not otherwise specified,
the shares represented by this proxy will be voted FOR items (1), (2) and (3),
and for and in accordance with the discretion of the persons named as proxies
as to such other matters as may properly come before the meeting, or at any and
all adjournments thereof.
Dated -------------------------------------------, 1994
-------------------------------------------------------
Signature
--------------------------------------------------------
Signature
(Signature should agree exactly with the name or names
appearing above. Joint owners should both sign. In
signing as attorney, administrator, executor, guardian
or trustee, please set forth your full title. If the
signer is a corporation, please sign the full
corporate name by a duly authorized officer.)
