<PAGE> 1
Pursuant to Rule 424(b)(3)
Registration No. 33-64680
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 24, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 2, 1993)
$100,000,000
MANOR CARE, INC.
% SENIOR NOTES DUE 2006
------------------------
Interest Payable and
------------------------
The Senior Notes offered hereby (the "Offering") will mature on ,
2006. Interest on the Senior Notes will be payable semiannually on
and , commencing on , 1996. The Senior
Notes will be redeemable, at the option of the Company, in whole at any time or
in part from time to time, at a redemption price equal to the greater of (i)
100% of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted, on a
semiannual basis (assuming a 360-day per year consisting of twelve 30-day
months), at the Treasury Rate (as defined herein), plus basis points, plus
accrued interest to the date of redemption. The Senior Notes will not be subject
to any sinking fund.
The Senior Notes will constitute senior unsecured obligations of the
Company and rank pari passu in right of payment with all present and future
senior indebtedness of the Company. The Senior Notes will be effectively
subordinated to all existing and future claims of creditors of the Company's
subsidiaries. See "Description of Debt Securities -- General" in the Prospectus.
At February 29, 1996, as adjusted to give effect to the Offering, the Company
and its subsidiaries had approximately $462,530,000 of outstanding indebtedness,
approximately $204,721,000 of which would have been effectively senior to the
Senior Notes. The Company has announced its intention to spinoff its lodging
business (the "Spinoff"). Following the Spinoff, the Senior Notes will remain
the obligation of the Company. The Spinoff is not expected to have an effect on
the amount of outstanding indebtedness of the Company.
The Senior Notes will be represented by one or more global securities
("Global Notes") registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Global Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Except as described in this
Prospectus Supplement, Senior Notes in definitive form will not be issued in
exchange for Global Notes. Settlement for the Senior Notes will be made in
immediately available funds. The Senior Notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity for the Senior Notes will therefore settle in immediately available
funds. See "Description of Senior Notes -- Same-Day Settlement."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------------
Per Senior Note....................... % % %
- -----------------------------------------------------------------------------------------------------
Total................................. $ $ $
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. "See Underwriting."
(3) Before deducting expenses, payable by the Company, estimated at $400,000.
------------------------
The Senior Notes offered by this Prospectus Supplement are being offered by
the Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the Senior Notes will be made in book-entry form through the facilities of the
Depositary on or about , 1996.
------------------------
LEHMAN BROTHERS
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
NATIONSBANC CAPITAL MARKETS, INC.
, 1996
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
THE COMPANY
The Company and its subsidiaries have been engaged since October 1968 in
the business of developing, owning and managing nursing centers that provide
skilled nursing and convalescent care principally for residents over the age of
65. With 174 skilled nursing and rehabilitation facilities and 24 assisted
living facilities in 28 states, the Company is the third largest provider of
long-term care in the country. The Company provides quality long-term care,
targeting upper income, service sensitive, private paying patients. In the
Company's latest quarter, private pay patients accounted for approximately 59%
of healthcare revenues.
The Company's nursing centers provide, in general, five types of services:
High acuity services -- for persons who require complex medical and
physical rehabilitation services (patients who would otherwise be treated
in an acute care hospital setting).
Skilled nursing care -- for persons who require 24-hour-a-day
professional services of a registered nurse or a licensed practical nurse.
Intermediate care -- for persons needing less intensive nursing care
than that provided to those requiring skilled care.
Custodial care -- for persons needing a minimum level of care.
Assisted living -- for persons needing some supervision and assistance
with personal care.
Services provided to all patients include the required type of nursing
care, room and board, special diets, occupational, speech, physical and
recreational therapy and other services that may be specified by the patient's
physician, who directs the admission, treatment and discharge of that patient.
With over a decade of experience in providing complex medical and physical
rehabilitation, the Company is an industry leader in serving high acuity
patients. The Company currently operates 22 dedicated high acuity units.
The Company's assisted living operations consist of 17 facilities serving
the needs of the general assisted living population and seven facilities
designed to meet the specialized needs of individuals in the early to middle
stages of Alzheimer's disease.
Vitalink Pharmacy Services, Inc. ("Vitalink"), an 82%-owned subsidiary of
the Company, provides institutional pharmacy services to nursing facilities and
other institutions in 19 markets around the country.
In October 1995, the Company entered into a strategic partnership with In
Home Health, Inc., a leading provider of home health care services.
RECENT DEVELOPMENTS
On March 4, 1996, the Company's Board of Directors voted to approve, in
principle, the Spinoff, subject to the receipt of regulatory and other approvals
and consents and satisfactory implementation of the arrangements for the
Spinoff. The Company anticipates that the Spinoff will have several benefits,
including (i) increasing capital-raising efficiency due to investors' ability to
assess the risk profiles and operating characteristics of both the healthcare
and lodging businesses, (ii) increasing strategic freedom and focus at both
businesses and (iii) furthering the Company's efforts toward decentralizing its
corporate resources. The Company anticipates that the Spinoff will be completed
in approximately four to six months from the date of this Prospectus Supplement.
There can be no assurance, however, that the Spinoff will occur. The Senior
Notes will be the obligation of the Company following the Spinoff. On May 7,
1996, the Company completed the restatement of its annual audited financial
statements to reflect the lodging business as a discontinued operation. For
further information with respect to the Company's restatement of its financial
statements, see the Company's Form 8-K dated May 7, 1996 and Form 10-Q for the
quarterly period ended February 29, 1996, which are incorporated herein by
reference. The information included in this Prospectus Supplement treats the
Company's lodging business as discontinued operations.
The Company anticipates non-recurring charges against earnings in its
fourth quarter ending May 31, 1996. The Company is evaluating its investment in
certain assets, principally related to European hotel
S-3
<PAGE> 4
operations and, to a lesser extent, management information systems. Any
write-down of these investments will be calculated in accordance with SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets," and will constitute a
non-cash charge against fourth quarter earnings. The Company expects that such
non-cash charges will approximate $30 million, after tax. In addition, the
Company is reviewing one-time costs relating to the Spinoff and the relocation
of its corporate headquarters. Charges relating to these events are not expected
to exceed $4 million, after tax.
S-4
<PAGE> 5
SUMMARY FINANCIAL AND OPERATING DATA
The Company's financial statements have been restated to show the results of
operations of the lodging business as discontinued operations. The following
table, therefore, does not reflect revenue derived from, or expenses of, the
Company's lodging business. The following summary of financial and operating
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and related notes incorporated herein by reference. The income
statement data for the fiscal years ended 1993, 1994 and 1995 are derived from
the audited consolidated financial statements of the Company. The balance sheet
data at February 29, 1996 and the income statement data for the nine months
ended February 28, 1995 and February 29, 1996 are derived from unaudited
financial statements that, in the opinion of the Company, reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the information set forth below. The interim results for the nine
months ended February 29, 1996 are not necessarily indicative of results for the
entire 1996 fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------- YEARS ENDED MAY 31,
FEB. 29, FEB. 28, ----------------------------------
1996 1995 1995 1994 1993
-------- -------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................................... $908,118 $748,347 $1,019,458 $923,308 $830,968
-------- -------- ---------- -------- --------
Expenses
Operating expenses............................................. 699,271 568,802 769,998 696,199 627,733
Depreciation and amortization.................................. 49,685 39,527 54,374 49,019 46,394
General corporate.............................................. 53,756 44,270 63,197 53,644 46,371
-------- -------- ---------- -------- --------
Total expenses.......................................... 802,712 652,599 887,569 798,862 720,498
-------- -------- ---------- -------- --------
Income from continuing operations before other income and
(expenses) and income taxes.................................. 105,406 95,748 131,889 124,446 110,470
-------- -------- ---------- -------- --------
Other income and (expenses)
Interest income from advances to discontinued lodging
segment...................................................... 14,595 11,150 15,492 10,665 7,083
Interest income and other...................................... 3,371 5,639 7,348 5,288 6,292
Minority interest expense...................................... (1,243) (1,588) (2,129) (1,752) (1,408)
Gain on sale of property....................................... -- -- -- 7,978 --
Interest expense............................................... (22,015) (16,955) (22,769) (27,441) (34,988)
-------- -------- ---------- -------- --------
Total other (expenses), net............................. (5,292) (1,754) (2,058) (5,262) (23,021)
-------- -------- ---------- -------- --------
Income from continuing operations before income taxes............ 100,114 93,994 129,831 119,184 87,449
Income taxes..................................................... 41,034 37,654 52,156 50,481 32,720
-------- -------- ---------- -------- --------
Income from continuing operations................................ 59,080 56,340 77,675 68,703 54,729
Discontinued operations
Income from discontinued operations (net of income taxes of
$14,966, $9,246, $13,144, $8,019 and $5,780, respectively)... 20,436 11,771 16,811 9,659 7,654
-------- -------- ---------- -------- --------
Income before extraordinary item................................. 79,516 68,111 94,486 78,362 62,383
Extraordinary item (debt redemption, net of income taxes of
$1,851)........................................................ -- -- -- -- (3,019)
-------- -------- ---------- -------- --------
Net income....................................................... $ 79,516 $ 68,111 $ 94,486 $ 78,362 $ 59,364
========= ========= ========== ========= =========
Weighted average shares outstanding.............................. 62,592 62,468 62,480 60,524 57,316
========= ========= ========== ========= =========
INCOME PER SHARE OF COMMON STOCK
Income from continuing operations.............................. $ 0.94 $ 0.90 $ 1.24 $ 1.13 $ 0.96
Discontinued operations (net of income taxes).................. 0.33 0.19 0.27 0.16 0.13
Extraordinary item............................................. -- -- -- -- (.05)
-------- -------- ---------- -------- --------
Net income per share of common stock........................... $ 1.27 $ 1.09 $ 1.51 $ 1.29 $ 1.04
========= ========= ========== ========= =========
SELECTED OPERATING DATA:
Operating margin............................................... 11.6% 12.8% 12.9% 13.5% 13.3%
Investments in property and equipment.......................... $ 81.5 $ 63.0 $ 83.9 $ 72.9 $ 45.2
Healthcare beds in operation................................... 26,183 23,007 23,763 22,252 22,406
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................................... $1,575,235(a)
Total debt..................................................... 461,480
Shareholders' equity........................................... 702,657(b)
</TABLE>
- ---------------
(a) Indebtedness related to lodging acquisitions and renovations is reflected as
advances to discontinued lodging segment in the consolidated balance sheet
totaling $225,723 at February 29, 1996. Such indebtedness is to be repaid
over a three year period from the date of the Spinoff.
(b) If the Spinoff had occurred on February 29, 1996, total shareholders' equity
would have been reduced by $127,424.
S-5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following review of operating results includes the historical results
of operations of the Company for the years ended May 31, 1995, 1994 and 1993 and
for the three months and nine months ended February 29, 1996 and February 28,
1995 and reflects the Company's lodging business as discontinued operations.
COMPARISON OF FISCAL YEAR RESULTS
Income from continuing operations increased $9.0 million in fiscal year
1995. This compares to an increase of $14.0 million for fiscal year 1994. Fiscal
year 1994 includes a gain on sale of property of $8.0 million pretax or $4.8
million net of tax. Excluding gain on sale of property, increases in income from
continuing operations for fiscal 1995 and 1994 were 22% and 17%, respectively.
Revenues increased $96.2 million or 10% to $1.0 billion in fiscal year
1995, while operating expenses increased $73.8 million or 11% to $770.0 million,
resulting in a $22.4 million increase in operating profits. This compares to an
increase of 11% in both revenue and expense for fiscal year 1994. The increased
fiscal year 1995 revenue was predominantly due to increased rates, $57.4
million, and additional capacity, $33.6 million. The increase of $92.3 million
in revenue for fiscal year 1994 reflected a 28% increase in beds served for
Vitalink and approximately $56.3 million related to value added services in the
nursing and assisted living facilities.
The Company actively controls costs and generally has been successful at
maintaining overall cost increases at rates consistent with the applicable rates
of inflation. Increases in labor costs reflect additional services provided for
special needs and higher levels of acuity. Labor costs account for approximately
62% of the increase in operating expenses for fiscal year 1995 and 65% for
fiscal year 1994.
Depreciation and amortization expenses increased by 11% in fiscal year 1995
to $54.4 million. In fiscal year 1994 depreciation and amortization expenses
increased by 6%. Increases were due to acquisitions and construction of
additional facilities.
General corporate expenses represented 6% of revenue in fiscal years 1995,
1994 and 1993. General corporate expenses include all indirect operating
expenses as well as risk management, information systems, treasury, accounting,
legal and other administrative support for the Company and its various
subsidiaries.
Interest expense decreased 17% in fiscal year 1995 and 22% in fiscal year
1994. The decrease in both years was primarily due to the redemption of $99.0
million of 6 3/8% debentures in October 1993.
Included in discontinued operations is interest expense charged by the
continuing healthcare segment to the discontinued lodging segment relating to
cash advances provided to the lodging segment for the acquisition and renovation
of lodging assets for the fiscal years ended May 31, 1995, 1994 and 1993 of
$15.5 million, $10.7 million and $7.1 million, respectively. Interest is charged
at an annual rate of 9% on the indebtedness.
COMPARISON OF THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY
28, 1995
Net income for the three months ended February 29, 1996 was $22.3 million
or $.36 per share as compared to $18.7 million or $.30 per share reported in the
prior year quarter. For the nine months ended February 29, 1996, net income
amounted to $79.5 million or $1.27 per share as compared to the prior year's
period of $68.1 million or $1.09 per share.
Income from operations for the three and nine months ended February 29,
1996 was $36.8 million and $105.4 million, respectively. This compares to income
from operations in the same periods last year of $32.4 million and $95.7
million, respectively.
Gross profit for the three and nine months ended February 29, 1996
increased $11.8 million and $29.3 million, respectively, as compared with the
same periods last year. For the three months ended February 29, 1996, revenue
and operating expenses rose 30% and 32%, respectively. For the nine months ended
February 29, 1996, revenue and expenses increased 22% and 23%, respectively.
Higher occupancies and rate
S-6
<PAGE> 7
increases in the Company's nursing facilities improved year-to-date gross
profits by $6.2 million and $2.9 million, respectively. The remaining
improvement was primarily due to added capacity in Vitalink.
Depreciation and amortization increased $4.4 million and $10.2 million for
the three and nine month periods ended February 29, 1996, respectively, due to
acquisitions and increases in property and equipment resulting from additions
and renovations to existing facilities during the past twelve months.
General corporate expenses for the three and nine months ended February 29,
1996 increased $3.0 million and $9.5 million, respectively, as compared to the
same periods last year. These increases were primarily due to general inflation
and increased payroll and benefits costs relating to various programs. General
corporate expense represented 6% of revenues during the nine months ended
February 29, 1996 as well as during the same period in the prior year. General
corporate expenses includes risk management, information systems, treasury,
accounting, legal, human resources and other administrative support functions.
Interest expense for the three and nine months ended February 29, 1996
increased $1.5 million and $5.0 million, respectively, as compared to the same
periods last year. Interest income from advances to discontinued operations was
$5.1 million and $14.6 million for the three and nine months ended February 29,
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it maintains adequate capital resources. Its
available cash balances of $25.6 million and unused lines of credit of $81.0
million as of February 29, 1996 are considered adequate to ensure sufficient
liquidity and capital resources for both the upcoming year and the foreseeable
future.
In November 1994, the Company entered into a $250.0 million unsecured
revolving credit facility (the "Revolver") provided by a group of eighteen
banks. Borrowings under the Revolver are guaranteed by the Company's significant
subsidiaries. The Revolver replaced the $100.0 million revolving credit facility
agreement, as amended, dated June 1993, and the $65.0 million revolving credit
facility agreement, as amended, dated December 1992. The Revolver will expire in
November 1999. The Company is negotiating with its banks to enter into a new
revolving credit facility to replace the Revolver. The new facility is currently
anticipated to be approximately the same size as the Revolver and is not
expected to provide for subsidiary guarantees, thereby eliminating the
structural subordination to which the Senior Notes have been subject pursuant to
the Revolver.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Senior
Notes are estimated to be $99.0 million after deducting the underwriting
discount and the estimated expenses payable by the Company. The Company intends
to use the net proceeds to repay borrowings under the Revolver. As of February
29, 1996, there was $185.0 million of outstanding borrowings under the Revolver
with an average rate of 5.575%. The Revolver matures on November 30, 1999. The
Company may from time to time reborrow amounts repaid under the Revolver for
working capital, capital expenditures and other corporate purposes, including
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FEBRUARY YEARS ENDED MAY 31,
29, ----------------------------------------
1996 1995 1994 1993 1992 1991
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio...................... 4.87x 5.89x 5.01x 3.32x 2.92x 1.70x
</TABLE>
S-7
<PAGE> 8
For the purpose of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before provision for income taxes,
before fixed charges, plus dividends from less than 50%-owned companies carried
at equity and the Company's share of pre-tax income of 50%-owned companies
carried at equity, less capitalized interest and preferred stock dividend
requirements of consolidated subsidiaries. Fixed charges comprise interest on
long-term and short-term debt, capitalized interest, the portion of rentals
representative of an interest factor and the Company's share of fixed charges of
50%-owned companies carried at equity.
S-8
<PAGE> 9
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of February 29, 1996 on an actual basis and as adjusted to give
effect to the sale of the Senior Notes and the application of the net proceeds
therefrom. See "Recent Developments" and "Use of Proceeds." This data should be
read in conjunction with the Company's financial statements and the notes
thereto that are incorporated by reference herein. The actual data presented
below have been restated to reflect the lodging business as discontinued
operations. See "Recent Developments."
<TABLE>
<CAPTION>
FEBRUARY 29, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt
Bank loans........................................................ $ 189,323 $ 90,373
Mortgage loans and lease obligations(1)........................... 114,348 114,348
% Senior Notes due 2006......................................... -- 100,000
9 1/2% Senior Subordinated Notes due November 15, 2002............ 150,000 150,000
Subordinated Debentures due various dates......................... 7,809 7,809
Less current maturities of long-term debt......................... (13,279) (13,279)
---------- -----------
Total long-term debt...................................... 448,201 449,251
---------- -----------
Shareholders' equity
Preferred stock -- $1 par value, 5,000,000 shares authorized, none
issued......................................................... 0 0
Common stock -- $0.10 par value, 80,000,000 shares authorized,
shares issued....................................... 6,568 6,568
Contributed capital............................................... 171,884 171,884
Retained earnings................................................. 567,496 567,496
Cumulative translation adjustment................................. (353) (353)
Treasury stock, at cost........................................... (42,938) (42,938)
---------- -----------
Total shareholders' equity(2).................................. 702,657 702,657
---------- -----------
Total capitalization...................................... $1,150,858 $ 1,151,908
========= =========
</TABLE>
- ---------------
(1) A portion of the Company's owned and leased nursing centers have been
pledged to secure related mortgage and capital lease obligations. See the
Notes to the Company's Consolidated Financial Statements, which are
incorporated by reference herein.
(2) If the Spinoff had occurred on February 29, 1996, total shareholders' equity
would have been reduced by $127,424.
S-9
<PAGE> 10
DESCRIPTION OF SENIOR NOTES
The following description of the particular terms of the Senior Notes
offered hereby (referred to herein as the "Senior Notes" and in the Prospectus
as the "Debt Securities") is qualified in its entirety by reference to the
"Description of Debt Securities" in the Prospectus and supplements and, to the
extent inconsistent therewith, replaces the description of the general terms and
provisions of the Debt Securities set forth in the Prospectus. The following
summary of the Senior Notes is qualified in its entirety by reference to the
Indenture dated as of , 1996 by and between the Company and the Trustee,
as supplemented by a Supplemental Indenture dated as of ,
1996.
The Senior Notes will be limited to $100 million in aggregate principal
amount. The Senior Notes will be issued only in fully registered form, in
denominations of $1,000 and integral multiples of $1,000. The Senior Notes will
bear interest from , 1996 at the annual rate set forth on the cover
page of this Prospectus Supplement, and will mature on , 2006.
Interest will be payable on and , commencing ,
1996, to the persons in whose names the Senior Notes are registered at the close
of business on the applicable record date, which is the or
next preceding such interest payment date.
The Senior Notes will not be subject to any sinking fund.
The Senior Notes will be redeemable, at the option of the Company, in whole
at any time or in part from time to time, on at least 30 days but not more than
60 days prior notice mailed to the registered address of each holder of Senior
Notes to be so redeemed, at a redemption price equal to the greater of (i) 100%
of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted, on a
semiannual basis (assuming a 360-day per year consisting of twelve 30-day
months), at the Treasury Rate (as defined), plus basis points, plus accrued
interest thereon to the date of redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Senior Notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Senior Notes. "Independent Investment Banker" means the
Reference Treasury Dealer appointed by the Trustee after consultation with the
Company.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the average of
the Reference Treasury Dealer Quotations for such redemption date. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means Lehman Brothers Inc. and its successors;
provided however, that if Lehman Brothers Inc. shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.
S-10
<PAGE> 11
Principal of and interest on the Senior Notes will be payable, and the
Senior Notes will be exchangeable and transfers thereof will be registrable, at
the corporate trust office of the Trustee in New York, New York; provided,
however, that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto at such person's
registered address.
Neither the Indenture nor the Senior Notes will contain provisions that
would afford holders of the Senior Notes protection in the event of a decline in
the credit rating of the Company or the Senior Notes as the result of a
takeover, recapitalization, highly leveraged transaction or similar
restructuring involving the Company that could adversely affect such holders.
The Senior Notes will be subject to defeasance and discharge as described
under "Description of Debt Securities -- Satisfaction and Discharge of
Indenture" in the Prospectus.
GLOBAL NOTES
The Senior Notes will be issued in the form of one or more Global Notes
that will be deposited with, or on behalf of the Depositary. Unless and until it
is exchanged in whole or in part for Senior Notes in definitive form, a Global
Note may not be transferred except as a whole to a nominee of the Depositary for
such Global Note, or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
BOOK-ENTRY SYSTEM
Initially, the Senior Notes will be registered in the name of Cede & Co.,
the nominee of the Depositary. Accordingly, beneficial interests in the Senior
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the United States Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
United States Securities Exchange Act of 1934, as amended. The Depositary holds
securities that its participants ("Direct Participants") deposit with the
Depositary. The Depositary also facilitates the settlement among Direct
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in such
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations, and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Direct and Indirect Participants are on file with the
United States Securities and Exchange Commission.
The Depositary advises that its established procedures provide that (i)
upon issuance of the Senior Notes of the Company, the Depositary will credit the
accounts of Participants designated by the Underwriters with the principal
amounts of the Senior Notes purchased by the Underwriters and (ii) ownership of
interests in the Global Notes will be shown on, and the transfer of the
ownership will be effected only through, records maintained by the Depositary,
the Direct Participants and the Indirect Participants. The laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interest in the Global Notes is limited to such extent.
So long as a nominee of the Depositary is the registered owner of the
Registered Global Notes, such nominee for all purposes will be considered the
sole owner or holder of such Registered Global Notes under the Indenture. Except
as provided below, owners of beneficial interests in the Registered Global Notes
will not
S-11
<PAGE> 12
be entitled to have Senior Notes registered in their names, will not receive or
be entitled to receive physical delivery of Senior Notes in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Neither the Company, the Trustee, any paying agent nor the registrar will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Registered
Global Notes, or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
Principal and interest payments on the Senior Notes registered in the name
of the Depositary's nominee will be made in immediately available funds to the
Depositary's nominee as the registered owner of the Registered Global Notes.
Under the terms of the Senior Notes, the Company and the Trustee will treat the
persons in whose names the Senior Notes are registered as the owners of such
Senior Notes for the purpose of receiving payment of principal and interest on
such Senior Notes and for all other purposes whatsoever. Therefore, neither the
Company, the Trustee nor any paying agent has any direct responsibility or
liability for the payment of principal or interest on the Senior Notes to owners
of beneficial interest in the Registered Global Notes. The Depositary has
advised the Company and the Trustee that its current practice is, upon receipt
of any payment of principal or interest, to credit Direct Participants' accounts
on the payment date in accordance with their respective holdings of beneficial
interests in the Registered Global Notes as shown on the Depositary's records,
unless the Depositary has reason to believe that it will not receive payment on
the payment date. Payments by Direct and Indirect Participants to owners of
beneficial interests in the Registered Global Notes will be governed by standing
instructions and customary practices, as in the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Direct and Indirect Participants and not of
the Depositary, the Trustee, or the Company, subject to any statutory
requirements that may be in effect from time to time. Payment of principal and
interest to the Depositary is the responsibility of the Company or the Trustee,
and disbursement of such payments to the owners of beneficial interests in the
Registered Global Notes shall be the responsibility of the Depositary and Direct
and Indirect Participants.
Senior Notes represented by a Registered Global Note will be exchangeable
for Senior Notes in definitive form of like tenor as such Registered Global Note
in denominations of $1,000 and in any greater amount that is an integral
multiple if the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Registered Global Note or if at any time the
Depositary ceases to be a clearing agency registered under applicable laws and a
successor depositary is not appointed by the Company within 90 days or the
Company in its discretion at any time determines not to require all of the
Senior Notes to be represented by a Registered Global Note and notifies the
Trustee thereof. Any Senior Notes that are exchangeable pursuant to the
preceding sentence are exchangeable for Senior Notes issuable in authorized
denominations and registered in such names as the Depositary shall direct.
Subject to the foregoing, a Registered Global Note is not exchangeable, except
for a Registered Global Note or Registered Global Notes of the same aggregate
denominations to be registered in the name of the Depositary or its nominee.
SAME-DAY SETTLEMENT
Settlement for the Senior Notes will be made by the Underwriters in
immediately available funds. Secondary trading in long-term notes and debentures
of corporate issuers is generally settled in clearing-house or next-day funds.
In contrast, the Senior Notes will trade in the Depositary's Same-Day Funds
Settlement System, and secondary market trading activity in the Senior Notes
will therefore be required by the Depositary to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Senior Notes.
S-12
<PAGE> 13
UNDERWRITING
Subject to the terms and conditions set forth in the terms agreement (the
"Terms Agreement") dated May , 1996 between the Company and the Underwriters,
the Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase, the principal amount of
Senior Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OF SENIOR
UNDERWRITER NOTES
--------------------------------------------------------------- ------------
<S> <C>
Lehman Brothers Inc............................................ $
Chase Securities Inc...........................................
Dillon, Read & Co. Inc.........................................
NationsBanc Capital Markets, Inc...............................
------------
Total..................................................... $100,000,000
===========
</TABLE>
The Terms Agreement provides that the obligations of the Underwriters
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions. The nature of the Underwriters' obligations are such
that the Underwriters are committed to purchase all of the Senior Notes if any
are purchased.
The Underwriters propose to offer the Senior Notes directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of % of the principal amount. The Underwriters may allow and such dealers
may reallow a discount not in excess of % of the principal amount of the
Senior Notes to certain other dealers. After the initial offering, the offering
price and other selling terms may be changed by the Underwriters.
The Senior Notes are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Senior Notes but are not obligated to so do and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Senior Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
Certain of the Underwriters and/or certain of their affiliates perform
investment banking and/or commercial banking services for, and/or engage in
transactions with, the Company and certain of its affiliates from time to time
in the ordinary course of their business and may provide such services and
engage in such transactions with the Company and its affiliates in the future.
Affiliates of each of Chase Securities Inc. and NationsBanc Capital
Markets, Inc. are lenders under the Revolver, which is to be repaid with the
proceeds of the Offering. See "Use of Proceeds." An affiliate of Chase
Securities Inc. will receive approximately 11.2% of such proceeds and an
affiliate of NationsBanc Capital Markets, Inc. will receive approximately 10.4%
of such proceeds. Accordingly, the Offering is being made pursuant to the
provisions of Section 44(c)(B) of Article III of the Rules of Fair Practice of
the National Association of Securities Dealers Inc.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Cahill Gordon
& Reindel, a partnership including a professional corporation, New York, New
York, and for the Underwriters by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), New York, New York.
S-13
<PAGE> 14
PROSPECTUS
MANOR CARE, INC.
SENIOR DEBT SECURITIES
------------------------
Manor Care, Inc. ("Manor Care" or the "Company") may from time to time
offer up to $150 million aggregate principal amount of its senior unsecured debt
securities (the "Debt Securities") consisting of debentures, notes and/or other
unsecured evidences of indebtedness in one or more series. The Debt Securities
may be offered as separate series in amounts, at prices and on terms to be
determined in light of market conditions at the time of offering and set forth
in a Prospectus Supplement or Prospectus Supplements. The Company may sell Debt
Securities to or through underwriters, or to dealers, acting as principals for
their own accounts, and reserves the right to sell Debt Securities directly to
other purchasers or through agents on its own behalf.
This Prospectus will be supplemented and accompanied by a Prospectus
Supplement which shall set forth with regard to the Debt Securities to be
offered hereunder, where applicable and relevant, the title, aggregate principal
amount, denominations, maturity, interest rate (which may be fixed or variable)
and time of payment of interest, if any, terms for redemption at the option of
the Company or the holder, if any, any terms for sinking or purchase fund
payments, any terms for optional or mandatory redemption, any listing on a
securities exchange, the initial public offering price, the names of any
underwriters or agents involved in the sale of the Debt Securities, the
principal amounts, if any, to be purchased by underwriters or agents, the
compensation, if any, of such underwriters or agents and any other terms in
connection with the offering and sale of the Debt Securities in respect of which
this Prospectus is being delivered.
At May 31, 1993, Manor Care and its subsidiaries had approximately $426
million of outstanding indebtedness, approximately $94 million of which would
have been effectively senior to the Debt Securities. Although certain of the
agreements governing such other indebtedness restrict the ability of the Company
and its subsidiaries to incur additional indebtedness, the indenture governing
the Debt Securities will not limit the amount of additional indebtedness that
may be incurred by Manor Care and its subsidiaries, including some types of
indebtedness that may be effectively senior to the Debt Securities.
As substantially all of Manor Care's revenues are realized by its
subsidiaries, the ability of Manor Care to pay principal, premium (if any) and
interest on the Debt Securities will be dependent on the payment to Manor Care
of dividends, interest or other charges by, and advances from its subsidiaries
and the repayment to Manor Care of any advances made to subsidiaries. There
currently are existing no agreements to which any of the Company's subsidiaries
are a party that significantly restrict the ability of such subsidiaries to make
such payments and repayments to Manor Care.
Unless otherwise set forth in the applicable Prospectus Supplement, neither
the Debt Securities nor the indenture governing them will contain provisions
which would afford holders of the Debt Securities protection in the event of a
decline in the credit rating of the Company or the Debt Securities as a result
of a takeover, recapitalization or similar highly leveraged transaction or other
restructuring involving the Company that could adversely affect such holders.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is August 2, 1993
<PAGE> 15
AVAILABLE INFORMATION
Manor Care, Inc., a Delaware corporation, is subject to the informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by Manor Care can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048; and Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of such material
can be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Certain of Manor
Care's securities are listed on the New York Stock Exchange. Reports, proxy and
information statements and other information can be inspected and copied at the
Library of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Manor Care hereby incorporates by reference in this Prospectus its Annual
Report on Form 10-K for the fiscal year ended May 31, 1992, its Quarterly
Reports on Form 10-Q for the quarterly periods ended August 31, 1992, November
30, 1992 and February 28, 1993 and its Current Report on Form 8-K dated November
20, 1992.
All documents filed by Manor Care pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Manor Care undertakes to provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (not
including exhibits to such documents unless exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Manor Care, Inc., at its principal executive offices at 10750 Columbia Pike,
Silver Spring, Maryland 20901, Attention: Secretary; telephone: (301) 681-9400.
The terms "Manor Care" and the "Company" unless the context otherwise
requires, as used herein, refer to Manor Care, Inc., and all its subsidiaries.
USE OF PROCEEDS
Except as otherwise stated in the Prospectus Supplement, the net proceeds
from the sale of the Debt Securities will be used for general corporate
purposes.
2
<PAGE> 16
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED MAY 31,
FEB. 28, -------------------------------------
1993 1992 1991 1990 1989 1988
----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a)........... 4.09x 3.29x 2.04x 1.76x 1.64x .90x
</TABLE>
- ---------------
(a) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before provision for
income taxes, before fixed charges, plus dividends from less than 50%-owned
companies carried at equity and the Company's share of pre-tax income of
50%-owned companies carried at equity, less capitalized interest and
preferred stock dividend requirements of consolidated subsidiaries. Fixed
charges comprise interest on long-term and short-term debt, capitalized
interest, the portion of rentals representative of an interest factor and
the Company's share of fixed charges of 50%-owned companies carried at
equity.
BUSINESS
GENERAL
Manor Care, a Delaware corporation organized in August 1981, is a holding
company that conducts its business through the Manor Care Hotel Division and
three principal subsidiaries, Manor Healthcare Corp. ("Healthcare"), Vitalink
Pharmacy Services, Inc. ("Vitalink") and Choice Hotels International, Inc.
("Choice"). Healthcare and its subsidiaries have been engaged since October 1968
in the business of developing, owning and managing nursing centers, which
provide skilled nursing and convalescent care principally for residents over the
age of 65. Healthcare owns approximately 82% of Vitalink, a public company that
operates institutional pharmacies. Healthcare also owns and operates an acute
care general hospital and five nursing assistant training schools and has a 50%
interest in a clinical laboratory. Choice and its affiliates franchise the use
of the "Quality," "Comfort," "Clarion," "Sleep," "Rodeway," "Econo Lodge" and
"Friendship" trademarks and other related trademarks and services. The Hotel
Division is engaged primarily in the business of owning and operating hotels
under the "Quality," "Comfort," "Clarion" and "Rodeway" trademarks.
HEALTH CARE OPERATIONS
Healthcare and its subsidiaries own, operate or manage 166 nursing centers,
which provide, in general, four types of services:
(1) Skilled nursing care -- for persons who require 24-hour-a-day
professional services of a registered nurse or a licensed practical nurse; (2)
Intermediate care -- for persons needing less intensive nursing care than that
provided to those requiring skilled care; (3) Custodial care -- for persons
needing a minimum level of care; and (4) Assisted living -- for persons needing
some supervision and assistance with personal care.
Healthcare's nursing centers range in bed capacity from 60 to 240 beds,
have an aggregate bed capacity at February 28, 1993 of 22,705 beds, and achieved
an occupancy rate of 88%, excluding newly opened facilities, during the first
nine months of the 1993 fiscal year. The nursing centers are located in 28
states: Arizona, California, Colorado, Delaware, Florida, Georgia, Illinois,
Indiana, Iowa, Kansas, Maryland, Michigan, Missouri, Nevada, New Jersey, New
Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South
Carolina, South Dakota, Texas, Utah, Virginia, Washington and Wisconsin.
Patients seeking the services of the nursing centers come from a variety of
sources, and are principally referred by hospitals and physicians. Most of
Healthcare's nursing centers participate in state Medicaid and in the federal
Medicare program. However, Healthcare attempts to locate and operate its nursing
centers in a manner designed to attract patients who pay directly to the
facilities for services without benefit of any
3
<PAGE> 17
government assistance program ("private patients"). As a general rule, the
profit margin is higher with private patients than with patients to whom
services are rendered with government assistance programs. During the first nine
months of fiscal year 1993, Healthcare's nursing centers had private patient
occupancy of approximately 55%, and revenue from private patients was
approximately 62% of total nursing center revenue.
Manor Care owns and operates Mesquite Community Hospital in Mesquite,
Texas, which opened in 1978. The hospital is licensed for 172 beds all in
private rooms and is a modern, fully equipped, acute care facility that provides
general medical, obstetrical and emergency services, as well as general and
specialty surgery.
Vitalink, a subsidiary of Healthcare, owns and operates 11 institutional
pharmacies located in Florida, Indiana, Illinois, Maryland, New Jersey, Ohio,
Pennsylvania and Wisconsin. The pharmacies provide customized filling of
prescriptions for patients in nursing centers, and infusion therapy and
consultant pharmacy services. In March and April 1992, Vitalink sold 2,475,000
shares of its common stock to the public.
LODGING OPERATIONS
The Hotel Division operated 16 hotels containing a total of 2,800 rooms as
of February 28, 1993. The hotels operate under the "Clarion," "Comfort,"
"Quality," and "Rodeway" trade names and are located in Arizona, California,
Florida, Louisiana, Maryland, North Carolina, Texas, Utah and Virginia. As of
February 28, 1993, subsidiaries of Quality Hotels Europe, Inc., a subsidiary of
Manor Care, operated one hotel in Germany, and one hotel in the United Kingdom
and two hotels in Germany were under construction.
Manor Care owns 100% of the Preferred Stock and approximately 89% of the
Common Stock of Choice, which franchises the use of the "Quality," "Comfort,"
"Clarion," "Sleep," "Rodeway," "Econo Lodge" and "Friendship" trademarks.
Services provided to franchisees include training programs, advertising and
marketing, dissemination of directories of franchised locations, and
participation in a national reservations system. As of February 28, 1993, the
seven hotel chains comprised 2,903 hotels open or under development with
approximately 265,000 rooms.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture to be dated as of a
date to be determined (including any supplements or amendments, the "Indenture")
between the Company and Wilmington Trust Company, Trustee (the "Trustee"). A
copy of the proposed form of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is incorporated
herein by reference. The particular terms of the Debt Securities will be
described in a Prospectus Supplement, and set forth in a final form of the
Indenture.
The statements under this caption relating to the Debt Securities and the
Indenture pursuant to which they are to be issued are a summary of such
instruments and do not purport to be complete. The terms of the Debt Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "TIA") as in effect on the
date of the Indenture. The Debt Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
them. Anyone who receives this Prospectus may obtain a copy of the proposed
Indenture without charge by writing to the Secretary of Manor Care at the
address set forth under "Incorporation of Certain Documents by Reference." As
used under this caption "Description of Debt Securities," the terms "Manor Care"
and the "Company" refer to Manor Care, Inc. and do not include the Company's
subsidiaries ("Subsidiaries") unless otherwise indicated by reference to a
definition from the Indenture.
GENERAL
The Debt Securities will be limited to $150 million aggregate principal
amount.
Manor Care is a holding company which conducts its businesses through
Subsidiaries. Substantially all of Manor Care's assets consist of the stock of
its Subsidiaries. Thus, Manor Care's rights and the rights of Manor
4
<PAGE> 18
Care's creditors (including the holders of the Debt Securities) to participate
in the assets of any Subsidiary upon such Subsidiary's bankruptcy, liquidation,
reorganization or otherwise will be subject to the prior claims of the
Subsidiary's creditors, except to the extent that claims of Manor Care itself as
a creditor of the Subsidiary may be recognized. As substantially all of Manor
Care's revenues are realized by its Subsidiaries, the ability of Manor Care to
pay principal, premium (if any) and interest on the Debt Securities will be
dependent on the repayment to Manor Care of any advances made to Subsidiaries
and the payment to it of dividends, interest or other charges by, and advances
from, its Subsidiaries. The Indenture will not limit the amount of additional
indebtedness that may be incurred by Manor Care or its Subsidiaries.
The Debt Securities will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all senior debt of Manor Care,
whether outstanding on the date hereof or hereafter created, incurred, assumed
or guaranteed. However, the Debt Securities will be effectively subordinated to
certain creditors of the Company and its Subsidiaries, including secured lenders
and trade creditors. At May 31, 1993, the Debt Securities would have been
effectively subordinated to approximately $94 million of other liabilities of
Manor Care and its Subsidiaries.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Debt Securities: (1) the title of the Debt Securities
and the series of which the Debt Securities shall be a part; (2) any limit on
the aggregate principal amount of any series of the Debt Securities; (3) the
price (expressed as a percentage of the aggregate principal amount thereof) at
which the Debt Securities will be issued; (4) the date or dates (or manner of
determining the same) on which the principal of the Debt Securities is payable;
(5) the rate or rates (which may be fixed or variable) per annum (or a manner of
determining the same) at which the Debt Securities will bear interest, if any,
and whether the interest rate on the Debt Securities may be reset upon certain
designated events; (6) the date from which such interest, if any, on the Debt
Securities will accrue, the dates on which such interest, if any, will be
payable, the date on which payment of such interest, if any, will commence and
the record dates for such interest payment dates, if any; (7) the place or
places where principal of (and premium, if any) and interest on the Debt
Securities will be payable; (8) the period or periods within which, the price or
prices at which, and the terms and conditions upon which the Debt Securities may
be redeemed, in whole or in part, at the option of the Company; (9) the
obligation, if any, of the Company to redeem or purchase the Debt Securities at
the option of a holder thereof, and the period or periods within which, the
price or prices at which, and the terms and conditions upon which the Debt
Securities will be redeemed or purchased, in whole or in part, pursuant to such
obligation; (10) the dates, if any, on which and the price or prices at which
the Debt Securities will, pursuant to any mandatory sinking fund provisions, or
may, pursuant to any optional redemption or sinking fund provisions or pursuant
to any purchase fund provisions, be redeemed by the Company, and the other
detailed terms and provisions of such sinking and/or purchase fund; (11) the
denominations in which the Debt Securities are authorized to be issued; (12)
whether the Debt Securities are to be represented in whole or in part by a Debt
Security in global form and, if so, the identity of the depositary
("Depositary") for any Debt Security in global form; (13) if other than the full
principal amount thereof, the portion of the principal amount of the Debt
Securities which will be payable upon declaration of acceleration of the
maturity thereof; (14) if the amount of payments of principal of (and premium,
if any) or interest on the Debt Securities may be determined with reference to
an index, the manner in which such amounts will be determined; (15) whether the
Debt Securities are to be issued with original issue discount within the meaning
of Section 1273(a) of the Internal Revenue Code of 1986, as amended; (16) any
addition to, or modification or deletion of, any Events of Default or covenants
provided for in the Indenture with respect to the Debt Securities; and (17) any
other terms of the offered Debt Securities.
Unless otherwise set forth in the applicable Prospectus Supplement, neither
the Indenture nor the Debt Securities will contain provisions which would afford
holders of the Debt Securities protection in the event of a decline in the
credit rating of the Company or the Debt Securities as the result of a takeover,
recapitalization or similar restructuring involving the Company that could
adversely affect such holders.
The Debt Securities will bear interest at a rate and on dates to be
determined. Interest will be computed on the basis of a 360-day year of twelve
30-day months. Manor Care may pay principal and interest by check and may mail
an interest check to a holder's registered address. The Debt Securities will
mature on a date to
5
<PAGE> 19
be determined. Holders must surrender Debt Securities to a Paying Agent to
collect principal payments. Initially, the Trustee will act as Paying Agent and
Registrar. Manor Care may change any Paying Agent or Registrar without notice.
Manor Care or any of its Subsidiaries may act as Paying Agent or Registrar.
Unless otherwise provided in the applicable Prospectus Supplement, the Debt
Securities will be redeemable in whole or from time to time in part, on or after
a date to be determined, at the Company's option, at specified redemption prices
plus accrued interest to the redemption date. Notice of any redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each holder of Debt Securities to be redeemed at his registered address. Debt
Securities in a denomination larger than $1,000 may be redeemed in part. On and
after the redemption date, interest ceases to accrue on Debt Securities or
portions thereof called for redemption.
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global Debt Securities ("Global Debt Securities") that will
be deposited with, or on behalf of, a Depositary identified in the Prospectus
Supplement relating to the series. Unless otherwise indicated in the Prospectus
Supplement relating to a series, the terms of the depositary arrangement with
respect to any Debt Securities of a series specified in the Prospectus
Supplement as being represented by Global Debt Securities will be as set forth
below under "Global Debt Securities."
DEFINITIONS
"Affiliate" of any specified person means any other person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified person. For the purposes of this definition, "control" when
used with respect to any specified person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided, however, that the existence of a management contract by the Company or
an Affiliate of the Company to manage another entity shall not be deemed to be
control.
"Applicable Percentage" means (i) 15%, if the aggregate principal amount of
Debt Securities then outstanding exceeds $100,000,000, (ii) 20%, if the
aggregate principal amount of Debt Securities then outstanding exceeds
$50,000,000 but is less than or equal to $100,000,000, or (iii) 25%, if the
aggregate principal amount of Debt Securities outstanding is less than or equal
to $50,000,000.
"Attributable Debt" means, in connection with a Sale and Lease-Back
Transaction, at any date as of which the amount thereof is to be determined, the
lesser of (i) the fair value of the property subject to such Sale and Lease-Back
Transaction (as determined in good faith by the chief financial or accounting
officer of the Company) and (ii) the total net amount of rent required to be
paid by such person under the lease which is the subject of such Sale and
Lease-Back Transaction during the remaining term thereof, discounted from the
respective due dates thereof to such date at the weighted average interest borne
by the Debt Securities compounded annually. The net amount of rent required to
be paid under any such lease for any such period shall be the amount of the rent
payable by the lessee with respect to such period, after excluding amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"Consolidated Net Assets" means, with respect to any person as of any date
of determination, the total assets of such person and its subsidiaries on a
consolidated basis less current liabilities of such person and its subsidiaries
on a consolidated basis as of such date, all determined in accordance with GAAP.
"Debt" means, as to any person, all obligations of such person for borrowed
money.
"Existing Liens" means liens on property or assets of the Company or any
Subsidiary existing on the Issue Date.
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<PAGE> 20
"Foreign Subsidiary" of the Company shall mean any Subsidiary which is
incorporated or organized in a jurisdiction outside the United States and any
Subsidiary of such a Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession as in effect from time to time.
"Issue Date" means, with respect to any series of Debt Securities, the
first date on which Debt Securities of such series are issued under the
Indenture.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse Subsidiary)
(A) provide credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) is directly or indirectly liable or (C)
constitute the lender and (ii) in respect of which a default (including any
rights which the holders thereof may have to take enforcement action against a
Non-Recourse Subsidiary) would not permit (upon notice, lapse of time or both)
any holder of any other Debt of the Company or its Subsidiaries (including any
Non-Recourse Subsidiary) to declare a default on such other Debt or cause a
payment thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary which (i) has not acquired any
assets (other than cash) directly or indirectly from the Company or any
Subsidiary, (ii) only owns assets acquired after the Issue Date and on or prior
to the date such entity becomes a Subsidiary and (iii) has no Debt other than
Non-Recourse Debt.
"Subsidiary" of the Company means (i) a corporation a majority of whose
capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by the Company, by the
Company and one or more Subsidiaries of the Company or by one or more
Subsidiaries of the Company or (ii) any other person (other than a corporation)
in which the Company, one or more Subsidiaries of the Company or the Company and
one or more Subsidiaries of the Company, directly or indirectly, at the date of
determination thereof, has greater than a 50% ownership interest.
LIMITATION ON LIENS
The Indenture will provide that, except as provided below, the Company will
not, and will not permit any Subsidiary to, create, incur or assume any Lien on
any property or assets of the Company or any Subsidiary in order to secure any
Debt of the Company or any Subsidiary, without effectively providing that the
Debt Securities (together with, if the Company shall so determine, any other
Debt which is not subordinated to the Debt Securities) will be secured equally
and ratably with (or prior to) such Debt, so long as such Debt will be so
secured; provided, however, that this covenant will not apply to (i) any Lien
if, after giving effect thereto, the aggregate amount of all Debt of the Company
and its Subsidiaries secured by Liens existing at the time (excluding any Debt
secured by Liens permitted to be incurred by clauses (ii) through (xii) below)
would not exceed the Applicable Percentage of the Consolidated Net Assets of the
Company; (ii) any Lien if an amount of cash equal to the net proceeds of the
Debt secured by such Lien is used within 12 months of such creation, incurrence
or assumption to (x) acquire additional property or assets (or to make
investments in persons who, after giving effect to such investments, will become
Subsidiaries), (y) retire Debt which is pari passu with the Debt Securities
(provided that in connection with any such retirement, any related loan
commitment will be reduced in an amount equal to the principal amount so
retired) or (z) make an offer to purchase the Debt Securities at 100% of the
principal amount thereof plus accrued interest, if any, to the date of purchase;
(iii) Existing Liens and Liens created, incurred or assumed after the Issue Date
on property or assets of the Company or any Subsidiary that were subject to an
Existing Lien; (iv) Liens on property or assets of any person existing at the
time such person becomes a Subsidiary or merges into or consolidates with the
Company or a Subsidiary; (v) Liens on property or assets existing at the time of
acquisition thereof by the Company or any Subsidiary; (vi) Liens to secure the
financing of the acquisition, construction, alteration or improvement of
property or assets of the Company or any Subsidiary (or of any person who, after
giving effect to such financing, will become a Subsidiary), provided that such
Liens are created not later than 18 months
7
<PAGE> 21
after such acquisition or, in the case of construction, alteration or
improvement of property or assets, the later of the completion thereof or
commencement of commercial operation of such property or assets; (vii) Liens in
favor of the Company or any Subsidiary; (viii) Liens in favor of or required by
federal, state or local governmental authorities, including any department or
instrumentality thereof; (ix) Liens on property or assets of, or on any shares
of stock or other equity interest in, a Foreign Subsidiary to secure Debt of a
Foreign Subsidiary or a Non-Recourse Subsidiary to secure Non-Recourse Debt; (x)
Liens to secure Debt of joint ventures in which the Company or a Subsidiary has
an interest, to the extent such Liens are on property or assets of or equity
interests in such joint ventures; (xi) Liens on current assets to secure Debt
incurred for working capital purposes, provided that such Debt matures no later
than 18 months from the date of incurrence; and (xii) any extension, renewal or
replacement as a whole or in part, of any Lien referred to in the foregoing
clauses (i) to (xi), provided, however, that (a) such extension, renewal or
replacement Lien will be limited to all or a part of the same property or assets
that secured the Lien being extended, renewed or replaced and (b) the principal
amount of the Debt (or, if such Debt provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount) secured by such extended, renewed or
replaced Lien does not exceed the principal amount of Debt (or, if such Debt
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount) which
was secured by the Lien being extended, renewed or replaced.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture will provide that the Company will not, and will not permit
any Subsidiary to, enter into any arrangement with any person providing for the
leasing by the Company or a Subsidiary of any property or asset (other than any
such arrangement involving (i) a lease for a term, including renewal rights, of
not more than 36 months, (ii) a lease of property within 18 months from the
acquisition or, in the case of the construction, alteration or improvement of
property, the later of the completion of the construction, alteration or
improvement of such property or the commencement of commercial operation of the
property, or (iii) leases between the Company and a Subsidiary or between
Subsidiaries), which property or asset has been or is to be sold or transferred
by the Company or a Subsidiary to such person (a "Sale and Lease-Back
Transaction") unless (a) the Company or such Subsidiary would, at the time of
entering into a Sale and Lease-Back Transaction, be entitled to incur Debt
secured by a Lien on the property or asset to be leased in an amount at least
equal to the Attributable Debt in respect of such transaction without equally
and ratably securing the Debt Securities pursuant to the provisions described
under "Limitations on Liens" above, or (b) the proceeds of the sale of the
property or assets to be leased are at least equal to their fair value (the fair
value of such proceeds, if other than in cash, to be determined by the chief
financial or accounting officer of the Company) and an amount in cash equal to
the net proceeds is applied, within 12 months of the effective date of such
transaction, to (i) acquire additional property or assets (or to make
investments in entities which after giving effect to such investment will become
Subsidiaries), (ii) to retire Debt which is pari passu with the Debt Securities
(provided that in connection with any such retirement, any related loan
commitment or the like shall be reduced in an amount equal to the principal
amount so retired) or (iii) offer to purchase the Debt Securities at 100% of the
principal amount thereof, plus accrued interest, if any, to the date of
purchase.
LIMITATION ON AFFILIATE TRANSACTIONS
The Indenture will provide that neither Manor Care nor any of its
Subsidiaries will sell, lease, transfer or otherwise dispose of any of its
properties or assets to or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guaranty with, or for
the benefit of, an Affiliate of the Company (other than a Subsidiary) (an
"Affiliate Transaction") having a value, or for consideration having a value, in
excess of $20,000,000 individually or in the aggregate unless the Board of
Directors of Manor Care shall determine that the terms of such Affiliate
Transaction are no less favorable to Manor Care or such Subsidiary than those
which might be obtained at the time of such Affiliate Transaction from persons
who are not Affiliates. The restrictions of this "Limitation on Affiliate
Transactions" covenant are not applicable to the payment of reasonable and
customary fees to directors of Manor Care who are not employees, the payment of
8
<PAGE> 22
compensation to officers of Manor Care and any transaction between or among any
of Manor Care and its Subsidiaries.
DEFAULTS AND REMEDIES
An Event of Default is: default for 30 days in payment of interest on the
Debt Securities; default in payment of principal when due (upon redemption or at
maturity) on the Debt Securities; failure by Manor Care for 60 days after notice
to it to comply with any of its other agreements in the Indenture or the Debt
Securities; acceleration of in excess of an aggregate of $20,000,000 of
indebtedness for borrowed money of Manor Care or any Subsidiary (other than
Non-Recourse Debt of a Non-Recourse Subsidiary) under the terms of the
instrument under which such indebtedness is or may be outstanding if such
acceleration is not rescinded or annulled within 10 days after written notice
from the Trustee or the holders of at least 25% in principal amount of the Debt
Securities then outstanding has been received; a final judgment for the payment
of $20,000,000 or more rendered against the Company or any Subsidiary in any
court of competent jurisdiction and not fully covered by insurance or not
discharged or stayed within 90 days after the date all rights to appeal have
been extinguished; and certain events of bankruptcy or insolvency involving
Manor Care. If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the Debt Securities then
outstanding may declare 100% of the principal amount of the Debt Securities and
interest accrued to the date of acceleration to be due and payable immediately.
Such declaration may be annulled and past defaults (except, unless theretofore
cured, a default in payment of principal of or interest on the Debt Securities)
may be waived by the holders of a majority in principal amount of outstanding
Debt Securities upon the conditions provided in the Indenture.
Securityholders may not enforce the Indenture or the Debt Securities except
as provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Debt Securities. Subject to certain
limitations, holders of a majority in principal amount of the Debt Securities
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interest. Manor Care is required to file periodic
reports with the Trustee regarding compliance by Manor Care with the terms of
the Indenture and specifying any defaults of which the signers may have
knowledge.
A director, officer, employee or stockholder, as such, of Manor Care shall
not have any liability for any obligations of Manor Care under the Debt
Securities or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Securityholder by accepting
Debt Securities waives and releases all such liability.
TRANSFER AND EXCHANGE
Unless otherwise provided in the Prospectus Supplement, the Debt Securities
will be in registered form without coupons in denominations of $1,000 and
integral multiples of $1,000. A holder may transfer or exchange Debt Securities
in accordance with the Indenture. The Registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any tax or other governmental charge imposed in relation thereto. The
Registrar need not transfer or exchange any Debt Securities selected for
redemption. Also, it need not transfer or exchange any Debt Securities for a
period of 15 days before a selection of Debt Securities to be redeemed. The
registered holder of Debt Securities may be treated as the owner of them for all
purposes.
AMENDMENT, SUPPLEMENT, WAIVER
Subject to certain exceptions, the Indenture or the Debt Securities may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of the Debt Securities outstanding, and any past default or
compliance with any provision may be waived with the consent of the holders of a
majority in principal amount of the Debt Securities outstanding, but no
extension of the maturity of any Debt Securities, or reduction in the interest
rate or extension of the time of payment of interest, or any other
9
<PAGE> 23
modification in the terms of payment of the principal of or interest on the Debt
Securities, or of the subordination provisions of the Indenture in a manner
adverse to the Securityholders or any reduction of the percentage required for
modification will be effective against any Securityholder without his consent.
Without the consent of any Securityholder, Manor Care may amend or supplement
the Indenture or the Debt Securities to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Debt Securities in addition to or
in place of certificated Debt Securities, to create a series and establish its
terms, to provide for a separate Trustee for one or more series, or to make any
change that does not materially adversely affect the rights of any
Securityholder.
SUCCESSOR CORPORATION
The Company may not consolidate with or merge with or transfer all or
substantially all of its assets to another corporation unless, after giving
effect to such transaction, no event which constitutes a Default shall have
occurred and be continuing; and such corporation or the surviving corporation
(if other than Manor Care) shall be a corporation organized and existing under
the laws of the United States or a state thereof and shall assume all of the
obligations of the Company under the Debt Securities and the Indenture.
Thereafter, all obligations of Manor Care under the Indenture shall terminate.
SATISFACTION AND DISCHARGE OF INDENTURE
The Company may terminate as to a series all of its obligations under the
Debt Securities and the Indenture either upon delivery for cancellation to the
Trustee of all the Debt Securities of the series or (a)(i) within one year of
maturity or redemption of the series or (ii) at any time if the Holders will not
recognize income, gain or loss for Federal income tax purposes, (b) upon deposit
with the Trustee of funds or U.S. Government Obligations (as defined in the
Indenture) sufficient for payment of principal of and interest on, or redemption
of, the series and (c) upon delivery to the Trustee of an officers' certificate
and opinion of counsel stating that all conditions precedent to discharge have
been satisfied.
GLOBAL DEBT SECURITIES
If Debt Securities of a series are to be issued as Global Debt Securities,
one or more Global Debt Securities will be issued in a denomination or aggregate
denominations equal to the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Debt Security or
Global Debt Securities. Global Debt Securities may be issued in registered and
in either temporary or permanent form.
Ownership of beneficial interests in Global Debt Securities will be limited
to persons that have accounts with the Depositary ("participants") or persons
that may hold interests through participants. Ownership interests in Global Debt
Securities will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the Depositary or its nominee for
such Global Debt Securities (with respect to a participant's interest) and
records maintained by participants (with respect to interests of persons other
than participants).
Unless otherwise provided in a Prospectus Supplement, payment of principal
of and any premium and interest on the book-entry Debt Securities represented by
a Global Debt Security will be made to the Depositary or its nominee, as the
case may be, as the sole registered owner and the sole holder of the book-entry
Debt Securities represented thereby for all purposes under the Indenture.
Neither the Company or the Trustee, nor any agent of the Company or the Trustee,
will have any responsibility or liability for any acts or omissions of the
Depositary, for any records of the Depositary relating to beneficial ownership
interests in any Global Debt Security or for any transactions between the
Depositary and beneficial owners.
Upon receipt of any payment of principal of or any premium or interest on a
Global Debt Security, the Depositary will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Debt Security as shown on the records of the Depositary.
Payments by participants to owners of beneficial interests in Global Debt
Securities held through such participants will be governed by
10
<PAGE> 24
standing instructions and customary practices, as is now the case with
securities held for customer accounts registered in "street name," and will be
the sole responsibility of such participants.
Unless otherwise provided in the Prospectus Supplement, Global Debt
Securities will not be transferred except as a whole by the Depositary to a
nominee of the Depositary. Global Debt Securities will be exchangeable only if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Debt Securities or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act,
(ii) the Company in its sole discretion determines that such Global Debt
Securities shall be exchangeable for definitive Debt Securities in registered
form, or (iii) an Event of Default with respect to the series of Debt Securities
represented by such Global Debt Securities has occurred and is continuing. Any
Global Debt Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for registered Debt Securities issuable in denominations
of $1,000 and integral multiples thereof and registered in such names as the
Depositary holding such Global Debt Security shall direct. Subject to the
foregoing, the Global Debt Security is not exchangeable, except for a Global
Debt Security of like denomination to be registered in the name of the
Depositary or its nominee.
So long as the Depositary for Global Debt Securities of a series, or its
nominee, is the registered owner of such Global Debt Securities, such Depositary
or such nominee, as the case may be, will be considered the sole Holder of Debt
Securities represented by such Global Debt Securities for the purposes of
receiving payment on such Global Debt Securities, receiving notices and for all
other purposes under the Indenture and such Global Debt Securities. Except as
provided above, owners of beneficial interests in Global Debt Securities of a
series will not be entitled to receive physical delivery of Debt Securities of
such series in definitive form and will not be considered the Holders thereof
for any purpose under the Indenture. Accordingly, each person owning a
beneficial interest in a Global Debt Security must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a Holder under the Indenture. The Depositary may grant proxies and otherwise
authorize participants to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action which a Holder is entitled to
give or take under the Indenture. The Company understands that under existing
industry practices, in the event that the Company requests any action of Holders
or that an owner of a beneficial interest in such a Global Debt Security desires
to give or take any action which a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
TRUSTEE
Wilmington Trust Company will act as Trustee for Debt Securities issued
under the Indenture. The Indenture will contain limitations on the right of the
Trustee, should it become a creditor of Manor Care, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as
defined) it must eliminate such conflict or resign.
The holders of a majority in principal amount of all outstanding Debt
Securities will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee.
The Indenture will provide that in case an Event of Default shall occur (which
shall not be cured), the Trustee will be required to use the degree of care of a
prudent person in the conduct of his own affairs in the exercise of its power.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
Securityholders unless they have offered to the Trustee security and indemnity
satisfactory to it.
In the ordinary course of its business, the Company has engaged, and may
engage in the future, Wilmington Trust Company to perform certain financial
services.
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<PAGE> 25
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters, or to
dealers, acting as principals for their own accounts, and reserves the right to
sell Debt Securities directly to other purchasers or through agents on its own
behalf. The distribution of the Debt Securities may be effected from time to
time in one or more transactions at a fixed price or prices which may be changed
from time and time, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the Debt
Securities.
In connection with the sale of Debt Securities, underwriters and dealers
may receive compensation from the Company or from purchasers of Debt Securities
for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents who participate in
the distribution of Debt Securities may be deemed to be underwriters under the
Securities Act and any discounts or commissions received by them and any profit
on the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified and any such compensation will be described in the
Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities are expected to be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the Company pursuant to
delayed delivery contracts ("Delayed Delivery Contracts") providing for payment
and delivery on a future date. Institutions with which such Delayed Delivery
Contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by the Company.
LEGAL OPINIONS
The legality of the Debt Securities offered hereby will be passed upon for
Manor Care by Cahill Gordon & Reindel, a partnership including a professional
corporation, New York, New York.
EXPERTS
The consolidated financial statements and schedules of Manor Care, Inc. and
subsidiaries incorporated by reference in this Prospectus and elsewhere in this
Registration Statement have been audited by Arthur Andersen & Co., independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, BY THE UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY
NOT LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Company........................... S-3
Recent Developments................... S-3
Summary Financial and Operating
Data................................ S-5
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-6
Use of Proceeds....................... S-7
Ratio of Earnings to Fixed Charges.... S-7
Capitalization........................ S-9
Description of Senior Notes........... S-10
Underwriting.......................... S-13
Legal Matters......................... S-13
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Use of Proceeds....................... 2
Ratio of Earnings to Fixed Charges.... 3
Business.............................. 3
Description of Debt Securities........ 4
Plan of Distribution.................. 12
Legal Opinions........................ 12
Experts............................... 12
</TABLE>
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$100,000,000
MANOR CARE, INC.
% SENIOR NOTES DUE 2006
------------------------
PROSPECTUS SUPPLEMENT
, 1996
------------------------
LEHMAN BROTHERS
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
NATIONSBANC CAPITAL MARKETS, INC.
- ------------------------------------------------------
- ------------------------------------------------------
