<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
MANOR CARE, INC.
----------------------------------------------------------------
(Name of issuer)
Common Stock, par value $.10 per share
----------------------------------------------------------------
(Title of class of securities)
564-054-10-4
-----------------------------
(CUSIP number)
R. Jeffrey Bixler
Vice President and General Counsel
Health Care and Retirement Corporation
One SeaGate
Toledo, Ohio 43604-2616
(419) 252-5500
- -------------------------------------------------------------------------------
(Name, address and telephone number of person authorized to receive notices and
communications)
June 10, 1997
------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g) check the following box
/ /.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
Exhibit Index appears on page 11.
Page 1 of 11 Pages
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SCHEDULE 13D
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CUSIP No. 26633L103 Page 2 of 11 Pages
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Health Care and Retirement Corporation IRS. No. 34-1687107
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(a) /X/
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(b) / /
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEM 2(d) or 2(e)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
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7. SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 19,696,761
EACH ---------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,696,761
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES*
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.9%
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14. TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 11 Pages
<PAGE> 3
SCHEDULE 13D
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CUSIP No. 26633L103 Page 3 of 11 Pages
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Catera Acquisition Corp.
No S.S. or IRS Identification Number
- -------------------------------------------------------------------------------
(a) /X/
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(b) / /
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEM 2(d) or 2(e)
- -------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- -------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 19,696,761
EACH ---------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,696,761
- -------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES*
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.9%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 11 Pages
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ITEM 1. SECURITY AND ISSUER
-------------------
This statement on Schedule 13D relates to the common stock, par value $.10
per share (the "Common Stock"), of Manor Care, Inc. (the "Issuer"). The Issuer
is a Delaware corporation with its principal executive offices located at 11555
Darnestown Road, Gaithersburg, Maryland 20878.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
This Schedule 13D is filed on behalf of Health Care and Retirement
Corporation, a Delaware corporation ("HCR") and Catera Acquisition Corp, a
Delaware corporation and a wholly-own subsidiary of HCR ("Merger Sub" and
together with HCR, the "Filing Persons"). The Filing Persons' principal
place of business is located at One SeaGate, Toledo, Ohio 43604-2616.
HCR is a provider of a range of health care services, including long-term
care, subacute medical care, rehabilitation therapy, home health care, pharmacy
services and management services for subacute care, rehabilitation therapy,
vision care and eye surgery. Set forth in Schedule A is the name, citizenship,
business or residence address and present principal occupation or employment,
as well as the name and address of any corporation or other organization in
which such occupation or employment is conducted, of each of the directors and
executive officers of HCR, as of the date hereof.
Merger Sub was incorporated solely for the purpose of merging with and
into Issuer, and has no other business. Set forth in Schedule B is the name,
citizenship, business or residence address and present principal occupation or
employment, as well as the name and address of any corporation or other
organization in which such occupation or employment is conducted, of each of
the directors and executive officers of Merger Sub, as of the date hereof.
During the last five years, neither of the Filing Persons, nor, to the
knowledge of the Filing Persons, any person named in either Schedule A or
Schedule B, (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors); or (ii) has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
On June 10, 1998, HCR, Merger Sub and the Issuer entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger
Agreement, Merger Sub will merge with and into the Issuer (the "Merger")and the
Issuer will become a wholly owned subsidiary of the Filing Person and each
share of Common Stock (except as otherwise provided in the Merger Agreement)
will be converted into the right to receive one (1.0) share of common stock of
the HCR. The consummation of the transactions contemplated by the Merger
Agreement are subject to approval of the stockholders of each of the Issuer and
HCR, the receipt of certain regulatory approvals and the expiration of the
antitrust waiting periods. Upon the consummation of the Merger, the number of
directors on HCR's board of directors shall be increased from seven to ten
directors and half of the persons serving on the board of directors of HCR
shall be designated by the Issuer and half the persons serving thereon shall be
designated by HCR.
On June 10, 1998 in connection with the Merger Agreement, a voting
agreement ("Voting Agreement") was executed between HCR and each of
Bainum Associates Limited Partnership, M. C. Investments Limited Partnership,
Mid Pines Associates Limited Partnership, Realty Investment Company, Inc., The
Stewart Bainum Declaration of Trust and the Jane L. Bainum Declaration of Trust
(collectively, the "Stockholders"), with respect to the 19,696,761 shares of
Common Stock beneficially owned by the Stockholders. Pursuant to the Voting
Agreement, the Stockholders, severally and not jointly, have agreed, among
other things, to vote their shares of Common Stock and granted the Merger Sub
and certain officers thereof an irrevocable proxy to vote their shares of
Common Stock (a) in favor of the Merger, the adoption of and execution and
delivery of the Merger Agreement and the approval of the terms thereof and each
of the other transactions contemplated thereby and (b) against certain actions
involving the Issuer described in such Voting Agreement. The Stockholders also
agreed not to
Page 4 of 11 Pages
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offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any of their shares of
Common Stock, except under certain circumstances specified in the Voting
Agreement. The Stockholders also agreed not to solicit or respond to any
inquiries or the making of any proposal by any person or entity (other than the
Filing Person or any affiliate thereof) with respect to the Issuer that
constitutes or could reasonably be expected to lead to an Alternative
Transaction (as such term is defined within the Merger Agreement).
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
(a)-(b) The purpose of the transaction is to facilitate the approval of
the Merger by the stockholders of the Issuer. See Item 3.
(c)-(i) Not applicable.
(j) Other than as described above, the Filing Persons currently have no
plans or proposals which relate to, or may result in, any of the matters listed
in Items 4(a) - (j) of Schedule 13D (although the Filing Persons reserve the
right to develop such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a)-(b) As a result of the Voting Agreement, the Filing Persons may be
deemed to be the beneficial owners of 19,696,761 shares of Common Stock. Based
upon information contained in the most recently available filing by the Issuer
with the Securities and Exchange Commission (the "SEC"), such shares constitute
approximately 30.9% of the issued and outstanding shares of Common Stock. See
Item 3.
To the knowledge of the Filing Persons, no shares of Common Stock are
beneficially owned by any of the persons named in either Schedule A or
Schedule B.
(c) HCR has acquired a stock option to acquire in certain circumstances
and subject to certain contingencies up to 19.9% of the Issuer's Common Stock.
See Item 6. To the knowledge of the Filing Persons, no person named in either
Schedule A or Schedule B, has effected any other transaction in the Common Stock
during the past sixty (60) days.
(d) N/A
(e) N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
-----------------------------------
1. A stock option agreement (the "Stock Option Agreement") was also
executed between HCR and the Issuer, on June 10, 1998 in connection with
the Merger Agreement, pursuant to which the Issuer granted the HCR the right to
purchase up to 19.9% of the then issued and outstanding shares of Common Stock,
exercisable upon the occurrence of certain events, at the price equal to the
lower of (i) $31.00 and (ii) the average closing sales price of the Common
Stock on the New York Stock Exchange for the five consecutive trading days
beginning on and including the day that the Merger is publicly announced (as
adjusted as provided in the Stock Option Agreement).
2. See Item 3 regarding the Voting Agreement.
Page 5 of 11 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
<TABLE>
Exhibit Description
- ------- -----------
<S> <C>
1. Voting Agreement dated June 10, 1998 between Health Care and
Retirement Corporation and Bainum Associates Limited Partnership,
M. C. Investments Limited Partnership, Mid Pines Associates
Limited Partnership, Realty Investment Company, Inc., The Stewart
Bainum Declaration of Trust and the Jane L. Bainum Declaration of
Trust.
2. Stock Option Agreement dated June 10, 1998 between Health Care and
Retirement Corporation and Manor Care, Inc.
3. Joint Filing Agreement dated June 19, 1998 between Health Care and
Retirement Corporation and Catera Acquisition Corp.
</TABLE>
Page 6 of 11
<PAGE> 7
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 19, 1998 HEALTH CARE AND RETIREMENT
CORPORATION
By: /s/ R. Jeffrey Bixler
--------------------------------
Name: R. Jeffrey Bixler
Title: Vice President and General
Counsel
CATERA ACQUISITION CORP.
By: /s/ R. Jeffrey Bixler
--------------------------------
Name: R. Jeffrey Bixler
Title: Vice President and Secretary
Page 7 of 11 Pages
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Schedule A
----------
DIRECTORS AND EXECUTIVE OFFICERS OF
HEALTH CARE AND RETIREMENT CORPORATION
The name, business address and title with Health Care and Retirement
Corporation and present principal occupation or employment, of each of the
directors and executive officers of Health Care and Retirement Corporation are
set forth below. Except as indicated, each person's business address is One
SeaGate, Toledo, Ohio 43604-2616. Each person listed below is a citizen of the
United States.
<TABLE>
<CAPTION>
Present Principal
Occupation Including
Name and Title Name of Employer
-------------- ----------------
<S> <C>
Paul A. Ormond, Chairman of Chairman of the Board and Chief
the Board, President and Chief Executive Officer, Health Care
Executive Officer and Retirement Corporation
John J. Clair, Jr., Director Partner at law firm of Latham &
Watkins, 633 West Fifth Street,
Suite 4000, Los Angeles,
California 90071-2007
Joseph H. Lemieux, Director Chief Executive Officer of
Owens-Illinois, Inc.
Geoffrey G. Meyers, Executive Executive Vice President,
Vice President, Chief Financial Chief Financial Officer and
Officer and Treasurer Treasurer, Health Care and
Retirement Corporation
Robert G. Siefers, Director Vice Chairman and Chief Financial
Officer, National City
Corporation, 1900 E. Ninth Street
Cleveland, Ohio 44114-3484
M. Keith Weikel, Senior Senior Executive Vice President and
Executive Vice President Chief Operating Officer,
Chief Operating Officer Health Care and Retirement
Corporation
Thomas L. Young, Director Executive Vice President-
Administration and General
Counsel, Owens-Illinois, Inc.
Executive Officers
------------------
Name Title
---- -----
Paul A. Ormond Chairman of the Board and Chief
Executive Officer
M. Keith Weikel Senior Executive Vice President
and Chief Operating Officer
Geoffrey G. Meyers Executive Vice President, Chief
Financial Officer and Treasurer
R. Jeffrey Bixler Vice President and General Counsel
</TABLE>
Pages 8 of 11 Pages
<PAGE> 9
Schedule B
----------
DIRECTORS AND EXECUTIVE OFFICERS OF
CATERA ACQUISITION CORP.
The name, business address and title with Catera Acquisition Corp.
and present principal occupation or employment, of each of the directors and
executive officers of Health Care and Retirement Corporation are set forth
below. Except as indicated, each person's business address is One SeaGate,
Toledo, Ohio 43604-2616. Each person listed below is a citizen of the United
States.
<TABLE>
<CAPTION>
Present Principal
Occupation Including
Name and Title Name of Employer
-------------- ----------------
<S> <C>
Paul A. Ormond, Chairman of Chairman of the Board and Chief
the Board Executive Officer, Health Care
and Retirement Corporation
Geoffrey G. Meyers, Director Executive Vice President,
Chief Financial Officer and
Treasurer, Health Care and
Retirement Corporation
M. Keith Weikel, Director Executive Vice President and
Chief Operating Officer,
Health Care and Retirement
Corporation
Executive Officers
------------------
Name and Title Present Principal Occupation
-------------- ----------------------------
Paul A. Ormond, President Chairman of the Board and Chief
Executive Officer, Health Care
and Retirement Corporation
M. Keith Weikel, Vice President Senior Executive Vice President
and Chief Operating Officer,
Health Care and Retirement Corporation
Geoffrey G. Meyers, Vice President Executive Vice President, Chief
Financial Officer and Treasurer,
Health Care and Retirement Corporation
R. Jeffrey Bixler, Vice President Vice President and General Counsel,
and Secretary Health Care and Retirement Corporation
</TABLE>
Page 10 of 11 Pages
<PAGE> 10
<TABLE>
<S> <C>
Nancy A. Edwards Vice President
Jeffrey W. Ferguson Vice President
Spencer C. Moler Vice President and Controller
F. Joseph Schmitt Vice President
Paul G. Sieben Vice President
</TABLE>
Page 9 of 11 Pages
<PAGE> 11
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
1. Voting Agreement dated June 10, 1998 between Health Care and
Retirement Corporation and Bainum Associates Limited Partnership,
M. C. Investments Limited Partnership, Mid Pines Associates
Limited Partnership, Realty Investment Company, Inc., The Stewart
Bainum Declaration of Trust and the Jane L. Bainum Declaration of
Trust.
2. Stock Option Agreement dated June 10, 1998 between Health Care
and Retirement Corporation and Manor Care, Inc.
3. Joint Filing Agreement dated June 19, 1998 between Health Care
and Retirement Corporation and Catera Acquisition Corp.
</TABLE>
Page 11 of 11 Pages
<PAGE> 1
EXHIBIT 1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June 10, 1998 (the "Agreement"), between
the undersigned holders (collectively the "Holders" and each a "Holder") of
shares of the common stock, $.10 par value (the "Manor Care Common Stock"), of
MANOR CARE, INC., a Delaware corporation ("Manor Care"), and HEALTH CARE AND
RETIREMENT CORPORATION, a Delaware corporation ("HCR").
RECITALS
Manor Care, HCR and Catera Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of HCR ("Merger Sub"), propose to enter into an
Agreement and Plan of Merger dated the date hereof (the "Merger Agreement";
capitalized terms not otherwise defined herein being used herein as therein
defined), pursuant to which Merger Sub would be merged (the "Merger") with and
into Manor Care, and each outstanding share of Manor Care Common Stock would be
converted into the right to receive shares ("HCR Shares") of HCR Common Stock;
As a condition of its entering into the Merger Agreement, HCR has
requested each Holder to agree, and each Holder has agreed, to enter into this
Agreement;
Prior to the date hereof, HCR and the Holders had no agreement,
arrangement or understanding (as such terms are used in Section 203 of the
Delaware General Corporation Law (the "DGCL")) for the purpose of acquiring,
holding, voting or disposing of shares of Manor Care Common Stock; and
In consideration for the agreements contained herein, prior to the
execution hereof, and prior to HCR becoming an "interested stockholder" for
purposes of Section 203 of the DGCL, the board of the directors of Manor Care
has approved this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby, including the agreement of the Holders to vote
as provided in Section 2 of this Agreement and not to transfer shares of Manor
Care Common Stock as provided in Section 5(B) of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Representations and Warranties of the Holders. Each Holder, with
respect to itself and its Subject Securities, represents and warrants, severally
and not jointly, to HCR as follows:
A. Ownership of Securities. Each Holder is the record and/or
beneficial owner of the number of shares of Manor Care Common Stock (the
"Existing Securities") (together with any shares of Manor Care Common Stock
or other securities of Manor
1
<PAGE> 2
Care hereafter acquired by the Holder, the "Subject Securities") set forth
on the signature page to this Agreement, with such authority or power
concerning such shares as is described on Schedule 1.A hereto with respect
to such Holder. Such Holder does not beneficially or of record own any
securities of Manor Care on the date hereof other than the Existing
Securities. The Holder has sole voting power and sole power to issue
instructions with respect to the voting of the Existing Securities, sole
power of disposition, sole power of exercise and the sole power to demand
appraisal rights, except as described on Schedule 1.A, in each case with
respect to all of the Existing Securities, except as indicated on said
Schedule and, on the date of the Manor Care Stockholders Meeting (as
defined in the Merger Agreement), will have the sole voting power and power
to issue instructions with respect to the voting of all of such Holder's
Subject Securities, the sole powers of disposition, exercise and the sole
power to demand appraisal rights, in each case with respect to all of such
Holder's Subject Securities, except as described on Schedule 1.A.
B. Power; Binding Agreement. Each Holder has the legal capacity,
power and authority to enter into and perform all of such Holder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each Holder will not violate any other agreement
relating to the Subject Securities to which the Holder is a party,
including, without limitation, any voting agreement, shareholder's
agreement, partnership agreement or voting trust. This Agreement has been
duly and validly executed and delivered by such Holder and constitutes a
valid and binding agreement of such Holder, enforceable against such Holder
in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
C. No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Holder and the
consummation by such Holder of the transactions contemplated hereby and
neither the execution and delivery of this Agreement by such Holder nor the
consummation by such Holder of the transactions contemplated hereby nor
compliance by such Holder with any of the provisions hereof shall conflict
with or result in any breach of any applicable partnership or other
organizational documents applicable to such Holder, result in a violation
or breach of, or constitute (with or without notice or lapse of time or
both) a default (or give rise to any third-party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which such Holder is a party
or by which such Holder's properties or assets may be bound or violate any
order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to such Holder or any of such Holder's properties or
assets,
2
<PAGE> 3
except for any such conflicts, breaches, defaults or violations as would
not materially impair such Holder's performance of its obligations
hereunder.
D. No Liens. The Existing Securities are now and, at all times during
the term hereof, the Subject Securities will be held by such Holder, or by
a nominee or custodian for the benefit of such Holder, free and clear of
all liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any encumbrances arising hereunder or as set forth
on Schedule 1.A.
E. Certain Representations. Each Holder covenants that, at or
immediately prior to the Effective Time, it will execute and deliver to
each of HCR and Manor Care a letter in substantially the form of Exhibit A
attached hereto. Each Holder acknowledges that the representations made in
such letter may, among other things, be relied upon by counsel in opining
that the Merger constitutes a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
2. Agreement to Vote Shares. At every meeting of the stockholders of
Manor Care called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of Manor Care with respect to any of the following, each Holder, severally and
not jointly, agrees that it shall vote or execute a written consent, with
respect to, as appropriate all the Subject Securities as to which it has power
to vote in any such vote or consent: (i) in favor of the Merger, the adoption
of and execution and delivery of the Merger Agreement and the approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement and (ii) against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (1) any extraordinary
corporate transaction, including, but not limited to a merger, consolidation or
other business combination involving Manor Care or any of its subsidiaries
(other than IHH); (2) a sale, lease or transfer of a material amount of assets
of Manor Care or any of its subsidiaries (other than IHH) or a reorganization,
recapitalization, dissolution or liquidation of Manor Care or any of its
subsidiaries (other than IHH); (3) (a) any change in the majority of the board
of directors of Manor Care except as contemplated by this Agreement; (b) any
material change in the present capitalization of Manor Care or any amendment of
Manor Care's Certificate of Incorporation; (c) any other material change in
Manor Care's corporate structure or business; or (d) any other action, which, in
the case of each of the matters referred to in clauses (a), (b), (c) or (d)
above, is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or materially adversely affect the consummation of
the Merger or the transactions contemplated by the Merger Agreement or this
Agreement.
3. IRREVOCABLE PROXY. EACH HOLDER HEREBY, SEVERALLY AND NOT JOINTLY,
GRANTS TO, AND APPOINTS MERGER SUB AND THE PRESIDENT OF MERGER SUB AND THE
TREASURER OF MERGER SUB, IN THEIR RESPECTIVE CAPACITIES AS OFFICERS OF MERGER
SUB, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY SUCH OFFICE OF MERGER
SUB, AND ANY OTHER
3
<PAGE> 4
DESIGNEE OF MERGER SUB, EACH OF THEM INDIVIDUALLY, SUCH HOLDER'S PROXY AND
ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE OR ACT BY WRITTEN
CONSENT WITH RESPECT TO SUCH HOLDER'S SUBJECT SECURITIES IN ACCORDANCE WITH
SECTION 2 HEREOF. THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE, AND EACH HOLDER WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER
INSTRUMENTS AS MAY REASONABLY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS
PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH RESPECT TO THE
SUBJECT SECURITIES.
4. Representations and Warranties of HCR.
A. Power; Binding Agreement. HCR has full corporate power and
authority to enter into and perform all of HCR's obligations under this
Agreement. This Agreement has been duly and validly executed and delivered
by HCR and constitutes a valid and binding agreement of HCR, enforceable
against HCR in accordance with its terms, except that (i) such enforcement
may be subject to applicable bankruptcy, insolvency or other similar laws,
now or hereafter in effect, affecting creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
B. No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by HCR and the consummation
by HCR of the transactions contemplated hereby and neither the execution
and delivery of this Agreement by HCR nor the consummation by HCR of the
transactions contemplated hereby nor compliance by HCR with any of the
provisions hereof shall conflict with or result in any breach of any
organizational documents applicable, to HCR result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third-party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which HCR is a party or by
which HCR's properties or assets may be bound or violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable
to HCR or any of HCR's properties or assets, except for any such conflicts,
breaches, defaults or violations as would not materially impair HCR's
performance of its obligations hereunder.
5. Covenants of the Holders. Each Holder, severally and not jointly,
hereby agrees and covenants that:
A. No Solicitation. Such Holder shall not, directly or indirectly,
solicit (including by way of furnishing information) or respond to any
inquiries or the making of
4
<PAGE> 5
any proposal by any person or entity (other than HCR or any affiliate of
HCR) with respect to Manor Care that constitutes or could reasonably be
expected to lead to an Alternative Transaction. If any Holder receives any
such inquiry or proposal, then it shall promptly inform HCR of the terms
and conditions, if any, of such inquiry or proposal and the identity of the
person making it. Such Holder will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
B. Restriction on Transfer, Proxies and Noninterference. Such Holder
shall not, directly or indirectly: (i) except pursuant to the terms of the
Merger Agreement, offer for sale, sell, transfer (whether by merger,
operation of law or otherwise), tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of such Holder's Subject Securities; provided,
however, that such Holder may in connection with its estate planning
objectives, transfer or assign any or all of its Subject Securities to (a)
Stewart Bainum or his spouse or widow, their lineal descendants or their
spouses or widows or widowers (so long as they remain spouses) (each a
"Member of the Bainum Family"), or the estate of the foregoing persons (but
only until such time as such shares of the Common Stock are distributed
therefrom), (b) any partnership, trust, corporation or other entity (each,
an "Entity"), but only if a Member or Members of the Bainum Family or
another Entity satisfying the requirements hereof are the sole "Beneficial
Owners" (as such term is defined under the HCR Rights Plan (as defined in
the Merger Agreement)) of the Common Stock held by such Entity, other than
any officer, trustee, director, or other managing person or managing
partner or managing member of any such Entity to the extent any such person
is deemed to be the Beneficial Owner of Common Stock held by such Entity,
provided such person is not the Beneficial Owner, other than through an
Entity described in this clause (b), of in excess of 1% of the total
outstanding Common Stock; (ii) except as contemplated hereby, grant any
proxies or powers of attorney, deposit any such Subject Securities into a
voting trust or enter into a voting agreement with respect to any of such
Holder's Subject Securities; or (iii) take any action that would make any
representation or warranty contained herein untrue or incorrect or have the
effect of preventing or disabling such Holder from performing its
obligations under this Agreement. The Holder's Manor Care stock
certificates shall be legended to reflect the above restrictions.
6. Fiduciary Duties. Notwithstanding anything in this Agreement to the
contrary, the covenants and agreements set forth herein shall not prevent any
Holders serving on Manor Care's Board of Directors from taking any action,
subject to applicable provisions of the Merger Agreement, which such director
shall deem to be required by his fiduciary duties to Manor Care or its
stockholders while acting in such person's capacity as a director of Manor Care.
7. Assignment; Benefits. The rights (but not the obligations) of HCR
hereunder may be assigned, in whole or in part, to Merger Sub or any other
direct wholly-owned subsidiary of
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HCR, to the extent and for so long as it remains a direct wholly-owned
subsidiary of HCR. Other than as permitted in the preceding sentence, this
Agreement may not be assigned by any party hereto without the prior written
consent of the other party. This Agreement shall be binding upon, and shall
inure to the benefit of, the Holder, HCR and their respective successors and
permitted assigns.
8. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if and when delivered personally or by overnight courier or sent by electronic
transmission, with confirmation received, as specified below:
If to each Holder:
AT THE ADDRESSES SET FORTH ON THE SIGNATURE PAGES HERETO
If to HCR:
One SeaGate
Toledo, OH 43604-2616
Telecopier No.: (419) 252-5559
Telephone No.: (419) 252-5500
Attention: R. Jeffrey Bixler
With a copy to:
Latham & Watkins
233 South Wacker Drive
Sears Tower, Suite 5800
Chicago, IL 60606
Telecopier No.: (312) 993-9767
Telephone No.: (312) 876-7700
Attention: Mark D. Gerstein
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance herewith.
9. Specific Performance. The parties hereto agree that irreparable harm
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
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<PAGE> 7
10. Amendment. This Agreement may not be amended or modified, except by
an instrument in writing signed by or on behalf of each of the parties hereto.
This Agreement may not be waived by either party hereto, except by an instrument
in writing signed by or on behalf of the party granting such waiver.
11. Governing Law. The Laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Any suit, action or proceeding by a party hereto with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, may
be brought in any state or federal court of competent jurisdiction in the State
of Delaware, and each party hereto hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action, proceeding or judgment.
By the execution and delivery of this Agreement, (i) HCR and Merger Sub each
appoints The Corporation Trust Company, at its office in Wilmington, Delaware,
as its agent upon which process may be served in any such suit, action or
proceeding and (ii) each Stockholder appoints CSC/The United States Corporation
Company at its office in Wilmington, Delaware, as its agent upon which process
may be served in any such suit, action or proceeding. Service of process upon
such agent, together with notice of such service given to a party hereto in the
manner provided in Section 8 hereof, shall be deemed in every respect effective
service of process upon it in any suit, action or proceeding. Nothing herein
shall in any way be deemed to limit the ability of a party hereto to serve any
such writs, process or summonses in any other manner permitted by applicable
Law. Each party hereto hereby irrevocably waives any objections which it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any state or
federal court of competent jurisdiction in the State of Delaware, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum. No suit,
action or proceeding against a party hereto with respect to this Agreement may
be brought in any court, domestic or foreign, or before any similar domestic or
foreign authority other than in a court of competent jurisdiction in the State
of Delaware, and each party hereto hereby irrevocably waives any right which it
may otherwise have had to bring such an action in any other court, domestic or
foreign, or before any similar domestic or foreign authority.
12. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
13. Defined Terms. Terms used herein but not otherwise defined shall have
the meanings set forth in the Merger Agreement.
14. Termination. This Agreement shall terminate upon the earlier of (i)
the Effective Time the Merger and (ii) the date of termination of the Merger
Agreement, unless the termination of the Merger Agreement gives rise to the
obligation of Manor Care to pay a termination fee pursuant to Section 9.3 of the
Merger Agreement, in which case the Voting Agreement shall terminate on the date
that is the six month anniversary of the date of termination of the Merger
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<PAGE> 8
Agreement. The date and time at which this Agreement is terminated in
accordance with this Section 14 is referred to herein as the "Termination
Date." Upon any termination of this Agreement, this Agreement shall thereupon
become void and of no further force and effect, and there shall be no liability
in respect of this Agreement or of any transactions contemplated hereby or by
the Merger Agreement on the part of any party hereto or any of its directors,
officers, partners, stockholders, employees, agents, advisors, representatives
or affiliates; provided, however, that nothing herein shall relieve any party
from any liability for such party's willful breach of this Agreement; and
provided further that nothing herein shall limit, restrict, impair, amend or
otherwise modify the rights, remedies, obligations or liabilities of any person
under any other contract or agreement, including, without limitation, the
Merger Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of
the parties hereto, all as of the date first above written.
Bainum Associates Limited Partnership 5,417,761
By: /s/ B. Houston McCeney
-------------------------------------
B. Houston McCeney
Its Voting General Partner
MC Investments Limited Partnership 4,415,250
By: /s/ B. Houston McCeney
-------------------------------------
B. Houston McCeney
Its Voting General Partner
Mid Pines Associates Limited Partnership 1,779,628
By: /s/ Stewart Bainum, Jr.
-------------------------------------
Stewart Bainum, Jr.
Its Managing General Partner
Realty Investment Company, Inc. 3,567,869
By: /s/ Stewart Bainum
-------------------------------------
Stewart Bainum
President
The Stewart Bainum Declaration of Trust 3,717,542
By: /s/ Stewart Bainum
-------------------------------------
Stewart Bainum
Trustee
The Jane L. Bainum Declaration of Trust 798,711
By: /s/ Jane L. Bainum
-------------------------------------
Jane L. Bainum
Trustee
<PAGE> 1
EXHIBIT 2
HEALTH CARE AND RETIREMENT CORPORATION
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 10, 1998 (the "Agreement"),
between Health Care and Retirement Corporation, a Delaware corporation (the
"Grantee"), and Manor Care, Inc., a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, Catera Acquisition Corp., a Delaware corporation
("Sub"), and the Grantor have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), which provides, among
other things, for the merger (the "Merger") of Sub with and into the Grantor
such that the Grantor will become a wholly-owned subsidiary of Grantee and the
stockholders of the Grantor will become stockholders of Grantee;
WHEREAS, as a condition and inducement to their willingness to enter into
the Merger Agreement, the Grantee and Sub requested that the Grantor grant to
the Grantee an option to purchase up to 12,675,421 (subject to adjustment as
set forth herein) shares of Common Stock, par value $.10 per share, of the
Grantor (the "Common Stock"), upon the terms and subject to the conditions
hereof;
WHEREAS, prior to the date hereof, Grantee and the Holders (as defined in
the Voting Agreement dated the date hereof among the Holders party thereto,
Grantor and the Grantee (the "Voting Agreement")) had no agreement, arrangement
or understanding (as such terms are used in Section 203 of the Delaware General
Corporation Law (the "DGCL")) for the purpose of acquiring, holding, voting or
disposing of shares of Common Stock;
WHEREAS, in consideration for the agreements contained herein, prior to
the date hereof, and prior to Grantee becoming an "interested stockholder" for
purposes of Section 203 of the DGCL, the board of the directors of Grantor has
approved this Agreement and the Voting Agreement, and the transactions,
agreements, arrangements and understandings contemplated hereby and thereby,
including the agreement of the Holders to vote as provided in Section 2 of the
Voting Agreement and not to transfer shares of Common Stock as provided in
Section 5(B) of the Voting Agreement and the option to purchase Common Stock as
provided in this Agreement; and
WHEREAS, in order to induce the Grantee to enter into the Merger
Agreement, the Grantor hereby agrees to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
<PAGE> 2
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Immediately prior hereto the Grantee, Sub and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable
option (the "Option") to purchase up to 12,675,421 (as adjusted as provided
herein) shares of Common Stock (together with the associated purchase rights
(the "Rights") issued with respect thereto pursuant to the Rights Agreement
dated February 25, 1998, as amended, between the Grantor and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Grantor Rights Plan")
(including the Rights, the "Shares") at a per share cash purchase price equal
to the lower of (i) $31.00 per Share and (ii) the average closing sales price
of the Common Stock on the New York Stock Exchange ("NYSE") for the five
consecutive trading days beginning on and including the day that the Merger is
publicly announced (as adjusted as provided herein) (such lower price being the
"Purchase Price"). The Option may be exercised by the Grantee, in whole but not
in part, at any time, following the occurrence of a Purchase Event (as defined)
and prior to the termination of the Option in accordance with the terms of this
Agreement. A Purchase Event shall be the earliest of: (i) termination of the
Merger Agreement by Grantee pursuant to Section 9.1(d) of the Merger Agreement,
but only if a proposal for an Alternative Transaction (as defined in the Merger
Agreement) involving Grantor shall have been made prior to the Grantor
stockholders' meeting and either an Alternative Transaction with Grantor is
entered into, or an Alternative Transaction with Grantor is consummated, within
eighteen months of such termination (or twelve months in the case of the
Restructuring Transaction), (ii) the termination of the Merger Agreement by
Grantee pursuant to Section 9.1(f) of the Merger Agreement, or (iii) the
termination of the Merger Agreement by Grantor pursuant to Section 9.1(h) of
the Merger Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date not later than 10 business days and not earlier than the
second business day following the date such notice is sent for the closing of
such purchase, subject to extension until such date as the conditions specified
in Section 2 are satisfied. In the event of any change in the number of issued
and outstanding shares of Common Stock by reason of any stock dividend, stock
split, split-up, reclassification, recapitalization, merger or other change in
the corporate or capital structure of the Grantor (including the occurrence of
a Distribution Date under the Grantor Rights Plan), the number of Shares
subject to this Option and the purchase price per Share shall be appropriately
adjusted to restore the Grantee to its rights hereunder, including its right to
purchase Shares representing 19.9% of the capital stock of the Grantor entitled
to vote generally for the election of the directors of the Grantor which is
issued and outstanding immediately prior to the exercise of the Option at a per
share purchase price equal to the Purchase Price multiplied by 12,675,421. In
the event that any additional shares of Common Stock are issued after the date
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<PAGE> 3
of this Agreement (other than pursuant to an event described in the preceding
sentence), the number of Shares subject to this Option shall be increased by
19.9% of the number of the additional shares of Common Stock so issued (and
such additional Shares shall have a purchase price per share equal to the
Purchase Price).
(c) If at any time the Option is then exercisable pursuant to the terms
of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option
to purchase Shares provided in Section 1(a) hereof, to send a written notice to
the Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is sent on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by such number of
the Shares subject to the Option. As used herein "Spread" shall mean the
excess, if any, over the Purchase Price of the higher of (x) if applicable, the
highest price per share of Common Stock (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by any person in an
Alternative Transaction (as defined in Section 9.03(g) of the Merger Agreement)
(the "Alternative Purchase Price") or (y) the closing sales price per share of
Common Stock on the NYSE on the last trading day immediately prior to the date
the Cash Exercise Notice is sent (the "Closing Price"). If the Alternative
Purchase Price includes any property other than cash, the Alternative Purchase
Price shall be the sum of (i) the fixed cash amount, if any, included in the
Alternative Purchase Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing
public trading market, the average of the closing sales prices (or the average
of the closing bid and asked prices if closing sales prices are unavailable)
for such securities in their principal public trading market on the five
trading days ending five days prior to the date of sending of the Cash Exercise
Notice shall be deemed to equal the fair market value of such property. If
such other property consists of something other than cash or securities with an
existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price. Upon
exercise of the Grantee's right to receive cash pursuant to this Section 1(c)
and the payment of such cash to the Grantee, the obligations of the Grantor to
deliver Shares pursuant to Section 3 shall be terminated.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated and
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all other consents, approvals, orders, notifications or authorizations, the
failure of which to obtain or make would have the effect of making the issuance
of the Shares illegal (collectively, the "Regulatory Approvals") shall have
been obtained or made.
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may
be, at 8:00 A.M., local time, at the offices of Latham & Watkins, Suite 5800,
Sears Tower, 233 South Wacker Drive, Chicago, Illinois, or, if the conditions
set forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof,
the Grantor will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares in the denominations designated by the
Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares
from the Grantor at the price per Share equal to the Purchase Price or (ii) in
the event of a closing pursuant to Section 1(c) hereof, the Grantor will
deliver to the Grantee cash in an amount determined pursuant to Section 1(c)
hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to
the Grantee, pursuant to this Agreement shall be made by certified or official
bank check or by wire transfer of federal funds to a bank designated by the
party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations And Warranties of the Grantor. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this
Agreement has been duly executed and delivered by a duly authorized officer of
the Grantor and constitutes a valid and binding obligation of the Grantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles; (c) the Grantor has taken all necessary corporate action to
authorize and reserve the Shares issuable upon exercise of the Option and the
Shares, when issued and delivered by the Grantor upon exercise of the Option,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights and any and all liens, claims, charges or encumbrances;
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<PAGE> 5
(d) except as otherwise required by the HSR Act and other than any filings
required under the blue sky laws of any states or by the NYSE, the execution
and delivery of this Agreement by the Grantor and the issuance of Shares upon
exercise of the Option do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will not
violate, result in a breach of or the acceleration of any obligation under, or
constitute a material default under, any provision of any charter or by-law,
material indenture, mortgage, lien, lease, agreement, contract or instrument,
or any order, law, rule, regulation, judgment, ordinance, or decree, or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound; (e) no "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
(including, without limitation, the restrictions on "business combinations" set
forth in Section 203 of the DGCL) is or shall be applicable to the acquisition
of Shares pursuant to this Agreement (and the Board of Directors of Grantor has
taken all action to approve the acquisition of the Shares to the extent
necessary to avoid such application) and (f) the Grantor has taken all
corporate action necessary so that the grant and any subsequent exercise of the
Option by the Grantee will not result in the separation or exercisability of
rights under the Grantor Rights Plan.
5. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and (b) the Grantee is
acquiring the Option after the Grantee has been afforded the opportunity to
obtain, and has obtained, sufficient information regarding the Grantor to make
an informed investment decision with respect to the Grantee's purchase of the
Shares issuable upon exercise thereof, and, if and when the Grantee exercises
the Option, it will be acquiring the Shares issuable upon the exercise thereof
for its own account and not with a view to distribution or resale in any manner
which would be in violation of the Securities Act.
6. Quotation of Shares; HSR Act Filings; Regulatory Approvals. Subject to
applicable law and the rules and regulations of the NYSE, the Grantor will
promptly following receipt of a Stock Exercise Notice file an application to
have the Shares quoted on the NYSE and will use its best efforts to obtain
approval of such quotation and to file all necessary filings by the Grantor
under the HSR Act; provided, however, that if the Grantor is unable to effect
such quotation on the NYSE by the Closing Date, the Grantor will nevertheless
be obligated to deliver the Shares upon the Closing Date. Each of the parties
hereto will use its best efforts to obtain
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<PAGE> 6
consents of all third parties and all Regulatory Approvals, if any, necessary
to the consummation of the transactions contemplated hereby.
7. Repurchase of Shares; Sale of Shares. If an Alternate Transaction has
not occurred prior to the eighteen (18) month (twelve (12) months in the case
of the Restructuring Transactions) anniversary date of the date on which the
Merger Agreement terminated pursuant to the terms thereof, then beginning on
such anniversary date, the Grantor shall, subject to there being legally
available funds therefor, have the right to purchase (the "Repurchase Right")
all, but not less than all, of the Shares then beneficially owned by the
Grantee or any of its affiliates at a price per share equal to the greater of
(i) the Purchase Price, or (ii) the average of the closing sales prices for
shares of Common Stock on the twenty trading days ending five days prior to the
date the Grantor gives written notice of its intention to exercise the
Repurchase Right. If the Grantor does not exercise the Repurchase Right within
ninety days following the first anniversary of the date of termination of the
Merger Agreement, the Repurchase Right terminates. In the event the Grantor
wishes to exercise the Repurchase Right, the Grantor shall send a written
notice to the Grantee specifying a date (not later than 10 business days and
not earlier than the second business day following the date such notice is
sent) for the closing of such purchase. For purposes of the Agreement, an
"Alternative Transaction" shall have the meaning ascribed to in such term in
the Merger Agreement.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant to the terms
hereof, and such sale requires, in the opinion of counsel to the Grantee, which
opinion shall be reasonably satisfactory to the Grantor and its counsel,
registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares for
resale, including, without limitation, promptly filing a registration statement
which complies with the requirements of applicable federal and state securities
laws, entering into an underwriting agreement with such underwriters upon such
terms and conditions as are customarily contained in underwriting agreements
with respect to secondary distributions; provided that the Grantor shall not be
required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the filing or effectiveness of any
registration statement for no more than 120 days in the aggregate if the
offering would, in the judgment of the Board of Directors of the Grantor, after
consultation with the Grantor's principal securities counsel, require
disclosure of any material information that the Grantor has a bona fide
business purpose for preserving as confidential.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the
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<PAGE> 7
prospectus relating to the Shares covered thereby in such numbers as the
Grantee may from time to time reasonably request and (ii) if any event shall
occur as a result of which it becomes necessary to amend or supplement any
registration statement or prospectus, to prepare and file under the applicable
securities laws such amendments and supplements as may be necessary to keep
effective for at least 90 days a prospectus covering the Common Stock meeting
the requirements of such securities laws, and to furnish the Grantee such
numbers of copies of the registration statement and prospectus as amended or
supplemented as may reasonably be requested. The Grantor shall bear the cost
of the registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Grantor, except that the Grantee shall pay the fees and disbursements
of its counsel, the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by the Grantee. The Grantor shall indemnify and
hold harmless the Grantee, its affiliates and its officers, directors and
controlling persons from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
or incorporated by reference in, and omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Grantor by the Grantee, its affiliates and its officers expressly for use in
any registration statement (or any amendment thereto) or any preliminary
prospectus filed pursuant to this paragraph. The Grantor shall also indemnify
and hold harmless each underwriter and each person who controls any underwriter
within the meaning of either the Securities Act or the Securities Exchange Act
of 1934, as amended, against any and all losses, claims, damages, liabilities
and expenses arising out of or based upon any statements contained or
incorporated by reference in, and omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Grantor by the underwriters expressly for use in any registration statement (or
any amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Total Profit (as hereinafter defined) exceed $100 million and, if it
does exceed such amount, the Grantee, at its sole election, shall, within five
business days, either (a) deliver to the Grantor for cancellation without
consideration Shares (valued, for the purposes of this Section 9(a), at the
average closing sales price of the Common Stock on the NYSE for the twenty
consecutive trading days preceding the day on which the Total Profit exceeds
$100 million) previously purchased by the Grantee, (b) pay cash or other
consideration to the Grantor or (c)
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<PAGE> 8
undertake any combination thereof, so that the Total Profit shall not exceed
$100 million after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by the
Grantee pursuant to Section 9.3(e) of the Merger Agreement and Section 1(c)
hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the
Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the
Grantee's purchase price for such Shares, and (iii)(x) the amount received by
the Grantee pursuant to the sale of Shares (or any other securities into which
such Shares are converted or exchanged), less (y) the Grantee's purchase price
for such Shares.
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees
that the Grantee shall have the right, in addition to any other rights it may
have, to specific performance of this Agreement. Accordingly, if the Grantee
should institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Grantor hereby waives the claim or defense that the
Grantee has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law
exists. The Grantor further agrees to waive any requirements for the securing
or posting of any bond in connection with obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such
transmission has been received, to the person at the address set forth below,
or such other address as may be designated in writing hereafter, in the same
manner, by such person:
If to the Grantee:
Health Care and Retirement Corporation
One SeaGate
Toledo, OH 43604-2616
Attn: R. Jeffrey Bixler
Telecopy: (419) 252-5599
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With a copy to:
Latham & Watkins
233 South Wacker Drive
Sears Tower, Suite 5800
Chicago, IL 60606
Attn: Mark D. Gerstein
Telecopy: (312) 993-9767
If to the Grantor:
Manor Care, Inc.
11555 Darnestown Road
Gaithersburg, MD 20878-3200
Attn: James H. Rempe
Telecopy: (301) 979-4007
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attn: W. Leslie Duffy
Telecopy: (212)269-5420
13. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective permitted
successors and assigns; provided, however, that such successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Except as
set forth in Section 8, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
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<PAGE> 10
15. Assignment. No party to this Agreement may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations. Any assignment
made in violation of this Section 15 shall be void.
16. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. The Laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Any suit, action or proceeding by a party hereto with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, may
be brought in any state or federal court of competent jurisdiction in the State
of Delaware, and each party hereto hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action, proceeding or
judgment. By the execution and delivery of this Agreement, (i) Grantee
appoints The Corporation Trust Company in Wilmington, Delaware, as its agent
upon which process may be served in any such suit, action or proceeding and
(ii) Grantor appoints CSC/The United States Corporation in Wilmington,
Delaware, as its agent upon which process may be served in any such suit,
action or proceeding. Service of process upon such agent, together with notice
of such service given to a party hereto in the manner provided in Section 12
hereof, shall be deemed in every respect effective service of process upon it
in any suit, action or proceeding. Nothing herein shall in any way be deemed
to limit the ability of a party hereto to serve any such writs, process or
summonses in any other manner permitted by applicable Law. Each party hereto
hereby irrevocably waives any objections which it may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any state or federal court of competent
jurisdiction in the State of Delaware, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court
has been brought in any inconvenient forum. No suit, action or proceeding
against a party hereto with respect to this Agreement may be brought in any
court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Delaware, and
each party hereto hereby irrevocably waives any right which it may otherwise
have had to bring such an action in any other court, domestic or foreign, or
before any similar domestic or foreign authority.
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19. Termination. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which the Grantee realizes a
Total Profit of $100 million, (iii) the date on which the Merger Agreement is
terminated; provided that the Option is not exercisable at such time and does
not become exercisable simultaneous with such termination and (iv) 90 days
after the date the Option becomes exercisable (the date referred to in clause
(iv) being hereinafter referred to as the "Option Termination Date"); provided
that, if the Option cannot be exercised or the Shares cannot be delivered to
the Grantee upon such exercise because the conditions set forth in Section 2(a)
or Section 2(b) hereof have not yet been satisfied, the Option Termination Date
shall be extended until thirty days after such impediment to exercise has been
removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
21. Public Announcement. The Grantee will consult with the Grantor and
the Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
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<PAGE> 12
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
HEALTH CARE AND RETIREMENT CORPORATION
By: /s/ R. Jeffrey Bixler
-----------------------------------
Its: Vice President and General Counsel
----------------------------------
MANOR CARE, INC.
By: /s/ James H. Rempe
-----------------------------------
Its: Senior Vice President and General
Counsel
----------------------------------
<PAGE> 1
EXHIBIT 3
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, the persons named below agree to the joint filing on behalf of each of
them of a Statement on Schedule 13D (including amendments thereto) with respect
to the common stock of Manor Care, Inc. and further agree that this Joint
Filing Agreement be included as an Exhibit to such joint filings.
Dated: June 19, 1998 HEALTH CARE AND RETIREMENT CORPORATION
By: /s/ R. Jeffrey Bixler
--------------------------------
Name: R. Jeffrey Bixler
Title: Vice President and General
Counsel
CATERA ACQUISITION CORP.
By: /s/ R. Jeffrey Bixler
--------------------------------
Name: R. Jeffrey Bixler
Title: Vice President and Secretary
