NOTICE OF FUNDAMENTAL CHANGE
TO THE HOLDERS OF
MANOR CARE, INC. AND HCR HEALTHCARE, LLC
2.125% CONVERTIBLE SENIOR NOTES DUE 2023
CUSIP #*: 564055AK7
CUSIP #*: 564055AJ0
Notice is hereby given pursuant to Sections11.1 and 11.3 of the Indenture (the “Indenture”), dated as of December 10, 2004, among Manor Care, Inc. (the “Company” and, together with HCR Healthcare LLC, the“Issuer”), HCR Healthcare LLC, the subsidiary guarantors named therein and U.S. Bank Trust National Association, as trustee (the “Trustee”)in respect of the Issuer’s 2.125% Convertible Senior Notes due 2023 (the “Securities”) that, in accordance with a merger agreement between the Issuer and MCHCR-CP Merger Sub Inc. (“MergerCo”) dated as of July 2, 2007 (the “Merger Agreement”), MergerCo merged with and into the Company on December21, 2007, with the Company as the surviving entity (the “Merger”). As a result of the Merger, a Fundamental Change under the Indenture has occurred.
Pursuant to Article XI of the Indenture, each holder of Securities has the right, at such holder’s option, to require the Issuer to purchase any or all of such holder’s Securities on January25, 2008 (the “Fundamental Change Purchase Date”).
The Issuer will purchase the Securities in integral multiples of $1,000 principal amount at a price in cash (the “Fundamental Change Purchase Price”) equal to 100% of the principal amount of the Securities to be repurchased plus $7.22 of accrued and unpaid interest to but excluding the Fundamental Change Purchase Date.
The Fundamental Change Purchase Pricefor any Securities as to which a Fundamental Change Purchase Notice (as described below) has been given and not withdrawn shall be paid by the Trustee, as paying agent (the “Paying Agent”)promptly following the later of (a) the Fundamental Change Purchase Date and (b) the time of delivery or book-entrytransfer of such Securities to the Paying Agent by the holder thereof as follows:If by Mail (Registered Bonds):
Corporate Trust Services
P.O. Box 64111
St. Paul, MN 55164-0111 / If by Mail(Bearer Bonds):
Corporate Trust Services
P.O. Box 64452
St. Paul, MN 55164-0452 / If by Hand or Overnight Mail:
Corporate Trust Services
60 Livingston Avenue
1st Floor - Bond Drop Window
St. Paul, MN 55107
The Securities must be surrendered to the Paying Agent to collect the Fundamental Change Purchase Price. The method of delivery is at the option and risk of the holder; however, for certificated securities, transmission by registered mail, properly insured, is suggested as a precaution against loss.
For a Security to be so purchased at the option of the holder thereof on the Fundamental Change Purchase Date, the Paying Agent must receive such Security duly endorsed for transfer, together with a written notice of purchase (a “Fundamental Change Purchase Notice”) in the form set forth below and the form entitled “Form of Fundamental Change Purchase Notice” on the reverse of the Securities duly completed, in each case on or before the Fundamental Change Purchase Date, subject to extension to comply with applicable law.
TheFundamental Change Purchase Notice shall state:
(1)if certificated, the certificate numbers ofthe Securities which the holder shall deliver to be purchased;
(2)the portion of the principal amount of theSecurities which the holder shall deliver to be purchased, whichportion must be $1,000 in principal amount or an integral multiplethereof; and
(3)that such Securities shall be purchased as of the Fundamental Change Purchase Date pursuant to the terms and conditions specified in paragraph7 of the Securities and in the Indenture.
The Securities as to which a Fundamental Change Purchase Notice has been given may be converted only if the applicable Fundamental Change Purchase Notice has been withdrawn as specified below.
As a result of the Merger, the Securities are convertible until January 25, 2008 into $2,152.96 in cash per $1,000 principal amount outstanding. After January 25, 2008 through maturity, the Securities remain convertible into $2,152.96 in cash per $1,000 principal amount outstanding, subject to satisfaction of the conversion conditions in section 8 of the Securities.
Any holder deliveringto the Paying Agent a Fundamental Change Purchase Notice shall have the right at any time prior to the close of business onthe Business Day (as defined in the Indenture) prior to the Fundamental Change Purchase Date to withdraw suchFundamental Change Purchase Notice (in whole or in part) by delivery of awritten notice of withdrawal to the Paying Agent as set forth below.
A Fundamental Change Purchase Noticemay be withdrawn by means of a written notice of withdrawaldelivered to the office of the Paying Agent at any time prior to 5:00 p.m., NewYork City time, on the Business Day prior to theFundamental Change Purchase Date to which it relatesspecifying:
(1)the principal amount of the Securities with respect to which such notice of withdrawal is being submitted;
(2)if certificated, the certificate number ofthe Securities in respect of which such notice of withdrawal is being submitted, or, if not certificated, the written notice of withdrawal must comply with appropriate DTC procedures; and
(3)the principal amount, if any, of such Securities which remains subject to the original Fundamental Change Purchase Notice and which has been or shall be delivered for purchase by the Issuer.
There shall be no purchase of any Securities as a result of a Fundamental Change if an Event of Default (as defined in the Indenture) has occurred and is continuing (other than a default that is cured by the payment of the Fundamental Change Purchase Price). The Paying Agent will promptly return to the respective holders thereof any Securities (x) with respect to which a Fundamental Change Purchase Notice has been withdrawn in compliance with the Indenture, or (y) held by it during the continuance of an Event of Default (other than a default that is cured by the payment of the Fundamental Change Purchase Price) in which case, upon such return, the Fundamental Change Purchase Notice with respect thereto shall be deemed to have been withdrawn.
Unless the Issuer shall default in the making of payment of the Fundamental Change Purchase Price for Securities covered by any Fundamental Change Purchase Notice, interest on the purchased Securitieswill cease to accrue on and after the Fundamental Change Purchase Date.
Although the board of directors of the Company and the board of directors of HCR Healthcare, LLC,have approved this Notice of Fundamental Change, none of the Company, its board of directors, HCR Healthcare, LLC,and its board of directors has made or will make any recommendation as to whether or not holders should elect to have Securities purchased in accordance herewith. Holders must make their own decision whether or not to deliver a Fundamental Change Purchase Notice and require the Issuer to purchase any or all of their Securities, after taking into account their own personal circumstances and preferences. The Issuer recommends that holders discuss this Notice of Fundamental Change with their personal financial, tax and legal advisors.
Under federal income tax law, paying agents may be required to withhold 28% of payments to a holder if such holder has failed to furnish a taxpayer identification number to the paying agent.
FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE
To: Manor Care, Inc.
The undersigned is the registered holder of $______aggregate principal amount of 2.125% ConvertibleSenior Notes due 2023 (the “Securities”) issued by Manor Care, Inc. (the “Company”) pursuant to an indenture dated as of December 10, 2004, among the Company, HCR Healthcare, LLC (together with the Company, the “Issuer”),the subsidiary guarantors named therein and U.S. Bank Trust National Association, as trustee. The undersignedhereby acknowledges receipt of a notice from the Issuer as to the occurrence of a Fundamental Change with respect to the Issuer and requests and instructs the Issuer to repurchase $______,000 aggregate principal amount of the undersigned’s Securities [If Securities are certificated:, represented by certificates with the following certificate numbers:______], in accordance with the terms of the Indenture and paragraph 7 of the Securities. The undersigned directs that the check in payment for the Securities to be repurchased and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the undersigned unless a different name has been indicated below. Ifany portion of the Securities not repurchased is to be issued in the name of aperson other than the undersigned, the undersigned shall pay all transfer taxespayable with respect thereto.
The form of Fundamental Change Purchase Notice on the reverse of the Securities delivered herewith has been completed in accordance with these instructions.
Signature(s) must be guaranteed by a commercial bank or trust company or a member firm of a major stock exchange if Securities are to be delivered other than to or in the name of the registered holder.
Fill in for registration of Securities if to beissued other than to and in the name of registered holder:
______Principal amount to be purchased
(Name)(if less than all): $______,000
(City state and zip code)Social Security or Other Taxpayer
Please print name and address
* The CUSIP Number listed above is for information purposes only. Neither the Issuer nor the Trustee shall be responsible for the selection or use of this CUSIP Number, nor is any representation made to its correctness on the Security or as indicated in any redemption notice.
Dated: December21, 2007
U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE ON BEHALF OF MANOR CARE, INC., AND HCR HEALTHCARE, LLC