<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) APRIL 14, 1998
IN HOME HEALTH, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 33-17228C 41-1458213
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
CARLSON CENTER, SUITE 500
601 CARLSON PARKWAY
MINNETONKA, MINNESOTA 55305-5214
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 449-7500
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Item 5. Other Events
On April 13, 1998 the Registrant entered into a Preferred Stock
Modification Agreement with ManorCare Health Services, Inc. ("ManorCare") the
holder of all 200,000 outstanding shares of the Registrant's Series A Preferred
Stock. Under the Agreement, ManorCare agreed, with respect to 70,000 shares
(the "Modified Shares") of the Series A Preferred Stock, to waive the right to
give notice on or after October 24, 2000 requiring the Registrant to redeem the
Modified Shares. ManorCare also agreed that any transferee of the Modified
Shares would be required to agree to the same limitation.
The effect of the Agreement is to permit the Registrant to present the
Modified Shares in the Shareholders' Equity portion of its balance sheet, while
the remainder of the Preferred Stock continues to be presented as a "mezzanine
item" between the Liabilities and Shareholders' Equity sections of the balance
sheet.
The reason for the Agreement is to allow the Registrant to meet the
requirements for continued listing of its common stock on the NASDAQ National
Market. The Registrant has also provided an undertaking to the NASDAQ Stock
Market, Inc. ("NASDAQ') that the Registrant will not voluntarily redeem any of
its Preferred Stock if the redemption would cause the Registrant's net tangible
assists, as defined by NASDAQ, to be less than $5,000,000, unless NASDAQ
otherwise consents. Based on the Agreement and the undertaking described above,
the Registrant believes that its common stock will continue to be listed for
trading on the NASDAQ National Market.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information
Attached as an exhibit to the Form 8-K is an unaudited balance sheet of the
Registrant as of February 28, 1998 which includes pro forma disclosure of the
effect of the above referenced Agreement.
(c) Exhibits
4.1 Preferred Stock Modification Agreement
4.2 Secretary's Certificate as of resolutions of Registrant's Board of
Directors
99.1 Registrant's Balance Sheet as of February 28, 1998
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: April 14, 1998
IN HOME HEALTH, INC.
by /s/ Wolfgang von Maack
----------------------
Wolfgang von Maack
Chief Executive Officer
and President
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PREFERRED STOCK MODIFICATION AGREEMENT
THIS PREFERRED STOCK MODIFICATION AGREEMENT is made this 13th day of April,
1998 by and between In Home Health, Inc., a Minnesota corporation ("In Home")
and ManorCare Health Services, Inc., a Delaware corporation ("ManorCare").
WHEREAS, ManorCare holds all the outstanding shares of In Home's Series A
Preferred Stock (the "Preferred Stock"), which consists of 200,000 shares of the
Preferred Stock;
WHEREAS, under Section 402 of the Certificate of Designation governing the
Preferred Stock, ManorCare has the right to require the Company to redeem the
Preferred Stock on or after October 24, 2000;
WHEREAS, In Home and ManorCare have agreed that ManorCare will irrevocably
waive its rights under Section 402 of the Certificate of Designation;
WHEREAS, ManorCare will benefit from entering into this Agreement, in that
the modification provided herein will facilitate In Home maintaining the listing
of its common stock on the NASDAQ National Market, and ManorCare is currently
the largest holder of In Home common stock;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. REPRESENTATION BY MANORCARE. ManorCare hereby represents and warrants
to In Home that it is the sole owner of the Preferred Stock, that the Preferred
Stock is not subject to any encumbrances created by ManorCare or rights of any
third parties, and that ManorCare has full power and authority to enter into
this Agreement.
2. WAIVER. ManorCare hereby agrees that, with respect to 70,000 shares of
the Preferred Stock (the "Modified Shares"), it shall not hereafter exercise
its right under Section 402 of the Certificate of Designation to require In Home
after October 24, 2000 to redeem those 70,000 shares. ManorCare agrees that
this agreement and waiver shall be made binding upon any transferee of any of
the Modified Shares as a condition to any transfer thereof.
3. STOCK CERTIFICATE LEGEND. The single Stock Certificate P-1 which
currently evidences all 200,000 shares of the Preferred Stock shall be reissued
in the form of at least two stock certificates, one for the Modified Shares, and
one or more certificates for the other shares of the Preferred Stock. Each
stock certificate which hereafter evidences any Modified Shares shall bear a
legend stating as follows:
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"The shares evidenced by this Certificate are subject to a Preferred
Stock Modification Agreement between the issuer and the original
holder of these shares under which the holder's and any subsequent
transferee's right under Section 402 of the Certificate of Designation
governing these shares to require the issuer to redeem these shares
after October 24, 2000 has been waived. Any transfer of these shares,
whether or not for value, is subject to the condition that the
transferee agrees to be bound by such waiver. A copy of the Preferred
Stock Modification Agreement is available upon request from the
issuer."
4. CONSENT. In connection with this Agreement In Home's Board of
Directors has adopted a resolution which, in substance provided that In Home
will not redeem any shares of its capital stock from ManorCare if such
redemption would cause In Home's net tangible assets, as defined by The NASDAQ
Stock Market Inc., to be less than $5,000,000. ManorCare consents to the
adoption of that resolution by In Home.
5. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
6. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties concerning the subject matter. No provision of this Agreement shall be
modified or waived other than by a written agreement signed by both of the
parties to this Agreement.
7. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
8. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Minnesota, without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
IN HOME HEALTH, INC. MANORCARE HEALTH SERVICES, INC.
By By
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Its Its
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SECRETARY'S CERTIFICATE
I, Thomas R. Gross, do hereby certify that I am the Secretary of In Home
Health, Inc., a Minnesota corporation (the "Company"), and I further certify
that at a meeting of the Company's Board of Directors held telephonically on
October 10, 1998 at which a quorum was at all times present, the following
resolutions were duly adopted by the Company's Board of Directors and remains in
full force and effect as of the date hereof:
RESOLVED FURTHER, that the Company hereby undertakes and commits to The
NASDAQ National Market, Inc. ("NASDAQ") that the Company will not redeem any of
the Company's Preferred Stock if the redemption would cause the Company to have
tangible net assets, as defined by NASDAQ, to be less than $5,000,000, unless
NASDAQ otherwise consents;
RESOLVED FURTHER, that the Secretary is authorized and directed to provide
a Secretary's Certificate as to the preceding resolution to NASDAQ;
In Witness Whereof, I have executed this Secretary's Certificate this 13th
day of April, 1998.
------------------------------------
Thomas R. Gross, Secretary
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IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Proforma
Feb. 28, 1998 Feb. 28, 1998
(Unaudited) (Unaudited)
----------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $20,483 $20,483
Accounts receivable, net of allowance
of $2,008 13,547 13,547
Prepaid income tax 254 254
Deferred income tax 1,540 1,540
Prepaid expenses and other current assets 768 768
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Total current assets 36,592 36,592
Property:
Furniture and equipment 9,165 9,165
Computer equipment and software 7,460 7,460
Leasehold improvements 616 616
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Total 17,241 17,241
Accumulated depreciation (11,100) (11,100)
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Property - net 6,141 6,141
Other Assets:
Accounts receivable, long-term 2,890 2,890
Goodwill, net 5,366 5,366
Other assets 452 452
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Total other assets 8,708 8,708
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Total Assets $51,441 $51,441
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</TABLE>
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IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS AND SHARES IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Proforma
Feb. 28, 1998 Feb. 28, 1998
(Unaudited) (Unaudited)
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<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 517 $ 517
Accounts payable 7,219 7,219
Accounts payable - related party 49 49
Accrued liabilities:
Third party 7,447 7,447
Compensation 3,249 3,249
Insurance 5,967 5,967
Restructuring 982 982
Other 777 777
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Total current liabilities 26,207 26,207
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Long-Term Debt 87 87
Deferred Revenue 223 223
Deferred Rent Payable 228 228
Deferred Income Tax 1,643 1,643
Redeemable Convertible Preferred Stock -
$1.00 par value, $20,000 redemption value, 19,185 -
authorized 200 shares; issued and outstanding
February 28 - 200 shares
$1.00 par value, $13,000 redemption value, - 12,470
authorized 130 shares; issued and outstanding
February 28 Proforma - 130 shares
Shareholders' Equity:
Redeemable Convertible Preferred Stock -
$1.00 par value, $7,000 redemption value, - 7,000
authorized 70 shares; issued and outstanding
February 28 Proforma - 70 shares
Preferred stock - authorized 800 shares - -
Common stock - $.01 par value: 164 164
authorized - 40,000 shares;
issued and outstanding -
February 28 - 16,399 shares;
February 28 Proforma - 16,399 shares
Additional paid-in capital 23,661 23,661
Retained earnings (deficit) (19,957) (20,242)
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Total shareholders' equity 3,868 10,583
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Total Liabilities and Shareholders' Equity $51,441 $51,441
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</TABLE>
SEE NOTE TO PROFORMA BALANCE SHEET.
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NOTE TO PRO FORMA BALANCE SHEET
On April 13, 1998, In Home Health, Inc. and ManorCare Health Services, Inc.
entered into an agreement to modify the redemption terms of 70,000 shares of In
Home Health's Series A Preferred Stock. Pursuant to the modification, these
shares are redeemable only at the option of In Home Health. There are no other
changes in the terms of the 70,000 shares, and no changes in the remaining
130,000 shares of In Home Health's Series A Preferred Stock. The pro forma
balance sheet as of February 28, 1998 gives effect to the change in the
redemption feature by including 70,000 shares of In Home Health's Series A
Preferred Stock within shareholder's equity, and recording the amortization of
the discount relating to these shares as a reduction of retained earnings.
