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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 4, 1998
Notice is hereby given that an annual meeting of stockholders of In Home
Heath, Inc. will be held at the Minneapolis Marriott City Center, 30 South 7th
Street, Minneapolis, Minnesota on March 4, 1998 at 3:30 o'clock p.m. Central
Time for the following purposes:
1. To elect five directors;
2. To ratify the selection of independent public accountants for the
Company for the current fiscal year; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on January 16, 1998
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors,
/s/ Thomas R. Gross
Thomas R. Gross, Secretary
Minneapolis, Minnesota
January 30, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. Proxies are
revocable at any time prior to the time they are voted, and stockholders who are
present at the Meeting may withdraw their proxies and vote in person if they so
desire.
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PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the stockholders of In Home Health,
Inc. (the "Company") in connection with the Board of Directors' solicitation of
proxies to be voted at the annual meeting of stockholders to be held on March 4,
1998, or any adjournment thereof (the "Meeting"). The mailing of this Proxy
Statement to stockholders commenced on or about January 30, 1998.
All expenses in connection with solicitation of proxies will be borne by the
Company. The Company will pay brokers, nominees, fiduciaries, or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, officers, and
other employees of the Company may also solicit in person, by telephone, by
telegraph or by mail. The Company's principal offices are located at 601 Carlson
Parkway, Suite 500, Minnetonka, Minnesota 55305 and its telephone number is
(612) 449-7500.
Any proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, or by revocation in person
at the Meeting; but if not so revoked, the shares represented by such proxy will
be voted in the manner directed by the stockholder. If no direction is made,
proxies received from stockholders will be voted "for" the proposals set forth
in the Notice of Meeting.
Only stockholders of record at the close of business on January 16, 1998
will be entitled to vote at the meeting. As of such date, the Company had
outstanding 16,398,781 shares of common stock, par value $.01 per share (the
"Common Stock") and 200,000 shares of Series A Preferred Stock, par value $1.00
per share (the "Preferred Stock"). Each share of Common Stock is entitled to one
vote and each share of Preferred Stock is entitled to 50 votes on each of the
matters brought before the Meeting. The holders of Common Stock and Preferred
Stock vote together as a single class on all issues presented to the holders of
Common Stock or as to which the holders of Common Stock are entitled to vote
upon. In addition, the holders of Preferred Stock are entitled to vote as a
separate class on (i) all matters as to which such holders are entitled to vote
under the Minnesota Business Corporation Act, (ii) any amendment, alteration or
repeal of any provision of the Company's Articles of Incorporation or the
Certificate of Designation filed with respect to the Preferred Stock, and (iii)
any proposed creation of a class or series of preferred stock ranking on a
parity with the Preferred Stock as to dividends or on liquidation.
The Company's articles of incorporation exclude cumulative voting. Thus
ManorCare Health Services, Inc., which controls approximately 64% of the voting
power of the Company's stockholders, is able to effectively control the outcome
of any stockholder votes, including the election of directors. ManorCare Health
Services, Inc. acquired all of the 200,000 shares of Preferred Stock which are
outstanding and 6,750,000 shares of Common Stock on October 24, 1995 pursuant to
a Securities Purchase and Sale Agreement between the Company and ManorCare
Health Services, Inc. dated as of May 2, 1995, as amended (the "Purchase
Agreement").
The presence, in person or by proxy, of the holders of a majority of the
voting power of all shares of the Company entitled to vote at the Meeting will
constitute a quorum for the transaction of business. Under Minnesota law, if the
shares present and entitled to vote on an item of business would not constitute
a quorum for the transaction of business at the meeting, then the item must be
approved by a majority of the voting power of the minimum number of shares that
would constitute such a quorum. Votes cast by proxy or in person at the Meeting
will determine whether or not a quorum is present. Abstentions
2
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will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
the approval of the matter submitted to the stockholders. Therefore abstentions
are effectively a vote against the proposal. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. These
insiders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file, including
Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1997 all
Section 16(a) filing requirements applicable to its insiders were complied with.
3
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information provided to the Company as to the
beneficial ownership of Common Stock as of December 1, 1997 by persons known to
the Company to hold 5% or more of such stock and by all current directors,
nominees, the Named Executive Officers from the table on page 7 and all
directors, nominees, and executive officers as a group. All shares represent
sole voting and investment power, unless indicated to the contrary.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP VOTING POWER
- -------------------------------------------------------------------------------- ----------------------- ------------
<S> <C> <C>
ManorCare Health Services, Inc. (1)............................................. 22,750,000(2) 70.2%
BankAmerica Corporation (7)..................................................... 1,743,300 10.6%
Wolfgang von Maack (3)(4)....................................................... 31,000(6) *
Mark L. Gildea (3).............................................................. 54,000(5) *
Thomas R. Gross (3)............................................................. 54,290(5) *
Jeffrey M. Jasnoff (3).......................................................... 6,000(5) *
James J. Lynn (4)............................................................... 104,408(5) *
Donald C. Tomasso (4)........................................................... 0(6) *
Joseph R. Buckley (4)........................................................... 0(6) *
James H. Rempe (4).............................................................. 0(6) *
All Directors and Executive Officers as a Group (7 persons)..................... 208,241(5)(6) 1.3%
</TABLE>
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* Less than one percent
(1) ManorCare Health Services, Inc.'s address is 11555 Darnestown Road,
Gaithersburg, Maryland 20878.
(2) ManorCare Health Services, Inc. holds of record 6,750,000 shares of Common
Stock, 200,000 shares of Preferred Stock (which are presently convertible
into 10,000,000 shares of Common Stock) and currently exercisable warrants
to purchase 6,000,000 shares of Common Stock at an exercise price of $3.75
per share expiring on October 24, 1998.
(3) Named Executive Officer of the Company from the table on page 7.
(4) Director nominated for re-election.
(5) Includes 54,000 shares for Mr. Gildea, 45,000 shares for Mr. Gross, 6,000
shares for Mr. Jasnoff, 81,000 shares for Mr. Lynn, and 198,374 shares for
all directors and officers as a group which may be acquired pursuant to
stock options which are presently exercisable or become exercisable within
sixty days of December 1, 1997.
(6) Each of Messrs. von Maack, Tomasso, Buckley and Rempe are officers of
ManorCare Health Services, Inc., and as such may be considered to control
the shares held by ManorCare Health Services, Inc.; each disclaims
beneficial ownership of such shares.
(7) BankAmerica Corporation's address is 555 California Street, San Francisco,
CA 94104.
4
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The following table also sets forth, as of December 1, 1997, the amount of
Manor Care, Inc. Common Stock beneficially owned by the current directors,
nominees, the Named Executive Officers from the table on page 7 and all
directors, nominees and named executive Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
MANOR CARE, INC.
COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
- --------------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Wolfgang von Maack............................................................... 111,609(2) *
Mark L. Gildea................................................................... 0 *
Thomas R. Gross.................................................................. 0 *
Jeffrey M. Jasnoff............................................................... 0 *
James J. Lynn.................................................................... 0 *
Donald C. Tomasso................................................................ 156,059(3) *
Joseph R. Buckley................................................................ 122,910(4) *
James H. Rempe................................................................... 159,016(5) *
All Directors and Executive Officers as a group (7 persons)...................... 549,594(6) *
</TABLE>
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* Less than 1%
(1) Percentages are based on 63,612,924 shares outstanding on December 1, 1997
plus shares which would be issued assuming that the person exercised all
options which are exercisable within 60 days thereafter.
(2) Includes 107,067 shares which Mr. von Maack has the right to acquire
pursuant to stock options which were exercisable on December 1st or 60 days
thereafter, and 586 and 656 shares, respectively, which Mr. von Maack has
the right to receive upon termination of employment with the Company
pursuant to the terms of the 401(k) Plan and the Nonqualified Savings Plan
(based upon a report of each plan's trustee as of October 31, 1997).
(3) Includes 40 shares held by adult children of Mr. Tomasso who share the same
household. Beneficial ownership of such shares is disclaimed. Also includes
148,618 shares which Mr. Tomasso has the right to acquire pursuant to stock
options which were exercisable on December 1 of 60 days thereafter, and 327
and 574 shares, respectively, which Mr. Tomasso has the right to receive
upon termination of employment with the Company pursuant to the terms of the
401(k) Plan and the Nonqualified Savings Plan (based upon a report of each
plan's trustee as of October 31, 1997).
(4) Includes 121,701 shares which Mr. Buckley has the right to acquire pursuant
to stock options which were exercisable on December 1 or 60 days thereafter,
and 668 and 541 shares, respectively, which Mr. Buckley has the right to
receive upon termination of employment with the Company pursuant to the
terms of the 401(k) Plan and the Nonqualified Savings Plan (based upon a
report of each plan's trustee as of October 31, 1997).
(5) Includes 24,510 shares which Mr. Rempe has the right to acquire pursuant to
stock options which were exercisable on December 1 or 60 days thereafter.
(6) Includes a total of 401,896 shares which the officers, directors and
nominees included in the group have the right to acquire pursuant to stock
options which are presently exercisable or become exercisable within 60 days
after December 1, 1997, and a total of 1,581 shares and 1,771 shares,
respectively, which such officers have the right to receive upon termination
of employment from Manor Care, Inc. pursuant to the terms of Manor Care,
Inc.'s 401(k) Plan and Nonqualified Savings Plan.
5
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EXECUTIVE COMPENSATION AND
OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30, 1997,
1996 and 1995, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to Wolfgang von Maack, the
Company's Chief Executive Officer as of September 30, 1997, to Mark L. Gildea,
the Company's Chief Executive Officer for a period in the fiscal year ended
September 30, 1997, to each of the other two most highly compensated executive
officers of the Company, other than Mr. von Maack and Mr. Gildea, each of whose
total cash compensation exceeded $100,000 during fiscal 1997 (the "Named
Executive Officers") in all capacities in which they served. Certain columns
prescribed by Securities and Exchange Commission proxy regulations have not been
included in this table because the information called for therein is not
applicable to the Company or the Named Executive Officers for the periods
indicated.
6
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
----------
ANNUAL COMPENSATION STOCK
----------------------------------------------------------- OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER SHARES(#) COMPENSATION
- ------------------------------ ----- ------------- ------------ -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Wolfgang von Maack (1)........ 1997 $ 61,500(2) -- $ 6,336(3) -- --
Chief Executive Officer; 1996 -- -- -- -- --
President 1995 -- -- -- -- --
Mark L. Gildea (4)............ 1997 136,500 -- 24,188(5) 150,000 --
Chief Executive Officer 1996 184,875(6) $ 22,715(7) 271,221(8) 120,000 --
1995 -- -- -- -- --
Thomas R. Gross............... 1997 116,070 -- 28,586(9) 30,000 --
Executive Vice President 1996 108,275 -- (10) 20,000 --
Chief Financial Officer 1995 102,000 -- (10) 10,000 --
Jeffrey M. Jasnoff (11)....... 1997 117,077 -- 20,069(12) 30,000 --
Vice President--Human 1996 116,408(13) 8,724(14) (10) 30,000 --
Resources 1995 -- -- -- -- --
</TABLE>
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(1) Wolfgang von Maack was named acting Chief Executive Officer effective May
15, 1997. Effective June 6, 1997, Mr. von Maack was named President and
Chief Executive Officer and was elected a director of the Company.
(2) Consists of 75% of Mr. von Maack's salary paid by ManorCare Health Services,
Inc. and reimbursed by the Company.
(3) Consists of $2,646 of automobile expenses paid by ManorCare Health Services,
Inc. and reimbursed by the Company and $3,690 of miscellaneous expenses paid
by ManorCare Health Services, Inc. and reimbursed by the Company.
(4) Mark L. Gildea was named the Company's Chief Executive Officer effective
October 24, 1995. Effective May 15, 1997, Mr. Gildea resigned as Chief
Executive Officer and director of the Company.
(5) Consists of $6,733 of relocation expenses, $6,825 of automobile expenses,
and $10,630 of accrued vacation payout.
(6) Includes $65,625 of salary paid by ManorCare Health Services, Inc. and
reimbursed by the Company.
(7) Consists of $22,715 paid by ManorCare Health Services, Inc. and reimbursed
by the Company.
(8) Consists of $261,698 in relocation expenses, $7,762 of automobile expenses
paid by ManorCare Health Services, Inc. and reimbursed by the Company and
$1,761 of miscellaneous expenses.
(9) Consists of $18,314 of life insurance expenses, $8,525 of automobile
expenses and $1,747 of miscellaneous expenses.
(10) Other annual compensation in this fiscal year for the named executive
officer was less than 10% of the total salary and bonus.
(11) Jeffrey M. Jasnoff was named the Company's Vice President--Human Resources
effective January 16, 1996 and resigned from the Company on September 30,
1997.
(12) Consists of $8,525 of automobile expenses, $9,637 of accrued vacation
payout, and $1,907 of miscellaneous expenses.
(13) Includes $50,377 of salary paid by ManorCare Health Services, Inc. and
reimbursed by the Company.
(14) Consists of $8,724 paid by ManorCare Health Services, Inc. and reimbursed
by the Company.
7
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STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1995 Stock Option Plan to the four Named Executive
Officers of the Company identified on the table on page 7 as of the end of the
last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL
GRANTED RATES OF STOCK
TO MARKET PRICE APPRECIATION
EMPLOYEES EXERCISE PRICE FOR OPTION TERM (1)
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION --------------------
NAME GRANTED YEAR PER SHARE OF GRANT DATE 5% (2) 10% (3)
- ----------------------------- ------- --------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Wolfgang von Maack........... 0 -- -- -- -- -- --
Mark L. Gildea............... 150,000 19.89% $1.8125 $ 1.8125 11/5/06(4) $179,975 $ 433,295
Thomas R. Gross.............. 30,000 3.98% 1.8125 1.8125 11/5/06 34,195 86,659
Jeffrey M. Jasnoff........... 30,000 3.98% 1.8125 1.8125 11/5/06(5) 34,195 86,659
</TABLE>
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(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast future possible appreciation, if any, of the
Company's stock price. Since options are granted at market price, a zero
percent gain in the stock price will result in no realizable value to the
optionee.
(2) A 5% per year appreciation in stock price from $1.8125 per share yields
$2.9523 on the expiration date.
(3) A 10% per year appreciation in stock price from $1.8125 per share yields
$4.7011 on the expiration date.
(4) Mark L. Gildea resigned as an officer of the Company effective May 15, 1997.
As a term of his resignation, the expiration date of all outstanding options
was set at December 5, 1998.
(5) Jeffrey M. Jasnoff resigned effective September 30, 1997 and all outstanding
options issued to Mr. Jasnoff were canceled on December 29, 1997.
8
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OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
VALUE IN-THE-MONEY OPTIONS
REALIZED AT FY-END
(MARKET PRICE NUMBER OF UNEXERCISED (BASED ON FY-END CLOSING
SHARES AT EXERCISE OPTIONS AT FY-END PRICE OF $1.813/SH)
ACQUIRED LESS EXERCISE -------------------------- ------------------------------
NAME ON EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ------------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Wolfgang von Maack............ -0- -0- -0- -0- -0- -0-
Mark L. Gildea (1)............ -0- -0- 24,000 84,000 -0- $ 29
Thomas R. Gross............... -0- -0- 39,000 51,000 $ 15 $ 30
Jeffrey M. Jasnoff (2)........ -0- -0- 6,000 -0- -0- -0-
</TABLE>
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(1) Mark L. Gildea resigned as director and officer of the Company effective as
of May 15, 1997. In connection with such resignation, the expiration date of
his options was extended to December 5, 1998.
(2) Jeffrey M. Jasnoff resigned from the Company on September 30, 1997.
EMPLOYMENT AGREEMENTS
Pursuant to the terms of the Purchase Agreement with ManorCare Health
Services, Inc. on May 2, 1995, the Company entered into a two year employment
agreement with James Lynn under the terms provided in the Purchase Agreement.
Mr. Lynn's employment agreement was extended during fiscal 1997 to October 24,
1998 and requires Mr. Lynn to provide 60 to 80 hours of human resources/training
services for the Company each month, for which he is compensated at a rate of
$90,000 per annum. Mr. Lynn is also eligible to receive annual bonuses based on
the Company's financial performance up to a maximum amount equal to 50% of his
base salary. Mr. Lynn is also entitled to participate in the Company's benefit
plans or programs otherwise available to executives of the Company. Pursuant to
Mr. Lynn's employment agreement, he was granted options to purchase 50,000
shares of Common Stock at an exercise price of $3.0938 per share, which was the
fair market value of the Common Stock on the date of grant. These options
immediately vested upon the grant thereof, are currently exercisable and have a
term of 10 years from the date of grant, provided, however, that the options
will expire within three months after termination of employment.
The employment agreement with Mr. Lynn has a severance provision designed to
pay to the employee severance payments equal to the amount due for the remaining
term of the applicable employment agreement if such employee's employment is
terminated due to death, disability or resignation or retirement of the employee
for "Good Reason". "Good Reason" is defined to include any request that the
employee permanently relocate to a location not in the Minneapolis, Minnesota
metropolitan area or a failure or refusal by the Company to provide duties for
the employee to perform which are consistent with such employee's position.
9
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Compensation Committee included Donald C. Tomasso,
Joseph R. Buckley and James H. Rempe. Each of these individuals is an officer of
ManorCare Health Services, Inc., the owner of a majority of the voting power of
the stockholders of the Company, although none of them are directly or
indirectly compensated by the Company.
BOARD COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executives for fiscal 1997 were
made by the Compensation Committee of the Board, which consisted during fiscal
1997 of Messrs. Tomasso, Buckley and Rempe. All decisions by the Compensation
Committee for fiscal 1997 were reviewed by the full Board, except for decisions
about awards under certain of the Company's stock-based compensation plans,
which were reviewed solely by the Committee in order for the grants or awards
under such plans to satisfy SEC Rule 16b-3. This report describes the
Compensation Committee's policies for fiscal 1997 as they affected Mr. Gildea,
Mr. Jasnoff and Mr. Gross (collectively, the "Senior Executives"), who are named
in the table on page 7 as the Company's most highly paid officers in fiscal
1997.
CASH COMPENSATION POLICIES FOR SENIOR EXECUTIVES
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation, integrate pay with the Company's
annual and long-term performance goals, reward above-average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. The overall cash
compensation of Senior Executives is intended to be consistent with other
publicly held companies in the health care industry that were selected as
comparable because of comparable revenues and focus on providing health care
services in the home.
The compensation for each Senior Executive is set forth each year in a
Management Incentive Plan that is approved by the Compensation Committee at the
beginning of the fiscal year. Corporate officers other than the Senior
Executives were also eligible for selection as participants in the Management
Incentive Plan, but they typically receive a larger percentage of their
compensation as base salary and a small percentage as bonuses. For the Senior
Executives, the Management Incentive Plan for fiscal 1997 specified a base
salary for each and a maximum bonus opportunity, which was 80% of base salary in
the case of Mr. Gildea and 70% for the other Senior Executives. The bonus that
each Senior Executive could earn for the fiscal year is mathematically
determined by comparing the Company's actual revenue and net income with the
plan for the fiscal year. There would be no bonus if results were less than 95%
of plan, and receiving the maximum bonus would depend on the Company achieving
130% of plan.
FISCAL 1997 STOCK OPTION GRANTS
For fiscal 1997, the Compensation Committee granted stock options to various
executives. Stock options are intended to focus Senior Executives on long term
Company performance which results in improvement in stockholder value and
provides a significant earning potential to the executives. In order to direct
the Senior Executives toward steady growth and to retain their services,
incentive stock options vest over a five year period. The number of shares
optioned to the various Senior Executives depends on the level and degree of
responsibility of the position they hold.
10
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OTHER COMPENSATION PLANS
At various times in the past the Company has adopted certain broad-based
employee benefit plans in which the Senior Executives have been permitted to
participate and has adopted certain executive officer retirement, life and
health insurance plans. Other than with respect to the Company's Employee Stock
Purchase Plan, which allows the Company's employees to purchase shares of the
Company's Common Stock through payroll deductions at a purchase price of the
lower of 85% of the fair market value of the shares on the first day or the last
day of the applicable period of the Plan, benefits under these plans are not
directly or indirectly tied to Company performance.
CHIEF EXECUTIVE OFFICER'S FISCAL 1997 COMPENSATION
The Compensation Committee based Mr. Gildea's cash compensation for fiscal
1997 in part on an analysis done by Future Sense Inc. of the compensation
historically paid to the CEOs of thirteen publicly owned companies of comparable
size in the health care industry. Furthermore, consistent with historical
practice, the Compensation Committee established a bonus opportunity for Mr.
Gildea that could have reached a maximum of 80% of base salary if the Company's
performance for fiscal 1997 exceeded 130% of the Company's plan for the fiscal
year. The bonus opportunity was also set such that if the Company's results were
on plan, then Mr. Gildea's bonus would be at a level which would cause his total
cash compensation to not exceed the average total cash compensation paid to the
CEOs in the comparison group. As a result of the Company's fiscal 1997
performance being less than plan and Mr. Gildea's resignation during fiscal
1997, no bonus was paid to Mr. Gildea for fiscal 1997.
In fiscal 1997, a stock option award of 150,000 shares was granted to the
Mr. Gildea. The 1997 stock option was determined after reference to his current
compensation and the practices of other companies of comparable size and
operating characteristics, giving special consideration to the desirability of
establishing a significant alignment of his long-term economic interests with
those of the Company's shareholders.
Mr. von Maack is a Senior Vice President of ManorCare Health Services, Inc.
and his compensation is set by ManorCare Health Services, Inc. As part of the
Administrative Services Agreement between the Company and Manor Care, Inc., the
Company reimbursed Manor Care, Inc. for 75% of Mr. von Maack's total
compensation.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS (AS
CONSTITUTED DURING FISCAL 1997):
Donald C. Tomasso Joseph R. Buckley James H. Rempe
11
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this proxy statement a line-graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with the S&P 500 Stock Index and either
a nationally recognized industry standard or an index of peer companies selected
by the Company. The Board of Directors has approved the use of the Dow Jones
Industry Group Index of Health Care Providers as its peer group index. The table
below compares the cumulative total return as of the end of each of the
Company's last five fiscal years on $100 invested in the Common Stock of the
Company, the Dow Jones Industry Group Index of Health Care Providers and the
NASDAQ Market Index, assuming the reimbursement of all dividends:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
IN HOME HEALTH, INC. PEER GROUP INDEX NASDAQ MARKET INDEX
<S> <C> <C> <C>
1992 $ 100.00 $ 100.00 $ 100.00
1993 82.05 133.04 130.05
1994 47.44 178.21 137.62
1995 63.46 197.21 167.10
1996 44.87 213.50 195.08
1997 37.18 261.11 265.16
</TABLE>
12
<PAGE>
STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS
MEETINGS; REMUNERATION
The Board of Directors met ten times during fiscal 1997. Each director
attended more than 75% of the meetings of the Board of Directors and the
committees on which they serve. Non-employee directors receive annual retainers
of $15,000 plus reimbursement of out-of-pocket expenses incurred in connection
with attending Board meetings. For fiscal 1997, no directors received
non-employee director's fees.
COMMITTEES
The Board of Directors has an Audit Committee which consisted during fiscal
1997 of Mr. Buckley and Mr. Rempe (Chairman). The Audit Committee, among other
things, determines audit policies, reviews external audit reports and reviews
recommendations made by the Company's independent public accountants. During
fiscal 1997 the Audit Committee met two times.
The Board of Directors also has a Compensation Committee which consisted
during fiscal 1997 of Mr. Tomasso (Chairman), Mr. Rempe and Mr. Buckley. During
fiscal 1997 the Compensation Committee met six times.
The Board of Directors also has a Nominating Committee which consisted
during fiscal 1997 of Mr. Buckley and Mr. Lynn (Chairman). The Nominating
Committee did not meet during fiscal 1997.
ITEM I
NOMINATION AND ELECTION OF DIRECTORS
The Board of Directors has fixed at five the size of the Board of Directors
to be elected at the Meeting and has nominated its current members as the
management slate for election to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified. It is
anticipated that proxies will be voted for the management slate, and that each
nominee will serve if elected. Should any nominee be unable to serve, the
persons named in the proxies may in their discretion vote for a substitute.
The names and ages of the management slate of nominees, their principal
occupations and other information is set forth below, based upon information
furnished to the Company by the nominees. All of the nominees, except for
Wolfgang von Maack, have been previously elected by the stockholders of the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE OCCUPATION SINCE
- ------------------------------------------ ----------------------------------------------------------- -----------
<S> <C> <C>
Wolfgang von Maack (57)................... President and Chief Executive Officer of the Company; 1997
Senior Vice President, Healthcare Services of ManorCare
Health Services, Inc.
James J. Lynn (55)........................ Director of Management Development of the Company and 1987
President of Lynn & Associates (business consultant)
Donald C. Tomasso (52).................... President, ManorCare Health Services, Inc.; Executive Vice 1995
President, Manor Care, Inc.
Joseph R. Buckley (50).................... Executive Vice President, ManorCare Health Services; 1995
Executive Vice President, Manor Care, Inc.
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE OCCUPATION SINCE
- ------------------------------------------ ----------------------------------------------------------- -----------
<S> <C> <C>
James H. Rempe (67)....................... Senior Vice President, General Counsel and Secretary of 1995
each of Manor Care, Inc. and ManorCare Health Services,
Inc.
</TABLE>
BUSINESS EXPERIENCE; DIRECTORSHIPS
Mr. von Maack has served as President and Chief Executive Officer of the
Company since May 1997. He has also been Senior Vice President, Healthcare
Services of ManorCare Health Services, Inc. since June 1990 and was Vice
President, Operations of ManorCare Health Services, Inc. from March 1988 to June
1990.
Mr. Lynn has been a director of the Company since 1987 and has served as
Director of Management Development of the Company since October 1995. He served
as Vice President--Marketing and Human Resources of the Company from April 1986
to April 1990. Since 1981 Mr. Lynn has been a principal of Lynn & Associates, a
management consulting company of which Mr. Lynn is the founder and President.
Mr. Tomasso is an Executive Vice President of Manor Care, Inc. and President
of ManorCare Health Services, Inc. since September 1996, and previously as
President, Long Term Care Division, of ManorCare Health Services, Inc. from
February 1995 to August 1996, as President and Chief Operating Officer of
ManorCare Health Services, Inc. from May 1991 to February 1995 and as a Director
of ManorCare Health Services, Inc. since June 1991. He was Chairman and Chief
Executive Officer of Vitalink Pharmacy Services, Inc. from February 1995 to
February 1997 and Vice Chairman from September 1991 to February 1995. Mr.
Tomasso was previously employed by Marriott Corporation for more than five
years, including as Executive Vice President/General Manager of its Roy Rogers
Division.
Mr. Buckley has served as Executive Vice President of ManorCare Health
Services, Inc. and Manor Care, Inc. since March 1996, Director of Vitalink since
July 1996, and was President, Assisted Living Division of ManorCare Health
Services, Inc. from February 1995 to March 1996, and Senior Vice
President--Information Resources and Development of Manor Care, Inc. from June
1990 to February 1995. He previously served as Vice President--Information
Resources of Manor Care, Inc. from July 1989 to June 1990 and as Vice
President--Real Estate of Manor Care, Inc. from September 1983 to July 1989.
Mr. Rempe has served as Senior Vice President, General Counsel and Secretary
of Manor Care, Inc. since August 1981. He has served in the same capacity with
ManorCare Health Services, Inc. since December 1980 and with Choice Hotels
International, Inc. and its predecessors from February 1981 until November 1996.
He is a Director of Vitalink Pharmacy Services, Inc. and served as its Secretary
from January 1983 to January 1997.
CERTAIN TRANSACTIONS
Each of Messrs. Tomasso, Buckley, Rempe and von Maack are executive officers
of ManorCare Health Services, Inc, which beneficially owns shares constituting
approximately 64% of the voting power of the Company's stockholders. The Company
and ManorCare Health Services, Inc. entered into the Purchase Agreement as of
May 2, 1995 and the transactions contemplated thereby were consummated on
October 24, 1995. The Purchase Agreement contains extensive representations,
warranties, covenants and other agreements between the Company and ManorCare
Health Services, Inc. which extend beyond the
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consummation of the transactions contemplated therein. The Purchase Agreement
also contemplates that the Company and ManorCare Health Services, Inc. may enter
into agreements or arrangements which they deem prudent and mutually beneficial
for the provision of services between them on terms that are fair to each party.
Pursuant to the Purchase Agreement, the Company and ManorCare Health
Services, Inc. entered into a Registration Rights Agreement covering the
securities purchased by ManorCare Health Services, Inc. from the Company.
ManorCare Health Services, Inc. has the right to require the Company to use its
best efforts to register for sale in an underwritten public offering under the
Securities Act of 1933, at the Company's expense, all or any portion of the
Common Stock acquired by ManorCare Health Services, Inc., the Common Stock
purchasable upon exercise of a warrant issued to ManorCare Health Services, Inc.
or the Common Stock into which the Preferred Stock held by ManorCare Health
Services, Inc. is convertible ("Registerable Securities"). The Company will not
be entitled to sell its securities in any such registration for its own account
without the consent of ManorCare Health Services, Inc. In addition, if the
Company at any time seeks to register under the Securities Act of 1933 for sale
to the public any of its securities, the Company must include, at ManorCare
Health Services, Inc.'s request, ManorCare Health Services, Inc.'s Registerable
Securities in the Registration Statement, subject to underwriter cutback
provisions.
Manor Care and the Company entered into an Administrative Services Agreement
effective as of February 27, 1996, pursuant to which Manor Care provides the
Company certain corporate, administrative and management services. The original
term of the Agreement was retroactive to November 1, 1995 and expired on June
30, 1996. Thereafter, the term is on a quarter-to-quarter basis until terminated
by either party upon 90 days prior written notice. Effective June 1, 1996, the
total fees payable to Manor Care under the Administrative Services Agreement was
reduced to $7,000 per month. A new Administrative Services Agreement was entered
into on November 15, 1997. The original term of the Agreement was retroactive to
June 1997. Under the terms of the Agreement, the Company pays Manor Care a fee
of $24,583 per month. This includes $21,667 to pay for 75% of the Company's
President and his staff and $2,916 for services rendered by Manor Care's legal,
risk management, government relations, purchasing and reimbursement departments.
STOCKHOLDER NOMINATIONS
Under the Company's Bylaws a stockholder who wishes to make a nomination at
the Meeting of one or more persons for election as directors must give written
notice of their intent to make such nominations to the Company's Secretary
within 15 days after the date that the Notice of the Meeting was mailed. The
notice must state: the name and address of record of the stockholder who intends
to make the nomination; a representation that the stockholder is a holder of
record of Company shares entitled to vote at the Meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; the name, age, business and residence address, and principal
occupation or employment of each nominee; a description of all arrangements or
understanding between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information regarding
each nominee proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission; and the consent of each nominee to serve as a director of
the corporation if so elected. The Company may require any proposed nominee to
furnish such other information as may reasonably be required by the Company to
determine the eligibility
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of such proposed nominee to serve as a director of the Company. The presiding
officer of the Meeting may, if the facts warrant, determine that a nomination
was not made in accordance with the foregoing procedure and if he should so
determine and declare to the Meeting, the effective nomination will be
disregarded.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" ELECTION OF THE MANAGEMENT SLATE OF NOMINEES.
ITEM II
APPROVAL OF ACCOUNTANTS
Deloitte & Touche LLP, independent certified public accountants, have been
the Company's auditors since 1984. They have been reappointed by the Board of
Directors as the Company's auditors for the fiscal year ending September 30,
1998. Although stockholder approval is not required, the Board of Directors
requests it. In the event the appointment should not be approved by the
stockholders, the Board of Directors will make another appointment to be
effective at the earliest possible time.
A representative of Deloitte & Touche LLP is expected to be present at the
Meeting, will be given the opportunity to make a statement and will be available
to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE LLP.
OTHER BUSINESS
The management of the Company knows of no matter other than the foregoing to
be brought before the Meeting. However, the enclosed proxy gives discretionary
authority in the event any additional matters should be presented.
Under the Company's Bylaws any stockholder who wishes to present proposals
for stockholder action at the Meeting must give written notice to the Company's
Secretary within 15 days after the date that the Notice of the Meeting was
mailed. The notice must state a brief description of the other business proposed
to be raised, the reason for conducting that business at the Meeting, the name
and address of the stockholder proposing such business, the number of Company
shares owned by the stockholder, and any material interest of the stockholder in
the business.
The proxy rules of the Securities and Exchange Commission permit
stockholders, after timely notice to issuers, to present proposals for
stockholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's next meeting of stockholders (for the fiscal year
ending September 30, 1998) is expected to be held on or about March 1, 1999 and
proxy materials in connection with that meeting are expected to be mailed on or
about January 15, 1999. Any stockholder proposals prepared in accordance with
the proxy rules for inclusion in the Company's proxy materials must be received
by the Company on or before September 14, 1998.
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997 IS BEING MAILED TO STOCKHOLDERS WITH THIS PROXY STATEMENT.
STOCKHOLDERS MAY RECEIVE WITHOUT CHARGE A COPY OF THE
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COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO: IN HOME HEALTH, INC., 601 CARLSON PARKWAY, SUITE 500, MINNETONKA,
MINNESOTA 55305, ATTENTION: INVESTOR RELATIONS, OR BY CALLING THE COMPANY AT
(612) 449-7500.
By Order of the Board of Directors
/s/ Thomas R. Gross
Thomas R. Gross, Secretary
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PROXY--IN HOME HEALTH, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MARCH 4, 1998
The undersigned hereby appoints Wolfgang von Maack and Thomas R. Gross, or
either one of them, as proxies with full power of substitution to vote all of
the shares of common stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of In Home Health, Inc.
to be held March 4, 1998 at 3:30 p.m. at Minneapolis Marriott City Center, 30
South 7th Street, Minneapolis, Minnesota or at any adjournments thereof, upon
any and all matters which may properly be brought before the meeting or
adjournments thereof, hereby revoking all former proxies.
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHOUT AUTHORITY to vote
(except as indicated below) for all nominees listed below
Wolfgang von Maack, James J. Lynn, Donald C. Tomasso, Joseph R. Buckley and James H. Rempe.
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list above.)
<TABLE>
<S> <C> <C> <C>
(2) PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
/ / For / / Against / / Abstain
(3) In their discretion, the proxies are authorized to vote upon such other business as may properly come before the
meetings.
</TABLE>
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1) AND (2)
IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF THERE IS
NO SPECIFICATION.
PLEASE DATE AND SIGN exactly as your name(s) appears below indicating, where
proper, the official position or representative capacity in which you are
signing. When signing as executor, administrator, trustee or guardian, give full
title as such; when shares have been issued in names of two or more persons, all
should sign.
Dated _____________________, 1998
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Signature of Stockholder
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Signature of Stockholder
(if joint signature is required)
