<PAGE>
IN HOME HEALTH, INC.
601 CARLSON PARKWAY, SUITE 500
MINNETONKA, MINNESOTA 55305
------------------------
INFORMATION STATEMENT
---------------------
PURSUANT TO SECTION 14f(1)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being furnished to shareholders of In Home
Health, Inc., a Minnesota corporation (the "Company"), as required by
Section 14f(1) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder,
in connection with a change in the majority of the Board of Directors of the
Company.
On May 31, 2000, the Company received a demand from ManorCare Health
Services, Inc. (which, together with its parent corporation, Manor Care, Inc.,
is referred to as "Manor Care") that the Company call a special meeting of
shareholders. The purposes specified by Manor Care for the special meeting were
to vote on proposals by Manor Care to: (i) remove all members of the Board of
Directors of the Company other than C. Michael Ford and Eugene Terry (which
proposal, if adopted, would have resulted in the removal from the Board of
Steven M. Jessup, James J. Lynn, and Judith I. Storfjell); (ii) fix the size of
the Board of Directors at six; and (iii) elect to the Board four persons,
M. Keith Weikel, Geoffrey C. Meyers, Rodney A. Hildebrant, and Steven
M. Cavanaugh, who are officers of Manor Care. On June 16, 2000, the Company
filed with the United States Securities and Exchange Commission ("SEC")
preliminary proxy materials relating to Manor Care's demand for the special
meeting.
On June 29 and June 30, 2000, Manor Care filed with the SEC amendments to
Manor Care's Schedule 13D stating that on June 28 and June 29, 2000, Manor Care
purchased from three stockholders in privately negotiated transactions (and
obtained from the sellers irrevocable proxies to vote) a total of 1,146,735
additional shares of Common Stock of the Company, par value $.03 per share (the
"Common Stock"). This increased Manor Care's holdings of Common Stock to a total
of 3,396,735 shares, or 61.4% of the outstanding shares of Common Stock.
On July 10, 2000, the Company received a letter from Manor Care advising the
Company of Manor Care's intention to negotiate a business combination with the
Company in which the Company's shareholders would receive $3.375 in cash for
each share of Common Stock, and the Company would be acquired by Manor Care. The
Board has created a special committee consisting of C. Michael Ford and Eugene
Terry to evaluate the proposal and conduct negotiations with Manor Care with the
assistance of the Company's investment banker.
In light of these additional purchases by Manor Care, which made it the
Company's majority shareholder, Mr. Jessup, Dr. Lynn, and Dr. Storfjell advised
the Board that because Manor Care had the votes to elect the Board it wanted,
they did not want to needlessly cause the Company to incur the expense of
holding the special meeting demanded by Manor Care, and therefore they were
resigning from the Board effective July 7, 2000. The remaining members of the
Board, Mr. Ford and Mr. Terry, elected M. Keith Weikel and Geoffrey G. Meyers
(two of the Manor Care nominees) to the Board on July 7, 2000 to fill two of the
vacancies created by the resignations. This resulted in Manor Care withdrawing
its demand for the special meeting on July 10, 2000.
<PAGE>
The Board intends to elect Rodney A. Hildebrandt and Steven M. Cavanaugh
(the other two Manor Care nominees) not less than ten days after the mailing of
this Information Statement. The Company commenced delivery of this Information
Statement to shareholders on or about July , 2000.
THIS STATEMENT IS BEING PROVIDED FOR INFORMATIONAL PURPOSES ONLY. NO PROXIES ARE
BEING SOUGHT AND SHAREHOLDERS ARE NOT BEING ASKED TO TAKE ANY ACTION IN
CONNECTION WITH THE TRANSACTIONS DESCRIBED IN THIS INFORMATION STATEMENT.
SHARES OUTSTANDING
At the close of business on June 26, 2000, the Company had outstanding
5,534,224 shares of Common Stock, and 200,000 shares of Series A Preferred
Stock, par value $1.00 per share (the "Preferred Stock"), convertible into
3,333,334 shares of Common Stock. All of the Preferred Stock is owned by Manor
Care, and the current conversion price is $6.00 per share. Each share of Common
Stock is entitled to one vote. The Company's articles of incorporation exclude
cumulative voting. Pursuant to an agreement between the Company and Manor Care,
each share of Preferred Stock is entitled to 17 votes per share only with
respect to a proposal to (i) wind up, dissolve, or liquidate the Company or
revoke or forfeit its charter, (ii) amend the Company's articles of
incorporation, (iii) merge or consolidate or enter into an exchange agreement
with another corporation, or (iv) sell, lease, transfer, or otherwise dispose of
all or substantially all of the Company's assets not in the usual and regular
course of business.
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 July 1, 2000 by persons known to the
Company to hold 5% or more of such stock and by all current directors, proposed
directors, the Named Executive Officers from the table on page 6, and all
current directors and executive officers as a group. All shares represent sole
voting and investment power, unless indicated to the contrary.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT PERCENT OF CLASS
------------------------------------ --------- ----------------
<S> <C> <C>
ManorCare Health Services, Inc. ............................ 6,730,069(1) 75.9%
333 N. Summit Street
Toledo, Ohio 43699-0866
Robert J. Hoffman, Jr. (Chief Financial Officer) ........... 50,500(2) *
601 Carlson Parkway, Suite 500
Minnetonka Minnesota 55305
Eugene Terry (Director) .................................... 0 *
17759 Lake Estates Drive
Boca Raton, Florida 33496
C. Michael Ford, Chairman (Director) ....................... 16,671 *
601 Carlson Parkway, Suite 500
Minnetonka, Minnesota 55305
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT PERCENT OF CLASS
------------------------------------ --------- ----------------
<S> <C> <C>
M. Keith Weikel (Director)(3) .............................. 0 *
333 North Summit Street
Toledo, Ohio 43604
Geoffrey C. Meyers (Director)(3) ........................... 0 *
333 North Summit Street
Toledo, Ohio 43604
Rodney A. Hildebrant (Proposed Director)(3) ................ 0 *
333 North Summit Street
Toledo, Ohio 43604
Steven M. Cavanaugh (Proposed Director)(3) ................. 0 *
333 North Summit Street
Toledo, Ohio 43604
Wolfgang von Maack (CEO from May 1997 to February 15, 13,000
2000).....................................................
All Current Officers and Directors as a Group (7 persons)... 67,171(4) *
</TABLE>
------------------------
* Less than one percent.
(1) Manor Care owns 3,396,735 shares of Common Stock and 200,000 shares of
Preferred Stock, which are convertible into 3,333,334 shares of Common
Stock. Pursuant to an agreement between Manor Care and the Company, the
Preferred Stock can be voted only on proposals involving (i) the wind-up,
dissolution or liquidation of the Company or revocation or forfeiture of the
Company's charter; (ii) amendments to the Company's articles of
incorporation; (iii) mergers, consolidations, or exchange agreements with
other companies; or (iv) sales, leases, transfers, or dispositions of all or
substantially all of the Company's assets not in the usual and ordinary
course of business.
(2) Includes options to purchase 50,000 shares of Common Stock which may be
exercised within 60 days of July 7, 2000.
(3) Mr. Weikel is Senior Executive Vice President, Chief Operating Officer and
Director of Manor Care. Mr. Myers is Executive Vice President, Chief
Financial Officer and Treasurer of Manor Care. Mr. Hildebrandt and
Mr. Cavanaugh are senior executives of affiliates of Manor Care.
(4) Includes options to purchase 50,000 shares of Common Stock which may be
exercised within 60 days of July 7, 2000.
3
<PAGE>
DIRECTORS, DIRECTOR NOMINEES, AND EXECUTIVE OFFICERS
The name, age, occupation, and other information of the current members of
the Board of Directors and the persons proposed to be elected to the Board of
Directors is listed below, based upon information furnished to the Company by
these individuals.
<TABLE>
<CAPTION>
NAME AND AGE OCCUPATION DIRECTOR SINCE
------------ ---------- --------------
<S> <C> <C>
Clyde Michael Ford (61).............. Owner and Chairman of the Board of Montpelier 1998
Corporation
Eugene Terry (61).................... Principal of TC Solutions 1999
M. Keith Weikel (62)................. Senior Executive Vice President, Chief Operating 2000
Officer and director of Manor Care, Inc.
Geoffrey G. Meyers (56).............. Executive Vice President, Chief Financial 2000
Officer and Treasurer of Manor Care, Inc.
Rodney A. Hildebrandt (44)........... President of HCR Home Health Care and Hospice, --
Inc. and Heartland Home Care, Inc.
Steven M. Cavanaugh (30)............. Vice President of Manor Care, Inc. --
</TABLE>
BUSINESS EXPERIENCE; DIRECTORSHIPS OF CURRENT DIRECTORS
Mr. Ford has been a director of the Company since November 1998. He has been
the owner and Chairman of the Board of Montpelier Corporation since
October 1990. He has been a director of Krug International Corporation since
October 1999. He served as Vice President, Development of Columbia/ HCA
Healthcare Corporation from September 1994 to September 1997. He was Vice
President of Marketing for Meditrust from October 1993 to September 1994.
Mr. Terry has been a director of the Company since September 1999. He has
been a principal of TC Solutions, a consulting venture capital firm, since 1997.
He has served as a director of Windsor Capital since 1998, Vice Chairman and
director of Proxymed, a publicly-traded healthcare e-commerce firm, since 1994
and a director of Ivonyx, a privately held infusion company, since 1989.
Mr. Weikel has been a director of the Company since July 7, 2000. He has
been Senior Executive Vice President and Chief Operating Officer of Manor
Care, Inc. since August 1991, and a member of its Board of Directors since 1992.
Mr. Meyers has been a director of the Company since July 7, 2000. He has
been Executive Vice President, Chief Financial Officer and Treasurer of Manor
Care, Inc. since August 1991.
Mr. Hildebrandt is proposed to be appointed as a director of the Company. He
has been President of HCR Home Health Care and Hospice, Inc. and Heartland Home
Care, Inc., both of which are subsidiaries of Manor Care, Inc., since 1994.
Mr. Cavanaugh is proposed to be appointed as a director of the Company.
Mr. Cavanaugh has been Vice President of Manor Care, Inc. since February 2000.
Prior to that, he was Assistant Vice President of Health Care and Retirement
Corporation of America from 1998 to February 2000. Prior to that, he was Manager
of Corporate Development of Health Care and Retirement Corporation from 1994 to
1998.
4
<PAGE>
EXECUTIVE OFFICERS
Wolfgang von Maack served as President and Chief Executive Officer of the
Company from May 1997 to February 15, 2000. He was Senior Vice President,
Healthcare Services, of ManorCare Health Services, Inc. from June 1990 to
December 1998 and was Vice President, Operations, of ManorCare Health
Services, Inc. from March 1988 to June 1990.
Following Mr. von Maack's resignation in February 2000, certain of the
Company's directors served as interim officers or in various consulting
capacities during the Company's search for a new chief executive. Mr. Ford
served as Interim CEO from February 15, 2000 to June 28, 2000, and from July 7
to the present. For the period from February 15, 2000 until May 31, 2000,
Mr. Ford received compensation of $20,000 per month for his services of which
$10,000 was payable in common stock. Beginning June 1, 2000, Mr. Ford is being
paid on an hourly basis at $200 per hour, less any Board meeting fees earned.
For the month of June 2000, Mr. Ford earned approximately $13,000 for his duties
as Interim Chief Executive Officer.
Dr. Storfjell served as Interim Chief Operating Officer from May 22, 2000 to
July 7, 2000, and served as Interim Chief Executive Officer from June 28, 2000
until July 7, 2000. For her role as Interim Chief Operating Officer and for
consulting services for the period from February 15, 2000 until May 28, 2000,
Dr. Storfjell received $83,892. For her services as Interim Chief Executive
Officer, Dr. Storfjell received $24,000.
Mr. Hoffman has served as Corporate Secretary and Acting Chief Financial
Officer since June 1998, as Chief Financial Officer since February 1999, and as
Treasurer of the Company since June 1999. He was employed by Manor Care Inc.
from 1982 through 1998 in a variety of positions including Director of Internal
Audit, Controller of Rehab Services Division, Director of Financial Analysis,
and Director of SEC Compliance/Lodging Accounting. He previously served as
Assistant Controller for Makro Self Service Corporation from 1981 to 1982.
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 SEC
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 SEC
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, 1999, all
Section 16(a) filing requirements applicable to its insiders were complied with,
except Robert Hoffman reported, in October 1999, a grant of 50,000 stock options
in June 1999, and Wolfgang von Maack reported, in October 1999, a grant of
180,000 stock options in June 1999.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended September 30, 1999,
1998 and 1997, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued during
5
<PAGE>
those years, to Wolfgang von Maack, the Company's Chief Executive Officer for
the period shown, and to the other most highly compensated executive officers
whose cash compensation exceeded $100,000 during fiscal 1999 ("Named Executive
Officers") in all capacities in which they served. Certain columns prescribed by
the SEC regulations have not been included in this table because the information
called for therein is not applicable to the Company or the named Executive
Officers for the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
OTHER ANNUAL STOCK OPTION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SHARES(#)
--------------------------- -------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Wolfgang von Maack(1) .................. 1999 246,668(2) 195,000 10,220 180,000
Chief Executive Officer 1998 196,674(2) -- 7,650 50,000
1997 61,500(2) -- 6,336 --
Robert J. Hoffman, Jr.(3) .............. 1999 122,205(4) 41,300 25,947(5) 50,000
Chief Financial Officer, Treasurer and 1998 34,035(4) -- -- --
Corporate Secretary
</TABLE>
------------------------
(1) Wolfgang von Maack was named acting Chief Executive Officer on May 15, 1997.
He was named President and Chief Executive Officer and was elected as a
director of the Company on June 6, 1997 and was elected Chairman of the
Board on November 17, 1998. Mr. von Maack resigned as President and Chief
Executive Officer of the Company effective February 15, 2000 and resigned as
Chairman of the Board effective February 23, 2000. He continued to serve as
a Director until his resignation from the Board effective May 31, 2000.
(2) Amount reflects 75% ($46,668) of Mr. von Maack's Manor Care salary, which
was reimbursed by the Company under the Administrative Services Agreement
for the period from October 1 through December 31, 1998; 75% ($75,000) of
Mr. von Maack's salary from January 1 through April 30, 1999 (25% of this
salary for this period was paid by Manor Care for management services
provided) and 100% ($125,000) of his salary paid by the Company from May 1
through September 30, 1999. See "Certain Transactions."
(3) Robert J. Hoffman, Jr. was named Corporate Secretary and Acting Chief
Financial Officer on June 22, 1998. He became an employee on January 1, 1999
and was elected Chief Financial Officer on February 24, 1999 and Treasurer
on June 8, 1999.
(4) Consists of $33,705 of Mr. Hoffman's Manor Care salary from October 1
through December 31, 1998, which was reimbursed by the Company and $88,500
of his salary paid by the Company beginning January 1, 1999 when
Mr. Hoffman became an employee of the Company.
(5) Consists of $17,700 of relocation expense reimbursement, $6,968 of medical,
life and disability insurance paid by the Company, and $1,329 of 401(k)
matching contribution by the Company.
6
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1995 Stock Option Plan to the Named Executive
Officers during the last fiscal year (the fiscal year ended September 30, 1999):
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR PER SHARE DATE 5%(2) 10%(3)
---- ---------- -------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Wolfgang von Maack............. 180,000(4) 41.71% 1.75 6/8/09 $198,099 $502,027
Robert J. Hoffman, Jr.......... 50,000 11.59% 1.75 6/8/09 $ 55,027 $139,452
</TABLE>
------------------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and therefore are not intended to forecast
future possible appreciation, if any, of the Company's stock price.
(2) A 5% per year appreciation in stock price from $1.75 per share yields $2.85
on the expiration date.
(3) A 10% per year appreciation in stock price from $1.75 per share yields $4.54
on the expiration date.
(4) 100,000 options were granted subject to shareholder approval at the Annual
Meeting of Shareholders in February 2000 (the "Annual Meeting") of an
amendment to the 1995 Stock Option Plan to increase the number of shares
available under this stock option plan. The amendment to increase the number
of shares available for grant was not approved by the shareholders at the
Annual Meeting, and the grant of these 100,000 options was subsequently
revoked. As Mr. von Maack has resigned effective February 15, 2000, all
unexercised options were canceled on or about May 15, 2000, three months
after termination.
7
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options to purchase Common Stock
during the last fiscal year and unexercised options held as of the end of the
last fiscal year:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wolfgang von Maack............ 0 0 10,000 220,000 $0 $67,500
Robert J. Hoffman, Jr......... 0 0 0 50,000 $0 $18,750
</TABLE>
------------------------
(1) Based on the fiscal year ended September 30, 1999 closing price of the
Common Stock of $2.125 per share.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Robert J. Hoffman, Jr.
on December 31, 1998. This agreement was supplemented by a Severance Agreement
dated June 30, 2000 (collectively these agreements are referred to herein as the
"Agreement"). The term of the Agreement is January 1, 1999 through December 31,
2001. Pursuant to the Agreement, the Company employs Mr. Hoffman as Chief
Financial Officer, at a base salary of $118,000 per annum. Mr. Hoffman is
eligible to earn annual bonuses up to a maximum of 35% of his base salary and is
entitled to participate in the Company's benefit plans or programs accorded
other employees at the Company's headquarters. The Agreement provides that
Mr. Hoffman be reimbursed for up to $17,700 in relocation expenses.
In the event that Mr. Hoffman is terminated without cause, Mr. Hoffman will
be entitled to severance of 18 months base salary, the ratable portion of his
bonus, reasonable moving expenses and an amount equal to 7% of the appraised
value of his residence. In the event of corporate relocation, if Mr. Hoffman is
offered the option to continue employment contingent upon relocation from
Minnesota, he may opt to terminate employment and receive six months base salary
plus the ratable portion of his maximum bonus potential and reasonable moving
expenses.
Based upon the events described in this Information Statement, a change in
control of the Company has occurred under the Agreement. Consequently,
Mr. Hoffman's options to purchase 50,000 shares of Common Stock at $1.75 per
share have completely vested, and he is entitled to a cash payment equal to the
difference, if any, between the fair market value of the Common Stock underlying
the options and the exercise price of the options on the date of exercise. Based
upon a closing price of $3.1875 per share on July 14, 2000, Mr. Hoffman is
entitled to approximately $71,875. If this change in control results in
Mr. Hoffman being terminated, Mr. Hoffman would be entitled to 18 months base
salary, the ratable portion of his maximum bonus potential, reasonable moving
expenses, and an amount equal to 7% of the appraised value of his residence.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, Wolfgang von Maack, Clyde Michael Ford, and Judith I.
Storfjell served as members of the Company's Compensation Committee. Mr. von
Maack was the President and Chief Executive Officer of the Company until
February 15, 2000. Mr. von Maack was an officer of Manor Care until January 1,
1999, when he terminated his relationship with Manor Care and became an employee
of the Company. Mr. von Maack served as committee chairman during fiscal 1999.
BOARD COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executives for fiscal 1999 were
made by the Compensation Committee of the Board, which consisted during fiscal
1999 of Mr. von Maack, Dr. Storfjell, and Mr. Ford. All decisions by the
Compensation Committee for fiscal 1999 were reviewed by the full Board. This
report describes the Compensation Committee's policies for fiscal 1999 as they
affected Mr. von Maack and Mr. Hoffman (collectively, the "Senior Executives")
who were the Company's most highly paid officers in fiscal 1999.
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 revenue and focus on providing health care
services in the home.
Mr. von Maack's compensation is described below. The compensation for
Mr. Hoffman was approved by the Compensation Committee as set forth in the
employment agreement approved June 8, 1999. Mr. Hoffman's employment agreement
specifies a base salary and a maximum bonus opportunity, equal to 35% of base
salary. The bonus that each Senior Executive could earn for the fiscal year was
determined by comparing the Company's actual net income before taxes with the
Company's forecast for the fiscal year.
FISCAL 1999 STOCK OPTION GRANTS
For fiscal 1999, the Compensation Committee awarded stock options to Senior
Executives. Stock options are intended to focus the Senior Executives on
long-term Company performance to improve shareholder value and provide a
significant earning potential to the Senior 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 options granted to
each Senior Executive depends on the level and degree of responsibility of the
individual's position.
9
<PAGE>
OTHER COMPENSATION PLANS
The Senior Executives have been permitted to participate in certain
broad-based employee benefit plans adopted by the Company, as well as executive
officer retirement, life and health insurance plans. Other than 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 85% of the fair market value of the shares on either the first day or
the last day, whichever is lower, 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 1999 COMPENSATION
Through December 31, 1998, Mr. von Maack was a Senior Vice President of
Manor Care, and his compensation was set by Manor Care. As part of the
Administrative Services Agreement effective February 27, 1996 between the
Company and Manor Care, the Company reimbursed Manor Care for 75% of Mr. von
Maack's total compensation. Effective January 1, 1999, Mr. von Maack terminated
his relationship with Manor Care and became an employee of the Company.
Effective January 1, 1999, the Company entered into a Management Services
Agreement with Manor Care. As part of the Agreement, the Company provided
management services to Mesquite Hospital, a wholly owned subsidiary of Manor
Care. Manor Care reimbursed the Company for 25% of Mr. von Maack's salary.
Services were provided until April 30, 1999, when the agreement was terminated.
Mr. von Maack's compensation was evaluated and approved June 8, 1999 by the
Compensation Committee (excluding Mr. von Maack). It provided for an annual base
salary of $300,000 and an incentive of 65% of base salary to be paid if the
annual budget was achieved. As part of the approved stock option program for the
fiscal year, Mr. von Maack was granted 180,000 options, 100,000 of which were
subsequently revoked following failure of the shareholders to approve an
amendment to the Company's 1995 Stock Option Plan. In establishing the chief
executive officer's compensation, the Compensation Committee applied the
principles outlined in the cash compensation policies section above in
essentially the same manner as they were applied to other executives. In
addition to those factors, the Committee considered the important role Mr. von
Maack has played in the Company's turnaround.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS (AS
CONSTITUTED DURING FISCAL 1999):
<TABLE>
<S> <C> <C>
Wolfgang von Maack Clyde Michael Ford Judith I. Storfjell
</TABLE>
PERFORMANCE GRAPH
The SEC requires that the Company include in this Information Statement a
line-graph presentation comparing cumulative, five-year shareholder 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
10
<PAGE>
the Common Stock of the Company, the Dow Jones Industry Group Index of Health
Care Providers, and the NASDAQ Market Index, assuming the reinvestment of all
dividends:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
IN HOME HEALTH, INC. NASDAQ MARKET INDEX PEER GROUP INDEX
<S> <C> <C> <C>
9/30/94 $100.00 $100.00 $100.00
9/30/95 $133.79 $121.41 $111.25
9/30/96 $94.59 $141.75 $122.96
9/30/97 $78.38 $192.67 $137.36
9/30/98 $25.68 $200.23 $100.96
9/30/99 $30.63 $323.92 $85.17
</TABLE>
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/96 9/30/97 9/30/98 9/30/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IN HOME HEALTH, INC................... $100.00 $133.79 $ 94.59 $ 78.38 $ 25.68 $ 30.63
NASDAQ MARKET INDEX................... $100.00 $121.41 $141.75 $192.67 $200.23 $323.92
PEER GROUP INDEX...................... $100.00 $111.25 $122.96 $137.36 $100.96 $ 85.17
</TABLE>
The performance graph above shall not be deemed incorporated by reference by
any statement incorporating by reference this Information Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
and shall not otherwise be deemed filed under such Acts.
STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS
MEETINGS; REMUNERATION
The Board met six times during fiscal 1999. Each director attended more than
75% of the meetings of the Board of Directors and the committees on which they
served. Outside directors receive annual retainers of $10,000 plus meeting fees
of $1,000 per meeting in person, and $500 per telephonic meeting, plus
reimbursement of out-of-pocket expenses incurred in connection with attending
Board meetings. Outside directors who serve as committee chairpersons receive
$1,500 annually. Outside directors who serve as members of committees receive
$1,000 annually. Outside director fees are payable quarterly. During fiscal
1999, the Company paid $68,000 for director fees.
11
<PAGE>
COMMITTEES
The Board has an Audit Committee which consisted during fiscal 1999 of
Marvin Wilensky, James J. Lynn, and Clyde Michael Ford (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 1999 the Audit Committee met two times. As a result
of the resignation of Mr. Wilensky on March 5, 1999, Dr. Lynn was nominated to
serve on the Audit Committee effective July 8, 1999. Effective February 14,
2000, Mr. Terry and Mr. von Maack were nominated to serve on the Audit
Committee, Mr. Terry replaced Mr. Ford as Chairman of the Audit Committee.
Dr. Lynn resigned from the Audit Committee effective June 30, 2000 and Mr. von
Maack resigned from the Audit Committee on May 31, 2000. Mr. Jessup was
appointed to the Audit Committee effective June 27, 2000 and resigned from the
Audit Committee on July 7, 2000.
The Board also has a Compensation Committee which consisted during fiscal
1999 of Judith I. Storfjell, C. Michael Ford, and Wolfgang von Maack (Chairman).
The Compensation Committee evaluates and sets the total compensation package for
key executive positions, and reviews and approves various employee incentive and
benefit plans. During fiscal 1999, the Compensation Committee met one time.
Effective February 14, 2000, Dr. Lynn and Mr. Terry were nominated to serve on
the Compensation Committee; Mr. Ford and Mr. von Maack resigned from the
Compensation Committee; and Dr. Lynn replaced Mr. von Maack as Chairman of the
Compensation Committee. Dr. Lynn resigned as a member of the Compensation
Committee on July 7, 2000.
The Board also has a Nominating Committee that provides nominations for the
election of the Company's directors. During fiscal 1999, the Committee consisted
of Wolfgang von Maack and James J. Lynn (Chairman). The Nominating Committee met
two times during fiscal 1999. Effective February 14, 2000, C. Michael Ford
joined the Nominating Committee. Mr. von Maack resigned from the Nominating
Committee on May 31, 2000, and Dr. Lynn resigned from the Committee on July 7,
2000. The Nominating Committee will consider nominations from shareholders
provided that the Secretary of the Corporation receives written notice not later
than the close of business on the tenth business day following the date of
notice or public disclosure of the date of an upcoming regular or special
meeting of shareholders. A shareholder making a nomination must provide:
(1) the name and address of record of the shareholder who intends to make the
nomination; (2) a representation that the shareholder is a holder of record of
shares of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified; (3) the name, age, business and residential addresses, and principal
occupation or employment of each nominee; (4) description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons pursuant to which the nomination is made; (5) such other information as
would be required in a proxy statement under SEC rules; and (6) the consent of
each nominee to serve as a director.
CERTAIN TRANSACTIONS
Through December 31, 1998, Mr. von Maack was an executive officer of Manor
Care. The Company and Manor Care 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 Manor Care
which extend beyond the consummation of the transactions contemplated therein.
The Purchase Agreement also contemplates that the Company and Manor Care may
enter into agreements
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or arrangements which they deem prudent and mutually beneficial for the
provision of services between them on terms that are fair to each party. As of
January 1, 1999, Mr. von Maack terminated his relationship with Manor Care and
became an employee of the Company. Mr. von Maack resigned as President and Chief
Executive Officer of the Company effective February 15, 2000 and resigned as a
member of the Board on May 31, 2000.
Pursuant to the Purchase Agreement, the Company and Manor Care entered into
a Registration Rights Agreement covering the securities purchased by Manor Care
from the Company. Manor Care 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 Manor Care, and the Common Stock into which the
Preferred Stock held by Manor Care 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 Manor Care. 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 Manor Care's
request, Manor Care'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 provided 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 was on a quarter-to-quarter basis until
terminated by either party upon 90 days prior written notice. Effective June 1,
1996, the fee 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 paid
Manor Care a fee of $24,583 per month. This included $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. The agreement expired September 30, 1998 and was not
renewed. Manor Care continued to provide services on a month to month basis,
consisting of 75% of Mr. von Maack's salary and his staff until December 31,
1998, for $33,874 per month. On January 1, 1999 Mr. von Maack and his staff
became employees of the Company.
Effective January 1, 1999, the Company entered into a Management Services
Agreement with Manor Care. As part of the Agreement the Company provided
management services to Mesquite Hospital, a wholly owned subsidiary of Manor
Care. Manor Care reimbursed the Company for 25% of the salaries and reimbursable
expenses of Mr. von Maack and his administrative assistant. Manor Care paid fees
of $36,494.14 for services provided from January 1 through April 30, 1999, when
the agreement was terminated.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. The annual reports include the Company's
audited financial statements. You may read and copy any reports, statements or
other information that the Company files at the SEC public reference rooms which
are located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington
D.C. 20549, and at the SEC's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center 13th Floor, New York, New York
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10048. Copies of such materials are also available from the Public Reference
Section of the SEC at 450 Fifth Street N.W., Washington D.C. 20549 at prescribed
rates. Copies of such materials may also be accessed through the SEC Internet
site at www.sec.gov. You may also receive without charge a copy of these
documents including financial statements and schedules thereto 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/ Robert J. Hoffman, Jr.
Robert J. Hoffman, Jr., Secretary
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