<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or Section
240.14a-12
HORIZON HEALTH CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
--------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
----------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------
5) Total fee paid:
--------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------
3) Filing Party:
------------------------------------------------
4) Date Filed:
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<PAGE> 2
HORIZON HEALTH CORPORATION
1500 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057-6011
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 21, 2000
To the Stockholders of
Horizon Health Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Horizon Health Corporation (the "Company") will be held at the National Support
Center of the Company located at 1500 Waters Ridge Drive, Lewisville, Texas
75057-6011 on Friday, January 21, 2000 at 9:00 a.m., Central Time, for the
following purposes:
1. To elect seven directors to serve for the ensuing year;
2. To consider and vote upon a proposal to approve the Horizon
Health Corporation Employee Stock Purchase Plan, as further
described in the accompanying Proxy Statement;
3. To consider and vote upon a proposal to ratify the
appointment of PricewaterhouseCoopers LLP as the independent
accountants for the Company for the fiscal year ending August
31, 2000; and
4. To transact such other business as may properly come before
the Annual Meeting and any and all adjournments thereof.
The close of business on December 3, 1999 has been fixed by the Board
of Directors as the record date for determining stockholders entitled to notice
of and to vote at the Annual Meeting. A list of stockholders eligible to vote
at the Annual Meeting will be available for inspection at the Annual Meeting,
and during business hours from January 10, 2000 to the date of the Annual
Meeting at the National Support Center of the Company located at 1500 Waters
Ridge Drive, Lewisville, Texas 75057-6011.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend the Annual Meeting, it is important that you ensure your
representation by completing, signing, dating and promptly returning the
enclosed proxy card. A return envelope, which requires no postage if mailed in
the United States, has been provided for your use. If you attend the Annual
Meeting, you may revoke your proxy and vote in person if you wish.
By Order of the Board of Directors,
JAMES W. McATEE
President
December 10, 1999
<PAGE> 3
HORIZON HEALTH CORPORATION
1500 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057-6011
--------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
---------------------
TO BE HELD JANUARY 21, 2000
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Horizon Health Corporation, a Delaware
corporation (the "Company" or "Horizon"), of proxies for use at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held at the
National Support Center of the Company located at 1500 Waters Ridge Drive,
Lewisville, Texas 75057-6011 on Friday, January 21, 2000, at 9:00 a.m., Central
Time, and at any and all adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement
and the accompanying proxy card are first being mailed on or about December 10,
1999 to stockholders of the Company entitled to notice of and to vote at the
Annual Meeting. Only holders of record of the Common Stock, $.01 par value
("Common Stock"), of the Company at the close of business on December 3, 1999
will be entitled to notice of and to vote at the Annual Meeting. As of that
date, there were 6,241,228 shares of Common Stock outstanding. Each share of
Common Stock entitles the record holder to one vote. There is no cumulative
voting.
The holders of a majority of the issued and outstanding shares of
Common Stock entitled to vote at the Annual Meeting must be present in person
or represented by proxy at the Annual Meeting in order to have a quorum for the
Annual Meeting. Directors will be elected at the Annual Meeting by a plurality
of the votes of the shares present in person or represented by proxy at the
Annual Meeting and entitled to vote on the election of directors. Accordingly,
the seven nominees for director receiving the highest number of affirmative
votes cast on the election of directors at the Annual Meeting will be elected
as directors. The affirmative vote of the holders of a majority of the shares
of Common Stock which are actually present in person or represented by proxy at
the Annual Meeting and entitled to vote will be required to approve all other
matters to be acted upon at the Annual Meeting. Abstentions will be counted for
purposes of determining the presence or absence of a quorum, but not voted.
Abstentions will therefore have the same effect as votes against any proposal
requiring the affirmative vote of a majority of the shares present and entitled
to vote thereon. Broker non-votes will be counted only for purposes of
determining the presence or absence of a quorum, but will have no effect on the
outcome of the matters to be acted upon at the Annual Meeting.
If the accompanying proxy card is properly signed and received by the
Company prior to the Annual Meeting and not revoked, it will be voted in
accordance with the instructions contained therein. If no instructions are
given, the persons designated as proxies in the accompanying proxy card will
vote "FOR" the election as directors of those persons named below and "FOR" all
other proposals set forth therein.
The Board of Directors is not currently aware of any matters other
than those referred to herein which will come before the Annual Meeting. If any
other matter is properly presented at the Annual Meeting for action, the
persons named in the accompanying proxy card will vote the proxy in their own
discretion on such matter.
You may revoke your proxy at any time before it is actually voted at
the Annual Meeting by delivering written notice of revocation to the Secretary
of the Company, by submitting a subsequently dated
<PAGE> 4
proxy, or by attending the Annual Meeting and giving notice to the Secretary of
the Company in writing that the proxy is withdrawn. Attendance at the Annual
Meeting will not, by itself, constitute revocation of the proxy.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. Proxies may also be solicited personally or by telephone by
officers or employees of the Company, none of whom will receive additional
compensation therefor. The Company's regularly retained investor communications
firm, Corporate Communications, Inc., may also be called upon to solicit
proxies by telephone or mail. The Company will reimburse brokerage houses and
other nominees for their reasonable expenses in forwarding proxy materials to
beneficial owners of Common Stock.
The Company's principal executive offices are located at 1500 Waters
Ridge Drive, Lewisville, Texas 75057-6011. Its telephone number is (972)
420-8200.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL INFORMATION
As set by the Board of Directors pursuant to the Bylaws of the
Company, the authorized number of directors of the Company is eight. Seven
directors will be elected at the Annual Meeting, to hold office until the next
annual meeting of stockholders of the Company and until their respective
successors are duly elected and qualify, or until their earlier death,
resignation or removal. All director nominees named below are currently serving
as directors of the Company with terms expiring at the Annual Meeting. There is
currently one vacancy on the Board of Directors. The Company intends to fill
the vacancy but is still in the process of determining a qualified individual.
The Proxies solicited by this Proxy Statement cannot be voted for a greater
number of persons than the number of nominees named in this Proxy Statement.
The Board of Directors has no reason to believe that any of the nominees will
not serve if elected, but if any of them become unavailable to serve as a
director, and if the Board designates a substitute nominee, the persons named
in the accompanying proxy card will vote for the substitute nominee designated
by the Board.
INFORMATION REGARDING NOMINEES
Set forth below is certain information with respect to each director
nominee. Additional information regarding certain of the nominees is set forth
in other sections of this Proxy Statement.
<TABLE>
<CAPTION>
NAME AGE TITLE DIRECTOR SINCE
- ---- --- ----- --------------
<S> <C> <C> <C>
James Ken Newman 55 Chairman of the Board of Directors July 1989
James W. McAtee 54 President and Chief Executive Officer; July 1995
Director
Jack R. Anderson 74 Director December 1990
George E. Bello 64 Director April 1995
William H. Longfield 61 Director July 1995
Donald E. Steen 53 Director April 1995
James E. Buncher 63 Director August 1997
</TABLE>
2
<PAGE> 5
James Ken Newman has served as the Chairman of the Board since
February 1992. From July 1989 until September 1997, he served as President of
the Company and from July 1989 until October 1998, he also served as Chief
Executive Officer of the Company.
James W. McAtee has been President and Chief Executive Officer of the
Company since November 1998 and Secretary of the Company since September 1990.
He served as Executive Vice President - Finance & Administration of the Company
from February 1992 until October 1998. He was a Senior Vice President of the
Company from September 1990 to February 1992. He also served as the Chief
Financial Officer of the Company from September 1990 to July 1999.
Jack R. Anderson has been President of Calver Corporation, a health
care consulting and investment firm, and a private investor, since 1982. Mr.
Anderson currently serves on the board of directors of PacifiCare Health
Systems, Inc. and Genesis Health Ventures, Inc. Mr. Anderson is a member of the
Compensation and Option Committee of the Board of Directors of the Company.
George E. Bello has been Executive Vice President and Controller and a
member of the board of directors of Reliance Group Holdings, Inc., an insurance
holding company, since August 1981. Mr. Bello also currently serves on the
board of directors of Zenith National Insurance Corp. and Land America
Financial Group, Inc. Mr. Bello is a member of the Audit Committee of the Board
of Directors of the Company.
William H. Longfield has been the Chairman and Chief Executive Officer
of C.R. Bard, Inc., a multi-national developer, manufacturer and marketer of
health care products, since September 1995. Mr. Longfield was President and
Chief Executive Officer of C.R. Bard, Inc. from October 1993 to September 1995,
President and Chief Operating Officer from September 1991 to October 1993 and
Executive Vice President and Chief Operating Officer from February 1989 to
September 1991. Mr. Longfield currently serves on the board of directors of C.R.
Bard, Inc., Manor Care, Inc. and West Pharmaceutical Services, Inc. Mr.
Longfield is a member of the Compensation and Option Committee of the Board of
Directors of the Company.
Donald E. Steen has been Chairman of United Surgical Partners, Inc., a
surgery operations company, since February 1998. From October 1994 to December
1997, Mr. Steen was President of the International Group of Columbia/HCA
Healthcare Corporation, a health care services corporation primarily involved
in the ownership and operation of hospitals and providing related services.
From September 1981 to October 1994, Mr. Steen was the President and Chief
Executive Officer of Medical Care America, Inc., a corporation that operated
ambulatory surgery centers. Medical Care America, Inc. was acquired by
Columbia/HCA Healthcare Corporation in October 1994. Mr. Steen is a member of
the Audit Committee of the Board of Directors of the Company. He currently
serves on the board of directors of Kenetic Concepts, Inc.
James E. Buncher has been a private investor since September 1997. Mr.
Buncher was President and Chief Executive Officer of Community Dental Services,
Inc., a corporation operating dental practices in California, from October 1997
until July 1998. Mr. Buncher was the President of Health Plans Group of Value
Health, Inc., a national specialty managed care company, from September 1995 to
September 1997 and served as Chairman, President and Chief Executive Officer of
Community Care Network, Inc., a Value Health subsidiary, from August 1992 to
September 1997. In September 1997, Value Health was acquired by a third party
and Mr. Buncher resigned his positions with that company at that time.
SHARES REPRESENTED BY THE ACCOMPANYING PROXY CARD WILL BE VOTED "FOR"
THE ELECTION OF THE NOMINEES NAMED ABOVE EXCEPT TO THE EXTENT AUTHORITY TO VOTE
FOR ONE OR MORE NOMINEES IS WITHHELD. AS INDICATED ON THE PROXY CARD,
STOCKHOLDERS MAY (i) VOTE FOR THE ENTIRE SLATE OF NOMINEES, (ii) WITHHOLD
AUTHORITY TO VOTE FOR THE ENTIRE SLATE OF NOMINEES OR (iii) BY WRITING THE NAME
OF ONE OR MORE NOMINEES IN THE SPACE PROVIDED ON THE PROXY CARD, WITHHOLD
AUTHORITY TO VOTE FOR SUCH SPECIFIED NOMINEE OR NOMINEES.
3
<PAGE> 6
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held six meetings during the
fiscal year ended August 31, 1999. The only standing committees of the Board of
Directors are the Compensation and Option Committee and the Audit Committee.
During the fiscal year ended August 31, 1999, each current director of the
Company attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors of the Company and of the committees of the Board on
which the respective director served, that were held during the period for
which each such person has been a director or served on such committee, as the
case may be.
Compensation and Option Committee. The Compensation and Option
Committee reviews and sets from time to time the salaries and annual incentive
bonuses for the Chief Executive Officer of the Company and each of the officers
of the Company directly reporting to the Chief Executive Officer, and also
administers the stock option plans of the Company. The Compensation and Option
Committee met one time and acted by unanimous written consent on four occasions
during the fiscal year ended August 31, 1999. Jack R. Anderson and William H.
Longfield currently are the members of the Compensation and Option Committee.
Audit Committee. The principal functions of the Audit Committee are to
make recommendations to the Board of Directors as to the selection of the
independent auditors for the Company, and to review and consult with the Board
of Directors and management regarding the scope and results of any outside
audit of the Company and other auditing and accounting matters. The Audit
Committee met twice during the fiscal year ended August 31, 1999. George E.
Bello and Donald E. Steen currently are the members of the Audit Committee.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding
compensation earned by or awarded to the Chief Executive Officer and the other
executive officers of the Company named below (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) (2) OPTIONS (#) (3)
--------------------------- ------ --------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James Ken Newman (4)............. 1999 $ 46,488 $ 34,222 --- 15,000 $175,000
Chairman of the Board of 1998 281,942 50,000 --- 60,000 2,375
Directors; formerly CEO 1997 252,634 252,548 --- --- 3,007
James W. McAtee (5).............. 1999 312,548 216,944 --- 308,750 2,652
President and CEO 1998 241,811 --- --- 35,000 2,375
1997 226,317 171,168 --- --- 3,007
David Tingue (6)................. 1999 186,348 46,558 --- 10,125 ---
Sr. Vice-President, Marketing 1998 151,495 --- $53,882 --- ---
1997 --- --- --- --- ---
Linda Laitner (7)................ 1999 182,348 --- --- 14,600 ---
Sr. Vice-President, Operations 1998 95,578 --- 47,493 --- ---
1997 --- --- --- --- ---
David White...................... 1999 180,215 37,962 7,123 22,850 2,652
Sr. Vice-President, Operations 1998 167,653 22,606 48,686 4,000 ---
1997 144,991 62,500 --- --- ---
Frank Baumann (8)................ 1999 156,186 37,115 30,136 22,925 2,652
Sr. Vice-President, Operations 1998 134,257 22,122 8,981 --- ---
1997 101,980 14,384 26,926 --- ---
Gary A. Kagan (6)................ 1999 137,072 160,000 --- 16,475 2,652
Former Executive Vice 1998 220,537 155,706 --- 7,500 2,375
President - Development 1997 208,054 157,794 --- --- 3,007
Robert A. Lefton (7)............. 1999 156,699 --- --- 42,500 2,652
Former President and Chief 1998 225,201 --- (7,244) 35,000 2,375
Operating Officer 1997 180,033 108,000 5,283 --- 3,007
</TABLE>
5
<PAGE> 8
- ----------------
(1) Represents the amounts earned in the fiscal year indicated, irrespective
of when amounts were paid by the Company. The bonus amounts shown include
incentive bonuses. In addition, for Messrs. McAtee and Kagan in fiscal
1997, Messrs. Newman and Kagan in fiscal 1998 and Mr. Kagan in fiscal
1999, the bonus amounts shown include bonuses utilized in those fiscal
years under the contingent bonus plan. See "Other Compensation
Arrangements Contingent Bonuses." The incentive bonus amounts included
for Mr. Kagan were calculated based on the number of new management
contract locations that opened in the fiscal year in question,
irrespective of when the contracts were signed.
(2) The amounts shown represent reimbursement for relocation expenses. The
amount shown in fiscal 1998 for Mr. Lefton represents reimbursement to
the Company from Mr. Lefton of the proceeds from the sale of a club
membership which the Company had previously reimbursed as a relocation
expense to Mr. Lefton. The amounts shown do not include the dollar amount
of certain personal benefits, such as car allowances and payment of club
membership dues, which in the case of each individual were less than
$10,000 in the aggregate.
(3) The amounts shown, other than the amount shown for Mr. Newman in fiscal
1999, consist of Company contributions made in that fiscal year to the
401(k) Plan of the Company on behalf of the Named Executive Officer with
respect to the calendar year that ended during the respective fiscal
year. The amount shown for Mr. Newman in fiscal 1999 represents
consulting fees paid to Mr. Newman after his retirement as chief
executive officer of the Company.
(4) Mr. Newman retired as Chief Executive Officer and an employee of the
Company effective October 31, 1998.
(5) Effective November 1, 1998, Mr. McAtee was elected President and Chief
Executive Officer of the Company.
(6) Mr. Tingue was employed by the Company on October 6, 1997.
(7) Ms. Laitner was employed by the Company on February 16, 1998.
(8) Mr. Baumann was employed by the Company on November 25, 1996.
(9) Mr. Kagan resigned as an officer and employee of the Company effective
March 19, 1999.
(10) Mr. Lefton resigned as an officer and employee of the Company effective
March 19, 1999.
6
<PAGE> 9
STOCK OPTION GRANTS
The following table sets forth information regarding the grant of
options to purchase shares of Common Stock to the Named Executive Officers in
the fiscal year ended August 31, 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR ENDED AUGUST 31, 1999
INDIVIDUAL GRANTS
-------------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF EXERCISE ANNUAL RATES OF STOCK
UNDERLYING OPTIONS TOTAL OPTIONS OR PRICE APPRECIATION FOR
GRANTED (1) GRANTED TO BASE OPTION TERM (3)
EMPLOYEES IN PRICE (2) EXPIRATION --------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- ----------------------- -------------------- --------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James Ken Newman 15,000 (4) 2.4% $ 7.00 9/1/08 $ 66,035 $ 167,339
James W. McAtee 8,750 (4) 1.4 7.00 9/1/08 38,520 97,614
300,000 47.6 7.00 9/1/08 1,320,690 3,346,770
David Tingue 2,125 (4) 0.3 7.00 9/1/08 9,355 23,706
3,000 0.5 7.00 9/1/08 13,207 33,468
5,000 0.8 7.75 5/17/09 24,370 61,756
Linda Laitner 1,600 (4) 0.3 7.00 9/1/08 7,044 17,849
3,000 0.5 7.00 9/1/08 13,207 33,468
10,000 1.6 7.75 5/17/09 48,740 123,512
David White 2,850 (4) 0.5 7.00 9/1/08 12,547 31,794
8,000 1.3 7.00 9/1/08 35,218 89,247
2,000 0.3 7.00 1/28/09 8,805 22,312
2,000 0.3 7.75 3/19/09 9,746 24,702
8,000 1.3 7.75 5/17/09 38,992 98,809
Frank Baumann 2,925 (4) 0.5 7.00 9/1/08 12,877 32,631
4,000 0.6 7.00 9/1/08 17,609 44,624
8,000 1.3 7.75 3/19/09 38,992 98,809
8,000 1.3 7.75 5/17/09 38,992 98,809
Gary A. Kagan 9,475 (4) 1.5 7.00 9/1/08 41,711 105,702
7,000 1.1 7.00 9/1/08 30,816 78,091
Robert A. Lefton 32,500 (4) 5.2 7.00 9/1/08 143,075 362,567
10,000 1.6 7.00 9/1/08 44,023 111,559
</TABLE>
- ---------------
(1) The options vest and are exercisable cumulatively either in 20% annual
installments commencing two years after the date of grant or in 25%
annual installments commencing one year after the date of grant.
Exercisability of the options may be accelerated in the event of the
commencement of a tender offer for shares of the Company, the signing of
an agreement for certain mergers or consolidations involving the Company
or for the sale of all or substantially all assets of the Company, a
change in any consecutive two-year period in the majority of the members
of the Board of Directors of the Company serving on the Board at the
beginning of such period, and certain other extraordinary corporate
transactions. The options are subject to early termination in the event
of the optionee's termination of employment with the Company.
(2) The exercise price per share of the options equaled the reported closing
price of the Common Stock on the date of grant. Subject to the terms of
the applicable option agreements, the exercise price may be paid in cash
or in shares of Common Stock owned by the optionee, or a combination of
the foregoing.
7
<PAGE> 10
(3) There is no assurance that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock does in
fact appreciate over the option term, no value will be realized from the
option grants.
(4) These options represent replacement stock options that were granted upon
the cancellation of certain previously granted stock options. See "Report
on Option Repricing."
AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND OPTION VALUES AT FISCAL YEAR-END
The following table sets forth, for each Named Executive Officer,
information regarding stock options exercised during the fiscal year ended
August 31, 1999, the number of shares covered by both exercisable and
un-exercisable stock options as of August 31, 1999, and the value of stock
options outstanding as of August 31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES
IN FISCAL YEAR ENDED AUGUST 31, 1999
AND OPTION VALUES AS OF AUGUST 31, 1999
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
EXERCISE YEAR-END (#) FISCAL YEAR-END (1)
VALUE ---------------------------- ----------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James Ken Newman --- --- 384,918 38,941 1,748,061 23,632
James W. McAtee --- --- 239,669 326,597 1,133,941 32,610
David Tingue --- --- --- 10,125 --- 320
Linda Laitner --- --- --- 14,600 --- 288
David White --- --- 1,140 25,710 71 732
Frank Baumann --- --- 585 22,340 37 396
Gary A. Kagan 133,653 507,225 --- --- --- ---
Robert A. Lefton 19,375 65,281 --- --- --- ---
</TABLE>
- ---------------
(1) Calculated based on the closing price of the Common Stock of $7.063 per
share as reported on the NASDAQ National Market on August 31, 1999, the
last trading day of fiscal 1999, less the applicable exercise price.
REPORT ON OPTION REPRICING
Effective September 1, 1998, the Compensation and Option Committee Board
of Directors of the Company authorized the grant of new stock options to
officers and employees holding stock options with exercise prices significantly
in excess of the then current market price of the Common Stock of the Company.
The grant of each replacement stock option was contingent upon the voluntary
cancellation by the officer or employee of a previously granted stock option.
The replacement stock options have an exercise price equal to the closing price
of the stock on the date of grant but are for a lesser number of shares than
the surrendered stock options. The number of shares subject to each replacement
stock option was calculated to represent the number of shares that would yield
at the new exercise price approximately the same proceeds to the optionee that
the canceled stock option would have yielded at a market price in a range from
$26 to $30 per share of the Common Stock of the Company. The Named Executive
Officers collectively surrendered stock options for a total of 206,500 shares
and collectively received replacement stock options for a total of 75,225
shares. The Compensation and Option Committee of the Board of Directors
authorized the grant of such replacement stock options, subject to the
cancellation of the previously granted stock
8
<PAGE> 11
options, because it considered such action appropriate in order for the stock
options to serve the incentive purposes for which they are intended.
Compensation and Option Committee
Jack R. Anderson
William H. Longfield
The following table sets forth certain information concerning such
replacement and canceled stock options for the Named Executive Officers of the
Company. The Company has not repriced any stock options except for the
replacement options in its last ten fiscal years.
<TABLE>
<CAPTION>
TEN - YEAR OPTION REPRICINGS
NUMBER OF
NUMBER OF SECURITIES EXERCISE PRICE
SECURITIES UNDERLYING MARKET PRICE OF AT TIME OF
UNDERLYING OPTIONS/SARS STOCK AT TIME REPRICING OR NEW
DATE OF SURRENDERED REPRICED OR OF REPRICING OR AMENDMENT EXERCISE
NAME REPRICING OPTIONS AMENDED (#)(1) AMENDMENT ($) ($)(2) PRICE ($)
---- --------- ----------- -------------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
James K. Newman 9/1/98 60,000 15,000 $ 7.00 $ 23.7500 $ 7.00
James W. McAtee 9/1/98 35,000 8,750 $ 7.00 $ 23.7500 $ 7.00
David Tingue 9/1/98 5,000 2,125 $ 7.00 $ 19.3750 $ 7.00
Linda Laitner 9/1/98 5,000 1,600 $ 7.00 $ 22.0000 $ 7.00
David White 9/1/98 4,500 2,850 $ 7.00 $ 14.1667 $ 7.00
Frank Baumann 9/1/98 5,000 2,925 $ 7.00 $ 15.3750 $ 7.00
Gary A. Kagan 9/1/98 12,000 7,600 $ 7.00 $ 14.1667 $ 7.00
9/1/98 7,500 1,875 $ 7.00 $ 23.7500 $ 7.00
Robert A. Lefton 9/1/98 37,500 23,750 $ 7.00 $ 14.1667 $ 7.00
9/1/98 35,000 8,750 $ 7.00 $ 23.7500 $ 7.00
<CAPTION>
TEN - YEAR OPTION REPRICINGS
LENGTH OF ORIGINAL
OPTION TERM
REMAINING AT DATE
OF REPRICING OR
NAME AMENDMENT (3)
---- -------------------
<S> <C>
James K. Newman 9 Years
James W. McAtee 9 Years
David Tingue 9.39 Years
Linda Laitner 9.46 Years
David White 7.95 Years
Frank Baumann 8.53 Years
Gary A. Kagan 7.95 Years
9 Years
Robert A. Lefton 7.95 Years
9 Years
</TABLE>
- ---------------
(1) Represents number of shares subject to replacement stock options. In
consideration of the grant of the replacement stock options for a total
of 75,225 shares, the Named Executive Officers collectively surrendered
stock options for a total of 206,500 shares.
(2) Represents exercise price of surrendered stock options.
(3) Represents remaining term of surrendered stock options. The replacement
stock options vest and are exercisable in 20% annual installments
commencing two years after the original grant date of the surrendered
stock option and have a term of ten years from the grant date of the
replacement stock option.
9
<PAGE> 12
OTHER COMPENSATION ARRANGEMENTS
Executive Retention Agreement
Effective September 1, 1997, the Company entered into an Executive
Retention Agreement with James Ken Newman. Pursuant to the Executive Retention
Agreement, Mr. Newman agreed to continue to serve as Chairman and Chief
Executive Officer of the Company, subject to his right to retire as Chief
Executive Officer at any time during the term of the agreement. Mr. Newman
elected to retire as Chief Executive Officer of the Company on October 31,
1998, at which time he became a consultant to the Company for the remaining
term of the agreement. Mr. Newman had served as President of the Company from
July 1989 until September 1997, and also as Chief Executive Officer of the
Company from July 1989 until October 1998. Mr. Newman has served as Chairman
since February 1992.
The Executive Retention Agreement has a five year term, subject to
automatic renewal so that it maintains a three year term at all times until the
Company elects to terminate such automatic renewal provision which it can elect
to do at any time. Under the agreement, Mr. Newman receives as a consultant
annual compensation equal to seventy-five percent (75%) of his annual base
salary at the time of retirement, which was $280,000. Mr. Newman was also
provided a bonus plan under the agreement which, if performance criteria to be
established as a part of the plan are satisfied, permitted Mr. Newman to earn
an annual bonus up to 100% of his annual base salary. Following his retirement,
Mr. Newman is not entitled to any bonuses other than the bonus earned up to the
date of retirement. Any stock options granted to Mr. Newman during the term of
the agreement are to have a ten year term and vest not less than 10% per year
at the end of each of the first eight years and be fully vested at the end of
nine years, subject, however, to acceleration upon the occurrence of certain
events. All stock options granted to Mr. Newman prior to the date of his
retirement remained outstanding and did not change in any respect as a result
of his retirement to consultant status.
The agreement contains certain confidentiality and non-competition
provisions. The non-competition agreements stay in place after termination so
long as Mr. Newman receives severance payments under the agreement, which will
be for the remaining term of the agreement in the event of termination of the
agreement under certain conditions. Mr. Newman may limit the term of the
non-competition agreement to 24 months by electing to forego any additional
severance payments after such period. In the event Mr. Newman voluntarily
resigns, no severance payments are payable but he will be subject to the
non-competition agreement for 24 months after the date of resignation. The
agreement has certain provisions for the acceleration of the vesting of stock
options after the occurrence of a change of control of the Company.
President and CEO Compensation Arrangement
In connection with the election of James W. McAtee as President and
Chief Executive Officer of the Company effective November 1, 1998, the
Compensation and Option Committee of the Company authorized an increase in Mr.
McAtee's annual base salary to $325,000 and adjusted his annual bonus to be up
to 100% of his annual base salary based upon the performance of the Company.
Such annual bonus would be earned on a prorated basis commencing at 0% of the
annual base salary in the event that the Company achieves 85% or less of
budgeted earnings per share for the fiscal year and graduated up to 100% of
annual base salary in the event the Company achieves 100% or more of budgeted
earnings per share for the fiscal year. In addition, the Committee approved a
grant of stock options for 300,000 shares of Common Stock of the Company
vesting in four equal annual installments on September 1 of each year
commencing September 1, 1999. The exercise price of the stock options is $7.00
which was the closing price of the Common Stock of the Company on the NASDAQ
National Market on September 1, 1998.
10
<PAGE> 13
Contingent Bonuses
In January 1995, the Compensation and Option Committee approved
contingent bonuses applicable to Messrs. Newman, McAtee and Kagan. The
aggregate amounts of such bonuses that could be earned by Messrs. Newman,
McAtee and Kagan were $216,904, $123,176 and $206,000, respectively. The
bonuses vested in four equal annual installments but are payable only if (i)
the bonus, or a portion thereof, is utilized to pay the exercise price of stock
options for the purchase of Common Stock and (ii) the executive officer has
remained in the continuous employment of the Company until the date when the
bonus, or portion thereof, is paid. The bonuses may be payable in one or more
installments as and when the executive officer elects to exercise stock
options. In fiscal 1997, $35,404 and $67,794 of such bonuses were paid to
Messrs. McAtee and Kagan, respectively, and used to pay the exercise price of
stock options exercised by them in such fiscal year. In fiscal 1998, $50,000
and $86,706 of such bonuses were paid to Messrs. Newman and Kagan,
respectively, and used to pay the exercise price of stock options exercised by
them in such fiscal year. In fiscal 1999, $51,500 of such bonuses was paid to
Mr. Kagan and used to pay the exercise price of stock options exercised by him
in such fiscal year.
DIRECTOR COMPENSATION
The Company's Second Amended and Restated 1995 Stock Option Plan for
Eligible Outside Directors (the "Director Plan") provides for a one-time
formula grant of stock options to purchase 15,000 shares of Common Stock to
each non-employee director of the Company upon such director's initial election
to the Board of Directors if the director satisfies certain criteria specified
in the Director Plan. In addition, such non-employee directors receive a
subsequent grant when reelected to the Board of Directors at an annual meeting
and when such non-employee Director has served at least one year since the date
of the last grant under the Director Plan. Each subsequent grant is for a
number of shares of Common Stock equal to $50,000 divided by the fair market
value per share of the Common Stock of the Company on the date of grant (as
defined in the Director Plan, the closing price per share on the grant date)
rounded to the nearest hundred. With respect to each subsequent grant, each
Director has the election to reduce a grant amount by fifty percent (50%) of
the shares of Common Stock that would otherwise be subject to the subsequent
grant and, in lieu thereof, receive a fee of $2,500 for each of the next four
meetings of the Board of Directors actually attended by such Director within
the period from the annual meeting at which the Director is re-elected
(including the Board meeting immediately following such annual meeting) to the
next annual meeting of stockholders.
In addition to the formula stock options described above, the
Compensation and Option Committee has authority under the Director Plan to
grant discretionary stock options to non-employee directors upon such terms as
are determined by such committee. All formula grants under the Plan vest twenty
(20%) on the date of grant and in twenty percent (20%) installments over the
next four years if the Director is re-elected at each of the next successive
annual meetings of the stockholders and when the Director has served a period
of one year since the vesting of the most recent installment on the option,
including the installment that vested on the grant date. All stock options
under the Director Plan terminate on the date any optionee ceases to be a
director of the Company for any reason other than death (in the event of the
optionee's death, stock options vested at the date of death are exercisable for
one year thereafter).
Upon their reelection to the Board of Directors in January 1999, each
of Messrs. Bello, Buncher, Longfield and Steen received formula grants of stock
options to purchase 3,000 shares of Common Stock under the Second Amended and
Restated 1995 Stock Option Plan for Eligible Outside Directors as then in
effect. Each of these four Directors will receive a subsequent grant as
described above if re-elected to the Board of Directors at the Annual Meeting.
Such additional stock options will be granted on the date of the Annual Meeting
at an exercise price equal to the closing price of the Common Stock on the
Nasdaq National Market on that date.
11
<PAGE> 14
Directors of the Company do not receive any other compensation for
service on the Board of Directors or any committee thereof, except as described
above. Directors are, however, reimbursed for their out-of-pocket expenses
incurred in attending meetings of the Board of Directors.
COMPENSATION AND OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation and Option Committee of the Board of Directors of the
Company reviews and approves (i) the salaries and annual incentive bonuses of
the Chief Executive Officer of the Company and each of the officers of the
Company directly reporting to the Chief Executive Officer and (ii) all grants
of options to purchase shares under the Company's stock option plans to
eligible directors, officers, employees and consultants of the Company. At all
times during the fiscal year ended August 31, 1999, the Compensation and Option
Committee was composed exclusively of directors who were "non-employee
directors" and "outside directors" as defined by applicable Securities and
Exchange Commission ("Commission") rules and Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), respectively. The members of the
Committee are not former employees of the Company and have not ever
participated in any of the Company executive or other employee compensation
programs. In fiscal 1999, the Committee was composed of two directors, Mr.
Anderson and Mr. Longfield.
Horizon's executive compensation policy is designed and administered
to provide a competitive compensation program that will enable Horizon to
attract, motivate, reward and retain executives who have the skills, education,
experience and capabilities required to discharge their duties in a competent
and efficient manner. The compensation policy is based on the principle that
the financial rewards to the executive should be aligned with the financial
interests of the stockholders of Horizon.
Horizon's executive compensation strategy has three separate elements,
consisting of base salary, annual incentive compensation (bonuses) and
long-term incentive compensation (stock options). The following is a summary of
the policies underlying each element.
BASE SALARY
The Compensation and Option Committee reviews the base salaries of the
Chief Executive Officer and the other officers directly reporting to the Chief
Executive Officer periodically, considering factors such as individual and
corporate performance, and individual experience, expertise and years of
service.
In determining the Chief Executive Officer's overall compensation, as
well as the compensation of the other officers, the Compensation and Option
Committee also reviews compensation levels at other companies including
selected peer companies. Such other companies are not necessarily the same as
the companies in the peer group index in the Performance Graph section of this
Proxy Statement because the Compensation and Option Committee believes that the
Company competes for executive talent with companies in addition to those in
its peer group. The Compensation and Option Committee does not attempt to set
base salaries at any particular level based on such surveys, but rather uses
such surveys to obtain an overview of compensation levels in general.
No particular weight is given by the Compensation and Option Committee
to any of the foregoing factors, and decisions as to adjustments in base
salaries are primarily subjective. In August 1998, the base salaries of each of
the Company's executive officers were reviewed and certain increases approved
for some of the officers to be effective at various dates during fiscal 1999.
12
<PAGE> 15
ANNUAL INCENTIVE COMPENSATION
For services rendered during fiscal 1999, some of Horizon's executive
officers received cash bonuses upon the completion of such fiscal year. All
such cash bonuses were awarded based upon performance criteria. For fiscal
1999, the performance criteria were set based upon the Board-approved budget
which was consistent with the then current public expectation of earnings per
share for the Company.
Mr. Newman's bonus potential for fiscal 1999 was set by his Executive
Retention Agreement at up to 100% of his annual base salary. Mr. McAtee's bonus
was initially set at up to 60% of his average base salary for fiscal 1999 and
was based upon the Company achieving the Board-approved budget. Upon the
retirement of Mr. Newman as chief executive officer in October, 1998 and the
appointment of Mr. McAtee as President and Chief Executive Officer of the
Company in November, 1998, the bonus for Mr. McAtee was changed to up to 100%
of his average base salary for fiscal 1999.
In addition, the executive officers of the Company directly reporting
to the Chief Executive Officer had bonuses set at up to 50%-60% of their
average base salary for fiscal 1999, with the bonus based upon the financial
results of their area of responsibility and, in certain cases, the achievement
of certain contract retention targets.
LONG-TERM INCENTIVES
The Compensation and Option Committee is authorized to grant incentive
and non-qualified stock options to key employees of the Company, including
officers. Such option grants are intended to provide long-term incentive to
increase stockholder value by improving corporate performance and
profitability. Stock option grants provide an incentive that focuses the
executive's attention on managing the Company from the perspective of an owner
with an equity stake in the business. These grants also help ensure that
operating decisions are based on long-term results that benefit the Company and
ultimately the stockholders. Currently, stock options to employees are not
necessarily granted annually, but are granted from time to time at the
discretion of the Compensation and Option Committee. While no specific formula
is used to determine stock option grants made to any particular employee,
grants are generally based upon a subjective evaluation of non-objective
factors such as the employee's past contribution toward Company performance and
expected contribution to meeting long-term strategic goals of the Company.
Section 162(m) of the Code imposes a $1,000,000 limit on the amount of
compensation that will be deductible for Federal income tax purposes by the
Company each fiscal year with respect to each of the Chief Executive Officer
and the four other most highly compensated executive officers of the Company.
The base salary and annual incentive compensation level of the Company's
executive officers is currently well below this limit. The Company believes
that the limitation of Section 162(m) does not apply to compensation earned or
that may be earned with respect to the stock options granted to the Executive
Officers under the stock option plans of the Company during or prior to the
fiscal year ended August 31, 1999. The structure of the 1998 Stock Option Plan
is intended to make grants thereunder qualify as "performance-based
compensation" not subject to the limitation of Section 162(m).
Compensation and Option Committee
Jack R. Anderson
William H. Longfield
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph shows a comparison of the total cumulative
stockholder return for the Company, the Total Return Index for Nasdaq Stock
Market (U.S. Companies) (the "Nasdaq (U.S.) Index"), a new peer group selected
by the Company, and the former peer group selected by the Company in prior
years for the period from March 14, 1995 (the date on which the Common Stock of
the Company was first registered under Section 12 of the Securities Exchange
Act of 1934) through August 31, 1999. The comparison below assumes $100 was
invested on March 14, 1995 in each of the Common Stock, shares comprising the
Nasdaq (U.S.) Index and the common stock of the respective peer group, and
assumes reinvestment of dividends. Neither the Company nor any companies in the
peer group, except American Healthcorp. Inc., paid any dividends during such
period.
Total Cumulative Shareholder Return for
Five-Year Period Ending August 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
03/14/95 08/31/95 08/31/96 08/31/97 08/31/98 08/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Horizon Health Corp 100.00 150.00 220.00 356.25 99.37 105.94
NASDAQ 100.00 126.67 142.81 199.24 189.51 349.55
New Peer Group 100.00 100.82 128.91 151.36 130.75 139.89
Former Peer Group 100.00 113.06 123.34 186.76 231.77 347.13
</TABLE>
The new peer group consists of the following publicly traded companies
in the health care industry: American Healthcorp. Inc., Comprehensive Care
Corp., Continue Care Corporation, Corvel Corporation, Northstar Health Services
Inc., PMR Corporation, Rehabcare Group, Inc., and United Payors & United
Providers, Inc.
Horizon changed the companies included in the comparison peer group
because, during the fiscal 1999 year, the Company significantly changed the mix
of its business operations primarily as a result of increasing its presence in
behavioral services. As a result, a revised new peer group which better
reflected the current business operations of the Company was considered
appropriate. The former peer group consisted of the following publically traded
companies: Air Methods Corp., American Healthcorp Inc., Comprehensive Care
Corp., Hemacare Corp., Medquist, Inc., Northstar Health Services, Inc. and
Rehabcare Group, Inc.
14
<PAGE> 17
SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
Set forth below is certain information with respect to the beneficial
ownership of Common Stock as of December 3, 1999, by (i) each person who, to the
knowledge of the Company based upon statements filed as of December 13, 1999
with the Commission pursuant to Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, as amended, beneficially owns more than 5% of the
outstanding Common Stock, (ii) each director (which 7 includes all nominees for
director) of the Company, (iii) each Named Executive Officer (other than Messrs.
Kagan and Lefton who are former officers no longer employed by the Company) and
(iv) all directors and such Named Executive Officers of the Company as a group.
Except as indicated below, to the Company's knowledge, each person named has
sole voting and investment power with respect to all shares shown as
beneficially owned by such person.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
----------------------------------------------------
NAME NUMBER PERCENT
----------------------- -------------------------
<S> <C> <C>
Goldman Sachs Asset Management (1)............................. 919,500 14.7%
Fidelity Management & Research Company (2)..................... 644,400 10.3
James Ken Newman (3)........................................... 618,285 9.3
Jack R. Anderson (4)........................................... 427,400 6.8
Paul J. Schupf Associates (5).................................. 410,800 6.6
James W. McAtee (6)............................................ 404,954 6.2
Eagle Asset Management, Inc. (7)............................... 373,275 6.0
George E. Bello (8)............................................ 333,402 5.3
Donald E. Steen (8)............................................ 32,402 *
William H. Longfield (8)....................................... 31,402 *
James E. Buncher (9)........................................... 27,560 *
David Tingue (10).............................................. 425 *
Linda Laitner.................................................. 1,500 *
David White (11)............................................... 3,592 *
Frank Baumann (12)............................................. 1,124 *
All directors and Named Executive Officers as a group
(11 persons) (13) (14)........................................ 1,878,029 26.8
</TABLE>
- -----------------
* Less than 1%.
(1) The address of Goldman Sachs Asset Management, a division of Goldman,
Sachs & Co., is 1 New York Plaza, New York, New York 10004. Based on
information contained in a Schedule 13G dated October 12, 1999,
Goldman Sachs Asset Management has sole voting power over 869,600 and
sole investment power over 919,500 shares.
(2) The address of Fidelity Management & Research Company is 82 Devonshire
Street, Boston, Massachusetts. According to a Schedule 13G dated
February 1, 1999, Fidelity has sole investment power over the 644,400
shares and the voting power over such shares is held by the Board of
Trustees of the Fidelity Funds.
(3) The address of James Ken Newman is 700 El Paseo, Denton, Texas 76205.
Includes 16,000 shares of Common Stock held by a limited partnership
for which Mr. Newman serves as an officer and director of the
corporate general partner and 51,500 shares of Common Stock held by a
foundation of which Mr. Newman is a director and officer. Also
includes 399,859 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.
(4) The address of Jack R. Anderson is 16475 Dallas Parkway, Suite 735,
Dallas, Texas 75248. Excludes 100,000 shares of Common Stock owned by
Mr. Anderson's spouse, for which he disclaims any beneficial
ownership.
(5) The address of Paul J. Schupf Associates is 27 Payne, Hamilton, New
York 13346.
(6) The address of Mr. McAtee is 1500 Waters Ridge Drive, Lewisville,
Texas 75057. Includes 19,998 shares of Common Stock held in trust for
the benefit of Mr. McAtee's children. Also includes 325,266 shares of
Common Stock issuable upon the exercise of immediately exercisable
stock options.
(7) The address of Eagle Asset Management, Inc. is 880 Carillon Parkway
St., Petersburg, Florida 33716.
(8) The address of Mr. Bello is 55 East 52nd Street, 53rd Floor, New York,
New York 10055. Includes 13,783 shares of Common Stock issuable upon
the exercise of immediately exercisable stock options and 1,119 shares
of Common Stock issuable upon the exercise of stock options that
become exercisable within 60 days.
15
<PAGE> 18
(9) Includes 1,960 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options and 600 shares of Common Stock
issuable upon the exercise of stock options that become exercisable
within 60 days.
(10) Includes 425 shares of Common Stock issuable upon the exercise of
stock options that become exercisable within 60 days.
(11) Includes 1,940 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.
(12) Includes 585 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.
(13) Includes 772,391 shares of Common Stock issuable upon the exercise of
stock options held by certain directors and Named Executive Officers
that are immediately exercisable or that become exercisable within 60
days.
(14) Does not include Gary A. Kagan, a former Executive Vice President of
the Company, or Robert A. Lefton, a former Senior Vice President of
the Company, both of whom resigned in March, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors and certain officers of the Company, and persons who
beneficially own more than ten percent of the Common Stock, to file reports of
ownership and changes in ownership with the Commission. Such persons are
required to furnish the Company with copies of all Section 16(a) reports they
file. Based solely upon a review of the copies of such reports furnished to the
Company, the Company believes that, during the fiscal year ended August 31,
1999, all Section 16(a) filing requirements applicable to its directors,
officers and greater than ten percent beneficial stockholders were complied
with, except that (i) the required filing of a Form 3 by Ronald C. Drabik upon
his employment as Senior Vice President and Chief Financial Officer of the
Company in July 1999 was inadvertently made late, (ii) the required filing of a
Form 3 by each of David Tingue, Linda Laitner, David White and Frank Baumann
upon their respective appointment as an executive officer of the Company was
inadvertently made late, (iii) the required filing of a Form 4 reporting one
transaction by Linda Laitner was inadvertently made late and (iv) the required
filing of a Form 5 by each of Cliff Gardner, a former controller and principal
accounting officer of the Company, and Jack DeVaney, a former Senior Vice
President of the Company, both of whom resigned in 1999, has not been made.
16
<PAGE> 19
PROPOSAL NO. 2
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted in October, 1999 the Horizon Health
Corporation Employee Stock Purchase Plan (the "Plan"), subject to stockholder
approval. The purpose of the Plan is to provide employees of the Company and
its subsidiaries the opportunity to acquire an ownership interest in the
Company through the purchase of Common Stock at a price below current market
prices. It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
The following summary description of the Horizon Health Corporation
Employee Stock Purchase Plan is qualified in its entirety by reference to the
full text of the Plan, which is attached hereto as Appendix A.
DESCRIPTION OF THE PLAN
The Plan permits all eligible employees, including officers, of the
Company to purchase from the Company shares of Common Stock of the Company. To
be eligible an employee must work 20 hours or more per week, have been employed
by the Company for at least three months, and satisfy the other conditions
noted below. At December 1, 1999, the Company had approximately 796 employees
eligible to participate in the Plan.
The Plan provides that 250,000 shares of Common Stock will be
available for purchase in the 2000 calendar year. Each calendar year thereafter
an additional 50,000 shares will be made available for purchase under the Plan.
Unpurchased shares in a calendar year will carry over and be available for
purchase in succeeding calendar years. A total of 700,000 shares of Common
Stock of the Company will be available for purchase over the entire term of the
Plan. At the election of the Company, the shares issued pursuant to the Plan
will be either treasury shares or original issue shares.
The Plan has a term of ten years, subject to earlier termination by
the Board of Directors. The Plan must be approved by the stockholders of the
Company and, if the Plan is not approved by the stockholders at the annual
meeting, the Plan will terminate. Any payroll deductions made prior to such
termination will be promptly paid to the participants.
The Plan makes shares available for purchase pursuant to two
consecutive six-month offering periods each year. One offering period will
commence on the first trading day for the Common Stock on or after January 1
and end on the last trading day of the Common Stock on or before June 30. The
other offering period will commence on the first trading day of the Common
Stock on or after July 1 and end on the last trading day of the Common Stock on
or before December 31. For each six-month offering period, any eligible
employee, except as noted below, may participate in such offering under the
Plan.
Employees participate by making an election on a form provided by the
Company to have a percentage (only in terms of whole percentages) of their base
salary (excluding bonuses, commissions and other incentive compensation) up to
a maximum of 10% withheld for the purpose of making the purchase of shares of
Common Stock in the respective offering period. The amount of the payroll
deductions will not change in the event of changes in the compensation of the
employee in the respective offering period.
Effective on the first day of each offering period, as determined at
the end of the respective offering period, an employee who has elected to
participate is granted an option to purchase a number of whole shares
determined by dividing the total amount of the employee payroll deductions
actually made in the offering period by the "option price" per share of Common
Stock. The maximum number of shares for which an option can be granted to a
participant with respect to any single offering period is 12,500 shares. The
"option
17
<PAGE> 20
price" will be the lesser of (i) 85% of the closing price of the Common Stock
on the NASDAQ National Market as of the commencement date of the offering
period or (ii) 85% of the closing price of the Common Stock on the NASDAQ
National Market as of the ending date of the offering period. Payment for
shares to be purchased under the Plan will be made by payment of the
accumulated payroll deductions actually made by the employee to the Company.
Employees are restricted from trading shares acquired pursuant to the Plan for
a period of three months after the acquisition date.
No otherwise eligible employee shall be granted an option under the
Plan (i) if, immediately after the grant, the employee would own stock
(including by attribution from certain family members and affiliated entities)
and options possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company (assuming that the shares subject to the
options are outstanding) or (ii) if the grant would cause his or her rights to
purchase stock under all employee stock purchase plans of the Company to apply
to shares of Common Stock having a fair market value of $25,000 or more for the
calendar year in which such option is outstanding at any time.
Except in the case of a withdrawal, a participant cannot change his or
her payroll deduction level during an offering period. An election to
participate will remain in effect for successive offering periods unless the
participant files a new election form specifying a different payroll deduction
level or files a notice of withdrawal.
A participant may withdraw from the Plan at any time on or before 15
days prior to the last day of the offering period unless an earlier or later
date is established by the committee of the Board of Directors of the Company
administering the Plan. A participant withdraws by filing a notice of
withdrawal on a form provided by the Company. All of the participant's payroll
deductions credited to his or her account will be paid to him or her promptly
after receipt of the notice of withdrawal, and no further payroll deductions
will be made during that offering period. A participant's withdrawal will not
have any effect upon his or her eligibility to participate in any subsequent
offering period under the Plan. However, the participant will be required to
execute and deliver to the Company a new election form for the subsequent
offering period.
Termination of employment of a participant for any reason shall
automatically constitute a withdrawal from the Plan. Upon termination of
employment for any reason, the payroll deductions credited to the participant's
account will be returned to the participant and, in that event, the
participant's account will not be used to purchase shares of Common Stock on
the last day of the respective offering period.
Unless a participant terminates employment or withdraws from the Plan
as noted above, the option to purchase shares will be exercised automatically
for the participant on the last day of the offering period. If there are
insufficient shares available for purchase in any offering period to satisfy
the options of the participants, shares will be issued to the participants on a
pro rata basis based on the amount of their respective payroll deductions
withheld in the respective offering period. No fractional shares will be issued
under the Plan. Any funds remaining in a Participant's account after exercise
of an option which are not sufficient to purchase a full share will be carried
over for the next offering period.
A participant's account will be no more than a bookkeeping account
maintained by the Company, and neither the Company nor any subsidiary shall be
obligated to segregate or hold in trust or escrow any funds in a participant's
account. No interest will accrue or be payable on the payroll deductions of a
participant under the Plan. Each participant will receive at least annually a
statement regarding the status of his or her Plan account.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of by a
participant. The Company may treat any such act as an election to withdraw from
the Plan.
18
<PAGE> 21
The Board of Directors of the Company may at any time terminate or
amend the Plan. No termination can affect options previously granted, and no
amendment can make any change in options theretofore granted which would
adversely affect the rights of any participant. No amendment that increases the
number of shares authorized for sale under the Plan or changes the designation
of the subsidiary corporations whose employees may participate in the Plan
shall be effective unless approved by the stockholders of the Company within 12
months of the adoption of such amendment.
The Plan is administered by the Compensation and Option Committee of
the Board of Directors. The Committee is vested with authority to make,
administer and interpret such rules and regulations as it deems necessary to
administer the Plan, and any determination, decision or action of the Committee
in connection with the construction, interpretation, administration or
application of the Plan will be final and binding on all participants and all
persons claiming under or through any participant.
Except as otherwise described above, benefits under the Plan to the
Named Executive Officers of the Company and to other officers and employees of
the Company are not currently determinable because participation in the Plan by
such officers and employees is voluntary and the benefits are subject to the
market price of the Common Stock at future dates.
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION ADDRESSES ONLY THE GENERAL FEDERAL INCOME TAX
CONSEQUENCES UNDER THE PLAN. IT DOES NOT ADDRESS THE IMPACT OF STATE AND LOCAL
TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX OR SECURITIES LAWS RESTRICTIONS, AND
IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS A TAX
ADVICE TO PARTICIPANTS IN THE PLAN, WHO SHOULD CONSULT THEIR OWN TAX ADVISORS.
It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code.
The provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that
Section of the Code. The Company believes that the following federal income
consequences normally will apply with respect to the Employee Stock Purchase
Plan.
The payroll deductions withheld from a participant's pay under the
Plan will be taxable income to the participant and must be included in the
participant's gross income for federal income tax purposes in the year which
such amounts otherwise would have been received.
A participant will not be required to recognize any income for federal
income tax purposes either at the time the participant is granted an option
(which will be on the first day of the offering period) or by virtue of the
exercise of the option (which will take place on the last day of such offering
period). The federal income tax consequences of a sale or disposition of shares
acquired under the Plan depend in part on the length of time the shares are
held by a participant before such sale or disposition. If a participant sells
or otherwise disposes of shares acquired under the Plan (other than any
transfer resulting from death) within two years after the first day of the
offering period at the end of which the shares were acquired ("Two-Year
Period"), the participant must recognize ordinary compensation income in the
year of such disposition in an amount equal to the excess of (i) the fair
market value of the shares on the date such shares were acquired over (ii) the
price paid for the shares by the participant. The amount of "ordinary"
compensation income recognized by the participant will be added to the
participant's basis in such shares for purposes of determining any additional
gain or loss realized by the participant on the sale of the shares. Any such
additional gain or loss will be taxed as capital gain or loss, long or short,
depending on how long the participant held the shares.
If a participant sells shares acquired under the Plan after the
Two-Year Period or if the participant dies, the participant or the
participant's estate must include as ordinary compensation income in the year
of sale (or the taxable year ending upon death) an amount equal to the lesser
of (i) the excess of the fair market
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value of the shares on the first day of the offering period over the option
price (determined as if the option had been exercised on the first day of the
offering period), or (ii) the excess of the fair market value of the shares at
the time of sale of the shares or on the date of death over the price paid for
the shares by the participant. Except in the case of a transfer as a result of
death, the amount of ordinary income recognized by the participant will be
added to the participant's basis in such shares. Any gain realized upon the
sale in excess of such basis will be taxed as a long-term capital gain. Any
loss realized will be treated as long-term capital loss.
Under current law, the obligations of the Company to withhold FICA and
Federal Income Tax from a participant's compensation income attributable to the
Plan are unclear. Under the Plan, the Company reserves the right to withhold to
the extent necessary to meet any applicable withholding obligation.
The Company will not receive any income tax deduction as result of
issuing shares pursuant to the Plan, except upon sale or disposition of shares
by a participant within the Two-Year Period. In such an event, the Company will
be entitled to a deduction equal to the amount included as ordinary income to
the participant with respect to the sale or disposition of such shares.
VOTE REQUIRED
Approval and adoption of the Plan by stockholders requires the
affirmative vote of a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting. Assuming the existence of a quorum,
abstentions will be treated as a vote against the Plan and broker non-votes
will be disregarded and will have no effect on the outcome of the vote.
THE BOARD HAS UNANIMOUSLY APPROVED THE PLAN AND RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING
BY SIGNED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The stockholders are asked to ratify the appointment of
PricewaterhouseCoopers LLP as the independent accountants for the Company for
the fiscal year ending August 31, 2000. PricewaterhouseCoopers LLP, a certified
public accounting firm, has served as the independent accountants for the
Company since 1991. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the Annual Meeting to respond to appropriate questions and to
make such statements as they may desire.
Ratification of the appointment of the independent accountants is not
a matter which is required to be submitted to a vote of stockholders, but the
Board of Directors considers it appropriate for the stockholders to express or
withhold approval of the appointment. If stockholder approval should not be
obtained, the Board of Directors would consider an alternative appointment for
fiscal 2000.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING AUGUST 31,
2000, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
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PROPOSALS BY STOCKHOLDERS
Proposals by stockholders intended to be presented at the first annual
meeting of stockholders of the Company after the Annual Meeting must be
received at the executive offices of the Company no later than August 12, 2000,
to be included in the Company's proxy statement and form of proxy relating to
that meeting. Any stockholder who wishes to bring a proposal before such annual
meeting of stockholders, but does not wish to include it in the Company's proxy
materials, must provide written notice of the proposal to the Company's
Secretary at the executive offices of the Company by October 26, 2000.
Otherwise, proxies solicited for such annual meeting will confer discretionary
authority to vote on any such proposals that have not been so submitted to the
Company.
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be
presented for action at the Annual Meeting. If any other matter requiring a
vote of the stockholders properly comes before the Annual Meeting, the persons
authorized under management proxies will vote and act on such matter according
to their own discretion and judgment.
ANNUAL REPORT
The Company's Annual Report to Stockholders, which contains audited
consolidated financial statements of the Company for the fiscal year ended
August 31, 1999, is being mailed to stockholders of record with this Proxy
Statement. The Annual Report to Stockholders does not form a part of the proxy
solicitation materials.
UPON THE WRITTEN REQUEST OF ANY PERSON WHO IS A RECORD HOLDER OF
COMMON STOCK AS OF THE CLOSE OF BUSINESS ON DECEMBER 3, 1999, THE COMPANY WILL
PROVIDE WITHOUT CHARGE TO SUCH PERSON A COPY OF THE ANNUAL REPORT ON FORM 10-K
OF THE COMPANY FOR THE FISCAL YEAR ENDED AUGUST 31, 1999 AS FILED WITH THE
COMMISSION (EXCLUDING EXHIBITS). ANY SUCH WRITTEN REQUEST MUST BE DIRECTED TO
HORIZON HEALTH CORPORATION, 1500 WATERS RIDGE DRIVE, LEWISVILLE, TEXAS
75057-6011, ATTENTION: MR. RONALD C. DRABIK, SENIOR VICE PRESIDENT - FINANCE
AND ADMINISTRATION.
JAMES W. McATEE
President
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Appendix A
HORIZON HEALTH CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Horizon Health Corporation Employee
Stock Purchase Plan (the "Plan") is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section of
the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock, $.01 par value, of
the Company.
(d) "Company" shall mean Horizon Health Corporation, a Delaware
corporation, and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings, exclusive of commissions, payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean all wholly-owned
Subsidiaries of the Company and any other Subsidiary which has been designated
by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of the
Company for tax purposes. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed
to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Offering
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or the Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day on the date of such determination, as reported
in The Wall Street Journal or such other source as the Board deems reliable,
or;
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(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Offering Period" shall mean a period of approximately six (6)
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after January 1 and terminating on
the last Trading Day in the period ending the following June 30, or commencing
on the first Trading Day on or after July 1, and terminating on the last
Trading Day in the period ending the following December 31. The duration of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Participant" shall mean an eligible Employee who has elected
to participate in the Plan.
(m) "Plan" shall mean this Horizon Health Corporation Employee
Stock Purchase Plan.
(n) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided, however, that the Purchase Price
may be adjusted by the Board pursuant to Section 21 of this Plan.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan, except:
(1) Any individual who has been employed by the Company for
less than three (3) months before the applicable Enrollment Date.
(2) Any employee whose customary employment less than 20 hours
per week.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (together with any other persons
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding
options to purchase stock of the Company constituting in the aggregate five
percent (5%) or more of the total combined voting power or value of all classes
of the capital stock of the Company, or (ii) to the extent that his or her
option rights to purchase stock under this Plan and any other employee stock
purchase plans of the Company and its subsidiaries exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
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shares at the time such option is granted) in the aggregate for each calendar
year in which such option right is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods of six (6) months' duration, with a new Offering Period
commencing on the first Trading Day on or after January 1 and July 1 each year,
or on such other date as the Board shall determine, and continuing thereafter
until terminated in accordance with Section 21 hereof. The first Offering
Period under the Plan shall commence with the first Trading Day on or after
January 1, 2000 and end on the last Trading Day on or before June 30, 2000. The
Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
provided by the Company and filing it with the designated human resources
representative of the Company prior to the applicable Enrollment Date, unless a
later time for submission is set by the Board for all eligible Employees with
respect to a given Offering Period.
(b) Payroll deductions for a Participant shall commence on the
first payroll payment date occurring on or after the applicable Enrollment Date
and shall end on the last payroll payment date occurring on or before the
Exercise Date of the Offering Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in Section 11 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a Participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount equal to the percentage (not
exceeding ten percent (10%)) of the Compensation which he or she receives on
each pay day during the Offering Period.
(b) All payroll deductions made for a Participant shall be credited
to his or her account under the Plan. Payroll deductions shall only be in whole
percentages of the Participant's Compensation. A Participant may not make any
additional payments into such account. A Participant's account shall be no more
than a bookkeeping account maintained by the Company, and neither the Company
nor any Subsidiary shall be obligated to segregate or hold in trust or escrow
any funds in a Participant's account.
(c) A Participant may discontinue his or her participation in the
Plan as provided in Section 11 hereof, but no other change can be made and,
specifically, a Participant may not alter the rate of his or her payroll
deductions during an Offering Period. A Participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 11 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
Participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. In such event, payroll deductions shall
recommence at the rate provided in such Participant's subscription agreement at
the beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the Participant as provided in
Section 11 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the Participant must make adequate
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provision for federal, state, or other tax withholding obligations, if any,
which arise upon the exercise of the option or the disposition of the Common
Stock. At any time, the Company may, but shall not be obligated to, withhold
from the Participant's compensation the amount necessary for the Company to
meet applicable withholding obligations related to the Participant's tax
obligations, including any withholding required to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee which may be available to it.
7. GRANT OF OPTION. Effective on the Enrollment Date of each Offering
Period, as determined at the end of the respective Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) a number of shares of the Company's Common Stock
determined by dividing such Employee's total payroll deductions actually made
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price without adjustment for changes
in the Compensation of the Participant during the applicable Offering Period;
provided (i) that in no event shall an employee be permitted to purchase in an
Offering Period more than 12,500 shares (subject to adjustment pursuant to
Section 20), and (ii) that such purchase shall be subject to the limitations
set forth in Sections 3(b) and 14(b) hereof. Exercise of the option shall occur
as provided in Section 8 hereof, unless the Participant has withdrawn pursuant
to Section 11 hereof. The Option shall expire on the last day of the Offering
Period.
8. EXERCISE OF OPTION. Unless a Participant withdraws from the Plan as
provided in Section 11 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number
of full shares subject to option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be retained in the Participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the Participant as provided
in Section 11 hereof. Any other monies left over in a Participant's account
after the Exercise Date shall be returned to the Participant. During a
Participant's lifetime, a Participant's option to purchase shares hereunder is
exercisable only by him or her.
9. RESTRICTION ON TRANSFER OF SHARES. For a period of three months
following each Exercise Date, a Participant shall be restricted from selling or
otherwise transferring any of the shares purchased by the Participant on that
Exercise Date; provided, however, that such restriction in transfer will cease
immediately upon the termination of employment of the Participant. The stock
certificates evidencing the shares acquired pursuant to the Plan will contain a
legend evidencing such restriction on transfer.
10. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange for the delivery
to each Participant a stock certificate evidencing the shares purchased upon
exercise of his or her option, subject to the restrictions pursuant to Section
9 hereof.
11. WITHDRAWAL.
(a) A Participant may withdraw all, but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time on or before fifteen (15) calendar
days prior to the Exercise Date by giving written notice to the designated
representative of the Company in the form provided by the Company. All of the
Participant's payroll deductions credited to his or her account shall be paid
to such Participant promptly after receipt of notice of withdrawal, such
Participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a Participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period or any Offering Period thereafter unless the Participant delivers to the
Company a new subscription agreement.
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(b) A Participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
Participant withdraws.
12. TERMINATION OF EMPLOYMENT. Upon a Participant's ceasing to be an
Employee for any reason at any time on or prior to an Exercise Date of an
Offering Period, he or she shall be deemed to have elected to withdraw from the
Plan, and the payroll deductions credited to such Participant's account during
such Offering Period shall be returned to such Participant or, in the case of
his or her death, to the person or persons entitled thereto under Section 16
hereof, and such Participant's option shall be automatically terminated.
13. NO INTEREST. No interest shall accrue or be payable on the payroll
deductions of a Participant in the Plan.
14. STOCK.
(a) The shares of Common Stock to be sold to Participants under
the Plan may, at the election of the Company, be either treasury shares or
shares originally issued by the Company.
(b) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 20 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 250,000 shares in calendar year 2000, plus an annual increase to be
added on the first day of each calendar year beginning in 2001 in the amount of
50,000 shares. If, on a given Exercise Date, the number of shares with respect
to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(c) The Participant shall have no interest or voting rights in
shares covered by his option or in any dividends declared by the Company in
respect of its outstanding Common Stock until such option has been exercised.
(d) Shares to be delivered to a Participant under the Plan shall
be registered in the name of the Participant or in the name of the Participant
and his or her spouse, as designated by the Participant.
15. ADMINISTRATION. The Plan shall be administered by the Board or a
designated committee of members of the Board appointed by the Board. Initially,
the Board has designated the Compensation and Option Committee of the Board of
Directors as responsible for administering the Plan. The Board or its
designated committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its designated committee shall,
to the full extent permitted by law, be final and binding upon all parties.
16. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of such Participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
Participant of such shares and cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
prior to exercise of the option. If a Participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
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(b) Such designation of beneficiary may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
17. TRANSFERABILITY. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 16 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 11 hereof.
18. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan shall be general corporate funds and as such may be used
by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions or pay interest thereon.
19. REPORTS. Individual accounts shall be maintained for each
Participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
20. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves, the maximum number of shares
each Participant may purchase per Offering Period (pursuant to Section 7), as
well as the price per share and the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"),
and shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each Participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the Participant's option has been changed to the New Exercise Date and that the
Participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the Participant has withdrawn from the Offering
Period as provided in Section 11 hereof.
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(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or
an equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each Participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the Participant's option has been changed to the New
Exercise Date and that the Participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
Participant has withdrawn from the Offering Period as provided in Section 11
hereof.
21. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 20
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Offering
Period or the Plan is in the best interests of the Company and its
stockholders. Except as provided in Sections 20 and 21 hereof, no amendment may
make any change in any option theretofore granted which adversely affects the
rights of any Participant. To the extent necessary to comply with Section 423
of the Code (or any other applicable law, regulation or stock exchange rule),
the Company shall obtain shareholder approval in such a manner and to such a
degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board shall be entitled to change the Offering Periods, limit the frequency
and/or number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount
designated by a Participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's Compensation, and establish such other limitations or procedures
as the Board determines in its sole discretion advisable which are consistent
with the Plan.
(c) In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable, modify
or amend the Plan to reduce or eliminate such accounting consequence including,
but not limited to:
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan Participants.
28
<PAGE> 31
22. NOTICES. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
23. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
24. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company; provided, however, that to the extent that options
are granted under the Plan prior to its approval by the stockholders, the
options shall be contingent on approval of the Plan by the stockholders in
accordance with Treasury Regulations Section 1.423-2(c) (1999). In the event
that the Plan is not approved by the stockholders of the Company at its Annual
Meeting of Stockholders to be held in January, 2000, the Plan shall terminate
and any payroll deductions of Participants during the first Offering Period
under the Plan shall be paid to the Participants. The Plan shall continue in
effect for a term of ten (10) years unless sooner terminated by the Board
pursuant to Section 21 hereof.
25. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. In the cases of any such persons, this Plan and options issued to
such persons shall be deemed to contain, and the shares issued upon exercise of
such options shall be subject to, such additional conditions and restrictions
as may be required by Rule 16b-3 to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions on behalf of
such persons.
29
<PAGE> 32
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HORIZON HEALTH CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 21, 2000
The undersigned hereby constitutes and appoints JAMES W. McATEE and RONALD
C. DRABIK, each with power to act with or without the other and with full power
of substitution, as Proxies of the undersigned to represent and to vote all
shares of the Common Stock of Horizon Health Corporation (the "Company")
standing in the name of the undersigned, at the Annual Meeting of Stockholders
of the Company to be held at the executive offices of the Company located at
1500 Waters Ridge Drive, Lewisville, Texas 75057-6011, on Friday, January 1,
2000, at 9:00 a.m., Central Time, and at any and all adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE SEVEN NOMINEES OF THE BOARD OF DIRECTORS LISTED IN
PROPOSAL 1 AND FOR THE APPROVAL OF PROPOSALS 2 AND 3. IF THE EXECUTED PROXY
DOES NOT WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF A NOMINEE FOR DIRECTOR
IN PROPOSAL 1, THE PROXY WILL BE DEEMED TO GRANT AUTHORITY TO VOTE FOR THE
ELECTION OF SUCH NOMINEE AND WILL BE SO VOTED. THE PROXIES NAMED HEREIN ARE
EACH AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY AND ALL ADJOURNMENTS THEREOF.
The undersigned hereby revokes any proxy or proxies heretofore given. This
Proxy may be revoked at any time before it is exercised by following the
procedures stated in the Proxy Statement.
(PLEASE MARK, SIGN AND DATE ON THE OTHER SIDE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.)
<PAGE> 33
<TABLE>
<CAPTION>
<S> <C> <C>
A [X] Please mark your votes
as in this example.
WITHHOLD
FOR all nominees listed AUTHORITY
(except as listed to the to vote for all NOMINEES: James Ken Newman
contrary below) nominees listed James W. McAtee
Jack R. Anderson
1. Election of [ ] [ ] George E. Bello
Directors. William H. Longfield
Donald E. Steen
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL James E. Buncher
NOMINEE, MARK THE FOR BOX AND WRITE EACH SUCH NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW:
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Proposal to approve the Horizon Health [ ] [ ] [ ]
Corporation Employee Stock Purchase
Plan.
3. Proposal to ratify the appointment of PricewaterhouseCoopers
LLP as the independent accountants for the Company for the fiscal year [ ] [ ] [ ]
ending August 31, 2000.
4. The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the Annual Meeting and any and all
adjournments thereof.
PLEASE MARK, SIGN AND DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
</TABLE>
SIGNATURE Dated SIGNATURE Dated
--------------- ----- ----------------- -----
IF HELD JOINTLY
NOTE: Please date and sign exactly as name appears hereon. When shares of
Common Stock are owned by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign
in full partnership name by authorized person.
<PAGE> 34
EMPLOYEES SAVINGS AND PROFIT SHARING PLAN
HORIZON HEALTH CORPORATION
VOTING DIRECTION FOR ANNUAL MEETING OF STOCKHOLDERS
OF HORIZON HEALTH CORPORATION
TO BE HELD ON JANUARY 21, 2000
The undersigned hereby directs Chase Bank of Texas, National Association,
as Trustee (the "Trustee") of Horizon Health Corporation Employees Savings and
Profit Sharing Plan (the "Plan"), to vote, at the Annual Meeting of
Stockholders of Horizon Health Corporation to be held on January 21, 2000, and
at any and all adjournments thereof, all of the shares of Common Stock of
Horizon Health Corporation, a Delaware corporation ("Horizon"), held in my
individual Plan account as of the record date of the vote as set forth on the
reverse side of this Voting Direction card.
WHEN PROPERLY EXECUTED, THIS VOTING DIRECTION WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED PLAN PARTICIPANT. IF NO DIRECTION IS GIVEN,
THIS VOTING DIRECTION WILL BE VOTED FOR THE SEVEN NOMINEES OF THE BOARD OF
DIRECTORS LISTED IN PROPOSAL 1 AND FOR THE APPROVAL OF PROPOSALS 2 AND 3. IF
THE EXECUTED VOTING DIRECTION DOES NOT WITHHOLD AUTHORITY TO VOTE FOR THE
ELECTION OF A NOMINEE FOR DIRECTOR IN PROPOSAL 1, THE VOTING DIRECTION WILL BE
DEEMED TO GRANT AUTHORITY TO VOTE FOR THE ELECTION OF SUCH NOMINEE AND WILL BE
SO VOTED. THE TRUSTEE IS AUTHORIZED TO VOTE IN ITS DISCRETION UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY AND ALL
ADJOURNMENTS THEREOF.
The undersigned hereby revokes any and all Voting Direction cards
heretofore given. This Voting Direction may be revoked at any time before it is
exercised by following the procedures stated in the Participant Direction
letter accompanying this Voting Direction card.
(PLEASE MARK, SIGN AND DATE ON THE OTHER SIDE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.)
<PAGE> 35
<TABLE>
<CAPTION>
<S> <C> <C>
A [X] Please mark your votes
as in this example.
WITHHOLD
FOR all nominees listed AUTHORITY
(except as listed to the to vote for all NOMINEES: James Ken Newman
contrary below) nominees listed James W. McAtee
Jack R. Anderson
1. Election of [ ] [ ] George E. Bello
Directors. William H. Longfield
Donald E. Steen
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL James E. Buncher
NOMINEE, MARK THE FOR BOX AND WRITE EACH SUCH NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW:
-------------------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Proposal to approve the Horizon Health [ ] [ ] [ ]
Corporation Employee Stock Purchase
Plan.
3. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants for the Company for the fiscal year ending August [ ] [ ] [ ]
31, 2000.
4. The Trustee is authorized to vote in its discretion upon such other
matters as may properly come before the Annual Meeting and any and all
adjournments thereof.
PLEASE MARK, SIGN AND DATE AND RETURN THIS VOTING DIRECTION PROMPTLY IN THE
ENCLOSED ENVELOPE.
</TABLE>
SIGNATURE Dated SIGNATURE Dated
--------------- ----- ----------------- -----
(If applicable)
NOTE: Please date and sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such.
<PAGE> 36
December 10, 1999
Participants Owning Horizon Common Stock
Through The Horizon Health Corporation
Employees Savings and Profit Sharing Plan
Re: Your Opportunity to Instruct the Trustee How To Vote the
Horizon Common Stock in Your 401(k) Plan Account At Annual
Meeting of Stockholders
Dear Participant:
An Annual Meeting of Stockholders (the "Annual Meeting") of Horizon
Health Corporation, a Delaware corporation (the "Company"), will be held at the
executive offices of the Company located at 1500 Waters Ridge Drive,
Lewisville, Texas 75057-6011, on Friday, January 21, 2000, at 9:00 a.m.,
Central Time, for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. Only holders of record of the Common Stock, $.01 par
value ("Common Stock"), of the Company at the close of business on December 3,
1999 (the "Record Date"), will be entitled to vote at the Annual Meeting.
Chase Bank of Texas, National Association, as Trustee (the "Trustee")
of the Horizon Health Corporation Employees Savings and Profit Sharing Plan
(the "Plan"), is the record holder of the shares of Horizon Common Stock held
in your individual Plan account as of the Record Date. As described below, the
Trustee hereby requests your directions as to how you want the Trustee to vote
at the Annual Meeting the shares of Common Stock held in your individual Plan
account as of the Record Date.
You should find the following items enclosed:
o A "Proxy Statement" including a Notice of Annual Meeting of
Stockholders describing the matters to be voted on at the
Annual Meeting. The matters currently anticipated to be voted
on at the Annual Meeting consist of (a) the election of seven
directors of the Company to serve for the ensuing year, (b) a
proposal to approve the Horizon Health Corporation Employee
Stock Purchase Plan, and (c) a proposal to ratify the
appointment of PricewaterhouseCoopers LLP as the independent
accountants for the Company for the fiscal year ending August
31, 2000. All of these matters, together with other
information regarding the Annual Meeting, are described in
more detail in the accompanying Proxy Statement.
o The Company's Annual Report to Stockholders for the fiscal
year ended August 31, 1999.
o A "Voting Direction" card.
<PAGE> 37
o A pre-addressed postage-paid return envelope that you may use
to return your Voting Direction card to American Stock
Transfer & Trust Company, the Transfer Agent for the Common
Stock of the Company (the "Transfer Agent").
Please read the Proxy Statement for a detailed explanation of the
matters to be considered and voted on at the Annual Meeting before completing
your Voting Direction card. Also, please note that you do not have to complete
and submit any proxy form, or otherwise grant any proxy to any person with
respect to the shares of Horizon Common Stock held in your Plan account at the
Record Date, since you are not the holder of record of such shares. Under the
terms of the Plan, however, you have the right to direct the Trustee as to how
you want the Trustee to vote such shares at the Annual Meeting. All you have to
do to exercise this right is follow the instructions in this letter and in the
attached Voting Direction card.
EXPLANATION OF VOTING RULES OF THE PLAN
All voting rights of shares of Horizon Common Stock held in a
participant's Plan account belong to that participant. The participant may
exercise such voting rights by supplying written voting instructions to the
Trustee using the Voting Direction card enclosed for this purpose. Under the
terms of the Plan, the Trustee will vote the shares of Horizon Common Stock
held in the participant's account at the Record Date in accordance with the
participant's written instructions. Any shares of Common Stock as to which a
participant does not supply to the Trustee timely voting instructions will not
be voted.
Pursuant to these requirements of the Plan, the Transfer Agent is
delivering this letter and the enclosed materials to you to request your
direction as to how you want the Trustee to vote at the Annual Meeting the
shares of Horizon Common Stock held in your individual Plan account at the
Record Date.
STEPS YOU NEED TO TAKE TO INSTRUCT THE TRUSTEE HOW TO VOTE THE SHARES OF
HORIZON COMMON STOCK HELD IN YOUR INDIVIDUAL ACCOUNT IN THE PLAN
Once you have reached a decision concerning how you want the shares of
Horizon Common Stock held in your Plan account at the Record Date to be voted,
you need to do the following:
STEP 1: Mark your choice as to each such matter on the enclosed Voting
Direction card, date the card, and sign it.
STEP 2: Mail the Voting Direction card to American Stock Transfer &
Trust Company using the enclosed pre-addressed, U.S. mail postage-paid return
envelope, so that it will be RECEIVED by no later than 5:00 p.m.
E.S.T. on January 18, 2000.
If the Transfer Agent does not receive your Voting Direction card by
January 18, 2000, or if the Transfer Agent receives your Voting Direction card
by January 18, 2000, but it is not signed, the shares of Horizon Common Stock
held in your Plan account at the Record Date will not be voted.
<PAGE> 38
CHANGING OR REVOKING YOUR VOTING DIRECTION CARD
If, after submitting your Voting Direction card, you want to change
your vote, you must obtain a new Voting Direction card from the Transfer Agent
by writing, faxing, or telephoning the Transfer Agent at the following address,
phone number, or fax number:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10269-0436
Telephone No.: (800) 937-5449
Fax No.: (718) 921-8336
By properly completing and signing and timely returning a new Voting
Direction card to the Transfer Agent you will revoke any and all Voting
Direction cards previously submitted. You may also revoke your Voting Direction
by notifying the Transfer Agent in a signed writing of your decision to revoke
it, but in such a case, if you do not also timely submit a new Voting Direction
card to the Transfer Agent, your shares will not be voted. After January 18,
2000, you may not change or revoke your Voting Direction.
YOUR VOTING DIRECTION CARD WILL BE KEPT CONFIDENTIAL
Neither the Trustee nor the Transfer Agent will release your Voting
Direction card or any copy of it, or otherwise divulge how you directed the
Trustee to vote, to any person, including the Company or any of its individual
officers or employees, except as the Trustee or the Transfer Agent may be
compelled to do so by law.
Enclosures
