EXHIBIT 10.2
CHANGE IN CONTROL AGREEMENT
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Agreement, made this 22nd day of March, 2004, by and between Gentiva
Health Services, Inc., a Delaware corporation (the "Company"), and Ronald A.
Malone (the "Executive").
WHEREAS, the Executive is a key employee of the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") considers
the maintenance of a sound management to be essential to protecting and
enhancing the best interests of the Company and its stockholders and recognizes
that the possibility of a change in control raises uncertainty and questions
among key employees and may result in the departure or distraction of such key
employees to the detriment of the Company and its stockholders; and
WHEREAS, the Board wishes to assure that it will have the continued
dedication of the Executive and the availability of his or her advice and
counsel, notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company; and
WHEREAS, the Executive and the Company previously entered into a Change
in Control Agreement dated June 14, 2002; and
WHEREAS, the Executive and the Company wish to amend and restate the
Change in Control Agreement as set forth herein; and
WHEREAS, the Executive is willing to continue to serve the Company
taking into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Operation and Term of Agreement. This Agreement shall commence on
the date set forth above and shall terminate on the fourth anniversary of such
date unless this Agreement is extended or terminated earlier, in either case as
set forth below; provided, however, that after a Change in Control of the
Company during the term of this Agreement, this Agreement shall remain in effect
until all of the obligations of the parties hereunder are satisfied and the
Protection Period has expired. The term of this Agreement shall be extended
automatically for consecutive periods of one year unless either party shall
provide notice to the other of its intention not to so extend, such notice to be
given not less than six months prior to the end of the initial four year term or
any extension thereof, as the case may be. Notwithstanding the foregoing, prior
to a Change in Control this Agreement shall immediately terminate upon
termination of the Executive's employment, except in the case of such
termination under circumstances set forth in the last paragraph of Section 4
below.
2. Change in Control; Protection Period. A "Change in Control" shall
be deemed to occur on the date that any of the following events occur:
(a) any person or persons acting together which would constitute
a "group" for purposes of Section 13(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (other than the Company or any
subsidiary and other than Permitted Holders) shall beneficially own (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at
least 25% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of the Board;
(b) either (i) Current Directors (as herein defined) shall cease
for any reason to constitute at least a majority of the members of the
Board (for these purposes, a "Current Director" shall mean any member
of the Board as of the date hereof, and any successor of a Current
Director whose election, or nomination for election by the Company's
shareholders, was approved by at least two-thirds of the Current
Directors then on the Board) or (ii) at any meeting of the shareholders
of the Company called for the purpose of electing directors, a majority
of the persons nominated by the Board for election as directors shall
fail to be elected;
(c) consummation of (i) a plan of complete liquidation of the
Company, or (ii) a merger or consolidation of the Company (A) in which
the Company is not the continuing or surviving corporation (other than
a consolidation or merger with a wholly owned subsidiary of the Company
in which all shares of common stock of the Company (the "Common Stock")
outstanding immediately prior to the effectiveness thereof are changed
into common stock of the subsidiary) or (B) pursuant to which the
Common Stock is converted into cash, securities or other property,
except a consolidation or merger of the Company in which the holders of
the Common Stock immediately prior to the consolidation or merger have,
directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such
consolidation or merger or in which the Board immediately prior to the
merger or consolidation would, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
continuing or surviving corporation; or
(d) consummation of a sale or other disposition (in one
transaction or a series of transactions) of all or substantially all of
the assets of the Company.
For purposes of this Section 2 under this Agreement, "Permitted
Holders" shall mean Miriam Olsten, Stuart Olsten, and Cheryl Olsten, and each of
their spouses, their lineal descendants and their estates and their Affiliates
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or Associates (as defined in Rule 12b-2 of the Exchange Act) (collectively the
"Olsten Stockholders"), so long as the Olsten Stockholders beneficially own 20%
or less of the voting power of all classes of capital stock of the Company
entitled to vote generally in the election of the Board.
A "Protection Period" shall be the period beginning on the date of a
Change in Control and ending on the third anniversary of the date on which the
Change in Control occurs.
3. Termination Following Change in Control. The Executive shall be
entitled to the benefits provided in Section 4 hereof upon any termination of
his or her employment with the Company within a Protection Period, except a
termination of employment (a) because of his or her death, (b) because of a
"Disability," (c) by the Company for "Cause," or (d) by the Executive other than
for "Good Reason."
(i) Disability. The Executive's employment shall be deemed to
have terminated because of a "Disability" if the Executive applies for
and is determined to be eligible to receive disability benefits under
the Company's long-term disability plan or program, or, in the absence
of such a plan or program, as defined in Section 22 of the Internal
Revenue Code of 1986, as amended (the "Code").
(ii) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination due to (A) the
Executive's conviction of a felony, or (B) any act of willful fraud,
dishonesty or moral turpitude.
(iii) Without Cause. The Company may terminate the employment of
the Executive without Cause during a Protection Period only by giving
the Executive written notice of termination to that effect. In that
event, the Executive's employment shall terminate on the last day of
the month in which such notice is given (or such later date as may be
specified in such notice), and the benefits set forth in Section 4
hereof shall be provided to the Executive.
(iv) Good Reason. Termination of employment by the Executive for
"Good Reason" shall mean termination:
(A) if there has occurred a reduction by the Company in
the Executive's annual base salary (other than any reduction
therein which is in proportion to reductions in the base salaries
of all of the Company's executive officers, unless, however, such
proportionate reduction exceeds 20% of the Executive's annual base
salary);
(B) if without the Executive's written consent, the
Company has required the Executive to be relocated anywhere in
excess of forty (40) miles from the Executive's office location in
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Melville, New York, except for required travel on the business of
the Company;
(C) if there has occurred a failure by the Company to
maintain plans providing benefits not materially less favorable
than those provided by any benefit or compensation plan
(including, without limitation, any incentive compensation plan,
bonus plan or program, retirement, pension or savings plan, stock
option plan, restricted stock plan, life insurance plan, health
and dental plan and disability plan) in which the Executive is
participating immediately before the beginning of the Protection
Period, or if the Company has taken any action which would
adversely affect the Executive's participation in or reduce the
Executive's benefits (other than stock option or restricted stock
grants) under any of such plans or deprive the Executive of any
material fringe benefit enjoyed by the Executive immediately
before the beginning of the Protection Period, or if the Company
has failed to provide the Executive with the number of paid
vacation days to which he or she would be entitled in accordance
with the normal vacation policy of the Company as in effect
immediately before the beginning of the Protection Period;
provided, however, that a reduction in benefits under the
Company's tax-qualified retirement, pension or savings plans or
its life insurance plan, health and dental plan, disability plans
or other insurance plans which reduction applies equally to all
participants in the plans and has a de minimis effect on the
Executive shall not constitute "Good Reason" for termination by
the Executive;
(D) a material diminution in the Executive's positions,
duties and responsibilities from those described in Section 2 of
the Executive's Employment Agreement with the Company dated of
even date herewith;
(E) if the Company has failed to obtain the assumption of
the obligations contained in this Agreement by any successor as
contemplated in Section 9(c) hereof; or
(F) if there occurs any purported termination of the
Executive's employment by the Company without Cause which is not
effected pursuant to a written notice of termination as described
in subsection (iii) above.
The Executive shall exercise his or her right to terminate employment
for Good Reason by giving the Company a written notice of termination
specifying in reasonable detail the circumstances constituting such
Good Reason. In that event, the Executive's employment shall terminate
on the last day of the month in which such notice is given.
A termination of employment by the Executive within a Protection Period
shall be for Good Reason if one of the occurrences specified in this
subsection (iv) shall have occurred, notwithstanding that the Executive
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may have other reasons for terminating employment, including employment
by another employer which the Executive desires to accept.
4. Benefits Upon Termination Within Protection Period. If, within a
Protection Period, the Executive's employment by the Company shall be terminated
(a) by the Company not for Cause and not due to the Executive's death or
Disability, or (b) by the Executive for Good Reason, the Executive shall be
entitled to the benefits provided for below (and the Executive shall not be
entitled to severance benefits otherwise payable under the Executive's
Employment Agreement with the Company or under any other severance plan or
policy of the Company):
(i) The Company shall pay to the Executive through the date of
the Executive's termination of employment salary at the rate then in
effect, together with salary in lieu of vacation accrued to the date on
which his employment terminates, in accordance with the standard
payroll practices of the Company;
(ii) The Company shall pay to the Executive an amount in cash
equal to two and one half (2.5) times the sum of (A) the Executive's
annual base salary in effect immediately prior to the date of the
Executive's termination of employment or the date of the Change in
Control (whichever is higher), and (B) the higher of (x) the
Executive's target annual bonus for the year that includes the date of
the Executive's termination of employment or (y) the Executive's target
annual bonus for the year that includes the date of the Change in
Control; and such payment shall be made in a lump sum within 10
business days after the date of such termination of employment;
(iii) The Company shall continue to cover the Executive and his
or her dependents under, or provide the Executive and his or her
dependents with insurance coverage no less favorable than, the
Company's life, disability, health, dental or other employee welfare
benefit plans or programs (as in effect on the day immediately
preceding the Protection Period or, at the option of the Executive, on
the date of termination of his or her employment) for a period equal to
the lesser of (x) two years following the date of termination or (y)
until the Executive is provided by another employer with benefits
substantially comparable to the benefits provided by such plans or
programs, provided, however, that the provision of this benefit shall
be contingent upon the cooperation of the Executive (or his or her
dependent, as applicable) in any reasonable request by the Company to
facilitate the provision of such benefit, including responding to
questionnaires and submitting to minimally intrusive medical
examinations;
(iv) All options to purchase Company stock held by the Executive
and all restricted shares of Company stock, restricted Company share
units and other equity-based compensation awards held by the Executive
shall become immediately vested in full upon such termination of
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employment, and all such stock options shall be exercisable for three
years following such termination of employment (but not beyond the
original full term of the stock option); and
(v) All of the Executive's benefits accrued under the pension,
retirement, savings and deferred compensation plans of the Company
shall become vested in full; provided, however, that to the extent such
accelerated vesting of benefits cannot be provided under one or more of
such plans consistent with applicable provisions of the Internal
Revenue Code of 1986, as amended, such benefits shall be paid to the
Executive in a lump sum within 10 days after termination of employment
outside the applicable plan.
Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to the benefits described in this Section 4, if the
Executive's employment with the Company is terminated by the Company (other than
for Cause) within one year prior to the date on which a Change in Control
occurs, and it is reasonably demonstrated that such termination (i) was at the
request of a third party who has taken steps reasonably calculated or intended
to effect a Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control. In such event, amounts will be payable
hereunder only following the Change in Control.
5. Non-exclusivity of Rights. Except as expressly set forth herein,
this Agreement shall not prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plans, practices,
policies or programs provided by the Company or any of its subsidiaries and for
which the Executive may qualify, nor shall it limit or otherwise affect such
rights as the Executive may have under any stock option or other agreements with
the Company or any of its subsidiaries. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, practice,
policy or program of the Company or any of its subsidiaries at or subsequent to
the date of termination of the Executive's employment shall be payable in
accordance with such plan, practice, policy or program.
6. Full-Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount of any
payment hereunder) if the Executive substantially prevails in the dispute or
contest, plus in each case interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Code. In any such action brought by the Executive
for damages or to enforce any provisions of this Agreement, the Executive shall
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be entitled to seek both legal and equitable relief and remedies, including,
without limitation, specific performance of the Company's obligations hereunder,
in his or her sole discretion.
7. Excise Tax Gross-Up.
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(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment, award, benefit or
distribution (including, without limitation, the acceleration of any payment,
award, distribution or benefit), by the Company or any of its affiliates to or
for the benefit of the Executive (whether pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 7) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any corresponding provisions of state or
local tax law, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax, income tax or employment tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to such
taxes, the Executive retains from the Gross-Up Payment an amount equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions
of this Section 7(a), if it shall be determined that the Executive is entitled
to a Gross-Up Payment, but that the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code does not exceed
by more than $25,000 the greatest amount (the "Safe Harbor Amount") that could
be paid to the Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-up Payment shall be made to the Executive and
the amounts payable under this Agreement shall be reduced so that the Payments,
in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the
amounts payable hereunder, if applicable, shall be made by first reducing the
payments under Section 4(ii), unless an alternative method of reduction is
elected by the Executive prior to the effective date of the event that triggers
the Payments. For purposes of reducing the payments to the Safe Harbor Amount,
only amounts payable under this Agreement (and no other Payments) shall be
reduced. If the reduction of the amounts payable under this Agreement would not
result in a reduction of the Payments to the Safe Harbor Amount, no amounts
payable under this Agreement shall be reduced pursuant to this Section 7.
(b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including the determination of whether
a Gross-Up Payment is required and of the amount of any such Gross-up Payment,
shall be made by the outside firm of auditors regularly used by the Company to
audit its financial statements at the time of the Change in Control (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after the receipt of
notice from the Company that the Executive has received a Payment, or such
earlier time as is requested by the Company. The initial Gross-Up Payment, if
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any, as determined pursuant to this Section 7(b), shall be paid to the Executive
(or for the benefit of the Executive to the extent of the Company's withholding
obligation with respect to applicable taxes) no later than the later of (i) the
due date for the payment of any Excise Tax, and (ii) the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm
meeting the requirements of this Section 7(b) shall be binding upon the Company
and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 7(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive. The fees and disbursements of the Accounting Firm shall be paid by
the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but not later than ten business days after the Executive
receives written notice of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all fees, costs
and expenses (including additional interest and penalties, and reasonable
attorneys' fees) incurred in connection with such contest and shall indemnify
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and hold the Executive harmless, on an after-tax basis, for any Excise Tax,
income tax or employment tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of fees, costs
and expenses. Without limitation on the foregoing provisions of this Section
7(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax, income tax
or employment tax, including interest or penalties with respect thereto, imposed
with respect to such advance; and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 7(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 7(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its subsidiaries and which
has not become public knowledge (other than by acts of the Executive or his or
her representatives in violation of this Agreement). After the date of
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
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those designated by it. In no event shall an asserted violation of the
provisions of this Section 8 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
9. Successors.
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(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's heirs,
executors, administrators, legal representatives or successor(s) in interest.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
10. Miscellaneous.
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(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
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Ronald A. Malone
6 Target Rock Road
Lloyd Harbor, NY 11743
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If to the Company:
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Gentiva Health Services, Inc.
3 Huntington Quadrangle, Suite 200S
Melville, NY 11747
Attention: Chairman, Compensation, Corporate Governance
and Nominating Committee of the Board of Directors
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof but, except
as specifically provided in Section 4 hereof does not supersede or override the
provisions of (i) any stock option, employee benefit or other plan, program,
policy or practice in which Executive is a participant or under which the
Executive is a beneficiary, or (ii) the Employment Agreement of even date
herewith between the Executive and the Company; provided, however, that this
Agreement does supersede and replace any prior severance agreement and change in
control agreements between the Company and the Executive, including specifically
all such agreements entered into by the Executive and the Company as of March
14, 2000 and those entered into on June 14, 2002.
[Next Page is Signature Page]
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed as of the day and year first above written.
/s/ RONALD A. MALONE
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Name: Ronald A. Malone
GENTIVA HEALTH SERVICES, INC.
By: /s/ STUART R. LEVINE
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Name: Stuart R. Levine
Title: Chairman, Compensation, Corporate
Governance and Nominating
Committee of the Board of Directors
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