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
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/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Gentiva Health Services, Inc.
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(Name of Registrant as Specified In Its Charter)
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[LOGO] GENTIVA HEALTH SERVICES
April 10, 2003
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Gentiva Health Services, Inc. to be held on Friday, May 16, 2003 at 9:30 a.m. at
the Fleet Auditorium located at 300 Broad Hollow Road, Melville, New York
11747-8943.
Details about the meeting, nominees for the Board of Directors and other
matters to be acted upon are presented in the Notice of Annual Meeting and Proxy
Statement that follow. We would appreciate your signing, dating and returning
the enclosed proxy in the envelope provided for that purpose so that your shares
may be represented and voted at the Annual Meeting.
Thank you for your continued support, and we look forward to greeting you
personally if you are able to be present.
Sincerely,
/s/ Ronald A. Malone
Ronald A. Malone
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
GENTIVA HEALTH SERVICES, INC.
3 HUNTINGTON QUADRANGLE 2S
MELVILLE, NEW YORK 11747-8943
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2003
----------------------------
The Annual Meeting of Shareholders of Gentiva Health Services, Inc., a
Delaware corporation (the "Company"), will be held on Friday, May 16, 2003, at
9:30 a.m., New York time, at the Fleet Auditorium located at 300 Broad Hollow
Road, Melville, New York 11747-8943 for the following purposes:
1. To elect three directors, each to serve for a term of three years;
2. To consider and vote upon a proposal to ratify and approve the
appointment by the Audit Committee of the Board of Directors of
PricewaterhouseCoopers LLP, as independent accountants of the Company
for the fiscal year ending December 28, 2003; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 21, 2003 are
entitled to notice of and to vote at such meeting or any adjournments thereof.
By Order of the Board of Directors
/s/ John R. Potapchuk
John R. Potapchuk
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, TREASURER AND SECRETARY
Dated: April 10, 2003
Melville, New York
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY PROMPTLY. A STAMPED REPLY ENVELOPE IS ENCLOSED FOR THAT PURPOSE. IF YOU DO
ATTEND AND DECIDE TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY.
[LOGO] GENTIVA HEALTH SERVICES
PROXY STATEMENT
The 2003 Annual Meeting of Shareholders of Gentiva Health Services, Inc.
(the "Company" or "Gentiva") will be held on Friday, May 16, 2003, at 9:30 a.m.
at the Fleet Auditorium, located at 300 Broad Hollow Road, Melville, New York
11747-8943 for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders. The Board of Directors is soliciting proxies to be used
at the Annual Meeting and any adjournment and is furnishing this Proxy Statement
and the accompanying proxy in connection with its solicitation. Only
shareholders of record at the close of business on March 21, 2003 are entitled
to vote at such meeting. This Proxy Statement and the accompanying proxy are
first being sent or given to shareholders on or about April 10, 2003.
A shareholder who executes and returns the accompanying proxy may revoke it
at any time before it is voted by giving notice in writing to the Secretary of
the Company, by granting a subsequent proxy or by appearing in person and voting
at the meeting. Any shareholder attending the meeting and entitled to vote may
vote in person whether or not the shareholder has previously submitted a proxy.
Common Stock of the Company held by shareholders who are "shareowners of record"
(meaning the shares are registered directly in their name) and who sign their
proxy card with no further instructions will be voted in accordance with the
recommendations of Gentiva's Board of Directors (FOR all of the nominees to the
Board of Directors and ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants). Common Stock held by shareholders
who are "beneficial owners" (meaning that the shares are held in a stock
brokerage account or by a bank or other nominee) and who sign their proxy card
with no further instructions will be voted in the discretion of the broker with
respect to the election of directors and ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants.
At the close of business on March 21, 2003, the record date for determining
shareholders entitled to vote at the Annual Meeting, 26,756,446 shares of the
Company's Common Stock were outstanding and entitled to vote at the Annual
Meeting. Each share of Common Stock is entitled to one vote. A majority of all
the shares entitled to vote at the meeting, present in person or represented by
proxy, shall constitute a quorum at the Annual Meeting, and an inspector of
election appointed for the meeting shall determine whether a quorum is present.
Proxies marked as abstentions and "broker non-votes" (where a nominee holding
shares for a beneficial owner has not received voting instructions from the
beneficial owner on a particular matter and such nominee does not possess or
choose to exercise its discretionary voting authority) are counted in
determining whether a quorum is present. Proxies marked as abstentions will have
the effect of a negative vote. "Broker non-votes" will have no effect on the
vote. Votes are counted by EquiServe Trust Company, N.A., the Company's
independent transfer agent and registrar.
The Company, whose principal executive offices are located at 3 Huntington
Quadrangle 2S, Melville, New York 11747-8943, was incorporated in Delaware in
August 1999 in contemplation of its split-off (the "Split-Off") from Olsten
Corporation ("Olsten"), which was effective on March 15, 2000.
A copy of the 2002 Annual Report to Shareholders, including a copy of the
Company's 2002 Form 10-K, is also being mailed to you herewith. The Annual
Report is not deemed part of the soliciting material for the proxy.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors shall consist of three classes of directors with
overlapping three-year terms and that the number of directors in each of the
three classes shall be as nearly equal as possible. The Company's Board of
Directors currently consists of nine members. Each class of directors is elected
in a different year for a term extending to the Annual Meeting to be held three
years later.
Three directors are to be elected at the 2003 Annual Meeting to serve for
terms ending at the 2006 Annual Meeting. All three of the directors in Class
III, Stuart R. Levine, Mary O'Neil Mundinger and Stuart Olsten, are standing for
re-election at this year's Annual Meeting.
The vote of a plurality of the shares of Common Stock present or
represented and entitled to vote at the meeting is required for election as a
director. Proxies will be voted at the meeting (unless authority to do so is
withheld) for the election as directors of the three nominees. If for any reason
any of the nominees is not a candidate (which is not expected) when the election
occurs, the proxies may be voted for a substitute nominee or nominees. The Board
of Directors recommends that shareholders vote FOR the election of each of these
nominees.
INFORMATION AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS
The following information, as reported to the Company, is shown below for
each nominee for director and each continuing director: name, age and principal
occupation; period during which he or she has served as a director; position, if
any, with the Company; certain business experience; other directorships held;
and the committees of the Board of Directors on which the nominee or continuing
director serves.
NOMINEES FOR WHOM PROXIES WILL BE VOTED
CLASS III - NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2006
Stuart R. Levine . . . . . . . . . . Mr. Levine has served as a director of the Company and a
member of the Compensation, Corporate Governance and
Nominating Committee of the Board since November 1999,
serving as Chairman of such Committee since June 2002. He
served as a director of Olsten Corporation from 1995 until
March 2000. Since June 1996 he has served as the chairman
and chief executive officer of Stuart Levine and Associates
LLC, an international consulting and training company. From
September 1992 to June 1996 he was chief executive officer
of Dale Carnegie & Associates, Inc. He is the author of the
best seller, The Leader in You. Mr. Levine currently serves
as a trustee of North Shore - LIJ Health System, and for 15
years, until 1995, he served as a vice chairman of North
Shore Hospital. Mr. Levine is 55 years old.
Mary O'Neil Mundinger. . . . . . . . Dr. Mundinger has served as a director of the Company since
November 2002. She is the Centennial Professor in Health
Policy at the Columbia University School of Nursing and
since 1986 has served as dean of Columbia's School of
Nursing. Dr. Mundinger is an elected member of the Institute
of Medicine of the National Academy of Sciences, the
American Academy of Nursing and the New York Academy of
Medicine. She is a director of Cell Therapeutics Inc.,
UnitedHealth Group and Welch Allyn, Inc. Dr. Mundinger is 65
years old.
2
Stuart Olsten. . . . . . . . . . . . Mr. Olsten has served as a director of the Company since
November 1999. He served as a director of Olsten Corporation
from 1986 until March 2000. From February 1999 until March
2000 he was the chairman of the board of directors of Olsten
Corporation. He was vice chairman of Olsten Corporation from
August 1994 to February 1999 and was president of Olsten
Corporation from April 1990 to October 1998. Since April
2001, he has been chairman of Olsten Venture Partners, which
acquires and manages companies in the food service industry.
Mr. Olsten is 50 years old.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THESE
NOMINEES.
DIRECTORS WHOSE TERM OF OFFICE DOES NOT EXPIRE AT THIS MEETING
CLASS I - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004
Victor F. Ganzi. . . . . . . . . . . Mr. Ganzi has served as a director of the Company and
Chairman of the Audit Committee of the Board since November
1999. He served as a director of Olsten Corporation from
1998 until March 2000. He has been president and chief
executive officer of The Hearst Corporation, a private
diversified communications company with interests in
magazine, newspaper and business publishing, television and
radio stations and cable programming networks, since June
2002. He served as Hearst's executive vice president from
March 1997 to June 2002 and its chief operating officer from
March 1998 to June 2002. From 1992 to 1997, at various
times, Mr. Ganzi served as Hearst's senior vice president,
chief financial officer and chief legal officer. From March
1995 until October 1999, he was also group head of Hearst's
Books/Business Publishing Group. He is chairman of the board
of directors of Hearst-Argyle Television, Inc. Mr. Ganzi is
56 years old.
Josh S. Weston . . . . . . . . . . . Mr. Weston has served as a director of the Company and a
member of the Compensation, Corporate Governance and
Nominating Committee of the Board since November 1999 and a
member of the Audit Committee of the Board since June 2002.
He served as a director of Olsten Corporation from 1995
until March 2000. Since May 1998, he has been honorary
chairman of Automatic Data Processing, Inc., a provider of
computerized transaction processing, data communication and
information services. He was chairman of Automatic Data
Processing, Inc. from 1982 to April 1998 and was its chief
executive officer from 1982 to August 1996. He is a director
of Aegis Communications, Inc., Automatic Data Processing,
Inc., J. Crew Inc. and Russ Berrie Corp. and a trustee of
Atlantic Health Systems, Inc. Mr. Weston is 74 years old.
Gail R. Wilensky . . . . . . . . . . Dr. Wilensky has served as a director of the Company since
March 2000. She served as a member of the Audit Committee of
the Board from March 2000 to February 14, 2003. She is
currently the John M. Olin Senior Fellow at Project HOPE, an
international health foundation, and Co-Chair of the
President's Task Force To Improve Healthcare Delivery For
Our Nation's Veterans. From 1997 - 2001, she chaired the
Medicare Payment
3
Advisory Commission. She served as deputy assistant to
President George H. Bush for policy development from March
1992 to January 1993 and as administrator of the Health Care
Financing Administration from January 1990 to March 1992.
She is an elected member of the Institute of Medicine and
serves as a trustee of the Combined Benefits Fund of the
United Mineworkers of America and the Research Triangle
Institute. She is an advisor to the Robert Wood Johnson
Foundation and The Commonwealth Fund. She is a director of
Advanced Tissue Sciences, Cephalon, ManorCare, Quest
Diagnostics, and UnitedHealth Group. Dr. Wilensky is 59
years old.
CLASS II - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2005
Edward A. Blechschmidt . . . . . . . Mr. Blechschmidt has served as a director of the Company
since November 1999 and served as president, chief executive
officer and chairman of the board of directors of the
Company from November 1999 until June 2002. He served as the
chief executive officer and a director of Olsten Corporation
from February 1999 until March 2000. He was also the
president of Olsten Corporation from October 1998 until
March 2000 and served as its chief operating officer from
October 1998 to February 1999. From August 1996 to October
1998 he was president and chief executive officer of Siemens
Nixdorf Americas, an information technology company. He is a
director of Lionbridge Technologies, Inc. and Neoforma, Inc.
Mr. Blechschmidt is 50 years old.
Ronald A. Malone . . . . . . . . . . Mr. Malone has served as chief executive officer and
chairman of the board of directors of the Company since June
2002. He served as executive vice president of the Company
from March 2000 to June 2002 and as president of the
Company's home health services division from January 2001 to
June 2002. Prior to joining the Company, he served in
various positions with Olsten Corporation including
executive vice president of Olsten and president, Olsten
Staffing Services, United States and Canada, from January
1999 to March 2000. From 1994 to December 1998, he served
successively as Olsten's senior vice president, southeast
division; senior vice president, operations; and executive
vice president, operations. Mr. Malone is 48 years old.
Raymond S. Troubh . . . . . . . . . Mr. Troubh has served as a director of the Company and a
member of the Compensation, Corporate Governance and
Nominating Committee of the Board since November 1999 and as
a member of the Audit Committee of the Board since May 2000.
He served as a director of Olsten Corporation from 1993
until March 2000. He has been a financial consultant for
more than five years. He is Chairman of Enron Corp. and a
director of ARIAD Pharmaceuticals, Inc., Diamond Offshore
Drilling Inc., General American Investors Company, Hercules
Incorporated, Triarc Companies and WHX Corporation. Mr.
Troubh became a director of Enron Corp. in November 2001. He
is also a Trustee of Petrie Stores Liquidating Trust. Mr.
Troubh is 76 years old.
4
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors manages or directs the management of the business
and affairs of the Company. During the past fiscal year, the Board held seven
regularly scheduled and special meetings. In 2002, the Board had two standing
committees, an Audit Committee and a Nomination and Human Resources/Compensation
Committee, whose principal functions are briefly described below. The Board of
Directors renamed the Nomination and Human Resources/Compensation Committee in
February 2003 as the Compensation, Corporate Governance and Nominating Committee
and, at the same time, adopted a revised charter for the Committee. None of the
members of either committee is an employee or officer of the Company, and none
has a relationship which, in the opinion of the Company's Board of Directors,
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. During 2002, each incumbent director attended at
least 75% of the aggregate number of meetings held by the Board and all
committees on which the director served.
AUDIT COMMITTEE
In 2002, the principal functions and responsibilities of the Audit
Committee were:
o overseeing Gentiva's internal control structure, financial reporting
and legal and compliance program;
o reviewing and selecting an independent accounting firm, subject to
Board of Directors and shareholder ratification, to audit Gentiva's
consolidated financial statements;
o receiving and acting on reports and comments from Gentiva's
independent accountants;
o reviewing critical accounting principles and estimates employed in
Gentiva's financial reporting;
o reviewing Gentiva's annual audited consolidated financial statements
and quarterly financial statements with management and Gentiva's
independent accountants and recommending inclusion of the annual
financial statements in Gentiva's annual report on Form 10-K;
o maintaining direct lines of communication with the Board of Directors
and Gentiva's management, internal auditing staff and independent
accountants; and
o reporting to the Board of Directors a summary of its findings and
recommendations.
Mr. Ganzi served as the Chairman, and Messrs. Troubh and Weston and Dr.
Wilensky served as members, of the Audit Committee. The Committee met five times
in 2002. In February 2003, the Board of Directors adopted a revised written
charter for the Audit Committee, which is included as Appendix A to this Proxy
Statement. Dr. Wilensky resigned from the Audit Committee on February 14, 2003
but continues to serve as a member of the Company's Board of Directors. Messrs.
Ganzi, Troubh and Weston continue to serve on the Audit Committee.
NOMINATION AND HUMAN RESOURCES/COMPENSATION COMMITTEE
In 2002, the principal functions and responsibilities of the Nomination and
Human Resources/Compensation Committee were:
o overseeing and administering Gentiva's executive compensation
policies, plans and practices;
o establishing and adjusting from time to time compensation for the
Chief Executive Officer and the other executive officers;
o authorizing the issuance of stock options and stock awards in
connection with the administration of Gentiva's stock plans;
o overseeing succession planning for the Chief Executive Officer and
other key executives;
o seeking, considering and recommending to the Board of Directors
qualified candidates for election as directors and recommending a
slate of nominees for election as directors at the Annual Meeting; and
o reporting to the Board of Directors a summary of its findings and
recommendations.
5
Mr. Levine served as Chairman, and Messrs. Troubh and Weston served as
members, of the Nomination and Human Resources/Compensation Committee, which met
four times in 2002. As mentioned above, in February 2003 the Board of Directors
renamed this Committee the Compensation, Corporate Governance and Nominating
Committee and adopted a revised written charter for the Committee. Messrs.
Levine, Troubh and Weston continue to serve on this Committee.
Shareholders desiring to recommend for consideration candidates for
director may do so by writing to the Secretary of the Company giving the
candidate's name, biographical data and qualifications. Any such recommendation
must be accompanied by a written statement from the individual of his or her
consent to be named as a candidate and, if nominated and elected, to serve as a
director.
COMPENSATION OF DIRECTORS
Each non-employee member of the Board of Directors receives an annual
retainer fee of $25,000, up to half of which may be paid in cash on a quarterly
basis with the remainder paid in shares of the Company's Common Stock.
Non-employee directors may also defer the portion of their annual retainer fee
paid in shares into a share unit account. In addition, any non-employee
directors who serve as chairperson of a committee of the Board receive $5,000
annually for acting as chairperson. (In 2002, committee chairpersons received
$2,000.) Non-employee directors also receive $1,000 for each Board meeting they
attend ($500 if attendance is by telephone) and receive $1,500 for each
committee meeting they attend ($750 if attendance is by telephone). (In 2002,
non-employee directors received $1,000 for each committee meeting they attended
and $500 if attendance was by telephone.) All directors, regardless of whether
or not they are employees of the Company, receive reimbursement for
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors. In 2002, each non-employee director was awarded stock
options exercisable for up to 10,000 shares of the Company's Common Stock.
In 2002, the Company paid Dr. Wilensky $12,000 for consulting services she
provided to the Company on federal legislative, regulatory and reimbursement
developments in home health matters pursuant to a one-year consulting agreement
that terminates on May 31, 2003 and provides for monthly payments of $2,000 to
Dr. Wilensky as well as for reimbursement of reasonable out-of-pocket expenses
she may incur in connection with performing her consulting services. The Company
paid Mr. Blechschmidt $2,000 in 2002 for attending two board meetings as a
director of a company in which the Company holds a minority interest. Pursuant
to a cash tender offer for all of its outstanding stock options, the Company
made a payment in 2002 of $98,598 to each of Mr. Ganzi and Dr. Wilensky, who
each tendered 5,000 options to the Company. Payment was based on the difference
between the applicable exercise price of each option tendered and the market
value per share of the Company's Common Stock.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 21, 2003, the amount of
beneficial ownership of Gentiva's Common Stock by the executive officers of
Gentiva who are named in the Summary Compensation Table; each director and
nominee for director; each beneficial owner of more than five percent of
Gentiva's Common Stock; and all executive officers and directors of Gentiva as a
group. For the purpose of the table, a person or group of persons is deemed to
have "beneficial ownership" of any shares that such person or group has the
right to acquire within 60 days after such date through the exercise of options
or exchange or conversion rights, but such shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person.
AMOUNT OF SHARES OF
COMMON STOCK AND PERCENT OF CLASS
NATURE OF BENEFICIAL OWNED (IF MORE
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3)(4) THAN 1%)
- ------------------------- --------------------- ----------------
Robert Creamer . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,824 --
Kimberly S. Herman . . . . . . . . . . . . . . . . . . . . . . . . . 286 --
Ronald A. Malone . . . . . . . . . . . . . . . . . . . . . . . . . . 281,996 1.0%
Vernon A. Perry, Jr. . . . . . . . . . . . . . . . . . . . . . . . . 26,610 --
John R. Potapchuk. . . . . . . . . . . . . . . . . . . . . . . . . . 114,565 --
Edward A. Blechschmidt . . . . . . . . . . . . . . . . . . . . . . . 374,342 1.4
Victor F. Ganzi. . . . . . . . . . . . . . . . . . . . . . . . . . . 43,191 --
Stuart R. Levine . . . . . . . . . . . . . . . . . . . . . . . . . . 49,603 --
Mary O'Neil Mundinger. . . . . . . . . . . . . . . . . . . . . . . . 936 --
Stuart Olsten(5) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,241,352 4.6
Raymond S. Troubh(6) . . . . . . . . . . . . . . . . . . . . . . . . 150,800 --
Josh S. Weston . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,617 --
Gail R. Wilensky . . . . . . . . . . . . . . . . . . . . . . . . . . 4,029 --
Daruma Asset Management, Inc.(7) . . . . . . . . . . . . . . . . . . 2,119,100 7.9
80 West 40th Street
New York, NY
Deutsche Bank AG(8). . . . . . . . . . . . . . . . . . . . . . . . . 1,901,668 7.1
Taunusanlage 12, D-60325
Frankfurt am Main
Germany
Morgan Stanley(9). . . . . . . . . . . . . . . . . . . . . . . . . . 1,759,052 6.6
1585 Broadway
New York, NY
All executive officers and directors as a group (14 persons) . . . . 2,389,368(10) 8.8
- ---------------
(1) Unless otherwise indicated, the shareholders identified in this table have
sole voting and investment power with respect to the shares beneficially
owned by them.
(2) Includes beneficial ownership of the following number of shares that may be
acquired upon exercise of presently exercisable stock options under
Gentiva's 1999 Stock Incentive Plan: Mr. Creamer-- 20,214; Mr. Malone--
248,885; Mr. Potapchuk-- 101,071; Mr. Levine-- 16,845; Mr. Olsten-- 16,845;
and Mr. Troubh-- 16,845.
(3) Includes beneficial ownership of the following number of whole shares
acquired and currently held under Gentiva's Employee Stock Purchase Plan:
Mr. Creamer-- 1,610; Ms. Herman-- 286; Mr. Malone-- 4,692; Mr. Perry--
1,610; and Mr. Potapchuk-- 2,684.
(4) Includes beneficial ownership of the following number of shares
representing the equivalent of units deferred under Gentiva's Stock &
Deferred Compensation Plan for Non-Employee Directors: Mr. Blechschmidt--
1,467; Mr. Ganzi-- 8,058; Mr. Olsten-- 8,058; and Mr. Troubh-- 8,058.
7
(5) In addition to shares referred to in footnotes (2) and (4), Mr. Olsten's
holdings include 1,161,168 shares owned directly and 300 shares owned by
his wife, as to which shares he disclaims beneficial ownership. He has
shared voting and investment power as a trustee with respect to 11,250
shares owned by a trust for the benefit of his son, 22,500 shares owned by
two trusts for the benefit of his niece and nephew and 20,901 shares owned
by a trust for the benefit of his descendants, as to which shares he
disclaims beneficial ownership. His holdings further include 330 shares
held in a custodial account for his daughter, as to which shares he
disclaims beneficial ownership.
(6) In addition to shares referred to in footnotes (2) and (4), Mr. Troubh's
holdings include 56,149 shares owned directly and 69,748 shares owned
indirectly through a limited partnership.
(7) Based on a Schedule 13G dated February 14, 2003 and filed with the
Securities and Exchange Commission, Daruma Asset Management, Inc. held sole
voting power as to 1,203,800 of such shares and sole dispositive power as
to all of such shares.
(8) Based on a Schedule 13G dated February 5, 2003 and filed with the
Securities and Exchange Commission, Deutsche Bank AG held sole voting power
and sole dispositive power as to all of such shares.
(9) Based on Schedule 13G dated February 18, 2003 and filed with the Securities
and Exchange Commission, Morgan Stanley held shared voting power and shared
dispositive power as to all of such shares.
(10) Includes 1,867,219 shares owned by current executive officers and
directors, 496,508 shares that may be acquired upon exercise of presently
exercisable stock options and 25,641 shares representing shares deferred as
share units.
8
EXECUTIVE COMPENSATION
The Company began operating as an independent publicly traded company
following its Split-Off from Olsten on March 15, 2000. The information shown
below reflects the annual and long-term compensation, from all sources, of the
chief executive officer of the Company and the other four most highly
compensated executive officers of the Company at December 29, 2002 plus one
other person who served as chief executive officer of the Company in 2002 (the
"Named Officers") for services rendered in all capacities to the Company and its
subsidiaries during the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
AWARDS
OTHER ------------
ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS (#) ($)(2)
- --------------------------- ---- ---------- --------- ------------ ------------ ------------
Ronald A. Malone . . . . . . . . . 2002 $387,596 $300,000 $2,879 200,000 $ 310,797
Chief Executive Officer and 2001 375,000 180,000 3,099 40,000 38,551
Chairman of the Board(3) 2000 284,519 200,000 3,162 65,000 26,919
Vernon A. Perry, Jr. . . . . . . . 2002 247,596 125,000 1,455 72,000 766,216
President and 2001 229,231 85,000 1,554 25,000 25,974
Chief Operating Officer 2000 210,673 75,000 1,582 30,000 13,187
John R. Potapchuk. . . . . . . . . 2002 239,192 130,000 467 72,000 216,839
Senior Vice President, 2001 224,626 90,000 341 15,000 21,898
Chief Financial Officer,
Treasurer and Secretary(4)
Robert Creamer . . . . . . . . . . 2002 207,635 140,112 104 60,000 318,250
Senior Vice President,
Financial Operations, and
Chief Information Officer(5)
Kimberly S. Herman . . . . . . . . 2002 205,038 0 54 30,000 223,424
Senior Vice President and
Chief Marketing Officer(6)
Edward A. Blechschmidt . . . . . 2002 300,000 0 7,278 10,000 10,132,599
Former President, 2001 600,000 700,000 7,707 60,000 906,445
Chief Executive Officer and 2000 458,654 650,000 7,777 90,000 3,758,078
Chairman of the Board(7)
- ---------------
(1) Gross-up of taxable portion of fringe benefit.
(2) Represents profit sharing and matching contributions by Gentiva for the
Named Officers pursuant to Gentiva's Nonqualified Retirement and Savings
Plan for fiscal 2002, 2001 and for the period March 15, 2000 through
December 31, 2000. For fiscal 2002, also includes payments to the Named
Officers pursuant to a cash tender offer by Gentiva for all of its
outstanding options as follows: $262,518 to Mr. Malone, who tendered 13,527
options; $693,628 to Mr. Perry, who tendered 45,000 options; $194,694 to
Mr. Potapchuk, who tendered 11,944 options; $299,735 to Mr. Creamer, who
tendered 21,000 options; $220,979 to Ms. Herman, who tendered 11,038
options; and $7,638,866 to Mr. Blechschmidt, who tendered 381,449 options.
For fiscal 2002, also includes for Mr. Perry payment of $51,884 for
relocation expenses and for Mr. Blechschmidt a change in control payment of
$2,160,000, payment of $173,721 to reimburse Mr. Blechschmidt for certain
costs attributable to the acceleration of tax liabilities resulting from
his exercise of stock options in 2001 that were incorrectly identified by
Gentiva as incentive stock options (instead of as nonqualified stock
options), payment of an exit bonus of $100,000, payment of $18,462 for
unused vacation time and $259 of above-market interest earned on deferred
compensation. For fiscal 2001, also includes for Mr. Perry payment of
$5,223 for relocation expenses and for Mr. Blechschmidt a one-time payment
of $815,253 for excise taxes imposed by reason of the receipt of amounts
payable under his separation, consulting and non-competition
9
agreement with Olsten and its parent company, Adecco SA, and $3,939 of
above-market interest earned on deferred compensation. For fiscal 2000,
also includes for Mr. Blechschmidt a one-time payment of $3,700,000 from
Gentiva's now terminated Supplemental Executive Retirement Plan and $625 of
above-market interest earned on deferred compensation.
(3) For fiscal 2000, Mr. Malone's salary shown is for the period March 15, 2000
through December 31, 2000.
(4) Mr. Potapchuk became an executive officer in 2001.
(5) Mr. Creamer became an executive officer in 2002.
(6) Ms. Herman became an executive officer in 2002. She resigned from Gentiva
in February 2003.
(7) Mr. Blechschmidt resigned as an executive officer in June 2002 following
the sale of Gentiva's specialty pharmaceutical services business. For
fiscal 2000, Mr. Blechschmidt's salary shown is for the period March 15,
2000 through December 31, 2000. In addition, for the period January 3, 2000
through March 14, 2000, (i) Mr. Blechschmidt was paid $236,538 in salary
and for unused vacation by Olsten Corporation for services performed by Mr.
Blechschmidt for Olsten Corporation and its subsidiaries, including the
Company, and (ii) $7,096 in matching contributions were made to Olsten
Corporation's Nonqualified Retirement and Savings Plan for Mr.
Blechschmidt. Other payments to Mr. Blechschmidt made by Olsten Corporation
and Adecco SA in connection with the Split-Off are not reflected in the
Summary Compensation Table.
STOCK OPTIONS
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(#)(2) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ------------- ------------ ---------- ---------- ----------- -----------
Ronald A. Malone . . . . . . . 200,000 18.6% $7.50 6/14/12 $943,360 $2,390,560
Vernon A. Perry, Jr. . . . . . 72,000 6.7 7.50 6/14/12 339,610 860,602
John R. Potapchuk. . . . . . . 72,000 6.7 7.50 6/14/12 339,610 860,602
Robert Creamer . . . . . . . . 60,000 5.6 7.50 6/14/12 283,008 717,168
Kimberly S. Herman . . . . . . 30,000 2.8 7.50 6/14/12 141,504 358,584
Edward A. Blechschmidt . . . . 10,000 0.9 7.50 6/14/12 47,168 119,528
- ---------------------
(1) The dollar amounts under the indicated columns are the result of
calculation at the 5% and 10% rates set forth by the Securities and
Exchange Commission and are not intended to forecast possible future
appreciation of Gentiva's stock price.
(2) The options were granted at an exercise price equal to the fair market
value of Gentiva's Common Stock on the date of the grant. The options have
a ten-year term and become exercisable over a three-year period in
increments of 33-1/3% per year beginning with the first anniversary of the
date of the grant, except that Mr. Malone's options become exercisable over
a six-year period in increments of 16-2/3% per year beginning with the
first anniversary of the date of grant and all of Mr. Blechschmidt's
options become exercisable upon the first anniversary of the date of grant.
10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Ronald A. Malone . . . . . . . 0 0 248,885 200,000 $1,358,440 $170,000
Vernon A. Perry, Jr. . . . . . 0 0 0 72,000 0 61,200
John R. Potapchuk. . . . . . . 9,797 $50,229 101,071 72,000 560,346 61,200
Robert Creamer . . . . . . . . 0 0 20,214 60,000 133,538 51,000
Kimberly S. Herman . . . . . . 0 0 58,958 30,000 316,360 25,500
Edward A. Blechschmidt . . . . 0 0 262,833 10,000 1,890,539 8,500
- --------------------
(1) Based on the difference between the exercise price and the closing price of
a share of Gentiva Common Stock on December 27, 2002, the last trading day
in fiscal 2002.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information regarding the Company's
equity compensation plans as of December 29, 2002:
------------------------- --------------------------- ----------------------- ---------------------------
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FOR FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))*
------------------------- --------------------------- ----------------------- ---------------------------
Equity compensation
plans approved by 2,575,308 $4.70 2,968,901
security holders
------------------------- --------------------------- ----------------------- ---------------------------
Equity compensation
plans not approved -- -- --
by security holders
------------------------- --------------------------- ----------------------- ---------------------------
Total 2,575,308 $4.70 2,968,901
------------------------- --------------------------- ----------------------- ---------------------------
- --------------------
* Consists of securities available for future issuance under Gentiva's 1999
Stock Incentive Plan, Employee Stock Purchase Plan and Stock & Deferred
Compensation Plan for Non-Employee Directors.
EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL AGREEMENTS AND TERMINATION OF
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Malone, its chief
executive officer and chairman of the board of directors, which became effective
on June 13, 2002 and has a term of three years from such date. During the term
of the agreement, Mr. Malone will receive (i) a base salary of not less than
$400,000 per year and (ii) an annual bonus, based on the achievement of target
levels of performance, with target bonus equal to 80 percent of his base salary
and the maximum bonus equal to 150 percent of his base salary. However, Mr.
Malone's bonus will not be less than 50 percent of his target bonus for 2002.
Mr. Malone will also receive customary benefits, perquisites and reimbursement
for expenses.
11
The agreement provides that Mr. Malone's employment will terminate upon
death or disability, termination of his employment for cause, termination of his
employment without cause or termination by Mr. Malone of his employment for good
reason. In the event his employment is terminated as a result of his death or
disability, he or his estate will be entitled to receive his earned salary,
vested benefits and accelerated vesting of his accrued pension benefits. He will
not be entitled to severance benefits. In addition, in the event his employment
is terminated as a result of his death, Mr. Malone's widow will be entitled to
receive six months base compensation. In the event the agreement is terminated
for cause by the Company he will be entitled to receive earned salary and vested
benefits and will not be entitled to severance benefits. In the event the
agreement is terminated for good reason by Mr. Malone or without cause by the
Company he will be entitled to earned salary, vested benefits, severance
benefits and accelerated vesting of his accrued pension benefits and continued
medical benefits for up to two years. Severance benefits are deemed equal to two
times Mr. Malone base salary, so long as Mr. Malone does not receive any amounts
under his change in control agreement described below.
The employment agreement also restricts Mr. Malone's ability to engage in
any of the Company's business lines in the United States and Canada for the term
of the agreement and during the twelve months after termination of his
employment, other than termination without cause and termination for good
reason. It also contains confidentiality provisions and provisions for
non-solicitation of the Company's employees.
Mr. Malone has also entered into a change in control agreement with the
Company, similar to the terms described below.
The following Named Officers of the Company are parties to change in
control agreements in connection with their employment with the Company: Ronald
A. Malone, Vernon A. Perry, Jr., John R. Potapchuk and Robert Creamer. These
agreements have a term of three years, commencing on June 13, 2002. They
generally provide benefits in the event of a change in control of the Company if
(i) the employee's employment is terminated by the Company and the termination
is not for cause or is by the employee for good reason (as specified in the
agreement) or (ii) the termination is within three years after a change in
control. In addition, these executive officers will receive the benefit of their
agreements if they are terminated by the Company without cause up to a year
before a change in control, if their terminations arise in connection with the
change in control.
The benefits conferred under these agreements generally will include a cash
payment equal to two times the employee's base salary and target bonus;
continued benefits for the two years following the termination or until such
earlier date that the employee obtains comparable benefits from another
employer; immediate vesting of any stock options held by the employee (those
options would remain exercisable for one year following the termination, but not
beyond the original full term); and full vesting of retirement and deferred
compensation benefits. Under certain circumstances the benefits could be reduced
in order to avoid the incurrence of excise taxes by the employees.
Under the agreements, a change in control is defined to include the
following events: a person or group (with certain exceptions for the Olsten
family) becoming the beneficial owner of at least 25 percent of the voting stock
of the Company; either the directors (and their approved successors) cease to
constitute a majority of the board of directors or a majority of the persons
nominated by the board of directors for election fails to be elected; a merger
of the Company if the Company's stockholders do not own a majority of the stock
of the surviving company or if the members of the Company's board of directors
do not constitute a majority of the directors of the surviving company's board;
if the Company is liquidated; or if all or substantially all of the assets are
sold.
In addition, the change in control agreements provide that if an employee
substantially prevails in a dispute with the Company relating to his or her
agreement, the Company will pay that employee's attorney's fees which result
from the suit. The employees who have these agreements are not required to seek
other employment or otherwise mitigate any damages that are caused as a result
of a change in control, but they are required to keep the Company's confidential
information private.
12
The following Named Officers are parties to agreements in connection with
their employment with the Company: Vernon A. Perry, Jr., John R. Potapchuk,
Robert Creamer and Kimberly S. Herman. These agreements generally provide that,
in the event the officer is terminated other than for cause or has his or her
base salary reduced in a situation that is not part of a general salary
reduction, the officer has the right to receive payments for eighteen months
(six months in the case of Ms. Herman) in an amount based on that officer's base
salary at the time of termination. Additionally, the agreements provide that the
Company will provide these officers with health benefits based on their benefit
levels at the time of termination for the same period or until they obtain
similar health benefits elsewhere. No benefits are payable under these
agreements if benefits are payable to an officer under the officer's change in
control agreement. Pursuant to these agreements the officers agreed to certain
covenants relating to competition, confidential information and non-solicitation
of employees and business.
COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
COMPENSATION PHILOSOPHY
The Company's executive compensation philosophy is to align the interests
of the Company's shareholders and its executive officers, while fostering
collaboration amongst those executives. The Board of Directors and the
Nomination and Human Resources/Compensation Committee (now known as the
Compensation, Corporate Governance and Nominating Committee), which administers
the Company's executive compensation programs, have implemented this philosophy
through a compensation program that will enable the Company to attract, motivate
and retain executive officers by providing a competitive total compensation
opportunity. This program provides for (i) competitive base salaries, which
reflect the responsibilities of the position held and performance in the
position; (ii) annual incentive opportunities payable in cash, which are based
on the Company's achievement of performance goals; and (iii) reasonable levels
of stock options, which are designed to strengthen the mutuality of interest
between participating associates and the Company's shareholders. The Committee
strives to balance short- and long-term incentive objectives and to employ
prudent judgment in establishing performance criteria, evaluating performance
and determining actual incentive payment levels.
ANNUAL INCENTIVE COMPENSATION
The Committee's policy provides that a significant portion of executive
compensation should be dependent upon the Company's performance in relation to
targets established under the incentive compensation plan. The purpose of the
incentive compensation plan is to link a portion of total executive compensation
to shareholder value and individual contributions, while encouraging and
fostering collaboration among the executive team. Company goals that were
considered included revenue, EBITDA, shareholder value and employee voluntary
turnover. Goals for individual executives varied by their areas of
responsibility.
STOCK OPTIONS
Each year the Committee considers granting options to purchase Common Stock
to key employees, including executive officers. Stock option grants are intended
to provide additional incentive for superior performance by officers and key
employees who have the most impact on the management and success of the
Company's business. Stock options granted by the Committee in 2002 vest in three
equal annual installments beginning on the first anniversary of the date of
grant, except those granted the Chief Executive Officer, which vest over 6
years. Approximately 125 employees participate. Also, qualified executive
officers and other employees may purchase shares of Common Stock under the 1999
Employee Stock Purchase Plan.
13
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Pursuant to the provisions of an employment agreement negotiated with Mr.
Malone at the time of his recruitment to become Chairman of the Board and Chief
Executive Officer of the Company in June of 2002, and approved by the Committee,
Mr. Malone receives a base salary of not less than $400,000. For 2003, the
Committee has set Mr. Malone's base salary at $475,000. The term of the
employment agreement is through June 2005, unless renewed or sooner terminated.
Mr. Malone participates in the Company's Executive Officer Annual Incentive
Program. His payment under the plan if targets and individual goals are achieved
would be 80% of base salary. Under the plan, the Committee evaluated Company
performance against assigned goals and targets in addition to Mr. Malone's
individual performance and leadership particularly with the transition process
following the sale of the Company's specialty pharmaceutical services business.
The Committee concluded that the Company either met or made significant progress
towards achieving its goals and objectives under Mr. Malone's leadership and
direction. Consistent with its compensation philosophy, the Committee awarded
Mr. Malone a $300,000 annual incentive payment under the plan for fiscal 2002,
which represents 75% of his 2002 base salary.
At the time he was appointed to Chairman of the Board and Chief Executive
Officer, Mr. Malone received 200,000 stock options as long-term incentives
vesting over 6 years, with an exercise price of $7.50.
Compensation, Corporate Governance and Nominating Committee:
Stuart R. Levine, CHAIRMAN
Raymond S. Troubh
Josh S. Weston
14
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph for the period commencing on March 16, 2000
(when the Company's Common Stock was first quoted on Nasdaq) and ending December
29, 2002 comparing the cumulative total return on the Company's Common Stock
against the cumulative total return of the Nasdaq Market Index, a new peer
issuer group selected by the Company (the "New Peer Group Index") and the peer
issuer group comprised of the companies used in the shareholder return
performance graph in last year's proxy statement (the "Old Peer Group Index").
Since the Company sold its specialty pharmaceutical business in June 2002, the
Company believes that the companies in the New Peer Group Index are more
comparable to the Company's home health line of business.
The New Peer Group Index is comprised of the following publicly traded
companies: Almost Family, Inc., Amedisys, Inc., Apria Healthcare Group Inc.,
National Home Health Care Corp. and Pediatric Services of America, Inc. The Old
Peer Group Index is comprised of the following publicly traded companies:
Accredo Health, Incorporated, Apria Healthcare Group Inc., Caremark RX, Inc.,
Matria Healthcare, Inc., and Option Care, Inc.
The line graph assumes that $100 was invested on March 16, 2000 in each of
the Company's Common Stock, the Nasdaq Market index, the Old Peer Group Index
and the New Peer Group Index and that all dividends (if any) were reinvested.
Media General Financial Services furnished the data for the graph.
[PERFORMANCE GRAPH]
- ---------------------------------- ------------ ------------ ------------ ------------
3/16/2000 12/31/00 12/30/01 12/29/02
- ---------------------------------- ------------ ------------ ------------ ------------
Gentiva Health Services, Inc. $100.00 $222.92 $366.67 $436.79
- ---------------------------------- ------------ ------------ ------------ ------------
NASDAQ Market Index 100.00 53.34 42.52 29.66
- ---------------------------------- ------------ ------------ ------------ ------------
Old Peer Group Index 100.00 212.92 243.41 236.65
- ---------------------------------- ------------ ------------ ------------ ------------
New Peer Group Index 100.00 194.26 177.14 151.96
- ---------------------------------- ------------ ------------ ------------ ------------
15
PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP as independent accountants of the Company for the
2003 fiscal year, subject to ratification and approval by the shareholders.
PricewaterhouseCoopers LLP has audited the books and records of the Company
since the Company's incorporation in 1999.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the meeting and will have the opportunity to make a statement and to respond to
appropriate questions posed by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY.
AUDIT FEES
Fees billed or expected to be billed to the Company by
PricewaterhouseCoopers LLP for the audit of the Company's annual financial
statements for the year ended December 29, 2002 and for reviews of those
financial statements included in the Company's quarterly reports on Form 10-Q
for such year total $336,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed or expected to be billed to the Company by
PricewaterhouseCoopers LLP for financial information systems design and
implementation services provided during the Company's 2002 fiscal year.
ALL OTHER FEES
Fees billed or expected to be billed to the Company by
PricewaterhouseCoopers LLP for services provided during the Company's 2002
fiscal year for all services rendered to the Company, other than audit services
and financial information systems design and implementation services, total
$579,000, which includes $223,000 for tax and audit services related to the sale
of the specialty pharmaceutical services business, $201,000 for tax planning and
compliance services, $130,000 for reviews required by the Company's corporate
integrity agreement and $25,000 for miscellaneous accounting services.
GENERAL
The Audit Committee of the Board of Directors has considered whether the
provision of services by PricewaterhouseCoopers LLP covered by "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" above
is compatible with maintaining independence with PricewaterhouseCoopers LLP.
AUDIT COMMITTEE REPORT
During 2002 the Audit Committee of the Company's Board of Directors was
comprised of four directors, none of whom is an officer or employee of the
Company. Each of the members was "independent" under then existing rules.
The Committee acts under a written charter adopted by the Board of
Directors, which is reviewed annually and revised as appropriate.The Board most
recently amended the charter on February 12, 2003, a copy of which is included
as Appendix A to this Proxy Statement. In accordance with its charter, in 2002
the Audit Committee assisted the Board in fulfilling its responsibility for
monitoring the integrity of the accounting, auditing and financial reporting
practices and compliance of the Company. In addition, the Audit Committee
selected PricewaterhouseCoopers LLP to be the independent public accountants to
audit the consolidated financial statements of the Company and its subsidiaries.
In 2002, this selection was subject to the approval of the Board of Directors
and the Company's shareholders.
16
In accordance with the Audit Committee's revised charter, however, this
selection will no longer be subject to the approval of the Board of Directors.
The Audit Committee has received from PricewaterhouseCoopers LLP the
written disclosures and the letter regarding its independence as required by
Independence Standards Board Standard No. 1, describing all relationships
between the auditors and the Company that might bear on the auditors'
independence, and has discussed this information with PricewaterhouseCoopers
LLP. The Audit Committee has also discussed with management and with
PricewaterhouseCoopers LLP the quality and adequacy of the Company's critical
accounting principles, including internal controls and the internal audit and
compliance functions, organization, responsibilities, budget and staffing. The
Audit Committee has also reviewed with both PricewaterhouseCoopers LLP and the
Company's internal auditors and the Company's chief compliance officer their
audit and compliance plans, scope and identification of audit risks.
The discussions with PricewaterhouseCoopers LLP also included the matters
required by generally accepted auditing standards, including those described in
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
amended.
The Audit Committee has reviewed and discussed the audited consolidated
financial statements of the Company and its subsidiaries with management and
with PricewaterhouseCoopers LLP. Based on all of the foregoing reviews and
discussions with management and PricewaterhouseCoopers LLP, the Audit Committee
recommended that the audited consolidated financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 29,
2002 for filing with the Securities and Exchange Commission.
On February 14, 2003, Dr. Gail Wilensky, who has a consulting contract with
the Company, resigned from the Audit Committee to assure that all members of the
Audit Committee are independent under applicable and proposed standards. The
other three members of the Audit Committee continue to serve.
2002 Audit Committee:
Victor F. Ganzi, CHAIRMAN
Raymond S. Troubh
Josh S. Weston
Gail R. Wilensky
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules thereunder require the Company's directors and
officers and persons who beneficially own more than ten percent of its
outstanding Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company and to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on review of copies of reports furnished to the Company and upon
representations made, the Company believes that during the fiscal year ended
December 29, 2002, all persons subject to the Section 16(a) filing requirements
filed the required reports on a timely basis, except that Mary O'Neil Mundinger,
a director of the Company, filed a late Form 3 report, which also resulted in
the late reporting of the Company's award to her of stock options, and Mary
Morrisey Gabriel, an officer of the Company, filed a late Form 3 report.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy for its 2004 Annual Meeting must be received in
writing by December 13, 2003 at the Office of Secretary at the Company's
principal executive offices located at 3 Huntington Quadrangle 2S, Melville, New
York 11747-8943. In addition, notice of any proposal that a shareholder desires
to propose for
17
consideration at the 2004 Annual Meeting must contain information as specified
in the Company's By-Laws and must be received in writing by the Company at the
above address on or after January 17, 2004 and on or before February 16, 2004.
OTHER MATTERS
A COPY OF THE ANNUAL REPORT ON FORM 10-K, FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR ITS LAST FISCAL YEAR, IS AVAILABLE
WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST TO JOHN R. POTAPCHUK,
SECRETARY, GENTIVA HEALTH SERVICES, INC., 3 HUNTINGTON QUADRANGLE 2S, MELVILLE
NEW YORK 11747-8943. THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE ONLINE AT
THE INVESTOR RELATIONS SECTION OF THE COMPANY'S WEBSITE AT WWW.GENTIVA.COM.
Gentiva will pay the cost of soliciting proxies in the accompanying form.
The Company does not expect to pay any fees for the solicitation of proxies, but
may pay brokers, nominees, fiduciaries and other custodians their reasonable
fees and expenses for sending proxy materials to beneficial owners and obtaining
their instructions. In addition to solicitation by mail, proxies may be
solicited in person, or by telephone, facsimile transmission or other means of
electronic communication, by directors, officers and other employees of the
Company, who will not receive any additional compensation for any such
solicitation activities.
The Board of Directors knows of no other matters that may come before the
meeting. If any other matters should be brought before the meeting for action,
it is the intention of the persons named in the proxy to vote in accordance with
their discretion pursuant to authority conferred by the proxy.
By Order of the Board of Directors
/s/ John R. Potapchuk
John R. Potapchuk
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, TREASURER AND SECRETARY
Dated: April 10, 2003
Melville, New York
18
APPENDIX A
GENTIVA HEALTH SERVICES, INC.
CHARTER OF AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. STATEMENT OF POLICY
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Gentiva Health Services, Inc. (the "Corporation") shall provide
assistance to the Board in fulfilling its oversight responsibility relating to
(i) the integrity of the Corporation's financial statements, (ii) compliance
with legal and regulatory requirements, (iii) the Independent Auditors' (as
defined below) qualifications and independence and (iv) the performance of the
Corporation's internal audit function and its Independent Auditors. To this end,
the Committee shall maintain free and open communication with the Board, the
Independent Auditors, the Corporation's internal auditor, the Corporation's
Chief Compliance Officer and the financial management of the Corporation. The
Committee shall also prepare the report of the Committee required by the rules
of the Securities and Exchange Commission to be included in the Corporation's
annual proxy statement.
As an oversight body, the Committee does not have responsibility for
day-to-day operations and financial reporting. It is not the responsibility of
the Committee to plan or conduct audits or to determine that the Corporation's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles; rather, this is the responsibility of
management and the Independent Auditors. The Committee will require that each of
management and the Independent Auditors establish to the Committee's
satisfaction that appropriate actions have been taken and procedures followed in
order for the financial statements to be complete and accurate and in accordance
with generally accepted accounting principles.
II. ORGANIZATION AND MEMBERSHIP
The Committee shall be comprised of a minimum of three directors, each of
whom must be an "Independent Director" (as defined below) and free of any
relationship that, in the opinion of the Board, would interfere or appear to
interfere with their exercise of independent judgment in carrying out the
responsibilities of a member of the Committee or a Director. The members of the
Committee will be elected by the Board at the annual organizational meeting of
the Board and shall serve one-year terms. The Board will appoint one member of
the Committee as chairperson. Upon the removal or resignation of a member, the
full Board may appoint a successor to serve the remainder of the unexpired term.
III. QUALIFICATION
Each member of the Committee must be able to read and understand
fundamental financial statements, including a balance sheet, income statement
and cash flow statement. At least one member must be a "Financial Expert" (as
defined below). The Financial Expert will be identified in the minutes of the
Committee and of the Board.
IV. MEETINGS
The Chairperson of the Committee will establish the agenda for each
Committee meeting. The Committee will hold at least four meetings per year or
more frequently as circumstances dictate. As part of its job to foster open
communication, the Committee will meet at least quarterly with management, the
internal auditor, the Chief Compliance Officer and the Independent Auditors in
separate executive sessions to discuss any matters that the Committee or any of
these groups believe should be discussed privately.
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V. POWERS AND RESPONSIBILITIES
AUDITORS AND AUDITOR INDEPENDENCE
The Committee will:
1. Have the sole power to select and hire the Independent Auditors to
audit the financial statements of the Corporation and its subsidiaries
and advise the Independent Auditors that they are accountable to the
Board and the Committee as representatives of the shareholders.
2. Have the sole power to approve the Independent Auditors' fees.
3. Assess all relationships of the Independent Auditors with the
Corporation to determine their independence. Such assessment should
include the review on an annual basis of a formal written statement
from the Independent Auditors that discloses all relationships between
the Independent Auditors and its related entities and the Corporation
and its related entities, consistent with Independence Standards Board
Standard No. 1.
4. Discuss with the Independent Auditors any disclosed relationship or
services that may impact its objectivity and independence and take
appropriate action to oversee the independence of the Independent
Auditors.
5. Have the power to discharge the Independent Auditors when
circumstances warrant.
6. Have the sole power to approve all audit and non-audit services
provided by the Independent Auditors, except those services prohibited
by law. The Committee must approve all of these services prior to the
Corporation's receipt of such services.
7. Have the power to hire and determine the fees and other retention
terms for legal, accounting and other advisors to the Committee as it
sees fit without Board approval.
8. Present an evaluation of the Independent Auditor's qualifications,
performance and independence to the Board annually. To be in a
position to make such evaluation, the Committee shall:
(a) At least annually, obtain and review a report by the Independent
Auditors describing: the firm's internal quality-control
procedures; any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or
by any inquiry or investigation by professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken
to deal with any such issues; and (to assess the auditor's
independence) all relationships between the Independent Auditors
and the Corporation.
(b) Review and evaluate the lead partner of the Independent Auditors.
(c) Review the Independent Auditor's performance with the
Corporation's management and internal auditors.
(d) Ensure that the lead and concurring audit partner have not
performed audit services to the Corporation in any capacity for
more than five consecutive years, with a five year "time out"
period after rotation.
(e) Ensure that significant audit partners, as defined by the SEC,
have not performed audit services to the Corporation in any
capacity for more than seven consecutive years, with a two year
"time out" period after rotation.
(f) Consider whether, in order to assure continuing auditor
independence, there should be a regular rotation of the
Independent Auditors.
9. Set clear hiring policies for employees or former employees of the
Independent Auditors, including the requirement that the Corporation
not hire any person as Chief Executive Officer, Chief Financial
Officer, Controller, Chief Accounting Officer or any equivalent
position if such person was employed by the Independent Auditors and
participated in any capacity in the audit of the Corporation during
the one year period preceding the date of initiation of such audit.
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FINANCIAL REPORTING
The Committee will:
1. Meet with the Independent Auditors, internal auditors and financial
management of the Corporation prior to the annual audit to review the
scope and audit procedures of the proposed audit and, at the
completion of the audit, meet again with the Independent Auditors to
review audit results and discuss the Independent Auditors' judgment,
comments and recommendations about the quality, not just the
acceptability, of the Corporation's accounting principles as applied
in its financial reporting.
2. Review the annual audited financial statements and quarterly financial
statements with management and the Independent Auditors (both with and
separate from management), including the Corporation's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
3. Obtain and review a report of the Independent Auditors prior to the
filing of the Form 10-K or the release of any audited financial
statements of the Corporation with respect to:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
generally accepted accounting principles (GAAP) that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the Independent Auditors; and
(c) other material written communications between the Independent
Auditors and management, such as any management letter or
schedule of unadjusted differences.
4. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the Independent Auditors, management or the internal
auditing department.
5. Review with the Independent Auditors, the internal auditing department
and management the extent to which changes or improvements in
financial or accounting practices, as approved by the Committee, have
been implemented.
6. Discuss with the Independent Auditors its evaluation of the
Corporation's financial, accounting and auditing personnel and the
cooperation that the Independent Auditors received during the course
of its audit, and any audit problems or difficulties, including any
restrictions on the scope of work or access to required information
and management's response to the problem or difficulty.
7. Establish regular and separate systems of reporting to the Committee
by each of management, the Independent Auditors and the internal
auditor regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to
appropriateness of such judgments.
8. Discuss the guidelines and policies with respect to the Corporation's
financial risk assessment and risk management policies with
management.
INTERNAL CONTROLS AND PROCESS IMPROVEMENT
The Committee will:
1. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters.
2. Establish procedures for the confidential and anonymous submission by
employees of the Corporation of concerns regarding questionable
accounting or auditing matters.
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3. Review with the Independent Auditors, the Corporation's internal
auditor, and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the
Corporation, and elicit any recommendations for the improvement of
such internal control procedures or particular areas where new or more
detailed controls or procedures would be desirable. Particular
emphasis should be given to the adequacy of such internal controls to
expose any payments, transactions or procedures that might be deemed
illegal or otherwise improper.
4. Review the functions and effectiveness of the Corporation's internal
audit department, including its budget, staffing, organization,
independence, and proposed audit plans for the year.
5. Review at each meeting a summary of findings from completed internal
audits and a progress report on the proposed internal audit plan.
6. Review with the Chief Executive Officer and the Chief Financial
Officer the contents of their respective certifications required by
Section 302 of the Sarbanes-Oxley Act of 2002.
MISCELLANEOUS
The Committee will:
1. Oversee the Corporation's compliance program, including meeting with,
and receiving reports from, the Corporation's Chief Compliance Officer
and review and approve the annual compliance program.
2. Review with the Corporation's General Counsel, on not less than a
semi-annual basis, all material litigation and other significant legal
matters that may have a material impact on the Corporation's financial
statements and compliance policies and programs.
3. Review and pre-approve any related-party transaction. These include
transactions in which any of the following persons has a direct or
indirect material interest: a director or officer of the Corporation,
a nominee for director, an owner of more than 5% of the outstanding
shares of any class of stock or an Immediate Family Member of any of
the foregoing persons.
4. Review and update the Committee's Charter annually or as circumstances
dictate.
5. Report to the Board on a regular basis and submit minutes of all
meetings to the Board.
6. Cooperate in an annual performance evaluation of the Committee by the
Board. In connection with the evaluation, the Committee should review
with the Board:
(a) major issues regarding accounting principles and financial
statement presentations, including any significant changes in the
Corporation's selection or application of accounting principles,
and major issues as to the adequacy of the Corporation's internal
controls and any special audit steps adopted in light of material
control deficiencies;
(b) analyses setting forth significant financial reporting issues and
judgments made in connection with the preparation of the
financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements;
(c) the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, arrangements or obligations on the
Corporation's financial statements; and
(d) earnings press releases (paying particular attention to any use
of "pro forma" or "adjusted" non-GAAP information), as well as
financial information and earnings guidance provided to analysts
and rating agencies.
7. Post this Charter on the Corporation's website.
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VI. DEFINITIONS
1. For purposes of this Charter, the term "Family Member" includes any
person who is a relative by blood, marriage or adoption or who has the
same residence.
2. For purposes of this Charter, the term "Financial Expert" means a
person who has the following attributes:
(a) an understanding of generally accepted accounting principles
(GAAP) and financial statements;
(b) the ability to assess the general application of such principles
in connection with the accounting for estimates, accruals and
reserves;
(c) experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth
and complexity of issues that can reasonably be expected to be
raised by the Corporation's financial statements, or experience
actively supervising one or more persons engaged in such
activities;
(d) an understanding of internal controls and procedures for
financial reporting; and
(e) an understanding of audit committee functions.
The person shall have acquired such attributes through:
(a) education and experience as a principal financial officer,
principal accounting officer, controller, public accountant or
auditor or experience in one or more positions that involve the
performance of similar functions;
(b) experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant,
auditor or person performing similar functions;
(c) experience overseeing or assessing the performance of companies
or public accountants with respect to the preparation, auditing
or evaluation of financial statements; or
(d) other relevant experience.
3. For purposes of this Charter, the term "Independent Auditors" will
mean, as and when required by the Sarbanes-Oxley Act of 2002, a public
accounting firm registered with the Public Company Accounting
Oversight Board, and as otherwise defined by the SEC. Until such time,
"Independent Auditors" shall mean an independent legal entity engaged
in the practice of public accounting or preparing or issuing audit
reports.
4. For purposes of this Charter, the term "Independent Director" means: a
person other than an officer or employee of the Corporation or its
subsidiaries or any other individual having a relationship which, in
the opinion of the Corporation's Board of Directors, would interfere
with or appear to interfere with the exercise of independent judgment
in carrying out the responsibilities of a member of the Committee or a
director. The following persons shall not be considered independent:
(a) a director who is or has been employed by the Corporation or any
parent or subsidiary of the Corporation within the past five
years;
(b) a director who accepts or who has a non-employee Family Member
who accepts any payment from the Corporation or any of its
affiliates, including political contributions, in the current
year or any of the past three fiscal years, other than
compensation for board or board committee service;
A-5
(c) a director who is a partner, member, principal or occupier of a
similar position of an entity that accepts payments from the
Corporation for the provision of accounting, consulting, legal,
investment banking, financial or other advisory services or
similar services;
(d) a director who is a director, executive officer, partner, member,
principal or designee of an affiliate of the Corporation
(affiliate shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Corporation, including a
10% shareholder of the Corporation);
(e) a director who is a Family Member of an individual who is, or
within the past five years was, employed by the Corporation or by
any parent or subsidiary of the Corporation as an officer;
(f) a director who is a partner in, or a controlling shareholder or
an executive officer of, any business organization, including a
non-profit entity, to which the Corporation made, or from which
the Corporation received, payments (other than those arising
solely from investments in the Corporation's securities) that
exceed 5% of the recipient's consolidated gross revenues for that
year, or $200,000, whichever is more, in the current fiscal year
or if such relationship existed within the past three years;
(g) a director who is employed by another company while any of the
Corporation's executive officers serve on that other company's
compensation committee, or if such relationship existed within
the past three years;
(h) a director who holds, directly or indirectly, 10% or more of the
Corporation's outstanding common stock;
(i) a director who serves on the audit committee of three other
companies; or
(j) a director who was a partner or employee of the Corporation's
outside auditors, and worked on the Corporation's audit within
the past three years.
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GENTIVA HEALTH SERVICES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 16, 2003
P
The undersigned hereby appoints Ronald A. Malone and John R. Potapchuk, and each of them, as proxies, with
full power of substitution, to represent and to vote, as designated herein, all shares of Common Stock of
R Gentiva Health Services, Inc. (the "Company"), at its Annual Meeting of Shareholders to be held at the
Fleet Auditorium, 300 Broad Hollow Road, Melville, New York on Friday, May 16, 2003 at 9:30 a.m., and at
all adjournments thereof, which the undersigned could vote, if present, in such manner as the proxies may
O determine on any matters which may properly come before the meeting and to vote on the following as specified
below:
X THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING: (Change of Address)
1. ELECTION OF DIRECTORS for a term to expire in 2006:
Y Nominees: 01. Stuart R. Levine; 02. Mary O'Neil Mundinger; ------------------------------------------
and 03. Stuart Olsten.
------------------------------------------
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS: Ratification of appointment of ------------------------------------------
PricewaterhouseCoopers LLP as independent public
accountants of the Company. ------------------------------------------
(If you have written in the above space,
You are encouraged to specify your choices by marking please mark the corresponding box on the
the appropriate boxes on the reverse side but you need reverse side of this card)
not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendation.
THIS PROXY, WHEN PROPERLY EXECUTED ON THE REVERSE SIDE OF THIS CARD, WILL BE VOTED IN THE -----------
MANNER DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL SEE REVERSE
NOMINEES AND FOR THE RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. THE SIDE
PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY -----------
PROPERLY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
We urge you to vote your shares. Thank you very much for your cooperation
and continued loyalty as a Gentiva Health Services shareholder.
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
FOR ALL
EXCEPT
FOR NOMINEE(S) WITHHOLD
ALL WRITTEN BELOW ALL FOR AGAINST ABSTAIN
1. Election of [ ] [ ] [ ] 2. Ratification of appointment of [ ] [ ] [ ]
Directors PricewaterhouseCoopers
(see reverse) LLP as independent public
accountants
FOR, except vote withheld from the
following nominee(s):
-----------------------------------
Change of Address on Reverse Side [ ]
Will Attend Annual Meeting [ ]
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournment thereof.
Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. Only authorized officers
should sign for corporations. PLEASE SIGN AND DATE HERE AND RETURN
PROMPTLY.
-------------------------------------------------------------------
-------------------------------------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
IMPORTANT: PLEASE VOTE, DATE AND SIGN YOUR PROXY CARD AND
RETURN IT IN THE ENVELOPE PROVIDED.
THANK YOU FOR VOTING.