SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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GENTIVA HEALTH SERVICES, INC.
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO OF GENTIVA(TM) HEALTH SERVICES]
April 8, 2004
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of Shareholders
of Gentiva Health Services, Inc. to be held on Friday, May 14, 2004, 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 completing, signing, dating and
returning the enclosed proxy in the envelope provided at your earliest
convenience. This will assure that your shares will be represented and voted at
the Annual Meeting even if you do not attend.
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, SUITE 200S
MELVILLE, NEW YORK 11747-4627
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 2004
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The Annual Meeting of Shareholders of Gentiva Health Services, Inc., a
Delaware corporation (the "Company"), will be held on Friday, May 14, 2004, at
9:30 a.m., Eastern Daylight 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 until the 2007 Annual Meeting
of Shareholders;
2. To consider and vote upon a proposal to ratify and approve the
appointment of PricewaterhouseCoopers LLP, as independent auditors of
the Company for the fiscal year ending January 2, 2005;
3. To consider and vote upon a proposal to approve the Company's 2004
Equity Incentive Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only shareholders of record at the close of business on March
19, 2004 are entitled to notice of and to vote at the Annual 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 8, 2004
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 OF GENTIVA(TM) HEALTH SERVICES]
PROXY STATEMENT
GENERAL INFORMATION
INTRODUCTION
The 2004 Annual Meeting of Shareholders of Gentiva Health Services, Inc.
(the "Company" or "Gentiva") will be held on Friday, May 14, 2004, 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 19, 2004 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 8, 2004.
The securities that can be voted at the Annual Meeting consist of the
Company's Common Stock, $.10 par value per share (the "Common Stock"). At the
close of business on March 19, 2004, the record date for determining
shareholders entitled to vote at the Annual Meeting, 25,360,560 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.
VOTING PROCEDURES
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 with no further instructions, as well as 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
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, FOR ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors and FOR
approval of the Company's 2004 Equity Incentive Plan).
REVOCABILITY OF PROXIES
A shareholder of record 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. Please note, however, that under the rules of the
national stock exchanges and the Nasdaq National Market ("Nasdaq"), any
beneficial owner of the Company's Common Stock (which is listed on Nasdaq) whose
shares are held in street name by a member brokerage firm may revoke his or her
proxy and vote his or her shares in person at the Annual Meeting only in
accordance with applicable rules and procedures of the exchange or Nasdaq, as
employed by the beneficial owner's brokerage firm.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
A majority of all the shares of Common Stock 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 with respect to a proposal will have the effect of a
negative vote as to such proposal. "Broker non-votes" will have the effect of
neither a vote for nor a vote against a proposal and will have the effect of
reducing the number of affirmative votes required to achieve a majority vote. A
broker holding shares in street name may not vote such shares on the proposal
relating to approval of the Company's 2004 Equity Incentive Plan absent
instructions from the beneficial holder of such shares. Proxies marked to
withhold authority to vote for a director will be counted in determining whether
a quorum is present but will have no other effect on the election of directors.
Votes are counted by EquiServe Trust Company, N.A., the Company's independent
transfer agent and registrar.
ADDITIONAL MATTERS
The Company, whose principal executive offices are located at 3 Huntington
Quadrangle, Suite 200S, Melville, New York 11747-4627, 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 2003 Annual Report to Shareholders, including a copy of the
Company's Form 10-K for the fiscal year ended December 28, 2003, is also being
mailed to you herewith. Copies are also available on the Company's website at
www.gentiva.com under the Investor Relations section. 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 2004 Annual Meeting to serve for
terms ending at the 2007 Annual Meeting of Shareholders. All three of the
directors in Class I, Victor F. Ganzi, Josh S. Weston and Gail R. Wilensky, are
standing for re-election at this year's Annual Meeting. Each of these nominees
has consented to serve another term as a director if re-elected.
The vote of a plurality of the shares of Common Stock present or
represented and entitled to vote at the Annual 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 VICTOR F. GANZI, JOSH S. WESTON AND GAIL R. WILENSKY.
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.
2
NOMINEES FOR WHOM PROXIES WILL BE VOTED
CLASS I - NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2007
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
57 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 Automatic Data Processing, Inc.,
J. Crew Inc. and Russ Berrie Corp. and a
trustee of Atlantic Health Systems, Inc. Mr.
Weston is 75 years old.
Gail R. Wilensky ............... Dr. Wilensky has served as a director of the
Company since March 2000 and as a member of
the Clinical Quality Committee of the Board
since May 2003. She served as a member of
the Audit Committee of the Board from March
2000 to February 2003. She is presently a
Senior Fellow at Project HOPE, an
international health foundation, and
Co-Chaired the President's Task Force To
Improve Healthcare Delivery For Our Nation's
Veterans from 2001 to 2003. From 1997 to
2001, she chaired the Medicare Payment
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 American Heart Association.
She is an advisor to the Robert Wood Johnson
Foundation and The Commonwealth Fund. She is
a director of Cephalon, Inc., Manor Care,
Inc., Quest Diagnostics Incorporated and
UnitedHealth Group Incorporated. Dr.
Wilensky is 60 years old.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THESE
NOMINEES.
3
DIRECTORS WHOSE TERM OF OFFICE DOES NOT EXPIRE AT THIS MEETING
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 HealthSouth Corp.,
Lionbridge Technologies, Inc. and Neoforma,
Inc. Mr. Blechschmidt is 51 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 49 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 a
director of Diamond Offshore Drilling Inc.,
General American Investors Company, Triarc
Companies, Inc. and WHX Corporation. Mr.
Troubh is Chairman of Enron Corp. and became
a director in November 2001. He is also a
Trustee of Petrie Stores Liquidating Trust.
Mr. Troubh is 77 years old.
4
CLASS III - CONTINUING 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 has served as Lead Director of
the Board since February 2003 and as a
member of the Clinical Quality Committee of
the Board since May 2003. 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 LEADER IN YOU and THE SIX
FUNDAMENTALS OF SUCCESS. 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 56 years old.
Mary O'Neil Mundinger .......... Dr. Mundinger has served as a director of
the Company since November 2002 and as
Chairwoman of the Clinical Quality Committee
of the Board since May 2003. 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 and Associate Dean of the
Faculty of Medicine at Columbia. Dr.
Mundinger is an elected member of the
Institute of Medicine of the National
Academies, the American Academy of Nursing
and the New York Academy of Medicine. She is
a director of Cell Therapeutics Inc.,
UnitedHealth Group Incorporated and Welch
Allyn, Inc. Dr. Mundinger is 66 years old.
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, Mr.
Olsten has been the chairman of the
operating board of MaggieMoos International,
LLC, an owner and franchisor of ice cream
stores throughout the United States, and was
president and chief executive officer from
July 2003 through December 2003. Mr. Olsten
is 51 years old.
5
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors, which currently consists of nine members, manages
or directs the management of the business and affairs of the Company. During the
past fiscal year, the Board held five regularly scheduled and special meetings
and one strategic planning meeting. The Board has affirmatively determined that
each of the following directors is "independent," as that term is defined by
applicable Nasdaq listing standards: Victor F. Ganzi, Stuart R. Levine, Mary
O'Neil Mundinger, Stuart Olsten, Raymond S. Troubh, Josh S. Weston and Gail R.
Wilensky. The independent directors customarily meet in executive session on the
dates when regularly scheduled Board meetings are held. Stuart Levine, the Lead
Director, presides over the executive sessions of the independent directors.
The Board has three standing committees, an Audit Committee, a Clinical
Quality Committee and a Compensation, Corporate Governance and Nominating
Committee, whose principal functions are briefly described below. None of the
members of any committee is an employee or officer of the Company, and each is
"independent" under Nasdaq listing standards.
During 2003, 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. All Board members attended Gentiva's 2003 Annual Meeting of
Shareholders. It is Gentiva's policy to encourage its Board members to attend
the Annual Meeting of Shareholders.
Gentiva has adopted two codes of ethics, a Code of Ethics for Senior
Financial Officers and a Code of Business Conduct and Ethics. The codes are
designed to promote honest and ethical conduct by Gentiva's employees, officers
and directors, and each is posted on the Company's website at www.gentiva.com
under the Investor Relations section.
AUDIT COMMITTEE
The principal functions and responsibilities of the Audit Committee are:
o overseeing Gentiva's internal control structure, financial reporting
and legal and compliance program;
o reviewing and selecting an independent auditing firm, subject to
shareholder ratification, to audit Gentiva's consolidated financial
statements;
o receiving and acting on reports and comments from Gentiva's
independent auditors and approving the independent auditors' fees;
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 auditors and recommending inclusion of the 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
auditors; and
o reporting to the Board of Directors a summary of its findings and
recommendations.
Mr. Ganzi serves as the Chairman, and Messrs. Troubh and Weston serve as
members, of the Audit Committee. The Committee met six times in 2003. In
February 2004, the Board of Directors adopted an amended written charter for the
Audit Committee, which is included as Appendix A to this Proxy Statement and is
also posted on the Company's website at www.gentiva.com under the Investor
Relations section. The Audit Committee has been established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The
Board of Directors has determined that each member of the Audit Committee is
"independent" under the heightened independence standards required for members
of the Audit Committee by the Nasdaq listing standards, the rules of the
Securities and Exchange Commission and the Audit Committee Charter. The Board of
Directors has also determined that Victor F. Ganzi is an "audit committee
financial expert," as such term is defined by rules and regulations of the
Securities and Exchange Commission.
6
CLINICAL QUALITY COMMITTEE
The principal functions and responsibilities of the Clinical Quality
Committee are:
o advising the Company's clinical leadership of leading edge clinical
strategies and practices;
o monitoring the Company's performance against established internal and
external benchmarking regarding clinical performance and outcomes;
o facilitating the development of industry best practices based on
internal and external data comparisons;
o fostering enhanced awareness of the Company's clinical performance by
the Board of Directors and external sources;
o establishing a long term, strategic clinical vision for the Company;
and
o reporting to the Board of Directors a summary of its findings and
recommendations.
Dr. Mundinger serves as the Chairwoman, and Mr. Levine and Dr. Wilensky
serve as members, of the Clinical Quality Committee. The Committee, which was
established in May 2003, met once in 2003. The Board of Directors has adopted a
written charter for the Clinical Quality Committee, which is posted on the
Company's website at www.gentiva.com under the Investor Relations section.
COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The principal functions and responsibilities of the Compensation, Corporate
Governance and Nominating Committee are:
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.
Mr. Levine serves as Chairman, and Messrs. Troubh and Weston serve as
members, of the Compensation, Corporate Governance and Nominating Committee,
which met four times in 2003. In February 2004, the Board of Directors adopted
an amended written charter for the Compensation, Corporate Governance and
Nominating Committee, which is posted on the Company's website at
www.gentiva.com, under the Investor Relations section.
CONSIDERATION OF DIRECTOR NOMINEES
The Compensation, Corporate Governance and Nominating Committee will
consider recommendations for director nominees from an array of sources,
including members of Gentiva's Board and management and shareholders.
Shareholders who would like the Compensation, Corporate Governance and
Nominating Committee to consider a prospective candidate should submit the
candidate's name, biographical data and qualifications, as well as 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, to Gentiva's Secretary,
Gentiva Health Services, Inc., 3 Huntington Quadrangle, Suite 200S, Melville,
New York 11747-4627. Submissions of names (and other required information) of
prospective candidates for consideration by the Committee for nomination and
election at the Company's 2005 Annual Meeting of Shareholders must be received
in writing by the Company at the above address on or after October 1, 2004 and
on or before December 11, 2004. The Committee reserves the right to request
additional information from the candidate to assist the Committee in the
evaluation process.
7
The Compensation, Corporate Governance and Nominating Committee believes
that all members of the Board should have the highest professional and personal
ethics and values and have a record of outstanding ability and judgment.
Directors should be committed to enhancing shareholder value and have sufficient
time to attend meetings and participate effectively on the Board. Each director
is expected to represent the interests of all shareholders.
While there is no firm requirement of minimum qualifications or skills that
a director candidate must possess, the Compensation, Corporate Governance and
Nominating Committee will evaluate director candidates based on a number of
factors, including their independence, business judgment, leadership ability,
experience in developing and analyzing business strategies, experience in the
health care industry, strategic vision and financial literacy, and, for
incumbent directors, his or her past performance. All members of the Board may
interview the final candidates. The same identifying and evaluating procedures
apply to all candidates for director nomination, including candidates submitted
by shareholders.
In accordance with Nasdaq listing standards, the Company also ensures that
at least a majority of the Company's Board is independent under the Nasdaq
definition of independence, and that the members of the Board as a group
maintain the requisite qualifications under Nasdaq listing standards for
populating the Audit Committee and the Compensation, Corporate Governance and
Nominating Committee.
SHAREHOLDER COMMUNICATIONS
The Board of Directors has established a process for shareholders to send
communications to the Board. Shareholders may communicate with the Board
generally or with a specific director at any time by writing to Gentiva's
Secretary, Gentiva Health Services, Inc., 3 Huntington Quadrangle, Suite 200S,
Melville, New York 11747-4627. The Secretary will forward communications to the
director to whom they are addressed, or, if addressed to the Board generally, to
the Chairman of the Compensation, Corporate Governance and Nominating Committee.
COMPENSATION OF DIRECTORS
As of January 1, 2004, each non-employee member of the Board of Directors
receives an annual retainer fee of $25,000 payable in cash and an annual
deferred stock unit award valued at $30,000 credited quarterly to a director's
share unit account, which will be paid to a director in shares of the Company's
Common Stock at the time of termination of service on the Board. (In 2003, each
non-employee director received an annual retainer fee of $25,000, up to half of
which could be paid in cash on a quarterly basis with the remainder paid in
shares of the Company's Common Stock or credited as units to a director's share
unit account, and each non-employee director was awarded stock options
exercisable for up to 7,500 shares of the Company's Common Stock.) In addition,
any non-employee director who serves as chairperson of a committee of the Board
receives $5,000 annually for acting as chairperson, except that the chairperson
of the Audit Committee receives $10,000 annually. (In 2003, the chairperson of
the Audit Committee received $5,000.) Beginning in 2004, the Lead Director of
the Board receives an additional $10,000 annually. Non-employee directors also
receive $1,500 for each Board meeting they attend ($750 if attendance is by
telephone) and receive $2,000 for each committee meeting they attend ($750 if
attendance is by telephone). (In 2003, non-employee directors received $1,000
for each board meeting they attended ($500 if attendance was by telephone) and
$1,500 for each committee meeting they attended ($750 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 2003, each
non-employee director who participated in a strategic planning meeting sponsored
by the Company was paid $1,000.
In 2003, the Company paid Dr. Wilensky $26,000 for consulting services she
provided to the Company on federal legislative, regulatory and reimbursement
developments in home health matters pursuant to a consulting agreement that
terminates on May 31, 2004 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 $2,500 in 2003 for attending three board meetings as a
director of a company in which the Company held a minority interest.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 19, 2004 (unless otherwise
indicated), 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 .................................................... 43,731 --
Ronald A. Malone .................................................. 319,223 1.2%
Mary Morrisey Gabriel ............................................. 13,925 --
Vernon A. Perry, Jr. .............................................. 50,610 --
John R. Potapchuk ................................................. 141,683 --
Edward A. Blechschmidt(5) ......................................... 233,884 --
Victor F. Ganzi ................................................... 57,017 --
Stuart R. Levine .................................................. 64,529 --
Mary O'Neil Mundinger ............................................. 13,320 --
Stuart Olsten(6) .................................................. 1,222,697 4.8
Raymond S. Troubh(7) .............................................. 164,626 --
Josh S. Weston .................................................... 15,010 --
Gail R. Wilensky .................................................. 16,484 --
Barclays Global Investors, NA(8) .................................. 1,632,575 6.4
45 Fremont Street
San Francisco, CA 94105
Daruma Asset Management, Inc.(9) .................................. 2,070,300 8.2
80 West 40th Street
New York, NY 10018
Deutsche Bank AG(10) .............................................. 1,904,766 7.5
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany
Heartland Advisors, Inc.(11) ...................................... 1,351,900 5.3
789 North Water Street
Milwaukee, WI 53202
Morgan Stanley(12) ................................................ 1,756,416 6.9
1585 Broadway
New York, NY 10036
Perry Corp.(13) ................................................... 2,063,962 8.1
599 Lexington Ave
New York, NY 10022
All executive officers and directors as a group (15 persons)(14) .. 2,441,639 9.4
- ----------
(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 -- 40,214;
9
Mr. Malone -- 282,219; Ms. Morrisey Gabriel -- 10,000; Mr. Perry -- 24,000;
Mr. Potapchuk -- 125,071; Mr. Blechschmidt -- 10,000; Mr. Ganzi -- 10,000;
Mr. Levine -- 26,845; Dr. Mundinger -- 10,000; Mr. Olsten -- 26,845; Mr.
Troubh -- 26,845; Mr. Weston -- 10,000; and Dr. Wilensky -- 10,000.
(3) Includes beneficial ownership of the following number of whole shares
acquired and currently held under Gentiva's Employee Stock Purchase Plan:
Mr. Creamer -- 3,017; Mr. Malone -- 7,583; Ms. Morrisey Gabriel -- 2,132;
Mr. Perry -- 1,610; and Mr. Potapchuk -- 4,800.
(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 --
3,884; Mr. Ganzi -- 11,884; Mr. Levine -- 3,826; Dr. Mundinger -- 869; Mr.
Olsten -- 11,884; Mr. Troubh -- 8,854; Mr. Weston -- 878; and Dr. Wilensky
-- 940.
(5) In addition to the shares referred to in footnotes (2) and (4), Mr.
Blechschmidt's holdings include 200,000 shares owned directly and 14,000
shares owned by his wife and 2,000 shares owned by each of three children,
as to which shares owned by his wife and children he disclaims beneficial
ownership.
(6) 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 22,500
shares owned by two trusts for the benefit of his niece and nephew, as to
which shares he disclaims beneficial ownership.
(7) In addition to shares referred to in footnotes (2) and (4), Mr. Troubh's
holdings include 59,179 shares owned directly and 69,748 shares owned
indirectly through a limited partnership.
(8) Based on a Schedule 13G dated February 13, 2004 and filed with the
Securities and Exchange Commission, as of December 31, 2003 Barclays Global
Investors, NA reported beneficial ownership of 1,396,742 of such shares,
with sole voting power and sole dispositive power as to 1,266,833 of such
shares. In addition, in the Schedule 13G, Barclays Global Fund Advisors
reported that it held sole voting power and sole dispositive power as to
225,833 of such shares, and Barclays Bank PLC reported that it held sole
voting power and sole dispositive power as to 10,000 of such shares. The
Schedule 13G indicates that the reported shares are held in trust accounts
for the economic benefit of the beneficiaries of those accounts.
(9) Based on a Schedule 13G (Amendment No. 1) dated February 12, 2004 and filed
with the Securities and Exchange Commission, as of December 31, 2003 Daruma
Asset Management, Inc. reported beneficial ownership of 2,070,300 of such
shares, with sole voting power as to 987,800 of such shares and sole
dispositive power as to 2,070,300 of such shares. In addition, in the
Schedule 13G, Mariko O. Gordon, who owns in excess of 50% of the
outstanding voting stock and is the president of Daruma Asset Management,
Inc., reported that she held sole voting power as to 987,800 of such shares
and sole dispositive power as to 2,070,300 of such shares. The Schedule 13G
indicates that the reported shares are beneficially owned by one or more
investment advisory clients whose accounts are managed by Daruma Asset
Management, Inc. Daruma Asset Management, Inc. and Mariko O. Gordon
disclaim beneficial ownership in any of the shares covered by the Schedule
13G.
(10) Based on a Schedule 13G (Amendment No. 1) dated February 9, 2004 and filed
with the Securities and Exchange Commission, as of December 31, 2003
Deutsche Bank AG reported beneficial ownership of 1,904,766 of such shares,
with sole voting power and sole dispositive power as to 1,904,766 of such
shares. In addition, in the Schedule 13G, Deutsche Bank AG, London Branch
reported that it held sole voting power and sole dispositive power as to
1,887,842 of such shares; Deutsche Bank Securities Inc. reported that it
held sole voting power and sole dispositive power as to 16,924 of such
shares; and DB Advisors, L.L.C. reported that it held sole voting power and
sole dispositive power as to 561 of such shares. Deutsche Bank AG and its
subsidiaries and affiliates disclaim beneficial ownership of the shares.
(11) Based on a Schedule 13G dated February 13, 2004 and filed with the
Securities and Exchange Commission, as of December 31, 2003 Heartland
Advisors, Inc. reported beneficial ownership of 1,351,900 of such shares,
with shared voting power as to 1,331,500 of such shares and shared
dispositive power as to 1,351,900 of such shares. In addition, in the
Schedule 13G, William J. Nasgovitz, the President and principal shareholder
of Heartland Advisors, Inc., reported that he held shared voting power as
to 1,331,500 of such shares and shared dispositive power with respect to
1,351,900 of such shares. The Schedule 13G indicates that the reported
shares are beneficially owned by one or more investment advisory clients
whose accounts are managed by Heartland Advisors, Inc. Heartland Advisors,
Inc. and William J. Nasgovitz disclaim beneficial ownership in any of the
shares covered by the Schedule 13G.
(12) Based on a Schedule 13G (Amendment No. 1) dated February 15, 2004 and filed
with the Securities and Exchange Commission, Morgan Stanley reported
beneficial ownership of 1,756,416 of such shares, with shared voting power
and shared dispositive power as to 1,756,416 of such shares. In addition,
in the Schedule 13G, Morgan Stanley Capital Services Inc. reported that it
held shared voting power and shared dispositive power as to 1,689,500 of
these shares.
10
(13) Based on a Schedule 13G dated February 13, 2004 and filed with the
Securities and Exchange Commission, as of December 31, 2003 Perry Corp.
reported beneficial ownership of 2,063,962 of such shares, with sole voting
power and sole dispositive power as to 2,063,962 of such shares. In
addition, in the Schedule 13G, Richard C. Perry, the President and sole
stockholder of Perry Corp., reported that he held sole voting power and
sole dispositive power as to 2,063,962 of such shares. The Schedule 13G
indicates that the reported shares are held for the accounts of two or more
private investment funds for which Perry Corp. acts as general partner
and/or investment advisor. Richard C. Perry disclaims beneficial ownership
in any of the shares covered by the Schedule 13G, except for the portion of
such shares that relates to his economic interest in such shares.
(14) Includes 1,704,111 shares owned by current executive officers and
directors, 694,509 shares that may be acquired upon exercise of presently
exercisable stock options and 43,019 shares representing shares deferred as
share units.
EXECUTIVE COMPENSATION
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 28,
2003 (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 .............. 2003 $ 471,539 $ 500,000 -- 70,000 $ 71,383
Chief Executive Officer and 2002 387,596 300,000 $ 2,879 200,000 310,797
Chairman of the Board 2001 375,000 180,000 3,099 40,000 38,551
Vernon A. Perry, Jr. .......... 2003 274,308 165,000 -- 40,000 29,622
President and 2002 247,596 125,000 1,455 72,000 766,216
Chief Operating Officer 2001 229,231 85,000 1,554 25,000 25,974
John R. Potapchuk ............. 2003 264,308 175,000 -- 40,000 30,568
Senior Vice President, 2002 239,192 130,000 467 72,000 216,839
Chief Financial Officer, 2001 224,626 90,000 341 15,000 21,898
Treasurer and Secretary
Robert Creamer ................ 2003 239,308 150,000 -- 36,000 28,097
Senior Vice President, 2002 207,635 140,112 104 60,000 318,250
Nursing Operations, and
Chief Information Officer(3)
Mary Morrisey Gabriel ......... 2003 248,846 150,000 -- 50,000 21,095
Senior Vice President and 2002 95,192 70,000 -- 30,000 5,277
Chief Sales Officer(4)
- ----------
(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 2003, 2002 and 2001. 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; and
$299,735 to Mr. Creamer, who tendered 21,000 options. For fiscal 2002 and
2001, also includes for Mr. Perry payments of $51,884 and $5,223,
respectively, for relocation expenses.
(3) Mr. Creamer became an executive officer in 2002. He became Senior Vice
President, Nursing Operations, in September 2003. Prior thereto, he was
Senior Vice President, Financial Operations. He was Chief Information
Officer during 2003.
(4) Ms. Morrisey Gabriel became an executive officer in 2002.
11
STOCK OPTIONS
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED (#)(2) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------- -------------- ------------ -------- ---------- --------- ----------
Ronald A. Malone ................. 70,000 10.3% $ 8.74 1/2/13 $ 385,000 $ 975,100
Vernon A. Perry, Jr. ............. 40,000 5.9 8.74 1/2/13 220,000 557,200
John R. Potapchuk ................ 40,000 5.9 8.74 1/2/13 220,000 557,200
Robert Creamer ................... 36,000 5.3 8.74 1/2/13 198,000 501,480
Mary Morrisey Gabriel ............ 20,000 2.9 8.74 1/2/13 110,000 278,600
30,000 4.4 9.75 2/12/13 183,900 466,200
- ----------
(1) The dollar amounts under the indicated columns represent hypothetical gains
assuming exercise at the end of the option term and assuming rates of stock
price appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission. These assumptions are not intended to forecast
future appreciation of Gentiva's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock. The actual
gains, if any, on the stock option exercises will depend on the future
performance of Gentiva's Common Stock, the optionee's continued employment
through applicable vesting periods and the dates on which the options are
exercised and the underlying shares are sold.
(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 four-year period as follows:
50% at the end of year two, another 25% at the end of year three and the
final 25% at the end of year four; except that Mr. Malone's options become
exercisable over a six-year period as follows: 15% at the end of year two,
another 15% at the end of year three, another 15% at the end of year four,
another 15% at the end of year five and the final 40% at the end of year
six.
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 0 282,219 236,666 $ 2,690,625 $ 1,207,763
Vernon A. Perry, Jr. ... 0 0 24,000 88,000 131,280 431,760
John R. Potapchuk ...... 0 0 125,071 88,000 1,158,574 431,760
Robert Creamer ......... 0 0 40,214 76,000 336,326 371,085
Mary Morrisey Gabriel .. 0 0 10,000 70,000 43,700 268,600
- ----------
(1) Based on the difference between the exercise price and the closing price of
a share of Gentiva Common Stock on December 26, 2003, the last trading day
in fiscal 2003.
12
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 ("2002 employment agreement"). Under the 2002 employment
agreement, Mr. Malone was entitled to 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. Mr. Malone was
also entitled to receive customary benefits, perquisites and reimbursement for
expenses.
The 2002 employment agreement terminated as of March 22, 2004 and was
replaced by a new employment agreement dated as of such date ("2004 Employment
Agreement"). The 2004 Employment Agreement has a term of four years, commencing
on March 22, 2004, and will automatically extend for consecutive one-year
periods unless either party provides not less than six months prior notice to
the other party of its intention not to extend the initial four year term or any
subsequent one year extension. During the term of the 2004 Employment Agreement,
Mr. Malone will receive (i) a base salary of not less than $525,000 per year and
(ii) an annual bonus, based on the achievement of target levels of performance,
with target bonus equal to 100 percent of his base salary and the maximum bonus
equal to 150 percent (or such other greater amount as determined by the Board of
Directors or a committee of the Board) of his base salary. Mr. Malone will also
receive customary benefits, perquisites and reimbursement for expenses.
The 2004 Employment Agreement provides that Mr. Malone's employment will
terminate upon his 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 (as defined in the agreement). 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 Mr. Malone's employment 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 Mr. Malone's
employment 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, accelerated vesting of his accrued pension benefits, continued medical
benefits generally for up to two years and accelerated vesting of his options or
other equity-based awards granted after March 22, 2004 that would otherwise have
vested during the two years following the termination of his employment had he
continued to be employed by the Company. Mr. Malone's severance benefits will be
equal to two times (or, in the case of termination for good reason by Mr. Malone
because of the Company's giving him notice of nonextension of the 2004
Employment Agreement prior to the end of the initial four year term, one and
one-half times) Mr. Malone's base salary and target bonus for the year of
termination. Mr. Malone will not be entitled to severance benefits under the
2004 Employment Agreement if he receives severance payment under his change in
control agreement described below.
The 2004 Employment Agreement also restricts Mr. Malone's ability to engage
in competition with the Company during his employment by the Company and for the
twenty-four months after termination of his employment. It also contains
confidentiality provisions and provisions for non-solicitation of the Company's
employees and clients.
Mr. Malone has also entered into a new change in control agreement with the
Company, effective March 22, 2004, which replaced his prior change in control
agreement. His new change in control agreement has a term of four years,
commencing March 22, 2004, and will automatically extend for consecutive
one-year periods unless either party provides not less than six months prior
notice to the other party of its intention not to extend the initial four year
term or any subsequent one year extension. The agreement generally provides
benefits in the event of a change in control of the Company if (i) Mr. Malone's
13
employment is terminated by the Company not for cause or by Mr. Malone for good
reason (as defined in the agreement) and (ii) the termination is within three
years after a change in control. In addition, Mr. Malone will receive the
benefit of his agreement if he is terminated by the Company without cause within
one year before a change in control, if his termination arises in connection
with the change in control.
The benefits conferred under Mr. Malone's change in control agreement
generally will include a cash payment equal to two and one-half times his base
salary and target bonus; continued benefits for the two years following the
termination or until such earlier date that he obtains comparable benefits from
another employer; immediate vesting of any stock options, restricted stock and
other equity-based compensation awards held by him (the options would remain
exercisable for three years following the termination, but not beyond the
original full term); and full vesting of retirement and deferred compensation
benefits. Under Mr. Malone's change in control agreement, if any payment to him
(under his change in control agreement or otherwise) is subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended,
Mr. Malone will be generally entitled to receive an additional "gross-up
payment" in an amount sufficient to make him whole for such excise tax.
Under Mr. Malone's agreement, 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 total voting
power of all classes of capital stock of the Company; either the directors (and
their approved successors) ceasing to constitute a majority of the Board of
Directors or a majority of the persons nominated by the Board of Directors for
election failing to be elected; a merger of the Company if the Company
shareholders 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; a complete liquidation of the
Company; or a sale of all or substantially all of the assets of the Company.
In addition, the change in control agreement provides that if Mr. Malone
substantially prevails in a dispute with the Company relating to the agreement,
the Company will pay his legal fees which result from the suit. Mr. Malone is
not required to seek other employment or otherwise mitigate any damages that are
caused as a result of a change in control, but he is required to keep the
Company's confidential information private.
The following Named Officers of the Company are also parties to change in
control agreements in connection with their employment with the Company: Vernon
A. Perry, Jr., John R. Potapchuk, Robert Creamer and Mary Morrisey Gabriel.
These change in control 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 not for cause or by the employee for good reason (as defined in the
agreement) and (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 within one year
before a change in control, if their terminations arise in connection with the
change in control.
The benefits conferred under these change in control 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
(the 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 these change in control agreements, the events constituting a change
in control are substantially identical to the events constituting a change in
control in Mr. Malone's change in control agreement as described above.
In addition, these 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 legal
14
fees which result from the suit. The employees 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.
The following Named Officers are parties to severance agreements in
connection with their employment with the Company: Vernon A. Perry, Jr., John R.
Potapchuk, Robert Creamer and Mary Morrisey Gabriel. These severance 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 (twelve months in the case of Ms. Morrisey Gabriel) in an amount
based on that officer's base salary at the time of termination. Additionally,
the severance 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 severance agreements if benefits are payable to
an officer under the officer's change in control agreement. Pursuant to these
severance agreements the officers agreed to certain covenants relating to
competition, confidential information and non-solicitation of employees and
business.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information regarding the Company's
equity compensation plans as of December 28, 2003:
(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
security holders 2,722,542 $ 6.06 2,056,673
Equity compensation
plans not approved
by security holders -- -- --
--------- ------ ---------
Total 2,722,542 $ 6.06 2,056,673
--------- ------ ---------
- --------------
* Consists of securities available for future issuance under Gentiva's 1999
Stock Incentive Plan (1,476,698), Employee Stock Purchase Plan (498,534)
and Stock & Deferred Compensation Plan for Non-Employee Directors (81,441).
On December 31, 2003, the Company issued 992,100 stock options under its
1999 Stock Incentive Plan at an exercise price of $12.87 per share and issued
125,039 shares of Common Stock under its Employee Stock Purchase Plan. Giving
effect to such issuances of stock options and shares, as of December 31, 2003,
(a) the number of stock options outstanding was 3,678,396, with a
weighted-average exercise price of $7.95 and a weighted-average remaining term
of 8.4 years; (b) the number of deferred stock units outstanding was 36,246; and
(c) the number of securities remaining available for future issuance was 484,598
under the 1999 Stock Incentive Plan, 373,495 under the Employee Stock Purchase
Plan and 81,441 under the Stock & Deferred Compensation Plan for Non-Employee
Directors.
15
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 among those executives. The Board of Directors and 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.
BASE SALARY
The Committee sets the base salary for the Chief Executive Officer, subject
to the minimum annual base salary provided for in his employment agreement with
the Company. The Chief Executive Officer recommends the base salaries of the
other executive officers for review and approval by the Committee. In the
setting of base salaries, consideration is given to the relative importance of
an executive's position and the individual's performance and contributions, as
well as to the results of compensation analysis studies.
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 in 2003 included revenue, diluted earnings per share, operating cash
flow and employee 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 fiscal 2003 vest
50% at the end of year two and another 25% at the end of each of years three and
four, except those granted the Chief Executive Officer, which vest 15% at the
end of each of years two, three, four and five and 40% at the end of year six.
Approximately 150 employees participate. Also, executive officers and other
employees may purchase shares of Common Stock under the 1999 Employee Stock
Purchase Plan.
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 2002, and approved by the Committee,
Mr. Malone was entitled to receive a base salary of not less than $400,000. For
2003, the Committee set Mr. Malone's base salary at $475,000. In March 2004, Mr.
Malone
16
entered into a new employment agreement with the Company. The Committee set Mr.
Malone's base salary for 2004 at $525,000.
In fiscal 2003, Mr. Malone participated in the Company's Executive Officer
Annual Incentive Program. His target payment under the plan, if targets and
individual goals were achieved, was 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. The Committee
viewed favorably the overall financial performance of the Company and total
shareholder return. The Committee concluded that the Company either met or
exceeded its goals and objectives under Mr. Malone's leadership and direction.
Consistent with its compensation philosophy, the Committee awarded Mr. Malone a
$500,000 annual incentive payment under the plan for fiscal 2003, which
represents 105% of his 2003 base salary.
In fiscal 2003, Mr. Malone was awarded 70,000 stock options as long-term
incentives vesting over six years from the date of grant, with an exercise price
of $8.74.
Compensation, Corporate Governance and Nominating Committee:
Stuart R. Levine, CHAIRMAN
Raymond S. Troubh
Josh S. Weston
17
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
28, 2003 comparing the cumulative total return on the Company's Common Stock
against the cumulative total return of the Nasdaq Market Index and a peer issuer
group selected by the Company (the "Peer Group Index") 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 line graph assumes that $100 was invested on March 16, 2000 in each of
the Company's Common Stock, the Nasdaq Market index and the Peer Group Index and
that all dividends (if any) were reinvested. Media General Financial Services
furnished the data for the graph.
[TABULAR REPRESENTATION OF LINE GRAPH]
3/16/2000 12/31/00 12/30/01 12/29/02 12/28/03
--------- -------- -------- -------- --------
GENTIVA HEALTH SERVICES, INC. $ 100.00 $ 222.92 $ 366.67 $ 436.79 $ 678.47
NASDAQ MARKET INDEX 100.00 53.34 42.52 29.66 44.59
PEER GROUP INDEX 100.00 194.26 177.14 151.96 196.49
18
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP as independent auditors of the Company for the 2004
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 AUDITORS OF THE
COMPANY.
FEES BILLED BY PRICEWATERHOUSECOOPERS LLP
Fees billed to the Company by PricewaterhouseCoopers LLP for services
rendered during fiscal years 2003 and 2002 were as follows:
FEE CATEGORY 2003 2002
------------------------------------------ -------- --------
Audit Fees ............................... $344,700 $361,000
Audit-Related Fees ....................... 133,900 223,000
Tax Fees ................................. 109,000 201,000
All Other Fees ........................... 130,000 130,000
-------- --------
Total .................................... $717,600 $915,000
======== ========
AUDIT FEES related to the audit of the Company's annual financial
statements, the review of financial statements included in the Company's
quarterly reports on Form 10-Q and miscellaneous audit services. AUDIT-RELATED
FEES related in fiscal 2003 to Sarbanes-Oxley Act compliance and Section 404
internal control reporting preparedness review and in fiscal 2002 to audit
services related to the sale of the Company's specialty pharmaceutical services
business. TAX FEES related to tax planning and compliance services. ALL OTHER
Fees related to reviews required by the Company's corporate integrity agreement.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee is responsible for the appointment, compensation and
oversight of the work performed by the Company's independent auditors. The Audit
Committee has adopted a pre-approval policy requiring it to pre-approve all
audit (including audit-related) services and permitted non-audit services
provided by the independent auditors in order to assure that the provision of
such services does not impair the auditor's independence. The Audit Committee
pre-approved all fiscal 2003 services provided by PricewaterhouseCoopers LLP.
The policy sets forth specified audit, audit-related, tax and other
permissible non-audit services for which pre-approval is provided up to a
maximum fee amount set annually by the Audit Committee. Pre-approval is
generally provided for up to one year, and any proposed services exceeding these
fee levels must be specifically pre-approved by the Audit Committee. The
independent auditors and management report periodically to the Audit Committee
regarding the extent of services provided by the independent auditors in
accordance with this pre-approval. The Audit Committee may also pre-approve
particular services on a case-by-case basis and may delegate specific
pre-approval authority to one or more members, provided that the member reports
any pre-approved services at the next regularly scheduled Audit Committee
meeting.
19
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is comprised of
three directors, none of whom is an officer or employee of the Company. Each of
the members is "independent" under existing rules of the Securities and Exchange
Commission and Nasdaq and under the Committee's charter.
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, 2004, a copy of which is included
as Appendix A to this Proxy Statement. In accordance with its charter, the Audit
Committee assisted the Board in fulfilling its oversight responsibility relating
to the integrity of the Company's financial statements and for monitoring the
Company's accounting, auditing and financial reporting practices and compliance
by the Company with legal and regulatory requirements. In addition, the Audit
Committee selected PricewaterhouseCoopers LLP to be the independent auditors to
audit the consolidated financial statements of the Company and its subsidiaries,
subject to shareholder ratification.
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 28,
2003 for filing with the Securities and Exchange Commission.
Audit Committee:
Victor F. Ganzi, CHAIRMAN
Raymond S. Troubh
Josh S. Weston
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 by such persons, the Company believes that during the
fiscal year ended December 28, 2003, all persons subject to the Section 16(a)
filing requirements filed the required reports on a timely basis, except that
Edward Blechschmidt, Victor Ganzi, Mary O'Neil Mundinger, Stuart Olsten, Raymond
Troubh, Josh Weston and Gail Wilensky, directors of the Company, all filed late
Form 4 reports covering the Company's award to them of stock options; Stuart
Levine, a director of the Company, filed a late Form 4 report covering the
Company's award to him of stock options and a late Form 4 report covering
20
his acquisition of shares of the Company's Common Stock; Christopher Anderson,
Robert Creamer, Ronald Malone, Vernon Perry and John Potapchuk, officers of the
Company, all filed late Form 4 reports covering the Company's award to them of
stock options; and Mary Morrisey Gabriel, an officer of the Company, filed two
late Form 4 reports, each covering the Company's award of stock options to her.
PROPOSAL 3
APPROVAL OF GENTIVA HEALTH SERVICES, INC.
2004 EQUITY INCENTIVE PLAN
The Board of Directors has adopted the Gentiva Health Services, Inc. 2004
Equity Incentive Plan (the "2004 Plan") as a replacement for the Gentiva Health
Services, Inc. 1999 Stock Incentive Plan (the "1999 Plan"), subject to approval
by the shareholders of the Company. The vote of a majority of the shares of
Common Stock present or represented and entitled to vote at the Annual Meeting
is required for approval of the 2004 Plan. A significant difference between the
2004 Plan and the 1999 Plan is that the 2004 Plan affords the Company the
flexibility of granting a wide range of incentive awards, while the 1999 Plan
permitted the Company to grant only incentive stock options and nonqualified
stock options.
PURPOSE. The purpose of the 2004 Plan is to attract, retain and motivate
highly competent persons as officers and employees of, consultants to, and
non-employee directors of, the Company and its subsidiaries and affiliates by
providing them with appropriate incentives and rewards either through a
proprietary interest in the long-term success of the Company or compensation
based on their performance in fulfilling their personal responsibilities.
Described below is a summary of the principal features of the 2004 Plan.
The summary is qualified in its entirety by reference to the full text of the
2004 Plan, which is attached to this Proxy Statement as Appendix B.
ADMINISTRATION. Unless the Board of Directors determines otherwise, the
2004 Plan is to be administered by a committee (the "Committee") comprised
solely of not less than two members who shall be (i) "non-employee directors"
within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii)
"outside directors" within the meaning of the regulations under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), and (iii)
"independent directors" within the meaning of the listing standards of Nasdaq.
The 2004 Plan is presently administered by the Company's Compensation, Corporate
Governance and Nominating Committee, which satisfies each of these requirements.
Among other functions, the Committee has the authority, subject to the
terms of the 2004 Plan, to (i) establish rules for the administration of the
2004 Plan, (ii) designate participants to receive awards under the 2004 Plan,
(iii) determine the type of awards to be granted under the 2004 Plan, (iv) set
the terms and conditions of the award and (v) make such determinations and
interpretations to take such action in connection with the 2004 Plan and any
awards granted thereunder as it deems necessary or advisable, which
determinations and interpretations are binding on all participants and their
legal representatives.
ELIGIBILITY. The Committee may grant awards to such officers and other
employees of, and consultants to, the Company and its subsidiaries and
affiliates as it determines from time to time in its sole discretion. In
addition, the Committee may grant awards (other than cash awards) to
non-employee directors of the Company. As of March 19, 2004, there were
approximately 3,500 full-time employees, including officers, eligible for awards
under the 2004 Plan. As of the same date, there were eight non-employee
directors eligible for awards (other than cash awards) under the 2004 Plan.
NEW PLAN BENEFITS. Any awards under the 2004 Plan will be at the discretion
of the Committee. Therefore, it is not possible at present to determine the
amount or form of any award that will be received by an individual under the
2004 Plan.
21
AUTHORIZED SHARE POOL. The 2004 Plan authorizes the grant of up to
3,500,000 shares of the Company's Common Stock plus any shares authorized under
the 1999 Plan as to which awards have not been made as of the effective date of
the 2004 Plan.
During the term of the 2004 Plan, the following shares of the Company's
Common Stock are added back to the authorized share pool:
o Shares subject to an outstanding award under the 2004 Plan or the 1999
Plan which are forfeited, expire or are cancelled or settled in cash
without delivery to the award recipient of shares of Common Stock;
o Shares delivered to the Company as part or full payment for the
exercise or purchase price of an award granted under the 2004 Plan or
the 1999 Plan or to satisfy the Company's withholding obligation with
respect to an award granted under the 2004 Plan or the 1999 Plan; and
o Shares reacquired by the Company on the open market or otherwise using
cash proceeds received by the Company from the exercise of stock
options granted under the 2004 Plan or the 1999 Plan, provided that
the number of shares so repurchased shall not exceed (A) the amount of
the proceeds, divided by (B) the fair market value on the date of
exercise which generated such proceeds.
Generally, each share subject to an outstanding award is charged against
the authorized share pool at the time of grant. However, in recognition of the
additional value of restricted stock and stock units, shares subject to such
awards are charged against the authorized share pool at an enhanced rate of two
shares for each share subject to such award. Shares added back to the authorized
share pool related to grants of restricted stock and stock units are also added
back at a rate of two shares for each share subject to such award.
The shares subject to the authorized share pool are subject to adjustment
for any changes in the Company's Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend, special one-time cash
dividend, stock split, reverse stock split, split up, spin-off, combination of
shares, exchange of shares, dividend in kind or other like change in capital
structure or distribution (other than normal cash dividends) to shareholders of
the Company.
INDIVIDUAL MAXIMUM. The maximum number of shares that may be granted or
measured to any individual participant under the 2004 Plan in any calendar year
during the term of the 2004 Plan is 500,000 shares.
TYPES OF AWARDS. The 2004 Plan permits the granting of (i) stock options,
(ii) stock appreciation rights, (iii) restricted stock, (iv) stock units and (v)
cash. Any award may be structured to qualify as a performance-based award so
that it is exempt from the $1 million dollar compensation limit under Section
162(m) of the Code.
STOCK OPTIONS. The 2004 Plan permits the Committee to grant options to purchase
shares during the term of the option at an exercise price established by the
Committee. Generally, the exercise price must equal the fair market value of the
Company's shares on the date of grant. However, a lower price is permitted for
(i) stock options retroactively granted in tandem with or in substitution for
other awards made by the Company, if the exercise price is established as the
price on the date of grant of the other award or (ii) stock options granted to a
participant upon assumption of, or in substitution of, an award granted by
another entity in connection with a corporate transaction between the Company
and the granting entity (such as a merger, consolidation or acquisition) if the
aggregate fair market value of the shares subject to the substitute stock option
over the aggregate exercise price of the substitute stock option does not exceed
the aggregate fair market value of the shares of the predecessor entity subject
to the award being assumed or substituted as of the date immediately preceding
the corporate transaction (as determined by the Committee) over the aggregate
exercise price or aggregate base value, if any, of such an award.
22
EXERCISABILITY AND VESTING. Stock options granted under the 2004 Plan may
only be exercised to the extent the option is vested. Stock options may not vest
earlier than the first anniversary of their date of grant except in the case of
a change of control, or with respect to stock options granted in settlement of
any obligation under any other compensation arrangement, or, to the extent
provided in the applicable award agreement, upon the participant's termination
of service due to death or disability.
TERM. Stock options granted under the 2004 Plan may not have a term longer
than ten years, except that in the case of the death of the participant within
six months prior to the expiration of the term, the exercise period may be
extended, but not beyond one year after the participant's death.
TYPE OF OPTIONS. The 2004 Plan permits the Committee to grant nonqualified
stock options (i.e., stock options that do not qualify as "incentive stock
options" under Section 422 of the Code). On June 6, 2003, the Internal Revenue
Service issued proposed regulations regarding incentive stock options that,
among other things, would prevent the Company from administering the authorized
share pool in the manner described above. Based on these proposed regulations,
the Company does not believe that it could presently grant options under the
2004 Plan that would qualify as incentive stock options. Because the proposed
regulations may be modified to permit the Company to grant incentive stock
options if a separately calculated maximum number of shares applies to incentive
stock options, the plan (i) establishes the maximum number of shares that may be
granted as incentive stock options at 3,500,000 (which maximum would be
determined under applicable regulations) and (ii) authorizes the Committee to
grant incentive stock options if it determines that such options can be granted
in compliance with the applicable statutory and regulatory requirements. If an
option is granted as an incentive stock option and fails to qualify as such, it
will be treated as a nonqualified option.
STOCK APPRECIATION RIGHTS. The 2004 Plan permits the Committee to grant stock
appreciation rights which confer upon the participant the right to receive, upon
exercise, the excess of the fair market value of each share subject to the award
over a "base value." Generally, the base value must equal the fair market value
of the Company's shares on the date of grant. However, a lower price is
permitted for (i) stock appreciation rights retroactively granted in tandem
with, or in substitution for, other awards made by the Company, if the base
value is established as the price on the date of grant of the other award and
(ii) stock appreciation rights granted to a participant upon assumption of, or
in substitution of, an award granted by another entity in connection with a
corporate transaction between the Company and the granting entity (such as a
merger, consolidation or acquisition) if the aggregate fair market value of the
shares subject to the substitute stock appreciation right over the aggregate
base value of the substitute stock appreciation right does not exceed the
aggregate fair market value of the shares of the predecessor entity subject to
the award being assumed or substituted as of the date immediately preceding the
corporate transaction (as determined by the Committee) over the aggregate
exercise price or aggregate base value, if any, of such award.
VESTING. Stock appreciation rights granted under the 2004 Plan may not vest
earlier than the first anniversary of their date of grant except in the case of
a change of control, or with respect to stock appreciation rights granted in
settlement of any obligation under any other compensation arrangement, or to the
extent provided in the applicable award agreement upon the participant's
termination of service due to death or disability.
TERM. Stock appreciation rights granted under the 2004 Plan may not have a
term longer than ten years, except that in the case of the death of the
participant within six months prior to the expiration of the term, the exercise
period may be extended, but not beyond one year after the participant's death.
TYPE OF STOCK APPRECIATION RIGHTS. The 2004 Plan permits the Committee to
grant stand alone stock appreciation rights or in tandem with stock option
grants.
RESTRICTED STOCK. The 2004 Plan permits the Committee to grant shares of
restricted stock consisting of Common Stock issued or transferred to
participants with or without other payments therefor, which are subject to
transferability restrictions and/or a substantial risk of forfeiture. Except in
the event of a change of control, settlement of any obligation under any other
compensation arrangement, or to the extent
23
provided in the award agreement upon the participant's death or disability, each
restricted stock award shall vest not more rapidly than ratably over a period of
three years. Holders of restricted stock awards have the right to receive
dividends and to vote the shares but unless the Committee or the award agreement
provides otherwise, dividends on restricted stock awards shall be held in escrow
and shall be payable at such time as the restrictions on the shares lapse.
STOCK UNITS. The 2004 Plan permits the Committee to grant stock units with each
such stock unit representing one share of Common Stock of the Company. Stock
units will be credited to a notional account maintained by the Company. Unless
the award agreement provides otherwise, each stock unit shall also entitle the
holder to an amount equal to the value of dividends paid in respect of one share
of Common Stock of the Company during the period the unit is outstanding, which
amount shall also be credited to the notional account.
Stock units may be subject to such terms and conditions, including vesting
and the time and method of settlement, as the Committee determines appropriate;
PROVIDED HOWEVER, that unless the Committee or the award agreement provides
otherwise, stock units shall be settled in shares of Common Stock; and PROVIDED
FURTHER, except in the case of a change of control, settlement of any obligation
under any other compensation arrangement, or to the extent provided in the award
agreement upon the participant's death or disability, stock units may not
completely vest prior to the expiration of three years from the date of grant
although they may vest ratably over a three year or longer vesting period.
CASH AWARDS. The 2004 Plan permits the Committee to grant cash awards to any
participant other than a non-employee director of the Company. The Company may,
in its discretion, permit participants to defer settlement of cash awards. The
maximum award that may be granted to any participant as a cash award for any
performance period of thirty-six months is $3,000,000, with proportionate
adjustments for shorter or longer performance periods between one and five years
and $1,000,000 for cash awards that are unrelated to time-based vesting or
performance periods.
PERFORMANCE-BASED AWARDS. Awards granted under the 2004 Plan may be granted in a
manner that qualifies the awards for the performance-based compensation
exemption to the $1 million compensation limit under Section 162(m) of the Code.
As determined by the Committee in its sole discretion, either the granting or
vesting of performance-based awards made under the 2004 Plan will be based on
achievement of hurdle rates, growth rates, and/or reductions in one or more of
the business criteria listed below as they apply to an individual participant,
one or more business units, or the Company as a whole. The business criteria may
be used individually or in combination. In addition, performance-based awards
may be based upon comparisons to the performance of other companies with such
performance measured by one or more of the listed business criteria. The
measurement of performance of selected business criteria against performance
goals applicable to performance-based awards will exclude the impact of charges
for restructurings, discontinued operations, extraordinary items and other
unusual or non-recurring items, and the cumulative effects of accounting
changes, each as defined by generally accepted accounting principles as
identified in the Company's financial statements, notes to the financial
statements or management's discussion and analysis of financial condition and
results of operations included in the Company's annual report on Form 10-K.
BUSINESS CRITERIA. The business criteria that the Committee may select from
in establishing performance goals for performance-based awards are: (i) net
earnings; (ii) earnings per share; (iii) net sales growth; (iv) market share;
(v) operating profit; (vi) earnings before interest and taxes; (vii) earnings
before interest, taxes, depreciation and amortization; (viii) gross margin; (ix)
expense targets; (x) working capital targets relating to inventory and/or
accounts receivable; (xi) operating margin; (xii) return on equity; (xiii)
return on assets; (xiv) planning accuracy (as measured by comparing planned
results to actual results); (xv) market price per share; (xvi) total return to
shareholders; (xvii) net income; (xviii) pro forma net income; (xix) return on
capital; (xx) revenues; (xxi) expenses; (xxii) operating cash flow; (xxiii) net
profit margin; (xxiv) employee headcount; (xxv) employee turnover; (xxvi) labor
costs; and (xxvii) customer service.
24
PROCEDURAL REQUIREMENTS. In accordance with the requirements of Section
162(m) of the Code, (i) performance goals for performance-based awards will be
established no later than ninety (90) days after the commencement of a period
(but in no event after twenty-five percent (25%) of such period has elapsed),
(ii) the Committee may not modify a performance-based award goal after it has
been established to increase the amount of compensation payable thereunder upon
the attainment of such performance goal, but may modify such award to exercise
negative discretion with respect to performance-based awards, and (iii) no
compensation will be payable in respect of a performance-based award unless the
Committee certifies that the performance goals have been achieved.
NONTRANSFERABILITY OF AWARDS. Awards granted under the 2004 Plan are not
transferable except by will or the laws of descent and distribution or as
permitted by the Committee. If the Committee elects to provide for the
transferability of awards to third parties, it shall have complete discretion to
establish the terms and conditions applicable to the transfer and the
transferred awards.
EFFECT OF TERMINATION OF SERVICE. Unless the Committee or the applicable
award agreement provides otherwise, if a participant's service with the Company
or any subsidiary or affiliate terminates for any reason other than for "cause"
or on account of a change of control:
o Stock options and stock appreciation rights (to the extent then
vested) shall expire on the earlier of (i) the expiration of their
term, (ii) ninety (90) days following termination of the participant's
service other than termination of service on account of death,
disability or retirement, and (iii) twelve (12) months following
termination of the participant's service as a result of death or
disability or on account of "retirement" (which for this purpose shall
mean termination of service at age 55 or later with ten (10) or more
years of service, at age 62 or later with five (5) or more years of
service, at age 65 or later, or at such other age as the Committee may
determine);
o All unvested stock options and stock appreciation rights shall expire
on termination of employment;
o All unvested restricted stock awards and stock units shall expire upon
termination of service; and
o All cash awards and performance-based awards shall be forfeited upon
termination of service but if a participant has satisfied all of the
conditions to receiving such award except that the participant is not
in service on the payment date due to his or her termination of
service by the Company without cause, or because of the participant's
retirement, death or disability, such award shall be payable to the
participant at the regularly scheduled payment date.
CHANGE OF CONTROL. If there is a change of control of the Company, then
unless the Committee provides otherwise:
o All then outstanding stock options, stock appreciation rights and
stock units, and unvested cash awards will immediately vest and become
exercisable and any restrictions on restricted stock awards or stock
units shall immediately lapse; and
o All awards held by participants who are at the time of the change of
control in the service of the Company, a subsidiary or an affiliate
shall remain exercisable for the remainder of their terms,
notwithstanding any subsequent termination of a participant's service.
Thereafter, all awards shall be subject to the terms of any agreement
effecting the change of control, which agreement may provide, without
limitation, that in lieu of continuing the awards, each stock option and stock
appreciation right outstanding under the 2004 Plan will terminate within a
specified number of days after notice to the participant, and that the
participant will receive, with respect to each share of Common Stock subject to
such stock option or stock appreciation right, an amount equal to the excess of
the fair market value of such shares of Common Stock immediately prior to the
occurrence of such change of control over the exercise price (or base value )
per share underlying such stock option or stock appreciation right with such
amount payable in cash, in one or more kinds of property (including the
property, if any, payable in the transaction) or in a combination thereof, as
the Committee, in its discretion, shall determine.
25
DURATION, AMENDMENT AND TERMINATION. The Committee may not make any award
under the 2004 Plan more than ten years after its effective date.
The Committee may amend the 2004 Plan from time to time, or suspend or
terminate the 2004 Plan at any time. No amendment of the 2004 Plan may be made
without approval of the shareholders of the Company if the amendment will: (i)
increase the aggregate number of shares of Common Stock that may be delivered
through stock options under the 2004 Plan; (ii) increase the maximum shares in
the authorized share pool or the individual maximum; (iii) permit the re-pricing
of an award to a lower exercise price, base price or purchase price, as
applicable (including, without limitation, the cancellation of an award followed
by a re-grant of that award six months later); (iv) change the types of business
criteria on which performance-based awards are to be based; (v) modify the
requirements as to eligibility for participation in the 2004 Plan; or (vi)
change the legal entity authorized to make awards under the 2004 Plan.
The Committee may modify awards following a change in the Company's Common
Stock, such as a merger or consolidation, to prevent dilution or enlargement of
participants' rights under the 2004 Plan, including the right to adjust in an
equitable manner the number and kind of shares subject to outstanding awards,
the exercise price applicable to outstanding awards, and the fair market value
of the Common Stock and other value determinations applicable to outstanding
awards. In addition, other than with respect to stock options, stock
appreciation rights and other awards intended to constitute performance-based
awards, the Committee is authorized to make adjustments to the terms and
conditions of, and the criteria included in, awards in recognition of unusual or
nonrecurring events affecting the Company or the financial statements of the
Company, or in response to changes in applicable laws, regulations or accounting
principles.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of the federal income tax aspects of awards that may be made under the 2004 Plan
based on existing U.S. federal income tax laws. This summary is not complete and
does not describe a number of special tax rules, including FICA taxes and
various elections that may be applicable under certain circumstances. The
realization of ordinary taxable income under the 2004 Plan will require the
Company to collect withholding taxes from the participant. In the case of
ordinary income generated by a stock-based award, a participant will be required
to arrange for payment of his or her tax withholding obligation.
STOCK OPTIONS. A participant who has been granted a stock option (whether
an incentive stock option or a nonqualified stock option) will not recognize
taxable income on the date of grant and the Company will not be entitled to a
deduction at that time.
When a participant exercises a nonqualified stock option, the participant
realizes ordinary income, subject to withholding of taxes, in the amount equal
to the exercise of the fair market value of the shares received on the date of
exercise over the exercise price, and the Company will generally be entitled to
take a corresponding deduction in the same amount and at the same time as the
participant recognizes income.
When a participant exercises an incentive stock option, the participant is
not taxed at the time of exercise and the Company is not entitled to a
deduction. However, the excess of the fair market value of the shares received
on the date over the exercise price is treated as a tax preference and must be
included by the participant for purposes of calculating any alternative minimum
tax which may be payable. If the participant holds the shares acquired upon the
exercise of an incentive stock option for the required holding period (generally
two years after grant and one year after exercise), upon disposition of such
shares the gain will be taxed as a long-term capital gain and the Company will
not be entitled to a tax deduction. If the participant fails to satisfy the
holding period, the participant will realize ordinary income in the amount equal
to the lesser of (i) the gain realized upon the disposition and (ii) the excess
of exercise of the fair market value of the shares on the date of exercise over
the exercise price and the Company will generally be entitled to a corresponding
deduction in the same amount and at the same time as the participant recognizes
income. Any additional gain realized by the participant will be treated as a
capital gain, which will be long term or short term depending upon how long the
shares are held after the date of exercise.
26
STOCK APPRECIATION RIGHTS. A participant who has been granted a stock
appreciation right will not recognize taxable income on the date of grant and
the Company will not be entitled to a deduction at that time.
When a participant exercises a stock appreciation right, the participant
realizes ordinary income, subject to withholding taxes, in the amount equal to
the exercise of the fair market value of the shares, cash or other property
received and the Company is generally entitled to take a corresponding deduction
in the same amount and at the same time as the participant recognizes income.
RESTRICTED STOCK. A participant holding restricted stock will not recognize
income at the time of the award, unless the participant specifically makes an
election to do so within thirty days of such award. Unless the participant has
made an earlier election, the participant will realize ordinary income, subject
to withholding taxes, in an amount equal to the fair market value of the shares
on the date the restrictions on the shares lapse, reduced by the amount, if any,
paid by the participant for such stock. The Company will generally be entitled
to a corresponding deduction in the same amount and at the same time as the
participant recognizes income. Upon the otherwise taxable disposition of the
shares awarded after ordinary income has been recognized, the participant will
realize a capital gain or loss (which will be long term or short term depending
upon how long the shares are held after the restrictions lapse).
STOCK UNITS. A participant holding stock units generally will not recognize
income at the time of the award, unless the terms of the stock unit provide
participant with the right to request settlement of the award at the
participant's discretion. Upon settlement of a stock unit not taxed, a
participant will realize ordinary income, subject to withholding taxes, in an
amount equal to the fair market value of the cash or shares distributed. The
Company will generally be entitled to a corresponding deduction in the same
amount and at the same time as the participant recognizes income. If shares are
distributed in settlement of the stock unit and the participant later disposes
of such shares, the difference between the amount realized on sale and the
amount recognized by the participant upon settlement of the stock unit will be a
capital gain or loss (which will be long term or short term depending upon how
long the shares are held by the participant).
CASH AWARDS. A participant who receives a cash award will realize ordinary
income, subject to withholding taxes, in the year the award is received and the
Company will generally be entitled to a corresponding deduction in the same
amount and at the same time as the participant recognizes income.
EFFECT OF SECTION 162(m) OF THE CODE. Section 162(m) imposes a $1 million
limit on the amount of compensation that may be deducted by the Company in any
tax year with respect to the Company's chief executive officer and each of the
next four most highly paid executive officers. The Company is not entitled to
deduct compensation paid in excess of the limit. Compensation that is
"qualifying performance-based compensation" is not taken into account in
determining whether the limit has been exceeded. Generally, stock options and
stock appreciation rights granted at fair market value are treated as qualifying
performance-based compensation. As such, any applicable deduction by the Company
related to the exercise of such awards would be allowed.
All other awards made under the 2004 Plan would not be treated as
qualifying performance-based compensation except to the extent they are designed
as "performance-based awards" as described above.
EFFECT OF SECTION 280G OF THE CODE. Section 280G limits the deductibility
of certain payments that are contingent upon a change of control if the total
amount of such payments exceeds three times a participant's "base amount" (i.e.,
generally annualized five year W-2 compensation). If payment or settlement of an
award is accelerated upon a change of control, a portion of such payment
attributable to the value of the acceleration is considered a payment that is
contingent upon a change of control. Amounts that are not deductible under
Section 280G also lower the Section 162(m) $1 million compensation cap. In
addition, the affected person must pay an excise tax (in addition to any income
tax) equal to 20% of such amount.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 2004
EQUITY INCENTIVE PLAN.
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SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy for its 2005 Annual Meeting must be received in
writing by December 11, 2004 at the Office of Secretary at the Company's
principal executive offices located at 3 Huntington Quadrangle, Suite 200S,
Melville, New York 11747-4627. In addition, notice of any proposal that a
shareholder desires to propose for consideration at the 2005 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 14, 2005 and
on or before February 13, 2005.
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, SUITE 200S,
MELVILLE, NEW YORK 11747-4627. 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 has retained the services of Georgeson Shareholder Communications,
Inc. to assist in the solicitation of proxies for a fee estimated to be
approximately $6,000. Except for this fee, the Company does not expect to pay
any other 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 persons named
in the proxy to vote in accordance with their discretion 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 8, 2004
Melville, New York
28
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 (i) 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 and (ii) must not
have participated in the preparation of the financial statements of the
Corporation or any current subsidiary at any time during the past three years.
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 power to resolve disagreements between management and the
Independent Auditors.
7. 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.
8. 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.
9. 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.
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10. 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.
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.
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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.
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
semiannual 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;
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(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.
8. Oversee and review the Corporation's activities relating to its
Investments Policy and Procedures and approve any future amendments to
same.
VI. DEFINITIONS
1. For purposes of this Charter, the term "Family Member" means a
person's spouse, parents, children, and siblings, whether by blood,
marriage or adoption, or anyone residing in such person's home.
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:
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(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;
(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, or who has a Family Member 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, or who has a Family Member 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 is, or who has a Family Member who is, a current
partner of the company's outside auditors or was a partner or
employee of the Corporation's outside auditors, and worked on the
Corporation's audit within the past three years.
Amended as of February 12, 2004
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APPENDIX B
GENTIVA HEALTH SERVICES, INC.
2004 EQUITY INCENTIVE PLAN
1. PURPOSE. Gentiva Health Services, Inc. 2004 Equity Incentive Plan (the
"PLAN") is intended to attract, retain and motivate highly competent persons as
officers and employees of, consultants to, and non-employee directors of Gentiva
Health Services, Inc. (the "COMPANY") and its subsidiaries and affiliates by
providing them with appropriate incentives and rewards either through a
proprietary interest in the long-term success of the Company or compensation
based on their performance in fulfilling their personal responsibilities.
2. ADMINISTRATION.
(a) COMMITTEE. The Plan will be administered by a committee (the
"COMMITTEE") appointed by the Board of Directors of the Company (the "BOARD")
from among its members and shall be comprised, unless otherwise determined by
the Board, solely of not less than two (2) members who shall be (i)
"NON-EMPLOYEE DIRECTORS" within the meaning of Rule 16b-3(b)(3) (or any
successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (ii) "OUTSIDE DIRECTORS" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "CODE"), and (iii) "INDEPENDENT DIRECTORS"
within the meaning of the listing requirements of the NASDAQ (and each other
exchange on which the Company may be listed).
(b) AUTHORITY. The Committee is authorized, subject to the provisions
of the Plan, to establish such rules as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
in its sole discretion and to take such action in connection with the Plan and
any awards granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all participants and their legal representatives.
(c) INDEMNIFICATION. Except in circumstances involving bad faith or
willful misconduct of the person acting or failing to act, no member of the
Committee and no employee of the Company shall be liable for any act or failure
to act hereunder or for any act or failure to act hereunder by any other member
or employee or by any agent to whom duties in connection with the administration
of this Plan have been delegated. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company, a
subsidiary or an affiliate against any and all liabilities or expenses to which
they may be subjected by reason of any act or failure to act with respect to
their duties on behalf of the Plan, except in circumstances involving such
person's bad faith or willful misconduct.
(d) DELEGATION AND ADVISERS. The Committee may delegate to one or
more of its members, or to one or more agents, (i) such administrative duties as
it may deem advisable, and (ii) the authority to make awards to any persons not
subject to Section 16 of the Exchange Act. Any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company, or the subsidiary or affiliate whose
employees have benefited from the Plan, as determined by the Committee.
3. PARTICIPANTS. Participants will consist of such officers and employees
of, consultants to, and non-employee directors of the Company and its
subsidiaries and affiliates as the Committee in its sole discretion determines
and whom the Committee may designate from time to time to receive awards under
the Plan. Designation of a participant in any year shall not require the
Committee to designate such person to receive an award in any other year or,
once designated, to receive the same type or
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amount of award as granted to the participant in any other year. The Committee
shall consider such factors as it deems pertinent in selecting participants and
in determining the type and amount of their respective awards.
4. TYPE OF AWARDS. Awards under the Plan may be granted in any one or a
combination of: (a) stock options, (b) stock appreciation rights, (c) restricted
stock, (d) stock units, and (e) cash. Any awards under the Plan may, as
determined by the Committee in its discretion, constitute performance-based
awards, as described in Section 11 hereof. Awards granted under the Plan shall
be evidenced by agreements (which need not be identical) that provide additional
terms and conditions associated with such awards, as determined by the Committee
in its sole discretion; PROVIDED, HOWEVER, that in the event of any conflict
between the provisions of the Plan and any such agreement, the provisions of the
Plan shall prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN.
(a) MAXIMUM SHARES. The aggregate number of shares of common stock of
the Company, par value $.10, that may be issued under this Plan shall be
3,500,000 shares of common stock, which may be authorized and unissued or
treasury shares, subject to Section 5(c) hereof and any adjustments made in
accordance with Section 13 hereof plus any shares authorized under the Gentiva
Health Services, Inc. 1999 Stock Incentive Plan ("1999 PLAN") as to which, as of
the Effective Date, awards have not been made ("MAXIMUM SHARES"). The maximum
number of shares of common stock with respect to which awards may be granted or
measured to any individual participant under the Plan in any calendar year
during the term of the Plan shall not exceed 500,000 shares (subject to
adjustments made in accordance with Section 13 hereof) (the "INDIVIDUAL
MAXIMUM"). The maximum number of shares that may be "INCENTIVE STOCK OPTIONS",
within the meaning of Section 422 of the Code, is 3,500,000 shares (the "ISO
MAXIMUM").
(b) COUNTING SHARES. Shares shall be charged against the Maximum
Shares and Individual Maximum, and, if applicable, the ISO Maximum, upon the
grant of each award (other than cash awards, stock appreciation rights and stock
units to be settled only in cash and performance-based awards which are not
denominated in common stock) regardless of the vested status of the award,
PROVIDED, HOWEVER, that in the case of a stock appreciation right granted in
tandem with a stock option, only the number of shares subject to the stock
option shall be counted, and, PROVIDED, FURTHER, that two (2) shares shall be
charged against the Maximum Shares for each share of common stock subject to a
restricted stock award or stock unit.
(c) ADDITIONAL SHARES. Any shares of common stock subject to an
outstanding award, on or after the Effective Date, granted under the Plan or the
1999 Plan, which for any reason are forfeited, expire or are cancelled or
settled in cash without delivery to the award recipient of shares of common
stock, shall again be available for awards under the Plan. Any shares of common
stock (i) delivered to the Company as part or full payment for the exercise or
purchase price of an award granted under the Plan or the 1999 Plan or to satisfy
the Company's withholding obligation with respect to an award granted under the
Plan or the 1999 Plan or (ii) reacquired by the Company on the open market or
otherwise using cash proceeds received by the Company from the exercise of stock
options granted under the Plan or the 1999 Plan, provided that the number of
shares so repurchased shall not exceed (A) the amount of the proceeds, divided
by (B) the fair market value on the date of exercise which generated such
proceeds, shall again be available for awards under the Plan but shall continue
to be counted as outstanding for purposes of determining whether an Individual
Maximum and, if applicable, the ISO Maximum has been attained. Additional shares
that again become available under the Plan shall count as two (2) shares if such
additional shares relate to an award of restricted stock or stock units.
6. STOCK OPTIONS.
(a) GENERALLY. Stock options will consist of awards from the Company
that will enable the holder to purchase a number of shares of common stock at
set terms. Generally options granted under the Plan shall be options which do
not constitute incentive stock options ("NONQUALIFIED STOCK OPTIONS"). However,
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if the Committee determines that the Plan complies with statutory and regulatory
requirements for granting incentive stock options, the Committee may grant a
number of incentive stock options not to exceed the ISO Maximum. The Committee
will have the authority to grant to any participant stock options (with or
without stock appreciation rights). An option granted as an incentive stock
option shall, to the extent it fails to qualify as an incentive stock option, be
treated as a nonqualified option. Each stock option shall be subject to such
terms and conditions, including vesting, consistent with the Plan as the
Committee may impose from time to time, subject to the following limitations.
(b) EXERCISE PRICE. Each stock option granted hereunder shall have
such per-share exercise price as the Committee may determine at the date of
grant. Except as hereafter provided, the exercise price of a stock option shall
not be less than the fair market value (as defined in Section 17 of the Plan) on
the date of grant; PROVIDED, HOWEVER, that if an award is retroactively granted
in tandem with or in substitution for other awards made by the Company, the
exercise price may be the price on the date of grant of such other award; and
PROVIDED, FURTHER, that if a stock option is granted to a participant upon
assumption of or in substitution of an award granted by another entity in
connection with a corporate transaction between the Company and the granting
entity, such as a merger, consolidation or acquisition, the exercise price may
be less than fair market value of the common stock on the date the substitute
stock option is granted if the aggregate fair market value of the shares subject
to the substitute stock option over the aggregate exercise price of the
substitute stock option does not exceed the aggregate fair market value of the
shares of the predecessor entity subject to the award being assumed or
substituted as of the date immediately preceding the corporate transaction (as
determined by the Committee), over the aggregate exercise price or the aggregate
base value, if any, of such award.
(c) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid
in cash or, in the discretion of the Committee, by the delivery of shares of
common stock of the Company then owned by the participant, provided that if such
shares were acquired from the Company by the participant they must have been
held for at least six (6) months. In the discretion of the Committee, payment
may also be made by delivering a properly executed exercise notice to the
Company together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the exercise
price. To facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The Committee may
prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the Plan, including, without
limitation, in lieu of permitting the exercise of a stock option by delivery of
shares of common stock of the Company then owned by a participant, permitting
the participant to provide the Company with a notarized statement attesting to
the number of shares owned, where upon verification by the Company, the Company
would issue to the participant only the number of incremental shares to which
the participant is entitled upon exercise of the stock option.
(d) EXERCISE PERIOD. Stock options granted under the Plan shall be
exercisable to the extent vested, at such time or times and subject to such
terms and conditions as shall be determined by the Committee; PROVIDED, HOWEVER,
that except in the case of a Change of Control, or stock options granted in
settlement of any obligation under any other compensation arrangement, or, to
the extent provided in the award agreement upon the participant's termination of
service due to death or Disability (which shall have the meaning defined in the
applicable award agreement, or in the absence of such definition shall be
defined by the Committee), no stock option shall be exercisable earlier than the
first anniversary of the date of grant; and PROVIDED, FURTHER, that no stock
option shall be exercisable later than ten (10) years after the date it is
granted except in the event of a participant's death within six (6) months prior
to such expiration date, in which case, the exercise period of such
participant's stock options may be extended beyond such period but no later than
one (1) year after the participant's death. All stock options shall terminate at
such earlier times and upon such conditions or circumstances as the Committee
shall in its discretion set forth in such option agreement at the date of grant.
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(e) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive stock options
may be granted only to participants who are employees of the Company or of a
"PARENT CORPORATION" or "SUBSIDIARY CORPORATION" (as defined in Sections 424(e)
and (f) of the Code, respectively) at the date of grant. The aggregate fair
market value (determined as of the time the stock option is granted) of the
common stock with respect to which incentive stock options are exercisable for
the first time by a participant during any calendar year (under all option plans
of the Company and of any parent corporation or subsidiary corporation) shall
not exceed one hundred thousand dollars ($100,000). For purposes of the
preceding sentence, incentive stock options will be taken into account in the
order in which they are granted. The per-share exercise price of an incentive
stock option shall not be less than one hundred percent (100%) of the fair
market value of the common stock on the date of grant, and no incentive stock
option may be exercised later than ten (10) years after the date it is granted
or, in the case of the death of a participant, such longer period as permitted
by Section 6(d).
(f) ADDITIONAL LIMITATIONS ON INCENTIVE STOCK OPTIONS FOR TEN PERCENT
SHAREHOLDERS. Incentive stock options may not be granted to any participant who,
at the time of grant, owns stock possessing (after the application of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
parent corporation or subsidiary corporation, unless the exercise price of the
option is fixed at not less than one hundred ten percent (110%) of the fair
market value of the common stock on the date of grant and the exercise of such
option is prohibited by its terms after the expiration of five (5) years from
the date of grant of such option or, in the case of the death of a participant,
such longer period as permitted by Section 6(d).
7. STOCK APPRECIATION RIGHTS.
(a) GENERALLY. The Committee may, in its discretion, grant stock
appreciation rights, including a concurrent grant of stock appreciation rights
in tandem with any stock option grant. A "STOCK APPRECIATION RIGHT" means a
right to receive a payment in cash, common stock or a combination thereof, in an
amount equal to the excess of (i) the fair market value, or other specified
valuation, of a specified number of shares of common stock on the date the right
is exercised over (ii) the "BASE VALUE". Except as provided in Section 7(b)
below, the base value shall not be less than the fair market value of such
shares of common stock on the date the right is granted, PROVIDED, HOWEVER, that
if a stock appreciation right is granted in tandem with or in substitution for a
stock option, the designated fair market value in the award agreement shall
reflect the exercise price of the stock option. Each stock appreciation right
shall be subject to such terms and conditions, including vesting, as the
Committee shall impose from time to time.
(b) BASE VALUE. If a stock appreciation right is granted in
substitution for other awards made by the Company, the base value may be less
than the fair market value of the common stock underlying the stock appreciation
right if the value used is the value of the shares on the date of grant of the
award being substituted. If a stock appreciation right is granted to a
participant upon assumption of or in substitution of an award granted by another
entity in connection with a corporate transaction between the Company and the
granting entity, such as a merger, consolidation or acquisition, the base value
may be less than the fair market value of the common stock on the date the
substitute stock appreciation right is granted if the aggregate fair market
value of the shares subject to the substitute stock appreciation right over the
aggregate base value of the substitute stock appreciation right does not exceed
the aggregate fair market value of the shares of the predecessor entity subject
to the award being assumed or substituted, as of the date immediately preceding
the corporate transaction (as determined by the Committee), over the aggregate
exercise price or the aggregate base value, if any, of such award.
(c) EXERCISE PERIOD. Stock appreciation rights granted under the Plan
shall be exercisable at such time or times and subject to such terms and
conditions, including vesting, as shall be determined by the Committee;
PROVIDED, HOWEVER, that except in the case of a Change of Control, or stock
appreciation rights granted in settlement of any obligation under any other
compensation arrangement or, to the extent provided in the award agreement upon
the participant's termination of service due to death or Disability, no stock
appreciation right shall be exercisable earlier than the first anniversary of
the date of grant; and PROVIDED, FURTHER, that no stock appreciation right shall
be exercisable later than
B-4
ten (10) years after the date it is granted except in the event of a
participant's death within six (6) months prior to such expiration date, in
which case, the exercise period of such participant's stock appreciation rights
may be extended beyond such period but no later than one (1) year after the
participant's death. All stock appreciation rights shall terminate at such
earlier times and upon such conditions or circumstances as the Committee shall
in its discretion set forth in such right at the date of grant.
8. RESTRICTED STOCK AWARDS.
(a) GENERALLY. The Committee may, in its discretion, grant restricted
stock awards consisting of common stock issued or transferred to participants
with or without other payments therefor, which are subject to transferability
restrictions and/or a substantial risk of forfeiture. Except in the event of a
Change of Control, settlement of any obligation under any other compensation
arrangement, or to the extent provided in the award agreement upon the
participant's death or Disability, each restricted stock award shall vest not
more rapidly than ratably over a period of three (3) years. Restricted stock
awards shall be construed as an offer by the Company to the participant to
purchase the number of shares of common stock subject to the restricted stock
award at the purchase price, if any, established therefor, and shall be subject
to acceptance by a participant.
(b) PAYMENT OF THE PURCHASE PRICE. If a restricted stock award
requires payment therefor, the purchase price of any shares of common stock
subject to a restricted stock award may be paid in any manner authorized by the
Committee, which may include any manner authorized under the Plan for the
payment of the exercise price of a stock option. Restricted stock awards may
also be made in consideration of services rendered to the Company or its
subsidiaries or affiliates.
(c) ADDITIONAL TERMS. Restricted stock awards may be subject to such
terms and conditions, including vesting, as the Committee determines
appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares, the right of the Company to reacquire such shares
for no consideration upon termination of the participant's employment within
specified periods, and may constitute performance-based awards, as described in
Section 11 hereof. The Committee may require the participant to deliver a duly
signed stock power, endorsed in blank, relating to the common stock covered by
such an award. The Committee may also require that the stock certificates
evidencing such shares be held in custody or bear restrictive legends until the
restrictions thereon shall have lapsed.
(d) RIGHTS AS A SHAREHOLDER. Holders of restricted stock awards have
the right to receive dividends and to vote the shares; PROVIDED, HOWEVER, unless
the Committee or the award agreement provides otherwise, dividends on restricted
stock awards shall be held in escrow and shall be payable, at such time as the
restrictions on the shares lapse, in either cash, shares or if applicable the
kind of property distributed as a dividend or any combination thereof.
9. STOCK UNITS.
The Committee may, in its discretion, grant stock units with each such
stock unit representing one share of common stock of the Company. Stock units
will be credited to a notional account maintained by the Company. Unless the
award agreement provides otherwise, each stock unit shall also entitle the
holder to an amount equal to the value of dividends paid in respect of one share
of common stock of the Company during the period the unit is outstanding, which
amount shall also be credited to the notional account. Stock units may be
subject to such terms and conditions, including vesting and the time and method
of settlement, as the Committee determines appropriate; PROVIDED, HOWEVER, that
unless the Committee or the award agreement provides otherwise, stock units
shall be settled in shares of common stock; and PROVIDED, FURTHER, except in the
case of a Change of Control, settlement of any obligation under any other
compensation arrangement, or, to the extent provided in the award agreement upon
the participant's death or Disability, stock units may not completely vest prior
to the expiration of three (3) years from the date of grant although they may
vest ratably over a three year or longer vesting period. Stock units may
constitute performance-based awards, as described in Section 11 hereof.
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10. CASH AWARDS.
The Committee may grant awards to be settled in cash; PROVIDED, HOWEVER,
that non-employee directors shall not be eligible for cash awards. Cash awards
may be subject to such terms and conditions, including vesting, as the Committee
determines to be appropriate. Cash awards may constitute performance-based
awards, as described in Section 11 hereof. The Company may, in its discretion,
permit participants to defer settlement of cash awards. The maximum award that
may be granted to any participant as a cash award for any performance period of
thirty-six months is $3,000,000, with proportionate adjustments for shorter or
longer performance periods between 1 and 5 years and $1,000,000 for cash awards
that are unrelated to time-based vesting or performance periods.
11. PERFORMANCE-BASED AWARDS.
(a) GENERALLY. Any awards granted under the Plan may be granted in a
manner such that the awards qualify for the performance-based compensation
exemption of Section 162(m) of the Code ("PERFORMANCE-BASED AWARDS"). As
determined by the Committee in its sole discretion, either the granting or
vesting of such performance-based awards shall be based on achievement of hurdle
rates, growth rates, and/or reductions in one or more business criteria that
apply to the individual participant, one or more business units or the Company
as a whole.
(b) BUSINESS CRITERIA. The business criteria shall be as follows,
individually or in combination: (i) net earnings; (ii) earnings per share; (iii)
net sales growth; (iv) market share; (v) operating profit; (vi) earnings before
interest and taxes (EBIT); (vii) earnings before interest, taxes, depreciation
and amortization (EBITDA); (viii) gross margin; (ix) expense targets; (x)
working capital targets relating to inventory and/or accounts receivable; (xi)
operating margin; (xii) return on equity; (xiii) return on assets; (xiv)
planning accuracy (as measured by comparing planned results to actual results);
(xv) market price per share; (xvi) total return to shareholders; (xvii) net
income; (xviii) pro forma net income; (xix) return on capital; (xx) revenues;
(xxi) expenses; (xxii) operating cash flow; (xxiii) net profit margin; (xxiv)
employee headcount; (xxv) employee turnover; (xxvi) labor costs; and (xxvii)
customer service. In addition, performance-based awards may include comparisons
to the performance of other companies, such performance to be measured by one or
more of the foregoing business criteria.
(c) ESTABLISHMENT OF PERFORMANCE GOALS. With respect to
performance-based awards, the Committee shall establish in writing (i) the
performance goals applicable to a given period, and such performance goals shall
state, in terms of an objective formula or standard, the method for computing
the amount of compensation payable to the participant if such performance goals
are obtained and (ii) the individual employees or class of employees to which
such performance goals apply no later than ninety (90) days after the
commencement of such period (but in no event after twenty-five percent (25%) of
such period has elapsed).
(d) CERTIFICATION OF PERFORMANCE. No performance-based awards shall
be payable to or vest with respect to, as the case may be, any participant for a
given period until the Committee certifies in writing that the objective
performance goals (and any other material terms) applicable to such period have
been satisfied.
(e) MODIFICATION OF PERFORMANCE-BASED AWARDS. With respect to any
awards intended to qualify as performance-based awards, after establishment of a
performance goal, the Committee shall not revise such performance goal or
increase the amount of compensation payable thereunder (as determined in
accordance with Section 162(m) of the Code) upon the attainment of such
performance goal. However, the measurement of performance against goals shall
exclude the impact of charges for restructurings, discontinued operations,
extraordinary items and other unusual or non-recurring items, and the cumulative
effects of accounting changes, each as defined by generally accepted accounting
principles as identified in the financial statements, notes to the financial
statements or management's discussion or analysis. In accordance with Section
162(m) of the Code, the Committee may only exercise negative discretion with
respect to the amount of a performance-based award.
B-6
12. FOREIGN LAWS. The Committee may grant awards to individual
participants who are subject to the tax laws of nations other than the United
States, which awards may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action which it deems advisable to obtain approval of such awards by
the appropriate foreign governmental entity; PROVIDED, HOWEVER, that no such
awards may be granted pursuant to this Section 12 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.
13. ADJUSTMENT PROVISIONS; CHANGE OF CONTROL.
(a) ADJUSTMENT GENERALLY. If there shall be any change in the common
stock of the Company, through merger, consolidation, reorganization,
recapitalization, stock dividend, special one-time cash dividend, stock split,
reverse stock split, split up, spin-off, combination of shares, exchange of
shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to shareholders of the Company,
an adjustment shall be made to each outstanding stock option and stock
appreciation right such that each such stock option and stock appreciation right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the common stock subject to such stock
option or stock appreciation right had such stock option or stock appreciation
right been exercised in full immediately prior to such change or distribution,
and such an adjustment shall be made successively each time any such change
shall occur.
(b) MODIFICATION OF AWARDS. In the event of any change or
distribution described in subsection (a) above, in order to prevent dilution or
enlargement of participants' rights under the Plan, the Committee will have
authority to adjust, in an equitable manner, the number and kind of shares that
may be issued under the Plan, the number and kind of shares subject to
outstanding awards, the exercise price applicable to outstanding awards, and the
fair market value of the common stock and other value determinations applicable
to outstanding awards; PROVIDED, HOWEVER, that any such arithmetic adjustment to
a performance-based award shall not cause the amount of compensation payable
thereunder to be increased from what otherwise would have been due upon
attainment of the unadjusted award. Appropriate adjustments may also be made by
the Committee in the terms of any awards under the Plan to reflect such changes
or distributions and to modify any other terms of outstanding awards on an
equitable basis, including modifications of performance targets and changes in
the length of performance periods; PROVIDED, HOWEVER, that any such arithmetic
adjustment to a performance-based award shall not cause the amount of
compensation payable thereunder to be increased from what otherwise would have
been due upon attainment of the unadjusted award. In addition, other than with
respect to stock options, stock appreciation rights, and other awards intended
to constitute performance-based awards, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in, awards
in recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles.
(c) EFFECT OF A CHANGE OF CONTROL. Notwithstanding any other
provision of this Plan, if there is a Change of Control (as defined in
subsection (d) below) of the Company, then unless the Committee provides
otherwise, all then outstanding stock options, stock appreciation rights and
stock units and unvested cash awards shall immediately vest and become
exercisable and any restrictions on restricted stock awards or stock units shall
immediately lapse. In addition, unless the Committee provides otherwise, all
awards held by participants who are at the time of the Change of Control in the
service of the Company, a subsidiary or affiliate shall remain exercisable for
the remainder of their terms notwithstanding any subsequent termination of a
participant's service. Thereafter, all awards shall be subject to the terms of
any agreement effecting the Change of Control, which agreement may provide,
without limitation, that in lieu of continuing the awards, each stock option and
stock appreciation right outstanding hereunder shall terminate within a
specified number of days after notice to the holder, and that such holder shall
receive, with respect to each share of common stock subject to such stock option
or stock appreciation right, an amount equal to the excess of the fair market
value of such shares of
B-7
common stock immediately prior to the occurrence of such Change of Control over
the exercise price (or base price) per share underlying such stock option or
stock appreciation right with such amount payable in cash, in one or more kinds
of property (including the property, if any, payable in the transaction) or in a
combination thereof, as the Committee, in its discretion, shall determine. A
provision like the one contained in the preceding sentence shall be inapplicable
to a stock option or stock appreciation right granted within six (6) months
before the occurrence of a Change of Control if the holder of such stock option
or stock appreciation right is subject to the reporting requirements of Section
16(a) of the Exchange Act and no exception from liability under Section 16(b) of
the Exchange Act is otherwise available to such holder.
(d) DEFINITIONS. For purposes of this Section 13, a "Change of
Control" of the Company shall be deemed to have occurred upon any of the
following events:
(i) Any person or persons acting together which would constitute
a "GROUP" for purposes of Section 13(d) of the Exchange Act (other
than the Company or any subsidiary and other than "PERMITTED HOLDERS",
as defined below) shall "beneficially own" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, at least twenty-five
percent (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;
(ii) Either (A) "CURRENT DIRECTORS", as defined below, 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 Effective Date, 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 (2/3) of
the current directors then on the Board), or (B) 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;
(iii) Consummation of (A) a plan of complete liquidation of the
Company, or (B) a merger or consolidation of the Company (x) 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 outstanding immediately
prior to the effectiveness thereof are changed into or exchanged for
common stock of the subsidiary) or (y) pursuant to which the common
stock is converted into cash, securities or other property, except in
either case, 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
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
(iv) The 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 13(d), "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" 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 the capital stock of the Company entitled
to vote generally in the election of the Board.
14. TERMINATION OF SERVICE.
(a) TERMINATION (OTHER THAN FOR CAUSE). Unless the Committee or the
applicable award agreement provides otherwise, if a participant's service with
the Company or any subsidiary or affiliate terminates for any reason other than
for "cause" (which shall have the meaning defined in the applicable award
agreement or, in the absence of such definition shall be defined by the
Committee):
B-8
(i) STOCK OPTIONS/STOCK APPRECIATION RIGHTS. Except as provided
in Section 13(c) hereof, any outstanding stock options and stock
appreciation rights shall expire on the earlier of:
(A) the expiration of their term,
(B) ninety (90) days following termination of the
participant's service other than termination of service
on account of death, Disability or retirement,
(C) twelve (12) months following termination of the
participant's service as a result of death or
Disability or on account of "retirement" (which for
this purpose shall mean termination of service at age
55 or later with ten (10) or more years of service, at
age 62 or later with five (5) or more years of service,
at age 65 or later, or at such other age as the
Committee may determine);
PROVIDED, HOWEVER, that a participant (or in the case of the participant's death
or Disability, the participant's representative) may exercise all or part of the
participant's stock options and stock appreciation rights at any time before the
expiration of such stock options following termination of service only to the
extent that the stock options and stock appreciation rights are vested on or
before the date participant's service terminates. The balance of the stock
options and stock appreciation rights (which are not vested on the date
participant's service terminates) shall lapse when the participant's service
terminates.
If by virtue of this provision, an incentive stock option is not exercised
within three (3) months after a participant's employment terminates, then unless
such participant's employment termination is due to his or her death or
Disability (defined for this purpose only as described in Section 22(e)(3) of
the Code), the incentive stock option shall be treated as a nonqualified stock
option.
(ii) RESTRICTED STOCK AWARDS/STOCK UNITS. All unvested restricted
stock awards and stock units shall expire upon termination of service.
(iii) CASH AWARDS/PERFORMANCE-BASED AWARDS. All cash awards and
performance-based awards shall be forfeited upon termination of
service; PROVIDED, HOWEVER, that if a participant has satisfied all of
the conditions to receiving such award except that the participant is
not in service on the payment date due to his or her termination of
service by the Company without cause, or because of the participant's
retirement, death or Disability, such award shall be payable to the
participant at the regularly scheduled payment date.
(b) TERMINATION OF SERVICE (FOR CAUSE). All of a participant's awards
(including any exercised stock options for which shares or cash have not been
delivered to the participant) shall be cancelled and forfeited immediately on
the date of the participant's termination of service with the Company or any
subsidiary if such termination is for cause or cause exists on such date, and
the Company shall return to the participant the price (if any) paid for any
undelivered shares. Should a participant die at a time when cause exists, all of
the participant's awards (including any exercised stock options for which shares
have not been delivered to the participant) shall be cancelled and forfeited
immediately as of the date of the participant's death.
(c) LEAVE OF ABSENCE. For purposes of this Section, service shall be
deemed to continue while the participant is on a bona fide leave of absence, if
such leave was approved by the Company in writing or if continued crediting of
service for this purpose is expressly required by the terms of such leave or by
applicable law (as determined by the Committee).
15. NONTRANSFERABILITY. Each award granted under the Plan to a participant
shall not be transferable except by will or the laws of descent and distribution
or as permitted by the Committee, which shall have discretion to permit
transferability to third parties under such terms and conditions as it shall
determine. In the event of the death of a participant (which for this purpose
only shall include any transferee), each stock option or stock appreciation
right theretofore granted to him or her shall be exercisable during such period
after his or her death as described in Section 14 hereof but unless the
Committee or the award agreement provides otherwise, such award shall only be
exercisable by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the stock option or stock appreciation right shall pass by will or the
laws of descent and distribution.
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16. OTHER PROVISIONS. The granting of or distribution under any award
under the Plan may also be subject to such other provisions (whether or not
applicable to the awards of any other participant) as the Committee determines
appropriate, including, without limitation, for the forfeiture of, or
restrictions on resale or other disposition of, common stock acquired under any
form of award, for the acceleration of exercisability or vesting of awards in
the event of a Change of Control, for the payment of the value of awards to
participants in the event of a Change of Control, or to comply with federal and
state securities laws, or understandings or conditions as to the participant's
employment in addition to those specifically provided for under the Plan.
17. FAIR MARKET VALUE. For purposes of this Plan and any awards awarded
hereunder, fair market value shall mean the amount determined by the Committee
as the fair market value of the common stock of the Company, except that for
purposes of settling the amount due in respect of any award in connection with a
Change of Control, fair market value shall mean the consideration paid in
connection with the Change of Control.
18. WITHHOLDING. All payments or distributions of awards made pursuant to
the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements at the minimum
statutory withholding rates. If the Company proposes or is required to
distribute common stock pursuant to the Plan, it may require the recipient to
remit to it or to the corporation that employs such recipient an amount
sufficient to satisfy such tax withholding requirements prior to the delivery of
any certificates for such common stock. In lieu thereof, the Company or the
employing corporation shall have the right to withhold the amount of such taxes
from any other sums due or to become due from such corporation to the recipient
as the Committee shall prescribe. The Committee may, in its discretion and
subject to such rules as it may adopt (including any as may be required to
satisfy applicable tax and/or non-tax regulatory requirements), permit an
optionee or award or right holder to pay all or a portion of the federal, state
and local withholding taxes arising in connection with any award consisting of
shares of common stock by electing to have the Company withhold shares of common
stock having a fair market value equal to the amount of tax to be withheld, such
tax calculated at minimum statutory withholding rates.
19. TENURE. A participant's right, if any, to continue to serve the
Company or any of its subsidiaries or affiliates as an officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her designation
as a participant under the Plan.
20. UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
21. NO FRACTIONAL SHARES. No fractional shares of common stock shall be
issued or delivered pursuant to the Plan or any award. The Committee shall
determine whether cash, or awards, or other property shall be issued or paid in
lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
22. DURATION, AMENDMENT AND TERMINATION. No award shall be granted more
than ten (10) years after the Effective Date. The Committee may amend the Plan
from time to time or suspend or terminate the Plan at any time. No amendment of
the Plan may be made without approval of the shareholders of the Company if the
amendment will: (i) increase the aggregate number of shares of common stock that
may be delivered through stock options under the Plan; (ii) increase the Maximum
Shares or the
B-10
Individual Maximum as set forth in Section 5 hereof; (iii) permit the re-pricing
of an award to a lower exercise price, base price or purchase price, as
applicable, (including, without limitation, the cancellation of an award
followed by a re-grant of that award six (6) months later; (iv) change the types
of business criteria on which performance-based awards are to be based under the
Plan; (v) modify the requirements as to eligibility for participation in the
Plan; or (vi) change the legal entity authorized to make awards under the Plan.
23. GOVERNING LAW. This Plan, awards granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with the
laws of the State of Delaware (regardless of the law that might otherwise govern
under applicable Delaware principles of conflict of laws).
24. EFFECTIVE DATE. The Plan shall be effective as of March 15, 2004, the
date on which the Plan was adopted by the Board (the "Effective Date"), provided
that the Plan is approved by the shareholders of the Company at an annual
meeting or any special meeting of shareholders of the Company within twelve (12)
months of the Effective Date, and such approval of shareholders shall be a
condition to the right of each participant to receive any awards hereunder. Any
awards granted under the Plan prior to such approval of shareholders shall be
effective as of the date of grant (unless, with respect to any award, the
Committee specifies otherwise at the time of grant), but no such award may be
exercised or settled and no restrictions relating to any award may lapse prior
to such shareholder approval, and if shareholders fail to approve the Plan as
specified hereunder, any such award shall be cancelled.
B-11
We urge you to vote your shares. Thank you very much for your cooperation and
continued loyalty as a Gentiva Health Services shareholder.
DETACH HERE
- --------------------------------------------------------------------------------
PROXY
GENTIVA HEALTH SERVICES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 2004
P
R The undersigned hereby appoints Ronald A. Malone, Stephen B. Paige and John
O R. Potapchuk, and each of them, as proxies, with full power of
X substitution, to represent and to vote, as designated herein, all shares of
Y Common Stock of 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 14, 2004 at 9:30 a.m.,
and at all adjournments thereof, which the undersigned could vote, if
present, in such manner as the proxies may determine on any matters which
may properly come before the meeting and to vote on the following as
specified below:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING: (Change of Address)
1. ELECTION OF DIRECTORS for a term to expire in 2007: Nominees: _______________________________________________
01. Victor F. Ganzi; 02. Josh S. Weston; and 03. Gail R. Wilensky.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS: _______________________________________________
Ratification of appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company.
_______________________________________________
3. APPROVAL OF 2004 EQUITY INCENTIVE PLAN.
_______________________________________________
You are encouraged to specify your choices by marking the (If you have written in the above space, please
appropriate boxes on the reverse side but you need not mark any mark the corresponding box on the reverse side
boxes if you wish to vote in accordance with the Board of of this card.)
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 NOMINEES, FOR RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS AND FOR APPROVAL OF 2004 EQUITY INCENTIVE PLAN. THE
PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
-------------
SEE REVERSE
SIDE
-------------
GENTIVA HEALTH SERVICES, INC.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8050
EDISON, NJ 08818-8050
IMPORTANT: PLEASE VOTE, DATE AND SIGN YOUR PROXY CARD AND
RETURN IT IN THE ENVELOPE PROVIDED.
THANK YOU FOR VOTING.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
- --------------------------------------------------------------------------------
| 5521
PLEASE MARK _ |
[X] VOTES AS IN | |
THIS EXAMPLE. |_ _ _
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
- ---------------------------------------------------- 2. Ratification of [ ] [ ] [ ] 3. Approval of 2004 [ ] [ ] [ ]
GENTIVA HEALTH SERVICES, INC. appointment of Equity Incentive
- ---------------------------------------------------- Pricewaterhouse- Plan
1. Election of Directors Coopers LLP as
(Please see reverse) FOR WITHHOLD independent
ALL ALL auditors
[ ] [ ]
FOR
ALL
EXCEPT [ ]________________________________________
For all nominees except as written above
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:_____________________________ Date:________________ Signature:_____________________________ Date:___________________