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UNITED STATES OMB APPROVAL
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SECURITIES AND EXCHANGE COMMISSION OMB Number:
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Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
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Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule ss.240.14a-12
GENTIVA HEALTH SERVICES
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(Name of Registrant as Specified In Its Charter)
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[LOGO]
Gentiva
HEALTH SERVICES
April 6, 2005
Dear Shareholder:
You are cordially invited to attend the 2005 Annual Meeting of
Shareholders of Gentiva Health Services, Inc. to be held on Friday, May 6,
2005, at 9:30 a.m., at 300 Broad Hollow Road, Melville, New York 11747-4850 in
the lower level atrium.
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 6, 2005
-------------------------
The Annual Meeting of Shareholders of Gentiva Health Services, Inc., a
Delaware corporation (the "Company"), will be held on Friday, May 6, 2005, at
9:30 a.m., at 300 Broad Hollow Road, Melville, New York 11747-4850 in the lower
level atrium, for the following purposes:
1. To elect two directors in Class II, each to serve until the 2008
Annual Meeting of Shareholders;
2. To consider and vote upon a proposal to ratify and approve the
appointment of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as independent auditors of the Company for the
fiscal year ending January 1, 2006;
3. To consider and vote upon a proposal to approve the Company's
Executive Officers Bonus Plan, as amended;
4. To consider and vote upon a proposal to approve the Company's Employee
Stock Purchase Plan, as amended; and
5. 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
16, 2005 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 6, 2005
Melville, New York
It is important that your shares be represented at the meeting. Whether or
not you plan to attend, please mark, sign, date and return the accompanying
proxy promptly. A stamped reply envelope is enclosed for that purpose. If you
do attend and decide to vote in person, you may revoke your proxy.
[LOGO]
Gentiva
HEALTH SERVICES
PROXY STATEMENT
GENERAL INFORMATION
Introduction
The 2005 Annual Meeting of Shareholders ("Annual Meeting") of Gentiva
Health Services, Inc. (the "Company" or "Gentiva") will be held on Friday, May
6, 2005, at 9:30 a.m., at 300 Broad Hollow Road, Melville, New York 11747-4850
in the lower level atrium, 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 16,
2005 are entitled to vote at the Annual Meeting. This Proxy Statement and the
accompanying proxy are first being sent or given to shareholders on or about
April 6, 2005.
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 16, 2005, the record date for determining
shareholders entitled to vote at the Annual Meeting, 23,452,963 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, FOR approval
of the Company's Executive Officers Bonus Plan, as amended, and FOR approval of
the Company's Employee Stock Purchase Plan, as amended).
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 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.
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 2004 Annual Report to Shareholders, including a copy of the
Company's Form 10-K for the fiscal year ended January 2, 2005, as amended by
the Company's Form 10-K/A, 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 and Form 10-K, as amended by Form 10-K/A,
are 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.
The directors to be elected at the 2005 Annual Meeting will serve for a
three year term ending at the 2008 Annual Meeting. Two of the directors in
Class II, Ronald A. Malone and Raymond S. Troubh, are standing for re-election
at this year's Annual Meeting, and each has consented to serve another term as
a director if re-elected.
Edward A. Blechschmidt, currently a director in Class II, will serve until
the 2005 Annual Meeting. The Board of Directors is not proposing a third
nominee for election as a director in Class II at this time. As a result, Class
II will consist of two directors while the Compensation, Corporate Governance
and Nominating Committee seeks an appropriate candidate to fill the vacant
seat. Shareholders may only vote their shares to elect two persons as directors
in Class II at the 2005 Annual Meeting.
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 two nominees. If for any
reason either 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 Ronald A. Malone and Raymond S. Troubh as Class II directors.
2
Information as to Nominees for Director and Continuing Directors
The following information, as reported to the Company, is shown below for
each nominee for director and each continuing director: name, age and principal
occupation; period during which he or she has served as a director; position,
if any, with the Company; certain business experience; other directorships
held; and the committees of the Board of Directors on which the nominee or
continuing director serves.
NOMINEES FOR WHOM PROXIES WILL BE VOTED
Class II -- Nominees for Director with Terms Expiring in 2008
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 Corporation 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 50 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 and member of the audit
committee of Diamond Offshore Drilling Inc., a director and
member of the compensation committee of General American
Investors Company, a director of Portland General Electric
Company, a director and member of the audit committee of
Triarc Companies, Inc. and a director of WHX Corporation. He
is also a Trustee of Petrie Stores Liquidating Trust. Mr. Troubh
is 78 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 III -- Continuing Directors with Terms Expiring in 2006
Stuart R. Levine .............. Mr. Levine has served as a director of the Company since
November 1999 and as Lead Director of the Board since
February 2003. He has served as 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 also
served 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, serving as past vice chairman and
chair of its strategic planning committee and currently chairing
its joint conference/professional affairs ambulatory care
committee. He serves on the foundation board of the American
College of Physicians. Mr. Levine is 57 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. 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 and member of the compensation and
nominating committee of Cell Therapeutics Inc., a director and
member of the compensation committee of UnitedHealth
Group Incorporated and a director and member of the science
and technology committee of Welch Allyn, Inc. Dr. Mundinger
is 67 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 its
president and chief executive officer from July 2003 through
December 2003. Mr. Olsten is 52 years old.
4
Class I -- Continuing 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. He is chairman of the board of directors
of Hearst-Argyle Television, Inc. Mr. Ganzi is 58 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 J. Crew Inc. and Russ
Berrie Corp. and a trustee of Atlantic Health Systems, Inc.
Mr. Weston is 76 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. Since 1993, she has been a senior fellow at Project HOPE,
an international health foundation, and since October 2004, she
has been vice chair of the Maryland Health Care Commission.
She 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 and member of the
audit committee of Cephalon, Inc., a director and member of the
quality and governance committees of Manor Care, Inc., a
director and member of the quality/compliance and governance
committees of Quest Diagnostics Incorporated and a director
and member of the compliance committee of UnitedHealth
Group Incorporated. Dr. Wilensky is 61 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 seven 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. The
Board's 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 2004, 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 2004 Annual Meeting. It
is Gentiva's policy to encourage its Board members to attend the Annual
Meeting.
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
include:
o overseeing Gentiva's internal control structure, financial reporting
and legal and compliance program;
o reviewing and selecting an independent registered public accounting
firm as independent auditors, 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 seven times in 2004. The
Board of Directors has adopted a written charter for the Audit Committee, which
is 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 include:
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 met three
times in 2004. 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 include:
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, stock awards and other
awards under Gentiva's 2004 Equity Incentive Plan;
o monitoring and safeguarding the independence of the Board of
Directors;
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 six times in 2004. In February 2005, 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 2006 Annual Meeting of
7
Shareholders must be received in writing by the Company at the above address on
or after October 1, 2005 and on or before December 7, 2005. The Committee
reserves the right to request additional information from the candidate to
assist the Committee in the evaluation process.
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.
Pursuant to the Company's Amended and Restated Certificate of
Incorporation and By-Laws, an affirmative vote of the majority of the directors
in office may fill a vacancy on the Board. Any director chosen to fill a
vacancy on the Board will hold office for the remaining term of the class of
directors in which the vacancy occurred.
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
Effective 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,
pursuant to the Company's Stock & Deferred Compensation Plan for Non-Employee
Directors, receives 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 following termination of
service on the Board. The number of share units credited to a director
quarterly is calculated by dividing $7,500 by the average closing price of a
share of Gentiva Common Stock on the Nasdaq for the ten trading days preceding
the quarterly calculation dates. 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. 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). 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.
For 2004, the Company paid Dr. Wilensky $10,000 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 terminated on May 31, 2004.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 16, 2005 (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 ........................................................... 67,803 --
Ronald A. Malone ......................................................... 364,991 1.5%
Mary Morrisey Gabriel .................................................... 50,713 --
Vernon A. Perry, Jr ...................................................... 94,610 --
John R. Potapchuk ........................................................ 156,115 --
Edward A. Blechschmidt(5) ................................................ 229,280 --
Victor F. Ganzi .......................................................... 66,413 --
Stuart R. Levine ......................................................... 60,725 --
Mary O'Neil Mundinger .................................................... 22,716 --
Stuart Olsten(6) ......................................................... 223,374 --
Raymond S. Troubh(7) ..................................................... 174,022 --
Josh S. Weston ........................................................... 24,406 --
Gail R. Wilensky ......................................................... 25,880 --
Barclays Global Investors, NA(8) ......................................... 1,696,199 7.2
45 Fremont Street
San Francisco, CA 94105
Credit Suisse First Boston(9) ............................................ 1,219,935 5.2
Uetlibergstrasse 231
P.O. Box 900
CH 8070 Zurich
Switzerland
Perry Corp.(10) .......................................................... 2,189,873 9.3
599 Lexington Ave
New York, NY 10022
Strong Capital Management, Inc.(11) ...................................... 1,367,612 5.8
100 Heritage Reserve
Menomonee Falls, WI 53051
All executive officers and directors as a group (15 persons)(12) ......... 1,645,847 6.8
- ------------
(1) Unless otherwise indicated, the shareholders identified in this table have
sole voting and investment power with respect to the shares beneficially
owned by them.
(2) Includes beneficial ownership of the following number of shares that may be
acquired upon exercise of presently exercisable stock options under
Gentiva's 1999 Stock Incentive Plan: Mr. Creamer -- 63,214; Mr. Malone --
312,706; Ms. Morrisey Gabriel -- 44,999; Mr. Perry -- 68,000; Mr. Potapchuk
-- 128,603; Mr. Blechschmidt -- 17,500; Mr. Ganzi -- 17,500; Dr. Mundinger
-- 17,500; Mr. Olsten -- 34,345; Mr. Troubh -- 17,500; Mr. Weston --
17,500; and Dr. Wilensky -- 17,500.
(3) Includes beneficial ownership of the following number of whole shares
acquired and currently held under Gentiva's Employee Stock Purchase Plan:
Mr. Creamer -- 4,089; Mr. Malone -- 9,531; Ms. Morrisey Gabriel -- 3,921;
Mr. Perry -- 1,610; and Mr. Potapchuk -- 6,700.
9
(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 --
5,780; Mr. Ganzi -- 13,780; Mr. Levine -- 5,722; Dr. Mundinger -- 2,765;
Mr. Olsten -- 13,780; Mr. Troubh -- 10,750; Mr. Weston -- 2,774; and Dr.
Wilensky -- 2,836.
(5) In addition to the shares referred to in footnotes (2) and (4), Mr.
Blechschmidt's holdings include 200,000 shares owned directly and 2,000
shares owned by each of three children, as to which shares he disclaims
beneficial ownership.
(6) In addition to shares referred to in footnotes (2) and (4), Mr. Olsten's
holdings include 174,949 shares owned directly and 300 shares owned by his
wife, 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 76,024 shares owned directly and 69,748 shares owned
indirectly through a limited partnership.
(8) Based on a Schedule 13G dated February 14, 2005 and filed with the
Securities and Exchange Commission, as of December 31, 2004 Barclays Global
Investors, NA reported beneficial ownership of 1,084,396 of such shares,
with sole voting power as to 954,487 of such shares and sole dispositive
power as to 1,084,396 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 611,803 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 dated February 14, 2005 and filed with the
Securities and Exchange Commission, as of December 31, 2004 Credit Suisse
First Boston, on behalf of the Credit Suisse First Boston business unit,
reported beneficial ownership of 1,219,935 of such shares, with shared
voting and dispositive power as to all of such shares. In addition, in the
Schedule 13G, Credit Suisse First Boston reported that the Schedule 13G is
filed on behalf of itself and its subsidiaries, to the extent that they
constitute the Credit Suisse First Boston business unit excluding Credit
Suisse Asset Management. The Schedule 13G indicates that the ultimate
parent company of Credit Suisse First Boston is Credit Suisse Group, which
may beneficially own the shares, along with its executive officers and
directors and its direct and indirect subsidiaries. Credit Suisse Group,
its subsidiaries, the Winterthur business unit and the Credit Suisse
business unit, and Credit Suisse Asset Management disclaim beneficial
ownership of the shares.
(10) Based on a Schedule 13G/A (Amendment No. 1) dated February 8, 2005 and
filed with the Securities and Exchange Commission, as of December 31, 2004
Perry Corp. reported beneficial ownership of 2,189,873 of such shares, with
sole voting power and sole dispositive power as to all of such shares. In
addition, in the Schedule 13G/A, Richard C. Perry, the President and sole
stockholder of Perry Corp., reported that he held sole voting power and
sole dispositive power as to all of such shares. The Schedule 13G/A
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 adviser. Richard C. Perry disclaims beneficial ownership
in any of the shares covered by the Schedule 13G/A, except for the portion
of such shares that relates to his economic interest in such shares.
(11) Based on a Schedule 13G dated February 11, 2005 and filed with the
Securities and Exchange Commission, as of December 31, 2004 Strong Capital
Management, Inc. reported beneficial ownership of 1,367,612 of such shares,
with sole voting power and sole dispositive power as to all of such shares.
(12) Includes 750,657 shares owned by current executive officers and directors,
837,003 shares that may be acquired upon exercise of presently exercisable
stock options and 58,187 shares representing shares deferred as share
units.
10
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
January 2, 2005 (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 2004 $542,692 $600,000 $5,753 100,000 $ 65,768
Chief Executive Officer and 2003 471,539 500,000 6,668 70,000 71,383
Chairman of the Board 2002 387,596 300,000 9,595 200,000 310,797
Vernon A. Perry, Jr. .......... 2004 290,519 170,000 6,075 60,000 22,731
President and Chief 2003 274,308 165,000 7,602 40,000 29,622
Operating Officer 2002 247,596 125,000 8,355 72,000 766,216
John R. Potapchuk ............. 2004 285,077 200,000 3,224 60,000 25,525
Senior Vice President, Chief 2003 264,308 175,000 3,063 40,000 30,568
Financial Officer, Treasurer 2002 239,192 130,000 6,015 72,000 216,839
and Secretary
Robert Creamer ................ 2004 269,000 150,000 2,629 50,000 22,536
Senior Vice President, 2003 239,308 150,000 -- 36,000 28,097
Nursing Operations 2002 207,635 140,112 104 60,000 318,250
Mary Morrisey Gabriel ......... 2004 269,500 170,000 -- 50,000 22,610
Senior Vice President and 2003 248,846 150,000 -- 50,000 21,095
Chief Marketing Officer 2002 95,192 70,000 -- 30,000 5,277
- ------------
(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 2004, 2003 and 2002. As of the date of this Proxy
Statement, only partial-year 2004 profit sharing contributions under this
plan are calculable and are included for fiscal 2004. For fiscal 2002, also
includes payments to 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, also
includes for Mr. Perry payment of $51,884 for relocation expenses.
11
Stock Options
Stock Option Grants in Last Fiscal Year
Individual Grants Potential Realizable
------------------------------------------------------------- Value at Assumed
Percent Annual Rates of
Number of of Total Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term(1)
Options Employees in Price Expiration ---------------------------
Name Granted (#)(2) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------------- ---------------- -------------- ----------- ----------- ----------- -------------
Ronald A. Malone .............. 100,000 9.7% $ 12.87 12/31/13 $809,000 $2,051,000
Vernon A. Perry, Jr. .......... 60,000 5.8 12.87 12/31/13 485,400 1,230,600
John R. Potapchuk ............. 60,000 5.8 12.87 12/31/13 485,400 1,230,600
Robert Creamer ................ 50,000 4.9 12.87 12/31/13 404,500 1,025,500
Mary Morrisey Gabriel ......... 50,000 4.9 12.87 12/31/13 404,500 1,025,500
- ------------
(1) The dollar amounts under the indicated columns represent hypothetical gains
assuming exercise at the end of the option term and assuming rates of stock
price appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission. These assumptions are not intended to forecast
future appreciation of Gentiva's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock. The actual
gains, if any, on the stock option exercises will depend on the future
performance of Gentiva's Common Stock, the optionee's continued employment
through applicable vesting periods and the dates on which the options are
exercised and the underlying shares are sold.
(2) The options were granted at an exercise price equal to the fair market
value of Gentiva's Common Stock on the date of the grant. The options have
a ten-year term and become exercisable over a four-year period as follows:
50% at the end of year two, another 25% at the end of year three and the
final 25% at the end of year four.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
Acquired on Value ----------------------------- -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ------------- --------------- ------------- --------------
Ronald A. Malone .............. 13,333 $111,997 312,706 292,846 $4,017,018 $2,089,259
Vernon A. Perry, Jr. .......... 0 0 68,000 104,000 602,160 611,880
John R. Potapchuk ............. 40,468 567,172 128,603 104,000 1,451,877 611,880
Robert Creamer ................ 0 0 78,214 88,000 815,169 520,540
Mary Morrisey Gabriel ......... 0 0 29,999 100,001 242,192 562,608
- ------------
(1) Based on the difference between the exercise price and the closing price of
a share of Gentiva Common Stock on December 31, 2004, the last trading day
in fiscal 2004.
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 March 22, 2004 and replaced his prior employment agreement. Mr.
Malone's Employment Agreement has a term of four years 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 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 has the right to defer payment of up
to 50% (or such greater percentage as the Company permits) of his base salary
and annual bonus. Any such deferred amounts will be credited with interest at
1% above the prime rate in effect from time to time. Mr. Malone will also
receive customary benefits, perquisites and reimbursement for expenses.
The 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 any 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 any 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 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 Employment Agreement if he receives severance
payment under his Change in Control Agreement described below.
The 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 Change in Control Agreement with the
Company, effective March 22, 2004, which replaced his prior change in control
agreement. His Change in Control Agreement has a term of four years 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 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
13
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 or for a longer period of
exercisability if so provided for in the option plan, 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's 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 (one times in the case of Ms.
Morrisey Gabriel) the employee's base salary and target bonus; continued
benefits for the two years (one year in the case of Ms. Morrisey Gabriel)
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 or for a longer period of exercisability if so
provided for in the option plan, 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 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
14
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.
The Named Officers are eligible to participate in the Company's
Nonqualified Retirement and Savings Plan, which is a nonqualified defined
contribution retirement plan covering the Company's highly compensated
employees. The Plan provides for a partial match by the Company of employee
savings and for discretionary profit-sharing contributions by the Company based
on employee compensation. Under the Plan, participants may contribute up to 30%
of their base salary on a pre-tax and/or after-tax basis and up to 75% of their
bonus/incentive compensation on a pre-tax and/or after-tax basis. The Company
currently matches 50% of a participant's contributions, up to the first 6% of
the participant's compensation (for up to a total of 3% of compensation). A
participant is 100% vested in the Company's matching and profit sharing
contributions after completing five years of vested service with the Company. A
participant is always 100% vested in his or her own contributions. Each
participant's account under the Plan is adjusted for earnings and losses based
on the performance of investment options (principally mutual funds) the
participant selects. Distributions under the Plan are generally made in a lump
sum or annual installments for up to ten years (at the participant's election)
and generally begin after retirement, termination of employment, death or
disability.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information regarding the Company's
equity compensation plans as of January 2, 2005:
- ------------------------------------------------------------------------------------------------
(a) (b) (c)
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
Plan category warrants and rights* warrants and rights column (a))**
- ------------------------------------------------------------------------------------------------
Equity compensation
plans approved by 3,269,196 $8.28 4,181,574
security holders
- ------------------------------------------------------------------------------------------------
Equity compensation
plans not approved -- -- --
by security holders
- ------------------------------------------------------------------------------------------------
Total 3,269,196 $8.28 4,181,574
- ------------------------------------------------------------------------------------------------
- ------------
* Consists of securities to be issued upon exercise of outstanding stock
options under Gentiva's 1999 Stock Incentive Plan and 2004 Equity Incentive
Plan (3,214,585) and outstanding share units under Gentiva's Stock &
Deferred Compensation Plan for Non-Employee Directors (54,611).
** Consists of securities available for future issuance under Gentiva's 2004
Equity Incentive Plan (3,949,407), Employee Stock Purchase Plan (169,091)
and Stock & Deferred Compensation Plan for Non-Employee Directors (63,076).
Under the Stock & Deferred Compensation Plan for Non-Employee Directors,
non-employee directors are credited quarterly with share units, the number
of which is calculated by dividing $7,500 by the average closing price of a
share of Gentiva Common Stock on the Nasdaq for the ten trading days
preceding the quarterly calculation dates, generally March 1, June 1,
September 1 and December 1. Following termination of a director's service
on the Board, shares of the Company's Common Stock are distributed to a
director equivalent to the number of share units credited to the director.
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, as
well as on individually tailored performance criteria; and (iii) reasonable
levels of equity awards, including 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. The Committee has retained an independent compensation consultant,
which reports directly to the Committee, to assist with its compensation
responsibilities.
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 Executive Officers Bonus Plan. The purpose of
this 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 2004 included revenue, net income, margin improvement
and employee turnover. Goals for individual executives varied by their areas of
responsibility and were intended to add economic value to the Company.
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 2004 vest
50% at the end of year two and another 25% at the end of each of years three
and four. Approximately 150 employees participate. Also, eligible executive
officers and other employees may purchase shares of Common Stock under the
Company's Employee Stock Purchase Plan.
Compensation of Chief Executive Officer
In March 2004, the Company entered into a new employment agreement with
Mr. Malone, which replaced 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. Under the new employment
agreement, which has a four-year term and automatically extends for consecutive
one-year periods unless either party provides not less than six months prior
notice to the other party of its intention
16
not to extend the initial four year term or any subsequent one-year extension,
Mr. Malone is entitled to receive a base salary of not less than $525,000,
which was his base salary for 2004. For 2005, the Committee has set Mr.
Malone's base salary at $575,000.
In fiscal 2004, as in previous years, Mr. Malone participated in the
Company's Executive Officers Bonus Plan. Under Mr. Malone's employment
agreement, his annual target bonus, based upon the achievement of target levels
of performance, is equal to 100% of his base salary, with a maximum bonus
opportunity generally of 150% of his base salary. Under the bonus plan, the
Committee evaluated Company performance against assigned goals and targets in
addition to Mr. Malone's individual performance and leadership competencies.
The Committee viewed favorably the overall financial performance of the Company
and 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 $600,000 annual bonus payment
under the plan for fiscal 2004, which represents 111% of his 2004 base salary.
In consideration of Mr. Malone's past and expected future contributions to
the Company's achievement of its performance goals and to help further align
his compensation with shareholder interests, the Committee awarded Mr. Malone
100,000 stock options in fiscal 2004 as long-term incentives vesting over four
years from the date of grant, with an exercise price of $12.87.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code limits Gentiva's tax deduction
for compensation over $1,000,000 paid to the Chief Executive Officer and to the
four other most highly compensated executive officers. Compensation that meets
the requirements for qualified performance-based compensation or certain other
exceptions under the Internal Revenue Code is not included in this limit.
Generally, the Compensation, Corporate Governance and Nominating Committee
desires to maintain the tax deductibility of compensation for executive
officers to the extent it is feasible and consistent with the objectives of
Gentiva's compensation programs. However, the Committee retains the discretion
to determine whether the interests of Gentiva and its shareholders may be
served by providing compensation that is not deductible in order to compensate
executive officers in a manner commensurate with performance and the
competitive environment for executive talent.
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
January 2, 2005 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. CoreData furnished the data
for the graph.
[REPRESENTATION OF LINE CHART]
- ------------------------------------------------------------------------------------------------------------
3/16/00 12/31/00 12/30/01 12/29/02 12/28/03 1/2/05
- ------------------------------------------------------------------------------------------------------------
Gentiva Health Services, Inc. $100.00 $222.92 $366.67 $436.79 $678.47 $874.62
- ------------------------------------------------------------------------------------------------------------
Nasdaq Market Index 100.00 53.34 42.52 29.66 44.59 48.34
- ------------------------------------------------------------------------------------------------------------
Peer Group Index 100.00 194.26 177.14 151.96 196.49 240.55
- ------------------------------------------------------------------------------------------------------------
18
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
as independent auditors of the Company for the 2005 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 Annual Meeting and will have the opportunity to make a statement and to
respond to appropriate questions posed by shareholders.
The Board of Directors and the Audit Committee recommend 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, which include related "out-of-pocket costs," billed to the Company
by PricewaterhouseCoopers LLP for services rendered during fiscal years 2004
and 2003 were as follows:
Fee Category 2004 2003
- ------------ ---------- --------
Audit Fees ........................... $1,094,300 $389,500
Audit-Related Fees ................... 141,600 146,400
Tax Fees ............................. 116,300 109,000
All Other Fees ....................... 110,300 110,000
---------- --------
Total ................................ $1,462,500 $754,900
========== ========
Audit Fees related to the audit of the Company's annual consolidated
financial statements and the review of financial statements included in the
Company's quarterly reports on Form 10-Q. Audit fees in 2004 also included
attestation services related to Sarbanes-Oxley Act Section 404 certification
and in 2003 also included miscellaneous audit services. Audit-Related Fees
related to Section 404 advisory services and in 2004 also included deferred tax
consultation and miscellaneous audit-related services and in 2003 also included
other accounting consultations. Tax Fees related to tax planning and compliance
services and a special project related to property tax recovery audits. All
Other Fees related to compliance services in connection with 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 2004 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. Any
services not specifically identified in the policy must receive specific
pre-approval. 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 Board of
Directors has determined that Victor F. Ganzi, the Committee's Chairman, is an
"audit committee financial expert," as defined by rules of the Securities and
Exchange Commission.
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
posted on the Company's website at www.gentiva.com. 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, an
independent registered public accounting firm, 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, internal control over financial reporting and the
internal audit and compliance functions, organization, responsibilities, budget
and staffing. The Audit Committee has also reviewed with PricewaterhouseCoopers
LLP, 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 January 2,
2005 for filing with the Securities and Exchange Commission.
Audit Committee:
Victor F. Ganzi, Chairman
Raymond S. Troubh
Josh S. Weston
20
PROPOSAL 3
APPROVAL OF GENTIVA HEALTH SERVICES, INC.
EXECUTIVE OFFICERS BONUS PLAN, AS AMENDED
Introduction
Gentiva's shareholders are being asked to consider and vote on this
proposal to approve the Executive Officers Bonus Plan (the "Bonus Plan"), as
amended, effective January 1, 2005. The Bonus Plan was originally adopted by
Gentiva, effective January 1, 2000, and was approved on March 13, 2000 by the
shareholders of Olsten Corporation, Gentiva's then parent corporation. The
purpose of the Bonus Plan is to provide executive officers of Gentiva with an
opportunity to earn annual bonus compensation as an incentive and reward for
their leadership, ability and exceptional services.
Gentiva generally seeks to preserve its ability to claim tax deductions
for compensation paid to executives to the extent practicable. Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), limits to $1
million Gentiva's deduction for compensation paid in a taxable year to an
individual who, on the last day of the taxable year, was the chief executive
officer or among the four other highest-compensated executive officers whose
compensation is reported in the Summary Compensation Table (generally referred
to as the "Named Officers"). "Qualified performance-based compensation" is not
subject to this deduction limit, and therefore is fully deductible, if certain
conditions are met. In order to qualify under the performance-based
compensation exception under Section 162(m), and thereby avoid potential
nondeductibility of bonus compensation paid to the Named Officers, the material
terms of the performance goals under the Bonus Plan must be reapproved by
shareholders every five years. Accordingly, the Bonus Plan, as amended, is
being submitted for approval by Gentiva's shareholders.
The following description of the Bonus Plan, as amended, is qualified in
its entirety by reference to the applicable provisions of the Bonus Plan, as
amended, which is attached to this Proxy Statement as Appendix A.
The Board of Directors has approved, and recommends that the shareholders
of Gentiva approve, the Bonus Plan, as amended. The effective date of the Bonus
Plan, as amended, if approved by the shareholders at the Annual Meeting, will
be January 1, 2005. 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 Bonus Plan, as amended.
Administration
The Bonus Plan is administered by a committee of Gentiva's Board of
Directors consisting of not less than two persons who, to the extent required
to satisfy the exception for performance-based compensation under Section
162(m) of the Code, will be "outside directors" within the meaning of such
section. The Board of Directors has delegated this authority to the
Compensation, Corporate Governance and Nominating Committee (the "Committee").
None of the members of the Committee is an officer or employee of Gentiva, and
each is "independent" under Nasdaq listing standards.
Subject to the express provisions of the Bonus Plan, the Committee has the
authority to: (i) establish performance goals for the granting of annual
bonuses for each fiscal year, (ii) determine the executives to whom annual
bonus awards are to be made for each fiscal year, (iii) determine whether the
performance goals for any fiscal year have been achieved, (iv) authorize
payment of annual bonuses under the Bonus Plan, (v) adopt, alter and repeal
such administrative rules, guidelines and practices governing the Bonus Plan as
it deems advisable and (vi) interpret the terms and provisions of the Bonus
Plan. Pursuant to the amendment of the Bonus Plan, the Committee may also
correct any defect, supply any omission or reconcile any inconsistency or
conflict in the Bonus Plan or any award. The Bonus Plan, as amended, also
provides that the Committee may determine the extent to which awards shall be
structured to satisfy the performance-based compensation exception under
Section 162(m) of the Code, and to take such actions as the Committee deems
necessary or appropriate to conform to such requirements. Furthermore, the
amendment to the Bonus Plan provides that, with respect to awards subject to
the provisions of Section
21
409A of the Code (regarding deferral of compensation), the Bonus Plan will be
administered, interpreted and construed in compliance with Section 409A and
regulations issued thereunder.
Determination of Awards
The amount of any annual bonus granted to an executive for any fiscal year
will be determined by the Committee, but may not be greater than the lesser of
200% of such executive's annual base salary or $2.5 million. The actual amount
payable will be determined based on the achievement of one or more performance
goals established by the Committee with respect to such executive. Performance
goals may vary from executive to executive and will be based upon such one or
more of the performance criteria described below as the Committee may deem
appropriate. Pursuant to the amendment to the Bonus Plan, the Committee may
specify target bonus levels as well as various factors based upon which an
amount less than or more than the target award will be payable, may establish
additional restrictions or conditions on awards in its discretion, and may
reduce awards based on such factors or conditions as it deems relevant. Not
later than the day immediately preceding the first day of the fiscal year (or a
later date as may be permitted pursuant to Section 162(m) of the Code), the
Committee will establish: (i) the executives who will be eligible for an annual
bonus for such fiscal year, (ii) the performance goals for such fiscal year and
(iii) the corresponding annual bonus amounts payable under the Bonus Plan upon
achievement of the performance goals.
To the extent consistent with Section 162(m) of the Code, the amended
Bonus Plan permits the Committee to determine that certain adjustments may
apply to awards to take into account any of the following events that occur
during a fiscal year:
o the impairment of tangible or intangible assets;
o litigation or claim judgments or settlements;
o the effect of changes in tax law, accounting principles or other such
laws or provisions affecting reported results;
o accruals for reorganization and restructuring programs, including, but
not limited to, reductions in force and early retirement incentives;
o currency fluctuations; and
o any extraordinary, unusual, infrequent or non-recurring items.
Performance Criteria
The performance criteria for awards under the Bonus Plan are: appreciation
in share value, total shareholder return, earnings per share, operating income,
net income, pro forma net income, return on equity, return on designated
assets, return on capital, economic value added, earnings, revenues, expenses,
operating profit margin, operating cash flow, gross profit margin, net profit
margin, employee turnover, employee headcount, labor costs, customer service,
and accounts receivable, and a new criterion added under the amendment, market
share. The performance goals may be determined by reference to the performance
of Gentiva, or of a subsidiary or affiliate, or of a division or unit of any of
the foregoing.
Eligibility
Under the terms of the Bonus Plan, any executive officer of Gentiva may be
selected by the Committee to participate in the Bonus Plan for a given fiscal
year. As of March 16, 2005, there were seven executive officers of Gentiva, all
of whom would be eligible to participate in the Bonus Plan if selected by the
Committee. As of the date of this Proxy Statement, 2005 target bonuses and
performance goals have been established. Each Named Officer's target bonus for
2005 is 55% or 60% of annual base salary, except for Mr. Malone, whose target
bonus is 100% of annual base salary, and each such executive can earn maximum
bonus compensation up to 150% of his or her target bonus, depending on the
extent to which the goals are met or exceeded. Other executive officers' target
bonuses for 2005 range from 40% to 50% of annual base salary, with a maximum of
150% of the target bonus payable depending on the
22
extent to which the goals are met or exceeded. All amounts awarded under the
Bonus Plan to the Named Officers in respect of the 2004 fiscal year are
reported in the Summary Compensation Table above as "bonus" payments to Messrs.
Malone, Perry, Potapchuk and Creamer and Ms. Morrisey Gabriel. Bonus payments
to all executive officers of Gentiva as a group in respect of the 2004 fiscal
year were $1,500,000. At this time, Gentiva cannot determine the actual amount
(if any) of the 2005 awards that will be payable, nor can Gentiva predict
future awards (if any).
Payment of Awards
An annual bonus (if any) to any executive participating in the Bonus Plan
for a fiscal year will be paid in a single lump sum in cash as soon as
practicable after the end of the fiscal year (but not later than two and
one-half months after the end of the fiscal year). Before a bonus is paid,
however, the Committee must first certify in writing (i) that a performance
goal with respect to the executive for such fiscal year was satisfied and the
level of the goal attained, and (ii) the amount of each executive's annual
bonus. If an executive dies after the end of a fiscal year but before receiving
payment of any annual bonus, the amount will be paid to a designated
beneficiary or if no beneficiary has been designated, to the executive's
estate. Notwithstanding the foregoing, the Committee may determine, by separate
employment agreement with any executive or otherwise, that all or a portion of
an executive's annual bonus for a fiscal year will be payable to such executive
upon his death, disability, or termination of employment with Gentiva or upon a
change of control of Gentiva, during the fiscal year.
Transferability
No annual bonuses or rights under the Bonus Plan may be transferred or
assigned other than by will or by the laws of descent and distribution.
Amendment and Termination
The Board of Directors may amend or terminate the Bonus Plan at any time.
No termination or amendment of the Bonus Plan, however, may adversely affect
the rights of an executive or a beneficiary to a previously certified annual
bonus. Amendments to the Bonus Plan may be made without shareholder approval
except as required to satisfy Section 162(m) of the Code. Under the amended
Bonus Plan, the Committee may also at any time, without the consent of any
executive, modify, amend or terminate any or all the provisions of the Bonus
Plan to the extent necessary to conform to the requirements of Section 409A of
the Code. Currently, Section 162(m) would require shareholder approval for any
amendment that (i) changes the performance goals under the Bonus Plan, (ii)
modifies the employees who are eligible under the Bonus Plan or (iii) modifies
the maximum compensation that may be paid under the Bonus Plan.
Certain Federal Income Tax Consequences
The following is a brief general description of the Federal income tax
consequences that will apply under the Code to awards under the Bonus Plan:
Upon payment of an annual bonus to an executive for any fiscal year,
pursuant to the Bonus Plan, such executive will recognize ordinary income in
the amount of the annual bonus on the date the compensation is paid. Gentiva
will generally be entitled to a deduction in the amount taxable as ordinary
income to an executive, subject to the limitation imposed by Section 162(m) of
the Code, as described above.
The Board of Directors recommends that you vote FOR approval of the
Executive Officers Bonus Plan, as amended.
23
PROPOSAL 4
APPROVAL OF GENTIVA HEALTH SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
Introduction
Gentiva's Board of Directors approved an amendment of the Gentiva Health
Services, Inc. Employee Stock Purchase Plan ("ESPP"), effective February 24,
2005, subject to shareholder approval, to increase the aggregate number of
shares of Gentiva Common Stock available for issuance under the ESPP by
1,200,000 shares, to a total of 2,400,000 shares. The amended ESPP also
contains a technical change to clarify the eligibility provisions for certain
employees. Gentiva's shareholders are being asked to consider and vote on the
amended ESPP, which is described below. The purpose of the ESPP is to provide
employees of Gentiva with an opportunity to purchase Gentiva Common Stock on a
tax-advantaged basis.
The ESPP was originally adopted by Gentiva in December 1999 and approved
on March 13, 2000 by the shareholders of Olsten Corporation, Gentiva's then
parent corporation. The ESPP originally permitted issuance of 1,200,000 shares
of Gentiva's Common Stock. As of January 2, 2005, 169,091 shares of Common
Stock were available for future issuance. Gentiva is therefore asking
shareholders to approve an increase in the number of shares available under the
ESPP to allow Gentiva to continue to offer this valuable and competitive
program to its employees.
The following description of the ESPP, as amended, is qualified in its
entirety by reference to the applicable provisions of the ESPP, as amended,
which is attached to this Proxy Statement as Appendix B.
The Board of Directors has approved, and recommends that the shareholders
of Gentiva approve, the amendment of the ESPP. The effective date of the
amendment to the ESPP, if approved by the shareholders at the Annual Meeting,
will be February 24, 2005. 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 amended ESPP.
Administration
The ESPP is administered by a committee of two or more directors appointed
by the Board of Directors. The Board has appointed the Compensation, Corporate
Governance and Nominating Committee (the "Committee") as the administrator for
the ESPP. None of the members of the Committee is an employee or officer of
Gentiva, and each is "independent" under Nasdaq listing standards. Subject to
the express provisions of the ESPP, the Committee has the power to determine
the terms and conditions of each offering of stock to employees thereunder. The
Committee also has authority to adopt and revise rules, guidelines and
practices governing the ESPP, to interpret the terms and provisions of the ESPP
and any offering made thereunder, and to otherwise supervise the administration
of the ESPP.
Stock Subject to Employee Stock Purchase Plan
A total of 1,200,000 shares of Gentiva Common Stock was previously
reserved for issuance under the ESPP, subject to equitable adjustment by the
Committee in the event of stock dividends, recapitalizations and other similar
corporate events. Upon shareholder approval of the amendment, the maximum
number of shares issuable under the ESPP would be increased by an additional
1,200,000 shares, to a total of 2,400,000 shares. Shares issued under the ESPP
may be treasury shares, shares purchased on the open market or from private
sources, or shares issued from Gentiva's authorized but unissued shares. As of
March 16, 2005, the fair market value of Gentiva's Common Stock, based on the
average of the high and low sales price of the stock on the Nasdaq National
Market, was $16.25 per share.
Eligibility
Under the ESPP as originally adopted, employees of Gentiva or any of its
subsidiaries who were employed for at least 8 months were eligible to
participate in the ESPP, except that employees whose customary employment was
20 hours or less per week were excluded. Under the ESPP as proposed to be
amended, employees of Gentiva or any of its subsidiaries who are employed for
60 days or more prior
24
to the beginning of an offering period and who customarily work at least 20
hours per week are eligible to participate in the ESPP.
As of January 1, 2005 (the start of the current offering period under the
ESPP), there were approximately 16,800 employees of Gentiva, 15,200 of whom
were eligible to participate in the ESPP. At this time, the number of shares to
be purchased during the 2005 fiscal year cannot be determined. Below is a table
listing the number of shares purchased under the ESPP during the 2004 fiscal
year for the indicated persons:
PLAN BENEFITS TABLE FOR 2004 FISCAL YEAR*
Employee Stock Purchase Plan
Number of
Name and Position Value ($) Full Shares
- ----------------- ---------- -----------
Ronald A. Malone, Chairman and
Chief Executive Officer ............................ $ 21,250 1,947
Vernon A. Perry, Jr., President and
Chief Operating Officer ............................ -0- -0-
John R. Potapchuk, Senior Vice President,
Chief Financial Officer, Treasurer
and Secretary ...................................... 26,561 2,589
Robert Creamer, Senior Vice President,
Nursing Operations ................................. 16,186 1,541
Mary Morrisey Gabriel, Senior Vice President
and Chief Marketing Officer ........................ 27,241 2,601
All current executive officers as a group ........... 120,825 11,283
All employees, other than current executive officers,
as a group ......................................... 3,342,512 318,159
Non-executive directors, as a group ................. -0- -0-
- ------------
* Because Gentiva's 2004 fiscal year contained 53 weeks and overlapped three
calendar years, the table reflects purchases under the ESPP for three
offering periods.
Operation of the ESPP
The ESPP is designed to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The ESPP allows participating employees to purchase
Gentiva Common Stock through payroll withholding, or in such other manner as
the Committee may approve, but not to exceed 10% of the employee's compensation
(or such lesser amount as the Committee determines). Employee contributions may
be credited with interest if determined by the Committee. No interest is
currently credited. Upon termination of employment, the employee's
participation ceases and the employee's outstanding contributions are refunded.
The ESPP provides for consecutive six month offering periods (or other
periods of not more than 27 months as determined by the Committee) under which
participating employees can elect to have amounts withheld from their total
compensation during the offering period and applied to purchase Gentiva Common
Stock at the end of the offering period. Unless otherwise determined by the
Committee before an offering period, the purchase price will be 85% of the fair
market value of Gentiva Common Stock at either the beginning or end of the
offering period, whichever is less. Fair market value under the ESPP is
computed as the average of the highest and lowest sales prices on the
applicable date. At the end of the offering period, the employee's
contributions are automatically applied to purchase stock, and any excess
amount in the employee's account after making the purchase is refunded.
Unless otherwise determined by the Committee, the maximum number of shares
that may be purchased by an employee in any offering is 5,000 shares. In
addition, applicable Code limitations specify, in general, that a participant's
right to purchase stock under the ESPP cannot accrue at a rate in excess of
$25,000 per calendar year (based on the value at the beginning of the
applicable offering periods). The
25
offering period may be suspended or accelerated by the Committee if required by
law or deemed to be in Gentiva's best interests, such as upon a change of
control.
Amendments and Termination
The ESPP will terminate when all shares authorized to be issued under it
have been exhausted. The full Board of Directors may discontinue the ESPP at
any time and may amend it from time to time. Amendments may be made without
shareholder approval except as required to satisfy Section 423 of the Code.
Currently, Section 423 requires shareholder approval for any amendment that
would (i) increase the number of shares available for issuance under the ESPP,
or (ii) modify the employees or class of employees eligible to participate in
the ESPP.
Transferability
No accounts or rights under the ESPP may be transferred or assigned.
Shares purchased under the ESPP may be transferred, but employees may lose tax
benefits if the shares are not held for a minimum period as described below.
Certain Federal Income Tax Consequences
The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The following discussion outlines in general terms the
federal income tax consequences of participating in the ESPP.
The amounts withheld from an employee's pay under the ESPP will be taxable
income to him or her and must be included in his or her gross income for
federal income tax purposes in the year in which such amounts otherwise would
have been received. An employee's direct payments to the ESPP do not result in
any deductions for tax purposes. An employee does not recognize any income for
federal income tax purposes either at the time he or she is granted an option
to purchase shares under the ESPP (the beginning of the offering period) or at
the time he or she acquires the shares (the end of the offering period).
Under the federal income tax laws, favorable tax treatment of a
disposition of shares acquired under the ESPP depends, in part, upon the length
of time the employee holds the shares before disposing of them. To obtain some
of the available federal income tax benefits, an employee must hold shares
acquired under the ESPP for a period ending two years after the first day of
the offering period (the "Two-year Period") and one year after the date the
shares were purchased at the end of the offering period (the "One-year
Period"). If, within the Two-year Period or the One-year Period, an employee
sells or otherwise disposes of (other than by transfer at death) shares
acquired under the ESPP, he or she must recognize ordinary income in the year
of sale in an amount equal to the excess of the fair market value of the shares
on the date of purchase over the amount he or she paid for them. Any profit
realized in excess of the amount included in ordinary income will be taxed as a
capital gain, and any loss realized after increasing the basis of the stock by
the ordinary income recognized will be a capital loss. There may or may not be
any difference in ordinary income and capital gain tax rates.
If an employee sells or otherwise disposes of shares acquired under the
ESPP after holding such shares for the Two-year Period and the One-year Period,
he or she must include as ordinary income in the year of sale an amount equal
to the lesser of 15% of the fair market value of the shares on the first day of
the offering period, or the excess of the fair market value of the shares at
the time he or she sells the shares (generally, the sale price) over the amount
he or she paid for them. Any gain realized in excess of the amount thus
included in ordinary income will be taxed as a long-term capital gain. Any loss
resulting from the sale will be treated as a long-term capital loss.
If an employee dies while owning shares acquired under the ESPP, he or she
will be taxed in the year of death as though he or she disposed of such shares
after holding them for the Two-year Period and the One-year Period, except that
no capital gain or capital loss will be realized upon such disposition.
Any dividends received by an employee with respect to shares acquired
under the ESPP and any interest paid with respect to an employee's account,
whether used to purchase the shares of stock or
26
received by the employee pursuant to the withdrawal of the amount in his or her
account, will be treated as ordinary income.
The Company does not receive any income tax deduction as a result of
issuing shares pursuant to the ESPP, except upon sale of shares by an employee
within the Two-year Period or the One-year Period. In such an event, the
Company would be entitled to a deduction equal to the amount included as
ordinary income to the employee with respect to his or her sale of shares.
The foregoing discussion is not a complete discussion of all federal
income tax aspects of the ESPP. Some of the provisions contained in the Code
have only been summarized, and additional qualifications and refinements may be
contained in regulations which will be issued in the future by the Internal
Revenue Service. Furthermore, subsequent legislative changes or changes in
administrative or judicial interpretation could alter significantly the tax
treatment discussed herein. No discussion of state income tax law has been
included. Each employee should consult his or her own tax advisors with respect
to the tax consequences of participation in the ESPP.
The ESPP is not, and is not intended to be, a qualified retirement plan.
The ESPP therefore is not subject to the Employee Retirement Income Security
Act of 1974 ("ERISA") or Section 401(a) of the Code.
The Board of Directors recommends that you vote FOR approval of the
Employee Stock Purchase Plan, as amended.
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 January 2, 2005, all persons subject to the Section 16(a)
filing requirements filed the required reports on a timely basis.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy for its 2006 Annual Meeting must be received in
writing by December 7, 2005 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 2006 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 6,
2006 and on or before February 5, 2006.
27
OTHER MATTERS
A COPY OF THE ANNUAL REPORT ON FORM 10-K OF THE COMPANY FOR ITS LAST
FISCAL YEAR, AS AMENDED BY THE COMPANY'S FORM 10-K/A, 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 for action,
it is the intention of the persons named in the proxy to vote in accordance
with their discretion pursuant to authority conferred by the proxy.
By Order of the Board of Directors
/s/ John R. Potapchuk
John R. Potapchuk
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Dated: April 6, 2005
Melville, New York
28
Appendix A
GENTIVA HEALTH SERVICES, INC.
EXECUTIVE OFFICERS BONUS PLAN
(amended as of January 1, 2005)
SECTION 1. Purpose.
Gentiva Health Services, Inc. (the "Company") has established this
Executive Officers Bonus Plan (the "Plan"), which was originally effective
January 1, 2000. The Plan is hereby amended, effective January 1, 2005, subject
to shareholder approval, in order to provide the Company's executive officers
with an opportunity to earn annual bonus compensation, contingent on the
achievement of certain performance goals, as an incentive and reward for their
leadership, ability and exceptional services.
SECTION 2. Definitions.
2.1 "Award" means the amount of bonus compensation to which an Eligible
Employee is entitled to each Plan Year as determined by the Committee
pursuant to Section 4 of the Plan.
2.2 "Code" means the Internal Revenue Code of 1986, as amended, including
applicable regulations thereunder.
2.3 "Committee" means a committee of the Company's Board of Directors (the
"Board") consisting solely of not less than two persons who, to the
extent required to satisfy the exception for performance-based
compensation under Code Section 162(m), are "outside directors" within
the meaning of such section. The members of the Committee shall serve
at the pleasure of the Board.
2.4 "Determination Date" means (i) the day immediately preceding the first
day of a Plan Year; or (ii) no later than ninety (90) days after the
beginning of the Plan Year (provided however, that if the performance
period is a period of less than one year, the Committee shall take any
such actions prior to the lapse of 25% of the performance period), by
which date the Committee may establish performance goals for a Plan
Year without causing an Award to be treated as other than
performance-based compensation within the meaning of Code Section
162(m).
2.5 "Eligible Employee" means any executive officer of the Company.
2.6 "Plan Year" means the fiscal year of the Company.
SECTION 3. Administration.
3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present shall be
deemed the acts of the Committee.
3.2 The Committee shall have the authority to establish performance goals
for the awarding of Awards for each Plan Year; to determine the
Eligible Employees to whom Awards are to be made for each Plan Year;
to determine whether performance goals for each Plan Year have been
achieved; to authorize payment of Awards under the Plan; to adopt,
alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable; to interpret the terms
and provisions of the Plan; and to correct any defect, supply any
omission or reconcile any inconsistency or conflict in the Plan or in
any Award. The Committee's determinations under the Plan need not be
uniform among all Eligible Employees.
3.3 Subject to the provisions of the Plan, the Committee shall have the
authority and discretion to determine the extent to which Awards under
the Plan will be structured to conform to the requirements applicable
to performance-based compensation as described in Code Section 162(m),
and to take such action, establish such procedures, and impose such
restrictions at the time such Awards are granted as the Committee
determines to be necessary or appropriate
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to conform to such requirements. Notwithstanding any provision of the
Plan to the contrary, if an Award under the Plan is intended to
qualify as performance-based compensation under Code Section 162(m)
and the regulations issued thereunder and a provision of the Plan
would prevent such Award from so qualifying, such provision shall be
administered, interpreted and construed to carry out such intention
(or disregarded to the extent such provision cannot be so
administered, interpreted or construed).
3.4 Notwithstanding any provision of the Plan to the contrary, if any
Award provided under the Plan is subject to the provisions of Section
409A of the Code and the regulations issued thereunder, the provisions
of the Plan shall be administered, interpreted and construed in a
manner necessary to comply with Section 409A and the regulations
issued thereunder (or disregarded to the extent such provision cannot
be so administered, interpreted, or construed.)
3.5 All determinations made by the Committee, in its sole and absolute
discretion, with respect to the Plan and Awards thereunder shall be
final and binding on all persons, including the Company and all
Eligible Employees.
SECTION 4. Determination of Awards.
4.1 No later than the Determination Date, the Committee shall establish
(i) the Eligible Employees who shall be eligible for an Award for a
Plan Year, (ii) the performance goals for such Plan Year and (iii) the
corresponding Award amounts payable under the Plan upon achievement of
such performance goals.
4.2 The amount of an Award for any Plan Year shall be an amount not
greater than the lesser of: (i) 200% of such Eligible Employee's
annual base salary; or (ii) $2.5 million, which amount shall be
determined based on the achievement of one or more performance goals
established by the Committee with respect to such Eligible Employee.
4.3 Performance goals may vary from Eligible Employee to Eligible Employee
and shall be based upon such one or more of the following performance
criteria as the Committee may deem appropriate: appreciation in share
value, total shareholder return, earnings per share, operating income,
net income, pro forma net income, return on equity, return on
designated assets, return on capital, economic value added, earnings,
revenues, expenses, operating profit margin, operating cash flow,
gross profit margin, net profit margin, employee turnover, employee
headcount, labor costs, customer service, market share and accounts
receivable. The performance goals may be determined by reference to
the performance of the Company, or of a subsidiary or affiliate, or of
a division or unit of any of the foregoing. In addition to
establishing minimum performance goals below which no compensation
shall be payable pursuant to an Award, the Committee, in its sole
discretion, may create a performance schedule under which the
Committee balances various factors in determining whether the target
Award may be paid, including determining that an amount less than or
more than the target Award will be paid as a result of the interplay
of such factors.
4.4 The Committee, in its sole discretion, may also establish such
additional restrictions or conditions that must be satisfied as a
condition precedent to the payment of all or a portion of any Awards.
Such additional restrictions or conditions need not be
performance-based and may include, among other things, the receipt by
an Eligible Employee of a specified annual performance rating, the
continued employment by the Eligible Employee and/or the achievement
of specified performance goals by the Company, business unit or
Eligible Employee. Furthermore and notwithstanding any provision of
the Plan to the contrary, the Committee, in its sole discretion, may
reduce the amount of any Award to an Eligible Employee if it concludes
that such reduction is necessary or appropriate based upon: (i) an
evaluation of such Eligible Employee's performance; (ii) comparisons
with compensation received by other similarly situated individuals
working within the Company's industry; (iii) the Company's financial
results and conditions; or (iv) such other factors or conditions that
the Committee deems relevant. Notwithstanding any provision of the
Plan to the contrary, the Committee shall
A-2
not use its discretionary authority to increase any Award that is
intended to be performance-based compensation under Code Section
162(m).
4.5 To the extent consistent with Code Section 162(m), the Committee may
determine that certain adjustments shall apply, in whole or in part,
in such manner as specified by the Committee, to exclude the effect of
any of the following events that occur during a performance period
hereunder: the impairment of tangible or intangible assets; litigation
or claim judgments or settlements; the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results; accruals for reorganization and restructuring
programs, including, but not limited to, reductions in force and early
retirement incentives; currency fluctuations; and any extraordinary,
unusual, infrequent or non-recurring items, including, but not limited
to, such items described in management's discussion and analysis of
financial condition and results of operations or the financial
statements and notes thereto appearing in the Company's annual report
on Form 10-K for the applicable year.
SECTION 5. Payment of Award.
5.1 An Award (if any) to any Eligible Employee for a Plan Year shall be
paid in a single lump sum in cash as soon as practicable after the end
of the Plan Year, provided, however, (A) that the Committee shall have
first certified in writing (i) that a performance goal with respect to
such Eligible Employee for such Plan Year was satisfied and the level
of such goal attained, and (ii) the amount of each such Eligible
Employee's Award; and (B) such payment shall be made no later than two
and one-half months from the end of the Plan Year in which the
Eligible Employee performed the services related to the Award.
5.2 If an Eligible Employee dies after the end of a Plan Year but before
receiving payment of any Award, the amount of such Award shall be paid
to a designated beneficiary or, if no beneficiary has been designated,
to the Eligible Employee's estate, in the form of a lump sum payment
in cash as soon as practicable after the Award for the Plan Year has
been determined and certified in accordance with this Section 5.
5.3 Notwithstanding the foregoing, the Committee may determine, by
separate employment agreement with any Eligible Employee or otherwise,
that all or a portion of an Award for a Plan Year shall be payable to
the Eligible Employee during the Plan Year upon the Eligible
Employee's death, disability (which, to the extent necessary to comply
with Code Section 409A, shall have the meaning set forth in Code
Section 409A(a)(2)(C)) or termination of employment with the Company,
or upon a change of control of the Company (which, to the extent
necessary to comply with Code Section 409A, shall have the meaning set
forth in Code Section 409A(a)(2)(A)(v)).
5.4 In the event a separate employment agreement does not provide for
payment upon the events described in Section 5.3, unless otherwise
determined by the Committee, Eligible Employees who have terminated
employment with the Company prior to the end of a performance period
for any reason other than death, retirement or disability, shall
forfeit any and all rights to payment under any Awards then
outstanding under the terms of the Plan and shall not be entitled to
any cash payment for such period. Unless otherwise determined by the
Committee, if an Eligible Employee's employment with the Company
should terminate during a performance period by reason of death,
retirement or disability, the Eligible Employee's Award shall be
prorated to reflect the period of service prior to his/her death,
retirement or disability, and shall be paid either to the Eligible
Employee or, as appropriate, to his/her estate, subject to the
Committee's certification that the applicable performance goals have
been met.
SECTION 6. Non-transferability.
No Award or rights under this Plan may be transferred or assigned other
than by will or by the laws of descent and distribution.
A-3
SECTION 7. Amendments and Termination.
7.1 The Board may terminate the Plan at any time and may amend it from
time to time, provided, however, that no termination or amendment of
the Plan shall adversely affect the rights of an Eligible Employee or
a beneficiary to a previously certified Award. Amendments to the Plan
may be made without shareholder approval except as required to satisfy
Code Section 162(m).
7.2 Notwithstanding the foregoing or any provision of the Plan to the
contrary, the Committee may at any time (without the consent of the
Eligible Employee) modify, amend or terminate any or all of the
provisions of the Plan to the extent necessary to conform the
provisions of the Plan with Code Section 409A, regardless of whether
such modification, amendment, or termination of the Plan shall
adversely affect the rights of an Eligible Employee under the Plan.
SECTION 8. General Provisions.
8.1 Nothing set forth in the Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of
the Plan nor the determination of any Award hereunder shall confer
upon an Eligible Employee any right to continued employment.
8.2 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation
taken or made with respect to the Plan, and all members of the Board
or the Committee and all officers or employees of the Company acting
on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such
action, determination or interpretation.
8.3 The Plan is not funded, and all Awards payable hereunder shall be paid
from the general assets of the Company. No provision contained in the
Plan and no action taken pursuant to the provisions of the Plan shall
create a trust of any kind or require the Company to maintain or set
aside any specific funds to pay benefits hereunder. To the extent an
Eligible Employee acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company.
8.4 The Company shall have the right to withhold from any Awards payable
under the Plan or other wages payable to an Eligible Employee such
amounts sufficient to satisfy federal, state and local tax withholding
obligations arising from or in connection with the Eligible Employee's
participation in the Plan and such other deductions as may be
authorized by the Eligible Employee or as required by applicable law.
SECTION 9. Effective Date of Plan.
The Plan was originally effective January 1, 2000, and the Plan, as herein
amended, shall be effective January 1, 2005, subject to approval by the
shareholders of the Company.
A-4
Appendix B
GENTIVA HEALTH SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
(amended as of February 24, 2005)
1. Purpose.
The purpose of this Plan is to provide eligible employees the opportunity
to purchase Gentiva Health Services, Inc. Common Stock on a basis that
qualifies for the tax treatment prescribed by Section 423 of the Code.
2. Definitions.
The following terms, when used in the Plan, shall have the following
meanings:
(a) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to a particular section of the Code include any
successor provisions.
(c) "Committee" means the committee appointed by the Board of Directors to
administer the Plan pursuant to the provisions of Section 3(a) below.
(d) "Common Stock" means common stock, par value $.10 per share, of the
Company.
(e) "Company" means Gentiva Health Services, Inc., a Delaware corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(g) "Fair Market Value" on a particular date means the mean between the
highest and lowest sales prices of a share of Common Stock on the
principal stock exchange or stock market on which the Common Stock may
be listed or admitted to trading. If there were no sales on such date,
the respective prices on the most recent prior day on which sales were
reported shall be used. If the foregoing method of determining fair
market value should be inconsistent with Section 423 of the Code,
"Fair Market Value" shall be determined by the Committee in a manner
consistent with Section 423 of the Code and shall mean the value as so
determined.
(h) "Offering" means a period, designated by the Committee in accordance
with the provisions of Section 6 of the Plan, on the first day of
which options will be granted to eligible employees pursuant to
Section 8(a) of the Plan and on the last day of which such options
will be deemed exercised or will expire, as applicable, in accordance
with Section 8(b) of the Plan.
(i) "Participant" or "Participating Employee" means an employee of the
Company or a Participating Subsidiary who is eligible to participate
in an Offering under the Plan pursuant to Section 5 below and who
elects to participate in such Offering in accordance with Section 6
below.
(j) "Participating Subsidiary" means, with respect to an Offering under
the Plan, a Subsidiary the employees of which are authorized by the
Committee as provided in Section 5 below to participate in such
Offering.
(k) "Plan" means the Gentiva Health Services, Inc. Employee Stock Purchase
Plan set forth herein, as amended from time to time.
(l) "Parent" means a parent corporation as defined in Section 424(e) of
the Code, including a corporation which becomes such a parent in the
future.
(m) "Subsidiary" means a subsidiary corporation as defined in Section 424
(f) of the Code, including a corporation which becomes such a
subsidiary in the future.
B-1
(n) "Total Compensation" means, with respect to any Offering, all
remuneration, as defined in Section 3401(a) of the Code (for purposes
of income tax withholding at the source), but determined without
regard to any rules that limit remuneration included in wages based on
the nature and location of employment or the services performed, for
services paid to an employee during, or coincident with the end of,
such Offering; provided, however, that "Total Compensation" shall not
include the following items (even if includable in gross income): (1)
reimbursement or other expense allowances; (2) fringe benefits (cash
and non cash); (3) moving expenses and gross up for taxes; (4) welfare
benefits (including disability income from insurance policies); (5)
payments on account of severance of the employee from employment; (6)
payments on account of early retirement of the employee; (7) income
arising from the grant or exercise of stock options; (8) restricted
stock awards; and (9) distributions under this Plan.
3. Administration.
(a) The Plan shall be administered by a committee of the Board consisting
of two or more directors appointed from time to time by the Board.
(b) Subject to the provisions of the Plan, the powers of the Committee
shall include having the authority, in its discretion, to:
(i) define, prescribe, amend and rescind rules, regulations,
procedures, terms and conditions relating to the Plan; and
(ii) interpret, administer and construe the Plan and make all other
determinations necessary or advisable for the administration of
the Plan, including but not limited to correcting defects,
reconciling inconsistencies and resolving ambiguities.
(c) The interpretation by the Committee of the terms and conditions of the
Plan, and its administration of the Plan, and all action taken by the
Committee, shall be final, binding and conclusive on the Company, its
stockholders, Subsidiaries, all Participants and employees, and upon
their respective successors and assigns, and upon all other persons
claiming under or through any of them.
(d) Members of the Board, members of the Committee and persons to whom
authority is delegated under Section 3(e) below acting under this Plan
shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for gross or willful
misconduct in the performance of their duties.
(e) The Committee may delegate its authority to administer the Plan to any
individuals as the Committee may determine and such individuals shall
serve solely at the pleasure of the Committee. Any individuals who are
authorized by the Committee to administer the Plan shall have the full
power to act on behalf of the Committee, but shall at all times be
subordinate to the Committee and the Committee shall retain ultimate
authority for the administration of the Plan.
4. Stock Subject to the Plan.
(a) Subject to paragraph (c) below, as of the initial adoption of the
Plan, the aggregate number of shares of Common Stock which may be sold
under the Plan is 1,200,000 shares of Common Stock. Effective as of
February 24, 2005, (but subject to shareholder approval within 12
months of that date), an additional 1,200,000 shares of Common Stock
may be sold under the Plan, such that the aggregate number of shares
of Common Stock which may be sold under the Plan is increased to
2,400,000 shares.
(b) If the number of shares of Common Stock that Participating Employees
become entitled to purchase is greater than the number of shares of
Common Stock that are offered in a particular Offering or that remain
available under the Plan, the available shares of Common Stock shall
be allocated by the Committee among such Participating Employees in
such manner as it deems fair and equitable.
B-2
(c) In the event of any change in the Common Stock, through
recapitalization, merger, consolidation, stock dividend or split,
combination or exchange of shares, spin-off or otherwise, the
Committee may make such equitable adjustments in the Plan and the then
outstanding Offerings as it deems necessary and appropriate including,
but not limited to, changing the number of shares of Common Stock
reserved under the Plan, and the purchase price of shares in the
current Offering; provided that any such adjustments shall be
consistent with Sections 423 and 424 of the Code.
(d) Shares of Common Stock which are to be delivered under the Plan may be
obtained by the Company from its treasury, by purchasing such shares
on the open market or from private sources, or by issuing authorized
but unissued shares of its Common Stock. Shares of authorized but
unissued Common Stock may not be delivered under the Plan if the
purchase price thereof is less than the par value (if any) of the
Common Stock at the time. The Committee may (but need not) provide at
any time or from time to time (including without limitation upon or in
contemplation of a change in control) for a number of shares of Common
Stock equal in number to the number of shares then subject to options
under this Plan to be issued or transferred to, or acquired by, a
trust (including but not limited to a grantor trust) for the purpose
of satisfying the Company's obligations under such options, and,
unless prohibited by applicable law, such shares held in trust shall
be considered authorized and issued shares with full dividend and
voting rights, notwithstanding that the options to which such shares
relate might not be exercisable at the time.
5. Eligibility.
All employees of the Company and any Subsidiaries designated by the
Committee from time to time will be eligible to participate in the Plan, in
accordance with and subject to such rules and regulations as the Committee may
prescribe; provided, however, that:
(a) such rules shall comply with the requirements of the Code (including
but not limited to Section 423(b)(3), (4) and (8) thereof);
(b) only employees of the Company or a Participating Subsidiary who have
been employed for 60 days or more prior to the beginning of an
offering period and who customarily work at least 20 hours per week
are eligible to participate in the Plan. For purposes of the
eligibility requirements, an employee shall be treated as "customarily
working at least 20 hours per week" if the employee works 20 or more
hours per week over 35% of the work weeks during the six month period
(or less, for newly hired employees) that ends 60 days before the
beginning of the offering period. This rule shall be applied in a
manner that complies with Section 423(b)(4) of the Code;
(c) the Committee may (but need not) in its discretion exclude employees
who have been employed by the Company or a Participating Subsidiary
less than two years and/or highly compensated employees within the
meaning of Section 414(q) of the Code from being eligible to
participate in the Plan or any Offering, but unless and until
otherwise determined by the Committee, only employees who have been
employed less than 60 days will be excluded;
(d) no employee may be granted an option under the Plan if such employee,
immediately after the option is granted, owns stock possessing 5% or
more of the total combined voting power or value of all classes of
stock of his employer corporation or any Parent or Subsidiary (with
the rules of Section 424(d) of the Code applicable in determining the
stock ownership of an employee, and stock which the employee may
purchase under outstanding options, whether or not such options
qualify for the special tax treatment afforded by Section 421(a) of
the Code, shall be treated as stock owned by the employee); and
(e) all Participating Employees shall have the same rights and privileges
except as otherwise permitted by Section 423(b)(5) of the Code.
B-3
6. Offerings; Participation.
The Company may make Offerings of up to 27 months' duration each, to
eligible employees to purchase shares of Common Stock under the Plan, until all
shares authorized to be delivered under the Plan have been exhausted or until
the Plan is sooner terminated by the Board. Subject to the preceding sentence,
the number, commencement date and duration of any Offerings shall be determined
by the Committee in its sole discretion; provided that, unless the Committee
determines otherwise, (a) the first Offering shall commence on February 1, 2000
and shall terminate on June 30, 2000, and (b) a new six-month Offering shall
commence immediately after the end of the previous Offering. The duration of
any Offering need not be the same as the duration of any other Offering, and
more than one Offering may commence or terminate on the same date if the
Committee so provides. Subject to such rules and procedures as the Committee
may prescribe, an eligible employee may elect to participate in an Offering at
such time(s) as the Committee may permit by authorizing a payroll deduction for
such purpose in one percent increments of up to a maximum of ten percent of his
or her Total Compensation with respect to such Offering or such lesser amount
as the Committee may prescribe. Participant elections may be made in any manner
deemed appropriate by the Committee from time to time, including by voice
response or through the internet. The Committee may (but need not) permit
employee contributions to be made by means other than payroll deductions,
provided that in no event shall an employee's contributions (excluding
interest, if any, credited pursuant to Section 7(a) below) from all sources in
any Offering exceed ten percent of his or her Total Compensation with respect
to such Offering or such lesser amount as the Committee may prescribe. The
Committee may at any time suspend or accelerate the completion of an Offering
if required by law or deemed by the Committee to be in the best interests of
the Company, including in the event of a change in ownership or control of the
Company or any Subsidiary.
7. Payroll Deductions.
(a) The Company will maintain payroll deduction accounts on its books for
all Participating Employees, and may (but need not) credit such
accounts with interest if (and only if) the Committee so directs at
such rate (if any) as the Committee may prescribe. All employee
contributions and any interest thereon which the Committee may
authorize in accordance with the preceding sentence shall be credited
to such accounts. Employee contributions and any interest credited to
the payroll deduction accounts of Participating Employees need not be
segregated from other corporate funds and may be used for any
corporate purpose.
(b) At such times as the Committee may permit and subject to such rules
and procedures as the Committee may prescribe, a Participating
Employee may suspend his or her payroll deduction during an Offering,
or may withdraw the balance of his or her payroll deduction account
and thereby withdraw from participation in an Offering.
(c) Any balance remaining in an employee's payroll deduction account after
shares have been purchased in an Offering pursuant to Section 8(b)
below will be refunded to the Participating Employee. Upon termination
of the Plan, all amounts in the accounts of Participating Employees
shall be carried forward into their payroll deduction accounts under a
successor plan, if any, or refunded to them, as the Committee may
decide.
(d) In the event of the termination of a Participating Employee's
employment for any reason, his or her participation in any Offering
under the Plan shall cease, no further amounts shall be deducted
pursuant to the Plan and the balance in the employee's account shall
be paid as soon as practicable following such termination of
employment to the employee, or, in the event of the employee's death,
to the employee's estate.
8. Purchase; Limitations.
(a) Subject to Section 5 above and within the limitations of Section 8(d)
below, each person who is an eligible employee of the Company or a
Participating Subsidiary on the first day of an Offering under the
Plan is hereby granted an option, on the first day of such Offering,
to purchase a number of whole and/or partial shares of Common Stock at
the end of such Offering determined by dividing ten percent (or such
lesser percentage as may be specified by the
B-4
Committee as the maximum employee contribution percentage in such
Offering) of such employee's Total Compensation with respect to such
Offering, plus such interest (if any) as the Committee may authorize
to be credited during such Offering in accordance with Section 7(a)
above, by 85 percent of the Fair Market Value of a share of Common
Stock on the first date of such Offering or on the last date of such
Offering, whichever is lower, provided that in no event shall the
number of shares of Common Stock that may be purchased under any such
option exceed 5,000 shares or such higher or lower number of whole or
partial shares as the Committee may have specified in advance of such
Offering as the maximum amount of stock which may be purchased by an
employee in such Offering. The purchase price of such shares under
such options shall be determined in accordance with Section 8(c)
below. The Company's obligation to sell and deliver Common Stock in
any Offering or pursuant to any such option shall be subject to the
approval of any governmental authority whose approval the Committee
determines it is necessary or advisable to obtain in connection with
the authorization, issuance, offer or sale of such Common Stock.
(b) As of the last day of the Offering, the payroll deduction account of
each Participating Employee shall be totaled. Subject to the
provisions of Section 7(b) above and 8(d) below, if such account
contains sufficient funds as of that date to purchase one or more
whole or partial shares of Common Stock at the price determined under
Section 8(c) below, the Participating Employee shall be conclusively
deemed to have exercised the option granted pursuant to Section 8(a)
above for as many whole or partial shares of Common Stock as the
amount of his or her payroll deduction account (including any
contributions made by means other than payroll deductions and
including any interest credited to the account) at the end of the
Offering can purchase (but in no event for more than the total number
of shares that are subject to the option); such employee's account
will be charged for the amount of the purchase and for all purposes
under the Plan the employee will be deemed to have acquired the shares
on that date; and either a stock certificate representing such shares
will be issued to him or her, or the Company's record keeper will make
an entry on its books and records evidencing that such shares have
been duly issued or transferred as of that date, as the Committee may
direct. Notwithstanding any provision of the Plan to the contrary,
unless otherwise determined by the Committee, fractional shares may be
purchased under the Plan. Any option granted pursuant to Section 8(a)
above which is not deemed exercised as of the last day of the Offering
in accordance with the foregoing provisions of this Section 8(b) shall
expire on that date.
(c) Unless the Committee determines before the first day of an Offering
that a higher price that complies with Section 423 of the Code shall
apply, the price at which shares of Common Stock may be purchased
under each option granted pursuant to Section 8(a) above shall be the
lesser of (i) an amount equal to 85 percent of the Fair Market Value
of the Common Stock at the time such option is granted, or (ii) an
amount equal to 85 percent of the Fair Market Value of the Common
Stock at the time such option is exercised.
(d) In addition to any other limitations set forth in the Plan, no
employee may be granted an option under the Plan which permits his or
her rights to purchase stock under the Plan, and any other stock
purchase plan of his or her employer corporation and its Parent and
Subsidiary that is qualified under Section 423 of the Code, to accrue
at a rate which exceeds $25,000 of the Fair Market Value of such stock
(determined at the time such option is granted) for each calendar year
in which the option is outstanding at any time. The Committee may
further limit the amount of Common Stock which may be purchased by any
employee during an Offering in accordance with Section 423(b)(5) of
the Code.
9. No Transfer.
(a) No option, right or benefit under the Plan may be transferred by any
employee, whether by will, the laws of descent and distribution, or
otherwise, and all options, rights and benefits under the Plan may be
exercised during an employee's lifetime only by such employee.
B-5
(b) Book entry accounts and certificates for shares of Common Stock
purchased under the Plan may be maintained or registered, as the case
may be, only in the name of the Participating Employee or, if such
employee so indicates on his or her payroll deduction authorization
form, in his or her name jointly with a member of his or her family,
with right of survivorship.
10. Effective Date and Duration of Plan.
The Plan shall become effective when adopted by the Board, provided that
the stockholders of the Company approve it within 12 months thereafter. If not
so approved by shareholders, the Plan shall be null, void and of no force or
effect. If so approved, the Plan shall remain in effect until all shares
authorized to be issued or transferred hereunder have been exhausted or until
the Plan is sooner terminated by the Board of Directors, and may continue in
effect thereafter with respect to any options outstanding at the time of such
termination if the Board of Directors so provides.
11. Amendment and Termination of the Plan.
The Plan may be amended by the Board of Directors, without shareholder
approval, at any time and in any respect, unless shareholder approval of the
amendment in question is required under Section 423 of the Code. The Plan may
also be terminated at any time by the Board of Directors.
12. General Provisions.
(a) Nothing contained in this Plan shall be deemed to confer upon any
person any right to continue as an employee of or to be associated in
any other way with the Company for any period of time or at any
particular rate of compensation.
(b) No person shall have any rights as a stockholder of the Company with
respect to any shares optioned under the Plan until such shares are
issued or transferred to him or her.
(c) All expenses of adopting and administering the Plan shall be borne by
the Company, and none of such expenses shall be charged to any
employee.
(d) The Plan shall be governed by and construed under the laws of the
State of New York, without giving effect to the principles of
conflicts of laws of that State.
(e) The Plan and each Offering under the Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of
the Code. Transactions under the Plan by or with respect to persons
subject to Section 16(b) of the Exchange Act with respect to
transactions involving equity securities of the Company are also
intended to qualify for exemption under SEC Rule 16b-3, unless the
Committee specifically determines otherwise. Every provision of the
Plan shall be administered, interpreted and construed to carry out
those intentions.
B-6
GENTIVA HEALTH SERVICES, INC.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
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
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|
|X| Please mark | 5521
votes as in |
this example. |
- - - -
- -----------------------------
GENTIVA HEALTH SERVICES, INC.
- -----------------------------
1. Election of Directors
(Please see reverse) FOR WITHHOLD
ALL ALL
__ __
| | | |
|__| |__|
__
FOR | |
ALL | |
EXCEPT |__| ----------------------------------------
For all nominees except as written above
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
__ __ __ __ __ __
2. Ratification of | | | | | | 3. Approval of Executive | | | | | |
appointment of |__| |__| |__| Officers Bonus Plan, as |__| |__| |__|
Pricewaterhouse- amended
Coopers LLP as
independent
auditors
4. Approval of Employee FOR AGAINST ABSTAIN
Stock Purchase Plan, as __ __ __
amended | | | | | |
|__| |__| |__|
__
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: _____________
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
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PROXY
GENTIVA HEALTH SERVICES, INC.
Proxy Solicited on Behalf of the Board of Directors
P
R for the Annual Meeting of Shareholders, May 6, 2005
O
X The undersigned hereby appoints Ronald A. Malone, Stephen B. Paige and John R. Potapchuk, and each of them, as
Y proxies, with full power of substitution, to represent and to vote, as designated herein, all shares of Common
Stock of Gentiva Health Services, Inc. (the "Company"), at its Annual Meeting of Shareholders to be held in the
lower level atrium at 300 Broad Hollow Road, Melville, New York on Friday, May 6, 2005 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 2008: Nominees:
01. Ronald A. Malone and 02. Raymond S. Troubh. _________________________________________________
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS: Ratification of
appointment of PricewaterhouseCoopers LLP as independent auditors of _________________________________________________
the Company.
3. APPROVAL OF EXECUTIVE OFFICERS BONUS PLAN, AS AMENDED. _________________________________________________
4. APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED.
You are encouraged to specify your choices by marking the appropriate boxes _________________________________________________
on the reverse side but you need not mark any boxes if you wish to vote in (If you have written in the above space, please
accordance with the Board of Directors' recommendation. mark the corresponding box on the reverse side of
this card.)
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 SEE REVERSE
INDEPENDENT AUDITORS, FOR APPROVAL OF EXECUTIVE OFFICERS BONUS PLAN, AS AMENDED AND FOR APPROVAL OF EMPLOYEE STOCK SIDE
PURCHASE PLAN, AS AMENDED. THE PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS -----------
MAY PROPERLY COME BEFORE THE MEETING.