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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
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule ss.240.14a-12
GENTIVA HEALTH SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[GENTIVA LOGO]
April 10, 2006
Dear Shareholder:
You are cordially invited to attend the 2006 Annual Meeting of Shareholders
of Gentiva Health Services, Inc. to be held on Friday, May 12, 2006, 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 of
Shareholders 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 12, 2006
-------------------------
The Annual Meeting of Shareholders of Gentiva Health Services, Inc., a
Delaware corporation (the "Company"), will be held on Friday, May 12, 2006, 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 consider and vote upon a proposal to amend the Company's Amended
and Restated Certificate of Incorporation to declassify the Board of
Directors;
2. To elect four directors in Class III, each to serve until the 2009
Annual Meeting of Shareholders, provided that if the proposal set
forth in item 1 above is approved, each will instead serve until the
2007 Annual Meeting of Shareholders;
3. To consider and vote upon a proposal to ratify and approve the
appointment of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of the Company for the fiscal year
ending December 31, 2006; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only shareholders of record at the close of business on March
16, 2006 are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
By Order of the Board of Directors
/s/ Stephen B. Paige
Stephen B. Paige
Senior Vice President, General Counsel
and Secretary
Dated: April 10, 2006
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.
[GENTIVA LOGO]
PROXY STATEMENT
GENERAL INFORMATION
Introduction
The 2006 Annual Meeting of Shareholders ("Annual Meeting") of Gentiva
Health Services, Inc. (the "Company" or "Gentiva") will be held on Friday, May
12, 2006, 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, 2006 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 10, 2006.
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, 2006, the record date for determining
shareholders entitled to vote at the Annual Meeting, 26,629,199 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 "shareholders 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. Gentiva's Board of Directors
recommends that you vote FOR the amendment to the Company's Amended and Restated
Certificate of Incorporation, FOR all of the nominees to the Board of Directors
and FOR ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm.
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, will constitute a quorum at
the Annual Meeting, and an inspector of election appointed for the meeting will
determine whether a quorum is present. Proxies marked as abstentions and "broker
non-votes" are counted in determining whether a quorum is present. A "broker
non-vote" occurs when a nominee holding shares for a beneficial owner has not
received voting instructions from
the beneficial owner on a particular matter and that nominee does not possess or
choose to exercise discretionary voting authority. Proxies marked as abstentions
with respect to a proposal will have the effect of a negative vote as to that
proposal. For Proposal 1, a "broker non-vote" will have the effect of a negative
vote as to that proposal. As to all other proposals, "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 Computershare
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.
A copy of the 2005 Annual Report to Shareholders (the "Annual Report"),
including a copy of the Company's Form 10-K for the fiscal year ended January 1,
2006 (the "Form 10-K"), is also being mailed to you with this Notice of Annual
Meeting and Proxy Statement. 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 are not deemed part of the soliciting material for the proxy.
PROPOSAL 1
AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
The Board of Directors recommends that the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") be amended to
eliminate the classified structure of the Board and allow for the annual
election of the directors.
Article VII, Section 7.2, of the Certificate of Incorporation currently
provides that:
o the Board of Directors shall be classified into three classes
designated as Class I, Class II and Class III, as nearly equal in
number as possible;
o one of the three classes shall stand for re-election each year; and
o each class of directors shall hold office for a three year term.
The Board of Directors has adopted a resolution recommending that
shareholders vote to amend the Company's Certificate of Incorporation to
declassify the Board of Directors (the "Amendment"). The proposed Amendment is
set forth in Appendix A to this Proxy Statement with deletions from the current
text of the Certificate of Incorporation indicated in brackets and additions
indicated by underlining. The Board of Directors recommends that shareholders
vote to approve the Amendment.
To become effective, the Amendment must receive the affirmative vote of a
majority of the outstanding shares entitled to vote. If it receives the required
vote, a Certificate of Amendment to the Certificate of Incorporation will be
filed with the State of Delaware. The Board has already approved amendments to
the Company's Amended and Restated By-Laws (the "By-Laws") that, upon
shareholder approval of this Proposal 1, will make them consistent with the
Amendment.
If the Amendment is approved by the Company's shareholders at the Annual
Meeting, the Board will be declassified, by each separate class in its
chronological order of election, such that (1) Class III, which is currently
nominated for election at this Annual Meeting, as set forth in Proposal 2, will
be elected to serve a one year term ending at the 2007 Annual Meeting of
Shareholders; (2) both Class I and Class III will be elected at the 2007 Annual
Meeting of Shareholders to serve a one year term ending at the 2008 Annual
Meeting of Shareholders; and (3) each of Class I, Class II and Class III will be
elected at the 2008 Annual Meeting of Shareholders to serve a one year term
ending at the 2009 Annual Meeting of Shareholders. Following the 2008 Annual
Meeting of Shareholders, the Board will no longer be classified, and each
director will serve a one year term upon election. In addition, any director
elected by the Board
2
of Directors to fill a newly created directorship or to fill a vacancy on the
Board will hold office for a term ending at the next annual meeting of
shareholders after the director's election.
If the Amendment is not approved by shareholders at the Annual Meeting, the
Board will remain classified and the directors elected at the Annual Meeting
will serve for a term ending at the 2009 Annual Meeting of Shareholders. All
other directors will continue in office for their full three year term, until
his or her successor has been duly elected and qualified.
Classified or staggered boards have been widely adopted and have a long
history in corporate law. Classified boards have been viewed as a means of
promoting stability and continuity of experience on a board of directors
primarily because the majority of directors at any given time will have had at
least one year of experience on the board, thus assisting a company in its
long-term strategic planning efforts. Also, because it would take at least two
elections for a potential acquiror to gain control of a classified board without
the cooperation of the board, the existence of a classified structure may
enhance shareholder value by making it more likely that a party seeking to gain
control of a target company will engage in arm's-length discussions with the
target's existing board instead of launching a proxy contest in an attempt to
gain control of the board and take over the company.
However, many investors and corporate governance proponents have come to
view a classified board structure as having the effect of reducing the
accountability of directors because classified boards limit the ability of
shareholders to evaluate and elect all directors on an annual basis. The
election of directors is the primary means for shareholders to influence
corporate governance policies and to hold management accountable for the
implementation of these policies. Opponents of classified boards also believe
that they discourage takeover proposals and proxy contests that could have the
effect of increasing shareholder value. In light of these views, a number of
major corporations have determined that principles of good corporate governance
dictate that all directors of a corporation should be elected annually.
The Gentiva Board of Directors has considered the advantages and
disadvantages of the classified board structure, and has voted to propose to the
shareholders that the Company's directors be elected annually. In reaching this
determination, the Board of Directors concluded that the benefits of a
classified board structure were outweighed by the following considerations:
o The Board's belief that providing the Company's shareholders with the
opportunity annually to register their views on the collective
performance of the Board and on each director individually will
further the Company's goal of ensuring that its corporate governance
policies conform to current best practices and maximize accountability
to the shareholders;
o The Board's belief that, because there is no current limit to the
number of terms an individual may serve, the continuity and stability
of the Board's membership should not be materially affected by
declassification of the Board of Directors; and
o The Board's belief that, even though annual election of directors may
enhance the ability of a third party to acquire control of the Company
without engaging in arm's-length discussions with the Board, there are
other factors, such as the regulatory requirements applicable to an
acquisition of control of the Company, the Company's rights agreement
and the inability of shareholders to act by written consent under the
Company's Certificate of Incorporation and By-Laws, that reduce the
likelihood that a third party would be successful in taking over the
Company without engaging in arm's-length discussions with the Board.
The affirmative vote of at least a majority of the Company's outstanding
shares entitled to vote at this Annual Meeting will be required for approval of
the Amendment. An abstention or a "broker non-vote" will have the same effect as
a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
THE CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS.
3
PROPOSAL 2
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation currently provides that the
Board of Directors will consist of three classes of directors with overlapping
three year terms and that the number of directors in each of the three classes
will be as nearly equal as possible. The Compensation, Corporate Governance and
Nominating Committee recommends the slate of nominees to the independent
directors for their approval. The Board of Directors then recommends the slate
approved by the independent directors to the shareholders for their approval at
the Annual Meeting. Each class of directors is currently elected in a different
year for a term extending to the Annual Meeting to be held three years later. As
described in Proposal 1, however, if the Amendment to the Certificate of
Incorporation is approved at this Annual Meeting, the Board of Directors will be
declassified, by each class in its chronological order of election, such that by
the 2008 Annual Meeting of Shareholders, all directors will stand for election
on an annual basis and will serve a one year term upon election. The Company's
Board of Directors currently consists of nine members; however, the Board of
Directors has approved an increase in the number of directors to ten effective
upon the election of the nominees for election as directors in Class III. The
Board of Directors approved the increase to permit the addition of John A.
Quelch, who has been nominated for election at this Annual Meeting as a new
director in Class III.
The directors to be elected at the 2006 Annual Meeting will serve for a
three year term ending at the 2009 Annual Meeting; however, as noted above, if
the Amendment to the Certificate of Incorporation is approved, the directors in
Class III will instead serve for a one year term ending at the 2007 Annual
Meeting. The three directors currently in Class III, Stuart R. Levine, Mary
O'Neil Mundinger and Stuart Olsten, 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. In addition, the Board of Directors has nominated John A. Quelch for
election as a director in Class III at this year's Annual Meeting, and Dr.
Quelch has consented to serve as a director if elected.
The vote of a plurality of the shares of Common Stock present or
represented and entitled to vote at the Annual Meeting is required for election
as a director. Proxies will be voted at the meeting (unless authority to do so
is withheld) for the election as directors of the four nominees. If for any
reason any of the nominees is not a candidate (which is not expected) when the
election occurs, the proxies may be voted for a substitute nominee or nominees.
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.
4
NOMINEES FOR WHOM PROXIES WILL BE VOTED
Class III -- Nominees for Director with Terms Expiring in 2009
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 & 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 58 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. and a director
and member of the compensation committee of UnitedHealth
Group Incorporated. Dr. Mundinger is 68 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
MaggieMoo's 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 53 years old.
5
John A. Quelch ......... Dr. Quelch is a current nominee for director and has not
previously served on the Company's Board of Directors. Dr.
Quelch has been the Senior Associate Dean for International
Development and Lincoln Filene Professor of Business
Administration at Harvard Business School since June 2001.
From July 1998 through June 2001, he was Dean of London
Business School. Prior to that, Dr. Quelch was an Assistant
Professor, an Associate Professor and a full Professor of
Business Administration at Harvard Business School from
1979 to 1998. Dr. Quelch is also a director of WPP Group plc,
one of the world's largest communications groups, Inverness
Medical Innovations, Inc., The Pepsi Bottling Group, Inc., and
is the Chairman of the Massachusetts Port Authority. Dr.
Quelch is 54 years old.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF STUART
R. LEVINE, MARY O'NEIL MUNDINGER, STUART OLSTEN AND JOHN A. QUELCH AS CLASS III
DIRECTORS.
DIRECTORS WHOSE TERM OF OFFICE DOES NOT EXPIRE AT THIS MEETING
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
has served as a director of Wyeth since December 2005.
Mr. Ganzi is 59 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 77 years old.
6
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, a director and member of the
compensation committee of SRA International, Inc. and a
director and member of the compliance committee of
UnitedHealth Group Incorporated. Dr. Wilensky is 62 years old.
Class II -- Continuing Directors 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 51 years old.
7
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 and a director and member of the audit committee of
Triarc Companies, Inc. He is also a director and chairman of the
nominating and governance committee of Hollinger
International Inc. Mr. Troubh is 79 years old.
Rodney D. Windley ......... On February 28, 2006, in connection with the Company's
acquisition of The Healthfield Group, Inc. ("Healthfield"),
Mr. Windley was elected by the Board of Directors to fill the
vacancy that existed in Class II and was appointed Vice
Chairman of the Board. Mr. Windley, Healthfield's founder,
served as its Chairman and Chief Executive Officer since its
inception in 1986 until the completion of the acquisition on
February 28, 2006. Prior to founding Healthfield, Mr. Windley
was co-founder and president of Central Health Services, Inc.,
a regional home health care company. Mr. Windley is President
of the Georgia Association for Home Care and Vice Chairman
of the Georgia Chapter of the March of Dimes. He is also Chair
Emeritus of Fragile Kids Foundation, Inc., having started the
charity in 1992. Mr. Windley is 58 years old.
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 six 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. Mr. Levine, 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 2005, 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 2005 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.
8
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 the independent registered public accounting
firm, subject to shareholder ratification, to audit Gentiva's
consolidated financial statements;
o receiving and acting on reports and comments from Gentiva's
independent registered public accounting firm and approving the firm's
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 registered public accounting firm 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
registered public accounting firm; and
o reporting to the Board of Directors a summary of its findings and
recommendations.
Mr. Ganzi serves as the Chairman, and Messrs. Troubh and Weston serve as
members, of the Audit Committee. The Committee met six times in 2005. 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 that term is defined by rules and regulations of the
Securities and Exchange Commission.
Clinical Quality Committee
The principal functions and responsibilities of the Clinical Quality
Committee include:
o providing oversight of the Company's clinical leadership in the
development 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 2005. 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.
9
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 qualified candidates for
election as directors and recommending a slate of nominees for
election by the shareholders at the Annual Meeting; and
o reporting to the Board of Directors a summary of its findings and
recommendations.
Mr. Levine serves as Chairman, and Messrs. Troubh and Weston serve as
members, of the Compensation, Corporate Governance and Nominating Committee,
which met four times in 2005. The Board of Directors has adopted a 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 2007 Annual Meeting of Shareholders must be received
in writing by the Company at the above address on or after October 11, 2006 and
on or before December 11, 2006. 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. Dr. Quelch, who is a nominee for election as a director in
Class III at this Annual Meeting, was recommended as a nominee by a
non-management director.
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
10
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.
Once the Compensation, Corporate Governance and Nominating Committee has
evaluated the director candidates as described above, it recommends the slate of
nominees to the independent directors for their approval. The Board of Directors
then recommends the slate approved by the independent directors to the
shareholders for their approval at the next annual meeting of shareholders.
Pursuant to the Company's 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. As noted above, on February 28, 2006, in connection with the Company's
acquisition of Healthfield, Mr. Windley was elected by the Board of Directors to
fill the vacancy that existed in Class II and appointed as Vice Chairman of the
Board.
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 May 6, 2005, 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 $40,000
credited quarterly to the 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 $10,000 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
$15,000 annually. The Lead Director of the Board receives an additional $15,000
annually. Non-employee directors also receive $2,500 for each Board meeting they
attend ($750 if attendance is by telephone) and receive $2,500 for each
committee meeting they attend ($750 if attendance is by telephone).
Prior to May 6, 2005, each non-employee member of the Board of Directors
received an annual retainer fee of $25,000 payable in cash and, pursuant to the
Company's Stock & Deferred Compensation Plan for Non-Employee Directors,
received an annual deferred stock unit award valued at $30,000 credited
quarterly to the 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 was 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 served as chairperson of a
committee of the Board received $5,000 annually for acting as chairperson,
except that the chairperson of the Audit Committee received $10,000 annually.
The Lead Director of the Board received an additional $10,000 annually.
Non-employee directors also received $1,500 for each Board meeting they attended
($750 if attendance was by telephone) and received $2,000 for each committee
meeting they attended ($750 if attendance was by telephone).
All directors, regardless of whether or not they are employees of the
Company, receive reimbursement for out-of-pocket expenses incurred in connection
with attending meetings of the Board of Directors and its committees.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 2006 (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 March 1, 2006 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 ................................ 170,079 --
Ronald A. Malone .............................. 557,691 2.1%
Mary Morrisey Gabriel ......................... 130,521 --
Stephen B. Paige .............................. 80,995 --
John R. Potapchuk ............................. 276,616 --
Victor F. Ganzi ............................... 68,751 --
Stuart R. Levine .............................. 57,063 --
Mary O'Neil Mundinger ......................... 25,054 --
Stuart Olsten(5) .............................. 225,712 --
John A. Quelch ................................ -- --
Raymond S. Troubh(6) .......................... 176,360 --
Josh S. Weston ................................ 26,744 --
Gail R. Wilensky .............................. 28,218 --
Rodney D. Windley(7) .......................... 1,682,721 6.4
Wells Fargo & Company(8)
420 Montgomery Street
San Francisco, CA 94104 ...................... 1,555,190 5.9
Westfield Capital Management Co. LLC(9)
One Financial Center, 24th Floor
Boston, MA 02111-2690 ........................ 2,214,100 8.4
WS Capital, L.L.C.(10)
300 Crescent Court, Suite 1111
Dallas, TX 75201 ............................. 1,700,000 6.4
All executive officers and directors as a group
(16 persons)(11) ............................. 3,868,196 13.9
- ------------
(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 or 2004 Equity Incentive Plan: Mr.
Creamer -- 164,547; Mr. Malone -- 546,656; Ms. Morrisey Gabriel -- 123,333;
Mr. Paige -- 78,000; Mr. Potapchuk -- 247,603; Mr. Ganzi -- 17,500; Dr.
Mundinger -- 17,500; Mr. Olsten -- 34,345; Mr. Troubh -- 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,
as amended: Mr. Creamer -- 5,032; Mr. Malone -- 11,035; Ms. Morrisey
Gabriel -- 5,395; Mr. Paige -- 2,995; and Mr. Potapchuk -- 8,201.
(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. Ganzi -- 16,118;
Mr. Levine -- 8,060; Dr. Mundinger -- 5,103; Mr. Olsten -- 16,118; Mr.
Troubh -- 13,088; Mr. Weston -- 5,112; Dr. Wilensky -- 5,174; and Mr.
Windley -- 597.
12
(5) 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.
(6) 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 and held in a limited partnership in which Mr. Troubh has an
approximate 45% interest and of which he is the general partner.
(7) In addition to the shares referred to in footnote (4), Mr. Windley's
holdings include 1,404,153 shares owned directly, 119,170 shares owned
indirectly through a grantor retained annuity trust, and 158,801 shares
held by RT Management, LLC with respect to which Mr. Windley shares voting
and investment power with H. Anthony Strange, Gentiva's Executive Vice
President and President, Gentiva Home Health. Mr. Windley is a co-manager
of RT Management, LLC and a 25% owner. Mr. Windley disclaims beneficial
interest of the shares held in RT Management, LLC, except to the extent of
his pecuniary interest therein. The address of Mr. Windley is c/o Gentiva
Health Services, Inc., 3 Huntington Quadrangle, Suite 200S, Melville, New
York 11747.
(8) Based on a Schedule 13G dated February 14, 2006 and filed with the
Securities and Exchange Commission, as of December 31, 2005 Wells Fargo &
Co. reported beneficial ownership of 1,555,190 of such shares, with sole
voting power as to 1,539,670 of such shares, sole dispositive power as to
1,537,830 of such shares and shared dispositive power as to 162,000 of such
shares. In the Schedule 13G, Wells Capital Management Incorporated reported
that it held sole voting power as to 313,933 of such shares and sole
dispositive power as to 1,483,677 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. In addition, in
the Schedule 13G, Wells Fargo Funds Management, LLC reported that it held
sole voting power as to 1,208,924 of such shares and sole dispositive power
as to 54,153 of such shares. Wells Fargo & Co. and its subsidiaries
disclaim beneficial ownership of the shares.
(9) Based on a Schedule 13G dated February 13, 2006 and filed with the
Securities and Exchange Commission, as of December 31, 2005, Westfield
Capital Management Co. LLC reported beneficial ownership of 2,214,100 of
such shares, with sole voting power as to 1,633,400 of such shares and sole
dispositive power as to 2,214,100 of such shares. The Schedule 13G
indicates that the shares are owned of record by certain mutual funds,
institutional accounts and/or separate accounts managed by Westfield
Capital Management Co. LLC. Westfield Capital Management Co. LLC disclaims
any beneficial ownership in such shares.
(10) Based on a Schedule 13G/A (Amendment No. 1) dated February 14, 2006 and
filed with the Securities and Exchange Commission, as of December 31, 2005,
WS Capital, L.L.C. reported beneficial ownership of 1,434,400 of such
shares, with sole voting power and sole dispositive power as to all of such
shares. In the Schedule 13G/A, WS Capital Management, L.P. reported
beneficial ownership of 1,434,400 of such shares, with sole voting power
and sole dispositive power as to all of such shares; WSV Management, L.L.C.
reported beneficial ownership of 265,600 of such shares, with sole voting
power and sole dispositive power as to all of such shares; and WS Ventures
Management, L.P. reported beneficial ownership of 265,600 of such shares,
with sole voting power and sole dispositive power as to all of such shares.
In addition, in the Schedule 13G/A, Reid S. Walker and G. Stacy Smith, who
are both principals of WS Capital, L.L.C. and WSV Management, L.L.C.,
reported that they each hold sole voting power and sole dispositive power
as to 1,700,000 of such shares. Patricia P. Walker, who is a principal of
WSV Management, reported that she held sole voting power and sole
dispositive power as to 265,660 of such shares. The Schedule 13G/A
indicates that each of the reporting persons expressly disclaims membership
in a "group" under Section 13(d) of the Securities Exchange Act of 1934.
(11) Includes 2,500,613 shares owned directly and indirectly by current
executive officers and directors, 1,298,213 shares that may be acquired
upon exercise of presently exercisable stock options and 69,370 shares
representing shares deferred as share units.
13
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 1,
2006 (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
Compensation
------------
Annual Compensation Awards
------------------------------------- ------------
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) ($)(1) Options (#) Compensation ($)
- --------------------------- ---- ---------- --------- ------------ ------------ ----------------
Ronald A. Malone ............... 2005 $574,039 $400,000 $ 5,883 75,000 $66,513 (2)
Chief Executive Officer and ... 2004 542,692 600,000 5,753 100,000 79,985
Chairman of the Board ......... 2003 471,539 500,000 6,668 70,000 71,930
John R. Potapchuk .............. 2005 289,712 130,000 2,018 45,000 26,762(3)
Executive Vice President, Chief 2004 285,077 200,000 3,224 60,000 30,776
Financial Officer and Treasurer 2003 264,308 175,000 3,063 40,000 31,123
Robert Creamer ................. 2005 274,711 100,000 2,893 40,000 22,468(4)
Senior Vice President, ........ 2004 269,000 150,000 2,629 50,000 25,157
CareCentrix ................... 2003 239,308 150,000 -- 36,000 28,892
Mary Morrisey Gabriel .......... 2005 274,711 125,000 -- 40,000 18,635(5)
Senior Vice President and ..... 2004 269,500 170,000 -- 50,000 25,290
Chief Marketing Officer ....... 2003 248,846 150,000 -- 50,000 21,285
Stephen B. Paige ............... 2005 259,615 120,000 11,395 24,000 9,095(6)
Senior Vice President, General 2004 248,731 115,000 1,615 30,000 8,449
Counsel and Secretary(7) ...... 2003 97,308 46,000 -- 40,000 310
- ------------
(1) Gross-up of taxable portion of income for automobile expenses.
(2) For 2005, reflects profit sharing and matching contributions by Gentiva
pursuant to Gentiva's Nonqualified Retirement and Savings Plan.
(3) For 2005, reflects premiums paid by Gentiva for Mr. Potapchuk for group
term life insurance of $624 and profit sharing and matching contributions
by Gentiva pursuant to Gentiva's Nonqualified Retirement and Savings Plan
of $26,138.
(4) For 2005, reflects premiums paid by Gentiva for Mr. Creamer for group term
life insurance of $165 and profit sharing and matching contributions by
Gentiva pursuant to Gentiva's Nonqualified Retirement and Savings Plan of
$22,303.
(5) For 2005, reflects premiums paid by Gentiva for Ms. Morrisey Gabriel for
group term life insurance of $252 and profit sharing and matching
contributions by Gentiva pursuant to Gentiva's Nonqualified Retirement and
Savings Plan of $18,383.
(6) For 2005, reflects premiums paid by Gentiva for Mr. Paige for group term
life insurance of $986 and profit sharing contributions by Gentiva pursuant
to Gentiva's Nonqualified Retirement and Savings Plan of $8,109.
(7) Amounts shown in 2003 for Mr. Paige are for a partial year due to his
commencement of employment with the Company on July 14, 2003.
14
Stock Options
Stock Option Grants in Last Fiscal Year
Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------------ Annual Rates of
Number of Percent of Total Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term(1)
Options Employees in Price Expiration -----------------------
Name Granted (#)(2) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- -------------- ------------ -------- ---------- -------- ----------
Ronald A. Malone ................ 75,000 7.9% $16.38 1/3/2015 $772,597 $1,957,913
John R. Potapchuk ............... 45,000 4.7 16.38 1/3/2015 463,558 1,174,748
Robert Creamer .................. 40,000 4.2 16.38 1/3/2015 412,052 1,044,220
Mary Morrisey Gabriel ........... 40,000 4.2 16.38 1/3/2015 412,052 1,044,220
Stephen B. Paige ................ 24,000 2.5 16.38 1/3/2015 247,231 626,532
- ------------
(1) The dollar amounts under the indicated columns represent hypothetical gains
assuming exercise at the end of the option term and assuming rates of stock
price appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission. These assumptions are not intended to forecast
future appreciation of Gentiva's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock. The actual
gains, if any, on the stock option exercises will depend on the future
performance of Gentiva's Common Stock, the optionee's continued employment
through applicable vesting periods and the dates on which the options are
exercised and the underlying shares are sold.
(2) The options were granted at an exercise price equal to the fair market
value of Gentiva's Common Stock on the date of the grant. The options have
a ten year term and become exercisable over a four year period as follows:
one-third vesting on each of the first, third and fourth anniversaries of
the date of grant.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
Acquired on Value ------------------------------ ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Ronald A. Malone .............. 22,946 $386,149 572,106 85,500 $4,543,947 $63,000
John R. Potapchuk ............. -- -- 222,603 55,000 1,543,203 60,000
Robert Creamer ................ 15,000 225,916 142,214 49,000 757,662 54,000
Mary Morrisey Gabriel ......... 20,000 173,780 104,999 45,001 394,594 30,006
Stephen B. Paige .............. -- -- 70,000 24,000 260,700 0
- ------------
(1) Based on the difference between the exercise price and the closing price of
a share of Gentiva Common Stock on December 30, 2005, the last trading day
in fiscal 2005.
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
15
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. In addition
to any amounts deferred under any Company deferred compensation or savings
plans, 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. The
deferred amounts generally must be paid out in a lump sum following termination
of Mr. Malone's employment. 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 before expiration of the agreement 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 Employment 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 a lump sum equal to 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. If the Company gives notice that
the Employment Agreement will not be renewed at the end of the initial term or
any one year extension, Mr. Malone will receive a pro rata portion of the target
bonus payment for the year of termination. 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
within 90 days following 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 ("CIC
Agreement") with the Company, effective March 22, 2004, which replaced his prior
change in control agreement. His CIC 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 CIC 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
CIC Agreement) and (ii) the termination is within three years after a change in
control. In addition, Mr. Malone will receive the benefit of his CIC 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 CIC Agreement generally will
include a cash payment equal to two and one-half times his base salary and
target bonus (for the year in which employment is terminated or the year of the
change in control, whichever is higher); continued benefits for the two years
following the termination or until such earlier date that he obtains comparable
benefits from another employer; immediate vesting of any stock options,
restricted stock and other equity-based compensation awards held by him (the
options would remain exercisable for three years following the termination or a
longer period if provided in the option plan, but not beyond the original full
term); and full vesting of retirement and deferred compensation benefits. Under
Mr. Malone's CIC Agreement, if any payment to him (under his CIC Agreement or
otherwise) is subject to the excise tax imposed by Section 4999 of the
16
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 CIC 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 CIC Agreement provides that if Mr. Malone substantially
prevails in a dispute with the Company relating to the CIC Agreement, the
Company will pay his legal fees that 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.
Effective May 6, 2005, the Company amended and restated its change in
control agreements that would have expired in June 2005 with John R. Potapchuk,
Robert Creamer, Mary Morrisey Gabriel and Stephen B. Paige. The new change in
control agreements are effective until May 6, 2008, and generally provide
benefits in the event of a change in control of the Company if (i) the
employee's employment is terminated by the Company not for cause or by the
employee for good reason (as defined in the agreement) and (ii) the termination
is within three years after a change in control. In addition, these executive
officers will receive the benefit of their agreements if they are terminated by
the Company without cause within one year before a change in control, if their
terminations arise in connection with the change in control.
The benefits conferred under these change in control agreements generally
will include a cash payment equal to two times the employee's base salary and
target bonus (for the year when employment is terminated or the year of the
change in control, whichever is higher); continued benefits for the two years
following the termination or until such earlier date that the employee obtains
comparable benefits from another employer; immediate vesting of any stock
options held by the employee and any restricted shares, restricted share units
or other equity-based awards held by the employee (the options would remain
exercisable for one year following the termination or a longer period if
provided 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 CIC 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 that 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: John R. Potapchuk, Robert
Creamer, Mary Morrisey Gabriel and Stephen B. Paige. These severance agreements
generally provide that, in the event the officer is terminated other than for
cause, or terminates his or her employment within 60 days after having 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 and Mr. Paige) 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.
17
The employee's benefits under all retirement and deferred compensation plans
also become fully vested. 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, and agree to sign a general release
at the time of termination.
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 and Company financial performance. 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 1, 2006:
(c)
Number of securities
(a) remaining available for
Number of securities (b) 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 3,635,680 $ 10.38 4,377,540
security holders
Equity compensation
plans not approved -- -- --
by security holders --------- ---------
Total 3,635,680 $ 10.38 4,377,540
- ------------
* Consists of securities to be issued upon exercise of outstanding stock
options under Gentiva's 1999 Stock Incentive Plan and 2004 Equity Incentive
Plan (3,568,288) and outstanding share units under Gentiva's Stock & Deferred
Compensation Plan for Non-Employee Directors (67,392).
** Consists of securities available for future issuance under Gentiva's 2004
Equity Incentive Plan (3,182,457), Employee Stock Purchase Plan, as amended
(1,147,770) and Stock & Deferred Compensation Plan for Non-Employee Directors
(47,313). Under the Stock & Deferred Compensation Plan for Non-Employee
Directors, from January 3, 2005 to May 6, 2005, non-employee directors were
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 Nasdaq for the ten trading days preceding the quarterly calculation
dates, generally March 1, June 1, September 1 and December 1. Under the Stock
& Deferred Compensation Plan for Non-Employee Directors, effective May 6,
2005, non-employee directors are credited quarterly with share units, the
number of which is calculated by dividing $10,000 by the average closing
price of a share of Gentiva Common Stock on Nasdaq for 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.
18
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, as amended. 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 2005 included increased revenue, increased net income
per share, margin improvement and reduced 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 2005 vest
one-third at the end of year one and another one-third at the end of each of
years three and four. Approximately 170 employees participate. Also, eligible
executive officers and other employees may purchase shares of Common Stock under
the Company's Employee Stock Purchase Plan, as amended.
Compensation of Chief Executive Officer
In March 2004, the Company entered into an 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 employment agreement, as
described in more detail above under "Employment Agreements, Change in Control
Agreements and Termination of Employment Agreements," Mr. Malone is entitled to
receive a base salary of not less than
19
$525,000. For 2005, the Committee set Mr. Malone's base salary at $575,000.
Effective March 1, 2006, the Committee has set Mr. Malone's base salary at
$625,000.
In fiscal 2005, as in previous years, Mr. Malone participated in the
Company's Executive Officers Bonus Plan, as amended. 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 reviewed the overall financial performance of the
Company and concluded that the Company did not entirely meet its 2005 goals and
objectives. Consistent with its compensation philosophy, the Committee awarded
Mr. Malone a $400,000 annual bonus payment under the plan for fiscal 2005, which
represented approximately 70% of his 2005 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 75,000
stock options in fiscal 2005 as long-term incentives vesting one-third at the
end of year one and another one-third at the end of each of years three and
four, with an exercise price of $16.38.
Discretionary Compensation in Connection with the Healthfield Acquisition
On February 28, 2006, the Company completed the acquisition of The
Healthfield Group, Inc. ("Healthfield"), a leading provider of home healthcare,
hospice and related services, for approximately $454 million in cash and shares
of Gentiva common stock. The transaction accomplished a key strategic objective
of the Company. The Committee recognized Mr. Malone's leadership and direction
in connection with the Healthfield acquisition, and awarded him a discretionary
bonus of $200,000 in March 2006. The Committee also recognized the leadership
and efforts of Named Officers John Potapchuk and Stephen Paige and awarded them
discretionary bonuses of $130,000 and $110,000, respectively, in March 2006.
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
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 28, 2006, the Company completed the acquisition of Healthfield, a
leading provider of home healthcare, hospice and related services, for
approximately $454 million in cash and shares of Gentiva common stock. Under the
terms of the Healthfield Merger Agreement dated as of January 4, 2006 (the
"Merger Agreement"), Mr. Windley, the former Chairman and Chief Executive
Officer of Healthfield, received 1,404,153 shares of Gentiva common stock and
the Rodney D. Windley 2005 Grantor Retained Annuity Trust received 119,170
shares of Gentiva common stock. H. Anthony Strange, the former President and
Chief Operating Officer of Healthfield, also received 168,797 shares of Gentiva
common stock. In addition, RT Management, LLC ("RT Management"), of which Mr.
Strange is a manager and 75% owner and Mr. Windley is a manager and 25% owner,
received 158,801 shares of Gentiva common stock. Mr. Windley, the Rodney D.
Windley 2005 Grantor Retained Annuity Trust, Mr. Strange and RT Management also
received approximately $80.1 million, $6.8 million, $8.2 million and $9.1
million, respectively, in cash consideration pursuant to the terms of the Merger
Agreement.
On February 27, 2006, the Board of Directors of the Company elected Mr.
Windley as a director in Class II and Vice Chairman of the Board of Directors,
effective February 28, 2006. Mr. Windley was elected as a director in accordance
with the Merger Agreement, which provided for his election to the Board as a
Class II director and as Vice Chairman of the Board upon the consummation of the
merger. In addition, the Board appointed Mr. Strange as Executive Vice President
of the Company and President of Gentiva Home Health effective February 28, 2006.
Pursuant to the Merger Agreement, Mr. Windley was appointed by the former
stockholders of Healthfield to serve as the "Stockholder Representative." In
that capacity, Mr. Windley is responsible for representing the interests of the
former Healthfield stockholders with respect to any purchase price adjustments
or indemnity claims arising in connection with the merger. In addition, Mr.
Windley is jointly and severally liable to the Company for breaches of certain
of the representations, warranties and covenants made by Healthfield in the
Merger Agreement.
On February 28, 2006, at the closing of the Healthfield acquisition, the
Company entered into a Registration Rights Agreement with certain former
stockholders of Healthfield, including Mr. Windley and Mr. Strange (the
"Registration Rights Agreement"). Pursuant to the Registration Rights Agreement,
the Company agreed to file a registration statement with the Securities and
Exchange Commission within 90 days after the date of the Registration Rights
Agreement, covering the resale of the 3,194,197 shares of Gentiva common stock
issued to the former stockholders of Healthfield pursuant to the merger. The
Company agreed to use its commercially reasonable efforts to cause the
registration statement to be declared effective under the Securities Act of 1933
no later than nine months after the date of the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, former stockholders of
Healthfield were also granted certain "piggyback" registration rights, entitling
them to join in other registration statements filed by the Company under
specified circumstances.
Prior to the completion of the merger, R.T. Ventures, LLC ("RT Ventures"), an
entity in which Mr. Windley and Mr. Strange are co-managers, and of which each
has a 50% beneficial interest, was a party to the Aircraft Dry Lease Agreement,
dated as of December 23, 2005, with Healthfield, as amended on January 1, 2006
(the "Aircraft Lease"). The Aircraft Lease provides for the use by Healthfield
of an aircraft owned by RT Ventures. The Company may continue to rent the
aircraft from RT Ventures, and these rentals will be on the terms and conditions
contained in the Aircraft Lease. The Company is not under any obligation to rent
the aircraft, and the Aircraft Lease may be terminated by the Company with
thirty days' notice.
21
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph for the period commencing on December 31,
2000 and ending January 1, 2006 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 December 31, 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. Hemscott, Inc. furnished the data
for the graph. The closing sale price of the Company's Common Stock on Nasdaq
was $16.43 per share on March 16, 2006.
[REPRESENTATION OF LINE GRAPH]
12/31/00 12/30/01 12/29/02 12/28/03 1/2/05 1/1/06
Gentiva Health Services, Inc. $100 $164.49 $195.94 $304.36 $392.35 $345.89
Nasdaq Market Index 100 79.71 55.60 83.60 90.63 92.62
Peer Group Index 100 91.41 78.50 102.50 127.02 101.88
22
PROPOSAL 3
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP as the independent registered public accounting firm
of the Company for the 2006 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 AND APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 2005 and
2004 were as follows:
Fee Category 2005 2004
- ------------ ----------- -----------
Audit Fees .................. $ 959,900 $1,094,300
Audit-Related Fees .......... 59,000 141,600
Tax Fees .................... 98,100 116,300
All Other Fees .............. -- 110,300
---------- ----------
Total ....................... $1,117,000 $1,462,500
========== ==========
Audit Fees related to the audit of the Company's annual consolidated
financial statements, review of financial statements included in the Company's
quarterly reports on Form 10-Q and attestation services related to
Sarbanes-Oxley Act Section 404 certification. Audit-Related Fees in 2005 related
to review of a Securities and Exchange Commission comment letter, review of a
Form S-8 registration statement related to Company's ESPP and a variety of
reporting matters. Audit-Related Fees in 2004 related to Section 404 advisory
services, review of a Form S-8 registration statement related to the Company's
2004 Equity Incentive Plan and deferred tax consultation. Tax Fees related to
tax planning and compliance services and in 2004 also related to 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 registered public
accounting firm. 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 registered public accounting firm
in order to assure that the provision of such services does not impair the
firm's independence. The Audit Committee pre-approved all fiscal 2005 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 registered public accounting firm and management
report periodically to the Audit Committee regarding the extent of services
provided by the independent registered public accounting firm 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 pursuant to a resolution adopted by the unanimous approval of
the
23
Audit Committee, provided that the member reports any pre-approved services at
the next regularly scheduled Audit Committee meeting.
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 to be the independent registered
public accounting firm 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 PricewaterhouseCoopers LLP and the Company that might bear on the firm's
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 1,
2006 for filing with the Securities and Exchange Commission.
Audit Committee:
Victor F. Ganzi, Chairman
Raymond S. Troubh
Josh S. Weston
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules thereunder require the Company's directors and
officers and persons who beneficially own more than ten percent of its
outstanding Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company and to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on review of copies of reports furnished to the Company and upon
representations made by such persons, the Company believes that during the
fiscal year ended January 1, 2006, all persons subject to the Section 16(a)
filing requirements filed the required reports on a timely basis.
24
SHAREHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy for its 2007 Annual Meeting must be received in
writing by December 11, 2006 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 2007 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 12, 2007 and
on or before February 11, 2007.
OTHER MATTERS
A COPY OF THE ANNUAL REPORT ON FORM 10-K OF THE COMPANY FOR ITS LAST FISCAL
YEAR IS AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST TO STEPHEN
B. PAIGE, 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/ Stephen B. Paige
Stephen B. Paige
Senior Vice President, General Counsel
and Secretary
Dated: April 10, 2006
Melville, New York
25
APPENDIX A
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF GENTIVA HEALTH SERVICES, INC.
The proposed amendment to Article VII of the Amended and Restated Certificate of
Incorporation of Gentiva Health Services, Inc. are shown below. Note: The text
of the proposed amendment is marked to reflect the proposed changes. Deletions
are marked with brackets and additions are underlined.
ARTICLE VII
BOARD OF DIRECTORS
Section 7.1. Powers of the Board of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, which shall be constituted as provided in this Article and as
provided by law.
Section 7.2. Number, Election and Term of Office. Except in respect of the
election of additional directors as otherwise provided for by or pursuant to the
provisions of the certificate of incorporation of the Corporation (including any
Preferred Stock Designation) pertaining to any class or series of stock having a
preference over the Common Stock as to dividends or distributions upon
liquidation, the number of the directors of the Corporation shall be fixed from
time to time (and may be changed) exclusively pursuant to a resolution adopted
by a majority of the directors then in office, but shall not be more or less
than that set forth in the Bylaws; provided, however, that no reduction in the
number of directors shall end the term of office of any incumbent director prior
to the date such director's term of office would otherwise end. The directors,
other than those who may be elected by the holders of any class or series of
stock having a preference over the Common Stock as to dividends or distributions
upon liquidation, shall be [classified, with respect to the time for which they
severally hold office, into three classes designated] elected for a term ending
-------------------------
at the Corporation's annual meeting of stockholders next following the
- ----------------------------------------------------------------------
Corporation's annual meeting of stockholders at which the directors were
- ------------------------------------------------------------------------
elected, except that directors elected at or prior to the Corporation's first
- -----------------------------------------------------------------------------
annual meeting of stockholders after the end of the Corporation's fiscal year
- -----------------------------------------------------------------------------
ended January 1, 2006 shall remain divided into Class I, Class II and Class III,
- -----------------------------------------------
[as nearly equal in number as possible. Class I directors shall initially be
elected for a term expiring at the first annual meeting of stockholders. Class
II directors shall initially be elected for a term expiring at the second
annual meeting of stockholders.] respectively, with the Board of Directors being
-----------------------------------------------
declassified by each separate class in its chronological order of election, such
- --------------------------------------------------------------------------------
that Class III directors shall [initially be elected for a term expiring at the
- ----
third annual meeting of stockholders.] be elected at the annual meeting of
-----------------------------------
stockholders to be held in 2006 for a one year term expiring at the annual
- --------------------------------------------------------------------------
meeting of stockholders to be held in 2007; both Class I and Class III shall be
- -------------------------------------------------------------------------------
elected at the annual meeting of stockholders to be held in 2007 to serve a one
- -------------------------------------------------------------------------------
year term expiring at the annual meeting of stockholders to be held in 2008; and
- --------------------------------------------------------------------------------
each of Class I, Class II and Class III shall be elected at the annual meeting
- ------------------------------------------------------------------------------
of stockholders to be held in 2008 to serve a one year term expiring at the
- ---------------------------------------------------------------------------
annual meeting of stockholders to be held in 2009. Each director shall hold
- --------------------------------------------------
office until his or her successor is duly elected and qualified. Following the
-------------
election of directors at the annual meeting of stockholders to be held in 2008,
- -------------------------------------------------------------------------------
the foregoing classification of the Board of Directors shall cease. At each
- --------------------------------------------------------------------
succeeding annual meeting of stockholders, all directors [elected to succeed
---
those directors whose terms then expire] shall be elected for a term of office
to expire at the [third succeeding] next following annual meeting
--------------
A-1
of stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified.
Section 7.3. Written Ballot Not Required. Unless and except to the extent that
the Bylaws of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
Section 7.4. Newly Created Directorships and Vacancies. Except for the election
of one or more directors as provided for by or pursuant to the provisions of the
certificate of incorporation of the Corporation (including any Preferred Stock
Designation) pertaining to any class or series of stock having a preference over
the Common Stock as to dividends or distributions upon liquidation and except as
the stockholders shall otherwise be entitled to elect directors as provided by
law, newly created directorships resulting from any increase in the number of
directors constituting the Board of Directors and any vacancies on the Board of
Directors occurring for any reason shall be filled only by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors, and not by the stockholders. Any director
elected to fill a vacancy on the Board of Directors shall hold office for [the
remainder of the full term of the class of directors in which the new
directorship was created or in which the vacancy occurred] a term ending at the
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next annual meeting of stockholders after the director's election and until such
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director's successor shall have been duly elected and qualified.
Section 7.5 Removal. Subject to the rights of any class of Preferred Stock or
series thereof to elect and remove additional directors under specified
circumstances, any director may be removed from office only for cause by the
affirmative vote of the holders of at least a majority of the voting power of
all shares of capital stock of the Corporation entitled generally to vote on the
election of directors of the Corporation ("Voting Stock") then outstanding,
voting together as a single class.
A-2
GENTIVA
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Annual Meeting Proxy Card
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Proxy Solicited on Behalf of the Board of Directors for the Annual Meeting of
Shareholders, May 12, 2006
The undersigned hereby appoints Ronald A. Malone, Stephen B. Paige and John R.
Potapchuk, and each of them, as proxies, with full power of substitution, to
represent and to vote, as designated herein, all shares of Common Stock of
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 12, 2006 at 9:30 a.m., and at all adjournments
thereof, which the undersigned could vote, if personally 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:
You are encouraged to specify your choices by marking the appropriate boxes
below but you need not mark any boxes if you wish to vote in accordance with the
Board of Directors' recommendation.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE AMENDMENT TO THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, FOR THE ELECTION OF ALL NOMINEES AND FOR
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
THE PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
A Proposals B Options
The Board of Directors recommends a vote FOR the following:
Mark this box with an X if you plan to attend the [ ]
Annual Meeting.
1. Amendment to the Company's Amended For Against Abstain
and Restated Certificate of [ ] [ ] [ ]
Incorporation to declassify the Board of
Directors.
2. Election of Directors for a term to
expire in 2009, or 2007 if Proposal 1 is
adopted: Nominees:
For Withhold For Withhold Please mark this box with an X if your address [ ]
01 - Stuart R. Levine [ ] [ ] 02 Mary O'Neil [ ] [ ] has changed and print the new address below
Mundinger
______________________________________________
For Withhold For Withhold
03 - Stuart Olsten [ ] [ ] 04 - John A. [ ] [ ] ______________________________________________
Quelch
______________________________________________
3. Ratification and approval of For Against Abstain
appointment of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as independent registered public
accounting firm.
C Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed.
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 authorized officers should sign for
corporations. PLEASE SIGN AND DATE HERE AND RETURN PROMPTLY.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
__________________________________________________ __________________________________________________ _____________________