Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 16. Related Party Transactions

On October 18, 2013, the Company completed the acquisition of Harden Healthcare Holdings, Inc., a provider of home health, hospice and community care services primarily in the southwestern United States, for approximately $365.0 million in cash, $53.8 million in shares of Gentiva's common stock and additional contingent consideration of $9.5 million, recorded at estimated fair value of approximately $8.1 million. Under the terms of the related Agreement and Plan of Merger dated as of September 18, 2013 (“Merger Agreement”), R. Steven Hicks, one of the Harden selling stockholders and one of the Company's directors, received 481,288 shares of Gentiva's common stock. In addition, five trusts, of which Mr. Hicks was trustee, received an aggregate of 484,715 shares of Gentiva's common stock, and two entities, of which one Mr. Hicks was the managing member and of which the other Mr. Hicks was managing partner of its general partner, received an aggregate of 1,955,905 shares of Gentiva's common stock. Mr. Hicks, the five trusts (in the aggregate) and the two entities (in the aggregate) also received approximately $0.89 million, $0.89 million and $3.6 million, respectively, in cash consideration pursuant to the terms of the Merger Agreement.

Pursuant to the Merger Agreement, Mr. Hicks serves as “Stockholder Representative” of the former Harden securityholders who are signatory to the Merger Agreement. In that capacity, Mr. Hicks is responsible for representing the interests of the former securityholders under the Merger Agreement, including in respect of any indemnity claims that may arise.

In connection with the Company's acquisition of Harden Healthcare Holdings, effective October 18, 2013, the Company entered into a Stockholders’ Agreement among the Harden sellers and R. Steven Hicks, one of the Company's directors, pursuant to which the Company's Board of Directors agreed to appoint Mr. Hicks to serve on the Board of Directors as its Vice Chairman and to nominate Mr. Hicks for election at the Annual Meeting. Pursuant to the Stockholders’ Agreement, the Company also (i) agreed to file, not later than 30 days following the closing date, a shelf registration statement on Form S-3 registering the resale of shares of Gentiva's common stock issued to the Harden sellers in connection with the acquisition and (ii) granted the Harden sellers certain piggyback registration rights, subject to customary cutback provisions. In November 2013, the Company filed the shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission in December 2013.

On October 18, 2013, the Company also entered into a five-year Consulting Agreement with Capstar Partners, LLC (“Capstar”), a Texas limited partnership of which Mr. Hicks has been Chairman since 2000, pursuant to which Capstar will provide the Company with certain transitional, strategic or commercial matters, including assistance with the development and maintenance of relationships with key customers and third party payors. Pursuant to the Consulting Agreement, the Company has agreed to pay Capstar, for each of five calendar years commencing January 1, 2014, an amount equal to $1.0 million per year if the reimbursement rate for certain healthcare services in the State of Texas exceeds a specified base reimbursement rate. If for any reason such reimbursement rate fails to exceed the specified base reimbursement rate, Capstar will not be entitled to any payment under the Consulting Agreement for such year. In addition, on October 18, 2013, the Company entered into an agreement pursuant to which Capstar Investment Partners, L.P., a Texas limited partnership in which Mr. Hicks has an indirect material interest (“Capstar L.P.”), agreed to terminate a certain sublease agreement in connection with the Company's acquisition of Harden. Under the agreement, the Company agreed to pay Capstar L.P., for each of five calendar years commencing January 1, 2014, an amount equal to either (i) $750,000 if the reimbursement rate for certain healthcare services in the State of Texas exceeds the specified base reimbursement rate for such year and (ii) $0 if such reimbursement rate fails to exceed the specified base reimbursement rate for such year. Effective December 31, 2013, Capstar L.P. assigned its right under the sublease termination agreement to Capstar. Although the Company's policies did not require that the Company's Audit Committee pre-approve the transactions as Mr. Hicks was not a director prior to the acquisition of Harden, the transactions were reviewed by the Company's Board of Directors prior to closing.