ODSY Odyssey Healthcare (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) )
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

Odyssey HealthCare, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies: Common Stock, $0.001 par value per share (the “Common Stock”).
	(2)		Aggregate number of securities to which transaction applies: 33,683,913 shares of Common Stock outstanding as of June 4, 2010, 1,499,510 shares of Common Stock underlying restricted stock units as of June 4, 2010, and 1,133,296 shares of Common Stock issuable upon the exercise of options (vested and unvested) with an exercise price less than $27.00 per share as of June 4, 2010.
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			The filing fee was determined by multiplying 0.0000713 by the sum of:
			(i) 33,683,913 shares of Common Stock multiplied by $27.00 per share;
			(ii) 1,499,510 shares of Common Stock underlying restricted stock units multiplied by $27.00 per share; and
			(iii) 1,133,296 shares of Common Stock issuable upon the exercise of options to purchase Common Stock with an exercise price of less than $27.00 per share multiplied by $12.21 in cash consideration for the cancellation of such options (which is the excess of the merger consideration of $27.00 over the weighted average exercise price of such options).
	(4)		Proposed maximum aggregate value of transaction: $963,789,965.16
	(5)		Total fee paid: $68,718.22

o		Fee paid previously with preliminary materials:
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

ODYSSEY HEALTHCARE, INC.
717 North Harwood Street, Suite 1500
Dallas, Texas 75201

 

 

Dear Stockholder:

 

We invite you to attend a special meeting of the stockholders of Odyssey HealthCare, Inc. (“Odyssey”) to be held at 717 North Harwood Street, Suite 1600, Dallas, Texas on          , 2010.

 

At the special meeting, you will be asked to consider and vote on a proposal to (i) approve the merger (“Merger”) of GTO Acquisition Corp., a wholly-owned subsidiary of Gentiva Health Services, Inc. (“Gentiva”), with and into Odyssey, resulting in Odyssey becoming a wholly-owned subsidiary of Gentiva, pursuant to the Agreement and Plan of Merger, dated as of May 23, 2010 (as it may be amended from time to time, the “Merger Agreement”), among Odyssey, Gentiva and GTO Acquisition Corp. and (ii) adopt the Merger Agreement. You will also be asked to consider and vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

If the Merger is consummated, holders of shares of Odyssey common stock (other than shares owned by holders properly exercising dissenters’ appraisal rights under Delaware law, shares that are owned by Odyssey as treasury stock and any shares owned by Gentiva, GTO Acquisition Corp. or any other wholly-owned subsidiary of Gentiva) will become entitled to receive $27.00 in cash, without interest and subject to any required withholding of taxes, for each share of Odyssey common stock owned as of immediately prior to the effective time of the Merger. The $27.00 per share cash consideration to be paid in the Merger represents a premium of approximately 40% over the $19.29 closing price of Odyssey common stock on May 21, 2010, which was the last trading day before the signing of the Merger Agreement was publicly announced.

 

Our board of directors has unanimously determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Odyssey and its stockholders. Accordingly, our board of directors unanimously recommends that you vote “FOR” the proposal to approve the Merger and adopt the Merger Agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Your vote is important.   We cannot consummate the Merger unless holders of at least a majority of our outstanding common stock entitled to vote approve the Merger and adopt the Merger Agreement. Failure to submit a properly executed proxy will have the same effect as a vote against approval of the Merger and adoption of the Merger Agreement. Whether or not you plan to be present at the special meeting, we urge you to vote by completing, signing, dating and returning the enclosed proxy card or voting by telephone or via the Internet as promptly as possible. By submitting your proxy now, you will not be precluded from attending the special meeting and voting in person.

 

The enclosed proxy statement provides detailed information about the proposed Merger, the Merger Agreement and the special meeting. We urge you to read the entire document carefully, including the attached annexes.

 

Thank you for your cooperation and continued support.

 

Sincerely,

 

 

Robert A. Lefton

President and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon
the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is
a criminal offense.

 

THIS PROXY STATEMENT IS DATED          , 2010 AND IS FIRST BEING MAILED TO STOCKHOLDERS OF ODYSSEY HEALTHCARE, INC. ON OR ABOUT          , 2010.

 

ODYSSEY HEALTHCARE, INC.

717 North Harwood Street, Suite 1500

Dallas, Texas 75201

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held          , 2010

 

 

Dear Stockholder:

 

Notice is hereby given that a special meeting of the stockholders of Odyssey HealthCare, Inc., a Delaware corporation (“Odyssey”), will be held at 717 North Harwood Street, Suite 1600, Dallas, Texas, at 9 a.m. local time, on          , 2010, for the following purposes:

 

1.  Approval of the Merger and Adoption of the Merger Agreement.   To consider and vote on a proposal to (i) approve the merger (the “Merger”) of GTO Acquisition Corp., a wholly-owned subsidiary of Gentiva Health Services, Inc. (“Gentiva”), with and into Odyssey, resulting in Odyssey becoming a wholly-owned subsidiary of Gentiva, pursuant to the Agreement and Plan of Merger, dated as of May 23, 2010 (as it may be amended from time to time, the “Merger Agreement”), among Odyssey, Gentiva and GTO Acquisition Corp., and (ii) adopt the Merger Agreement.

 

2.  Adjournment of the Special Meeting.   To consider and vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the Merger and adopt the Merger Agreement.

 

Only stockholders of record at the close of business on          , 2010 are entitled to notice of and to vote at the special meeting and at any adjournment or postponement of the special meeting. All stockholders of record are cordially invited to attend the special meeting in person. To ensure your representation at the meeting in case you cannot attend, you are urged to vote your shares by completing, signing, dating and returning the enclosed proxy card as promptly as possible in the postage prepaid envelope enclosed for that purpose or by voting by telephone or via the Internet.

 

Stockholders of Odyssey who do not vote in favor of adopting the Merger Agreement will have the right to seek appraisal of the fair value of their shares of Odyssey common stock if the Merger is consummated, but only if they submit a written demand for appraisal to Odyssey prior to the time the vote is taken on the Merger and the Merger Agreement, continuously hold their shares through the effective date of the Merger and comply with all other applicable requirements of Delaware law. A copy of the applicable statutory provisions is included as Annex C to this proxy statement, and a summary of these provisions can be found under “Dissenters’ Rights of Appraisal” in the accompanying proxy statement.

 

The approval of the Merger and adoption of the Merger Agreement requires the affirmative vote of the holders of at least a majority of the outstanding shares of our common stock entitled to vote thereon. The failure to vote your shares will have the same effect as a vote against the approval of the Merger and adoption of the Merger Agreement. Because the affirmative vote of at least a majority of the shares of our common stock represented in person or by proxy and entitled to vote at the special meeting is required to approve the proposal to adjourn the special meeting, whether or not a quorum is present, the failure to vote your shares will have no effect on the outcome of this proposal.

 

Even if you plan to attend the special meeting in person, please complete, sign, date and return the enclosed proxy card or vote by telephone or via the Internet as instructed in these materials as promptly as possible to ensure that your shares will be represented at the special meeting if you are unable to attend. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote for the proposal to approve the Merger and adopt the Merger Agreement and for the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will effectively be counted as a vote against the approval of the Merger and adoption of the Merger Agreement.

 

By Order of the Board of Directors,

 

 

W. Bradley Bickham

Secretary

 

Dallas, Texas

          , 2010

 

TABLE OF CONTENTS

 

 

The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. See also “Where You Can Find More Information” on page 70. References to “Odyssey,” the “Company” “we,” “our” or “us” in this proxy statement refer to Odyssey HealthCare, Inc. and its subsidiaries unless otherwise indicated by context.

 

Proposals (Page 17)

 

You are being asked to vote on a proposal to adopt the Agreement and Plan of Merger dated as of May 23, 2010 (as it may be amended from time to time, the “Merger Agreement”), by and among Odyssey, Gentiva Health Services, Inc. (“Gentiva”), and GTO Acquisition Corp., a wholly-owned subsidiary of Gentiva (“Merger Sub”) pursuant to which Merger Sub will merge with and into Odyssey (the “Merger”), and to approve the Merger. Odyssey will be the surviving corporation in the Merger (the “Surviving Corporation”) and will become a wholly-owned subsidiary of Gentiva. If there are insufficient votes at the time of the special meeting to approve the proposal to approve the Merger and adopt the Merger Agreement, then Odyssey’s stockholders may be asked to vote on a proposal to adjourn the special meeting, if necessary or appropriate, to permit solicitation of additional proxies.

 

The Parties to the Merger (Page 17)

 

Based in Dallas, Texas, Odyssey is one of the largest providers of hospice care in the United States in terms of both average daily patient census and number of locations. Odyssey seeks to improve the quality of life of terminally ill patients and their families by providing care directed at managing pain and other discomforting symptoms and by addressing the psychosocial and spiritual needs of patients and their families.

 

Gentiva is a leading provider of home health and hospice services, delivering innovative, high quality care to patients across the United States. Gentiva is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; and other therapies and services.

 

Merger Sub is a Delaware corporation that was organized solely for the purpose of completing the proposed Merger. Merger Sub is a wholly-owned subsidiary of Gentiva and has not engaged in any business except for activities incidental to its organization and as contemplated by the Merger Agreement. Upon the consummation of the Merger, Merger Sub will cease to exist and Odyssey will be the Surviving Corporation and will become a direct wholly-owned subsidiary of Gentiva.

 

The Merger (Page 20)

 

In the Merger, each issued and outstanding share of Odyssey common stock (other than shares owned directly or indirectly by Odyssey, Gentiva, Merger Sub, or any other subsidiary of Gentiva, or shares held by stockholders who have properly exercised dissenters’ appraisal rights under Delaware law) will be converted into the right to receive $27.00 in cash, without interest and subject to any applicable withholding of taxes. We expect to consummate the Merger in the third quarter of 2010, assuming that all of the conditions set forth in the Merger Agreement have been satisfied or waived.

 

Effects of the Merger (Page 44)

 

If the Merger is consummated, you will be entitled to receive $27.00 in cash (the “Merger Consideration”), without interest and subject to any applicable withholding of taxes, for each share of Odyssey common stock you own, unless you have properly exercised your appraisal rights under Delaware law with respect to the Merger. As a result of the Merger, Odyssey will cease to be an independent, publicly traded company and

will instead be a wholly-owned subsidiary of Gentiva. You will not own any shares of the Surviving Corporation or Gentiva as a result of the Merger.

 

The Special Meeting (Page 17)

 

Time, Place and Date (Page 17)

 

The special meeting will be held on          , starting at 9 a.m. local time, at 717 North Harwood Street, Suite 1600, Dallas, Texas.

 

Purpose (Page 17)

 

You will be asked to consider and vote on the proposal to approve the Merger and adopt the Merger Agreement and also to consider and vote on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Record Date and Quorum (Page 18)

 

You are entitled to vote at the special meeting if you owned shares of Odyssey common stock at the close of business on          , 2010, which is the record date for the special meeting. You will have one vote for each share of common stock that you owned on the record date. As of the record date there were shares of common stock outstanding and entitled to vote. A majority of the shares of common stock issued, outstanding and represented at the special meeting in person or by a duly-authorized and properly completed proxy constitutes a quorum for the purpose of considering the proposals.

 

Vote Required (Page 18)

 

Consummation of the Merger requires the approval of the Merger and adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of Odyssey common stock entitled to vote thereon. Failure to vote your shares of common stock in person or by proxy or by abstaining will have the same effect as a vote “AGAINST” approval of the Merger and adoption of the Merger Agreement. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of at least a majority of the shares of our common stock represented in person or by proxy and entitled to vote at the special meeting, whether or not a quorum is present. Failing to vote your shares of common stock will not have an effect on the approval of the proposal to adjourn the special meeting. Abstaining from voting your shares of common stock will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting.

 

Ownership of Directors and Executive Officers (Page 65)

 

As of the record date, the directors and executive officers of Odyssey held in the aggregate approximately     % of the shares of Odyssey common stock entitled to vote at the special meeting. In the aggregate, these shares represent approximately     % of the votes necessary to approve the proposal to approve the Merger and adopt the Merger Agreement at the special meeting.

 

Voting and Proxies (Page 18)

 

Any stockholder of record entitled to vote at the special meeting may vote by returning the enclosed proxy card by mail, by submitting a proxy by telephone or via the Internet, or by voting in person by appearing at the special meeting. If your shares of Odyssey common stock are held in “street name” by your broker, you should instruct your broker on how to vote your shares of common stock using the instructions provided by your broker. If you do not provide your broker with instructions, your shares of common stock will not be voted and that will have the same effect as a vote “AGAINST” the approval of the Merger and adoption of the Merger Agreement. The persons named in the accompanying proxy will also have discretionary authority to vote on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

Revocability of Proxy (Page 18)

 

Any stockholder of record who executes and returns a proxy card (or votes by telephone or via the Internet) may revoke the proxy at any time before it is voted at the special meeting in any one of the following ways:

 

 

Treatment of Options, Restricted Stock and other Equity Awards (Page 44)

 

Under the terms of the Merger Agreement, each outstanding option to purchase Odyssey common stock (each, an “Option”), whether vested or unvested, that is outstanding immediately before the effective time of the Merger will be cancelled and converted into the right to receive, from the Surviving Corporation, an amount in cash determined by multiplying (i) the excess, if any, of the Merger Consideration over the applicable exercise price of the Option; by (ii) the number of shares subject to such Option (subject to any applicable withholding of taxes). Options with an exercise price greater than or equal to the Merger Consideration will be cancelled immediately prior to the effective time of the Merger for no consideration.

 

Each right to receive shares of Odyssey common stock based on the satisfaction of service or performance-based conditions or otherwise (each, a “Restricted Stock Unit”), whether vested or unvested, that is outstanding immediately before the effective time of the Merger will be cancelled and converted into the right to receive, from the Surviving Corporation, an amount in cash determined by multiplying (i) the Merger Consideration; by (ii) the number of shares subject to such Restricted Stock Unit (subject to any applicable withholding of taxes).

 

In addition, each share of Odyssey common stock subject to restrictions on transfer and/or forfeiture, including those shares of common stock subject to satisfaction of service or performance-based conditions (“Restricted Stock”) will accelerate and vest in full immediately prior to the effective time of the Merger and will be treated in connection with the Merger as a share of Odyssey common stock, including the right to receive the Merger Consideration (subject to any applicable withholding of taxes).

 

Recommendation of Our Board of Directors (Page 26)

 

Our board of directors unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Odyssey and its stockholders, (ii) approved and authorized to be taken all corporate action required to authorize the execution of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement and (iii) resolved to recommend that the stockholders approve the Merger and adopt the Merger Agreement. Our board of directors unanimously recommends that our stockholders vote “FOR” the proposal to approve the Merger and adopt the Merger Agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

For a discussion of the material factors considered by our board of directors in reaching its conclusions, see “The Merger — The Recommendation of our Board of Directors and the Reasons for the Merger” beginning on page 26.

 

Interests of Odyssey’s Directors and Executive Officers in the Merger (Page 37)

 

In considering the recommendation of our board of directors, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder, and that may present actual or potential conflicts of interest.

 

Opinion of Financial Advisor (Page 30)

 

Goldman, Sachs & Co. (“Goldman Sachs”) delivered its opinion to Odyssey’s board of directors that, as of May 23, 2010 and based upon and subject to the factors and assumptions set forth therein, the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated May 23, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided its opinion for the information and assistance of Odyssey’s board of directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of Odyssey common stock should vote with respect to the Merger or any other matter. Pursuant to an engagement letter between Odyssey and Goldman Sachs, Odyssey has agreed to pay Goldman Sachs a transaction fee of approximately $12 million, the principal portion of which is payable upon consummation of the Merger.

 

Financing of the Merger (Page 36)

 

Gentiva received a commitment letter, dated as of May 23, 2010, from Bank of America, N.A., Banc of America Bridge LLC, Banc of America Securities LLC, Barclays Bank PLC, Barclays Capital, General Electric Capital Corporation, GE Capital Markets, Inc., SunTrust Bank and Sun Trust Robinson Humphrey, Inc. (collectively, the “Lenders”) to provide, subject to the conditions set forth in the commitment letter, debt financing for the purposes of paying the Merger Consideration and other costs and expenses related to the Merger, repaying certain existing indebtedness of Odyssey and Gentiva and their respective subsidiaries, and the financing of the ongoing working capital and other general corporate needs of Gentiva and its subsidiaries after the consummation of the Merger in the following amounts: (i) $925 million in senior secured credit facilities, comprising (a) term loan facilities aggregating $800 million and (b) a revolving credit facility of $125 million; and (ii) $305 million in gross proceeds from the issuance and sale by Gentiva of senior unsecured notes, or, if, and to the extent that, less than $305 million in such senior notes are issued and sold on or prior to the closing date of the Merger, $305 million of senior unsecured loans under a bridge facility.

 

The commitments of the Lenders under the commitment letter are subject to the negotiation, execution and delivery of definitive documentation with respect to the financing, and the satisfaction of certain other conditions. For a discussion of the conditions to the commitments of the Lenders under the commitment letter, see “The Merger — Financing of the Merger” beginning on page 36.

 

The Merger Agreement does not contain any financing-related closing conditions.

 

Regulatory Approvals (Page 42)

 

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules promulgated thereunder by the Federal Trade Commission (“FTC”), the Merger may not be consummated until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice, and the applicable waiting period has expired or been terminated. Odyssey and Gentiva filed notification and report forms on June 4, 2010; however, the applicable waiting period has not yet expired

or been terminated. The Merger may also be subject to review by the governmental authorities of various other jurisdictions under the antitrust laws of those jurisdictions.

 

Material U.S. Federal Income Tax Consequences (Page 41)

 

The exchange of shares of Odyssey common stock for cash pursuant to the Merger Agreement generally will be a taxable transaction for U.S. federal income tax purposes. A U.S. stockholder that exchanges shares of common stock in the Merger generally will recognize gain or loss in an amount equal to the difference between the cash received in the Merger and such stockholder’s adjusted tax basis in the shares of common stock. You should consult your tax advisor for a complete analysis of the effect of the Merger on your U.S. federal, state and local and/or non-U.S. taxes.

 

Conditions to the Merger (Page 54)

 

As more fully described in this proxy statement, the consummation of the Merger depends upon the satisfaction, or where legally permissible, waiver of certain conditions. Each party’s obligation to consummate the Merger is subject to the satisfaction of certain conditions, including the approval of the Merger and adoption of the Merger Agreement by our stockholders, compliance with federal antitrust laws, and the absence of any legal or other prohibition of the Merger.

 

Gentiva’s and Merger Sub’s obligation to consummate the Merger is further conditioned upon the satisfaction of specific conditions, including:

 

 

Our obligation to consummate the Merger is further conditioned upon the satisfaction of certain conditions, including:

 

 

Restrictions on Solicitations of Other Offers (Page 56)

 

Until 11:59 p.m. (Central Time) on June 22, 2010, we are permitted to (i) initiate, solicit or encourage the submission of Acquisition Proposals (as defined in “The Merger Agreement — Restrictions on Solicitations of Other Offers” beginning on Page 56) (including by way of contacting third parties or public disclosure and providing non-public information pursuant to an acceptable confidentiality agreement); provided that we must promptly provide to Gentiva any material non-public information that is provided to any such person and was not previously provided to Gentiva and (ii) enter into, participate in and maintain discussions regarding, and facilitate any inquiries or the making of any proposal that constitutes, or would be reasonably likely to lead to, an Acquisition Proposal.

 

After 11:59 p.m. (Central Time) on June 22, 2010, until the earlier to occur of the effective time of the Merger or the termination of the Merger Agreement, we may not directly or indirectly (i) solicit, initiate, knowingly facilitate or knowingly encourage any inquiries, proposals or offers that constitute, or that would reasonably be expected to lead to, an Acquisition Proposal, (ii) knowingly engage in, continue or otherwise participate in any discussions or negotiations with any person (other than Gentiva), regarding, or furnish to any such person information in connection with or for the purposes of encouraging or facilitating an Acquisition Proposal, or (iii) enter into any letter of intent, agreement, contract, commitment or agreement in principle with respect to an Acquisition Proposal or requiring us to abandon, terminate, or fail to consummate the Merger. In addition, we must cease and terminate any existing solicitation, encouragement, discussion or negotiation with any third party that we have conducted with respect to an Acquisition Proposal and we must request that all non-public information previously provided by us be returned or destroyed in accordance with the applicable acceptable confidentiality agreement.

 

Notwithstanding the restrictions in the preceding paragraph, after 11:59 p.m. (Central Time) on June 22, 2010 and prior to the earlier to occur of the approval of the Merger and adoption of the Merger Agreement by our stockholders or the termination of the Merger Agreement, we may continue to engage in the activities described in the first paragraph of this section “Restrictions on Solicitation of Other Offers” and not request the return or destruction of non-public information from any Excluded Party (as defined in “The Merger Agreement — Restrictions on Solicitations of Other Offers beginning on Page 56).

 

In addition, if at any time after 11:59 p.m. (Central Time) on June 22, 2010 and prior to the approval of the Merger and adoption of the Merger Agreement by our stockholders, (i) we receive a written Acquisition Proposal from a third party, (ii) such Acquisition Proposal did not result from a material breach of our agreement not to solicit such proposals (as described above), (iii) our board of directors determines in good faith (after consultation with Goldman Sachs or another independent financial advisor and outside legal counsel) that such Acquisition Proposal constitutes or would be reasonably likely to lead to a Superior Proposal (as defined in “The Merger Agreement — Restrictions on Solicitation of Other Offers beginning on Page 56), and (iv) our board of directors determines in good faith (after consultation with Goldman Sachs or another independent financial advisor and outside legal counsel) that the failure to furnish information and data with respect to Odyssey to, and to enter into, maintain and participate in discussions or negotiations with, such third party would be reasonably likely to be inconsistent with its fiduciary duties to our stockholders under applicable laws, then we may (a) furnish information and data with respect to Odyssey to, and (b) enter into, maintain and participate in discussions or negotiations with, such third party regarding such Acquisition Proposal or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations; provided that we have agreed not to furnish any non-public information except pursuant to an acceptable confidentiality agreement and will promptly provide to Gentiva any material non-public information concerning us that is provided to such third party and was not previously provided to Gentiva. In addition, (x) we are permitted to take any of the actions described in clauses (a) and (b) of this paragraph with respect to any Excluded Party and (y) may (1) following the receipt of an Acquisition Proposal, contact the third party making such Acquisition Proposal in order to clarify and understand the terms and conditions of such proposal so as to determine whether such Acquisition Proposal constitutes or would be reasonably likely to lead to a Superior Proposal or (2) direct any person to the Merger Agreement.

We have agreed to provide Gentiva with notice of certain events with regard to alternative Acquisition Proposals, including a copy of the applicable written Acquisition Proposal (or if oral, the material terms of such proposal) and the identity of the third party making such Acquisition Proposal.

 

Termination of the Merger Agreement (Page 59)

 

The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the effective time of the Merger:

 

 

 

 

 

 

 

Termination Fees (Page 60)

 

We have agreed to pay Gentiva a termination fee of $24,100,000 if the Merger Agreement is terminated by us in order to accept a Superior Proposal made by an Excluded Party.

 

We have agreed to pay Gentiva a termination fee of $28,900,000 in cash if the Merger Agreement is terminated:

 

 

 

 

 

Only one of the termination fees described above, if any, would be payable by us to Gentiva upon a termination as described above.

Specific Performance (Page 63)

 

Prior to the termination of the Merger Agreement and in addition to any other remedy to which they might be entitled at law or in equity, subject to the limitations set forth in the Merger Agreement, Odyssey and Gentiva are entitled to an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement.

 

Dissenters’ Rights of Appraisal (Page 66)

 

Under Delaware law, any holder of Odyssey common stock who does not vote to adopt the Merger Agreement will have the right to seek appraisal of the fair value of its shares of common stock as determined by the Delaware Court of Chancery if the Merger is consummated, but only if such holder submits a written demand for appraisal to Odyssey prior to the time the vote is taken on the Merger and the Merger Agreement, continuously hold its shares through the effective date of the Merger and complies with all other requirements of Delaware law, which are summarized in this proxy statement. This appraisal amount could be more than, the same as or less than the Merger Consideration. Any holder of common stock intending to exercise such holder’s appraisal rights, among other things, must submit a written demand for an appraisal to us prior to the vote on the approval of the Merger and adoption of the Merger Agreement, must not vote or otherwise submit a proxy in favor of approval of the Merger and adoption of the Merger Agreement, and must continuously hold its shares of common stock from the date it makes the demand through the effective date of the Merger. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. A copy of the relevant section of Delaware law is attached as Annex C to this proxy statement.

 

Litigation (Page 43)

 

On May 27, 2010, a lawsuit captioned Pompano Beach Police & Firefighters’ Retirement System v. Odyssey Healthcare, Inc., et al. , Cause No. CC-10-03561-E, was filed in the County Court at Law No. 5 in Dallas County, Texas against Odyssey, the members of Odyssey’s board of directors, Gentiva, and Merger Sub. The lawsuit, brought by a plaintiff, who is a purported stockholder of Odyssey, both individually and on behalf of a putative class of stockholders, alleges that our board of directors breached its fiduciary duties, and that Odyssey and Gentiva aided and abetted the purported breaches, in connection with the Merger. The petition seeks equitable relief, including, among other things, to enjoin consummation of the Merger, rescission of the Merger Agreement, and an award of all costs of the action, including reasonable attorneys’ fees. Odyssey believes the suit is without merit and intends to vigorously defend it. However, there can be no assurance that Odyssey or the other defendants will be successful in such defense.

 

Market Price of Common Stock (Page 64)

 

The closing sale price of our common stock on The Nasdaq Global Select Market (symbol: ODSY) on May 21, 2010, the last trading day prior to public announcement of the Merger Agreement, was $19.29 per share. The closing sale price of our common stock on The Nasdaq Global Select Market on June 9, 2010, the last trading day prior to the filing of this proxy statement, was $26.55 per share.

 

The following questions and answers address briefly some questions you may have regarding the Merger and the special meeting. These questions and answers may not address all questions that may be important to you as a holder of shares of Odyssey common stock. For important additional information, please refer to the more detailed discussion contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.

 

 

 

 

 

 

 

Georgeson, Inc.
199 Water St.
26th Floor

New York, NY USA 10038-3650

Phone: 1 (212) 440-9800

 

If your brokerage firm, bank, trust or other nominee holds your shares in “street name,” you should also contact your brokerage firm, bank, trust or other nominee for additional information.

 

This proxy statement and the documents to which we refer you in this proxy statement include forward-looking statements based on estimates and assumptions. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings “Summary,” “The Special Meeting,” “The Merger,” “Opinion of Financial Advisor,” “Financial Projections,” “Regulatory Approvals,” and in statements containing words such as “believes,” “estimates,” “anticipates,” “continues,” “predict,” “potential,” “contemplates,” “expects,” “may,” “will,” “likely,” “could,” “should” or “would” or other similar words or phrases. These statements are subject to risks, uncertainties, and other factors, including, among others:

 

 

In addition, we are subject to other risks, uncertainties and factors that are also beyond Odyssey’s ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent Odyssey’s views as of the date of this proxy statement, and it should not be assumed that the statements made herein will remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

Odyssey

 

Odyssey HealthCare, Inc.

717 North Harwood Street, Suite 1500

Dallas, Texas 75201

Telephone: (214) 245-3176

 

Based in Dallas, Texas, Odyssey is one of the largest providers of hospice care in the United States in terms of both average daily patient census and number of locations. Odyssey seeks to improve the quality of life of terminally ill patients and their families by providing care directed at managing pain and other discomforting symptoms and by addressing the psychosocial and spiritual needs of patients and their families.

 

Gentiva

 

Gentiva Health Services, Inc.

3350 Riverwood Parkway, Suite 1400

Atlanta, Georgia 30339

Telephone: (631) 501-7214

 

Gentiva is a leading provider of home health and hospice services, delivering innovative, high quality care to patients across the United States. Gentiva is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; and other therapies and services.

 

Merger Sub

 

GTO Acquisition Corp.

c/o Gentiva Health Services, Inc.

3350 Riverwood Parkway, Suite 1400

Atlanta, Georgia 30339

Telephone: (631) 501-7214

 

Merger Sub is a Delaware corporation that was organized solely for the purpose of completing the proposed Merger. Merger Sub is a wholly-owned subsidiary of Gentiva and has not engaged in any business except for activities incidental to its organization and as contemplated by the Merger Agreement. Upon the consummation of the proposed Merger, Merger Sub will cease to exist and Odyssey will be the surviving corporation in the Merger and will become a direct wholly-owned subsidiary of Gentiva.

 

This proxy statement is being furnished to Odyssey’s stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on          , 2010, starting at 9 a.m. local time, at 717 North Harwood Street, Suite 1600, Dallas, Texas, or at any adjournment or postponement thereof. The purpose of the special meeting is for Odyssey’s stockholders to consider and vote on (i) a proposal to approve the Merger and adopt the Merger Agreement and (ii) a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger and adopt the Merger Agreement. Stockholders holding at least a majority of Odyssey’s outstanding common stock entitled to vote must approve the Merger and adopt the Merger Agreement in order for the Merger to occur. If Odyssey’s stockholders fail to approve the Merger and adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is attached as Annex A to this proxy statement. You are urged to read the Merger Agreement in its entirety.

 

We have fixed the close of business on          , 2010 as the record date for the special meeting, and only holders of record of Odyssey common stock on the record date are entitled to vote at the special meeting. As of the record date, there were           shares of Odyssey common stock issued and outstanding and entitled to vote at the special meeting. Each share of Odyssey common stock entitles its holder to one vote on each matter properly coming before the special meeting.

 

A majority of the shares of Odyssey common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the purpose of considering the proposals. Shares of Odyssey common stock held by stockholders present in person or represented at the special meeting but not voted, including shares of Odyssey common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. If a quorum is not present at the special meeting, the special meeting may be adjourned or postponed to solicit additional proxies.

 

You may vote “FOR” or “AGAINST” , or you may “ABSTAIN” from voting on, the proposal to approve the Merger and adopt the Merger Agreement. Consummation of the Merger requires the approval of the Merger and adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the shares of Odyssey common stock entitled to vote thereon. Therefore, if you abstain or fail to vote, it will have the same effect as a vote “AGAINST” the approval of the Merger and adoption of the Merger Agreement .

 

The approval of the proposal to adjourn the special meeting to a later time, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of at least a majority of the shares of Odyssey common stock represented in person or by proxy and entitled to vote at the special meeting, whether or not a quorum is present. Therefore, if you fail to vote, it will have no effect on the outcome of the proposal to adjourn the special meeting. If you abstain from voting, it will have the, same effect as a vote “AGAINST” the proposal to adjourn the special meeting.

 

If you are a stockholder of record of your shares of Odyssey common stock and you vote by telephone or via the Internet or by returning a signed and dated proxy card by mail that is received by Odyssey before the date of or at the special meeting, your shares will be voted at the special meeting as you indicate. If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the proposal to approve the Merger and adopt the Merger Agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

If your shares of Odyssey common stock are held in “street name,” you will receive instructions from your brokerage firm, bank, trust or other nominee that you must follow in order to have your shares voted. If you have not received such voting instructions or require further information regarding such voting instructions, contact your brokerage firm, bank, trust or other nominee, as the case may be. If you fail to provide your brokerage firm, bank, trust or other nominee with instructions on how to vote your shares of Odyssey common stock, your brokerage firm, bank, trust or other nominee will not be able to vote such shares at the special meeting. Please follow the directions on the voting instruction form sent to you by your brokerage firm, bank, trust or other nominee with this proxy statement.

 

Proxies received by Odyssey at any time before the vote is taken at the special meeting, which have not been revoked or superseded before being voted, will be voted at the special meeting. If you are a stockholder of record of shares of Odyssey common stock, you have the right to change or revoke your proxy at any time, unless noted below, before the vote is taken at the special meeting:

 

 

 

If you are a “street name” holder of Odyssey common stock, you may change your vote by submitting new voting instructions to your brokerage firm, bank, trust or other nominee. You must contact your brokerage firm, bank, trust or other nominee to obtain instructions as to how to change or revoke your proxy.

 

Written notices of revocation and other communications with respect to the revocation of any proxies should be addressed to: Odyssey HealthCare, Inc., 717 North Harwood Street, Suite 1500, Dallas, Texas 75201, Attention: Secretary.

 

Although it is not currently expected, the special meeting may be adjourned or postponed, if necessary or appropriate, for the purpose of soliciting additional proxies. Odyssey’s amended and restated bylaws provide that, if a quorum is not present, any adjournment may be made without notice if announced at the meeting at which the adjournment is taken and if the adjournment is to a date that is not greater than 30 days after the original date fixed for the special meeting and no new record date is fixed for the adjourned meeting. Any signed proxies received by Odyssey before the special meeting in which no voting instructions are provided on such matter will be voted “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. Whether or not a quorum exists, holders of at least a majority of shares of common stock represented in person or by proxy and entitled to vote at the special meeting may adjourn the special meeting.

 

The proposal to adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of at least a majority of the shares of Odyssey common stock represented in person or by proxy and entitled to vote at the special meeting. Therefore, if you fail to vote, it will have no effect on the outcome of the proposal. If you abstain from voting it will have the same effect as a vote against the proposal to adjourn the special meeting.

 

Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Odyssey’s stockholders who have already sent in their proxies to revoke them at any time before the vote is taken at the special meeting as adjourned or postponed.

 

Each stockholder of Odyssey is entitled to appraisal rights under Section 262 of the DGCL, provided that such stockholder satisfies the special criteria and conditions set forth in Section 262 of the DGCL.

 

To properly exercise your dissenters’ appraisal rights, you must submit a written demand for appraisal to Odyssey before the vote is taken on the Merger Agreement, you must not vote in favor of the approval of the Merger and adoption of the Merger Agreement, you must continuously hold your shares through the effective date of the Merger and you must comply with all other requirements of Delaware law. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See “Dissenters’ Rights of Appraisal” beginning on page 66 and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex C to this proxy statement.

 

This proxy solicitation is being made and paid for by Odyssey on behalf of its board of directors. In addition, we have retained Georgeson, Inc. to assist in the solicitation. We will pay Georgeson, Inc. approximately $9,000, plus out-of-pocket expenses for their assistance. Our directors, officers and employees may solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication.

These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of common stock that the brokers and fiduciaries hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses. In addition, we will indemnify Georgeson, Inc. against any losses arising out of its proxy soliciting services on our behalf.

 

If you have questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our proxy solicitor, Georgeson, Inc., by calling (212) 440-9800 (or by mail at 199 Water St., 26th Floor, New York, NY 10038-3650).

 

The reports, opinions or appraisals referenced in this proxy statement will be made available for inspection and copying at Odyssey’s principal executive offices during its regular business hours by any interested stockholder.

 

 

As part of the ongoing oversight and management of Odyssey’s business, our board of directors and senior management regularly review and discuss Odyssey’s performance, risks, long-terms goals, prospects, and overall strategic direction. In the course of these discussions, and in light of economic, regulatory, competitive and other conditions, our board of directors and senior management have from time to time, evaluated the possibility of pursuing strategic alternatives that could complement and strengthen Odyssey’s business and enhance stockholder value. From time to time, Odyssey has also engaged in discussions with senior management of other hospice and home health care companies and other potential strategic partners about the potential benefits of possible business combinations.

 

On October 6, 2009, Robert Lefton, our President and Chief Executive Officer, and Dirk Allison, our Chief Financial Officer, met with the Chief Executive Officer and the Chief Financial Officer of an industry competitor, which is referred to herein as “Company A”, at an investor conference in New York. Company A’s Chief Executive Officer expressed interest in exploring the possibility of a strategic business combination between Odyssey and Company A. In October and early November 2009, Mr. Lefton discussed Company A’s interest in Odyssey with several of our board members, who were supportive of such discussions with Company A.

 

In early November 2009, Mr. Lefton and Company A’s Chief Executive Officer spoke again, and Mr. Lefton suggested a tax-free transaction structure for the possible strategic business combination initially discussed on October 6, 2009. Although Company A’s Chief Executive Officer expressed continued interest in considering a strategic business combination between Odyssey and Company A, he also stated that any such business combination must result in Company A being the surviving entity.

 

On November 12, 2009, our board of directors convened a special meeting to discuss strategic planning, at which members of our senior management and representatives of Goldman Sachs were also present. Mr. Lefton led a discussion of the current economic and regulatory environment and its possible impact on Odyssey’s operations, including the potential impact of the budget neutrality adjustment factor (BNAF) phase out and various health care reform proposals. Mr. Allison reviewed Odyssey’s internal financial projections. At the meeting, representatives of Goldman Sachs discussed its preliminary financial analysis of Odyssey and also discussed their views as to potential strategic alternatives for Odyssey, including a potential business combination with Company A. Our senior management then led a discussion of Odyssey’s 2010 strategic plan, and our board of directors discussed various uses for Odyssey’s growing cash reserves in order to enhance stockholder value.

On December 11, 2009, our board of directors convened a special meeting to further discuss the possibility of a strategic business combination with Company A. Members of our senior management and representatives of Goldman Sachs were also present at the meeting. Mr. Lefton provided background information regarding the opportunity with Company A and an overview of the tax-free transaction structure that previously had been proposed to, but rejected by, Company A’s Chief Executive Officer. Following a discussion of the potential benefits of a business combination with Company A, our board of directors discussed with senior management and representatives of Goldman Sachs possible next steps to determine the feasibility and likelihood of such a transaction. Based on such discussions, our board of directors authorized Mr. Lefton to submit a proposal letter to Company A’s Chief Executive Officer outlining a potential strategic business combination.

 

On December 11, 2009, Odyssey sent a written, preliminary, non-binding proposal letter to Company A proposing a tax-free strategic business combination of the two companies. The proposal letter expressed Odyssey’s willingness to discuss alternative transaction structures.

 

On December 22, 2009, Company A’s Vice President of Finance left a message with Mr. Lefton’s executive assistant acknowledging receipt of Odyssey’s proposal letter, and communicating that Company A’s board of directors would review the proposal, but that Company A would not be able to convene a board meeting until the second week in January due to the holidays.

 

In late January 2010, Company A’s Chief Executive Officer contacted Mr. Lefton and advised that Company A’s board of directors had discussed Odyssey’s proposal and was not interested in pursuing any type of transaction with Odyssey, expressing concern over both Company A’s ability to integrate the two companies effectively and increases in Odyssey’s common stock price since October 2009.

 

In early February 2010, the Chief Development Officer of another health care company, which is referred to herein as “Company B”, contacted Mr. Lefton by telephone to arrange a meeting with Company B’s Chief Executive Officer at a health care conference in February.

 

On February 14, 2010, Mr. Lefton met with Company B’s Chief Executive Officer at such conference. Company B’s Chief Executive Officer expressed Company B’s interest in acquiring Odyssey and Mr. Lefton indicated to Company B’s Chief Executive Officer that if Company B desired to do so it could submit a proposal based on publicly available information.

 

On March 4, 2010, our board of directors convened a regular meeting. Members of our senior management were also present. At the meeting, among other things, our board of directors and senior management discussed the status of discussions with Company A, including that Company A’s Chief Executive Officer had expressed that, after Company A’s board of directors reviewed and considered Odyssey’s written proposal, it no longer had any interest in pursuing a strategic business combination with Odyssey. Based on that information, our board of directors concluded that it was not in the best interest of Odyssey to continue to explore the possibility of a business combination with Company A. Mr. Lefton advised our board of directors of his conversation with Company B’s Chief Executive Officer on February 14, 2010 concerning Company B’s interest in acquiring Odyssey, and that Company B’s Chief Executive Officer had subsequently called him to request a follow-up meeting with Mr. Lefton and other members of senior management. Our board of directors instructed Mr. Lefton to continue preliminary discussions with Company B.

 

On March 12, 2010, Odyssey received a preliminary oral indication of interest from Company B to acquire Odyssey in an all cash transaction for approximately a 30% premium to the then most recent closing price of Odyssey’s common stock.

 

On March 26, 2010, at the invitation of Company B, Messrs. Lefton and Allison had lunch in Dallas with members of Company B’s senior management. Company B’s Chief Executive Officer reiterated Company B’s interest in acquiring Odyssey and also informed Messrs. Lefton and Allison that Company B had already begun discussing acquisition financing with financing sources. Mr. Lefton informed Company B’s Chief Executive Officer that if Company B submitted an acquisition proposal to Odyssey, Mr. Lefton would present the proposal to Odyssey’s board of directors for its consideration.

 

On March 30, 2010, Odyssey received a written preliminary non-binding proposal letter, dated March 29, 2010, from Company B to purchase all of Odyssey’s outstanding capital stock for $22.00 per share in cash.

The proposal letter requested that Odyssey agree to negotiate exclusively with Company B for 45 days and to enter into mutually acceptable exclusivity and confidentiality agreements. The proposal letter also stated that Company B’s expected financing for the proposed transaction would be a combination of existing cash and senior debt, that Company B had met with and engaged in discussions with several senior lenders, and also that Company B and such lenders were highly confident in Company B’s ability to obtain all required financing. On April 1, 2010, Odyssey scheduled a meeting of our board of directors for April 7, 2010 to discuss Company B’s proposal letter.

 

During the first week of April 2010, a representative of Edge Healthcare Partners, LLC (“EHP”), Gentiva’s financial advisor, contacted Mr. Lefton to arrange a meeting in Dallas between Mr. Lefton and Tony Strange, Gentiva’s Chief Executive Officer, and a representative of EHP for the purpose of discussing a potential business combination between Odyssey and Gentiva. At such meeting on April 7, 2010, Mr. Strange expressed Gentiva’s interest in acquiring Odyssey and Mr. Lefton indicated to Mr. Strange that if Gentiva desired to do so it could submit a proposal based on publicly available information.

 

Later in the day on April 7, 2010, our board of directors convened the previously scheduled special meeting, at which members of our senior management and representatives of Goldman Sachs were also present. At the meeting, Mr. Lefton provided background information to our board of directors regarding Company B’s proposal to acquire Odyssey for $22.00 per share in cash and Company B’s request for exclusivity. Mr. Lefton then advised our board of directors of his and Mr. Allison’s discussions with Gentiva and its expressed interest in acquiring Odyssey. Representatives of Goldman Sachs then discussed its preliminary financial analysis of Company B’s proposal. Representatives of Goldman Sachs also discussed with our board of directors their views as to Company B’s potential ability to finance the proposed acquisition and other possible strategic and financial buyers, including their potential ability to finance a transaction with Odyssey. After extensive discussions, our board of directors then instructed Mr. Lefton to advise Company B that the price offered was not sufficient for Odyssey to enter into a confidentiality agreement with Company B or to negotiate a possible transaction with Company B, whether exclusively or otherwise. After the board meeting on April 7, 2010, Mr. Lefton contacted Company B’s Chief Executive Officer by telephone and so advised him as directed by our board of directors.

 

On April 13, 2010, Odyssey received an updated non-binding proposal letter from Company B to purchase Odyssey at an increased offer price of $23.25 per share in cash. In the proposal letter, Company B again requested access to non-public information about Odyssey pursuant to a confidentiality agreement and a 45 day exclusivity period during which Odyssey would negotiate exclusively with Company B. The proposal letter was accompanied by a letter from Company B’s financing source expressing that it was highly confident that it could provide the financing necessary for the transaction.

 

On April 15, 2010, our board of directors convened a special meeting, at which members of our senior management and Goldman Sachs also participated, to discuss the status of the acquisition proposal received by Odyssey from Company B and of Gentiva’s expressed interest in acquiring Odyssey. Mr. Lefton advised our board of directors of the increased offer price received from Company B and also of Company B’s continued request for access to non-public information and exclusive negotiations with Odyssey. Mr. Lefton also noted that there had not been any new developments with Gentiva since the meeting with Gentiva’s representatives on April 7, 2010. After a thorough discussion, our board of directors authorized Odyssey’s senior management to negotiate a confidentiality agreement with Company B but not grant Company B any right to exclusive negotiations at that time. Our board of directors also authorized Odyssey’s management to enter into a confidentiality agreement with Gentiva if Gentiva were to submit a written proposal that at least matched Company B’s proposed acquisition price. After Goldman Sachs left the meeting, our board of directors discussed the formal engagement of Goldman Sachs as its financial advisor and authorized management to enter into an engagement letter with Goldman Sachs.

 

Later in the day on April 15, 2010, Mr. Lefton informed Company B’s Chief Executive Officer that Odyssey would not agree to exclusivity but would enter into a confidentiality agreement with Company B. On the same day, Company B’s Chief Executive Officer delivered a letter to Mr. Lefton that included a

preliminary due diligence information request outlining the items Company B believed to be of high importance in understanding and confirming the value of the proposed transaction.

 

On April 20, 2010, after a series of negotiations, Odyssey and Company B entered into a confidentiality and standstill agreement. Commencing on April 21, 2010, Company B began actively conducting due diligence by meetings and teleconferences with senior management of Odyssey and representatives of Goldman Sachs and, when opened, review of materials posted in Odyssey’s electronic data room.

 

On April 21, 2010, Odyssey entered into an engagement letter with Goldman Sachs pursuant to which Goldman Sachs was formally engaged to act as Odyssey’s financial advisor in connection with a possible sale of Odyssey.

 

On April 22, 2010, Odyssey opened an electronic data room and granted Company B access thereto.

 

On April 23, 2010, following a special meeting of the Gentiva board of directors at which the potential transaction with Odyssey and the related financing were discussed, Gentiva delivered a written preliminary non-binding proposal letter to acquire Odyssey for $25.50 per share in cash. The proposal letter stated that Gentiva’s expected financing for the proposed transaction would be through a combination of existing cash and senior debt arrangements, and also stated that Gentiva had been in contact with several lenders and that such lenders were confident in Gentiva’s ability to obtain all required third-party financing for the proposed transaction. The proposal letter also noted that Gentiva’s board of directors unanimously supported the proposal and requested to enter into a confidentiality agreement and be provided with non-public information for due diligence purposes. With the proposal letter, Gentiva also sent Odyssey a copy of a “highly confident letter” from Banc of America Securities LLC expressing that it was highly confident of its ability to arrange and syndicate fully underwritten credit facilities in connection with the potential transaction. Later in the day on April 23, 2010, Odyssey provided to Gentiva a confidentiality and standstill agreement that, following negotiations, was entered into on or about April 25, 2010. During the period extending from approximately April 25, 2010 through May 23, 2010, Gentiva actively conducted due diligence by meetings and teleconferences with senior management of Odyssey and representatives of Goldman Sachs and K&L Gates LLP, Odyssey’s outside legal counsel (“K&L Gates”), and review of materials posted in Odyssey’s electronic data room.

 

On April 28, 2010, our board of directors convened a special meeting, at which members of our senior management were also present, to review Odyssey’s five-year financial forecast. At the meeting, our board of directors and management also discussed the status of discussions with Gentiva and Company B and the adoption of a change of control severance program for support center and regional leadership employees (excluding Odyssey’s executive officers) in order to reduce the uncertainty to these employees that could result from a change of control transaction. On April 28, 2010, Company B also supplemented its original due diligence request.

 

On April 30, 2010, Gentiva delivered its initial due diligence request to Odyssey, and, on May 5, 2010, Gentiva delivered a prioritized due diligence request to Odyssey.

 

On May 6, 2010, our board of directors held its regular quarterly meeting, at which members of our senior management and representatives of Goldman Sachs, K&L Gates and Richards, Layton & Finger, P.A. (“RLF”), Odyssey’s outside Delaware counsel, were also in attendance. Initially, representatives of K&L Gates and RLF discussed with our board of directors, and responded to questions regarding, its fiduciary duties under Delaware law in relation to the acquisition proposals by Gentiva and Company B. Thereafter, representatives of Goldman Sachs joined the meeting, and our board of directors then received an update from Goldman Sachs and senior management as to the status of discussions with Gentiva and Company B and then considered and discussed the acquisition proposals by Gentiva and Company B with senior management and representatives of K&L Gates and RLF. Our board of directors found it to be in the best interests of Odyssey and its stockholders to continue to explore and evaluate the transactions proposed by Gentiva and Company B.

 

Late in the day on May 6, 2010, Company B’s outside legal counsel distributed to Odyssey an initial draft of a proposed merger agreement structured as a two-step transaction, with a cash tender offer followed by a merger.

On May 10, 2010 and May 11, 2010, representatives of Goldman Sachs contacted both Gentiva and Company B to request that they deliver, by no later than May 21, 2010, a final proposal for the acquisition of Odyssey, which would include a price per share and marked up merger agreement in the form that they would be prepared to sign.

 

On May 12, 2010, K&L Gates distributed a draft of a merger agreement to both Gentiva and Company B, and their respective legal counsel. The draft merger agreement contemplated a two-step transaction, with a cash tender offer followed by a merger, and included, among other things: a 30 day “go-shop” period during which Odyssey would be permitted to solicit alternative acquisition proposals; a termination fee of 2% of Odyssey’s equity value, unless the merger agreement were terminated during the “go-shop” period or thereafter, in connection with a party who made a proposal during the “go-shop” period, an “excluded party”, in which case the termination fee would be 1% of Odyssey’s equity value; a lack of any financing condition or other financing contingency; and the right of either party to seek specific performance if the other were to breach the merger agreement.

 

On May 14, 2010, Mr. Allison received a call from the Chief Development Officer of Company B to inform Odyssey that Company B remained very interested in a potential acquisition of Odyssey, but that it had additional due diligence to perform. Company B requested a one week extension to the May 21 ^st  deadline for submitting proposals, and stated that it would likely cease negotiations if the extension were not granted. Although not willing to submit a final proposal by May 21 ^st , Company B stated that it would be prepared to provide an updated pricing proposal by May 21 ^st , subject to completion of its due diligence.

 

On May 15, 2010, Mr. Strange called Mr. Lefton to advise that Gentiva would submit its final proposal by the May 21 ^st  deadline. Mr. Strange also communicated that the proposed tender offer structure created financing issues for Gentiva’s lenders because they would not have time to arrange the financing prior to the close of the tender offer and would not be willing to provide bridge financing for a tender offer.

 

On May 16, 2010, Greenberg Traurig, P.A. (“GT”), Gentiva’s outside legal counsel, circulated a revised draft of the merger agreement in which Gentiva proposed a single-step merger structure rather than a two-step cash tender offer. The proposed merger agreement also provided for a termination fee of 3% of Odyssey’s equity value and a limited go-shop process to be completed within 20 days, restricted to one designated potential buyer and requiring that the designated potential buyer make a superior proposal during the “go-shop” period in order for Odyssey to be permitted to continue discussions with such person after the “go-shop” period. Other relevant revisions related to the allocation of substantial risk to Odyssey if Gentiva failed to obtain financing, including a reverse break-up fee of 4% of Odyssey’s equity value if Gentiva terminated the merger agreement, limitations on Gentiva’s potential liability if the acquisition were not completed, a definition of “Company Material Adverse Effect” that allocated significantly more execution risk to Odyssey, and limitations on the availability of specific performance.

 

On May 17, 2010, Company B’s financial advisor called a representative of Goldman Sachs and informed him that Company B would not be ready to discuss pricing by May 21st as it had previously indicated.

 

On the morning of May 18, 2010, Mr. Bickham, Mr. Strange, Gentiva’s Chief Compliance Officer, Gentiva’s Senior Vice President of Finance, and representatives of K&L Gates, GT, Goldman Sachs and EHP held a conference call to discuss the draft merger agreement proposed by Gentiva. On the conference call, representatives of Gentiva informed the representatives of Odyssey about the status of Gentiva’s proposed financing for the transaction and the reluctance of Gentiva’s financing sources to finance the acquisition if it were structured as a two-step cash tender offer transaction. Representatives of Odyssey then discussed the significant issues for Odyssey that were raised by Gentiva’s draft merger agreement, including (1) the uncertainties created by Gentiva’s proposed allocation of financing and execution risk to Odyssey via Gentiva’s proposed changes to the definition of “Company Material Adverse Effect”, Gentiva’s proposed reverse break-up fee and other limitations on Gentiva’s potential liability if the merger were not completed, and Gentiva’s proposed limitations on Odyssey’s right to specific performance, (2) Gentiva’s proposed limits on the “go-shop” provisions, and (3) Gentiva’s proposed termination fee equal to 3% of Odyssey’s equity value. Representatives of Odyssey informed Gentiva’s representatives that Odyssey would consider entering into a transaction with Gentiva only if completion of the transaction was reasonably certain to occur, including certainty of financing with any financing risk being allocated to Gentiva.

Later on May 18, 2010, after meeting with Gentiva’s senior management, representatives of GT advised representatives of K&L Gates that Gentiva was prepared to move forward with no financing condition to Gentiva’s obligation to close the merger, no reverse break-up fee, a 30-day go-shop period with unlimited potential parties, full specific performance, and a mutually satisfactory definition of “Company Material Adverse Effect”.

 

On the evening of May 18, 2010, GT delivered a revised draft of the merger agreement.

 

On May 19, 2010, after the terms of the draft merger agreement were discussed among members of our senior management, and representatives of Goldman Sachs, K&L Gates and RLF, K&L Gates delivered a revised draft of the merger agreement to Gentiva seeking to address the remaining issues. During the period extending from May 19, 2010 through May 23, 2010, representatives of Odyssey and Gentiva continued to exchange drafts of the merger agreement and negotiate the terms thereof.

 

On May 20, 2010, Gentiva’s board of directors held a meeting at which Gentiva’s management and financial and legal advisors provided reports regarding the terms of the potential transaction, the results to date of the due diligence investigation, the status of negotiations with Odyssey and the draft merger agreement, as well as the status of the transaction financing. As a result, Gentiva’s board of directors unanimously approved the merger agreement substantially in the form presented at the meeting and directed Gentiva’s management to present to Odyssey an all cash merger offer of $27.00 per share.

 

On May 21, 2010, the deadline set by Odyssey for final transaction proposals to be received from Gentiva and Company B, Gentiva delivered an updated non-binding written proposal letter to acquire Odyssey for $27.00 per share in cash. Included with the proposal letter were a revised merger agreement and a draft financing commitment letter with financing commitments from Bank of America, N.A., Barclays Bank PLC, General Electric Capital Corporation, SunTrust Bank and certain of their respective affiliates.

 

After receiving Gentiva’s proposal on May 21, 2010, representatives of Goldman Sachs contacted Company B’s financial advisor to notify Company B that another party had delivered a final proposal on May 21st and to request that Company B advise Odyssey of the status of its interest in acquiring Odyssey. Company B’s financial advisor sent an email later that day in response to Goldman Sachs’ request, expressing that Company B continued to have a serious interest in acquiring Odyssey, but did not mention the price that Company B might be willing to pay or a specific timeline by which Company B would proceed.

 

On the morning of May 22, 2010, our board of directors convened a special meeting to discuss the status of negotiations with Gentiva. Members of our senior management, representatives of K&L Gates, and representatives of Goldman Sachs were also present. Initially, representatives of K&L Gates reviewed and discussed with our board of directors its fiduciary duties under Delaware law in regard to the transactions proposed by Gentiva and Company B. Thereafter, Mr. Lefton provided our board of directors with an update of the status of the negotiations with Gentiva and Company B. Mr. Bickham and representatives of K&L Gates then provided a summary of the terms of, and remaining material business issues relating to, the latest drafts of the merger agreement, the draft financing commitment letter, the amendment to Odyssey’s rights agreement to render any rights granted under the rights agreement inapplicable to the acquisition by Gentiva, the change of control severance program, and a retention bonus program that would grant bonuses to selected employees, other than senior management, in order to ensure that these employees remain employed during the pendency of the change of control transaction. After a thorough discussion by our board of directors, our board of directors instructed senior management, Goldman Sachs and K&L Gates to negotiate the remaining issues relating to the terms of the merger agreement in accordance with its instructions and to minimize the conditionality of Gentiva’s financing commitment. Representatives of Goldman Sachs then reviewed for our board of directors its updated financial analysis of the $27.00 per share price offered by Gentiva, and indicated that Goldman Sachs would be prepared to deliver a fairness opinion if requested by our board of directors to do so.

 

During the evening of May 21, 2010 and throughout May 22, 2010 and May 23, 2010, representatives of Odyssey and K&L Gates and representatives of Gentiva and GT held numerous discussions and negotiated the remaining unresolved issues in the merger agreement and the financing commitment letter and exchanged drafts of such documents.

On the evening of May 23, 2010, our board of directors convened a special meeting to review and consider the final proposal from Gentiva. Members of our senior management and representatives of K&L Gates and Goldman Sachs were also present. Mr. Lefton provided an update on the status of the negotiations with Gentiva and Company B. Mr. Bickham and representatives of K&L Gates then updated our board of directors on the material changes to the terms and conditions of the merger agreement and the financing commitment letter since the last board meeting on May 22, 2010. Our board of directors was informed that the remaining issues with the merger agreement had been resolved satisfactorily in accordance with its previous instructions and that the conditionality of the financing commitment letter had been substantially removed. Next, representatives of Goldman Sachs reviewed for our board of directors its updated financial analysis of the $27.00 per share of Odyssey common stock offered by Gentiva. Following questions and discussion by our board of directors, at the request of our board of directors, representatives of Goldman Sachs delivered an oral opinion, which was subsequently confirmed in writing, to the effect that, as of May 23, 2010 and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders. The full text of the written opinion of Goldman Sachs is attached to this proxy statement as Annex B.

 

Our board of directors then considered the merger from a business, financial and legal perspective and the current conditions in the healthcare industry and also considered the reasons for the merger described in “The Merger — The Recommendation of our Board of Directors and the Reasons for the Merger.” After careful consideration and deliberation, our board of directors unanimously (a) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement were advisable, fair to and in the best interests of Odyssey and its stockholders, (b) approved and authorized the execution of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, (c) directed that the adoption of the Merger Agreement be submitted to the Odyssey stockholders for consideration, and (d) resolved to recommend that the Odyssey stockholders approve the Merger and adopt the Merger Agreement.

 

Goldman Sachs and our board of directors then engaged in a discussion of the “go-shop” process to be conducted after the signing of the Merger Agreement.

 

Late in the evening on May 23, 2010, Odyssey and Gentiva executed the Merger Agreement and Gentiva delivered the fully executed Commitment Letter.

 

On the morning of May 24, 2010, prior to the open of the financial markets, Gentiva issued a press release announcing the Merger Agreement and the Merger.

 

Commencing on May 24, 2010, Odyssey, with the assistance of Goldman Sachs, began soliciting and encouraging alternative acquisition proposals from third parties.

 

Our board of directors, acting with the advice and assistance of independent legal and financial advisors, evaluated and negotiated the Merger, including the terms and conditions of the Merger Agreement, with Gentiva. Our board of directors unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Odyssey and its stockholders, (ii) approved and authorized to be taken all corporate action required to authorize the execution of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement and (iii) resolved to recommend that the stockholders approve the Merger and adopt the Merger Agreement.

 

In the course of reaching its determination, our board of directors consulted with management and its financial and legal advisors and considered a number of factors, including, among others, the following:

 

 

 

 

 

 

 

 

Our board of directors also considered a variety of risks and other potentially negative factors concerning the Merger Agreement and the Merger, including, among others, the following:

 

 

This discussion summarizes the material factors considered by our board of directors in its consideration of the Merger. After considering these factors, our board of directors concluded that the positive factors relating to the Merger Agreement and the Merger significantly outweighed the potential negative factors. In view of the wide variety of factors considered by our board of directors, and the complexity of these matters, our board of directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of our board of directors may have assigned different weights to various factors. Our board of directors unanimously approved and recommended the Merger Agreement and the Merger based upon the totality of the information presented to and considered by it. Our board of directors believes that the Merger is in the best interests of Odyssey and its stockholders.

 

Goldman Sachs rendered its opinion to Odyssey’s board of directors that, as of May 23, 2010 and based upon and subject to the factors and assumptions set forth therein, the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated May 23, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided its opinion for the information and assistance of Odyssey’s board of directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Odyssey common stock should vote with respect to the Merger or any other matter.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of the senior management of Odyssey regarding their assessment of the past and current business operations, financial condition and future prospects of Odyssey; reviewed the reported price and trading activity for Odyssey common stock; compared certain financial and stock market information for Odyssey with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the home health and hospice industry specifically and in other industries generally; and performed such other studies and analyses and considered such other factors, as it deemed appropriate.

 

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it and it did not assume any responsibility for any such information. In that regard, Goldman Sachs assumed with Odyssey’s consent that the forecasts for Odyssey had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Odyssey. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Odyssey or any of its subsidiaries, nor was any such evaluation or appraisal furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the expected benefits of the Merger in any way meaningful to its analysis. Goldman Sachs also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

 

Goldman Sachs’ opinion does not address the underlying business decision of Odyssey to engage in the Merger or the relative merits of the Merger as compared to any strategic alternatives that may be available to Odyssey; nor does its address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of May 23, 2010, of the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other

term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including, without limitation, the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Odyssey; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Odyssey, or class of such persons, in connection with the Merger, whether relative to the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement or otherwise. Goldman Sachs does not express any opinion as to the impact of the Merger on the solvency or viability of Odyssey or Gentiva or the ability of Odyssey or Gentiva to pay its obligations when they come due. In addition, Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of, May 23, 2010 and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after May 23, 2010. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors of Odyssey in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before May 21, 2010 and is not necessarily indicative of current market conditions.

 

Historical Stock Trading Analysis.   Goldman Sachs reviewed the historical trading prices for Odyssey common stock for the period beginning on October 31, 2001 (the date of the initial public offering of Odyssey common stock) and ended on May 21, 2010 (the last trading day before the Merger Agreement was announced). In addition, Goldman Sachs analyzed the $27.00 per share in cash to be paid to holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement in relation to the closing price of Odyssey common stock on May 21, 2010, the average closing prices of Odyssey common stock during the one-month, three-month, six-month, one-year, three-year and five-year periods ended May 21, 2010, the average closing price of the Odyssey common stock during the period from the initial public offering of Odyssey common stock on October 31, 2001 until May 21, 2010, and the highest closing price of the Odyssey common stock during the 52-week period ended May 21, 2010 and during the five-year period ended May 21, 2010.

 

This analysis indicated that the price per share to be paid to Odyssey stockholders pursuant to the Merger Agreement represented premia of:

 

 

 

Selected Companies Analysis.   Goldman Sachs reviewed and compared certain financial information for Odyssey to corresponding financial information for the following publicly traded corporations in the hospice and home care industry:

 

 

Although none of the selected companies is directly comparable to Odyssey, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Odyssey.

 

With respect to Odyssey and each of the selected companies, Goldman Sachs calculated:

 

 

For purposes of these calculations, Goldman Sachs utilized an equity value for each company derived by multiplying the number of fully diluted outstanding shares of that company as reported in its most recent SEC filings by the company’s closing share price on May 21, 2010. By adding the net debt amount of each company as reported in its most recent SEC filings to the equity value of such company derived from the foregoing calculations, Goldman Sachs determined an enterprise value for each company. The multiples and ratios for Odyssey and for the selected companies were calculated using estimates published by Institutional Brokers’ Estimate System, or IBES. The results of these analyses are summarized as follows:

 

 

 

Illustrative Discounted Cash Flow Analysis.   Goldman Sachs performed an illustrative discounted cash flow analysis based on Odyssey management’s estimate of Odyssey’s unlevered free cash flows to derive ranges of illustrative present values per share of Odyssey common stock.

 

Using illustrative discount rates ranging from 9.5% to 11.0%, reflecting estimates of Odyssey’s weighted average cost of capital, Goldman Sachs derived illustrative ranges of implied enterprise values for Odyssey by discounting to present value as of July 1, 2010 (a) estimates of Odyssey’s unlevered free cash flows for the second half of 2010 and for 2011 through 2014 and (b) illustrative terminal values for Odyssey as of December 31, 2014 derived by applying illustrative perpetuity growth rates ranging from 1.0% to 3.0% to estimated unlevered free cash flow for Odyssey for 2014. This analysis resulted in an illustrative range of implied terminal EBITDA multiples of 5.9x to 9.2x.

To calculate the illustrative ranges of present values per share of Odyssey common stock, Goldman Sachs subtracted Odyssey’s net debt amount as of June 30, 2010 from the illustrative ranges of implied enterprise values it derived for Odyssey and divided the result by the number of shares of Odyssey common stock, Options (using the weighted average exercise price) and Restricted Stock Units outstanding as of May 19, 2010.

 

This analysis resulted in an illustrative range of present values per share of Odyssey common stock of $20.23 to $28.64.

 

Illustrative Present Value of Future Stock Price Analysis.   Goldman Sachs calculated illustrative ranges of implied present values per share of Odyssey common stock based on hypothetical future share prices for Odyssey common stock for each of 2010 through 2014. For purposes of this analysis, Goldman Sachs derived hypothetical future share prices for Odyssey common stock by applying forward P/E multiples ranging from 11.0x to 15.0x to Odyssey’s management’s estimate of EPS for Odyssey for each of 2010 through 2014. By applying illustrative discount rates of 11.0% and 13.5%, reflecting estimates of Odyssey’s cost of equity, to these hypothetical future share prices (discounted to present value as of July 1, 2010), Goldman Sachs derived implied present values per share of Odyssey common stock ranging from $14.52 to $23.55 when applying an 11.0% discount rate, and $13.28 to $23.55, when applying a 13.5% discount rate.

 

Using the same forecasts, Goldman Sachs analyzed the potential impact of a share repurchase on the implied present value of future share prices. For purposes of the analysis, Goldman Sachs assumed a $50 million share repurchase in 2010, share repurchases of $30 million in each of 2011 through 2014, a constant P/E ratio of 12.4x and a share repurchase premium of 5%. The sensitivity analysis indicated implied present values per share of Odyssey common stock ranging from $17.64 to $25.19 when applying an 11.0% discount rate, and $16.14 to $25.19, when applying a 13.5% discount rate.

 

Illustrative Leveraged Buyout Analysis.   Goldman Sachs performed an illustrative leveraged buyout analysis using projections provided by Odyssey’s management. Goldman Sachs calculated the implied value per share that would generate an internal rate of return of 20% assuming the following: (i) a range of exit EBITDA multiples of 7.0x to 9.0x for the assumed exit at the end of 2014, and (ii) leverage ratios of debt over EBITDA for the last twelve months ended March 31, 2010, or LTM, between 4.0x and 5.0x. This analysis resulted in illustrative purchase prices per share of Odyssey common stock ranging from $19.06 and $22.83.

 

Goldman Sachs also derived illustrative equity returns to a hypothetical financial buyer assuming an exit year of 2014 and a total leverage ratio of debt over LTM EBITDA of 4.5x. Goldman Sachs assumed, for purposes of this analysis, a purchase price for Odyssey common stock ranging from $19.29 per share to $26.00 per share, or a premium ranging from 0.0% to 34.8% over the market price of Odyssey as of May 21, 2010, and a range of estimated exit EBITDA multiples of 7.0x to 9.0x for the assumed exit at the end of 2014. This analysis resulted in illustrative equity returns to a hypothetical financial buyer ranging from 5.8% to 28.8%.

 

General.   The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Odyssey or the contemplated Merger.

 

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to Odyssey’s board of directors that, as of May 23, 2010 and based upon and subject to the factors and assumptions set forth therein, the $27.00 per share in cash to be paid to the holders (other than Gentiva and its affiliates) of Odyssey common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders. These analyses do not purport to be appraisals nor do they necessarily reflect the prices

at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Odyssey, Gentiva, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

 

The Merger Consideration was determined through arm’s-length negotiations between Odyssey and Gentiva and was approved by Odyssey’s board of directors. Goldman Sachs provided advice to Odyssey during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Odyssey or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the Merger.

 

As described above, Goldman Sachs’ opinion to Odyssey’s board of directors was one of many factors taken into consideration by Odyssey’s board of directors in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.

 

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, Odyssey, Gentiva and any of their respective affiliates or any currency or commodity that may be involved in the Merger for their own account and for the accounts of their customers. Goldman Sachs has acted as financial advisor to Odyssey in connection with, and participated in certain of the negotiations leading to, the Merger. In addition, Goldman Sachs has provided certain investment banking and other financial services to Odyssey and its affiliates from time to time for which the investment banking division of Goldman Sachs has received, and may receive, compensation. Goldman Sachs also has provided certain investment banking and other financial services to Gentiva and its affiliates from time to time for which the investment banking division of Goldman Sachs has received, and may receive, compensation, including having acted as Gentiva’s financial advisor in connection with the sale of a majority of interest in Gentiva CareCentrix, Inc. to Water Street Healthcare Partners II, L.P. in August 2008. Goldman Sachs also may provide investment banking and other financial services to Odyssey and Gentiva and their respective affiliates in the future for which the investment banking division of Goldman Sachs may receive compensation.

 

The board of directors of Odyssey selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated April 21, 2010, Odyssey engaged Goldman Sachs to act as its financial advisor in connection with the contemplated Merger. Pursuant to the terms of this engagement letter, Odyssey has agreed to pay Goldman Sachs a transaction fee of approximately $12 million, the principal portion of which is contingent upon consummation of the Merger. In addition, Odyssey has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Odyssey generally does not make public projections as to future performance, earnings or other results. However, senior management of Odyssey did make available to Gentiva and its financial advisors certain non-public financial projections (as described below) originally prepared for Odyssey’s internal use and responded to questions regarding such financial projections.

In April 2010, management prepared projections of Odyssey’s standalone financial performance for fiscal years 2010 through 2014 (the “Projections”), which are summarized below and which we approved for use by Goldman Sachs in connection with its rendering of its fairness opinion to our board of directors and performing its related financial analyses, as described in the section entitled “The Merger — Opinion of Financial Advisor”.

 

 

The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic and competitive conditions and financial market conditions, which are difficult to predict accurately and many of which are beyond Odyssey’s control.

 

We cannot assure you that the Projections will be realized and actual results may vary materially from those shown. Important factors that may affect actual results and result in the Projections not being achieved include, but are not limited to, the risks described in Odyssey’s most recent annual and quarterly reports filed with the SEC on Forms 10-K and 10-Q, respectively, and in this proxy statement under the heading “Cautionary Statement Concerning Forward-Looking Information.” The Projections also cover multiple years and by their nature become subject to greater uncertainty with each successive year. Furthermore, and for the same reasons, the Projections should not be construed as commentary by Odyssey’s management as to how management expects Odyssey’s actual results to compare to research analysts’ estimates.

 

The Projections included in this proxy statement have been prepared by, and are the responsibility of, Odyssey’s management. The Projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles. Ernst & Young LLP, Odyssey’s independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to the Projections and does not express an opinion or any form of assurance with respect thereto. The summary of the Projections is not being included in this proxy statement to influence a stockholder’s decision whether to vote in favor of the proposal to approve the Merger and adopt the Merger Agreement, but because the Projections were made available to Gentiva and represent an assessment by Odyssey’s management of future cash flows and were approved by us for use by Goldman Sachs in connection with its rendering of its fairness opinion to our board of directors, and performing its related financial analyses, as described in the section entitled “The Merger — Opinion of Financial Advisor”.

 

The inclusion of the Projections in this proxy statement should not be regarded as an indication that Odyssey or any of its affiliates, advisors or representatives considered or considers the Projections to be predictive of actual future events, and the Projections should not be relied on as such. Neither Odyssey nor any of its affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from these Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing or arising after the date such Projections were generated or to reflect the occurrence of future events even if any or all of the assumptions underlying the Projections are shown to be in error. Odyssey does not intend to make publicly available any update or other revision to the Projections, except as required by law. Neither Odyssey nor any of its affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of Odyssey compared to the information contained in the Projections or that projected results will be achieved. Odyssey has made no representation to Gentiva, in the Merger Agreement or otherwise, concerning the Projections.

Odyssey’s stockholders are cautioned not to place undue reliance on the projected financial information included in this proxy statement.

 

Gentiva has received a commitment letter (the “Commitment Letter”), dated as of May 23, 2010 from Bank of America, N.A., Banc of America Bridge LLC, Banc of America Securities LLC, Barclays Bank PLC, Barclays Capital, General Electric Capital Corporation, GE Capital Markets, Inc., SunTrust Bank and Sun Trust Robinson Humphrey, Inc. (collectively, the “Lenders”) to provide, subject to the conditions set forth in the Commitment Letter, debt financing for the purposes of paying the Merger Consideration and other costs and expenses related to the Merger, repaying certain existing indebtedness of Odyssey and Gentiva and their respective subsidiaries, and financing of the ongoing working capital and other general corporate needs of Gentiva and its subsidiaries after the consummation of the Merger in the following amounts: (i) $925 million in senior secured credit facilities of Gentiva (the “Senior Credit Facilities”), comprising (a) term loan facilities aggregating $800 million and (b) a revolving credit facility of $125 million; and (ii) $305 million in gross proceeds from the issuance and sale by Gentiva of senior unsecured notes (the “Senior Notes”), or, if and to the extent that, less than $305 million in Senior Notes are issued and sold on or prior to the closing date of the Merger, $305 million of unsecured loans under a bridge facility (the “Bridge Facility”, and collectively with the Senior Credit Facilities and the Senior Notes, the “Financing”).

 

The commitments of the Lenders under the Commitment Letter expire on October 29, 2010 unless the Merger is consummated prior to such date.

 

The commitments of the Lenders under the Commitment Letter are subject to the negotiation, execution and delivery of definitive documentation with respect to the Financing, and the satisfaction of certain other conditions, including, among others:

 

 

The Commitment Letter requires that the definitive documentation with respect to the Financing must be negotiated by the Lenders in good faith and must contain only terms consistent with the Commitment Letter or as otherwise mutually agreed by Gentiva and the Lenders to be reasonable and customary. The closing of

the Financing under the definitive documentation cannot be conditioned upon the accuracy of any representations and warranties other than (i) representations and warranties made by Odyssey in the Merger Agreement as are material to the interests of the Lenders, but only to the extent Gentiva has a right to terminate its obligations under the Merger Agreement as a result of a breach of such representations and warranties, and (ii) certain specified and limited representations and warranties made by Gentiva and its subsidiaries under the definitive documentation with respect to the Financing, including power and authority, due execution, and solvency of Gentiva and its subsidiaries on the closing date of the Merger (after giving effect to the Merger).

 

Gentiva’s obligations under the Merger Agreement are not conditioned in any manner upon Gentiva obtaining the Financing, or any other financing. The existence of any conditions contained in the Commitment Letter does not constitute a condition to the consummation of the Merger. The failure, for any reason, of Gentiva to consummate the Merger as required under the Merger Agreement would constitute a knowing or intentional breach by Gentiva of the Merger Agreement for which Odyssey would be entitled to seek damages, including damages based on the consideration that would have otherwise been payable to Odyssey’s stockholders if the Merger was consummated. Although obtaining financing is not a condition to the completion of the Merger, the failure of Gentiva to obtain sufficient financing is likely to result in the failure of the Merger to be consummated.

 

In considering the recommendation of our board of directors in favor of the approval of the Merger and adoption of the Merger Agreement, you should be aware that the consummation of the Merger will result in certain benefits to our directors and executive officers that are not available to our stockholders generally. Individual executive officers also have specific benefits that are different from other executive officers as described in more detail below. Our board of directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and recommending that our stockholders approve the Merger and adopt the Merger Agreement. Stockholders should take these benefits into account in deciding whether to vote for the approval of the Merger and adoption of the Merger Agreement. These interests relate to or arise from:

 

 

Acceleration of Vesting and Cash-Out of Outstanding Equity Awards

 

Under the terms of the Merger Agreement, each outstanding Option issued by Odyssey under an equity incentive plan or otherwise that is held by an executive officer or director (as well as those Options held by our other employees), to the extent not previously vested, will accelerate and vest in full immediately before the Effective Time and will be cancelled and converted into the right to receive, from the Surviving Corporation, an amount in cash determined by multiplying (i) the excess, if any, of the Merger Consideration over the applicable exercise price of the Option; by (ii) the number of shares subject to such Option (subject to any applicable withholding of taxes). Options with an exercise price greater than or equal to the Merger Consideration will be cancelled immediately prior to the Effective Time for no consideration.

 

Each outstanding Restricted Stock Unit that was issued by Odyssey under an equity incentive plan or otherwise that is held by an executive officer or director (as well as those Restricted Stock Units held by our other employees), to the extent not previously vested, will accelerate and vest in full immediately before the Effective Time and will be cancelled and converted into the right to receive, from the Surviving Corporation, an amount in cash determined by multiplying (i) the Merger Consideration; by (ii) the number of shares subject to such Restricted Stock Unit (subject to any applicable withholding of taxes).

In addition, each share of Restricted Stock, to the extent not previously vested, will accelerate and vest in full immediately prior to the Effective Time and will be treated in connection with the Merger as a share of common stock, including the right to receive the Merger Consideration (subject to any applicable withholding of taxes).

 

The table below sets forth, as of June 4, 2010, the total number of Options, Restricted Stock Units and shares of Restricted Stock held by Odyssey’s executive officers and directors that are expected to be cashed out as a result of the Merger and the amounts expected to be received by such individuals in connection with the cash-out. All dollar amounts are gross amounts and do not reflect deductions for income taxes and other withholdings. The Options have exercise prices ranging between $1.38 and $22.33 per share.

 

 

 

 

Employment Agreements

 

Each of our executive officers has an employment agreement with us that provides for special severance payments and benefits in the event of certain terminations of the officer’s employment on or within two years following a “change in control” (as defined in the employment agreements). Consummation of the Merger would constitute a “change in control”. Accordingly, if an executive officer’s employment is terminated by the Surviving Corporation without “cause,” by the officer for “good reason,” or due to a “non-renewal” election by

the Surviving Corporation upon or within two years following the Merger, then the officer will be entitled to the following severance benefits:

 

 

For purposes of the employment agreements, the terms “cause” and “good reason” have the following meanings:

 

 

The employment agreements contain non-disparagement and confidentiality provisions, as well as covenants not to compete or solicit during the employment term and continuing until the first anniversary (second anniversary, in the case of Mr. Lefton) of the date of termination. In addition, the employment agreements also condition payment of severance payments, healthcare continuation coverage, and exercisability of Options upon the executive officer’s execution of a release within 45 days of termination of employment (and nonrevocation thereafter).

 

The table below sets forth the potential severance payments and benefits the executive officers would be entitled to on an eligible termination within two years of the consummation of the Merger (equity compensation for the executive officers related to the Merger is set forth in the table above under the heading “Acceleration of Vesting and Cash-Out of Outstanding Equity Awards” ). As we do not expect that any of our executive officers will remain employed by the Surviving Corporation after the consummation of the Merger, we anticipate that our executive officers will receive the severance payments and benefits set forth below.

 

 

 

 

Indemnification of Directors and Executive Officers and Insurance

 

The Merger Agreement provides that for a period of six years from the Effective Time, the Surviving Corporation will indemnify and hold harmless those persons who were directors or officers of Odyssey at any time before the Effective Time against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was an officer, director, employee, fiduciary or agent of Odyssey or any of its subsidiaries, for matters existing or occurring at or prior to the Effective Time (including the Merger) to the fullest extent permitted by applicable law. In this regard, the Surviving Corporation will also be required to advance expenses as incurred to an indemnified officer or director to the fullest extent permitted by law. Persons who were directors or officers of Odyssey have the right, as contemplated by Delaware law, to require that a determination of whether such former director or officer is entitled to indemnification by the Surviving Corporation be made by special, independent legal counsel selected by such former director or officer and approved by the Surviving Corporation (which approval must not be unreasonably withheld, conditioned or delayed), and who has not otherwise performed material services for Odyssey or the Surviving Corporation within the last three years.

 

The Merger Agreement also provides that the indemnification or advancement of expenses provisions in the respective certificate of incorporation and bylaws or similar organizational or governing documents of the Surviving Corporation and its subsidiaries will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of directors and officers than the provisions that are currently included in such governing documents of Odyssey and its subsidiaries.

 

In addition, the Merger Agreement provides that Gentiva will maintain or cause to be maintained Odyssey’s existing policies of directors’ and officers’ liability insurance for a period of six years from the Effective Time (or policies of substantially equivalent coverage and amounts); provided that Gentiva is not required to pay aggregate premiums for such insurance in excess of 300% of the aggregate premiums paid by Odyssey in 2009 for such insurance coverage. Alternatively, at our option, we may obtain, before the Effective Time, a six-year run-off policy for our directors’ and officers’ liability insurance; provided that the premium for such policy does not exceed 300% of the aggregate premiums paid by Odyssey in 2009 for its directors’ and officers’ liability insurance policies.

 

We have also entered into agreements to indemnify our directors and executive officers. Under these agreements, we are obligated to indemnify our directors and officers to the fullest extent permitted under Delaware law for expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by them in any action or proceeding arising out of their service as a director or officer. The indemnification provided for by the Merger Agreement is in addition to, and will not limit, the rights of our executive officers and directors to be indemnified pursuant to the indemnification agreements.

 

The following is a discussion of the material U.S. federal income tax consequences related to the exchange of shares of Odyssey’s common stock for cash pursuant to the Merger. Unless otherwise indicated, this summary deals only with stockholders of the Company who are “United States persons” (each as defined below) and who hold their shares of common stock as capital assets. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), the proposed, temporary and final Treasury regulations promulgated thereunder, and any relevant administrative rulings or pronouncements or judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the tax consequences that may be relevant to a particular Company stockholder in light of that stockholder’s specific circumstances, nor does it discuss the U.S. federal income tax consequences that may be applicable to certain types of Company stockholders, such as stockholders of the Company who are dealers in securities, financial institutions, tax-exempt entities, life insurance companies, or who are holding their shares of common stock as a part of a hedging, integrated, conversion or constructive sale transaction or as part of a straddle, or whose functional currency is not the U.S. dollar, all of whom may be subject to special rules and/or limitations under the Code that are not discussed below. In addition, the following discussion does not discuss the alternative minimum tax consequences, if any, of an exchange of shares of common stock pursuant to the Merger, or the state, local or foreign tax consequences of such exchange. Consequently, each stockholder of the Company is urged to consult its own tax advisor in determining the federal, state, local and foreign income and any other tax consequences of the Merger.

 

For purposes of this discussion, (i) the terms “Company stockholder” or “stockholder of the Company” refer to a beneficial owner of shares of Odyssey common stock, (ii) the term “United States person” means a person who is (a) a citizen or resident of the United States, (b) a corporation or partnership created or organized in the United States or under the laws of the United States or any political subdivision thereof, (c) an estate the income of which is subject to United States federal income taxation regardless of its source or (d) a trust which is subject to the supervision of a court within the United States and the control of one or more United States persons (as defined in Section 7701)(a)(30) of the Code), (iii) the term “U.S. stockholder” means a stockholder of the Company who is a United States person, and (iv) the term “Non-U.S. stockholder” means a stockholder of the Company who is not a United States person.

 

Taxation of U.S. Stockholders.   An exchange of shares of common stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Consequently, an exchanging U.S. stockholder will recognize gain or loss in an amount equal to the difference between (i) the amount of cash received in the Merger, and (ii) the aggregate tax basis in the shares of common stock exchanged therefor. Such gain or loss generally will be (i) calculated separately for each block of shares of common stock (i.e., shares of common stock that were acquired at the same cost in a single transaction) exchanged pursuant to the Merger, (ii) capital gain or loss and (iii) long-term capital gain or loss if the relevant U.S. stockholder held the shares of common stock being exchanged in the Merger for more than one year as of the Effective Time. The long-term capital gains of individuals, estates and certain trusts generally are eligible for reduced rates of taxation. Capital losses generally must be used only to offset capital gains.

 

Taxation of Non-U.S. Stockholders.   Any gain realized by a Non-U.S. stockholder upon an exchange of shares of common stock pursuant to the Merger generally will not be subject to U.S. federal income or withholding tax unless (i) such gain is effectively connected with a U.S. trade or business conducted by the Non-U.S. stockholder within the United States, (ii) in the case of a Non-U.S. stockholder who is an individual, such individual is present in the United States for 183 days or more in the taxable year during which the Merger occurs and certain other conditions are met, or (iii) in the case of a Non-U.S. stockholder who held, directly or indirectly, more than 5% of the shares of common stock at any time during the five-year period ending on the date of the exchange of such shares in the Merger, the Company is or has been a U.S. real property holding corporation within the meaning of Section 897(c)(2) of the Code (which the Company does not believe to be the case).

Individual Non-U.S. stockholders who are subject to U.S. federal income tax because they were present in the United States for 183 days or more during the year of the Merger are subject to U.S. federal income tax on their “net” gains (the total gain realized by them from sales or other taxable exchanges of U.S. capital assets, including any gains realized by them from the sale of shares of common stock pursuant to the Merger, minus any losses from sales or taxable exchanges of other U.S. capital assets recognized by them for U.S. federal income tax purposes during the year) at a flat rate of 30% or such lower rate as may be specified by an applicable United States income tax treaty. If a Non-U.S. stockholder is engaged in a trade or business within the United States and such gain is “effectively connected” with such trade or business (and attributable to a permanent establishment of such Non-U.S. stockholder in the case of a Non-U.S. stockholder who can claim the benefit of an applicable United States income tax treaty) then the Non-U.S. stockholder generally will be taxed on such gain in the same manner as if it was a U.S. stockholder and, in the case of non-U.S. corporations, such gain also may be subject to an additional U.S. branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).

 

Backup Withholding Tax and Information Reporting.   The receipt of cash in exchange for shares of Odyssey common stock pursuant to the Merger by a U.S. stockholder may be subject to information reporting and backup withholding tax at the applicable rate (currently 28%), unless the U.S. stockholder (i) timely furnishes an accurate taxpayer identification number and otherwise complies with applicable U.S. information reporting or certification requirements (typically by completing and signing an IRS Form W-9, a copy of which will be included as part of the letter of transmittal to be timely returned to the paying agent) or (ii) is a corporation or other exempt recipient and, when required, establishes such fact. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. stockholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.

 

In general, Non-U.S. stockholders will not be subject to U.S. backup withholding and information reporting with respect to the receipt of cash in exchange for their shares of common stock pursuant to the Merger if they provide the paying agent with an IRS Form W-8BEN (or an IRS Form W-8ECI if the gain is effectively connected with the conduct of a U.S. trade or business by such Non-U.S. stockholder) and neither the Company nor the Paying Agent have actual knowledge (or reason to know) that the relevant Non-U.S. stockholder is a U.S. stockholder. If the shares of common stock are held through a non-U.S. partnership or other flow-through entity, certain documentation requirements also may apply to the partnership or other flow-through entity. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a Non-U.S. stockholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.

 

THE U.S. FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE ARE NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL OF THE TAX CONSEQUENCES RELATING TO THE MERGER. EACH STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES (INCLUDING THE STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES) OF THE MERGER TO IT IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES.

 

Under the HSR Act, and the rules promulgated thereunder by the FTC, the Merger cannot be consummated until Odyssey and Gentiva file a notification and report form under the HSR Act and the applicable waiting period has expired or been terminated. Odyssey and Gentiva each filed notification and report forms under the HSR Act with the FTC and the Antitrust Division of the Department of Justice (the “DOJ”) on June 4, 2010, but the applicable waiting period has not yet expired or been terminated. At any time before or after consummation of the Merger, the DOJ or the FTC may challenge the Merger on antitrust grounds. Private parties could also take antitrust action under the antitrust laws, including seeking an injunction prohibiting or delaying the Merger, divestiture or damages under certain circumstances. Additionally, at any time before or after consummation of the Merger, notwithstanding the expiration or termination of the applicable waiting period, any state could take action under its antitrust laws as it deems necessary or

desirable in the public interest. We cannot assure you that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

 

Under the Merger Agreement, both Odyssey and Gentiva have each agreed to use reasonable best efforts to obtain all regulatory and governmental approvals required to be obtained in connection with the consummation of the Merger. Notwithstanding that agreement, the Merger Agreement does not require Odyssey or Gentiva to enter into any consent decree, to make any divestiture or accept any operational restriction, or take or commit to take any action (i) the effectiveness or consummation of which is not conditional on the consummation of the Merger or (ii) that may have a materially detrimental effect or impact on the current or future business models, plans or structures of Odyssey, Gentiva or any of their respective subsidiaries, or which would be prohibited by the Financing, except that Gentiva must use its reasonable best efforts to obtain the consent of the Lenders.

 

On May 23, 2010, Odyssey and Computershare Trust Company, N.A. (successor to U.S. Stock Transfer Corporation) (the “Rights Agent”) entered into First Amendment to Rights Agreement between Odyssey and the Rights Agent dated as of November 5, 2001 pursuant to which (i) none of Gentiva, Merger Sub or any other subsidiary of Gentiva will be considered an “Acquiring Person” (as defined in the Rights Agreement), (ii) neither a “Distribution Date” nor a “Shares Acquisition Date” (as such terms are defined in the Rights Agreement) will be deemed to occur, and (iii) the rights to purchase Series A Junior Participating Preferred Stock of Odyssey issued under the Rights Agreement do not become exercisable, in the case of clauses (i), (ii), and (iii), in connection with the Merger Agreement and the Merger. The First Amendment to Rights Agreement also provides that the “Final Expiration Date” (as defined in the Rights Agreement) will occur immediately before the Effective Time.

 

On May 27, 2010, a lawsuit captioned Pompano Beach Police & Firefighters’ Retirement System v. Odyssey Healthcare, Inc., et al. , Cause No. CC-10-03561-E, was filed in the County Court at Law No. 5 in Dallas County, Texas against Odyssey, the members of Odyssey’s board of directors, Gentiva, and Merger Sub. The lawsuit, brought by a plaintiff, who is a purported stockholder of Odyssey, both individually and on behalf of a putative class of stockholders, alleges that our board of directors breached its fiduciary duties, and that Odyssey and Gentiva aided and abetted the purported breaches, in connection with the Merger. The petition seeks equitable relief, including, among other things, to enjoin consummation of the Merger, rescission of the Merger Agreement, and an award of all costs of the action, including reasonable attorneys’ fees. Odyssey believes the suit is without merit and intends to vigorously defend it. However, there can be no assurance that Odyssey or the other defendants will be successful in such defense.

 

If the Merger is consummated, Odyssey’s common stock will be delisted from The Nasdaq Global Select Market and deregistered under the Exchange Act and will cease to be publicly traded.

 

This summary of the Merger Agreement set forth in this section of the proxy statement describes the material provisions of the Merger Agreement but does not purport to describe all of the terms of the Merger Agreement. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. We urge you to read the full text of the Merger Agreement because it, and not this summary, is the legal document that governs the Merger and may contain important qualifications or details not set forth in this summary. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information” below.

 

The Merger Agreement provides for the Merger of Merger Sub with and into Odyssey upon the terms, and subject to the conditions, of the Merger Agreement. Odyssey will be the Surviving Corporation in the Merger and will become a direct wholly-owned subsidiary of Gentiva.

 

The Merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (or at a later date and time, if agreed in writing by the parties and specified in the certificate of merger) (the “Effective Time”). The parties are required to close the Merger no later than the second business day after the satisfaction or waiver of the last of the conditions described under “The Merger Agreement — Conditions to the Merger” beginning on page 54 (other than those conditions that by their nature are to be satisfied at the closing, but subject to the fulfillment or waiver of those conditions at closing), or on such other date as the parties may agree in writing; provided, that the closing of the Merger may not occur from August 23, 2010 to September 5, 2010 (the “Blackout Period”), and if the last to be satisfied of the closing conditions (other than those conditions that by their nature are to be satisfied at closing, but subject to the fulfillment or waiver of those conditions at closing) is satisfied or waived (to the extent permitted by applicable laws) during or less than two business days prior to the Blackout Period, then the closing will take place at 9:00 a.m., local time, on the later to occur of (x) the second business day after such satisfaction or waiver or (y) the first business day following the expiration of the Blackout Period, unless another date is agreed to in writing by the parties.

 

In the Merger, each share of Odyssey common stock (other than shares owned directly or indirectly by Odyssey, Gentiva, Merger Sub or any other subsidiary of Gentiva, or shares held by stockholders who have properly exercised dissenters’ appraisal rights under Delaware law) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive the Merger Consideration of $27.00 in cash, without interest and subject to any applicable withholding of taxes.

 

After the Effective Time, each holder of a certificate representing shares of Odyssey common stock (other than shares for which dissenters’ appraisal rights under Delaware law have been properly demanded and perfected) will no longer have any rights with respect to the shares, except the right to receive the Merger Consideration.

 

Options.   Each Option, whether vested or unvested, that is outstanding immediately before the Effective Time will be cancelled and converted into the right to receive, from the Surviving Corporation, an amount in cash (subject to any applicable withholding of taxes) determined by multiplying:

 

 

Options with an exercise price greater than or equal to the Merger Consideration will be cancelled immediately prior to the Effective Time for no consideration.

 

Restricted Stock.   Each share of Restricted Stock, whether vested or unvested, that is outstanding immediately before the Effective Time will be converted into the right to receive the Merger Consideration (subject to any applicable withholding of taxes).

 

Restricted Stock Units.   Each Restricted Stock Unit, whether vested or unvested, that is outstanding immediately before the Effective Time will be cancelled and converted into the right to receive from the Surviving Corporation an amount in cash determined by multiplying the Merger Consideration by the number of shares subject to such Restricted Stock Unit (subject to any applicable withholding of taxes).

The effect of the Merger on our other employee benefit plans is described under “— Employee Matters” beginning on page 62.

 

Merger Sub will designate a paying agent reasonably acceptable to us as agent for our stockholders in connection with the Merger in order to make payment of the Merger Consideration described above. At the closing of the Merger, Gentiva or Merger Sub will deposit with the paying agent funds sufficient to pay the Merger Consideration for the benefit of the stockholders whose shares will be converted at the Effective Time into the right to receive the Merger Consideration.

 

Following the Effective Time, our stock transfer books will be closed. After that time, there will be no further transfer of shares of our common stock, other than transfers that occurred before the Effective Time.

 

As soon as reasonably practicable after the Effective Time, and in any event by no later than five business days after the Effective Time, Gentiva will cause the paying agent to send you a letter of transmittal and instructions advising you how to surrender your certificates in exchange for the Merger Consideration. The paying agent will pay you your Merger Consideration after you have (i) surrendered your certificates to the paying agent and (ii) provided to the paying agent your signed letter of transmittal and any other items specified by the letter of transmittal, or in the case of book-entry or other uncertificated securities, upon the entry through a book-entry transfer agent of the surrender of the shares on a book-entry account. The paying agent will pay or mail you your Merger Consideration (subject to any applicable withholding of taxes) within two business days after the paying agent receives such documents and your surrendered certificates will be cancelled. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

 

Any cash funds deposited with the paying agent that are not claimed by former Odyssey stockholders within nine months following the Effective Time will be returned to the Surviving Corporation upon demand. Thereafter, any holders of shares of Odyssey common stock who have not surrendered their shares may look solely to the Surviving Corporation (subject to abandoned property, escheat or other similar laws, as general creditors of the Surviving Corporation) for payment of the Merger Consideration.

 

If the paying agent is to pay some or all of your Merger Consideration to a person other than you, as the registered owner of Odyssey common stock, you must have your certificates properly endorsed or otherwise in proper form for surrender and transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to the paying agent’s satisfaction that the taxes have been paid or are not required to be paid.

 

If you have lost your certificate, or if it has been stolen or destroyed, before receiving the Merger Consideration for the shares of common stock represented by such lost, stolen or destroyed certificate, you will have to provide an affidavit to that fact and, if reasonably required by the Surviving Corporation, post a bond in an amount that the Surviving Corporation directs as indemnity against any claim that may be made against the Surviving Corporation in respect of the lost, stolen or destroyed certificate.

 

The Merger Agreement contains representations and warranties made by Odyssey to Gentiva and Merger Sub and representations and warranties made by Gentiva and Merger Sub to Odyssey. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed by the parties in connection with negotiating its terms. Moreover, the assertions embodied in Odyssey’s representations and warranties are qualified by information contained in a confidential disclosure schedule that Odyssey provided to Gentiva in connection with the Merger Agreement. Furthermore, some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality or Company Material Adverse Effect (described below) different from that generally applicable to public

disclosures to stockholders or used for the purpose of allocating risk between the parties to the Merger Agreement rather than establishing matters of fact. Finally, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, and such subsequent information may or may not be fully reflected in Odyssey’s or Gentiva’s public disclosures. For the foregoing reasons, you should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information. This description of the representations and warranties is included to provide our stockholders with information regarding the terms of the Merger Agreement. The representations and warranties in the Merger Agreement and the description of them in this proxy statement should be read in conjunction with the other information contained in the reports, statements and filings we publicly file with the SEC. For instructions on how to obtain such public filings, see “Where You Can Find More Information” on page 70.

 

In the Merger Agreement, Odyssey, Gentiva and Merger Sub made a number of representations and warranties to each other. The parties’ reciprocal representations and warranties relate to, among other things:

 

 

In addition to the foregoing, the Merger Agreement contains representations and warranties made by Gentiva and Merger Sub to Odyssey, including representations and warranties relating to:

 

 

Odyssey also made representations and warranties to Gentiva, including representations and warranties relating to:

 

 

 

Many of Odyssey’s representations and warranties are qualified by a Company Material Adverse Effect standard. For purposes of the Merger Agreement, “Company Material Adverse Effect” is defined to mean any event, circumstance, change or effect that, individually or in the aggregate, (i) is materially adverse to the business, financial condition or results of our operations and the operations of our subsidiaries, taken as a whole, or (ii) would prevent or materially impair our ability to consummate the transactions contemplated by the Merger Agreement or otherwise prevent us from performing our obligations under the Merger Agreement. However, none of the following, alone or in combination, will be deemed to be, or taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse

Effect (except, to the extent any of the matters referred to in the first four sub-bullets under the first bullet below has had or would reasonably be expected to have a disproportionately adverse effect on us or our subsidiaries, taken as a whole, as compared to other for-profit and comparable or similar companies operating in the industries in which we and our subsidiaries operate, after taking into account our size relative to such other for-profit companies):

 

 

 

 

Except as required by applicable law, as otherwise contemplated or permitted by the Merger Agreement, or as agreed in writing by Gentiva (which consent may not be unreasonably withheld, conditioned or delayed) and subject to certain other exceptions, from the date of the Merger Agreement until the earlier of the valid

termination of the Merger Agreement and the Effective Time, we have agreed that we will, and that we will cause our subsidiaries to:

 

 

We have also agreed that, except as otherwise contemplated or required by the Merger Agreement, or as agreed in writing by Gentiva (which consent may not be unreasonably withheld, conditioned or delayed) from the date of the Merger Agreement until the earlier of the valid termination of the Merger Agreement and the Effective Time, we will not, and we will not permit any of our subsidiaries or hospices to, directly or indirectly:

 

 

 

 

In light of the operating restrictions described above, we disclosed to Gentiva that, as of the date of the Merger Agreement, we were considering developing or expanding inpatient units at eight of our current operating locations. Each development is currently in the planning stages. Some limited agreements have been entered into for two locations and additional agreements are being considered for developing or expanding the other inpatient units.

 

Additionally, we disclosed an outstanding offer of employment for a regional vice president that was made on May 19, 2010. Our board of directors is also evaluating alternatives for amending the restrictions under the noncompetition provisions of certain executive employment agreements to strengthen the restrictions and enhance enforceability of those provisions. Such amendments could include, without limitation, (i) increasing the length of the post-termination noncompetition period beyond 12 months, (ii) expanding the scope of the term “Competing Business” to include businesses that indirectly compete with us, and (iii) expanding the coverage of the term “Geographic Scope” beyond the cities or regions where we currently conduct our business.

 

We also disclosed to Gentiva that our board of directors has adopted a retention bonus program for a selected group of our corporate officers who do not have employment agreements with us, management at the vice president level and below and our support center employees. The individual bonus amount will vary for each grantee with a maximum aggregate bonus amount payable under the retention program of $1,500,000. The retention bonus will be earned by eligible employees on the sixtieth day following the consummation of the Merger if the employee remains employed as of such date. The bonus also is payable if the grantee is terminated by without “cause.” The bonus will be paid in a lump sum within 30 days of the applicable payout event.

 

In addition, we disclosed to Gentiva that our board of directors has adopted a change of control severance program for corporate officers who do not have employment agreements with Odyssey and certain other key corporate and regional level employees. All arrangements will require a double trigger based on an eligible termination of employment within one year following a change of control of Odyssey. Eligible employees will be entitled to between three months and one year of severance, and the payments will be due if an employee is terminated by us without “cause” or if the employee resigns for “good reason.” Severance payments will become due and payable in a cash lump sum within 30 days following an eligible termination. The maximum aggregate cost of the severance program, assuming all severance benefits are paid out, is approximately $8.7 million.

 

Reasonable Best Efforts.   Subject to the terms and conditions of the Merger Agreement, Odyssey, Gentiva and Merger Sub have agreed to use their reasonable best efforts to take, or cause to be taken, all actions or to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws to consummate the Merger as promptly as practicable. Additionally, Odyssey, Gentiva and Merger Sub have agreed to use their reasonable best efforts to obtain in a timely manner all necessary waivers, consents

and approvals and to effect all necessary registrations and filings, but are not required to waive or exercise any right under the Merger Agreement that is waivable or exercisable in the sole discretion of such party.

 

Proxy Statement; Stockholders’ Meeting.   We have agreed to prepare and file with the SEC this proxy statement and any other proxy materials seeking stockholder approval of the Merger and adoption of the Merger Agreement and to respond promptly to any comments made by the SEC with respect to this proxy statement. The Merger Agreement also provides that, as promptly as reasonably practicable after the date of the Merger Agreement, we will hold the stockholders’ special meeting, cause this proxy statement to be mailed to our stockholders and use reasonable best efforts to solicit our stockholder proxies in favor of the approval of the Merger and adoption of the Merger Agreement.

 

Access.   We have agreed that we and our subsidiaries will (i) upon reasonable prior written notice, give Gentiva and Merger Sub, their officers and a reasonable number of their employees and authorized representatives, reasonable access during normal business hours to our and our subsidiaries’ officers, properties, offices and other facilities and to their books and records, and (ii) furnish Gentiva and Merger Sub with financial and operating data and other information with respect to our and our subsidiaries’ business, properties and specified agreements as may be reasonably requested from time to time. We are not required to grant these access rights if such access would cause a violation of any agreement to which we or our subsidiaries is a party, or would cause a loss of attorney/client privilege or trade secret protection, or violate applicable laws. Such access must also not interfere unreasonably with our or our subsidiaries’ business or operations or result in significant interference with the prompt and timely discharge of our officers’ normal duties.

 

Other Agreements.   The Merger Agreement contains specified other agreements, including agreements relating to notifications of certain matters, confidentiality and publicity.

 

Obtaining the Financing

 

Gentiva and Merger Sub have agreed to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the Financing on the terms and conditions described in the Commitment Letter, including to:

 

 

Gentiva and Merger Sub have also agreed not to permit any material amendment or modification to be made to, or waiver of any material provision or remedy under, the Commitment Letter or the fee letter referred to in the Commitment Letter without our prior written consent (which consent cannot be unreasonably withheld, delayed or conditioned).

 

In the event any portion of the Financing becomes unavailable on the terms and conditions described in or contemplated by the Commitment Letter for any reason and that portion of the Financing is reasonably required to fund Gentiva’s and Merger Sub’s obligations under the Merger Agreement, each of Gentiva and Merger Sub must arrange to obtain, as promptly as practicable following the occurrence of such event (but by no later than October 20, 2010), alternative Financing from alternative sources in an amount sufficient to pay all funds necessary for the satisfaction of all of Gentiva’s and Merger Sub’s obligations under the Merger Agreement, including the payment of all amounts required to be paid pursuant to the Merger and the payment

of any debt required to be repaid or otherwise satisfied, including any breakage costs, in connection with the Merger and of all fees and expenses reasonably expected to be incurred in connection with consummating the Merger and the Financing.

 

Gentiva is required to give us prompt written notice of any material breach by any party to, or any condition not likely to be satisfied in, the Commitment Letter (or any alternative financing) of which Gentiva becomes aware or any termination (or threat of termination) of the Commitment Letter (or commitments for alternative financing). Gentiva is required to keep us informed on a reasonably current basis in reasonable detail of the status of its efforts to arrange and consummate the Financing (or alternative financing). In the event that the Commitment Letter is amended, replaced, supplemented or modified or alternative financing is obtained, Gentiva is required to promptly notify us and provide us with copies of any definitive agreements related thereto.

 

Obtaining the Financing or any alternative financing is not a condition to the obligations of Gentiva and Merger Sub under the Merger Agreement.

 

Cooperation of Odyssey

 

We have agreed to, and have agreed to cause our subsidiaries to (and to use our reasonable best efforts to cause our and their respective representatives to), use reasonable best efforts to provide such cooperation as may be reasonably requested by Gentiva and/or the Lenders in connection with the Financing (so long as such requested cooperation does not unreasonably interfere with our ongoing operations and the ongoing operations of our subsidiaries), including:

 

 

 

The parties have further agreed that we are not required to take any actions that would encumber any of our assets or that would constitute a breach of any of our material contracts or our material leases prior to consummation of the Merger. Also, prior to the Effective Time, we are not (A) required to pay any commitment or other similar fee relating to the Financing or (B) have any liability or any obligation under any credit agreement or any related document or any other agreement or document related to the Financing or any alternative financing that Gentiva may raise in connection with the Merger, other than the Merger Agreement. Furthermore, (i) all non-public or other confidential information provided by us or our representatives must be kept confidential in accordance with the confidentiality agreement between us and Gentiva, except that Gentiva and Merger Sub are permitted to disclose such information in accordance with the Commitment Letter, and (ii) we will be permitted a reasonable period to comment on those portions of the confidential information memoranda circulated to potential financing sources that contain or are based upon any such non-public or other confidential information. Gentiva has acknowledged and agreed that neither we nor our subsidiaries will incur any liability to any person prior to the Effective Time in connection with any Financing (or any alternative financing). Gentiva is required to promptly, upon our request, reimburse us for all out-of-pocket costs (including reasonable attorneys’ fees) incurred by us or our subsidiaries in connection with our cooperation described above and Gentiva and Merger Sub will jointly and severally indemnify and hold harmless us, our subsidiaries and our and our subsidiaries’ respective directors, officers and representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments, and penalties suffered or incurred by any of us in connection with the arrangement of the Financing (or any alternative financing) and any information used in connection therewith. The foregoing indemnification obligation survives the consummation of the Merger and any termination of the Merger Agreement.

 

Conditions to Each Party’s Obligations.   Each party’s obligations to consummate the Merger are subject to the satisfaction or waiver of specified conditions on or prior to the Effective Time, including:

 

 

 

Conditions to Gentiva’s and Merger Sub’s Obligations.   The obligations of Gentiva and Merger Sub to consummate the Merger are subject to the satisfaction or waiver by Gentiva and Merger Sub on or before the Effective Time of the following additional conditions:

 

 

Conditions to Odyssey’s Obligations.   Our obligations to consummate the Merger are subject to the satisfaction or waiver by us on or prior to the Effective Time of the following conditions:

 

 

The waiver of any condition described above by the relevant party is subject to, and limited to the extent of, applicable laws.

 

The Merger Agreement provides that, until 11:59 p.m. (Central Time) on June 22, 2010, we and our representatives have the right, under the direction of our board of directors, to directly or indirectly:

 

 

After 11:59 p.m. (Central Time) on June 22, 2010 until the earlier to occur of the Effective Time or the termination of the Merger Agreement, we have agreed to, and to cause our subsidiaries to, and will direct our and our subsidiaries’ representatives to immediately cease and terminate any existing solicitation, encouragement, discussion or negotiation with any third party with respect to an Acquisition Proposal. We have also agreed that we will not, nor will we permit our subsidiaries to, nor will we authorize our representatives to, and we will not publicly propose to, directly or indirectly (other than with respect to Gentiva and Merger Sub):

 

 

provided, that notwithstanding any of these restrictions, after 11:59 p.m. (Central Time) on June 22, 2010 until the earlier to occur of the approval of the Merger and adoption of the Merger Agreement by our stockholders or the termination of the Merger Agreement, we and our representatives may continue to engage in discussions and negotiations with and not request the return or destruction of non-public information from any person who submits an Acquisition Proposal by 11:59 p.m. (Central Time) on June 22, 2010 (which has not been rejected or withdrawn by such date and time) that on or prior to June 22, 2010, our board of directors determines in good faith (after consultation with Goldman Sachs or another financial advisor and outside legal counsel) constitutes or is reasonably likely to lead to a Superior Proposal (as defined below). We refer to such person as an “Excluded Party”.

 

Notwithstanding any of these restrictions, if at any time after 11:59 p.m. (Central Time) on June 22, 2010 and prior to the approval of the Merger and adoption of the Merger Agreement by our stockholders, (i) we receive a written Acquisition Proposal from a third party, (ii) such Acquisition Proposal did not result from a material breach of our agreement not to solicit such proposals (as described above), (iii) our board of directors determines in good faith (after consultation with Goldman Sachs or another independent financial advisor of nationally recognized reputation and outside legal counsel) that such Acquisition Proposal constitutes or would be reasonably likely to lead to a Superior Proposal, and (iv) our board of directors determines in good faith (after consultation with Goldman Sachs or another independent financial advisor of nationally recognized reputation and outside legal counsel) that the failure to furnish information to and enter into, maintain and participate in discussions with such party would be reasonably likely to be inconsistent with its fiduciary

duties to our stockholders under applicable laws, then we are permitted to furnish information and data to the third party making the Acquisition Proposal and enter into, maintain and participate in discussions or negotiations with the third party making the Acquisition Proposal; provided that we have agreed not to furnish any non-public information except pursuant to an acceptable confidentiality agreement and we must promptly provide to Gentiva any material non-public information concerning us that is provided to such third party and was not previously provided to Gentiva. In addition, we may (x) following the receipt of an Acquisition Proposal, contact the third party making such Acquisition Proposal in order to clarify and understand the terms and conditions of such proposal so as to determine whether such Acquisition Proposal constitutes or would be reasonably likely to lead to a Superior Proposal or (y) direct any person to the Merger Agreement.

 

An “Acquisition Proposal” means any inquiry (in writing or otherwise), proposal, indication of interest or offer by any third party (other than an offer or proposal by Gentiva or Merger Sub) that relates to:

 

 

A “Superior Proposal” is any bona fide written Acquisition Proposal that our board of directors determines in good faith (after consultation with Goldman Sachs or another financial advisor and outside legal counsel ), taking into account, among other things, all legal, financial, regulatory, and other aspects of the Acquisition Proposal and the third party making the Acquisition Proposal, including the financing terms (and certainty of financing) thereof and the likelihood of consummation, if consummated, would result in a transaction that is more favorable to our stockholders from a financial point of view than the transactions contemplated by the Merger Agreement (taking into account any adjustment to the terms and conditions proposed by Gentiva in an offer that is in writing in response to such Acquisition Proposal and not revocable during the time period that Odyssey cannot accept the Acquisition Proposal, and any termination fees); provided that, for purposes of the definition of “Superior Proposal,” references in the definition of “Acquisition Proposal” to “25% or more” means “more than 50%.”

 

We are required, as promptly as practicable (and in any event within 24 hours), to notify and advise Gentiva of any Acquisition Proposal, which notification must include a copy of the applicable written Acquisition Proposal (or, if oral, the material terms and conditions of such Acquisition Proposal) and the identity of the third party making such Acquisition Proposal. We are required thereafter to keep Gentiva reasonably informed on a reasonably current basis of the status of any material developments, discussions or negotiations regarding any such Acquisition Proposal, and the material terms and conditions thereof (including any change in price, structure or form of consideration), including by providing a copy of material documentation or correspondence relating thereto that is exchanged between the person making such Acquisition Proposal and us within 24 hours after the exchange thereof.

 

We have also agreed not to release or permit the release of any person from, or to waive or permit the waiver or termination of any provision of, any confidentiality, “standstill” or similar agreement to which any of we or any of our subsidiaries is a party and to use our reasonable best efforts to enforce or cause to be enforced to the fullest extent permitted by law each such agreement at the request of Gentiva. Nothing in the Merger Agreement, however, prohibits us from rendering inapplicable, exempting or taking any action to

render inapplicable or exempt any third party from any standstill agreement or similar arrangement to permit such third party to make an Acquisition Proposal.

 

Gentiva and Merger Sub have agreed that neither they nor any of their respective subsidiaries or other affiliates may, and that each will use its reasonable best efforts to cause their respective representatives not to, intentionally enter into, or seek to enter into any agreement, arrangement or understanding with a potential bidding third party (or any financing sources or representatives of such third party) that has the purpose or effect of interfering with our ability to seek and obtain a Superior Proposal from such third party (including interfering with the ability of Gentiva to hold discussions and negotiations with such third party in connection therewith) in accordance with our rights under the Merger Agreement.

 

At any time before the approval of the Merger and adoption of the Merger Agreement by our stockholders, our board of directors may, if our board of directors or any such committee determines in good faith (after consultation with Goldman Sachs or another financial advisor and outside legal counsel), that the failure to do so would be reasonably likely to be inconsistent with the directors’ fiduciary duties to our stockholders under applicable laws:

 

 

provided that in the case of a Superior Proposal, no Company Change in Recommendation may be made and no termination of the Merger Agreement may be made, in either case:

 

 

and provided that in the case of an Intervening Event, no Company Change in Recommendation may be made:

 

 

 

A “Company Change in Recommendation” is an action by our board of directors to:

 

 

We are not prohibited under the Merger Agreement from (i) taking and disclosing a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act or (ii) making any disclosure to our stockholders if, in the good faith judgment of the our board of directors, after consultation with outside legal counsel, the failure to do so would be inconsistent with the our board of directors’ fiduciary duties to our stockholders under applicable laws or any disclosure requirements under applicable laws.

 

The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time:

 

 

 

 

 

 

 

We have agreed to pay Gentiva a termination fee of $24,100,000 if the Merger Agreement is terminated by us in order to accept a Superior Proposal by an Excluded Party.

We have agreed to pay Gentiva a termination fee of $28,900,000 in cash if the Merger Agreement is terminated:

 

 

 

 

 

If Gentiva receives full payment of the fees described above, subject to limited exceptions, the receipt of the fees described above will be deemed to be liquidated damages for any and all losses or damages suffered or incurred by Gentiva, Merger Sub, any of their respective affiliates or any other person in connection with the Merger Agreement (and the termination hereof), the Merger (and the abandonment thereof) or any matter forming the basis for such termination, and none of Gentiva, Merger Sub, any of their respective affiliates or any other person will be entitled to bring or maintain any claim, action or proceeding against us or any of our affiliates for damages or any equitable relief arising out of or in connection with the Merger Agreement, the Merger or any matters forming the basis for such termination.

 

Except as described above, in the event of termination of the Merger Agreement in accordance with its terms, it will become void and there will be no liability or obligation on the part of any party thereto except with respect to certain matters involving confidentiality, payment of the termination fees described above, the payment of our costs related to the financing for the Merger, and certain miscellaneous provisions of the Merger Agreement, which provisions will survive such termination; provided, however, that no such termination will relieve any party from liability for any damages, including (i) in the case (and for the benefit) of us, damages based on the consideration that would have otherwise been payable to our stockholders if the Merger were consummated and (ii) in the case (and for the benefit) of Gentiva, damages based on the operating and financial synergies and other economic benefits that would have otherwise accrued to Gentiva if the Merger were consummated, in the case of each of the foregoing clauses (i) and (ii), for a knowing or intentional material breach of a representation or warranty or a knowing or intentional material breach of any obligation under the Merger Agreement made or allowed to occur or fraud. The failure, for any reason, of Gentiva to consummate the Merger as required under the Merger Agreement would constitute a knowing or intentional breach by Gentiva of the Merger Agreement for which Odyssey would be entitled to seek damages, including damages based on the consideration that would have otherwise been payable to Odyssey’s stockholders if the Merger was consummated.

 

The Merger Agreement provides that for a period of six years from the Effective Time, the Surviving Corporation will indemnify and hold harmless those persons who were directors or officers of Odyssey at any time before the Effective Time against all claims, losses, liabilities, damages, judgments, inquiries, fines and

reasonable fess costs and expenses, including attorneys’ fees and disbursements incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was an officer, director, employee, fiduciary or agent of Odyssey or any of its subsidiaries, for matters existing or occurring at or prior to the Effective Time (including the Merger) to the fullest extent permitted by law. In this regard, the Surviving Corporation will also be required to advance expenses as incurred to an indemnified officer or director to the fullest extent permitted by law. Persons who were directors or officers of Odyssey have the right, as contemplated by Delaware law, to require that a determination of whether such former director or officer is entitled to indemnification by the Surviving Corporation be made by special, independent legal counsel selected by such former director or officer and approved by the Surviving Corporation (which approval should not be unreasonably withheld, conditioned or delayed), and who has not otherwise performed material services for Odyssey or the Surviving Company within the last three years.

 

The Merger Agreement also provides that, for a period of six years after the Effective Time, the indemnification or advancement of expenses provisions in the respective certificate of incorporation and bylaws or similar organizational or governing documents of the Surviving Corporation and its subsidiaries will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of directors and officers than the provisions that are currently included in such documents.

 

In addition, the Merger Agreement provides that Gentiva will maintain or cause to be maintained Odyssey’s existing policies of directors’ and officers’ liability insurance for a period of six years from the Effective Time (or policies of substantially equivalent coverage and amounts); provided that Gentiva is not required to pay aggregate premiums for such insurance in excess of 300% of the aggregate premiums paid by Odyssey in 2009 for such insurance coverage. Alternatively, at our option, we may obtain, before the Effective Time, a six-year run-off policy for our directors’ and officers’ liability insurance; provided that the premium for such policy does not exceed 300% of the aggregate premiums paid by Odyssey in 2009 for its directors’ and officers’ liability insurance policies.

 

Gentiva will act to ensure that each employee of Odyssey who is employed by Gentiva or one of its subsidiaries after the Effective Time receives full credit (for all purposes, including eligibility to participate, vesting, vacation entitlement and severance benefits, but excluding benefit accrual under any defined benefit plan) for service with us or any of our subsidiaries under each of the comparable employee benefit plans, programs and policies of Gentiva, the Surviving Corporation or the relevant subsidiary, as applicable, in which such continuing employee becomes or may become a participant without allowing such service recognition to result in any duplication of benefits. Each health or welfare benefit plan maintained by Gentiva, the Surviving Corporation or the relevant subsidiary for the benefit of any continuing employees will waive any eligibility waiting periods, any evidence of insurability requirements and the application of any pre-existing condition limitations under such plan and grant each continuing employee credit under such plan for all amounts paid by such continuing employee under any similar benefit plan for the plan year that includes the closing date of the Merger for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the applicable plan maintained by Gentiva, the Surviving Corporation or the relevant subsidiary, as applicable, for the plan year in which the closing date of the Merger occurs. Gentiva will assume all employment-related claims, liabilities and obligations with respect to each of the continuing employees, whether known or unknown, and any other claims, liabilities or obligations arising out of the employment of or termination of employment of any of the continuing employees whether or not such claims, liabilities and/or obligations are related to periods before, on or after the closing date of the Merger. On and after the closing date of the Merger, Gentiva and its affiliates will retain and indemnify, defend and hold harmless us and our subsidiaries and their employees and former employees against any and all claims, liabilities and/or obligations assumed by Gentiva or its affiliates pursuant to the Merger Agreement.

 

The Merger Agreement may be amended or waived by a signed writing by Odyssey, Gentiva and Merger Sub (or in the case of a waiver, by the party against whom the waiver is to be effective). If any amendment or waiver after the approval of the Merger and adoption of the Merger Agreement by our stockholders will require further approval of our stockholders under applicable laws or in accordance with the Nasdaq Marketplace Rules, the effectiveness of such amendment or waiver will be subject to the approval of our stockholders.

 

Odyssey, Gentiva and Merger Sub have agreed that irreparable damage would occur and that the parties would not have any adequate remedy at law if any of the provisions of the Merger Agreement were not performed in accordance with their specific terms or were otherwise breached, except for the specific performance remedy described below. Each party is entitled to an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in any court of the State of Delaware or any federal court sitting in the State of Delaware, without proof of actual damages, and to waive any requirement for the securing or posting of any bond in connection with such remedy, this being in addition to any other remedy to which they are entitled at law or in equity (subject to the limitations set forth in the Merger Agreement), other than as limited hereunder. The parties also agreed that (i) by seeking specific performance, a party does not in any respect waive its right to seek any other form of relief that may be available to a party under the Merger Agreement (including monetary damages) if the Merger Agreement is terminated or if specific performance is not available or otherwise is not granted, and (ii) the parties are not required to institute any proceeding for (or limit any party’s right to institute any proceeding for) specific performance prior or as a condition to exercising any termination right under the Merger Agreement (and pursuing damages after such termination), nor does the commencement of any legal proceeding for specific performance restrict or limit any party’s right to terminate the Merger Agreement or pursue any other remedies under the Merger Agreement that may be available then or thereafter. All costs of Odyssey, Gentiva and Merger Sub incurred in connection with any action brought by Odyssey, Gentiva or Merger Sub relating to the terms and provisions of the Merger Agreement will be paid by Odyssey if Gentiva is successful on the merits in such action and will be paid by Gentiva if Odyssey is successful on the merits in such action. None of the Lenders will have any liability to us or any of our controlling persons, directors, officers, employees, agents, attorneys, affiliates, members, managers, general or limited partners, stockholders, and will not be obligated to any of them, or anyone claiming by or through them, to pay consequential, special, multiple, punitive or exemplary damages including, but not limited to, damages arising from loss of profits, business opportunities or goodwill in respect of any breach or failure to comply with the Merger Agreement or in respect of any of the transactions contemplated by the Merger Agreement (including the Financing and the Commitment Letter).

CURRENT MARKET PRICE OF COMMON STOCK

 

Odyssey common stock is traded on The Nasdaq Global Select Market under the symbol “ODSY.” The following table sets forth the high and low sales prices of Odyssey common stock for the periods indicated as reported by The Nasdaq Global Select Market:

 

 

The closing price of our common stock, as reported on The Nasdaq Global Select Market on May 21, 2010, the last full trading day before we publicly announced the signed Merger Agreement with Gentiva, was $19.29 per share. The closing price of our common stock on The Nasdaq Global Select Market on June 9, 2010, the last full trading day before the filing of this proxy statement, was $26.55 per share. You are encouraged to obtain current market quotations for Odyssey common stock in connection with voting your shares. Following the Merger, there will be no further market for our common stock.

 

We have never declared or paid any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.

 

The following table sets forth as of June 4, 2010 certain information regarding the amount of our common stock beneficially owned (as defined by the SEC’s rules and regulations) by:

 

 

Unless otherwise indicated, all stockholders set forth below have our same principal business address. We have determined beneficial ownership in accordance with the rules of the SEC. Unless otherwise indicated, to our knowledge, the persons included in this table have sole voting and investment power with respect to all the shares of our common stock beneficially owned by them, subject to applicable community property laws. The number of shares beneficially owned by a person includes shares of common stock that are subject to Options or Restricted Stock Units that are either currently exercisable or exercisable within 60 days of June 4, 2010. These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person. These shares are not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person. On June 4, 2010, 33,683,913 shares of common stock were outstanding.

 

 

 

 

 

Under the DGCL, you have the right to dissent from the Merger and to receive payment in cash for the fair value of your shares of Odyssey common stock as determined by the Delaware Court of Chancery, together with interest, if any, as determined by the court, in lieu of the consideration you would otherwise be entitled to pursuant to the Merger Agreement. These rights are known as appraisal rights. Stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. We will require strict compliance with these statutory provisions.

 

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to dissent from the Merger and perfect appraisal rights.

 

This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C attached to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 the DGCL

may result in a termination or waiver of your appraisal rights. All references in this summary to a “stockholder” are to the record holder of shares of Odyssey common stock unless otherwise indicated.

 

Section 262 of the DGCL requires that stockholders for whom appraisal rights are available be notified not less than 20 days before the stockholders’ meeting to vote on the Merger that appraisal rights will be available. A copy of Section 262 of the DGCL must be included with such notice. This proxy statement constitutes our notice to Odyssey’s stockholders of the availability of appraisal rights in connection with the Merger in compliance with the requirements of Section 262 of the DGCL. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex C to this proxy statement since failure to timely and properly comply with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights under Delaware law.

 

If you elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

 

If you fail to comply with any of these conditions and the Merger is consummated, you will be entitled to receive the Merger Consideration, but you will have no appraisal rights with respect to your shares of Odyssey common stock.

 

All demands for appraisal should be addressed to Odyssey HealthCare, Inc., 717 North Harwood Street, Suite 1500, Dallas, Texas 75201, Attention: Secretary, and must be delivered before the vote on the Merger Agreement is taken at the special meeting and should be executed by, or on behalf of, the record holder of the shares of common stock. The demand must reasonably inform us of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares.

 

To be effective, a demand for appraisal by a holder of common stock must be made by, or in the name of, such registered stockholder, fully and correctly, as the stockholder’s name appears on his or her stock certificate(s). Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to us. The beneficial holder must, in such cases, have the registered owner, such as a brokerage firm, bank, trust or other nominee, submit the required demand in respect of those shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary; and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares as

a nominee for others, may exercise his or her right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

 

If you hold your shares of common stock in a brokerage account or in other nominee form and you wish to exercise appraisal rights, you should consult with your broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

 

Within 10 days after the effective date of the Merger, the surviving corporation must give written notice that the Merger has become effective to each stockholder who has properly delivered a written demand for appraisal as described above and who did not vote in favor of the Merger Agreement and the Merger. At any time within 60 days after the effective date of the Merger, any stockholder who has demanded an appraisal, and who has not commenced an appraisal proceeding or joined that proceeding as a named party, has the right to withdraw the demand and to accept the cash payment specified by the Merger Agreement for his or her shares of common stock; after this period, the stockholder may withdraw such demand for appraisal only with the consent of the surviving corporation. Within 120 days after the effective date of the Merger, any stockholder who has complied with Section 262 of the DGCL will, upon written request to Odyssey as the surviving corporation, be entitled to receive a written statement setting forth the aggregate number of shares not voted in favor of the Merger Agreement and the Merger and with respect to which demands for appraisal rights have been received and the aggregate number of holders of such shares. A person who is the beneficial owner of shares of common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, request from the corporation the statement described in the previous sentence. Such written statement will be mailed to the requesting stockholder within 10 days after such written request is received by the surviving corporation or within 10 days after expiration of the period for delivery of demands for appraisal, whichever is later. Within 120 days after the effective time, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL and who is otherwise entitled to appraisal rights may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. A person who is the beneficial owner of shares of Odyssey common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file the petition described in the previous sentence. Upon the filing of the petition by a stockholder, service of a copy of such petition will be made upon Odyssey, as the surviving corporation. The surviving corporation has no obligation to file such a petition in the event there are dissenting stockholders. Accordingly, the failure of a stockholder to file such a petition within the period specified could nullify the stockholder’s previously written demand for appraisal. There is no present intent on the part of Odyssey to file an appraisal petition, and stockholders seeking to exercise appraisal rights should not assume that Odyssey will file such a petition or that Odyssey will initiate any negotiations with respect to the fair value of such shares. Accordingly, stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.

 

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to Odyssey as the surviving corporation, Odyssey as the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Delaware Court of Chancery with a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. The Delaware Court of Chancery is empowered to conduct a hearing upon the petition, and to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided thereby. The Delaware Court of Chancery may require the stockholders who have demanded appraisal for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

 

After determination of the stockholders entitled to appraisal of their shares of common stock, the Delaware Court of Chancery will appraise the shares, determining their fair value exclusive of any element of value arising

from the accomplishment or expectation of the Merger, together with interest, if any. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon accrued during the pendency of the proceeding, if the Delaware Court of Chancery so determines, to the stockholders entitled to receive the same, upon surrender to the surviving corporation of the certificates representing those shares.

 

In determining fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.”

 

Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.”

 

You should be aware that the fair value of your shares as determined under Section 262 of the DGCL could be more than, the same as, or less than the value that you are entitled to receive under the terms of the Merger Agreement.

 

Costs of the appraisal proceeding may be imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Delaware Court of Chancery as the Court deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any stockholder who had demanded appraisal rights will not, after the effective date of the Merger, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date before the effective date of the Merger however, if no petition for appraisal is filed within 120 days after the effective date of the Merger, or if the stockholder delivers a written withdrawal of his or her demand for appraisal and an acceptance of the Merger within 60 days after the effective date of the Merger or thereafter with the written approval of the surviving corporation, then the right of that stockholder to appraisal will cease and that stockholder will be entitled to receive the cash payment for shares of his, her or its shares of Odyssey common stock pursuant to the Merger Agreement. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the prior approval of the Court, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will maintain the right to withdraw its demand for appraisal and to accept the cash that such holder would have received pursuant to the Merger Agreement within 60 days after the effective date of the Merger.

 

In view of the complexity of Section 262 of the DGCL, stockholders who may wish to dissent from the Merger and pursue appraisal rights should consult their legal advisors.

SUBMISSION OF STOCKHOLDER PROPOSALS

 

If the Merger is consummated, Odyssey will not have public stockholders and there will be no public participation in any future meetings of stockholders. However, if the Merger is not consummated, Odyssey expects to hold the 2011 Annual Meeting of Stockholders.

A stockholder proposal submitted pursuant to Rule 14a-8 of Exchange Act must be received by our Secretary at 717 North Harwood Street, Suite 1500, Dallas, Texas 75201, no later than December 6, 2010, to be included in our board of directors’ solicitation of proxies relating to the 2011 Annual Meeting of Stockholders.

 

Pursuant to our bylaws, a stockholder must deliver notice, in the form specified in our bylaws, to our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the Annual Meeting in order to (1) nominate persons for election to the board of directors at the 2011 Annual Meeting or (2) bring business before the 2011 Annual Meeting. However, if the date of our 2011 Annual Meeting is changed by more than 30 days from the anniversary date of the 2010 Annual Meeting, notice must be delivered to our principal executive offices not later than the close of business on the 10th day following the earlier of (1) the day on which notice of the date of the meeting is mailed or (2) public disclosure of the meeting date is made.

 

With respect to proxies submitted for the 2011 Annual Meeting, our management will have discretionary authority to vote on any matter for which we do not receive notice by the date specified in the advance notice provisions of our bylaws described above, pursuant to Rule 14a-4(c)(1) of the Exchange Act.

 

 

Some brokers, banks, trusts and other nominees may be participating in the practice of “householding” proxy statements. This means that only one copy of this notice and proxy statement may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of a proxy statement either now or in the future, please (1) mail your request to Odyssey HealthCare, Inc., 717 North Harwood Street, Suite 1500, Dallas, Texas 75201, Attention: Investor Relations, or (2) call our Investor Relations department at (+1) 214-922-9711. Upon written or oral request, we will provide a separate copy of the proxy statement. In addition, security holders sharing an address can request delivery of a single copy of a proxy statement if you are receiving multiple copies upon written or oral request at the address and telephone number stated above.

 

 

Odyssey files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy this information at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC’s website at http://www.sec.gov. You also may obtain free copies of the documents we file with the SEC by going to our Investor Relations page on our corporate web site at www.odsyhealth.com (click on “Investor Relations”, then on “SEC Filings”). Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated herein by reference.

 

Odyssey’s annual, quarterly and current reports are not incorporated by reference in this proxy statement or delivered with it, but are available, without exhibits, to any person, including any beneficial owner, to whom this proxy statement is delivered, without charge, by contacting Investor Relations by telephone at (+1) 214-922-9711 or by mail at Odyssey HealthCare, Inc., 717 North Harwood Street, Suite 1500, Dallas, Texas 75201, Attention: Investor Relations.

 

THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED 2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

ANNEX A

 

EXECUTION COPY

 

 

AGREEMENT AND PLAN OF MERGER
among
GENTIVA HEALTH SERVICES, INC.,
GTO ACQUISITION CORP.
and
ODYSSEY HEALTHCARE, INC.
Dated as of May 23, 2010

 

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