ISS recommends stockholders vote for a majority of Enhabit director nominees

Enhabit, Inc., a leading home health and hospice provider, today announced that Institutional Shareholder Services (ISS) has recommended stockholders vote “FOR” a majority of Enhabit’s director nominees in connection with the Company’s Annual Meeting of Stockholders scheduled for July 25, 2024.

Enhabit’s definitive proxy materials and other materials regarding the Board of Directors’ recommendations for the 2024 Annual Meeting can be found at investors.ehab.com/2024-annual-meeting/.

In reaching its conclusion, ISS noted in its report¹:

The company's two most recent quarters have been promising and there are a number of underlying metrics which point to building momentum in the company's home health and hospice business. Further, the board has been receptive to investor input, reaching a settlement with two shareholders and adding two directors in 2023, and running a public sales process as requested by the dissident. The board has also demonstrated some openness to a settlement with the dissident. These factors, along with the dissident's prior intense focus on a sale of the company, suggest that majority change at the board level may not be necessary at this point, even if the addition of industry-relevant expertise may be beneficial.

Among the targeted management nominees, we note that [Tina] Brown-Stevenson has relevant experience with large national payors, and [Jeffrey] Bolton has relevant experience with hospitals and health networks which are referral sources. … Although [Charles] Elson served as a long-tenured member of [Encompass] prior to the EHAB spin-off, we note that he has extensive public company board and corporate governance expertise; moreover, Elson's prior experience as a dissident candidate will likely be beneficial in bringing both sides together after the conclusion of this contest. Lastly, [Stuart] McGuigan brings valuable IT and c-suite experience at large public companies and additional public company board experience. ISS is additionally supportive of the election of EHAB CEO [Barbara] Jacobsmeyer and incumbent director [Barry] Schochet, both of whom are not being targeted by the dissident.

Further, the board has exhibited a willingness to engage with its shareholders, as evidenced by the March 2023 settlement with Cruiser Capital and Harbour Point which expanded the board by two members, and the fact that it ran a publicly announced sales process in response to demands from the dissident in August 2023. … Though the dissident expressed disappointment in the outcome of the sales process and stated that it was "profoundly skeptical of the integrity and effectiveness of the Company’s strategic review process," there has been no evidence presented that the process was improperly run or that specific bidders may have been discouraged from making a formal offer. Ultimately, given the disclosures to date, the sales process appears to have been sufficiently broad and thorough and provides evidence of the board's openness to a potential sale.

Enhabit issued the following statement:

Enhabit has just passed its two-year anniversary as a public company following its separation from Encompass Health Corporation. During that period, in the face of substantial industry and company-specific headwinds, our Board and management team stabilized Enhabit’s business and built the necessary infrastructure to enable stockholder value creation as a separate public company.

We are pleased that ISS recognizes our performance over the last two quarters and agrees with the Company that shifting course now and handing control of the Board to AREX is not in the best interests of the Company’s stockholders.

Enhabit’s Board was intentionally designed to have the right mix of expertise to understand the key drivers of the business, as well as the functions that are necessary to oversee the management of a stand-alone, public company. We believe Enhabit’s nine nominees are best positioned to oversee our value creation initiatives and deliver enhanced stockholder value.

We disagree with ISS’s recommendation as it relates to Enhabit’s highly experienced nominees Gregory Rush, Erin Hoeflinger and Susan La Monica. We believe that critical experience would be lost by replacing these directors with AREX’s nominees, including (1) public company accounting, internal control and compensation expertise needed to form well-functioning Audit and Human Capital Committees, (2) deep experience with key payors most relevant to Enhabit, and (3) C-suite level public company human resources perspective.

Gregory Rush: Sitting CFO with deep and current experience overseeing public company financial controls and managing financial organizations and interfacing with auditors

• As an executive leader in corporate finance, Mr. Rush developed innovative compensation programs and retention strategies, increasing retention rates of clinical research staff and nurses, contributing to operational performance and significant shareholder value creation.
• Led the transformation of Parexel, a global clinical research organization with nearly 4,000 medical doctors, physicians and nurses and its capital structure as part of a shareholder value creation strategy, delivering over 2.5x return to shareholders in under four years.
• Well-qualified to chair Audit and Finance Committee, with ISS recognizing Rush’s “more than 30 years of experience in finance and audit,” given his current role as CFO at Parexel, and the time he has put in with management and the Company’s external auditors to understand and address accounting and internal control risks specific to Enhabit.

Erin Hoeflinger: Proven track record navigating industry cycles as a senior executive at two of the nation’s largest health insurance and managed care organizations, with payor industry experience essential as Enhabit implements its payor innovation strategy to grow its payor network

• Developed a deep understanding of the healthcare payor industry through her service at Anthem, a health insurance provider, with oversight responsibilities, including contracting results, for more than 17 million members and $35 billion in revenue across the company’s 14 commercial states.
• Contributes firsthand experience overseeing operations, sales and consumer experience, managing business lines for both healthcare and prescription coverage, as well as insights into the full spectrum of reimbursement models including fee-for-service, value-based care and alternative payment systems.
• Experienced director with service on multiple public company boards, as well as Amedisys’ advisory board.
• Brings expertise in major operational turnarounds – BCBS of Maine and the strategic integration of CVS and Aetna – the largest healthcare merger in U.S. history.

Susan La Monica: Invaluable C-suite experience as Enhabit strives to bolster its talent pool and improve retention

• Established CHRO with over 25 years of experience in senior executive leadership positions in human capital management.
• Her understanding of the complexities of managing a workforce in a widely dispersed branch banking system is directly relevant to the challenges presented in managing Enhabit’s workforce.
• Ms. La Monica also supports Enhabit’s current CHRO in designing compensation and incentive plans that align with the Company’s strategic priorities, and in overseeing executive compensation matters.
• Well-qualified to chair Compensation and Human Capital Committee given the time she has put in with management and the Company’s independent compensation consultant to understand and address compensation risks unique to Enhabit and design compensation programs that balance retention and pay for performance.

We urge our stockholders to protect the value of their investment and vote the YELLOW proxy card today “FOR” ONLY Enhabit’s nine highly qualified nominees – Jeffrey W. Bolton, Tina L. Brown-Stevenson, Charles M. Elson, Erin P. Hoeflinger, Barbara A. Jacobsmeyer, Susan A. La Monica, Stuart M. McGuigan, Gregory S. Rush and Barry P. Schochet.

If stockholders have questions or need assistance voting their shares, please contact:

MacKenzie Partners, Inc.

Toll-Free: 1-800-322-2885

Or

Email: [email protected]

About Enhabit Home Health & Hospice

Enhabit Home Health & Hospice (Enhabit, Inc.) is a leading national home health and hospice provider working to expand what’s possible for patient care in the home. Enhabit's team of clinicians supports patients and their families where they are most comfortable, with a nationwide footprint spanning 255 home health locations and 112 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com.