The Company provides several equity-based compensation plans under which the Company’s officers, employees and non-employee directors may participate, including (i) the 2004 Equity Incentive Plan (amended and restated as of March 16, 2011, as further amended by Amendment Nos. 1 and 2 thereto) (“2004 Plan”), (ii) the Stock & Deferred Compensation Plan for Non-Employee Directors (“DSU Plan”) and (iii) the Employee Stock Purchase Plan (“ESPP”). Collectively, these equity-based compensation plans permit the grants of (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) restricted stock, (v) performance units, (vi) stock units and (vii) cash, as well as allow employees to purchase shares of the Company’s common stock under the ESPP at a pre-determined discount.

Under the 2004 Plan, 7.8 million shares of common stock are available for grant, which includes the additional 1.6 million shares of common stock last authorized on May 9, 2013 by the shareholders of the Company for issuance under the 2004 Plan. The maximum number of shares of common stock for which grants may be made in any calendar year to any 2004 Plan participant is 500,000. Under the 2004 Plan, stock options granted on and after February 25, 2009 will have a maximum term of seven years. Options granted prior to February 25, 2009 retain their ten year term. As of December 31, 2013, the Company had 1,850,597 shares available for issuance under the 2004 Plan.

For the year ended December 31, 2013, the Company recorded equity-based compensation expense, as calculated on a straight-line basis over the vesting periods of the related equity instruments, of $8.2 million as compared to $7.6 million and $7.5 million for the corresponding periods of 2012 and 2011, which were reflected as selling, general and administrative expense in the consolidated statements of comprehensive income. During 2011, the Company recorded non-cash compensation expense of approximately $0.4 million associated with modifications of stock options for a former executive officer, which is reflected as selling, general and administrative expense in the consolidated statements of comprehensive income.

Stock Options

The weighted average fair values of the Company’s stock options granted during 2013, 2012 and 2011 calculated using the Black-Scholes option pricing model and other assumptions used in the option pricing model, were as follows:



	For the Year Ended
	December 31, 2013			December 31, 2012			December 31, 2011
Weighted average fair value of options granted	$	6.02		$	4.32		$	3.46
Risk-free interest rate	0.29% - 0.54%			0.77% - 0.95%			0.91		%
Expected volatility	76% - 79%			64% - 65%			60		%
Contractual life	7 years			7 years			7 years
Expected life	3.4 - 5.4 years			3.4 - 5.4 years			4.5 - 6.5 years
Expected dividend yield	—		%	—		%	—		%

For the year ended December 31, 2013, the Company issued 375,000 stock options that are both time-vesting (one-third each year) and carry a market vesting feature based on the average 30-day closing stock price of the Company's common stock based on stock price thresholds of $14, $16, and $18 (each covering one-third of the options granted). The fair value of the stock options granted ranged from $5.22 to $5.87 and was determined using the Monte Carlo stock option valuation model. Assumptions used in the model included volatility of 67 percent, risk-free interest rate of 0.60 percent, zero percent dividend yield, a forfeiture rate based on the Company's historical experience and a contractual life of seven years.

Stock option grants in 2011 through 2013 vest over a three-year period based on a vesting schedule that provides for one-third vesting after each year. Stock option grants in 2010 fully vest over a four-year period based on a vesting schedule that provides for one-half vesting after year two and an additional one-fourth vesting after each of years three and four. The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock price over a period corresponding to the expected term of the stock option. Forfeitures are estimated utilizing the Company’s historical forfeiture experience. The expected life of the Company’s stock options is based on the Company’s historical experience of the exercise patterns associated with its stock options.

A summary of Gentiva stock option activity as of December 31, 2013 and changes during the year then ended is presented below:



	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance as of December 31, 2012	3,752,418		$	15.99
Granted	642,700		10.74
Exercised	(97,455	)	5.60
Cancelled	(292,074	)	15.98
Balance as of December 31, 2013	4,005,589		$	15.40	4.4	$	8,651,115
Exercisable options	2,829,292		$	17.58	3.9	$	4,771,998
Shares expected to vest as of December 31, 2013	1,139,228		$	10.19	5.5	$	3,785,503

During 2013, the Company granted 642,700 stock options to employees under its 2004 Plan at an average exercise price of $10.74 and a weighted-average, grant-date fair value of $6.02. The total intrinsic value of options exercised during 2013, 2012 and 2011 was $0.6 million, $0.3 million and $1.9 million, respectively.

As of December 31, 2013 and December 31, 2012, the Company had $3.4 million and $2.5 million, respectively, of total unrecognized compensation cost related to nonvested stock options. This compensation expense is expected to be recognized over a weighted-average period of 1.4 years and 1.3 years, respectively. The total fair value of options that vested during 2013 and 2012 was $4.0 million and $4.7 million, respectively.

Performance Based Awards

The Company may grant performance based awards under its 2004 Plan that are either settled in shares of the Company's common stock or settled in cash depending on the individual award type. Performance based awards may result in the issuance of a range of shares of common stock or cash based on the achievement of defined levels of performance criteria. Performance based awards also carry a three-year service period requirement from the date of grant to vest. Forfeitures are estimated utilizing the Company’s historical forfeiture experience.

A summary of Gentiva's performance based share award activity by grant year as of December 31, 2013 is presented below:



	2010		2011		Number of Performance Share Units		Weighted- Average Exercise Price
Service period to vest:	3 years		3 years
Performance range of target:	0% - 150%		0% - 200%
Performance measured on:	EPS		EPS
Performance measurement period:	1/3 based on 2010 results		90% based on 2011 results
	1/3 based on 2011 results		10% based on 2013 results
	1/3 based on 2012 results
Performance target achieved:	2010 - 150%		2011 - 200%
	2011 - 150%		2013 - 0%
	2012 - 0%
Performance share units:
Balance as of December 31, 2012	33,700		166,750		200,450		$	26.31
Forfeited	—		(1,800	)	(1,800	)	26.67
Change in performance achievement expectations	—		(6,650	)	(6,650	)	26.58
Issued	(33,700	)	(158,300	)	(192,000	)	26.29
Balance as of December 31, 2013	—		—		—		$	—

These performance share units carry performance criteria measured on annual diluted earnings per share targets and fully vest at the end of a three-year service period provided the performance criteria are met. There were no grants of performance share units for 2012 or 2013.

As of December 31, 2013, all performance share units were fully vested and the Company had no unrecognized compensation cost related to performance based share awards. As of December 31, 2012, the Company had $1.5 million of total unrecognized compensation cost related to performance based share awards, which is expected to be recognized over a weighted-average period of 1.0 year.

A summary of Gentiva's performance based cash award activity by grant year as of December 31, 2013 is presented below:



	2012		2013
Service period to vest:	3 years		3 years
Performance range of target:	0% - 200%		0% - 240%
Performance measured on:	EPS		EPS
Performance measurement period:	1/2 based on 2012 results		60% based on 2013 results
	1/2 based on 2014 results		40% based on 2015 results
Performance target achieved:	2012 - 85%		2013 - 0%
Performance cash:
Balance as of December 31, 2012	$	1,293,687	$	—
Earned	1,225,589		1,005,832
Issued	—		—
Balance as of December 31, 2013	$	2,519,276	$	1,005,832

For the year ended December 31, 2013, the Company recorded $2.2 million of compensation expense associated with its performance based cash awards as compared to $1.3 million for the corresponding period of 2012. As of December 31, 2013, the Company had unrecognized compensation cost at target of $3.3 million to be recognized over a weighted-average period of 1.6 years. As of December 31, 2012, the Company had unrecognized compensation cost at target of $2.6 million to be recognized over a weighted-average period of 2.0 years. During the third quarter of 2013, the Company's Compensation Committee and Board of Directors approved an amendment to the 2013 performance cash awards for the Company's named executive officers to measure performance based entirely on year 2015 results and not on any year 2013 results. Also, under the amendment, the performance range of target could extend to 240 percent under certain circumstances.

Restricted Stock

A summary of Gentiva restricted stock activity as of December 31, 2013 is presented below:



	Number of Restricted Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of December 31, 2012	364,650		$	25.25
Granted	338,300		11.37
Exercised	(39,750	)	26.06
Cancelled	(27,800	)	14.70
Balance as of December 31, 2013	635,400		$	18.27	$	7,885,314
Nonvested shares expected to vest as of December 31, 2013	602,343		$	18.53	$	7,475,074

The restricted stock fully vests at the end of a three-year or five-year period, depending on the individual grants. Forfeitures are estimated utilizing the Company’s historical forfeiture experience.

As of December 31, 2013, 2012 and 2011 the aggregate intrinsic value of the restricted stock awards was $7.9 million, $3.7 million and $2.5 million, respectively. The Company had $4.9 million and $4.3 million of total unrecognized compensation cost related to restricted stock as of December 31, 2013 and 2012, respectively. This compensation expense is expected to be recognized over a weighted-average period of 2.0 and 2.5 years, respectively.

Directors Deferred Share Units

Under the Company’s DSU Plan, each non-employee director receives an annual deferred stock unit award credited quarterly and paid in shares of the Company’s common stock following termination of the director’s service on the Board of Directors. In May of 2012, the Company’s shareholders approved increasing the aggregate number of shares of common stock available for issuance under the plan by 350,000 shares; therefore, the total number of shares of common stock reserved for issuance under this plan is 650,000, of which 206,837 shares were available for future grants as of December 31, 2013. During 2013, the Company granted 67,696 stock units under the DSU Plan at a grant date weighted-average fair value of $11.29 per stock unit. Prior to the increase in the aggregate shares available for issuance in May of 2012, there were insufficient deferred stock units available under the DSU Plan for the full quarterly equity grant to each non-employee director in the first quarter of 2012. Therefore, the Company also made a cash payment of approximately $28,100 to each non-employee director during 2012. Under the DSU Plan, 332,776 stock units were outstanding as of December 31, 2013.

Employee Stock Purchase Plan

The Company’s ESPP, as amended on May 10, 2012, provides an aggregate of 1,800,000 shares of common stock available for issuance under the ESPP. The Compensation Committee of the Company’s Board of Directors administers the plan and has the power to determine the terms and conditions of each offering of common stock. All employees of the Company are immediately eligible to purchase stock under the plan regardless of their actual or scheduled hours of service. Employees may purchase shares having a fair market value of up to $25,000 per calendar year based on the value of the shares on the date of purchase. The maximum number of shares of common stock that may be sold to any employee in any offering, however, will generally be 10 percent of that employee’s compensation during the period of the offering. The offering period is three months and the purchase price of shares is equal to 85 percent of the fair market value of the Company’s common stock on the last day of the three-month offering period. As of December 31, 2013, 2,067,483 shares of common stock were available for future issuance under the ESPP. During 2013, 2012 and 2011, the Company issued 269,156 shares, 403,292 shares and 407,091 shares shares, respectively, of common stock under its ESPP. The Company records compensation expense equal to the 15 percent discount from the fair market value of the Company’s common stock on the date of purchase.