Long-Term Debt

Credit Arrangements

At March 31, 2014, the Company’s credit arrangements included a senior secured credit agreement providing (i) a six-year $670 million Term Loan B facility, (ii) a five-year $155 million Term Loan C facility and (iii) a five-year $100 million revolving credit facility (collectively, the “Credit Agreement”), and $325 million aggregate principal amount of 11.5 percent Senior Notes due 2018 (the “Senior Notes”). The Credit Agreement’s revolving credit facility also includes borrowing capacity of $80 million available for letters of credit and $15 million for borrowings on same-day notice, referred to as swing line loans.

As of March 31, 2014 and December 31, 2013, the Company’s long-term debt consisted of the following (in thousands):



	March 31, 2014			December 31, 2013
Credit Agreement:
Term Loan B, maturing October 18, 2019, net of unamortized discount of $6,271 and $6,508 as of March 31, 2014 and December 31, 2013, respectively	$	662,054		$	663,492
Term Loan C, maturing October 18, 2018, net of unamortized discount of $687 and $735 as of March 31, 2014 and December 31, 2013, respectively	151,406			154,265
11.5% Senior Notes due 2018	325,000			325,000
Revolving Credit Facility	27,000			27,000
Total debt	1,165,460			1,169,757
Less: current portion of long-term debt	(47,263		)	(45,325		)
Total long-term debt	$	1,118,197		$	1,124,432

As of March 31, 2014, advances under the revolving credit facility may be made, and letters of credit may be issued, up to the $100 million borrowing capacity of the facility at any time prior to the facility expiration date of October 18, 2018. Outstanding letters of credit were $51.6 million and $52.0 million at March 31, 2014 and December 31, 2013, respectively. The letters of credit were issued to guarantee payments under the Company’s workers’ compensation program and for certain other commitments. As of March 31, 2014, the Company’s unused and available borrowing capacity under the Credit Agreement was $21.4 million. As governed by the indenture covering the unsecured senior notes, the Company has a maximum permitted borrowing capacity, as defined, which may limit the Company's ability to borrow up to the full capacity of the revolving credit facility.

The Term Loan B facility is subject to mandatory principal payments of $6.7 million per year, payable in equal quarterly installments, with the remaining balance of the original $670 million loan payable on October 18, 2019. The Term Loan C facility is subject to mandatory principal payments, payable in quarterly installments. The mandatory principal payments for 2014 are $11.6 million and increase each year through the maturity date of the loan, October 18, 2018.

As of March 31, 2014, the mandatory aggregate principal payments of long-term debt were $20.3 million due during the twelve months ending March 31, 2015, $27.0 million due during the twelve months ending March 31, 2016, $31.9 million due during the twelve months ending March 31, 2017, $45.5 million due during the twelve months ending March 31, 2018, $60.9 million due during the twelve months ending March 31, 2019 and $634.8 million thereafter under the Credit Agreement, and 325.0 million due in September 2018 under the Senior Notes. The weighted average cash interest rate on outstanding borrowings was 7.7 percent per annum at March 31, 2014 and 8.2 percent per annum at December 31, 2013.

The Company may voluntarily repay outstanding loans under the revolving credit facility or the term loans at any time without premium or penalty, other than customary “breakage” costs with respect to LIBOR loans. Prepayment and commitment reductions will be required in connection with (i) certain asset sales, (ii) certain extraordinary receipts such as certain insurance proceeds, (iii) cash proceeds from the issuance of debt, (iv) 75 percent of “Excess Cash Flow” (as defined in the Credit Agreement) with two step-downs based on the Company’s leverage ratio.

The interest rate per annum on borrowings under the Credit Agreement is based on, at the option of the Company, (i) the Eurodollar Rate, adjusted for certain costs plus an Applicable Margin or (ii) the Base Rate, plus an Applicable Rate. The Base Rate represents the highest of (x) the Barclays Bank prime rate, (y) the federal funds rate plus 0.50 percent or (z) the Eurodollar Rate adjusted for certain costs plus 1.00 percent. In connection with determining the interest rates on the Term Loan B and Term Loan C facilities, in no event shall the Eurodollar Rate be less than 1.25 percent and the Base Rate be less than 2.25 percent. The Company may select interest periods of one, two, three or six months for Eurodollar Rate loans. Interest is payable at the end of the selected interest period. The Company must also pay a fee of 0.50 percent per annum on unused commitments under the revolving credit facility. As of March 31, 2014, the interest rate on Term Loan B borrowings is 6.50 percent, Term Loan C borrowings is 5.75 percent and revolving credit borrowings is 5.48 percent.

The Applicable Rate component of the interest rate under the Company's Credit Agreement is based on the Company's consolidated leverage ratio as follows:



	Applicable Rates
	Eurodollar Rate for Revolving Credit Facility and Letter of Credit Fees	Base Rate for Revolving Credit Facility	Term Loan B		Term Loan C
Consolidated Leverage Ratio		Base Rate for Revolving Credit Facility	Eurodollar Rate	Base Rate	Eurodollar Rate	Base Rate
> 4.0:1	4.50%	3.50%	5.25%	4.25%	4.50%	3.50%
< 4.0:1	4.25%	3.25%	5.25%	4.25%	4.50%	3.50%

Debt Covenants

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s and its subsidiaries’ ability to incur additional indebtedness or issue certain preferred stock, create liens on assets, enter into sale and leaseback transactions, engage in mergers or consolidations with other companies, sell assets, pay dividends, repurchase capital stock, make investments, loans and advances, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements, repay certain indebtedness, change the nature of the Company’s business, change accounting policies and practices, grant negative pledges and incur capital expenditures. The Credit Agreement also requires the Company to maintain a maximum consolidated leverage ratio, as calculated based on provisions in the Credit Agreement that provide for certain defined adjustments to consolidated EBITDA, and contains certain customary affirmative covenants and events of default.

Gentiva’s permitted maximum consolidated leverage ratio is set forth in the following table:



Four Quarters Ending	Maximum Consolidated Leverage Ratio
March 31, 2014 to March 31, 2015	≤ 6.75:1
June 30, 2015 to March 31, 2016	≤ 6.50:1
June 30, 2016 to March 31, 2017	≤ 6.25:1
June 30, 2017 to December 31, 2017	≤ 6.00:1
March 31, 2018 and each fiscal quarter thereafter	≤ 5.75:1

As of March 31, 2014, the Company’s consolidated leverage ratio was 5.8x. As of March 31, 2014, the Company was in compliance with all covenants in the Credit Agreement.

Guaranty Agreement and Security Agreement

Gentiva and substantially all of its subsidiaries (the “Guarantor Subsidiaries”) entered into a guaranty agreement pursuant to which the Guarantor Subsidiaries have agreed, jointly and severally, fully and unconditionally to guarantee all of the Company’s obligations under the Credit Agreement. Additionally, Gentiva and its Guarantor Subsidiaries entered into a security agreement pursuant to which a first-priority security interest was granted in substantially all of the Company’s and its Guarantor Subsidiaries’ present and future real, personal and intangible assets, including the pledge of 100 percent of all outstanding capital stock of substantially all of the Company’s domestic subsidiaries to secure full payment of all of the Company’s obligations for the ratable benefit of the lenders.

Senior Notes

The Senior Notes are unsecured, senior subordinated obligations of the Company. The Senior Notes are guaranteed by all of Gentiva’s subsidiaries that are guarantors under the Credit Agreement. Interest on the Senior Notes accrues at a rate of 11.5 percent per annum and is payable semi-annually in arrears on March 1 and September 1. Gentiva will make each interest payment to the holders of record on the immediately preceding February 15 and August 15.

The Senior Notes mature on September 1, 2018 and are generally free to be transferred. Gentiva may redeem the Senior Notes, in whole or in part, at any time prior to the first interest payment of 2014, at a price equal to 100 percent of the principal amount of the Senior Notes redeemed plus an applicable make-whole premium based on the present value of the remaining payments discounted at the treasury rate plus 50 basis points plus accrued and unpaid interest, if any, to the date of redemption.

On or after September 1, 2014, Gentiva may redeem all or part of the Senior Notes at redemption prices set forth below plus accrued and unpaid interest and Additional Interest, if any, as defined in the indenture relating to the Senior Notes during the twelve month period beginning on September 1 of the years indicated below:



Year	Redemption Percentage
2014	105.750%
2015	102.875%
2016 and thereafter	100.000%