0001179022-02-000005.txt : 20020814 0001179022-02-000005.hdr.sgml : 20020814 20020814180117 ACCESSION NUMBER: 0001179022-02-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENTIVA HEALTH SERVICES INC CENTRAL INDEX KEY: 0001096142 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HEALTH SERVICES [8000] IRS NUMBER: 364335801 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15669 FILM NUMBER: 02737744 BUSINESS ADDRESS: STREET 1: 3 HUNTINGTON QUADRANGLE 2S CITY: MELVILLE STATE: NY ZIP: 11747-8943 BUSINESS PHONE: 6315017000 MAIL ADDRESS: STREET 1: 3 HUNTINGTON QUADRANGLE 2S CITY: MELVILLE STATE: NY ZIP: 11747-8943 FORMER COMPANY: FORMER CONFORMED NAME: OLSTEN HEALTH SERVICES HOLDING CORP DATE OF NAME CHANGE: 19991001 10-Q 1 gentiva10q1.htm FORM 10-Q Gentivas 3rd Quarter Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

Commission File No. 1-15669

Gentiva Health Services, Inc.
(Exact name of Registrant as specified in its charter)

DELAWARE	36-433-5801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



3 Huntington Quadrangle 2S, Melville, NY 11747-8943
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (631) 501-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No __

The number of shares outstanding of the Registrant's Common Stock,
as of August 12, 2002 was 26,380,483.

INDEX

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited) - June 30, 2002 and December 30, 2001	3
	Consolidated Statements of Operations (Unaudited) - Three and Six Months Ended June 30, 2002 and July 1, 2001	4
	Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2002 and July 1, 2001	5
	Notes to Consolidated Financial Statements (Unaudited)	6-19
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19-31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	32-34
Item 2.	Changes in Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34-35
Item 5.	Other Information	35-36
Item 6.	Exhibits and Reports on Form 8-K	36-38
SIGNATURES		39

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Gentiva Health Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)

			June 30, 2002	December 30, 2001

ASSETS
Current assets:
	Cash and cash equivalents		$ 67,500	$ 71,980
	Restricted cash		35,164	35,164
	Receivables, less allowance for doubtful accounts of $12,855
	and $10,831 in 2002 and 2001, respectively		136,384	140,295
	Prepaid expenses and other current assets		23,989	46,767
	Assets held for sale		-	306,537

		Total current assets	263,037	600,743

Fixed assets, net			14,150	17,045
Goodwill, net			-	217,327
Other assets			14,164	14,764

		Total assets	$ 291,351	$ 849,879

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$ 19,525	$ 10,022
	Accrued expenses		92,438	73,730
	Payroll and related taxes		11,688	12,756
	Income taxes payable		6,097	-
	Insurance costs		38,034	29,613
	Liabilities held for sale		-	56,673

		Total current liabilities	167,782	182,794

Other liabilities			19,798	45,378

Shareholders' equity:

	Common stock, $.10 par value; authorized 100,000,000 shares; issued and outstanding 26,267,330 and 25,638,794 shares, respectively		2,627	2,564
	Additional paid-in capital		262,645	722,725
	Accumulated deficit		(161,501)	(103,582)

		Total shareholders' equity	103,771	621,707

		Total liabilities and shareholders' equity	$ 291,351	$ 849,879

See notes to consolidated financial statements.


Gentiva Health Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)


		Three Months Ended		Six Months Ended

		June 30, 2002	July 1, 2001	June 30, 2002	July 1, 2001

Net revenues		$ 195,623	$ 179,705	$ 388,422	$ 365,322
Cost of services sold		138,892	119,266	268,078	240,025

	Gross profit	56,731	60,439	120,344	125,297

Selling, general and administrative expenses		103,062	67,609	165,851	134,571
Interest income (expense), net		383	(130)	579	(541)

	Loss before income taxes from continuing operations	(45,948)	(7,300)	(44,928)	(9,815)
Income tax benefit (expense)		12,270	(111)	12,195	(527)

	Loss from continuing operations	(33,678)	(7,411)	(32,733)	(10,342)
Discontinued operations, net of tax		184,953	9,729	192,141	18,772

	Income before cumulative effect of accounting change	151,275	2,318	159,408	8,430
Cumulative effect of accounting change, net of tax		-	-	(217,327)	-

	Net income (loss)	$ 151,275	$ 2,318	$ (57,919)	$ 8,430



Basic and diluted earnings per share:
	Loss from continuing operations	$ (1.29)	$ (0.33)	$ (1.26)	$ (0.47)
	Discontinued operations, net of tax	7.08	0.43	7.39	0.86
	Cumulative effect of accounting change, net of tax	-	-	(8.36)	-

	Net income (loss)	$ 5.79	$ 0.10	$ (2.23)	$ 0.39

	Weighted average shares outstanding	26,143	22,265	25,993	21,859



See notes to consolidated financial statements.

Gentiva Health Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


		Six Months Ended

		June 30, 2002	July 1, 2001


OPERATING ACTIVITIES:
Net income (loss)		$ (57,919)	$ 8,430
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
	Income from discontinued operations	(192,141)	(18,772)
	Cumulative effect of accounting change	217,327	-
	Depreciation and amortization	3,741	9,621
	Provision for doubtful accounts	3,014	3,250
	Stock option tender offer	21,388	-
	Deferred income taxes	(12,195)	527
Changes in assets and liabilities, net of acquisitions/divestitures
	Accounts receivable	897	24,545
	Prepaid expenses and other current assets	(6,990)	4,082
	Current liabilities	35,564	(10,404)
Change in net assets held for sale		3,685	35,808
Other, net		(5,237)	1,361

Net cash provided by operating activities		11,134	58,448

INVESTING ACTIVITIES:
Purchase of fixed assets - continuing operations		(882)	(101)
Purchase of fixed assets - discontinued operations		(2,121)	(2,695)
Proceeds from sale of business		207,500	275

Net cash provided by (used in) investing activities		204,497	(2,521)

FINANCING ACTIVITIES:
Proceeds from issuance of common stock		6,581	10,191
Debt issuance costs		(1,321)	-
Cash distribution to shareholders		(203,983)	-
Payments for stock option tender		(21,388)	-
Advance from Medicare program		-	20,878
Decrease in book overdrafts		-	(10,379)

Net cash (used in) provided by financing activities		(220,111)	20,690

Net change in cash and cash equivalents		(4,480)	76,617
Cash and cash equivalents at beginning of period		71,980	435

Cash and cash equivalents at end of period		$ 67,500	$ 77,052


SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
In connection with the sale of the Company's Specialty Pharmaceutical Services business on June 13, 2002, the Company
received 5,060,976 shares of common stock of Accredo Health, Incorporated, which was subsequently distributed
to the shareholders.

See notes to consolidated financial statements.

Gentiva Health Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1. Accounting Policies

The accompanying interim consolidated financial statements are unaudited, but have been prepared by Gentiva Health Services, Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments necessary for a fair presentation of results of operations, financial position and cash flows for each period presented. Results for interim periods are not necessarily indicative of results for a full year. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

New Accounting Standards

In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS 144") which supercedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 144 further refines SFAS 121's requirement that companies recognize an impairment loss if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and measure an impairment loss as the difference between the carrying amount and fair value of the asset. In addition, SFAS 144 provides guidance on accounting and disclosure issues surrounding long-lived assets to be disposed of by sale. SFAS 144 also extends the presentation of discontinued operations to include more disposal transactions. SFAS 144 is effective for all fiscal quarters of all fiscal years beginning after December 15, 2001 (December 31, 2001 for the Company). The Company's adoption of SFAS 144 did not result in any impairment loss being recorded.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statements No. 13, and Technical Correction" ("SFAS 145"). SFAS 145 rescinds SFAS No. 4 "Reporting Gains and Losses from Extinguishment of Debt" ("SFAS 4"), SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" ("SFAS 44") and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" ("SFAS 64") and amends SFAS No. 13, "Accounting for Leases" ("SFAS 13"). This statement updates, clarifies and simplifies existing accounting pronouncements. As a result of rescinding SFAS 4 and SFAS 64, the criteria in APB 30 "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" will be used to determine whether gains and losses from extinguishment of debt receive extraordinary item treatment. SFAS 44 was no longer necessary because the transitions under the Motor Carrier Act of 1980 were completed. SFAS 13 was amended to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and makes technical corrections to existing pronouncements. The provisions of SFAS 145 are effective for fiscal years beginning after May 15, 2002, with earlier application encouraged. The Company has elected to

SFAS 145, effective April 1, 2002. The impact of this adoption resulted in the Company recognizing a write off of approximately $1.5 million of deferred debt issuance costs associated with the terminated credit facility which is reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses the recognition, measurement, and reporting of costs associated with exit or disposal activities, and supercedes Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit An Activity (including Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). The principal difference between SFAS 146 and EITF 94-3 relates to the requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity, including those related to employee termination benefits and obligations under operating leases and other contracts, be recognized when the liability is incurred, and not necessarily the date of an entity's commitment to an exit plan, as under EITF 94-3. SFAS 146 also establishes that the initial measurement of a liability recognized under SFAS 146 be based on fair value. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company expects to adopt SFAS 146, effective December 30, 2002. For exit or disposal activities initiated prior to December 30, 2002, the Company plans to follow the accounting guidelines outlined in EITF 94-3.

2. Background and Basis of Presentation.

On June 13, 2002, the Company consummated the sale of substantially all of the assets of the Company's Specialty Pharmaceutical Services ("SPS") business to Accredo Health, Incorporated ("Accredo") pursuant to the asset purchase agreement dated January 2, 2002. See Note 4 for further information. On June 13, 2002, the Company's Board of Directors declared a dividend, payable to shareholders of record on June 13, 2002, of all the common stock consideration and substantially all the cash consideration received from Accredo. The cash consideration received by the Company was $207.5 million; however, the amount distributed to the Company's shareholders was reduced by $3.5 million to $204 million as a holdback for income taxes the Company expects to incur on the estimated proceeds received in excess of $460 million as detailed in the Company's proxy statement, dated May 10, 2002.

The operating results of the SPS business, through the closing date of the sale to Accredo, including corporate expenses directly attributable to SPS operations, as well as the gain on the sale, net of transaction costs and related income taxes; are reflected as discontinued operations in the accompanying consolidated statements of operations. Continuing operations includes the results of the home health services business, including corporate expenses that did not directly relate to SPS, as well as restructuring and special charges. Results of all prior periods have been reclassified to conform to this presentation.

In addition, under the Statement of Financial Accounting Standards No. 131 " Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), the SPS business had been reported as a segment of the Company. Subsequent to the sale of the SPS business, the Company operates its remaining Home Health Services business as a single reporting unit.

3. Earnings per Share

Basic and diluted earnings (loss) per share for each period presented has been computed by dividing the net income (loss) by the weighted average number of shares outstanding for each respective period. In accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"), the computation for diluted loss from continuing operations per share for all periods presented excludes the effect of any shares issuable upon the exercise of stock options since their inclusion would have an antidilutive effect on earnings. Furthermore, as required under SFAS 128, the common shares used in reporting the diluted per share amount for continuing operations is to be used for discontinued operations and cumulative effect of accounting change although the impact may be antidilutive on some periods presented.

For the second quarter and first six months of fiscal 2002, the basic and diluted net income (loss) per share has been computed using the weighted average number of shares outstanding of 26,143,000 and 25,993,000, respectively. Basic and diluted net income (loss) per share for the second quarter and first six months of fiscal 2001 has been computed using the weighted average number of shares outstanding of 22,265,000 and 21,859,000, respectively.

Dilutive common equivalent shares that would be issued upon the assumed conversion of stock options under the treasury stock method represented 1,226,000 shares and 1,304,000 shares for the second quarter and first six months of fiscal 2002, respectively, and 1,594,000 shares and 1,523,000 shares for the second quarter and first six months of fiscal 2001, respectively.

4. Disposition of Specialty Pharmaceutical Services Business

On June 13, 2002, the Company consummated the sale of its Specialty Pharmaceutical Services ("SPS") business (the "SPS Sale") to Accredo Health, Incorporated ("Accredo"). The SPS Sale was effected pursuant to an asset purchase agreement (the "Asset Purchase Agreement") dated January 2, 2002, between Gentiva, Accredo and certain of Gentiva's subsidiaries named therein.

The assets of the SPS business acquired by Accredo in the SPS Sale were assets used by Gentiva in the business of:

distribution of drugs and other biological and pharmaceutical products and professional support services for individuals with chronic diseases,

administration of antibiotics, chemotherapy, nutrients and other medications for patients with acute or episodic disease states,

distribution services for pharmaceutical, biotechnology and medical service firms, and

clinical support services for pharmaceutical and biotechnology firms.

The SPS business generated approximately 50 percent of the Company's total net revenues, including intersegment revenues, for fiscal 2001.

Pursuant to the terms of the Asset Purchase Agreement, Accredo acquired the SPS business in consideration for:

The payment to the Company of a cash amount equal to $207.5 million, and

5,060,976 shares of Accredo common stock.

Based on the closing price of the Accredo common stock on June 13, 2002 ($51.89 per share), the value of the stock consideration was $262.6 million. The aggregate proceeds from the sale are subject to adjustments based on the net book value of SPS assets as reflected in the final closing balance sheet.

In connection with the SPS Sale, the Company's Board of Directors declared a dividend, payable to shareholders of record on June 13, 2002, of all the common stock consideration and substantially all the cash consideration received from Accredo. The cash consideration received by the Company was $207.5 million; however, the amount distributed to the Company's shareholders was reduced by $3.5 million to $204 million as a holdback for income taxes the Company expects to incur on the estimated proceeds received in excess of $460 million as detailed in the Company's proxy statement, dated May 10, 2002. The special dividend, which was delivered to the distribution agent on June 13, 2002 for payment to the Company's shareholders, resulted in shareholders of record on the record date receiving $7.76 in cash and .19253 shares of Accredo common stock for each share of Gentiva common stock held. Cash was paid in lieu of fractional shares.

SPS revenues and operating results for the periods presented were as follows (in thousands):

	Three Months Ended		Six Months Ended

	June 30, 2002	July 1, 2001	June 30, 2002	July 1, 2001


Net revenues	$ 146,534	$ 155,739	$ 323,319	$ 327,300

Operating results of discontinued SPS business:
Income before taxes	$ 813	$ 9,819	$ 11,238	$ 18,946
Income taxes	(96)	(90)	(1,313)	(174)

Net income	717	9,729	9,925	18,772

Gain on disposal of SPS business,including transaction costs of $13.7 million and $16.2 million, respectively.

	208,803	-	206,291	-
Income taxes	(24,567)	-	(24,075)	-

Gain on disposal, net of taxes	184,236	-	182,216	-

Discontinued operations, net of tax	$ 184,953	$ 9,729	$ 192,141	$ 18,772

The net assets of the SPS business included in the accompanying consolidated balance sheet as of December 30, 2001 consisted of the following (in thousands):

Accounts receivable, net	$ 239,447
Inventory	46,544
Fixed assets, net	13,404
Other assets	7,142

Total assets	306,537

Accounts payable	(47,704)
Payroll and accrued expenses	(6,875)
Other liabilities	(2,094)

Total liabilities	(56,673)

Net assets of discontinued operations	$ 249,864

5. Restructuring and Special Charges

During the second quarter and first six months of fiscal 2002, the Company recorded restructuring and special charges aggregating $46.1 million. Charges during the period are summarized and further described below (dollars in thousands):

		Three and Six Months Ended June 30, 2002
Restructuring charges:
Business realignment activities		$ 6,813

Special charges:
Option tender offer		21,388
Settlement costs		7,731
Insurance costs		6,300
Asset writedowns and other		3,824
	Total Special charges	39,243

Total Restructuring and Special charges		$ 46,056

Restructuring Charges

Business Realignment Activities

The Company recorded charges of $6.8 million in the second quarter of fiscal 2002 in connection with a restructuring plan. This plan included the closing and consolidation of seven field locations and the realignment and consolidation of certain corporate and administrative support functions due primarily to the sale of the Company's SPS business. These charges included employee severance of $0.9 million relating to the termination of 115 employees in field locations and certain corporate and administrative departments, and future lease payments and other associated costs of $5.9 million resulting principally from the consolidation of office space at the Company's corporate headquarters and a change in estimated future lease obligations and other costs in excess of sublease rentals relating to a lease for a subsidiary of the Company's former parent company which the Company agreed to assume in connection with its split off in March 2000. The Company expects the restructuring plan to be fully implemented by the fourth quarter of fiscal 2002. These charges are reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Special Charges

Fiscal 2002

Option Tender Offer

During the second quarter of fiscal 2002, the Company commenced a cash tender offer for all outstanding options to purchase its common stock. The tender offer was based on a purchase price calculated by subtracting the applicable exercise price of the option per share from the market value per share of Gentiva's common stock. The market value represented the average of the daily closing price of Gentiva's common stock on the Nasdaq National Market for the five trading days ended June 12, 2002.

In connection with this tender offer, the Company recorded a charge of $21.4 million which is reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Settlement Costs

The Company recorded a $7.7 million charge in the second quarter of fiscal 2002 to reflect settlement costs relating to the Fredrickson v. Olsten Health Services Corp. and Olsten Corporation lawsuit as well as estimated settlement costs related to government inquiries regarding cost reporting procedures concerning contracted nursing and home health aide costs (see Note 10). These costs are reflected in selling, general and administrative costs in the accompanying consolidated statement of operations.

Insurance Costs

During the second quarter of 2002, the Company recorded a special charge of $6.3 million related primarily to a refinement in the estimation process used to determine the Company's actuarially computed workers compensation and professional liability insurance reserves. This special charge is reflected in cost of services sold in the accompanying consolidated statement of operations.

Asset Writedowns and Other

During the second quarter of fiscal 2002, the Company recorded charges of $3.8 million consisting primarily of a writedown of inventory and other assets associated with the Company's home medical equipment business, and a write off of deferred debt issuance costs associated with the terminated credit facility. The charges are reflected in selling, general and administrative expenses in the accompanying statement of operations.

Fiscal 2001

Settlement Costs

Resources, Inc. and Olsten Health Services, Inc. lawsuits and for various other legal costs. These special charges are reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

6. Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which broadens the criteria for recording intangible assets separate from goodwill. SFAS 142 requires the use of a nonamortization approach to account for purchased goodwill and certain intangibles. Under a nonamortization approach, goodwill and certain intangibles are not amortized into results of operations, but instead are reviewed for impairment and an impairment charge is recorded in the periods in which the recorded carrying value of goodwill and certain intangibles is more than its estimated fair value. The Company adopted SFAS 142 as of the beginning of fiscal 2002. The provisions of SFAS 142 require that a transitional impairment test be performed as of the beginning of the year the statement is adopted. The provisions of SFAS 142 also require that a goodwill impairment test be performed annually or on the occasion of other events that indicate a potential impairment. The new criteria for recording intangible assets separate from goodwill did not require any reclassification in the Company's consolidated financial statements.

At December 30, 2001, the Company had goodwill of $220.5 million, of which $217.3 million related to the Home Health Services business and $3.2 million related to the SPS business. The SPS goodwill of $3.2 million was acquired by Accredo as a component of the net assets of the SPS business. The Company's transitional impairment test indicated that there was an impairment of goodwill relating to the Home Health Services business upon adoption of SFAS 142 as further described below.

The impairment test is a two step process that begins with the estimation of the fair value of each reporting unit. The first step screens for potential impairment and the second step measures the amount of the impairment. The estimate of fair value of the Home Health Services business as of the beginning of fiscal 2002 considered publicly available information as well as financial projections and estimates prepared by outside advisors, and was determined by subtracting the agreed-upon purchase price for the SPS business from the market capitalization of the Company. As part of the first step to assess potential impairment, management compared the estimate of fair value for the Home Health Services business to the book value of the business unit's net assets. Since the book value of Home Health Services' net assets was greater than its estimated fair value, management proceeded to the second step to measure the impairment. The second step compared the implied fair value of goodwill with its carrying value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the carrying amount of the reporting unit's goodwill is greater than its implied fair value, an impairment loss would be recognized in the amount of the excess.

Based on the results of the transitional impairment tests, the Company determined that an impairment loss relating to goodwill had occurred and recorded a non-cash charge of $217.3 million as cumulative effect of accounting change in the accompanying consolidated statement of operations for the six months ended June 30, 2002. The Company recorded a deferred tax benefit of approximately $66 million resulting from this non-cash charge. However, because of the uncertainty of the ultimate realization of the deferred tax asset, the Company increased its tax valuation allowance by the same amount.

The table below presents a reconciliation of reported net income to adjusted net income as if the SFAS 142 was adopted as of the beginning of fiscal 2001 (in thousands, except per share amounts).

	Three Months Ended		Six Months Ended
	July 1, 2001		July 1, 2001
	Net Income	Earnings Per Share Basic and Diluted	Net Income	Earnings Per Share Basic and Diluted
Reported net income	$ 2,318	$ 0.10	$ 8,430	$ 0.39
Add back: Goodwill amortization	2,499	0.11	5,057	0.23

Adjusted net income	$ 4,817	$ 0.21	$ 13,487	$ 0.62

7. Current Liabilities

In early 2001, the Center for Medicare and Medicaid Services ("CMS"), formerly known as the Health Care Financing Administration, issued cash advances to certain Medicare providers in connection with the transition from the Interim Payment System to the Prospective Payment System (PPS) for Medicare reimbursement. In the first quarter of fiscal 2001, the Company received such an advance, net of payments for estimated settlements relating to cost report filings, of approximately $20.9 million, which is reflected in accrued expenses in the accompanying consolidated balance sheets as of June 30, 2002 and December 30, 2001. Such advances are expected to be repaid during the third quarter of fiscal 2002.

8. Revolving Credit Facility and Restricted Cash

In connection with the sale of the SPS business, the Company terminated its existing credit facility, and entered into a new credit facility on June 13, 2002. The new credit facility provides the Company with up to $55 million in borrowings, including up to $40 million which is available for letters of credit. The Company may borrow up to a maximum of eighty percent of the net amount of eligible accounts receivable, as defined, less any reserves required by the lender. Borrowing availability under the new credit facility is reduced by $10 million until such quarter in 2003 in which trailing twelve month earnings before interest, taxes, depreciation and amortization ("EBITDA"), excluding certain restructuring costs and special charges, as defined, exceeds $15 million. At the Company's option, the interest rate on borrowings under the credit facility is based on the London Interbank Offered Rates (LIBOR) plus 3.5 percent or the lender's prime rate plus 1.25 percent. In addition, the Company must pay a fee equal to 2.5 percent per annum of the aggregate face amount of outstanding letters of credit. Beginning in 2003, the applicable margin for the LIBOR borrowing, prime rate borrowing and letter of credit fees decrease by 0.25 percent to 3.25 percent, 1.0 percent, and 2.25 percent, respectively, provided that the Company's trailing twelve month EBITDA, excluding certain restructuring costs and special charges, as defined, is in excess of $20 million. The higher margins and fees are subject to reinstatement in the event that EBITDA falls below $20 million. The Company is

subject to an unused line fee equal to 0.50 percent per annum of the average daily difference between $55 million and the total outstanding borrowings and letters of credit. For 2003, the unused credit line fee decreases to 0.375 percent provided the minimum EBITDA target described above is achieved, but is subject to reinstatement to the higher fee in the event that EBITDA falls below $20 million. Total outstanding letters of credit were approximately $26.6 million as of June 30, 2002. There were no borrowings outstanding under the credit facility as of June 30, 2002.

The new credit facility, which expires in 2006, includes certain covenants requiring the Company to maintain a minimum tangible net worth, minimum EBITDA, a minimum fixed charge coverage, and a minimum cash balance related to the Medicare advance. Other covenants in the credit facility include limitation on mergers, consolidations, acquisitions, indebtedness, liens, distributions, capital expenditures and dispositions of assets and other limitations with respect to the Company's operations. The credit facility further provides that if the agreement is terminated for any reason, the Company must pay an early termination fee equal to 1.0 percent if terminated during year one, 0.5 percent if terminated in year two and 0.25 percent if terminated in year three, of $55 million (or $45 million during the time when borrowing availability is reduced by $10 million due to EBITDA requirements). Loans under the credit facility will be collateralized by all of the Company's tangible and intangible personal property, other than equipment.

In connection with the Frederickson v. Olsten Health Services Corp. and Olsten Corporation case, a supersedeas bond in the amount of $35.2 million was posted to satisfy the judgment plus interest. Under terms of the bond, cash equal to the amount of the bond is held in a segregated account and is reported as restricted cash in the accompanying consolidated balance sheets as of June 30 2002 and December 30, 2001. This matter has been settled and the procedural steps for the release of the supersedeas bond are in process.

9. Shareholders' Equity

Changes in shareholders' equity during the six months ended June 30, 2002 were as follows (in thousands):

		Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total

Balance at December 30, 2001		$ 2,564	$722,725	$ (103,582)	$621,707

	Comprehensive loss: Net loss
	Comprehensive loss: Net loss			(57,919)	(57,919)

	Dividends paid ($17.75 per share)		(466,597)		(466,597)
	Issuance of stock upon exercise of stock options and under stock plans for employees and directors

		63	6,517	-	6,580

Balance at June 30, 2002		$ 2,627	$262,645	$ (161,501)	$ 103,771

Comprehensive income amounted to $151.3 million and $2.7 million for the second quarter of fiscal 2002 and 2001, respectively, and a comprehensive loss of $57.9 million and comprehensive income of $8.2 million were recorded during the first six months of fiscal 2002 and 2001, respectively.

10. Legal Matters

Litigation

In addition to the matters referenced below, the Company is party to certain legal actions arising in the ordinary course of business including legal actions arising out of services rendered by its various operations, personal injury and employment disputes.

Fredrickson v. Olsten Health Services Corp. and Olsten Corporation, Case No. 01C.A.116, Court of Appeals, Seventh Appellate District, Mahoning County, Ohio. In November, 2000, the jury in this age-discrimination lawsuit returned a verdict in favor of the plaintiff against Olsten consisting of $675,000 in compensatory damages, $30 million in punitive damages and an undetermined amount of attorneys' fees. The jury found that, although Olsten had lawfully terminated the plaintiff's employment, its failure to transfer or rehire the plaintiff rendered Olsten liable to the plaintiff. Following post-trial motion practice by both parties, the trial court, in May 2001, denied all post-trial motions, and entered judgment for the plaintiff for the full amount of compensatory and punitive damages, and awarded the plaintiff reduced attorney's fees of $247,938. In June 2001, defendants timely filed a Notice of Appeal with the Court of Appeals, and the Company posted a supersedeas bond for the full amount of the judgment, plus interest. This matter has been settled, and settlement costs were recorded as part of special charges during the second quarter of fiscal 2002 (see Note 5). The procedural steps for the release of the supersedeas bond are in process.

Cooper v. Gentiva CareCentrix, Inc., t/a/d/b/a Gentiva Health Services, U.S. District Court (W.D. Penn), Civil Action No. 01-0508. On January 2, 2002, this Amended Complaint was served on the Company alleging that the defendant submitted false claims to the government for payment in violation of the Federal False Claims Act, 31 U.S.C. 3729 et seq., and that the defendant had wrongfully terminated plaintiff. Plaintiff claims that infusion pumps delivered to patients did not supply the full amount of medication, allegedly resulting in substandard care. Based on a review of the court's docket sheet, plaintiff filed a complaint under seal in March 2001. In October 2001, the United States Government filed a Notice with the court declining to intervene in this matter, and on October 24, 2001, the court ordered that the seal be lifted. The Company filed its responsive pleading on February 25, 2002 and discovery has now commenced. The Company has denied the allegations of wrongdoing in the complaint and intends to defend itself vigorously in this matter. Given the preliminary stage of the proceedings, the Company is unable to assess the probable outcome or potential liability, if any, arising from this matter; therefore, a range of damages, if any, cannot be determined.

United States of America ex rel. Lee Einer v. Olsten Corporation, No. CIV-S-99-0860 DFL/DAD, U.S. District Court for the Eastern District of California. On November 1, 2001, the Company received notice of the entry of an Order dated October 25, 2001, unsealing the referenced complaint. As recited in the Order unsealing the complaint, the United States gave notice to the District Court that the United States was declining to intervene in the action. The Company believes that it was this complaint that gave rise to a document subpoena served on the Company in December 1999 from the Department of Health and Human Services, Office of Inspector General, and Office of Investigations. The Company

acknowledged service of the complaint on November 29, 2001 and timely filed responsive pleadings to the Complaint. The Company is engaged in discovery and intends to defend itself vigorously in this matter. Given the preliminary stage of the proceedings, the Company is unable to assess the probable outcome or potential liability, if any, arising from this matter; therefore, a range of damages, if any, cannot be determined.

In 1999, Kimberly Home Health Care, Inc. ("Kimberly"), one of the Company's subsidiaries, initiated three arbitration proceedings against hospitals owned by Columbia/HCA Healthcare Corp. ("Columbia/HCA") with which Kimberly had management services agreements to provide services to the hospitals' home health agencies. The basis for each of the arbitrations is that Columbia/ HCA sold the home health agencies without assigning the management services agreements and, as a result, Columbia/HCA has breached the management services agreements. In response to the arbitrations, Columbia/HCA has asserted that the arbitrations be consolidated and stayed, in part based upon its alleged claims against Kimberly for breach of contract, and requested indemnity and possibly return of management fees. Columbia/HCA has not yet formally presented these claims in the arbitrations or other legal proceedings and has not yet quantified the claims. Still pending before the arbitrators is Columbia/HCA's request to consolidate the proceedings, which Kimberly has opposed. The proceedings are currently in abeyance pending ruling on Columbia/HCA's motion to consolidate. The Company is the claimant in this matter and the defendant has not formally asserted any counterclaims against the Company in the arbitration, nor has the defendant made any formal demand on the Company. The Company is unable to assess the liability or losses, if any, attributable to the threatened counterclaims.

Furthermore, in connection with the Company's split off from Olsten Corporation on March 15, 2000 (the "Split-Off"), the Company agreed to assume, to the extent permitted by law, the liabilities, if any, arising out of (and to indemnify Olsten for) the above proceedings and other liabilities arising out of the health services business, including any such liabilities arising after the Split-Off in connection with the government investigations described below.

In addition, the Company and Accredo have agreed to indemnify each other for breaches of representations and warranties of such party or the non-fulfillment of any covenant or agreement of such party in connection with the sale of the SPS business. In addition, the Company has agreed to indemnify Accredo for the retained liabilities and for tax liabilities and Accredo has agreed to indemnify the Company for assumed liabilities and the operation of the SPS business after the closing of the acquisition. The representations and warranties generally survive for the period of two years after the closing of the acquisition, except that:

representations and warranties related to health care compliance survive for three years after the closing of the acquisition;

representations and warranties related to title of the assets and sufficiency of assets and employees survive for the applicable statute of limitations period; and

representations and warranties related to tax matters survive until thirty days after the expiration of the applicable tax statute of limitations period, including any extensions of the applicable period, subject to certain exceptions.

Accredo and the Company may recover indemnification for a breach of a representation or warranty only to the extent a party's claim exceeds $5 million in the aggregate, subject to certain conditions and only up to a maximum amount of $100 million.

These indemnification rights are the exclusive remedy from and after the closing of the acquisition, except for the right to seek specific performance of any of the agreements in the asset purchase agreement, in any case where a party is guilty of fraud in connection with the acquisition, and with respect to tax liabilities and obligations.

Government Investigations

In early February 2000, the Company received a document subpoena from the Department of Health and Human Services, Office of Inspector General, and Office of Investigations. The subpoena relates to its agencies' cost reporting procedures concerning contracted nursing and home health aide costs. To the Company's knowledge, the government has not filed a complaint against the Company. a settlement in principle of this matter has been reached, subject to approval of applicable government departments (see Note 5).

11. Stock Plans

Prior to the closing of the sale of the SPS business, the Company commenced a cash tender offer for all of the outstanding options to purchase its common stock, subject to a maximum aggregate option purchase price to be paid of $25 million. The tender offer was subject to the satisfaction or waiver of a number of conditions, including the consummation of the sale of the SPS business. Under the terms of the tender offer, the Company purchased for cash, tendered options at a purchase price calculated by subtracting the applicable exercise price of the option per share from the market value per share of Gentiva's common stock (the "option purchase price"). For this purpose, market value represented the average of the daily closing price of Gentiva's common stock on the Nasdaq National Market for the five trading days ending on June 12, 2002.

On June 20, 2002, the Company's cash tender offer expired, resulting in 1,253,141 options tendered and accepted by the Company in the tender offer for a cash payment of $21.4 million. As of such date, 463,829 vested options remained outstanding and subject to adjustment. The 463,829 options were adjusted in accordance with the Company's option plans to give effect to the distribution of the proceeds of the sale of the SPS business at a conversion ratio of 3.369 Gentiva options for every one Gentiva option outstanding immediately prior to the adjustment. This resulted in 1,562,646 options outstanding at a weighted average exercise price of approximately $2.63 after giving effect to the option adjustment.

In addition, on June 14, 2002, the Company granted 1,091,000 new options under its existing option plans to officers, directors and employees at an exercise price of $7.50 per share.

12. Income Taxes

Deferred tax assets and deferred tax liabilities were as follows (in thousands):


		June 30, 2002	December 30, 2001

Deferred tax assets
	Reserves and allowances	$ 22,007	$ 48,663
	Net operating loss (Federal and state)	-	36,230
	Intangible assets	37,635	-
	Other	1,067	3,347
	Less: valuation allowance	(58,808)	(57,330)

Total deferred tax asset		1,901	30,910

Deferred tax liabilities
	Capitalized software	(947)	(2,035)
	Intangible assets	-	(26,859)
	Depreciation	(954)	(2,016)

Total deferred tax liability		(1,901)	(30,910)

Net deferred tax asset (liability)		$ -	$ -

At December 30, 2001, the Company had a federal net operating loss carryforward of $89.7 million generated subsequent to its Split-off from Olsten Corporation on March 15, 2000, all of which will expire by 2020. The net operating loss carryforwards were fully used in the second quarter of fiscal 2002 to offset, in part, the gain from the sale of the SPS business.

A federal and state income tax benefit was recorded for the three and six months ended June 30, 2002 relating to the loss from continuing operations. Because of the uncertainty of the ultimate realization of net deferred tax assets, a valuation allowance is maintained relating to deferred tax assets that are not otherwise used to offset deferred tax liabilities. The benefits associated with approximately $12 million of deferred tax assets, when ultimately realized, will be credited to stockholders' equity.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations

General

The Company's results of operations are impacted by various regulations and other matters that are implemented from time to time in its industry, some of which are described in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended December 30, 2001 and in other filings with the Securities and Exchange Commission.

Significant Developments

On June 13, 2002, the Company consummated the sale of substantially all of the assets of the Company's SPS business to Accredo Health, Incorporated ("Accredo") pursuant to the asset purchase agreement dated January 2, 2002, for a purchase price of $470.1 million subject to a post closing reconciliation based on the net book value of the SPS assets as reflected on the final closing balance sheet. In accordance with the agreement, the Company received cash proceeds of

$207.5 million and 5,060,976 shares of Accredo common stock. Based on the closing price of the Accredo common stock on June 13, 2002 ($51.89 per share), the value of the stock consideration was $262.6 million.

On June 13, 2002, the Company's Board of Directors declared a dividend, payable to shareholders of record on June 13, 2002, of all the common stock consideration and substantially all the cash consideration received from Accredo. The cash consideration received by the Company was $207.5 million, however, the amount distributed to the Company's shareholders was reduced by $3.5 million to $204 million as a holdback for income taxes the Company is expected to incur on the estimated proceeds received in excess of $460 million as detailed in the Company's proxy statement, dated May 10, 2002.

The operating results of the SPS business, through the closing date of the sale to Accredo, including corporate expenses directly attributable to SPS operations, as well as the gain on the sale net, of transaction costs and related income taxes, are reflected as discontinued operations in the accompanying consolidated statements of operations. Continuing operations includes the results of the home health services business, including corporate expenses that did not directly relate to SPS, as well as restructuring and special charges. Results of all prior periods have been reclassified to conform to this presentation.

Results of Operations

Revenues

Net revenues increased by $16 million or 8.9 percent to $196 million during the second quarter of fiscal 2002 as compared to the second quarter of fiscal 2001, primarily due to an increase in the number of Preferred Provider Organization enrollees served by the Company's CareCentrix unit and an increase in the volume of nursing admissions for Medicare eligible beneficiaries.

For the first six months of 2002, net revenues increased $23 million or 6.3 percent to $388 million compared to $365 million for the corresponding period in 2001. This increase was driven by a combination of increased rates to commercial and governmental payors, increased volume in nursing patient admissions and an increase in the number of enrollees served by the Company's CareCentrix unit.

Gross Profit

Gross profit was approximately $57 million in the second quarter of fiscal 2002 and $60 million in the second quarter of fiscal 2001. As a percentage of net revenue, gross profit margins decreased from 33.6 percent in the second quarter fiscal 2001 to 29.0 percent in the second quarter of fiscal 2002. The decrease in margin was primarily related to a $6.3 million special charge relating principally to a refinement in the estimation process used to determine the Company's actuarially computed workers compensation and professional liability insurance reserves. In addition to the special charge, the Company also recorded a revenue adjustment of $2.5 million related to a change in the estimated amount of the repayment to Medicare for partial episode payments ("PEPS") from the inception of the Prospective Payment Reimbursement System ("PPS") in October 2000 through June 30, 2002. The remaining change in gross profit percentage can be attributed to training costs associated with the training of full time caregivers, an increase in caregiver wages in certain markets, and a change in business

mix due to the accelerated growth in the CareCentrix business, which generates a lower gross margin but also requires lower administrative costs to service the business.

Gross profit margins decreased from 34.3 percent for the first six months of 2001 to 31.0 percent in the first six months of 2002. This decrease in margins was driven by the $6.3 million special charges recorded in the second quarter of 2002 and the $2.5 million revenue adjustment related to PEPS recorded in the second quarter, revenue adjustments related to estimated third party settlements as well as various other factors, including increased insurance and labor costs, training costs associated with orientation of additional full-time caregivers and changes in business mix resulting from growth in lower margin CareCentrix business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $35 million or 51.5 percent to $103 million during the second quarter of fiscal 2002 as compared to $68 million during the second quarter of fiscal 2001. For the first six months of 2002, selling, general and administrative expenses increased $31 million or 23.2 percent to $166 million compared to $135 million for the corresponding period in 2001. These increases were driven by restructuring and special charges of $46.1 million during the second quarter ended June 30, 2002 of which approximately $40 million is reflected in selling, general and administrative expenses in the accompanying consolidated statement of operations.

Charges during the period are summarized and further described below (dollars in thousands):

		Three and Six Months Ended June 30, 2002
Restructuring charges:
Business realignment activities		$ 6,813

Special charges:
Option tender offer		21,388
Settlement costs		7,731
Insurance costs		6,300
Asset writedowns and other		3,824
	Total Special charges	39,243

Total Restructuring and Special charges		$ 46,056

Restructuring Charges

Business Realignment Activities

The Company recorded charges of $6.8 million in the second quarter and first six months of fiscal 2002 in connection with a restructuring plan. This plan included the closing and consolidation of seven field locations and the realignment and consolidation of certain corporate and administrative support functions due primarily to the sale of the Company's SPS business. These charges included employee severance of $0.9 million relating to the termination of 115 employees in field locations and certain corporate and administrative departments, and future lease payments and other associated costs of $5.9 million resulting principally from the consolidation of office space at the Company's corporate headquarters and a change in

estimated future lease obligations and other costs in excess of sublease rentals relating to a lease for a subsidiary of the Company's former parent company which the Company agreed to assume in connection with its Split off in March 2000. The Company expects the restructuring plan to be fully implemented by the fourth quarter of fiscal 2002. These charges are reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Special Charges

Fiscal 2002

Option Tender Offer

Settlement Costs

Insurance Costs

Asset Writedowns and Other

During the second quarter of fiscal 2002, the Company recorded charges of $3.8 million consisting primarily of a writedown of inventory and other assets associated with the Company's home medical equipment ("HME") business, and a write off of deferred debt issuance costs associated with the terminated credit facility. These charges are reflected in selling, general and administrative expenses in the accompanying statement of operations.

Fiscal 2001

Settlement Costs

During the second quarter of fiscal 2001, the Company recorded special charges of approximately $3.0 million in connection with the settlement of the Gile v. Olsten Corporation, et al, and the State of Indiana v. Quantum Health Resources, Inc. and Olsten Health Services, Inc. lawsuits and for various other legal costs. These special charges are reflected in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Interest Income (Expense), Net

Net interest income was approximately $0.4 million in the second quarter of fiscal 2002 and net interest expense was approximately $0.1 million in the second quarter of fiscal 2001. Net interest income for the second quarter of fiscal 2002 represented interest income of approximately $0.8 million, offset by fees relating to the revolving credit facility and outstanding letters of credit. Net interest income was approximately $0.6 million for the first six months of 2002 and net interest expense was approximately $0.5 million for the corresponding period in 2001. Net interest expense for the first six months of fiscal 2001 represented fees relating to the revolving credit facility and outstanding letters of credit and the 10 percent convertible preferred trust securities offset by interest income of approximately $1.4 million.

Income Taxes

A federal and state income tax benefit was recorded for the three and six months ended June 30, 2002 relating to the loss from continuing operations. Because of the uncertainty of ultimate realization of net deferred tax assets, a valuation allowance is maintained relating to deferred tax assets that are not otherwise used to offset deferred tax liabilities. The Company had net operating tax loss carryforwards (NOLs) of approximately $90 million as of December 30, 2001. The NOLs were fully used in the second quarter of fiscal 2002 to offset, in part, the gain from the sale of the SPS business.

Liquidity and Capital Resources

The Company's principal source of liquidity is the collection of its accounts receivable.

Working capital at June 30, 2002, was $95 million, a decrease of $323 million as compared to $418 million at December 30, 2001, primarily due to:

a $250 million decrease resulting from the sale of the net assets of the SPS business,

a $23 million decrease in prepaid and other assets relating to an increase in the valuation allowance for deferred tax assets as further described in Note 6, and

a $42 million increase in current liabilities, excluding liabilities held for sale, primarily driven by accrued expenses ($19 million), accounts payable ($9 million), insurance costs ($8 million) and income taxes payable of ($6 million) associated with the sale of the SPS business, restructuring activities and special charges.

Days Sales Outstanding ("DSO") was 68 days at December 30, 2001. DSO was reduced by 5 days to 63 days at June 30, 2002, as a result of continued improved cash collections.

In early 2001, the Center for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration, issued cash advances to certain Medicare providers in connection with the transition from the IPS to the PPS for Medicare reimbursement. In the first quarter of fiscal 2001, the Company received such a cash advance relating to the transition to PPS, net of payments for estimated settlements relating to cost report filings, of approximately $21 million, which was reflected in accrued expenses in the accompanying consolidated balance sheet as of June 30, 2002 and December 30, 2001. Such advances are expected to be repaid during the third quarter of fiscal 2002.

In connection with the sale of the SPS business, the Company terminated its existing credit facility, and entered into a new credit facility on June 13, 2002. The new credit facility provides the Company with up to $55 million in borrowings, including up to $40 million which is available for letters of credit. The Company may borrow up to a maximum of eighty percent of the net amount of eligible accounts receivable, as defined, less any reserves required by the lender. Borrowing availability under the new credit facility is reduced by $10 million until such quarter in 2003 in which trailing twelve month EBITDA, excluding certain restructuring costs and special charges, as defined, exceeds $15 million. At the Company's option, the interest rate on borrowings under the credit facility is based on the London Interbank Offered Rates (LIBOR) plus 3.5 percent or the lender's prime rate plus 1.25 percent. In addition, the Company must pay a fee equal to 2.5 percent per annum of the aggregate face amount of outstanding letters of credit. Beginning in 2003, the applicable margin for the LIBOR borrowing, prime rate borrowing and letter of credit fees decrease by 0.25 percent to 3.25 percent, 1.0 percent, and 2.25 percent, respectively, provided that the Company's trailing twelve month EBITDA, excluding certain restructuring costs and special charges, as defined, is in excess of $20 million. The higher margins and fees are subject to reinstatement in the event that EBITDA falls below $20 million. The Company is subject to an unused line fee equal to 0.50 percent per annum of the average daily difference between $55 million and the total outstanding borrowings and letters of credit. For 2003, the unused credit line fee decreases to 0.375 percent provided the minimum EBITDA target described above is achieved, but is subject to reinstatement to the higher fee in the event that EBITDA falls below $20 million. Total outstanding letters of credit were approximately $26.6 million as of June 30, 2002. There were no borrowings outstanding under the credit facility as of June 30, 2002.

The new credit facility, which expires in 2006, includes certain covenants requiring the Company to maintain a minimum tangible net worth, minimum EBITDA, a minimum fixed charge coverage and a minimum cash balance related to the Medicare advance. Other covenants in the credit facility include limitation on mergers, consolidations, acquisitions, indebtedness, liens, distributions, capital expenditures and dispositions of assets and other limitations with respect to the Company's operations. The credit facility further provides that if the agreement is terminated for any reason, the Company must pay an early termination fee equal to 1.0 percent if terminated during year one, 0.5 percent if terminated in year two and 0.25 percent if terminated in year three, of $55 million (or $45 million during the time when borrowing availability is reduced by $10 million due to EBITDA requirements). Loans under the credit facility will be collateralized by all of the Company's tangible and intangible personal property, other than equipment.

The new credit facility includes provisions, which, if not complied with, could require early payment by the Company. These include customary default events, such as failure to comply with financial covenants, insolvency events, non-payment of scheduled payments, acceleration of other financial obligations and change in control provisions. In addition, these provisions include an account obligor whose accounts are more than 25 percent of all accounts of the Company over the previous

12-month period canceling or failing to renew its contract with the Company and ceasing to recognize the Company as an approved provider of health care services, or the Company revoking the lending agent's control over its governmental lockbox accounts. The Company does not have any trigger events in the new credit facility that are tied to changes in its credit rating or stock price.

As of June 30, 2002, the Company was in compliance with its financial covenants and had borrowing capacity under the credit facility, after adjusting for outstanding letters of credit, of approximately $18 million.

The Company has no off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

In connection with the Frederickson v. Olsten Health Services Corp. and Olsten Corporation case, a supersedeas bond in the amount of $35.2 million was posted to satisfy the judgment plus interest. Under terms of the bond, cash equal to the amount of the bond is held in a segregated account and is reported as restricted cash in the accompanying consolidated balance sheets as of June 30 2002 and December 30, 2001. This matter has been settled and settlement costs were recorded as part of special charges during the second quarter of fiscal 2002. The procedural steps for the release of the supersedeas bond are in process.

Although the Company had cash and equivalents, including restricted cash, of $102.7 million at June 30, 2002, the Company is obligated to make certain cash payments during the remainder of fiscal 2002. These payments include a $20.9 million cash advance from the Medicare program, which is expected to be repaid during the third quarter of 2002, settlement costs of $7.7 million, certain other restructuring and special charges and other cash outflows in the ordinary course of business. These cash outflows could be offset by cash flow generated from operations during the period. Based on current projections and assuming there will be no significant cash requirements for new strategic initiatives during the second half of fiscal 2002, the Company expects to have a cash balance of between $70 million and $80 million at the end of fiscal 2002.

The Company intends to make investments and other expenditures to, among other things, upgrade its computer technology and system infrastructure and comply with regulatory changes in the industry. In this regard, management expects that capital expenditures will range between $4 million and $6 million during the second half of fiscal 2002. The Company may also make certain other investments to expand its business, including acquisitions. Management expects that the

Company's working capital needs for the remainder of fiscal 2002 will be met through operating cash flow. If cash flows from operations or availability under the credit facility fall below expectations, the Company may be forced to delay planned capital expenditures, reduce operating expenses, seek additional financing or consider alternatives designed to enhance liquidity.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions and select accounting policies that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates of the Company relate to revenue recognition, the collectibility of accounts receivable, the cost of claims incurred but not reported, obligations under workers compensation and professional liability insurance programs and Medicare settlement and investigation issues.

A description of the accounting policies and a discussion of the significant estimates and judgments associated with such policies are described below.

Revenue Recognition

Under fee-for-service agreements with patients and commercial and certain government payors, net revenues are recorded based on net realizable amounts to be received in the period in which the services and products are provided or delivered. Under capitated arrangements with managed care customers, net revenues are recognized based on a predetermined monthly contractual rate for each member of the managed care plan regardless of the services provided. Under the Prospective Payment System for Medicare reimbursement, net revenues are recorded based on a reimbursement rate which varies based on the severity of the patient's condition, service needs and certain other factors; revenue is recognized ratably over the estimated period in which services are provided and revenue is subject to adjustment if there are significant changes in the patient's condition during the treatment period or if the patient is discharged but readmitted to another agency within the same sixty day episodic period.

Revenue adjustments result from differences between estimated and actual reimbursement amounts, an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Revenue adjustments are deducted from gross accounts receivable. These revenue adjustments are based on significant assumptions and judgments which are determined by Company management based on historical trends.

The process for recognizing revenue under capitated contracts and the majority of fee-for-service arrangements is generally straight-forward. The process for estimating revenue to be recognized under the Medicare program is based on certain assumptions and judgments, including the average length of time of each treatment as compared to a standard sixty day episode, the appropriateness of the clinical assessment of each patient at the time of certification and the level of adjustments to the fixed reimbursement rate relating to patients who receive a limited number of visits, have significant changes in condition or are subject to certain other factors during the episode.

During the first six months of fiscal 2002, the percentage of net revenues attributable to major sources of reimbursement were as follows: 21 percent related to Medicare reimbursement, 22 percent related to reimbursement by Medicaid, state reimbursed programs and other state/county funding programs, 54 percent related to insurance and managed care payors and 3 percent related to private pay and other reimbursement sources. In addition, for the same period, Cigna Healthcare accounted for approximately 38 percent of the Company's total net revenues. Of the total revenue generated from Cigna Healthcare, approximately 39 percent was recognized under a capitated arrangement. The Company has renewed its contract with Cigna Healthcare for a seventh consecutive year, with the current contract expiring on December 31, 2003, with an option to renew. Fee-for-service contracts with other commercial payors are traditionally one year in term and renewable automatically on an annual basis, unless terminated by either party.

Collectibility of Accounts Receivable

The process for estimating the ultimate collection of receivables, particularly with respect to fee-for-service arrangements, involves significant assumptions and judgments. In this regard, the Company has implemented a standardized approach to estimate and review the collectibility of its receivables based on accounts receivable aging trends. Historical collection and payor reimbursement experience is an integral part of the estimation process related to determining the allowance for doubtful accounts. In addition, the Company assesses the current state of its billing functions in order to identify any known collection or reimbursement issues to determine the impact, if any, on its reserve estimates, which involve judgment. The Company believes that the collectibility of its receivables is directly linked to the quality of its billing processes, most notably those related to obtaining the correct information to bill effectively for the services that are provided. Revisions in reserve estimates are recorded as an adjustment to the provision for doubtful accounts which is reflected in selling, general and administrative expenses. The Company believes that its collection and reserve processes, along with the monitoring of its billing processes, help to reduce the risk associated with material revisions to reserve estimates resulting from adverse changes in collection and reimbursement experience and billing functions.

Cost of Claims Incurred But Not Reported

Under capitated arrangements with managed care customers, the Company estimates the cost of claims incurred but not reported based on applying actuarial assumptions, historical patterns of utilization to authorized levels of service, current enrollment statistics and other information. In addition, under fee-for-service arrangements with certain managed care customers, the Company also estimates the cost of claims incurred but not reported and the estimated revenue relating thereto in situations in which the Company is responsible for care management and patient services are performed by a non-affiliated provider.

The estimate of cost of claims incurred but not reported involves significant assumptions and judgments which relate to and may vary depending on the services authorized at each of our care management centers, historical patterns of service utilization and payment trends. These assumptions and judgments are evaluated on a quarterly basis and changes in estimated liabilities for costs incurred but not reported are determined based on such evaluation.

Obligations Under Workers Compensation and Professional Liability Insurance Programs

The Company may be subject to workers compensation claims and lawsuits alleging negligence or other similar legal claims. The Company maintains various insurance programs to cover this risk but is substantially self-insured for most of these claims. The Company recognizes its obligations associated with these programs in the period the claim is incurred. The cost of both reported claims and claims incurred but not reported, up to specified deductible limits, have generally been estimated based on historical data, industry statistics, current enrollment statistics and other information. Such estimates and the resulting reserves are reviewed and updated periodically.

During the second quarter of fiscal 2002, the Company recorded a special charge of $6.3 million relating primarily to a refinement in the estimation process used to determine the Company's actuarially computed workers compensation and professional liability reserves. In this regard, management believes it now has sufficient data to allow the Company to more heavily rely on home health specific historical claims experience in determining the Company's estimates of workers compensation and professional liability reserves. Previously the Company utilized insurance industry actuarial information in developing reserve estimates.

The Company maintains insurance coverage on individual claims. The Company is responsible for the cost of individual workers compensation claims up to $500,000 per incident and individual professional liability claims up to $500,000 per incident through March 15, 2002 and $1,000,000 per incident thereafter. The Company also maintains excess liability coverage relating to professional liability and casualty claims which provides insurance coverage for individual claims of up to $25,000,000 in excess of the deductible amount. The Company believes that present insurance coverage and reserves are sufficient to cover currently estimated exposures but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.

Settlement Issues and Government Investigations

Prior to October 1, 2000 reimbursement of Medicare home care nursing services was based on reasonable, allowable costs incurred in providing services to eligible beneficiaries subject to both per visit and per beneficiary limits in accordance with the Interim Payment System established through Balanced Budget Act of 1997. These costs are reported in annual cost reports, which are filed with the Center for Medicare and Medicaid Services (CMS), and are subject to audit by the fiscal intermediary engaged by CMS. The fiscal intermediary has not completed its audit of the fiscal 2000 cost reports and the review of cost limits relating to certain of the Company's Medicare providers. Furthermore, settled cost reports relating to certain years prior to fiscal 2000 could be subject to reopening of the audit process by the fiscal intermediary. Although management believes that established reserves are sufficient, it is possible that adjustments resulting from such audits by the fiscal intermediary could result in adjustments to the consolidated financial statements that exceed established reserves.

The Company has filed appeals with the Provider Reimbursement Review Board for the years 1997, 1998 and 1999 concerning audit adjustments made by its Medicare fiscal intermediary. These audit adjustments relate to the methodology used by the Company in allocating a portion of its residual overhead cost on the Medicare cost reports. The Company

believes its methodology used to allocate such overhead cost was accurate and consistent with past practice accepted by the fiscal intermediary; however, the Company has recorded the impact of the audit adjustments in its consolidated financial statements and has not recorded any anticipated recovery from the appeals. The Company is unable to predict the outcome of these appeals.

In addition, as discussed in Note 10, the Company is subject to a government investigation and has provided the Office of Inspector General and other government agencies with requested documents and has cooperated fully with the investigation. A settlement in principle of the matter has been reached, subject to approval of applicable government departments.

These accounting policies have been described in the Company's 2001 Annual Report on Form 10-K, as amended, with the following accounting policy adopted effective December 31, 2001.

estimated fair value, management proceeded to the second step to measure the impairment. The second step compared the implied fair value of goodwill with its carrying value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the carrying amount of the reporting unit's goodwill is greater than its implied fair value, an impairment loss would be recognized in the amount of the excess.

The table below presents a reconciliation of reported net income to adjusted net income as if the SFAS 142 was adopted as of the beginning of fiscal 2001 (in thousands, except per share amounts).

	Three Months Ended		Six Months Ended
	July 1, 2001		July 1, 2001
	Net Income	Earnings Per Share Basic and Diluted	Net Income	Earnings Per Share Basic and Diluted
Reported net income	$ 2,318	$ 0.10	$ 8,430	$ 0.39
Add back: Goodwill amortization	2,499	0.11	5,057	0.23

Adjusted net income	$ 4,817	$ 0.21	$ 13,487	$ 0.62

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Generally, the fair market value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. The Company had no interest rate exposure on fixed rate debt at June 30, 2002.

OTHER:

INFORMATION CONTAINED HEREIN, OTHER THAN HISTORICAL INFORMATION, SHOULD BE CONSIDERED FORWARD-LOOKING AND IS SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. FOR INSTANCE, THE COMPANY'S STRATEGIES AND OPERATIONS INVOLVE RISKS OF COMPETITION, CHANGING MARKET CONDITIONS, CHANGES IN LAWS AND REGULATIONS AFFECTING THE COMPANY'S INDUSTRY AND NUMEROUS OTHER FACTORS DISCUSSED IN THIS DOCUMENT AND IN OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Litigation

Fredrickson v. Olsten Health Services Corp. and Olsten Corporation, Case No. 01C.A.116, Court of Appeals, Seventh Appellate District, Mahoning County, Ohio. In November, 2000, the jury in this age-discrimination lawsuit returned a verdict in favor of the plaintiff against Olsten consisting of $675,000 in compensatory damages, $30 million in punitive damages and an undetermined amount of attorneys' fees. The jury found that, although Olsten had lawfully terminated the plaintiff's employment, its failure to transfer or rehire the plaintiff rendered Olsten liable to the plaintiff. Following post-trial motion practice by both parties, the trial court, in May 2001, denied all post-trial motions, and entered judgment for the plaintiff for the full amount of compensatory and punitive damages, and awarded the plaintiff reduced attorney's fees of $247,938. In June 2001, defendants timely filed a Notice of Appeal with the Court of Appeals, and the Company posted a supersedeas bond for the full amount of the judgment, plus interest. This matter has been settled, and settlement costs were recorded as part of special charges during the second quarter of fiscal 2002. The procedural steps for the release of the supersedeas bond are in process.

Furthermore, in connection with the Split-Off, the Company agreed to assume, to the extent permitted by law, the liabilities, if any, arising out of (and to indemnify Olsten for) the above proceedings and other liabilities arising out of the health services business, including any such liabilities arising after the Split-Off in connection with the government investigations described below.

representations and warranties related to health care compliance survive for three years after the closing of the acquisition;

representations and warranties related to title of the assets and sufficiency of assets and employees survive for the applicable statute of limitations period; and

representations and warranties related to tax matters survive until thirty days after the expiration of the applicable tax statute of limitations period, including any extensions of the applicable period, subject to certain exceptions.

Government Investigations

In early February 2000, the Company received a document subpoena from the Department of Health and Human Services, Office of Inspector General, and Office of Investigations. The subpoena relates to its agencies' cost reporting procedures concerning contracted nursing and home health aide costs. To the Company's knowledge, the government has not filed a complaint against the Company. A settlement in principle of this matter has been reached, subject to approval of applicable government departments.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

Special Meeting - June 12, 2002

(a) A Special Meeting of Shareholders was held on June 12, 2002.

(c) (i) The proposal to approve the sale of substantially all the assets of the
Company's specialty pharmaceutical services business to Accredo

Health, Incorporated was approved by votes as follows:

FOR:	17,630.268
AGAINST:	22,733
ABSTAIN:	16,903
BROKER NONVOTES:	--

                         (ii)        The proposal to authorize the proxies, in their discretion, to vote on any other
                                     matter that might properly come before the meeting or any adjournment or
                                     postponement was approved by votes as follows:

FOR:	9,949.419
AGAINST:	4,194,231
ABSTAIN:	3,526,254
BROKER NONVOTES:	--

Annual Meeting - June 28, 2002

(a) The Annual Meeting of Shareholders was held on June 28, 2002.

Name	Votes FOR	Votes WITHHELD

Edward A. Blechschmidt	22,738,474	859,301
Ronald A. Malone	22,739,470	858,305
Raymond S. Troubh	23,083,125	514,650

                       (ii)      The proposal to ratify and approve the appointment of Pricewaterhouse
                                  Coopers LLP as independent public accountants of the Company for 2002
                                  was approved by votes as follows:

FOR:	23,051,672
AGAINST:	540,774
ABSTAIN:	5,329
BROKER NONVOTES:	--

Item 5. Other Information

In connection with a July 19, 1999 settlement with various government agencies, Olsten executed a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services which will remain in effect until August 18, 2004. The July 1999 corporate integrity agreement applies to the Company's businesses that bill the federal government health programs directly for services, such as its Home Health Services business (but excluding the SPS business). This corporate integrity agreement focuses on issues and training related to cost report preparation, contracting, medical necessity and billing of claims.

Under the corporate integrity agreement, the Company is required, for example, to maintain a corporate compliance officer to develop and implement compliance programs, to retain an independent review organization to perform annual reviews and to maintain a compliance program and reporting systems, as well as provide certain training to employees.

The Company's compliance program will be implemented for all newly established or acquired business units if their type of business is covered by the corporate integrity agreement. Reports under the integrity agreement are to be filed annually with the Department of Health and Human Services, Office of Inspector General. After the corporate integrity agreement expires, the Company is to file a final annual report with the government. The Company is in compliance with the corporate integrity agreement and has timely filed all required reports. If the Company fails to comply with the terms of its corporate integrity agreement, the Company will be subject to penalties.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibit Number	Description
	3.1	Restated Certificate of Incorporation of Company. (1)
	3.2	Certificate of Correction to Certificate of Incorporation, filed with the Delaware Secretary of State on July 1, 2002.+
	3.3	Restated By-Laws of Company.+
	4.1	Specimen of common stock. (3)
	4.2	Form of Certificate of Designation of Series A Junior Participating Preferred Stock. (1)
	4.3	Form of Certificate of Designation of Series A Cumulative Non-Voting Redeemable Preferred Stock. (2)
	10.1	Employment Agreement with Ronald A. Malone.+*
	10.2	Form of Change of Control Agreement with Executive Officers of Company. +*
	10.3	Change in Control Agreement with Ronald A. Malone. +*
	10.4	Form of Severance Agreement with Executive Officers of Company.+*
	10.5	Loan and Security Agreement dated June 13, 2002 by and between Fleet Capital Corporation, as Administrative Agent, on behalf of the lenders named therein, Fleet Securities, Inc., as Arranger, Gentiva Health Services, Inc., Gentiva Health Services Holding Corp. and the subsidiaries named therein. (4)
	21	List of Subsidiaries of Company. +
	(1)	Incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form S-4, dated January 20, 2000 (File No. 333-88663).
	(2)	Incorporated herein by reference to Amendment No. 3 to the Registration Statement on Form S-4, dated February 4, 2000 (File No. 333-88663).
	(3)	Incorporated herein by reference to Amendment No. 4 to the Registration Statement on Form S-4, dated February 9, 2000 (File No. 333-88663).
	(4)	Incorporated by reference to Form 8-K for the Company dated June 13, 2002 and filed June 21, 2002.
	+	Filed herewith.
	*	Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

On June 21, 2002, the Company filed a report on Form 8-K in connection with the completion of the sale of its SPS business to Accredo Health, Incorporated.

On June 28, 2002, the Company filed a report on Form 8-K in connection with the distribution of proceeds from the sale of its SPS business, the closing of its tender offer for all outstanding options to purchase the Company's common stock and the reporting of the Company's pro forma financial information to give effect to the sale of its SPS business.

On August 7, 2002, the Company filed a report on Form 8-K in connection with the Statements filed by the Chief Executive Officer and the Chief Financial Officer in accordance with SEC Order No. 4-460.

On August 12, 2002, the Company filed a report on Form 8-K/A in connection with the Statements filed by the Chief Executive Officer and the Chief Financial Officer in accordance with SEC Order No. 4-460.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 14, 2002	/S/ Ronald A. Malone Ronald A. Malone Chairman and Chief Executive Officer
Date: August 14, 2002	/S/ John R. Potapchuk John R. Potapchuk Senior Vice President and Chief Financial Officer

EX-3 3 certofcorrection11.htm EXHIBIT 3.2 CERTIFICATE OF CORRECTION

Exhibit 3.2

CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF INCORPORATION
OF
GENTIVA HEALTH SERVICES, INC.

Pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware

I, the undersigned, of Gentiva Health Services, Inc. do hereby certify that the Amended and Restated Certificate of Incorporation filed on January 4, 2000 contained an inaccurate record.

ARTICLE 7. provided that:

"Section 7.2. Number, Election and Term of Office. Except in respect of the election of additional directors as otherwise provided for by or pursuant to the provisions of the certificate of incorporation of the Corporation (including any Preferred Stock Designation) pertaining to any class or series of stock having a preference over the Common Stock as to dividends or distributions upon liquidation, the number of the directors of the Corporation shall be fixed from time to time (and may be changed) exclusively pursuant to a resolution adopted by a majority of the directors then in office, but shall not be more or less than that set forth in the Bylaws; provided, however, that no reduction in the number of directors shall end the term of office of any incumbent director prior to the date such director's term of office would otherwise end. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or distributions upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes designated Class I, Class II and Class III, as nearly equal in number as possible. Class I directors shall initially be elected for a term expiring at the annual meeting of stockholders to be held in 2000. Class II directors shall initially be elected for a term expiring at the annual meeting of stockholders to be held in 2001. Class III directors shall initially be elected for a term expiring at the annual meeting of stockholders to be held in 2002. Each director shall hold office until his or her successor is duly elected and qualified. At each succeeding annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified."

ARTICLE 7. should read as follows:

"Section 7.2. Number, Election and Term of Office. Except in respect of the election of additional directors as otherwise provided for by or pursuant to the provisions of the certificate of incorporation of the Corporation (including any Preferred Stock Designation) pertaining to any class or series of stock having a preference over the Common Stock as to dividends or distributions upon liquidation, the number of the directors of the Corporation shall be fixed from time to time (and may be changed) exclusively pursuant to a resolution adopted by a majority of the directors then in office, but shall not be more or less than that set forth in the Bylaws; provided, however, that no reduction in the number of directors shall end the term of office of any incumbent director prior to the date such director's term of office would otherwise end. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or distributions upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes designated Class I, Class II and Class III, as nearly equal in number as possible. Class I directors shall initially be elected for a term expiring at the first annual meeting of stockholders. Class II directors shall initially be elected for a term expiring at the second annual meeting of stockholders. Class III directors shall initially be elected for a term expiring at the third annual meeting of stockholders. Each director shall hold office until his or her successor is duly elected and qualified. At each succeeding annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified."

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed by its authorized person as of the 28th day of June, 2002.

GENTIVA HEALTH SERVICES, INC.

By: /s/ John R. Potapchuk
Name:  John R. Potapchuk
Title:    Senior Vice President and
            Chief Financial Officer

EX-3 4 gentivabylaws1.htm EXHIBIT 3.3 Amended and Restated By-Laws of Gentiva

Exhibit 3.3

AMENDED AND RESTATED BY-LAWS

OF

GENTIVA HEALTH SERVICES, INC.

TABLE OF CONTENTS

Page

ARTICLE 1

STOCKHOLDERS

1.1       Place of Meetings                                                                                                                         1
1.2       Annual Meeting                                                                                                                            1
1.3       Special Meetings                                                                                                                          1
1.4       Notice of Meetings                                                                                                                       1
1.5       Quorum                                                                                                                                        2
1.6       Adjournments                                                                                                                               3
1.7       Proxies                                                                                                                                         3
1.8       Notice of Stockholder Nominations and
                 Other Proposed Stockholder Action                                                                                      3
1.9       Procedure for Election of Directors and
                 Other Stockholder Votes                                                                                                         8
1.10     Conduct of Meetings                                                                                                                    9
1.11     Vote Required for Stockholder Action                                                                                          9
1.12     No Stockholder Action by Written Consent                                                                                10

ARTICLE 2

DIRECTORS

2.1       General Powers                                                                                                                          10
2.2       Number and Tenure                                                                                                                  10
2.3       Vacancies                                                                                                                                 11
2.4       Resignation                                                                                                                                 11
2.5       Regular Meetings                                                                                                                        11
2.6       Special Meetings                                                                                                                        11
2.7       Notice of Special Meetings                                                                                                         12
2.8       Meetings by Telephone Conference Calls                                                                                    12
2.9       Quorum                                                                                                                                      12
2.10     Action at Meeting                                                                                                                       13
2.11     Action by Consent in Lieu of a Meeting                                                                                       13
2.12     Removal                                                                                                                                     13
2.13     Board Approval Policies                                                                                                             13
2.14     Committees                                                                                                                                14

ARTICLE 3

OFFICERS

3.1 Officers 14

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Page

3.2       Election and Term of Office                                                                                                        15
3.3       Chairman of the Board; Vice Chairman of
                 the Board                                                                                                                              15
3.4       Chief Executive Officer                                                                                                             15
3.5       President                                                                                                                                    16
3.6       Vice Presidents                                                                                                                           16
3.7       Treasurer; Assistant Treasurers                                                                                                   16
3.8       Secretary; Assistant Secretaries                                                                                                  17
3.9       Removal                                                                                                                                     17
3.10     Vacancies                                                                                                                                   17
3.11     Resignations                                                                                                                               18

ARTICLE 4

INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS

4.1       Indemnification Respecting Third Party
                 Claims                                                                                                                                   18
4.2       Indemnification Respecting Derivative
                 Claims                                                                                                                                   19
4.3       Determination of Entitlement to
                 Indemnification                                                                                                                      21
4.4       Right to Indemnification in Certain
                 Circumstances                                                                                                                       21
4.5       Advances of Expenses                                                                                                                22
4.6       Indemnification Not Exclusive                                                                                                     23
4.7       Corporate Obligations; Reliance                                                                                                  23
4.8       Accrual of Claims; Successors                                                                                                    23
4.9       Insurance                                                                                                                                    24
4.10     Definitions of Certain Terms                                                                                                        24

ARTICLE 5

STOCK CERTIFICATES AND TRANSFERS

5.1 Stock Certificates and Transfers 24
5.2 Lost, Stolen or Destroyed Certificates 25

ARTICLE 6

CONTRACTS, PROXIES, ETC.

6.1 Contracts 25
6.2 Proxies 25

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Page

ARTICLE 7

MISCELLANEOUS PROVISIONS

7.1       Fiscal Year                                                                                                                                 26
7.2       Dividends                                                                                                                                   26
7.3       Seal                                                                                                                                            26
7.4       Waiver of Notice                                                                                                                        26
7.5       Annual Audit                                                                                                                              27
7.6       Delaware Office                                                                                                                         27
7.7       Other Offices                                                                                                                              27
7.8       Books and Records                                                                                                                    27
7.9       Certificate of Incorporation                                                                                                         27
7.10     Severability                                                                                                                                 27

ARTICLE 8

AMENDMENTS

8.1 Amendments 28

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AMENDED AND RESTATED BY-LAWS

OF

GENTIVA HEALTH SERVICES, INC.

ARTICLE 1

STOCKHOLDERS

1.1 Place of Meetings. All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Board of Directors or, if not so designated, at the principal office of the corporation.

1.2 Annual Meeting. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on such date and at such time as may be fixed by the Board of Directors, except as may otherwise be provided by law.

1.3 Special Meetings. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or distributions upon liquidation, special meetings of stockholders of any class or series for any purpose or purposes may be called only by the Chairman of the Board of Directors, the Chief Executive Officer of the corporation or by the Board of Directors pursuant to a resolution, stating the purpose or purposes thereof, approved by a majority of the directors then in office. No business other than that stated in the notice provided for in Section 1.4 shall be transacted at any special meeting.

1.4 Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be delivered not less than 10 calendar days nor more than 60 calendar days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such

person's address as it appears on the records of the corporation. Such further notice shall be given as may be required by law. Only such business shall be conducted at a special meeting of stockholders of which notice shall have been given in accordance herewith. Any proper matter for stockholder action may be brought before an annual meeting of stockholders, provided that notice of any such matter to be brought before the meeting by any stockholder shall have been given to the corporation as provided by Section 1.8 of these By-Laws. Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived in accordance with Section 7.4 of these By-Laws by those not present or not provided notice. Any previously scheduled meeting of the stockholders may be postponed or canceled and any special meeting of the stockholders called by the Board of Directors may be postponed or canceled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders.

1.5 Quorum. Except as otherwise provided by law or the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum; provided that the vote required for the taking of any particular stockholder action shall nonetheless continue to be required for such action. Once a share is represented for any purpose at a meeting, it shall be present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting.

Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes, provided, however, that the foregoing shall not limit the right of the corporation or any subsidiary of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

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1.6 Adjournments. The Chairman of the meeting may adjourn the meeting to another place, date or time if a quorum shall fail to attend any meeting or for any other reason. The stockholders present at a meeting shall not have authority to adjourn the meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. No notice of the time and place of adjourned meetings need be given except as required by law. If such notice is required by law, the provisions of Section 1.4 of these By-Laws shall govern the delivery of notice. A new record date must be set if the meeting is adjourned in a single adjournment to a date more than 120 days after the original date fixed for the meeting. If after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting consistent with the new record date.

1.7 Proxies. At all meetings of stockholders, a stockholder may vote by proxy in writing (or in such other form as permitted by the General Corporation Law of the State of Delaware (the "DGCL")) executed by the stockholder or by the stockholder's duly authorized attorney-in-fact.

1.8 Notice of Stockholder Nominations and Other Proposed Stockholder Action.

(a) Annual Meetings of Stockholders.

(1) Nominations of persons for election as directors and the proposal of matters to be considered and voted on by the stockholders at an annual meeting of stockholders may be made only (i) pursuant to Section 1.4 of these By-Laws (or any supplement thereto), (ii) by or at the direction of the Board of Directors, or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the notice required by this Section and who shall be entitled to vote at the meeting (or a duly authorized proxy therefor) and who complies with the notice procedures set forth in this Section.

(2) For nominations or other proposals to be properly brought before an annual meeting of stockholders by a stockholder pursuant to paragraph (a)(1) of this Section, the stockholder must

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have given timely notice thereof (including the information required hereby) in writing to the Secretary of the corporation and any such proposal must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 90th calendar day nor earlier than the close of business on the 120th calendar day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 calendar days before or more than 60 calendar days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th calendar day prior to such annual meeting and not later than the close of business on the later of the 90th calendar day prior to such annual meeting or the 10th calendar day following the calendar day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period or extend any time period for the giving of a stockholder's notice of a nomination or proposed action as described above. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation and employment of the person, (iii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by the person and (iv) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder (or any successor provision of law), including such person's written consent to being named as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the

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event that such business includes a proposal to amend the By-Laws of the corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of any of such stockholder's affiliates (as defined below) and of any person who is the beneficial owner (as defined below), if any, of such stock and any other information relating to the stockholder, the beneficial owner or proposed business that would be required to be disclosed in solicitations of proxies relating to the proposed items of business pursuant to Regulation 14A under the Exchange Act and Rule 14a-11 thereunder (or any successor provision of law); and (c) as to the stockholder giving the notice and each beneficial owner, if any, of such stock, (i) the name and address of such stockholder, as they appear on the corporation's stock ownership records, (ii) the name and address of each beneficial owner of such stock, (iii) the class and number of shares of capital stock of the corporation which are owned of record or beneficially by each such person, (iv) in the case of a proposal for a nomination for election or reelection of a director, (1) a description of all arrangements or understandings between such stockholder and

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each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (2) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to nominate the person named in its notice, (3) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock required to elect the nominee and/or (y) otherwise solicit proxies from stockholders in support of such nomination, and (4) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder, and (v) in the case of any other proposal of a stockholder, (1) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) pursuant to which the proposals are to be made by such stockholder, (2) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to propose the items of business set forth in the notice, (3) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock required to approve or adopt the proposal and/or (y) otherwise solicit proxies from stockholders in support of such proposal, and (4) any other information relating to such stockholder, beneficial owner or proposed business that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies in support of such proposal pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. The corporation may require the stockholder to furnish such other information as it may reasonably require to determine whether each proposed item of business is a proper matter for stockholder action or to determine the eligibility of such proposed nominee to serve as a director of the corporation.

(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation at an annual meeting of stockholders is increased and there is no public announcement by the corporation specifying the increased size of the Board of Directors at least 100 calendar days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the corporation at the principal executive offices of the corporation not later than the close of business on the 10th calendar day following the day on which such public announcement is first made by the corporation.

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(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting under Section 1.4 of these By-Laws. Nominations of persons for election to the Board of Directors at a special meeting of stockholders at which directors are to be elected pursuant to the corporation's notice of meeting may be made only (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who is a stockholder of record at the time of giving the notice required by this Section and who shall be entitled to vote at the meeting (or a duly authorized proxy therefor) and who complies with the procedures set forth in this Section. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, for nominations to be properly brought before the special meeting by a stockholder pursuant to this paragraph, the stockholder must give notice thereof containing the information required in the case of a nomination to be made by a stockholder at an annual meeting of stockholders by paragraph (a)(2) of this Section to the Secretary of the corporation at the principal executive offices of the corporation not earlier than the close of business on the 120th calendar day prior to such special meeting and not later than the close of business on the later of the 90th calendar day prior to such special meeting or the 10th calendar day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice of a nomination as described above.

(1) Only such persons who are nominated in accordance with the procedures set forth in this Section shall be eligible to be elected as directors (except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred shares of the corporation to nominate and elect a specified number of directors in certain circumstances) and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the Certificate of Incorporation or

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these By-Laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section and, if any proposed nomination or business is not in compliance with this Section, to declare that such defective proposal or nomination shall be disregarded.

(2) For purposes of this Section, "affiliate" in respect of a person shall mean another person who controls, is controlled by or is under common control with such person and the term "beneficially owns" (and variations thereof) shall have the same meaning as when used in Section 13(d) of the Exchange Act and Regulation 13D-G thereunder (or any successor provision of law). For purposes of this Section, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section, (i) a stockholder shall also be required to comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section and nothing contained herein shall constitute a waiver by the corporation or any stockholder of compliance therewith and (ii) nothing in this Section shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law) or (B) of the holders of any series of preferred stock to elect directors in accordance with the provisions of any applicable certificate of designation for preferred stock.

1.9 Procedure for Election of Directors and Other Stockholder Votes. Election of directors at all meetings of the stockholders at which directors are to be elected shall be by ballot only if required by the Chairman of the meeting. The Board of Directors by resolution shall appoint, or shall authorize

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an officer of the corporation to appoint, one or more inspectors of election with respect to all votes at any annual or special meeting of stockholders, which inspector or inspectors may include individuals who serve the corporation in other capacities, including, without limitation, as officers, employees, agents or representatives. One or more persons may be designated as alternate inspector(s) to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the Chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging such person's duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person's ability. The inspector(s) shall collect any ballots and tabulate all votes and make a report thereon and shall have the other duties prescribed by law.

1.10 Conduct of Meetings. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors or by another Chairman designated by the Board of Directors. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be determined by the Chairman of the meeting and announced at the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Such rules, regulations or procedures may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the Chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants.

1.11 Vote Required for Stockholder Action. Subject to the rights (if any) of the holders of any series of preferred stock to elect directors from time to time as provided by the Certificate of Incorporation of any certificate of designation, a plurality of the votes cast in favor of a nominee at the meeting shall be required for, and sufficient to, elect a director. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws (including with respect to removal of directors), in all matters other than the

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election of directors, the affirmative votes of a majority of the voting power of the shares present in person or represented by proxy at a meeting and entitled to vote on a matter presented to the meeting and voting in favor of or against the matter presented shall be required for, and sufficient to constitute, the act of the stockholders on such matter.

1.12 No Stockholder Action by Written Consent. Subject to the rights of the holders of any series of preferred stock, any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

ARTICLE 2

DIRECTORS

2.1 General Powers. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders.

2.2 Number and Tenure. Except as otherwise fixed by or pursuant to provisions of the Certificate of Incorporation relating to the rights of the holders of any class of preferred stock or series thereof with respect to the election of additional directors under specified circumstances, the number of the directors of the corporation which shall constitute the entire Board shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the directors then in office (but shall not be less than five nor more than twelve); provided, however, that no reduction in the number of directors shall reduce the term of office of any director then in office. The directors, other than those who may be elected by the holders of any class of preferred stock or any series thereof, shall be classified with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, one class to be originally elected for a term expiring at the first annual meeting of stockholders, another class to be originally elected for a term expiring at the second annual meeting of stockholders, and another class to be originally elected for a term expiring at the third annual meeting of stockholders, with a director of each class to hold office until his or her successor is

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duly elected and qualified. At each succeeding annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election (and until such person's successor shall have been duly elected and qualified).

2.3 Vacancies. Except as otherwise provided for or fixed by or pursuant to provisions of the Certificate of Incorporation relating to the rights of the holders of any class of preferred stock or series thereof, with respect to the election of additional directors under specified circumstances, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the remaining directors then in office, although less than a quorum. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office for the remainder of the full term of the class of directors in which the new directorship was created and until his successor is elected and qualified, or until his earlier death, resignation or removal. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director.

2.4 Resignation. Any director may resign by delivering his written resignation to the corporation at its principal office or to the Chairman, President or Secretary. Such resignation shall be effective upon receipt unless it specifies that it is effective at some other time or upon the happening of some other event.

2.5 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.

2.6 Special Meetings. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated by the Chairman of the Board, President, or by a majority of the directors then in office.

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2.7 Notice of Special Meetings. Notice of any special meeting of directors shall be given to each director in a writing addressed to such person's business address or principal residence (as the Secretary has most recently been advised of) and sent by hand delivery, first-class or overnight mail or courier service, telegram or facsimile transmission, or given to the director orally. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mail so addressed, with postage thereon prepaid, at least five calendar days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least 24 hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least 12 hours before such meeting. If given orally (by telephone or in person) or by hand delivery, the notice shall be given at least 12 hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors then in office are present or if all directors then in office waive in writing notice of the meeting either before or after such meeting.

2.8 Meetings by Telephone Conference Calls. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.

2.9 Quorum. Subject to Section 2.3 of these By-Laws, a whole number of directors equal to at least a majority of the directors then in office shall constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. Directors present at a meeting duly organized may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum; provided that the votes required for the taking of any particular action shall nonetheless continue to required for such action to be taken.

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2.10 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these By-Laws.

2.11 Action by Consent in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing, and the written consents are filed with the minutes of proceedings of the Board or committee.

2.12 Removal. Subject to the rights of any class of preferred stock or series thereof to elect and remove directors under specified circumstances, any one or more or all of the directors may be removed, only for cause, by the holders of at least a majority of the voting power of all outstanding shares of the corporation entitled to vote generally in the election of directors.

2.13 Board Approval Policies. The Board of Directors by resolution adopted by the affirmative vote of a majority of the directors then in office may establish such policies for the corporation with respect to the categories of matters which shall require the approval of the Board of Directors or a committee thereof prior to the corporation taking action to put such a matter into effect, as the Board of Directors may from time to time consider appropriate for the exercise of effective oversight of the corporation's business and affairs by the Board of Directors. Any such resolution or resolutions may provide that the approval by the Board of Directors required for a particular category of matter shall require the affirmative vote of a number of directors greater than that which would otherwise be required by Section 2.10 of these By-Laws and any such greater vote requirement established by such resolution requiring the affirmative vote of a number of directors greater than that which would otherwise be required by Section 2.10 of these By-Laws shall have the same force and effect as if set forth in these By-Laws; provided, however, that such resolution shall have been adopted by the like affirmative vote of the Board of Directors as that required by such resolution for such approval of the Board of Directors; and provided further that, any such resolution that has been adopted by the Board of Directors may be rescinded or amended only by the affirmative vote of a majority of the directors then in office.

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2.14 Committees. The Board of Directors may, by resolution passed by a majority of the directors then in office, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee may, to the extent permitted by law, exercise such powers and shall have such responsibilities as shall be specified in the designated resolution. Each such committee shall make such reports as the Board of Directors may from time to time request. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 2.7 of these By-Laws. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.

ARTICLE 3

OFFICERS

3.1 Officers. The Board of Directors shall elect, as officers of the corporation, a Chairman of the Board, a Chief Executive Officer, a President, a Treasurer, a Secretary, and such officers (including, without limitation, one or more Vice Chairmen, a General Counsel, a Controller, and such Vice Presidents, Senior Vice Presidents and Executive Vice Presidents) as the Board of Directors from time to time shall determine to be appropriate for the conduct of the governance and affairs of the corporation. All officers elected by the Board of Directors shall each have such powers and duties as are provided by these By-Laws and determined by the Board of Directors or a committee thereof and, subject thereto, as customarily pertain to their respective offices. The Board of Directors or any committee thereof may from time to time also elect, or the Chief Executive Officer or the President may appoint, such subordinate officers (including one or more Assistant Vice Presidents, Assistant General Counsel, Assistant Controllers, Assistant Secretaries and Assistant Treasurers), as the Board of Directors or such officer shall determine to be appropriate for the

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conduct of the business and affairs of the corporation; provided that the Board of Directors shall be notified of the appointment by the Chief Executive Officer or the President of any such subordinate officer. Such subordinate officers shall have such duties and shall hold their offices for such terms as shall be prescribed by the Board of Directors or a committee thereof or, if appointed thereby, by the Chief Executive Officer or the President, as the case may be. Two or more offices may be held by one individual. The Board of Directors shall designate, from among the officers, a chief financial officer and a chief accounting officer.

3.2 Election and Term of Office. The elected officers of the corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until such person's successor shall have been duly elected and shall have qualified or until such person's death or incapacity or until such person shall resign or be removed in accordance with these By-Laws.

3.3 Chairman of the Board; Vice Chairman of the Board. The Chairman of the Board shall perform the duties, and have the powers and authority, as may be assigned to such person from time to time by the Board of Directors. The Chairman of the Board shall, if present, preside at all meetings of the stockholders and at all meetings of the Board of Directors. If there is no Chief Executive Officer or President, the Chairman of the Board shall also be the chief executive officer of the corporation and shall have the duties, and the power and authority, prescribed in Section 3.4 of these By-Laws. The Board of Directors also may elect one or more Vice Chairmen to act in place of the Chairman upon his or her absence or inability to act and to have such other responsibilities and powers and authority, as may be determined by the Board of Directors.

3.4 Chief Executive Officer. As the corporation's chief executive officer, the Chief Executive Officer shall be responsible for the general supervision of the management and the policies and affairs of the corporation and shall perform the duties, and have the powers and authority, customarily incidental to such office and all such other duties, powers and authority as are determined by the Board of Directors. As the chief executive officer of the corporation, he or she shall be responsible to keep the Board of Directors

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reasonably informed about the business and affairs of the corporation, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.

3.5 President. The President shall act in a general executive capacity and shall assist the Chief Executive Officer in the general supervision of the management and the policies and affairs of the corporation and shall supervise the day-to-day operations of the corporation. The President shall, in the absence of or because of the inability to act of the Chief Executive Officer, perform all duties of the Chief Executive Officer.

3.6 Vice Presidents. The Board of Directors may elect such Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, with such powers, authority and duties, as the Board of Directors shall determine to be appropriate for the conduct of the business and affairs of the corporation. The Vice Presidents shall have such power and duties and shall be subject to such directions, as may be provided from time to time by the Board of Directors, any committee thereof, the Chief Executive Officer or the President. Assistant Vice Presidents shall have such of the powers, authority and duties of the Vice Presidents they assist as may be assigned by the Board of Directors, a committee thereof, the Chief Executive Officer, the President or such Vice President and during the absence or the disability of such Vice President, may exercise such or his or her powers and authority and perform such of his or her duties as may be appropriate to the conduct of the business and affairs of the corporation.

3.7 Treasurer; Assistant Treasurers. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of the funds, including cash-equivalent securities, of the corporation. The Treasurer shall cause the funds of the corporation to be deposited in such banks, other depository institutions and brokerage firms as may be authorized by the Board of Directors or designated in such manner as may be provided by resolution of the Board of Directors. The Treasurer shall have such further powers and duties, and shall be subject to such directions, as may be provided from time to time by the Board of Directors, any committee thereof, the Chief Executive Officer or the President. Assistant Treasurers shall have such of the powers, authority and duties of the Treasurer as may be assigned by the Board of Directors, a committee thereof, the Chief Executive Officer, the President or the Treasurer and, during the absence or the disability of the Treasurer, may exercise such of his or her powers and authority and perform such of his or her duties as may be appropriate for the conduct of the business and affairs of the corporation.

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3.8 Secretary; Assistant Secretaries. The Secretary shall see that all notices of meetings of the Board, the committees of the Board and the Stockholders or actions taken thereby are duly given in accordance with the provisions of these By-Laws and as required by law; shall be custodian of the seal of the corporation and may cause it to be affixed to all stock certificates of the corporation (unless the seal of the corporation on such certificates shall be a facsimile, as hereinafter provided) and to all other documents to be executed on behalf of the corporation under its seal; shall certify or attest to actions of the Board of Directors, the committees thereof, or the stockholders or officers of the corporation; and shall see that all such certificates and other documents required by law to be kept and filed are properly kept and filed; and, in general, shall perform all the duties customarily incident to the office of secretary of a corporation. The Secretary shall have such other powers and duties, and shall be subject to such directions, as may be provided from time to time by the Board, a committee thereof, the Chief Executive Officer or the President. Assistant Secretaries shall have such of the powers, authority and the duties of the Secretary as may be assigned by the Board of Directors, a committee thereof, the Chief Executive Officer, the President or the Secretary, and during the absence or disability of the Secretary, may exercise such of his or her powers and authority and perform such of his or her duties as may be appropriate for the conduct of the business and affairs of the corporation.

3.9 Removal. Any officer elected, or agent appointed, by the Board of Directors or a committee thereof and any subordinate officer or employee or agent appointed by the Board of Directors, a committee thereof, the Chief Executive Officer or the President, may be removed by the Board of Directors, a committee or the officer who appointed such subordinate officer, employee or agent whenever, in the judgment thereof, the best interests of the corporation would be served thereby. No officer shall have any rights against the corporation for compensation by virtue of such election beyond the date of the election of such person's successor, such person's death, such person's resignation or such person's removal, whichever event shall first occur, except as otherwise provided in an employment or other contract or under an employee benefit plan.

3.10 Vacancies. A newly created office and any vacancy in any elected office arising for any reason may be filled by the Board of Directors or a committee thereof. Any vacancy in a subordinate

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office appointed by the Chief Executive Officer or the President arising for any reason may be filled by the Chief Executive Officer or the President.

3.11 Resignations. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the Chairman, President or Secretary. Such resignation shall be effective upon receipt unless it specifies that it is effective at some other time or upon the happening of some event. No acceptance or other formal action shall be required of the Board of Directors, the stockholders or any officers to be made effective.

ARTICLE 4

INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS

4.1 Indemnification Respecting Third Party Claims.

(a) Indemnification of Directors and Officers. The corporation, to the fullest extent permitted and in the manner required, by the laws of the State of Delaware as in effect from time to time shall indemnify and/or hold harmless in accordance with the following provisions of this Article any person who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative, regulatory or investigative in nature (other than an action by or in the right of the corporation), by reason of the fact that such person is or was a director or officer of the corporation, or, if at a time when he or she was a director or officer of the corporation, is or was serving at the request of, or to represent the interests of, the corporation as a director, officer, partner, member, trustee, fiduciary, employee or agent (a "Subsidiary Officer") of another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise including any charitable or not-for-profit public service organization or trade association (an "Affiliated Entity"), against expenses (including attorneys' fees and disbursements), costs, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to

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the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; provided, however, that (i) the corporation shall not be obligated to indemnify and/or hold harmless a director or officer of the corporation or a Subsidiary Officer of any Affiliated Entity against expenses incurred in connection with an action, suit, proceeding or investigation to which such person is threatened to be made a party but does not become a party unless such expenses were incurred with the approval of the Board of Directors, a committee thereof or the Chief Executive Officer or the President of the corporation and (ii) the corporation shall not be obligated to indemnify and/or hold harmless against any amount paid in settlement unless the corporation has consented to such settlement. The termination of any action, suit or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful. Notwithstanding anything to the contrary in the foregoing provisions of this paragraph, a person shall not be entitled, as a matter of right, to indemnification and/or to be held harmless pursuant to this paragraph against costs or expenses incurred in connection with any action, suit or proceeding commenced by such person against the corporation or any Affiliated Entity or any person who is or was a director, officer, partner, member, fiduciary, employee or agent of the corporation or a Subsidiary Officer of any Affiliated Entity in their capacity as such, but such indemnification and/or such right to be held harmless may be provided by the corporation in a specific case as permitted by Section 4.6 of these By-Laws.

(b) Indemnification of Employees and Agents. The corporation may indemnify and/or may hold harmless any employee or agent of the corporation in the manner and to the same or a lesser extent that it shall indemnify and/or hold harmless any director or officer under paragraph (a) above in this Section.

4.2 Indemnification Respecting Derivative Claims.

(a) The corporation, to the fullest extent permitted and in the manner required, by the Laws of the State of Delaware as in effect from time to time shall indemnify and/or hold harmless, in accordance with the following provisions of this Article, any person who was or is made a party to or is

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threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or, if at a time when he or she was a director or officer to the corporation, is or was serving at the request of, or to represent the interests of, the corporation as a Subsidiary Officer of an Affiliated Entity against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection with such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Court of Chancery of the State of Delaware or the court in which such judgment was rendered shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses and costs as the Court of Chancery of the State of Delaware or such other court shall deem proper; provided, however, that the corporation shall not be obligated to indemnify and/or hold harmless a director or officer of the corporation or a Subsidiary Officer of any Affiliated Entity against expenses incurred in connection with an action or suit to which such person is threatened to be made a party but does not become a party unless such expenses were incurred with the approval of the Board of Directors, a committee thereof, or the Chief Executive Officer or the President of the corporation. Notwithstanding anything to the contrary in the foregoing provisions of this paragraph, a person shall not be entitled, as a matter of right, to indemnification and/or to be held harmless pursuant to this paragraph against costs and expenses incurred in connection with any action or suit in the right of the corporation commenced by such Person, but such indemnification and/or right to be held harmless may be provided by the corporation in any specific case as permitted by Section 4.6 of these By-Laws.

(b) Indemnification of Employees and Agents. The corporation may indemnify and/or hold harmless any employee or agent of the corporation in the manner and to the same or a lesser extent that it shall indemnify and/or hold harmless any director or officer under paragraph (a) above in this Section.

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4.3 Determination of Entitlement to Indemnification. Any indemnification and/or right to be held harmless to be provided under any of the paragraphs of Section 4.1 or 4.2 of these By-Laws (unless ordered by a court of competent jurisdiction) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification and/or right to be held harmless is proper under the circumstances because such person has met the applicable standard of conduct set forth in such paragraph. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding in respect of which indemnification and/or right to be held harmless is sought or by majority vote of the members of a committee of the Board of Directors composed of at least three members each of whom is not a party to such action, suit or proceeding, or (ii) if such a quorum is not obtainable and/or such a committee is not established or obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders entitled to vote thereon. In the event a request for indemnification is made by any person referred to in paragraph (a) of Section 4.1 or 4.2 of these By-Laws, the corporation shall use its best efforts to cause such determination to be made not later than 90 days after such request is made.

4.4 Right to Indemnification in Certain Circumstances.

(a) Indemnification upon Successful Defense. Notwithstanding the other provisions of this Article, to the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in any of paragraphs (a) or (b) of Section 4.1 or 4.2 of these By-Laws, or in defense of any claim, issue or matter therein, such person shall be indemnified and/or held harmless against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection therewith.

(b) Indemnification for Service as a Witness. To the extent any person who is or was a director or officer of the corporation has served or prepared to serve as a witness in any action, suit or proceeding (whether civil, criminal, administrative, regulatory or investigative in nature), including any investigation by any legislative body or any regulatory or self-regulatory body by which the corporation's business is regulated, by reason of his or her services as a director or officer of the corporation or his or her

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service as a Subsidiary Officer of an Affiliated Entity at a time when he or she was a director or officer of the corporation (assuming such person is or was serving at the request of, or to represent the interests of, the corporation as a Subsidiary Officer of such Affiliated Entity) but excluding service as a witness in an action or suit commenced by such person, the corporation shall indemnify and/or hold harmless such person against out-of-pocket costs and expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith and shall use its best efforts to provide such indemnity and/or hold harmless within 45 days after receipt by the corporation from such person of a statement requesting such indemnification or right to be held harmless, averring such service and reasonably evidencing such expenses and costs; it being understood, however, that the corporation shall have no obligation under this Article to compensate such person for such person's time or efforts so expended. The corporation may indemnify and/or hold harmless any employee or agent of the corporation to the same or a lesser extent as it may indemnify and/or hold harmless any director or officer of the corporation pursuant to the foregoing sentence of this paragraph.

4.5 Advances of Expenses.

(a) Advances to Directors and Officers. Expenses and costs incurred by any person referred to in paragraph (a) of Section 4.1 or 4.2 of these By-Laws in defending a civil, criminal, administrative, regulatory or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified and/or held harmless in respect of such costs and expenses by the corporation as authorized by this Article.

(b) Advances to Employees and Agents. Expenses and costs incurred by any person referred to in paragraph (b) of Section 4.1 or 4.2 of these By-Laws in defending a civil, criminal, administrative, regulatory or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors, a committee thereof or an officer of the corporation authorized to so act by the Board of Directors upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined

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that such person is not entitled to be indemnified and/or held harmless by the corporation in respect of such costs and expenses as authorized by this Article.

4.6 Indemnification Not Exclusive. The provision of indemnification to and/or hold harmless or the advancement of expenses and costs to any person under this Article, or the entitlement of any person to indemnification or to be held harmless or advancement of expenses and costs under this Article, shall not limit or restrict in any way the power of the corporation to indemnify and/or hold harmless or advance expenses and costs to such person in any other way permitted by law or be deemed exclusive of, or invalidate, any right to which any person seeking indemnification or to be held harmless or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's capacity as an officer, director, employee or agent of the corporation and as to action in any other capacity.

4.7 Corporate Obligations; Reliance. The provisions of this Article shall be deemed to create a binding obligation on the part of the corporation to the persons who from time to time are elected officers or directors of the corporation, and such persons in acting in their capacities as officers or directors of the corporation or Subsidiary Officers of any Affiliated Entity shall be entitled to rely on such provisions of this Article, without giving notice thereof to the corporation. Any repeal or modification of the provisions of this Article 4 shall not adversely affect any right or protection hereunder in respect of any act or omission occurring prior to the time of such repeal or modification.

4.8 Accrual of Claims; Successors. The indemnification and/or right to be held harmless provided or permitted under the foregoing provisions of this Article shall or may, as the case may be, apply in respect of any expense, cost, judgment, fine, penalty or amount paid in settlement, whether or not the claim or cause of action in respect thereof accrued or arose before or after the effective date of such provisions of this Article. The right of any person who is or was a director, officer, employee or agent of the corporation to indemnification and/or to be held harmless or advancement of expenses as provided under the foregoing provisions of this Article shall continue after he or she shall have ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, distributees, executors, administrators and other legal representatives of such person.

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4.9 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of, or to represent the interests of, the corporation as a Subsidiary Officer of any Affiliated Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the corporation would have the power to indemnify and/or hold harmless such person against such liability under the provisions of this Article or applicable law.

4.10 Definitions of Certain Terms. For purposes of this Article, (i) references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; (ii) references to "serving at the request of the corporation" shall include any service as a director, officer, partner, member, trustee, fiduciary, employee or agent of the corporation or any Affiliated Entity which service imposes duties on, or involves services by, such director, officer, partner, member, trustee, fiduciary, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and (iii) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the corporation" as referred to in this Article.

ARTICLE 5

STOCK CERTIFICATES AND TRANSFERS

5.1 Stock Certificates and Transfers. The interest of each stockholder of the corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors or appropriate officers of the corporation may from time to time prescribe in accordance with the DGCL, the Certificate of Incorporation and these By-Laws; provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of stock of the corporation shall be uncertificated. Any such resolution, however, shall not apply to shares represented by a certificate until such certificate is surrendered to the

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corporation. Notwithstanding the adoption of a resolution by the Board of Directors providing that shares of any class or series of stock of the corporation shall be uncertificated, every holder of uncertificated shares shall be entitled to receive from the corporation a certificate representing the number of shares registered in such holder's name. The shares of the stock of the corporation shall be transferred on the books of the corporation by the holder thereof in person or by such person's attorney, upon surrender for cancellation of certificates for at least the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of such signature as the corporation or its agents may reasonably require. The certificates of stock shall be signed, countersigned and registered in such manner as required by the DGCL and as the Board of Directors may by resolution prescribe.

5.2 Lost, Stolen or Destroyed Certificates. No certificate for shares of stock in the corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the corporation of a bond of indemnity in such amount (if any), upon such terms and secured by such surety, as the Board of Directors or an appropriate officer may in its, his or her discretion require.

ARTICLE 6

CONTRACTS, PROXIES, ETC.

6.1 Contracts. Except as otherwise explicitly prohibited or required by law, the Certificate of Incorporation or these By-Laws, any contract or other instrument may be executed and delivered in the name and on the behalf of the corporation, and under its corporate seal, by such officer or officers, or such employee or employees or other agent or agents, of the corporation as by or pursuant to these By-Laws may be authorized to act on the subject matter thereof, (and within any such limits as may have been established by the Board of Directors) without further specific direction thereunto from the Board of Directors.

6.2 Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chief Executive Officer, the President or any Vice President may from time to time act or appoint an

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attorney or attorneys or agent or agents of the corporation to act, in the name and on behalf of the corporation, to cast any votes which the corporation may be entitled to cast as the holder of stock or other securities in any other corporation or other company, at meetings of the holders of the stock or other securities of such other company, or to consent in writing, in the name of the corporation as such holder, to any action by such other company or to waiver of any notice, or to exercise or waive any right appurtenant to such stock or other securities and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent or waiver or exercising or waiving any such right, and may execute or cause to be executed, in the name and on behalf of the corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he may deem appropriate for the conduct of the business and affairs of the corporation.

ARTICLE 7

MISCELLANEOUS PROVISIONS

7.1 Fiscal Year. The fiscal year of the corporation shall be in such term as the Board of Directors shall prescribe.

7.2 Dividends. The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

7.3 Seal. The corporate seal shall be in such form as the Board of Directors shall prescribe.

7.4 Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the corporation under the provisions of the DGCL, the Certificate of Incorporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting. The attendance of a

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stockholder at a meeting shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon the director's arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting.

7.5 Annual Audit. The accounts, books and records of the corporation and its consolidated subsidiaries shall be audited upon the conclusion of each fiscal year by a firm of independent certified public accountants selected by the Board of Directors or the appropriate committee thereof, if any, and it shall be the duty of the Board of Directors or the appropriate committee thereof, to cause such audit to be done annually.

7.6 Delaware Office. The principal office of the Corporation in the State of Delaware shall be located at 15 East North Street, Dover, Delaware, 19901 and the name of its registered agent is XL Corporate Services.

7.7 Other Offices. The corporation may have such other offices, either within or without the State of Delaware, as the business of the Corporation may from time to time require or as may be authorized by the Board of Directors.

7.8 Books and Records. The books and records of the corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors or officers.

7.9 Certificate of Incorporation. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time.

7.10 Severability. Any determination that any provision of these By-Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision by these By-Laws.

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ARTICLE 8

AMENDMENTS

8.1 Amendments. These By-Laws may be altered or repealed and new By-Laws may be adopted (i) at any annual or special meeting of stockholders by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereon; provided, however, that, in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, repeat or adoption of the new By-Law or By-Laws must be contained in the notice of such special meeting, or (ii) by the affirmative vote of a majority of the directors then in office.

As amended 6/28/02

EX-10 5 maloneempagrmtexhibit1010.htm EXHIBIT 10.1 MALONE EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of June 10, 2002, by and between GENTIVA HEALTH SERVICES, INC., a Delaware corporation (the "Company"), and RONALD A. MALONE ("Executive").

W I T N E S S E T H:

WHEREAS, the Company desires that Executive serve as Chairman and Chief Executive Officer of the Company and Executive is willing to serve as such;

WHEREAS, the Company and Executive wish to enter into an agreement embodying the terms of his employment as Chairman and Chief Executive Officer (the "Agreement"); and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and Executive hereby agree as follows:

1. Employment. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to employ Executive and Executive hereby agrees to his employment by the Company until the third anniversary of the Effective Date (as defined below) of this Agreement. The period during which Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period."

2. Position and Duties. During the Employment Period, Executive shall serve as Chairman and Chief Executive Officer of the Company and shall be nominated for election, and if so elected, shall serve as a member of the Board of Directors of the Company (the "Board"). In addition, Executive shall serve in such other position or positions with the Company and its subsidiaries commensurate with his position and experience as the Board shall from time to time specify. During the Employment Period, Executive shall have the duties, responsibilities and obligations customarily assigned to individuals serving as the chairman and chief executive officer of comparable companies, and such other duties, responsibilities and obligations as the Board shall from time to time specify. Executive shall devote his full time to the services required of him hereunder, except for vacation time and reasonable periods of absence due to sickness, personal injury or other disability, and shall use his best efforts, judgment, skill and energy to perform such services in a manner consonant with the duties of his position and to improve and advance the business and interests of the Company and its subsidiaries. Nothing contained in this Section 2 shall preclude Executive from (i) serving on the board of directors of any business corporation, unless such service would be contrary to applicable law, (ii) serving on the board of, or working for, any charitable or community organization or (iii) pursuing his personal financial and legal affairs, so long as such activities, individually or collectively, do not interfere with the performance of Executive's duties hereunder or violate any of the provisions of Section 6 hereof.

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3. Compensation.

(a) Base Salary. During the Employment Period, the Company shall pay Executive a base salary at the annual rate of $400,000 per annum. The annual base salary payable under this section shall be reduced, however, to the extent Executive elects to defer such salary under the terms of any deferred compensation or savings plan or arrangement maintained or established by the Company or any other arrangement acceptable to the Company. The Board (or the appropriate committee of the Board) shall annually review Executive's base salary in light of competitive practices, the base salaries paid to other executive officers of the Company and the performance of Executive and the Company, and may, in its discretion, increase such base salary by an amount it determines to be appropriate. Any such increase shall not reduce or limit any other obligation of the Company hereunder. Executive's base salary (as set forth or as may be increased from time to time) shall not be reduced, except that Executive's base salary may be reduced in proportion to comparable reductions in the base salaries of the Company's other executive officers (as determined for purposes of Section 16(b) of the Securities Exchange Act of 1934, as amended). Executive's annual base salary payable hereunder, as it may be increased from time to time and without reduction for any amounts deferred as described above, is referred to herein as "Base Salary." The Company shall pay Executive the portion of his Base Salary not deferred not less frequently than in equal bi-weekly installments.

(b) Annual Bonus. For each calendar year ending during the Employment Period, Executive shall have the opportunity to receive an annual bonus ("Annual Target Bonus Opportunity"), based on the achievement of target levels of performance, equal to 80% of his Base Salary, provided that, so long as Executive is employed on the last day of the calendar year, in no event shall the annual bonus payable to Executive for the Company's 2002 fiscal year be less than an amount equal to 50% of Executive's Target Bonus (as established by the Company's Compensation Committee), regardless of whether any applicable performance criteria have been met. Depending on actual results as measured against the performance objectives established, Executive's actual bonus payment may range from (i) a low of (A) 50% of Executive's Target Bonus with respect to the Company's 2002 fiscal year prorated from the date of this Agreement to the end of the year, and (B) zero for subsequent fiscal years to (ii) a maximum of 140% of Executive's Base Salary for each full fiscal year during the Employment Period. Subject to the guaranteed minimum set forth above, the actual bonus, if any, payable for any such year shall be determined in accordance with the terms of the Company's Executive Officers' Bonus Plan (the "Annual Plan") based upon the performance of the Company and/or Executive against target objectives established under such Annual Plan. The determination of whether and to what extent the requisite performance objectives have been met shall be made by the Board committee responsible for administering the Annual Plan, whose determination shall be final. Subject to Executive's election to defer all or a portion of any annual bonus payable hereunder pursuant to the terms of any deferred compensation or savings plan or arrangement maintained or established by the Company, any annual bonus payable under this Section 3(b) shall be paid to Executive in accordance with the terms of the Annual Plan, provided, however, that, regardless of the terms of such Annual Plan, Executive shall have the right to defer payment of up to that portion of his annual bonus which, when coupled with any portion of his Base Salary deferred for the same year of service, does not

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exceed 50% (or such greater percentage as the Company shall permit) of the sum of his Base Salary and his annual bonus, provided, however, that, any portion of Executive's annual bonus which would not be deductible to the Company pursuant to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), shall be deferred. Unless Executive shall otherwise elect a different payment date or dates or a different number of payments, any portion of Executive's annual bonus and/or Base Salary which is deferred in accordance with this Section 3 (whether at Executive's election or by reason of Section 162(m)) shall be payable to Executive in a single lump sum as soon as practicable following termination of Executive's employment for any reason and shall be credited with interest, on a compounded basis, on the last day of each calendar quarter, at 1% above the prime rate (as reported in The Wall Street Journal, Eastern Edition), as in effect on the first day of each such calendar quarter. Any election by Executive to change the timing of the distribution of the deferred amounts and/or the number of payments to be made shall be made in writing in a calendar year prior to the date payment is to be made, and shall only be effective if Executive completes at least six months' additional service as an employee following the date any such election is filed with the Secretary of the Company.

4. Benefits, Perquisites and Expenses.

(a) Benefits. During the Employment Period, Executive shall be eligible to participate in (i) each welfare benefit plan sponsored or maintained by the Company, including, without limitation, each group life, hospitalization, medical, dental, health, accident or disability insurance or similar plan or program of the Company, and (ii) each pension, retirement, deferred compensation, savings or employee stock purchase plan sponsored or maintained by the Company, and (iii) to the extent of any awards made from time to time by the Board committee administering the plan, each stock option, restricted stock, stock bonus or similar equity-based compensation plan sponsored or maintained by the Company, in each case, whether now existing or established hereafter, to the extent that Executive is eligible to participate in any such plan under the generally applicable provisions thereof. Nothing in this Section 4(a) shall limit the Company's right to amend or terminate any such plan in accordance with the procedures set forth therein.

(b) Perquisites. During the Employment Period, Executive shall be entitled to at least four weeks' paid vacation annually and shall also be entitled to receive such perquisites as are generally provided to other senior officers of the Company in accordance with the then current policies and practices of the Company

(c) Business Expenses. During the Employment Period, the Company shall pay or reimburse Executive for all reasonable expenses incurred or paid by Executive in the performance of Executive's duties hereunder, upon presentation of expense statements or vouchers and such other information as the Company may require and in accordance with the generally applicable policies and procedures of the Company.

(d) Indemnification. During the Employment Period, the Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive's performance as an officer, director or employee of the Company or any of its subsidiaries or in any other capacity, including any fiduciary capacity, in which Executive serves at the request of the Company to the maximum extent permitted by applicable law and the Company's Restated Certificate of Incorporation and By-Laws.

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5. Termination of Employment.

(a) Early Termination of the Employment Period. Notwithstanding Section 1, the Employment Period shall end upon the earliest to occur of (i) a termination of Executive's employment on account of Executive's death, (ii) a termination due to Executive's Disability, (iii) Termination for Cause, (iv) a Termination Without Cause or (v) a Termination for Good Reason.

(b) Benefits Payable Upon Early Termination. Following the end of the Employment Period pursuant to Section 5(a), Executive (or, in the event of his death, his surviving spouse, if any, or his estate) shall be paid the type or types of compensation determined to be payable in accordance with the following table at the times established pursuant to Section 5(c):

	Earned Salary	Vested Benefits	Severance Benefits	Additional Benefits
Termination due to death	Payable	Payable	Not payable	Available
Termination due to Disability	Payable	Payable	Not payable	Available
Termination for Cause	Payable	Payable	Not payable	Not available
Termination for Good Reason	Payable	Payable	Payable	Available
Termination Without Cause	Payable	Payable	Payable	Available

(c) Timing of Payments. Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no event more than 10 days, following the end of the Employment Period. Vested Benefits shall be payable in accordance with the terms of the plan, policy, practice, program, contract or agreement under which such benefits have been awarded or accrued. Severance Benefits shall be paid in a single lump sum cash payment as soon as practicable, but in no event later than 10 days after the Executive's termination, unless otherwise agreed to in writing by Executive. Additional Benefits shall be provided or made available at the times specified below as to each such Additional Benefit.

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(d) Definitions. For purposes of Sections 5 and 6, capitalized terms have the following meanings:

"Additional Benefits" means, if Executive's employment terminates due to death or in a Termination due to Disability, the benefits described in subclause (i) below, or if the Executive's employment is terminated in a Termination Without Cause or a Termination for Good Reason, the benefits described in subclauses (i) and (ii):

(i) All of the Executive's benefits accrued under the pension, retirement, savings and deferred compensation plans of the Company shall become vested in full; provided, however, that to the extent such accelerated vesting of benefits cannot be provided under one or more of such plans consistent with applicable provisions of the Internal Revenue Code of 1986, as amended, such benefits shall be paid to the Executive in a lump sum within 10 days after termination of employment outside the applicable plan; and

(ii) Executive (and, to the extent applicable, his dependents) will be entitled to continue participation in all of the Company's medical, dental and vision care plans (the "Health Benefit Plans"), until the 24 month anniversary of Executive's termination of employment; provided that Executive's participation in the Company's Health Benefit Plans shall cease on any earlier date that Executive becomes eligible for comparable benefits from a subsequent employer. Executive's participation in the Health Benefit Plans will be on the same terms and conditions (including, without limitation, any contributions that would have been required from Executive) that would have applied had Executive continued to be employed by the Company. To the extent any such benefits cannot be provided under the terms of the applicable plan, policy or program, the Company shall provide a comparable benefit under another plan or from the Company's general assets.

"Disability" means long-term disability within the meaning of the Company's long-term disability plan or program.

"Earned Salary" means any Base Salary earned, but unpaid, for services rendered to the Company on or prior to the date on which the Employment Period ends pursuant to Section 5(a) (other than Base Salary deferred pursuant to Executive's election, as provided in Section 3(a) of (b) hereof).

"Severance Benefit" means an amount equal to two (2) times the Executive's Base Salary; provided, however, that Severance Benefits shall not be payable under this Agreement to the Executive if the termination of the Executive's employment results in the payment of severance benefits under the Executive's Change in Control Agreement with the Company dated June 14, 2002.

"Termination for Cause" means a termination of Executive's employment by the Company due to (i) Executive's conviction of a felony, (ii) Executive's willful and continued failure to perform the material duties of his position which has had (or is expected to have) a material adverse effect on the business of the Company or its subsidiaries, or (iii) Executive's breach of any material Company policy or procedure which has had (or is expected to have) a material adverse effect on the business of the Company or its subsidiaries.

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"Termination for Good Reason" means a termination of Executive's employment by Executive (i) within 90 days following (A) a material diminution in Executive's positions, duties and responsibilities from those described in Section 2 hereof, (B) the removal of Executive from, or the failure to re-elect Executive as a member of, the Board, (C) a reduction in Executive's annual Base Salary (other than any reduction therein which is in proportion to reductions in the base salaries of all of the Company's executive officers, as contemplated by Section 3(a) hereof), or (iv) failure by the Company to offer in writing, at least six months prior to the end of the initial three year Employment Period, to extend the term of this Agreement for at least one year, or (v) a material breach by the Company of any other provision of this Agreement.

"Termination Without Cause" means any termination of Executive's employment by the Company other than a Termination for Cause.

"Vested Benefits" means amounts which are vested or which Executive is otherwise entitled to receive under the terms of or in accordance with any plan, policy, practice or program of, or any contract or agreement with, the Company or any of its subsidiaries, at or subsequent to the date of his termination without regard to the performance by Executive of further services or the resolution of a contingency.

(e) Full Discharge of Company Obligations. Except as expressly provided in the last sentence of this Section 5(e), the amounts payable to Executive pursuant to this Section 5 following termination of his employment (including amounts payable with respect to Vested Benefits) shall be in full and complete satisfaction of Executive's rights under this Agreement and any other claims he may have in respect of his employment by the Company or any of its subsidiaries. Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon Executive's receipt of such amounts, the Company shall be released and discharged from any and all liability to Executive in connection with this Agreement or otherwise in connection with Executive's employment with the Company and its subsidiaries. If requested by the Company, Executive shall execute a release following termination of his employment, in form and substance satisfactory to the Company (but not inconsistent with the terms of this Agreement), as a prior condition to the receipt of the benefits payable pursuant to this Section 5. Nothing in this Section 5(e) shall be construed to release the Company from its commitment to indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action as described in Section 4(e).

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(f) Excise Tax Cut Back.

(i) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, distribution or benefit provided (including, without limitation, the acceleration of any payment, distribution or benefit and the acceleration of exercisability of any stock option) to the Executive or for his or her benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise would be subject, in whole or in part, to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Excise Tax"), then the amounts payable to the Executive under this Agreement shall be reduced (by the minimum possible amount) until no amount payable to the Executive is subject to the Excise Tax; provided however, that no such reduction shall be made if the net after-tax benefit (after taking into account Federal, state, local or other income, employment, self-employment and excise taxes) to which the Executive would otherwise be entitled without such reduction would be greater than the net after-tax benefit (after taking into account Federal, state, local or other income, employment, self-employment and excise taxes) to the Executive resulting from the receipt of such payments with such reduction. If, as a result of subsequent events or conditions, it is determined that payments have been reduced by more than the minimum amount required under this Section 5(f), then an additional payment shall be promptly made to the Executive in an amount equal to the excess reduction.

(ii) All determinations required to be made under this Section 5(f), including whether a payment would result in an Excise Tax shall be made by PricewaterhouseCoopers LLP or other nationally recognized accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive as requested by the Company or the Executive. All fees and expenses of the Accounting Firm shall be borne solely by the Company and shall be paid by the Company. Except as set forth in the last sentence of Section 5(f)(i) hereof, all determinations made by the Accounting Firm under this Section 5(f) shall be final and binding upon the Company and the Executive.

6. Noncompetition and Confidentiality. By and in consideration of the salary and benefits to be provided by the Company hereunder, including particularly the severance arrangements set forth herein, Executive agrees that:

(a) Noncompetition. Executive acknowledges that the Company and its subsidiaries conduct business throughout the United States, the District of Columbia, and Canada, and that his duties to Company relate to some or all of these territories and to some or all business lines of the Company. During the Employment Period and during the twelve (12) month period following any termination of Executive's employment, other than a Termination Without Cause or a Termination for Good Reason, Executive shall not directly or indirectly: (i) perform or provide any services to any individual or business which is engaged in the type of business(es) similar to the type of business(es) conducted by Company or any of its subsidiaries; and/or (ii) own, manage, operate, control, be employed by, participate in, provide services or financial assistance to, or be connected in any manner with, the ownership, management, operation or control of any business which directly competes with Company or any of its subsidiaries or engages in the type of business(es) principally conducted by the Company or any of its subsidiaries, except that Executive may own for investment purposes up to 1% of the capital stock of any such company whose stock is publicly traded.

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(b) Confidentiality. Except as may be required by the lawful order of a court or agency of competent jurisdiction, or applicable law, or except to the extent that Executive has express authorization from the Company, Executive agrees to keep secret and confidential indefinitely all non-public information (including, without limitation, information regarding litigation and pending litigation and any information that may be subject to attorney-client privilege) concerning the Company, its subsidiaries and affiliates (collectively, the "Company Group") which was acquired by or disclosed to Executive during the course of Executive's employment with the Company, and not to disclose the same, either directly or indirectly, to any other person, firm, or business entity, or to use it in any way. Such non-public information shall include, but not be limited to, the following:

(i) information which the Company Group has compiled to identify, develop and service its clients and customers, including "negative research" to identify those entities who have not subscribed to the services of the Company and its subsidiaries;

(ii) information which the Company Group has compiled concerning the operations of the clients and customers of the Company and its subsidiaries, including key contacts within the clients' and customers' business, familiarity with special needs and customer characteristics, workers' compensation information, billing rates, profit margins, sales volumes, and other sensitive financial information; and

(iii) information which the Company Group has compiled concerning the employees and labor force at the Company and its subsidiaries, including compilations of their names, addresses, job skills, employment histories and employment records.

Upon termination of Executive's employment, Executive shall promptly deliver to the Company all materials of a confidential nature relating to the business of the Company and its subsidiaries and which are Executive's possession or control. To the extent that Executive obtained information on behalf of the Company or any subsidiary or affiliate that may be subject to attorney-client privilege, Executive shall take reasonable steps to maintain the confidentiality of such information and to preserve such privilege.

(c) Non-Solicitation of Employees. During the Employment Period and the one-year period following any termination of Executive's employment, Executive shall not directly or indirectly, for his own benefit or that of any other person, offer any employment in a similar field or business association to any of the Company's employees, agents or representatives or suggest or in any way encourage, any of the Company's employees, agents or representatives to terminate their employment or business association with the Company.

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(d) Non-Solicitation of Clients and Customers. During the Employment Period and the one-year period following any termination of Executive's employment, Executive shall not solicit or accept for Executive's own benefit or the benefit of any other person any of the Company's customers and/or clients with a view to selling or providing any product or service competitive with any product or service sold or provided or under development by the Company. For the purposes of this Section 6(d), the term "customers" shall include any person or entity to whom the Company has sold, provided or been obligated to provide, any service or product, or who has otherwise received any service or benefit from the Company within the last 24 months or within the 24-month period preceding the date Executive's employment terminates.

(e) Company Property. Except as expressly provided herein, promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company.

(f) Injunctive Relief and Other Remedies with Respect to Covenants. Executive acknowledges and agrees that the covenants and obligations of Executive with respect to noncompetition, nonsolicitation, confidentiality and Company property, relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations may cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive agrees that the Company shall be entitled to seek an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Executive from committing any violation of the covenants and obligations contained in this Section 6. This remedy is in addition to any other rights and remedies the Company may have at law or in equity.

7. Miscellaneous.

(a) Effective Date. This Agreement shall become effective for all purposes (the "Effective Date") at the later of May 20, 2002, or the Closing Time of the transaction contemplated by the Asset Purchase Agreement by and between Accredo Health, Incorporated and Gentiva Health Services, Inc. dated January 2, 2002. . In the event that the Closing does not occur, this Agreement shall become null and void and shall no have effect.

(b) Survival. Sections 5 (relating to early termination), 6 (relating to noncompetition, nonsolicitation and confidentiality), 7(c) (relating to arbitration), 7(d) (relating to binding effect) and 7(n) (relating to governing law) shall survive the termination hereof.

(c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be resolved by binding arbitration. This arbitration shall be held in New York City and except to the extent inconsistent with this Agreement, shall be conducted in accordance with the Expedited Employment Arbitration Rules of the American Arbitration Association then in effect at the time of the arbitration, and otherwise in accordance with principles which would be applied by a court of law or equity. The arbitrator shall be acceptable to both the Company and Executive. If the parties cannot agree on an acceptable arbitrator, the dispute shall be held by a panel of three arbitrators one appointed by each of the parties and the third appointed by the other two arbitrators.

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(d) Binding Effect. This Agreement shall be binding on, and shall inure to the benefit of, the Company and any person or entity that succeeds to the interest of the Company (regardless of whether such succession does or does not occur by operation of law) by reason of the sale of all or a portion of the Company's stock, a merger, consolidation or reorganization involving the Company or, unless the Company otherwise elects in writing, a sale of the assets of the business of the Company (or portion thereof) in which Executive performs a majority of his services. This Agreement shall also inure to the benefit of Executive's heirs, executors, administrators and legal representatives.

(e) Assignment. Except as provided under Section 7(d), neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party.

(f) Entire Agreement. This Agreement, together with the Change in Control Agreement between the Company and the Executive dated June 14, 2002, constitute the entire agreement between the parties hereto with respect to the matters referred to herein. No other agreement (other than awards made in accordance with the terms of one of the Company's applicable compensatory plans, programs or arrangements) relating to the terms of Executive's employment by the Company, oral or otherwise, including, without limitation, the Severance Letter dated March 14, 2000 and the Change in Control Agreement dated March 15, 2000, between the Executive and the Company, shall be binding between the parties. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. Executive acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has read this Agreement and that he understands it and its legal consequences.

(g) Severability; Reformation. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that any of the provisions of any of Section 6(a), (b) or (c) is not enforceable in accordance with its terms, Executive and the Company agree that such Section shall be reformed to make such Section enforceable in a manner which provides the Company the maximum rights permitted at law.

(h) Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions.

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(i) Notices. Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered personally, by courier service, by certified mail, return receipt requested, or by telecopy and shall be effective upon actual receipt by the party to which such notice shall be directed, and shall be addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

If to the Company:		Gentiva Health Services, Inc. 3 Huntington Quadrangle 2S Melville, NY 11747 Attention: General Counsel

If to Executive:		Ronald A. Malone 6 Target Rock Drive Lloyd Harbor, NY 11743

(j) Amendments. This Agreement may not be altered, modified or amended except by a written instrument signed by each of the parties hereto.

(k) Headings. Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

(l) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

(m) Withholding. Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, State or local income tax laws or similar statutes then in effect.

(n) Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws thereof.

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IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed as of the day and year first above written.

GENTIVA HEALTH SERVICES, INC.

By: ______________________________
            Josh S. Weston, Chairman,
            Human Resources and
            Compensation Committee

_________________________________
Ronald A. Malone

EX-10 6 formcicagreement1.htm EXHIBIT 10.2 Form Change in Control Agreement

Exhibit 10.2

CHANGE IN CONTROL AGREEMENT

Agreement, made this ___ day of June, 2002,by and between Gentiva Health Services, Inc., a Delaware corporation (the "Company"), and ______________ (the "Executive").

WHEREAS, the Executive is a key employee of the Company; and

WHEREAS, the Board of Directors of the Company (the "Board") considers the maintenance of a sound management to be essential to protecting and enhancing the best interests of the Company and its stockholders and recognizes that the possibility of a change in control raises uncertainty and questions among key employees and may result in the departure or distraction of such key employees to the detriment of the Company and its stockholders; and

WHEREAS, the Board wishes to assure that it will have the continued dedication of the Executive and the availability of his or her advice and counsel, notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company, and to induce the Executive to remain in the employ of the Company; and

WHEREAS, the Executive is willing to continue to serve the Company taking into account the provisions of this Agreement;

NOW, THEREFORE, in consideration of the foregoing, and the respective covenants and agreements of the parties herein contained, the parties agree as follows:

1. Operation and Term of Agreement. This Agreement shall commence at the Effective Time of the Merger as contemplated in the Purchase Agreement (defined below) and shall continue through the third anniversary of such date; provided, however, that after a Change in Control of the Company during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied and the Protection Period has expired. Prior to a Change in Control this Agreement shall immediately terminate upon termination of the Executive's employment, except in the case of such termination under circumstances set forth in the last paragraph of Section 4 below.

2. Change in Control; Protection Period. A "Change of Control" shall be deemed to occur on the date that any of the following events occur:

(a) any person or persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (other than the Company or any subsidiary and other than Permitted Holders) shall beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of the Board;

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(b) either (i) Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members of the Board (for these purposes, a "Current Director" shall mean any member of the Board as of the date hereof, and any successor of a Current Director whose election, or nomination for election by the Company's shareholders, was approved by at least two-thirds of the Current Directors then on the Board) or (ii) at any meeting of the shareholders of the Company called for the purpose of electing directors, a majority of the persons nominated by the Board for election as directors shall fail to be elected;

(c) consummation of (i) a plan of complete liquidation of the Company, or (ii) a merger or consolidation of the Company (A) in which the Company is not the continuing or surviving corporation (other than a consolidation or merger with a wholly owned subsidiary of the Company in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into common stock of the subsidiary) or (B) pursuant to which the Common Stock is converted into cash, securities or other property, except a consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or in which the Board immediately prior to the merger or consolidation would, immediately after the merger or consolidation, constitute a majority of the board of directors of the continuing or surviving corporation; or

(d) consummation of a sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Company.

For purposes of this Section 2 under this Agreement, "Permitted Holders" shall mean Miriam Olsten, Stuart Olsten, and Cheryl Olsten, and each of their spouses, their lineal descendants and their estates and their Affiliates or Associates (as defined in Rule 12b-2 of the Exchange Act) (collectively the "Olsten Stockholders"), so long as the Olsten Stockholders beneficially own 20% or less of the voting power of all classes of capital stock of the Company entitled to vote generally in the election of the Board.

Notwithstanding the foregoing, the transactions provided for in the Asset Purchase Agreement By and Between Accredo Health, Incorporated and the Company dated as of January 2, 2002, (the "Purchase Agreement"), shall not constitute a Change in Control for purposes hereof.

A "Protection Period" shall be the period beginning on the date of a Change in Control and ending on the third anniversary of the date on which the Change in Control occurs.

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3. Termination Following Change in Control. The Executive shall be entitled to the benefits provided in Section 4 hereof upon any termination of his or her employment with the Company within a Protection Period, except a termination of employment (a) because of his or her death, (b) because of a "Disability," (c) by the Company for "Cause," or (d) by the Executive other than for "Good Reason."

(i) Disability. The Executive's employment shall be deemed to have terminated because of a "Disability" if the Executive applies for and is determined to be eligible to receive disability benefits under the Company's Long-Term Disability Plan.

(ii) Cause. Termination by the Company of the Executive's employment for "Cause" shall mean termination upon: (A) the willful and continued failure by the Executive to substantially perform his or her duties with the Company, after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes hereof, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his or her counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive engaged in the prohibited conduct set forth above in clauses (A) or (B) of the first sentence of this subsection and specifying the particulars thereof in detail.

(iii) Without Cause. The Company may terminate the employment of the Executive without Cause during a Protection Period only by giving the Executive written notice of termination to that effect. In that event, the Executive's employment shall terminate on the last day of the month in which such notice is given (or such later date as may be specified in such notice), and the benefits set forth in Section 4 hereof shall be provided to the Executive.

(iv) Good Reason. Termination of employment by the Executive for "Good Reason" shall mean termination:

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(A) if there has occurred a reduction by the Company in the Executive's base salary in effect on the date hereof, as increased from time to time thereafter, other than a reduction in the Executive's base salary of not more than ten percent which is part of a general salary reduction for a majority of the salaried employees of the Company and its subsidiaries;

(B) if without the Executive's written consent, the Company has required the Executive to be relocated anywhere in excess of fifty (50) miles from the Executive's office location on the date hereof, except for required travel on the business of the Company;

(C) if there has occurred a failure by the Company to maintain plans providing benefits not materially less favorable than those provided by any benefit or compensation plan (including, without limitation, any incentive compensation plan, bonus plan or program, retirement, pension or savings plan, stock option plan, restricted stock plan, life insurance plan, health and dental plan and disability plan) in which the Executive is participating immediately before the beginning of the Protection Period, or if the Company has taken any action which would adversely affect the Executive's participation in or reduce the Executive's benefits (other than stock option or restricted stock grants) under any of such plans or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately before the beginning of the Protection Period, or if the Company has failed to provide the Executive with the number of paid vacation days to which he or she would be entitled in accordance with the normal vacations policy of the Company as in effect immediately before the beginning of the Protection Period; provided, however, that a reduction in benefits under the Company's tax-qualified retirement, pension or savings plans or its life insurance plan, health and dental plan, disability plans or other insurance plans which reduction applies equally to all participants in the plans and has a de minimis effect on the Executive shall not constitute "Good Reason" for termination by the Executive;

(D) the assignment to the Executive of any material duties inconsistent with his or her status as a senior executive officer of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control;

(E) if the Company has failed to obtain the assumption of the obligations contained in this Agreement by any successor as contemplated in Section 8(c) hereof; or

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(F) if there occurs any purported termination of the Executive's employment by the Company which is not effected pursuant to a written notice of termination as described in subsection (ii) or (iii) above.

The Executive shall exercise his or her right to terminate employment for Good Reason by giving the Company a written notice of termination specifying in reasonable detail the circumstances constituting such Good Reason. In that event, the Executive's employment shall terminate on the last day of the month in which such notice is given.

A termination of employment by the Executive within a Protection Period shall be for Good Reason if one of the occurrences specified in this subsection (iv) shall have occurred, notwithstanding that the Executive may have other reasons for terminating employment, including employment by another employer which the Executive desires to accept.

4. Benefits Upon Termination Within Protection Period. If, within a Protection Period, the Executive's employment by the Company shall be terminated (a) by the Company other than for Cause or because of the Executive's death or Disability, or (b) bythe Executive for Good Reason, the Executive shall be entitled to the benefits provided for below (and the Executive shall not be entitled to severance benefits otherwise payable under the Executive's separate severance letter agreement with the Company):

(i) The Company shall pay to the Executive through the date of the Executive's termination of employment salary at the rate then in effect, together with salary in lieu of vacation accrued to the date on which his employment terminates, in accordance with the standard payroll practices of the Company;

(ii) The Company shall pay to the Executive an amount in cash equal to two times the sum of (A) the Executive's annual base salary in effect immediately prior to the date of the Executive's termination of employment or the date of the Change in Control (whichever is higher), and (B) the higher of (x) the Executive's target annual bonus for the year that includes the date of the Executive's termination of employment or (y) the Executive's target annual bonus for the year that includes the date of the Change in Control; and such payment shall be made in a lump sum within 10 business days after the date of such termination of employment;

(iii) The Company shall continue to cover the Executive and his or her dependents under, or provide the Executive and his or her dependents with insurance coverage no less favorable than, the Company's life, disability, health, dental or other employee welfare benefit plans or programs (as in effect on the day immediately preceding the Protection Period or, at the option of the Executive, on the date of termination of his or her employment) for a period equal to the lesser of (x) two years following the date of

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termination or (y) until the Executive is provided by another employer with benefits substantially comparable to the benefits provided by such plans or programs, provided however, that the provision of this benefit shall be contingent upon the cooperation of the Executive (or his or her dependent, as applicable) in any reasonable request by the Company to facilitate the provision of such benefit, including responding to questionnaires and submitting to minimally intrusive medical examinations;

(iv) All options to purchase Company stock granted under the Company's 1999 Stock Incentive Plan (or other Company plan) held by the Executive shall become immediately vested and exercisable in full upon such termination of employment, and all such stock options shall remain exercisable for one year following such termination of employment (but not beyond the original full term of the stock option); and

(v) All of the Executive's benefits accrued under the pension, retirement, savings and deferred compensation plans of the Company shall become vested in full; provided, however, that to the extent such accelerated vesting of benefits cannot be provided under one or more of such plans consistent with applicable provisions of the Internal Revenue Code of 1986, as amended, such benefits shall be paid to the Executive in a lump sum within 10 days after termination of employment outside the applicable plan.

Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to the benefits described in this Section 4, if the Executive's employment with the Company is terminated by the Company (other than for Cause) within one year prior to the date on which a Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated or intended to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control.

5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, practices, policies or programs provided by the Company or any of its subsidiaries and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, practice, policy or program of the Company or any of its subsidiaries at or subsequent to the date of termination of the Executive's employment shall be payable in accordance with such plan, practice, policy or program.

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6. Full-Settlement; Legal Expenses. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, upon written demand therefore by the Executive, all legal fees and expenses which the Executive may reasonably incur as a result of any dispute or contest by or with the Company or others regarding the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount of any payment hereunder) if the Executive substantially prevails in the dispute or contest, plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). In any such action brought by the Executive for damages or to enforce any provisions of this Agreement, the Executive shall be entitled to seek both legal and equitable relief and remedies, including, without limitation, specific performance of the Company's obligations hereunder, in his or her sole discretion.

7. Excise Tax Cut Back.

(a) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, distribution or benefit provided (including, without limitation, the acceleration of any payment, distribution or benefit and the acceleration of exercisability of any stock option) to the Executive or for his or her benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise would be subject, in whole or in part, to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Excise Tax"), then the amounts payable to the Executive under this Agreement shall be reduced (by the minimum possible amount) until no amount payable to the Executive is subject to the Excise Tax; provided however, that no such reduction shall be made if the net after-tax benefit (after taking into account Federal, state, local or other income, employment, self-employment and excise taxes) to which the Executive would otherwise be entitled without such reduction would be greater than the net after-tax benefit (after taking into account Federal, state, local or other income, employment, self-employment and excise taxes) to the Executive resulting from the receipt of such payments with such reduction. If, as a result of subsequent events or conditions, it is determined that payments have been reduced by more than the minimum amount required under this Section 7, then an additional payment shall be promptly made to the Executive in an amount equal to the excess reduction.

(b) All determinations required to be made under this Section 7, including whether a payment would result in an Excise Tax shall be made by PricewaterhouseCoopers LLP (the "Accounting

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Firm") which shall provide detailed supporting calculations both to the Company and the Executive as requested by the Company or the Executive. All fees and expenses of the Accounting Firm shall be borne solely by the Company and shall be paid by the Company. Except as set forth in the last sentence of Section 7(a) hereof, all determinations made by the Accounting Firm under this Section 7 shall be final and binding upon the Company and the Executive.

8. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its subsidiaries and which shall not be or become public knowledge (other than by acts of the Executive or his or her representatives in violation of this Agreement). After the date of termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

9. Successors.

(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives or successor(s) in interest.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to a11 or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

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10. Miscellaneous.

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws thereof. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:		___________________ _____________________ _____________________

If to the Company:		Gentiva Health Services, Inc. 3 Huntington Quadrangle, 2S Melville, NY 11747 Attention: Chief Executive Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof.

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(f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof but, except as specifically provided in Section 4 hereof, does not supersede or override the provisions of (i) any stock option, employee benefit or other plan, program, policy or practice in which Executive is a participant or under which the Executive is a beneficiary; or (ii) the Severance Agreement of even date between the Executive and the Company provided, however, that this Agreement does supersede and replace any prior Severance Agreement and Change in Control agreements between the Company (its predecessors) and the Executive, including specifically all such agreements previously entered into by the Executive and Olsten Corporation or the Company.

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___________________________
Name:

GENTIVA HEALTH SERVICES, INC.

By:___________________________
Name:
Title:

EX-10 7 malonecicexhibit101.htm EXHIBIT 10.3 Malone Change in Control Agreement

Exhibit 10.3

CHANGE IN CONTROL AGREEMENT

Agreement, made this 14^th day of June, 2002,by and between Gentiva Health Services, Inc., a Delaware corporation (the "Company"), and Ronald A. Malone (the "Executive").

WHEREAS, the Executive is a key employee of the Company; and

WHEREAS, the Executive is willing to continue to serve the Company taking into account the provisions of this Agreement;

NOW, THEREFORE, in consideration of the foregoing, and the respective covenants and agreements of the parties herein contained, the parties agree as follows:

2. Change in Control; Protection Period. A "Change of Control" shall be deemed to occur on the date that any of the following events occur:

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(d) consummation of a sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Company.

A "Protection Period" shall be the period beginning on the date of a Change in Control and ending on the third anniversary of the date on which the Change in Control occurs.

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(iv) Good Reason. Termination of employment by the Executive for "Good Reason" shall mean termination:

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(E) if the Company has failed to obtain the assumption of the obligations contained in this Agreement by any successor as contemplated in Section 8(c) hereof; or

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4. Benefits Upon Termination Within Protection Period. If, within a Protection Period, the Executive's employment by the Company shall be terminated (a) by the Company other than for Cause or because of the Executive's death or Disability, or (b) by the Executive for Good Reason, the Executive shall be entitled to the benefits provided for below (and the Executive shall not be entitled to severance benefits otherwise payable under the Executive's separate severance letter agreement with the Company):

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termination of his or her employment) for a period equal to the lesser of (x) two years following the date of termination or (y) until the Executive is provided by another employer with benefits substantially comparable to the benefits provided by such plans or programs, provided however, that the provision of this benefit shall be contingent upon the cooperation of the Executive (or his or her dependent, as applicable) in any reasonable request by the Company to facilitate the provision of such benefit, including responding to questionnaires and submitting to minimally intrusive medical examinations;

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7. Excise Tax Cut Back.

(b) All determinations required to be made under this Section 7, including whether a payment would result in an Excise Tax shall be made by PricewaterhouseCoopers LLP (the "Accounting

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9. Successors.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

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10. Miscellaneous.

If to the Executive:		Ronald A. Malone 6 Target Rock Road Lloyd Harbor, NY 11743

If to the Company:		Gentiva Health Services, Inc. 3 Huntington Quadrangle, 2S Melville, NY 11747 Attention: Chairman, Human Resources and Compensation Committee

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof.

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(f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof but, except as specifically provided in Section 4 hereof, does not supersede or override the provisions of (i) any stock option, employee benefit or other plan, program, policy or practice in which Executive is a participant or under which the Executive is a beneficiary; or (ii) the Severance Agreement of even date between the Executive and the Company provided, however, that this Agreement does supersede and replace any prior Severance Agreement and Change in Control agreements between the Company and the Executive, including specifically all such agreements entered into by the Executive and the Company as of March 14, 2000.

[Next Page is Signature Page]

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		___________________________ Name: RONALD A. MALONE

		GENTIVA HEALTH SERVICES, INC. By:_________________________ Name: Title:

EX-10 8 formseveranceagreement11.htm EXHIBIT 10.4 Form Severance Letter

Exhibit 10.4

Personal and Confidential

May ___, 2002

___ __________________
______________________
______________________

Dear __________:

In consideration of the mutual promises, covenants and obligations contained herein, Gentiva Health Services, Inc. (the "Company"), is pleased to offer you the following terms which become effective upon the closing of the sale of the Company's specialty pharmaceutical services division to Accredo Health, Incorporated, currently scheduled for May , 2002.

1. Should the Company terminate your employment other than for cause (as hereinafter defined), the Company will pay to you, on a bi-weekly basis (or other regular payroll cycle in used by the Company), 12 months of severance (the "Severance Period"), based on your then current base salary. In addition, your medical/prescriptions/ dental/vision benefits will be continued until the end of the Severance Period or until similar benefits become available to you from a new employer, whichever comes first. Such benefits continuation shall be on the same basis as if you had continued in the employ of the Company (e.g. including any required associate contributions) during that period adjusted for any plan changes.

2. Upon a reduction in your current base salary, as the same may be increased from time to time, which is not part of a general salary reduction for a majority of salaried employees of the Company, you will have the right to resign and receive the severance benefits described above, with your severance payments based on your salary prior to it having been reduced. This right can only be exercised within the 60 day period immediately following any such reduction in salary.

Termination "for cause" is defined as your involuntary termination by the Company due to: your having been convicted of a felony; or your having breached Company policy or procedure, the breach of which has had a material adverse effect on the Company.

3. All of your benefits accrued under the pension, retirement, savings and deferred compensation plans of the Company shall become vested in full; provided, however, that to the extent such accelerated vesting of benefits cannot be provided under one or more of such plans consistent with applicable Internal Revenue Code provisions, the value of such benefits shall be paid to you in a lump sum within 10 days after termination of your employment outside the applicable plan.

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4. In consideration of the severance payments and benefits provided for herein, you agree to be bound by the confidentiality and restrictive covenants set forth in Exhibit A attached hereto and made a part hereof. In addition, you agree that at the time of your termination in order to receive the severance payments and benefits provided for herein, you will enter into the Company's standard form of Release Agreement, attached hereto as Exhibit B.

5. Notwithstanding anything herein to the contrary, your employment by the Company is "employment at will."

6. This Agreement may only be amended by a written instrument signed by the Company and you. Except with respect to your Change in Control Agreement with the Company of even date, and any other agreement between the Company and you specifically referenced herein and intended to continue beyond the execution of this Agreement, this Agreement shall constitute the entire agreement between the Company and you with respect to the subject matter hereof. Further, this Agreement supercedes and replaces any other agreements you may have with the Company or with Olsten Corporation dated prior to the date of this Agreement. This Agreement shall be governed by the laws of the State of New York, without regard to the principles of conflict of laws thereof. This Agreement shall be binding upon the inure to the benefit of the parties hereto and their respective successors, heirs (in your case) and assigns.

Sincerely,

By: ____________________
Ronald A. Malone
Chief Executive Officer

Agreed to and Accepted by:

________________________

Date: ________________________

EX-21 9 gentivaexhibit211.htm EXHIBIT 21

Exhibit 21

Subsidiaries of Gentiva Health Services, Inc.

Subsidiary *	Jurisdiction of Incorporation

CCI-ASDS, Inc.	Massachusetts
Chronic Health Management of California	California
Commonwealth Home Care, Inc.	Massachusetts
Gentiva CareCentrix, Inc.	Delaware
Gentiva CareCentrix (Area One) Corp.	Delaware
Gentiva CareCentrix (Area Two) Corp.	Delaware
Gentiva CareCentrix (Area Three) Corp.	Delaware
Gentiva Certified Healthcare Corp.	Delaware
Gentiva Health Services Holding Corp.	Delaware
Gentiva Health Services (USA), Inc.	Delaware
Gentiva Health Services of New York, Inc.	New York
The IV Clinic, Inc.	Texas
The IV Clinic II, Inc.	Texas
The IV Clinic III, Inc.	Texas
Kimberly Home Health Care, Inc.	Missouri
New York Healthcare Services, Inc.	New York
OHS Service Corp.	Texas
Partnersfirst Management, Inc.	Florida
QC-Medi-New York, Inc.	New York
Quality Care-USA, Inc.	New York
Quality Managed Care, Inc.	Delaware
Quantum Care Network, Inc.	Massachusetts
Quantum Disease Management, Inc.	Indiana
Quantum Health Resources, Inc.	Delaware
QHR Southwest Business Trust	Pennsylvania
QHR Southwest Holdings Corp.	California
Skilled Nursing Services, Inc.	Michigan

* All subsidiaries do business under the name "Gentiva Health Services" and/or "Gentiva" except for Gentiva Health Services (USA), Inc., which does business under the name "Gentiva Rehab Without Walls."