13.

Equity-Based Compensation Plans

The Company provides several equity-based compensation plans under which the Company's officers, employees and non-employee directors may participate, including: (i) the Amended and Restated 2004 Equity Incentive Plan ("2004 Plan"), (ii) the Stock & Deferred Compensation Plan for Non-Employee Directors and (iii) the Employee Stock Purchase Plan ("ESPP"). Collectively, these equity-based compensation plans permit the grants of (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) restricted stock, (v) performance units, (vi) stock units and (vii) cash, as well as allow employees to purchase shares of the Company's common stock under the ESPP at a pre-determined discount.

On May 12, 2011, the shareholders of the Company authorized an additional 2,100,000 shares of the Company's common stock for issuance under the 2004 Plan.

For the second quarter and first six months of 2011, the Company recorded equity-based compensation expense, as calculated on a straight-line basis over the vesting periods of the related equity instruments, of $2.3 million and $4.0 million, respectively, as compared to $1.6 million and $3.2 million for the corresponding periods of fiscal 2010, which were reflected as selling, general and administrative expense in the consolidated statements of income. During the second quarter of 2011, the Company recorded non-cash compensation expense of approximately $0.4 million associated with modifications of stock options for a former executive. During the second quarter of fiscal 2010, the Company recorded non-cash compensation expense of approximately $0.6 million associated with the acceleration of compensation expense relating to future vesting of stock options under severance agreements for certain of the Company's former executive officers, which is reflected as selling, general and administrative expense in the consolidated statements of income and is categorized as restructuring costs. See Note 8.

Stock Options

The weighted-average fair values of the Company's stock options granted during the first six months of 2011 and fiscal 2010, calculated using the Black-Scholes option pricing model and other assumptions, were as follows:


	Six Months Ended
	June 30, 2011			July 4, 2010
Weighted average fair value of options granted	$	11.30		$	10.82
Risk-free interest rate		2.15	%		2.66	%
Expected volatility		44	%		43	%
Contractual life		7 years			7 years
Expected life		4.5 - 6.5 years			4.5 - 6.5 years
Expected dividend yield		0	%		0	%

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

A summary of Gentiva stock option activity as of June 30, 2011 and changes during the six months then ended is presented below:


	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance as of December 31, 2010		2,981,354		$	19.94
Granted		185,100			26.60
Exercised		(202,384	)		18.25
Cancelled		(56,832	)		19.21

Balance as of June 30, 2011		2,907,238		$	20.50		4.9	$	7,307,130

Exercisable options		2,012,488		$	18.39		4.3	$	7,046,548

The total intrinsic value of options exercised during the six months ended June 30, 2011 and July 4, 2010 was $1.9 million and $3.8 million, respectively. As of June 30, 2011, the Company had $3.4 million of unrecognized compensation expense related to nonvested stock options. This compensation expense is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of options that vested during the first six months of 2011 was $4.3 million.

Performance Share Units

The Company may grant performance share units under its 2004 Plan. Performance share units result in the issuance of common stock at the end of the three-year performance period and may range between zero and 150 percent of the performance share units granted at target in 2010 and between zero and 200 percent of the performance share units granted at target in 2011, based on the achievement of defined thresholds of the performance criteria. A summary of Gentiva performance share unit activity as of June 30, 2011 is presented below:


	Number of Performance Share Units			Weighted- Average Exercise Price
Balance as of December 31, 2010		36,200		$	25.61
Granted		98,600			26.60
Exercised		—			—
Earned		5,884			25.61
Cancelled		(2,500	)		25.61

Balance as of June 30, 2011		138,184		$	26.31

These performance share units carry performance criteria measured on annual diluted earnings per share targets and fully vest at the end of a three-year period provided the performance criteria are met. Forfeitures are estimated utilizing the Company's historical forfeiture experience.

As of June 30, 2011, the Company had $2.5 million of total unrecognized compensation cost related to performance share units. This compensation expense is expected to be recognized over a weighted-average period of 2.1 years.

Restricted Stock

A summary of Gentiva restricted stock activity as of June 30, 2011 is presented below:


	Number of Restricted Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of December 31, 2010		281,350		$	24.92
Granted		114,500			26.61
Exercised		—			—
Cancelled		(3,300	)		26.07

Balance as of June 30, 2011		392,550		$	25.40	$	8,176,817

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

As of June 30, 2011, the aggregate intrinsic value of the restricted stock awards was $8.2 million and the Company had $7.6 million of total unrecognized compensation cost related to restricted stock. This compensation expense is expected to be recognized over a weighted-average period of 3.5 years.

Directors Deferred Share Units

Under the Company's Stock & Deferred Compensation Plan for Non-Employee Directors, each non-employee director receives an annual deferred stock unit award credited quarterly and paid in shares of the Company's common stock following termination of the director's service on the Board of Directors. During the first six months of 2011, the Company granted 16,262 stock units under the Stock & Deferred Compensation Plan for Non-Employee Directors at a grant date weighted-average fair value of $25.40 per share unit. As of June 30, 2011, 124,346 share units were outstanding under the Plan.

Employee Stock Purchase Plan

The Company provides an ESPP under which the offering period is three months and the purchase price of shares is equal to 85 percent of the fair market value of the Company's common stock on the last day of the three-month offering period. All employees of the Company are eligible to purchase stock under the ESPP regardless of their actual or scheduled hours of service. During the first six months of 2011, the Company issued 97,318 shares of common stock under its ESPP. Under the Company's ESPP, compensation expense is equal to the 15 percent discount from the fair market value of the Company's common stock on the date of purchase.