Kindred Healthcare Announces Proposal to Acquire Gentiva Health Services for $14.00 Per Share in Cash and Stock, Representing a

  Kindred Healthcare Announces Proposal to Acquire Gentiva Health Services for
  $14.00 Per Share in Cash and Stock, Representing a 64% Premium, in $1.6
  Billion Transaction

Combination Places Patient-Centered Integrated Care Front and Center, Helping
      to Shape the Evolution of the American Healthcare Delivery System

  Gentiva Shareholders Would Benefit from Significant and Immediate Premium,
Meaningful Dividend, Accelerated Growth and Enhanced Financial Strength of the
                               Combined Company

   Combination Would Create Premier Post-Acute Care Provider Serving Nearly
    127,000 Patients per Day in 47 States, Employing Approximately 110,000
  Individuals and Generating Pro Forma Annual Revenues of Approximately $7.2
                   Billion and EBITDAR of Nearly $1 Billion

Compelling Financial and Strategic Benefits; Transaction Expected to be Highly
Accretive to Kindred Earnings and Cash Flows and Create Significant Value for
                        Shareholders of Both Companies

Business Wire

LOUISVILLE, Ky. -- May 15, 2014

Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today
announced a proposal to acquire all of the outstanding shares of common stock
of Gentiva Health Services, Inc. (“Gentiva”) (NASDAQ:GTIV) for a combination
of $7.00 per share in cash and $7.00 of Kindred common stock. Kindred also
offered to increase its offer to 100% cash if the Gentiva Board so elects.

Based upon the closing price of Gentiva’s common stock on May 14, 2014,
Kindred’s proposal would provide Gentiva shareholders with consideration
currently valued at approximately $14.00 per share, representing a 64% premium
over the closing price of Gentiva common stock on May 14, 2014, and a 59%
premium over Gentiva’s 60-day volume-weighted average closing price. The
proposed price for Gentiva implies a total equity value of approximately $533
million. With the assumption of Gentiva’s debt, the transaction would be
valued at approximately $1.6 billion.

The combination of Kindred and Gentiva would further enhance Kindred’s
position as the nation’s premier post-acute care provider. The combined
company would:

  *Serve nearly 127,000 patients per day;
  *Operate in 47 states;
  *Employ approximately 110,000 individuals, making it the 78^th largest
    private employer in the United States;
  *Deliver pro forma annual revenues of approximately $7.2 billion; and
  *Generate pro forma EBITDAR of nearly $1 billion.

Paul J. Diaz, Chief Executive Officer of the Company, said, “This compelling
combination would unite two highly complementary businesses by joining
Kindred’s resources with Gentiva’s home health and hospice capabilities.
Together we would create a unique platform to ‘Continue the Care’ by
delivering patient-centered care across the full spectrum—from hospital to
outpatient facility to the patient’s home. The combined company’s national
footprint would allow it to deliver enhanced coordinated care, helping to
transition patients home more quickly and provide more patient-centric,
cost-effective treatment. We would also benefit from cost, capital and revenue
synergies as well as enhanced relationships with physicians and managed care
organizations, augmenting our platform for value- and risk-based payment
models.”

Gentiva shareholders would benefit from a significant and immediate premium, a
meaningful dividend, accelerated growth and the enhanced financial strength of
the combined company. Kindred believes the transaction would be highly
accretive to earnings and operating cash flows, exclusive of one-time items
related primarily to transaction and integration costs. Kindred expects the
combined company would have operating and financial synergies of approximately
$60 million to $80 million within a period of two years following consummation
of the acquisition, with $40 million expected in the first year after closing.

Mr. Diaz added, “Kindred, together with Gentiva, would help accelerate the
evolution of population health and medical homes through our combined national
platform, and the adoption of best practices in innovation and clinical care
in more local communities. With greater financial flexibility and a lower cost
of capital, the combined company would be able to invest in clinical programs,
information technology and infrastructure to improve care management and
clinical outcomes, drive growth, reduce costs and deliver value for our
patients, payors, hospital and physician partners, and shareholders.”

Mr. Diaz concluded, “The strategic and financial benefits of the proposed
transaction are highly compelling, and we are confident that it would create
more value for Gentiva stakeholders than Gentiva could achieve on a standalone
basis. Our proposal provides a significant and immediate premium for Gentiva
shareholders, while allowing them to benefit from the upside potential
inherent in this combination. We have undertaken extensive efforts and had
several private discussions with Gentiva’s management team in an effort to
engage Gentiva on a mutually acceptable transaction. Gentiva has indicated
repeatedly that it is not willing to discuss a transaction at this time. As
such, we have elected to make our compelling proposal known to Gentiva’s
shareholders—a proposal that represents a 64% premium to yesterday’s closing
price and a 40% premium to Wall Street analysts’ one-year median price target
of $10.00 per share. We strongly believe that many of Gentiva’s shareholders,
and in particular the greater than 20% who are also shareholders of Kindred,
would support the transaction and favor the stock of the combined company if
given an opportunity. We look forward to the opportunity to engage with
Gentiva’s Board and management team to discuss our proposal and agree upon the
terms of a transaction that benefits both companies and all of our
stakeholders. Kindred is ready and willing to complete this transaction, and
we are prepared to take the necessary steps to realize the benefits inherent
in this proposed combination.”

Benjamin A. Breier, President and Chief Operating Officer of the Company,
said, “Kindred has an outstanding track record of successfully integrating
acquisitions and a history of operational excellence. This transaction would
position the combined company for accelerated growth and advance our mission
of promoting healing, providing hope, preserving dignity and producing value
for every constituent we serve. We would be excited to welcome Gentiva’s
47,000 talented employees to join us in this mission as part of the Kindred
family.”

Mr. Breier added, “Kindred’s teammates are the heart of our culture and have
made Kindred one of Fortune Magazine’s Most Admired Healthcare Companies six
years in a row. In recent years, Kindred has taken a series of steps to
strengthen and grow our operations; we believe this transaction would be a
logical extension of our successful repositioning efforts. Our combined scale
and resources would also facilitate job creation, and allow for greater
investment in the professional development and career advancement of our
teams. We look forward to the opportunity to bring Gentiva’s employees
together with the team members of Kindred, and believe our combined talents
would help us make even greater strides in clinical innovation and
excellence.”

Stephen D. Farber, Executive Vice President and Chief Financial Officer of the
Company, said, “From a financial perspective, this combination checks all of
the boxes: a compelling and immediate premium for Gentiva, meaningful
accretion for Kindred shareholders, and the opportunity for shareholders of
both companies to participate in the accelerated growth of the combined
company. We have structured the proposed combination with a mix of debt,
equity and other instruments to maintain Kindred’s existing leverage profile
and deleveraging cadence. The combined company would have the financial
strength and investment capacity to support our nationwide operations and our
110,000 teammates, as well as accelerate investments in further expanding our
‘Continue the Care’ delivery model.”

Below is the text of a letter that was sent on May 5, 2014, to Mr. Rodney
Windley, Executive Chairman of the Board of Directors of Gentiva, and Tony
Strange, Chief Executive Officer, President and member of the Board of
Gentiva.

   May 5, 2014
                                                                             
      Rodney Windley
      Executive Chairman
      Gentiva Health Services, Inc.
      3350 Riverwood Parkway, Suite 1400
      Atlanta, GA 30339
                                                                             
      Tony Strange
      Chief Executive Officer, President and Director
      Gentiva Health Services, Inc.
      3350 Riverwood Parkway, Suite 1400
      Atlanta, GA 30339
                                                                             
      Dear Rod and Tony:
                                                                             
      I appreciate the time you have taken to speak with me as well as the
      time your Board of Directors has taken to review our offer to combine
      our two businesses. We are very disappointed, however, that we have
      not been able to engage more substantially on the strategic, financial
      and industrial logic of the combination of our two companies and the
      opportunity it affords our patients for a more integrated care
      experience. It is unclear to us how Gentiva on a standalone basis can
      replicate the clinical, strategic and financial opportunities
      generated from our combined operations. Moreover, now is the perfect
      time to bring Gentiva and Kindred together and leverage our combined
      platforms to achieve revenue, cost and capital synergies which will
      better positions each of us to not just respond to, but to help shape,
      the evolution of the post-acute care industry.
                                                                             
      Our team would like to work with you and your team towards crafting a
      transaction that would benefit all of our shareholders. In light of
      your April 28, 2014 letter, articulating Gentiva’s unwillingness to
      engage in meaningful dialogue on a potential combination of our two
      companies, Kindred is prepared to increase its offer to $14.00 per
      share composed of 50% stock and 50% cash. Additionally, given our
      confidence in the strategic and financial opportunities of the
      combination, Kindred is prepared to increase the cash portion of
      consideration up to 100% at your shareholders’ election. We strongly
      believe that many of your shareholders, and in particular the greater
      than 20% of Gentiva shareholders who are also shareholders of Kindred,
      will favor the stock of the combined company if given an opportunity.
      This proposal represents a significant premium of 82% over Gentiva’s
      closing price on May 2, 2014. While the aggregate cash component of
      consideration would represent approximately 91% of Gentiva’s market
      capitalization, the Gentiva shareholders also would continue to
      benefit from the additional value creation in the combined company.
                                                                             
      We have been working with Citi to assess financing options, and we and
      Citi are highly confident in the ability to raise the necessary funds
      to complete the proposed transaction, as reflected in the attached
      correspondence from Citi.
                                                                             
      I also want to respond to your comments regarding Kindred approaching
      executives of Gentiva. First, let me assure you that we have not
      shared any material non-public information with respect to our
      discussions with anyone other than our Board and our teammates and
      advisors working on the transaction. Moreover, I want to assure you
      that we are not soliciting any of your executive officers for
      employment at Kindred nor have we engaged in any broad solicitation or
      recruitment of Gentiva employees. From time to time, however, we may
      hire current and former employees of Gentiva, just as we assume that
      Gentiva, from time to time, may hire current and former Kindred
      employees. If in the ordinary course we were to hire any of Gentiva’s
      employees we would not knowingly violate any enforceable non-compete
      restrictions.
                                                                             
      Kindred would welcome discussing the proposed transaction with you and
      the Gentiva Board of Directors in order to understand your Board’s
      views, facilitate further interaction between our respective
      management teams and to work towards achieving a transaction in the
      best interest of all of our constituents. To that end, we request a
      meeting with you and your independent directors to present what we
      think is an incredibly compelling opportunity for our collective
      shareholder groups, patients and employees. If we ultimately pursue a
      transaction that includes a significant stock component, we also would
      be open to expanding the Kindred Board of Directors to include
      representation from your Board.
                                                                             
      This letter is not intended to create or constitute any legally
      binding obligation, liability or commitment by us regarding a
      transaction or any other matter. There will be no legally binding
      agreement between us regarding a transaction unless and until a
      definitive agreement is executed.
                                                                             
      We are very excited by the prospect of combining our two businesses.
      Our proposed terms reflect our current understanding of the
      attractiveness of Gentiva’s business and the value that a transaction
      could create for both sets of our shareholders. We trust you and your
      Board will carefully evaluate the logic of the combination and look
      forward to productive discussions regarding our proposal. We
      respectfully request your response by the close of business on May 13,
      2014.
                                                                             
      Please feel free to contact me with any questions.
                                                                             
      Yours truly,
                                                                             
      Paul J. Diaz
      Chief Executive Officer
      Kindred Healthcare, Inc.
                                                                             
      cc: Edward L. Kuntz, Chairman of the Board
      

In response, Gentiva sent the following letter to Kindred:

   May 13, 2014
                                                                             
      Kindred Healthcare, Inc.
      680 South Fourth Street
      Louisville, Kentucky 40202
                                                                             
      Attention: Paul J. Diaz, Chief Executive Officer
      Edward L. Kuntz, Chairman of the Board
                                                                             
      Dear Paul:
                                                                             
      Thank you for your letter dated May 5, 2014. As we noted in our prior
      letter to you, dated April 28, 2014, last month our Board of Directors
      gave careful consideration to Kindred Healthcare’s unsolicited
      proposal to combine our two businesses. Our Board of Directors has,
      with the assistance of its legal and financial advisors, once again
      carefully considered Kindred’s unsolicited proposal to combine our two
      businesses. Having considered your revised proposal, our Board
      continues to believe that our long-term strategy as a stand-alone
      company will generate substantially more value to our shareholders.
      Accordingly, at this time, we are not interested in pursuing the
      transaction you are proposing.
                                                                             
      Please feel free to contact me with any questions.
                                                                             
      Sincerely,
                                                                             
      Rodney D. Windley                   Victor F. Ganzi
      Executive Chairman                  Lead Director
      Gentiva Health Services, Inc.       Gentiva Health Services, Inc.
                                                                             
                                                                             
      cc: Tony Strange
      Chief Executive Officer
                                                                             

Citi is acting as financial advisor to Kindred and Cleary Gottlieb Steen &
Hamilton LLP is acting as legal advisor.

Conference Call and Additional Presentation Materials

Kindred’s management team will be discussing the proposed transaction with
analysts and investors on a conference call today at 8:30 a.m. (Eastern Time).
Interested parties can participate in the conference by dialing (888) 802-8577
(U.S.) or (404) 665-9928 (International), conference code 47570847, five to 10
minutes prior to the start of the call. A live webcast is also accessible on
the Company’s website at www.kindredhealthcare.com. The conference call
webcast will feature accompanying slides, which can be accessed through the
Investor Relations section of the Company’s website.

A replay of the conference call will be available for the next 30 days and can
be accessed by dialing (800) 585-8367 (U.S.) or (404) 537-3406
(International), conference code 47570847. The replay will also be available
online at the Company’s website, www.kindredhealthcare.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of
Section27A of the Securities Act and Section21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements include, but are not
limited to, statements regarding the Company’s proposed business combination
transaction with Gentiva (including financing of the proposed transaction and
the benefits, results, effects and timing of a transaction), all statements
regarding the Company’s (and the Company and Gentiva’s combined) expected
future financial position, results of operations, cash flows, dividends,
financing plans, business strategy, budgets, capital expenditures, competitive
positions, growth opportunities, plans and objectives of management, and
statements containing the words such as “anticipate,” “approximate,”
“believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,”
“should,” “will,” “intend,” “may,” “potential,” “upside,” and other similar
expressions. Statements in this press release concerning the business outlook
or future economic performance, anticipated profitability, revenues, expenses,
dividends or other financial items, and product or services line growth of the
Company (and the combined businesses of the Company and Gentiva), together
with other statements that are not historical facts, are forward-looking
statements that are estimates reflecting the best judgment of the Company
based upon currently available information.

Such forward-looking statements are inherently uncertain, and stockholders and
other potential investors must recognize that actual results may differ
materially from the Company’s expectations as a result of a variety of
factors, including, without limitation, those discussed below. Such
forward-looking statements are based upon management’s current expectations
and include known and unknown risks, uncertainties and other factors, many of
which the Company is unable to predict or control, that may cause the
Company’s actual results, performance or plans with respect to Gentiva, to
differ materially from any future results, performance or plans expressed or
implied by such forward-looking statements. These statements involve risks,
uncertainties and other factors discussed below and detailed from time to time
in the Company’s filings with the Securities and Exchange Commission (the
“SEC”).

Risks and uncertainties related to the proposed transaction with Gentiva
include, but are not limited to, uncertainty as to whether the Company will
further pursue, enter into or consummate the transaction on the terms set
forth in the proposal or on other terms, potential adverse reactions or
changes to business relationships resulting from the announcement or
completion of the transaction, uncertainties as to the timing of the
transaction, adverse effects on the Company’s stock price resulting from the
announcement or consummation of the transaction or any failure to complete the
transaction, competitive responses to the announcement or consummation of the
transaction, the risk that regulatory, licensure or other approvals and
financing required for the consummation of the transaction are not obtained or
are obtained subject to terms and conditions that are not anticipated, costs
and difficulties related to the integration of Gentiva’s businesses and
operations with the Company’s businesses and operations, the inability to
obtain, or delays in obtaining, cost savings and synergies from the
transaction, unexpected costs, liabilities, charges or expenses resulting from
the transaction, litigation relating to the transaction, the inability to
retain key personnel, and any changes in general economic and/or industry
specific conditions.

In addition to the factors set forth above, other factors that may affect the
Company’s plans, results or stock price are set forth in the Company’s Annual
Report on Form 10-K and in its reports on Forms 10-Q and 8-K.

Many of these factors are beyond the Company’s control. The Company cautions
investors that any forward-looking statements made by the Company are not
guarantees of future performance. The Company disclaims any obligation to
update any such factors or to announce publicly the results of any revisions
to any of the forward-looking statements to reflect future events or
developments.

The Company has provided information in this press release to compute certain
non-GAAP measurements for specified periods. A reconciliation of the non-GAAP
measurements to the GAAP measurements is included this press release and on
our website atwww.kindredhealthcare.com under the heading “investors.”

Additional Information

This press release is provided for informational purposes only and does not
constitute an offer to purchase or the solicitation of an offer to sell any
securities. Subject to future developments, Kindred may file a registration
statement and/or tender offer documents with the SEC in connection with a
possible business combination transaction with Gentiva. Kindred and Gentiva
shareholders should read those filings, and any other filings made by Kindred
with the SEC in connection with a possible business combination, if any, as
they will contain important information. Those documents, if and when filed,
as well as Kindred other public filings with the SEC, may be obtained without
charge at the SEC’s website at www.sec.gov and at Kindred’s website at
www.kindredhealthcare.com.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-150 private employer in the United States, is
a FORTUNE 500 healthcare services company based in Louisville, Kentucky with
annual revenues of $5 billion and approximately 63,000 employees in 47 states.
At March 31, 2014, Kindred through its subsidiaries provided healthcare
services in 2,313 locations, including 100 transitional care hospitals, five
inpatient rehabilitation hospitals, 99 nursing centers, 22 sub-acute units,
157 Kindred at Home hospice, home health and non-medical home care locations,
105 inpatient rehabilitation units (hospital-based) and a contract
rehabilitation services business, RehabCare, which served 1,825 non-affiliated
facilities. Ranked as one of Fortune magazine’s Most Admired Healthcare
Companies for six years in a row, Kindred’s mission is to promote healing,
provide hope, preserve dignity and produce value for each patient, resident,
family member, customer, employee and shareholder we serve. For more
information, go to www.kindredhealthcare.com. You can also follow us on
Twitter and Facebook.

                                                                             
                                                                             
Kindred Healthcare, Inc.

Reconciliation of Non-GAAP Measures

($ in millions)
                                                                             
This press release includes a financial measure referred to as operating
income, or earnings before interest, income taxes, depreciation,
amortization and rent (“EBITDAR”). Kindred’s management uses operating
income as a meaningful measure of operational performance in addition to
other measures. Kindred uses operating income to assess the relative
performance of its operating divisions as well as the employees that operate
these businesses. In addition, Kindred believes this measurement is
important because securities analysts and investors use this measurement to
compare Kindred’s performance to other companies in the healthcare industry.
Kindred believes that income from continuing operations is the most
comparable GAAP measure. Readers of Kindred’s financial information should
consider income from continuing operations as an important measure of
Kindred’s financial performance because it provides the most complete
measure of its performance. Operating income should be considered in
addition to, not as a substitute for, or superior to, financial measures
based upon GAAP as an indicator of operating performance. A reconciliation
of Kindred’s May 7, 2014 guidance to income from continuing operations is
below. The combined total of nearly $1 billion of EBITDAR included in this
press release includes a 2014 EBITDAR estimate of $226 million for Gentiva,
which is based upon Gentiva’s consensus estimates.

                                               
                                                  2014 Earnings Guidance (a)
                                                  As of May 7, 2014
                                                  Low            High
                                                                             
Revenues                                          $   5,200       $   5,200
                                                                             
Operating income (EBITDAR)                        $   715         $   732
                                                                             
Rent                                                 335            335
EBITDA                                                380             397
Depreciation and amortization                         163             163
Interest, net                                        98             98
Income from continuing operations before              119             136
income taxes
Provision for income taxes                           46             53
Income from continuing operations                     73              83
Earnings attributable to noncontrolling              (15)           (15)
interests
Income from continuing operations                     58              68
attributable to Kindred
Allocation to participating unvested                 (2)            (2)
restricted stockholders
Available to common stockholders                  $   56          $   66
                                                                             
Earnings per diluted share                        $   1.05        $   1.25
                                                                             
Shares used in computing earnings per diluted         53.2            53.2
share

____________________

        The earnings guidance excludes the effect of reimbursement changes,
(a)   severance, retirement and retention costs, litigation costs,
        transaction-related costs, any further acquisitions or divestitures,
        any impairment charges, and any repurchases of common stock.

Contact:

Kindred Healthcare, Inc.
Media
Kindred Healthcare, Inc
Susan Moss, 502-596-7296
Senior Vice President, Marketing and Communications
or
Joele Frank, Wilkinson Brimmer Katcher
Andy Brimmer / Andrew Siegel, 212-355-4449
or
Investors and Analysts
Kindred Healthcare, Inc.
Hank Robinson, 502-596-7732
Senior Vice President, Tax and Treasurer
or
D.F. King & Co., Inc.
Jordan Kovler / Kristian Klein, 212-493-6990 / 12-232-2247
 
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