Exhibit 10.1

EXECUTION VERSION

NEW LENDER SUPPLEMENT

AND

INCREMENTAL AMENDMENT

NEW LENDER SUPPLEMENT AND INCREMENTAL AMENDMENT, dated as of May 17, 2011 (this
“Amendment”), to the Credit Agreement, dated as of February 1, 2011 (as
heretofore amended, supplemented or otherwise modified, the “Credit Agreement”),
among LIFECARE HOLDINGS, INC. (the “Borrower”), LCI HOLDCO, LLC, the several
banks and other financial institutions or entities from time to time party
thereto as lenders (the “Lenders”) and JPMORGAN CHASE BANK, N.A., as
administrative agent and collateral agent (in such capacities, the
“Administrative Agent”).

W I T N E S S E T H

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and
have made, certain loans and other extensions of credit to the Borrower;

WHEREAS, the Required Lenders under the Credit Agreement have consented to the
borrowing by the Borrower of the New Term Loans (as defined below) on and
subject to the terms and conditions of this Amendment; and

WHEREAS, pursuant to Section 2.20 of the Credit Agreement, the Borrower has
requested that additional term loans in an aggregate amount of $47,200,000 (the
“New Term Loans”) be made available to the Borrower, and the New Term Loan
Lenders (as defined below) and the Administrative Agent have agreed, upon the
terms and subject to the conditions set forth herein, that (a) certain financial
institutions (collectively, the “New Term Loan Lenders”) will make New Term
Loans, (b) the proceeds of the New Term Loans shall be utilized to finance a
portion of the Acquisition (as defined below), to pay fees and expenses incurred
in connection with the Acquisition and this Amendment and for working capital
purposes of the Borrower and its Subsidiaries and (c) as permitted by
Section 2.20 of the Credit Agreement, the Credit Agreement will be amended as
set forth herein without any additional consent or approval of the Lenders;

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1. Defined Terms. Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Credit Agreement (as amended by
this Amendment). As used in this Amendment:

(a) the “Acquired Hospital Assets” means eight long term acute care hospitals
and substantially all of the assets related thereto;

(b) the “Acquisition” means the acquisition pursuant to the Acquisition
Agreement of the Acquired Hospital Assets;

(c) the “Acquisition Transactions” means, collectively, the transactions to
occur on the New Term Loan Borrowing Date pursuant to the Acquisition Agreement,
the Amendment Documents and the other Loan Documents, including (i) the
consummation of the Acquisition; (ii) the execution, delivery and performance by
each Loan Party of the Amendment Documents to which it is a party, including the
borrowing of the New Term Loans, (iii) the payment of amounts owed under the
master lease agreement to be entered into in connection with the Acquisition and
(iv) the payment of all fees and expenses to be paid on or prior to the New Term
Loan Borrowing Date and owing in connection with the foregoing;

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(d) the “Acquisition Agreement” means the Asset Purchase Agreement, and the
schedules and exhibits thereto, which were delivered to the Administrative Agent
on May 17, 2011, as amended, supplemented or otherwise modified (but without
giving effect to any such amendment, supplement or other modification that is
materially adverse to the interests of the Lenders in their capacity as
Lenders);

(e) the “Amendment Documents” means this Amendment and the Reaffirmations;

(f) the “Amendment Transactions” means (a) the execution, delivery and
performance by each Loan Party of the Amendment Documents to which it is a party
and (b) the payment of all fees and expenses to be paid on or prior to the New
Term Loan Borrowing Date and owing in connection with the foregoing;

(g) “New Term Loan Borrowing Date” means the date on which the conditions
precedent set forth in Section 4 shall have been satisfied, which date shall not
be later than September 1, 2011 and shall be designated in a notice of the
Borrower delivered to the Administrative Agent in accordance with Section 2.03
of the Credit Agreement;

(h) “New Term Loan Borrowing Date Material Adverse Change” means any change,
fact, circumstance, occurrence, event, effect or condition that, individually or
in the aggregate with all other changes, facts, circumstances, occurrences,
events, effects or conditions (a) has or is reasonably likely to have a material
adverse effect on the ability of Sellers (as defined in the Acquisition
Agreement) to consummate the Contemplated Transactions (as defined in the
Acquisition Agreement) or (b) has or is reasonably likely to have a material
adverse effect on the business, operation, condition (financial or otherwise) or
results of operation of a Facility (as defined in the Acquisition Agreement) or
the Purchased Assets (as defined in the Acquisition Agreement) constituting a
Facility; except to the extent resulting from (A) changes in general local,
domestic, foreign or international economic or political conditions or the
securities market in general, (B) changes affecting generally the same or
similar industries or markets in which the Facilities operate, (C) acts of war,
sabotage or terrorism, military actions, armed conflicts or the escalation
thereof, (D) any changes in applicable laws, regulations, rules, ordinances,
policies, mandates, guidelines or other requirements of any Governmental
Authority generally applicable to the Facilities or the Purchased Assets,
including long-term acute care hospital rules or regulations, (E) any changes in
accounting rules or principles, including changes in GAAP or its application,
(F) any other action required by the Acquisition Agreement and/or (G) the
negotiation, execution, announcement or performance of the Acquisition Agreement
or the consummation of the Contemplated Transactions, including the impact
thereof on relationships, contractual or otherwise, with customers, suppliers,
licensors, distributors, partners or employees;

(i) “New Term Loan Commitment” means as to any New Term Loan Lender, the
obligation of such New Term Loan Lender to make a New Term Loan to the Borrower
on the New Term Loan Borrowing Date in a principal amount not to exceed the
amount set forth opposite such New Term Loan Lender’s name on Annex I. The
initial aggregate amount of the New Term Loan Commitments is $47,200,000; and

(j) “Reaffirmation” shall have the meaning assigned thereto in Section 3(g)
hereof;

SECTION 2. New Term Loans. (a) Subject to the terms and conditions set forth
herein, each New Term Loan Lender agrees to make a New Term Loan to the Borrower
on the New Term Loan Borrowing Date in a principal amount equal to its New Term
Loan Commitment. The New Term Loans

 

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shall be made in accordance with the procedures set forth In Sections 2.02 and
2.03 of the Credit Agreement, except that the Interest Periods applicable
thereto shall be the same as the remaining portions of the Interest Periods then
applicable to the other Term Loans and the Eurodollar Rates applicable for such
Interest Periods shall likewise be the same as those applicable to the other
Term Loans. After the borrowing of the New Term Loans, the New Term Loans shall
be Term Loans for all purposes of the Credit Agreement without any distinction
between them and the original Term Loans (except that the interest payable on
the New Term Loans at the end of the first Interest Periods applicable thereto
shall only reflect accruals from the New Term Loan Borrowing Date), and the New
Term Loan Lenders shall be Term Lenders.

(b) Upon the borrowing of the New Term Loans, the amount in the amortization
schedule in Section 2.10 shall be updated by the Borrower by delivery to the
Administrative Agent of a new schedule on or prior to September 20, 2011, and
such schedule shall specify that each installment due during the period from and
including September 30, 2011 to and including December 31, 2015 shall be equal
(subject to appropriate rounding) to $643,750 plus an amount which is the same
proportion of the aggregate principal amount of the New Term Loans as of
September 30, 2011 (including any such principal attributable to PIK Interest
then due or accrued thereon) as $643,750 is to the aggregate principal amount of
the original Term Loans on September 30, 2011 (including any such principal
attributable to PIK Interest previously added thereto and then due or accrued
thereon) and the amount in such amortization schedule for the last installment
(due on the Term Loan Maturity Date) shall be revised to provide that the
remaining principal amount of the Term Loans shall then be due.

(c) The proceeds of the New Term Loans shall be used only for the payment of
(i) consideration for the Acquisition, (ii) fees and expenses incurred in
connection with the foregoing and with the New Term Loans and (iii) for working
capital purposes of the Borrower and its Subsidiaries.

(d) The Credit Agreement is hereby deemed amended as necessary to reflect the
provisions of this Section 2.

SECTION 3. Conditions to Effectiveness of Amendment. This Amendment shall become
effective (the date of such effectiveness, the “Amendment Effective Date”) when
the Administrative Agent shall have received a counterpart of this Amendment,
executed and delivered by a duly authorized officer of the Borrower, Holdings,
the New Term Loan Lenders and the Administrative Agent.

SECTION 4. Conditions to Borrowing the New Term Loans. The obligations of each
New Term Loan Lender to make a New Term Loan hereunder are subject to the
satisfaction of each of the following conditions:

(a) The Acquisition shall have been consummated or shall be consummated
substantially simultaneously on the New Term Loan Borrowing Date, in each case
in accordance with the terms hereof and the terms of the Acquisition Agreement,
without giving effect to any waivers thereof or amendments thereto by the
Borrower that are materially adverse to the interests of the Lenders in their
capacity as Lenders, without the consent of the Administrative Agent and the
Arranger, such consent not to be unreasonably withheld or delayed.

(b) (i) The representations made by the Seller in the Acquisition Agreement as
are material to the interests of the Lenders, but only to the extent that the
accuracy of any such representation is a condition to Borrower’s obligations to
consummate the Acquisition under the Acquisition Agreement or entitles Borrower
to terminate its obligations under the Acquisition Agreement, or not to close
thereunder, as a result of a breach of such representations in the Acquisition
Agreement shall be true and

 

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correct in all material respects and (ii) the representations and warranties set
forth in Sections 5(a), 5(c)(i) through (iv) and 5(e) hereof and Section 3.01,
3.09 and 3.18 of the Credit Agreement shall be true and correct in all material
respects on and as of the date of the borrowing of the New Term Loans with the
same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct in all
material respects on and as of such earlier date).

(c) There shall have been no New Term Loan Borrowing Date Material Adverse
Change and no event or circumstance shall have occurred which might reasonably
be expected to result in a New Term Loan Borrowing Date Material Adverse Change.

(d) The Administrative Agent and the Arranger shall have received all fees and
other amounts due and payable on or prior to the New Term Loan Borrowing Date,
including, to the extent invoiced, reimbursement or payment of all reasonable
documented out-of-pocket expenses (including reasonable fees, charges and
disbursements of counsel) required to be reimbursed or paid by any Loan Party
hereunder or under any other Loan Document.

(e) The Administrative Agent shall have received a certificate from the chief
financial officer of the Borrower, substantially in the form of Exhibit A,
certifying that as of the New Term Loan Borrowing Date the Borrower and its
Subsidiaries, on a consolidated basis after giving effect to the Acquisition
Transactions, are Solvent.

(f) The Administrative Agent shall have received an executed legal opinion of
Ropes & Gray LLP, counsel to the Borrower substantially in the form of Exhibit B
hereto.

(g) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of each Loan Party, the
authorization of the Acquisition Transactions and any other legal matters
relating to the Loan Parties, the Loan Documents or the Acquisition
Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent.

(h) The Subsidiary Guarantors shall reaffirm, by executing an Acknowledgement
and Consent, substantially in the form of Exhibit C hereto (each, a
“Reaffirmation”), that the New Term Loans shall be secured equally and ratably
with the Term Loans outstanding immediately prior to the New Term Loan Borrowing
Date by the Collateral (including receipt of any Mortgages and supporting
documents for all Mortgaged Properties, it being understood that with respect to
any Mortgaged Properties acquired pursuant to the Acquisition, Mortgages and
supporting documents shall be received within 30 days of the New Term Loan
Borrowing Date).

(i) The Administrative Agent shall have received a certified copy of the
Acquisition Agreement, including all schedules and exhibits thereto, duly
executed by the parties thereto, as certified by an executive officer or a
Financial Officer of the Borrower that such documents are true and complete and
in full force and effect as of the New Term Loan Borrowing Date.

For the avoidance of doubt, the obligations of each New Term Loan Lender to make
a New Term Loan hereunder shall not be subject to the satisfaction of the
requirements of Section 2.20(a)(iii) and (iv) of the Credit Agreement.

 

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The acceptance of the benefits of the making of the New Term Loans shall be
deemed to constitute a representation and warranty by Holdings and the Borrower
on the date thereof that the conditions set forth in clauses (a) and (b)(ii) of
this Section 4, exist as of that time.

SECTION 5. Representations and Warranties. Each of Holdings and the Borrower
represents and warrants to the Lenders that:

(a) The Amendment Transactions entered into and to be entered into by each Loan
Party are within such Loan Party’s corporate, limited partnership or limited
liability company powers, as applicable, and have been duly authorized by all
necessary corporate, limited partnership or limited liability company and, if
required, stockholder action. This Amendment has been duly executed and
delivered by each of Holdings and the Borrower and constitutes, and each
Reaffirmation, when executed and delivered by each Subsidiary Loan Party, will
constitute, a legal, valid and binding obligation of Holdings, the Borrower or
such Subsidiary Loan Party (as the case may be), enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law, and implied covenants of good
faith and fair dealing.

(b) As of the Amendment Effective Date, after giving effect to this Amendment,
no Default or Event of Default has occurred and is continuing and the
representations and warranties made by the Borrower and the other Loan Parties
in or pursuant to the Credit Agreement or any other Loan Document are true and
correct in all material respects (or, in the case of any representation and
warranty qualified by materiality, in all respects) on and as of the Amendment
Effective Date as if made on the Amendment Effective Date (except to the extent
that any such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties were true and correct in
all material respects on and as of such earlier date or, in the case of any
representation and warranty qualified by materiality, in all respects as of such
earlier date).

(c) (i) The Amendment Transactions do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect,
(ii) the Amendment Transactions will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of
Holdings, the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (iii) the Amendment Transactions will not violate or
result in a default under any indenture, agreement or other instrument binding
upon Holdings, the Borrower or any of its Subsidiaries or any of their assets,
or give rise to a right thereunder to require any payment to be made by
Holdings, the Borrower or any of its Subsidiaries, (iv) the Amendment
Transactions will not result in the creation or imposition of any Lien on any
asset of Holdings, the Borrower or any of its Subsidiaries, except Liens
permitted under Section 6.02 of the Credit Agreement; except, in the case of
clauses (i), (ii) and (iii), where the failure to obtain such consent or
approval or make such registration, filing or action or any such violation or
default would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect and (v) the Amendment Transactions will
not result in any limitation on any right, qualification, approval, permit,
authorization, reimbursement approval, reimbursement or franchise, or
authorization granted by a Governmental Authority or third-party payor or other
Person applicable to the business or operations of the Borrower or adversely
affect the ability of the Borrower or any of the Subsidiaries to participate in
any third-party payor arrangement or restrict the ability of the Borrower or any
of its Subsidiaries to operate the Healthcare Facilities, except where such
limitation will not have a Material Adverse Effect.

(d) As of the Amendment Effective Date, there are no actions, suits, proceedings
or investigations by or before any arbitrator or Governmental Authority pending
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knowledge of Holdings or the Borrower, threatened against Holdings, the Borrower
or any of their Subsidiaries or Healthcare Facilities that involve any of the
Amendment Documents or the Acquisition Transactions.

SECTION 6. Effects on Loan Documents. (a) Except as specifically amended herein,
all Loan Documents shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed.

(b) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of any Lender or the
Administrative Agent under any of the Loan Documents, nor constitute a waiver of
any provision of the Loan Documents or in any way limit, impair or otherwise
affect the rights and remedies of the Administrative Agent or the Lenders under
the Loan Documents.

(c) The Borrower and the other parties hereto acknowledge and agree that this
Amendment shall constitute a Loan Document.

SECTION 7. Expenses. The Borrower agrees to pay or reimburse the Administrative
Agent for all its reasonable documented out-of-pocket costs and expenses
incurred in connection with this Amendment, and any other documents prepared in
connection herewith and the transactions contemplated hereby, including, without
limitation, the reasonable documented fees and disbursements of counsel to the
Administrative Agent, in each case to the extent required by Section 9.03 of the
Credit Agreement.

SECTION 8. Non-Reliance on Agents. Each New Term Loan Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to make its New Term
Loans and to enter into this Amendment. Each New Term Loan Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Amendment,
any other Loan Document or related agreement or any document furnished hereunder
or thereunder.

SECTION 9. Joinder. From and after the Amendment Effective Date, each New Term
Loan Lender executing and delivering a signature page to this Amendment shall
become a party to the Credit Agreement as amended hereby and shall have the
rights and obligations of a Lender thereunder and under the other Loan Documents
and shall be bound by the provisions thereof.

SECTION 10. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AMENDMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE
INTERPRETATION OF THE DEFINITION OF “NEW TERM LOAN BORROWING DATE MATERIAL
ADVERSE CHANGE” (AND WHETHER OR NOT A NEW TERM LOAN BORROWING DATE MATERIAL
ADVERSE CHANGE HAS OCCURRED) SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE AS APPLIED TO CONTRACTS SUCH AS THE STOCK PURCHASE
AGREEMENT WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THAT WOULD RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. EACH PARTY HERETO HEREBY AGREES
AS SET FORTH FURTHER IN SECTIONS 9.09 AND 9.10 OF THE CREDIT AGREEMENT AS IF
SUCH SECTION WERE SET FORTH IN FULL HEREIN.

 

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SECTION 11. Amendments; Execution in Counterparts. (a) This Amendment shall not
constitute an amendment of any other provision of the Credit Agreement not
referred to herein and shall not be construed as a waiver or consent to any
further or future action on the part of the Borrower that would require a waiver
or consent of the Lenders or the Administrative Agent. Except as expressly
amended hereby, the provisions of the Credit Agreement are and shall remain in
full force and effect.

(b) This Amendment may not be amended nor may any provision hereof be waived
except pursuant to a writing signed by Holdings, the Borrower, the
Administrative Agent and the New Term Loan Lenders. This Amendment may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, including by means of facsimile, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective proper and duly authorized officers
as of the day and year first above written.

 

LIFECARE HOLDINGS, INC. By:  

/s/ Chris A. Walker

  Name:   Chris A. Walker   Title:   Chief Financial Officer LCI HOLDCO, LLC By:
 

/s/ Chris A. Walker

  Name:   Chris A. Walker   Title:   Chief Financial Officer

 

[Signature Page to LifeCare Incremental Amendment]

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JPMORGAN CHASE BANK, N.A., as Administrative Agent By:  

/s/ Bruce S. Borden

  Name:   Bruce S. Borden   Title:   Executive Director

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EXHIBIT A

FORM OF SOLVENCY CERTIFICATE

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EXHIBIT B

FORM OF LEGAL OPINION OF ROPES & GRAY LLP

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EXHIBIT C

ACKNOWLEDGEMENT AND CONSENT

Each of the parties hereto hereby acknowledges and consents to the Incremental
Amendment, dated as of [                    ], 2011 (the “Amendment”;
capitalized terms used herein, but not defined, shall have the meanings set
forth in the Amendment), to the Credit Agreement, dated as of February 1, 2011,
among LifeCare Holdings, Inc., LCI Holdco, LLC, the several banks and other
financial institutions or entities from time to time party thereto as lenders
and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and
agrees with respect to each Loan Document to which it is a party:

(a) all of its obligations, liabilities and indebtedness under such Loan
Document shall remain in full force and effect on a continuous basis after
giving effect to the Amendment and its guarantee, if any, of the obligations,
liabilities and indebtedness of the other Loan Parties under the Credit
Agreement shall extend to and cover the New Term Loans made pursuant to the
Amendment and interest thereon and fees and expenses and other obligations in
respect thereof and in respect of commitments related thereto; and

(b) all of the Liens and security interests created and arising under such Loan
Document remain in full force and effect on a continuous basis, and the
perfected status and priority of each such Lien and security interest continues
in full force and effect on a continuous basis, unimpaired, uninterrupted and
undischarged, after giving effect to the Amendment, as collateral security for
its obligations, liabilities and indebtedness under the Credit Agreement and
under its guarantees, if any, in the Loan Documents, including, without
limitation, the New Term Loans.

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IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement and
Reaffirmation to be duly executed and delivered by their respective proper and
duly authorized officers as of the day and year first above written.

 

[Signature Page to Acknowledgement]

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ANNEX 1

Commitments

New Term Loan Commitment

 

Name of New Term Loan Lender

   New Term
Loan
Commitment  

JPMorgan Chase Bank, N.A.

   $ 47,200,000