EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 15th day of
August, 2016 (the “Effective Date”), by and between Kindred Healthcare
Operating, Inc., a Delaware corporation (the “Company”), and Jason P. Zachariah
(the "Executive").

 

W I T N E S S E T H:

 

WHEREAS, the Executive is employed by the Company, a wholly-owned subsidiary of
Kindred Healthcare, Inc. (“Parent”), and the parties hereto desire to provide
for the terms of Executive’s employment by the Company; and

 

WHEREAS, the Executive Compensation Committee of the Board of Directors of the
Parent has determined that it is in the best interests of the Company and Parent
to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the respective covenants
and agreements contained herein, and intending to be legally bound hereby, the
Company and Executive agree as follows:

 

1.Employment. The Company hereby agrees to employ Executive and Executive hereby
agrees to be employed by the Company on the terms and conditions herein set
forth. The term of this Agreement (the “Term”) shall initially be for a one-year
period commencing on the Effective Date.  The Term shall be automatically
extended by one additional day for each day beyond the Effective Date that the
Executive remains employed by the Company until such time as the Company elects
to cease such extension by giving written notice of such election to the
Executive, stating the date upon which such election will be effective.  In such
event, this Agreement shall terminate on the first anniversary of such effective
date of such election notice.

 

2.Duties.  Executive is engaged by the Company as President, Kindred
Rehabilitation Services. The Executive, in carrying out his duties under this
Agreement, shall report to the Chief Operating Officer of the Company during the
Term.

 

3.Extent of Services.  Executive, subject to the direction and control of the
Board of Directors (the “Board”), shall have the power and authority
commensurate with his executive status and necessary to perform his duties
hereunder.  During the Term, Executive shall devote his entire working time,
attention, labor, skill and energies to the business of the Company, and shall
not, without the consent of the Company, be actively engaged in any other
business activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage.

 

 

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4.Compensation. As compensation for services hereunder rendered, Executive shall
receive during the Term:

 

(a)A base salary (“Base Salary”) of $380,000 per year payable in equal
installments in accordance with the Company’s normal payroll procedures.
Executive may receive increases in his Base Salary from time to time, as
approved by the Board.

 

(b)In addition to Base Salary, Executive will be eligible to receive bonuses and
other incentive compensation as the Board may approve from time to time,
including participation in the Company’s annual short-term incentive
compensation plan and its long-term incentive compensation plan, in accordance
with the terms and conditions of such plans as may be in effect from time to
time.

  

5.Benefits.  

 

(a)Executive shall be entitled to participate in any and all pension benefit,
welfare benefit (including, without limitation, medical, dental, disability and
group life insurance coverages) and fringe benefit plans from time to time in
effect for officers of the Company and its affiliates.

 

(b)Executive shall be entitled to participate in such bonus, stock option, or
other incentive compensation plans of the Company and its affiliates that are in
effect from time to time for officers of the Company.  On the Effective Date,
the Executive will be granted 20,000 shares of restricted stock that will vest
in equal installments over three years and will be subject to the terms and
conditions of the Kindred Healthcare, Inc. 2011 Stock Incentive Plan and the
applicable award agreement related thereto.

 

(c)Executive shall be entitled to paid time off each year, subject to the
Company’s policies, as in effect from time to time for the Company’s executive
officers.  The Executive shall schedule the timing of such paid time off in a
reasonable manner.  The Executive may also be entitled to such other leave, with
or without compensation, as shall be mutually agreed by the Company and
Executive.

 

(d)Executive may incur reasonable expenses for promoting the Company’s business,
including expenses for entertainment, travel and similar items.  The Company
shall reimburse Executive for all such reasonable expenses in accordance with
the Company’s reimbursement policies and procedures, as may be in effect from
time to time.

 

(e)While this Agreement is in effect, the Company shall provide the Executive
with (i) director’s and officer’s liability insurance coverage; (ii) life
insurance for which the Executive may designate the beneficiary or
beneficiaries; and (iii) long-term disability insurance; in each such case,
consistent with the benefits provided from time to time to the Company’s other
executive officers.

 

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6.Termination of Employment.

 

(a)Death or Disability.  Executive’s employment shall terminate automatically
upon Executive’s death during the Term.  If the Company determines in good faith
that the Disability of Executive has occurred during the Term (pursuant to the
definition of Disability set forth below) it may give to Executive a written
Notice of Termination in accordance with Section 6(d) below.  In such event,
Executive’s employment with the Company shall terminate effective on the 30th
day after receipt of such Notice of Termination by Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of Executive’s
duties. For purposes of this Agreement, "Disability" shall mean Executive’s
absence from his full-time duties hereunder for a period of 90 days due to
disability as defined in the long-term disability plan provided to Executive by
the Company.

 

(b)Cause.  The Company may terminate Executive’s employment during the Term for
Cause.  For purposes of this Agreement, "Cause" shall mean the Executive’s
(i) conviction of or plea of nolo contendere to a crime involving moral
turpitude; or (ii) conduct that constitutes a willful and material breach by
Executive of his duties and responsibilities, which is committed in bad faith or
without reasonable belief that such breaching conduct is in the best interests
of the Company and its affiliates, but with respect to (ii) only if (a) the
Company has given Executive a Notice of Termination in accordance with Section
6(d) below, (b) Executive has been given a reasonable opportunity of not less
than 30 days after Executive’s receipt of the Notice of Termination to remedy or
correct the purported breaching conduct, and (c) within not less than 45 days
after Executive’s receipt of the Notice of Termination the Board has adopted a
resolution by a vote of at least 75% of its members, after giving the Executive
and his attorney an opportunity to be heard at a meeting of the Board, finding
that such conduct constituted such a willful and material breach, was committed
in bad faith or without reasonable belief that it was in the best interests of
the Company and its affiliates, and has not been remedied or corrected by
Executive.  For purposes of the adoption by the Board of any such resolution in
respect of the Executive’s termination for Cause, any act, or failure to act, of
Executive, based upon authority given to Executive pursuant to a resolution duly
adopted by the Board or based upon advice of counsel for the Company to
Executive shall be conclusively presumed by the Board to have been done, or
omitted to be done, by Executive in good faith and with reasonable belief that
such conduct was in the best interests of the Company.

 

(c)Good Reason. Executive’s employment may be terminated during the Term by
Executive for Good Reason.  "Good Reason" shall exist upon the occurrence,
without Executive’s express written consent, of any of the following events:

 

(i)a material adverse change in Executive’s authority, duties or
responsibilities (including, without limitation the Company assigning to
Executive duties of a substantially nonexecutive or nonmanagerial nature) (other
than any such change directly attributable to the fact that the Company is no
longer publicly owned);

 

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(ii)the Company shall materially reduce the Base Salary or annual bonus
opportunity of Executive;

 

(iii)the Company shall require Executive to relocate Executive’s principal
business office more than 30 miles from its location on the Effective Date,
which shall be 680 South Fourth Street, Louisville, KY; or

 

(iv)a material breach by the Company of any of Section 5(a), 5(b), 5(e) or 9(c)
of this Agreement.

 

For purposes of this Agreement, "Good Reason" shall not exist until after
Executive has given the Company a Notice of Termination in accordance with
Section 6(d) below, and the specified event is not remedied within 30 days after
the Company’s receipt of such Notice of Termination; from Executive specifically
delineating such claimed event and setting forth Executive's intention to
terminate employment if not remedied; provided, that if the specified event
cannot reasonably be remedied within such 30-day period and the Company
commences reasonable steps within such 30-day period to remedy such event and
diligently continues such steps thereafter until a remedy is effected, such
event shall not constitute "Good Reason" provided that such event is remedied
within 60 days after the Company’s receipt of such Notice of Termination.

 

(d)Notice of Termination.  Any termination by the Company for Cause, or by
Executive for Good Reason, shall be communicated by Notice of Termination given
in accordance with this Agreement.  For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated and (iii) specifies the
intended termination date (which date, in the case of a termination for Good
Reason, shall be not more than 30 days after the giving of such notice, and in
the case of a termination for Cause, shall not be more than 45 days after the
giving of such notice).  The failure by Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or the
Company, respectively, hereunder or preclude Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing Executive’s
or the Company’s rights hereunder.

 

(e)Date of Termination.  "Date of Termination" means (i) if Executive’s
employment is terminated by the Company for Cause, or by Executive for Good
Reason, the later of the date specified in the Notice of Termination or the date
that is one day after the last day of any applicable cure period, (ii) if
Executive’s employment is terminated by the Company other than for Cause or
Disability, or Executive resigns without Good Reason, the Date of Termination
shall be the date on which the Company or Executive notified Executive or the
Company, respectively, of such termination and (iii) if Executive’s employment
is terminated by reason of death or Disability, the Date of Termination shall be
the date of death of Executive or the Disability Effective Date, as the case may
be.

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7.Obligations of the Company Upon Termination.  Following any termination of
Executive’s employment hereunder, the Company shall pay Executive his Base
Salary through the Date of Termination and any amounts owed to Executive
pursuant to the terms and conditions of the benefit plans and programs of the
Company at the time such payments are due.  In addition, subject to Sections
7(e) and 12 hereof and the conditions set forth below, Executive shall be
entitled to the following additional payments:

 

(a)Death or Disability.  If, during the Term, Executive’s employment shall
terminate by reason of Executive’s death or Disability, the Company shall pay to
Executive (or his designated beneficiary or estate, as the case may be) the
prorated portion of any Target Bonus (as defined below) Executive would have
received for the year of termination of employment.  Such amount shall be paid
on the date when such amounts would otherwise have been payable to the Executive
if Executive’s employment with the Company had not terminated as determined in
accordance with the terms and conditions of the applicable short-term incentive
plan of the Company.

 

For purposes of this Agreement: “Target Bonus” shall mean the full amount of the
targeted annual short-term incentive bonus that would be payable to the
Executive, assuming the targeted performance criteria on which such annual
short-term incentive bonus is based were deemed to be satisfied, in respect of
services for the calendar year in which the date in question occurs.

 

(b)Good Reason; Other than for Cause.  If, during the Term, the Company shall
terminate Executive’s employment other than for Cause (but not for Disability),
or the Executive shall terminate his employment for Good Reason:

 

(1)in satisfaction of the annual bonus Executive would otherwise be eligible to
receive under the short-term incentive plan in respect of the calendar year in
which the Date of Termination occurs, the Company shall pay to Executive an
amount equal to the product of (i) the annual bonus, if any, to which the
Executive would have been entitled for the year in which the Date of Termination
occurs had Executive’s employment with the Company not been terminated, as
determined in accordance with the terms and conditions of the applicable
short-term incentive plan of the Company as provided in Section 4(b) hereof, and
(ii) a fraction, the numerator of which is the number of days in the period
beginning on the first day of the calendar year in which the Date of Termination
occurs and ending on the Date of Termination and the denominator of which is
365.  Such amount shall be paid on the date when such amounts would otherwise
have been payable to the Executive if Executive’s employment with the Company
had not terminated as determined in accordance with the terms and conditions of
the applicable short-term incentive plan of the Company.

 

(2)Within 14 days following Executive’s Date of Termination, the Company shall
pay to Executive a cash severance payment in an amount equal to 1.5 times the
sum of the Executive’s Base Salary and Target Bonus as of the Date of
Termination.

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(3)For a period of 18 months following the Date of Termination (the “Benefit
Continuation Period”), the Executive shall be treated as if he had continued to
be an Executive for all purposes under the Company’s health insurance plan and
dental insurance plan; or if the Executive is prohibited from participating in
such plans, the Company shall otherwise provide such benefits.  Executive shall
be responsible for any employee contributions for such insurance
coverage.  Following the Benefit Continuation Period, the Executive shall be
entitled to receive continuation coverage under Part 6 of Title I or ERISA
(“COBRA Benefits”) by treating the end of this period as the applicable
qualifying event (i.e., as a termination of employment) for purposes of ERISA
Section 603(2)) and with the concurrent loss of coverage occurring on the same
date, to the extent allowed by applicable law.

 

(4)For the Benefit Continuation Period, Company shall maintain in force, at its
expense, the Executive’s life insurance in effect under the Company’s voluntary
life insurance benefit plan as of the Date of Termination. Executive shall be
responsible for any employee contributions for such insurance coverage.  For
purposes of clarification, the portion of the premiums in respect of such
voluntary life insurance for which Executive and Company are responsible,
respectively, shall be the same as the portion for which Company and Executive
are responsible, respectively, immediately prior to the Date of Termination.

 

(5)For the Benefit Continuation Period, the Company shall provide short-term and
long-term disability insurance benefits to Executive equivalent to the coverage
that the Executive would have had if he had remained employed under the
disability insurance plans applicable to Executive on the Date of
Termination.  Executive shall be responsible for any employee contributions for
such insurance coverage. Should Executive become disabled during such period,
Executive shall be entitled to receive such benefits, and for such duration, as
the applicable plan provides.  For purposes of clarification, the portion of the
premiums in respect of such short-term and long-term disability benefits for
which Executive and Company are responsible, respectively, shall be the same as
the portion for which Executive and Company are responsible, respectively,
immediately prior to the Date of Termination.

 

(6)Within fifteen (15) days after the Date of Termination, the Company shall pay
to Executive a cash payment in an amount, if any, necessary to compensate
Executive for the Executive's unvested interests under the Company's retirement
savings plan which are forfeited by Executive in connection with the termination
of Executive's employment.

 

(7)Company may adopt such amendments to its executive benefit plans, if any, as
are necessary to effectuate the provisions of this Agreement.

 

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(8)Any outstanding unvested stock options, stock performance units or similar
equity awards (other than restricted stock awards) held by Executive on the Date
of Termination shall continue to vest in accordance with their original terms
(including any related performance measures) for the duration of the Benefit
Continuation Period as if Executive had remained an employee of the Company
through the end of such period and any such stock option, stock performance unit
or other equity award (other than restricted stock awards) that has not vested
as of the conclusion of such period shall be immediately cancelled and forfeited
as of such date.  In addition, Executive shall have the right to continue to
exercise any outstanding vested stock options held by Executive during the
Benefit Continuation Period; provided that in no event shall Executive be
entitled to exercise any such option beyond the original expiration date of such
option.  Any outstanding restricted stock award held by Executive as of the Date
of Termination that would have vested during the Benefit Continuation Period had
Executive remained an employee of the Company through the end of such period
shall be immediately vested as of the Date of Termination and any restricted
stock award that would not have vested as of the conclusion of such period shall
be immediately cancelled and forfeited as of such date.

 

(9)Following the Executive’s Date of Termination, the Executive shall receive
the computer which Executive is utilizing as of the Date of Termination.

 

(10)Notwithstanding anything in this Agreement to the contrary, in no event
shall the provision of in-kind benefits pursuant to this Section 7 during any
taxable year of Executive affect the provision of in-kind benefits pursuant to
this Section 7 in any other taxable year of Executive.

 

(c)Cause; Other than for Good Reason.  If Executive’s employment shall be
terminated for Cause or Executive terminates employment without Good Reason (and
other than due to such Executive’s death) during the Term, this Agreement shall
terminate without further additional obligations to Executive under this
Agreement.

 

(d)Death after Termination.  In the event of the death of Executive during the
period Executive is entitled to receive payments pursuant to this Agreement,
Executive’s designated beneficiary shall be entitled to receive the balance of
the payments; or in the event of no designated beneficiary, the remaining
payments shall be made to Executive’s estate.

 

(e)General Release of Claims.  Notwithstanding anything herein to the contrary,
the amounts payable pursuant to this Section 7 are subject to the condition that
Executive has delivered to the Company an executed copy of an irrevocable
general release of claims in a form reasonably satisfactory to the Company
within the 60 day period immediately following the Executive’s separation from
service (the “Release Period”).  Any payment that otherwise would be made prior
to Executive’s delivery of such executed release pursuant to this Section 7
shall be paid on the first business day following the conclusion of the Release
Period; provided that in-kind benefits provided

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pursuant to subsections (b)(3), (4) and (5) of this Section 7 shall continue in
effect after separation from service pending the execution and delivery of such
release for a period not to exceed 60 days; provided further that if such
release is not executed and delivered within such 60-day period, Executive shall
reimburse the Company for the full cost of coverage during such period.

 

(f)Six Month Delay for Specified Employees.  Notwithstanding anything herein to
the contrary, if at the time of Executive’s separation from service Executive is
a “specified employee” as defined in Section 409A of the Internal Revenue Code
of 1986, as amended and the regulations promulgated thereunder (the “Code”) and
the deferral of the payment payable pursuant to Section 7(b)(2) is necessary in
order to prevent any accelerated or additional tax under Section 409A of the
Code, then the payment to which Executive would otherwise be entitled during the
first six months following his separation from service shall be deferred and
accumulated (without any reduction in such payment ultimately paid to Executive)
for a period of six months from the date of separation from service and paid in
a lump sum on the first day of the seventh month following such separation from
service (or, if earlier, the date of Executive’s death), together with interest
during such period at a rate computed by adding 2.00% to the Prime Rate as
published in the Money Rates section of the Wall Street Journal, or other
equivalent publication if the Wall Street Journal no longer publishes such
information, on the first publication date of the Wall Street Journal or
equivalent publication after the date of Executive’s separation from service
(provided that if more than one such Prime Rate is published on any given day,
the highest of such published rates shall be used).

 

8.Disputes.  Any dispute or controversy arising under, out of, or in connection
with this Agreement shall, at the election and upon written demand of either
party, be finally determined and settled by binding arbitration in the City of
Louisville, Kentucky, in accordance with the Labor Arbitration rules and
procedures of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction thereof.  The Company shall pay
all costs of the arbitration and all reasonable attorneys’ and accountants’ fees
of the Executive in connection therewith, including any litigation to enforce
any arbitration award.

 

9.Successors.

 

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

 

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

 

(c)The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, or any business of the Company for which
Executive’s services are principally performed, to assume expressly and agree to
perform this

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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 this
Section 9(c), "Company" shall mean the Company as hereinbefore defined, Parent,
and any successor to its or their business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

10.Other Severance Benefits.  Executive hereby agrees that in consideration for
the payments to be received under Section 7(b) of this Agreement, Executive
waives any and all rights to any payments or benefits under any severance plans
or arrangements of the Company or their respective affiliates that specifically
provide for severance payments, other than the Change in Control Severance
Agreement between the Company and Executive (the “Change in Control Severance
Agreement”); provided that any payments payable to Executive under Section 7(b)
hereof shall be offset by any payments received by Executive from the Company or
any successor to the Company under the Change in Control Severance Agreement.

 

11.Withholding.  All payments to be made to Executive hereunder will be subject
to all applicable required withholding of taxes.

 

12.Non-Competition.  The provisions of this Section 12 and any related
provisions shall survive termination of this Agreement and/or Executive’s
employment with the Company and do not supersede, but are in addition to and not
in lieu of, any other agreements signed by Executive concerning non-competition,
confidentiality, solicitation of employees, or trade secrets, and are included
in consideration for the Company entering into this Agreement.  Executive’s
right to receive and retain the benefits specified in this Agreement is
conditioned upon Executive’s compliance with the terms of this Section 12:

 

(a)Non-Compete.  

 

(i)During Executive’s employment with the Company and during the period
beginning on the Date of Termination and ending one (1) year thereafter (the
“Non-Compete Period”), Executive shall not, without prior written approval of
the Board, become an officer, employee, agent, partner, or director of, or
provide any services or advice to or for or on behalf of, any business
enterprise in substantial direct competition (as defined in Section 12(a)(ii))
with the Company.  The above constraint shall not prevent Executive from making
passive investments, not to exceed five percent (5%) of the total equity value,
in any enterprise where Executive’s services or advice is not required or
provided.

 

(ii)For purposes of this Section 12(a), a business enterprise with which
Executive becomes an officer, employee, agent, partner, or director of, or
provide any services or advice to or for or on behalf of, shall be considered in
substantial direct competition with the Company if such entity owns, operates or
manages long-term acute care hospitals, nursing facilities, inpatient
rehabilitation hospitals, or provides contract rehabilitation therapy services,
home health services or hospice services within any state or country where the
Company or any of its direct or indirect subsidiaries or affiliates has any such
hospital or facility or provides any such services as of the Date of
Termination.

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(iii)During Executive’s employment with the Company and during the Non‑Compete
Period, Executive shall not, without prior written approval of the Board,
directly or indirectly, solicit, provide to, take away, or attempt to take away
or provide to any customer or solicited prospect of the Company or any of its
direct or indirect subsidiaries any business of a type which the Company or such
subsidiary provides or markets or which is in substantial direct competition
with any business then engaged in (or product or services marketed or planned to
be marketed) by the Company or any of its direct or indirect subsidiaries; or
induce or attempt to induce any such customer to reduce such customer’s business
with that business entity, or divert any such customer’s business from the
Company and its direct or indirect subsidiaries; or discuss that subject with
any such customer.

(b)Non-Solicit.  During Executive’s employment with the Company and during the
Non-Compete Period, Executive shall not directly or indirectly, individually or
on behalf of any person other than the Company, aid or endeavor to solicit or
induce any of the Company’s or its affiliates’ employees to leave their
employment with the Company or such affiliates in order to accept employment
with Executive or any other person, corporation, limited liability company,
partnership, sole proprietorship or other entity; provided, however, that the
foregoing shall not restrict Executive or any other person from conducting
general solicitations or advertisements not directed specifically at employees
of the Company or its affiliates, or from employing any employee who responds to
any such general solicitation or advertisement or who otherwise initiates a
request for employment.

 

13.Confidential Information.  At no time shall Executive divulge, furnish or
make accessible to anyone any confidential or proprietary knowledge or
information about the Parent, the Company or any of their affiliates, including
without limitation any confidential or proprietary information concerning the
operations, plans or methods of the Company (except as required by law or order
of court or other governmental agency) or any of the employees, clients,
patients, customers or suppliers of the Parent or Company or any of their
affiliates. For purposes of this Section 13, “confidential or proprietary
information” shall mean any information, whether in writing or disclosed orally
to Executive, which is not generally available to the public.

 

14.Provisions Relating To Non-Competition, Non-Solicitation and
Confidentiality.  The provisions of Sections 12 and 13 shall survive the
termination of Executive’s employment and this Agreement and shall not be
affected by any subsequent changes in employment terms, positions, duties,
responsibilities, authority, or employment termination, permitted or
contemplated by this Agreement.  To the extent that any restrictive covenant set
forth in Sections 12 and 13 of this Agreement shall be determined to be invalid
or unenforceable, such restrictive covenant shall be modified so that the scope
of the restrictive covenant is reduced only to the minimum extent necessary to
render the modified covenant valid, legal and enforceable and as will grant the
Company the maximum protection and restrictions on Executive’s activities
permitted by applicable law in such circumstances.  The Company shall have the
right to advise any prospective or then current employer of Executive of the
provisions of Sections 12 and 13 of this Agreement without liability.  The
Company’s right to enforce the provisions of Sections 12

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and 13 of this Agreement shall not be affected by the existence, or
non-existence, of any other similar agreement for any other executive, or by the
Company’s failure to exercise any of its rights under Sections 12 and 13 of this
Agreement or any other similar agreement or to have in effect a similar
agreement for any other employee.  Given the potential irreparable harm to the
Parent, Company or their affiliates, Executive expressly acknowledges and agrees
that Parent and Company shall have the right to seek injunctive relief, a
restraining order or such other equitable relief, including, but not limited to,
specific performance (without the requirement to post bond) to restrain any
breach or threatened breach of any provisions in Sections 12 and 13 in addition
to pursuing all appropriate legal relief, including but not limited to
attorneys’ fees, costs, damages and recoupment of amounts paid hereunder for any
and all violations of such provisions.  If the Company shall institute any
action or proceeding to enforce the provisions in Sections 12 and 13, Executive
hereby waives the claim or defense that the Company has an adequate remedy at
law and agrees not to assert in any such action or proceeding the claim or
defense that the Company has an adequate remedy at law.  The parties hereby
agree that the Non-Compete Period shall be extended by any period during which
Executive is found to be in violation of, or to have violated, any provisions in
Sections 12 and 13.

 

15.No Mitigation.  Executive shall have no duty to mitigate his damages by
seeking other employment and, should Executive actually receive compensation
from any such other employment, the payments required hereunder (including,
without limitation, the provision of in-kind benefits provided under Section
7(b) hereof) shall not be reduced or offset by any such compensation.  Further,
the Company’s and Parent’s obligations to make any payments hereunder shall not
be subject to or affected by any setoff, counterclaims or defenses which the
Company or Parent may have against Executive or others.

 

16.Notices.  Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or sent by telephone facsimile transmission, personal or overnight couriers, or
registered mail with confirmation or receipt, addressed as follows:

 

If to Executive:

Jason P. Zachariah

680 South Fourth Street

Louisville, KY 40202

 

If to Company:

Kindred Healthcare Operating, Inc.

680 South Fourth Street

Louisville, KY  40202

Attn:  General Counsel

 

17.Waiver of Breach and Severability.  The waiver by either party of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by either party.  In the event
any provision of this Agreement is found to be invalid or unenforceable, it may
be severed from the Agreement and the remaining provisions of the Agreement
shall continue to be binding and effective.

 

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18.Entire Agreement; Amendment.  This instrument contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations and warranties between them, whether written or oral with
respect to the subject matter hereof.  No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by Executive and such officer of the Company
specifically designated by the Board.

 

19.Governing Law.  This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware.

 

20.Headings.  The headings in this Agreement are for convenience only and shall
not be used to interpret or construe its provisions.

 

21.Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

 

22.Section 409A.  If any provision of this Agreement (or any award of
compensation or benefits provided under this Agreement) would cause Executive to
incur any additional tax or interest under Section 409A of the Code, the Company
shall reform such provision to comply with 409A and agrees to maintain, to the
maximum extent practicable without violating 409A of the Code, the original
intent and economic benefit to Executive of the applicable provision; provided
that nothing herein shall require the Company to provide Executive with any
gross-up for any tax, interest or penalty incurred by Executive under Section
409A of the Code.  

  

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

KINDRED HEALTHCARE OPERATING, INC.

 

 

By:

/s/ Benjamin A. Breier

 

Benjamin A. Breier

 

President and Chief Executive Officer

 

Solely for the purpose of Section 7:

 

KINDRED HEALTHCARE, INC.

 

By:

/s/ Benjamin A. Breier

 

Benjamin A. Breier

 

President and Chief Executive Officer

 

/s/ Jason P. Zachariah

JASON P. ZACHARIAH

 

 

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