EXHIBIT 10.34

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is made as of the 19th day of December, 2011 (the
“Effective Date”), by and between Kindred Healthcare Operating, Inc., a Delaware
corporation (or as appropriate, one of its wholly-owned subsidiaries) (the
“Company”), and Patricia Henry (the “Executive”).

W I T N E S S E T H:

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

WHEREAS, the Company has determined that it is in the best interests of the
Company 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 initial term of this Agreement shall 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. In
such event, the Agreement shall terminate on the first anniversary of the
effective date of such election notice (the initial term together with all such
extensions, the “Term”).

2. Duties. Executive is employed by the Company as President, RehabCare,
reporting directly to Benjamin A. Breier, Chief Operating Officer.

3. Extent of Services. Executive, subject to the direction and control of the
Board of Directors of Kindred Healthcare, Inc. (the “Board”), shall have the
power and authority commensurate with her status and necessary to perform her
duties hereunder. During the Term, Executive shall devote her 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. Notwithstanding the foregoing, Executive
shall be entitled to serve on the board of directors, managers or comparable
governing authority of up to two entities that are unaffiliated with the Company
subject to the approval of the Board of Directors of Kindred Healthcare, Inc.

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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 $415,000 per year payable in equal
installments in accordance with the Company’s normal payroll procedures.
Executive may receive increases in her Base Salary from time to time, as
approved by the Board.

(b) In addition to Base Salary, Executive shall be entitled 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 long-term incentive compensation plan, in accordance with
the terms and conditions of such plans as may be in effect from time to time,
subject to the following:

(1) beginning in 2012, the Executive’s target bonus under the short-term
incentive plan shall be up to 60% of Base Salary (the “Target Short-Term Bonus”)
with a maximum potential short-term incentive bonus of 81% of Base Salary; and

(2) beginning in 2012, the Executive’s target bonus under the long-term
incentive plan shall be up to 45% of Base Salary with a maximum potential
long-term incentive bonus of 90% of Base Salary.

For 2011, any awards under the short-term incentive plan and long-term incentive
plan shall be prorated based on Executive’s June 1, 2011 start date with the
Company and remain consistent with Executive’s prior employment agreement with
the Company dated June 1, 2011.

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 in effect from time to
time for officers of the Company and its affiliates, and shall be eligible for
discretionary contributions made by the Company to the Company’s 401(k) plan
based on the profitability of the Company in any given year.

(b) Executive shall be entitled to participate in such bonus, stock option, or
other incentive compensation plans of the Company and its affiliates in effect
from time to time for officers of the Company.

(c) In addition to Company holidays, Executive shall be entitled to paid time
off of 26 calendar days each year subject to the Company’s policies in effect
from time to time. The Executive shall schedule the timing of such paid time off
in a reasonable manner. The Executive also may be entitled to such other leave,
with or without compensation, as shall be mutually agreed by the Company and
Executive.

 

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(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) Executive shall receive a one-time transition performance bonus (“Transition
Performance Bonus”) in the amount of $391,000 to be paid on March 31, 2012,
subject to her continued employment with the Company through such date, provided
that in the event Executive terminates her employment for Good Reason or is
terminated without Cause prior to such date, then Executive shall be entitled to
receive the entire Transition Performance Bonus in lump sum within thirty
(30) days of the date of such resignation or termination. The Transition
Performance Bonus shall be in addition to any short-term incentive plan cash out
payment to which Executive is entitled from RehabCare Group, Inc. or any of its
affiliates in connection with the transactions contemplated by the Agreement and
Plan of Merger dated as of February 7, 2011 among Kindred Healthcare, Inc.,
Kindred Healthcare Development, Inc. and RehabCare Group, Inc. (the “RehabCare
STIP Cash-Out”).

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 written
notice of its intention to terminate Executive’s employment. In such event,
Executive’s employment with the Company shall terminate effective on the
thirtieth day after receipt of such notice by Executive (the “Disability
Effective Date”), provided that, within the thirty (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 Executive full-time duties hereunder for a period of ninety
(90) consecutive 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) willful and material breach by Executive of her 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 the Board adopts a resolution by a
vote of at least 75% of its members so finding after giving the Executive and
her attorney an opportunity to be heard by the Board and a reasonable
opportunity of not less than thirty (30) days to remedy or correct the purported
breaching conduct. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.

 

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(c) Good Reason. Executive’s employment may be terminated during the Term by
Executive with or without 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);

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

(iii) the Company requires Executive to relocate Executive’s principal business
office more than thirty (30) miles from 2555 N. Pearl Street, #502, Dallas, TX
75201; or

(iv) a material breach by the Company of this Agreement.

For purposes of this Agreement, “Good Reason” shall not exist until after
Executive has given the Company notice of the applicable event within ninety
(90) days of the initial occurrence of such event and which is not remedied
within thirty (30) days after receipt of written notice 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 thirty (30) day period
and the Company commences reasonable steps within such thirty (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 sixty (60) days after receipt of such written notice.

(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 thirty 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.

 

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(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.

7. Obligations of the Company Upon Termination. Following any termination of
Executive’s employment hereunder, the Company shall pay Executive her Base
Salary through the Date of Termination and any amounts owed to Executive
pursuant to the terms and conditions of the expense reimbursement policies and
benefit plans and programs of the Company at the time such payments are due. In
addition, subject to Section 7(e) 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 terminates
by reason of Executive’s death or Disability, the Company shall pay to Executive
(or her 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 within thirty
(30) days of 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
Target Short-Term Bonus that would be payable to the Executive, assuming the
targeted performance criteria on which such Target Short-Term 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
terminates Executive’s employment other than for Cause (but not for Disability),
or the Executive terminates her 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,
multiplied by (ii) a fraction, the numerator of which is the number of days

 

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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 fourteen (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.

(3) For a period of eighteen (18) months following the Date of Termination (the
“Benefit Continuation Period”), the Executive shall be treated as if she had
continued to be an Executive for all purposes under the Company’s health and
dental benefits plans with respect to Executive and Executive’s covered
dependents; or if the Executive is prohibited from participating in such plans,
the Company or Parent shall otherwise provide such benefits; or if such benefits
cannot be provided by the plans or the Company with the same overall income tax
treatment to Executive as in effect before the Date of Termination, the Company
shall permit Executive to continue coverage under the plans for Executive and
Executive’s covered dependents on an after-tax basis and the Company shall pay
Executive a monthly amount for the remainder of the one year period equal to the
total monthly premium cost for such coverage (employer contribution portion only
at COBRA rates) that would otherwise apply to the coverage for Executive and
Executive’s covered dependents. Executive shall be responsible for any employee
contributions for such insurance. Following the Benefit Continuation Period, the
Executive shall be entitled to receive continuation coverage under Part 6 of
Title I of 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, the 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 or Parent shall provide
short-term and long-term disability insurance benefits to Executive equivalent
to the coverage that the Executive would have had if she had remained employed
under the disability insurance plans applicable to Executive on the Date

 

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of Termination. Executive shall be responsible for any employee contributions
for such insurance coverage. Should Executive become disabled during the Benefit
Continuation 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 benefit plans, if any, as are
necessary to effectuate the provisions of this Agreement.

(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 the Date of Termination.

(9) 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 is 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.

 

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(d) Death after Termination. In the event of the death of Executive during the
period Executive is receiving 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 satisfactory to the Company within the 60
(sixty) 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 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 any payment under Section 7(b) is necessary in order to prevent
any accelerated or additional tax under Section 409A of the Code with respect to
such payment, then the amount to which Executive would otherwise be entitled
during the first six months following Executive’s separation from service in
respect of such payment shall be deferred and accumulated (without any reduction
in such payment ultimately paid to Executive) for a period of six (6) 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.

 

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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
and its 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 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 Agreement, “Company” shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

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 payable under the Change in Control
Severance Agreement and any severance payments pursuant to applicable law.

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

12. No Mitigation. Executive shall have no duty to mitigate her 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.

13. Non-Competition. The provisions of this Section 13 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.

 

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Executive’s right to receive and retain the benefits specified in this Agreement
are conditioned upon Executive’s compliance with the terms of this Section 13:

(a) Non-Compete Agreement.

(1) During the Executive’s employment with the Company and during the period
beginning on the Date of Termination and ending one (1) year thereafter (i.e.,
on the anniversary of the date the Executive’s employment terminates) (the
“Post-Termination Period”), the Executive shall not, without prior written
approval of the Company’s Chief Executive Officer, become an officer, employee,
agent, partner, or director of, or provide any services or advice to or for, any
business enterprise in substantial direct competition (as defined in
Section 13(a)(2)) with the Company. The above constraint shall not prevent the
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.

(2) For purposes of this Section 13(a), a business enterprise with which the
Executive becomes associated as an officer, employee, agent, partner, or
director shall be considered in substantial direct competition with the Company
if such entity competes with the Company or any of its direct or indirect
subsidiaries in the Rehabilitation Business (as defined below) or provides
services or products of a type which is marketed, sold or provided by the
Company or any of its direct or indirect subsidiaries or affiliates related to
the Rehabilitation Business (including but not limited to any product or service
which the Company or any such other entity is developing) within the state or
country where the Company or any such direct or indirect subsidiary or affiliate
then provides or markets or plans to provide or market any such service or
product as of the Date of Termination. For purposes of this Agreement,
“Rehabilitation Business” shall mean the provision of rehabilitation services,
including physical and occupational therapies and speech pathology services, to
residents and patients of nursing centers, assisted living facilities and
hospice providers. Notwithstanding the above, Executive shall not be restricted
from providing direct patient care as a speech pathologist as long as Executive
does not serve in any executive or managerial role.

(3) During the Executive’s employment with the Company and during the
Post-Termination Period, the Executive shall not, without prior written approval
of the Company’s Chief Executive Officer, 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 competitive 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.

 

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(4) During the Executive’s employment with the Company and during the
Post-Termination Period, the Executive shall not, without prior written approval
of the Company’s Chief Executive Officer, directly or indirectly solicit the
employment of, recruit, employ, hire, cause to be employed or hired, entice
away, or establish a business with, any then current officer, office manager,
staffing coordinator or other employee or agent of the Company or any of its
direct or indirect subsidiaries or affiliates (other than non-supervisory or
non-managerial personnel who are employed in a clerical or maintenance position)
or any other such person who was employed by the Company or any of its direct or
indirect subsidiaries or affiliates within the twelve (12) months immediately
prior to the Date of Termination; or suggest to or discuss with any such
employee the discontinuation of that person’s status or employment with the
Company or any of its direct or indirect subsidiaries and affiliates, or such
person’s employment or participation in any activity in competition with the
Company or any of its direct or indirect subsidiaries or affiliates.

(b) Confidential Information. The Executive has received (and will receive)
under a relationship of trust and confidence, and shall hold in a fiduciary
capacity for the benefit of the Company, all “Confidential Information” and
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies or direct or indirect subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Executive’s employment
with the Company and after termination of the Executive’s employment with the
Company, the Executive shall never, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, use (other
than during Executive’s employment with the Company for the benefit of the
Company), or communicate, reveal, or divulge any such information knowledge or
data, to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 13(b) constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement. “Confidential Information” means confidential
and/or proprietary information and trade secrets of or relating to the Company
or any of its direct or indirect subsidiaries and affiliates (and includes
information the disclosure of which might be injurious to those companies),
including but not limited to information concerning personnel of the Company or
any of its direct or indirect subsidiaries and affiliates, confidential
financial information, customer or customer prospect information, information
concerning temporary staffing candidates, temporary employees, and personnel,
temporary employee and customer lists and data, methods and formulas for
estimating costs and setting prices, research results (such as marketing
surveys, or trials), software, programming, and programming architecture,
enhancements and developments, cost data (such as billing, equipment and
programming costs projection models), compensation information and models,
business

 

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or marketing plans or strategies, new products or marketing strategies, deal or
business terms, budgets, vendor names, programming operations, information on
proposed acquisitions or dispositions, actual performance compared to budgeted
performance, long-range plans, results or internal analyses, computer programs
and programming information, techniques and designs, business and marketing
plans, acquisition plans and strategies, divestiture plans and strategies,
internal valuations of Company assets, and trade secrets, but does not include
information generally known in the marketplace. In addition, Confidential
Information includes information of another company given to the Company with
the understanding that it will be kept confidential. All Confidential
Information described herein is and constitutes trade secret information
(regardless of whether the same is legally determined to be a trade secret) and
is not the property of the Executive.

(c) Provisions Relating To Non-Competition, Non-Solicitation and
Confidentiality. The provisions of this Section 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 covenant set forth in this Section 13 of this
Agreement shall be determined to be invalid or unenforceable in any respect or
to any extent, the covenant shall not be void or rendered invalid, but instead
shall be automatically amended for such lesser term, to such lesser extent, or
in such other lesser degree, as will grant the Company the maximum protection
and restrictions on the Executive’s activities permitted by applicable law in
such circumstances. In cases where there is a dispute as to the right to
terminate the Executive’s employment or the basis for such termination, the term
of any covenant set forth in Section 13 shall commence as of the date specified
in the Notice of Termination and shall not be deemed to be tolled or delayed by
reason of the provisions of this Agreement. The Company shall have the right to
injunctive relief to restrain any breach or threatened breach of any provisions
in this Section 13 in addition to and not in lieu of any rights to recover
damages or cease making payments under this Agreement. The Company shall have
the right to advise any prospective or then current employer of Executive of the
provisions of this Agreement without liability. The Company’s right to enforce
the provisions 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 this Agreement or any
other similar agreement or to have in effect a similar agreement for any other
employee.

14. 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:

 

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If to Executive:

Patricia Henry

2555 N. Pearl Street, #502

Dallas, TX 75201

If to Company:

Kindred Healthcare Operating, Inc.

680 South Fourth Street

Louisville, KY 40202

Attn: General Counsel

15. 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.

16. Entire Agreement; Amendment. This Agreement 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, including without limitation the Employment Agreement between
Company and Executive, dated June 1, 2011, the provisions of any offer letter,
the Termination Compensation Agreement between RehabCare Group, Inc.
(“RehabCare”) and Executive, dated December 8, 2008, all prior non-competition,
non-solicitation or similar covenants or agreements between Executive and the
Company, Parent or any of their respective subsidiaries or affiliates, or any
similar plan or agreement with RehabCare or its affiliates, except that this
Agreement shall not supersede or in any way adversely impact (i) Executive’s
right to receive amounts to which she is entitled in respect of the RehabCare
STIP Cash-Out, or (ii) Executive’s right to continue participation in the
Company’s short-term incentive plan for the remainder of the 2011 calendar year.
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.

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

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

 

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19. 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.

20. Survival. Any provision of this Agreement creating obligations extending
beyond the Term of this Agreement shall survive the expiration or termination of
this Agreement, regardless of the reason for such termination.

21. 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. For purposes of Section 409A of the Code, each payment
that the Executive may be eligible to receive under this Agreement shall be
treated as a separate and distinct payment and shall not collectively be treated
as a single payment.

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

 

KINDRED HEALTHCARE OPERATING, INC.

/s/ Paul J. Diaz

By: Paul J. Diaz President and Chief Executive Officer

 

Solely for the purposes of Section 7 and Section 16:

 

KINDRED HEALTHCARE, INC.

/s/ Paul J. Diaz

By: Paul J. Diaz President and Chief Executive Officer

/s/ Patricia Henry

PATRICIA HENRY

 

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